4 Apn Bank LTD Ceo

MRP I PRIVATE SECTORE BANKS BASED IN INDIA
BANKING INDUSTRY IN INDIA

Sr. No. 1. 2. 3. 4. HISTORY POST-INDENPENCE SCENARIO LIBERALIZATION CURRENT SCENARIO Particulars Page No. 2 3 4 6
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Figure / Charts
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1.
STRUCTURE OF INDIAN BANKING SYSTEM
NSVKMS MBA COLLEGE VISNAGAR
BANKING INDUSTRY IN INDIA

Banking in India originated in the first decade of 18th century with The General Bank of India coming into existence in 1786. Bank of Hindustan followed this. Both these banks are now defunct. The oldest bank in existence in India is the State Bank of India being established as "The Bank of Bengal" in Calcutta in June 1806. A couple of decades later, foreign banks like Credit Lyonnais started their Calcutta operations in the 1850s. At that point of time, Calcutta was the most active trading port, mainly due to the trade of the British Empire, and due to which banking activity took roots there and prospered. The first fully Indian owned bank was the Allahabad Bank, which was established in 1865. By the 1900s, the market expanded with the establishment of banks such as Punjab National Bank, in 1895 in Lahore and Bank of India, in 1906, in Mumbai both of which were founded under private ownership. The Reserve Bank of India formally took on the responsibility of regulating the Indian banking sector from 1935. After India's independence in 1947, the Reserve Bank was nationalized and given broader powers.
HISTORY:
At the end of late-18th century, there were hardly any banks in India in the modern sense of the term. At the time of the American Civil War, a void was created as the supply of cotton to Lancashire stopped from the Americas. Some banks were opened at that time which functioned as entities to finance industry, including speculative trades in cotton. With large exposure to speculative ventures, most of the banks opened in India during that period could not survive and failed. The depositors lost money and lost interest in keeping deposits with banks. Subsequently, banking in India remained the exclusive domain of Europeans for next several decades until the beginning of the 20th century. At the beginning of the 20th century, Indian economy was passing through a relative period of stability. Around five decades have elapsed since the India's First war of Independence, and the social, industrial and other infrastructure have developed. At that time there did Indians operate very small banks, and most of them were owned and operated by particular communities. The banking in India was
controlled and dominated by the presidency banks, namely, the Bank of Bombay, the Bank of Bengal, and the Bank of Madras - which later on merged to form the Imperial Bank of India, and Imperial Bank of India, upon India's independence, was renamed the State Bank of India. There were also some exchange banks, as also a number of Indian joint stock banks. All these banks operated in different segments of the economy. The presidency banks were like the central banks and discharged most of the functions of central banks. They were established under charters from the British East India Company. The exchange banks, mostly owned by the Europeans, concentrated on financing of foreign trade. Indian joint stock banks were generally under capitalized and lacked the experience and maturity to compete with the presidency banks, and the exchange banks. There was potential for many new banks as the economy was growing. Lord Carson had observed then in the context of Indian banking: "In respect of banking it seems we are behind the times. We are like some old fashioned sailing ship, divided by solid wooden bulkheads into separate and cumbersome compartments." Under these circumstances, many Indians came forward to set up banks, and many banks were set up at that time, a number of which have survived to the present such as Bank of India and Corporation Bank, Indian Bank, Bank of Baroda, and Canara Bank
POST-INDENPENCE SCENARIO
The partition of India in 1947 had adversely impacted the economies of Punjab and West Bengal, and banking activities had remained paralyzed for months. India's independence marked the end of a regime of the Laissez-faire for the Indian banking. The Government of India initiated measures to play an active role in the economic life of the nation, and the Industrial Policy Resolution adopted by the government in 1948 envisaged a mixed economy. This resulted into greater involvement of the state in different segments of the economy including banking and finance. The major steps to regulate banking included: In 1948, the Reserve Bank of India, India's central banking authority, was nationalized, and it became an institution owned by the Government of India. In 1949, the Banking Regulation Act was enacted which empowered the
Reserve Bank of India (RBI) "to regulate, control, and inspect the banks in India." The Banking Regulation Act also provided that no new bank or branch of an existing bank may be opened without a licence from the RBI, and no two banks could have common directors. However, despite these provisions, control and regulations, banks in India except the State Bank of India, continued to be owned and operated by private persons. This changed with the nationalization of major banks in India on 19th July 1969.
LIBERALIZATION
In the early 1990s the then Narasimha Rao government embarked on a policy of liberalization and gave licenses to a small number of private banks, which came to be known as New Generation tech-savvy banks, which included banks such as UTI Bank(now re-named as Axis Bank) (the first of such new generation banks to be set up), ICICI Bank and HDFC Bank. This move, along with the rapid growth in the economy of India, kick started the banking sector in India, which has seen rapid growth with strong contribution from all the three sectors of banks, namely, government banks, private banks and foreign banks. The next stage for the Indian banking has been setup with the proposed relaxation in the norms for Foreign Direct Investment, where all Foreign Investors in banks may be given voting rights which could exceed the present cap of 10%, at present it has gone up to 49% with some restrictions. The new policy shook the Banking sector in India completely. Bankers, till this time, were used to the 4-6-4 method (Borrow at 4%; Lend at 6%; The new wave ushered in a modern outlook and tech-savvy methods of working for traditional banks. All this led to the retail boom in India. People not just demanded more from their banks but also received more.
STRUCTURE OF INDIAN BANKING SYSTEM
Figure 1
CURRENT SCENARIO
Currently (2007), banking in India is generally fairly mature in terms of supply, product range and reach-even though reach in rural India still remains a challenge for the private sector and foreign banks. In terms of quality of assets and capital adequacy, Indian banks are considered to have clean, strong and transparent balance sheets relative to other banks in comparable economies in its region. The Reserve Bank of India is an autonomous body, with minimal pressure from the government. The stated policy of the Bank on the Indian Rupee is to manage volatility but without any fixed exchange rate-and this has mostly been true. With the growth in the Indian economy expected to be strong for quite some time-especially in its services sector-the demand for banking services, especially retail banking, mortgages and investment services are expected to be strong. One may also expect M&As, takeovers, and asset sales. In March 2006, the Reserve Bank of India allowed Warburg Pincus to increase its stake in Kotak Mahindra Bank (a private sector bank) to 10%. This is the first time an investor has been allowed to hold more than 5% in a private sector bank since the RBI announced norms in 2005 that any stake exceeding 5% in the private sector banks would need to be vetted by them. Currently, India has 88 scheduled commercial banks (SCBs) - 28 public sector banks (that is with the Government of India holding a stake), 29 private banks (these do not have government stake; they may be publicly listed and traded on stock exchanges) and 31 foreign banks. They have a combined network of over 53,000 branches and 17,000 ATMs. According to a report by ICRA Limited, a rating agency, the public sector banks hold over 75 percent of total assets of the banking industry, with the private and foreign banks holding 18.2% and 6.5% respectively.
PRIVATE SECTOR BANKING IN INDIA

Sr. No. 1. 2. INTRODUCTION PRIVATE SECTOR BANKS: CURRENT POSITION Particulars Page No. 8 9
PRIVATE SECTOR BANKING IN INDIA

INTRODUCTION
Private sector banks have existed for over a century in India. Formation of the State Bank Group in 1955/1957 and two nationalization in 1969 and 1980 have led to the dominance of public sector Banks. Economic reforms in 1991 and banking sector reforms in 1997-98 have changed the banking scene totally. People generally relay on nationalized banks backed by the Government. Change in the mindset of the customer forced the Reserve Bank of India allow new private banks to come into existence a decade back. The world trade Organization (WTO) and globalization initiated more foreign banks to add to the competition and proper, level playing field.
It is pertinent and appropriate to mention that the Imperical Bank of India was a large private sector bank that handled all the commercial banking business as well as treasury related work of the Government until the RBI was formed in 1034. It was in the Post-independent era in 1948 that RBI itself converted it into a fully state-owned bank, followed by the formation of the State Bank of India in 1955. The debate about RBI fully autonomous or not is inconclusive even today, as it operates as the countrys central bank and also advises the Government on monetary and fiscal matters and yet, implements welfare-oriented policies as far as regulating the commercial banks are concerned, irrespective of the fact whether these banks are in the public, Private, cooperative or foreign sectors. Prior to the first major nationalization of 14 banks in July 1969, Private capital called the shots in commercial banking. The Tatas owned the Central Bank of India, the Birlas-the United Commercial Bank (UCO bank now) and so on. The policy of social control of banks in India in 1969, brought in a different turn, but in retrospect, it is evident that political motives demitted the decision about the two nationalizations. Large-scale branch explanation, mass recruitment of staff to take banking to grass route level, directed investment and credit programs administer interest rate regime, credit dispensation toward poverty alleviation program through loan Melas, ruled the roost in the Indian banking seen of over two decades.
PRIVATE SECTOR BANKS: CURRENT POSITION

During the med 80s, the scenario changed both at the political front and the banking system in India Productivity, Profitability Proffessionlization, introduction to technology, competition from private sector, innovations of new products and services etc. have set in and necessitated dramatic changes, beginning with the Financial sector Reform in 1991. Public sector banks started declaring losses and experiencing the need for total change in their working, and preparing to face stiff competition from the new generation banks (which permitted to start in mid 90s after introducing the prudential norms for the banking system in 1993) PSBs and old private sector banks realize the new role and also welcomed the new generation banks-bank of Punjab, HDFC bank, IDBI bank, ICICI bank, Centurion bank, Axis bank, Indusland bank etc. these new banks has the advantages of starting with a clean slat, adequacy capital resources, well trained and professional man power, absences of Non performing loans in their books, computerization, lean organizational system, a handful of branches in chosen centers, a new verity of products and services. The formation of WTO in 1995 and Indias commitment to open up financial services to global players had also brought in many foreign banks to open their offices and expand branches, offering a new range of products and services through ATMs, electronic services, credit cards and portfolio management for high net worth individuals and corporate customers. An entirely new level playing field was created to accept perfect competition among all types of blank of the country, particularly in the metro and urban centers. Amidst the transition from the traditional and controlled banking system, the old private sector banks which were carrying on their business within limited areas of operation started feeling the heat, both from the recharged PSBs and new private sector banks, besides the foreign banks. The new private banks to enter the scene are Kotak Mahindra bank in March 2003 and yes bank in September 2004. Among the 30 private sector banks in India today, we have 21 old and new banks that are able to sustain the competition. Stringent capital adequacy requirement, compliance to prudential asset liability and risk management norms, huge investment in technology to move towards total computerization, etc., have put tremendous presser on all the banks, including the old private banks. In the post-reforms era too there have been several changes in the banking system in India.
MAJOR PRIVATE SECTOR BANKS

Sr. No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. ICICI BANK HDFC BANK AXIS BANK SOUTH INDIAN BANK CITY UNION BANK KARUR VYSYA BANK JAMMU AND KASHMIR BANK KARNATAKA BANK YES BANK BANK OF RAJASTHAN DEVELOPMENT CREDIT BANK KOTAK MAHINDRA BANK Particulars Page No. 11 11 12 12 13 13 13 14 14 15 15 16
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MAJOR PLAYERS IN PRIVATE SECTOR BANKS IN INDIA

ICICI BANK
The World Bank, the Government of India and the Indian Industry, for the promotion of industrial development in India by giving project and corporate finance to the industries in India, established ICICI LIMITED, in 1955. ICICI Bank has grown from a development bank to a financial conglomerate and has become one of the largest public financial institutions in India. ICICI Bank has financed all the major sectors of the economy, covering 6,848 companies and 16,851 projects. As of March 31, 2000, ICICI had disbursed a total of Rs. 1,13,070 crores, since inception.
HDFC BANK
HDFC Bank was amongst the first to receive an 'inprinciple' approval from the Reserve Bank of India (RBI) to set up a bank in the private sector from Housing Development Finance Corporation Limited (HDFC), in 1994 during the period of liberalization of the banking sector in India. HDFC India was incorporated in August 1994 in the name of 'HDFC Bank Limited'. HDFC India commenced operations as a Scheduled Commercial Bank in January 1995. HDFC India deals in varieties of products like home loan, standard life insurance, mutual fund, securities, credit cards, etc. HDFC has branch offices in all major cities in India like Calcutta, Chennai, Delhi, Bangalore, Hyderabad, Ahmedabad apart from HDFC Mumbai.
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AXIS BANK
(UTI BANK IS NOW AXIS BANK)
Axis Bank India, the first bank to begin operations as new private banks in 1994 after the Government of India allowed new private banks to be established. Axis Bank was jointly promoted by the Administrator of the specified undertaking of the Unit Trust of India (UTI-I), Life Insurance Corporation of India (LIC) and General Insurance Corporation Ltd. Also with associates viz. National Insurance Company Ltd., The New India Assurance Company, The Oriental Insurance Corporation and United Insurance Company Ltd.
SOUTH INDIAN BANK

One of the earliest banks in South India, "South Indian Bank" came into being during the Swadeshi movement. The establishment of the bank was the fulfillment of the dreams of a group of enterprising men who joined together at Thrissur, a major town (now known as the Cultural Capital of Kerala), in the erstwhile State of Cochin to provide for the people a safe, efficient and service oriented repository of savings of the community on one hand and to free the business community from the clutches of greedy money lenders on the other by providing need based credit at reasonable rates of interest. Translating the vision of the founding fathers as its corporate mission, the bank has during its long sojourn been able to project itself as a vibrant, fast growing, service oriented and trend setting financial intermediary.
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CITY UNION BANK (CUB) 1

City Union Bank is an Indian bank, earlier known as 'The Kumbakonam Bank Ltd.' It was incorporated as a limited company on 31st October, 1904. It was included in the Second Schedule of RBI Act of 1934 on 22nd March 1945. The first branch of the Bank was opened at Mannargudi on 24th Jan.'1930. The Bank took over the assets and liabilities of the Commonwealth Bank Limited in 1957 at Aduthurai, Kodavasal, Valangaiman, Jayankondacholapuram and Ariyalur Branches.
KARUR VYSYA BANK 2

The Karur Vysya Bank Limited was set up in the year 1916 at Karur in Tamil Nadu (India). The Bank started with only Rs. 1 lakh Capital. The Bank is spread over in 10 States and 1 Union Territory with 231 branches and 5 extension counters. The Bank is one of the early banks to adhere the norm of Capital Adequacy Ratio stipulated in Reserve Bank of India and is maintaining over 16% ratio.
JAMMU AND KASHMIR BANK3

Jammu and Kashmir Bank Limited was incorporated on 1st October 1938 and commenced its business from 4th July 1939 at in Kashmir (India). The Bank was the first in the country as a State owned bank.
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Website of City Union Bank www.cityunionbank.com Website of Karur Vysya Bank www.kvb.co.in Website of Jammu & Kasmir Bank www.jkbank.net
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According to the extended Central laws of the state, Jammu & Kashmir Bank was defined as a Government. Company as per the provision of Indian companies act 1956. In the year 1971, the Bank received the status of scheduled bank. RBI declared it as A Class Bank in 1976.
KARNATAKA BANK: 4
Karnataka Bank Ltd. was incorporated on February 18th, 1942 at Mangalore in Karnataka (India). In its growth process, it merged with Sringeri Sharada Bank Ltd., Chitladurg Bank Ltd. and Bank of Karnataka.The Bank has a network of 385 branches across 18 states and 2 Union Territories. Today it has 97,617 shareholders and over 2.5 million customers.
YES BANK:
YES BANK, Indias new age private sector Bank, is an outcome of the professional commitment of its Founder, Rana Kapoor and his highly competent top management team, to establish a high quality, customer centric, service driven, private Indian Bank catering to Emerging India. YES BANK is the only Greenfield license awarded by the RBI in the last 12 years, associated with the finest pedigree investors. YES BANK has adopted international best practices, the highest standards of service quality and operational excellence, and offers comprehensive banking and financial solutions to all its valued customers. A key strength and differentiating feature of YES BANK is its knowledge driven approach to banking and an unprecedented customer experience for its retail banking and wealth management clients. YES BANK is built on a foundation of trust, strengthened by knowledge, backed by cutting-edge technology, governed by transparency and committed to responsible banking. The result is an unstinted commitment to growing your wealth. It is this commitment that has earned us the distinction of being ranked Indias No. 3 Bank in a recent survey of listed banks in India, by Business world. The same survey
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Website of Karnataka Bank www.ktkbankltd.com
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also ranked YES BANK No. 1 in Safety, Efficiency & Growth. YES BANK was recently ranked No. 2 amongst New Private Sector Banks, in the Financial Express survey of Indias Best Banks for 2006, while being ranked No. 1 in Growth. Today, YES BANK is present across all major cities in India and offers a comprehensive range of banking products and financial services which include corporate and institutional banking, financial markets, investment banking, business and transactional banking, retail and private banking business lines across the country.
BANK OF RAJASTHAN5
Bank of Rajasthan was established at Udaipur on May 8, 1943 as The Bank of Rajasthan Ltd. The initial capital of the bank was Rs. 10.00 lakhs. RBI put the Bank into the schedule in 1948. This was the first bank to start mobile branch by introducing banking at the doorstep in Jaipur on 5th August 1960. It achieved distinction when its Jaipur branch qualified for ISO 9002:94 certifications by Det Norske Veritas (DNV), London in 1997.
DEVELOPMENT CREDIT BANK 6

Development Credit Bank Ltd. is one of the fastest growing private sector scheduled commercial banks in India. It has a network of 72 branches and 121 ATMs in the country. Aga Khan Fund for Economic Development (AKFED) in the largest and only stakeholder in the Bank AKFED holds 68% of stake in the Bank.
Website of Bank of Rajasthan www.bankofrajasthan.com Website of Development Credit Bank www.dcbl.com
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KOTAK MAHINDRA BANK A part of the Kotak Mahindra Group that came into existence nearly twenty years ago and one of India's leading financial institutions today enjoying the trust and confidence of over 5 lakh customers. Partnering us in our growth have been leading international players like Goldman Sachs (Investment Banking and Equities). Established in 1984, Kotak Mahindra is one of India's leading financial institutions, offering complete financial solutions. From commercial banking, to stock broking, to mutual funds, to life insurance, to investment banking, the group caters to the financial needs of individuals and corporates.
In February 2003, Kotak Mahindra Finance Ltd, the group's flagship company was given the license to carry on banking business by the Reserve Bank of India (RBI). Kotak Mahindra Finance Ltd. is the first company in the Indian banking history to convert to a bank.
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OPPORTUNITIES AND THREATS ANALYSIS

Sr. No. 1. 2. OPPORTUNITIES THREATS Particulars Page No. 18 20
Sr. No. 1.
Figure / Charts HNWI POUPLATION GROWTH
Page No. 19
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OPPORTUNITIES FOR THE PRIVATE SECTOR BANKS

According to one estimation 41% of Government of the countries population is still unblocked in urban areas. So there is a great opportunity for the private sector banks to capture that market as most of the unborn areas having branches of Private sector banks in India. 61% of the Population of the in rural areas is without bank, so Private sector banks have the opportunities to establish branches in the rural areas to increase their market share. The No of peoples of having no assess to loans is 86% in urban areas while 90% in the rural areas. So here is a good prospect for the private sector banks to corporate higher market share. Indian Government has opened up the private sector banks for foreign investors raising the FDI to 49% and Government plans to increase FDI to 74% by the year 2009. Increasing high network population leads a great opportunities for the private sector bank to focus on the wealth management services. The growth of HNWI (High Net work Individual) grows y 20.5% in the year 2006. India is having the second largest growth in the HNWI in the year 2005-2006. This Private banking sector must offer their wealthy clients innovative and comprehensive strategies to effectively organize their investments. (Refer Figure 2) . Most of the private sector bank offers all the services under the one roof, which create better opportunities to sell No. of services to the customers Private sector banks focus on the niche market to serve. So there is better opportunity to serve and create a loyal customer. Hugh Net work of IT infrastructure leads private sector banks to focus on the virtual banking system.
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Figure 2
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THREATS FOR THE PRIVATE SECTOR BANKS

Increasing amount of NPA is one of the biggest threats for the private sector banks in India. Cyber crime is one of the emerging threats for the operations of the private sector banks in India, because most of the private sector banks are focusing on the new age of the banking by providing facilities likes net banking, ATM etc. now a days most of the banking operations are depending on the information technology. The threats related to the increase in the rate of the CRR and the SLR. These are the two important ratios that all the private sector banks have to follows. Increasing interest rate is the major concerns for the private sector banks in India, as the profitability of the banks are depends on interest earned and the interest paid. By the open up of the Indian economy foreign payers are also allowed to enter in to the Indian economy, the foreign payer giant like ABN Amro, HSBC etc entered into the Indian banking industry. By the year 2009 foreign players would allowed for the branch expansion, which creates the biggest threats for the private sector banks in India. Emerging opportunities in the private sector creates threat for the existing players by the new entry. Huge Network and large customers base that creates threat for the private sector banks Ex: banks like SBI As per the report KPMG India 7 is among the most preferred private banking destination for the purpose of merger and acquisition.
KPMG International is a global network of professional firms providing Audit, Tax, and Advisory service
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FIVE FORCE ANALYSIS

Sr. No. 1. Particulars FIRMS IN OTHER INDUSTRY OFFERING SUBSTITUTE PRODUCTS 2. 3. 4. 5. BARGAINING POWER OF THE BUYERS POTENTIAL NEW ENTRANTS BARGAINING POWER OF SUPPLIERS RIVALRY AMONG COMPETING PLAYERS 23 23 24 24 Page No. 22
Sr. No. 1. FIVE FORCES
Figure / Charts REPENSENTING PRIVATE SECTOR BANKS IN INDIA
Page No. 25
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FIVE FORCE ANALYSIS

1) FIRMS IN OTHER INDUSTRY OFFERING SUBSTITUTE PRODUCTS Substitutes of the private sector banks services a) Investment Advisory services substitute: Assets management companies offering mutual funds. Personal provided fund and employee provided fund. Investment options by the Postal Department and other government departments like KVP, T BILLS. Life insurance b) Banking Service: Banking services by the public sector banks and foreign banks. Private self-deposit vault (Diamond Merchants) Community Bank (Bombay mercantile bank Mumbai). c) Credit Services (Services of Loans) Private or institutional lenders like Fullerton India Credit Company Limited, Mass financial services, Muthoot Capital Services These are the substitute of the private sector banks due to the competitive pressures coming from the attempts of the companies outside the industry to win buyers over to their products. So the private sector banks facing high pressure from the substitute investment alternatives, on the parameter of banking services low pressures of substitute products.
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2) BARGAINING POWER OF THE BUYERS: In case of the banking services customers are plays the role of the buyers as well as the suppliers. Landing by the banks converts customers in to the buyers while deposits by the customers make them suppliers. Because of the high competition and the government reforms in the banking industry there has been increase in the bargaining power of the buyer (banks are allowed to decide their own PRIME LENDING RATE). As for the interest rates on Deposits, Saving a/c and the Charges like Documentation Charges, the barging power of buyer is low. But due to the competitive pressure by the public and foreign banks there has been increase in the bargaining power of the customer. Customers with high investment volume/option on those cases the bargaining power of the customer increases to some extend. Ex.: A customer with high deposit may have bargaining power on the interest rates of deposits. 3) POTENTIAL NEW ENTRANTS: In the private sector banks the threats of new entrants is high. The major threats for the private sector banks are the approval by the Government. of India and RBI to enter in to Indian Private sector banks. Emerging interest of Indian players in the Indian private sector banks have Increase the threats of the new entrants. As the foreign banks like citi bank, ABN Amro, HSBC etc have expanded their activities in India and by the 2009 they would be allowed to for the branch expansion.
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4) BARGAINING POWER OF SUPPLIERS: As the Indian economy is growing and the factor behind the such growth because of the investment generation by the Indian economy, there are number of options are available to the consumer (supplier of money) like stock market, insurance, mutual fund, government securities etc which provides higher return than the any banks in India, so due to this there has been high bargaining power if supplier of money (customer). In case of banking software and IT enable suppliers there is high bargaining power of the supplier as it would be difficult for the any private sector bank to switch over to the other software and it service providers. In case of suppliers of plastic money to the private banks, the bargaining power of supplier is low. 5) RIVALRY AMONG COMPETING PLAYERS: Most of the private sector banks comparing on the basis of providing large number of financial services to the customers like investment advisory and options services, ATM centers, Credit cards, saving accounts, Safe deposits lockers, loans ets. to capture more market share. Most of the private sector banks focusing on the product differentiations in the financial services to increase the customer value so, as to capture higher market share. The rivalry level is high amongst the private sector players so as to gain higher sales and market share to increase profits.
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FIVE FORCES REPENSENTING PRIVATE SECTOR BANKS OF INDIA

Figure 4
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PESTL ANALYSIS OF THE PRIVATE BANKS

Sr. No. 1. 2. 3. 4. 5. Particulars POLITICAL FACTORS ECONOMICAL FACTORS SOCIO-CULTURAL FACTORS TECHNOLOGICAL FACTORS LEGAL FACTORS Page No. 27 27 29 29 30
Sr. No. 1.
Figure / Charts INTEREST RATE MOVEMENT IN INDIA
Page No. 43
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PESTL ANALYSIS OF THE PRIVATE SECTOR BANKING INDUSTRY

Political Factors:
The Political and the government factor play a vital role in the economic and industrial development of the country. The government policies direct the role of the industries in the economic upliftment of the country. Here, for the private sector bank government (finance ministry) and the RBI decides the role of these banks in the economy. The instability in the current UPA Government creates the pressure for the industry as the change in government might results in to the new rules and regulations for the private sector banks in India. The Government has identify the needs of the private sector banks for the economic development and to cope with changing global banking scenario frames the rules and regulation for the private sector banks The effects of political and government changes have an influence on the regulatory body of RBI and rules and regulations for the functioning of private sector banks.
Economical Factors:
The developing economy of India shown a outstanding performance the last decades. The GDP grew by around 8.6%. Almost all sectors showing the performance as per the required by the developing economy of India. The economic policies of the country have great influence on its industries and the growth rate. The economical changes like changes in CRR - SLR rates, Interest rate on Time Deposits and saving deposits, Repo Rate, credit rate, etc. have the impact on the performance of the private sector banks The economical changes mention above have the impact on functioning of the private sector bank as well the overall economy. Raised general provisioning requirement on standard assets such as personal loans, loans and advances qualifying as capital market exposures, residential housing loans
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beyond Rs.20 lakh and commercial real estate loans from the present level of 0.4% to 1.0%. The above prudential measures would definitely require banks to allocate more capital to meet their capital adequacy requirements. Provisioning requirements would also increase which could raise the lending rates to some extent catering to theses segments, which has attracted higher provisioning and also restrict growth in profits. Lending rates on personal loans, loan against shares could become costlier for customers. The measures have mainly been a reflection of RBIs concern over higher asset prices and bank credit getting into the equity markets which is perhaps not being adequately factored in by banks. Such measures would definitely make banks review their asset quality and exposure to certain segments of credit. Policy rates Ratio: PLR CRR SLR 7.50 % 25.00 % Saving Bank Rate Deposit Rate
Figure 5
Reserve Ratio:
Lending/ Deposit
Bank rate Repo rate Reserve Repo rate
6.0% 7.75% 6.00%
12.75% to 13.25% 3.5% 7.50% to 9.60%
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Socio-cultural Factors: India is one of the ten fastest growing population of High Net Worth Individuals (HNWIs) globally. The number of HNWI is more than 1,00,000. The salary increase in India 40 per cent is the highest in the world. These figures highlight the potential in the top brass of the society in India. The number of middle class is likely to exceed 300 mn. Thus rising affluence and growth of the consuming class accounts for a huge untapped market waiting to be discovered. The credit deposit ratio for the private sector banking industry is growing and is currently at 76.3%. Bank Credit is growing about 30%. With the private banks targeting at the rural market, they have found a niche segment in the form of micro credit. Thus, sociocultural factors do affect the industry but the industry is well geared up to take the challenge and has decided to carve a niche for themselves in their way. Technological Factors: The banking sector globally is probably a sector most influenced by the development in interactive technologies in general. The banking sectors core service basically involves handling money wherein the importance of interaction between the banks and customers is being felt on both sides. Customers expect more and more convenient services from their banks, which were difficult and costly in past. Lately, it has become easier and cost effective to meet such expectations due to the advancement of interactive technologies. In recent times, banks worldwide have huge investment in advanced interactive technologies to serve their customers better. In India, Most of the private sector banks and some public sector banks provide multiple channels of interactions with their customers with the help of advanced interactive technologies. An Indian customer today has the option of mobile banking, automatic teller machines (ATMs), Phone banking and Net banking at anytime of the day. Technological affects the functioning of the banking. The IT plays an important role in the private sector banking, as most of the operations of the banks depend on it. Technological changes might change the phase of the current private sector banking.
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Private sector banks provides the IT enable services like Internet banking, mobile baking, ATM, SMS banking etc. which have a great influence on the technological factors. The banking operations are now days enable by the use of the information technology. Growth of the IT has change the phase of the current banking. Legal Factors: In India, private sector banks are under close scrutiny of RBI, which plays a role of supervisor and governing body. Yet RBI has given enough space for development and has ensured high competition based on innovation. RBI has ensured that a free and open banking sector is created where most business are covered by market determined rates. RBI has also made provisions for full banking system. Some legal reforms steps taken by RBI like deregulated Interest rates and significant steps towards full account convertibility clearly show the intent of RBI to create a fair and market driven industry. The legal environment for conducting banking business has also been strengthened. Debt recovery tribunals were part of the early reforms process for adjudication of delinquent loans. More recently, the Securitisation Act was enacted in 2003 to enhance protection of creditor rights. To combat the abuse of financial system for crime-related activities, the Prevention of Money Laundering Act was enacted in 2003 to provide the enabling legal framework. The Negotiable Instruments (Amendments and Miscellaneous Provisions) Act 2002 expands the erstwhile definition of 'cheque' by introducing the concept of 'electronic money' and 'cheque transition'. The Credit Information Companies (Regulation) Bill 2004 has been enacted by the Parliament, which is expected to enhance the quality of credit decisions and facilitate faster credit delivery.
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TECHNOLOGY EDGE AND THE INNOVATIONS IN THE PRIVATE SECTOR BANKS

Sr. No. 1. 2. 3. 4. 5. Particulars AUTOMATED TELLER MACHINE (ATM) MOBILE BANKING SMS BANKING NET BANKING PROXY BANKING Page No. 32 32 33 33 36
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TECHNOLOGY EDGE AND THE INNOVATIONS IN THE PRIVATE SECTOR BANKS.

This section is fully dedicated to the Tech Banking. A decade before, it was tough to belief that banking sector will be at a finger tip. Now it is possible. A mobile hand set with a connection is the only instrument needed to make a gateway to your banking transaction, the latest innovation of technology. Apart from the Mobile Banking, including of SMS Banking, Net Banking and ATMs are the major steps taken by the banks in India towards modernization. With all these devises and systems, there is a complete freedom to experience.
Automated Teller Machine (ATM):

The first bank to introduce the ATM concept in India was the Hong Kong and Shanghai Banking Corporation (HSBC). It was in the year 1987. Now, almost every commercial bank gives ATM facilities to its customers.
The first bank to cross 1,000 marks in installing ATMs in India is ICICI. SBI is following the concept of 'ATMs in Quantity'. But Private Sector Banks have taken the lead. ICICI, UTI, HDFC and IDBI count more than 50% of the total ATMs in India.
Mobile Banking:
The account that travels with you". This is needed in today's fast business environment with unending deadlines for fulfillment and loads of appointments to meet and meetings to attend. With mobile banking facilities, one can bank from anywhere, at anytime and in any condition or anyhow. The system is either through SMS or through WAP. Mobile Banking is the hottest area of development in the banking sector and is expected to replace the credit/debit card system in future. In past two years, mobile banking users have increased three times if we compare the use of either debit card or credit card. Moreover 85-90% mobile users do not own credit cards. Mobile banking uses the same infrastructure like the ATM solution. But it is extremely easy and inexpensive to implement. It reduces the cost of operation for bankers in comparison to the use of ATMs.
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Using compact HTML and WAP technologies, the following operations can be conducted through advanced mobile phones which can is further viewed on channels such as the Internet via the Channel Manager. In countries like Korea, two SIM Card is used in mobile phones. One for the telephonic purpose and the other for banking. Bank account data is encrypted on a smart-card chip. Bank of Korea reported about 3.3 million transactions in 2004.
SMS Banking
Now one may have to thank the banks, which are providing banking at the send-ofyour-sms. The technology is at its highest level to move ones money while one is on the move. If one is having non-WAP enabled mobile handset, one can use the facility of SMS services. The service provider can easily use the following operations: The SMS facility brings peace of mind to customers and opens doors to many more technological possibilities and innovative services. It is very similar to how an ATM works. To use ATM, a card is necessary and to use SMS service, a mobile phone is needed. In both the cases, secret number is necessary to access. SMS banking is also very much safe. First, one authenticates the mobile number with the authentications key. Second, the customer uses secret Mobile Personal Identification Number (MPIN). Bank of Punjab Ltd has developed a new concept. They call it "Mobile Wallet". With the support of this technology, a customer can make payment and receive payment of account of buy/sell (merchants) through SMS. In this system, a buyer sends a message for buying and the bank in return sends a message confirming the purchase both to the merchant as well as to the buyer. Debit card number is the key field which is used for the authenticity of the customer.
Net Banking
Net Banking is conducting ones banking or bank account online through a computer and a net connection. The system is updated immediately after every transaction automatically. In other words it is said that it is updated 'on-line, real time'. Through
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net banking one can check the status of his/her account, place queries and also can be facilitated with a wide range of transactions simultaneously. In India, the regulatory body has not yet sanctioned virtual bank, in abroad there are banks like EGG Bank or NET Bank, which only have a virtual presence without any physical branches. Net Banking has three basic features. They are as follows:
The banks offer only relevant information about their products and services to the mass.
Few banks provide interaction facility between the banks and its customers. Banks are coming up with arrangements of utility payments, like telephone bills, electricity bills, etc.
The current statistics show that hardly 10 per cent of Indian customers uses the Internet for banking. Among all the facilities provided the maximum of them uses only for checking balance or requesting for a chequebook. Very few customers use the advance interactive services provided by the banks. According to HDFC and ICICI Bank, 17 per cent of ICICI customers use the Internet for banking and 10 per cent of HDFC customers prefer it. Emerging Challenges A large sophisticated and highly competitive Internet Banking Market has developed which is driven by Demand side pressure due to increasing access to low cost
electronic services. Emergence of open standards for banking functionality. Growing customer awareness and need of transparency. Global players in the fray
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More convenient international transactions due to the fact that the Internet along with general deregulation trends eliminates geographic boundaries. The Internet and its underlying technologies have changed and transformed not just banking, but also all aspects of finance and commerce. It represents much more than a new distribution opportunity. It will enable nimble players to leverage their brick and mortar presence to improve customer satisfaction and gain share. It will force lethargic players who are struck with legacy cost basis, out of business-since they are unable to bring to play in the new context. Main Concerns in Internet Banking In a survey conducted by the Online Banking Association, member institutions rated security as the most important issue of online banking. There is a dual requirement to protect customers' privacy and protect against fraud. Banking Securely: Online Banking via the World Wide Web provides an overview of Internet commerce and how one company handles secure banking for its financial institution clients and their customers. Some basic information on the transmission of confidential data is presented in Security and Encryption on the Web. PC Magazine Online also offers a primer: How Encryption Works. A multi-layered security architecture comprising firewalls, filtering routers, encryption and digital certification ensures that your account information is protected from unauthorized access: Firewalls and filtering routers ensure that only the legitimate
Internet users are allowed to access the system. Encryption techniques used by the bank (including the
sophisticated public key encryption) would ensure that privacy of data flowing between the browser and the Infinity system is protected. Digital certification procedures provide the assurance that the
data one receives is from the Infinity system. Advantages of Net Banking
It removes the traditional geographical barriers as it could reach out to customers of different countries/legal jurisdiction. This has raised the question
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of jurisdiction of law/supervisory system to which such transactions should be subjected.
It has added a new dimension to different kinds of risks traditionally associated with banking, heightening some of them and throwing new risk control challenges.
Security of banking transactions, validity of electronic contract, customers' privacy, etc., which have all along been concerns of both bankers and supervisors have assumed different dimensions given that Internet is a public domain, not subject to control by any single authority or group of users.
It poses a strategic risk of loss of business to those banks who do not respond in time to this new technology, being the efficient and cost effective delivery.
Proxy Banking
Indian villages were miles away from mutual funds, insurance and even equity trading8. But thanks to Internet Kiosk and the ATM duo which has made it possible for rural India. This kiosk has been set up by ICICI Bank in partnership with network n-Logue Communications in remote villages of Southern part of the country. This is known as Proxy Banking. With the help of fiber optic cables, this kiosk works on wireless in local loop technology. Reasons for setting-up of Proxy Banking

58% of rural households still do not have bank accounts. Only 21% of rural households have access to credit from a formal source. 70% of marginal farmers do not have deposit account. 87% households have no formal credit. Only 1% rural households rely on a loan from a financial intermediary. The loans take between 24 to 33 weeks to get sanctioned.
htt.://finance.indiamart.com/investment_in_India/proxy_banking_India.html
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Consumers bribe officials to get loans approved which varies between 10 and 20 per cent of the loan amount.
Branch banking in rural is a loss making.
Benefits to rural

Small loans given for buying buffaloes. Loans for setting up a teashop. Life and non-life insurance provided. Weather insurance given to farmers. Insurance policies sold to farmers like groundnut, castor, soya, paddy crop, etc.
The Proxy Banking is an innovative approach to rural lending and will add to the government's expanding base of kisan credit cards and the good old guidelines for agricultural lending.
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CAMEL MODEL
Sr. No. 1. 2. 3. 4. 5. 6. 7.
Particulars INTRODUCTION TO CAMEL MODEL RESEARCH METHODOLOGY
Page No. 39 41 42 44 46 47 49
CAPITAL ADEQUCY ASSET QUALITY MANAGEMENT EARNINGS LIQUIDITY
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CAMEL MODEL
A C.A.M.E.L. Model Analysis of New Private Sector Banks in India:
Economic development of any country is mainly influenced by the growth of banking industry in that country. In India banks are classified mainly into two categories as commercial banks (which includes Public sector banks, Old private sector banks, New private sector banks and foreign banks) and Corporative institutions. The new private sector banks, which are started during the liberalization period, reached a remarkable position due to its high level of technology, core banking and aggressive marketing strategies. Some of these new banks outperformed their counterparts in the private and public sector in various efficiency parameters like assets, business profitability etc. In worldwide finance industry is considered highly flexible, and risky and so they are under the strict control of regulatory authorities. The Basel 1 and 11 accords for which many countries are members calls for a healthy banking system in the world. To have global standards, India also joined in Basel accord and urged our banks to adhere to its norms by March 2007. By 2009 end foreign banks will get a free hand to grow and acquire other banks in India on an equal footing with banks incorporated in India. Indian banks, irrespective of their ownership status, are for mergers and acquisitions. So Indian banking industry is going to face stiff competition. So our banks also in need of International standards. Even though banking industry is under the strict control there is lot of cases of bank failures worldwide. The Global Trust bank and Nedungadi bank episodes are the latest examples of mismanagement of Indian banking. Now CAMEL model is an internationally accepted tool for evaluating performance and predicting bank failures. CAMEL stands for Capital Adequacy, Asset Quality, Management Quality, Earnings Quality and Liquidity. It is considered as the best available method for evaluating bank performance and healthy position of the bank since it consider all areas of banking operations. Quality of any research study enhances, when samples, analyzing period and variables considered are more.
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This study considers this points and analyzes the performance of all newly formed Private sector banks (Bank of Punjab, Centurion bank, Development Credit bank, HDFC bank, ICICI bank, IDBI bank, Indusland bank, Kotak Mahindra bank, UTI bank and Yes bank) of India from their year of inception. So the analyzing period is from 2 years (Yes bank) to 12 years (UTI bank). We used four variable under Capital Adequacy parameter (CAR, Debt equity ratio, advances to total assets ratio and Government. securities to total investment ratio), two variables under Asset Quality (gross NPA to net advances and net NPA to net advances,), four variables under Management Quality parameter (market value to equity capital, total advances to total deposits, business per employee and profit per employee) five variables under Earnings Quality (Operating profit by average working funds, spread, net profit to average assets, interest income to total income and non interest income to total income) and five variable under Liquidity parameter (liquid assets to total assets, Government. securities to total assets, approved securities to total assets, liquid assets to demand deposits and liquid assets to total deposits). All the parameters are given equal weightage while individual variables under each parameter are given different wieghtage, according to its importance.
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Research Methodology
Individual Parameter Ranking (CAMEL) Average of Group : Calculated by taking the average of ranks of all indicators under respective parameters. Group Ranks : It is done by sorting the Average of Group in ascending order (lower the rank average better the performance and better the rank.) Composite Ranking Average of Average Group : Calculated by taking the average of Average of Group values. Composite Rank: Ranking is given by sorting the Average of Average Group in ascending order. For the purpose of analyzing the fifteen private sector banks are selected on the basis of Total Income, Interest Income, PAT, Deposits, Advances and Total Assets. The selected banks are leading on the basis mention parameter The analysis is based on the annexure 1 to 5.
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CAPITAL ADEQUCY:
Capital Adequacy is regarded as one of the key components of the CAMEL MODEL to assess the financial health of a bank. Under capital adequacy the banks are assesses under four different sub-performance namely CAR, D/E, Advances /Asset Ratio and G-Security investment. Capital Adequacy refers to the amount of a banks Capital expressed as percentage of its risk weighted assets (Credit) exposures. Also known as CRAR, It is one of the significant indications of the financial soundness of a bank. According to RBI, CRAR ones down either due to unstructuring growth. In assets especially risk-weighted assets without concomitant increase in capital or inadequate. Internal generation because of low earning and high quality resulting in heavy provisioning requirements. The Apex bank says that such banks will have little cushion to absorb any shocks triggered by credit or market risk or other external developments. This is important, as a banks capital is the cushion for potential losses, which protects the banks depositors of the other lenders. CAR (Capital Adequacy Ratio): On the parameter of CAR it is the Maharashtra based Ratnakar bank that tops the list with CAR of 34.34% (rising by 11% in 2005-06) the usually high CAR to the share price in the banks share capital that was raised to Rs 300 cr in 2006-07 from Rs 54 cr. in the previous year. In accordance with RBI guidelines that require all of private bank to raise net worth is Rs 300 cr. Tamilnad mercantile bank and Karur VYSYA bank with CAR of 16.77% and 14.51% respectively are among the top three banks. As per the latest RBI norms, banks in India should have CAR of 9%. Dividing the sum of Tier- 1 arrives it at and Tier-2 Capital by risk weighted assets. Tier-1 Capital include equity Capital free reserves. Tier-2 Capital comprises subordinated debt of 5-7 year tenure. The higher the CAR stronger the bank.
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Debt/Equity Ratio: D/E Ratio is arrived by dividing total borrowings and deposits by shareholders net worth which includes equity capital and reserve & surplus.
On the Parameter of D/E ratio the longest D/E ratio is the Ratnakar Bank Ltd of 0.03 times. Followed by the 0.05 times of the City Union Bank. The highest D/E ratio of the Karnataka Bank Ltd is 15 times
Advances to Asset Ratio: This is the ratio of the total advances to total assets. The total advances also include receivables. The value of total assets excludes the revaluation of all the assets. As the name suggest advances to asset ratio indicates the percentage of the advances to the assets The highest advances to asset ratio of the Karur VYSYA bank Ltd of 63.55% followed by the 62.08% and 59.72 by City union bank Ltd and the Centurion bank of Punjab respectively. The lower advance to asset ratios are of the bank of Rajasthan Ltd 47.11% and Ratnakar bank Ltd 46.21% G-SECS to total investment: This ratio shows the risk involved in a banks investment since government securities are risk free higher the G-SECS to investment. It is arrived by dividing the amount invested in the Government securities by total investment. The highest G-SECS to investment ratio of the City Union bank of Punjab and A South Indian bank Ltd respectively. The longer G-Secs to investment ratio of the Ratnakar Bank Ltd is 46.21% and Axis bank is 61.09% The banks like HDFC, ICICI, YES Bank having the G-SECS to Investment ratio of 73.72%, 74.15% and 70.04% respectively.
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The total capital adequacy among the private sector bank is highest of Axis bank, of 12.75, followed by the Bank of Rajasthan and development credit bank. Worst capital adequacy is of Karur vysya bank and City Union Bank. Followed by the J & K bank and Tamilnad Mercantical bank.
ASSET QUALITY:
The Capabilities and strength of a bank lies on the Quality of its assets. A Compressive analysis of the asset quality is vital to asset the current state of affairs and future viability of the bank. The Primary motto behind measuring the asset quality is to ascertain the component of non-performing assets as a percentage of the total assets. In addition this parameter also ascertain the NPA movement and amount locked up in investment as a percentage of the total asset. Net NPAs to total assets: The efficiency of bank in assessing credit risk and recovering debts is indicated by Net Credit Risk and recovering debts is indicated by Net Non Performing assets (NNPA) to the ratio better will be the performance of the bank On this parameter Yes Bank tops with the longest ratio 0.00%, banks such as Kotak Mahindra bank Ltd, Ratnakar bank Ltd, and development credit bank have displays higher ratios. 1.98%, 1.92% and 1.64% respectively. Net NPA to Net advances: NNPA as a percentage to advances is the most standards reassure of asset quality. NNPAs are gross NPAs net of provisions on NPA and suspense account. IN this ratio too net NPA are measured as a percentage of net advances. Among private sector banks considering this parameter Yes bank is the best performer. Having a ratio of 0.00% followers by the bank of Rajasthan and Karur VYSYA bank having a ratio of 0.11% and 0.14% respectively while Kotak Mahindra bank is worst having ratio of 1.09% The total NNPA to Net Advance Ratio of 15 Private sector banks comes to 8.17% longer the Ratio indicating higher efficiency of the bank.
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Total Investment to Total Asset: Total investment to total assets indicates the extent of deployment of assets investment against advances. A higher level of investment means lack of credit off-take and the banks choosing other avenues such as government securities and approved securities to park their funds. This ratio has to be low as the primary business of banks is to lending. This ratio issued as a tool to measure the percentage of total assets locked up in investment, which by conventional definition doesnt form part of the core income of a bank. It is arrived at by dividing total investment by total asset. Among the Private sector banks the best performance on this parameter is City Union bank followed by the centurion bank of Punjab having the ratio of 24.37% and 24.56% respectively the worst performer amongst the private sector banks is Axis bank having the highest ratio of 36.69% is the total of private bank. Percentage change in Net NPAs: Banks have to consistently work on their NPAs percentage change in NPAs is very important indicator the many the banks is working on the recovery of its NPAs or writing off these NPAs and improving the quality of the balance sheet. Generally there has been reduction in the banks NPAs in the last couples of years. Lower the % change better the quality of assets As per the indicators Bank of Rajasthan is the best performer amongst the private sector banks having reduction by the 68.98% followed by the karur VYAYA bank having reduction by 64.38% The worst performance of Kotak Mahindra bank and centurion bank of Panjab having the 1345.33% and 91.35% respectively. The highest Asset quality is of the Kotak Mahindra bank followed by the Development Credit bank and centurion bank of Punjab. The worst Asset Quality is of the Karur vysya bank followed by the bank of Rajasthan and Yes bank.
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MANAGEMENT:
The development and endurance of a bank is ensured by its management. The management of a bank plays a very crucial role in marketing decision depending on their risk perception. It sets the vision and goals for the bank and sees that they are achieved within the given time frame. It involved a subjective analysis for measuring the efficiency of the management to parameters like profit performance, business per employees and advances to adiposities. Total advances to Total adiposities: The ratio of the total advances to
deposits indicates the ability of a bank to effectively deploy its resources. Hence the higher the ratio the better is the performance of the bank This ratio measures the efficiency of the management in converting the deposits available with the bank (Excluding other funds like equity Capital etc) in to advances. Total deposits include demand deposits, saving deposits, term deposits and deposits of other bank. Total advances also include the receivables. Kotak Mahindra Bank remind as the most aggressive bank among the Private sector banks having the ratio of 99.31% followed by the ICICI bank having the ratio of 84.97%. The worst performance on this parameters is Bank of Rajasthan having the ratio of 52.74%, Development Credit bank having the ratio of 60.21%. The banks like HDFC bank and Yes bank having the ratio of 68.74% & 76.51% respectively. Profit Per Employees: This measures the efficiency of the employees at the branch level It also gives valuable inputs to assess the real strength of a bank branches. It is arrived by the dividing the Net Profit earned by the bank by total No of employees .The higher the ratio, higher the efficiency of Management However it is advisable to look at the no of branches can figure among the top players in this category despite earning a lower net profit. Indias highest Private players ICICI bank leads on this parameter having the 0.09 because of their specific nature of operations PPE followed by the Axis bank and HDFC bank having PPE of 0.08 lacks and 0.06 lacks respectively.
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The worst PPE of Ratnakar bank, Centurion bank of Punjab having PPE of Rs 0.01 Lacks and 0.02 lacks respectively The total PPE of the all private sector banks in India comes to 0.61 lacks Business per Employees: The tool to measure the efficiency of the branch it is arrived by dividing total business to total no of branches. Here also the private sector giant ICICI bank leads amongst the industry player having the BPE of 10.27 lacks followed by the Axis bank and the HDFC bank having BPE of 10.24 lacks and 6.07 lacks There the worst performance ion this parameter is Kotak Mahindra bank having BPE of 0.01 lacks. Development credit banks and the south Indian bank having BPE of 0.04 lacks and 0.05 lacks respectively. The total BPE of all the private sector bank is 66.47 lacks. Return On Net worth: Return to the shareholder is indicated by high return on Net worth. It is the measure of profitability of the bank and is expressed as PAT as a percentage of average Net worth. It means better utilized of capital and resource.
Among the private sector banks the highest return on the Net worth of the bank of Rajasthan having the ratio of 28.60% followed by the City Union bank and the HDFC bank having the ratio of 21.93% and 17.66% respectively. The average return on Net worth of the peivate sector banks is 13.14%. The composite ranking of the management is highest of the development credit bank followed by the Ratnakar bank. The worst management is of the Karur vysya bank.
EARNINGS:
Profitability of the banks and also its ability to earn consistently can be easily determined by its earning quality measure This parameter gains important in the light of the argument that much of the banks income is earned through non-core activities like investment treasure operations, corporate advisory services. Here we try to assess the quality of income generated by core activities income from lending operations.
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Operation Profit by average working fund: This ratio measure the effectiveness of the bank in employing its working fund to generate profit. This is arrived by dividing the operating profit by average working fund. Working fund is the daily average of the total assets during the year. On this parameter Tamil Mercantile bank Ltd having the ratio of 3.42% followed by the HDFC bank and City Union bank having ratio of 2.98% and 2.87% respectively. The worst performance on this parameter is development credit bank having ratio of 0.91% Percentage Growth in Net profit: PAT Growth is also an important indicator. It is the percentage change in Net Profit form last year. The highest growth rate in the Net Profit of the Rarnakar Bank Ltd having growth of 1444.44% followed by the south Indian bank and Yes bank having growth rate of 157.66% and 58.66% respectively Spread: The spread or the difference between the interest earned and interest expanded is another good indicator to value the performance of the bank. The higher the spread the better the performance. The bank should keep their interest low on deposits and high on advances to increase their earning capacity The highest spread is of the Tamilnad mercantile bank 4.17% followed by the HDFC bank and Kotak Mahindra bank having spread of 3.91% and 3.29% The worst performance on this parameter is Yes bank, ICICI bank and the Axis bank having the ratio of 1.54%, 1.92% and 2.14% respectively. Net Profit /Average Assets: This ratio measures the return on assets
employed or the efficiency in utilization of the asset. It is arrived by dividing the Net Profit by average assets, which is the average of total assets in the current year and previous year. The highest ratio of the Karur VYAYA bank 0.8% followed by the City Union bank and the Tamilnad mercantile bank having the ratio of 0.75% and 0.74% respectively
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Interest Income/ Total income: The ratio measure the income from lending operations as a percentage of the total income on advances, interest on deposits with RBI and dividend income. The best performance on this parameter are Karur VYSYA bank, J&K bank and South India bank having ratio of 93.84% , 92.22% and 88.93% respectively. The worst performance on this parameter is centurion bank of Punjab having ratio of 74.27% Non Interest income / Total Income: This measure the income from
operation other than lending a percentage of total income non-interest income is the interest income earned by the banks excluding income on advances and deposits with RBI The best performance amongst the private sector banks are of Ratnakar bank, City Union bank and J & K bank having ratio of 3.66%, 4.67%, 5.90% respectively. The worst ratio of the Centurion bank of Punjab having the ratio of 24.24%. The composite ranking of earning quality indicates that highest earnings is of the ICICI bank followed by the Development credit bank. The worst earning quality is of the City Union bank followed by the Tamilnad mercantile bank.
LIQUIDITY:
Liquidity is very crucial for any organization, which deals money. It is all the more important for banks. Poor liquidity management not only leads to dwindling banks earning but can also jeopardize, its continued operations. The parameter assesses the ability of a bank to meet the demand from the deposits holder in a particular time. The higher the ratio, the better off will be the banks. Liquidity can be compared primarily based on two parameters like liquid assets/total deposits and liquid assets/total assets etc.
On the liquidity parameters the highest liquidity of the private sector banks, the Tamilnad mercantile banks leads the figures, followed by the Cebturian bank of Punjab and the Karur Vysya bank and the Bank of Rajasthan.
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The worst liquidity are of the banks like south Indian bank, development credit bank. The above analysis indicates that the overall performance amongst the private sector banks are of Development credit bank followed by the Kotak Mahindra bank and Centurion bank of Punjab. The Private sector banks giants like HDFC bank, ICICI bank and Axis bank perform lower than the above mention banks. The worst performer amongst the private sector banks are Karur vysya bank, City Union bank and the South Indian bank.
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Z - SCORE
ANALYSIS
An evaluation of financial distress
Sr. No. 1. 2.
Particulars Z SCORE ANALYSIS - INTRODUTION AN EVALUATION OF FINANCIAL DISTRESS
Page No. 52 53
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Z score analysis Introduction 9

" Score analysis has been established by Edward I. Altman (1968) to evaluate the general trend in the financial health of an enterprise over a period. Many of the individual accounting ratios used frequently to predict the financial performance of an enterprise might only provide warnings when it is too late to take a corrective action. Further single ratio does not convey much of the sense. There is no internationally accepted standard for financial ratios against which the results can be compared. Therefore, Edward combined a number of accounting ratios (liquidity, leverage, activity and profitability) to form an index of the probability, which was effective indicator of corporate performance in predicting bankruptcy. In this direction a variety of studies have been conducted, over the period by applying Multiple Discriminant Analysis (MDA) to predict the corporate failure, by financial analysts like Altman. Z Score Analysis The data collected were first analysed with the help of five accounting ratios. These different ratios are combined into a single measure-Z Score Analysis with the help of MDA. The formula used to evaluate the "Z" Score analysis as established by Altman is as follows. Z = 0.012X1 + 0.014X2 + 0.033X3 + 0.006X4 + 0.999X5 X1 = WC/TA Ratio X2 = NOP/Sales Ratio X3 = EBIT/TA Ratio X4 = Market Value of Equity /Book Value of Debt X5 = Sales / TA Ratio INTERPRITATION OF Z SCORE Above 3.0 Z SCORE AND INTERPRETATION The company is safe based on these financial figures only. On alert. This zone is an area where one should exercise caution More chance of company going bankrupt within 2 years of operations from the given date of financial Below 1.80 figures. Probability of financial embarrassment is very high.
Between 2.7 and 2.99 Between 1.8 and 2.7
http://pages.stern.nyu.edu/~ealtman/Corp-Distress.pdf
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Z - SCORE ANALYSIS An evaluation of financial distress
PRIVATE BANKS U T I Bank Ltd. City Union Bank Ltd. Jammu & Kashmir Bank Ltd. Karur Vysya Bank Ltd. South Indian Bank Ltd. H D F C Bank Ltd. Bank Of Rajasthan Ltd. Karnataka Bank Ltd. Yes Bank Ltd. Kotak Mahindra Bank Ltd. Centurion Bank Of Punjab Ltd. Development Credit Bank Ltd. I C I C I Bank Ltd.
Z score 5.558630 8.235629 8.473468 8.772143 8.170474 1.350725 7.303453 8.996785 3.039857 2.548237 6.004686 7.409637 4.890411
RANK 5 10 11 12 9 1 7 13 3 2 6 8 4
In the above table most of the private Banks, which are performing higher then the required Z score. The best financial among the private banks is of the Karnataka Bank Ltd. having a Z score 8.99 followed by the Karur Vysya Bank and South Indian Bank having a Z score of 8.77 and 8.17 respectively The worst performer among private banks is HDFC BANK LTD. Having Z score of 1.35 indicating the higher chances bankruptcy, followed by the KOTAK MAHINDRA BANK LTD. and YES BANK LTD. having Z score of 2.54 and 3.03 respectively The average financial stability is 6.21 indicating a good position of the private banks.
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THE EVALUATION OF PRIVATE SECTOR BANKS IN INDIA
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THE EVALUATION OF PRIVATE SECTOR BANKS IN INDIA

PRIVATE BANKS PUBLIC EDGE Private Banks in India are alluring the new generation to bank with them. What does private banking matter to youth in India? Just a couple of months ago, HDFC bank acquired the Times Bank to strengthen its customer muscles. Indian banking sector, worth US $ 250 million approximately has started experiencing a clear shift in its service paradigm towards retail customers. The new offerings in personal banking are very sharp now a day to challenge the Indian traditional banking system. What do private players offer to the retail customers that public sector banks are unable to offer? Consider these facts. The smart account opening will allow you to complete all the formalities required to open a bank account right in your house or office. You need not carry your passbook, as the bank statement will be available in your mailbox every month. Dial-a-draft facility offers you to request a draft through phone and your bank will take care of sending it to the concerned party. Internet will allow monitoring your account online, 24 hours a day, 365 days a year. Bank will give you the facility of Any Time Money (The popular ATM network) using your Personal Identification number. ICICI and HDFC are the two prominent players in the new retail market. Every three months, they come out to offer a new service. The Youth surely are caught by the services such as HDFCs 60 seconds loan sanction facility and ICICIs Zero balance offers etc. Citibank is ready to extend its hand to you with Relationship Banking while UTI and Syndicate Bank are ready to offer FD interest rate at your savings account once it touches a limit of Rs.5000. Now, compare this whole new gambit of banking services with cluttered, conspicuous god fatherly like banking services of public sector banks. They often exercise anti-queuing theory, a means of articulating a never-ending busy culture, where you will be going late invariably. They may like to see you waiting for one hour
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for a demand draft. All these things resulted in losing customer base. Strong age-old banks are unable to attract the new generation. Banks like UTI, UBI and Allahabad bank are the major customer- losers to private banking in India in the last two to three years. The service Net banking has offered has pulled the customers of public-sector banks towards it. What is Net Banking and how important it is to people? Come to the fact now. Internet can be a friend of customers but cannot replace the traditional banking process. In India, the Internet population is 1 million of which only 2-3 percent does net banking. But, the smart packaging of services like Tele-banking, Dial-a-draft, 7Days-8 Hours banking, warm welcome at the reception or a courteous attitude of the private players along with the facility of Internet banking definitely spells pleasure of banking to the new generation. The successful integrity of tangible offerings with intangible benefits led these banks to pull the customers. Take a look at the excellent financial performance of the private banks during the second quarter ended September 2000. HDFC, ICICI, Global Trust and UTIs combined PAT stands at Rs.835 million, a 55.3% good growth over the previous quarter while substantial investment in Infrastructure (ATM network building, eInitiative, Internet banking etc.) has doubled the other expenses of the bank. Needless to mention, the success of private banks in India is not built at a single stroke but was achieved with a pure focus at the needs of the new generation a long time back. And the customer-pulling exercise is just a transition process in Indian banking industry as a result of that effort.
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CONCLUSION
As India celebrates its 60th independence anniversary and amazing ascendance as one of the fastest growing economies of the world, one sector which has played a vital role in proposing up its economy is undoubtedly the banking sector. The banking sectors performance is seen as the replica of economic activities of the nations as the healthy banking system acts as the bedrock of solid economy and industrial growth of the nation. During the past six decades, since independence the banking witnessed a significant changes and has surely come a long way from the days of nationalization. The flurry of reforms witnessed over the last fifteen years has brought about significant changes in the banking arena of the country with technology being a major facilitator of this transformation. Among the banking system in India, private sector banks perform a vital role in the economic in the Indian economy, though the 28 PSB accounts for over 70% of assets in the banking system. The new private banks have been rapidly growing (15 % of assets in FY- 06). The increasing importance of some of these banks is likely to continue given the sizable equity issuances by the three largest private banks ICICI bank, HDFC bank, AXIS bank which together raised about $USD 7 billion in June July 2007 The private sector banks mainly focus on the technological and innovated services and financial products to their customers. Most of the private sector banks provides No. of services under one roof. As far as challenges are concerned, the major challenges are to cope with the changing requirement by the RBI and other regulatory bodies. The major threats from the private sector banks are the competition from the PSB and increasing No. of foreign banks in India. There are many opportunities for the private sector banks is the growing economy of the India it self. The Indian private sector giants like ICICI Bank and HDFC Bank etc. have expanded their activities at the global level.
57
BIBLIOGRAPHY
References :
Evaluating Performance of banks Through CAMEL Model - The ICFAI Journal of Bank Management, Vol. V No. 3, August 2006, by B S Bodla and Richa Verma. Page No. 49 63. Private Sector Banks in India SWOT Analysis - The ICFAI Journal of Bank Management, Vol. IV No.4, February 2005, by Chowdari Prasad and KS Srinivasa Rao Page No. 31 63. Measuring Financial Distress of Indian Bnaks Using Altman Z- Score Model - The ICFAI Journal of Bank Management, Vol. IV No. 3, August 2005, by Krishna Chaitanya V. Indian Banking Sector of performance, Progress and Challenges THE ANALYST, October 2007, ICFAI University Press, Page No. 18 20, 27-56, 78-80 .
Books :
Thompson, Stricklan, Gamble, Arun Jain. CRAFTING AND EXECUTING
STRATEGY, Edition 14.
Web Sources:
http://pages.stern.nyu.edu/~ealtman/Corp-Distress.pdf http://en.wikipedia.org/wiki/Indian_banking http://www.ecs-limited.com/insight/index.asp#2 htt.://finance.indiamart.com/investment_in_India/proxy_banking_India.html
Web Sites:
www.rbi.org www.bis.org www.indiamart.com www.blonnet.com www.thehindubusinessline.com www.iba.com www.myiris.com www.hinduline.com www.envestindia.com
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4 Apn Bank LTD Ceo

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MRP I PRIVATE SECTORE BANKS BASED IN INDIA

BANKING INDUSTRY IN INDIA

STRUCTURE OF INDIAN BANKING SYSTEM

NSVKMS MBA COLLEGE VISNAGAR

MRP I PRIVATE SECTORE BANKS BASED IN INDIA

BANKING INDUSTRY IN INDIA

NSVKMS MBA COLLEGE VISNAGAR

MRP I PRIVATE SECTORE BANKS BASED IN INDIA

NSVKMS MBA COLLEGE VISNAGAR

MRP I PRIVATE SECTORE BANKS BASED IN INDIA

NSVKMS MBA COLLEGE VISNAGAR

MRP I PRIVATE SECTORE BANKS BASED IN INDIA

STRUCTURE OF INDIAN BANKING SYSTEM

NSVKMS MBA COLLEGE VISNAGAR

MRP I PRIVATE SECTORE BANKS BASED IN INDIA

NSVKMS MBA COLLEGE VISNAGAR

MRP I PRIVATE SECTORE BANKS BASED IN INDIA

PRIVATE SECTOR BANKING IN INDIA

NSVKMS MBA COLLEGE VISNAGAR

MRP I PRIVATE SECTORE BANKS BASED IN INDIA

PRIVATE SECTOR BANKING IN INDIA

NSVKMS MBA COLLEGE VISNAGAR

MRP I PRIVATE SECTORE BANKS BASED IN INDIA

PRIVATE SECTOR BANKS: CURRENT POSITION

MRP I PRIVATE SECTORE BANKS BASED IN INDIA

MAJOR PRIVATE SECTOR BANKS

NSVKMS MBA COLLEGE VISNAGAR

MRP I PRIVATE SECTORE BANKS BASED IN INDIA

MAJOR PLAYERS IN PRIVATE SECTOR BANKS IN INDIA

NSVKMS MBA COLLEGE VISNAGAR

MRP I PRIVATE SECTORE BANKS BASED IN INDIA

(UTI BANK IS NOW AXIS BANK)

SOUTH INDIAN BANK

NSVKMS MBA COLLEGE VISNAGAR

MRP I PRIVATE SECTORE BANKS BASED IN INDIA

CITY UNION BANK (CUB) 1

KARUR VYSYA BANK 2

JAMMU AND KASHMIR BANK3

NSVKMS MBA COLLEGE VISNAGAR

MRP I PRIVATE SECTORE BANKS BASED IN INDIA

Website of Karnataka Bank www.ktkbankltd.com

NSVKMS MBA COLLEGE VISNAGAR

MRP I PRIVATE SECTORE BANKS BASED IN INDIA

DEVELOPMENT CREDIT BANK 6

Website of Bank of Rajasthan www.bankofrajasthan.com Website of Development Credit Bank www.dcbl.com

NSVKMS MBA COLLEGE VISNAGAR

MRP I PRIVATE SECTORE BANKS BASED IN INDIA

NSVKMS MBA COLLEGE VISNAGAR

MRP I PRIVATE SECTORE BANKS BASED IN INDIA

OPPORTUNITIES AND THREATS ANALYSIS

Figure / Charts HNWI POUPLATION GROWTH

NSVKMS MBA COLLEGE VISNAGAR

MRP I PRIVATE SECTORE BANKS BASED IN INDIA

OPPORTUNITIES FOR THE PRIVATE SECTOR BANKS

NSVKMS MBA COLLEGE VISNAGAR

MRP I PRIVATE SECTORE BANKS BASED IN INDIA

NSVKMS MBA COLLEGE VISNAGAR

MRP I PRIVATE SECTORE BANKS BASED IN INDIA

THREATS FOR THE PRIVATE SECTOR BANKS

NSVKMS MBA COLLEGE VISNAGAR

MRP I PRIVATE SECTORE BANKS BASED IN INDIA

FIVE FORCE ANALYSIS