Page 37 - Banking Finance October 2015

ARTICLE

Statement of the Problem parameters like NPA, Operating expense to total income,
Cost of funds and wage bill. Financial performance is
Nationalization of banks in 1969 and 1980 to sustain the measured under the headings of liquidity performance and
economy was a great event in the banking history of India. profitability performance.
Increase in deposits, loans and advances and assets after
nationalization shows that public sector banks have been The basic parameters to evaluate the liquidity performance
running smoothly to a great extent. With the are credit deposit ratio, Investment to total deposit ratio
implementation of the reforms of Narasimham committee, & capital adequacy ratio. The basic parameters that
the operational and financial performance of public sector measure profitability generated by SBI are interest income,
banks improved further to a greatest extent. other income, net interest spread divided by total assets,
Return on Assets and net profit margin. The financial
Deposits, loans and advances, assets, interest income, non- viability is measured through the analysis of camel model.
interest income and profit was hiked. Various technological
innovations have been introduced to serve the customers Operational performance of SBI
in a better way. But despite this progress, when the
performance of the public sector banks is compared to that The following parameters have been used to evaluate the
of foreign banks and private sector banks,the performance operational performance of SBI, the details of which are
of public sector banks stands secondary. shown in Table 1.
D NPA as % to net advances
So the RBI and Central Government are still lagging to take
several steps to make these banks stronger and vibrant. As D Operating expenses to total income
the SBI is the largest public sector bank in India with over
200 years presence in financial services, this study is focused D Cost of funds
on the performance level of SBI.
D Wage as % to total expenses
Methodology of the Study
Table: 1 Operational performance of SBI
The study is based on the secondary data. The data required during 2008-2013.
for the study are collected from RBI annual reports,
journals, Reports on Trend and Progress of Banking in India, Year Net NPA Operating Wage as
Government publication books and websites. The yardsticks
by which the performance of SBI is appraised in this study 2008-09 as % to expenses as Cost of % to total
are the basic operational and financial parameters. The 2009-10
analyzed data stands for five years starting from 2008-09 2010-11 net % to total funds expenses
to 2012-13. 2011-12
2012-13 Advances income
RBI has introduced a rating methodology technique to Total
judge the financial viability of banks which is known as Mean 1.79 20.46 5.72 16.64
CAMEL (Capital adequacy, Asset Quality, Management value
performance, Earning performance, Liquidity) Model. The 1.72 23.63 5.14 18.86
period for evaluating performance through CAMEL in this
study ranges from 2008-09 to 2012-13, i.e., for 5 years. In 1.63 23.67 4.67 21.16
total,eleven parameters have been used to evaluate the
operational and financial performance of SBI. 1.82 21.57 5.35 19.01

Data Analysis 2.1 21.58 5.63 17.57

The operational performance of SBI is analyzed by using the 9.06 110.91 26.51 93.24

1.81 22.18 5.3 18.65

Source : RBI

Non -performing assets: The level of net NPA is a continuous
issue and a vital parameter in the analysis of financial health
of banking industry. In the past, SBI announced for higher
level of NPA as they held a higher share in lending. But the

BANKING FINANCE | OCTOBER | 2015 | 37

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