The paper identifies why there are more non-performing assets (NPAs) in the publicsectorbanks (PSBs) than those in the private sectorbanks (PVSBs). It evaluates and reviews the policies and practices of scheduled commercial banks (SCBs) in terms of NPA management. It studies the causes of NPAs, such as ownership structure, credit terms, conditions and covenants, nature of loans, kind of borrowers, bank management practices and business cycles. The study suggests that PSBs have adopted liberal and loose credit policies, and have concentrated loans on borrowers and sectors, i.e. , huge credit ex- posures to a few large corporate borrowers and to a few sectors. It also finds that PSBs are subject to weak and mild regulatory and supervisory impacts on their operations and functions as these are owned by the Government of In- dia. The managements of PSBs are indifferent to the success and performance of PSBs as there are no incentives or penalties for their performance and nonperformance. It is suggested that the PSBs should develop both the skills and practices towards credit and credit risk management. The government has to introduce flexible compensation package and incentives to the ma- nagements of PSBs linked to the performance so that it will improve profita- bility and reduce NPAs. The Reserve Bank of India’s regulation and supervi- sion should be ownership neutral.
Kunmar & Gulati, 2008 assessed the extent of technical efficiency in 27 publicsectorbanks operating in India and to provide strict ranking to these banks.Authors have used two popular data envelopment analysis (DEA) models, namely, CCR model and Andersen and Petersen’s super- efficiency model, were employed. The cross-section data for the financial year 2004/2005 were used for getting technical efficiency scores. It was found that only seven of the 27 banks are found to be efficient and thus, defined the efficient frontier; and technical efficiency scores range from 0.632 to 1, with an average of 0.885. Thus, Indian publicsectorbanks, on an average, waste the inputs to the tune of 11.5 percent. Andhra Bank has been observed to be the most efficient bank tagged closely by Corporation Bank. Further, the banks associated with SBI group turned out to be more efficient than the nationalized banks.
In Economic times, Crisil's chief analytical officer Pawan Agarwal said that Private sectorbanks with better loan books will be able to raise capital, which will be difficult for the state-run lenders. Even though there is an enabling provision to reduce government stake in PublicSectorBanks to 52 per cent, raising capital will be a tough task for them. 2 Mr. Reghuram Rajan, the Governor of Reserve Bank of India wrote in a column on the Project Syndicate website. Regarding NPA recovery he said, “We have to improve the efficiency of the recovery system, especially at a time of economic uncertainty like the present. Recovery should be focused on efficiency and fairness – presenting the value of underlying assets and jobs where possible, even while redeploying unviable assets to new uses and compensating fairly. 3 A healthy banking system is important for a strengthen the economy. The failure of the banking system may have an adverse impact on other sectors. It may be concluded that the publicsectorbanks should give more attention on controlling and preventing of NPA than Private sectorBanks.
Lending activities of PublicSectorBanks show a varying trend in the three areas. But in absolute term maximum of amount has been disbursed in urban area followed by semi-urban and rural areas. The statutory provision of lending to priority sector have compelled the Commercial Banks to advance loans in rural areas. Private SectorBanks have been able to advance a sizeable amount with in last eight years as depicted in the table 2. An increasing trend is observed in their lending activities. But on close scrutiny of the lending activities of some of the leading Private SectorBanks it was revealed that had not granted any loan for small & micro business. The advances were made mostly to big business houses, owners of health care centres, builders and technocrats.
Abstract: Banks are the strongest pillars of any economy. As their very nature of business like providing loans, Banks attract different types of default risks. Banks face credit risk, operational risk and market risk. In banks, Capital is crucial and vigorous to maintain the survival of bank. Capital Adequacy indicates that banks have adequate capital to maintain all of its liabilities and risks. So, capital adequacy requires in banks to build investors’ confidence and prevent bank from bankruptcy. In this present paper researcher analysed CRAR of selected PublicSectorBanks, Private SectorBanks and Foreign Banks in India with an objective to compare within selected banks that which bank is highly adequate in terms of their capital management. The time period of the study is from 2008 to 2016. For objective of this study; tool and techniques are CAMELs criteria, rank and correlation. Banks are selected on the basis of market capitalization rate. This paper has resulted that ICICI bank is highly consistent in maintenance of CRAR.
In this section, the input-oriented efficiency scores obtained from the CCR and BCC models have been discussed. It is significant to note that input-oriented efficiency measures address the question: ‘By how much can input quantities be proportionally reduced without altering the output quantities produced?’ Table 5 presents OTE scores of 27 PSBs, along with the magnitude of overall technical inefficiency (OTIE) 6 . The results indicate that Indian publicsector banking industry has been characterized with large asymmetry between banks as regards their OTE (in percentage terms) that ranges between 63.2 percent and 100 percent. The average of efficiency scores turned out to be 0.885 for 27 PSBs (see Table 6 for descriptive statistics of OTE scores). This suggests that an average PSB, if producing its outputs on the efficient frontier instead of its current (virtual) location, would need only 88.5 percent of the inputs currently being used. The connotation of this finding is that the magnitude of OTIE in Indian publicsector banking industry is to the tune of 11.5 percent. This suggests that, by adopting best practice technology, PSBs can, on an average, reduce their inputs of physical capital, loanable funds and labour by at least 11.5 percent and still produce the same level of outputs. However, the potential reduction in inputs from adopting best practices varies from bank to bank. Alternatively, PSBs have the scope of producing 1.13 times (i.e., 1/0.885) as much as outputs from the same level of inputs.
Today banks have become a part and parcel of Kotak Bank's life. There was a time when dwellers of the city alone could enjoy their services. Now banks offer access to even a common man and their activities extend to areas hitherto untouched. Banks cater to the needs of agriculturalists, industrialists, traders and to all the other sections of the society. In modern age, the banking constitutes the fundamental basis of economic growth. Thus, they accelerate the economic growth of a country and steer the wheels of the economy towards its goals of “self reliance in all fields”. It naturally arouses Kotak Bank's interest in knowing more about the „Bank‟ and the various men and the activities connected with it.
Out of the 16 years data it is observed that the publicsectorbanks have managed the NPAs in a manner over the previous year from 201-02 to 2006-07. Foreign bank is concerned, it has faced the swift ups and downs during the mentioned period and it faced a highest NPAs growth rate of 55.63 percent in the year 2009-10. Private sectorbanks are concerned, its growth rate over the previous year having gradual ups and downs and the highest growth rate of NPAs has been recorded in the year 2015-16 as 37.58 percent. From the Mann Whitney U test it is understand that, there is a difference in the growth rate of the NPAs of NBs and SBI and its group, publicsector and FBs and old private sector and NPSBs. Through the Kruskal Wallis test it is understand that the significance difference exist in the growth of NPAs of the NBs, SBI and its group, PSBs, FBs, OPSBs and NPSBs. With the help of both statistical tools, it is proved that all the banks have the problem of NPAs irrespective of their size and operation. NPAs mean allocation of funds in terms of bad asset, which arises due to the selection Table 3. Growth rate of NPAs of OPSBs and NPSBs
ndian banking is the lifeline of the nation and its people. Banking has helped in developing the vital sectors of the economy and usher in a new dawn of progress on the Indian horizon. The sector has translated the hopes and aspirations of millions of people into reality. But to do so it has to control miles and miles of difficult terrain, suffer the indignities of foreign rule and the pangs of partition. Today, Indian banks can confidently compete with modern banks of the world. As the banking institutions expand and become increasingly complex under the impact of deregulation, innovation and technological up gradation, it is crucial to maintain balance between efficiency and stability. During the last 30 years since nationalization tremendous changes have taken in the financial markets as well as in the banking industry due to financial sector reforms. The banks have shed their traditional functions and have been innovating, improving and coming out with new types of services to cater to the emerging needs of their customers. Banks have been given greater freedom to frame their own policies. Rapid advancement of technology has contributed to significant reduction in transaction costs, facilitated greater diversification of portfolio and improvements in credit delivery of banks. During the past one decade, one of the sectors which underwent visible sea-change through innovative strategies is undoubtedly the banking sector. The sector has been growing at a fast pace in India and is challenged with several aspects like new regulations from time to time, changing customer needs and perceptions, changing technology and changing operations. Technology has been playing a crucial role in the tremendous improvement of banking services and operations. Banks appear to be on the path of achieving sustainability and a long term survival because of innovation. Technological changes relating to telecommunications and data processing have spurred financial innovations that have altered bank products and services and production processes.
Indian financial sector has observed various modifications in the policies and prudential norms to raise the banking standards in India to the international strength. Various financial reforms have taken place in 1991 which improved flexibility and operational autonomy in the banking sector. In 1992, on the recommendation of Narasimham committee, a series of developments were instigated. In 1993-94, the approval was accepted for the entry of new private banks and foreign banks in Indian banking sector. After the post reform era, the operations of Foreign Banks (FBs) received a considerable boost. The Reserve Bank of India liberalized its policy for foreign banks implying new opportunities for growth and different representations in India. The present study makes an attempt to measure and compare the efficiency scores of PublicSectorBanks (PSBs), Private Sectorbanks and FBs operating in India during 2008-2013 using frontier based non-parametric technique, i.e., DEA, the result demonstrates that the efficiency of FBs has shown continuous improvement in comparison with PSBs and Private Banks following the route of deregulation with modest drifts.
Ashok Khurana and Mandeep Singh (2010) stated that issuing of mounted NPAs is a challenge to publicsectorbanks. The study found that the asset wise classification of publicsectorbanks is in right direction and there is significant variation in the recovery of NPAs in the different sector. The research observed that PSBs should not be loaded with the twin object of profitability and social well fair.
Banks are basically service-rendering institutions. The existence and success of banks depend on their ability to meet the various needs and wants of the customers. Private sectorbanks play an important role in development of Indian economy. After liberalization the banking industry under went major changes. The economic reforms totally have changed the banking sector. RBI permitted new banks to be started in the private sector as per the recommendation of Narashiman committee. The Indian banking industry was dominated by publicsectorbanks. But now the situations have changed, new generation banks with used of technology and professional management has gained a reasonable position in the banking industry. The main focus of this research is to analyse the effect of NPA on Indian Private Sectorbanks.
From the tables 9 and 10 SERVQUAL dimension, Tangibility (Modern looking equipment, physical facilities appearance communication material) has χ2cal 1.0561 for publicsectorbanks and χ2cal 0. 7449 for private sectorbanks respectively. Both the values are much lower than χ2tab 12.592 which shows that for tangibility dimension the expected and perceived scores are nearly same at 5% level of significance. And the same trends are observed for other dimensions like reliability (Timely service, error free records, ability to perform the promised service dependably and accurately), Responsiveness (Willingness to help and provide prompt service), Assurance (Knowledge and courtesy of employees and their ability to convey trust and confidence) and Empathy (The firm provides individual attention, care, understanding specific needs and maintain long term customer relationships). SERVQUAL SCORE of tangibility suggests that public
At the present juncture, banking in India is largely dependent on technology. Now, banks are using various other channels like, Automatic Teller Machine (ATM), internet, mobile, etc., to provide banking services. Banking in India is changing from traditional branch banking to technology based banking. Currently, it is evident that there are two distinct customer groups - one is who like to have face-to-face interaction and other who does banking using technology. The primary challenge is to give consistent service to customers irrespective of the kind of channel they choose to use. Information technology poses both opportunities and challenges. Even with ATM machines and Internet Banking, many consumers still prefer the personal touch of their neighborhood branch bank. Technology has made it possible to deliver services throughout the branch bank network, providing instant updates to checking accounts and rapid movement of money for stock transfers. Publicsectorbanks provide various value added services to the customers. The awareness level of customers is increasing day by day. Their expectations are also increasing for choice of choosing the product and services. The Publicsectorbanks offering Value Added Services like bill payments, transfer of money, enquiring account balances, buying and selling of financial instruments such as securities, credit cards, mutual funds, ATM cum debit card, insurance policy, demat accounts and so on. Creation of all those facilities involves very huge investment. So it’s most important to increase the usage of Value Added Services among the customers to improve the operational efficiency and get maximum benefit from the investment made in these facilities.
The forgoing analysis reveals that thought there is phenomenal development in various banking sectors yet the public sectors in particular is still lagging behind major thrust areas such as asset quality, business per employee capital adequacy requirements, and profitability etc. Some suggestions and recommendations for improvement in performance of publicsectorbanks are given below. Higher operating cost is a major obstacle affecting the profitability of publicsectorbanks. . PublicSectorBanks are lagging behind in Human Resource Development practices as compared to foreign and private sectorbanks. PublicSectorBanks should devise continuous and compulsory training and development program in their organizations to inculcate professional work culture, and interpersonal skills. Efforts should also be made for making for making the staff technical. Human resource development is a critical factor which can play major role in enhancing business per employee and profit per employee. Assets quality reflects the soundness of financial institutions. PublicSectorBanks should disburse their funds in quality assets to reduce NPA level. As the risk profile of banks lending is adequate attention to quality of lending so that credit expansion could be on sustainable basis building upon higher profitability while ensuring financial stability. Information technologies have become a driver along with business enabler. PublicSectorBanks required considerable investment on computerization of branch networks and their operations to get quick and greater access to information.. Strong internal control and supervision mechanism can play an important role in ensuing quality of assets and reduction in NPA lever. For financial stability, an efficient and sound risk management system is a pre-requisite..
In India, the working environment of a bank is not homogeneous. The operating expenses of private and foreign sectorbanks are more comparing to publicsectorbanks. The publicsectorbanks will focus urban and rural areas equally, but the functioning environment of private and foreign sectorbanks is almost urban areas. Evaluation of Indian banking efficiency is quite tricky because of the nature of the working environments of the banks. There were a number of studies on banking efficiency using DEA and stochastic frontier analysis models. . Most of the studies in banking efficiency
Despite, mass acceptance of the concept of CSR reporting by banking sector around the globe, Indian banks are not responding in the expected manner. According to some critics, Indian financial institutions are concerned to the exclusion of all other considerations about the ecology of their balance- sheets and, therefore, focused on ever-greening their assets. From the results of this study it can be concluded that CSR activities are not more than 10 per year except few banks and among all activities focus on Community welfare is highest, followed by employee welfare and financial literacy where environment protection activities are negligible or just 1 or 2 per year. Except PNB, SBI and Syndicate Bank from publicsector and ICICI & HDFC from Private sector others are not doing well in CSR practices. But collectively private sectorbanks are performing better than the publicsectorbanks in community development, employee welfare and environment protection but as far as financial literacy is concerned, it is publicsectorbanks which are performing better through credit counselling of masses in rural areas by opening financial literacy and Credit Counselling Centres. There is negative relationship between CSR variables and ROA & ROE but in case of ROA community and employee welfare have positive impact. There are again mixed results because in case of ROA some CSR variables have significant impact while in case of ROE no variable witness significant impact. Hence it can be concluded that financial performance may get affected by CSR to some extent but on the other side it can be drawn from the results that if the banks start following CSR practice to the desired extent then these may have significant impact on their financial performance.
) Pointed Out There Is A Significance Difference In The Customers’ Perception In Internet Banking Services Provided By The Public And Private SectorBanks. Private SectorBanks Are Providing Better Service Quality Of Internet Banking That The PublicSectorBanks. Haq And Muhammad (2012) Compared Public And Private SectorBanks Of Pakistan By Evaluating Their Customer Satisfaction. The Research Shows That Customer Satisfaction Varies From Person To Person. Lau Et. Al. (2013) Identified The Interrelationships Between Service Quality, Customer Satisfaction And Customer Loyalty In The Retail Banking Sector In Hong Kong Based On SERVQUAL Model. The Results Indicate That The Five SERVQUAL Dimensions Have A Positive Influence On Customer Satisfaction. The Study Suggests That SERVQUAL Is A Suitable Instrument For Measuring Service Quality In The Retail Banking Sectors. Nagabhushanam (2013) Identified The Degree Of Importance Attached To Various Dimensions Of Service Quality By The Customers; And Found That Foreign Banks Are Rated High By The Customers In All The Service Quality Dimensions. PublicSectorBanks Have Been Rated Second In All Parameters Except That Of ‘Responsiveness’ And Private Banks Stands The Last In All The Parameters. Many Studies Have Shown That Service Quality Is The Key Determinant Of Customer Satisfaction. These Frontages The Pertinent Questions Relating To Whether The Banks Are Offering The Services As Per Customer’s Requirements, Whether Customers Are Satisfied With These Services. Against This Backdrop, The Present Study Is An Attempt To Examine Empirically The Quality Of Services Delivered By Commercial Banks And The Extent Of Impact On Customer Satisfaction.
Customers expectations perceptions and service gap of private sectorbanks is better than that of publicsectorbanks in case of all the service dimensions expect the dimensions of assurance in which publicsectorbanks exceeds private sectorbanks. The more expectation in private sectorbanks is may be due to greater interest in transaction which them than with publicsectorbanks. Customer’s expectations reveal that they believe better awarencess can be arrived with private sectorbanks than with publicsectorbanks. As the service gap regarding the dimensions of tangibles, responsiveness and empathy were comparatively lower than publicsectorbanks they provide greater awareness to their customers.
2) Recapitalization need will come down: The requirement in terms of recapitalization for government of India is also increasing. In the year 2014 the government of India announced that they will provide a recapitalization of around 70,000 cr but in a span of 5 years that is through budgetary allocation. In the first two years they allocated 25,000 cr and in the next two years they allocated 10,000 cr . So basically government of India said they will provide recapitalization till 2019. But over a period of time the government of India is realised that this amount of 70,000 cr is not sufficient for the banking sector. As a result of this last year itself the government of India has extended this particular idea of recapitalization from 70,000 cr to more than 2.1 lakh cr. 3) Regulatory burden will come down: It is becoming burned for RBI to regulate all the participants in the banking sector. On one side RBI has to regulate differentiated banks, RBI has to regulate regional rural banks, RBI has to regulate scheduled commercial banks which are private sectorbanks as well as publicsectorbanks. Since the number of banking units have kept on increasing the burden to regulate also has increased on the shoulders of RBI. So What if the number of banks under the publicsectorbanks are reduced the burden on the shoulders of RBI will also come down. So regulatory burden on RBI also will come down.