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PERFORMANCE APPRAISAL OF STATE BANK OF INDIA Senior Professor in Finance, P.G Department of Commerce Utkal

PERFORMANCE APPRAISAL OF STATE BANK OF INDIA

Senior Professor in Finance, P.G Department of Commerce Utkal University Bindu Bothra(11MFC030) Alina Sarma(11MFC025) Under the
Senior Professor in Finance,
P.G Department of Commerce
Utkal University
Bindu Bothra(11MFC030)
Alina Sarma(11MFC025)
Under the guidance of:
Prof. Samson Moharana
Submitted by:

MASTER OF FINANCE & CONTROL

P.G. DEPARTMENT OF COMMERCE

UTKAL UNIVERSIT, VANIVIHAR BHUBANESWAR

(2011-2013)

 LARGEST COMMERCIAL BANK OF INDIA  HAVING HIGHEST NO. OF BRANCHES AND ATMS IN INDIA(BRANCHES-19347
 LARGEST COMMERCIAL BANK OF INDIA
 HAVING HIGHEST NO. OF BRANCHES
AND ATMS IN INDIA(BRANCHES-19347
& ATM-25,005)
 HAVING HIGHEST NO. OF FOREIGN
BRANCHES (156)
 HIGHEST AMOUNT OF CAA DEPOSITS
 PROVIDINGA WIDE RANGE OF
PRODUCTS AND SERVICES
SBI AT A QUICK GLANCE
(48.66%)

AIMING HIGH ON STRONG FOUNDations

DECLARATION

We hereby declare that the work presented in this Project entitled Performance appraisal of SBIsubmitted to Prof. Samson Moharana (Senior Professor in Finance), at Department of Commerce, Utkal University, Bhubaneswar is an authentic record of our original work.

Bindu Bothra Alina Sharma Signature of the Candidate: Signature of the Mentor: Date:
Bindu Bothra
Alina Sharma
Signature of the Candidate:
Signature of the Mentor:
Date:

ACKNOWLEDGEMENT

The satisfaction and joy that accompanies the successful completion of a task is incomplete without mentioning the name of the person who extended his help and support in making it a success.

Finally, we thank all those who have directly or indirectly helped us in our project. We
Finally, we thank all those who have directly or indirectly helped us
in our project. We express our profound thanks to our teachers as well
as friends who are the constant source of encouragement for us.
We are greatly indebted to Prof. Samson Moharana (Senior
Professor in Finance), at Department of Commerce, Utkal
University, Bhubaneswar for devoting his valuable time and efforts
towards our project. We thank him for being a constant source of
knowledge, inspiration and help for successfully making this project.

CONTENTS

CERTIFICATE DECLARATION ACKNOWLEDGEMENT EXECUTIVE SUMMARY

COMPANY PROFILE CHAPTER 5: DATA ANALYSIS & INTERPRETATIONCHAPTER       THE CAMELS
COMPANY PROFILE
CHAPTER 5: DATA ANALYSIS & INTERPRETATIONCHAPTER
THE CAMELS FRAMEWORK
CAPITAL ADEQUACY
ASSET MANAGEMENT
MANAGEMENT SOUNDNESS
EARNINGS & PROFITABILITY
LIQUIDITY
SENSITIVITY TO MARKET RISK
CAMELS FRAMEWORK
CHAPTER 4:
STATE BANK OF INDIA
SL.NO
CHAPTER 3:
THE BANKING REFORMS & BASEL II ACCORD
CHAPTER 2:
LIMITATIONS OF STUDY
RESEARCH METHODOLOGY:
OBJECTIVE OF STUDY:
STATEMENT OF PROBLEM:
INTRODUCTION
CHAPTER 1:

CHAPTER 6:

SUGGESTIONS & CONCLUSION

BIBLIOGRAPHY

LISTS OF TABLES & GRAPH:-

TABLES:-

  • a) Debt Equity Ratio

  • b) Total Advance to Total Asset Ratio

  • c) Government Securities to Total Investments

  • d) Gross NPA ratio

  • e) Net NPA ratio

5. Total Advance to Total Deposit Ratio o) Government Securities to Total Asset q) Liquidity Asset
5. Total Advance to Total Deposit Ratio
o) Government Securities to Total Asset
q) Liquidity Asset to Demand Deposit
p) Approved Securities to Total Asset
f) Total Advance to Total Deposit Ratio
3. Government Securities to Total Investments
r) Liquidity Asset to Total Deposit
l) Interest Income to Total Income
n) Liquidity Asset to Total Asset
m) Other Income to Total Income
k) Net Profit to Average Asset
2. Total Advance to Total Asset Ratio
g) Business per Employee
6. Business per Employee
h) Profit per Employee
7. Profit per Employee
9. Operating Profit by Average Working Fund
1. Debt Equity Ratio
j) Operating Profit by Average Working Fund
i) Return on Asset
8. Return on Asset
4. Net NPA ratio
GRAPHS:-

10. Net Profit to Average Asset 11. Interest Income to Total Income 12. Other Income to Total Income

13. Liquidity Asset to Total Asset 14. Government Securities to Total Asset 15. Approved Securities to Total Asset 16. Liquidity Asset to Demand Deposit 17. Liquidity Asset to Total Deposit

EXECUTIVE SUMMARY

Due to the nature of banking and the important role of banks in the economy in capital formation, banks should be more closely watched than any other types of economic unit in the economy.

Indian banking system has transformed in recent years due to globalization in the world market, which has resulted in fierce competition. Banking sector is

To evaluate the performance of banking sector we have chosen the CAMEL model which measures the
To evaluate the performance of banking sector we have chosen the CAMEL
model which measures the performance of banks from each of the important
parameter like Capital Adequacy, Assets Quality, Management Efficiency,
Earning Quality and Liquidity. The CAMEL supervisory improvement over the
earlier system in terms of frequency, coverage and focus. In the present study an
attempt is made to evaluate relative performance of banks using CAMEL
approach. Each parameter of CAMEL—Capital Adequacy, Asset Quality,
Management Quality, Earning Quality and Liquidity has been evaluated taking
various ratios.
factors, which need to be taken care while differentiating good banks from bad
ones.
one of the fastest growing sectors in India. Today‘s banking sector becoming more
complex. Evaluating Indian banking sector is not an easy task. There are so many
INTRODUCTION OF BANKING SECTOR CHAPTER -1
INTRODUCTION OF
BANKING SECTOR
CHAPTER -1

Introduction

The Indian banking sector performed better in 2010-11 over the previous year despite the challenging operational environment. The banking business of Scheduled Commercial Banks (SCBs) recorded higher growth in 2010-11 as compared with their performance during the last few years. Credit grew at 22.9 per cent and deposits grew at 18.3 per cent in 2010-11 over the previous year. Accordingly, the outstanding credit-deposit ratio of SCBs increased to 76.5 per cent in 2010-11 as compared with 73.6 per cent in the previous year. Despite the growing pressures on margins owing to higher interest rate environment, the return on assets (RoA) of SCBs improved to 1.10 per cent in 2010- 11 from 1.05 per cent in 2009-10. The capital to risk weighted assets ratio under both Basel I and II frameworks at 13.0 per cent and 14.2 per cent, respectively in 2010-11 remained well above the required minimum of 9 per cent. The gross NPAs to gross advances ratio declined to 2.25 per cent in 2010-11 from 2.39 per cent in 2009-10, displaying improvement in asset quality of the banking sector. Though there was improvement in the penetration of banking services in 2010-11 over the previous year, the extent of financial exclusion continued to be staggering. The number of complaints received at the Banking Ombudsman offices witnessed decline in 2010-11 over the previous year.

The word bank means an organization where people and business can invest or borrow money; change
The word bank means an organization where people and business can invest or
borrow money; change it to foreign currency etc. According to Halsbury ³A
Banker is an individual, Partnership or Corporation whose sole pre-dominant
business is banking, that is the receipt of money on current or deposit account, and
the payment of cheque drawn and the collection of cheque paid in by a customer.
THE BANK

The Origin and Use of Banks

The Word ―Bank‖ is derived from the Italian word ―Banko‖ signifying a bench,

which was erected in the market-place, where it was customary to exchange money. The Lombard Jews were the first to practice this exchange business, the first bench

having been established in Italy A.D. 808. Some authorities assert that the Lombard merchants commenced the business of money-dealing, employing bills of exchange as remittances, about the beginning of the thirteenth century. About the middle of

the twelfth century it became evident, as the advantage of coined money was gradually acknowledged, that there must be some controlling power, some corporation which would undertake to keep the coins that were to bear the royal stamp up to a certain standard of value; as, independently of the µsweating¶ which invention may place to the credit of the ingenuity of the Lombard merchants- all coins will, by wear or abrasion, become thinner, and consequently less valuable; and it is of the last importance, not only for the credit of a country, but for the easier regulation of commercial transactions, that the metallic currency be kept as nearly as possible up to the legal standard. Much unnecessary trouble and annoyance has been caused formerly by negligence in this respect. The gradual merging of the business of a goldsmith into a bank appears to have been the way in which banking, as we now understand the term, was introduced into England; and it was not until long after the establishment of banks in other countries-for state purposes, the regulation of the coinage, etc. that any large or similar institution was introduced into England. It is only within the last twenty years that printed cheques have been in use in that establishment. First commercial bank was Bank of Venice which was established in 1157 in Italy.

The study is conducted to analyse state Bank of India on the basis of CAMELS 
The study is conducted to analyse state Bank of India on the basis of CAMELS
model.
DATA SOURCE:
RESEARCH METHODOLOGY:
OBJECTIVE OF STUDY:
STATEMENT OF PROBLEM:
evaluate the strength of State Bank
of India by using CAMELS model
technique.
Primary Data: Primary data was collected from the company balance sheets
and company profit and loss statements
Secondary Data: Secondary data on the subject was collected from Business
journals, Newspaper, company prospectus, company annual reports and RBI
websites.
To achieve our objective we have calculated ratios as per CAMEL
Framework:
To
  • LIMITATIONS OF STUDY

    • 1. Time and resources constraints.

    • 2. The study was completely done on the basis of ratios calculated from the balance sheets.

    • 3. It has not been possible to get a personal interview with the top management employees of State bank of Bank.

4. It has not been possible to get sensitive real data on actual CAMELS analysis performed
4. It has not been possible to get sensitive real data on actual CAMELS
analysis performed by the RBI on State bank of India.
BANKING Reforms & basel accord CHAPTER-2
BANKING Reforms
& basel accord
CHAPTER-2
  • THE BANKING REFORMS

In 1991, the Indian economy went through a process of economic liberalization, which was followed up by the initiation of fundamental reforms in the banking sector in 1992. The banking reform package was based on the recommendations proposed by the Narasimham Committee Report (1991) that advocated a move to a more market oriented banking system, which would operate in an environment of prudential regulation and transparent accounting. One of the primary motives behind this drive was to introduce an element of market discipline into the regulatory process that would reinforce the supervisory effort of the Reserve Bank of India (RBI). Market discipline, especially in the financial liberalization phase, reinforces regulatory and supervisory efforts and provides a strong incentive to

is for the over, 1992. world sector, known Banking the adoption of multidimensional strategies from time
is
for
the
over,
1992.
world
sector,
known
Banking
the adoption of
multidimensional strategies from time to time with varying degrees of success.
problems created by information asymmetries. From a central bank‘s perspective,
Banks are very important for the smooth functioning of financial markets as they
serve as repositories of vital financial information and can potentially alleviate the
banks to conduct their business in a prudent and efficient manner and to maintain
adequate capital as a cushion against risk exposures. Recognizing that the success
of economic reforms was contingent on the success of financial sector reform as
well, the government initiated a fundamental banking sector reform package in

such high-quality disclosures help the early detection of problems faced by banks in the market and reduce the severity of market disruptions. Consequently, the RBI as part and parcel of the financial sector deregulation, attempted to enhance the transparency of the annual reports of Indian banks by, among other things, introducing stricter income recognition and asset classification rules, enhancing the capital adequacy norms, and by requiring a number of additional disclosures sought by investors to make better cash flow and risk assessments. During the pre economic reforms period, commercial banks & development financial institutions were functioning distinctly, the former specializing in short & medium term financing, while the latter on long term lending & project financing. Commercial banks were accessing short term low cost funds thru savings investments like current accounts, savings bank accounts & short duration fixed deposits, besides collection float. Development Financial Institutions (DFIs) on the other hand, were essentially depending on budget allocations for long term lending at a concessionary rate of interest. The scenario has changed radically during the post reforms period, with the resolve of the government not to fund the DFIs through budget allocations. DFIs like IDBI, IFCI & ICICI had posted dismal financial results. Infect, their very viability has become a question mark. Now, they have taken the route of reverse merger with IDBI bank & ICICI bank thus converting them into the universal banking system.

  • BASEL - II ACCORD

Bank capital framework sponsored by the world's central banks designed to promote uniformity, make regulatory capital more risk sensitive, and promote enhanced risk management among large, internationally active banking organizations. The International Capital Accord, as it is called, will be fully effective by January 2008 for banks active in international markets. Other banks can choose to "opt in," or they can continue to follow the minimum capital guidelines in the original Basel Accord, finalized in 1988. The revised accord (Basel II) completely overhauls the 1988 Basel Accord and is based on three mutually supporting concepts, or "pillars," of capital adequacy. The first of these pillars is an explicitly defined regulatory capital requirement, a minimum capital- to-asset ratio equal to at least 8% of risk-weighted assets. Second, bank supervisory agencies, such as the Comptroller of the Currency, have authority to adjust capital levels for individual banks above the 9% minimum when necessary. The third supporting pillar calls upon market discipline to supplement reviews by banking agencies. Basel II is the second of the Basel Accords, which are recommendations on banking laws and regulations issued by the Basel Committee on Banking Supervision. The purpose of Basel II, which was initially published in June 2004, is to create an international standard that banking regulators can use when creating regulations about how much capital banks need to put aside to guard against the types of financial and operational risks banks face.

Advocates of Basel II believe that such an international standard can help protect the international financial
Advocates of Basel II believe that such an international standard can help
protect the international financial system from the types of problems that might
arise should a major bank or a series of banks collapse. In practice, Basel II
attempts to accomplish this by setting up rigorous risk and capital management
requirements designed to ensure that a bank holds capital reserves appropriate to
the risk the bank exposes itself to through its lending and investment practices.
Generally speaking, these rules mean that the greater risk to which the bank is
exposed, the greater the amount of capital the bank needs to hold to safeguard its
solvency and overall economic stability.
1. Ensuring that capital allocation is more risk sensitive;
The final version aims at:
  • 2. Separating operational risk from credit risk, and quantifying both;

  • 3. Attempting to align economic and regulatory capital more closely to reduce the

scope for regulatory arbitrage. While the final accord has largely addressed the regulatory arbitrage issue, there are still areas where regulatory capital requirements will diverge from the economic. Basel II has largely left unchanged the question of how to actually define bank capital, which diverges from accounting equity in important respects. The Basel I definition, as modified up to the present, remains in place.

The Accord in operation Basel II uses a "three pillars" concept (1) Minimum capital requirements (addressing risk), (2) Supervisory review and (3) Market discipline to promote greater stability in the financial system.

The Basel I accord dealt with only parts of each of these pillars. For example: with respect to the first Basel II pillar, only one risk, credit risk, was dealt with in a simple manner while market risk was an afterthought; operational risk was not dealt with at all.

1. The First Pillar
1. The First Pillar

The first pillar deals with maintenance of regulatory capital calculated for three major components of risk that a bank faces: credit risk, operational risk and market risk. Other risks are not considered fully quantifiable at this stage. The credit risk component can be calculated in three different ways of varying degree of sophistication, namely standardized approach, Foundation IRB and Advanced IRB. IRB stands for "Internal Rating-Based Approach". For operational risk, there are three different approaches - basic indicator approach, standardized approach and advanced measurement approach. For market risk the preferred approach is VaR (value at risk). As the Basel II recommendations are phased in by the banking industry it will move from standardized requirements to more refined and specific requirements that have been developed for each risk category by each individual bank. The upside for banks that do develop their own bespoke risk measurement systems is that they will be rewarded with potentially lower risk capital requirements. In future there will be closer links between the concepts of economic profit and regulatory capital. Credit Risk can be calculated by using:-

  • 1. Standardized Approach

  • 2. Foundation IRB (Internal Ratings Based) Approach

  • 3. Advanced IRB Approach

The standardized approach sets out specific risk weights for certain types of credit risk. The standard risk weight categories are used under Basel 1 and are 0% for short term government bonds, 20% for exposures to OECD Banks, 50% for residential mortgages and 100% weighting on commercial loans. A new 150% rating comes in for borrowers with poor credit ratings. The minimum capital requirement (the percentage of risk weighted assets to be held as capital) has remains at 8%.

The second pillar deals with the regulatory response to the first pillar, giving regulators much improved
The second pillar deals with the regulatory response to the first pillar, giving
regulators much improved 'tools' over those available to them under Basel I. It also
provides a framework for dealing with all the other risks a bank may face, such as
systemic risk, pension risk, concentration risk, strategic risk, reputation risk,
liquidity risk and legal risk, which the accord combines under the title of residual
risk. It gives banks a power to review their risk management system.
For those Banks that decide to adopt the standardized ratings approach they
will be forced to rely on the ratings generated by external agencies. Certain Banks
are developing the IRB approach as a result.
2. The Second Pillar
3. The Third Pillar

The third pillar greatly increases the disclosures that the bank must make. This is designed to allow the market to have a better picture of the overall risk position of the bank and to allow the counterparties of the bank to price and deal appropriately. The new Basel Accord has its foundation on three mutually reinforcing pillars that allow banks and bank supervisors to evaluate properly the various risks that banks face and realign regulatory capital more closely with underlying risks. The first pillar is compatible with the credit risk, market risk and operational risk. The regulatory capital will be focused on these three risks. The second pillar gives the bank responsibility to exercise the best ways to manage the risk specific to that bank. Concurrently, it also casts responsibility on the supervisors to review and validate banks‘ risk measurement models. The third pillar on market discipline is used to leverage the influence that other market players can bring. This is aimed at improving the transparency in banks and improves reporting.

COMPANY PROFILE CHAPTER-3
COMPANY PROFILE
CHAPTER-3

Company Profile

The State Bank of India, the country‘s oldest Bank and a premier in terms of

balance sheet size, number of branches, market capitalization and profits is today going through a momentous phase of Change and Transformation the two hundred year old Public sector behemoth is today stirring out of its Public Sector legacy and moving with an ability to give the Private and Foreign Banks a run for their money.

It is also focusing at the top end of the market, on whole sale banking capabilities
It is also focusing at the top end of the market, on whole sale banking
capabilities to provide India‘s growing mid / large Corporate with a complete array
of products and services. It is consolidating its global treasury operations and
entering into structured products and derivative instruments. Today, the Bank is
the largest provider of infrastructure debt and the largest arranger of external
commercial borrowings in the country. It is the only Indian bank to feature in the
Fortune 500 list.
The bank is entering into many new businesses with strategic tie ups –
Pension Funds, General Insurance, Custodial Services, Private Equity, Mobile
Banking, Point of Sale Merchant Acquisition, Advisory Services, structured
products etc – each one of these initiatives having a huge potential for growth.
The Bank is forging ahead with cutting edge technology and innovative new
banking models, to expand its Rural Banking base, looking at the vast untapped
potential in the hinterland and proposes to cover 100,000 villages in the next two
years.

The Bank is changing outdated front and back end processes to modern customer friendly processes to help improve the total customer experience. With about 8500 of its own 10000 branches and another 5100 branches of its Associate Banks already networked, today it offers the largest banking network to the Indian customer. The Bank is also in the process of providing complete payment solution to its clientele with its over 21000 ATMs, and other electronic channels such as Internet banking, debit cards, mobile banking, etc.

With four national level Apex Training Colleges and 54 learning Centres spread all over the country the Bank is continuously engaged in skill enhancement of its employees. Some of the training programes are attended by bankers from banks in other countries.

The bank is also looking at opportunities to grow in size in India as well as Internationally. It presently has 82 foreign offices in 32 countries across the globe. It has also 7 Subsidiaries in India SBI Capital Markets, SBICAP Securities, SBI DFHI, SBI Factors, SBI Life and SBI Cards - forming a formidable group in the Indian Banking scenario. It is in the process of raising capital for its growth and also consolidating its various holdings.

Throughout all this change, the Bank is also attempting to change old mindsets, attitudes and take all employees together on this exciting road to Transformation. In a recently concluded mass internal communication programme

The origin of the State Bank of India goes back to the first decade of the
The origin of the State Bank of India goes back to the first decade of the
nineteenth century with the establishment of the Bank of Calcutta in Calcutta on 2
June 1806. Three years later the bank received its charter and was re-designed as
the Bank of Bengal (2 January 1809 ). A unique institution, it was the first joint-
stock bank of British India sponsored by the Government of Bengal. The Bank of
Bombay (15 April 1840) and the Bank of Madras (1 July 1843) followed the Bank
of Bengal. These three banks remained at the apex of modern banking in India till
their amalgamation as the Imperial Bank of India on 27 January 1921.
The CNN IBN, Network 18 recognized this momentous transformation
journey, the State Bank of India is undertaking, and has awarded the prestigious
Indian of the Year – Business, to its Chairman, Mr. O. P. Bhatt in January 2008.
The elephant has indeed started to dance.
workshops fired the imagination of the employees with some other banks
in India as well as other Public Sector Organizations seeking to emulate the
programme.
country and covered over 130,000 employees in a period of 100 days using about
400 Trainers, to drive home the message of Change and inclusiveness. The
termed ‗Parivartan‘ the Bank rolled out over 3300 two day workshops across the

Primarily Anglo-Indian creations, the three presidency banks came into existence either as a result of the compulsions of imperial finance or by the felt needs of local European commerce and were not imposed from outside in an arbitrary manner to modernise India's economy. Their evolution was, however, shaped by ideas culled from similar developments in Europe and England, and was influenced by changes occurring in the structure of both the local trading environment and those in the relations of the Indian economy to the economy of Europe and the global economic framework.

SWOT ANALYSIS OF SBI

 It 32 has its presence in Weakness:- STRENGTHS:- countries engaging currency trade all over the
It
32
has its presence in
Weakness:-
STRENGTHS:-
countries engaging currency trade all over the
It is the largest bank of India in terms of market share, revenue & asset.
As per recent data the bank has more than outlets & ATM centers.
security and customers‘ waiting period is long when compared to private
Lack of proper technology driven services when compared to private banks.
Employees show reluctance to solve issues quickly due to higher job
All the branches of SBI has core banking which enable the customer to bank
anywhere same as local bank.
world.
The bank has merged with Stata Bank of Saurashtra, State Bank of Indore
and the bank is planning to go further acquisition in current FY-2012
It has the first mover advantage in commercial banking services
SBI has recently Changed its vision & mission statement showing sign up
inclination towards new age banking services
It has a powerful brand name over the country & overseas. It became the
synonymous for banking in rural area.
SBI has a portfolio of product and services. It succeeded in cross selling of
its product and services.

banks. The banks spends a huge amount on its rented buildings. SBI has the largest number of employees in banking sector, hence the bank spends a considerable amount of its income in employee‘s salary compensation. In spite of modernization, the bank still carries the perception of traditional bank to new age customers. SBI fails to attract salary accounts of corporate and many government sector employees salary accounts are also shifted to private bank for ease of operations unlike before. It is fully computerized but lack of computer efficiency made the banking very slow. NPA in credit card is more. Resistance from employees and trade union against merger of associate bank.

  • Opportunities:-

SBI‘s merger with five more banks namely State Bank of Hydrabad, State bank of Patiala, State bank of Bikaner and Jaipur, State of bank of Travancore and State bank of Mysore are in approval stage Mergers will result in expansion of market share to defend its number one position SBI is planning to expand and invest in international operations due to good inflow of money from Asian Market Since the bank is yet to modernize few of its banking operations, there is a better scope of using advanced technologies and software to improve customer relations Young and talented pool of graduates and B schools are in rise to open new horizon to so called ―old government bank

 Net profit of the year has decline from 9166.05 in the year FY 2010 to
 Net profit of the year has decline from 9166.05 in the year FY 2010 to
7,370.35 in the year FY2011
 This shows the reduce in market share to its close competitor ICICI
 Other private banks like HDFC, AXIS bank etc
 FDIs allowed in banking sector is increased to 49% , this is a major threat to
SBI as people tend to switch to foreign banks for better facilities and
technologies in banking service
 Other government banks like PNB, Andhra, Allahabad bank and Indian
bank are showing
 Customer prefer to switch to private banks and financial service providers
for loans and mortgages, as SBI involves stringent verification procedures and
take long time for processing
 Threats:-
 FY2012-13. The government is committed to protect the financial health of PSB for The gross
FY2012-13.
The government is committed to protect the financial health of PSB for
The gross NPA of bank touched a record 40,0098 crore.
SBI has reported a slippage of Rs.8,161 & 85% rising in provisioning.
Provision amount Rs.1200cr has set aside for Kingfisher (bad loan).
Other contributor to this slippage are iron ore & steel, sugar, textile, plastic.
BUDGET HIGHLIGHTS:-
What is more ironical is kingfisher has become NPA even after debt recast
in 2010 for around Rs.7000 cr.
Segment wise large corporate account for Rs.4,000cr., SME for Rs.21,00cr.,
agriculture loan Rs.1,100cr., retail Rs.400 cr. & Rs.600 from international
operation.
Govt. is proposed to provide 15888cr for capitalization of PSB.
Govt. is also examining the possibility of creating a financial holding
company to meet the capital requirement of PSB.
It has proposed to raise the target for agricultural credit to 575000 cr. this
move will increase the NPA of PSB.
FM proposed to enhance the additional subvention to 3%, it will be negative
for PSB in terms of NIM.
FM has made interest income up to Rs.10,000 from a saving bank account
exempted from tax, it will boost to mobilize the low cost deposit and
provide another attraction to draw customer.
Signal on interest rates.
HIGH LIGHT OF SBI Q3 RESULTS:-

Despite of massive provisioning the bank beat market & analyst forecast

Its net profit rise at Rs.3,263crore on higher interest income and margin.

Chairman Pratip Chaudhuri says NPA have plateaued.

DOWNGRADATION OF SBI

SBI was downgraded to D+ from C- , citing capital constraint quality and quantity of assets in Octobert, 2011.

After this Bankex lost 22.93% & benchmark sensex fell 17.55%.

SOME RECENT STEPS TAKEN BY SBI: It has plan to open around 100 branches in abroad
SOME RECENT STEPS TAKEN BY SBI:
It has plan to open around 100 branches in abroad in Nepal, Singapore,
Australia, U.S.A & Britain.
It has increased interest rate to 8% on deposit across various maturity below
one year.
IT has cut the interest rate on education loan 25-100bps
IT has launched a one time settelement scheme for recovering bad loan in
MSME borrower.
Some of these loans turned bad and slow down in economy worsened the
scenario further.
O.P. Bhatt who was helm for 5 years in his passion for regaining & market
tried to expand its loan book & mopped up deposit at high cost.
Its market capitalisation has dropped 36.64% and wealth eroded by 65000
cr.
HDFC bank Ltd. Topped the chart in terms of market capitalisation.

It has raised retail deposit rate by 25-100 bps.

  • CHALLENGES AHEAD: In a path of global banking, There are so many challenges which are as follows:

Mounting pressure due to exposure to sensitive sector like power, aviation, textile, telecom. May face significant
Mounting pressure due to exposure to sensitive sector like power, aviation,
textile, telecom.
May face significant head winds due to tighter margin dip in credit growth.
Slowdown in economy due to high interest & inflation
Higher capital requirement to meet basal- 3 target.
Liquidity deficit in banking sector.
Monitoring of RBI its global operation as it has expand its global operation.
High chances of corporate debt restructuring.
Volatility of rupee may lead to further tightening of liquidity.
Impose of pre-condition before capital infusion as it is invested Rs.1000
crore in life insurance business and providing para banking activities.
Quality of human capital will be the single most important defining factor as
80% of general maneger,65% of DGM, 58% OF AGM &44% OF CM
would be retiring.
CAMEL FRAME- WORK CHAPTER-4
CAMEL FRAME-
WORK
CHAPTER-4

The CAMELS FRAMEWORK

Sound financial health of the bank is the guarantee not only its depositor‘s but is equally

significant for the shareholders, employees, as well as the whole economy. As a sequel to the maxim, efforts have been made from time to time, to measure the financial position of each bank

and mange it efficiently and effectively. The latest CAMEL Model is used to apprise the financial performance of the banks.

 Liquidity  Asset quality,  Management,  Earnings, and  Capital adequacy, 1. C- Capital
 Liquidity
 Asset quality,
 Management,
 Earnings, and
 Capital adequacy,
1. C- Capital Adequacy:
A sixth component, a bank's Sensitivity to market risk, was added in 1997;
hence the acronym was changed to CAMELS. CAMELS is basically a ratio-based
model for evaluating the performance of banks. Various ratios forming this model
are explained below:
During an on-site bank exam, supervisors gather private information, such as
details on problem loans, with which to evaluate a bank's financial condition and
to monitor its compliance with laws and regulatory policies. A key product of such
an exam is a supervisory rating of the bank's overall condition, commonly referred
to as a CAMELS rating. The acronym "CAMEL" refers to the five components of
a bank's condition that are assessed:
Capital base of financial institutions facilitates depositors in forming their
risk perception about the institutions. Also, it is the key parameter for financial
managers to maintain adequate levels of capitalization. Moreover, besides
absorbing unanticipated shocks, it signals that the institution will continue to
honour its obligations. The most widely used indicator of capital adequacy is
capital to risk-weighted assets ratio (CRWA). According to Bank Supervision
Regulation Committee (The Basle Committee) of Bank for International
Settlements, a minimum 9 percent CRWA is required.

Capital adequacy ultimately determines how well financial institutions can cope with shocks to their balance sheets. Thus, it is useful to track capital- adequacy ratios that take into account the most important financial risksforeign exchange, credit, and interest rate risksby assigning risk weightings to the institution‘s assets. A sound capital base strengthens confidence of depositors.

This ratio is used to protect depositors and promote the stability and efficiency of financial systems around the world. The following ratios measure capital adequacy:

  • s) Capital Risk Adequacy Ratio:

CRAR is a ratio of Capital Fund to Risk Weighted Assets. Reserve Bank of India prescribes Banks to maintain a minimum Capital to risk-weighted Assets Ratio (CRAR) of 9 % with regard to credit risk, market risk and operational risk on an ongoing basis, as against 8 % prescribed in Basel documents.

Total capital includes tier-I capital and Tier-II capital. Tier-I capital includes paid up equity capital, free reserves, intangible assets etc. Tier-II capital includes long term unsecured loans, loss reserves, hybrid debt capital instruments etc. The higher the CRAR, the stronger is considered a bank, as it ensures high safety against bankruptcy.

capital and reserve and surplus. Higher the ratio indicates less protection for the creditors and depositors
capital and reserve and surplus. Higher the ratio indicates less protection for the
creditors and depositors in the banking system.
This ratio indicates the degree of leverage of a bank. It indicates how much of
the bank business is financed through debt and how much through equity. This is
calculated as the proportion of total asset liability to net worth. ‗Outside liability‘
includes total borrowing, deposits and other liabilities. ‗Net worth‘ includes equity
CRAR = Capital/ Total Risk Weighted Credit Exposure
This is the ratio of the total advanced to total asset. This ratio indicates banks
aggressiveness in lending which ultimately results in better profitability. Higher
ratio of advances of bank deposits (assets) is preferred to a lower one. Total
advances also include receivables. The value of total assets is excluding the
revolution of all the assets.
Borrowings/ (Share Capital + reserves)
u) Total Advance to Total Asset Ratio:
Total Advances/ Total Asset
t) Debt Equity Ratio:
  • v) Government Securities to Total Investments:

The percentage of investment in government securities to total investment is a very important indicator, which shows the risk taking ability of the bank. It

indicates a bank‘s strategy as being high profit high risk or low profit low risk. It

also gives a view as to the availability of alternative investment opportunities. Government securities are generally considered as the most safe debt instrument,

which, as a result, carries the lowest return. Since government securities are risk free, the higher the government security to investment ratio, the lower the risk

involved in a bank‘s investments.

Government Securities/ Total Investment

  • 2. A Asset Quality:

Asset quality determines the healthiness of financial institutions against loss of value in the assets. The weakening value of assets, being prime source of banking problems, directly pour into other areas, as losses are eventually written-off against capital, which ultimately expose the earning capacity of the institution. With this backdrop, the asset quality is gauged in relation to the level and severity of non- performing assets, adequacy of provisions, recoveries, distribution of assets etc. Popular indicators include nonperforming loans to advances, loan default to total advances, and recoveries to loan default ratios.

which, as a result, carries the lowest return. Since government securities are risk free, the higher

The solvency of financial institutions typically is at risk when their assets become impaired, so it is important to monitor indicators of the quality of their assets in terms of overexposure to specific risks, trends in nonperforming loans, and the health and profitability of bank borrowersespecially the corporate sector. Share of bank assets in the aggregate financial sector assets: In most emerging markets, banking sector assets comprise well over 80 per cent of total financial sector assets, whereas these figures are much lower in the developed economies. Furthermore, deposits as a share of total bank liabilities have declined since 1990 in many developed countries, while in developing countries public deposits continue to be dominant in banks. In India, the share of banking assets in total financial sector assets is around 75 per cent, as of end-March 2008. There is, no doubt, merit in recognizing the importance of diversification in the institutional and instrument-specific aspects of financial intermediation in the interests of wider choice, competition and stability. However, the dominant role of banks in financial intermediation in emerging economies and particularly in India will continue in the medium-term; and the banks will continue to be ―special‖ for a long time. In this regard, it is useful to emphasize the dominance of banks in the developing countries in promoting non-bank financial intermediaries and services including in development of debt-markets. Even where role of banks is apparently diminishing in emerging markets, substantively, they continue to play a leading role in non- banking financing activities, including the development of financial markets. One of the indicators for asset quality is the ratio of non-performing loans to total loans. Higher ratio is indicative of poor credit decision-making.

NPA: Non-Performing Assets:

Advances are classified into performing and non-performing advances (NPAs) as per RBI guidelines. NPAs are further classified into sub-standard, doubtful and loss assets based on the criteria stipulated by RBI. An asset, including a leased asset, becomes nonperforming when it ceases to generate income for the Bank.

An NPA is a loan or an advance where:

The Bank classifies an account as an NPA only if the interest imposed during any quarter
The Bank classifies an account as an NPA only if the interest imposed
during any quarter is ot fully repaid within 90 days from the end of the relevant
quarter. This is a key to the stability of the banking sector. There should be no
hesitation in stating that Indian banks have done a remarkable job in containment
of non-performing loans (NPL) considering the overhang issues and overall
difficult environment.
4. A loan granted for short duration crops will be treated as an NPA if the
instalments of principal or interest thereon remain overdue for two crop
seasons; and
5. A loan granted for long duration crops will be treated as an NPA if the
instalments of principal or interest thereon remain overdue for one crop
season.
3. The bill remains overdue for a period of more than 90 days in case of bills
purchased and discounted;
1. Interest and/or instalment of principal remains overdue for a period of more
than 90 days in respect of a term loan;
2. The account remains "out-of-order'' in respect of an Overdraft or Cash
Credit (OD/CC);
The following ratios are necessary to assess the asset quality.
I. Gross NPA ratio:

This ratio is used to check whether the bank's gross NPAs are increasing quarter on quarter or year on year. If it is, indicating that the bank is adding a fresh stock of bad loans. It would mean the bank is either not exercising enough caution when offering loans or is too lax in terms of following up with borrowers on timely repayments.

Gross NPA/ Total Loan

II.

Net NPA ratio:

Net NPAs reflect the performance of banks. A high level of NPAs suggests high probability of a large number of credit defaults that affect the profitability and net-worth of banks and also wear down the value of the asset. Loans and advances usually represent the largest asset of most of the banks. It monitors the quality of the bank‘s loan portfolio. The higher the ratio, the higher the credits risk.

Net NPA/Total Loan

Management of financial institution is generally evaluated in terms of capital adequacy, asset quality, earnings and
Management of financial institution is generally evaluated in terms of
capital adequacy, asset quality, earnings and profitability, liquidity and risk
sensitivity ratings. In addition, performance evaluation includes compliance with
set norms, ability to plan and react to changing circumstances, technical
competence, leadership and administrative ability. Sound management is one of
Nevertheless, total advance to total deposit, business per employee and
profit per employee helps in gauging the management quality of the banking
institutions. Several indicators, however, can jointly serve—as, for instance,
efficiency measures do—as an indicator of management soundness. The ratios
used to evaluate management efficiency are described as under:
quality of management, however, are primarily applicable to individual
institutions, and cannot be easily aggregated across the sector. Furthermore, given
the qualitative nature of management, it is difficult to judge its soundness just by
looking at financial accounts of the banks.
the most important factors behind financial institutions‘ performance. Indicators of
a. Total Advance to Total Deposit Ratio:
3. M – Management:

This ratio measures the efficiency and ability of the banks management in converting the deposits available with the banks (excluding other funds like equity capital, etc.) into high earning advances. Total deposits include demand deposits, saving deposits, term deposit and deposit of other bank. Total advances also include the receivables.

Total Advance/ Total Deposit

  • b. Business per Employee:

Revenue per employee is a measure of how efficiently a particular bank is utilizing its employees. Ideally, a bank wants the highest business per employee possible, as it denotes higher productivity. In general, rising revenue per employee is a positive sign that suggests the bank is finding ways to squeeze more sales/revenues out of each of its employee.

Total Income/ No. of Employees

Strong earnings and profitability profile of banks reflects the ability to support present and future operations.
Strong earnings and profitability profile of banks reflects the ability to
support present and future operations. More specifically, this determines the
capacity to absorb losses, finance its expansion, pay dividends to its shareholders,
and build up an adequate level of capital. Being front line of defense against
erosion of capital base from losses, the need for high earnings and profitability can
hardly be overemphasized. Although different indicators are used to serve the
purpose, the best and most widely used indicator is Return on Assets (ROA).
Earnings and profitability, the prime source of increase in capital base, is
examined with regards to interest rate policies and adequacy of provisioning. In
addition, it also helps to support present and future operations of the institutions.
The single best indicator used to gauge earning is the Return on Assets (ROA),
which is net income after taxes to total asset ratio.
This ratio shows the surplus earned per employee. It is arrived at by dividing
profit after tax earned by the bank by the total number of employee. The higher the
ratio shows good efficiency of the management.
Profit after Tax/ No. of Employees
E – Earning & Profitability:
c. Profit per Employee:

However, for in-depth analysis, another indicator Interest Income to Total Income and Other income to Total Income is also in used. Compared with most other indicators, trends in profitability can be more difficult to interpretfor instance, unusually high profitability can reflect excessive risk taking. The following ratios try to assess the quality of income in terms of income generated by core activity income from landing operations.

  • i. Dividend Payout Ratio:

Dividend payout ratio shows the percentage of profit shared with the shareholders. The more the ratio will increase the goodwill of the bank in the share market.

Dividend/ Net profit

ii.

Return on Asset:

Net profit to total asset indicates the efficiency of the banks in utilizing their assets in generating profits. A higher ratio indicates the better income generating capacity of the assets and better efficiency of management in future. Net Profit/ Total Asset

iii.

Operating Profit by Average Working Fund:

This ratio indicates how much a bank can earn from its operations net of the operating
This ratio indicates how much a bank can earn from its operations net of the
operating expenses for every rupee spent on working funds. Average working
funds are the total resources (total assets or total liabilities) employed by a bank. It
is daily average of total assets/ liabilities during a year. The higher the ratio, the
better it is. This ratio determines the operating profits generated out of working
fund employed. The better utilization of the funds will result in higher operating
profits. Thus, this ratio will indicate how a bank has employed its working funds in
generating profits.
Net profit to average asset indicates the efficiency of the banks in utilizing
their assets in generating profits. A higher ratio indicates the better income
generating capacity of the assets and better efficiency of management. It is arrived
at by dividing the net profit by average assets, which is the average of total assets
in the current year and previous year. Thus, this ratio measures the return on assets
employed. Higher ratio indicates better earning potential in the future.
Net Profit/ Average Asset
Operating Profit/ Average Working Fund
v. Interest Income to Total Income:
Net Profit to Average Asset:
iv.

Interest income is a basic source of revenue for banks. The interest income total income indicates the ability of the bank in generating income from its lending. In other words, this ratio measures the income from lending operations as a percentage of the total income generated by the bank in a year. Interest income includes income on advances, interest on deposits with the RBI, and dividend income.

Interest Income/ Total Income

vi.

Other Income to Total Income:

Fee based income account for a major portion of the bank‘s other income. The

bank generates higher fee income through innovative products and adapting the technology for sustained service levels. The higher ratio indicates increasing proportion of fee-based income. The ratio is also influenced by gains on government securities, which fluctuates depending on interest rate movement in the economy.

Other Income/ Total Income

The common theme in all three contexts is cash. A corporation is liquid if it has
The common theme in all three contexts is cash. A corporation is liquid if it
has ready access to cash. A market is liquid if participants can easily convert
positions into cash— or conversely. An asset is liquid if it can easily be converted
to cash. The liquidity of an institution depends on:
4. L – Liquidity:
An adequate liquidity position refers to a situation, where institution can obtain
sufficient funds, either by increasing liabilities or by converting its assets quickly
at a reasonable cost. It is, therefore, generally assessed in terms of overall assets
and liability management, as mismatching gives rise to liquidity risk. Efficient
fund management refers to a situation where a spread between rate sensitive assets
(RSA) and rate sensitive liabilities (RSL) is maintained. The most commonly used
tool to evaluate interest rate exposure is the Gap between RSA and RSL, while
liquidity is gauged by liquid to total asset ratio.
Initially solvent financial institutions may be driven toward closure by poor
management of short-term liquidity. Indicators should cover funding sources and
capture large maturity mismatches. The term liquidity is used in various ways, all
relating to availability of, access to, or convertibility into cash. An institution is
said to have liquidity if it can easily meet its needs for cash either because it has
cash on hand or can otherwise raise or borrow cash. A market is said to be liquid if
the instruments it trades can easily be bought or sold in quantity with little impact
on market prices. An asset is said to be liquid if the market for that asset is liquid.
  • 1. The institution's short-term need for cash;

  • 2. Cash on hand;

  • 3. Available lines of credit;

  • 4. The liquidity of the institution's assets;

  • 5. The institution's reputation in the market placehow willing will counterparty

is to transact trades with or lend to the institution? The ratios suggested to measure

liquidity under CAMELS Model are as follows:

1) Liquidity Asset to Total Asset:

Liquidity for a bank means the ability to meet its financial obligations as they come due. Bank lending finances investments in relatively illiquid assets, but it fund its loans with mostly short term liabilities. Thus one of the main challenges to a bank is ensuring its own liquidity under all reasonable conditions. Liquid assets include cash in hand, balance with the RBI, balance with other banks (both in India and abroad), and money at call and short notice. Total asset include the revaluations of all the assets. The proportion of liquid asset to total asset indicates the overall liquidity position of the bank.

Government Securities are the most liquid and safe investments. This ratio measures the government securities as
Government Securities are the most liquid and safe investments. This ratio
measures the government securities as a proportion of total assets. Banks invest in
government securities primarily to meet their SLR requirements, which are around
25% of net demand and time liabilities. This ratio measures the risk involved in the
assets hand by a bank.
Approved securities include securities other than government securities. This
ratio measures the Approved Securities as a proportion of Total Assets. Banks
invest in approved securities primarily after meeting their SLR requirements,
which are around 25% of net demand and time liabilities. This ratio measures the
risk involved in the assets hand by a bank.
2) Government Securities to Total Asset:
4) Liquidity Asset to Demand Deposit:
3) Approved Securities to Total Asset:
Approved Securities/ Total Asset
Government Securities/ Total Asset
Liquidity Asset/ Total Asset

This ratio measures the ability of a bank to meet the demand from deposits in a particular year. Demand deposits offer high liquidity to the depositor and hence banks have to invest these assets in a highly liquid form.

Liquidity Asset/ demand Deposit

5) Liquidity Asset to Total Deposit:

This ratio measures the liquidity available to the deposits of a bank. Total deposits include demand deposits, savings deposits, term deposits and deposits of other financial institutions. Liquid assets include cash in hand, balance with the RBI, balance with other banks (both in India and abroad), and money at call and short notice.

Liquidity Asset/ Total Deposit

It refers to the risk that changes in market conditions could adversely impact earnings and/or capital.
It refers to the risk that changes in market conditions could adversely impact
earnings and/or capital. Market Risk encompasses exposures associated with
changes in interest rates, foreign exchange rates, commodity prices, equity prices,
etc. While all of these items are important, the primary risk in most banks is
interest rate risk (IRR), which will be the focus of this module. The diversified
nature of bank operations makes them vulnerable to various kinds of financial
risks. Sensitivity analysis reflects institution‘s exposure to interest rate risk,
foreign exchange volatility and equity price risks (these risks are summed in
market risk).
monitor and control market risk. Banks are increasingly involved in diversified
operations, all of which are subject to market risk, particularly in the setting of
interest rates and the carrying out of foreign exchange transactions. In countries
that allow banks to make trades in stock markets or commodity exchanges, there is
also a need to monitor indicators of equity and commodity price risk.
Risk sensitivity is mostly evaluated in terms of management‘s ability to
S – Sensitivity to Market Risk:
Interest Rate Risk Basics:

In the most simplistic terms, interest rate risk is a balancing act. Banks are trying to balance the quantity of reprising assets with the quantity of repricing liabilities. For example, when a bank has more liabilities repricing in a rising rate environment than assets repricing, the net interest margin (NIM) shrinks. Conversely, if your bank is asset sensitive in a rising interest rate environment, your NIM will improve because you have more assets repricing at higher rates.

Liquidity risk is financial risk due to uncertain liquidity. An institution might lose liquidity if its credit rating falls, it experiences sudden unexpected cash outflows, or some other event causes counterparties to avoid trading with or lending to the institution. A firm is also exposed to liquidity risk if markets on which it depends are subject to loss of liquidity.

Liquidity risk tends to compound other risks. If a trading organization has a position in an illiquid asset, its limited ability to liquidate that position at short notice will compound its market risk. Suppose a firm has offsetting cash flows with two different counterparties on a given day. If the counterparty that owes it a payment defaults, the firm will have to raise cash from other sources to make its payment. Should it be unable to do so, it too we default. Here, liquidity risk is compounding credit risk.

Accordingly, liquidity risk has to be managed in addition to market, credit and other risks. Because
Accordingly, liquidity risk has to be managed in addition to market, credit
and other risks. Because of its tendency to compound other risks, it is difficult or
impossible to isolate liquidity risk. In all but the most simple of circumstances,
comprehensive metrics of liquidity risk don't exist. Certain techniques of asset-
liability management can be applied to assessing liquidity risk. If an organization's
cash flows are largely contingent, liquidity risk may be assessed using some form
of scenario analysis. Construct multiple scenarios for market movements and
defaults over a given period of time. Assess day-to-day cash flows under each
scenario. Because balance sheets differed so significantly from one organization to
the next, there is little standardization in how such analyses are implemented.
Regulators are primarily concerned about systemic implications of liquidity risk.
Business activities entail a variety of risks. For convenience, we distinguish
between different categories of risk: market risk, credit risk, liquidity risk, etc.
Although such categorization is convenient, it is only informal. Usage and
definitions vary. Boundaries between categories are blurred. A loss due to
widening credit spreads may reasonably be called a market loss or a credit loss, so
market risk and credit risk overlap. Liquidity risk compounds other risks, such as
market risk and credit risk. It cannot be divorced from the risks it compounds.

An important but somewhat ambiguous distinguish is that between market risk and business risk. Market risk is exposure to the uncertain market value of a portfolio. Business risk is exposure to uncertainty in economic value that cannot be mark-to-market. The distinction between market risk and business risk parallels the distinction between market-value accounting and book-value accounting. The distinction between market risk and business risk is ambiguous because there is a vast "gray zone" between the two. There are many instruments for which markets exist, but the markets are illiquid. Mark-to-market values are not usually available, but mark-to-model values provide a more-or-less accurate reflection of fair value. Do these instruments pose business risk or market risk? The decision is important because firms employ fundamentally different techniques for managing the two risks.

Business risk is managed with a long-term focus. Techniques include the careful development of business plans and appropriate management oversight. Book-value accounting is generally used, so the issue of day-to-day performance is

not material. The focus is on achieving a good return on investment over an extended horizon. Market risk is managed with a short-term focus. Long-term losses are avoided by avoiding losses from one day to the next. On a tactical level, traders and portfolio managers employ a variety of risk metrics duration and convexity, the Greeks, beta, etc.to assess their exposures. These allow them to identify and reduce any exposures they might consider excessive. On a more strategic level, organizations manage market risk by applying risk limits to traders' or portfolio managers' activities. Increasingly, value-at-risk is being used to define and monitor these limits. Some organizations also apply stress testing to their portfolios.

not material. The focus is on achieving a good return on investment over an extended horizon.
DATA INTERPRETATION & ANALYSIS CHAPTER-5
DATA
INTERPRETATION
& ANALYSIS
CHAPTER-5

CAMEL FRAMEWORK

C- CAPITAL ADEQUACY

1. Capital risk Adequacy Ratio

Basel-II 13.39 9.45 3.94 Basel-II 12.00 8.46 3.54 Basel-I 14.25 9.38 4.87 Basel-I 12.97 8.53 4.44
Basel-II
13.39
9.45 3.94
Basel-II
12.00
8.46 3.54
Basel-I
14.25
9.38 4.87
Basel-I
12.97
8.53 4.44
Basel-I
13.54
9.14 4.40
Base-I
12.34
8.01 4.33
6.93 3.76
10.69
Basel-II
7.77 4.21
11.98
Year
2006-07
2007-08
2008-09
2008-09
2009-10
2009-10
2010-11
2.
2010-11
Basel-I
2008-09
2007-08
2006-07
Basel-II
Basel-I
Basel-II
Basel-I
Basel-II
2008-9
Base-I
Basel-I
INTERPREATATION:-
Ratio
Tier-I
Tier-II
Tier-II
Tier-I
2009-10
2009-10
2010-11
2010-11
16
14
12
10
CRAR is a ratio of Capital Fund to Risk Weighted Assets. Reserve Bank of India
prescribes Banks to maintain a minimum Capital to risk-weighted Assets Ratio (CRAR)
of 9 % with regard to credit risk, market risk and operational risk on an ongoing basis,
as against 8 % prescribed in basal II documents.
8
6
4
2
0
Basel-I

CAR of the SBI was 11.98 which was above RBI prescribes limit. Higher the ratio the banks are in a good position to absorb losses. But from the last year it has decreased from 13.39 to 11.98.

  • 2. Debt Equity Ratio

INTERPREATATION:- 1.8 capital(Rs.) Share 537136821 517274113 1195689550 1030116011 Debtio euity ratio Borrowings(Rs.) Reserve(Rs.) Debt equity ratio
INTERPREATATION:-
1.8
capital(Rs.)
Share
537136821
517274113
1195689550
1030116011
Debtio euity ratio
Borrowings(Rs.)
Reserve(Rs.)
Debt equity ratio
1.6
Debtio euity ratio
30772575
39703352
2006-07
2007-08
2008-09
2009-10
2010-11
0
2
1
The Debt to Equity Ratio measures how much money a bank should safely
be able to borrow over long periods of time. Generally, any bank that has a debt to
equity ratio of over 40% to 50% should be looked at more carefully to make sure
there are no liquidity problems.
2009-10
2008-09
2007-08
2006-07
Year
The debt equity ratio of SBI has increased by 183% in the year 2011.
Because the Bank's aggregate liabilities (excluding capital and reserves) rose by
17.35% from Rs. 9,87,464.53 crores on 31st March 2010 to Rs.11,58,750.16
crores on 31st March 2011. The increase in liabilities was mainly contributed by
increase in deposits and borrowings so that ratio was increased.
6349990 183.99
6348826 156.19
6348802 092.69
6314704 105.49
5262989 110.17
2010-11
643510442
653143160
573128162
484011911
0.2
0.4
0.6
0.8
1.2
1.4

3. Total Advance to Total Asset Ratio

74 2009- 6319141520 10534137305 59.98 10 8041162268 78.58 2010- 7567194480 12237362005 61.83 11 9339328130 81.02 2006-07
74
2009-
6319141520 10534137305
59.98
10
8041162268 78.58
2010-
7567194480 12237362005
61.83
11
9339328130 81.02
2006-07 2007-08 2008-09 2009-10 2010-11
82
80
78
76
7420731280 73.10
72
70
68
63
62
61
60
59
58
57
56
55
54
53
Deposit(Rs.)
Asset Ratio
Total Advance to Total
Total Advance to Total
Deposit Ratio
Total Advance to Total Asset Ratio
Total Advance to Total Deposit Ratio
Year
Total
Total
Total Advance to
Total Asset Ratio
(%)
Advance(Rs.)
Asset(Rs.)
Total
Total advance to
total deposit (Rs.)
2006-07 2007-08 2008-09 2009-10 2010-11
2006-
3373364935 5665652388
59.54
07
4355210894 77.45
2007-
4167681862 7215263121
57.76
08
5374039409 77.55
2008-
5425032042 9644320807
56.25
09

Total Advance to Total Asset Ratio shows that how much amount the bank holds against its asset. Here in SBI Bank, from 2010 to 2011 this ratio is continuously increased after 2006 because increase in advances is more than increase in total assets which shows growth in investment. And that is good sign for the bank. During the year, total advances of the Bank grew by 19.75% in the previous year.

Total Advance to Total Asset Ratio shows that how much amount the bank holds against its
Total Advance to Total Asset Ratio shows that how much amount the bank holds
against its assets. Here in SBI Bank, from 2009 to 2011 this ratio is continuously
increased because increase in advances is more than increase in total assets which
shows growth in investment. Bank’s advances remain well distributed across all
verticals. Large Corporate advances have grown to Rs.1,08,741 crores in March’11,
registering a growth of 23.38%. Mid-Corporate Advances increased to Rs.1,57,565
crores with increase 19.42% growth. Retail advances grew 22.04% from 1,34,849
crores in March’10 to Rs.1,64,576 crores in March’11. SME Advances of the Bank rose
by 22.80 & International advances went up by 12.66% to Rs.1,09,358 crores in
1895012709 148.73
2008-09
2269600632
2759539569 164.22
2009-10
2267060163
2875635892 79.53
2010-11
2307414469
2855869958 81.57
1411282709
180
160
140
120
100
2009-10
2007-08
2006-07
2008-09
2010-11
Govt.
March’11.
4.
Government Securities to total Investment
Govt. Securities to Total Investment
Govt. Securities to
Total Investment
80
60
40
20
Year
0
Total Investment(Rs.)
Govt.
Securities
to
Securities(Rs.)
Total Investment
2006-07
1182708274
1491488825 158.21
2007-08

This shows the percentage of investment in govt securities. It is believed that the more investment in govt securities is a safe. As per norm stipulated by RBI the bank have to maintain SLR at the rate of 24%. In this year investment in govt securities was decreasing steeply from the last 2 years but still it is a good sign of the bank because it increasing their profitability.

A-ASSET QUALITY

1.79 3.28 2010-2011 3.05 2009-2010 1. Gross NPA 2. Net NPA March‘10. Net NPA Ratio Ratio
1.79
3.28
2010-2011
3.05
2009-2010
1. Gross NPA
2. Net NPA
March‘10.
Net NPA Ratio
Ratio
Year
Along with increase in credit, State Bank of India is conscious about asset
1.63
2010-11
1.72
2009-10
quality. Though gross NPAs stood at 3.28% in March‘11 against 3.05% in
2008-09
1.78
2007-08
1.56
2006-07
0.2
0.4
Series1
0.6
0.8
This ratio is used to check whether the bank's gross NPAs are increasing
quarter on quarter or year on year. If it is, indicating that the bank is adding a fresh
stock of bad loans. It would mean the bank is either not exercising enough caution
when offering loans or is too lax in terms of following up with borrowers on
timely repayments.
1.2
0
1
20010-11 2009-10 2007-08 2006-07 2008-09 .
20010-11
2009-10
2007-08
2006-07
2008-09
.

INTERPRETATION:-

Net NPA reflects the performances of banks. A high level of NPAs suggests high probability of a large no of credit defaults that affect the profitability and net worth of banks and also wear down the value of asset. Loans and advances generally consider as largest asset of bank. The higher the ratio, the higher is the risk. The NPA level in 2010-11 is 1.63% which is lower than previous year‘s Net NPA 1.70 %.

804116 78.58 435521 77.45 337336 2007-08 537404 77.55 416768 2008-09 742073 73.10 542503 2009-10 2006-07 631914
804116 78.58
435521 77.45
337336
2007-08
537404 77.55
416768
2008-09
742073 73.10
542503
2009-10
2006-07
631914
2010-11
933933 81.02
756719
800000
600000
400000
200000
Deposits
0
2010-11
2008-09
2006-07
2007-08
2009-10
1000000
Advances
1.
M- MANAGEMENT
Total Advance to Total Deposit Ratio
To comply with 70% provision coverage as up Sep. 2010. SBI had to create
a 3430 cr. Counter cyclical buffer. Of this, the bank set aside Rs. 2330 cr. by
March, 2011.
Year
Advances(Rs.)
Deposits(Rs.)
Total Advance to
Total Deposit Ratio
INTERPRETATION:- Net NPA reflects the performances of banks. A high level of NPAs suggests high probability

INTERPRETATION:-

Deposits of SBI rose to 16.14% yoy from Rs.8,04,116 crores in March,10 to

Rs. 9,33,933 crores in March‘11, driven by CASA growth of 22.14%. With

sustained 26.20% rise in Saving Bank deposits, CASA ratio improved from

46.67% in March‘10 to 48.66% in March‘11, an increase of 199bps.

Total Advance to Total Deposit Ratio

63600 35700 44007.59 2007-08 45600 57645.24 2008-09 55600 76479.22 2009-10 2006-07 85962.07 2010-11 70465 97218.95 0.78
63600
35700
44007.59
2007-08
45600
57645.24
2008-09
55600
76479.22
2009-10
2006-07
85962.07
2010-11
70465
97218.95
0.78
0.76
0.74
0.72
Business per Employee
0.8
0.82
0.68
2006-07 2007-08 2008-09 2009-10 2010-11
Total Advance to Total
Deposit Ratio
2.
INTERPRETATION:-
0.7
(Domestic) at 76.32% as at the end of SBI advances remain well distributed across
Business per Employee
Gross Advances of SBI recorded a yoy growth of 20.32% from Rs.6,41,480
crores in March‘10 to Rs.7,71, 802 crores in March‘11. Credit Deposit Ratio
all verticals. Large Corporate advances have grown from Rs. 88,137 crores in
March‘10 to Rs.1,08,741 crores in March‘11, registering a growth of 23.38%.
Mid-Corporate Advances increased from to Rs.1,57,565 with 19.42% growth.
Retail advances grew 22.04% to ` Rs.64,576 crores in March‘11. SME Advances
of the Bank rose by 22.80% to Rs.19,676 crores in March‘11, while Agri
advances rose 21.18% to Rs. 94,826 crores. International advances went up by
12.66% from ` 97,072 crores in March‘10 to ` 1,09,358 crores in March‘11.
Year
Business per Employee(Rs.)
Total (Rs.)Income

Business per Employee

236.81 0 2006-07 2007-08 2008-09 2009-10 2010-11 INTERPRETATION:- 3. Profit Per Employee Profit per Employee 384.63
236.81
0
2006-07 2007-08 2008-09 2009-10 2010-11
INTERPRETATION:-
3. Profit Per Employee
Profit per Employee
384.63
20010-11
446.03
2009-10
473.77
2008-09
372.57
2007-08
80000
2006-07
Profit per Employee
Year
It shows how efficiently a particular bank is utilising its employees. Ideally
a bank wants the highest business per employees. As it denotes higher
productivity. Increase in this is a positive sign of Bank finding ways to squeeze
more sales revenue out of its each employee. In SBI it has gone up to 70465.
10000
20000
30000
Business per Employee
40000
50000
60000
70000
500 400 300 200 Profit per Employee 100 0 20010-11 2009-10 2007-08 2006-07 2008-09
500
400
300
200
Profit per Employee
100
0
20010-11
2009-10
2007-08
2006-07
2008-09

INTERPRETATION:-

It

is

a

measure

of

how

efficiently

a

particular

bank

is utilizing its

employee. A bank wants highest profit per employee. In this year it has decrease to 384 from 446 in 2010. That is a good sign.

E- EARNING & PROFITABILITY

  • 1. Dividend Payout Ratio

20 2008-09 29.0 2009-10 30.0 2010-11 30.0 10 15 21.5 25 30 35 Dividend Pay out
20
2008-09
29.0
2009-10
30.0
2010-11
30.0
10
15
21.5
25
30
35
Dividend Pay out Ratio
Dividend Pay out Ratio
0
5
INTERPRETATION:-
2007-08
14.0
2006-07
14.0
2005-06
12.5
2004-05
11.0
2003-04
8.5
2002-03
6.0
2001-02
Dividend Payout Ratio
Year

It shows the percentage of profit shared with share holder. The higher the ratio the more will be the goodwill of company in share market. The dividend payout ratio is same as previous year that is 30% & and from last 10 years constantly it is increasing. It shows better position in the market.

  • 2. Return on Asset

 

ROA

2006-07

0.84

2007-08

1.01

2008-09

1.04

2009-10

0.88

20010-11

0.71

0.6 2.24 20010-11 32526.4 1223736.201 2.65 3. Operating Profit by Average working Fund INTERPRETATION:- 0.2 0.4
0.6
2.24
20010-11
32526.4
1223736.201
2.65
3. Operating Profit by Average working Fund
INTERPRETATION:-
0.2
0.4
Series1
1053443.731
0.8
20010-11
2009-10
2007-08
2006-07
2008-09
1.2
0
1
2007-08
Year
Operating
Average Working fund(Rs.)
Operating Profit by Avg.
Working fund
Profit(Rs.)
2006-07
15058.2
566565.2388
2.65
It shows that how much return bank can get from their total asset. Higher ratio
is good for bank. Because if ratio is increasing then we can say that the return of
the bank is high. It has decreased from 88%t o 71%. So that bank should look after
to use of assets efficiently & effectively.
17021.23
721526.3121
2.35
2008-09
20873
964432.0807
2.16
2009-10
23671.44

Operating Profit by Avg. Working fund

0.84 2001-03 0.86 2001-04 0.94 2001-05 0.99 2001-06 0.89 2001-07 0.73 2001-08 1.01 2001-09 1.04 2001-10
0.84
2001-03
0.86
2001-04
0.94
2001-05
0.99
2001-06
0.89
2001-07
0.73
2001-08
1.01
2001-09
1.04
2001-10
0.88
2001-11
0.71
Earning reflect the growth capacity and the financial health of the bank.
High earnings signify high growth prospects. It shows core operations of SBI
remain robust. The Operating Profit of the Bank for 2010-11 stood at Rs.25,335.57
crores as compared to Rs.18,320.91 crores in 2009-10 registering an excellent
growth of 38.29%. The Bank has posted a Net Profit of Rs.8,264.52 crores for
2010-11 as compared to Rs.9,166.05 crores in 2009-10 registering a decline of
2006-07
0.03
0.02
0.01
Year
0.005
0.015
0.025
Ratio
2008-09
0
2007-08
2009-10
20010-11
9.84%.
INTERPRETATION:-
Operating Profit by Avg.
Working fund
4. Net Profit to Average Asset
2001-02

Net Profit to AVG. Ratio

6765.26 2008-09 15.08 84.91 57645.24 8694.93 48950.31 2007-08 15.37 84.62 44007.59 63788.43 37242.33 2006-07 17.12 82.87
6765.26
2008-09
15.08
84.91
57645.24
8694.93
48950.31
2007-08
15.37
84.62
44007.59
63788.43
37242.33
2006-07
17.12
82.87
43414.78
7435.2
35979.58
2005-06
18.00
17.41
0.2
0.4
0.6
0.8
16.27
83.31
97218.95
15824.59
81394.36
2010-11
81.99
82.58
85962.07
14968.15
70993.92
2009-10
16.59
83.40
76479.22
12690.79
Total
Ratio
Total
Total Income
Income to
Income to
Income(Rs.)
Income (Rs.)
Income(Rs.)
Other
Interest
Income
Other
Interest
Year
INTERPRETATION:-
5.
Interest Income to Total Income
Net Profit to AVG. Ratio
0
1.2
84.41
39547.9
7119.9
32428
2004-05
19.99
80.00
7612.46 38072.95
30460.49
2003-04
15.58
1
5740.26 36827.28
31087.02
2002-03
12.28
87.71
4174.48 33984.56
29810.08
2001-02
The net profit of the SBI has decreased by 9.84% from 9,166 cr. to 8,265 cr.
The reasons of decreasing are due to substantial provision towards additional
liability for enhance superannuation out of wage revision and increase in seiling
gratuity with higher tax provision. While Net Interest Income recorded a growth of
37.41%, the Other Income increased by 5.72%, Operating Expenses increased by
13.27% attributable to higher staff cost and other expenses.
Interest Income to Total Income Ratio Interest Income to Total Income Ratio 0.84 0.86 0.88 0.78

Interest Income to Total Income Ratio

Interest Income to Total Income Ratio
Interest Income to
Total Income Ratio

0.84

0.86

0.88

0.78

0.82

0.8

0.9

(3.27%). Driven by loan growth of 20.32%, interest income on advances has It shows that how
(3.27%). Driven by loan growth of 20.32%, interest income on advances has
It shows that how much interest income earn from total income. Higher the
ratio higher is the profit.it is the regular income from customer. This ratio has gone
upto 83% in 2011 from 82% in 2010.
increased by 18.45% yoy in FY‘11 against a growth of 9.11% in FY‘10. Growth in
interest expenses was contained mainly due to CASA deposits growth of 22.14%.
Consequently, net interest income increased by 37.41% to Rs.32,526 crores
Net Interest Margin (NIM) rose by 66 bps to 3.32% in FY‘11 from 2.66% in
FY‘10, ue to faster increase in interest income (14.65%) than interest expenses
against 13.41% rise recorded in FY‘10. Fee income also recorded a handsome rise
of 20% in FY‘11.
Total Income
0.05
Other Income to
0.1
0
Other Income to Total Income
6. Other Income to total Income
INTERPRETATION:-
0.76
0.15
0.25
0.2
Interest Income to Total Income Ratio Interest Income to Total Income Ratio 0.84 0.86 0.88 0.78

INTERPRETATION:-

Fee based incomes account form a major source of banks income. Bank generates higher income through innovative product and services. The ratio is also

influenced securities. higher

is the ratio higher is the income.SBI it decreases

from 17% to 16%. The Other Income increased by 5.72%, Operating Expenses increased by 13.27% attributable to higher staff cost and other expenses. Non

0.02 612908652 248978483 10534437305 861887135 8 2010-11 943955020 284786457 12237362005 1228741477 10 0.08 0.06 Liquidity Asset
0.02
612908652
248978483 10534437305
861887135
8
2010-11
943955020
284786457 12237362005
1228741477
10
0.08
0.06
Liquidity Asset to Total
Asset
0.04
2009-10
Liquidity Asset to Total Asset
1. Liquidity Asset to Total Asset
L-LIQUIDITY
2009-10
2007-08
2006-07
2008-09
2010-11
0.12
0.1
0
2006-07
Year
Cash &
Balances with
banks &
money at call
& short
notice(Rs.)
Asset(Rs.)
Asset(Rs.)
Liquidity
Total
Liquidity Asset
to Total Asset
balances
with
Reserve
Bank of
India(Rs.)
interest income rose by 5.72%. the ratio was decreased because of proportionately
more increment in total income than other than interest income.
290764250
228922650 5665652388
519686900 9
2007-08
515346158
159317192 7215263121
674663350 9
2008-09
555461727
488576259 9644320807
1044037986
10

INTETRPRETATION:-

Liquidity for a bank means ability to meet its financial Obligations as they come due. Bank lending finances investment in relatively illiquid asset but it funds its loan with mostly short term liability. Thus one of the main challenges to a bank is ensuring its own liquidity under all reasonable condition. The ratio was decreased in the year 2009 because of increment in total assets.

2009-10 2287155315 21.7112243 2010-11 2307414469 22390788 2329805257 19.0384599 0.5 0.4 0.3 Govt.Securities to 0.2 Total Asset
2009-10
2287155315 21.7112243
2010-11
2307414469 22390788
2329805257 19.0384599
0.5
0.4
0.3
Govt.Securities to
0.2
Total Asset
0.1
Govt.Securities to Total Asset
INTERPRETATION:-
2267060163 20095152
2007-08
2006-07
2008-09
2010-11
2.
0
Government securities
total asset ratio
shows
that,
what
to
outside
Year
Govt.
Govt.
Total
Govt.
Govt.
Securities in
Securities
Securities(Rs.)
Securities
to
India(Rs.)
Government Securities to Total Asset
Total Asset
India(Rs.)
2006-07
1182708274 1177031114
2359739388 41.6499147
2007-08
1411282709 1407340368
2818623077 39.0647303
2008-09
2269600632 2262174704
4531775336 46.9890563
2009-10

percentage of government securities bank has against total assets. Higher the ratio is good for the bank because if this ratio is higher than we can say that bank is more investing in government securities. Here we can see the

ratio is decreasing constantly from 2008 due to investment in other avenue.

  • 3. Approved Securities to Total Asset

0.005 2010-11 4237113 0.03 Approved securities include securities other than govt. Securities. This ratio measures the
0.005
2010-11
4237113
0.03
Approved securities include securities other than govt. Securities. This
ratio measures the approved securities as a proportion of total asset. Bank
invest in this primarily after meeting their SLR requirements. This ratio
measures the risk involved in the asset hand a bank. The ratio is constantly
decreasing due to decrement in approved securities. Government and other
approved securities. The Bank‘s market share in domestic advances was
16.40% as of March 2011. And the total assets of the Bank increased by
0.001
0.002
0.003
0.004
0.09
0.006
0.007
Approved Securities to Total Asset
Approved Securities to
Total Asset
2006-07 2007-08 2008-09 2009-10 2010-11
0
Year
10351255
2009-10
0.19
18926808
2008-09
0.37
27382517
2007-08
0.59
33430589
2006-07
Approved Securities to Total
Asset(Rs.)
INTERPRETATION:-
Securities(Rs.)
Other Approved

16.17%.

Deposit 89044695 1136749627 87003565 1224949827 Liquidity Asset(Rs.) Liquidity Total Deposit Total Deposit(Rs.) 519686900 674663350 Demand Demand
Deposit
89044695 1136749627
87003565 1224949827
Liquidity
Asset(Rs.)
Liquidity
Total Deposit
Total
Deposit(Rs.)
519686900
674663350
Demand
Demand
from
109748101 710231637
123134067 858201234
107618416 999917342
Demand
Deposit
from
others(Rs.)
Liquidity
Asset
Demand
1228741477
2010-11
2009-10
2006-07
2008-09
2007-08
to
to
Asset
14.12
1044037986
861887135
Deposit
1044037986
861887135
1228741477
Bank(Rs.)
Deposit(Rs.)
ITERPRETATION:-
Liquidity Asset to Demand Deposit
Liquidity Asset to Total Deposit
Liquidity Asset to Demand Deposit
Liquidity Asset to
Demand Deposit
Total
819979738
0
4.
5.
Year
2006-07
2007-08
2008-09
2009-10
2010-11
Liquidity
Asset(Rs.)
2
981335301
519686900
674663350
1107535758
1225794322
1311953392
Year
2006-07
2007-08
2008-09
2009-10
14.06
4.73
5.47
9.70
9.67
4355210894
5374039409
7420731280
8041162268
9339328130
11.93
12.55
2010-11
10.71
13.15
The ratio shows power of liquidity asset against total demand deposits. It means
what part of demand deposit can be easily Converted into monetary form in need.
In SBI, the ratio was fluctuate because of the change in the cash balance during the
each year ending. In the year 2011. because of increment in cash balance,the
liquidity assets were increased and vice versa the ratio was also increased.
16
14
12
10
8
6
4

Liquidity Asset to Total Deposit

0.12 0.14 0.16 0 0.1 2006-07 2007-08 2008-09 2009-10 2010-11 Deposit Liquidity Asset to Total INTERPETATION:-
0.12
0.14
0.16
0
0.1
2006-07 2007-08 2008-09 2009-10 2010-11
Deposit
Liquidity Asset to Total
INTERPETATION:-
14% in 2009 . then it decreased to 10% and again
In 2011 it is increased to 13% due to increase in liquid asset.
It shows how much part of the deposits invested into liquid asset, which can
be easily converted into monetary value in the time need. In SBI the ratio was
0.08
0.06
0.04
0.02

ANALYSIS

COMPONENT RATINGS TO THE BANKS:-

Now, after analyzing the ratio next, task to do is to give weightage to all the parameters according to the importance of the ratios. Each component will be given weightage according to the importance of itself and ratios covered in that particular point. The total weightage allocated to the all parameters would be out of 100.

Net Profit to Average Asset 3 3% Other income to Total Income 4 3% Interest Income
Net Profit to Average Asset
3
3%
Other income to Total Income
4
3%
Interest Income to Total Income
2
3%
Liquidity
5
3%
Operating Profit to Average
Working Fund
2
3%
Return on Asset
4
3%
5%
Overall ranking to the SBI:-
=72
100%
3
5%
1
5%
1
Dividend payout Ratio
Approved Securities to Total
Security
Liquidity Asset to Demand deposit
Liquidity Asset to Total Deposit
Total
1
5%
Government Securities to Total
Security
3
5%
Liquidity Asset to total Asset
Out of 25%
7%
7%
Gross NPA to Total Loan
Out of 14%
Asset Quality
6
7%
Government Securities to Total
Asset
5
5
7
7%
1
7%
1
Capital Adequacy
Capital Risk Adequacy Ratio
Debt Equity Ratio
Total Advance to Total Asset Ratio
SBI Ratings
Weightage
Out of 28%
5
Out of 18 %
Earnings
2
5%
Profit per Employee
5
5%
Business per Employee
Ratio
5%
Total Advance to Total Deposits
Out of 15%
Management
6
7%
Net NPA to Total Loan

Overall rating has been assigned according to following tables:

The weightage given to different parameters is as follows:

Above 1.5 3.00 4.50 6.00 9.00 9 NPA to Below 1.50- 3.00- 4.50- 6-7.50 7.50- Total
Above
1.5
3.00
4.50
6.00
9.00
9
NPA to
Below
1.50-
3.00-
4.50-
6-7.50
7.50-
Total
Gross
7
6
5
4
3
2
1
Ratio
TABLE - Asset Quality:
Investment
to total
93
1.00
Parameter
Weightage
TABLE - Capital Quality:
TABLE - Management Quality
100%
25%
18%
15%
14%
28%
Capital Adequacy
Asset Quality
Management
Earnings
Liquidity
Total
Loan
o.5
58
1.50
2.00
3.00
to Total
Below
0.50-
1.00-
1.50-
2-2.50
2.50-
Above 3
Net NPA
Loan
29.00-
105-115
115-125
Above
Debt-Equity
38
38.00
33.50
29.00
24.50
20.00
15.50
Above
33.50-
95-105
24.50-
20.00-
15.50-
Below
CRAR
7
6
5
4
3
2
1
Ratio
Above
Securities
Above
86-93
79-86
72-79
65-72
58-65
Below
Government
Total Asset
60
35
Advance to
TABLE - Component Weightage
55-60
50-55
45-50
40-45
35-40
Below
Total
75
125
Ratio
Below
75-85
85-95

Ratios

1

2

3

4

5

Total Advance to Total Deposit

Below

46-55

55-64

64-73

Above

46

73

Business per Employee

Below

2.5 0

5.00

7.50

Above

2.5

5.00

7.50

10.00

10

Profit per Employee

Below2.

2.00

4.50

7.00

Above

00

4.50

7.00

9.50

9.50

Net Profit to average Asset Devidend Payout Ratio Below 10 Return on Asset Below 0.50 Operating
Net Profit to average Asset
Devidend Payout Ratio
Below
10
Return on Asset
Below
0.50
Operating Profit to average
working fund
Below
1.75
18
Below
0.50
Interest Income to Total Income
Below
56
Other Income to Total Income
Below
4
43
0.75
1.25
Above
1.00
1.25
35
– 43
TABLE – Liquidity quality:
– 51
Above
51
12
-15
15
– 18
Above
Deposit
0.50
0.75
Total Asset
Liquid Asset
Below 27
27
to Demand
35
Securities to
Liquid Asset
Below 9
9
– 12
to Total
Deposit
Ratios
0.50
Below 24
Ratios
1
2
Liquidity
Below 7
7-9
Asset to
Total Asset
G-Sec to
1.00
24
Total Asset
31
Approved
Below
0.50
2.25
Above
0.75
1.00
1.25
1.50
1.50
1.75 -
2.00
2.50
Above
2.00
2.25
2.50
2.75
Above
1.00
1.50
2.00
2.50
3.00
10 – 17
17 - 24
24 – 31
31 – 38
2.75
38
0.50
-
0.75
1.00
1.25
3
Above
94
4-13.50
13.50-
23-32.5
32.5-42
Above
23
42
85-94
4
5
9-11
11-13
Above 13
31-38
38-45
Above 45
Above
0.50
-
0.75
1.00
1.25
TABLE - Earnings Quality:
0.75
1.00
1.25
1.50
1.50
56-67
67-76
76-85
SUGGESTIONs & CONCLUSION CHAPTER -6
SUGGESTIONs &
CONCLUSION
CHAPTER -6

SUGGESTIONs

  The bank should maintain globally standardized with the coming of BASEL-III requirement. The Bank
The bank should maintain globally standardized with the coming of
BASEL-III requirement. The Bank should strengthen the internal position to
cope with the international standard.
NPA level of SBI is very high so the bank should take some preventive
action to reduce NPA. To reduce NPA level the bank should adopt some
risk management techniques. And they should give loans to the customers,
whose credit worthiness is good.
In State Bank of India, debt equity ratio is continuously rising over the years
which are not good so they have to increase equity or reduce debts in their
capital structure.
The bank should use some innovative product to compete with private banks
& global banks.
Bank has to give more advances in order to earn more interest. But they
should have to also keep in mind the credit worthiness of the customers.
The bank should adapt itself quickly to changing norms.

CONCLUSION

State bank is the one largest public sector bank. It has shown tremendous growth over the past 5 years. State bank of India has been able to withstand the acid test of CAMELS model. However it should not rest on its laurels. SBI will also open its branches outside India. NAP of SBI has also decreased from previous year. Its CASA deposits is more than any other banks.SBI is also giving more focus on retail banking sector. It should also gear up for BASEL-III norms which are imminent in the near future. It should also strive for disruptive innovative banking practices to beat other stronger competitors, both in the domestic as well as international arena. All in all, State bank is a bank with sound fundamentals which is growing at a really fast pace but there are so many challenges which it must prepare itself for to sustain and succeed.

CONCLUSION State bank is the one largest public sector bank. It has shown tremendous growth over