Financial Performance of Selected Banks in India

Financial system is the backbone of any economy as it has a direct bearing on the economic growth of a country and thereby prosperity and welfare of the populace.. The financial system services other sectors of the economy, viz,the real economy .Stability of the financial system is critical to the stability of the economy itself. Banking plays an important role in the growth and development of Indian economy in each and every aspect. Banks lubricate the entire financial system and ensure smooth operations in india. It supplies the lifeblood-money that supports and rapid growth in all the industries as well as for the nation. . The banking sector is the principal constituent of the financial system, which is directly linked to the country‘s economy; each complements the other for growth, strength and status. A strong and resilient banking system is the foundation for sustainable economic growth. Financial performance of the banking sector is measured by the increase in number of banks branches, deposits, credit,etc. In analyzing the financial performance of the banking sector . it indicates the direction in which the Indian economy is moving with the limitation of the process of liberalization and globalization of the economy. The major landmark in the development of the Indian banking system was the nationalization of banks, after which profit earning was not regarded as the main objective. The focus shifted to social banking and the main focus on public sector that too highly regulated environment. However, after liberalization, privatization and globalization, commercial banks started facing lot of challenges in the form of competition due to which increased efficiency to meet new challenges led to stable banking system. Banking sector has brought about a considerable progress in its efforts at deposit mobilization and has taken a number of measures in the recent past for increase in the rate of growth of deposit..The analysis of financial performance of banks is the process of identifying the financial strengths and weakness of the bank by establishing proper relationship between profit and loss account and balance sheet . Finanical performance helps in short term and long term forecasting and growth can be identified..Performance of commercial banks is important indicator of the growth of the banking system..Performance can be measured in terms of profitabilityefficiency, solvency and credibility of banks. These indicators not only tell about the success or the performance of the banks but also help in retaining the confidence of the saving community, who view banking as one of the safest modes of savings.

Kulkarni (1979) emphasized the social responsibilities of banking sector in India. He concluded profit maximization was not indicator of profitability of banks because social benefits arising from the bank operations cannot be ignored. He was of view that while fulfilling social responsibility ,the Indian banks must always try to make the banking industry as successful by reducing cost,improving banking system and by increasing overall profitability. industry of India. Further, she stressed that the scientific management practices must be introduced in order to enhance the profits and profitability of the public sector banks. Das (1997) thoroughly studied various variables affecting the productivity of nationalized banks in India. . He also recommended the restructuring of banks in order to improve the different parameters of productivity in the Indian banks. Raul and Ahmed (2005) conducted their study for two distinct time periods, pre- and post reforms, and found that during the post-reform years, public sector banks had shown low level of net profit as a percentage to total assets. So, the profitability of banks had come under reverse pressure. It was analyzed that lower interest spread and priority sector lending to a large extent are responsible for the low profitability. They suggested that in order to control the adverse situation, corporate governance should be implemented in these banks to make the system more transparent, consistent and accountable Baral (2005), examined the performance of joint ventures banks in Nepal by applying the CAMEL Model. The research was mainly based on secondary data drawn from the annual the reports published by joint venture banks. The report of the research were analyzed the financial health of joint ventures banks in the CAMEL parameters. The findings of the research stated that the financial health of joint ventures is more effective than that of commercial banks. The research also revealed that the components of CAMEL showed that the financial health of joint venture banks was not difficult to manage the possible impact to their balance sheet on a large scale basis without any constraints inflicted to the financial health. Wirnkar and Tanko (2008), analyzed the adequacy of CAMEL in evaluating the performance of bank. This research was examined to find out the ampleness of CAMEL in examining the overall performance of bank, to find out the importance of each component in CAMEL and finally to look out for best ratios that bank regulators can adopt in assessing the efficiency of banks. To analysis the bank was evaluated from a sample of eleven commercial banks operating in Nigeria. The research period covered data from annual reports over a period of nine years (1997-2005). The research concluded the inability of each component in CAMEL to congregate the full performance of a bank. It also determined the best ratios in each CAMEL parameter. Prasad and Ravinder (2014) analyzed the profitability of four major banks in India, i.e., State Bank of India, Punjab National Bank, ICICI Bank and HDFC Bank for the period 2005-06 to 2009-10. Statistical tools used in this stusy like arithmetic mean, parameters like Operating Profit Margin, Gross Profit Margin, Net Profit Margin, Earning per Share, Return on Equity, Return on Assets, Price Earning Ratio and Dividend Payout Ratio. The study stated that State Bank of India performed better in terms of earning per share anddividend payout ratio, while Punjab National Bank performed better in terms of operating profit margin and return on equity. The study determined that HDFC Bank outperformed in terms of gross profit margin, net profit margin, return on assets and price earning ratio. The study concluded that ICICI Bank paid highest portion of earning as dividends to shareholders.

1. To find out Capital adequacy, Assets quality,Managementefficiency,Earnings and liquidity of the selected banks. 2. To compare the financial performance of selected banks using CAMEL rating system. 3. To evaluate the financial performance of selected banks.

1. The study depends on secondary data only. 2. The period of study is limited to five years only 3. All the secondary data complications are apply for the study. 4. The result of the study is restricted to selected banks only.

The nature of study of this project is analytical study. The study is based on secondary data.

• Annual reports

• Periodicals

• Bulletins

• News letter

• Internal report of banks

• Journals

• Websites

The tool used to analysis the financial performance of selected banks are: CAMEL FRAMEWORK

from 2014 to 2018 period.

CAMEL ANALYSIS

• Capital Adequacy Ratios

During the last five years, ICIC Bank is in a position to maintain more than this minimumRequirement.Higher the ratio the bank is in a comfortable position to absorb losses.It isFound that ICICI ranked on the top postion followed by YES bank and HDFC bank..

• Assets Quality Ratio

YES bank is one of the top position with least average of 0.05 followed by HDFC bank with average of 0.22 and AXIS bank with average of 0.33. ICICI bank sound the lowest position with highest average of 1.04.

In above table and figure shows that ICICI bank is one of the top position with highest average of 100.72, followed by HDFC bank with average of 80.09 and AXIS bank with average of 79.88. FEDERAL bank scored the lowest position.

In above table and figure shows that YES bank is one of the top position with highest average of 22.6, followed by AXIS bank with average of 19.73 and HDFC bank with average of 17.49. ICICI bank scored the lowest position.

• Earning ability

bank with average of 1.52. FEDERAL bank scored the lowest position.

• Liquidity ratio

In above table and figure shows that HDFC bank is one of the top position with highest average of 7.58, followed by ICICI bank with average of 7.46 and AXIS bank with average of 6.98. YES bank scored the lowest position.

In above table and figure shows that ICICI bank is one of the top position with highest average of 13.53, followed by HDFC bank with average of 10.15 and AXIS bank with average of 9.394. FEDERAL bank scored the lowest position.

In above table and figure shows that FEDERAL bank is one of the top position with highest average of 134.89, followed by ICICI bank with average of 99.05 and YES bank with average of 79.22. AXIS bank scored the lowest position.

The overall financial performance of new generation banks in India for the period of 2014-2018. It is found that under the capital adequacy ratio parameter HDFC bank was at the top position, while YES bank got lowest rank. Under the asset quality parameter, HDFC bank held the top rank while ICICI bank held the lowest rank. Under management efficiency parameter it is observed that top rank taken by YES bank and lowest rank taken by FEDERAL bank. In terms of earning quality parameter the capability of HDFC bank and AXIS bank were got the top rank in the while YES bank was at the lowest position. Under the liquidity parameter HDFC bank and ICICI bank were on the top position and AXIS bank was on the lowest position.

1. According to the capital adequacy ratio of the banks during the last five years ICICI bank is able to achieve more than the minimum requirement capital adequacy in the last five years. 2. The overall performance of the capital adequacy ratio of the banks shows the HDFC bank got top positions. 3. The overall performance of the assets quality ratio of the banks shows the HDFC bank got top position. This indicates the models of advances which the bank has made to generate interest income. 4. According to the overall performance of management efficiency ratio of the banks shows the YES bank got top position. 5. According to the overall performance of earning quality ratio of the banks show the HDFC and AXIS bank were got top position.

During the process of evaluation of financial performance of the selected banks , the study highlighted that, the banks have obtained different ranks with respect to CAMEL ratios. This tudy concluded that in terms of capital adequacy ratio parameter HDFC bank was at the top position, while YES bank got lowest rank. The possible reason for this was the poor performance of YES bank in

rank while ICICI bank held the lowest rank. The possible reason for this was the poor performance of ICICI in net NPAs to net advances, total investments to total assets and net NPAs to total assets ratios. Under management efficiency parameter it is observed that top rank taken by YES bank and lowest rank taken by FEDERAL bank. The possible reason for this was the poor performance of FEDERAL bank in total advances to total deposits, profit per employee assets ratios. Under management efficiency parameter it is observed that top rank taken by YES bank and lowest rank taken by FEDERAL bank. The possible reason for this was the poor performance of FEDERAL bank in total advances to total deposits, profit per employee and return on equity ratios. In terms of earning quality parameter the capability of HDFC and AXIS banks were got the top rank in the while YES bank was at the lowest position. The possible reason for this was the poor performance of YES bank in operating profit to total assets, net profit to total assets and net interest margin to total assets ratios. Under the liquidity parameter HDFC and ICICI banks were on the top position andAXIS bank was on the lowest position. The possible reason for this was the poor performance of AXIS bank in Liquid Assets to Demand Deposits, Government securities to total asset ratios.

1 Baral (2005), ―A Case Study of Joint Venture Banks in Nepal‖ The Journal of Nepalese Business Studies, Vol.2 –No.1 2 Wirnkar&Tanko (2008), CAMELS and Banks Performance Evaluation: The Way Forward Working paper Series. Social Science Research Network 3 Prasad and Ravinder, G. (2014), ―Performance Evaluation of Banks: A Comparative Study on SBI,PNB,ICICI And HDFC.Advances in management Vol 4 (2) 4 Chopra Kiran (1987), Managing Profits, Profitability and Productivity in Public Sector Banking.ABS Publication 5 Das MR (1997), ‗Productivity in Nationalised Banks‘ , a paper presented at the bank Economists Conference, IBA – Bulletin, October, Mumbai. 6 Kulkarni LG (1979) , ‗Development Responsibility and Profitability of Banks‘ , Economic and Political Weekly, August, Mumbai.

1. www.moneycontrol.com 2. www.icicibank.com 3. www.hdfcbank.co.in 4. www.yesbank.in 5. www.federalbank.co.in

Research Scholar, Meerut College, Meerut, Uttar Pradesh