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INTRODUCTION

DEFINITION OF BANK The Oxford dictionary defines the Bank as, An establishment for the custody of money, which it pays out, on a customers order. According to Whitehead, A Bank is defined as an institution which collects surplus funds from the public, safeguards them, and makes them available to the true owner when required and also lends sums be their true owners to those who are in need of funds and can provide security. Banking Company in India has been defined in the Banking Companies act1949, One which transacts the business of banking which means the accepting, for the purpose of lending or investment of the deposits of money from the public, repayable on demand, or otherwise and withdraw able be cheque, draft, order or otherwise. The banking system is an integral subsystem of the financial system. It represents an important channel of collecting small savings from the households and lending it to the corporate sector. The Indian banking system has Reserve Bank of India (RBI) as the apex body for all matters relating to the banking system. It is the central Bank of India. It is also known as the Banker to All Other Banks.

EVOLUTION OF INDIAN BANKING Ancient banking system of India constituted of indigenous bankers. They have been carrying on their age-old banking operations in different parts of the country under different names. The modern age of banking constitutes the fundamental basis of economic growth. The term Bank is being used since long time but there is no clear conception regarding its beginning. Italian money leaders were known as Banchi because they kept a special type of table to transact their business. HISTORY OF BANKING IN INDIA There are three different phases in the history of banking in India. 1) 2) 3) Pre-Nationalization Era. Nationalization Stage. Post Liberalization Era.

1) Pre-Nationalization Era: In India the business of banking and credit was practices even in very early times. The remittance of money through Hundies, an indigenous credit instrument, was very popular. The hundies were issued by bankers known as Shroffs, Sahukars, Shahus or Mahajans in different parts of the country. The modern type of banking, however, was developed by the Agency Houses of Calcutta and Bombay after the establishment of Rule by the East India Company in 18th and 19th centuries. During the early part of the 19th Century, ht volume of foreign trade was relatively small. Later on as the trade expanded, the need for banks of the European type was felt and the government of the East India Company took
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interest in having its own bank. The government of Bengal took the initiative and the first presidency bank, the Bank of Calcutta (Bank of Bengal) was established in 180. In 1840, the Bank of Bombay and IN 1843, the Bank of Madras was also set up. These three banks also known as Presidency Bank. The Presidency Banks had their branches in important trading centers but mostly lacked in uniformity in their operational policies. In 1899, the Government proposed to amalgamate these three banks in to one so that it could also function as a Central Bank, but the Presidency Banks did not favor the idea. However, the conditions obtaining during world war period (1914-1918) emphasized the need for a unified banking institution, as a result of which the Imperial Bank was set up in1921. The Imperial Bank of India acted like a Central bank and as a banker for other banks. The RBI (Reserve Bank of India) was established in 1935 as the Central Bank of the Country. In 1949, the Banking Regulation act was passed and the RBI was nationalized and acquired extensive regulatory powers over the commercial banks. In 1950, the Indian Banking system comprised of the RBI, the Imperial Bank of India, Cooperative banks, Exchange banks and Indian Joint Stock banks. 2) Nationalization Stages: After Independence, in 1951, the All India Rural Credit survey, committee of Direction with Shri. A. D. Gorwala as Chairman recommended amalgamation of the Imperial Bank of India and ten others banks into a newly established bank called the State Bank of India (SBI). The Government of India accepted the recommendations of the committee and introduced the State Bank of India bill in the Lok Sabha on 16th April 1955 and it was passed by Parliament and got the
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presidents assent on 8th May 1955. The Act came into force on 1st July 1955, and the Imperial Bank of India was nationalized in 1955 as the State Bank of India. The main objective of establishing SBI by nationalizing the Imperial Bank of India was to extend banking facilities on a large scale more particularly in the rural and semi-urban areas and to diverse other public purposes. In 1959, the SBI (Subsidiary Bank) act was proposed and the following eight state-associated banks were taken over by the SBI as its subsidiaries. Name of the Bank 1. State Bank of Hyderabad 2. State Bank of Bikaner 3. State Bank of Jaipur 4. State Bank of Saurashtra 5. State Bank of Patiala 6. State Bank of Mysore 7. State Bank of Indore 8. State Bank of Travancore Subsidiary with effect from 1st October 1959 1st January 1960 1st January 1960 1st May 1960 1st April 1960 1st March 1960 1st January 1968 1st January 1960

With effect from 1st January 1963, the State Bank of Bikaner and State Bank of Jaipur with head office located at Jaipur. Thus, seven subsidiary banks State Bank of India formed the SBI Group. The SBI Group under statutory

obligations was required to open new offices in rural and semi-urban areas and modern banking was taken to these unbanked remote areas. On 19th July 1969, then the Prime Minister, Mrs. Indira Gandhi announced the nationalization of 14
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major scheduled Commercial Banks each having deposits worth Rs. 50 crore and above. This was a turning point in the history of commercial banking in India. Later the Government Nationalized six more commercial private sector banks with deposit liability of not less than Rs. 200 crores on 15th April 1980, viz. i) ii) iii) iv) v) vi) Andhra Bank. Corporation Bank. New Bank Of India. Oriental Bank of Commerce. Punjab and Sind Bank. Vijaya Bank.

In 1969, the Lead Bank Scheme was introduced to extend banking facilities to every corner of the country. Later in 1975, Regional Rural Banks were set up to supplement the activities of the commercial banks and to especially meet the credit needs of the weaker sections of the rural society. Nationalization of banks paved way for retail banking and as a result there has been an all round growth in the branch network, the deposit mobilization, credit disposals and of course employment. The first year after nationalization witnessed the total growth in the agricultural loans and the loans made to SSI by 87% and 48% respectively. The overall growth in the deposits and the advances indicates the improvement that has taken place in the banking habits of the people in the rural and semi-urban areas where the branch network has spread. Such credit expansion enabled the banks to achieve the goals of nationalization, it was however, achieved at the coast of profitability of the banks.
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3) Post-Liberalization Era---Thrust on Quality and Profitability: By the beginning of 1990, the social banking goals set for the banking industry made most of the public sector resulted in the presumption that there was no need to look at the fundamental financial strength of this bank. Consequently they remained undercapitalized. Revamping this structure of the banking industry was of extreme importance, as the health of the financial sector in particular and the economy was a whole would be reflected by its performance. The need for restructuring the banking industry was felt greater with the initiation of the real sector reform process in 1992. the reforms have enhanced the opportunities and challenges for the real sector making them operate in a borderless global market place. However, to harness the benefits of globalization, there should be an efficient financial sector to support the structural reforms taking place in the real economy. Hence, along with the reforms of the real sector, the banking sector reformation was also addressed. The route causes for the lackluster performance of banks, formed the elements of the banking sector reforms. Some of the factors that led to the dismal performance of banks were. Regulated interest rate structure. Lack of focus on profitability. Lack of transparency in the banks balance sheet. Lack of competition. Excessive regulation on organization structure and managerial resource. Excessive support from government.

Against this background, the financial sector reforms were initiated to bring about a paradigm shift in the banking industry, by addressing the factors for its dismal performance. In this context, the recommendations made by a high level committee on financial sector, chaired by Mr. Narasimham, laid the foundation for the banking sector reforms. These reforms tried to enhance the viability and efficiency of the banking sector. The Narasimham Committee suggested that there should be functional autonomy, flexibility in operations, dilution of banking strangulations, reduction in reserve requirements and adequate financial infrastructure in terms of supervision, audit and technology. The committee further advocated introduction of prudential forms, transparency in operations and improvement in productivity, only aimed at liberalizing the regulatory framework, but also to keep them in time with international standards. The emphasis shifted to efficient and prudential banking linked to better customer care and customer services. BSE BANKEX In view of the emergence of banking stocks as a major segment in the equity markets, BSE considered it desirable to design an index exclusively for bank stocks. Features A few important features of the BANKEX are given below:

BANKEX tracks the performance of the leading banking sector stocks listed on the BSE

BANKEX is based on the free-float methodology of index construction


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The base date for BANKEX is 1st January 2002. The base value for BANKEX is 1000 points BSE has calculated the historical index values of BANKEX since 1 st January 2002.

12 stocks which represent 90 percent of the total market capitalization of all banking sector stocks listed on BSE are included in the Index

The Index is disseminated on a real-time basis through BSE Online Trading (BOLT) terminals.

Stocks forming part of the BANKEX along with the particulars of their freefloat adjusted market capitalization are listed below.

History of replacements in BANKEX Date 09.02.2004 Outgoing Scrips ING Vysya Bank Replaced by UTI Bank Ltd. Kotak Mahindra Bank UCO Bank Indian Overseas Bank Jammu & Kashmir Bank Vijaya Bank Allahabad Bank Ltd.

31.01.2005 06.06.2005

28.11.2005

Corporation Bank Jammu & Kashmir Bank Ltd. UCO Bank ---

03.07.2006 08.01.2007 09.07.2007 09.06.2008 28.07.2008

Indusind Bank Ltd Karnataka Bank Vijaya Bank ... Centurion Bank of Punjab Ltd. Andhra Bank
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Centurion Bank Ltd. Indusind Bank Ltd Karnataka Bank Limited Federal Bank Ltd.

Karnataka Bank Ltd. Yes Bank Ltd IDBI Bank Ltd. Indusind Bank Ltd.

PROFILE OF MAJOR BANKS IN INDIA


AXIS BANK

History Axis Bank was the first of the new private banks to have begun operations in 1994, after the Government of India allowed new private banks to be established. The Bank was promoted jointly 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 of India (GIC) and other four PSU insurance companies, i.e. National Insurance Company Ltd., The New India Assurance Company Ltd., The Oriental Insurance Company Ltd. and United India Insurance Company Ltd Branches and Business The Bank's Registered Office is at Ahmadabad and its Central Office is located at Mumbai. The Bank has a very wide network of more than 1281 branches (including 169 Service Branches/CPCs as on 31st December, 2010). The Bank has a network of over 5303 ATMs (as on 31st December, 2010) providing 24 hrs a day banking convenience to its customers. This is one of the largest ATM networks in the country. The Bank has strengths in both retail and corporate banking and is committed to adopting the best industry practices internationally in order to achieve excellence. There are 21,640 peoples are working in axis bank and profit per employee is rupees 12lakh.

Product and Services Axis Bank is one of the few Banks that offer Zero Balance Account. Recently Axis Bank introduced Platinum Credit Card which is Indias foremost EMV chip based card. Axis Bank also had provided net Banking facility for the customers. Axis Bank plays a key role in personal Banking, Mobile Banking, corporate Banking, NRI Banking and also on some other banking products.

FEDERAL BANK Federal Bank Limited was founded as Travancore Federal Bank Limited in the year 1931, with an authorized capital of Rs. 5000. It was established at Nedumpuram, a place near Tiruvalla, in Central Travancore (a princely state later merged into Kerala), under Travancore Company's Act. Thirteen years later, in 1944, Shri K P Hormis and his close relatives /friends took over the controlling interest in the bank. The following year, the paid-up capital of the bank went up to 71,000 and its registered office shifted to Aluva, in Ernakulam district of Kerala. With the opening of its first branch at Aluva, Travancore Federal Bank commenced its business. It was in the Board Meeting of March 1947 that the name of the bank was changed to Federal Bank Limited. After a gap of 12 years i.e. in 1959, the bank was licensed under Sec. 22 of the Banking Companies Act 1949, after which it floated several kuries and launched various deposit schemes. In 1964, it took over the liabilities of Chalakudy Public Bank Ltd. (Chalakudy), Cochin Union Bank Ltd. (Trichur) and Alleppey Bank Ltd. (Alleppey). In the next five year, Federal Bank took over St.George Union Bank Ltd. Puthenpally (1965) and Marthandom Commercial Bank Ltd. Trivandrum (1968). In 1970, it became a Scheduled Bank. Two years later, it

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became an authorized dealer in Foreign Exchange. Thereafter, Federal Bank came in an expansion mode and opened 53 branches in 1975 and 42 branches in 1976. In 1984, Federal Bank set up an Agricultural Finance Department in its head office, improving its performance in the field of agricultural and priority sector lending. The year 1985 saw Federal Bank opening a Personnel and Industrial Relations Department and a Computer Department. Four year later, the bank had entered the arena of Merchant Banking Operations. In 1993, ICICI group was roped in as a shareholder, through private placement. The following year, the bank came out with its first public issue, which was oversubscribed around 60 times. In the year 1997, Federal Bank inaugurated its first ATM, at Eranakulam North. Branches and Business The Federal Bank has a wide range of networks of over 708 branches across India. The Federal Bank has more than 751 ATMs in the India. Mr. M. Venugopalan is the chairman and managing director of Federal Bank. The estimated total business of the Federal Bank has crossed over Rs.50, 000/- Crores. In 2008, the Federal Bank has the honor of winning the award for the category of Best Customer Relationship Achievement' in the Banking Technology awards. The bank also has been ranked Number One in Efficiency and in Financial Strength in comparison to any other Indian Banks. The head branch of Federal Bank is situated at in Kochi, Kerala. As on 31march 2010 Federal Bank has 7896 employees and the profit per employee is Rs 6.01lakh.

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Product

and

Services

Deposit services Fixed Deposit, Cash Certificate, Fed Jeevan, Federal Savings Fund (FSF), Suraksha Deposit, Federal Tax Savings Deposit, Accounts Services SB Plus, Fed Power, FreedomSB, FedClassic, FedClassic +, Yuvamitra, MahilaMitra, FedSmart, No-Frills Savings Account, Fed Power +, FISA etc Loan Services Home Term Loan Scheme, Gold Loan Scheme, Mortgage Loan, Personal Loan, Loans for Doctors, Federal Vidya Loan, Federal Housing Loan, Rent Securitization Loan, Aashray Scheme, Consumer Loan Scheme, Purchase of House Plots, Personal Car Loan, Subha Yatra Loan and many more NRI Banking Non- Resident Ordinary (NRO) accounts, Resident External (NRE), foreign Currency Non Resident, Non Resident (External) A/C, Ordinary Non Resident Account, Foreign Currency Non- Resident (FCNR) accounts Internet Banking Mobile Alerts, Account Information, net banking, Railway Tickets Booking, online Funds Transfer, online Bills, Trade, Financial enquiries, Tele Banking, Non Financial enquiries and lots more.

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HDFC BANK HDFC (Housing Development Finance Corporation Limited) is Indias leading housing finance company since its commencement in the year 1977. By gaining experience in financial markets, the finance company was incorporated as HCFC Bank Limited in the year 1994. Later it was called as scheduled Bank in the year 1995. HDFC Bank was the first to set up a Bank in the private sector. Since July 2001, Mr. Jagdish Capoor as a chairman leads HDFC Bank towards higher growth and prosperity. HDFC Bank has been awarded as Best Performing Bank by UTI MF-CNBC TV18 Financial Advisor Awards 2009. Branches and Business With its headquarters in Mumbai, the HDFC Bank has a network of 1,729 branches across the country. All the branches spread over 550 cities are linked on an online real-time basis. The HDFC Bank also has a network of about 3,570 ATMs across these 550 cities. HDFC Banks ATM network can be accessed by all domestic and international Visa/MasterCard, Visa Electron/Maestro, Plus/Cirrus and American Express Credit/Charge cardholders. HDFC Bank runs in a highly automated surrounding in terms of information technology and communication systems. To construct the infrastructure, the HDFC Bank has made considerable efforts in obtaining the Worlds best technology. HDFC Bank has created Supply Chain Finance which facilitates the customers to automate supply chain management resulting in operational efficiency and supply chain gains. As on 31march 2010 bank has 51888 employees and the profit per employee is Rs5.98lakh.
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Product and Services HDFC Bank provides services such as net Banking, phone Banking, trade services, commercial and industrial Banking services, transactional services, mobile Banking, cash management, agricultural finance etc It also offers many services to the non resident Indians (NRIs). The authorized share capital of HDFC Bank was Rs. 550crore till the month of March, 2009. HDFC Banks target market ranges from large industries to small & mid-sized companies and agriculture based businesses.

ICICI BANK

ICICI Bank was originated in the year 1955 in India as financial institution. Nearly after 10 decades of its inception, ICICI started Banking corporation in the year 1994 and was named as ICICI Bank Limited. The status of ICICI Bank was enhanced when ICICI took over the Bank of Madura Limited which was very famous in the rural areas. The Board of Directors of ICICI Bank includes Ms. Chanda D. Kochhar, Managing Director & CEO, Mr. Sandeep Bakhshi, Deputy Managing Director and Mr. N. S. Kannan, Executive Director & CFO. ICICI Bank, Indias second largest Bank was adjudged Best Bank Award for Initiatives in Mobile Payments and Banking by IDRBT. Branches and Business

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In India, ICICI Bank covers a network of 1,717 branches and over 4816 ATMS and ICICI Bank is available in 18 countries. All ICICI Bank branches are fully computerized with online facility and also the ATMs are interconnected by means of internet. ICICI Banks equity shares are scheduled in the country on BSE and NSE of India Limited. As on 31March 2010 the Bank has 35256 employees and the profit per employee is Rs12lakh.

Product and Services ICICI Bank provides a range of Banking stuffs and financial services such as mobile Banking, TV Banking, I zone, internet Banking, online shopping etc. ICICI Bank works with an aim to form a development financial institution for providing medium-term and long-term project financing to Indian trades. The asset of ICICI Bank was Rs. 3,674.19 billion as on 30th June, 2009. ICICI Bank currently has branches in UK, USSR and Canada, branches in US, Singapore, Bahrain, Hong Kong, Ceylon, Qatar and Dubai International Finance Center and representative offices in UAE, China, South Africa, Bangladesh, Thailand, Malaysia and Indonesia.

BANK OF INDIA Bank of India (BOI) is a state-owned commercial bank with headquarters in Mumbai. Government-owned since nationalization in 1969, It is India's 4th largest bank, after State Bank of India, Punjab National Bank and Bank of Baroda. It has 3762 branches, including 29 branches outside India, and about 1300 ATMs. BoI is a founder member of SWIFT (Society for Worldwide Inter Bank Financial
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Telecommunications), which facilitates provision of cost-effective financial processing and communication services. The Bank completed its first one hundred years of operations on 7 September 2006. History Previous banks that used the name Bank of India At least three banks having the name Bank of India had preceded the setting up of the present Bank of India. 1. A person named Ramakishen Dutt set up the first Bank of India in Calcutta (now Kolkata) in 1828, but nothing more is known about this bank. 2. The second Bank of India was incorporated in London in the year 1836 as an Anglo-Indian bank. 3. The third bank named Bank of India was registered in Bombay (now Mumbai) in the year 1864. The earlier holders of the Bank of India name had failed and were no longer in existence by the time a diverse group of Hindus, Muslims, Parsees, and Jews helped establish the present Bank of India in 1906. It was the first in India promoted by Indian interests to serve all the communities of India. At the time, banks in India were either owned by Europeans and served mainly the interests of the European merchant houses, or by different communities and served the banking needs of their own community. The promoters incorporated the Bank of India on 7 September 1906 under Act VI of 1882, with an authorized capital of Rs. 1 crore divided into 100,000 shares each of Rs. 100. The promoters placed 55,000 shares privately, and issued 45,000 to the
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public by way of IPO on 3 October 1906; the bank commenced operations on 1 November 1906. The lead promoter of the Bank of India was Sir Sassoon J. David (1849-1926). He was a member of the Sassoons, who in turn were part of a Bombay community of Baghdadi Jews, which was notable for its history of social service. Sir David was a prudent banker and remained the Chief Executive of the bank from its founding in 1906 until his death in 1926. The first board of directors of the bank consisted of Sir Sassoon David, Sir Cowasjee Jehangir, J. Cowasjee Jehangir, Sir Frederick Leigh Croft, Ratanjee Dadabhoy Tata, Gordhandas Khattau, Lalubhai Samaldas, Khetsety Khiasey, Ramnarain Hurnundrai, Jenarrayen Hindoomull Dani, Noordin Ebrahim Noordin. Products --commercial banking, private banking, retail banking, asset

management, credit cards, mortgage. Revenue ----------- Rs. 24,393.50 crore (US $ 4.87 BILLION) total asset --3,64,556.48 crore. Operating income---- Rs. 5,384.23 crore (US $ 1.07 billion). Net Income---Rs. 2,488.71 crore (US $ 496.5 million)

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UNION BANK OF INDIA Employees-----27,746 (2011) ) (BSE: 532477) is one of India's largest state-owned banks (the government owns 55.43% of its share capital), is listed on the Forbes 2000. It has assets of USD 13.45 billion and all the bank's branches have been networked with its 3025 ATMs. Its online Telebanking facility are available to all its Core Banking Customers - individual as well as corporate. It has representative offices in Abu Dhabi, United Arab Emirates, and Shanghai, Peoples Republic of China, and a branch in Hong Kong. History Union Bank of India (UBI) was registered on 11 November 1919 as a limited company in Mumbai and was inaugurated by Mahatma Gandhi. At the time of India's Independence in 1947, UBI still only had four branches - three in Mumbai and one in Saurashtra, all concentrated in key trade centres. After Independence UBI accelerated its growth and by the time the government nationalized it in 1969, it had grown to 240 branches in 28 states. Shortly after nationalization, UBI merged in Belgaum Bank, a private sector bank established in 1930 that had itself merged in a bank in 1964, the Shri Jadeya Shankarling Bank. Then in 1985 UBI merged in Miraj State Bank, which had been established in 1929. In 1999 the Reserve Bank of India requested that UBI acquire Sikkim Bank in a rescue after extensive irregularities had been discovered at the non-scheduled bank. Sikkim Bank had eight branches located in the North-east, which was attractive to UBI. UBI began its international expansion in 2007 with the opening of representative offices in Abu Dhabi, United Arab Emirates, and Shanghai, Peoples Republic of
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China. The next year, UBI established a branch in Hong Kong, its first branch outside India. In 2009, UBI opened a representative office in Sydney, Australia. Industry-----Financial services

Headquarters ----Mumbai, India Key people---- Mavila Vishwanathan Nair (Chairman & MD) Revenue-----18,491 crore (US$3.69 billion)

Net income------ 2,081 crore (US$415.16 million)

BANK OF BARODA Bank of Baroda (BOB) is the third largest bank in India, after the State Bank of India and the Punjab National Bank and ahead of ICICI Bank. BOB is ranked 763 in Forbes Global 2000 list. BOB has total assets in excess of Rs. 3.58 lakh crores, or Rs. 3,583 billion, a network of over 3,778 branches and offices, and about 1,657 ATMs. It plans to open 400 new branches in the coming year. It offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery channels and through its specialized subsidiaries and affiliates in the areas of investment banking, credit cards and asset management. Its total business was Rs. 5,452 billion as of June 30. As of August 2010, the bank has 78 branches abroad and by the end of FY11 this number should climb to 90. In 2010, BOB opened a branch in Auckland, New Zealand, and its tenth branch in the United Kingdom. The bank also plans to open five branches in Africa. Besides branches, BOB plans to open three outlets in the Persian Gulf region that will consist of ATMs with a couple of people.The
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Maharajah of Baroda, Sir Sayajirao Gaekwad III, founded the bank on 20 July 1908 in the princely state of Baroda, in Gujarat. The bank, along with 13 other major commercial banks of India, was Nationalised on 19 July 1969, by the government of India. Type ---------Founded Public 1908

Headquarters---- -- Vadodra India, Mumbai India Products------Credit cards, consumer banking, corporate banking, finance and

insurance, investment banking, mortgage loans, private banking, private equity, wealth management Revenue----25,800 crore (US$5.15 billion)

Net income-------- 4,433 crore (US$884.38 million) Total Assets----Subsidiaries BOB Capital Markets Ltd. (BOBCAPS) is a SEBI-registered investment banking company based in Mumbai, Maharashtra. It is a wholly owned subsidiary of Bank of Baroda. Its financial services portfolio includes Initial Public Offerings, private placement of debts, corporate restructuring, Business valuation, mergers & acquisition, project appraisal and Bank of Baroda financials 2012

355,826 crore (US$70.99 billion)

Sales Rs. 24,695 crores Profits Rs. 4,241 crores Assets Rs. 3,58,397 crores
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STATE BANK OF INDIA State Bank of India (SBI) (NSE: SBIN, BSE: 500112, LSE: SBID) is the largest banking and financial services company in India by revenue, assets and market capitalization. Its a state-owned corporation with its headquarters in Mumbai, Maharashtra. As of March 2011, it had assets of US$ 370 billion with over 13,000 outlets including 150 overseas branches and agents globally. The bank traces its ancestry to British India, through the Imperial Bank of India, to the founding in 1806 of the Bank of Calcutta, making it the oldest commercial bank in the Indian Subcontinent. Bank of Madras merged into the other two presidency banks, Bank of Calcutta and Bank of Bombay to form Imperial Bank of India, which in turn became State Bank of India. The government of India nationalized the Imperial Bank of India in 1955, with the Reserve Bank of India taking a 60% stake, and renamed it the State Bank of India. In 2008, the government took over the stake held by the Reserve Bank of India. SBI is ranked 292 globally in Fortune Global 500 list in 2011. SBI provides a range of banking products through its vast network of branches in India and overseas, including products aimed at Non-resident Indians (NRIs). The State Bank Group, with over 16,000 branches, has the largest banking branch network in India. SBI has 14 Local Head Offices situated at Chandigarh, Delhi, Lucknow, Patna, Kolkata, Guwahati (North East Circle), Bhuwaneshwar, Hyderabad, Chennai, Trivandram, Banglore, Mumbai, Bhopal & Ahmedabad and 57 Zonal Offices that are located at important cities throughout the country. It also has around 130 branches overseas.
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SBI is a regional banking behemoth and is one of the largest financial institutions in the world. It has a market share among Indian commercial banks of about 20% in deposits and loans. The State Bank of India is the 29th most reputed company in the world according to Forbes. Also SBI is the only bank featured in the coveted "top 10 brands of India" list in an annual survey conducted by Brand Finance and The Economic Times in 2010. The State Bank of India is the largest of the Big Four banks of India, along with ICICI Bank, Punjab National Bank and HDFC Bankits main competitors. Products--------- Credit cards, Consumer banking, corporate banking, finance and insurance, investment banking, mortgage loans, private banking, wealth management Revenue---------- US$ 32.44 billion Profit-----------US$ 02.34 billion

Total Assets--------US$ 369.56 billion Total Equity-------US$ 018.71 billion Employees---------- 222,933 Non-banking subsidiaries Apart from its five associate banks, SBI also has the following non-banking subsidiaries: 1.SBI Capital Markets Ltd 2.SBI Funds Management Pvt Ltd

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3.SBI Factors & Commercial Services Pvt Ltd 4.SBI Cards & Payments Services Pvt. Ltd. (SBICPSL) 5.SBI DFHI Ltd 6.SBI Life Insurance Company Ltd.

Branches of SBI

State Bank of India has 172 foreign offices in 37 countries across the globe. SBI has about 25,000 ATMs (25,000th ATM was inaugurated by the then Chairman of State Bank Shri O.P. Bhatt on 31 March 2011, the day of his retirement); and SBI group(including associate banks) has about 45,000 ATMs.

SBI has 21,500 branches, including branches that belong to its associate banks.

SBI includes 99345 offices in India. India's number one ADB is in bellary i.e State bank of India bellary ADB

PUNJAB NATIONAL BANK Punjab National Bank (PNB) is an Indian financial services company based in New Delhi, India. PNB is the third largest bank in India by assets. It was founded in 1894 and is currently the second largest state-owned commercial bank in India ahead of Bank of Baroda with about 5000 branches across 764 cities. It serves over 37 million customers. The bank has been ranked 248th biggest bank in the world
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by the Bankers Almanac, London. The bank's total assets for financial year 2007 were about US$60 billion. PNB has a banking subsidiary in the UK, as well as branches in Hong Kong, Dubai and Kabul, and representative offices in Almaty, Dubai, Oslo, and Shanghai. History Punjab National Bank was registered on 19 May 1894 under the Indian Companies Act with its office in Anarkali Bazaar Lahore. The founding board was drawn from different parts of India professing different faiths and a varied back-ground with, however, the common objective of providing country with a truly national bank which would further the economic interest of the country. PNB's founders included several leaders of the Swadeshi movement such as Dyal Singh Majithia and Lala Harkishan Lal, Lala Lalchand, Shri Kali Prosanna Roy, Shri E.C. Jessawala, Shri Prabhu Dayal, Bakshi Jaishi Ram, and Lala Dholan Dass. Lala Lajpat Rai was actively associated with the management of the Bank in its early years. The board first met on 23 May 1894. Ironically, the PNB Website now claims Lala Lajpat Rai to be the founding father, surpassing Rai Mul Raj and Dyal Singh Majithia. PNB has the distinction of being the first Indian bank to have been started solely with Indian capital that has survived to the present. (The first entirely Indian bank, the Oudh Commercial Bank, was established in 1881 in Faizabad, but failed in 1958.) PNB has had the privilege of maintaining accounts of national leaders such as Mahatma Gandhi, Shri Jawahar Lal Nehru, Shri Lal Bahadur Shastri, Shrimati Indira Gandhi, as well as the account of the famous Jalianwala Bagh Committee.

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since 2001 and is an affiliate of MetLife. The new entity, PNB Metlfe markets insurance products through PNB's branches. Products------------ Credit cards, consumer banking, corporate banking, finance and insurance, investment banking, mortgage loans, private banking, private equity, wealth management. Revenue -------------- 31,206 crore (US$6.23 billion) Net income---------- 4,574 crore (US$912.51 million) Total Assets--------- 373,786 crore (US$74.57 billion) Employees--------56,928

IDBI BANK IDBI Bank Limited is an Indian financial service company headquartered Mumbai, India. RBI categorised IDBI as an "other public sector bank". It was established in 1964 by an Act of Parliament to provide credit and other facilities for the development of the fledgling Indian industry. It is currently 10th largest development bank in the world in terms of reach with 1514 ATMs, 923 branches including one overseas branch at DIFC, Dubai and 621 centers including two overseas centres at Singapore & Beijing. Some of the institutions built by IDBI are the Securities and Exchange Board of India (SEBI), National Stock Exchange of India (NSE), the National Securities Depository Limited (NSDL), the Stock Holding Corporation of India Limited (SHCIL), the Credit Analysis & Research Ltd, the Exim Bank (India), the Small Industries Development Bank of India (SIDBI), the Entrepreneurship Development Institute of India, and IDBI BANK, which is owned by the Indian Government. IDBI Bank is on a par with
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nationalized banks and the SBI Group as far as government ownership is concerned. It is one among the 26 commercial banks owned by the Government of India. The Bank has an aggregate balance sheet size of Rs. 2,53,378 crore as on March 31, 2011. IDBI Bank's operations during the financial year ended March 31, Products-------------Credit cards, consumer banking, corporate banking, finance and insurance, investment banking, mortgage loans, private banking, private equity, wealth management Revenue-----------20,858 crore (US$4.16 billion)

Net Income----------- 1,563 crore (US$311.82 million) Total Assets--------- 253,116 crore (US$50.5 billion) Employees ------------14,000

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REVIEW OF LITERATURE
Researchers have proposed many different theories about the factors that influence a firms dividend policy. A number of factors have been identified in the previous empirical studies to influence the dividend policy decisions of the firm such as profitability, risk, cash flow, growth, taxes, price earnings ratio, debt equity ratio etc. Profitability of the firm has long been regarded as the main indicator of the firms ability to distribute dividend to the shareholders. Since the literature available in the field under reference is wide in nature and scope, the literature found in the form of popular write-ups, working groups, research studies/ articles of researchers/ economists and the comments of economic analysts are reviewed here in this particular section. The most important theoretical and empirical studies related to dividend decisions have been reviewed here. 1. Lintner (1956) made an empirical attempt to explain corporate dividend

behaviour by means of conducting interviews of personnel of large firms of United States of America. It was established that the primary determinants of changes in dividends paid out were the most recent earnings and past dividend paid. It was found that management is concerned with change in dividends rather than the amount and it tries to maintain a level of dividends. Also, there was propensity to move towards some target payout ratio but speed of adjustment varies among companies. There exist many empirical studies in India and abroad that identify the pattern and factors affecting dividend policy. 2. Miller and Modigliani (1961) viewed dividend as irrelevant, and believed that in a world without market imperfections like taxes, transaction costs or asymmetric information, dividend policy should have no effect on its market value. However, since the capital market is neither perfect nor complete, the dividend irrelevance proposition needs to be re-visited, especially focusing on the effects of information
27

content of dividend, agency cost and institutional constraints. The

market

imperfection of asymmetric information is the basis for three distinct efforts to explain corporate dividend policy. The mitigation of the information asymmetric between managers and owners via unexpected change in the dividend policy is the cornerstone of dividend signalling models. Agency cost theory uses dividend policy to better align the interests of shareholders and corporate managers. The free cash flow hypothesis is an ad hoc combination of the signalling and agency cost paradigm; the payment of dividends can decrease the level of funds available for perquisite consumption by corporate managers. The signalling theories posit dividend policy as a vehicle used by corporate managers to transmit private information to the market. Agency problems result from information asymmetries, potential wealth transfers from bondholders to stockholders through the acceptance of high-risk and high-return projects by managers, and failure to accept positive net present value projects and perquisite consumption in excess of the level consumed by prudent corporate managers. 3. Smith (1963) studied factors influencing corporate saving decision of firms. The factors have been classified into two broad categories, first being factors involved in investment decisions and second arising from stability of dividends. It was concluded that income, previous level of dividend played a very important role in corporate savings in the short run but demand for investment funds had somewhat smaller role in deciding behaviour of corporate savings. But in the long run, demand for investment funds played a crucial role in estimating corporate savings. In the Indian context, few studies have analysed the dividend behaviour of corporate firms. 4. Fama and Bablak (1968) studied the determinants of dividend payments by individual firms during 1946-64. For this purpose, the statistical techniques of regression analysis, simulation and prediction tests were used. The study
28

concluded that net income seems to provide a better measure of dividend than either cash flow or net income and depreciation included as separate variables in the model. 5. Krishnamurty and Sastry (1971) analysed dividend behaviour of Indian chemical industry for the period 1962-1967 and took cross sectional data of 40 public limited companies. The results revealed that Linter model provides good explanation of dividend behaviour. 6. Dhameja (1978) in his study tested the dividend behaviour of Indian companies by classifying them into size group, industry group, growth group, and control group. The study found that there was no statistically significant relationship between dividend payout, on the one hand and industry and size on the other. Growth was inversely related to dividend payout and was found to be significant. The main conclusions are that dividend decisions are better explained by Lintners model with current profit and lagged dividend as explanatory variables. 7. Rozeff (1982), used beta value of a firm as an indicator of its market risk. They found statistically significant and negative relationship between beta and dividend payout. The liquidity or cash flow position is also an important determinant of dividend payouts. A poor liquidity position means less generous dividends due to shortage of cash. 8. Partington (1983) elaborated that firms use target payout ratio, firms motives for paying dividends and the extent to which dividends are determined are independent of investment policy. Allietal (1993) reveal that dividend payment depend more on cash flows, which reflect the companys ability to pay dividends, than on current earnings, which are less heavily influenced by accounting practices. They claim current earnings do not really reflect the firms ability to pay dividends.

29

9. Baker, Farelly and Edelman (1986) syrveyed 318 New York exchange firms and concluded that the major determinants of dividend payments are anticipated level of future earnings and pattern of past dividends. 10. Pruitt and Guitmann (1991) asked the financial manager of 1000 large US companies and reported that current and past years profits are important factors influencing dividend payments. He found in another study that risk (year to year variability of earnings) also determine the firms dividend policy. A firm that has relatively stable earnings is often able to predict approximately what its future earning will be. Such a firm is more likely to pay a higher percentage of its earnings as dividend rather than a firm with fluctuating earnimgs. 11. Green et. al (1993) questioned the irrelevance argument and investigated the relationship between the dividends and investment and financing decisions. Their study illustrated that dividend payout levels are not totally decided after a firms investment and financing decisions. The results however do not support the views of irrelevance of dividend given by Modigliani and Miller(1961). 12. Mahapatra and Sahu (1993) find cash flow as a major determinant of dividend followed by net earnings. 13. Bhat and Pandey (1994) undertook a survey of managers perceptions of dividend decisions and found that managers perceive current earnings as the most significant factor. 14. Solvin, Sushka and Poloncheck (1994) assessed the information conveyed by commercial bank announcements of dividend reductions. It has been established that valuation effects on announcing banks are negative and significantly greater than for industrial firms. Cross sectional regressions used in the study indicates that the size of dividend reductions is crucial but there is no evidence of clientele effects.

30

15.Narasimhan and Asha (1997) observe that the uniform tax rate of 10 percent on dividend as proposed by the Indian union budget 1997-98 alters the demand of investors in favour of high payouts. 16. D. souza (1999) showed a positive but insignificant relationship in the case of growth and negative but insignificant relationship in case of market to book value with dividend payout ratio 17. Mohanty (1999) found that firms, which issued bonus shares, have either maintained the pre-bonus level or only decreased in marginally, thereby, increasing the payout to shareholders. 18. DeAngelo, DeAngelo and Skinner (2000) analysed the information content of special dividends. The research concluded that special dividends were not displaced by stock repurchases, indicating that most specials failed to survive on their own accord and not because managers discovered the tax advantages of repurchase. 19. Narasimhan and Vijayalakshmi (2002) analysed the influence of ownership structure on dividend payout and found no influence of insider ownership on dividend behaviour of firms 20. Frankfurter and wood (2002) established that a number of conflicting

theoretical models lacking strong empirical support define current attempts to explain the puzzling reality of corporate dividend behaviour. The outcome is consistent with the contention that no dividend model, either separately or jointly with other models, is supported invariably. 21. Mahakud J. (2005) examined the influence of shareholding pattern on

dividends payout ratio of Indian Companies which belong to manufacturing industries and were listed on the Bombay Stock Exchange (BSE) during the period 2001-2004. The study found a positive association of dividend with lagged dividend, earning, sales and size of the company. Debt to equity ratio is found to
31

be negatively related with dividend. Institutional shareholders have greater impact or influence on the determination of dividend payout ratio and it influences dividend policy inversely. 22. Li, Feng, Son and Shu (2006) analysed the decision making of dividend policy and the reason for dividends policy selection in non-state-owned listed companies in China by using structural equation modelling. The main research findings are as follows: The dividend policy of non-state-owned listed companies in China can be interpreted by the western agency theory for dividend, and they found that if compared with the manager, the owner is a more important variable that influences the dividend policy. Four motives such as investment opportunities, refinancing ability, stock price and potential repayment capacity are all important factors for decisions makers to determine the dividend policy. 23. K.Jayesh (2006) investigated the association between corporate governance and dividend payout policy for a panel of Indian corporate firms over the period 1994-2000. He found a positive association of dividend trends. Debt equity ratio was also identified to be negatively associated whereas, past investment opportunities exert a positive impact on the dividends payout in level and corporate ownership is negatively related in square. 24. Twaijri. A and Abdurrahman. A (2007) studied the variables with an

expected influence on dividend policy and payout ratio. They randomly selected 300 firms from Kuala Lumpur Stock Exchange. They had found that the current dividends were affected by their past and their future prospects. Dividends were associated to a lesser extent with net earnings. Payout ratios were not found to have strong effect on the companys future earnings growth, but had negative correlation with the companys leverage.
32

25.Pourhevdari .O(2009) investigated the views of Chief Financial Officer (CFOs) of Iranian firms listed on the Tehran Stock Exchange about the factors influencing dividend policy. The findings showed that the most important determinants of a firms dividend policies are the stability of cash flow, the availability of profitable investment opportunities and stability of profitability. Also, industry type appeared to influence that respondents placed on one determinant of dividend policy.

REFERENCE 1. Linter, J.(1956), Distribution of income of corporations among dividends, retained earnings and taxes, American Economic Revirew, Vol 46,pp97113. 2. Miller,M.H. and Modigliani,F. (1961), Dividend policy, growth and the valuation of shares, Journal of Business,No. October,pp.411-35. 3. Miller, M. and Modigliani, F. 1961. Dividend Policy, Growth, and the Valuation of Shares, Journal of Business,34:411-433. 4. Smith, D.C. 1963. Corporate Saving Behavior, The Canadian Journal Of Economic and Political Science, August. 5. Fama, Eugene F., and Babiak,H. 1968. Dividend Policy: An Empirical Analysis, Journal of American Statistical Association, 63:1132-1161. 6. Krishnamurty, K. and Sastry, D.U. 1971. Some Aspects of Corporate Behavior in India: A Cross Section Analysis of Investment, Dividend and External financing for the chemical industry:1962-1967, Indian Economic Review, October.

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7. Dhameja, N.L 1978. Control of Companies and Their Dividend Practices, Margin, January. Dhrymes, P.J. and Kurz, M. 1964. On the Dividend Policy of Electric Utilities, Rewiew of Economic and Statistics, Feb. 8. Rozeff, S.M. (1982),Growth, beta and agency cost as determinants of dividend payout ratio, Journal of Financial Research, Vol.5,pp.411-33. 9. Partington,G.H.(1983),Why firms use payout target: a comparative study of dividend policies:, paper presented at AAANZ Conference, Brisbane. 10.Farrelly, Gali E., Baker,K. and Richard B. Edelman, (1986),Corporate Dividends: Views of Policy makers, Akon Business and Economic review, Vol 17 No:4,pp 62-74. 11.Pruitt, S.W. and Gitman, L.W (1991), The interactions between the investment, financing and dividend decisions of major US firms, Financial review, Vol.26 No.33,pp.409-30. 12.Green, P., Pogue, M., Watson, I. (1993), Dividend policy and its relationship to investment and financing policies: empirical evidence using Irish data, IBAR, Vol. 14 No.2,pp.69-83. 13.Mahapatra, R.P. and Panda, B.K.1995. Determinants of Corporate Dividend Policy and the Target Payment Ratio, Productivity, July-Sep,36. 14.Bhat, R. and Pandey, I.M. 1991.Dividend Decision: A Study of Managers Perceptions, Decisions 21, (1&2) January-June. 15.Slovin, Myron B., Sushka, Marie E. and Poloncheck, John 1994. Dividend Restrictions and Commercial Banks, http://papers.ssrn.com/sol3/

papers.cfm?abstract_id=5739. Accessed on April 28, 2010.


34

16.Narasimhan,M.S. and C. Asha 1997.Implications of Dividend Tax on Corporate Financial Policies, the ICFAI Journal of Applied

Finance,3(2):11-28. 17.DSouza, J.(1999), Agency cost, market risk, investment opportunities and dividend policy-an international perspective, Managerial Finance, Vol.25 No. 6,pp.35-43. 18.Mohanty,P. 1999. Dividend and Bonus Policies of the Indian Companies, Vikalpa,24,(4) October-December:35-42. 19.DeAngelo, H.DeAngelo, L. and Skinner, Douglas J.2000. Special dividends and the Evolution of Dividend Signaling,Journal of Financial Economics,57 (3):309. 20.Narasimhan,M.S. and Vijayalakshmi, S.2002. Impact of Agency Cost on Leverage and Dividend Policies, The ICFAI Journal of Applied Finance, 8(2):16-25. 21.Frankfurter, George M.,and Wood,Bob G.Jr.2002. Dividend Policy Theories and Their Empirical Tests, International Review of Financial Analysis, 11:111-138. 22.Mahakud,M. (2005) Shareholding Pattern and Dividend Policy: Evidence from Indian Corporate Sector, ICFAI Journal of Applied Finance, Vol No 10, pp. 8-24. 23.Li, Li Qi feng, Yin, Song, Liu and Shu, Wang Man. 2006. Who make the dividend policy decision and their motives for doing so.Analysis based on a questionnaire survey of non-state owned listed companies

35

inChina,http://ccfr.org.cn/cicf2006paper/2006012820011.pdf.Accessed on April 28 2010. 24.Twaijiry A, and Ali A (2007), Dividend Policy and Payout Ratio: Evidence from Kualalumpur stock exchange, Journal of Risk Finance, Vol 8 No 4,pp.349-363. 25.Pourheydari, O.(2009) A Survey of management views on Dividend policy in Iranian firm, International Journal of Islamic andMideastern finance and management, Vol 2 No 1,pp.20-31.

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RESEARCH METHODOLOGY

OBJECTIVES OF THE STUDY: An investor would like to be rational and scientific in his investment activity has to evaluate a lot of information about past performance and the expected future performance of the companies, industries and economies as a whole before taking the investment decision. Some of the objectives of conducting the study are as follows: 1. To know the basic detail of selected Banks (Bankex). 2. To analyse the key determinants affecting the dividend Payout Ratio. 3. To know the relationship between dependent and independent variables in selected Banks. 4. To identify the most affecting determinant of Dividend Payout ratio.

RESEARCH DESIGN: Research Design is the conceptual structure within which research is conducted, it constitutes the blueprint for the collection, measurement and analysis of data. In this study, Empirical research design is used. Empirical research relies on experience or observation alone, often without due regard for system and theory. It is data based research, coming up with conclusions which are capable of being verified by observation or experiment.

37

SCOPE OF THE STUDY: Key Determinants Dividend Payout ratio Beta (Risk) Earnings Per Share Earnings Tax profit before and tax Debt-Equity Ratio Cash flow From Operation Sample Size: 10 Major Banks in India are chosen as sample size for the study. They are : State Bank of India. Punjab National Bank. Housing Development Finance Corporation Limited (HDFC). Industrial Development Bank of India (IDBI). Bank of India. Axis Bank. Bank of Baroda. Industrial Credit and Investment Corporation of India (ICICI). Federal Bank. Union Bank. SOURCE OF DATA: For the purpose of this study, secondary data has been used. The relevant secondary data has been collected from : Money control .com BSE India.com

38

TIME PERIOD OF STUDY: The study has been conducted during APRIL 2006 To MARCH 2011 . TOOLS USED FOR ANALYSIS: 1. Ratio Analysis: Ratios being designed are named as: Earnings Per Share (EPS) Dividend Per Share (DPS) Dividend Payout Ratio Debt Equity Ratio

2. Correlation 3. Multiple Regression Model

LIMITATION OF THE STUDY: 1. Time and resource constraints. 2. Chances of human error in analysis and interpretation of the data used in the study. 3. The researcher had made an honest attempt to complete the study but financial resources and lack of experience may be considered the major limitation.

39

DATA ANALYSIS AND INTERPRETATION


YEAR : 2006-07 TABLE : 4.1
BANKS SBI PNB HDFC IDBI BOI AXIS BOB ICICI FEDERAL UNION Y 19 30.71 22.91 20.16 17.51 22.57 24.59 33.89 13.68 24.2 X1 0.97 0.87 1.09 1.02 1.28 0.93 0.96 1.02 1.11 1.07 X2 86.29 48.84 43.29 8.7 23.04 23.4 28.18 34.59 34.2 16.74 X3 -0.0195 -0.0106 0.0086 -0.0439 -0.0175 -0.0172 -0.0157 -0.024 -0.0102 -0.0192 X4 -0.2457 -0.1465 -0.1252 -0.0463 -0.1258 -0.195 -0.1977 -0.0664 -0.1268 -0.204 X5 903 449.75 222.65 118.4 259.15 227.18 344.86 313.3 261.15 177 X6 -1776.07 -10144.3 666.63 200.63 5111.96 5295.53 5153.94 23061.9 467.76 1956.28

TABLE 4.2 CORRELATION BETWEEN INDEPENDENT & DEPENDENT VARIABLE


DPR DPR Pearson Correlation Sig. (2-tailed) N BETA RISK Pearson Correlation Sig. (2-tailed) N EPS Pearson Correlation Sig. (2-tailed) N 1 BETA RISK -.520 .123 10 1 EPS .014 .970 10 -.298 .404 10 1 EARNING -.005 .988 10 .094 .797 10 .360 .306 10 1 TAXPBT .163 .653 10 .282 .430 10 -.477 .163 10 -.307 .389 10 1 DER -.002 .995 10 -.339 .337 10 .935** .000 10 .090 .805 10 .567 .087 10 1 CFO .348 .324 10 .229 .525 10 -.260 .468 10 -.214 .552 10 .332 .348 10 -.228 .526 10 1

EARNING Pearson Correlation Sig. (2-tailed) N TAXPBT Pearson Correlation Sig. (2-tailed) N DER Pearson Correlation Sig. (2-tailed) N Pearson Correlation Sig. (2-tailed) N

CFO

**Correlation is significant at the 0.01 level (2 tailed).

40

TABLE 4.3.1 REGRESSION RESULTS OF EMPIRICAL MODEL Model Summary


Model 1 a. Adjusted R Square .800a .641 -.078 Predictors: (Constant), CFO, EARNING, DER, BETERISK, TAXPBT, EPS. R R Square Std. Error of The Estimate 6.22169

TABLE 4.3.2 EGRESSION COEFFICIENT AND THEIR SIGNIFICANCE Coefficientsa


Unstandardized Coefficients Model B 1 (Constant) BETA RISK EPS EARNING TAXPBT DER CFO 80.293 -41.685 -.404 342.657 57.484 .040 .000 Std. Error 31.133 20.632 .639 396.890 64.269 .064 .000 Beta -.798 -1.464 .745 .605 1.473 .444 2.579 -2.020 -.633 .863 .894 .621 1.173 .082 .137 .572 .451 .437 .578 .325 Standardized Coefficients t Sig

a.

Dependent variable: DPR

INTERPRETATION

From correlation matrix in Table 4.2, it can be highlighted that there is no significant correlation of dividend payout ratio with Beta, EPS, Earnings, Taxpbt, DER, and CFO. It is clear from the table that Beta risk, earnings, and DER have negative but low degree of correlation with DPR. EPS, Taxpbt and CFO have positively correlated with DPR but CFO has significant correlation and shows moderate degree of correlation. Table 4.3.1, reveals that existing models explain about 64 % variability in the Dividend Payout ratio. It means that 64% of total variations in the DPR occur due to all defined variables. It is clear from the table 4.3.2, that B value of beta risk and EPS shows negative association with DPR. Beta has negative but significant relationship with DPR. The value of earnings and Taxpbt shows positive association with DPR but earnings have very significant relationship with DPR. B value of DER and CFO shows insignificant relationship with DPR.
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YEAR : 2007-08 TABLE:4.4


BANKS SBI PNB HDFC IDBI BOI AXIS BOB ICICI FEDERAL UNION Y 22.64 23.4 22.16 22.92 12.23 23.45 23.75 33.12 21.74 17.04 X1 1.12 1.08 1.03 1.16 1.45 1.12 0.88 1.19 1.08 0.91 X2 106.56 64.98 44.87 10.06 38.26 29.94 39.41 37.37 21.25 27.46 X3 -0.026 -0.0237 -0.0084 -0.0461 -0.0247 -0.0253 -0.0271 -0.0388 -0.0262 -0.0304 X4 -0.283 -0.3113 -0.1834 -0.07 -0.1824 -0.3494 -0.2548 -0.1128 -0.1663 -0.18 X5 932.95 545.2 296.95 154 298.88 260.68 426.67 278.68 156.14 215.03 X6 -856.87 1756.13 3583.43 2144.64 -565.02 5960.45 2241.82 -11631.2 -1525.86 1930.64

TABLE 4.5 CORRELATION BETWEEN INDEPENDENT AND DEPENDENT VARIABLE


DPR BET A RISK -.240 .505 10 1 EPS EARNING TAXPBT DER CFO

DPR

Pearson Correlation Sig. (2-tailed) N BETA RISK Pearson Correlation Sig. (2-tailed) N EPS

.066 .856 10 .013 .972 10 1

-.303 .395 10 -.146 .687 10 .360 .307 10 1

.074 .838 10 .207 .567 10 -.537 .109 10 -.505 .137 10 1

.078 .830 10 -.041 .909 10 .975** .000 10 .235 .514 10 -.552 .098 10 1

-.517 .126 10 -.316 .373 10 -.079 .828 10 .405 .246 10 -.479 .161 10 -.025 .945 10 1

Pearson Correlation Sig. (2-tailed) N EARNING Pearson Correlation Sig. (2-tailed) N TAXPBT Pearson Correlation Sig. (2-tailed) N DER Pearson Correlation Sig. (2-tailed) N CFO Pearson Correlation Sig. (2-tailed) N **Correlation is significant at the 0.01 level (2 tailed).

42

TABLE 4.6.1 REGRESSION RESULTS OF EMPIRICAL MODEL Model Summary


Model 1 a. Adjusted R Square .721a -.520 -.439 Predictors: (Constant), CFO, EARNING, DER, R R Square Std. Error of The Estimate 6.34202

BETERISK, TAXPBT, EPS

TABLE 4.6.2 EGRESSION COEFFICIENT AND THEIR SIGNIFICANCE Coefficientsa


Unstandardized Coefficients Model B 1 (Constant) BETA RISK EPS EARNING TAXPBT DER CFO 31.076 -14.839 .038 -141.252 -21.792 -.006 -.001 Std. Error 21.233 14.863 .665 445.534 37.344 .072 .001 Beta -.444 .194 -.264 -.364 -.287 -.717 1.464 -.998 .057 -.317 -.584 -.089 -1.097 .239 .392 .958 .772 .601 .935 .353 Standardized Coefficients t Sig

a.

Dependent variable: DPR

INTERPRETATION

From correlation matrix in Table 4.5, it can be highlighted that there is no significant correlation of dividend payout ratio with Beta, EPS, Earnings, Taxpbt, DER, and CFO. It is clear from the table that Beta risk, earnings, and CFO have negative but beta risk shows low degree of correlation with DPR whereas earning and CFO has significant relationship. EPS, Taxpbt and DER have positively correlated and show most significant and moderate degree of correlation with DPR. Table 4.6.1 reveals that, existing models explain about 52% variability in the dividend payout ratio. It means that 52% of total variations in the DPR occur due to all defined variables. It is clear from the table 4.6.2 that, B value of beta risk Earnings, Taxpbt shows negative association with DPR. Beta has been found to have a negative but significant relationship with DPR. The value of EPS shows positive and has significant relationship with DPR. B value of DER and CFO shows negatively insignificant relationship with DPR.
43

YEAR : 2008-09 TABLE:4.7


BANKS SBI PNB HDFC IDBI BOI AXIS BOB ICICI FEDERAL UNION Y 22.9 23.86 22.16 24.69 16.34 23.16 17.22 36.6 20 17.11 X1 1.06 0.86 0.86 1.23 0.96 1.24 0.91 1.54 1.02 0.68 X2 143.67 98.03 52.77 11.85 57.26 50.57 61.14 33.76 29.26 34.18 X3 -0.026 -0.0265 -0.02 -0.0518 -0.024 -0.0232 -0.025 -0.0364 -0.019 -0.031 X4 -0.2824 -0.2918 -0.2036 -0.0922 -0.212 -0.2604 -0.26 -0.1522 -0.2322 -0.2005 X5 1253.44 679.15 342.04 216.37 378.76 355.31 541.77 256.6 192.64 282.28 X6 29479.73 2105.16 -1736.14 2767.71 4018.39 10551.63 1125.47 -14188.5 918.11 5599.13

TABLE 4.8 CORRELATION BETWEEN INDEPENDENT AND DEPENDENT VARIABLE


DPR DPR Pearson Correlation Sig. (2-tailed) N BETA RISK Pearson Correlation Sig. (2-tailed) N EPS 1 BETA RISK .819** .004 10 1 EPS -.085 .816 10 .215 .552 10 1 EARNING -.421 .226 10 -.432 .213 10 .382 .276 10 1 TAXPBT .362 .305 10 .416 .232 10 -.746* .013 10 -.776** .008 10 1 DER -.067 .854 10 -.151 .678 10 .969** .000 10 .215 .550 10 -.633* .050 10 1 CFO -.401 .251 10 -.259 .471 10 -.697* .025 10 .183 .613 10 -.498 .143 10 .765** .010 10 1

Pearson Correlation Sig. (2-tailed) N EARNING Pearson Correlation Sig. (2-tailed) N TAXPBT Pearson Correlation Sig. (2-tailed) N DER Pearson Correlation Sig. (2-tailed) N CFO Pearson Correlation Sig. (2-tailed) N **Correlation is significant at the 0.01 level (2 tailed). *Correlation is significant at the 0.05 level (2 tailed).

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TABLE 4.9.1 REGRESSION RESULTS OF EMPIRICAL MODEL Model Summary


Model 1 a. Adjusted R Square .921a .849 .547 Predictors: (Constant), CFO, EARNING, DER, BETERISK, TAXPBT, EPS. R R Square Std. Error of The Estimate 3.93219

TABLE 4.9.2 EGRESSION COEFFICIENT AND THEIR SIGNIFICANCE Coefficientsa


Unstandardized Coefficients Model B 1 (Constant) BETA RISK EPS EARNING TAXPBT DER CFO .550 16.473 .170 -133.722 15.229 -.010 .000 Std. Error 17.497 6.163 .231 282.129 53.845 .028 .000 Beta .693 1.112 -.222 .160 -.533 -.469 .031 2.673 .735 -.474 .283 -.347 -1.173 .977 .075 .516 .668 .796 .752 .326 Standardized Coefficients t Sig

INTERPRETATION

From correlation matrix in Table 4.8, it can be highlighted that there is significant correlation of dividend payout ratio with Beta. Also a weak correlation exists with EPS, Earnings, Taxpbt, DER, and CFO. It is clear from the table that EPS, earnings, DER, and CFO have negative and shows low degree of correlation with DPR but earning and CFO has significant relationship with DPR. Taxpbt have positively correlated with DPR and shows moderate degree of correlation. Table 4.9.1 reveals that, existing models explain about 84% variability in the dividend payout ratio. It means that 84% of total variations in the DPR occur due to all defined variables. It is clear from the table 4.9.2 that, B value of Earnings, shows negative association with DPR. The value of Beta, EPS and Taxpbt shows positive relationship with DPR. B value of DER shows negatively insignificant relationship with DPR whereas CFO shows insignificant relationship with DPR.

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YEAR : 2009-10 TABLE:4.10


BANKS SBI PNB HDFC IDBI BOI AXIS BOB ICICI FEDERAL UNION Y 23.36 20.74 21.72 24.14 24.61 28.57 20.9 37.31 21.46 15.66 X1 1.16 0.85 0.78 1.14 1.03 1.18 0.82 1.41 0.85 0.71 X2 144.37 123.86 64.42 14.23 33.15 62.06 83.96 36.1 27.16 41.08 X3 -0.0275 -0.019 -0.006 -0.044 -0.027 -0.0077 -0.021 -0.0216 -0.0228 -0.028 X4 -0.26 -0.273 -0.2085 -0.005 -0.156 -0.255 -0.239 -0.1357 -0.3123 -0.2071 X5 1428.82 851.86 393.93 297.13 479.48 391.11 696 265.75 219.87 354.87 X6 -1805 1836 9389.89 3879.39 8439.81 28.57 11252.45 1869.21 -555.25 -505.07

TABLE 4.11 CORRELATION BETWEEN INDEPENDENT AND DEPENDENT VARIABLE

DPR DPR Pearson Correlation Sig. (2-tailed) N BETA RISK Pearson Correlation Sig. (2-tailed) N EPS 1

BETA RISK .902** .000 10 1

EPS -.194 .591 10 -.085 .815 10 1

EARNING .125 .730 10 -.169 .640 10 .274 .444 10 1

TAXPBT .308 .387 10 .413 .235 10 -.543 .105 10 -.611 .061 10 1

DER -.197 .585 10 .035 .924 10 .919** .000 10 -.038 .916 10 -.352 .319 10 1

CFO -.081 .285 10 -.276 .440 10 -.137 .705 10 .153 .673 10 -.254 .480 10 -.146 .687 10 1

Pearson Correlation Sig. (2-tailed) N EARNING Pearson Correlation Sig. (2-tailed) N TAXPBT Pearson Correlation Sig. (2-tailed) N DER Pearson Correlation Sig. (2-tailed) N CFO Pearson Correlation Sig. (2-tailed) N **Correlation is significant at the 0.01 level (2 tailed).

46

TABLE 4.12.1 REGRESSION RESULTS OF EMPIRICAL MODEL Model Summary


Model 1 a. Adjusted R Square .987a .975 .925 Predictors: (Constant), CFO, EARNING, DER, BETERISK, TAXPBT, EPS. R R Square Std. Error of The Estimate 1.58177

TABLE 4.12.2 EGRESSION COEFFICIENT AND THEIR SIGNIFICANCE Coefficientsa


Unstandardized Coefficients Model B 1 (Constant) BETA RISK EPS EARNING TAXPBT DER CFO -7.749 29.106 .070 -19.805 -15.328 -.012 .000 Std. Error 7.857 3.564 .056 115.582 12.989 .006 .000 Beta 1.135 .520 -.037 -.234 -.761 .258 -.986 8.167 1.245 -.171 -1.180 -1.832 1.909 .397 .004 .301 .875 .323 .164 .152 Standardized Coefficients t Sig

a.

Dependent variable: DPR

INTERPRETATION

From correlation matrix in Table 4.11, it can be highlighted that there is significant correlation of dividend payout ratio with Beta. Also a weak correlation exists with EPS, Earnings, Taxpbt, DER, and CFO. It is clear from the table that EPS, DER, and CFO have negative and shows low degree of correlation with DPR. Earnings, Taxpbt have positively correlated Taxpbt shows significant and moderate degree of correlation with DPR. Table 4.12.1 reveals that, existing models explain about 97% variability in the dividend payout ratio. It means that 97% of total variations in the DPR occur due to all defined variables.It is clear from the table 4.12.2 that, B value of Earnings, Taxpbt shows negative association with DPR. Taxpbt has been found to have a negative but significant relationship with the DPR. Beta and EPS has been found to have a positive but Beta has significant relationship with DPR. B value of DER and CFO shows negatively insignificant relationship with DPR.
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YEAR : 2010-11 TABLE:4.13


BANKS SBI PNB HDFC IDBI BOI AXIS BOB ICICI FEDERAL UNION Y 26.03 18.27 22.72 24.23 17.58 19.78 17.76 35.23 28.78 23.44 X1 1.27 1.14 1.67 0.43 0.82 1.59 0.74 1.4 1.12 1.34 X2 116.07 139.94 84.4 16.76 45.54 82.54 108.33 44.73 34.32 39.71 X3 -0.0192 -0.016 -0.006 -0.04 -0.0244 -0.009 -0.0158 -0.02 -0.0171 -0.025 X4 -0.264 -0.2352 -0.245 -0.1516 -0.187 -0.2723 -0.2017 -0.1778 0.2205 -0.2029 X5 1659.05 1087.36 479.3 235.7 586.43 525 834.3 290.97 262.51 411.53 X6 34282.52 8045.67 -375.83 3515.88 5946.8 11425.07 11778.81 -6908.92 1268.5 4431.48

TABLE 4.14 CORRELATION BETWEEN INDEPENDENT AND DEPENDENT VARIABLE


DPR BET A RISK .247 .492 10 1 EPS EARNING TAXPBT DER CFO

DPR

Pearson Correlation Sig. (2-tailed) N BETA RISK Pearson Correlation Sig. (2-tailed) N EPS

-.437 .206 10 .260 .467 10 1

-.141 .698 10 .763* .010 10 .584 .076 10 1

.389 .266 10 -.217 .547 10 -.488 .152 10 -.134 .712 10 1

-.283 .428 10 -.059 .870 10 .813** .004 10 .219 .543 10 -.436 .208 10 1

-.296 .407 10 -.040 .914 10 .569 .086 10 .064 .861 10 -.337 .341 10 .881** .001 10 1

Pearson Correlation Sig. (2-tailed) N EARNING Pearson Correlation Sig. (2-tailed) N TAXPBT Pearson Correlation Sig. (2-tailed) N DER Pearson Correlation Sig. (2-tailed) N CFO Pearson Correlation Sig. (2-tailed) N *Correlation is significant at the 0.05 level (2 tailed). **Correlation is significant at the 0.01 level (2 tailed).

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TABLE 4.15.1 REGRESSION RESULTS OF EMPIRICAL MODEL Model Summary


Model 1 a. Adjusted R Square .783a .614 -.159 Predictors: (Constant), CFO, EARNING, DER, BETERISK, TAXPBT, EPS. R R Square Std. Error of The Estimate 6.02724

TABLE 4.15.2 EGRESSION COEFFICIENT AND THEIR SIGNIFICANCE Coefficientsa


Unstandardized Coefficients Model B 1 (Constant) BETA RISK EPS EARNING TAXPBT DER CFO 5.276 12.196 -.074 -351.247 17.566 .013 .000 Std. Error 26.326 10.586 .185 617.323 19.205 .020 .000 Beta .851 -.544 -.591 .449 1.009 -.652 .200 1.152 -.402 -.569 .915 .646 -.680 .854 .333 .714 .609 .428 .564 .546 Standardized Coefficients t Sig

a.

Dependent variable: DPR

INTERPRETATION

From correlation matrix in Table 4.14, it can be highlighted that there is no significant correlation of dividend payout ratio with Beta, EPS, Earnings, Taxpbt, DER, and CFO. It is clear from the table that EPS, earnings, DER and CFO have negative and have low degree of correlation but EPS, DER, and CFO has significant relationship with DPR. Beta risk, and Taxpbt have positively correlated with DPR but Taxpbt has significant correlation and shows moderate degree of correlation. Table 4.15.1 reveals that existing models explain about 61% variability in the dividend payout ratio. It means that 61% of total variations in the DPR occur due to all defined variables. It is clear from the table 4.15.2, that B value of earnings shows negative association with DPR. Earning has been found to have a negative but significant relationship with DPR. The value of Beta risk and Taxpbt shows positive association with DPR but Taxpbt have very significant relationship with DPR. B value of EPS, DER and CFO shows insignificant relationship with DPR.
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FINDINGS 1. In the year 2006-07, there is no significant correlation of dividend payout ratio with Beta, EPS, Earnings, Taxpbt, DER, and CFO. Beta risk, earnings, and DER have negative but low degree of correlation with DPR. EPS, Taxpbt and CFO have positively correlated with DPR but CFO has significant correlation and shows moderate degree of correlation. In regression model, 64% of total variations in the DPR occur due to all defined variables. B value of beta risk and EPS shows negative association with DPR. Beta has negative but significant relationship with DPR. The value of earnings and Taxpbt shows positive association with DPR but earnings have very significant relationship with DPR. B value of DER and CFO shows insignificant relationship with DPR. 2. In the year 2007-08, there is no significant correlation of dividend payout ratio with Beta, EPS, Earnings, Taxpbt, DER, and CFO. Beta risk, earnings, and CFO have negative but beta risk shows low degree of correlation with DPR whereas earning and CFO has significant relationship. EPS, Taxpbt and DER have positively correlated and show most significant and moderate degree of correlation with DPR. In regression model, 52% of total variations in the DPR occur due to all defined variables. B value of beta risk Earnings, Taxpbt shows negative association with DPR. Beta has been found to have a negative but significant relationship with DPR. The value of EPS shows positive and has significant relationship with DPR. B value of DER and CFO shows negatively insignificant relationship with DPR. 3. In the year 2008-09, there is significant correlation of dividend payout ratio with Beta. Also a weak correlation exists with EPS, Earnings, Taxpbt, DER,
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and CFO. EPS, earnings, DER, and CFO have negative and shows low degree of correlation with DPR but earning and CFO has significant relationship with DPR. Taxpbt have positively correlated with DPR and shows moderate degree of correlation. In regression model, 84% of total variations in the DPR occur due to all defined variables. B value of Earnings shows negative association with DPR. The value of Beta, EPS and Taxpbt shows positive relationship with DPR. B value of DER shows negatively insignificant relationship with DPR whereas CFO shows insignificant relationship with DPR. 4. In the year 2009-10, there is significant correlation of dividend payout ratio with Beta. Also a weak correlation exists with EPS, Earnings, Taxpbt, DER, and CFO. EPS, DER, and CFO have negative and shows low degree of correlation with DPR. Earnings, Taxpbt have positively correlated Taxpbt shows significant and moderate degree of correlation with DPR. In Regression model, 97% of total variations in the DPR occur due to all defined variables. B value of Earnings, Taxpbt shows negative association with DPR. Taxpbt has been found to have a negative but significant

relationship with the DPR. Beta and EPS has been found to have a positive but Beta has significant relationship with DPR. B value of DER and CFO shows negatively insignificant relationship with DPR. 5. In the year 2010-11, there is no significant correlation of dividend payout ratio with Beta, EPS, Earnings, Taxpbt, DER, and CFO. EPS, earnings, DER and CFO have negative and have low degree of correlation but EPS, DER, and CFO has significant relationship with DPR. Beta risk, and Taxpbt have positively correlated with DPR but Taxpbt has significant correlation and shows moderate degree of correlation. In Regression model, 61% of total
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variations in the DPR occur due to all defined variables. B value of earnings shows negative association with DPR. Earning has been found to have a negative but significant relationship with DPR. The value of Beta risk and Taxpbt shows positive association with DPR but Taxpbt have very significant relationship with DPR. B value of EPS, DER and CFO shows insignificant relationship with DPR.

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CONCLUSIONS It is often argued that the share prices of a bank tend to be reduced whenever there is a reduction in dividend payments. This may result in loss of reputation and goodwill. It may then be difficult to regain the market position and sustain the high share prices. Such a calculation on the part of the management of the banks may lead to a stable dividend payout ratio. There are certain irreducible administrative costs each time the bank floats new issues. A loss of reputation and reduction in share price may necessitate further floatation to maintain the equity base. A stable dividend payout ratio may be maintained to avoid these costs. Against this background, this study makes an attempt to identify the major determinants of dividend policy and their relative significance on Indian banks. As per dividend details of different bank : SBI has increased continuously their dividend payment from 140% to 300% from 2007-2011. PNB has also increased their dividend payment from 100% to 200% from 2006-2009. HDFC has also increased their dividend payment from 70% to 165% from 2007-2011. IDBI has also increased their dividend payment from 15% to 35% from 2007-2011. BANK OF INDIA has also increased their dividend payment from 15% to 70% from 2007-2011. AXIS BANK has also increased their dividend payment from 35% to 100% from 2007-2009.
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BANK OF BARODA has also increased their dividend payment from 30% to 165% from 2007-2011. ICICI has also increased their dividend payment from 100% to 140% from 2007-2011. UNION BANK has also increased their dividend payment from 20% to 80% from 2007-2011.

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