FUNDAMENTAL ANALYSIS OF BANKING INDUSTRY IN INDIAproject report Submitted to Punjab Technical University in partial fulfillment of the requirements for the degree of Master of Business Administration(MBA) By Amandeep kaur (University. Roll.NO.80103317102) Department of Business Management Guru Nanak Institute Of Management & Technology (GNIMT) Ludhiana-141002 2010 1 CERTIFICATE-1 This is to certify that the Project Report Entitled FUNDAMENTAL ANALYSIS OF BANKING INDUSTRY IN INDIA Submitted in partial fulfillment of the requirements for the degree of Master of Business Administration(MBA) By Amandeep kaur (University. Roll.NO.80103317102) Has been prepared under my supervision and guidance and no part of it has been submitted for the award of my other degree and that the work has been published in any journal ,magazine or book. Dr. Harmeet Kaur Lecturer GNIMT 2 CERTIFICATE-2 This project Report Of Amandeep kaur University Roll. No.(80103317102) Titled FUNDAMENTAL ANALYSIS OF BANKING INDUSTRY IN INDIA Is approved And is acceptable in Quality and form Dr. H S Singha Director GNIMT External Examiner Dr. Harmeet Kaur Lecturer GNIMT ACKNOWLEDGMENT 3 Concentration, dedication, hard work & application are essential but not the only factors to achieve the desired goal. There must be supplemented by guidance, assistance and cooperative of people to make it a success. Every complete successful assignment is the result of many hands joined together. .I am highly indebted to Dr. Harmeet Kaur Lecturer of GNIMT Ludhiana, who gave me weighty guidance in the study. It was really nice experience to work in his guidance and helping me in knowing practical things, which was my main objective, before entering the corporate world. I sincerely thank Dr. (Col.) H.S. Singha (Director, GNIMT) who has given me an opportunity to show my skills and bag a great source of experience. It is warmth and efforts of my teachers, friends and well wishers who has been a source of strength and confidence for me in the endeavor. Finally, yet importantly, we would like to thank almighty for blessing me to do and complete this project. Through this acknowledgement I would like to grab the opportunity to thank all those, who helped me from the start of the project, to its end. It is 4 Each article discusses related ratios. They focus on earnings. Book Value. The variable for the study is the banks that are Allahabad Bank. PNB. HDFC. I have broken them into separate articles. For convenience.Projected Earning Growth – PEG. growth. The Indian Banking sector has been witnessing bizarre changes in the terms of new product and services and stiff competition as well. Price to Earnings Ratio – P/E . Axis Bank. BOB. The study brings the comparative efficiency of the selected banks. and value in the market. The present study attempts to analyzing the profitability of the selected 10 banks. Price to Sales – P/S.IDBI. BOI. BOB. These are the most popular tools of fundamental analysis. The sort of IPOs that have been taking place in banking sector amazing. Earnings per Share – EPS. in all sectors have been gaining paramount: importance. warranting the investors to be continuously cautious of risk and return involved in the same. 5 . Dividend Payout Ratio.ABSTRACT Investment decisions . Price to Book – P/B. IOB. Return on Equity. SBI. 5. 3.CONTENTS Chapter 1. 6. Topic INTRODUCTION REVIEW OF LITERATURE RESEARCH METHODOLOGY RESULTS AND DISCUSSION SUMMARY REFERENCES APPENDIX VITAE Page 7-16 17 18-20 21-42 43-44 45 6 . 2. 4. The value comes from fundamental analysis. the market is a voting machine. to calculate its credit risk. production. futures contract. Managers may use fundamental analysis to determine future growth rates for buying high priced growth stocks. believing that 'it's hard to fall out of a ditch'. There are several possible objectives: • • • • to conduct a company stock valuation and predict its probable price evolution. but with the goal of making financial forecasts. so they lower their risk and probability of wipe-out. Fundamental analysis lets them find 'good' companies. its management and competitive advantages. bottom up analysis and top down analysis. Value investors restrict their attention to under-valued companies. creating opportunities for profits. not a weighing machine"[2]. Even 'bad' companies' stock goes up and down. interest rates. it focuses on the overall state of the economy.[1] The term is used to distinguish such analysis from other types of investment analysis. When applied to futures and Forex. Fundamental analysis is performed on historical and present data. to make a projection on its business performance. • Buy and hold investors believe that latching onto good businesses allows the investor's asset to grow with the business. or currency using fundamental analysis there are two basic approaches one can use. such as quantitative analysis and technical analysis. Managers may use fundamental analysis to correctly value 'good' and 'bad' companies. Contrarian investors distinguish "in the short run. earnings. Fundamental analysis allows you to make your own decision on value. Managers may also include fundamental factors along with technical factors into computer models (quantitative analysis). When analyzing a stock. to evaluate its management and make internal business decisions. and ignore the market.CHAPTER:-1 INTRODUCTION Fundamental analysis of a business involves analyzing its financial statements and health. Managers may also consider the economic cycle in determining whether conditions are 'right' to buy fundamentally suitable companies. Use by different portfolio styles Investors may use fundamental analysis within different portfolio management styles. and its competitors and markets. and management. • • • • • • 7 . Top-down and bottom-up Investors can use either a top-down or bottom-up approach. or cash flows of the company. such as GDP growth rates. foreign competition. price levels. a new career has been invented. Computer modelling of stock prices has now replaced much of the subjective interpretation of fundamental data (along with technical data) in the industry. inflation. The bottom-up investor starts with specific businesses. Its validity depends on the length of time you think the growth will continue. At some funds (called Quant Funds) the manager's decisions have been replaced by proprietary mathematical models Fundamental Analysis Tools 8 . interest rates. It can be quickly assessed using the debt to equity ratio and the current ratio (current assets/current liabilities). and entry or exit from the industry. The multiple accepted is adjusted for expected growth (that is not built into the model). Growth estimates are incorporated into the PEG ratio but the math does not hold up to analysis. The simple model commonly used is the Price/Earnings ratio. new equity issues and capital financing. It looks at dividends paid. regardless of their industry/region. Since about year 2000. The amount of debt is also a major consideration in determining a company's health. The determined growth rates (of income and cash) and risk levels (to determine the discount rate) are used in various valuation models. Only then he narrows his search to the best business in that area. He narrows his search down to regional/industry analysis of total sales. productivity. which calculates the present value of the future • • • dividends received by the investor. and energy prices. • The top-down investor starts his analysis with global economics. The foremost is the discounted cash flow model. the effects of competing products. Implicit in this model of a perpetual annuity (Time value of money) is that the 'flip' of the P/E is the discount rate appropriate to the risk of the business. operating cash flow. exchange rates. with the power of computers to crunch vast quantities of data. (Gordon model) earnings of the company. The earnings estimates and growth rate projections published widely by Thomson Reuters and others can be considered either 'fundamental' (they are facts) or 'technical' (they are investor sentiment) based on your perception of their validity. along with the eventual sale price. Under Fundamental framework following three types of analysis is undertaken Procedures The analysis of a business' health starts with financial statement analysis that includes ratios. including both international and national economic indicators. when it failed. became the State Bank of India. the other two being the Bank of Bombay and the Bank of Madras. This was one of the three presidency banks. with some of its assets and liabilities being transferred to the Alliance Bank of Simla. promoters opened banks to finance trading in Indian cotton. and value in the market. For many years the Presidency banks acted as quasi-central banks. The Allahabad Bank. I have broken them into separate articles. is the oldest Joint Stock bank in India. INDIAN BANKING INDUSTRY Banking in India originated in the last decades of the 18th century. • • • • • • • • • Earnings per Share – EPS Price to Earnings Ratio – P/E Projected Earning Growth – PEG Price to Sales – P/S Price to Book – P/B Dividend Payout Ratio Dividend Yield Book Value Return on Equity No single number from this list is a magic bullet that will give you a buy or sell recommendation by itself. When the American Civil War stopped the supply of cotton to Lancashire from the Confederate States. these numbers will become benchmarks to measure the worth of potential investments. Indian merchants in Calcutta established the Union Bank in 1839. which originated in the Bank of Calcutta in June 1806. For convenience. however as you begin developing a picture of what you want in a stock. growth. The three banks merged in 1921 to form the Imperial Bank of India. all three of which were established under charters from the British East India Company. Each article discusses related ratios. upon India's independence. The first banks were The General Bank of India which started in 1786. and which survived until 1913. which. The oldest bank in existence in India is the State Bank of India. and the Bank of Hindustan. both of which are now defunct. but it failed in 1848 as a consequence of the economic crisis of 1848-49. as did their successors.These are the most popular tools of fundamental analysis. which almost immediately became the Bank of Bengal. It was not the first though. They focus on earnings. established in 1865 and still functioning today. That honor belongs to the Bank of Upper India. which was established in 1863. With large 9 . The depositors lost money and lost interest in keeping deposits with banks. mostly owned by Europeans. Around five decades had elapsed since the Indian Mutiny. The presidency banks dominated banking in India but there were also some exchange banks and a number of Indian joint stock banks. most of the banks opened in India during that period failed. which has survived to the present and is now one of the largest banks in India. Indian Bank. Indians had established small banks. established in Lahore in 1895. Calcutta was the most active trading port in India. in the 1860s. Four nationalised banks started in this district and also a leading private sector bank. and so became a banking center. and another in Bombay in 1862. industrial and other infrastructure had improved. Indian joint stock banks were generally under capitalized and lacked the experience and maturity to compete with the presidency and exchange banks. Hence undivided Dakshina Kannada district is known as "Cradle of Indian Banking". A number of banks established then have survived to the present such as Bank of India. At least 94 banks in India failed between 1913 and 1918 as indicated in the following table: 10 . The Comptoire d'Escompte de Paris opened a branch in Calcutta in 1860. HSBC established itself in Bengal in 1869. banking in India remained the exclusive domain of Europeans for next several decades until the beginning of the 20th century. The exchange banks. then a French colony. saw the establishment of banks inspired by the Swadeshi movement. The fervour of Swadeshi movement lead to establishing of many private banks in Dakshina Kannada and Udupi district which were unified earlier and known by the name South Canara ( South Kanara ) district. From World War I to Independence The period during the First World War (1914-1918) through the end of the Second World War (1939-1945). Subsequently. Foreign banks too started to arrive. most of which served particular ethnic and religious communities. followed. divided by solid wooden bulkheads into separate and cumbersome compartments. The Swadeshi movement inspired local businessmen and political figures to found banks of and for the Indian community. This segmentation let Lord Curzon to observe. which later became the State Bank of India. The next was the Punjab National Bank. established in 1881 in Faizabad. The years of the First World War were turbulent. branches in Madras and Pondichery. concentrated on financing foreign trade. Corporation Bank. It failed in 1958. "In respect of banking it seems we are behind the times. Around the turn of the 20th Century. and the social. The first entirely Indian joint stock bank was the Oudh Commercial Bank. The Bank of Bengal. mainly due to the trade of the British Empire. Canara Bank and Central Bank of India. All these banks operated in different segments of the economy. and two years thereafter until the independence of India were challenging for Indian banking. the Indian economy was passing through a relative period of stability.exposure to speculative ventures. We are like some old fashioned sailing ship. particularly in Calcutta. Bank of Baroda." The period between 1906 and 1911. and it took its toll with banks simply collapsing despite the Indian economy gaining indirect boost due to war-related economic activities. This in turn resulted in a significant growth in the geographical coverage of banks. Every bank had to earmark a minimum percentage of their loan portfolio to sectors identified as “priority sectors”. In terms of ownership. Lakhs) 12 274 42 710 11 56 13 231 9 76 7 209 Paid-up Capital (Rs. The Government of India initiated measures to play an active role in the economic life of the nation. which is governed by the Banking Regulation Act of India. The first phase of financial reforms resulted in the nationalization of 14 major banks in 1969 and resulted in a shift from Class banking to Mass banking. India's independence marked the end of a regime of the Laissez-faire for the Indian banking. These banks have over 67. • • non-scheduled banks and scheduled banks. The manufacturing sector also grew during the 1970s in protected environs and the banking sector was a critical source. The next wave of reforms saw the nationalization of 6 more commercial banks in 1980. the State Bank of India and its group banks.000 branches spread across the country. commercial banks can be further grouped into nationalized banks. paralyzing banking activities for months. Lakhs) 35 109 5 4 25 1 Post-independence The partition of India in 1947 adversely impacted the economies of Punjab and West Bengal. Scheduled banks comprise commercial banks and the co-operative banks. Since then the number of scheduled commercial banks increased four-fold and the number of bank branches increased eight-fold.Years 1913 1914 1915 1916 1917 1918 Number of banks that Authorized failed capital (Rs. The Indian Banking industry. 11 . 1949 can be broadly classified into two major categories. and the Industrial Policy Resolution adopted by the government in 1948 envisaged a mixed economy. regional rural banks and private sector banks (the old/ new domestic and foreign). This resulted into greater involvement of the state in different segments of the economy including banking and finance. 1 percent share in credit. 3. These banks due to their late start have access to state-ofthe-art technology.000 ATMs.27 public sector banks (that is with the Government of India holding a stake). 3. they may be publicly listed and traded on stock exchanges) and 38 foreign banks.41 percent.85 percent respectively in credit during the year 2000. India has 96 scheduled commercial banks (SCBs) . 31 private banks (these do not have government stake. the State Bank Of India (SBI) and its 7 associates accounted for a 25 percent share in deposits and 28. In the 21st century. The 20 nationalized banks accounted for 53. Eight new private sector banks are presently in operation. The share of foreign banks (numbering 42). In the 1990s.After the second phase of financial sector reforms and liberalization of the sector in the early nineties.000 branches and 17. the Public Sector Banks (PSB) s found it extremely difficult to compete with the new private sector banks and the foreign banks.2% and 6. regional rural banks and other scheduled commercial banks accounted for 5.5% respectively BANKING STRUCTURE IN INDIA INDIAN ECONOMY The economy of India is the twelfth largest economy in the world by nominal value and the fourth largest by purchasing power parity (PPP). India is an emerging economic power with vast human and 12 .14 percent and 12.2 percent respectively in deposits and 8. with the private and foreign banks holding 18. They have a combined network of over 53. the country began to experience rapid economic growth.7 percent. following economic reform from the socialist-inspired economy of post-independence India. the public sector banks hold over 75 percent of total assets of the banking industry.9 percent and 12. a rating agency. The new private sector banks first made their appearance after the guidelines permitting them were issued in January 1993.5 percent of credit during the same period. During the year 2000. According to a report by ICRA Limited.2 percent of the deposits and 47. as markets opened for international competition and investment. Currently. which in turn helps them to save on manpower costs and provide better services. 5% respectively. Despite robust economic growth. accounting for about 52% of employment. cement. potatoes. tea. Major agricultural products include rice. approximately 80% of its population lives on less than $2 a day (PPP). water buffalo. continuing economic liberalisation has moved the economy towards a market-based system. protectionism. mining. OBJECTIVES OF THE STUDY • To take investment Decisions cautiously after studying risks involved in the same.1% as well as the return of a large projected fiscal deficit of 10. steel. The economy was characterised by extensive regulation. India's large service industry accounts for 62.3% of GDP which would be among the highest in the world. goats. Major industries include telecommunications. petroleum. ranked 139th in the world. India had established itself as the world's second-fastest growing major economy. Despite sustained high economic growth rate. up from 6% in 1985. India's total merchandise trade (counting exports and imports) was valued at $294 billion in 2006 and India's services trade inclusive of export and import was $143 billion. The labor force totals half a billion workers. cattle. India currently accounts for 1.932 is ranked 128th. Economists predict that by 2020.natural resources. India continues to face many major problems. 40% of children under the age of three are underweight and a third of all men and women suffer from chronic energy deficiency. The recent economic development has widened the economic inequality across the country. India's trade has reached a still relatively moderate share 24% of GDP in 2006. Previously a closed economy. up by a record 72% from a level of $253 billion in 2004. poultry and fish. food processing. sugarcane. wheat.6% of the country's GDP while the industrial and agricultural sector contribute 20% and 17. leading to pervasive corruption and slow growth. Even though the arrival of Green Revolution brought end to famines in India. while its per capita (PPP) of US$2. India's per capita income (nominal) is $1032. The service sector makes up a further 34%. chemicals. 13 . transportation equipment. sheep. India will be among the leading economies of the world.5% of World trade as of 2007 according to the WTO. and industrial sector around 14%. and public ownership. India's trade has grown fast. information technology enabled services and software. Thus. textiles. machinery. and a huge knowledge base. Since 1991. Agriculture is the predominant occupation in India. oilseed. India was under social democratic-based policies from 1947 to 1991. jute. According to the World Trade Statistics of the WTO in 2006. However. cotton. By 2008. A revival of economic reforms and better economic policy in 2000s accelerated India's economic growth rate. the year 2009 saw a significant slowdown in India's official GDP growth rate to 6. India's global economic engagement in 2006 covering both merchandise and services trade was of the order of $437 billion. • • • • • To acquire practical exposure of financial analysis of an enterprise. To know the Growth Trends of the selected Banks. To study the crucial Role of Banks in India’s Economic Development. CHAPTER:-2 14 . To know the soundness and Resilient of the Indian Banking Sector. To analyze the profitability position of the sample Banks. This paper Examines Financial trading from the aspect of security selection. “Share Market Analysis-Fundamental vs Technical Analysis”’. and Tan C. there has been a bigger push towards stock market research. the prediction of future profitability.REVIEW OF LITERATURE Literature review is a study involving a collection of literature in a selected area of research in which the researcher has limited experiences. This paper identified three major issues associated with practical implementation of the model. The objective was to identify companies that may be considered undervalued in the market with a view to investing when the time is right .” This paper has outlined the development of fundamental valuation model and reviewed related empirical work. the most common methods adoped to conduct research on the performance of stock market. This study Examined that fundamental analysis looks at the fundamental issues that drive the value of the particular company. now available online to any subscriber. In this study John Colnan (1994). First.“Enhancing Security Selection in the Australian Stock Market Using Fundamental Analysis and Neural Network”. Senior Research Analyst from SHAN Stockbroking’s Research Department provides some briefs pointers on what information to look for and how to make sense of what is available. Thus the review in the present study consist of the ones discussed below and they reveal that there are very scant studies in India emphasizing on the fundamental analysis of banking sector. Mark P. (2004) conducted a study entitled. It also helps the researchers to update the past data. These issues include its financial position. 15 .Vanstone B. and critical examination and comparison of them to have a better understanding. Jon Lynch conducted a study. in this study. They verified its descriptive validity regarding the mapping of accounting numbers into stock prices. data sources and results and identify the gaps. the length of appropriate forecast horizon.Bauman (1996) conducted a study named. Jim Burg(1999) Conducted a study – “Fundamental Analysis Using Internet”. and the determination of the appropriate discount rate. an accounting-based expression for a firm’s equity value has been developed into a rich theoretical framework. This article explains the difference between the fundamental and technical analysis. Jim Berg outlined more about what Fundamental analysis is and how it could be used. This paper also examines the practice of fundamental analysis and demonstrates how neural networks can be practically employed to enhance the fundamentalist selection process. its industry sector and the current economic environment. which reveals that in recent times. which is being conducted by private individuals. if any in the researches. “A Review of Fundamental Analysis Research in Accounting. Finnie G. This has been possible through the vast amount of information on the Australian stock market. balance sheets published by the companies and the websites of the companies. of Outstanding Equity Shares 16 . HDFC.CHAPTER:-3 RESEARCH METHODOLOGY 3. 3.3 SAMPLING PLAN A finite sample size of Ten Banks listed on the BSE. IOB.1 RESEARCH DESIGN The present study adopts an analytical and descriptive research design. The variables used in the analysis of the data are Earning Per Share (EPS) Operating Profit Margin (OPM) Net Profit Margin (NPM) Debt Equity Ratio (DER) Return On Equity (ROE) Price Earning Ratio (PER) Return On Assets (ROA) Earnings Per Share = Prifit After Tax – Preference Dividends No.IDBI. PNB.4 DATA ANALYSIS TECHNIQUE Ratio analysis: Ratios have been calculated for the past five years for the purpose of analysis. The data of the sample companies (for a period of five years from 2005 to 2009) has been collected from the annual reports and the balance sheet published by the companies and the websites of the companies. Axis Bank. 3. That are Allahabad bank. BOI. ICICI. Bank of Baroda. The major data of the economy has been collected from the Magazines and newspapers. 3.2 DATA COLLECTION METHODS The data has been collected from annual reports.Bankex) has been selected for the purpose of the study. SBI. 17 .5 LIMITATIONS OF THE STUDY Some limitations of the study are as follows it can be due to any reason: • • Absence of Standard universally Accepted Termology. Incorrect information or the incomplete information is also the limitation of the study because sometime companies does not provide the right information.Net Profit Margin = Profit After Tax * 100 Net Sales Debt Equity Ratio = Total Debt(Long term + Short term) Equity (Equity + Preference) Or Total Debt Net Worth Return On Equity = Profit After Tax – Preference Dividends * 100 Paid – Up Equity Capital + Reserves Or ROE = Worth Net Profit Margin*Total Asset Turnover Ratio*Total Assets to Net Dividend Payout Ratio = Earning Per Share Dividends Per Share Return On Assets = Earnings after Taxes and Preferred Dividends * 100 Total Assets 3. • • • • • • • Different methods are adopted by the different persons while analyzing the particular company or industry so Biasness is there in the result. Study is purely based upon the past performance of the companies and Indusry that can be misunderstood. Study does not baste on the facts it is just baste on the figures that can’t be true. In the study only few tools that the ratios are used on the basis of only that ratios one cannot judge the profitability or the efficiency of the companies or the industry. The present study adopts an analytical and descriptive research design. 18 . The study may not include all the factors that are important for the analysis. That is also one of the limitations. The study is not providing the fair knowledge about the investment and the risk involved in the same. 257 9.672 41.024 22.266 Real GDP growth (%) 4. sectoral growth that can be in the Agriculture.0 602 9. Per capita income. National Income. in this study the Inflation and GDP are taken as a base for the analysis. Understanding the Indian economy is more difficult than it ever was.655 31.581 27. GDP. It provides the various inputs on economic conditions of the country. The trend shows that there is a growth in the communication sector as compare to the other that are declining in the year 2008-09.4 911 .5 552 FY06 FY07 35.5 514 19 7. In this section we undertake an objective analysis of the economy. FDI.8 473 8.1 Source: CSO data on components of GDP (2004-05 base year) As shown in the table the combination of the Agriculture.CHAPTER:-4 ANALYSIS AND DISCUSSIONS ANALYSIS OF INDIAN ECONOMY The analysis of the economy is a very difficult task there are many factors that effects the indian economy that can be Inflation.4.8 456 3. Table no. communication or Manufacturing etc. Ministry of Finance and the Centre for Monitoring the Indian Economy (CMIE).811 24.4 Nominal GDP (US$431 5. The material is sourced legaly from the RBI. Analysis of Indian Economy Base Year: 1999-00 = FY01 FY02 FY03 FY04 FY05 100 Nominal GDP (Rs bn) 21. communication and Manufacturing. 8 9.7 54.3 5.9 9. Power.8 26.2 2.7 10.7 52.580 2.1 3.3 4.1 Primary Articles 15.7 9.5 0.1 12. 2.7 10.3 27.7 5.9 3.2 8.3 7.7 Sectoral composition of GDP (%) Agriculture and allied 23. Light 8.0 23.9 11 Inflation Annual Averages (%) FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 Wholesale Price Index All Commodities 12.1 2.4 10.7 Value added at constant prices (%) Agriculture Industry Services -0.9 and Lubricants Manufactured Products 10.3 50.1 8.7 activities Industry Services 26.6 2.2 20.840 US$) Pvt Consumption growth Final Expdt7.7 7.6 21.5 19.6 27.3 2.7 5.3 1.2 4.6 8.9 4.9 10.9 3.5 8.7 3.9 12.3 13.9 5.2 18.1 17.7 12.0 7.6 27.6 51.4 2.420 2.2 6.2 7.4 3.2 6.5 9.4 5.0 2.8 3.6 54.1 9.bn) Per capita GDP (US$) 438 GDP (PPP.8 2.3 5.6 6.0 1.930 - Per capita GNP (PPP.0 9.2 -7.7 8.1 7.0 26.2 25.6 9. US$ bn) 434 436 488 533 579 819 - 2.2 2.4 3.3 53.4 8.730 2.574 2.773 2.5 3.4 4.6 Consumer Price Index 20 .3 5.0 6.4 2.7 Fuel.9 8.7 6.4 4.4 28.7 3.4 10.4 52.375 2.6 6. 6 4.3 1.7 9.Industrial Workers 10. due to a strong domestic market.3 6.93 to a British Pound.1 3.9 3. information technology and other significant areas such as auto components. India's recently liberalized FDI policy (2005) allows up to a 100% FDI stake in ventures. The exchange rate as on 23 March 2010 is 45. pharmaceuticals.4 11.45 to a EUR. and 68. This was more than 21 .8 13.8 4.1 3.2 3.8 4. FDI inflows into India reached a record $19.8 3. according to the government's Secretariat for Industrial Assistance.9 11.4 . the government amended the rules to allow 100 per cent FDI in the construction business.3 4.50 to a United states dollar and on 10 January 2010 as high as Rupee 73. In March 2005. chemicals. India is a preferred destination for foreign direct investments (FDI).3 10.0 4. 61.7 3.7 Currency The Indian rupee is the only legal tender accepted in India.1 3.19 to a GBP. On 11 January 2010 Rupee went as high as 45.5 5.5 General Index 9.3 4.4 3.9 2.0 9.4 -0.4 3. apparels.1 Labourers (1986-87=100) Urban Non Manual Employees -9.0 3. A rising rupee also prompted Government of India to buy 200 tonnes of Gold from IMF.5 billion in fiscal year 2006-07 (April-March).General Index (1982=100) Agricultural/Rural 12. The Rupee hit a record low during early 2009 on account of global recession.5 9. and jewellery. Foreign direct investment in India As the fourth-largest economy in the world in PPP terms.40 INR the USD.6 5. India managed to bounce back sooner than the western countries. However.4 4.0 6.0 10. Since September 2009 there has been a constant appreciation in Rupee versus most Tier 1 currencies. India has strengths in telecommunication. down from 42.B (2009) Imports $232. The FDI inflow for 2007-08 has been reported as $24 billion and for 2008-09.O.5% in Sub-Saharan Africa. In 2003.3 billion F.double the total of US$7. The World Bank further estimates that a third of the global poor now reside in India.O. 24. This is much higher than the 80.2009) 22 . While the credit rating of India was hit by its nuclear tests in 1998.242 trillion which shows the growth at 67%. Goldman Sachs predicted that India's GDP in current prices will overtake France and Italy by 2020.4 a month). which is around 20 rupees or $0. 41. around $0. Income and consumption Percentage of population living under the poverty line of $1 (PPP) a day.30 billion (31Dec.1% in 1981. It was down from 86. This has been accompanied by increases in life expectancy.6% of its population is living below the new international poverty line of $1.2010 was 9. down from 59. during this period.5% in 1981. Germany.6%. In 2009 India purchased 200 Tons of Gold for $6. Inflation as on Feb.B (2009) FDI stock $156.8% in 1981. Exports $155 billion F. down from 92. currently 356.5 a day in nominal terms. it has been raised to investment level in 2007 by S&P and Moody's.7% of the population lives on less than $2.7 Billion from IMF as a total role reversal from 1991.35 rupees a month in rural areas (around $7.6% of the population lives on less than $2 a day (PPP). but is still even more than the 73. • • Interpretation: Since 1990 India has emerged as one of the fastest-growing economies in the developing world.25 in nominal terms) a day in 2005.25 (PPP) per day.8bn in the previous fiscal year.3% of the population earned less than $1 (PPP. By 2035.0% in Sub-Saharan Africa. the economy has grown constantly. As of 2005: • • 85. but with a few major setbacks. GDP in 2009 was $1. literacy rates and food security. it is expected to be above $35 billion.89% which is rising day by day. UK and Russia by 2025 and Japan by 2035.50 (PPP) a day. behind US and China. 75. it was projected to be the third largest economy of the world. present and future of the Banking Industry has outlined.of banks Total branches [a]urban branches [b]rural branches Population June1969 89 8262 3108 5154 64 June1979 75 30202 9024 21178 21 June1989 78 57699 13519 44281 14 March1999 301 64939 17914 47025 15 March2006 222 69417 23271 46146 16 March2007 -----73836 26792 47044 ----- 23 . The opportunities for this Industry are amazing and progress that will hopefully be made should invigate our country and others during this new Millennium. For this study the performance of the Scheduled Commercial Banks is analyzed. In this Industry Analysis. the past. Infrastructure Development of SCBs in India Indicators No. The study is based upon the analysis of the Indian banking industry. As we approach the 225th anniversary of the Country. our Nations financial industry has never seen a time such as this.INDUSTRY ANALYSIS Industry analysis involves the analysis of different growth opportunities in the economy in relative to the other industries. The US and other economies are growing and technology has changes how business is conducted. 4.94 23279 524310 523085 2672630 3311025 2417006 --73.There has been an increase in the urban as well as rural Branches from 3108 and 5154 in 1969 to 26792 and 47044 in 2007 respectively.1 19069 429731 2182203 1947100 73.71 29.But in later years the number of SCB’s has decreased due to the merger and acquisition taking place in the banking system.88 72.68 Infrastructure Development The number of SCB’s has increase from 89 in 1969 to 301 in 1999.5 ------19116 65.44 crore in june 1989 to Rs.1 7264 Table no.44 Table no.80 35.39 28093 33225 Source: Money and Banking Centre for Monitoring Indian Economy.per office[000] Deposite per office Interpretation --- --- 2.68 crore in 2007. Indian banking Industry has done remarkably well in developing its Infrastructure Total Credits and Deposits of SCBs Indicators Total deposits Demand deposits Time deposits Total Credits Credit / deposit ratio Deposit per capita(in rs. Interpretation 24 . The population per office has coe down from 64 in 1969 to 2006.87 417 ----89080 60.4.) June1969 June1979 June1989 March1999 March2006 March2007 March March 2008 2009 4646 28671 147854 722203 2109049 2611933 3196939 3834110 2104 2542 3599 77.2 10.32 1788 117423 604780 368837 51. This table reveals that the deposits per office has increased from 2. 35.3 364640 1744409 1507077 70. 1 13.3085crore in 2009. time deposits of banks have increased from Rs. The growth of the credit and deposits has therefore.While credit deposits ratio has decreased from 77.006crore and Rs. Rural credit has however decreased from 16.006crore in 2008. Total credits of SCBs has increased from Rs.4 19822 June1989 14553 16.17. The proportion of rural credit to Total Credit has also increased from 1.39 during the same period.37. 2. 55crore in June 1969 to Rs.5 to 72.542crore to Rs.2 in 1989 to the present level of 13.025crore in same period.599crore in 1969 to Rs.2 March1999 March2006 March2007 March2008 53909 199423 235704 323133 14.5 3609 June1979 1661 8. Demand deposits of SCB’s have increased from Rs. Interpretation The credit as well as rural credit has increased from Rs.23.This table shows that the analytical results of the credit and deposits by SCBs operating in INDIA. However . 24. 24.11.37 2417006 89361 382425 Table no.225crore.17crore in 1969 to Rs.17. Deposits per capita has increased from Rs.17 1513842 12. been significant over the period under study. The growth of time deposits in absolute term has been more than demand deposits.11 1947099 13.3.133crore in March 2008 respectively. 25 .37% in same period. 4. 33. Rural Credit by SCBs Indicators Rural credit (Rs.5% to 13.4.4 Source: Money and Banking Centre for Monitoring Indian Economy various issues.33. Crore) %Share of Rural Credit Total Credit June1969 55 1.3. 3609crore and Rs. 52. 78 23.891 Table no.42 30.99 March 2009 30.6 2009 67.013 2008 55.66 56. Both ratios have increased from 23.51 June 1989 25.07 June 1979 24.924 Source: The Economic Challanger Pp14 26 .Ratio as % of GDP and Investment in Government Security to Total Deposits Indicators Investment in govt.497 2.90 17. Item Gross NPA (Rs.07 % and 10.82 45.62 22. In Crore) Gross NPA(%) Net NPA(Rs. sector to deposit ratio (%) Credit/ GDP ratio (in %) June 1971 23.4.26 % in March 2009 respectively.51 22.26 March 2006 33.39 24.10 54.842 2.26 Table no. Securities to deposit ratio as % to GDP ratios are important indicators of growth of banking industry.14 % and 56.39 March 1999 31.5 Source: Money and Banking Centre for Monitoring Indian Economy various issues. In Crore) 1998 48.71 March 2008 29.4. Interpretation Investment in Govt.23 March 2007 29.90 % in June 1971 to 30. The Composition of NPAs of Scheduled Commercial Banks.306 14.91 51.14 10. 1 2005 0.4.It is a measure of great achievement for the RBI that as at end – march 2009. Stress test findings for Indian banks by the RBI proved’a strong resilience of the finacial system in the face of the severe externel contagion from the globel finacial crisis. for India and China. There is adequate evidence to show that over a period.5 1.306crore and 23.6 0.Reserve Bank Of India and banks themselves have resulted in making the indian banking sector not only sound enough but also resilient enough to face challenges produce both by internationel finacial system as well as the indion economic developments.and particulrarly during the last decade.9 2006 0.6 2007 1.7 0.0 0.3 1.sustained efforts by the governtment. The gross and net NPAs of Indian banks have increase from 48.7 Source: Indian Journal of Finance.0 2004 0.Interpretation The table shows the compositions of INDIAN BANKING INDUSTRY. But in term of ratio the gross NPA has decreased from 14.8 2003 0.all the Indian scheduled commercial banks had migrated to the simpler approaches available under the Basel 2nd framework. Interpretation This table shows the banking profitability as returns on assets .924crore in 2009 respectively. Banking Profitability:(Return of assets) (As Percentage) Country China India 2002 0.013crore in 1998 to 67.9 Table no.1 0.That is why the banking system in the India remained largely unaffected by the globel financial crisis which had forced the developed countries like USA and UK to bailout banks with large sovereignsupport.78 % in 1998 to 2.42 % in 2009. The table shows that the ROA ratio of INDIAN BANKING INDUSTRY has always been more than that for China. 27 .Pp360.497crore and 30. Bank Deposit as a proportion of GDP wasn56% from 29% in the end of March 2000.062 of the State Bank Group .651 ATMs which constituted of Branches of SCBs. In total there were 43. and 1721 UCBs. Besides .5%.4673 of old private sector banks. Public Sector Banks (PSBs) share was 71. bank intermediation continues to dominate the financial system.376 were of nationalized banks.204 of new private sector banks and 293 of the foreign bamks. • • • • 28 . Together with Co-Operative banks.3% in total advances and 69. 4. 19 nationalised banks and the IDBI Bank Limited). Urban Co-operative Banks (UCBs).NonBanking Financial Companies(NBFCs). 75.608 bank branches of which 39. The Ratio of assets of SCBs to GDP was 98. 16. Commercial Banks accounts for around 60% of the total assets of the financial sector.there are 4 local area banks. 86 RRBs. 7 new private sector banks and 31 foreign banks. rural financial institutions. Development Financial Institution (DFIs) and the Insurance sector.Banking Segment in the Indian Financial System: Notwithstanding significant expansion of the capital market over a period particularly during the last two decades. Housing Finance Companies(HFCs). At the end March 2009 • Scheduled Commercial Banks (SCBs) comprised 27 public sector banks(State Bank of India and its 6 associates. the banking sector accounts for nearly 70% of the total assets of Indian financial institutions. 76. There were 64.9% in total investment of SCBs.6% in total deposits. The financial sector in India has seven major components: Commercial banks.9% in total assets. 5 13.1 11.2 11.Soundness indicator of select bank groups: 2001 and 2009 (end March) Soundness Indicators Capital Adequacy: CRAR (capital to Risk Weighted Asset Ratio) All scheduled commercial banks(SCBs) Public Sector Banks(PSBs) National Banks New Private Sector Banks(NPSBs) Non Performing Assets(NPAs)NNPA(Net NPA to Net Advances Ratio) SCBs 6.20 1.1 2001 2009 29 .2 12.2 10.4 11.1 15.3 12. 0 1.3% by March 2009.7 1.2% to 12.16 5. CAPITAL ADEQUACY: The overall Capital to Risk weighted Assets Ratio (CRAR) for all the Scheduled Commercial Banks has increased to 13.4% as at end March 2001.40 12.3% during the decade. ASSET QUALITY: The most significant improvement indicating enhanced soundness of theIndian Banking System has been a sharp fall in the ratio of non performing assets (NPA) 30 .7 0. the two crucial parameters reflecting the soundness of the Banking institutions.72 2.8 2. have shown a significant improvement during the last dacade in Particular.8 6.3 2.61* .4.PSBs Nationalised Banks NPSBs Gross NPAs( GrossNPA to Gross Advances Ratio) SCBs PSBs Nationalised Banks NPSBs Operational Efficiency (Operating expenses to Assets Ratio) SCBs PSBs Nationalised Banks NPSBs Profitability Return On Equity(ROE) Return On Assets(ROA) *Low due to VRS payments by PSBs.76 1.5 1.1% in March 2001 to reach a level of 6.7 1.01 3. Table no. Subsequently it was more than 13.8 2.10 0. Leverage ratio for Indian banks risen from about 4.0% .3 11. For PSBs also the CRAR has also increased from 11.3 1.5 2.75 1.64 2.0 INTERPRETATION Capital Adequacy and asset quality of Indian banks.50 13.10 2.70 7.40 12.2% at the end March 2009 from 11.2 9. 4** to .6* 6.8% as at the end March 2009 from 2. it is important to note that even against a close possibility of significantslippage in NPAs as a consequence to international financial turmoil.3 % at end March 2009. The gross NPA ratio for SCBs touched an all time low at 2.2% during 2008-09 from 12. the slippage for Indian banks during the year 2008-2009 was moderate when compared to the problem faced by banks all over the World. The ROE of SCBs increased to 13.5% only during the decade.0* on Gross NPL to CRAR Gross Advances 3 4 2.72% to 1. using the data envelopment analysis (DEA) has shown that there has been a significant improvement in efficiency levels across the bank groups since the initiation of reforms. Benchmarking of Indian Banking Sector: Country 1 India Return Assetss 2 1. supervisory andprecautionary measures taken by the banking system.March 2009 from 6. For SCBs the NNPA ratio reduced to 1. INTERNATIONAL BANKING TURMOIL AND INDIAN BANKING Owing to some important regulatory.2% at end March 2001. a study in an RBI Report (Report on Currency and finace: 2006-08). COMMERCIAL SOUNDNESS: Return on Assets(ROA): The commercial soundness of Banking Systemgets reflected from the ROA which was 1. For PSBs also the decline is from 2. ROE defined as the ratio of net after tax to total equity capital. is used as an alternative measure of profitability reflecting efficiency with which capital is being uesd by bank.3* 13.0* 31 Provision to Capital NPL Assets 5 6 52.1% as at end. Finally. Finally.4% to 2.64 as at end March 2001. Thus the intermediation cost ratio for SCBs has fallen to 1. the Indian Banks could be insulated from the international banking and financial crises. EFFICIENCY: Operational efficiency of the Indian banking system as reflected by the ratio of operating expenses to total assets(intermediation cost ratio) has been consistently improving particularly for the PSBs.5% in 2007-08 despite the pressure on profitability owing to external circumstances.to Gross advances.0% during the decade.0% at the end 2008 and 1.02% at end March 2009. For PSBs also the reduction in the gross NPA ratio in sharp from 12. 39 45.5* 0.4. allowing for vital comparisons that are not possible when dealing with a single number.9 12.5* *: Data Pertains to 2008.41 83.75 28.9** 134.7* 5.73 35.83 81. ^: Data Pertain to 2006.9* 12.0* 12. Source: Trend and Progress in Indian Banking 2008-09(RBI 2009) An Overall Assesment A comprehencive self assessment of India’s Banking Sector by the Committee of Financial Sector Assessment (CFSA) in its report jointly prepared and released by the Government of India and RBI in March 2009.55 7.3** 1. The insight gained through financial analysis of multi year financial ratios will assist in gaining vital understanding of any given company or industry.63 11. asset liquidity.36 23.38 32 .70 11. Note: Data Pertains to 2009.56 14.3 54.08 6.7** Table no. **: Data Pertains to 2007.China UK Germany 1* -0.4 4.79 27.4 4.22 6.64 28. Based on : Global Financial Stability report. October 2009.96 2006 15. found that: “Banks have shown a healthy growth rate and an improvement in performance as is evident from capital adequacy.55 27.8 1.98 44.6* 2. earnings and efficiency indicators.6^ 56.” CHAPTER:-4 Company Analysis Financial ratio analysis provide for last 5-years plus most recent quarter in depth financial analysis.81 17. IMF. Earning per Share Allahabad Axis year bank Bank SBI HDFC ICICI IDBI BOB BOI PNB IOB 2005 15.83 14. A company with an erratic profitability record is perceived to have a higher degree of business.97 24.56%.46 14.31 14.4 86.26 57.26 48.74 6.84%. Net Profit Margin(%) Year 2005 2006 2007 2008 2009 Average Allahabad Axis bank Bank SBI HDFC ICICI IDBI BOB BOI PNB IOB 15.50 16.18 39.86 15.54 Table no. which of ICICI.81 8.79 10.77%. the NPM of Indian Overseas bank is 14.12 8.56 50. 11. IOB.82 18.82 32.76 8.67 17.77 34.47 11.18 13.94 106. IDBI is having the lowest NPM among the sample banks with 8.56 17.74 10.13 27. On average basis .57 10.22 11. 9.07 11. The data in the table reveals that HDFC outperformed other banks in terms of net profit margin. 14. PNB.94 22.87 14 13.27%.32%.77 in 2005.39 18.47 10.38 13.71 12.79 21.21% ) .Allahabad bank and HDFC are the most efficient companies in controlling indirect expenses in comparison to others.48 12.92 13.23 10.01 10.39 9.77 5.53 16.14 23.37 33.54% the highest followed by HDFC(14.68 13.44 14.82 17. and other banks. 9.65 12. 15. 14.51 64.31 14.3%.29 44.12 13. Axis bank.31%.81 13.59 37. IDBI and BOI are 16.21 Interpretation Investors or Analysts are primarily interested in the profitability and the Leverage position of the company.57 143.2 5 Table no.82 10.84 14. SBI.7 10. The highest NPM of HDFC is 17. BOB.41 61.2007 2008 2009 Average 16.4.51 7.22 10.06 11.08 13.03 11.29 29.21 12.94 36.89 13.08% respectively.39% and 5.45 26.94 9.33%.30 8.96 12.30 8.76 11.32 9.27 16.63 14. The EPS Show the profitability of the company.77 16.84 10. The measure of EPS can be analyzed that the SBI is having the higher profitability because the EPS is higher than from all other companies/ banks. 33 . In 2009 BOI is having the highest NPM and PNB is having the 2nd highest.43 13.69 12.65 12. but in average we can conclude that IOB .55 14.85 28.21 15. 13.4.99 60.87 52.78 8. Allahabad Bank.4 1 43.07 97.31 12.04 38.23 Interpretation Net Profit Margin indicates how much a company is able to earn after accounting for all the indirect expenses to every rupee of revenue.35 9.33 11.34 40.21 23. Allahabad Bank(14% ).63 100. 63 0.28 84.99 70. Thus HDFC and IOB are more efficient in generating yield over assets and hence their overall efficiency is better than other sample companies.64 91.63 0.95 1.23 2008 1.13 1.93 0.Return on Assets(ROA): Return on Assets measures the overall efficiency of the capital invested in business.88 65.79 1.50% in 2009.35 65.57 0.52 1.13 140.27 68.52% in 2006 and 2007.assets created by Banks from the deposits received.79 87.36 1.36% in the year 2005 and IDBI of .79 166.98 0.11% after the HDFC.17 65.87 89. The data in the Table indicate that BOI registered the lowest ROA of .59 66. The average ROA of HDFC is highest among the other banks.50 0.11 0.30 62.36 65.18 0.79 0.26 1.44 65.12 HDFC ICICI 64.40 Table no.51 74.83 65.49 BOB 51.10 238.80 1.08 83.04 0.67 68.32 2007 1. Axis Bank and SBI are bit lower. It indicate what the yield is for every rupee invested in assets.57 SBI 52.4.18 2009 0.55 72.99 0.98 1.47 71.20 1.22 0.94 68.01 0.60 70.33 60.39 69.27 IOB 53.72 0. HDFC has achieved the highest yield of 1.83 0.11 Average 1.04 1.28 0.21 73.29 2006 1.71 0.90 0.40 52.97 68. year 2005 2006 2007 2008 2009 Average Allahabad bank 50.77 0.47 PNB 56.23% and Allahabad Bank is having 1.34 1.66% in 2005 and 1.48 BOI 67.35 100.19 69. Credit Deposit Ratio: This ratio indicate the performance of loan.86 0.04 65.4.89 1.90 0.03 0.12 1.42 1.52 56.60 65.15 70.52 0.51 75.07 1.23 Interpretation Among all the Ten Banks.99 1.19 1.95 1.20 59.80 1.26 IDBI 73. BOI.99 66.97 70.51 0.85 1.44 77.15 Axis Bank 47.23 0. BOB.55 62.20 0.85 65.90 1.24 Allahabad Axis Year bank Bank SBI HDFC ICICI IDBI BOB BOI PNB IOB 2005 1.73 87.72 72.79 52.12 124.89 57.11 0. Table no.71 34 .98 0. The amount of the bank loans divided by the amounts of its deposits at any given time.08 63.78 63.94 1.93 1.11 73.66 1. While that of IDBI. IOB is having the 1.62 0.22 73.99 0. 92 7.98 2.4. Debt Equity Ratio: This ratio indicate a measure of a Company Financial Leverage.04 7.75 13.35 14.86% in 2007 and on average it is also having the highest DER as compare to other banks.62 9.18 13.92 10.97 13.44 20.71 13.27 10.75 4.10 14. Table shows that BOI is having the highest DER as 20.52 11.65 9. A company with the high Debt-Equity Ratio that mean the bank is more relying on borrowed funds.53 7. calculated by dividing its total liabilities by S/H equity.79. which are generally more costly than most type of the deposits.78 14.76 5.00 15.27 Interpretation Debt Equity Ratio helps in assessing the financial risk of a firm.25 8. This ratio indicate what proportion of equity and debt company is using to finance its assets.14 18.33 13.18 13.86 13.81 9.99 16.74 13.08 11.30 17. Year 2005 2006 2007 2008 2009 Average Allahabad Axis bank Bank SBI HDFC ICICI IDBI BOB BOI PNB IOB 17.96 16.79 17.1 15. CHAPTER:-5 FINDINGS 35 . Table shows that In 2006 IDBI is having the highest ratio that is 238.77 17.28 13. On the average IDBI is having the highest ratio it means it is relying on the borrowed funds.42 Table no. Axis Bank is having least ratio which represents that it is not more relying on the borrowed funds.44 17.42 15.Interpretation This ratio based on that higher the ratio the more the Bank is relying on borrowed funds.75 10.17 15.30 17.33 13.51 13.45 18.05 14.46 13. It means BOI is more relying on the borrowed funds.34 9.49 12.50 6.58 14.46 13.45 4.85 14.54 13.94 19.96 8.91 18. which are generally more Costly than most type of the deposits.54 6.19 16.99 10. Agriculture is the predominant occupation in India.Allahabad bank and HDFC are the most efficient companies in controlling indirect expenses in comparison to others. • India's per capita income (nominal) is $1032. the year 2009 saw a significant slowdown in India's official GDP growth rate to 6. Industry estimates indicate that out of 274 commercial banks operating in the country. Real GDP growth is Increasing that was 4. Industry and Company which are as follows: In 2007-08 Average Inflation was around 4.5% respectively. 223 banks are in the public sector and 51 are in the private sector By 2008.932 is ranked 128th.66%. India's large service industry accounts for 62.3% of GDP which would be among the highest in the world. HDFC and IOB are more efficient in generating yield over assets and hence their overall efficiency is better than other sample companies. However. High prices of oil were responsible for proportionatly high rate of inflation in2008-09. accounting for about 52% of employment. The industry is highly fragmented with 30 banking units contributing to almost 50% of deposits and 60% of advances. • while its per capita (PPP) of US$2. rate was lower than Av.There are some major findings related to the Economy.6% of the country's GDP while the industrial and agricultural sector contribute 20% and 17. The rupee hit a record low during early 2009 on account of global recession. but in average we can conclude that IOB . ranked 139th in the world. CHAPTER:-6 Concusion and Suggessions 36 . In 2007-08 fiscal high prices of food items were primary cause behind the high rate of inflation. of necessary commodities as well as various financial steps.4% in 2007-08 which is a good indicator. India had established itself as the world's second-fastest growing major economy. The Earning Per Share of SBI is substantially higher than the other banks for the data taken from 2005-09. Inflation of financial year 2006-07. That high rate of inflation had to be controlled by banning a no.1% as well as the return of a large projected fiscal deficit of 10.4% in 2001-02 and 9. In 2009 BOI is having the highest NPM and PNB is having the 2nd highest. product marketing and sales executive. Brokers who work for institutional investors are often called securities traders. probationary officer. it isn't going to stay in business. and customer service executive among others. mortgage loan underwriter. home loan officer.000 in 2006 from 2000. Banking sector investment in Information Technology is expected grow at 18% in 2007 from last year. loan manager. While some brokers like to practice with individual clients others work for institutions. Many prefer to work as dealers. Rural and semi-urban India is expected to account for 58. banking officer. Pension fund industry in India grew at a CAGR of 122.44% from 1999-00 to 200607. and in the long run no company can survive without them. Major Challenges and Issues Facing the Indian Banking Industry. accountant. Investment Banking and Retail Banking. It makes sense when you think about it. Opportunities The Banking sector is considered the most lucrative option in today’s job market. In the industry. a position in Treasury or Forex is considered right on top and this is followed by careers in Private Banking. loan processing officer. One could work in a variety of areas in banking industry including Recurring Deposit account.The most important factor that affects the value of a company is its earnings.33% of the insurance sector by 2010. 37 . personal loan officer. Security analysts are those who advise companies on floatation’s of shares as they are expected to have sound knowledge of capital markets. If a company never makes money. Public companies are required to report their earnings four times a year (once each quarter). Rural and semi-urban centers account for 66% of total bank branches. advisors and securities analysts. home loan agent.33% of the insurance sector by 2010. loan officer.99% to reach 20. The ATM outlets in India increased at a CAGR of 53. Bankable household India is anticipated to grow at a CAGR of 28. assessor. some of the important jobs include that of a stockbroker who is essentially a person who buys and sells securities on behalf of individuals and institutions for some commission.10% during 2007-2011. Earnings are the profit a company makes. • • • • • • • Rural and semi-urban India is expected to account for 58.In the Financial Services. SUGGESTIONS Some suggestions through which the banking industry can improve their performance more that are: • • • • • • • • • • Improve governance. Raise educational achievement Increase quality and quantity of universities Control inflation Introduce a credible fiscal policy Liberalize financial markets Increase trade with neighbors Increase agricultural productivity Improve infrastructure and Improve environmental quality. 38 . CHAPTER:-6 SUMMARY Fundamental analysis of the Indian Banking Indusrty the Study is based on the Analysis of three things that are: • • • Economy Analysis Industry Analysis Company Analysis Economy Analysis includes the study of GDP. METHODOLOGY The present study adopts an analytical and descriptive research design. Industry analysis includes the Study of Capacity. The data of the sample companies (for a period of five years from 2005 to 2009)has been collected from the annual reports and the balance sheet published by the companies and the websites of the companies. That are 39 . Govt. To study the crucial Role of Banks in India’s Economic Development. Money Supply and Growth Rate. Market Position. To analyze the profitability position of the sample Banks. To know the Growth Trends of the selected Banks. OBJECTIVES OF THE STUDY • • • • • • To take investment Decisions cautiously after studying risks involved in the same. To acquire practical exposure of financial analysis of an enterprise. policy and Changes etc. To know the soundness and Resilient of the Indian Banking Sector. Inflation Rate. A finite sample size of Ten Banks listed on the National Stock Exchange(NSE) has been selected for the purpose of the study. Company analysis includes the Study of Financial and Non Finacial. rbi.com.org and other company websites.moneycontrol. www. Ratios have been calculated for the past five years for the purpose of analysis.com. www.• • • • • • • • • • Allahabad Bank Axis Bank SBI HDFC ICICI IDBI BOB BOI PNB IOB DATA COLLECTION Financial Statements are thr raw data collected from various websites such as www. Communication and manufacturing for study of past performance of economy with context to GDP. Inflation and money supply etc. 40 .investopedia. TOOLS USED FOR ANALYSIS Study of the three major factors of indian economy that are Agriculture. Bauman (1996) conducted a study named.worldbank.BIBLIOGRAPHY Jim Burg(1999) Conducted a study – “Fundamental Analysis Using Internet”.com www. “Share Market Analysis-Fundamental vs Technical Analysis”’.rbi. 41 .” www. Mark P.org www. “A Review of Fundamental Analysis Research in Accounting.org.countrydata.com www.moneycontrol.developmentgateway.investopedia.com www. Jon Lynch conducted a study.com www. 42 .
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