A MANAGEMENT THESIS ON
“A STUDY ON THE PERFORMANCE OF PUBLIC SECTOR BANKS PRE AND POST FINANCIAL CRISIS.”
A THESIS ON
“A STUDY ON THE PERFORMANCE OF PUBLIC SECTOR BANKS PRE AND POST FINANCIAL CRISIS.”
MASTERS IN BUSINESS ADMINISTRATION
A repost submitted in partial fulfillment of the requirement of the MBA program(class of 2010)
1.Review of literature
3. Company Profile
3.1 State Bank of India
3.2 Punjab National Bank
4.Analysis and Interpretation with foot note
5.Findiongs Suggestion and Conclusion
This is to certify that the Management Thesis titled “A Study On The Performance of Public Sector Banks Pre And Post Financial Crisis.” submitted during 3rd Semester of the MBA program (the class of 2010) embodied original work done by me
Signature of the student
Name in Capitals JITHU J
Enroll No. 8NBBP113
Campus ADAM SMITH INSTITUTE OF MANAGEMENT
Signature of Faculty Supervisor
Name in Capitals
MEANING OF BANKING
Banking in India was defined under Section 5(A) as "any company which transacts banking, business" and the purpose of banking business defined under Section 5(B),"accepting deposits of money from public for the purpose of lending or investing, repayable on demand through cheque/draft or otherwise". In the process of doing the above-mentioned primary functions, they are also permitted to do other types of business referred to as Utility Services for their customers (Banking Regulation Act, 1949).
INTRODUCTION ON PUBLIC SECTOR BANKS
Indian Banking sector is dominated by Public sector banks (PSBs) which accounted for 72.6% of total advances for all SCBs as on 31st March 2008. PSBs have rapidly expanded their foot prints after nationalization of banks in India in 1969 and further in 1980. Although there is a restrictive entry/expansion for private and foreign banks in India, these banks have increased their presence and business over last 5 years.
Peculiar characteristic of Indian banks unlike their western counterparts such as high share of household savings in deposits (57.4% of total deposits), adequate capitalisation, stricter regulations and lower leverage makes them less prone to financial crisis, as was seen in the western world in mid FY09.
The Scheduled Commercial Banks (SCBs) in India have shown an impressive growth from FY04 to the mid of FY09. Total deposits, advances and net profit grew at CAGR of 19.6%, 27.4% and 20.2% respectively from FY03 to FY08. Banking sector recorded credit growth of 33.3% in FY05 which was highest in last 2 and half decades and credit growth in excess of 30% for three consecutive years from FY04 to FY07, which is best in the banking industry so far. Increase in economic activity and robust primary and secondary markets during this period have helped the banks to garner larger increase in their fee based incomes.
With in the group of banks, foreign and private sector banks grew at higher rate than the industry from FY03 to FY08 primarily because of lower base effect and rapid expansion undertaken by these banks. In FY09, overall growth in credit and deposits was led by PSBs. However, growth of private and foreign banks was significantly lower in FY09 due to their high exposure to stressed sectors and problem at parent level for foreign banks.
The government had announced its intend to retain majority stake in public sector banks in its budget early this month, reversing its earlier plans of reducing the shareholding to 33 percent while retaining management control.
In fiscal 2009, the government infused 16.5 billion rupees of capital into three public sector banks and is expected to infuse 21.5 billion rupees more by the end of September, Crisil said in a statement.
Minister Pranab Mukherjee may announce on Monday recapitalization of public sector banks to help them meet the credit demand of productive sectors, especially those hit hard by the global financial meltdown.
WHY I CHOOSE THIS TOPIC:-
Banking performance is the mirror reflection of an economy. So long as banks do their primary function of banking by lending to the constituents of economy, they stand a chance
of nudging ahead.
Public banks still dominate the banking systems serving the majority of people in developing countries, despite the rash of privatizations of the last 10 years and including the pickup in the last five years. The overall stance of RBIs monetary and credit policy during the year was to ensure price stability and financial system stability along with continuation of the growth momentum, emphasis on credit quality and credit delivery including financial inclusion. During 2007-08, the Bank Rate, Repo and Reverse Repo rates were kept unchanged. To manage the liquidity in the economy, RBI raised the Cash Reserve Ratio four times: in April, August and November 2007 from 6% to 7.50%. In line with liquidity tightening, PLRs and deposit rates of rnajor banks were hiked during the year. While lending rates rose to 12.25-12.75% from 12.25- 12.50%, deposit rates (for more than one year maturity) rose to 8.25-9.0% from 7.5-9.0% in the previous financial year. However, in the month of February 2008, to keep up the growth momentum in the economy, some banks announced cuts in their PLR and interest rate on housing loans below Rs.20 lakh.
Public Sector bank means any Government Sector Bank/Institute that goes public... means that issues it share to general public. It also has a greater share of government (more than 50%) so that the main motto of social welfare other than maximizing Profit remains. A public sector bank also looks for funding developmental work in the country as the government has a majority share in it
A public bank is that in which there are numerous partners or shareholders, and they elect from their own body a certain number, who are intrusted with its management. The business of banking consists chiefly in receiving deposits of money, upon which interest may or may not be allowed; in making advances of money, principally in the way of discounting bills; and in affecting the transmission of money from one place to another.
Among the Public Sector Banks in India, United Bank of India is one of the 14 major banks which were
nationalized on July 19, 1969. Its predecessor, in the Public Sector Banks, the United Bank of India Ltd., was formed in 1950 with the amalgamation of four banks viz. Comilla Banking Corporation Ltd. (1914), Bengal Central Bank Ltd. (1918), Comilla Union Bank Ltd. (1922) and Hooghly Bank Ltd. (1932).
Oriental Bank of Commerce (OBC), a
Government of India Undertaking offers Domestic, NRI and Commercial banking services. OBC is implementing a GRAMEEN PROJECT in
Defraud District (UP) and Hanumangarh District (
Rajasthan) disbursing small loans. This Public
Sector Bank India has implemented 14 point action plan for strengthening of credit delivery to women and has designated 5 branches as
specialized branches for women entrepreneurs.
The following are the list of Public Sector Banks in India
REFORMS IN BANKING SECTOR
CAMELS stands for Capital Adequacy, Asset Quality, Management, Efficiency, Liquidity
and Systems with reference to reforms in Banking Sector.
BANKS CHOSEN FOR ANALYSIS
For the purpose of analyzing the financial performance of public sector banks . I have hereby chosen two major public sector banks namely State Bank Of India and Punjab national bank
STATE BANK OF INDIA
State Bank of India or SBI Bank , the premier Nationalized Indian Bank. State Bank of India is actively involved since 1973 in non-profit activity called Community Services Banking.
State Bank of India is India's largest bank amongst all public and private sector banks operating in India. State Bank of India owns and operates the following subsidiaries and Joint Ventures
The corporate center of SBI is located in Mumbai. In order to cater to different functions, there are several other establishments in and outside Mumbai, apart from the corporate center. The bank boasts of having as many as 14 local head offices and 57 Zonal Offices, located at major cities throughout India. It is recorded that SBI has about 10000 branches, well networked to cater to its customers throughout India.
The eight banking subsidiaries are:
- State Bank of Bikaner and Jaipur (SBBJ)
- State Bank of Hyderabad (SBH)
- State Bank of India (SBI)
- State Bank of Indore (SBIR)
- State Bank of Mysore (SBM)
- State Bank of Patiala (SBP)
- State Bank of Saurashtra (SBS)
- State Bank of Travancore (SBT)
PRODUCTS AND SERVICES
- SBI Term Deposits SBI Loan For Pensioners
- SBI Recurring Deposits Loan Against Mortgage Of Property
- SBI Housing Loan Loan Against Shares & Debentures
- SBI Car Loan Rent Plus Scheme
- SBI Educational Loan Medi-Plus Scheme
- Agriculture/Rural Banking
- NRI Services
- ATM Services
- Demat Services
- Corporate Banking
- Internet Banking
- Mobile Banking
- International Banking
- Safe Deposit Locker
- SBI Vishwa Yatra Foreign Travel Card
- Broking Services
FINANCIAL PERFORMANCE OF STATE BANK OF INDIA AND PUNJAB NATIONAL BANK
State Bank of India
------------------- in Rs. Cr. -------------------
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Capital and Liabilities:
Total Share Capital
Equity Share Capital
Share Application Money
Preference Share Capital