A REPORT ON

PUBLIC SECTOR BANKING INDUSTRY

Submitted to
Dr. PADMA
HOD, NIT Warangal,
SCHOOL OF MANAGEMENT

Submitted by
BHANU PRAKASH SHARMA G (158906)
G NIKHILA VARMA (158915)

CONTENTS
S. No.

Topic

Page
No.

Introduction

02

Financial Structure

02

Structure of Indian Banking System

03

Company Overview

04

Deposit Growth

06

Revenue Growth

07

Sales Growth

08

Market Capitalization

09

Profit after Tax analysis

10

10

Conclusion

12

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1. INTRODUCTION :
The Indian Banking industry, which is governed by the Banking Regulation Act of India, 1949
can be broadly classified into two major categories, non-scheduled banks and scheduled
banks. Scheduled banks comprise commercial banks and the co-operative banks. In terms
of ownership, commercial banks can be further grouped into nationalized banks, the State
Bank of India and its group banks, regional rural banks and private sector banks (the old/
new domestic and foreign). These banks have over 84,000 branches spread across the
country. Public-sector banks control nearly 80 percent of the market, thereby leaving
comparatively much smaller shares for its private peers. As of November 11, 2015, 192.1
million accounts had been opened under Pradhan Mantri Jan Dhan Yojna (PMJDY) and
165.1 million RuPay debit cards were issued. These new accounts have mustered deposits
worth Rs 26,819 crore (US$ 4 billion).
2. FINANCIAL STRUCTURE:
The Indian financial system comprises the following institutions:
1. Commercial banks
a. Public sector

2. Financial institutions

b. Private sector

a. All-India financial institutions (AIFIs)

c. Foreign banks

b. State financial corporations (SFCs)

d. Cooperative institutions

c.
State
industrial
corporations (SIDCs)

(i) Urban cooperative banks

development

(ii) State cooperative banks

(iii) Central cooperative banks
3. Nonbanking financial companies (NBFCs)

4. Capital market intermediaries

Banks play a vital role in the economic development of a country; their performance
undertakes or determines the pace of development of economy. Mostly they engage in
the money transactions including accepting deposits from the customers and lending
them to the needy ones in the form of loans. The last two decades witnessed many
positive developments in the Indian banking sector, especially after arrival of Private
Banks. Some banks established an outstanding track record of innovation, growth and
value creation. The financial performance of banking sector always puts an impact on
the performance of the economy. Hence, the stability of banking sector is vital for the
growth of any economy. The growth of banks mainly depends on its conventional
business services like deposits and loans. In order to grow and gain the faith of
shareholders, organizations should try to improve the long-term financial performance
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and create wealth for the shareholders. Wealth creation is considered as imperative. The
key to creating wealth is adding value. All financial success, especially business
success, is based on adding value. Adding value is the way that all fortunes are made.
3. STRUCTURE OF THE INDIAN BANKING SYSTEM:

Analysis:
As depicted in the above figure, out of 26 public sector banks 5 banks were considered
for the study and analysis. The 5 public sector banks are State Bank of India (SBI), Bank
of Baroda (BOB), Punjab National Bank (PNB), Canara Bank and Central Bank of India
(CBI). Some of the performance indicators were considered for the analysis such as
Deposit growth, Revenue growth, Sales growth, Market Capitalization and Profit after
Taxes (PAT). The analysis has been made with the help of data collected from the
Capitaline software. The Y-o-Y growth, overall growth and total amount (in Cr.) for the
respective banks have been tabularized and the plots have been shown in the following
report.

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4. Company Overview :
(i)

State Bank of India (SBI) :

State Bank of India is the king among all public sector banks in India and leads
this front. Incorporated in the year 1955, State Bankof India presently has more
than 13,000 branches in the countryand over 190 foreign offices in the world.
State Bank of India is known for technologically advanced products and recently,
SBI has launched SBIinTouch cards, which allow users to make payments by
simply waving or touchingcard near contactless readers. These cards uses Near
Field Communication Technology, in whichcard establish communication with
contactless reader present in its proximity.
Headquartered in Mumbai, State Bank of India is the first bank to install ATM in
Dras, a town located in Jammu and Kashmir. Apart from banking, SBI also
provides services in fields like LifeInsurance, General Insurance and Capital
Markets through its subsidiaries.
Market Capitalization: Rs 2, 10,302Crore (As on 2nd June 2015).

(ii)

Bank of Baroda (BOB) :

Bank of Baroda is the next public sector bank and stand at 2 nd position in the list
of top 10 best public sector banks in India 2015.Incorporated in the year 1908,
Bank of Baroda has more than 100branches and offices in 25 countries in the
world.
Winner of Excellence in Banking (PSU Sector) Award, Bank of Baroda has a
workforce of more than 49,000 employees. Also, Bank of Baroda is present
widely across the nation with more than5,000 branches.
Market Capitalization: Rs 36,194 Crore (As on 2nd June 2015)

(iii)

Punjab National Bank (PNB) :

Punjab National Bank, which came into existence in the year 1894. Punjab
National Bank has a strongpresence with more than 6,000 branches in the
country and 5 overseas branches.Headquartered in New Delhi, Punjab National
Bank has a workforce of more than 62,000employees. Winner of Golden
Peacock Award, Punjab National Bank performs Corporate Social Responsibility
by organising blood donation camps, medical camps and tree plantation.
Market Capitalization: Rs 28,448 Crore (As on 2nd June 2015)

(iv)

Canara Bank :
Canara Bank is another leading public sector bank and placed at 4th in the list of
top 10 best public sectors. Headquartered in Bangalore, Canara Bank has 8
subsidiaries operating in different domains and sponsors regional rural banks.
Also, Canara Bank in partnership with UNEP (United Nations Environment
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Programme) started solar loan programme to provide financial assistance for

installing solar power systems in homes in South India.
Market Capitalization: Rs 17,555 Crore (As on 2nd June 2015)
(v)

Central Bank of India (CBI) :

Central Bank of India is the next public sector bank, which was started in the year
1911 and among the oldest banks in India.Headquartered in Mumbai, Central
Bank of India has a workforce ofmore than 40,000 employees.Central Bank of
India owns more than 4,000 branches in the country and among the first banks
inIndia to launch credit cards in India.
Market Capitalization: Rs 17,445 Crore (As on 2nd June 2015)

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5. DEPOSIT GROWTH
As on March, 2015, Scheduled Commercial Banks showed a y-o-y growth of 11.4% as
compared to 16.05% a year ago.
The following table shows the deposits growth percentage for public sector banks
covered in our study.

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6.

REVENUE GROWTH:
Revenue Growth is used to measure how fast a company's business is expanding. While
revenue growth tends to fluctuate from fiscal year to fiscal year and fiscal quarter to fiscal
quarter, investors look for trends in revenue growth as a means of gauging the
company's growth over prescribed periods of time.
As on March, 2015, the public sector banks showed a y-o-y growth of 9.70% as
compared to 15.79% a year ago.

7. SALES GROWTH:

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Sales growth shows the amount by which the average sales volume of a company's
products or services has grown, typically from year to year.
As on March, 2015, Scheduled Commercial Banks showed a y-o-y growth of 10.4% as
compared to 11.8% a year ago.

8. MARKET CAPITALIZATION:

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Market capitalization (market cap) is the total market value of the shares outstanding of a
publicly traded company; it is equal to the share price times the number of shares
outstanding.
As on March, 2015, a large growth in the market cap has been observed for the year
2015 as compared to the previous years which have been tabularized as below.

9. Profit after Tax (PAT) :

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The overall Profit after Tax (PAT) showed a muted growth of 14.6% (y-o-y) during FY15
as compared to the fall during FY14. PAT declined in FY14 as compared to FY13 due to
loss reported by some of the banks.

Profitability has taken a hit for public sector banks due to margin compression and asset
quality deterioration. Public sector banks under study showed almost no growth in PAT
during FY15 as compared to de-growth of 27% during FY14. De-growth in PAT in FY14
was driven by loss reported by two public sector banks. Public sector banks other than
the State Bank of India (SBI) group reported de-growth of 9.1% during FY15 as
compared to de-growth of 29% during FY14.
To summarize, the profitability of the public sector banks continued to remain impacted
on account of slowing economy leading to weakening of income profile led by low
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advances growth, pressure on margins and higher provisioning and interest reversals on
account of weakening asset quality.
Governments Indradhanush SchemeFocus on revival of PSU banks
The government has announced the Indradhanush framework which is a comprehensive
scheme for revival of PSU banks. The frameworks focus is at providing capital support,
improving the governance standards and designing an appropriate method for
performance measurement of PSU banks.
The Government has announced a capital infusion of Rs.70,000 crore for PSU banks
over the next four years with Rs.25,000 crore to be infused in FY16. This comes as a
positive move since the budgeted allocation of Rs.7,940 crore was inadequate. The
following table captures the bank wise capital infusion plan of the government for FY16.
Bank

Amount (Rs. crore)

State Bank of India

5,531

Bank of India

2,455

IDBI Bank

2,229

Bank of Baroda

1,786

Punjab National Bank

1,732

Canara Bank

947

Indian Overseas Bank

2,009

Union Bank of India

1,080

Corporation Bank

857

Andhra Bank

378

Bank of Maharashtra

394

Allahabad Bank

283

Dena Bank

407

Total

20,088

Current infusion plan may help in providing some growth capital for the banks in FY16;
however, given the fact that the provision coverage ratio is low for most of the PSU
banks, additional capital will be required to provide sufficient cover for stressed assets.
The scheme also stipulates the setting of a Bank Board Bureau which will oversee the
appointments of Whole-time Directors and Non-Executive Chairman of PSBs and also
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actively participate in formulating strategies for growth and development. There is also
an assurance that there would be no interference from the government in the functioning
of banks. These steps would go a long way in improving governance standards of PSU
banks.
The Indradhanush framework has revamped the methodology to measure the
performance of PSU banks. Under this model, banks would be evaluated based on
quantitative parameters like efficient use of capital, growth/diversification of business,
NPA management and financial inclusion. They would also be assessed on qualitative
parameters like improvement in external rating, initiative taken to improve asset quality,
efforts made to conserve capital and HR initiatives for skill development and talent
management. Moreover, the performance bonus of CEOs will be linked to the
performance of banks on these parameters which would motivate banks to improve their
performance on all the key parameters.
10. Conclusion
The Indian economy is on the brink of a major transformation, with several policy
initiatives set to be implemented shortly. Positive business sentiments, improved
consumer confidence and more controlled inflation are likely to prop-up the countrys the
economic growth. Enhanced spending on infrastructure, speedy implementation of
projects and continuation of reforms are expected to provide further impetus to growth.
All these factors suggest that Indias banking sector is also poised for robust growth as
the rapidly growing business would turn to banks for their credit needs.
Also, the advancements in technology have brought the mobile and internet banking
services to the fore. The banking sector is laying greater emphasis on providing
improved services to their clients and also upgrading their technology infrastructure, in
order to enhance the customers overall experience as well as give banks a competitive
edge.
The report shows the growth rates and other performance indicators of various public
sector banks. The State Bank of India (SBI) still is on the top of chart in terms of growth
rate improvement. The Government initiatives such as Pradhan Mantri Jan Dhan Yojna
(PMJDY) and other schemes may help in improving the deposits growth and net shares
of the banks which results in the growth of the industry.

11. References
(i) http://www.capitaline.com
(ii) http://www.moneycontrol.com/
(iii) http://www.ibef.org/
(iv) https://www.rbi.org.in/
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