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Banks in India are geographically widespread and are functionally diverse and are
playing a vital role in the socio-economic progress of our nation.
Post-Nationalisation there has been a great change in the outlook of Indian Banks.
There has been fundamental change in the lending policies and performance of
Indian nationalised banks.
The present study is been undertaken to analyse the performance of select
nationalised banks in India. Profitability is definitely a key measure of
performance, but in the present study several other alternative measures are used
which is vital in analysing Banks performance. With the study period of 2011 to
2015 the performance of three nationalised banks are analyzed based on efficiency,
strength and soundness, profitability and growth of banks using EPS net profit
margin, assets turn over ,current ratio and earning retention ratio.
KEYWORDS:
Nationalisation, profitability, performance
Introduction
Post independence the Government of India (GOI) adopted planned economic
development for the nation. Accordingly, five year plans came into existence since
1951. Commercial banks were in the private sector those days. In 1950-51 there
were 430 commercial banks. The Government of India had some social objectives
of planning. These commercial banks failed helping the government in attaining
these objectives. Thus, the government decided to nationalize 14 major commercial
banks on 19th July, 1969. All commercial banks having a deposit base over Rs.50
crores were nationalized. It was considered that banks were controlled by corporate
and thus failed in catering to the credit needs of poor sections of society such as
cottage industry, village industry, farmers, craft men, etc. The second phase of
nationalisation came in April 1980 when banks were nationalized.
In India the government or public sector banks have dominated over the banking
sector since 64 years. In 1954 the All India Rural Credit Survey Committee
submitted its report recommending creations of a states sponsored , integrated,
strong, state partnered, commercial banking institution with an efficient
mechanism of branches spread geographically. Such recommendations of the
committee lead to the establishment of public sector banks which emerged in the
name of state bank of India on July 1, 1955 by acquiring the substantial part of
share capital by Reserve Bank Of India of then Imperial Bank Of India. Likewise
during 1956 to1959, due to the recognition of princely state the State Bank Of
India associate bank came into the spectrum of public sector banking.
The Government publisized Banking Companies ordinance july 19 1969, to aquire
b14 bigger commercial banks with nwhich deposits were over fifty crores.
However Bank Nationalization was mainly done with the objective of spreading
banking infrastructure in Rural India and to ensure the availability of finance at
lower cost to the farmers of India.
The second phase of Nationalisation of Bank took place in 1980 during the Prime
Ministerial tenure of Inira Gandh, in which six more Banks were MNationalised
with deposits above 200 crores.
Allahabad Bank.
Andhra Bank.
Bank of Baroda.
Bank of India.
Bank of Maharashtra.
Canara Bank.
Corporation Bank.
Dena Bank
Indian Bank
Syndicate Bank
Uco Bank
Vijaya Bank
CANARA
BANK
ALLAHABA
D BANK
BANK OF
INDIA
MARCH
2015
(in Rs.
Cr.)
56.87
MARCH
2014
(in Rs.
Cr.)
52.86
MARCH
2013
(in Rs.
Cr.)
64.83
MARCH
2012
(in Rs.
Cr.)
74.10
MARCH
2011
(in Rs.
Cr.)
90.88
10.87
21.52
23.70
37.33
29.88
25.67
42.45
46.14
46.66
45.54
Earnings per share commonly known as EPS , is the portion of a company's profit
allocated to each share which is outstanding in the company .EPS serves as an
indicator of a company's profitability.
EPS is derived by earnings available to equity shareholders/ number of equity
shares .
As in the above table we can see the various EPS ratios among different
nationalised banks from the year 2011 2015 . to analyse the above, Canara bank
has the highest EPS in 2011 which is 90.88% but shows a consecutive decrease of
74.10, 64.83, 52.86 in the year 2012, 2013, 2014 respectively, where as it shows an
increase in 2015 at 56.87.
Allahabad bank has 29.88 in 2011 and shows a significant decrease in EPS trends
as we can see it drops down to 37.33, 23.70,21.52,10.87 in the years
2012,2013,2014 and 2015 respectively.
Bank of India has an EPS of 45.54 in 2011 and has slight difference in the years
2012 and 2013 where the EPS is 46.66 and 46.14 respectively and thete is a fall in
trend of eps being 42,45 and 25.67 in 2014 and 2015 accordingly.
\
MARCH
2014
(in Rs.
Cr.)
6.16
MARCH
2013
(in Rs.
Cr.)
8.42
MARCH
2012
(in Rs.
Cr.)
10.64
MARCH
2011
(in Rs.
Cr.)
17.54
5.99
6.79
12.02
12.92
7.19
8.61
9.40
11.44
Net profit margin is the percentage of revenue that remains after all operating i.e.
day to day expenses, interest, taxes and preference dividends (but not common
stock dividends) have been deducted from total revenue.
The formula for net profit margin is:
Total Revenue Total Expenses/Total Revenue = Net Profit/Total Revenue = Net
ProfitMargin
The bank has a margin of 6.17 in the year 2015, whereas 6.16 in the year 2014, it
also shows a margin of 8.42 in the year 2013, in 2012 it was 10.64 and in the year
2011 it has a margin of 17.54.
Allahabad Bank shows a significant decrease in the margins from 2015 to 2011 ,
being 3.14,5.99,6.79,12.02,
12.92.
Bank of India also shows a decreasing trend in margins .its margins are 11.44 in
2011, 9.40 in 2012,8.61 in 2013,7.19 in 2014, 3.93 in 2015
CANARA
BANK
ALLAHABA
D BANK
BANK OF
INDIA
MARCH
2015
(in Rs.
Cr.)
0.09
MARCH
2014
(in Rs.
Cr.)
0.09
MARCH
2013
(in Rs.
Cr.)
0.09
MARCH
2012
(in Rs.
Cr.)
0.09
MARCH
2011
(in Rs.
Cr.)
0.08
0.09
0.09
0.09
0.10
0.08
0.07
0.08
0.08
0.08
0.07
Current Ratio
NAME OF
THE BANKS
CANARA
BANK
ALLAHABA
D BANK
BANK OF
INDIA
MARCH
2015
(in Rs.
Cr.)
0.03
MARCH
2014
(in Rs.
Cr.)
0.03
MARCH
2013
(in Rs.
Cr.)
0.03
MARCH
2012
(in Rs.
Cr.)
0.03
MARCH
2011
(in Rs.
Cr.)
0.02
0.01
0.01
0.01
0.01
0.02
0.03
0.04
0.03
0.03
0.04
The current ratio is also knownliquidity ratio that measures a company's capacity
to pay short-term and long-termrequirements . To understand this ability, the
current ratio considers the current total assets of a company relative to that
companys current total liabilities.
The formula for calculating current ratio, is:
CANARA
BANK
ALLAHABA
D BANK
BANK OF
INDIA
MARCH
2015
(in Rs.
Cr.)
79.99
MARCH
2014
(in Rs.
Cr.)
79.20
MARCH
2013
(in Rs.
Cr.)
79.95
MARCH
2012
(in Rs.
Cr.)
85.16
MARCH
2011
(in Rs.
Cr.)
87.90
85.01
88.39
74.69
83.93
79.93
80.57
88.23
78.30
82.60
82.15
The retention ratio is the proportion of earnings kept back in the business as
retained earnings. The retention ratio refers to the percentage of net income that is
retained to take the business further to growth level , instead of being paid out as
dividends. It is on contrary with the of payout ratio, which measures the percentage
of earnings paid out to shareholders as dividends.
The retention ratio is 100% for companies that do not pay dividends, and is zero
for companies that pay out their entire net income as dividends.
To analyse the above table, Canara Bank has earning retention ratio of 79.99 in
2015,79.20 in 2014,79.95 in 2013,85.16 in the year 2012, 87.90 in the year 2011.
Allahabad Bank has a earning retention ratio of 85.01 in the year 2015,88.39 in the
year 2014,74.69 in the year 2013,83.93 in the year 2012 and79.93in the year 2011.
CONCLUSION
The banking system is indispensable in the modern It plays a key role in the
economic development of the money market in an advanced economy. Realising
the crucial role of the banks in the national economy, the Government of India
nationalised fourteen major commercial banks in July.1969 and six more in
April.196O. As a result of this 'banking revolution 'there has been a transformation
of the old concepts, attitudes and methods of banking in India .Now the credit
institutions in the country are required to participate in the nation-building
activities and help in bringing about socio-economic changes. They are catalysts
in the development of the country to act as mobilising resources where ever they
may be and channelising them towards productive purposes.