Embed Size (px)
Citation preview
46
CHAPTER 3: PROFILE OF THE SELECTED
BANKS UNDER STUDY
47
CHAPTER 3: PROFILE OF SOME SELECT BANKS
(ORIGIN, STRUCTURE AND ACHIEVEMENTS)
3.1 ORIGIN OF BANKS UNDER STUDY:
Looking into the dynamism of the Banking industry, indeed selection of the banks for
analysis was not an easy task. The selection of banks was made on the criteria of age of the
banks, reach, and adaptability to changes etc. The public Sector Banks have relative
strengths in the following areas as compared to private sector banks:
A) Growth in fee based Income
B) Less risk averse during credit crisis.
c) Low cost of funds
D) Sharp focus on improving asset Quality
E) Lending across sectors as against private sectors .
On the other hand, private sectors enjoy more autonomy, have access to better technology,
have a relatively better asset quality etc. A lot of work went into for selection of the banks
based on their business growth, number of branches, expansion, and various other
performance parameters. The Banks that were taken for the study are:
Public Sector Banks (on the basis of Alphabetical Order)
Bank of Baroda
Bank of India
Central Bank of India
Punjab National Bank
State Bank of India
Private Sector Banks (In Alphabetical order)
Axis Bank
HDFC
ICICI
Indus Ind Bank
The Federal Bank
48
3.2 PROFILE OF BANK OF BARODA:
3.2.1 Introduction: Bank of Baroda is the third largest public sector Bank in India which was
incorporated with an initial investment of Rs.10 lakhs on 20th July, 1908 at Baroda under
the companies’ act of 1987. The initiator of Bank of Baroda, Maharaja Sayajirao Gaekwad
with his outlook approach saw “a Bank of this kind will provide benefits for lending,
transmission and deposit of money and will play a major role in developing agriculture,
industries etc.” Through these years Bank of Baroda has been converted into a reliable
financial organization. A total of 76 Bank of Baroda overseas branches are available
including 3 representative offices across 25 countries. It has been a long and eventful
journey of almost a century across 26 countries. Starting in 1908 from a small building in
Baroda to its new hi-rise and hi-tech Baroda Corporate Centre in Mumbai is a saga of vision,
enterprise, financial prudence and corporate governance. It is a story scripted in corporate
wisdom and social pride. It is a story crafted in private capital, princely patronage and state
ownership. It is a story of ordinary bankers and their extraordinary contribution in the
ascent of Bank of Baroda to the formidable heights of corporate glory. It is a story that
needs to be shared with all those millions of people - customers, stakeholders, employees &
the public at large - who in ample measure, have contributed to the making of an
institution. The mission statement is “To be a top ranking National Bank of international
Standards committed to augmenting stake holders value through concern, care and
competence.” The new logo is a unique representation of a universal symbol. It comprises
dual ‘B’ letterforms that hold the rays of the rising sun.
Shri. M. D. Mallya, Chairman & Managing Director and Shri Rajiv Kumar Bakshi, Executive
Director are managing Bank of Baroda at present and the Bank has managed to notch up to
the 4th position among the best banks in the country .According to BT_ KPMG Study on
banks (Business India-The best Banks) in the year 2009, BOB has graduated from the
13th position to the 4th position and has the following ranks in various parameters:
49
Growth in Loans-3rd: Absolute increase in market share 5th: balance sheet size-3rd; Net
NPA / Nat advances- 5th. Absolute increase in ROA (return on assets)- 6th. BOB has got
ISO 9001:2000 certifications for 15 of its branches. Bank of Baroda has taken many steps to
facilitate customer service and is now providing services like personal Banking, corporate
Banking, and Business Banking, international Banking, treasury and rural Banking. Bank of
Baroda offers home loans, educational loans etc.Net banking, phone Banking, online
Banking and any branch Banking are also available in Bank of Baroda. The banks calibrated
approach towards balance sheet expansion with a keen eye on profitability and asset quality
garnered gains for this bank.
3.2.2 Key attributes: (Technological advancements, Growth, other financial parameters
etc)
3.2.2.1 It enjoys a strong domestic presence with 3106 branches all across the country and
has an Uninterrupted Record in Profit-making and Dividend Payment as on 30 June 2010. All
domestic branches are on Core Banking systems .As on 30 June, 2010, Bank of Baroda had
1,372 ATMs – 863 Onsite ATMs & 509 Offsite ATMs. An Integrated Global Treasury Solution
is implemented in UK, UAE, Bahamas, Bahrain, and Hong Kong & recently in India. Bank has
created an Online Centralized-Database of its employees, which enables speedy decision-
making, promotions, selection, etc. through automated processes. Payment Messaging
Solution has been implemented in 16 overseas territories & all B category branches in India
All Back-Office functions have now been effectively centralized in Bank of Baroda.
3.2.2.2 Growth and other financials: (TABLE 3.1) Pattern of financing (year 2010)
Sector % share in Gross Domestic Credit
Agriculture 15.3%
Retail 18.1%
SME 15.7%
Trading plus Other PS 15.2%
Wholesale 35.7%
Total 100.0%
50
` TABLE 3.2 –FINANCIALS BOB
ITEMS
2001-
02
2002-
03
2003-
04
2004-
05
2005-
06
2006-
07
2007-
08
2008-
09
2009-
10
No of offices 2718 2798 2770 2772 2777 2812 2845 2916 3088
No of employees 38899 40313 39803 38851 38774 38604 37260 36440 38960
Business/
employee(lakhs) 222.76 237.67 252.51 310.37 396.00 555.00 710.00 914.00 981.00
profit/employee 1.4 1.92 2.43 1.71 2.13 2.73 3.94 6.05 8.00
Capital, reserves
and surplus (Cr) 3827 4387 5131 5628 7844 8650 11044 12880 15106
Deposits(Cr) 61804 66441 72967 81333 93662 124916 152034 192397 241044
Investments(Cr) 23833 30179 38019 37074 35114 34944 43870 52446 61182
Advances(Cr) 33663 35348 35601 43400 59912 83621 106701 143251 175035
Interest Income 5956 6098 6147 6431 7050 9004 11813 15092 16698
Other Income 993 1262 1719 1305 1127 1382 2051 2758 2806
Interest expense 4076 3994 3575 3452 3875 5427 7902 9968 10759
operating expense 1563 1648 1805 1982 2385 2544 3034 3576 3811
operating profit
(witht
contngencies) 1310 1718 2486 2302 1917.00 2415 2928 4306 4934
Cost of Funds (%) 6.68 5.93 4.85 4.18 4.03 4.58 5.33 5.25 4.38
Return on
Advances (%) 3.34 2.95 3.05 3.17 3.28 3.69 3.51 3.71 3.50
Wages as % of
Total expenses 18.73 20 23.28 25.41 24.34 20.63 17.41 17.34 16.14
Return on assets 0.81 1.05 1.20 0.75 0.79 0.80 0.89 1.09 1.21
CRAR 11.32 12.65 13.91 12.61 13.65 11.80 12.94 14.05 14.36
Net NPA ratio (on
Net advances) 4.98 3.72 2.99 1.45 0.87 0.60 0.47 0.31 0.34
51
Analysis Of financials:
No of branches increased by 13% during the years 2001-10
Only 61 net employees have been added, thus contributing to less than .1% increase
in employment. As observed from the table, there has been a sudden increase in the
year 2002(from 38899 to 40313) and from then on, it has shown a decreasing trend
consistently indicating voluntary retirements, restrictions on entry etc. This trend
continued till 2008-09 and again in the year 09-10, there has been a spurt in its
enrolments.
Due to BOB’s consistent policy of employment, there has been a tremendous
increase in business/ employee. The turnaround in business development over the
decade has been a phenomenal 340%
Because of significant development in business and reduction in the number of
employees , the profit/employee has also shown a considerable increment of 6.6
lakhs , but for the year 04-05, when the profit / employee fell to a mere 1.71 lakhs.
This can be attributed to sudden dip in other income to the extent of 410 crores, and
an increase in wages (the highest percent between 2001-10.)
BOB’s Net worth 01-10 shows that they have managed to raise and productively
employ funds to the tune of 11385 crores.
There is also an increase of deposits to the tune of 179240 cores (an increase of
around 290%) during the decade.
Investments have shown an increase to the tune of 156%.
Though the operating profits has shown a remarkable increase, the pace of increase
has dwindled from 31.01% (from 01-02 to 02-03) to 15.48% (08-09 to 09-10) - almost
a 50% reduction in the pace. This can be attributed to the intense competition and
growth.
BOB has managed to have a stable returns all through the period at an average of 3%
A look at the table reveals that the bank has managed to have a Capital Risk Adjusted
rate ( under Basel 1 and Basel 2 ) within the limit specified (9% under Basel 2)
The bank has followed the prudential norms on NPAs by creating provisions and has
effectively reduced its NPA s from 4.98% to .34% in these years.
All these factors have effectively helped Bob to rise from its 13th position to 4th position in
the public Sector.
52
Diag 3.1: (Comparative growth in advances)
(BOB Annual Reports 2010)
Return on Average Assets at 1.19% [1.19% in Q1, FY10]
Earnings per Share (annualized) at Rs 94.36 [Rs 75.28 in Q1, FY10]
Book Value per Share at Rs 402.08 [Rs 331.26 in Q1, FY10]
Return on Equity (ROE) at 23.46% [22.72% in Q1, FY10]
Cost-Income Ratio declined from 47.06% to 38.27% (Y-o-Y).
Gross NPA ratio declined from 1.44% to 1.41% (Y-o-Y).
Net NPA ratio increased from 0.27% to 0.39 %( Y-o-Y).
NPA Coverage at the healthy level of 73.01% (without write-offs) and at 85.65%
(with write-offs)
The Bank’s CRAR as on 30th June, 2009 stood at 13.25%; of which Tier1 was at 8.16%
and Tier 2 at 5.09%.: The total business of Bank of Baroda has increased to Rs
3,36,383 crore reflecting a growth of 30.01% with respect to the previous year. Total
assets has increased to Rs 227406.73crores registering a growth of 36.40% over the
previous year with a net profit Rs. 2227.20crores
37.5
27.5
42.1
27.730.7
0.0
10.0
20.0
30.0
40.0
50.0
Jun'06 Jun'07 Jun'08 Jun'09 Jun'10
Growth: Total Advances (%)
53
3.3: PROFILE OF BANK OF INDIA
3.3.1 Introduction: Bank of India originated at Mumbai on 7th September, 1906 due to the
efforts of a team of eminent industrialists joining with 50 employees and by investing Rs. 50
lakhs initially. Till July 1969 Bank of India was a private Bank and then it was nationalized
along with 13 other Banks. Shri Alok Kumar Mishra, Chairman and Managing Director and
Shri B. A. Prabhakar , Executive Director are steering Bank Of India with an aim to provide
cost effective developmental Banking for small business, mass market and rural markets.
3.3.2 Beginning with one office in Mumbai, with a paid-up capital of Rs.50 lakh and 50
employees, the Bank has made a rapid growth over the years and blossomed into a mighty
institution with a strong national presence and sizable international operations. In business
volume, the Bank occupies a premier position among the nationalised banks.
3.3.3 Key attributes (technological advancements, growth, financials etc): Bank has 3101
branches in India spread over all states/ union territories including 141 specialized branches.
These branches are controlled through 48 Zonal Offices. There are 29 branches/ offices
(including three representative offices) abroad. The Bank came out with its maiden public
issue in 1997 and follow on Qualified Institutions Placement in February 2008. .Total
number of shareholders as on 30/09/2009 is 2, 15,790.
While firmly adhering to a policy of prudence and caution, the Bank has been in the
forefront of introducing various innovative services and systems. Business has been
conducted with the successful blend of traditional values and ethics and the most modern
infrastructure.
The Bank has many firsts to its credit. It has been the first among the nationalised banks
to establish a fully computerized branch and ATM facility at the Mahalaxmi Branch at
Mumbai way back in 1989. The Bank is also a Founder Member of SWIFT in India. It
pioneered the introduction of the Health Code System in 1982, for evaluating/ rating its
credit portfolio. Bank of India was the first Indian Bank to open a branch outside the
country, at London, in 1946, and also the first to open a branch in Europe, Paris in 1974.
The Bank has sizable presence abroad, with a network of 29 branches (including five
representative offices) at key banking and financial centres viz. London, Newyork, Paris,
54
Tokyo, Hong-Kong and Singapore.
The Bank's association with the capital market goes back to 1921 when it entered into an
agreement with the Bombay Stock Exchange (BSE) to manage the BSE Clearing House. It is
an association that has blossomed into a joint venture with BSE, called the BOI Shareholding
Ltd. to extend depository services to the stock broking community. The international
business accounts for around 17.82% of Bank's total business
Bank of India has coupled with IDFC mutual fund to distribute mutual fund products. Net
value of Bank of India between 2008 and 2009 has risen to Rs.11, 143.58crores. The asset of
Bank of India till March 2009 was Rs. 22550.17crores with a net profit of Rs. 3,007crores,
recording 49.68% growth over previous year.
Financials of BOI: In the year 2009, the bank slipped a notch from its NUMERO UNO
position (according to the first BT-KPMG study) and had a 57% drop in its profits due to its
loss of asset quality. This position worsened in 2010.
(Diagram 3.2- Three year analysis of profits of BOI)
(Data Source: Annual report of BOI-09)
55
Table 3.3 - BOI FINANCIALS
ITEMS
2001-
02
2002-
03
2003-
04
2004-
05
2005-
06
2006-
07
2007-
08
2008-
09
2009-
10
No of offices 2643 2654 2653 2668 2687 2760 2846 3076 3165
No of employees 43420 43141 42574 42220 42206 41511 40557 40155 39202
Business/
employee(lakhs) 218.74 242.97 266.72 320.00 381.00 498.00 652.00 833.00 1011.00
profit/employee 1.16 1.97 2.35 0.80 1.66 2.71 4.95 7.49 4.39
Capital/reserves(Cr) 2845 3541 4010 4465 4984 5895 10589 13495 14230
Deposits(Crores) 59589 64098 71482 78821 93932 119882 150012 189708 229762
Investments(Cr) 22084 24435 27163 28203 31782 35493 41803 52607 67080
Advances(Cr) 38311 42633 45856 56013 65174 85116 113476 142909 168491
Interest Income(cr) 5594 5928 5796 6032 7029 8936 12355 16347 17878
Other Income(Cr) 1103 1642 1792 1156 1184 1563 2117 3052 2617
Interest
expense(Cr) 3769 3892 3594 3795 4397 5496 8126 10848 12122
Operating expense 1531 1649 1752 1932 2115 2608 2645 3094 3668
Operating profit 1397 2029 2242 1461 1701 2395 3701 5457 4705
Cost of funds (%) 6.23 5.68 4.73 4.29 4.18 4.55 5.37 5.69 4.00
Return on advances 3.16 3.11 2.75 2.81 3.40 3.96 3.97 4.09 3.45
Wages as % of Total
expenses 20.51 20.32 21.93 22.06 20.40 19.92 15.38 13.90 14.54
Return on assets
(%) 0.78 1.16 1.25 0.38 0.68 0.88 1.25 1.49 0.7
CRAR 10.68 12.02 13.01 11.52 10.75 11.75 12.04 13.01 12.94
Net NPA /net
advances 6.02 5.37 4.50 2.77 1.49 0.95 0.52 0.44 1.31
56
Analysis of BOI FINANCIALS:
There is a 20% penetration in the market in the past decade. This is high when
compared to Bank of Baroda, which has posted only a 13% increase for the same
period.
Bank of India has reduced its employees over the years. It only goes to show that the
recruitment has been very minimal in place of candidates who have applied for VRS.
The dip has been 9.79 % when compared to the previous years.
There has been a significant improvement in the productivity/employee as there is
an increase of around 36.2% over the years. This means that the bank has managed
to productively employ its human resources.
Due to consistent reduction in the number of employees, the profit /employee has
increased by 3.23 lakhs, but for the year 04-05, when the profit /employee fell to a
mere .80 lakhs. This is attributed to a sudden dip in other income to the extent of
636 crores, and an increase in wages, the highest in 2001-10.
BOB’s net worth from 2001-10 shows that they have managed to raise and
productively employ funds to the tune of a whopping 11385 crores.
There is also an increase in the deposits to the tune of 197240 crores (increase of
285%) during the decade. From a mere 59,589 crores, it has increased to 229762
crores
There is also an increase of an absolute increase of 44096 crores which is nearly an
increase of nearly 200% over the 10 year period. During the same period, BOB has
managed to employ only to the tune of 156%.
As mentioned earlier, the other income and operating profits also saw a dip in the
years 2004-06
Operating profits saw an increase of 45% in the year 02-03. However in the last year,
this pace (the year on year growth) dropped to 13.7% showing that with the passage
of time, the pace of earning profit is also going down.
The table reveals that the bank is earning a stable return on advances averaging
around 3.5%
The CRAR (Capital risk adjusted rate) is as per the mandatory norm of RBI.
57
3.4 PROFILE OF CENTRAL BANK OF INDIA:
Central Bank of India is one of the oldest commercial banks of India, and reportedly is the
first truly Indian bank which was totally owned and established by Indians without any
foreign help in the year 1906.
Sir Sorabji Pockhanwala was the founder of the bank, who had always dreamt of
establishing an Indian bank. He was so happy and excited about the project that he
reportedly termed the Central Bank of India as “property of the nation and the country’s
asset”. The first Chairman of the bank was Sir Pherozesha Mehta, a yet another Indian
enthusiast. In the year 1969 the bank was nationalized by the Government of India. The new
symbol of the bank projects its true character and present day profile. The Blue colour in the
signage denotes peace and stability. The bottom strip in red stands for vibrant thought and
positive action. Together, they aptly bring forth the forward looking approach and new-age
outlook of one of India's most historic banks. The new colours of the signage together with
the existing logo is an apt depiction of carrying forward the old values yet presenting the
image of a dynamic and contemporary organization.
3.4.2: Key Attributes (Advancements, achievements, financials)
Central Bank of India has a strong presence in the country with over 3000 branches and
more than 250 extension counters nationwide as of April 2009. The Bank has made a rapid
growth over the years and blossomed into a mighty institution with a strong national
presence and sizable international operations. In business volume, the Bank occupies a
premier position among the nationalised banks.
The headquarters of the bank are located in Mumbai, the financial capital of India, along
with 16 other zonal offices established in different cities of the nation, including Agra,
Ahmedabad, Bhopal, Chandigarh, Chennai, Guwahati, Hyderabad, Kolkata, Lucknow,
Mumbai Metro Zonal Office, Muzaffarpur, Nagpur, New Delhi, Patna, Pune and Raipur.
58
During the past 99 years of history the Bank has weathered many storms and faced many
challenges. The Bank could successfully transform every threat into business opportunity
and excelled over its peers in the Banking industry. A number of innovative and unique
banking activities have been launched by Central Bank of India and a brief mention of some
of its pioneering services are as under:
1921 Introduction to the Home Savings Safe Deposit Scheme to build saving/thrift habits
in all sections of the society.
1924 An Exclusive Ladies Department to cater to the Bank's women clientele.
1926 Safe Deposit Locker facility and Rupee Travellers’ Cheques.
1929 Setting up of the Executor and Trustee Department.
1932 Deposit Insurance Benefit Scheme.
1962 Recurring Deposit Scheme.
1976 The Merchant Banking Cell was established.
1980 Central card, the credit card of the Bank was introduced.
1986 'Platinum Jubilee Money Back Deposit Scheme' was launched.
1989 The housing subsidiary Cent Bank Home Finance Ltd. was started with its
headquarters at Bhopal in Madhya Pradesh.
1994 Quick Cheque Collection Service (QCC) & Express Service was set up to enable
speedy collection of outstation cheques.
Further in line with the guidelines from Reserve Bank of India and also the Government of
India, Central Bank has been playing an increasingly active role in promoting the key thrust
areas of agriculture, small scale industries as also medium and large industries. The Bank
also introduced a number of Self Employment Schemes to promote employment among the
educated youth.
59
Among the Public Sector Banks, Central Bank of India can be truly described as an All India
Bank, due to distribution of its large network in 27 out of 29 States and also in 3 out of 7
Union Territories in India. Central Bank of India holds a very prominent place among the
Public Sector Banks on account of its network of 3656 branches and 178 extension counters
at various centers throughout the length and breadth of the country.
Central Bank of India claims to be the first bank to be conferred with the National Award for
Excellence in Micro and Small Enterprises (MSE) Lending for the year 2007-08. The bank
entered into a partnership with Kotak Mahindra Assets Management Company in December
2008, under which all the Kotak Mutual Fund products will be made available through
Central Bank of India branches
Products and Services
Central Bank of India offers a host of banking services to its customers including Regular
Banking Services such as Deposits and Loans, International Banking Services, and other
services including Central card Electronic Cards, Debit Cards, No-Frills Savings Deposit
Account under the name Cent Bachat Khata, and Finance options for domestic and
international tours under the name Cent Safar.
Financials of CBI in the following page:
60
(TABLE 3.4 – Financials of CBI)
ITEMS 2001-
02 2002-
03 2003-
04 2004-
05 2005-
06 2006-
07 2007-
08 2008-
09 2009-
10
No of offices 3200 3201 3225 3239 3254 3321 3435 3644 3702
No of employees 39631 39330 38933 38303 40124 39055 37488 32804 32140
Business/ employee(lakhs) 148.77 167.85 181.51 206.89 240.46 303.85 400.99 560.28 711.76
profit/employee 0.40 0.77 1.58 0.93 0.68 1.35 1.56 1.71 3.3
Capital/reserves and surplus(Cr) 1997 2424 2974 3265 3442 3790 5943 6412 7692
Deposits(Cr) 47137 51165 55909 60752 66483 82776 110320 131272 162107
Investments(Cr) 21100 26045 31405 30835 28639 27742 31455 43061 50563
Advances(Cr) 21288 22252 22804 27277 37483 51795 72997 85483 105383
Interest Income 4657 5073 5064 5205 5386 6234 7884 10455 12064
Other Income(Cr) 601 554 964 920 531 476 902 1070 1735
Interest expense(Cr) 3123 3176 2942 2830 3006 3760 5772 8227 9519
operating expense(Cr) 1431 1527 1558 1686 1716 1684 1746 1862 2222
Operating profit 704 924 1548 1609 1195 1266 1268 1436 2058
Cost of funds 6.71 6.14 5.20 4.63 4.53 4.78 5.76 6.59 6.06
Return on advances 4.10 4.22 4.32 4.32 3.47 3.42 2.73 3.19 3.00
Wages as % of Total expenses 24.57 25.23 26.30 28.29 27.02 21.59 16.15 12.61 13.15
Return on assets 0.31 0.54 0.98 0.53 0.37 0.62 0.54 0.45 0.66
CRAR 9.58 10.51 12.43 12.15 11.03 10.40 9.39 13.12 12.23
Net NPA ratio (on Net advances) 7.98 7.02 5.57 2.98 2.59 1.70 1.45 1.24 0.69
61
Analysis of CBI Financials:
The increase in the number of offices from 01-10 is around 502. This works out to an
increase of 16% in the number of offices. This is low when compared to BOB or BOI , which
has a penetration of 19-20%
As is the case with other banks, CBI has also decreased its number of employees
gradually. There has been a sudden rise in the year 2008-09 as compared to 07-08 (around
4684 employees). This accounts for the sudden increase in business /employee during 08-
09. A 12% decrease in employees has led to a 40% increase in business/ Employee during
the same period. of course, there has also been a development in business (deposits and
advances) that may have led to this increase
A look at the profit / employee has shown a constant increase all years, excepting
the years 04-05, when there has been a decrease in profit /employee. The reason behind
this reduction could be because of extra intake of employees (around 1821 in number) and
slow growth in deposits and advances in 04-05, as compared to other years.
There is also a sudden dip that is observed in other income during the year 05-06,
which may have contributed to the low profit/employee.
The wage bill for 04-05 has also been the highest at 28.2%. There may have been a
sale of investments in the year 04-05 and 05-06 to cope up with the crises, as in these 2
years; there has been a reduction of investments of 2000 crores.
A look at the operating profit shows that the operating profit grew by 31% (between
01-02 and 02-03) and during the last year ie 09-10, it grew by 43%. This shows that the bank
has steadily managed to increase its profits after the crisis year 05-06, when the profit
decreased and a negative growth was registered to the tune of 26%
It is really ironical that the return of advances has gone down from 05-06 to 07-08
which has gone to prove that Central bank of India had to do a lot of damage building
exercise in the year 06-07 and 07-08 to bring it to earlier levels by selling investments,
reducing operating expense etc.
There has been a consistent decrease in NPAs due to provisioning and the CRAR is
well within the BASEL 2 limits of 9%.
62
3.5 PUNJAB NATIONAL BANK (PNB)
3.5.1 Introduction: Established in 1895 at Lahore, undivided India, Punjab National Bank
(PNB) has the distinction of being the first Indian bank to have been started solely with
Indian capital. The bank was nationalized in July 1969 along with 13 other banks. From its
modest beginning, the bank has grown in size and stature to become a front-line banking
institution in India at present.
With over 56 million satisfied customers and 5002 offices including 5 overseas branches,
PNB has continued to retain its leadership position amongst the nationalized banks. The
bank enjoys strong fundamentals, large franchise value and good brand image. Besides
being ranked as one of India's top service brands, PNB has remained fully committed to its
guiding principles of sound and prudent banking. Apart from offering banking products, the
bank has also entered the credit card, debit card; bullion business; life and non-life
insurance; Gold coins & asset management business, etc.
3.5.2 Key parameters (Technological advancements, financials, etc) Since its humble
beginning in 1895 with the distinction of being the first Swadeshi Bank to have been started
with Indian capital, PNB has achieved significant growth in business which at the end of
March 2010 amounted to Rs 4, 35,931 crore. PNB is ranked as the 2nd largest bank in the
country after SBI in terms of branch network, business and many other parameters. During
the FY 2009-10, with 40.85% share of CASA deposits, the Bank achieved a net profit of Rs
3905 crore. Bank has a strong capital base with capital adequacy ratio of 14.16% as on
Mar’10 as per Basel II with Tier I and Tier II capital ratio at 9.15% and 5.01% respectively. As
on March’10, the Bank has the Gross and Net NPA ratio of 1.71% and 0.53% respectively.
During the FY 2009-10, its ratio of Priority Sector Credit to Adjusted Net Bank Credit at
40.5% & Agriculture Credit to Adjusted Net Bank Credit at 19.7% was also higher than the
stipulated requirement of 40% & 18% respectively.
The Bank has been able to maintain its stakeholders’ interest by posting an improved NIM of
3.57% in Mar’10 (3.52% Mar’09) and a Return on Assets of 1.44% (1.39% Mar’09). The
Earning per Share improved to Rs 123.98 (Rs 98.03 Mar’09) while the Book value per share
63
improved to Rs 514.77 (Rs 416.74 Mar’09). Punjab National Bank continues to maintain its
frontline position in the Indian banking industry. In particular, the bank has retained its
NUMBER ONE position among the nationalized banks in terms of number of branches,
Deposit, Advances, total Business, Assets, Operating and Net profit in the year 2009-10. The
impressive operational and financial performance has been brought about by Bank’s focus
on customer based business with thrust on CASA deposits, Retail, SME & Agri Advances and
with more inclusive approach to banking; better asset liability management; improved
margin management, thrust on recovery and increased efficiency in core operations of the
Bank. The performance highlights of the bank in terms of business and profit are shown
below:
Diagram No 3.3 TOTAL BUSINESS DEVELOPMENTS FOR 3 YEARS OF PNB
119502 154703 186601
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Mar'08 Mar'09 Mar'10
Advance
Deposit
Table 3.5 –DATA FOR 3 YEARS (total business)
Parameters Mar'08 Mar'09 Mar'10
Operating Profit 4006 5690 7326
Net Profit 2049 3091 3905
64
Parameters Mar'08 Mar'09 Mar'10
Deposit 166457 209760 249330
Advance 119502 154703 186601
Total Business 285959 364463 435931
PNB has always looked at technology as a key facilitator to provide better customer service
and ensured that its ‘IT strategy’ follows the ‘Business strategy’ so as to arrive at “Best Fit”.
The Bank has made rapid strides in this direction. All branches of the Bank are under Core
Banking Solution (CBS) since Dec’08, thus covering 100% of its business and providing
‘Anytime Anywhere’ banking facility to all customers including customers of more than 3000
rural & semi urban branches. The Bank has also been offering Internet banking services to
its customers which also enables on line booking of rail tickets, payment of utilities bills,
purchase of airline tickets, etc. Towards developing a cost effective alternative channels of
delivery, the Bank with more than 3700 ATMs has a large ATM network amongst
nationalized banks.
With the help of advanced technology, the Bank has been a frontrunner in the industry so
far as the initiatives for Financial Inclusion is concerned. With its policy of inclusive growth,
the Bank’s mission is “Banking for Unbanked”. The Bank has launched a drive for biometric
smart card based technology enabled Financial Inclusion with the help of Business
Correspondents/Business Facilitators (BC/BF) so as to reach out to the last mile customer.
The Bank has started several innovative initiatives for marginal groups like rickshaw pullers,
vegetable vendors, dairy farmers, construction workers, etc. Under Branchless Banking
model, the Bank is implementing 40 projects in 16 States.
Backed by strong domestic performance, the Bank is planning to realize its global
aspirations. Bank continues its selective foray in international markets with presence in 9
countries, with 2 branches at Hongkong, 1 each at Kabul and Dubai; representative offices at
Almaty, Dubai, Shanghai and Oslo; a wholly owned subsidiary in UK; a joint venture with
Everest Bank Ltd. Nepal and a JV banking subsidiary “DRUK PNB Bank Ltd.” in Bhutan.
65
FINANCIALS PNB (Table 3.6)
ITEMS 2001-02
2002-
03
2003-
04
2004-
05
2005-
06
2006-
07
2007-
08
2008-
09 2009-10
No of offices 3932 4115 4100 4117 4146 4192 4319 4472 4971
No of
employees 57859 58981 58839 58329 58047 57316 56025 54780 53417
Business/
employee(lakhs) 167.76 195.64 228.22 276.87 330.92 407.41 504.52 654.92 807.95
profit/employee 0.97 1.43 1.88 2.42 2.48 2.68 3.66 5.64 7.31
Capital/reserves
and surplus (Cr) 3381 4033 5012 8161 9376 10435 12318 14654 17723
Deposits(Cr) 64123 75814 87916 103167 119685 139860 166457 209760 249330
Investments(Cr) 28207 34030 42125 50673 41055 45190 53992 63385 77724
Advances(Cr) 34369 40228 47225 60413 74627 96597 119502 154703 186601
Interest Income 6648 7485 7780 8460 9584 11236 14265 19127 21467
Other Income 978 1250 1867 1676 1274 1730 1998 3065 3565
Interest
expense 4353 4361 4155 4453 4917 6023 8731 12295 12944
operating
expense 1799 2057 2371 2975 3023 3326 3525 4206 4762
Operating profit 1474 2317 3121 2708 2918 3617 4007 5691 7326
Cost of funds
(%) 6.87 5.91 4.76 4.31 4.03 4.24 5.31 5.93 4.90
Return on
advances (%) 3.76 4.04 4.11 3.58 3.88 4.69 4.35 4.71 4.89
Wages as % of
Total expenses 21.40 23.00 25.35 28.56 26.64 25.16 20.08 17.72 17.63
Return on
assets (%) 0.77 0.98 1.08 1.12 1.09 1.03 1.15 1.39 1.44
CRAR 10.70 12.02 13.10 14.78 11.95 12.29 13.46 14.03 14.16
Net NPA ratio 5.32 3.86 0.98 0.20 0.29 0.76 0.64 0.17 0.53
66
Analysis of financials:
PNB expanded its offices by a good 1039 branches during the period 2001-2010.
Represented in percentage, this works out to an increase of over 26% over the levels
of 01-02. (3932 branches to 4971 branches)
A look at the number of employees reveal that the there was a continuous and a
steady decrease in the number of employees. Unlike Central Bank of India, PNB has
followed as systematic decrease from 2001-2010. From a 2% decrease in 2001-02 to
02-03, decrease in the year 08-09 to 09-10 was 3%. This shows that a steady percent
is being maintained.
There has been a steady increase in the business/employee. The increase has been
really phenomenal in this decade. This can be attributed to the uniform rate of 20%
decline in the number of employees. The growth was 17% in the year 01-02 to 02-03.
And it shot up to 23% in the years 08-09- to 09-10.
A look at the profit / employee reveals that PNB’s. growth during the last 2 years ( ie
during 08-09 to 09-10 is well above the rate of growth in the years 01-02 to 08-09
Similarly, the capital and surplus have grown from a mere 3381 crores to 17723
crores highlighting an increase of 14342 crores during the 10 years.
The deposits have also registered a net growth of 289% when compared to the year
2001.It is interesting to note that during the year 2005-06 , there has been a sudden
dip in investments .
A look at the operating profits reveal that the profit jump was around 57% in the
year 02-03 when compared to 01-02. But there is a sudden dip of around 13% profit
in the year 05-05 due to a dip in other income and an increase in the operating
expense (a rise of 25% in operating expenses compared to other years which is
around 15%)
PNB has managed to curtail the increase to merely 2% in the next year following (05-
06) due to which the operating profits soared to 2918 crores from 2708 crores.
The Net NPA ratio is also steadily decreasing in the years signifying effective
provisions.
67
3.6 STATE BANK OF INDIA:
SBI Profile:
3.6.1 SBI History
3.6.1.1: The origin of State bank of India goes back to the first decade of the nineteenth
century with the establishment of the Bank of Calcutta in Calcutta on 2nd June 1806. Three
years later the bank received its charter and it was re-designed as the Bank of Bengal (2nd
January 1809). A unique institution, it was the first joint stock bank of British India
sponsored by the Government of Bengal. The Bank of Bombay (15th April 1840) and the
Bank of Madras (1st July 1843) followed the Bank of Bengal. These three banks remained at
the apex of modern banking in India till their amalgamation as the Imperial Bank of India on
27th January 1921. After Independence, to serve the economy in general and the rural sector
in particular, the All India Rural Credit Survey Committee recommended the creation of a
State partnered and State sponsored bank by taking over the Imperial Bank of India and
integrating with it, the former State owned or State Associate banks. An Act was accordingly
passed in Parliament in May 1955 and the State Bank of India was constituted on 1st July
1955 .More than a quarter of the resources of the Indian banking system thus passed under
the direct control of the state. Later the State bank of India (subsidiary banks) Act was
passed in 1959 enabling the State bank of India to take over eight former State associated
banks of India as its subsidiaries (later named associates)
3.6.1.2 The State Bank of India was thus born with a new sense of social purpose aided by
the 480 offices comprising branches, sub offices and three local head offices inherited from
the Imperial bank. The concept of banking as mere repositories of the community’s savings
and lenders to creditworthy parties was soon to give way to the concept of purposeful
banking thus serving the growing and diversified financial needs of planned economic
development.
The State Bank of India, the country’s oldest Bank and a premier in terms of balance sheet
size, number of branches, market capitalization and profits is today going through a
momentous phase of Change and Transformation – the two hundred year old Public sector
68
behemoth is today stirring out of its Public Sector legacy and moving with an ability to give
the Private and Foreign Banks a run for their money.
The bank is entering into many new businesses with strategic tie ups – Pension Funds,
General Insurance, Custodial Services, Private Equity, Mobile Banking, Point of Sale
Merchant Acquisition, Advisory Services, structured products etc – each one of these
initiatives having a huge potential for growth.
The Bank is forging ahead with cutting edge technology and innovative new banking models,
to expand its Rural Banking base, looking at the vast untapped potential in the heartland
and proposes to cover 1,00,000 villages in the next two years.
It is also focusing at the top end of the market, on whole sale banking capabilities to provide
India’s growing mid / large Corporate with a complete array of products and services. It is
consolidating its global treasury operations and entering into structured products and
derivative instruments. Today, the Bank is the largest provider of infrastructure debt and
the largest arranger of external commercial borrowings in the country. It is the only Indian
bank to feature in the Fortune 500 list.
The Bank is changing outdated front and back end processes to modern customer friendly
processes to help improve the total customer experience. With about 8500 of its own 10000
branches and another 5100 branches of its Associate Banks already networked, today it
offers the largest banking network to the Indian customer. The Bank is also in the process of
providing complete payment solution to its clientele with its over 21000 ATMs, and other
electronic channels such as Internet banking, debit cards, mobile banking, etc.
With four national level Apex Training Colleges and 54 learning Centres spread all over the
country the Bank is continuously engaged in skill enhancement of its employees. Some of
the training programmes are attended by bankers from banks in other countries.
The bank is also looking at opportunities to grow in size in India as well as internationally. It
presently has 82 foreign offices in 32 countries across the globe. It has also 7 Subsidiaries in
69
India – SBI Capital Markets, SBICAP Securities, SBI DFHI, SBI Factors, SBI Life and SBI Cards -
forming a formidable group in the Indian Banking scenario. It is in the process of raising
capital for its growth and also consolidating its various holdings.
Throughout all this change, the Bank is also attempting to change old mindsets, attitudes
and take all employees together on this exciting road to Transformation. In a recently
concluded mass internal communication programme termed ‘Parivartan’ the Bank rolled
out over 3300 two day workshops across the country and covered over 130,000 employees
in a period of 100 days using about 400 Trainers, to drive home the message of Change and
inclusiveness. The workshops fired the imagination of the employees with some other banks
in India as well as other Public Sector Organizations seeking to emulate the programme.
The CNN IBN, Network 18 recognized this momentous transformation journey, the State
Bank of India is undertaking, and has awarded the prestigious Indian of the Year –
(Business), to its Ex-Chairman, Mr. O. P. Bhatt in January 2008.
3.6.1.3. Strengths, Weaknesses, Threats and opportunities
The largest public sector bank in India and also one of the world’s top 100 banks in the
world.
Low cost CASA and reduced reliance on bulk deposits.
Prudent lending practices helping control NPAs
Weaknesses
Compared to foreign banks in India, SBl’s overseas presence is minuscule and susceptible to
political interventions.
Opportunities
New licenses and approvals likely to expand revenue and profits
Investments in information technology will decrease transaction costs of SBI
Growth in general insurance industry will help SBI to increase the market share SBS merger
70
further hastens SBI and its associate banks merger and helping defend its leadership
position.
Threats
Liberalization of Indian banking sector lead to intense competition. Tepid global interbank
lending could derail overseas expansion
3.6.2 SBI Services
SBI was started as a community services banking. 8500 SBI bank branches are
interconnected to ease the process of serving. The bank provides online educational loan,
online home loan, online car loan, internet banking, mobile banking, ATM services, Demat
services, NRI banking, corporate banking, International banking etc. Some of its other
services are listed below.
Domestic Treasury, SBI Vishwa Yatra Foreign Travel Card, Broking Services, ATM Services
Internet Banking. E-Pay, E-Rail, RBIEFT, Safe Deposit Locker, Gift Cheques SBI Personal
Banking services like SBI Term Deposits, SBI Loan For Pensioners, SBI Recurring Deposits,
Loan Against Mortgage Of Property, SBI Housing Loan, Loan Against Shares & Debentures,
SBI Car Loan, Rent Plus Scheme, SBI Educational Loan, Medi-Plus Scheme, SBI Personal Loan,
e-Invest (ASBA) – IPO SBI Agriculture / Rural Banking services like Crop Loan (ACC), Produce
Marketing Loan Scheme Loan Against Warehouse Receipts / Cold Storage Receipts, Kisan
Credit Card Scheme (KCC) Agricultural Term Loans (ATL), Land Development Schemes,
Minor Irrigation Schemes, Farm Mechanisation Schemes, Financing Of Combine Harvesters,
Kisan Gold Card Scheme, Land Purchase Scheme, Krishi Plus Scheme, Arthias Plus Scheme,
Dairy Plus Scheme, Broiler Plus Scheme, Finance To Horticulture, Lead Bank Scheme SBI NRI
Banking schemes, International banking schemes such as Trade Finance, Correspondent
Banking, Merchant Banking, Project Export Finance, Exporter Gold Card, Treasury and
Offshore Banking.
3.6.3 ORGANISATION STRUCTURE OF SBI
3.6.3.1 Central Office: - The Bank’s Apex policy making body is the Central office in Mumbai.
It is known as corporate office. The Registered office is at Kolkata.
71
State Bank went through a series of changes in the organisation structure since its
establishment. The first reorganization was envisaged in 1971 by Indian Institute of
Ahmedabad. The main focus of reorganization was Market Segmentation, Segregation of
planning and operation, Unity of command and performance budgeting.
The Second Reorganization (or modular structure) came up in 1979 on the lines
recommended by IIM Ahmedabad. This basically focused on the establishment of Zonal
office and expansion of regional offices.
The third and the latest Organisation structure or the latest restructuring is based on the
recommendations of M/S McKinsey, in the year 1995-96. The new model was adopted in
the year 1996.The Changes were in the following areas.
Key business:- The Focus was around key business type ( in fact, a logical extension
an mkt. segment concept)
Integration of planning with operation
Increase in profit and loss responsibilities.
Creation and New Deputy Managing Director positions (for e.g.: – Chief Financial
Officer, Corp Dvpt. Officer and so on)
The main reasons that warranted the change were the following:
1. Adoption of technology.
2. Declining market share
3. Improper branch functioning
4. Excessive paper Movement.
5. Delay in operations.
Business India adjudged SBI to be the ‘Best Bank 2009’ in August 2009. Shri Pradip Choudhry
is the current Chairman of SBI.
3.6.3.2. SBI Network:
SBI covers a huge network across India consisting about 14 Head offices, 57 Zonal offices,
ten thousand branches (excluding 5,100 branches of its associate banks) and 8500 ATMs
which contains the ATM centers of SBI associate banks. Currently the bank has 82 foreign
offices in 32 other countries across the World. SBI also consists of 8 banking subsidiaries and
numerous non – banking subsidiaries. The bank has planned to spread its branches to one
lakh villages by 2010.
72
3.6.3.3. Bank’s Mission Statement:
To retain the bank’s position as the Premier Indian Financial Services group, with
World- class Standards and significant global Business, committed to excellence in customer,
Shareholder and Employee Satisfaction, and to play a leading role in the expansion and
diversification of financial services sector, while continuing its emphasis on its banking role.
3.6.3.4 Core Values of the Bank:
Excellence in Customer Service.
Profit Orientation.
Belonging and Commitment to Bank.
Fairness in all dealings and Relations. Risk Taking and Innovation. Team playing.
Learning and Renewal. Integrity. Transparency and Discipline in Policies and Systems.
PRESENT STRUCTURE OF SBI AT VARIOUS LEVELS. (Diagram 3.4)
ORGANISATION STRUCTURE
CENTRAL OFFICE-(CORPORATE CENTRE)
Chief financial
Officer (CFO) Chief Credit
Officer (CCO)
Inspection and
Audit
Department
Chief Vigilance
Officer
Corporate
Development
Officer CDO)
International Associates
&Subsidiaries
National
Banking
Corporate
Circles
Chairman
73
ZONAL OFFICE STRUCTURE (Diag 3.5)
Deputy General Manager
Direct Dev. & Personnel Office. Gen
Branches Per HRD Administration Banking
Under Bkng.
DGM. NPA Security Disciplinary AGMS of
Mgt section section Regions
REGIONAL OFFICE STRUCTURE (Diag 3.6)
Assistant General Manager
Personnel G. Managers planning Branch Mgt. HR Managers monitorng
3.6.4 SBI Financials
SBI has commenced many new businesses like private equity, mobile banking etc. SBI annual
report delivered the Operating Profit of SBI for the year ended 2008-09 was Rs.17, 915.23
crores as compared to Rs. 13, 107.55 crores in 2007-08 recording a growth of 36.68%. The
Bank has posted a Net Profit of Rs. 9, 121.23 crores for 2008-09 as compared to Rs.
6, 729.12 crores in 2007-08 registering a growth of 35.55%.
(Table 3.7 – Financials of SBI to follow)
74
ITEMS
2001-
02
2002-
03
2003-
04
2004-
05
2005-
06
2006-
07
2007-
08
2008-
09
2009-
10
No of offices 9102 9088 9107 9161 9468 9679 10683 12022 13039
No employees 209462 208998 207039 205515 198774 185388 179205 205896 200299
Business/
employee(lakhs)
173.01
191.00
210.56
243.08 299.23 357.00 456.00 556.00 636.00
profit/employee
1.16
1.47
1.77
2.08 2.17 2.37 3.73 4.74 4.46
Capital/reserves
and surplus (Cr) 15224 17203 20231 24072 27644 31299 49033 57948 65949
Deposits(Cr) 270560 296123 318619 367048 380046 435521 537404 742073 804116
Investments(Cr) 145142 172348 185676 197098 162534 149149 189501 275954 285790
Advances(Cr) 120806 137758 157934 202374 261801 337336 416768 542503 631914
Interest Income 29810 31087 30460 32428 35980 37242 48950 63788 70994
Other Income 4174 5740 7612 7120 7435 6765 8695 12691 14968
Interest
expense(Cr) 20729 21109 19274 18483 20390 22184 31929 42915 47322
operating
expense(Cr) 7211 7942 9245 10074 11725 11824 12609 15649 20319
Operating profit 6044 7776 9553 10991 11300 9999 13107 17915 18321
Cost of Funds 7.47 6.96 5.74 4.90 4.88 4.55 5.64 5.72 5.14
Return on
Advances(%) 1.97 1.73 1.88 2.34 2.74 3.74 3.70 3.95 3.48
Wages as % of
Total expenses 18.44 19.58 22.61 24.19 25.29 23.33 17.48 16.64 18.86
Return on
assets 0.70 0.86 0.94 0.99 0.89 0.84 1.01 1.04 0.88
CRAR 13.35 13.50 13.53 12.45 11.88 12.34 13.54 14.25 13.39
Net NPA ratio
(on Net
advances)
5.63 4.50 3.48 2.65 1.88 1.56 1.78 1.79 1.72
75
Analysis of Financials:
SBI has the greatest network of branches. This public Sector giant has registered a
43% increase in the number of branches compared to 01-02 levels. This is perhaps the
highest growth ever recorded among the banks, thus making SBI an Aam Aadmi Bank.
The number of employees has shown a decline of less than 1% every year. This is the
lowest when compared to any other bank. This only goes to highlight that SBI’s employee
friendly policies. A recent study states that the requirements in public sector banks in the
next 5 years would be around 4 lakhs.( LST Journal of G. K 2011 edition) A look into the
financials also reveal that SBI has inducted 26691 employees during 08-09 when compared
to the previous years ( an increase of 14% )though there was a 3% decline in 07-08 and a
2.7% decline in 09-10 , may be because of VRS Schemes
The business/employee is also the highest compare to any other bank. From a 10%
growth between 02-03, it has grown to 14.3% in the year 09-10.
The profit/employee has also registered a consistent increase and it is quite
surprising that SBI has managed to increase its profit/employee in the year 08-09, inspite of
a huge intake during the recruitment drive in 08-09.
SBI has resorted to a sale of its investments in the year 05-06 and 06-07. The year
06-07 also saw its operating profits dip for the first time.
A look at the interest expense reveals that there was a sudden spurt in the interest
expense in the year 07-08 and 08-09 onwards. The increase shot up from 1.8% in 02-03 to
43% in 07-08 suggesting that SBI had to shell out huge interest on its unexpected spurt in
advances during the year 06-07 and 07-08.(may be govt deposits)
The sale of investments during the year 05-06 and 06-07 may have been due to the
urgent need to maintain interest parity and better Asset liability management.
SBI has also managed to effectively reduce the cost of funds since the past 10 years.
It has also ensured a stable growth in its return on advances except for 09-10 and
01-02 and return on assets too. The NPA Management of the bank seems to be efficient due
to the steady decline in the net NPAs.
76
3.7 Profile of AXIS BANK
3.7.1: Axis Bank History:
Axis Bank was incorporated in the year 1994 as a private sector Bank in India by a group of
administrators of UTI, LIC, GIC and other 4 PSU insurance companies with a capital of Rs.
115 crores in which 100 crores was invested by UTI. In the year 2007, UTI renamed itself as
Axis Bank. Axis Bank is now under the guidance of Smt. Shikha Sharma, Managing Director &
CEO and Shri M. M. Agrawal, Deputy Managing Director. 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.
The Bank as on 31st December, 2010 is capitalized to the extent of Rs. 409.90 crores with
the public holding (other than promoters and GDRs) at 53.62%.
The Bank's Registered Office is at Ahmedabad 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).
3.7.2 Axis Bank Network and Services:
Axis Bank branches extend to more than 1000 including extension counters. 3723 ATMs of
Axis Bank provides 24 hour services to the customers and it has one of the largest ATM
networks in the country. All the branches are furnished with internet facility. Axis Bank
registered office is located at Ahmedabad and central office at Mumbai.
Axis Bank is one of the few Banks that offer Zero Balance Account. Recently Axis Bank
introduced Platinum Credit Card which is India’s 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, and NRI Banking and also on some
other banking products.
77
3.7.3 Axis Bank Financials:
Axis Bank had tied up with Hyundai Motor India Ltd, Tata Motors Ltd and Maruti Udyog Ltd
for Car Loans and with IIFCL to provide finance for infrastructural projects to its customers.
Axis Bank became the first Indian Bank to successfully issue Foreign Currency Hybrid Capital
in the International Market. Axis Bank today is capitalized to the extent of Rs 16000 crores
with the public holding (other than promoters) at 57.79%.
AXIS BANK FINANCIALS (TABLE 3.8).
ITEMS
2001-
02 2002-03
2003-
04
2004-
05
2005-
06
2006-
07
2007-
08
2008-
09
2009-
10
No of offices 112 137 185 249 352 501 626 786 1019
No of
employees 1721 2338 3447 4761 6553 9980 14739 20624 21640
Business/
employee(lakhs) 896 926 808 895 1020 1024 1117 1060 1111
profit/employee 7.79 8.22 8.07 7.03 8.69 7.59 8.38 10.02 12
Capital/reserves
and surplus (Cr) 615 918 1138 2422 2886 3402 8771 10215 16045
Deposits(Cr) 12287 16965 20954 31712 40114 58786 87626 117374 141300
Investments(Cr) 5678 7841 7793 14275 21527 26887 33705 46330 55975
Advances(cr) 5352 7180 9363 15603 22314 36876 59661 81557 104343
Interest Income 1180 1465 1587 1924 2889 4462 7005 10835 11638
Other Income 416 410 540 416 730 1010 1795 2897 3946
Interest
expense(Cr) 980 1142 1021 1193 1811 2993 4420 7149 6634
operating
expense(Cr) 205 323 419 581 814 1215 2155 2859 3710
Operating profit 411 410 687 566 994 1266 2225 3724 5240
78
ITEMS
2001-
02 2002-03
2003-
04
2004-
05
2005-
06
2006-
07
2007-
08
2008-
09
2009-
10
Cost of funds 7.65 6.94 3.94 3.94 4.23 4.96 4.98 5.74 4.03
Return on
advances 2.95 4.81 3.9 3.9 3.83 4.17 4.85 4.83 4.57
wages as % of
Total expenses 4.18 5.82 9.97 9.97 9.15 9.06 10.19 9.97 12.14
Return on
assets 1.13 1.17 1.21 1.21 1.18 1.1 1.24 1.44 1.67
CRAR 10.65 10.9 12.66 12.66 11.08 11.57 13.73 13.69 15.8
Net NPA ratio 3.47 2.39 1.39 1.39 0.98 0.72 0.42 0.4 0.4
Analysis of financials: (chart3.7 a no of offics) Chart 3.7b(Employees no)
79
Chart3.7c- operating pft Chart 3.7d -Cost of funds
Chart 3.7e (npas ratio)
Axis Bank made a very moderate beginning and had around 112 branch offices in the
year 2002. However, this private sector bank made mammoth strides in the decade
and its branch offices increased to 1019 to by 2010, thus suggesting massive
expansion. The increase is is around 800%
Contrary to the public sector Banks, this Pvt Sector bank has contributed more to the
development of the nation by generating employment through an increase in its
work force. Between the years 02 and 03, it has a 36% increase in its employment
rate. Till last year, the rate has been maintained between 30-40%. In the year 09-10,
80
however this increase has only been 5% suggesting that the stabilization level has
come for Axis Bank.
It is really commendable that Axis Bank has a steady growth in business per
employee .Even in spite of massive intake of employees, it has a 3.34 % increase in
the year 02-03 and this grew to 4.8% in the later years .
Its capital and reserves too saw an increase in this decade. From a mere 615 crores,
the bank has garnered 16045 crores in the 10 years. It has retained capital to the
tune of 5000 crores in the year 07-08 and 09-10.
An analysis of the deposits reveal that there have been a more than 10 times leap in
the 10 years. Similar is the case with Investments that increased 10 times in these 10
years. This increase in 10 years for advances has been around 20 times.
The operating profit increase has been really commendable in the later years. in the
year 02-03, the operating profit registered a negative growth of 1 crore, but after
that, the operating profit has recorded a growth rate of 67% in 03-04 and fell down
gradually to 47%
Axis Bank displayed an erratic pattern as far as its cost of funds is considered. First
there is an immense pace in its decrease and then it there’s a gradual increase in its
cost of funds till 07-08. The increase is grater in the year 08-09.
There seems to be an erratic pattern in the return on advances, wage%, return on
assets.
The NPA ratio has shown a steady decrease indicating that the Bank has taken care
of the RBI norms for provisioning.
81
3.8 Profile of HDFC Bank
3.8.1 History
HDFC Bank marked the beginning of its services in the year 1995 with setting a loud and
clear message that it wants to become a "World-class Indian Bank". It always believed in
winning the hearts of its customers with quality products and services. It is the sole reason
why today HDFC has been able to achieve both national and international acclaim.
Housing Development Finance Corporation Limited (HDFC) was arguably the first to obtain
RBI's 'in-principle' approval to foray into private sector bank. This came into effect when RBI
was implementing liberalization process to improve the banking industry of India in 1994.
HDFC (Housing Development Finance Corporation Limited) is India’s 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.
3.8.2 HDFC Bank Network
With its headquarters in Mumbai, the HDFC Bank has a network of 1,416 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
Bank’s 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 World’s 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.
82
3.8.3 HDFC Bank Services, Achievements and Financials:
During the fiscal year 2010, HDFC was conferred the following awards.
Asian Banker Excellence award 2009( Best retail bank in a row(4th time): Excellence in
Automobile lending).,The triple Asset A award:: Financial Insights Innovation award 2010
(innovation in Branch operations); Global financial award (best trade provider2010) business
today Best employer survey listed in top 10).Most tech savvy bank by Business world Best
Banks award. Outlook money NDTV profit awards2009: Forbes Asia award for Fab 50
companies: UTI MF CNBC TV 18, Financial Adviser awards 2009 as Best performing Bank.
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).
HDFC Bank's mission is to be a World-Class Indian Bank. The objective is to build sound
customer franchises across distinct businesses so as to be the preferred provider of banking
services for target retail and wholesale customer segments, and to achieve healthy growth
in profitability, consistent with the bank's risk appetite. The bank is committed to maintain
the highest level of ethical standards, professional integrity, corporate governance and
regulatory compliance. HDFC Bank's business philosophy is based on four core values -
Operational Excellence, Customer Focus, and Product Leadership.
Credit Rating
The Bank has its deposit programs rated by two rating agencies - Credit Analysis & Research
Limited (CARE) and Fitch Ratings India Private Limited. The Bank's Fixed Deposit programme
has been rated 'CARE AAA (FD)' [Triple A] by CARE, which represents instruments
considered to be "of the best quality, carrying negligible investment risk". CARE has also
rated the bank's Certificate of Deposit (CD) programme "PR 1+" which represents "superior
capacity for repayment of short term promissory obligations". Fitch Ratings India Pvt. Ltd.
(100% subsidiary of Fitch Inc.) has assigned the "AAA (ind)" rating to the Bank's deposit
programme, with the outlook on the rating as "stable". This rating indicates "highest credit
quality" where "protection factors are very high"
The Bank also has its long term unsecured, subordinated (Tier II) Bonds rated by CARE and
Fitch Ratings India Private Limited and its Tier I perpetual Bonds and Upper Tier II Bonds
83
rated by CARE and CRISIL Ltd. CARE has assigned the rating of "CARE AAA" for the
subordinated Tier II Bonds while Fitch Ratings India Pvt. Ltd. has assigned the rating "AAA
(ind)" with the outlook on the rating as "stable". CARE has also assigned "CARE AAA [Triple
A]" for the Banks Perpetual bond and Upper Tier II bond issues. CRISIL has assigned the
rating "AAA / Stable" for the Bank's Perpetual Debt programme and Upper Tier II Bond
issue. In each of the cases referred to above, the ratings awarded were the highest assigned
by the rating agency for those instruments.
Corporate Governance rating:
The bank was one of the first four companies, which subjected itself to a Corporate
Governance and Value Creation (GVC) rating by the rating agency, The Credit Rating
Information Services of India Limited (CRISIL). The rating provides an independent
assessment of an entity's current performance and an expectation on its "balanced value
creation and corporate governance practices" in future. The bank has been assigned a
'CRISIL GVC Level 1' rating which indicates that the bank's capability with respect to wealth
creation for all its stakeholders while adopting sound corporate governance practices is the
highest. (Table 3.9- HDFC financials)
ITEMS
2001-
02
2002-
03
2003-
04
2004-
05
2005-
06
2006-
07
2007-
08
2008-
09
2009-
10
No of offices 166 215 295 446 516 666 745 1422 1500
No of
employees 3742 4791 5673 9030 14878 21477 37386 52687 58850
Business/
employee(lakhs) 778 865 866 806 758 607 506 446 1135.52
profit/employee 9.75 10.09 9.39 8.8 7.39 6.13 4.97 4.18 11.73
Capital/reserves
and surplus 1942 2252 2694 4520 5300 6433 11497 14652 21522
Deposits 17654 22376 30409 36354 55797 68298 100769 142812 167404
Investments 12004 13388 19363 19350 28394 30565 49394 58818 58608
Advances 6814 11755 17745 25566 35061 46945 63427 98883 125831
Interest Income 1703 2014 2549 3093 4475 6648 10115 16332 16173
Other Income 333 466 480 651 1124 1516 2283 3291 3808
84
ITEMS
2001-
02
2002-
03
2003-
04
2004-
05
2005-
06
2006-
07
2007-
08
2008-
09
2009-
10
Interest
expense 1074 1192 1211 1316 1930 3179 4887 8911 7786
operating
expense 418 577 810 1085 1691 2421 3746 5533 5764
Operating profit 544 711 1008 1343 1978 2564 3765 5179 6431
Cost of funds 6.48 5.29 4.12 3.45 3.76 4.58 5.24 6.92 4.66
Return on
advances 4.42 3.19 3.4 4.23 5.15 5.99 7.38 8.04 6.11
wages as % of
Total expenses 7.32 8.52 10.1 11.52 13.45 13.87 15.07 15.5 16.89
Return on
assets 1.48 1.52 1.45 1.47 1.38 1.33 1.32 1.28 1.53
CRAR 13.93 11.11 11.66 12.16 11.41 13.08 13.6 15.69 17.44
Net NPA ratio
(on Net
advances) 0.5 0.37 0.16 0.24 0.44 0.43 0.47 0.63 0.31
Chart 3.8 a (offices) Cart 3.9 b (No of employees)
85
Chart 3.8.c (operating profit) charts Chart 3.8.d (Cost of funds)
Chart 3.8. e Net NPA RAtio
It is really commendable that HDFC Bank has a steady growth in business per employee.
Even in spite of massive intake of employees, it had a 150% increase in the year 09-10. This
is indicative of the major strides that the bank has made in this decade.
Its capital and reserves too saw an increase in this decade. From a mere 1942 crores,
the bank has garnered 21522 crores in the 10 years.
86
An analysis of the deposits reveal that there have been a more than 10 times leap in
the 10 years. Similar is the case with Investments that increased 10 times in these
10 years. This increase in 10 years for advances has been around 20 times.
The operating profit increase has been really commendable in the later years. In the
year 02-03, the operating profit registered a growth of 159 crore,(growth about 38%)
but after that, the operating profit has recorded a rate of 4%
HDFC displayed an erratic pattern as far as its cost of funds is considered. First there
is an immense pace in its decrease and then it there’s a gradual increase in its cost of
funds till 08-09. Later this has decreased to 4.66.
There seems to be an erratic pattern in the return on advances return on assets.
The NPA ratio has shown a steady decrease indicating that HDFC has taken care of
the RBI norms for provisioning.
3. 10. Profile of ICICI Bank
3.10.1 ICICI Bank History
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,
India’s second largest Bank was adjudged “Best Bank Award for Initiatives in Mobile
Payments and Banking” by IDRBT.
3.10.2 ICICI Bank Network:
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 Bank’s equity shares are
actively traded in BSE and NSE.
ICICI Bank is the largest private sector bank in India in terms of market capitalization. It is
also the second largest bank in India in terms of assets with a total asset of Rs 4,874.19
87
billion as on march 31st, 2010. For the year ended on March 31st 2010, the total profit after
tax has been Rs. 9.78 billion. Formerly known as Industrial Credit and Investment
Corporation of India, ICICI Bank has an extensive network of 1717 branches with about
4,816 ATMS located across India and in 18 other countries. ICICI Bank serves over 24 Million
customers throughout the world. It is considered as one of the ‘Big Four Banks’ in India
along with State Bank of India, HDFC Bank and Axis Bank.
ICICI Bank provides a wide array of banking products and financial services to its retail and
corporate customers. It has a wide variety of delivery channels and specialized affiliates and
subsidiaries that ensure the flow of its offerings in the areas like investment banking,
venture capital, life and non-life insurance and asset management. This bank is also India's
largest credit card issuer. The equity share of ICICI Bank is listed on various stock exchanges
like NSE, BSE, Kolkata Stock Exchange and Vadodara Stock Exchange etc. Its ADRs are also
listed on the New York Stock Exchange.
3.10.3 ICICI Bank Services and Financials:
ICICI Bank provides a range of Banking stuffs and financial services such as mobile Banking, T
V 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.
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.
ICICI Bank Personal Banking offers a wide range of products and services and has become
the preferred Bank of the customers. Deposits, Loans, Investments, Cards, Insurance, Forex
Services, Demat Services, Online Services, Wealth Management
ICICI Bank Business Banking helps industrialists and farmers by offering financial support.
Some of its corporate and agriculture services are Commercial Banking, Treasury Banking,
Investment Banking, Capital Markets, Custodial Services, International Banking, Agri/Rural
Banking, and Structured Finance
ICICI Bank NRI Banking also plays a main role in serving the Indians living in different parts
of the World through its NRI services.
88
Table 3.10- ICICI Financials
ITEMS
2001-
02
2002-
03
2003-
04
2004-
05
2005-
06
2006-
07
2007-
08
2008-
09
2009-
10
No of offices 359 392 419 519 569 716 1269 1430 1717
No ofemployees 7726 11544 13609 18161 25834 33321 40686 34596 35256
Business/
employee(lakhs) 486.79 1120 1010 880 905 1027 1008 1154 1029
profit/employee 5.333 11 12 11 10 9 10 11 12
Capital/reserves
and surplus(Cr) 6599 7284 8360 12950 22556 24663 46820 49533 51618
Deposits(Cr) 32085 48169 68109 99819 165083 230510 244431 218348 202017
Investments(Cr) 35891 35462 43436 50487 71547 91258 111454 103058 120893
Advances(cr) 47035 53279 62648 91405 146163 195866 225616 218311 181206
Interest Income 2152 9368 9002 9410 14306 21996 30788 31093 25707
Other Income 575 3159 3065 3416 4181 6928 8811 7604 7478
Interest
expense(Cr) 1559 7944 7015 6571 9597 16358 23484 22726 17593
Operating
Expense 623 2012 2571 3299 5001 6691 8154 7045 5860
operating profit 545 2571 2481 2956 3889 5875 7961 8926 9732
Cost of funds
(%) 2.91 3.25 3.59 3.02 4.01 5.33 6.4 5.72 4.18
Return on
advances -0.06 8.74 6.94 5.78 4.58 4.08 4.33 4.33 4.51
Wages as % of
Total expenses 6.75 4.05 5.7 7.47 7.41 7.01 6.57 6.62 8.21
Return on
assets 0.67 1.13 1.31 1.59 1.3 1.09 1.12 0.98 1.13
CRAR 11.44 11.1 10.36 11.78 13.35 11.69 13.97 15.53 19.41
Net NPA ratio
(on NetAdv) 5.48 5.21 2.21 1.65 0.72 1.02 1.55 2.09 2.12
89
Analysis of financials:
3.9 a No of offices 3.9. b No of employees
3.9. c Operating Profits 3.9.d Cost of funds
NET NPA RATIO 3.9.e
90
Analysis of financials:
o There was a 56% increase in the year 03 in business/employee , a decrease of 9.2%
in 04 and this fell down to 2.84 % in the year 5-6. There was a growth till 08-09 and
again in the year 2010, there was a negative growth of 10.83%.
o There was an increase in its capital and reserves about 8 times as compared to 2000
levels. During the same time (2001-10), deposits grew by 6 times and advances grew
by 4 times approximately.
o Interest income increased by 4 times in 2003 and dipped by 3.90% decrease in the
year 03-04. , 525 increase in the year 5-06 54% in 06-07 and grew till 08-09. From
then on, it showed a decrease of 17%.
o There was an erratic pattern in the interest pattern. It is however interesting to note
that in 03 and 04, while the deposits grew, the interest reduced. There was also a
redn noticed in the last year.
o There was a negative growth in Return on advances in 01-02, Return on assets in 06-
07.NPA too increased this year to 1.02 suggesting that the bank couldn’t collect
many of its interest overdues.
3.10 PROFILE OF INDUS IND BANK:
IndusInd Bank Limited is a Mumbai based Indian new generation bank, established in 1994.
The bank offers commercial, transactional and electronic banking products and services.
IndusInd Bank was incorporated in April 1994 by Dr. ManMohan Singh the then Union
Finance Minister. IndusInd Bank is the first among the new-generation private banks in
India.
The bank started its operations with a capital amount of Rs.1, 000 million among which
Rs.600 million was donated by the Indian Residents and Rs.400 million was raised by the
Non-Resident Indians. The bank has specialized in retail banking services and continuously
upgrades its support systems by introducing newer technologies. It is also working on
expanding its network of branches all across the country along with meeting the global
91
benchmark. According to the bank, its name is derived from the rich and vivid Indus Valley
Civilisation.
3.10.1 Growth:
Since its incorporation, IndusInd Bank Ltd went through a good climbing phase to reach at
its current status within a very short period of time. In 1996-97, IndusInd Bank became the
pioneer in launching Internet Banking. In 2000-01, the total business of IndusInd crossed Rs.
10,000 crores, which reached Rs. 14,000 crores mark in the next financial year. It recorded
the highest productivity in Indian banking sector with a business of Rs. 16 crores per
employee.
In 2003-04, IndusInd Bank Ltd celebrated its 10th year by touching Rs. 19,000 crores
business volume. In the same year, Ashok Leyland Finance also merged with IndusInd. The
bank also achieved ISO 9001:2000 Quality Management System certification for its 'Entire
Network of Branches'. It's the first Indian Commercial Bank to achieve the distinction.
The following years saw further growth of IndusInd Bank Ltd at a great pace. In 2008-09, the
total business of IndusInd Bank Ltd crossed Rs. 37,800 crores. Its net worth became Rs. 1429
crores, while the earning per share augmented to Rs. 4.28 from Rs. 2.35.
(Table 3.11-Indus Ind financials)
ITEMS
2001-
02
2002-
03
2003-
04
2004-
05
2005-
06
2006-
07
2007-
08
2008-
09
2009-
10
No of offices 41 54 62 127 152 185 195 195 230
No of
employees 738 863 1693 2106 2365 2613 2869 4251 5383
Business/
employee(lakhs) 1587.9 1284.1 1080 924.78 880.18 1039.77 1062.67 836 837.46
profit/employee 6.88 9.5 14.98 10.12 1.56 2.61 2.62 3.49 6.51
Capital/reserves
and surplus 562 602 800 830 866 1057 1350 1664 2397
Deposits 8400 8598 11200 13114 15006 17645 19037 22110 26710
92
ITEMS
2001-
02
2002-
03
2003-
04
2004-
05
2005-
06
2006-
07
2007-
08
2008-
09
2009-
10
Investments 2485 2535 4483 4069 5410 5892 6630 8083 10402
Advances 5574 5348 7301 8999 9310 11084 12795 15774 20551
Interest Income 710 743 986 1134 1188 1500 1881 2309 2708
Other Income 184 258 345 251 189 244 298 456 553
Interest
expense 547 558 669 719 873 1229 1580 1850 1821
operating
expense 95 118 217 265 317 344 402 547 736
operating profit 252 325 445 401 187 358 197 368 704
Cost of funds 5.92 5.92 5.92 5.92 5.92 5.92 5.92 5.92 5.92
Return on
advances 2.81 2.78 5.28 4.65 3.47 3.47 4.34 5.03 5.95
Wages as % of
Total expenses 3.16 4.18 5.68 6.11 7.13 6.12 6.15 7.81 11.37
Return on
assets 0.5 0.91 1.74 1.32 0.22 0.34 0.34 0.58 1.14
CRAR 12.51 12.13 12.75 11.62 10.54 12.54 11.91 12.55 15.33
Net NPA ratio
(on Net
advances) 6.59 4.25 2.62 2.71 2.09 2.47 2.27 1.14 0.5
93
Table 3.10 a –offices table 3.10 10b -
3.10 c-operating profits 3.10 d cost of funds
3.10.e business/employee 3.10 f Capital, Reserves
94
3.10 g- Advances 3.10 h – Return on advances
3.10 i- NPA Ratio Indus Ind
.
95
3.12 PROFILE OF THE FEDERAL BANK
Kulangara Paulo Hormis, the visionary Banker was born on 18th October, 1917 at
Mookkannur; a small village in the suburbs of Greater Cochin, in a middle class agricultural
family.
Educated as a lawyer, Shri Hormis began his career as an Advocate in the Courts of
Perumbavoor. But the path breaker soon gravitated to commercial banking and soon took
up the reins of Federal Bank in 1945 as its Chief Executive. Fired by a passion for institution
building Shri Hormis built out of a One-Branch-Small-Time Bank, a nationwide institution of
285 branches in the 34 years that he remained at the helm.
The quintessential banker that he was, a structure for extending finance to agriculture and
the weaker sections of society was laid by him much before these areas came into national
focus.
3.12.1 History and growth
The history of Federal Bank dates back to the pre-independence Era. Though initially it was
known as the Travancore Federal Bank, it gradually transformed into a full-fledged bank
under the able leadership of its Founder, Mr. K P Hormis. The name Federal Bank Limited
was officially announced in the year 1947 with its headquarters nestled on the banks on the
river Periyar. Since then there has been no looking back and the bank has become one of
the strongest and most stable banks in the country.
Mission:
Devote balanced attention to the interests and expectations of stakeholders, and in
particular:
Shareholders: Achieve a consistent annual post-tax return of at least 20% on net
worth.
Employees: Develop in every employee a high degree of pride and loyalty in serving
the Bank.
96
Customers: Meet and even exceed expectations of target customers by delivering
appropriate products and services, employing, as far as feasible, the single-window
and 24-hour-seven-day-week concepts, leveraging strengthened branch
infrastructure, ATMs, and other alternative distribution channels, cross-selling a
range of products and services to meet customer needs varying over time, and
ensuring the highest standards of service at all times. Pursue excellence in various
facets of banking. Adopt best industry practices.
o Develop, adopt, and review a well-conceived business plan for achieving
realistic targets of growth, profitability, and market share over the medium
term.
o Operate within a well-defined, diversified, risk profile and adopt prudent risk-
management norms and processes and effective control practices.
o Employ and leverage appropriate modern information technology to:
enhance the quality, speed, and accuracy of product/service delivery; provide
‘anytime-anywhere’ banking facility; strengthen management information
and control systems and processes; improve productivity; and reduce costs.
o Increase awareness of the "Federal Bank" brand among targeted customer
groups through cost-effective marketing.
o Adopt a robust corporate governance code emphasizing a high degree of
professionalism of the Board and the management, and accountability and
disclosure to shareholders.
o Decentralize decision making with accountability for decisions made, and
assign cascading profit responsibilities to middle and junior management.
o Develop a conducive and transparent work environment that fosters staff
commitment, competence, initiative, innovation, teamwork and service-
orientation.
1945: The paid up capital was increased to Rs.71000.The Board of Directors of the Bank was
reconstituted in 1945 and fresh Articles of Association adopted. On 18-5-1945, the Regd.
Office of the Bank was shifted to Aluva and the Bank commenced business by opening its
first branch at Aluva.
97
1946: The Bank opened its second branch at Angamally on 26-1-1946
1947: In the Board Meeting held on 24-3-1947, it was resolved to change the name of the
Bank as "The Federal Bank limited". The third branch of the Bank was opened at
Perumbavoor on 18-4-1947: Licensing in 1959 under Banking Companies Act.
1964: The Bank embarked for a massive takeover bids, which accelerated its growth
horizontally and vertically. In that process it took over the assets and liabilities of the
following banks
1. The Chalakudy Public Bank Ltd., Chalakudy
2. The Cochin Union Bank Ltd., Trichur
3. The Alleppey Bank Ltd., Alleppey: The St. George Union Bank Ltd. Puthenpally was
merged with the Bank in 1965: In 1968, The Marthandom Commercial Bank Ltd. Trivandrum
was amalgamated with the Bank.
1972: Witnessed expansion beyond the home state. The Bank became an Authorised Dealer
in Foreign Exchange in 1972.International Banking Department started functioning from
Mumbai in 1973.Since then, the Bank could substantially increase its market share of the
NRI business. The International Banking Department was later shifted to Cochin in 1982 as
part of consolidation and centralisation of activities
1973 to 1977: During the period, the bank adopted a massive branch expansion and growth
oriented programmes. To reflect the bank's approach towards the Industrial finance it
adopted a new emblem -Farmer in action encircled by an industrial wheel. A few hallmarks
of the period: In the year 1973, there was a quantum jump in deposits to the tune of 67%
and in advances to the tune of 56% over that of the previous year. The deposits grew by
52% while the advances registered an increase of 45%. Increase in Priority sector advances
was by 63%.
1975-89:This period witnessed Rapid branch expansion followed by reorganisation and
establishment of computer department, opening of Admn buiding.
1992: Deposits crossed Rs.10, 000 Million. Adopted profit sector banking as its slogan
98
1993: Roped in ICICI group as a shareholder through private placement.
1994: Tapped the Capital Market with a public issue in March, 1994. The issue
oversubscribed by about 60 times. Started Leasing Business.
1995: Registered 142.44% increase in PAT in FY 94-95.Bank registered a CAGR of 78.13% in
PAT during the period 1991-96. The bank Emerged as a perfect banking partner with
diverse products, global reach and focus on automation and HRM. Deposits cross Rs.35, 000
Million
1996: Shri. K Nandan, a veteran banker from State Bank of India took the stewardship on 1-
1-1996: The bank had steady growth. The bank's business crossed Rs.100000 Million mark
as on 31/3/98 for the first time
1997-2000: Bank's first ATM was inaugurated at Ernakulam North on 27-02-97. Deposits
crossed 110000 million.
2000: a) On 24.1.2000 Bank started Any Where Banking at Bangalore connecting all
branches located in the Bangalore metro. b) Launched Depository Services in association
with NSDL on 24.2.2000 c) The Bank had commenced Internet Banking 'FedNet' on 28th
April 2000 with software support from Infosys Technologies Ltd,
2001: In March 2001, Wide Area Network was launched connecting Regional Offices at
Mumbai, Bangalore, Chennai, Ernakulam and Chennai F & I with Head Office
2002: 1. All the 412 branches of the Bank were fully computerised (using FedSoft) as on
31.03.2002
2. The Installation of switch for networking all the ATMs, already installed/proposed to be
installed, started from 17/08/2002
3. Dec 10 2002 Federal Bank introduced FedAlerts, and FedMobile, another first of its kind
service among traditional banks in India. Real time transaction alerts across the globe, and
customizable options make the service unique.
2003: International Debit Cards launched
99
January 2004: Federal Bank becomes the first traditional bank to network all its branches
and attain 100% connectivity
February 2004: Co-branded credit cards launched in association with ICICI Bank
October 2004: RTGS is enabled in all branches of the Bank and becomes the first bank in
India to implement RTGS facility in all the branches. Online Railway Reservation through
FedNet launched. The First Kiosk inaugurated at the Marine Drive ( Kochi) branch
December 2004:
1. First Bank to launch automated telephone bill payment through Interactive Voice
Response System (IVR). Bank launched an innovative product 'Fed-e-Pay' for automated
payment of utility Bills
2. The Bank issued Bonus shares in the ratio of 2:1
February 2005: Federal Bank is awarded for Best Use of Information Technology in Retail
Banking by IBA and Infosys. The runner up status reveals the strength and innovation in
technology initiatives
May 2005: Shri.M Venugopalan joined the Bank as Chairman and Chief Executive Officer
Prior to joining the Bank, he was the Chairman and Managing Director of Bank of India, one
of the leading public sector banks in India, from August 2003 to April 2005, and was an
executive director of the Union Bank of India immediately prior to joining the Bank of India
June 2005: Federal Bank in association with AMRITA super specialty hospital launches
Fed+Amrita, an innovative online system for fixing medical consultation, Health check up,
and inpatient payments from anywhere
January 2006: Federal Bank becomes the first traditional bank to successfully issue GDR.
While the issue of 18 million Global Depository Receipts realised $71.46 million, the green
shoe option of 2 million GDR was also fully subscribed, bringing in a total of $80 million to
the bank. The GDR, each representing an underlying equity share, were priced at $3.97 each
— working out to approximately Rs.175 per share. The issue was subscribed by major banks
and Financial Institutions across the globe.
100
February 2006: Federal Bank wins two prestigious awards for BEST USE OF IT IN RETAIL
BANKING & BEST PAYMENTS INITATIVE from IBA and TFCI. This is the second consecutive
time that the Bank has won the award for best use of IT in Retail Banking. More details
available here
September 2006:
1. Amalgamation of Ganesh Bank of Kurundwad with Federal Bank .
2. Bank’s Total No. of Branches crossed 500.
November 2006: Bank entered into Life Insurance Joint Venture with IDBI & FORTIS
January 2007: Bank won the award under category “Best Clearing & Settlement System” in
the Banking Technology Awards 2006 instituted by IBA, Infosys & TFCI
Mar 2007: A full fledged Data Center was set up by the Bank
September 2007: All branches/offices of the Bank were migrated to Centralized Banking
Solution (CBS), Finacle
January 2008:
1. Successfully completed 1:1 Rights Issue
2. Opened first overseas Representative Office at Abu Dhabi, UAE.
March 2008:
1. Bank’s Total No. of Branches crossed 600
2. The Asian Banker, together with the Technology Advisory Council of The Asian Banker
Summit, has affirmed Federal Bank as sole recipient of the Best Core Banking Project Award
2007
September 2008: Bank started providing Online Stock Trading facility to the customers in
association with M/s Geojit Financial Services
January 2009: Bank won the award under category 'Best Customer Relationship
Achievement' in the Banking Technology awards 2008 instituted by IBA, Infosys & TFCI for
101
the outstanding achievements in technology infusion and dissemination. The Bank was
winning IBA-TFCI awards for the fourth time
March 2009:
1. Total Business of the Bank crossed Rs.50, 000/- Crores
2. Bank becomes BASEL-II compliant
August 2009:
1. Bank has taken an important step in customer Service by dedicating 24 X 7 Contact Center
to the customers. Started offering NEFT/RTGS facility through Internet Banking. Bank
started offering Tele banking facility through a Toll-free number
2. Launched three new variants of Visa Debit Cards – Platinum, Gold and Shop’n Save
January 2010:
Launched Point Of Sale (POS) Terminal Business, June 2010:
Federal Bank became part of National Financial Switch ATM Network – the largest ATM
network in India
July 2010:1. Total number of branches crossed 700
2. Launched Debit Cards in association with MasterCard
102
(Table 3.12 – Federal bank Financials)
ITEMS 2001-
02 2002-
03 2003-
04 2004-
05 2005-
06 2006-
07 2007-
08 2008-
09 2009-
10
No of offices 428 435 455 471 488 553 619 640 699
No ofemployees 6240 6217 6363 6474 6015 6029 6945 7570 7896
Business/ employee(lakhs) 219.00 270.00 327.00 366.00 431 544 655 750 813
profit/employee 1.31 1.69 2.14 1.39 3.54 4.43 5.43 6.9 6.01
Capital/reserves and surplus 449 530 649 724 1250 1502 3926 4326 4690
Deposits(Cr) 8865 10947 13477 15193 17879 21854 25913 32198 36058
Investment(Cr) 3756 4552 5521 5799 6272 7033 10027 12199 13055
Advances(Cr) 5189 6218 7701 8823 11736 14899 18905 22392 26950
Interest Income 1042 1111 1192 1191 1437 1801 2515 3315 3673
Other Income 220 234 298 212 217 303 395 516 531
Interest expense 766 772 770 689 837 1085 1647 2000 2262
operating expense 191 222 283 314 365 406 469 571 677
operating profit 305 351 437 400 452 613 794 1260 1265
Cost of funds 8.30 7.24 5.88 4.54 4.73 5.11 6.32 6.32 6.11
Return on advances 4.37 4.34 4.38 4.81 4.18 4.51 4.49 6.1 5.44
Wages as % of Total expenses 12.63 14.02 16.92 18.53 19.02 17.47 12.82 12.35 12.45
Return on assets 0.81 0.86 0.90 0.54 1.28 1.38 1.34 1.48 1.15
CRAR 10.63 11.23 11.48 11.27 13.75 13.43 22.46 20.22 18.36
Net NPA ratio (on Net
advances) 8.60 4.95 2.89 2.21 0.95 0.44 0.23 0.3 0.48
103
Analysis of financials:
3.11 a-No of offices, 3.11b-No of employees, 3.11c-operating pft , 3.11d-Cost of funds
3.11e business/employee 3.11f Capital and reserves
104
3.11g- Advances 3.11h- Return on advances
3.11 i-Net NPA Ratio
Conclusion: Thus, it is found from the above analysis that the overall performance of the
banking sector has catapulted to greater heights in their contribution to the success story
of the banking sector.
