COMPREHENSIVE PROJECT REPORT

On
‘Impact of sectorial lending on bank’s profitability: A study on
Consumer Goods’
Submitted to
Institute Code: 768
Shri Chimanbhai Patel Institute of Management and Research
Under the Guidance of
Rajesh Desai
Prof. (CPIMR)
In partial Fulfilment of the Requirement of the award of the degree of
Master of Business Administration (MBA)
Offered By
Gujarat Technological University
Ahmedabad
Prepared by:
Sanket Patel
Vivek Patel
177680592094
177680592096
MBA (Semester - IV)
Month & Year:
April 2019
 Student(s)’s Declaration
I hereby declare that the COMPREHENSIVE Project Report titled “Impact of sectorial
lending on bank’s profitability: a study on Consumer goods is a result of my/our own work
and my/our indebtedness to other work publications, references, if any, has/have been duly
acknowledged. If I/we am/are found guilty of copying from any other report or published
information and showing as my/our original work, or extending plagiarism limit, I/we understand
that I/we shall be liable and punishable by the university, which may include ‘Fail’ in examination
or any other punishment that university may decide.

Enrolment Name Signature

177680592094 Sanket B Patel
177680592096 Vivek M Patel

Place: ___________ Date: ___________

 AKNOWLEGEMENT

First of all, we thanks to Gujarat Technology University, for providing us an opportunity to become
familiar with an organization atmosphere. It has helped us to gain the idea of real system and
procedures.
We are of course solely responsible for the content in this report .We wants to thank several people
for their assistance. From the practical study we have got the experience and improve our
knowledge and it Provides guidelines to perform work in the actual situation.

We have thankful to our college Director Abhinav singh and Shree Chimanbhai Patel institute of
management and research. Firstly we are thankful to the faculty and mentor Prof. Rajesh Desai
who reviewed this report and provides us their valuable guidance, constant help, Motivation,
Suggestion and encouragement throughout course of our work. Our profound and sincere thanks
to all the faculty of shree chimanbhai patel institute of management, who constant to be my project
advisor.

Finally, we thanks the almighty for providing us the great opportunity undertakes this value based
learning. Here we can’t forget the psychological and financial support provided by our parents
during the course of the report.

Place: Ahmedabad Date :

 Executive summery

The consumer good industry in India has evolved with the changing lifestyle of the young Indian
Population. Performance in the consumer good sector depends heavily on consumer behaviour.
When the economy grows the sector will see an increased demand for higher-end products. When
the economy shrinks there is an increased demand for value products. While some product types,
such as food, are necessary, others, such as automobiles, luxury items are considered in consumer
goods. Among the all consumer goods FMCGs (fast moving consumer goods) are highly growing
sector. Even it is in among top five growing sector in india.

If look at banking sector then As per the Reserve Bank of India (RBI), India’s banking sector is
sufficiently capitalised and well-regulated. The financial and economic conditions in the country
are far superior to any other country in the world.

The Indian banking system consists of 27 public sector banks, 21 private sector banks, 49 foreign
banks, 56 regional rural banks, 1,562 urban cooperative banks and 94,384 rural cooperative banks,
in addition to cooperative credit institutions. In FY07-18, total lending increased at a CAGR of
10.94 per cent and total deposits increased at a CAGR of 11.66 per cent.

Aim of this study was to identify factor affecting the profitability of all nifty bank (10). This study
used Panel data from 2012 to 2018. The study examined a causal relationship between sectorial
lending in consumer good industry and four major profitability indicators of all nifty banks(10) in
India. In this study we have taken ROE, ROA, EPS and NIM as a dependent variable and advances
of Cotton Textile, Food Processing, Automobile and trucks and Gems and Jewellery sector as an
independent variable.

Data was analysed using descriptive analysis, multiple linear regressions and Pearson correlation
method with help of SPSS (statistical package for the social science). the result of the model of the
study show that all the nifty banks(10) are influence by landings in cotton textiles, food processing
,automobile and trucks and gems and jewellery.
1
 TABLE OF CONTENT

SR NO. CONTENT PAGE NO.

CHAPTER 1 INTRODUCTION TO TOPIC 3-5
CHAPTER 2 INTRODUCTION TO INDUSTRY 6-8
CHAPTER 3 INTERODUCTION TO BANKS 9-12
CHAPTER 4 LITERATURE REVIEW 13-17
CHAPTER 5 RESEARCH METHODOLOGY 18-22
5.1 Research Objectives 18
5.2 Research Design 18
5.3 Variables of the study 19
5.4 Sources of the data 20
5.5 Sample size 20
5.6 Research Hypotheses 21
5.7 Model Specification 22

CHAPTER 6 DATA ANALYSIS AND TOOLS 23-35

CHAPTER 7 FINDINDS AND CONCLUSION 36-37
REFERENCES AND BIBLIOGRAPHY 38-39

2
 CHAPTER 1 - INTRODUCTION TO TOPIC

 Introduction

Priority Sector Lending is an important role given by the Reserve Bank of India (RBI) to the banks for
providing a specified portion of the bank lending to few specific sectors like agriculture and allied activities,
micro and small enterprises, poor people for housing, students for education and other low income groups and
weaker sections.. This is essentially meant for an all-round development of the economy as opposed to
focusing only on the financial sector. Non-Priority Sector lending is the sector towards which financial
institutions are always ready to lend credit. This sector is still glamorous. It attracts finance every time.

 Priority Sector Lending

Priority sector lending (PSL) is intended to provide institutional credit to those sectors and segments for which
it is difficult to get credit. According to priority sector standards, scheduled commercial banks have to give
40% of their loans (measured regarding Adjusted Net Bank Credit or ANBC) to the identified priority sectors
by the RBI directions. The regulations are revised periodically by setting limits for subsectors and other
qualifications for the beneficiary groups. If these targets are not achieved, banks have to finance the
construction programs implemented by the government for the concerned sectors. In April 2016, RBI
(https://rbi.org.in/Scripts/BS_ViewMasCirculardetails.aspx?id=985) has introduced Priority Sector Lending
Certificates so that banks can trade the loan certificates given to the different sectors to meet their targets.

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The targets and sub-targets set under priority sector lending for all scheduled commercial banks operating in India
are furnished below:

Categories Domestic scheduled commercial banks

Total Priority Sector 40 percent of Adjusted Net Bank Credit

[ANBC defined in sub paragraph (iii)] or
Credit Equivalent Amount of Off-Balance
Sheet Exposure, whichever is higher.

Agriculture 18 percent of ANBC or Credit Equivalent

Amount of Off-Balance Sheet Exposure,
whichever is higher. Within the 18 percent
target for agriculture, a target of 8 percent of
ANBC or Credit Equivalent Amount of Off-
Balance Sheet Exposure, whichever is higher
is prescribed for Small and Marginal
Farmers, to be achieved in a phased manner
i.e., 7 percent by March 2016 and 8
percent by March 2017.

Micro Enterprises 7.5 percent of ANBC or Credit Equivalent

Amount of Off-Balance Sheet Exposure,
whichever is higher to be achieved in a
phased manner i.e. 7 percent by March
2016 and 7.5 percent by March 2017.

Advances to Weaker Sections 10 percent of ANBC or Credit Equivalent

Amount of Off-Balance Sheet Exposure,
whichever is higher.

Non-Priority Sector lending is the sector towards which the financial institutions are always ready to lend the
credit. This sector is still glamorous. It attracts the finances every time.

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 Present Categorisation of Priority Sector Advances Presently the advances to following sub sectors are
included into priority sector advances by the banks.

1. Agriculture

2. Small scale Industries (SSIs)

3. Micro and small enterprises.

4. Setting up of Industrial estates.

5. Small road and water transport operators.

6. Retail trade

7. Small Business

8. Professional and self-employed persons.

9. Micro credit

10. Education

11. Consumption

12. State sponsored Corporation/organisations for on lending to other priority sectors.

13. State sponsored organizations for SC/STs for purchase and supply of inputs and marketing of outputs.

14. Housing loans

15. Fund provided to Regional Rural Banks. (RRBs).

16. Advances to Self-help groups (SHGs)

17. Advances to Software Industries.

18. Advances to food and agro processing sectors.

19. Investment in venture capital.

In view of the fact that banks are the predominant source of finance in India, the Reserve Bank of India includes
micro and small enterprises in the list of priority lending sectors. Banks have also been advised to achieve a year-
on-year growth of 20% in credit to micro and small enterprises and an annual growth of 10% in the number of
microenterprise accounts. In view of such policies, this study attempts to understand whether such incentives and
schemes have percolated down to the MSMEs.
5
 CHAPTER – 2 INTRODUCTION TO INDUSTRY

 Introduction

Consumer goods are tangible goods that are purchased for direct consumption to satisfy a human need or
want. This is in contrast to producer goods, which are purchased as an input to produce another good.

Consumer goods are those that are purchased for direct consumption. 'Consumption' in this context does not
necessarily mean consume, as in eat. There are plenty of consumer goods that no one would consider eating,
such as clothes. Clothing is a good purchased to satisfy a human need - the need to be clothed.

Another way to identify a consumer good is to think of a production line. The goods used as inputs at the
beginning of the production line are not consumer goods; these would be considered capital or producer goods
and might include cloth, plastic, or other materials. The good that is produced at the end of the production line
(the clothing item) is a consumer good. It's a final end product made for a buyer to consume.

 Consumer Goods industry in India

FMCG sector

India’s FMCG sector is worth $35 billion and is the fourth largest of its economy. India continues to top the
Nielsen’s global consumer confidence index (a measure of how people feel about their own finances and their
country’s current and future financial positions).

FMCGs were sold through 8.5 million outlets all over the country. Among the top companies are ITC ($ 7 billion),
Hindustan Unilever and Godrej (turnover $4 billion), Amul ($2.15 billion), Parle Agro ($1 billion), Marico ($850
million), Britannia Industries ($730 million), Procter and Gamble ($83 billion), Nestlé ($87 billion), and Colgate
Palmolive (global turnover $17 billion). Dabur, Cadbury India, and Asian Paints are also included in the toppers’
list by some sources.

The most loved brands in the country are Colgate, Parle, Wheel, Clinic Plus, Fair and Lovely, Lifebuoy, Tata Salt,
Lux, Rin, Britannia, Kwality Walls, and Nestlé.

Food and beverages have a more than 50 percent share of the FMCG market in India. Personal care products (20
percent), tobacco products (15 percent), and household care products (10 percent) come next.

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FMCG companies reach their customers through retail stores, department stores, malls, and franchisee outlets.
Among the biggest names in the retail business are Shoppers Stop, Reliance Retail, ITC-LRBD, Westside,
Pantaloons Retail, Big Bazaar, and Aditya Birla Retail.

The growth of rural markets has been a major factor in the improving fortunes of FMCG companies. Nielsen
predicts that the rural FMCG market alone will increase to $100 billion by 2025. Companies have been quick to
target it by creating specific products.

In urban areas, double-income couples and bigger disposal incomes have made consumers switch from value
products to high-quality goods. The quantity of foods purchased has also increased.

The other drivers of the FMCG market are changing lifestyles, advertising, and foreign investment. The
government’s decision to relax licensing rules and allow 100 per cent foreign direct investment (FDI) in single-
brand retail and 51 per cent FDI in multi-brand retain have helped the sector to no small extent.

The reduction in customs duty on machinery used by food units and the cut in excise duty on food mixes have
been a blessing.

However, the sector also faces some challenges, including relaxation of import restrictions, and thereby greater
availability of foreign brands, which might result in customers shifting to these brands in place of domestic ones.
The problems of the farming sector will affect sale in rural areas.

Consumer durables sector

The Indian consumer durables sector was worth about $10 billion in the 2014-15 financial year and is expected
to grow to $12.5 billion in 2015-16. The sector is seeing tough competition, as a result of which prices are coming
down.

Among the top brands are Sony, Samsung, Whirlpool, LG, Godrej, Sony, Hitachi, Haier, Blue Star, Carrier,
Khaitan+, Kelvinator, Videocon, Titan, TTK Prestige, Bajaj Electricals, HP, Philips, VIP, and Siemens. Although
domestic demand is growing, high-end products continue to be imported. Similarly, there is high reliance on
imports for components, such as semiconductors.

Urban areas account for 65 percent of the consumer durables market. In cities, the demand for LED TVs, split
ACs, and laptops are increasing, whereas, in rural areas, more households are purchasing refrigerators and mobile
phones.

The government’s initiatives, such as the National Electronics Mission and digitisation of television broadcasting
and the setting up of electronic hardware technology parks, are likely to facilitate the growth of the sector.

7
The challenges for the durables sector include the complex taxation system (the central and state governments
both levy taxes on goods), the availability and quality of raw materials (only about 35 percent of electronic
components can be sourced in India), the competition from China and South Asian countries (which have specific
advantages such as availability of raw materials), and the high cost of finance.

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 CHAPTER 3 INTRODUCTION TO BANK

 NIFTY BANK (10 BANKs)

 Axis Bank

Axis Bank is the third largest of the private-sector banks in India. It was founded in 1993.

MD AND CEO : Amitabh Chaudhry

HEAD QUARTERS : Mumbai

BRANCHES AND ATMS : 3,964 branches, 13,814 ATMs,

EMPLOYEES : 59,600

MARKET CAPITAL : ₹1.86 trillion (as on Feb 6, 2019)

NET NPA : 3.4%

 Bank of Baroda (BoB)

Bank of Baroda (BoB) public sector banking and financial services company. It is owned by Government of
India. It was established in 1908.

MD AND CEO : Shri P. S. Jayakumar

HEAD QUARTERS : Vadodara, Gujarat

BRANCHES AND ATMS : 5546 branches, 9661 ATMs

EMPLOYEES : 55000+

MARKET CAPITAL : ₹1.86 trillion (as on Feb 6, 2019)

NET NPA : 5.49%

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  Federal Bank

The Federal Bank is leading Private Sector, scheduled commercial bank in India. It was founded in 1931.

MD AND CEO : Shri SHYAM SRINIVASAN

HEAD QUARTERS : Kochi, Kerala

BRANCHES AND ATMS : 1252 branches and 1696 ATMs

EMPLOYEES : 12112

MARKET CAPITAL : 15884 (Rs. In crore

NET NPA : 1.72%

 HDFC Bank

HDFC Bank Limited (Housing Development Finance Corporation) is an Indian private sector bank. It was
founded in 1994.
MD AND CEO : Shri SHYAM SRINIVASAN

HEAD QUARTERS : Mumbai

BRANCHES AND ATMS : 4,787 branches and 12,635 ATMs

EMPLOYEES : 88,253

MARKET CAPITAL : 569,219.50 (Rs. In Crore)

NET NPA : 0.40%

 ICICI Bank

ICICI Bank Limited (Industrial Credit and Investment Corporation of India) is

an Indian multinational banking and financial services company. It was founded in 1994.
MD AND CEO : Mr Sandeep bakhshi

HEAD QUARTERS : Mumbai

BRANCHES AND ATMS : 4867 branches and 14367 ATMs

EMPLOYEES : 80,000+

MARKET CAPITAL : 220,997.40 (Rs. In Crore)

NET NPA : 4.77%

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  IndusInd Bank Limited

IndusInd Bank Limited is a Mumbai based Indian new generation bank, established in 1994.
MD AND CEO : Mr. Romesh Sobti

HEAD QUARTERS : Mumbai

BRANCHES AND ATMS : 1004 branches and 1885 ATM

EMPLOYEES : 25,284

MARKET CAPITAL : 89030.85 (RS. In Crore)

NET NPA : 0.51%

 Punjab National Bank (PNB)
Punjab National Bank, India’s first Swadeshi Bank, commenced its operations on April 12, 1895 from Lahore,
with an authorised capital of Rs 2 lac and working capital of Rs 20,000.

MD AND CEO : Shri Sunil Mehta

HEAD QUARTERS : New Delhi

BRANCHES AND ATMS : 6983 branches and 9668 ATM

EMPLOYEES : 74,897

MARKET CAPITAL : 27,032.10 (RS. In Crore)

NET NPA : 11.24%

 RBL/Ratnakar Bank Limited

RBL/Ratnakar Bank Limited is a scheduled commercial bank, It was Founded in August 1943. The Bank has a
range banking services categorized in five sectors: Corporate & Institutional Banking, Commercial
Banking, Retail Banking, Agri & Development Banking and Financial Markets.

MD AND CEO : Mr Vishwavir Ahuja

HEAD QUARTERS : Mumbai

BRANCHES AND ATMS : 265 branches and 388 ATM

EMPLOYEES : 5,300

MARKET CAPITAL : 23,640.34 (RS. In Crore)

NET NPA : 0.78%

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  State Bank of India

The State Bank of India (SBI) is an Indian multinational, public sector bank. The bank descends from

the Bank of Calcutta, founded in 1806.

MD AND CEO : Shri B. Sriram, Shri P. K. Gupta and

Shri Dinesh Kumar Khara

HEAD QUARTERS : Mumbai

BRANCHES AND ATMS : 22,414 branches and 59,541 ATM

EMPLOYEES : 2, 64,041

MARKET CAPITAL : 2, 38,331.75 (RS. In Crore)

NET NPA : 5.73%

 Yes Bank Limited

Yes Bank Limited is India's fourth largest private sector bank, founded by Rana Kapoor and Ashok Kapoor in
2004. It primarily operates as a corporate bank, with retail banking and asset management as subsidiary functions.
MD AND CEO : Rana Kapoor (Ravneet Gill)

HEAD QUARTERS : Mumbai

BRANCHES AND ATMS : 1,100 branches and 1,724 ATMs

EMPLOYEES : 18,238

MARKET CAPITAL : 50,397.12 (RS. In Crore)

NET NPA : 0.64%

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 CHAPTER 4-LITERATURE REVIEW

Joshi (1972) has proposed to RBI to give clear & specific definition of the different components of priority sector
as some of the bankers are not clear about the scope of agricultural advances. He also suggested out of total
advances to priority sector, at least 40 per cent should be extended to agriculture sector by each bank. It also stated
that out of total direct advances under agriculture; at least 50 per cent should be to the weaker sections (small and
marginal farmers and landless labourers and persons engaged in related activities with advances limits not
exceeding Rs 10,000).

The Narasimham committee (1998) detected that directed credit had controlled to an increase in non- performing
loans and had adversely the efficiency and profitability of banks. It was detected that 47 percent of all Non-
performing assets have come from the priority sector. At the same time, the committee also accepted that a sudden
reduction of priority Sector targets could have the danger of a disruption in the flow of credit to these sectors. In
its report, the committee recognized that the small and marginal farmers and the small sector of industry and small
businesses have problems with regard to obtaining credit and some earmarking may be necessary for this sector.
Under the present dispensation, within the priority sector, 10 percent of net bank credit is earmarked for lending
to weaker sections.

Ghosh (2006) reports in a study covering the period 1995-2004, that since liberalisation, cash flow has become
less important for the firm’s investments, implying that financial liberalisation improves the access of financially
constrained firms to external finance, and thus financing has eased for smaller firms. While it may be too early to
conclude that SME firms in India are not financially constrained, the reforms in the financial sector and the
improvement in the lending infrastructure has certainly improved access to finance for small firms.

R K Uppal (2009) Thus, the study concludes that priority sector advances of all the banking groups are increasing.
Inspite of increasing advances, Indian banks have not achieved some targets fixed by RBI. Lending to priority
sector creates many problems for the Indian banks like low profitability, high NPAs, transaction cost etc. It is a
need of the hour to find out solutions for these problems otherwise progress of the Indian banks will cease. If the
proper priority sector advances are given they will be helpful in reducing the poverty level.

Jaynal Ud-din Ahmed's (2010) study shows that the recovery situation in agriculture and related activities in
comparison to other priority sectors is unpromising in three districts under consideration. With the increase of
priority sector lending, there has been a similar upgrading in the volume of NPAs. However, it cannot maintain
that PSL is the only factor in expanding the size of NPAs in the area under study, other factors like credit-deposit
ratio, ratio of NPA to advance, capital adequacy ratio are equally responsible for increased NPAs.

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Najmi Shabbir(2013) Agriculture credit, including direct agriculture, has better-quality. The rate of advancing
to Agriculture was fairly rapid soon aFPer nationalisation but later progress was more uncertain. The growth rate
of advancing to small Scale industries by public sector banks was higher before nationalisation but later the growth
was uncertain. As compared to SCBs as a whole, the share of PSBs in credit to SSI has been higher. This implies
that non-public sector Scheduled Commercial banks have been giving a lesser percentage of credit to SSI. The
growth rate of loaning to SSI continuously increased from 2004 to 2007, and out of that the highest growth rate
was in 2007 i.e. 25 percent. Several favourable policy initiatives undertaken by the Central Government and the
Reserve Bank including, inter alia, the policy package for stepping up of credit to Small and medium enterprises
(SMEs) announced on August 10, 2005, have had a positive impact, that is why growth rate of advancing to SSI
was highest in 2006 and 2007. Over the selected period of time, indirect loans to agriculture had increased while
direct loans decreased from 80 percent of Agricultural credit in 1999 to 68 percent in 2007. Non Public Sector
Scheduled Commercial banks have been giving a smaller percentage in terms of direct credit to agriculture and
further to indirect credit.

Biswajit Bose (2013) despite various policy initiatives of Government and guidelines by RBI, there still exists
demand-supply mismatch in the availability of finance for the MSMEs. Absences of timely and adequate credit
have always been constraints for the MSMEs. The share of micro enterprises in the total number of MSMEs in
India is disproportionately high. The reach of formal financial institutions has been limited in providing banking
services to these firms. The size and financial exclusion have meant that most of these firms rely on the self-
finance and retained earnings. The capacity building is therefore extremely vital for these firms to become more
competitive, productive and viable. The strengthening of the sector cannot happen if these firms remain starved
of financing opportunities. In the one hand, there is a pressing need to improve the basic infrastructure like roads,
electricity and water supply etc. On the other hand, adequate availability of finance can help these firms in
improving the products, processes and technology. It must be noted that the country is witnessing the emergence
of small but innovative firms, especially in the services sector which are current in their outlook and they need
support in the form of risk capital. There has to be continuous attention on the development of advancing products
to suit the varied requirements of these firms considering the diverse set of firms that establish this sector. The
Indian SMEs have played a vital role in making partnership with larger firms and transporting products in the
market at a competitive price. As a valued partner of larger enterprises in the supply chain, many of these firms
have also undertaken modernisation initiatives to keep pace with the changing time. The contribution of these
firms demands that the bottlenecks in getting credit be removed. It is true that a large number of enterprises
becoming sick units increases risk perception of the lenders. The NPA of banks resulting from advancing to this
sector is also very high. The setting up of Credit Information Bureau of India Limited (CIBIL) can support the
credit information infrastructure. This can boost the confidence of the lending institutions in extending the credit

14
to the MSMEs. It is important to increase the level of awareness about MSMEs about the policy measures and
institutional measures aimed to facilitate credit flow to the sector. The MSME sector can grow to be more
competitive and contribute more knowingly towards India’s goal of sustainable and inclusive growth with the
greater access to finance.

Nagarajan, Sathyanarayan & Ali (2013) These studies show that there is a significant contribution of priority
sector lending towards the NPAs in public sectors banks. In relation to the non-priority sector, there is also a
significant relation between both priority and non-priority sector NPAs in contributing to the total NPAs in public
sector banks.

A.S. KANNAN (2014) The paper concludes with the recommendation to the Indian Banking industry to enhance
its share of finance to MSME sector, through lending either directly or indirectly, in order to ensure additional
improvements in their contributions to the economy – in terms of jobs creation, export possible, GDP addition,
and better standard of living to millions of families.

Pankaj Trivedi (2015) Indian banks are facing variety of challenges in the last few years to keep their profitability
and pace of growth. Lending to large corporate and thereby increasing interest income is challenging under present
situation. Lower off take of finance along with rising risk of NPAs makes the bank to adopt cautious approach
while advancing to large scale borrowers. Under uncertain macroeconomic environment different strategy banks
are thinking of to neutralise this effect and ensuring revenue. Focus on MSME sector is a suggested strategy under
the situation. Due to relatively lower loan size MSME sector is preferred compared to large borrowers. Indian
banks can tap the MSME sector for increasing their interest based earnings and growth. MSME sector is one of
the important sectors for the economy to grow. Hence, it provides plenty opportunity for Indian banks to give
fund-based facility right from inception of the enterprise to expansion and technological up gradation. Financial
exclusion of MSME sector by formal channel is one of the issue bank can address and in the process it can grow.

Ms. Jahnavi K. Dubal (2015) The SME sector in India, which includes the micro, small and medium enterprises,
constitutes an important part of the economy. However, a major concern for the SMEs is the availability of an
adequate amount of finances. The government has recognized the key role that the SME segment plays in creating
new enterprises and in providing employment to a large segment of the population and has adopted several public
policy measures to enhance flow of credit to the sector. One of the prominent measures used to ensure adequate
flow of funds to the SME sector is through regulation requiring banks to provide at least 40% of loans to targeted
areas which include the micro, small and medium enterprises. The challenge for banks is to bridge the information
irregularity so as to take the appropriate lending decision so that the good firms are not financially constrained,
and at the same time, cut down on exposures to bad credit risks. Measures such as credit scoring for SMEs should
improve the quality of financial information and enable greater funding for the sector. The SARFAESI Act and

15
the strengthening of legal provisions to take possession of assets used as security has improved the legal
environment for advancing in India, thus lowering the cost of lending and enforcement of contracts.

Collins Peprah (2016) The study evaluated the different factors banks consider before making loan decisions in
developed and developing markets. Some of these factors being internal and others are external. Among the
internal factors include prime interest rate, managerial policies and available finance. The external factors that
form the core determinants include management character, business capacity, condition and guarantee of
customers. SMEs can easily access bank loans if they have adequate knowledge of determinants of accessing bank
loans.

Akshay Kumar Mishra (2016) It can be concluded that the bad loans create many problems for the banks over
the years. Till the March 2011, the contribution of priority sector NPAs were more than 50 % over the years,
obviously this become the case with the non-priority sectors NPAs after that period. Still these both sectors have
significant amount of NPAs, which put tax on the banks overall performance. However the percentage
contribution of priority sector NPAs have been decreasing for last couple of years but increasing in absolute terms
as bank’s total advances are increasing. Similarly non priority sector NPAs are increasing both in percentage
contribution to total NPAs as well as in absolute terms. Significantly, on the basis of the insights of the study, it
can be concluded that both priority and non-priority sector have significant effect on banks NPAs.

Kandela Ramesh (2017) The non-performing asset is one of the major problems for the Indian banking system.
The contribution of priority sector NPAs is more than 50% in total NPAs till 2011. After that it gradually declined.
Non-priority sector NPAs hovered well above 50% after 2011. Non-priority Sector NPAs steadily increased
during the period. By the insights of the study, both priority sector and non-priority sector NPAs were showing
significant effects on total NPAs of public sector banks. However Non-priority sector NPAs contribution was
found to be more than priority sector NPAs of total NPAs. Hence it can be concluded that gross loans also have a
significant impact on total NPAs of Indian public sector banks. In a shorter period, reducing entire NPAs is
difficult for banks. Therefore, banks should identify which category contributes NPAs under priority and non-
priority sector more towards total NPAs. Hence, banks and government should make efforts for reducing sector-
wise NPAs.

Joslyn Sheeba (2017) The general objectives of the study was to establish the impact of credit risk on profitability
of State Bank of India and specific objectives were to establish impact of Capital adequacy ratio (CAR),
Nonperforming Asset ratio (NPA), Loan to Deposit Ratio (LDR), Cost per Loan Ratio (CLR), Provision Coverage
Ratio (PCR), Leverage Ratio (LR) and Nonperforming Asset to Asset Ratio (NPAAR) on Return On Equity. The
result displayed that NPAAR alone have significant, negative impact on ROE and other variables do not have
significant impact on ROE. It can be concluded that overall credit risk have significant impact on the profitability

16
of State Bank of India. State bank of India faces credit risk due to ineffective Credit risk management. So it is
advised to improve Credit risk management practices in State Bank of India. State Bank of India can minimise
the Credit risk by reducing the Nonperforming assets by framing strict loan policies.

Juliana Stanley Isanzu (2017) The results shows that credit risk management has improved over the past years
as prudential techniques have been used to reduce the negative impact of credit risk on the financial performance
of banks. The study found nonperforming loans and capital adequacy as measures of credit risk to have a
significant impact on financial performance. Hence managers should pay more attention to improving capital
adequacy since it positively enhances financial performance while reducing nonperforming loans by applying
modern strategies and techniques for credit risk management.

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 Chapter 5-Research Methodology
Research methodology is the specific procedures or techniques used to identify, select, process, and analyse
information about a topic. In a research paper, the methodology section allows the reader to critically evaluate a
study’s overall validity and reliability.

1. Research Objectives
2. Research Design
3. Variables of the study
4. Sources of the data
5. Period of the study
6. Sample size
7. Research Hypotheses
8. Model Specification
9. Data analysis tools

5.1 Research Objectives

o To analyse the impact of consumer goods sector advances on all the Nifty banks profitability.
o To measure the extent to which Non priority sector advances and profitability measures are correlated.

5.2 Research design –

 Descriptive Research – it refers to research that provides an accurate description of characteristics of a
particular individual, situation, or group. Descriptive research also known as statistical research.
 In short descriptive research deals with everything that can be counted and studied, which has an impact
of the lives of people it deals with.
 Descriptive research involves gathering data that describe events and then organizes, tabulates, depicts,
and describes the data collection.

This study used the quantitative approach to analyse the data. The population of this study was banks in India.
The desired sample size is 10 banks in India during 2011-2018. The study investigate the Impact of sectorial lending
on bank’s profitability in India.

18
5.3 Variable of the Study –
A variable is an object, event, idea, feeling, time period, or any other type of category you are trying to measure.
There are two types of variables-independent and dependent.

 Independent variable

An independent variable is exactly what it sounds like. It is a variable that stands alone and isn't changed by the
other variables you are trying to measure. In fact, when you are looking for some kind of relationship between
variables you are trying to see if the independent variable causes some kind of change in the other variables, or
dependent variables.

CT = (cotton textile advances/Total lending), FP= (food processing advances/Total lending), AT=(automobile
advances/Total lending), GEMT = (gem & jewellery advances/Total lending) are independent variable in this
case.

 Dependent variable

Just like an independent variable, a dependent variable is exactly what it sounds like. It is something that depends
on other factors. Usually when you are looking for a relationship between two things you are trying to find out
what makes the dependent variable change the way it does.

Example - ROE, ROA, EPS, NIM

ROE - Return on equity (ROE) is a measure of financial performance calculated by dividing net
income by shareholders' equity. Because shareholders' equity is equal to a company’s assets minus its debt, ROE
could be thought of as the return on net assets. ROE is considered a measure of how effectively management is
using a company’s assets to create profits.

ROA - Return on assets (ROA) is an indicator of how profitable a company is relative to its total assets. ROA
gives a manager, investor, or analyst an idea as to how efficient a company's management is at using its assets to
generate earnings. Return on assets is displayed as a percentage.

EPS - Earnings per share (EPS) is the portion of a company's profit allocated to each share of common stock.
Earnings per share serve as an indicator of a company's profitability.

NIM - Net interest margin is a measure of the difference between the interest income generated by banks or other
financial institutions and the amount of interest paid out to their lenders, relative to the amount of their assets.

CAR - Capital Adequacy Ratio (CAR) is also known as Capital to Risk (Weighted) Assets Ratio (CRAR), is
the ratio of a bank's capital to its risk. National regulators track a bank's CAR to ensure that it can absorb a

19
reasonable amount of loss and complies with statutory Capital requirements. It is a measure of a bank's capital. It
is expressed as a percentage of a bank's risk weighted credit exposures. The enforcement of regulated levels of
this ratio is intended to protect depositors and promote stability and efficiency of financial systems around the
world.

OPRATING REVENUE - Operating revenue is revenue generated from a company's primary business activities.

ASSETS - A bank can have different types of assets, including physical assets, such as equipment and land;
loans, including interest from consumer and business loans; reserves, or holdings of deposits of the central bank
and vault cash; and investments, or securities.

DATA SOURCE:

Secondary Data - Secondary data refers to data which is collected by someone who is someone other than the
user. Common sources of secondary data for social science include censuses, information collected by government
departments, organizational records and data that was originally collected for other research purposes.

Sample size: we are taking sample size of all nifty bank (10) for our study.

1. Axis Bank
2. Bank of baroda
3. Federal Bank
4. HDFC Bank
5. Icici Bank
6. Induslnd Bank
7. Punjab National Bank
8. RBL Bank
9. State Bank of India
10. Yes Bank

20
Hypothesis:

1) Cotton Textile industry Lending With Profitability

Ho: There is no significant impact of Cotton Textile industry lending on ROA

H1: There is significant impact of Cotton Textile industry lending on ROA

Ho: There is no significant impact of Cotton Textile industry lending on ROE

H1: There is significant impact of Cotton Textile industry lending on ROE

Ho: There is no significant impact of Cotton Textile industry lending on EPS

H1: There is significant impact of Cotton Textile industry lending on EPS

Ho: There is no significant impact of Cotton Textile industry lending on NIM

H1: There is significant impact of Cotton Textile industry lending on NIM

2) Food Processing Lending With Profitability

Ho: There is no significant impact of food processing industry lending on ROA.

H1: There is significant impact of food processing industry lending on ROA.

Ho: There is no significant impact of food processing industry lending on ROE.

H1: There is significant impact of food processing industry lending on ROE

Ho: There is no significant impact of food processing industry lending on EPS

H1: There is significant impact of food processing industry lending on EPS

Ho: There is no significant impact of food processing industry lending on NIM

H1: There is significant impact of food processing industry lending on NIM

21
 3) Automobile and Truck

Ho: There is no significant impact of automobile and truck industry lending on ROA

H1: There is significant impact of automobile and truck industry lending on ROA

Ho: There is no significant impact of automobile and truck industry lending on ROE

H1: There is significant impact of automobile and truck industry lending on ROE

Ho: There is no significant impact of automobile and truck industry lending on EPS

H1: There is significant impact of automobile and truck industry lending on EPS

Ho: There is no significant impact of automobile and truck industry lending on NIM

H1: There is significant impact of automobile and truck industry lending on NIM

4) Gems & Jewellery

Ho: There is no significant impact of gems and jewellery industry lending on ROA

H1: There is significant impact of gems and jewellery industry lending on ROA

Ho: There is no significant impact of gems and jewellery industry lending on ROE

H1: There is significant impact of gems and jewellery industry lending on ROE

Ho: There is no significant impact of gems and jewellery industry lending on EPS

H1: There is significant impact of gems and jewellery industry lending on EPS

Ho: There is no significant impact of gems and jewellery industry lending on NIM

H1: There is significant impact of gems and jewellery industry lending on NIM

22
Model Specification:

1. ROA = α + β1CT + β2FP+β3AT+β4GJ +β5OR + β6SZ

2. ROE = α + β1CT + β2FP+β3AT+β4GJ +β5OR + β6SZ
3. EPS = α + β1CT + β2FP+β3AT+β4GJ +β5OR + β6SZ
4. NIM = α + β1CT + β2FP+β3AT+β4GJ +β5OR + β6SZ

Where:-
CT – COTTON TEXTILE
FP – FOOD PROCESSING
AT - AUTOMOBILE AND TRUCKS
GJ – GEMS AND JEWELLERY
OR – OPERATING REVENUE GROWTH
SZ – SIZE

23
 CHAPTER 6 - DATA ANALYSIS TOOLS

Multiple regression and Co-relation was run for all the models described in the study. In order to test the
significance of regression coefficient t statistics was tested at α = 0.05. To analysis the problem of autocorrelation
among the time series data of the variables. All the statistical calculation were done by running SPSS (statistical
package for social science) software.

1. Descriptive Statistics
2. Multiple regression
3. Co-relation
4. Durbin Watson
5. VIF (VARIANCE INFLATION FACTOR)

 Descriptive Statistics - Descriptive statistics are brief descriptive coefficients that summarize a given data
set, which can be either a representation of the entire or a sample of a population. Descriptive statistics are
broken down into measures of central tendency and measures of variability (spread). Measures of central
tendency include the mean, median, and mode, while measures of variability include the standard
deviation, variance, the minimum and maximum variables, and the kurtosis and skewness. Descriptive
statistics, in short, help describe and understand the features of a specific data set by giving short
summaries about the sample and measures of the data. The most recognized types of descriptive statistics
are the mean, median, and mode, which are used at almost all levels of math and statistics. However, there
are less-common types of descriptive statistics that are still very important.

 Multiple regression - Regression is a statistical measurement used in finance, investing and other
disciplines that attempts to determine the strength of the relationship between one dependent variable
(usually denoted by Y) and a series of other changing variables (known as independent variables). In
order to test the significance of regression coefficient t statistics was tested at α = 0.05. To analysis the
problem of autocorrelation among the time series data of the variables. All the statistical calculation
were done by running SPSS software.

The Regression Analysis is a statistical tool used to determine the probable change in one variable for
the given amount of change in another. This means, the value of the unknown variable can be estimated
from the known value of another variable.

The regression analysis is widely used in all the scientific disciplines. In economics, it plays a significant
role in measuring or estimating the relationship among the economic variables. For example, the two
variables – price (X) and demand (Y) are closely related to each other, so we can find out the probable

24
 value of X from the given value of Y and similarly the probable value of Y can be found out from the
given value of X.

 Co-relation - Correlation is a statistical measure that indicates the extent to which two or more variables
fluctuate together. A positive correlation indicates the extent to which those variables increase or decrease
in parallel; a negative correlation indicates the extent to which one variable increases as the other
decreases.
A correlation coefficient is a statistical measure of the degree to which changes to the value of one variable
predict change to the value of another. When the fluctuation of one variable reliably predicts a similar
fluctuation in another variable, there’s often a tendency to think that means that the change in one causes
the change in the other. However, correlation does not imply causation. There may be, for example, an
unknown factor that influences both variables similarly.
 Durbin watson statistic - Autocorrelation, also known as serial correlation, can be a significant problem in
analysing historical data if one does not know to look out for it. For instance, since stock prices tend not
to change too radically from one day to another, the prices from one day to the next could potentially be
highly correlated, even though there is little useful information in this observation. In order to avoid
autocorrelation issues, the easiest solution in finance is to simply convert a series of historical prices into
a series of percentage-price changes from day to day.

Autocorrelation can be useful for technical analysis, which is most concerned with the trends of, and
relationships between, security prices using charting techniques in lieu of a company's financial health or
management. Technical analysts can use autocorrelation to see how much of an impact past prices for a
security have on its future price.
 VIF (Variance inflation factor)- it is a measure of the amount of multicollinearity in a set of
multiple regression variables. A multiple regression is used when a person wants to test the effect of
multiple variables on a particular outcome. The dependent variable is the outcome that is being acted upon
by the independent variables, which are the inputs into the model. Multicollinearity exists when there is a
linear relationship, or correlation, between one or more of the independent variables or inputs.
Multicollinearity creates a problem in the multiple regression because since the inputs are all influencing
each other, they are not actually independent and it is difficult to test how much the combination of the
independent variables affects the dependent variable, or outcome, within the regression model.
To ensure the model is properly specified and functioning correctly, there are tests that can be run for
multicollinearity. Variance inflation factor is one such measuring tool. Using variance inflation factors
helps to identify the severity of any multicollinearity issues so that the model can be adjusted. Variance
inflation factor measures how much the behaviour (variance) of an independent variable is influenced, or
inflated, by its interaction/correlation with the other independent variables.

25
 1) Descriptive statistics

Descriptive Statistics
N Minimum Maximum Mean Std.
Deviation
ROE 70 -.2832 .2494 .121536 .0895879
ROA 70 -.0160 .0202 .011299 .0073827
EPS 70 -55.3900 210.0600 45.132143 51.1746667
NIM 70 2.0500 4.5000 3.343714 .5878508
CAR 70 9.2000 39.8200 15.255143 3.7456625
CT 70 .0000 .0728 .015761 .0147684
FP 70 .0026 .2378 .041242 .0466246
AT 70 .0004 .0528 .014114 .0115811
GEMT 70 .0017 .0916 .011992 .0112117
GR 70 -.0676 .8907 .207279 .1757339
SZ 70 10.6755 13.5384 12.379879 .6359486
Valid N
70
(listwise)
Interpretation

 Descriptive analysis shows the mean, and standard deviation of the different variables of interest in this
study. It also presents the minimum and maximum values of the variables which help in getting a picture
about the maximum and minimum values a variable has achieved.
 Above data shows that all the bank’s average lending in Cotton textile is 1.5761%, average lending in
Food Processing is 4.1242, average lending in Automobile and Truck is 1.4114, average lending in Gems
and Jewellery is 1.1992. which is indicates all the banks are more prefere to lending in food processing
sector (4%).
 The results of descriptive statistics are presented in above table. It is evident from the table that the mean
value of NIM (33.43%) was highest among three dependent variables with a higher standard deviation.
So this result proves that the NIM is highly affected from independent variables compare with other two
dependent variables.

 Food processing sector lending’s recorded highest standard deviation of 4.66% indicating higher volatility
in the food processing sector lending.

26
2)Correlation

Dependent Independent variable CT FP AT GEMT GR SZ

variable
.307** -.186
Pearson Correlation -.289* -.222 .224 -.290*

.010 .123
ROE Sig. (2-tailed) .015 .065 .062 .015

321** .294*
Pearson Correlation -.360** -.222 .260* -.249*
.007 .014
ROA Sig. (2-tailed) .002 .065 .030 .037

.055 .179
Pearson Correlation .014 -.189 -.101 -.070

.652 .138
EPS Sig. (2-tailed) .911 .116 .405 .562

.260* -.044
Pearson Correlation -.324** -.238* .322** -.210
NIM
.030 .719
Sig. (2-tailed) .006 .047 .006 .081

Interpretation:

 As on above table we found that there is Correlation between ROE and Cotton Textile is -0.289*, which
indicates positive significant. Correlation between ROE and Food Processing is -0.222 so there is negative
significance. Correlation between ROE and Automobile and Trucks is 0.224 hence it is negative
significant. Correlation between ROE and Gems and Jewellery is -0.290* however it is positive
significant. Correlation between ROE and Operating Revenue Growth is 0.307** though it is positive
significant. Correlation between ROE and Bank Size is -0.186 hence there is negative significance
between the two. From the above data identify that banks are increase lending in cotton textile and gems
and jewellery however ROE will be increase. At other hand correlation relationship between ROE with
respectively to Food Processing and Automobile and truck is Insignificant so no any impact of both the
variables on ROE.
 As on above table we found that there is Correlation between ROA and cotton textile which is -0.360**,
however this is positive significant. Correlation between ROA and food processing is -0.222 so there is
negative significance. Correlation between ROA and automobile and truck is 0.260* hence it is positive
significant. Correlation between ROA and gems and jewellery is -0.249* however it is positive
significant. Correlation between ROA and Operating Revenue Growth is 0.321** though it is positive
significant. Correlation between ROA and Bank Size is -0.294* hence there is positive significance
between the two. From the above data identify that is banks are increase lending in cotton textile,
automobile and trucks and gems and jewellery however ROA will be increase. At other hand correlation

27
 relationship between ROA with food processing is Insignificant so no any impact of the variables on
ROA
 As on above data we found that there is Correlation between EPS and Cotton textile which is -0.14,
however this is not Significant. Correlation between EPS and food processing is -0.189 and there is not
significance. Correlation between EPS and automobile and trucks is 0.101 hence it is not significant.
Correlation between EPS and gems and jewellery is -0.070 however it is not Significant. Correlation
between EPS and Operating Revenue Growth is 0.055 though it is not significant. Correlation between
EPS and Bank Size is -0.179 hence there is no significance between the two. From the above data banks
are increase lending in cotton textile, food processing, automobile and truck and gems and jewellery
however EPS will be not affected.
 As on above table we found that there is Correlation between NIM and cotton textile which is -0.324**,
however this is positive significant. Correlation between NIM and food processing is -0.238* so there is
Positive significance. Correlation between NIM and automobile and truck is 0.322** hence it is positive
significant. Correlation between NIM and gems and jewellery is -0.210 however it is negative significant.
Correlation between NIM and Operating Revenue Growth is 0.260* though it is positive significant.
Correlation between NIM and Bank Size is -0.044 hence there is negative significance between the two.
From the above data identify that is banks are increase lending in cotton textile, food processing and
automobile and trucks however NIM will be increase. At other hand correlation relationship between
NIM with gems and jewellery is Insignificant so no any impact of the variables on NIM

3) Regression

Model Summaryb

Model R R Square Adjusted R Std. Error of the Durbin-Watson

Square Estimate

1 .592a .351 .289 .0062246 .931

a. Predictors: (Constant), SZ, GEMT, AT, CT, FP, GR

b. Dependent Variable: ROA

Interpretation: R2 is 0.351 it reflects that all independent variable are collectively affect ROA with respect to
35.1 %.

ANOVAa

Model Sum of Squares Df Mean Square F Sig.

Regression .001 6 .000 5.677 .000b

1 Residual .002 63 .000

Total .004 69
a. Dependent Variable: ROA
b. Predictors: (Constant), SZ, GEMT, AT, CT, FP, GR

28
  INTERPRETATION
Ho: There is no significant impact of CT, FP, AT, GEMT, OR and SZ on ROA
H1: There is significant impact of CT, FP, AT, GEMT, OR and SZ on ROA

 As Significant value above is 0.000b which is less than .05 so we shall accept H1. H0 is not accepted. So
it is proved that there is significant impact CT, FP, AT, GEMT, OR and SZ on ROA.
 There are all independent variables are was not affected but those who are affect that are strong so allover
significant is positive impact on dependent variables.

Coefficientsa

Model Unstandardized Coefficients Standardized T Sig. Collinearity Statistics

Coefficients

B Std. Error Beta Tolerance VIF

(Constant) .043 .018 2.391 .020

CT -.114 .055 -.227 -2.076 .042 .861 1.161

FP -.034 .017 -.215 -1.979 .052 .875 1.143

1 AT .144 .065 .226 2.210 .031 .984 1.016

GEMT -.137 .067 -.208 -2.035 .046 .982 1.018

GR .006 .005 .154 1.288 .202 .724 1.382

SZ -.002 .001 -.210 -1.753 .084 .721 1.386

Dependent Variable: ROA

ROA = 0.043 + (-0.114)CT +(-0.034)FP+(0.144)AT+(-0.137)GEMT+(0.006)GR +

(-0.002)SZ
Interpretation:
 As Significant value of Cotton Textile (CT) is 0.042 which is less than .05 so we shall accept H1. H0 is
rejected. So it is proved that there is significant impact of Cotton textile on ROA.

 As Significant value of food processing (FP) is 0.052 which is greater than .05 so we shall not accept H1.
H0 is accepted. So it is proved that there is no significant impact of Food processing on ROA.

 As Significant value of Automobile and truck (AT) is 0.031 which is less than .05 so we shall accept H1.
H0 is not accepted. So it is proved that there is significant impact of Automobile and truck on ROA.

 As Significant value of Gems and Jewelry (GEMT) is 0.046 which is less than .05 so we shall accept H1.
H0 is rejected. So it is proved that there is significant impact of Gems and Jewelry on ROA.

There are cotton textile, automobile and truck, gems and jewelry lending was affected ROA
but only food processing not affect and that was strong so allover significant is positive
impact on Return on Assets.

29
Model Summary

Model R R Square Adjusted R Square Std. Error of the Durbin-Watson

Estimate

1 .541a .293 .225 .0788616 1.126

a. Predictors: (Constant), SZ, GEMT, AT, CT, FP, GR

b. Dependent Variable: ROE

Interpretation: R2 is 0.293 it reflects that all independent variable are collectively affect ROE with respect
to 29.3 %.

ANOVAa

Model Sum of Squares Df Mean Square F Sig.

Regression .162 6 .027 4.341 .001b

Residual .392 63 .006

1

Total .554 69

a. Dependent Variable: ROE

b. Predictors: (Constant), SZ, GEMT, AT, CT, FP, GR

 INTERPRETATION
Ho: There is no significant impact of CT, FP, AT, GEMT, OR and SZ on
ROE.
H1: There is significant impact of CT, FP, AT, GEMT, OR and SZ on ROE.

 As Significant value above is 0.001b which is less than .05 so we shall accept H1. H0
is not accepted. So it is proved that there is significant impact CT, FP, AT, GEMT, OR
and SZ on ROE.

30
Coefficientsa

Model Unstandardized Coefficients Standardized T Sig. Collinearity

Coefficients Statistics

B Std. Error Beta Tolerance VIF

(Constant) .264 .227 1.160 .250

CT -.894 .693 -.147 -1.290 .202 .861 1.161

FP -.410 .218 -.213 -1.882 .064 .875 1.143

1 AT 1.535 .826 .198 1.857 .068 .984 1.016

GEMT -2.092 .854 -.262 -2.449 .017 .982 1.018

GR .113 .064 .222 1.784 .079 .724 1.382

SZ -.011 .018 -.075 -.603 .549 .721 1.386

a. Dependent Variable: ROE

1. ROE = 0.264 + CT(-0.894) + FP(-0.410)+AT(1.535)+GEMT(-2.092) +GR(0.113) + SZ

(-0.011)
Interpretation:
 As Significant value of Cotton Textile (CT) is 0.202 which is more than .05 so we shall accept H0.
H1 is rejected. So it is proved that there is not significant impact of Cotton textile on ROE.

 As Significant value of food processing (FP) is 0.064 which is greater than 0.05 so we shall accept
H0. H1 is rejected. So it is proved that there is not significant impact of Food processing on ROE.

 As Significant value of Automobile and truck (AT) is 0.068 which is more than .05 so we shall not
accept H1. H0 is accepted. So it is proved that there is not significant impact of Automobile and
truck on ROE.

 As Significant value of Gems and Jewelry (GEMT) is 0.017 which is less than .05 so we shall
accept H1. H0 is rejected. So it is proved that there is significant impact of Gems and Jewelry on
ROE.

There are cotton textile, food processing, automobile and truck, was not affected ROE but
only gems and jewelry lending significant is positive impact on Return on Equity.

31
 MODEL

Model R R Square Adjusted R Std. Error of the Durbin-Watson

Square Estimate

1 .322a .104 .019 50.6962491 .882

a. Predictors: (Constant), SZ, GEMT, AT, CT, FP, GR

b. Dependent Variable: EPS

Interpretation: R2 is 0.104 it reflects that all independent variable are collectively affect EPS with respect to
10.4%.

ANOVAa

Model Sum of Squares Df Mean Square F Sig.

Regression 18783.500 6 3130.583 1.218 .309b

1 Residual 161916.910 63 2570.110

Total 180700.410 69

a. Dependent Variable: EPS

b. Predictors: (Constant), SZ, GEMT, AT, CT, FP, GR

Ho: There is no significant impact of CT, FP, AT, GEMT, OR and SZ on EPS.
H1: There is significant impact of CT, FP, AT, GEMT, OR and SZ on EPS.

As Significant value above is 0.309b which is more than .05 so we shall accept H0. H1 is not accepted. So it is
proved that there is not significant impact on CT, FP, AT, GEMT, OR and SZ on EPS.

32
Coefficientsa
Model Unstandardized Standardized T\ Sig. Collinearity Statistics
Coefficients Coefficients
B Std. Error Beta Tolerance VIF
(Constant) -176.194 146.080 -1.206 .232
CT 329.017 445.315 .095 .739 .463 .861 1.161
FP -204.029 139.958 -.186 -1.458 .150 .875 1.143
1 AT -450.504 531.141 -.102 -.848 .400 .984 1.016
GEMT -382.664 549.196 -.084 -.697 .489 .982 1.018
GR 58.677 40.829 .201 1.437 .156 .724 1.382
SZ 18.041 11.299 .224 1.597 .115 .721 1.386
a. Dependent Variable: EPS

EPS = -176.194 +(329.017)CT+(-204.029)FP+(-450.504)AT+(-382.664)GEMT +(58.677) GR+ (18.041)SZ

Interpretation: As Significant value of Cotton Textile (CT) is 0.463 which is more than .05 so we shall accept H0.
H1 is rejected. So it is proved that there is not significant impact of Cotton textile on EPS.

 As Significant value of food processing (FP) is 0.150 which is greater than 0.05 so we shall accept
H0. H1 is rejected. So it is proved that there is not significant impact of Food processing on EPS.

 As Significant value of Automobile and truck (AT) is 0.400 which is more than .05 so we shall not
accept H0. H1 is Rejected. So it is proved that there is not significant impact of Automobile and
truck on EPS.

 As Significant value of Gems and Jewelry (GEMT) is 0.489 which is less than .05 so we shall
accept H0. H1 is rejected. So it is proved that there is significant impact of Gems and Jewelry on
EPS.

 There are cotton textile, food processing, automobile and truck gems and
jewelry lending, was not affected EPS.

33
 Model Summaryb

Model R R Square Adjusted R Std. Error of the Durbin-Watson

Square Estimate

1 .555a .308 .242 .5117975 .779

a. Predictors: (Constant), SZ, GEMT, AT, CT, FP, GR

b. Dependent Variable: NIM

Interpretation: R2 is 0.308 it reflects that all independent variable are collectively affect NIM with respect to
30.8%.

ANOVAa

Model Sum of Squares Df Mean Square F Sig.

Regression 7.342 6 1.224 4.672 .001b

1 Residual 16.502 63 .262

Total 23.844 69

a. Dependent Variable: NIM

b. Predictors: (Constant), SZ, GEMT, AT, CT, FP, GR

Ho: There is no significant impact of CT, FP, AT, GEMT, OR and SZ on NIM.
H1: There is significant impact of CT, FP, AT, GEMT, OR and SZ on NIM.

As Significant value above is 0.001b which is more than .05 so we shall accept H1. H0 is not accepted. So it is
proved that there is significant impact on CT, FP, AT, GEMT, OR and SZ on NIM.

Coefficientsa
Model Unstandardized Standardized t Sig. Collinearity Statistics
Coefficients Coefficients
B Std. Error Beta Tolerance VIF
(Constant) 2.187 1.475 1.483 .143
CT -8.636 4.496 -.217 -1.921 .059 .861 1.161
FP -2.133 1.413 -.169 -1.510 .136 .875 1.143
1 AT 15.874 5.362 .313 2.960 .004 .984 1.016
GEMT -9.651 5.544 -.184 -1.741 .087 .982 1.018
GR .796 .412 .238 1.932 .058 .724 1.382
SZ .089 .114 .097 .784 .436 .721 1.386
a. Dependent Variable: NIM

34
NIM = 2.187 + (-8.636)CT +(-2.133)FP+(15.874)AT+(-9.651)GEMT+(0.796)GR +
(0.089)SZ

 Interpretation: As Significant value of Cotton Textile (CT) is 0.059 which is more than .05 so we
shall not accept H1. H0 is accepted. So it is proved that there is not significant impact of Cotton
textile on NIM.

 As Significant value of food processing (FP) is 0.136 which is greater than 0.05 so we shall not
accept H1. H0 is accepted. So it is proved that there is not significant impact of Food processing
on NIM.

 As Significant value of Automobile and truck (AT) is 0.004 which is less than .05 so we shall
accept H1. H0 is rejected. So it is proved that there is significant impact of Automobile and truck
on NIM.

 As Significant value of Gems and Jewelry (GEMT) is 0.087 which is more than .05 so we shall
accept H0. H1 is rejected. So it is proved that there is not significant impact of Gems and Jewelry
on NIM.

 There are cotton textile, food processing, gems and jewelry lending, was not affected NIM
but automobile and truck lending is affected on NIM.

35
 CHAPTER 7 FINDINGS AND CONCLUSION

 FINDINGS
 It is found from the model summary of multiple regression models that all the chosen predicator variables
except EPS denotes the good impact on the all model. These models high explanatory power as their R
square values are high in all the category except EPS of all nifty banks(10).
 All the banks are more prefer to landings in food processing sector as compare to cotton textiles ,
automobile and trucks and gems and jewellery. statistical test shows automobile and trucks landings does
not impact on ROE and EPS.
 Overall all four independent variable makes 35.1% impact on ROA, 29.3% on ROE, 10.4% on EPS and
30.8% on NIM. So all the variable’s impacts on EPS is weak.
 Juliana Stanley Isanzu (2017) found in her study that nonperforming loans and capital adequacy as
measures of credit risk to have a significant impact on financial performance. Hence managers should pay
more attention to improving capital adequacy since it positively enhances financial performance while
reducing nonperforming loans by applying modern strategies and techniques for credit risk management.
Our study revealed that all the executive manager already pay attention in CAR and non performing loans
because descriptive statistical test proves growth of operating revenue is increased by average 20.72% of
all nifty banks (10) .

36
  CONCLUSION

The aim of this study was to quantify factors affecting the profitability of all nifty bank (10). This study used
Panel data from 2012 to 2018. the study examined a casual relationship between sectoral lending in consumer
good industry and four major profitability indicators of all nifty banks(10) in India. Basic objective of the study
was evaluating impact of sectoral lending on bank’s profitability : A study on consumer goods’.

Data was analysed using descriptive analysis, multiple linear regressions and Pearson correlation method with
help of SPSS (statistical package for the social science). The results of this study indicate that, the ROA, ROE,
EPS and NIM indicator represent 35.1%, 29.3%, 10.4% and 30.8% respectively. which indicates good
performance, as well as and the result of the model of the study show that all the nifty banks are influence by
landings in cotton textiles, food processing ,automobile and trucks and gems and jewellery. Even though other
variables, such as bank size and operating revenue growth also have significant effect on profitability but its
influence are very weak.

Main objective of the study was identifying sector advances and impact thereof on bank profitability. The study reveals
that Return on Assets (ROA), Return on equity (ROE), and Net interest to margin(NIM) have a statistically significant
relationship with consumer good sector advances whereas Earning per share(EPS) has been found to be statistically
insignificant. The results of the study thus imply that consumer good sector advances have a bearing on bank profitability.

37
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