A

PROJECT REPORT

ON

“FINANCIAL ANALYSIS of PUBLIC SECTOR and

PRIVATE SECTOR BANKS”
A detailed study done in

“FINANACE”
Submitted in partial fulfillment of the requirement for the award of degree of

Bachelor of Business Administration (BBA) under BharatiVidyapeeth

Deemed University, Pune.

Submitted by

VISHAL VILAS PATIL

ROLL NO: 35

BATCH: 2015-2018

Under the guidance of

Dr.MRINAL PHALLE

BharatiVidyapeeth’s

Institute of Management & Entrepreneurship Development

Navi Mumbai
 ACKNOWLEDGEMENT

Whatever I do and whatever we achieve during the course of our limited life is just not done
only efforts, but by efforts contributed by other people associated with us indirectly or
directly.by our own

First of all I would like to thank our Director Sir Dr. D.Y. Patil, for providing me an
opportunity to undertake the project work. I thank all those people who contributed to this
from the very beginning until its successful end.

I acknowledge my gratitude to my project guide Dr. MRINAL PHALLE for her extended
guidance, encouragement, support and reviews without whom this project would not have
been a success.

Signature of the student

(NAME OF THE STUDENT)

VISHAL V. PATIL
 CERTIFICATE FROM THE INSTITUTE
This is here to certify that the project titled “FINANCIAL ANALYSIS OF PUBLIC SECTOR BANK
AND PRIVATE SECTOR BANK” is successfully done by Mr. Vishal Patil during the final year in
partial fulfillment of the Bachelor of Business Administration (BBA) in FINANCE under
Bharati Vidyapeeth Deemed University through Bharati Vidyapeeth Institute of
Management & Entrepreneurship Developent, Navi Mumbai.

Date –

Signature Signature

Dr. D. Y. Patil Dr.MRINAL PHALLE

Director Project Guide

 EXICUTIVE SUMARRY

The project is about to know the comparison analysis of public sector bank and private sector
bank. This project puts more focus on to know about the financial position of both sector
banks.

This project gives us information and report about company’s financial position. The purpose
is to study the financial performance of last 3 years of public and private sector banks.

Throughout the project the focus has been on presenting information and comments in easy
and intangible manner.

It begins with introduction of topic, along with the objectives undertaken, scope of the study
and limitation that was faced while doing the study along with the extensive literature review.

The next part includes introduction to the bank, introduction to the company, its management,
its functioning etc.

The analysis about the project based on study conducted is been done and observation based
on it has been taken into account.

Lastly the conclusion drawn from the study is being written along with the reference.
 Table of contents

PARTICULARSPAGE NO
Acknowledgement (i)

Certificates (ii)

Executive summary (iii)

Table of Contents (iv)

Chapter 1: Introduction to the Project

1.1 Introduction to the company

1.2: Objective of the Study

1.3: Literature Review

1.4: Limitations of the study

1.5: Need of the study

Chapter 2: Company Profile

2.1: history of Indian Banking System

2.2: role of banks in economy

Chapter 3: Research Methodology

3.1: Research Design

3.2: Data Collection Techniques and Tools

3.3: Sample Design

Chapter 4: Data Analysis and Interpretation

Chapter 5: Conclusion and Suggestions

Bibliography
Chapter 1
 Introduction of banks

A bank is a financial institution that provides banking and other financialservices to their
customers. A bank is generally understood as an institution which provides fundamental
banking services such as accepting deposits and providing loans. There are also nonbanking
institutions that provide certain banking services without meeting the legal definition of a
bank. Banks are a subset of the financial services industry.

A banking system also referred as a system provided by the bank which offers cash
management services for customers, reporting the transactions of their accounts and
portfolios, throughout the day. The banking system in India, should not only be hassle free
but it should be able to meet the new challenges posed by the technology and any other
external and internal factors. For the past three decades, India’s banking system has several
outstanding achievements to its credit. The Banks are the main participants of the financial
system in India.

The Banking sector offers several facilities and opportunities to their customers. All the
banks safeguards the money and valuables and provide loans, credit, and payment services,
such as checking accounts, money orders, and cashier’s cheques. The banks also offer
investment and insurance products. As a variety of models for cooperation and integration
among finance industries have emerged, some of the traditional distinctions between banks,
insurance companies, and securities firms have diminished. In spite of these changes, banks
continue to maintain and perform their primary role—accepting deposits and lending funds
from these deposits.
1.1 Public Sector Bank:
Public sector in the banking industry emerged with the nationalization of Imperial Bank of
India (1921) and creating the State Bank of India (1955) as a part of integrated scheme of
rural credit proposed by the All India Rural Credit Survey Commsittee (1951). The Bank is
unique in several respects and it enjoys a position of permanence as the agent of RBI
wherever RBI has no branches.

It is the single largest bank in the country with large international presence, with a network of
48 overseas offices spread over 28 countries covering all the time zones. One of the
objectives of establishing the SBI was to provide extensive banking facilities in rural areas by
opening as a first step 400 branches within a period of 5 years from July 1, 1955.

In 1959, eight banking companies functioning in formerly princely states were acquired by
the SBI, which later came to be known as Associate Banks. Later, two of the subsidiary
banks', viz., the State Bank of Bikaner and Jaipur were merged to form the State Bank of
Bikaner and Jaipur, thus form eight banks in the SBI group then making banks in the state
bank group.
Private sector banks:
The private-sector banks in India represent part of the Indian banking sector that is made up
of both private and public sector banks. The "private-sector banks" are banks where greater
parts of stake or equity are held by the private shareholders and not by government.

Banking in India has been dominated by public sector banks since the 1969 when all major
banks were nationalised by the Indian government.

However since liberlisation in government banking policy in 1990s, old and new private
sector banks have re-emerged. They have grown faster and bigger over the two decades since
liberalisation using the latest technology, providing contemporary innovations and monetary
tools and techniques.

The private sector banks are split into two groups by financial regulators in India, old and
new. The old private sector banks existed prior to the nationalisation in 1969 and kept their
independence because they were either too small or specialist to be included in
nationalisation.

The new private sector banks are those that have gained their banking license since the
liberalisation in the 1990s.
 1.2 Objectives

1. To study the financial performance of selected public sector and private sector banks

2. A comparison between private sector bank and public sector bank .

 1.3 Literature Review

“Comparative study of promotional studies adopted by public and private sector banks
in India” published in Asia- pacific business review, July September (2008) by SL Gupta,
arunmittal. The study concluded that public sector is more reliable that but not so good in
quality and innovativeness, a private sector bank is not so reliable but they are better in
services quality and innovation.

Bhallabh(2002) analyzes challenges in the post banking sector reforms. With globalization
and changes in technology, financial markets, world over, have become closely integrated.
For the survival of the banks, they should adopt new policies/ strategies according to the
changing environment.

Kumar (2006) studied the bank nationalization in India marked a paradigm shift in the focus
of banking as it was intended to shift the focus from class banking to mass banking.
Internationally also efforts are being to study causes of financial inclusion of low income
group treating it both a business opportunity as well as a corporate social responsibility.
Financial inclusion can emerge as commercial profitable business.

Laxman, deen and Badiger (2008) examined that Banking Industry is undergoing paradigm
shift in scope, content, structure, functions and governance. The information and
communication technology revolution is radically perceptible changing the operational
environment of the banks.

Nair(2006) discussed the future challenges of technology in banking. The author also point
out how IT possesses a bright future in rural banking, but is neglected as it is traditionally
considered unviable in the rural segment. A successful bank has to be nimble and agile
enough to respond to the new market paradigm and ineffectively controlling risk. Innovation
will be the key extending the banking services to the untapped vast potential at the bottom of
the pyramid.

Singh(2003) analyzed profitability management of banks under the deregulated environment

with some financial parameters of the managers for bank group that is public sector banks,
old private sector banks, new private sector banks and foreign banks, profitability has
declined in thederegulated environment. He emphasized to make the banking sector
competitive in the deregulated environment. They should prefer non-interest income sources.

Singla(2008) examines that how financial management plays a crucial role industrialist
growth of banking. It is concerned with examined the profitability position of selected sixteen
banks of banker index for a period of six years(2001-2006) the study reveals that the
profitability position was reasonable during the period of study when compared with the
previous year. Strong capital position and balance sheet place. Banks in batter position to deal
with and absorb the economic constant over a period of time.
 1.4 Limitation of the study

Thus the following are the main limitations of the study.

The study is based on the secondary data and the limitation of using secondary data may
affect the results.

1. The secondary data was taken from the annual reports of the SBI and HDFC Bank. It may
be possible that the data shown in the annual reports may be window dressed which does not
show the actual position of the banks.

2. The company personnel do not reveal the trade secrets and some confidential financial
information.

3. The study records restricted to a period of 5 years.

4. Ratio analysis has its own limitations.

5. Although the time duration of the project is not up to the extent, the collection of full-
fledged data could not be achieved
 1.5 Need of the study

Significance of performance evaluation in an organization, for sustainable growth and

development, has been recognized since long. This calls for a system that first measures and
evaluates the performance, and then brings out the strengths and weaknesses of the
organization for the purpose of further improvement. Efficient performance evaluation
system encompasses all aspects of an organization. With theadvances in computational tools,
performance evaluation systems have evolved over aperiod of time from single-aspect
systems to more comprehensive systems covering allaspects of an organization. Such an
improvement was inevitable as the traditionalperformance measurement systems, with an
overwhelming reliance on financial aspectsin isolation were ill suited to meet demands of
modern business world characterized byvalue creation stemming from intangible assets such
a s employee know-how, strongcustomer relationship and cultures capable of innovation and
change.

The notion wassimple, but the ramification profound. Moreover, almost every industry, that
envisagesimportance of evaluation, can adopt many methods to evaluate the performance. It
proveto be better for performance measurement, evaluation and strategic planning for
futuregrowth and development of the Indian banks in the light of changing requirements of
thissector.
 Chapter 2

Company Profile
 Public-sector banks:

1. State Bank Of India

Type: Public

Industry: Banking, Financial services

Founded: 2nd June 1806, Bank of Calcutta; 27th January 1921; Imperial Bank
of India, 1st July 1955; State Bank of India, 2nd June 1956, nationalisation

Headquarters: Mumbai, Maharashtra, India

Area served: Worldwide

Key people: Arundhati Bhattacharya (Chairperson)

Products: Consumer banking, corporate banking, finance and insurance,

investment banking, mortgage loans, private banking, private equity, savings,
securities, asset management, wealth management, credit cards

Revenue Increase: ₹2.85 trillion (US$42 billion) (2016)

Profit Increase: ₹127 billion (US$1.9 billion) (2016)

Total assets: Decrease ₹30.72 trillion (US$460 billion) (2016)

Owner: Government of India

Number of employees: 293,469 (2016)

Website: sbi.co.in
 2. Bank of India

Type: Public

Industry: Financial services

Founded: 7 September 1906; 110 years ago

Headquarters: Mumbai, Maharashtra, India

Key people: ShriMelwynRego (MD & CEO)

Products: Commercial Banking, Retail Banking, Private Banking, Asset

Management, Mortgages, Credit Cards

Revenue: ₹243,935.0 million (US$3.6 billion)

Operating income: ₹53,842.3 million (US$800 million)

Net income: ₹24,887.1 million (US$370 million)

Total assets: ₹6,469 billion (US$96 billion) (2015)

Website: www.bankofindia.com

3.Punjab National Bank

Type: Public

Industry: Banking, Financial services

Founded: 19 May 1894 – 122 years ago

Founder: people: LalaLajpatRai

Headquarters: New Delhi

Key people: UshaAnanthasubramanian (MD & CEO)

Products: Credit cards, consumer banking, corporate banking, finance and

insurance, investment banking, mortgage loans, private banking, private equity,
wealth management

Revenue Increase: ₹47,400 crore (US$7.0 billion)(2013)

Net income: Decrease ₹4,748 crore (US$710 million) (2013)

Total assets: ₹6,435 billion (US$96 billion) (2015)

Owner: Government of India

Number of employees: 62,392 (March 2013)

 4. Canara Bank

Type: Public

Industry: Banking, Financial services

Founded: Canara Bank Hindu Permanent Fund (1906; 111 years ago at

Mangalore, India), Canara Bank Ltd (1910), Canara Bank (1969).

Products: Investment Banking, Consumer Banking, Commercial Banking.

Net income: ₹33.41 billion (US$500 million) (2012)

Total assets: ₹4.72 trillion (US$70 billion) (2015)

Owner: Government of India

Number of employees: 53,506 (2016)

Website: Canara Bank

 5. Bank of Baroda

Type: Public

Industry: Banking, Financial services

Founded: 20 July 1908 – 108 years ago

Founder: Maharaja H. H. Sir SayajiraoGaekwad

III[1] Headquarters: Vadodara, India

Key people: P. S. Jayakumar(CEO & MD), Ravi Venkatesan (Chairman),

Bharat Dangar Products: Credit cards, consumer banking, corporate banking,

finance and insurance,.

Total assets: ₹6.714 trillion (US$100 billion) (2015)

Owner: Government of India

Website: www.bankofbaroda.com
 Private-sector banks:

1. ICICI Bank:

Type: Private Sector Bank

Industry: Banking, Financial services

Founded: 1994

Headquarters: Mumbai, Maharashtra, India

Key people: Mr M. K. Sharma (Chairman), MrsChandaKochhar (MD)

Products: Credit cards, consumer banking, corporate banking, finance and

insurance, investment banking, mortgage loans, private banking.

Revenue: US$10.3 billion (2016)

Operating income : US$3.6 billion (2016)

Profit: US$1.5 billion (2016)

Total assets: US$109.0 billion (2016)

Total equity: US$13.5 billion (2016)

Number of employees: 74,096 (2016)

Website: www.icicibank.com

.
2 Axis Bank:
Type: Private

Industry: Banking, Financial services

Founded: 1993(as UTI Bank)

Headquarters: Ahmedabad, Gujarat, India

Key people: Shikha Sharma (MD & CEO) SanjivMisra (Chairman)

Products: Credit cards, consumer banking, corporate banking, finance and

insurance, investment banking, mortgage loans, private b anking, private equity,

wealth management

Revenue: ₹414.0925 billion (US$6.2 billion) (2016)

Net income: ₹83.5759 billion (US$1.2 billion) (2016)

Total assets: ₹5.25468 trillion (US$78 billion) (2016)

Total equity: ₹4.7657 billion (US$71 million)

Number of employees: 56,084 (March 2016)

Website: axisbank.com

3.HDFC Bank:
Type: Private Sector Bank

Industry: Financial services

Founded: 1994

Headquarters: Mumbai India

Area served: India

Products: Banking

Asset: USD 66.7 billion

Number of employees: 87,555 (31st March 2016)

Website: www.hdfcbank.com

4.Yes Bank:

Type: public company

Industry: Banking and financial services

Founded: 2004

Founder: Ranakapoor and Ashok kapur

Headquarters: Mumbai,india

Key people: Ranakapoor (Managing director & CEO)

Products: Banking and Financial services

Net income: 3000 crore (US$470 million 2015)

Total assets: 91,000 crore (US$14 billion) (july,2015)

5.Kotak Mahindra Bank:

Type: Private sector bank

Industry: banking, Financial services

Founded: 1985

Headquarters: Mumbai, india

Products: Deposit accounts, loans, Investament services

Net income: 3,431.12 crore (US$540 million) (2016)

Total assets: US$15.8 billion(2015)

Number of employees: 46,500

2.1 History of Indian Banking System

The first bank in India, called The General Bank of India was established in the year 1786.
The East India Company established The Bank of Bengal/Calcutta (1809), Bank of Bombay
(1840) and Bank of Madras (1843). The next bank was Bank of Hindustan which was
established in 1870. These three individual units (Bank of Calcutta, Bank of Bombay, and
Bank of Madras) were called as Presidency Banks. Allahabad Bank which was established in
1865, was for the first time completely run by Indians. Punjab National Bank Ltd. was set up
in 1894 with head quarters at Lahore. Between 1906 and 1913, Bank of India, Central Bank
of India, Bank of Baroda, Canara Bank, Indian Bank, and Bank of Mysore were set up.

In 1921, all presidency banks were amalgamated to 22 form the Imperial Bank of India
which was run by European Shareholders. After that the Reserve Bank of India was
established in April 1935. At the time of first phase the growth of banking sector was very
slow. Between 1913 and 1948 there were approximately 1100 small banks in India. To
streamline the functioning and activities of commercial banks, the Government of India came
up with the Banking Companies Act, 1949 which was later changed to Banking Regulation
Act 1949 as per amending Act of 1965 (Act No.23 of 1965). Reserve Bank of India was
vested with extensive powers for the supervision of banking in India as a Central Banking
Authority.

2.2 Role of banks in economy of a country:

Banks play an important role as an intermediary, or go-between, in the financial system. They
have three main functions:

1. Banks are where people can safely deposit their savings, which banks then pay interest on.
If there were no banks, people would have to store and protect their savings themselves,
which would involve major risks.

2. Banks are largely responsible for the payments system. Electronic payments are becoming
more important as people use less cash. This means that banks are processing more card
payments, transfers, direct debits, etc. every day.

3. Banks issue loans to both people and companies. Without banks, it would be very hard for
people to buy a home or start a business, or for companies to make investments, for example.

Banks do a variety of other things, such as helping corporations with their, often more
complex, financial needs. This can range from the various ways to gain access to capital for
growth and investments, to assisting in mergers and acquisitions, to converting currencies
 CHAPTER 3

RESEARCH METHODOLOGY

3.1 Research Design: The present study is conducted byfollowing a Descriptive Design.
3.3 Data Collection::

Study is based on secondary data. Data was collected through Reserve

Bank of India monthly bulletins, annual reports,
Moneyrediff, moneycontrol , banks websites etc.
Three private sector and three public sector banks were selected on the basis of their total
assets
 CHAPTER4

Data Analysis and Interpretation:

RATIO ANALYSIS:
The term “Ratio” refers to the numerical and quantitative relationship between two items or
variables. This relationship can be exposed as

 Percentages
 Fractions
 Proportion of numbers
“Ratio analysis” is defined as the systematic use of the ratio to interpret the financial
statements. So that the strengths and weaknesses of a firm, as well as its historical
performance and current financial condition can be determined. Ratio reflects a quantitative
relationship helps to form a quantitative judgment.

Nature of Ratio Analysis:

Ratio analysis is a technique of analysis and Interpretation of financial statements. It is the

process of establishing and interpreting various ratios for helping in making certain decisions.
It is only a means of understanding of financial strengths and weaknesses of a firm. There are
a number of ratios which can be calculated from the information given in the financial
statements, but the analyst has to select the appropriate data and calculate only a few
appropriate ratios. The following are the steps involved in the ratio analysis.

 Selection of relevant data from the financial statements depending upon the objective
of the analysis.
 Calculation of appropriate ratios from the above data.
 Comparison of the calculated ratios with the ratios of the same firm in the past, or the
ratios developed from projected financial statements or the ratios of some other firms
or the comparison with ratios of the industry to which the firm belongs.

I. Capital Adequancy Ratio:

Tier 1 Capital + Tier 2 Capital
Capital Adequacy Ratio =
Risk-weighted Exposures

Capital Adequacy signifies the banks‟ ability to maintain capital with the nature and extent of
all types of risk and the ability of management to identify, measure, monitor and control these
risks. It also tells about the ability of bank to absorb a reasonable amount of loss and comply
with statutory Capital requirements. Currently Reserve Bank of India (RBI) prescribes banks
to maintain Capital Adequacy Ratio (CAR) of 9% with regard to credit risk, market risk and
operational risk on an ongoing basis, as against 8% prescribed in BASEL framework.
 www.ermt.net

The Capital Adequacy ratio (BASEL-II) of new private sector banks is way above RBI‟s
minimum requirement of 9%. This shows that private banks are in comfortable position to
absorb losses since they have more capital to cover for their risk weighted assets and they
have less risky assets in their portfolio for a fixed capital base.

II. Productivity:

Productivity = Output / Input

Productivity is the ratio of what is produced to what is required to produce. In the banking
scenario productivity can be measured by profit per employee, business per employee.
Productivity is a very important measure of efficiency of banks because it means that the firm
can meet its obligations to employees, shareholders, and governments (taxes and regulation),
and still remain competitive in the market place.
 www.ermt.net

These ratios can be misleading as banks can improve these ratios by reducing their number of
their employees during the time of recession. This is evident since asset base and profit levels
declined during 2009-10 for new private sector banks but still the above ratios is showing a
continuous increasing trend.

III. Growth of bank:

Every bank aspires to grow and its growth can be judged by various parameters like growth
in balance sheet size i.e. asset base, total income and many others.

% Growth in Balance Sheet Size % Growth in Total Income

 2016 2017 2016 2017

New Private Sector Banks 10.86% 23.51% -2.19% 14.63%

Public Sector Banks 17.93% 19.21% 12.46% 16.71%

Percentage growth in banks‟ Balance Sheet & Income (Source: RBI) The public sector
banks‟ asset base and income grew at an increasing rate in the last 2 years whereas new
private sector banks faced many fluctuations mainly due to recession. But the growth of these
banks was phenomenal during 2010-11 that shows their ability to recover faster after such a
phase.

IV. Asset Quality:

Asset Quality reflects the amount of existing credit risk associated with the loan and
investment portfolio as well as off-balance sheet activities. The asset quality of banks can be
judged by the non-performing assets (NPA) ratio.

NPA ratio = Net non-performing assets / Advance

 www.ermt.net

However there is huge difference in asset qualities of public & new private sector banks
because the public sector banks have higher NPAs in services sector. The NPAs in other
sectors like Agriculture, Industry and Personal Loans are almost similar for these banks. The
asset quality of a bank directly affects its credit rating

The Off-Balance Sheet (BS) activities under the purview of New Private Sector banks are
astoundingly large as compared to public sector banks, being the liability of these banks on
outstanding derivative contracts like Interest rate swaps, currency options and interest rate
futures. This makes their business highly susceptible to market risk.

V. Efficiency of management:

Several indicators are used to measure the efficiency of the management for example ratio of
non-interest exp to total assets which explains the management controls on operating
expenses. Similarly efficiency ratios like Asset Turnover ratio can be used to assess how
efficiently company is using its assets to earn the revenue.
 Management efficiency

www.ermt.net

Management efficiency

The efficiency ratios of new private sector banks are better than public sector banks which
eventually lead to enhanced bottom line. The asset turnover of both sectors banks is
decreasing over the last 3 years which is mainly due to a combination of decrease in non-
interest income and increase in asset base.

VI. Earnings:
 www.ermt.net

The above two graphs signifying the new private sector banks have better ratios since:

a) The interest expense is less as compared to interest income due to better asset
liability management.
b) The share of fee income is more in total income which reflects that banks have
other options to earn money like in exchanges, commissions, brokerages etc.

VII. Liquidity:

LR = liquid assets / short-term liabilities.

 www.ermt.net

The credit deposit (C-D) ratio of any bank signifies the proportion of loan-assets created by
banks from the deposits received, higher the ratio, better it is for the banks. Similarly higher
is the investment deposit (I-D) ratio good it is for the banks as itincreases the opportunity of
earning but on the other hand may also create liquidity problems. Therefore it is essential for
the banks to have a stock of short-term investments to ensure higher liquidity.
CHAPTER 5

CONCLUSION
1) In the year 2015 we can clearly see that new private sector
banks had more capital adiquancy ratio then public sector banks
the next two years signifies the same
2) The private sector banks considerably showed that there was
increase in profit per employee in lakhs more than it was seen
in public sector banks. The profit increase in 2017 twice as was
in 2015
3) The NPA ratio in public sector banks was very high as against
private sector banks. This was in case of assets but in case of
Net NPA/advance was more in private sector banks than in
public sector bnks
4) In the above graph we can clearly see that the assets turnover
was more in per sector banks than in public sector banks
operating expences for private sector banks was more as
compared to public sector banks per turnover assets

Suggestions
As discussed above, it has been witnessed that the major area of concern for any bank is the
customer service and customer satisfaction, thus just like the private sector banks, it is high
time that the public sector banks also start concentrating more on the customers and the
services provided to them. Top most rank held by a private bank is a clear indicator of the
better performance of the private banks due to their higher concern towards customer
feedback, their efficient management and thus yielding to higher productivity and networks
throughout India. To strive the cut throat competition given to the public sector banks by the
private sector banks, the public sector will have to pull up their shoes to be at the better half
part of the race else the time is very near which can make these public sector banks just a
memory or a history for everyone.

Bibliography
Websites:-

www.rbi.org.in

www.moneycontrol.com

www.investmentz.com

http://www.allbankingsolutions.com/camels.html

www.sbi.co.in

State Bank of India –Financial Highlights 2015-2017