Page 39 - Banking Finance October 2015
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ARTICLE
Deposits: Deposits are both liabilities and assets of the from the level of 73.11 in 2008-09 to the level of 86.93 in
banks. They are also the major portion of the bank's working 2012-13. The factors that influence the Credit Deposit Ratio
capital. Various types of deposits are demand deposits, time are SLR and CRR. It may be said that deposits and advances
deposits and savings deposits. Demand deposits can be are in increasing trend.
withdrawn at any time and no interest is paid. Time deposit
can be withdrawn after a fixed period of time and high rate Investments/Total Deposits:- Usually Public sector banks
of interest is paid. Savings deposits are those which can be invest in government securities, public sector units as per
withdrawn to the limited extent in a given period and some the RBI and the Central Governments norms. The
interest is paid. investment rate has been on decrease. ie; 37.19 percent
in 2008-09 and 29.18 percent in 2012-13. So Return on
Table 2 shows that deposits of SBI have been on increase Investment are also decreased 6.01 percent from 2008-09
due to the growth of economy. The deposits increased by to 2012-13. It may be observed that the profitability
about 1.6 times from 2008-09 to 2012-13 ie; from Rs. performance had reported to a decline.
7420731 million Rupees in 2008-09 to Rs.12027396 million
by 2012-13. Capital Adequacy Ratio:- This Ratio is also known as capital
to risk weighted assets ratio(CRAR). As per the RBI norms,
Advances:- Advances are the most profitable but least liquid CRAR should not be reduced from the level of 9 per cent
assets. The difference between the loans and advances is and as per Basel norms it should not be reduced to 8 per
that, advances are for short period and loans are for longer cent. The capital Adequacy Ratio had varied between the
period. Loans and advances earn high rate of interest but lowest of 11.98 in 2010-11 and the highest of 14.25 in 2008-
carry greater risk and are non-shiftable. Indian public sector 09. However the ratio depicted mild fluctuations over a
banks have to make loans and advances obliging the Central period of time as can be seen from year to year changes in
Government norms. capital adequacy ratio. It may be observed that SBI has
been maintained over and above the norm specified by the
Public sector banks must lend 10 percent of their credit to RBI and Basel. It signifies healthy condition.
the priority sectors such as agriculture, small scale
industries and other priority sectors. As the deposits have Profitability Performance:- The basic parameters that
been on increase, the bank's lending capacity has also been measure profitability generated by SBI are:-
increased. The advances increased from Rs.5425032 million D Interest income
in 2008-09 to Rs.10456166 million in 2012-13. D Other income
D Net interest income as % to total assets
Credit Deposit Ratio:- Higher CD ratio and I/TD ratio, results D Net profit Margin
in less liquidity while lower CD ratio and I/Td ratio increases D Return on Assets
the liquidity of the bank. Scheduled banks have to maintain
25 per cent of their net demand and time liability in the
form of cash, gold and unencumbered approved securities.
This is known as statutory Liquidity ratio. A raise in the SLR
reduces the bank's ability to create credit. As per the
guidelines of RBI, every commercial bank should vest certain
proportion of its deposits in the form of cash reserves to
meet certain unforeseen situations which is known as Cash
Reserve Ratio.
Credit Deposit Ratio is an important parameter in the
analysis of financial health of banking industry. From
Table.2, it is inferred that this ratio has been increasing
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