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Research Paper LR

Financial system impacts on growth of any country and thereby welfare and prosperity of the populace. Banking sector being a prominent constituent of the financial system impacts the entire economy. Currently there are 27 public sector banks in India out of which 6 are State Bank of India and its associates and 19 are Nationalised banks.

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Sriranga G H
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73 views

Research Paper LR

Financial system impacts on growth of any country and thereby welfare and prosperity of the populace. Banking sector being a prominent constituent of the financial system impacts the entire economy. Currently there are 27 public sector banks in India out of which 6 are State Bank of India and its associates and 19 are Nationalised banks.

Uploaded by

Sriranga G H
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Introduction:

Backgroundofthetopic:

Financial system impacts on growth of any country and thereby welfare and prosperity of the
populace, hence financial system is the backbone of any economy. Stability of the financial
system is critical for the stability of the economy. Banking sector being a prominentconstituent
of the financialsystemimpactstheentireeconomy.Astrongsystemofbankingisthefoundation
forsustainableeconomicgrowth.

Indian banking sector originated in 18th century. The General Bank of India was established in
the year 1786 but failed in 1791. SBI the largest and the oldest Bank still in existence was
originated as Bank of Calcutta , in June 1806. Later in the year 1809itwasrenamedasBankof
Bengal. In the year 1921 Bank of Calcutta, Bank of Bombay and the Bank of Madras were
merged toformImperialBankofIndia.AfterIndependenceImperialBankofIndiabecameState
BankofIndia(1955).

Banking system in India features a large network of bank branches offering wide range of
financial services. Indian banking sector can be classified into scheduled banks and
nonscheduledbanks.

Scheduled Commercial Banks are categorised into five different groups according to their
ownershipand/ornatureofoperation:
StateBankofIndiaanditsAssociates
NationalisedBanks
PrivateSectorBanks
ForeignBanks
RegionalRuralBanks.

Currently there are 27 public sector banks inIndiaoutofwhich6areStateBankofIndiaandits


Associates and 19 are Nationalised banks ,IDBIandBharatiyaMahilaBankarealsoconsidered
aspublicsectorbanks.
StateBankanditsassociates

1. StateBankofIndia
2. StateBankofPatiala
3. StateBankofMysore
4. StateBankofTravancore
5. StateBankofBikanerandJaipur
6. StateBankofHyderabad

Nationalisedbanks

1. AllahabadBank
2. AndhraBank
3. BankofBaroda
4. BankofIndia
5. BankofMaharashtra
6. CanaraBank
7. CentralBankofIndia
8. CorporationBank
9. DenaBank
10. IndianBank
11. IndianOverseasBank
12. OrientalBankofCommerce
13. Punjab&SindBank
14. PunjabNationalBank
15. SyndicateBank
16. UCOBank
17. UnionBankofIndia
18. UnitedBankofIndia
19. VijayaBank

Otherpublicsectorbanks

1. IDBIBank
2. BharatiyaMahilaBank

There are currently 22 private sector banks many Foreign Banks and RRBs (Regional Rural
Banks).

1. AxisBank
2. BandhanBank
3. CatholicSyrianBank
4. CityUnionBank
5. DhanlaxmiBank
6. DCBBank
7. FederalBank
8. HDFCBank
9. ICICIBank
10. IDFCBank
11. KarnatakaBank
12. IndusIndBank
13. INGVysyaBank(mergedwithKotakMahindraBankinApril2015)
14. JammuandKashmirBank
15. KarurVysyaBank
16. KotakMahindraBank
17. LakshmiVilasBank
18. NainitalBank
19. RBLBank
20. SouthIndianBank
21. TamilnadMercantileBankLimited
22. YesBank

NeedandImportanceofthetopic:
In the recent years the financial system especially the banks have undergone numerous changes
in the form of reforms, regulations & norms. Evolution of banking sectorfrom18thcenturyhas
impacted the working of Banks in India. Each bankwithdifferentproducts,services,customers,
geographical mandate has created issues concerning resource allocation, risk management and
performance management. These issues call foradoptionofbrodersetofperformanceindicators
beyondtraditionalROA(ReturnonAssets)andROE(ReturnonEquity).

The economic downturn of 2008 resultedinfailureoffunctioningofbanks.Thisnecessitatesfor


frequent examination of banks. The economic crisis highlighted that wellfunctioning financial
systemissignificantlyimportantforeconomicgrowth.

CAMEL Model provides a framework for analysing performance of banks that not only
incorporates ROA and ROE but also incorporates other ratios covering various aspects of
bankingoperations.

Theoreticalimplication
The topic involves review of literature relevant to the topic anddiscussaboutCamelModelfor
evaluation of performance of banks, this topic also involves in comparison between Privateand
PublicsectorbanksinIndia.

CAMEL rating system was first introducedbyU.S.supervisoryauthoritiesin1980s,asasystem


of rating for onsite examinations of banking institutions. Under this system, each banking
institution subject to onsite examination is evaluated on the basis of five (now six) critical
dimensions relating to its operations and performance, which are referred to as the component
factors.TheseareCapital,AssetQuality,Management,EarningsandLiquidityusedtoreflectthe
financial performance,financialcondition,operatingsoundnessandregulatorycomplianceofthe
banking institution. A sixth component relating to Sensitivity to market risk has been added to
theCAMELratingtomaketheratingsystemmoreriskfocused.

RecentTrends:
Banking sector in India today is stronger and capable of withstanding pressures. Internationally
accepted norms with higher disclosures and transparency has been adopted. With best practices
of accounting, corporate governance andriskmanagementalongwithimplementationofBasel3
accords,bankingsectorwillbemorestringentinitsoperations.
Electronic payment services, RTGS (Real Time Gross Settlement), EFT ( Electronic Fund
Transfer), ATM, tele banking has redefined the banking operations through leveraging
technology,thishasresultedinhigherconvenienceandlesserimportanceofphysicalbranches

Literaturereview

Kajal Chaudhary, Monika Sharma (2011) This paper suggested that it was righttimetotake
suitable measures to get rid of NPA problem. Public sector banks must pay attention on their
functioning to compete against private sector banks.This paper also suggested that bank staff
involved in sanctioning of advances must be trained for proper documentation, theyshouldalso
know about charge of securities and they are motivated to take precautionary measurestoavoid
NPAs.
R Satish, Dr.S.S.Rao (2010) Comparing CAMEL rating technique and Balance Scorecard
approach, it was concluded that camel rating technique covers only financial ratios whereas
Balance Scorecard technique covers both quantitative and qualitative aspects. The concept of
camel rating performance evaluation of bank can be widened by incorporating long term
perspective of performance valuation of BalanceScorecard.TheultimateobjectiveofanyBank
is to maximize market value added as it reflects the premium or discount of the market value
relativetocapitalinvestedinthebank.
K.V.N Prasad, G Ravinder (2012) According to this study covering 20BanksinIndiaCanara
Bank stood top position in terms of capital adequacy. In terms of asset quality it was Andhra
bank and Bank of Baroda. India bank in the top position in context of Earnings Quality and
BankofBarodatopincaseofliquidity.

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