A Comparative Study of Financial Ratio between Public Sector

Bank and Private Sector Bank

Summer Internship Project Report

Submitted towards Partial

fulfillment
of

Post Graduate Diploma in Management

Academic Session
2020-22

Submitted By Submitted To
Amisha Saxena Dr. Santosh Kumar
Roll No. 2020007
Batch 2020-22

Jaipuria School of Business

Indirapuram, Ghaziabad, Delhi NCR
2021

Block – B, Shakti Khand IV, Indirapuram, Ghaziabad 201014(U.P.)

Tel: 0120-4881100 Toll Free No.: 1800 1033 488 E-mail: [email protected] Website: jsb.jaipuria.edu.in/

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 Declaration of the Student

This is to declare that I, Ms. Amisha Saxena, student of PGDM from Jaipuria School of
Business, Indirapuram, Ghaziabad has successfully completed Summer Training Programme
for a period of 9 weeks with CSA Advisors (Name of organization) from 13-07-2021 To 31-
08-2021, under the supervision of Ms. Dhriti Gupta, Wealth Manager and Mr. Santosh
Kumar, Associates Professors.

This research report is my original work and it has not been submitted elsewhere for the
award of any degree/diploma.

Student Signature
Student Name : Amisha Saxena
Roll No.: 2020007

Block – B, Shakti Khand IV, Indirapuram, Ghaziabad 201014(U.P.)

Tel: 0120-4881100 Toll Free No.: 1800 1033 488 E-mail: [email protected] Website: jsb.jaipuria.edu.in/

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 CERTIFICATE FROM COMPANY

Block – B, Shakti Khand IV, Indirapuram, Ghaziabad 201014(U.P.)

Tel: 0120-4881100 Toll Free No.: 1800 1033 488 E-mail: [email protected] Website: jsb.jaipuria.edu.in

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 Acknowledgement

I wish to express my heartfelt appreciation to all those who have contributed to this project,
both explicitly and implicitly, without the cooperation of whom, it would not have been
possible to complete this project.
I would like to convey our deepest gratitude to our respected Director Management Dr.
Jitendra Mishra and I would also like to thanks to my Project guide, Dr. Santosh Kumar, who
helped me direcly and indirectly which had contributed in numerous ways to the development
of my project. He supported me throughout the days of my project and also very thankful to
him for giving me the precious time. I am also very thankful for him guidance and
motivation, which really means a lot for me.
I would also like to thanks my industry mentor Miss. Dhriti Gupta who guided me in my
entire summer internship and enhance my knowledge for practical exposure. Which helped in
the completion of my project work also.
I would like to say thanks to all my friends Aryan, Akash , Sachin Saxena and parents for
standing behind us all the time.
Last but not least I express our sincere thanks to the institute, Jaipuria School of Business,
Ghaziabad and CSA Advisors for providing me such a great opportunity for implementing
the ideas in my mind.

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 EXECUTIVE SUMMARY

Efficiency and profitability of the banking sector in India has assumed primal importance due to
intense competition, greater customer demands and changing banking reforms. Since
competition cannot be observed directly, various indirect measures in the form of simple
indicators or complex models have been devised and used both in theory and in practice. This
study attempts to measure the relative performance of Indian banks. For this study, we have used
public sector banks and private sector banks. We know that in the service sector, it is difficult to
quantify the output because it is intangible. Hence different proxy indicators are used for
measuring productivity of banking sector. Segmentation of the banking sector in India was done
on bank assets size. Overall, the analysis supports the conclusion that new banks are more
efficient that old ones. The public sector banks are not as profitable as other sectors are. It means
that efficiency and profitability are interrelated. The key to increase performance depends upon
ROA, ROE and NIM.

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 This report is divided into six chapters which are as follows:

1. Industry and Company Profile

The first chapter deals with the introduction and evolution of the industry, company and the
services offered by it. This includes external and internal analysis in the form of SWOT
analysis, Porter’s five forces, marketing mix and competitive analysis.

2. Introduction of the Project

This part includes the need for doing this study along with the common terminology used in
the project. The scope of the study provides information about different types of insurance.
Along with this the chapter includes a brief about objectives, limitations and hypothesis of
research.
3. Review of Literature
This chapter incorporates the various researches and studies on the topic related to behavior
of customer towards purchase decision of insurance products. This chapter would help the
reader in developing a deep study into the history of the topic which would further help him
to gain a better understanding of the content of the research.

4. Research Methodology
This chapter illustrates the research methodology explored in the present study by giving a
brief about study as exploratory research. This chapter also presents the sampling method
used for gathering data with details of the method, sample size, and all other tools used in the
study for conducting the research.

5. Results and Discussions

This is one of the most important part of the project which involves drawing the
interpretation through graphs and pivot tables, beginning with the demographic information
and continuing till the myths and expectations of customer towards purchase decision of
insurance products.
The Likert scale questions were tested by applying the T- test to test the hypothesis and to
reach towards conclusion by using SPSS.

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 6. Conclusion, Suggestions and Implications
This last chapter depicts the key findings of the research. On the basis of the above chapter,
the results and conclusions have been derived. This chapter also includes the suggestions
and recommendations for the company as well as for the customers. And the implications
include the need of advisors in today’s times.

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 LIST OF CONTENTS

DECLARATION……………………………………………………………………… 2
CERTIFICATE FROM COMPANY……………………………………………….…..3
ACKNOWLEDGEMENT……………………………………………………………....4
EXECUTIVE SUMMARY……………………………………………………………..5-7
LIST OF CONTENTS…………………………………………………………………..8-9
LIST OF TABLES………………………………..…………………………………….10-11
CHAPTER - 1 INDUSTRY & ORGANIZATION PROFILE…………………………..12
About The Industry…………………………………………………......13-15
About Companies……………………………………………………….16-18
SWOT Analysis………………………………………………………...19-20
Porter’s Five Forces……………………………………………………21-22
CHAPTER – 2 INTRODUCTION OF THE PROJECT………………………………...23
Context of The Research……………………………………………….24-36
Brief Review from the previous study…………………………………37-41
Need of The Study………...……………………………………………42
Research Problem and Objectives Of the Study .....................................43
Scope of Study ........................................................................................44
Limitation of the Research ......................................................................44
CHAPTER – 3 REVIEW OF LITERARTURE………………..……………….………45

Existing Literature Related to Problem………………………………..46-48

CHAPTER – 4 RESEARCH METHODOLOGY……………………………………..49

The Study……………………………………………………………….50
Data Collection…………………………………………………………50
The Tools………………………………………………………………..50

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 CHAPTER – 5 RESULT AND DISCUSSION…………………………………….51
Ratio Analysis…………………….…………………………………………52-59
CHAPTER – 6 CONCLUSION, SUGGESTIONS& IMPLICATIONS……………60
Conclusion…………………………………………………………..61
Suggestions………………………………………………………….62
References……………………………………………………………63-64

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 LIST OF IMAGES AND TABLE

S.NO. TOPIC PAGE NO.

1. IMAGE 1 18
Core Business
2. IMAGE 2 19
Swot analysis
3. IMAGES 3 21
Porter five force
4. IMAGES 4 33
Banking Sectors
5. IMAGES 5 35
Structure of banking sector
6. IMAGES 6 36
Hierarchy of employees
7. TABLE 1 51
DDR
8. TABLE 2 52
Net Interest Margin
9. TABLE 3 53
Credit Deposit Ratio
10. TABLE 4 54
Debt Equity Ratio
11. TABLE 5 54
Return on Equity
12. TABLE 6 55
Return on Assets
13. TABLE 7 56
Return on Equity

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 TABLE 8 57
Operating Margin Ratio
TABLE 9 58
Net Profit Margin Ratio

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 CHAPTER 1
INDUSTRY AND COMPANY PROFILE

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 A. ABOUT THE INDUSTRY

The consulting industry can trace its roots back to the late 19th century, when the world's first
modern consulting firms were founded. From the turn of the century, management consulting –
which focused mainly on engineering and finance early on – increasingly gained terrain in the
business world. However, it wasn’t until the 1930s that consulting firms started to grow their size
beyond a few founding partners and small teams. In the slipstream of the growth of scientific
management, operations and organizational theory, the number of consulting firms rapidly
expanded in the next decades, with today’s well-known US firms such as Arthur D. Little, A.T.
Kearney, Booz Allen Hamilton and McKinsey & Company playing frontrunner roles.
The consulting industry started its internationalization in the early 1960s, when the large
American management consultancies expanded into Europe, bringing their management models
and experience to transform European organizations. In the next thirty years, the consulting
industry found itself in a phase of unprecedented growth across Western markets, far outpacing
the growth of the world economy during the same time period. Revenues of the top ten
worldwide management consultancies, for instance, grew from around $200 million to around
$50 billion at the beginning of the 21st century, while the headcount of the thirty largest
consultancy firms in the industry grew from about 20,000 in the early 1980s to approximately
430,000 in 2000.

Nearly two decades down the line, the consulting industry has developed into one of the most
mature sectors in the professional services industry, generating between $100 billion to $300
billion in revenues, with the precise estimate depending on the definitions used. At the heart of
the industry stand six main domains – Strategy Consulting, Management Consulting, Operations
Consulting, Financial Advisory, HR Consulting and IT Consulting – that when combined, span
services and offerings in over 200 industry and functional areas. The majority of consultants
work at large and mid-sized consulting firms, yet, in terms of the number of consultancy
enterprises, these firms typically represent no more than 15% of the total, with the majority of
enterprises active as sole proprietorships (i.e. freelance consultants).

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Besides consultants working in the consulting industry, advisors are increasingly working in a
consultant role that leverages consultancy skills but lies outside the consulting industry. Over the
past few decades, organizations have taken large steps in maturing their internal advisory and
implementation units, building internal consulting and project management teams as well as
developing typical ‘consulting’ capabilities across key departments, functions and process areas.
Little is known on the exact global size of the ‘internal consulting’ industry, and estimates range
widely from a fraction of the consulting industry’s size to a market that is larger in terms of
scale. Typical internal consulting roles are based in, among others, corporate development,
project management units and dedicated advisory departments. Many consultants also often
venture into managerial roles.
The chapter 'Consulting Industry' presents an overview of all aspects of the advisory market,
ranging from the definition of consulting and its key segments to insight into market sizes
per region/country, including India. The chapter further presents an outline of fees &
rates billed by consultants, details on the M&A landscape in consulting and an overview of the
main rankings and recognitions in the industry.

b. Industry Analysis

➢ In May 2021, the Reserve Bank of India (RBI) granted authorisation to Eroute
Technologies to operate as a prepaid payment instruments (PPI) company.
➢ In February 2021, the Reserve Bank of India (RBI) cleared the Rs. 34,250 crore (US$ 4.7
billion) acquisition of Dewan Housing Finance Corporation (DHFL) by the Piramal
Group.
➢ In January 2021, Sundaram Asset Management Company announced the acquisition of
Principal Asset Management for Rs. 338.53 crore (US$ 46.78 million).
➢ In January 2021, the National Stock Exchange (NSE) launched derivates on the Nifty
Financial Service Index. This service index is likely to provide institutions and retail
investors more flexibility to manage their finances.
➢ In November 2020, LIC took initiatives to facilitate quicker proposal completion by
launching a digital application – ANANDA.

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 ➢ In November 2020, Paytm reported 2x growth in digital gold transactions in the last six
months. New customers have increased 50% since the beginning of this financial year
and the average order value has increased by 60%.
➢ In November 2020, the Reserve Bank of India (RBI) announced establishment of its
Innovation Hub. In order to encourage access to financial services and goods and foster
financial inclusion, this initiative would create an ecosystem. The Innovation Hub of the
Reserve Bank (RBIH) is intended to promote innovation across the financial sector by
leveraging technology and creating a conducive environment for innovation.
➢ VC investments grew to US$ 3.6 billion in July-September 2020 from US$ 1.5 billion in
the previous quarter, powered by the mega deals, which included the US$ 1.3 billion
raised by the online retailer—Flip kart.
➢ On November 6, 2020, Whats App started its UPI payment services in India on receiving
the National Payments Corporation of India (NPCI) approval to ‘Go Live’ on UPI in a
graded manner.
➢ In June 2021, Unified Payments Interface (UPI) recorded 2.80 billion transactions worth
Rs. 5.47 lakh crore (US$ 73.42 billion).
➢ The number of transactions through immediate payment service (IMPS) increased to
279.81 million (by volume) and amounted to Rs. 2.66 trillion (US$ 40.85 billion) by
value in May 2021.

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 B. ABOUT THE COMPANY
CSA MANAGEMENT CONSULTANT PRIVATE LTD.

a. Background of the Company

Name of the Company CSA ADVISORS

Year of Inception 2015
Country India
Location Gurugram (Haryana)
Phone 9873759607
Website https://www.csa-advisor.com

CSA MANAGEMENT CONSULTANT PRIVATE LTD. (CSA ADVISOR) is one of the finest
organizations in India dealing in financial services. It provides advisory services to clients in
order to help meet challenges and understand the opportunities that arise in the Global & Indian
Financial Market Our company is engaged in selling investments products in the market and is
making the best possible efforts with Banks, AMC and other financial institutions.
CSA ADVISOR is a key player in both retail and institutional segments. Our strength has been
to continuously innovate and reinvent ourselves with a strong digital footprint. The company is a
leading player in the broking industry. The company provide execution, advisory and research
service across products like equity, F&O, Commodity & Currency and Mutual Funds, AIF and
PMS.
The company is actively engaged in selling all the investment products in the market and is
working closely with banks, AMCs and other financial institution.

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Mission & Values

Its mission is to help you achieve financial competence. They stand for trust, assurance while
making sure that you grow.

The prime objects of CSA ADVISOR are:

➢ CSA ADVISOR plays a key in both Retail and Institutional segments.

➢ As a part of CSA ADVISOR, our clients are provided with advice related to financial
services including equity, commodity & currency, F&O, mutual funds, AIF and PMS.
➢ Guide and help clients to ensure their wealth investment decision with us comes out to be
fruitful.
Its strength is leaving a remarkable digital foot-print by innovating and upgrading techniques that
will eventually help our clients. Apart from financial services CSA ADVISOR also includes
investment planning and is a leading competitor in the Broking industry as well. Its vision is not
bound to any limitation and belief is to spread its services globally.

c. Core Business

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 Image 1

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 C. Analyze the 3C’

SWOT Analysis of the Company

Image 2

Strength
Offering a variety of insurance products, such as auto, credit, health and health, what attracts a
variety of targeted markets is potential. When you raise insurance rates and customers are willing
to pay the Costs, that means higher commissions for you, making the business more profitable.
The existing customers are stronger as you earn revenue from their payments. If you have been
in business for many years and have built a strong reputation in your community, this is a
strength. Building and maintaining strong relationships with private insurance companies is
another strength.

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Weaknesses
If you rely on paper sales instead of digital solutions, you may look outdated and outdated when
it comes to marketing policies, fundraising and reminding people of high pay outs in day-to-day
operations, your business may face issues that affect your profits. One focus on working with the
same customers rather than finding new customers in need of insurance is a weakness, as you do
not increase your customer base and face problems when clients switch to a competing vendors.

Opportunities
Selling additional products gives you the opportunity to increase your profits, Using email and
the internet to do business means you can reach more people who need insurance while saving
money on repair and marketing Costs. Providing services as an insurance consultant, in addition
to sell policies is a way to increase revenue and be a reliable source of recommended policy
coverage. Exerting yourself in marketing to recommend products based on customer profiles,
such as promoting boat insurance or supplement policies, gives you a way to grow your business.
Communication and building relationships with other business, such as accounting and law
firms, provides an opportunity to seek referrals to business and consumers,

Threats
Local competitors who sell similar policies, as well as banks and Internet retailers, pose a threat
to your bottom line. As insurance prices rise, some people may transfer their polices to other
insurance agencies, further threatening your profits The freedom to enter the insurance business
is dangerous because it encourages new competition. Changing the rules regarding health care
may require immediate adjustments in the way you present policies, a threat if your company is
unable to comply with changing markets and changing laws.

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 Porter’s Five Forces Analysis

Image 3

After applying Porter’s five Forces, We can Analyze The growth Chances of the company and
also find out areas where it is needed to be worked.
1. Competition in the industry- With the emerging trend, competition in this
industry is increasing day by day and numbers of competitors are also which are directly
target the customer by offering more benefits. So that it is necessary to connect with
their customers, investors and stakeholder. But CSA advisor also has good command on
the customer so that the company has a moderate competition.

2. New Entrants Threats- Threat of new entrants is less for the company because in
this industry, there are more barriers such as economies of scale, capital requirements,
and government policies etc for new entrants. As well as in this industry a good brand
name is also necessary to form a customer relation because no one wants to rely on any

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 consultancy service which is new in market and do not has good customer relation
history.

3. Power of Supplier- Power of supplier is less for CSA advisors because there are
number of major player doing well in this industry and in compare of them, the
company is treated as new entrant and also it is providing its services within the
partnership of SMC Global for Forming customer trust and satisfaction.

4. Power of Customers- Power of customer is more for the company because there
already many player which are doing well in the same industry. So that for forming a
good relationship with the customer, the company has to provide same service with
more benefits.

5. Threats of Substitute Products- Threats of substitute product is low for

CSA advisors because they are providing service which is a different category. And also
there is no substitute for the services.

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 CHAPTER 2
INTRODUCTION OF THE PROJECT

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a) Context of The Research

Financial Analysis

Financial analysis is the process of identifying the financial strengths and weakness of a firm
by properly establishing relationships between the items of Balance Sheet and Profit and Loss
Account. Analysis is the process of critically examining in detail accounting information
given in the financial statements. Analyzing financial statement is a process of evaluating
relationship between component parts of financial statements to obtain a better understanding
of firm’s position and performance.

The study is descriptive in nature and this attempt is made to evaluate the performance of the
bank through the financial data which are disclosed in accounting policies. Thus the study is
based on the published accounts and annual reports.

Key Financial ratios-There are five categories of ratios used in financial statement analysis.
These are:

i. Liquidity ratios, which measure a firm’s ability to meet cash needs as they arise.
ii. Activity ratios, which measure the liquidity of specific assets and the efficiency of
managing assets.
iii. Solvency ratios, which measure the extent of a firm’s financing with debt relative to
equity and its ability to cover interest and other fixed charges.
iv. Profitability ratios, which measure the overall performance of a firm and its efficiency in
managing assets, liabilities, and equity.
v. Valuation ratios, which bring in the stock price and give an idea of what investors, think
about the firm and its future prospects.

Liquidity Ratio

1. Current Ratio

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 The current ratio is a commonly used measure of short-run solvency, the ability of the
firm to meet its debt requirements as they come due. Current liabilities are used as the
denominator of the ratio because they are considered to represent the most urgent debts,
requiring retirement within one year or one operating cycle. The available cash resources
to satisfy these obligations must come primarily from cash or the conversion to cash of
other current assets

Activity Ratio

1. Inventory Turnover Ratio

Inventory turnover is a financial ratio showing how many times a company has sold and
replaced inventory during a given period. A company can then divide the days in the
period by the inventory turnover formula to calculate the days it takes to sell the
inventory on hand. Calculating inventory turnover can help businesses make better
decisions on pricing, manufacturing, marketing, and purchasing new inventory.

2. working Capital Turnover Ratio

Working capital turnover is a ratio that measures how efficiently a company is using
its working capital to support sales and growth. Also known as net sales to working
capital, working capital turnover measures the relationship between the funds used to
finance a company's operations and the revenues a company generates to continue
operations and turn a profit.

3. Asset Turnover Ratio

The asset turnover ratio measures the value of a company's sales or revenues relative to
the value of its assets. The asset turnover ratio can be used as an indicator of the
efficiency with which a company is using its assets to generate revenue. The higher the
asset turnover ratio, the more efficient a company is at generating revenue from its assets.
Conversely, if a company has a low asset turnover ratio, it indicates it is not efficiently
using its assets to generate sales.

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Solvency Ratio

1. Debt-to-equity Ratio

The debt to equity ratio measures the riskiness of the firm’s capital structure in terms of
the relationship between the funds supplied by creditors and investors.

2. Interest Coverage Ratio

The Interest Coverage Ratio (ICR) is a financial ratio that is used to determine how well a
company can pay the interest on its outstanding debts. The ICR is commonly used
by lenders, creditors, and investors to determine the riskiness of lending capital to a
company. The interest coverage ratio is also called the “times interest earned” ratio.

3. Total Asset to Debt Ratio

Total-debt-to-total-assets is a leverage ratio that defines the total amount of debt relative
to assets owned by a company. Using this metric, analysts can compare one company's
leverage with that of other companies in the same industry. This information can reflect
how financially stable a company is. The higher the ratio, the higher the degree of
leverage (DoL) and, consequently, the higher the risk of investing in that company.

4. Proprietary Ratio

The proprietary ratio (also known as the equity ratio) is the proportion of
shareholders' equity to total assets, and as such provides a rough estimate of the
amount of capitalization currently used to support a business.

Profitability Ratios

1. Operating Profit Margin

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 The operating margin measures how much profit a company makes on a dollar of sales
after paying for variable cost of production, such as wages and raw materials, but before
paying interest or tax. It is calculated by dividing a company’s operating income by
its net sales. Higher ratios are generally better, illustrating the company is efficient in its
operations and is good at turning sales into profits.

2. EBITDA Margin
The EBITDA margin is a measure of a company's operating profit as a percentage of its
revenue. The acronym EBITDA stands for earnings before interest, taxes, depreciation,
and amortization. Knowing the EBITDA margin allows for a comparison of one
company's real performance to others in its industry.

3. Net Profit Margin

The net profit margin, or simply net margin, measures how much net income or profit is
generated as a percentage of revenue. It is the ratio of net profits to revenues for a
company or business segment. Net profit margin is typically expressed as a percentage
but can also be represented in decimal form. The net profit margin illustrates how much
of each dollar in revenue collected by a company translates into profit.

4. Return on Assets

Return on assets (ROA) is an indicator of how profitable a company is relative to its total
assets. ROA gives a manager, investor, or analyst an idea as to how efficient a company's
management is at using its assets to generate earnings.

5. Return on Equity

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 By measuring the earnings a company can generate from assets, ROE offers a gauge of
profit-generating efficiency. ROE helps investors determine whether a company is a lean,
profit machine or an inefficient operator.

Valuation Ratios

1. P/E Ratio

The P/E ratio measures how cheaply valued a company's stock price is by comparing the
current stock price to its earnings-per-share (EPS).

2. P/B Ratio

Investors use the price-to-book value to gauge whether a company's stock price is valued
properly. A P/B ratio of one means that the stock price is trading in line with the book
value of the company. The P/B ratio can also help investors identify and
avoid overvalued companies.

3. PEG Ratio

The price/earnings to growth ratio (PEG ratio) is a stock's price-to-earnings (P/E) ratio
divided by the growth rate of its earnings for a specified time period. The PEG ratio is
used to determine a stock's value while also factoring in the company's expected earnings
growth, and it is thought to provide a more complete picture than the more standard P/E
ratio.

BANKING SECTOR IN INDIA

India’s banking sector is sufficiently capitalised and well-regulated as per the Reserve bank of
India (RBI). The condition of financial and economic of the country are far superior to other
countries in the world. Credit, market and liquidity risk studies suggest that Indian banks are
generally resilient and have withstood the global downturn well.

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indian banking industry has recently witnessed the roll out of innovative banking models like
payments and small finance banks. RBI’s new measures may go a long way in helping the
restructuring of the domestic banking industry.
The Indian banking system consists of 12 public sector banks, 22 private sector banks, 46 foreign
banks, 56 regional rural banks, 1485 urban cooperative banks and 96,000 rural cooperative banks
in addition to cooperative credit institutions As of November 2020, the total number of ATMs in
India increased to 209,282.
Public sector banks assets stood at Rs. 107.83 lakh crore (US$ 1.52 trillion) in FY20.
During FY16-FY20, credit of banks grew at a CAGR of 3.57%. As of FY20, total credit
extended surged to US$ 1,698.97 billion. During FY16-FY20, deposits grew at a CAGR of
13.93% and reached US$ 1.93 trillion by FY20.
Bank credit stood at Rs. 108.41 trillion (US$ 1.45 trillion) and bank deposits stood at Rs. 152.98
trillion (US$ 2.05 trillion), as of June 25, 2021, According to the RBI,
Credit to non-food industries stood at Rs. 107.54 trillion (US$ 1.47 trillion), as of June 25, 2021.

a. Growth Opportunity
Enhanced spending on infrastructure, speedy implementation of projects and continuation of
reforms are expected to provide further impetus to growth in the banking sector. All these factors
suggest that India’s banking sector is poised for a robust growth as rapidly growing businesses
will turn to banks for their credit needs.
Also, the advancement in technology has brought mobile and internet banking services to the
fore. The banking sector is laying greater emphasis on providing improved services to their
clients and upgrading their technology infrastructure to enhance customer’s overall experience as
well as give banks a competitive edge.
India’s digital lending stood at US$ 75 billion in FY18 and is estimated to reach US$ 1 trillion
by FY23 driven by the five-fold increase in the digital disbursements.

Banking systems and financial institutions are integral parts of an economy. Seamless
functioning of these sectors is important for an economy to grow. Due to the advent
of digital technology, banking and financial services ha ve undergone a massive shift
in their mode of operations. New trends are gaining momentum at a fast pace as the

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customers find it convenient and also flexible at the same time. The emergence of
financial technology has resulted in the introduction of sever al technological
advancements in the industry. Fintech companies, internet banking and mobile
banking are just some examples that mark this shift. Today, we will read about the
latest trends that are revolutionising the Indian banking and financial sector.

Digitization
With the rapid growth of technology, digital services became an indispensable part of
banking operations as these institutions needed to keep up with the changes and
introduce innovations that made services convenient. In India, the initial p hase of
digitization began in the 1980s when information technology was used to perform
basic functions like customer service, bookkeeping, etc. Gradually core banking
solutions were also adopted to improve customer experience. The main shift came
during the 1990s when liberalization opened the Indian market to the global world.
Private and international banks which came into operation boosted technological
changes in the banking sector. Features like online banking, IMPS (Immediate
Payment Service), RTGS (Real Time Gross Settlement), telebanking
enabled customers to avail banking facilities from anywhere.

Mobile Banking
Almost a decade back, even though digital services came into the picture, it was only
done through desktop computers which means the customer must be at home or at a
place with a computer and internet connection. But the vast penetration of smart
phones created a need among customers to avail banking services on their mobile
phones. Cheap data charges also contributed towards the increase in usage of mobile
banking.

Unified Payment Interface (UPI)

UPI is a trend that emerged in the last couple of years and it is revolutionizing the
way we pay and receive money. Transactions can be done within seconds using this
interface. Goggle Pay and BHIM (Government of India) are two major interfaces
among numerous other services that enable easy payment even if you are out of
physical cash.

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Block chain
Block chain is a robust technology that is still in the development phase. Security is a
major factor as far as digital services are concerned. Despite technical advances,
fraud practices are still a challenge in the digi tal domain. Block chain is the answer
to these challenges. Like the way in which it operates, there is no scope for any
malpractices in it. The technology works on computer science, data structures and
cryptography.

Artificial Intelligence (AI) Robots

Many private and nationalized banks have started to make use of chat bots or
Artificial Intelligence (AI) robots for assistance in customer support. The practice is
still in its initial stage but will definitely evolve and make the entrance to the general
public in the near future. Chat bots are one of the emerging trends that are estimated
to grow.

Fintech Companies
Fintech or financial technology is indeed a disrupting force in the sector. Due to the
changing landscapes in the Indian financial sector, many companies have emerged to
be a significant part of this ecosystem. Fintech companies specialise in developing
technology solutions that help companies to manage the financial aspects of their
business, like new software’s, applications, processes as well as business models.
Investments made on Fintech companies have increased drastically in the past decade
making it a multi-billion dollar industry globally.

b. Industry Analysis

➢ The Indian banking system consists of 12 public sector banks, 22 private sector banks, 44
foreign banks, 43 regional rural banks, 1,484 urban cooperative banks and 96,000 rural
cooperative banks in addition to cooperative credit institutions. As of March 2021, the
total number of ATMs in India increased to 213,575.
➢ According to the RBI, India’s foreign exchange reserves reached US$ 582.41 billion, as
of April 16, 2021. According to the RBI, bank credit and deposits stood at Rs. 108.34
trillion (US$ 1.48 trillion) and Rs. 151.67 trillion (US$ 2.08 trillion), respectively, as of
June 04, 2021.

31 | P a g e
 ➢ Credit to non-food industries stood at Rs. 108.02 trillion (US$ 1.47 trillion), as of June
04, 2021.
➢ Asset of public sector banks stood at Rs. 107.83 lakh crore (US$ 1.52 trillion) in FY20.
➢ Total assets across the banking sector (including public, private sector and foreign banks)
increased to US$ 2.52 trillion in FY20.
➢ Indian banks are increasingly focusing on adopting integrated approach to risk
management. The NPAs (Non-Performing Assets) of commercial banks has recorded a
recovery of Rs. 400,000 crore (US$ 57.23 billion) in FY19, which is highest in the last
four years.
➢ RBI has decided to set up Public Credit Registry (PCR), an extensive database of credit
information, accessible to all stakeholders. The Insolvency and Bankruptcy Code
(Amendment) Ordinance, 2017 Bill has been passed and is expected to strengthen the
banking sector. Total equity funding of microfinance sector grew 42% y-o-y to Rs.
14,206 crore (US$ 2.03 billion) in 2018-19.
➢ As of June 2, 2021, the number of bank accounts opened under the government’s flagship
financial inclusion drive ‘Pradhan Mantri Jan Dhan Yojana (PMJDY)’ reached 42.44
crore and deposits in Jan Dhan bank accounts totaled >Rs. 1.45 lakh crore (US$ 19.81
billion).
➢ Rising income is expected to enhance the need for banking services in rural areas, and
therefore, drive the growth of the sector.
➢ The digital payments revolution will trigger massive changes in the way credit is
disbursed in India. Debit cards have radically replaced credit cards as the preferred
payment mode in India after demonetization. In May 2021, Unified Payments Interface
(UPI) recorded 2.54 billion transactions worth Rs. 4.91 lakh crore (US$ 67.32 billion).
Public sector bank with their Market Capitalization
Company name Market ca
(Rs. Cr.)
SBI 3857640931.336.33
PNB 41346.31
Bank of Baroda 37237.75
IOB 28572.55

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Canara Bank 23853.27
Union bank 23451.88
Central Bank 17969.54

UCO Bank 16953.55

Indian Bank 15549.33

Bank of Mah 12283.16

Punjab & Sind 6808.48

Private sector bank with their Market Capitalization

Company Name Market Cap

(Rs. cr)
HDFC Bank 868,320.76
ICICI Bank 499,073.36
Kotak Mahindra 360,782.01
Axis Bank 242,164.91
IndusInd Bank 77,324.80
Bandhan Bank 45,695.13
IDBI Bank 41,235.46
AU Small Financ 36,682.28
IDFC First Bank 29,130.96
Yes Bank 27,485.23
Federal Bank 17,326.59
City Union Bank 11,488.68

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RBL Bank 10,316.59
Equitas bank 6,878.94
CSB Bank 5,204.57
Ujjivan Small 3,491.19
Karur Vysya 3,397.12
DCB Bank 2,922.79
JK Bank 2,693.28
South Ind Bk 2,090.65
Karnataka Bank 2,087.49
Suryoday Small 1,590.90

ABOUT THE COMPANY

Image 4
Public sector bank and private bank are comes under commercial bank.
Public Sector Bank

Public sector banks are known for their better organizational structure and greater penetration in
the customer base. The work environment is also relatively less competitive as compared with
privately-owned banks and professionals often do not have to focus on meeting targets and being
the best performer in a team.

34 | P a g e
There is typically greater stress on providing necessary training to their personnel in order to
help update their knowledge and skills to be a better performer in the long run. Job security is
much higher as compared to private sector banks and for some, this could be the prime attraction
for building a long-term career.

Private Sector Bank

Private sector banks are usually known for their highly competitive outlook and technological
superiority. As a result, careers in private sector banking also tend to be more competitive where
professionals are required to meet stiff targets and perform above par to ensure good career
growth.

A risk-reward component is also higher and remuneration could be better but job security may
not be on par with publicly-owned banks.

a. Historical Background

The banking system is considered as the backbone of a nation’s economy. Modern banking in
India originated in the last decade of the 18th century. We have come up with the history of
banking, before and after independence.

The history of banking began when empires needed a way to pay for foreign goods and services
with something that could be exchanged or facilitated easily. Prior to this, banking procedures
were carried by informal methods in the ancient World. However, formal banking has been
developed around the 20th century. In India, banking has developed from the primitive to the
modern stage of banking in a fashion that has no parallel in world history.

Allahabad bank is the oldest public sector bank in India. It was established in 1965. The IndusInd
Bank was the first private bank in India set up in Mumbai on April 1994.
35 | P a g e
 Structure of the Indian Banking System

Reserve Bank of India is the central bank of the country and regulates the banking system of
India. The structure of the banking system of India can be broadly divided into scheduled banks,
non-scheduled banks and development banks.
Banks that are included in the second schedule of the Reserve Bank of India Act, 1934 are
considered to be scheduled banks.
All scheduled banks enjoy the following facilities:
• Such a bank becomes eligible for debts/loans on bank rate from the RBI
• Such a bank automatically acquires the membership of a clearing house.
All banks which are not included in the second section of the Reserve Bank of India Act, 1934
are Non-scheduled Banks. They are not eligible to borrow from the RBI for normal banking
purposes except for emergencies.
Scheduled banks are further divided into commercial and cooperative banks.

Image 5

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Organizational hierarchy of employees in Banks

Image 6

b) Brief Review of Previous Studies

A Comparison of the Performance of Commercial Banks: DEA Evidence for India -

Ram Pratap Sinha (2013) The present paper makes an attempt to fill this gap and evaluates
the performance of 49 Indian commercial banks for the period 2006-07 to 2010-11 using
Seiford and Joe Zhu (2002) approach, which is essentially a variant of the popular Banker-
Charnes-Cooper (BCC) model. The present paper makes an attempt to fill this gap and
evaluates the performance of 49 Indian commercial banks for the period 2006-07 to 2010-

37 | P a g e
 11.The analysis of results indicate that the new private sector commercial banks
performedthe best, followed by the old private sector banks, nationalized banks and the SBI
Group.

Financial Performance of Banks in India---Harish Kumar Singla (2008) It is concerned

with examining thprofitability position of the selected sixteen banks (BANKEX-based) for a
period of five years (2000-01 to 2006-2007). The study reveals that the profitability position
was reasonable during the period of study when compared with the previous years. Return
on Investment proved that the overall profitability, and the position of selected banks was
sustained at a moderate rate. From the study of the financial performance analysis of
selected banks, it can be concluded that the financial positions of banks is reasonable. Debt
equity ratio is maintained at an adequate level throughout and NPAs also witnessed a decline
during the study period. The ROI remains at a very low position, which is a worrying factor.
We can conclude that the banking sector, which is going through major reforms, is one of
the emerging sectors and will grow at a sustained rate over a period of timeProfitability,
efficiency and liquidity of the co-operative banks.

Dr. Dimitrios p. Petropoulos1 - George kyriazopoulos2 (2010) In his study he evaluated

the profitability, the efficiency and the liquidity of the co-operative bank for the time period.
The analysis of the economic magnitudes of the co-operative banks the groups of indexes
such as: of profitability, of efficiency and of liquidity are being implemented. From the
analysis is revealed that profitability and efficiency for the co-operative banks turn out to be
very satisfactory. The purpose is to present, to estimate and analyse the basic financial
indexes of the co-operative banks that become active at the present time. Also to make a
comparative analysis of the financial indexes of the co-operative banks with the
corresponding ones for the whole banking sector. The estimation of the profitability and
efficiency of the co-operative banks reaches satisfactory levels. Specifically, the
corresponding indexes reach better levels than the ones for the total of the banks. The

38 | P a g e
 liquidity indexes for the co- operative banks lack to size when they are compared with the
corresponding ones for the total of the banks

Jha and Sarangi (2011) analyzed the performance of seven public sector and private sector
banks for the year 2009-10. They used three sets of ratios, operating performance ratios,
financial ratios, and efficiency ratios. In all eleven ratios were used. They found that Axis
Bank took the first position, followed ICICI Bank, BOI, PNB, SBI, IDBI, and HDFC, in that
order.

Dangwal and Kapoor (2010) evaluated the financial performance of nationalized banks in
India and assessed the growth index value of various parameters through overall profitability
indices. The data for 19 nationalized banks, for the post-reform period from 2002-03 to
2006-07, was used to calculate the index of spread ratios, burden ratios, and profitability
ratios. They found that while four banks had excellent performance, five achieved good
performance, four attained fair performance, and six had poor performance.

Sharma (2010) assessed the bank failure resolution mechanism to analyze the powers given
by the countries to their regulators to carry out resolution of failed banks among 148
countries during 2003. She used 12 variables for correlation and regression analysis. Her
study revealed that the countries which had faced systemic crisis were more prone to
providing liquidation powers to their regulators. These countries had a tendency to protect
their regulators through immunity, rather than any legal action. Systemic crisis did not
significantly influenced the regulators’ powers for the restructuring of the banks.

Pat (2009) made an assessment of the RBI’s Report on “Trend and Progress of Banking’ in
India, 2007-08, which reported a relatively-healthy position of the Indian banking system.

39 | P a g e
 He noted that the various groups of banks reported improvements in net profits, return on
assets and return on equity. Two basic indicators of sound banking system, namely, capital
to risk weighted assets and quality of assets, also revealed considerable improvements over
the years.

Singla HK (2008), in his paper,’ financial performance of banks in India,’ in ICFAI Journal
of Bank Management No 7, has examined that how financial management plays a crucial
role in the growth of banking. It is concerned with examining the profitability position of the
selected sixteen banks of banker index for a period of six years (2001-06). The study reveals
that the profitability position was reasonable during the period of study when compared with
the previous years. Strong capital position and balance sheet place, Banks in better position
to deal with and absorb the economic constant over a period of time.

Makesh (2008) evaluated the financial management practices of Federal Bank and
Dhanlakshmi Bank, along with the SBI, for the financial year 2006-2007. He revealed that
all the three banks maintained capital in excess of the stipulated norms of the RBI. Federal
Bank had the lowest NPA Ratio to net advances and had the maximum return on equity.
Dhanalakshmi Bank maintained a very high liquidity. But Federal Bank performed well in
cost management, as compared to the SBI and Dhanalakshmi Bank.

Joshi Vijaya (2007) observed that on the eve of banking reforms Indian Banking Sector was
financially unsound, unprofitable and inefficient. They made a critical examination of the
changes that have taken place in the banking sector after reforms. Further, what remains to
be done with respect of pre-emption of bank resources, directed credit, deregulation of
interest rates, etc. in the field of banking sector were also elaborately discussed.

40 | P a g e
 Samwel Kakuku Lopoyetum (2005) in his article elaborated that the profitability
performance of the UCBs can be improved by strengthening the magnitude of burden ratio.
The spread ratio can be increased by increasing the interest receipts faster than the interest
payments. The burden ratio can be lowered by decreasing the manpower expenses, other
expenses and increasing other incomes.

Qamar (2003) identified the differences in terms of endowment factor, risk factor, revenue
diversification, profitability, and efficiency that might have existed among 100 scheduled
commercial banks, divided into three groups for the year 2000-2001. His study revealed that
the public sector banks were better endowed in terms of their assets base, share capital and
shareholders equity than other banks, whereas foreign banks and old private sector banks
operated at a very high capitalization ratio.

De (2003) The panel regression techniques were used to examine the effect of ownership on
bank performance in the context of Indian commercial banks. He noted that in case of public
sector banks, old private sector banks and new private sector banks, the ownership had no
effect on the return on assets. However, public sector banks had a higher ratio of net interest
margin and operating cost. He also found that new private sector banks were showing a
higher return on assets when the SBI and its associates were dropped from the sample.

Muniappan (2002) studied paradigm shift in banks from a regulator point of view in Indian
Banking: Paradigm Shift, IBA Bulletin, No24 -3. He concluded the positive effect of
banking sector reforms on the performance of banks. He suggested many effective measures
to strengthen the Indian banking system. The reduction of NPAs, more provisions for
standards of the banks, IT, sound capital bare are the positive measures for a paradigm shift.
A regulatory change is required in the Indian banking system.

c) Need of The Study

The study is descriptive in nature and this attempt is made to evaluate the performance of the
bank through the financial data which are disclosed in accounting policies. Thus the study is

41 | P a g e
 based on the published accounts and annual reports of Public sector banks and Private sector
Banks. Significance of performance evaluation in an organization, for sustainable growth and
development, has been recognized since long. This calls for a system that first measures and
evaluates the performance, and then brings out the strengths and weaknesses of the
organization for the purpose of further improvement. Efficient performance evaluation system
encompasses all aspects of an organization. With the advances in computational tools,
performance evaluation systems have evolved over a period of time from single-aspect
systems to more comprehensive systems covering all aspects of an organization. Moreover,
almost every industry, that envisages importance of evaluation, can adopt many methods to
evaluate the performance. It prove to be better for performance measurement, evaluation and
strategic planning for future growth and development of the Indian banks in the light of
changing requirements of this sector so to analyze the comparative profitability performance
of banks for the financial periods 2018-2020. By examining the relationship among banks
equity, assets and deposit size to profitability such as ROE, ROA and NIM. The banks will be
ranked based on their profitability performance and growth percentage. This will help the
banking industry for the improvement or change in their business model.

42 | P a g e
d) Research Problem and Objectives

This research paper aims to analyze the financial statements of Centro Public Sector Banks
and Private Sector banks for periods 2017-18 to 2019-20 using comparative financial ratios.
This seeks to provide an answer to the question: what are the norms, industry figures, and
peculiarities in the banking sectors using liquidity, activity, leverage, profitability, and
valuation ratios?

Moreover, this study specifically aims to meet the following objectives:

➢ To make a comparison of profitability between Public Sector Bank and Private Sector
Bank.
➢ To highlight the Financial Growth of Public sector Banks and Private sector Banks.
➢ To highlight the nature of change influencing financial position and performance of
the bank with aid of financial Ratios for 3 years.
➢ To investigate the factors affecting the profit earning of the selected banks during the
period.

43 | P a g e
e) Scope of the Study

The financial fund management is the essential function in every organization for the effective
utilization of funds for making profits. The financial fund management influences the
managerial decisions regarding the investment policies. Scope of the study is based on the
Financial Ratios for the accounting years 2017-18 to 2019-20. This covers only few banks
three from private sector Bank and three is from public sector Bank. This study is based on
the available information supplied by the respective Banks. This study covers few accounting
ratios analysis.

f) Limitations of the Study

Thus the following are the main limitations of the study.

The study is based on the secondary data and the limitation of using secondary data may
affect the results.

1. The secondary data was taken from the annual reports of the Public sector banks (SBI,
PNB, BOB) and Private sector banks( HDFC, Axis, ICICI). It may be possible that the data
shown in the annual reports may be window dressed which does not show the actual
position of the banks.

2. The company personnel do not reveal the trade secrets and some confidential financial
information.

3. The study records restricted to a period of 3 years.

4. Ratio analysis has its own limitations.

44 | P a g e
 CHAPTER 3

REVIEW OF LITERATURE

45 | P a g e
 a) Existing Literature Related to Problem

The opinion regarding the adequate level of capital adequacy differs among experts,
regulators and the bankers in banking and finance sector. On one side regulators
emphasized on the safety of banks, they prefer more level of capital adequacy for the
feasibility of insurance funds and stability of financial markets. A higher level of capital
adequacy increases liquidity of bank and condense the possibility of bank failure. On the
other side bankers normally favor to operate with lower level of capital adequacy. The
smaller equity base, the greater will be the financial leverage and equity multiplier, which
will converts a normal return on assets into a high return on equity (Koch, 2010).
Hitherto, numerous studies gave emphasis on the importance of capital adequacy and
there is an urgent need to review related studies with a view to gain further understanding
of the subject.

Jeff (1990) revealed that capital adequacy was reflected in asset size as a proxy of a well
managed bank. Capital adequacy has considered the foremost benchmark and primary
measure for safety and soundness for banks and financial institutions. Ebhodaghe (1991)
highlighted that capital adequacy level is a situation where the banks’ adjusted capital is
adequate to take up all unexpected losses arising in the future and cover fixed assets.
Moreover there should be a sufficient surplus for running of day to day operations and
future expansion. Umoh (1991) argued that adequate capitalization is a significant
variable in banking business. In addition to it,

Insured banks must have sufficient capital that may afford a cushion to absorb possible
future losses. There should be also sufficient funds for banks’ operation and expansion,
as well as ensure protection and safety for stakeholder and depositors deposits. Onoh
(2002) revealed that adequate capital is considered as the proportion of capital that can
efficiently protect operations of the banks from failure by absorbing losses. In addition,
the level of capital has to be adjusted in the situation when it is expected that the total
operational expenses and withdrawal requirements may increase. Tanaka (2002)
investigated the effect of bank capital adequacy regulation on the monetary transmission
mechanism. The finding suggested that using a general equilibrium frame-work, the

46 | P a g e
 study revealed that the monetary transmission mechanism is weakened if banks are
poorly capitalized or if the capital adequacy requirement is inflexible. Chen (2003)
analyzed the situation and regulation of the capital adequacy of state commercial banks in
China. Capital enhancement is always preferred and the mainly practical method which is
adopted is to use subordinated debt in order to increase the supplementary capital
requirements.

There are several specific bank performance factors that have an influence on capital
adequacy requirements of the banking system, particularly with reference to profitability,
asset quality, management efficiency, earning quality, liquidity and sensitivity. The
present study contributes evidence on the effect of Indian Private Sector Banks financing
risks and performance on capital adequacy requirements. Reynolds et al. (2000) studied
financial structure and bank performance using dependent variables (capital adequacy,
liquidity, profitability, and loan preference) were regressed to structural variables (bank
assets, net income, administrative expenses and time). Study found that profitability and
loan preferences increases with size, but capital adequacy decreases with size, so large
banks have smaller capital adequacy ratios, and profit is directly related to capital
adequacy. Yu (2000) documented bank size; liquidity and profitability are the main
determinants of bank capital ratio in Taiwan. The study found the relationship between
the equity-to-asset ratio and the liquidity ratio is significantly positive for small banks,
but significantly negative for medium size banks. Al-sbbagh (2004) investigated the
determinants of the capital adequacy ratio (CAR) in Jordanian commercial banks. Study
revealed that CAR was positively affected by return on assets, loan to assets ratio, risky
assets ratio and dividends payout ratio while negatively influenced by deposits assets
ratio, size of bank and loan provision ratio. Williams (2011) investigated the impact of
banks characteristics, financial structure and macroeconomic indicators on banks Capital
base in the Nigerian banking industry. The study revealed that economic indicators such
as rate of inflation, real exchange rate, demand deposits, money supply, political
instability, return on investment are most robust predictors of the determinants of capital
adequacy in Nigeria. Similarly in a study by Buyuksalvarc and Abdioglu (2012) used

47 | P a g e
 profitability, deposits, size of banks and liquidity as bank specific factors to assess their
impact on capital adequacy requirements.

Navapan and Tripe (2003) highlighted that return on equity is one way of measuring the
banks’ performance in comparison to other banks. Study asserted that there should be a
negative relationship between a bank’s ratio of capital to assets and its return on equity
may seem to be self-evident as to not need empirical verification. The study found
negative relationship between capital and profitability exists. Mathuva (2009) found that
bank profitability is positively related to the core capital ratio and tier 1 risk based capital
ratio. The study, using the return on assets and return on equity as proxies for bank
profitability for the period 1998 to 2007, also American Journal of Research
Communication www.usa-journals.com Aspal, et al, 2014: 2(11) 32
[email protected] established that there exists negative relationship between the
equity capital ratio and equity. Asarkaya and Ozcan (2007) analyzed the determinants of
capital structure and identified the factors that explain why banks hold capital beyond the
amount required by the regulation. The findings suggested that lagged capital, portfolio
risk, economic growth, average capital level of the sector and return on equity are
positively correlated with capital adequacy ratio and share of deposits are negatively
correlated with capital adequacy ratio. Ho and Hsu (2010) investigated the relation
between firms’ financial structures and risky investment strategy in Taiwan’s banking
industry. The results found that the restrictions on capital adequacy ratio have influenced
banks’ risky investment strategies, as market share and leverage are positively related.
Finally, the regression results found that financial structures for banking firms are
positively related to the states of business cycle.

48 | P a g e
 CHAPTER 4
RESEARCH METHODOLOGY

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 a) The Study
This research paper is both exploratory and quantitative in context and in design. It is
exploratory in the sense that the researcher found no published literature discussing
norms, industry figures, and peculiarities in the banking sector using financial ratios.
More so, it is a quantitative research in the sense that it aims to draw out conclusions
from the financial data gathered, summarized, and processes.
As a research procedure, the researcher obtained the audited financial statements for the
three periods (2017-18 to 2019-20) of

SBI and HDFC bank. Financial information necessary for financial ratios were derived
from these financial statements. These were then summarized and processed to come up
with comparative financial ratios that were used in the analysis phase.

b) Data Collection

Secondary Data
The secondary data is collected from the financial statements and annual report from website of
the banks. The financial statements of the company are collected from 2017-18 to 2019-20.

c) The Tools
Data Collection
Data was collected through Reserve Bank of India monthly bulletins, annual reports,
moneyrediff, moneycontrol , banks websites etc. private sector and public sector banks
were selected on the basis of their total assets.

50 | P a g e
 CHAPTER 5
RESULT AND DISCUSSION

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Data Analysis and Interpretation
RATIO ANALYSIS
Demand Deposit Ratio
The sum of money that is given to a bank but can be withdrawn as per the requirement of the
depositor. Amounts that are lying in the savings and current accounts are known as demand
deposits because they can be used at any point of time.

Demand Deposit Ratio = Demand Deposit / Total Deposit.

YEAR SBI PNB BOB AXIS HDFC ICICI

2018 7.02 10.82 7.78 20.96 15.10 15.60
2019 7.07 11.52 7.25 16.20 15.40 14.21
2020 7.01 6.55 6.79 13.98 15.11 13.11
MEAN 7.03 9.63 7.27 15.09 15.10 13.66
SD 0.03 2.69 0.50 1.57 0.01 0.78
CV 0.45 27.89 6.82 10.42 0.05 5.68

As shown in table the ratio of demand deposit is more in HDFC bank (15.10) followed by
another private sector bank AXIS (15.09). Demand deposit is more in private sector banks than
in public banks it may be because no interest is paid on these accounts except in special cases
where a large dormant balance is kept which could otherwise be transferred to the savings
deposits.

Saving Deposit Ratio

Accounts that pay interest and can be withdrawn on upon demand Offered by banks, credit
unions, and Savings and Loans.

Saving Deposit Ratio = Saving Deposit / Total Deposit.

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 YEAR SBI PNB BOB AXIS HDFC ICICI

2018 37.44 58.60 27.85 32.52 28.39 35.73

2019 37.48 61.34 27.36 27.99 26.96 34.57

2020 37.16 36.31 28.24 27.03 27.08 31.73

MEAN 37.36 52.08 27.82 27.51 27.48 33.15

SD 0.17 13.73 0.44 0.67 0.79 2.01

CV 0.46 26.36 1.58 2.45 2.88 6.06

As shown in table the ratio of savings deposit to total deposit is maximum in case of PNB
(52.08). It is an account at a bank in which the customer deposits money for any non-immediate
use. For example, one may utilize a savings deposit to save funds for an expensive purchase,
such as a house or a car. Because most customers keep money in a savings deposit for a longer
period than a checking account, a savings deposit pays a slightly higher interest rate.

Net Interest Margin

A measure of the return on a Company's investments relative to its interest expenses. The net
interest margin helps a company determine whether or not it has made wise investment
decisions. A negative net interest margin indicates that interest expenses exceed investment
returns and that the company therefore has a net negative return. A positive net interest margin
indicates the opposite.

Net Interest Margin = (Interest Received - Interest Paid) / total Assets.

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 YEAR SBI PNB BOB AXIS HDFC ICICI

2018 2.27 0 2.25 2.7 3.88 2.48

2019 2.5 -22.51 2.48 2.72 3.97 2.64

2020 2.59 0.68 2.4 2.77 3.79 2.91

MEAN 2.45 -7.28 2.38 2.73 3.88 2.68

SD 0.17 13.20 0.12 0.04 0.09 0.22

CV 6.73 -181.36 4.91 1.32 2.32 8.12

As shown in table NIM of HDFC is more than others i.e. 3.88 which shows that interest earned by HDFC
bank is much more than expended and other banks are earning less interest. Interest earned by bank is
there foremost income which is more in case of HDFC and NIM of PNB is lowest i.e. -7.28 which shows
that interest earned by PNB is less than expended and other banks following are almost at same level and
chart shows that there is very less variation in case of PNB bank and more variation in ICICI bank.

Credit Deposit Ratio

The proportion of loans generated by banks from the deposits received.
Credit Deposit Ratio= Credit / Deposit

YEAR SBI PNB BOB AXIS HDFC ICICI

2018 72.47 67.53 67.79 95.45 83.46 91.34

2019 73.94 67.75 72.44 95.04 91.72 89.85

2020 74.04 67.47 72.66 91.34 92.47 83.7

MEAN 73.48 67.58 70.96 93.94 89.22 88.30

SD 0.88 0.15 2.75 2.26 5.00 4.05

CV 1.20 0.22 3.88 2.41 5.60 4.59

54 | P a g e
As per table AXIS bank is issuing maximum credit as per the deposits generated by them 92.13
and other public banks are almost at same level and variation in least in case of PNB and
maximum in case of ICICI Bank.

Debt Equity Ratio

The debt-to-equity ratio (debt/equity ratio, D/E) is a financial ratio indicating the relative
proportion of entity's equity and debt used to finance an entity's assets. If the ratio is increasing,
the company is being financed by creditors rather than from its own financial sources which may
be a dangerous trend.A debt-to-equity ratio is calculated by taking the total liabilities and
dividing it by the shareholders' equity:
Debt-to-equity ratio = Debt / Equity

YEAR SBI PNB BOB AXIS HDFC ICICI

2018 0.06 0.04 0.04 0.08 0.13 0.39
2019 0.06 0.05 0.04 0.06 0.05 0.31
2020 0.05 0.05 0.04 0.13 0.06 0.27
MEAN 0.06 0.05 0.04 0.10 0.08 0.29
SD 0.01 0.01 0.00 0.05 0.04 0.03
CV 10.19 12.37 0.00 52.10 54.49 9.75

As shown in table debt equity is ratio is maximum in case of two banks i.e. AXIS and ICICI and
variation is least in case of BOB and maximum in case of HDFC Bank.

Return on Assets
Return on assets is the ratio of annual net income to average total assets of a business during a
financial year. It measures efficiency of the business in using its assets to generate net income.
ROA= Net income / Total asset

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 YEAR SBI PNB BOB AXIS HDFC ICICI

2018 -0.12 -1.67 -0.26 0.07 1.86 0.86

2019 0.08 -1.28 0.14 0.67 1.87 0.48
2020 0.45 0.04 0.09 0.22 1.90 0.86

MEAN 0.73 -0.97 -0.01 0.45 1.88 0.73

SD 0.22 0.90 0.22 0.32 0.02 0.22
CV 29.92 -92.39 -2179.45 71.51 1.11 29.92

As shown in table ROA is highest in case of HDFC is 1.88 and variation is more in case of BOB and least
in case of HDFC. This return is related with overall profitability.

Return on Equity

One of the most important profitability metrics is return on equity (or ROE for short). Return on
equity reveals how much profit a company earned in comparison to the total amount of
shareholder equity found on the balance sheet.

ROE= Net Income/ Shareholders Fund

YEAR SBI PNB BOB AXIS HDFC ICICI

2018 -2.16 -32.50 -4.62 0.77 18.43 8.70

2019 1.48 -24.96 2.45 7.65 17.05 5.20

2020 8.32 0.72 1.63 2.44 16.54 9.72

MEAN 7.87 -18.91 -0.18 5.05 17.34 7.87

SD 2.37 17.42 3.87 3.68 0.98 2.37

CV 30.11 -92.08 -2148.31 73.02 5.64 30.11

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As shown in table ROE is maximum in case of HDFC 17.34 and HDFC has least variation in this
and BOB is having more variation.

Operating Margin Ratio

Operating margin ratio or return on sales ratio is the ratio of operating income of a business to its
revenue. It is profitability ratio showing operating income as a percentage of revenue.

Operating margin = Operating Profit/ Total Revenue

YEAR SBI PNB BOB AXIS HDFC ICICI

2018 -35.7 -44.05 -21.50 -24.45 2.93 -76.74

2019 -29.14 -33.35 -12.85 -16.31 3.32 -74.51

2020 -29.63 -16.43 -14.25 -22.69 1.97 -63.32

MEAN -31.49 -31.28 -16.20 -19.50 2.74 -71.52

SD -30.09 13.93 4.64 4.51 0.69 7.19

CV 95.54 -44.53 -28.66 -23.14 25.36 -10.05

As shown in table operating margin of HDFC is maximum 2.74 operating margin is directly concerned
with profitability. HDFC is least variable and SBI is more variable which states that HDFC bank’s
profitability doesn’t change much.

Net Profit Margin Ratio

Net profit margin is the percentage of revenue remaining after all operating expenses, interest,
taxes and preferred stock dividends (but not common stock dividends) have been deducted from
a company's total revenue.

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 Net Profit Margin = Net Profit/Total Revenue

YEAR SBI PNB BOB AXIS HDFC ICICI

2018 -1.82 -25.82 -4.15 0.99 21.76 14.63

2019 1.21 -19.22 2.05 9.00 21.34 7.90

2020 6.73 0.66 1.19 2.94 22.33 13.23

MEAN 2.04 -14.79 -0.30 5.97 21.81 11.92

SD 3.33 13.78 3.36 4.29 0.50 3.55

CV 163.07 -93.18 -1107.35 71.78 2.28 29.79

As per table HDFC bank enjoys more net profit than other banks at 21.81 and variation is also
least in case of HDFC bank and much higher variation in SBI.

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 CHAPTER 6

Conclusion, Suggestions & Implications

CONCLUSION

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The foregoing analysis for SBI has revealed that the overall profitability is medium in year 2018-
20 because they there NIM is almost same with other banks. The deposits are being utilised in
good manner as they are giving credit on it and there CDR and profitability is well associated.
Debt equity ratio is not much high. And net profit margin is less than other banks.

For PNB savings deposit is very high as compared to other banks and they have good association
with deposits and there conversion of deposits into credits is very high and. NIM is very less and
need increase the interest income as compared to interest expended.

For BOB bank the demand deposit ratio for is less than other banks. It doesn’t have good
association with deposits so there CDR is also less and NIM is also so they need to gear up the
interest income by granting more loans or reducing interest so that more volume can be created.
NP in this case is directly associate with ROA.

For ICICI bank it has good association with CAR and deposits in banks are very high and NIM is
medium which needs to be increased somewhere because it will impact the profitability. TD and
SD are highly associated and conversion rate for deposit into credit is also good but there is lot of
variation in TD.

For HDFC it has very high NIM which will make it highly profitable and a great sign for
increase in profitability and in this case NIM and ROA are high which has drastically impacted
the NP.

For AXIS DDR is quite high as compared to other banks but saving deposit ratio of AXIS Bank
is less than others and credit deposit ratio is high as compared to other banks.

Suggestion

From the growth perspective we can easily determine that in the financial 2018-20 private sector
banks are making more profit which indicate that there would be more chances for future growth.
For enhancing the growth of public sector there NIM should be increased so that they will make
more profit.

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