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INTRODUCTION AND DESIGN OF THE STUDY Chapter-1

1.1 Introduction to Study

In todays scenario, the banking sector is one of the fastest growing sector and a lot of funds are invested in Banks. Also todays banking system is becoming more complex. So, we thought of evaluating the performance of the banks. There are so many models of evaluating the performance of the banks, but we have chosen the CAMEL Model to evaluate the performance of the banks. We have found that CAMEL is the best model because it measures the performance of the banks from each parameter i.e.

C-Capital A-Assets M-Management E-Earnings L-Liquidity

After deciding the model, we have chosen three banks from the three public sectors banks, i.e. Vijaya Bank, United Bank of India Bank of Maharashtra.

Then we have collected annual reports of the consecutive three years i.e. 2010 to 2012 of all the banks. And we have calculated ratios for all the banks and interpreted them.

1.2 PROBLEM STATEMENT

In the recent years the financial system especially the banks have undergone numerous changes in the form of reforms, regulations & norms. The attempt here is to see how various ratios have been used and interpreted to reveal a banks performance and how this particular model encompasses a wide range of parameters making it a widely used and accepted model in todays scenario

1.3 NEED FOR THE STUDY

The ultimate need for the study is to find the performance level of three public sector bank (Vijay bank, united bank of India, Bank of Maharashtra) using CAMEL Framework as a Tool. Through this project the Company is made aware of the areas in which they are effective and the areas in which they need to lay more emphasis.

1.4 SCOPE OF THE STUDY

This study was done using CAMEL Framework to the study of banking performance of public sector bank in India. The study covers three public sector bank only(Vijay bank, united bank of India, Bank of Maharashtra). Financials and other data regarding the bank financials are based on the yearly annual reports. This study also suggests that the bank should try formulating their future course of action.

1.5 OBJECTIVE OF THE STUDY

To study CAMEL Model Analysis of three public Sector Banks in India. To understand the financial performance of the banks. To apply CAMELS model of ranking on selected banking institutions & analyze the selected banks. To analyze the banks performance through CAMEL model and give suggestion for improvement if necessary

1.6 RESEARCH METHODOLOGY

Here, we are under going to have analytical research i.e. analysis of banks financial statements which will make us understand the position of one bank in comparison of another and their financial position.

1.6.1 RESEARCH DESIGN

AREA OF SURVEY: The survey will be done for three banks. The study environment will be the Banking industry. PLAN OF ANALYSIS: Here, we will be using financial statements of the banks in order to calculate different ratios required for camel rating system as it considers all areas of banking operations and considered to be the best available method for evaluation bank performance and banks health.

1.6.2 DATA COLLECTION METHOD

1.6.2.1 SECONDARY DATA The secondary data have been collected from the audited financial statements of the company and through the accounting records maintained by them (banks balance sheet and banks income statement).

1.6.3 LIMITATIONS OF STUDY

The study was limited to three banks only. Time and resource constrains. The method discussed pertains only to banks though it can be used for performance evaluation of other financial institutions. The study was completely done on the basis of ratios calculated from the balance sheets. It was not possible to get a personal interview with the top management employees of all banks under study.

REVIEW OF LITERATURE Chapter-2

2.1 CONCEPTUAL REVIEW

CAMEL FRAMEWORK

C A

CAPITAL ADEQUACY ASSET QUALITY

M MANAGEMENT E L
EARNINGS LIQUIDITY

CAPITAL ADEQUACY It is important for a bank to maintain depositors confidence and preventing the bank from going bankrupt. It reflects the overall financial condition of banks and also the ability of management to meet the need of additional capital. The following ratios measure capital adequacy: Capital Adequacy Ratio (CAR): The capital adequacy ratio is developed to ensure that banks can absorb a reasonable level of losses occurred due to operational losses and determine the capacity of the bank in meeting the losses. As per the latest RBI norms, the banks should have a CAR of 9 per cent. Debt-Equity Ratio (D/E): This ratio indicates the degree of leverage of a bank. It indicates how much of the bank business is financed through debt and how much through equity.

Advance to Assets Ratio (Adv/Ast): This is the ratio indicates a banks aggressiveness in lending which ultimately results in better profitability. Government Securities to Total Investments (G-sec/Inv): It is an important indicator showing the risk-taking ability of the bank. It is a banks strategy to have high profits, high risk or low profits, low risk.

ASSETS QUALITY The quality of assets is an important parameter to gauge the strength of bank. The prime motto behind measuring the assets quality is to ascertain the component of non-performing assets as a percentage of the total assets. The ratios necessary to assess the assets quality are: Net NPAs to Total Assets (NNPAs/TA): This ratio discloses the efficiency of bank in assessing the credit risk and, to an extent, recovering the debts. Net NPAs to Net Advances (NNPAs/NA): It is the most standard measure of assets quality measuring the net non-performing assets as a percentage to net advances.

Total Investments to Total Assets (TI/TA): It indicates the extent of deployment of assets in investment as against advances. Percentage Change in NPAs: This measure tracks the movement in Net NPAs over previous year. The higher the reduction in the Net NPA level, the better it for the bank.

MANAGEMENT EFFICIENCY Management efficiency is another important element of the CAMEL Model. The ratio in this segment involves subjective analysis to measure the efficiency and effectiveness of management. The ratios used to evaluate management efficiency are described as: Total Advances to Total Deposits (TA/TD): This ratio measures the efficiency and ability of the banks management in converting the deposits available with the bank excluding other funds like equity capital, etc. into high earning advances. Profit per Employee (PPE): This shows the surplus earned per employee. It is known by dividing the profit after tax earned by the bank by the total number of employees.

Business per Employee (BPE): Business per employee shows the productivity of human force of bank. It is used as a tool to measure the efficiency of employees of a bank in generating business for the bank. Return on Net worth (RONW): It is a measure of the profitability of a bank. Here, PAT is expressed as a percentage of Average Net Worth.

EARNING QUALITY The quality of earnings is a very important criterion that determines the ability of a bank to earn consistently. It basically determines the profitability of bank and explains its sustainability and growth in earnings in future. The following ratios explain the quality of income generation. Operating Profit to Average Working Funds (OP/AWF): This ratio indicates how much a bank can earn profit from its operations for every rupee spent in the form of working fund. Percentage Growth in Net Profit (PAT Growth): It is the percentage change in net profit over the previous year.

Net Profit to Average Assets (PAT/AA): This ratio measures return on assets employed or the efficiency in utilization of assets.

LIQUIDITY Risk of liquidity is curse to the image of bank. Bank has to take a proper care to hedge the liquidity risk; at the same time ensuring good percentage of funds are invested in high return generating securities, so that it is in a position to generate profit with provision liquidity to the depositors. The following ratios are used to measure the liquidity: Liquid Assets to Demand Deposits (LA/DD): This ratio measures the ability of bank to meet the demand from depositors in a particular year. To offer higher liquidity for them, bank has to invest these funds in highly liquid form. Liquid Assets to Total Deposits (LA/TD): This ratio measures the liquidity available to the total deposits of the bank.

Liquid Assets to Total Assets (LA/TA): It measures the overall liquidity position of the bank. The liquid asset includes cash in hand, balance with institutions and money at call and short notice. The total assets include the revaluation of all the assets.

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2.2 Research Review

In the process of continuous evaluation of the banks financial performance both in public sector and private sector, the academicians, scholars and administrators have made several studies on the CAMEL model but in different perspectives and in different periods.

1. Cole et al Published in: A CAMEL Ratings Shelf Life. Year of publication: 1995 Content: Cole conducted a study on A CAMEL Rating's Shelf Life and their findings suggest that, if a bank has not been examined for more than two quarters, off-site monitoring systems usually provide a more accurate indication of survivability than its CAMEL rating.

2. Godlewski Published in: Banks Default Modelisation: An Application to Banks from Emerging Market Economies. Journal of Social Science Research Network. Year of publication: 2003 Content: tested the validity of the CAMEL rating typology for bank's default modification in emerging markets. He focused explicitly on using a logical model applied to a database of defaulted banks in emerging markets.

3. Said and Saucier Published in: Liquidity, solvency, and efficiency: An empirical analysis of the Japanese banks distress. Journal of Oxford. Year of publication: 2003 Content: examined the liquidity, solvency and efficiency of Japanese Banks using CAMEL rating methodology, for a representative sample of Japanese banks for the period 1993- 1999, they evaluated capital adequacy, assets and management quality, earnings ability and liquidity position.

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4. Prasuna Published in: Performance Snapshot 2003-04, Chartered Financial Analyst. Year of Publication: 2003 Content: analyzed the performance of Indian banks by adopting the CAMEL Model. The performance of 65 banks was studied for the period 2003-04. The author concluded that the competition was tough and consumers benefited from better services quality, innovative products and better bargains.

5. Derviz et al Published in: Predicting Bank CAMEL and S&P Ratings: The Case of the Czech Republic. Emerging Markets, Finance & Trade. Year of Publication: 2008 Content: investigated the determinants of the movements in the long term Standard & Poors and CAMEL bank ratings in the Czech Republic during the period when the three biggestbank s, representing approximately 60% of the Czech banking sector's total assets, were privatized (i.e., the time span 1998-2001).

6. Bhayani Published in: Performance of the New Indian Private Sector Banks: A Comparative Study. Journal of Management Research. Year of Publication: 2006 Content: analyzed the performance of new private sector banks through the help of the CAMEL model. Four leading private sector banks Industrial Credit & Investment Corporation of India, Housing Development Finance Corporation, Unit Trust of India and Industrial Development Bank of India - had been taken as a sample.

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7. Gupta and Kaur Published in: A CAMEL Model Analysis of Private Sector Banks in India. Journal of Gyan Management. Year of publication: 2008 Content: conducted the study with the main objective to assess the performance of Indian Private Sector Banks on the basis of Camel Model and gave rating to top five and bottom five banks. They ranked 20 old and 10 new private sector banks on the basis of CAMEL model. They considered the financial data for the period of five years i.e., from 2003-07.

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PROFILE Chapter-3

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3.1 INDUSTRY PROFILE

The Bank The word bank means an organization where people and business can invest or borrow money; change it to foreign currency etc. According to Halsbury A Banker is an individual, Partnership or Corporation whose sole pre-dominant business is banking, that is the receipt of money on current or deposit account, and the payment of cheque drawn and the collection of cheque paid in by a customer. The Origin and Use of Banks The Word Bank is derived from the Italian word Banko signifying a bench, which was erected in the market-place, where it was customary to exchange money. The Lombard Jews were the first to practice this exchange business, the first bench having beenestablished in Italy A.D. 808. Some authorities assert that the Lombard merchants Commenced the business of money-dealing, employing bills of exchange as remittances, about the beginning of the thirteenth century. About the middle of the twelfth century it became evident, as the advantage of coined money was gradually acknowledged, that there must be some controlling power, some corporation which would undertake to keep the coins that were to bear the royal stamp up to a certain standard of value; as, independently of the sweating which invention may place to the credit of the ingenuity of the Lombard merchants- all coins will, by wear or abrasion, become thinner, and consequently less valuable; and it is of the last importance,not only for the credit of a country, but for the easier regulation of commercialtran sactions, that the metallic currency be kept as nearly as possible up to the legal standard. Much unnecessary trouble and annoyance has been caused formerly by negligence in this respect. The gradual merging of the business of a goldsmith into a bank appears to have been the way in which banking, as we now understand the term, was introduced into England; and it was not until long after the establishment of banks in other countries-for state purposes, the regulation of the coinage, etc. that any large or similar institution was introduced into England. It is only within the last twenty years that printed cheques have been in use in that establishment. First commercial bank was Bank of Venice which was established in1157 in Italy. Nature of the Banks Banks safeguard money and valuables and provide loans, credit, and payment services, such as checking accounts, money orders, and cashiers checks. Banks also may offer investment and insurance products, which they were once prohibited from selling. As a variety of models for cooperation and integration among finance industries have emerged, some of the traditional

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distinctions between banks, insurance companies, and securities firms have diminished. In spite of these changes, banks continue to maintain and perform their primary roleaccepting deposits and lending funds from these deposits. There are several types of banks, which differ in the number of services they provide and the clientele they serve. Although some of the differences between these types of banks have lessened as they begin to expand the range of products and services they offer, there are still key distinguishing traits. Commercial banks, which dominate this industry, offer a full range of services for individuals, businesses, and governments. These banks come in a wide range of sizes, from large global banks to regional and community banks. Global banks are involved in international lending and foreign currency trading, in addition to the more typical banking services. Regional banks have numerous branches and automated teller machine (ATM) locations throughout a multi-state area that provide banking services to individuals. Banks have become more oriented toward marketing and sales. As a result, employees need to know about all types of products and services offered by banks. Community banks are based locally and offer more personal attention, which many individuals and small businesses prefer. In recent years, online banks which provide all services entirely over the Internethave entered the market, with some success. However, many traditional banks have also expanded to offer online banking, and some formerly Internet-only banks are opting to open branches. Savings banks and savings and loan associations, sometimes called thrift institutions, are the second largest group of depository institutions. They were first established as community-based institutions to finance mortgages for people to buy homes and still cater mostly to the savings and lending needs of individuals. Credit unions are another kind of depository institution. Most credit unions are formed by people with a common bond, such as those who work for the same company or belong to the same labor union or church. Members pool their savings and, when they need money, they may borrow from the credit union, often at a lower interest rate than that demanded by other financial institutions. Federal Reserve banks are Government agencies that perform many financial services for the Government. Their chief responsibilities are to regulate the banking industry and to help implement our Nations monetary policy so our economy can run more efficiently by controlling the Nations money supplythe total quantity of money in the country, including cash and bank deposits. For example, during slower periods of economic activity, the Federal Reserve may purchase government securities from commercial banks, giving them more money to lend, thus expanding the economy. Federal Reserve banks also perform a variety of services for other banks. For example, they may make emergency loans to banks that are short of cash, and clear checks that are drawn and paid out by different banks. Interest on loans is the principal source of revenue for most banks, making their various lending departments critical to their success.

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The commercial lending department loans money to companies to start or expand a business or to purchase inventory and capital equipment. The consumer lending department handles student loans, credit cards, and loans for home improvements, debt consolidation, and automobile purchases. Finally, the mortgage lending department loans money to individuals and businesses to purchase real estate. The money to lend comes primarily from deposits in checking and savings accounts, certificates of deposit, money market accounts, and other deposit accounts that consumers and businesses set up with the bank. These deposits often earn interest for the owner, and accounts that offer checking provide an easy method for making payments safely without using cash. Deposits in many banks are insured by the Federal Deposit Insurance Corporation, which ensures that depositors will get their money back, up to a stated limit, if a bank should fail. Technology is having a major impact on the banking industry. For example, many routine bank services that once required a teller, such as making a withdrawal or deposit, are now available through ATMs that allow people to access their accounts 24 hours a day. Also, direct deposit allows companies and governments to electronically transfer payments into various accounts. Further, debit cards, which may also used as ATM cards, instantaneously deduct money from an account when the card is swiped across a machine at a stores cash register. Electronic banking by phone or computer allows customers to pay bills and transfer money from one account to another. Through these channels, bank customers can also access information such as account balances and statement history. Some banks have begun offering online account aggregation, which makes available in one place detailed and up-to date information on a customers accounts held at various institutions. Advancements in technology have also led to improvements in the ways in which banks process information. Use of check imaging, which allows banks to store photographed checks on the computer, is one such example that has been implemented by some banks. Other types of technology have greatly impacted the lending side of banking. For example, the availability and growing use of credit scoring software allows loans to be approved in minutes, rather than days, making lending departments more efficient. Other fundamental changes are occurring in the industry as banks diversify their services to become more competitive. Many banks now offer their customers financial planning and asset management services, as well as brokerage and insurance services, often through a subsidiary or third party. Others are beginning to provide investment banking services that help companies and governments raise money through the issuance of stocks and bonds, also usually through a subsidiary. As banks respond to deregulation and as competition in this sector grows, the nature of the banking industry will continue to undergo significant change.

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Structure The Indian banking system can be classified into nationalized banks, private banks and specialized banking institutions. The industry is highly fragmented with 30 banking units contributing to almost 50% of deposits and 60% of advances. The Reserve Bank of India is the foremost monitoring body in the Indian Financial sector. It is a centralized body that monitors discrepancies and shortcomings in the system. Industry estimates indicate that out of 274 commercial banks operating in the country, 223 banks are in the public sector and 51 are in the private sector. These private sector banks include 24 foreign banks that have begun their operations here. The specialized banking institutions that include cooperatives, rural banks, etc. form a part of the nationalized banks category.

THE BANKING REFORMS In 1991, the Indian economy went through a process of economic liberalization, which was followed up by the initiation of fundamental reforms in the banking sector in 1992.The banking reform package was based on the recommendations proposed by the Narasimham Committee Report (1991) that advocated a move to a more market oriented banking system, which would operate in an environment of prudential regulation and transparent accounting. One of the primary motives behind this drive was to introduce anelement of market discipline into the regulatory process that would reinforce the supervisory effort of the Reserve Bank of India (RBI). Market discipline, especially in the financial liberalization phase, reinforces regulatory and supervisory efforts and provides a strong incentive to banks to conduct their business in a prudent and efficient manner and to maintain adequate capital as a cushion against risk exposures. Recognizing that the success of economic reforms was contingent on the success of financial sector reform as well, the government initiated a fundamental banking sector reform package in 1992.Banking sector, the world over, is known for the adoption of multidimensional strategies from time to time with varying degrees of success. Banks are very important for the smooth functioning of financial markets as they serve as repositories of vital financialinformation and can potentially alleviate the problems created by informationasymme tries. From a central banks perspective, such high-quality disclosures help the early detection of problems faced by banks in the market and reduce the severity of market disruptions. Consequently, the RBI as part and parcel of the financial sector deregulation, attempted to enhance the transparency of the annual reports of Indian banks by, among other things, introducing stricter income recognition and asset classification rules, enhancing the capital adequacy norms, and by requiring a number of additional disclosures sought by investors to make better cash flow and risk assessments. During the pre-economic reforms period,

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commercial banks & development financial institutions were functioning distinctly, the former specializing in short & medium term financing, while the latter on long term lending & project financing. Commercial banks were accessing short term low cost funds thru savings investments like current accounts,savings bank accounts & short duration fixed deposits, besides collection float.Devel opment Financial Institutions (DFIs) on the other hand, were essentially depending on budget allocations for long term lending at a concessionary rate of interest. Thescenario has changed radically during the post reforms period, with the resolve of the government not to fund the DFIs through budget allocations. DFIs like IDBI, IFCI &ICICI had posted dismal financial results. Infect, their very viability has become a question mark. Now, they have taken the route of reverse merger with IDBI bank &ICICI bank thus converting them into the universal banking system.

BASEL II ACCORD Bank capital framework sponsored by the world's central banks designed to promote uniformity, make regulatory capital more risk sensitive, and promote enhanced risk manageme nt among large, internationally active banking organizations. The International Capital Accord, as it is called, will be fully effective by January 2008 for banks active in international markets. Other banks can choose to "opt in," or they can continue to follow the minimum capital guidelines in the original Basel Accord, finalized in 1988. The revised accord (Basel II) completely overhauls the 1988 Basel Accord and is based on three mutually supporting concepts, or "pillars," of capital adequacy. The first of these pillars is an explicitly defined regulatory capital requirement, a minimum capital-to-asset ratio equal to at least 8% of riskweighted assets. Second, bank supervisory agencies, such as the Comptroller of the Currency, have authority to adjust capital levels for individual banks above the 8% minimum when necessary. The third supporting pillar calls upon market discipline to supplement reviews by banking agencies.

Basel II is the second of the Basel Accords, which are recommendations on banking laws and regulations issued by the Basel Committee on Banking Supervision. The purpose of Basel II, which was initially published in June 2004, is to create an international standard that banking regulators can use when creating regulations about how much capital banks need to put aside to guard against the types of financial and operational risks banks face. Advocates of Basel II believe that such an international standard can help protect the international financial system from the types of problems that might arise should a major bank or a series of banks collapse.

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In practice, Basel II attempts to accomplish this by setting up rigorous risk and capital management requirements designed to ensure that a bank holds capital reserves appropriate to the risk the bank exposes itself to through its lending and investment practices. Generally speaking, these rules mean that the greater risk to which the bank is exposed, the greater the amount of capital the bank needs to hold to safeguard its solvency and overall economic stability. Basel II uses a "three pillars" concept (1) minimum capital requirements (addressing risk), (2) supervisory review and (3) market discipline to promote greater stability in the financial system. The Three Pillars of Basel II The Basel I accord dealt with only parts of each of these pillars. For example: with respect to the first Basel II pillar, only one risk, credit risk, was dealt with in a simple manner while market risk was an afterthought; operational risk was not dealt with at all.

The First Pillar The first pillar deals with maintenance of regulatory capital calculated for three major components of risk that a bank faces: credit risk, operational risk and market risk. Other risks are not considered fully quantifiable at this stage. The credit risk component can be calculated in three different ways of varying degree of sophistication, namely standardized approach, Foundation IRB and Advanced IRB. IRB stands for "Internal Rating-Based Approach". For operational risk, there are three different approaches basic indicator approach or BIA, standardized approach or TSA, and advanced measurement approach or AMA. For market risk the preferred approach is VAR (value at risk). As the Base 2 recommendations are phased in by the banking industry it will move fromstandardized requirements to more refined and specific requirements that have beendevel oped for each risk category by each individual bank. The upside for banks that dodevelop their own bespoke risk measurement systems is that they will be rewarded with potentially lower risk capital requirements. In future there will be closer links between the concepts of economic profit and regulatory capital.

Credit Risk can be calculated by using one of three approaches: 1. Standardized Approach 2. Foundation IRB (Internal Ratings Based) Approach

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3. Advanced IRB Approach The standardized approach sets out specific risk weights for certain types of credit risk. The standard risk weight categories are used under Basel 1 and are 0% for short term government bonds, 20% for exposures to OECD Banks, 50% for residential mortgages and 100% weighting on commercial loans. A new 150% rating comes in for borrowers with poor credit ratings. The minimum capital requirement (the percentage of risk weighted assets to be held as capital) remains at 8%. For those Banks that decide to adopt the standardized ratings approach they will be forced to rely on the ratings generated by external agencies. Certain Banks are developing the IRB approach as a result. The Second Pillar The second pillar deals with the regulatory response to the first pillar, giving regulators much improved 'tools' over those available to them under Basel I. It also provides a framework for dealing with all the other risks a bank may face, such as systemic risk, pension risk, concentration risk, strategic risk, reputation risk, liquidity risk and legal risk,which the accord combines under the title of residual risk. It gives banks a power toreview their risk management system. The Third Pillar The third pillar greatly increases the disclosures that the bank must make. This is designed to allow the market to have a better picture of the overall risk position of the bank and to allow the counterparties of the bank to price and deal appropriately. The new Basel Accord has its foundation on three mutually reinforcing pillars that allow banks and bank supervisors to evaluate properly the various risks that banks face and realignregulato ry capital more closely with underlying risks. The first pillar is compatible with The credit risk, market risk and operational risk. The regulatory capital will be focused on these three risks. The second pillar gives the bank responsibility to exercise the best ways to manage the risk specific to that bank. Concurrently, it also casts responsibility on the supervisors to review and validate banks risk measurement models. The third pillar on market discipline is used to leverage the influence that other market players can bring. This is aimed at improving the transparency in banks and improves reporting.

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3.2 COMPANY PROFILE 3.2.1 VIJAYA BANK

Vijaya Bank (VB) came into existence in 15th April of the year 1980, as a consequence of the Government of India taking over the undertaking of Vijaya Bank Ltd. The Bank is engaged in transacts all types of banking business including foreign exchange. The bank has a strong presence in the fast-growing southern states. Its business activities are diversified and encompass merchant banking, credit cards, ATMs, housing finance, fast collection services etc. The Bank had sponsored its first Regional Rural Bank in the year 1985 under the name and style Visweswaraya Grameena Bank in March. This Regional Rural Bank caters the needs of the target group belonging to Mandya district of Karnataka State. VB introduced the novel scheme under the name of Vijaya Vichar Vihar' in the year 1989. During the year 1992, the bank had introduced automatic renewal facility upto four times in respect of short-term deposits accepted for periods from forty-six days to one year for the convenience of the customers. VB had entered into the Memorandum of Understanding (MoU) with the Reserve Bank of India in the year of 1994 to fulfill definite performance commitments. Also in the same year of 1994, the bank introduced the new schemes viz. Vijaya Gift Bond Scheme and Vijaya Service Card for enlarging its services to its business clientele. The Bank opened its third exclusive NRI branch at Mapuca (Goa) and established special NRI Cells at the branches in Tiruvalla, Kottayam, Trivandrum and Kozhencherry (all in the Kerala State). During the year 1995, VB had opened 33 new branches and also the bank opened five Hi-tech Agricultural Finance branches at Bangalore, Coimbatore, Delhi, Hyderabad and Lucknow. In the identical year of 1995, the bank entered into an agreement with M/s. Oriental Exchange Co., WLL Manama, Bahrain providing for the Bank's participation in the said exchange company's day-to-day management. Vijaya Bank launched a fully operational Custodial Services Division at Mumbai. In the year 1996, VB had opened its first subsidiary, Vibank Housing Finance Limited to add impetus to housing finance. Vijaya Bank introduced three new loan schemes, namely, 'Vijaya Nivruthi', 'Vijaya Krishi Vikas' and 'Vijaya Mangala' to cater to the credit needs of pensioners, farmers and workingwomen respectively. The Bank had also entered into tie-up arrangements with ICICI, Banking Corporation Limited and Oman International Bank Ltd. VB had introduced innovative banking service called Any Branch Banking' in the same year of 1996. During the year 1997, Vijaya Bank had launched a special agriculture credit plan targeted specifically at agriculture and other, rural advances. The Bank also launched the special loan recovery motivation scheme', which helped reduce the level of NPAs from 11.6 per cent to 9.6 per cent. The Bank had entered into domestic correspondent Banking arrangements with various private sector

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banks and foreign banks during the year 1998. After a year, in 1999, Vijaya Bank had entered into Rs 200-crore take-out financing agreement with the Housing and Urban Development Corporation (HUDCO) for funding infrastructure projects. In the year 2000, VB had introduced a new scheme named V-Star savings bank Account Scheme. Vijaya Bank taped the capital market with an initial public offering in the year 2000. The Bank had signed a pact with LIC in the year of 2003 to offer Life insurance cover to all its existing as well as its new deposit-holders. VB had unveiled a new electronic fund remittance facility called V-REMIT, under which the bank customers can electronically remit funds to the account holders in any bank. The MoU was signed with M/s National Insurance Company Limited in the year 2003 for marketing banc assurance products. Bank has decided to amalgamate its own subsidiary VIBANK Housing Finance Ltd. (VHFL) with the Vijaya Bank. Vijaya Bank had opened a Kiosk that is exclusively for retail lending at its Ashoknagar Branch in Mangalore and signed the MoU with Punjab National Bank and Principal Financial Group of USA for a joint venture participation in Asset Management Company. In the year 2004, the bank made tie-up with NIC to offer free insurance policy. Punjab National Bank (PNB) and VB had entered into a four-way partnership with Principal Financial of the US and Berger Paints to set up an insurance broking company. Vijaya bank Housing Finance Ltd became a wholly owned subsidiary of the bank in the identical year of 2004. The Bank signed a pact with Nabard to co-finance agriculture, agro processing, hi-tech agriculture and rural development projects. Vijaya Bank launched the bank's second city specific credit card - the 'Hyderabad Card'. During the year 2005, the bank made tie-up with TAFE. In the year 2006-07, the bank implemented the Crore Banking Solution (CBS) in additional 152 branches. VB opened 43 new branches, upgraded 10 extension counters into full-fledged branches, converted 2 regional foreign exchanges into full-fledged overseas branches and also converted one capital market services branch into a general banking branch in the year 200607. The bank had helped 11061 Self Help Groups in the same year by the way of loan disbursement. In June of the year 2007, VB had inked a memorandum of understanding (MoU) with credit rating agency ICRA, under which ICRA will assign ratings to small scale industries (SSIs) and small and medium enterprises (SMEs) that are borrowers of the bank. As of April 2008, signed a memorandum of understanding with Fitch Ratings India to provide bank loan ratings to its corporate clients at a normal fee. Vijaya Bank plans to focus on farm and retail lending to push up business.

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3.2.2 UNITED BANK OF INDIA

United Bank of India (UBI) is one of the 14 major banks which were nationalized on July 19, 1969. Its predecessor the United Bank of India Ltd., was formed in 1950 with the amalgamation of four banks viz. Camilla Banking Corporation Ltd. (1914), Bengal Central Bank Ltd. (1918), Camilla Union Bank Ltd. (1922) and Hooghly Bank Ltd. (1932) (which were established in the years indicated in brackets after the names). The origin of the Bank thus goes as far back as to 1914. As against 174 branches, Rs. 147 crores of deposits and Rs. 112 crores of advances at the time of nationalization in July, 1969, today the Bank is 100% CBS enabled with more than 1700 branches and offices and is having a Total business of more than Rs 1.5 lac crore. Presently the Bank is having a Three-tier organizational set-up consisting of the Head Office, 33 Regional Offices and the Branches. After nationalization, the Bank expanded its branch network in a big way and actively participated in the developmental activities, particularly in the rural and semi-urban areas in conformity with the objectives of nationalization. In recognition of the role played by the Bank, it was designated as Lead Bank in several districts and at present it is the Lead Bank in 30 districts in the States of West Bengal, Assam, Manipur and Tripura UBI played a significant role in the spread of banking services in different parts of the country, more particularly in Eastern and North-Eastern India. UBI has sponsored 4 Regional Rural Banks (RRB) one each in West Bengal, Assam, Manipur and Tripura. These four RRBs together have over 1000 branches. United Bank of India has contributed 35% of the share capital/ additional capital to all the four RRBs in four different states. In its efforts to provide banking services to the people living in the not easily accessible areas of the Sunder bans in West Bengal, UBI had established two floating mobile branches on motor launches which moved from island to island on different days of the week. The floating mobile branches were discontinued with the opening of full-fledged branches at the centers which were being served by the floating mobile branches. UBI is also known as the 'Tea Bank' because of its age-old association with the financing of tea gardens. It has been the largest lender to the tea industry.The Bank has three full fledged Overseas Branches one each at Kolkata, New Delhi and Mumbai with fully equipped dealing room and SWIFT terminal . Operations of all the branches have since been computerized and Electronic Fund Transfer System came to be implemented in the Bank's branches across the country. The Bank has ATMs all over the country and customers can use United International Debit Card at all VISA ATMs across the globe.

UNITED BANK OF INDIA IS A MEMBER OF BANKING CODES AND STANDARDS BOARD OF INDIA (BCSBI).

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3.2.3 BANK OF MAHARASHTRA

Bank of Maharashtra is the premier bank of Maharashtra, operating in the country of India. Registered on 16 September 1935 with an authorized capital of Rs 1 million and commenced business on 8 February 1936. Known as a common man's bank since inception, its initial help to small units has given birth to many of today's industrial houses. After nationalization in 1969, the bank expanded rapidly. The Bank has the largest network of branches by any Public sector bank in the state of Maharashtra. The Bank was founded by a group of visionaries led by the late V. G. Kale and the late D. K. Sathe and registered as Banking Company on 16 September 1935 at Pune. Today, Bank of Maharashtra has over 15 million customers across the length and breadth of the country served through 1711 branches in 28 states and 2 union territories. Bank is the convener of State level Bankers committee. Bank offers Depository services and Demat facilities at 131 branches. Bank has a tie up with LIC of India and United India Insurance Company for sale of Insurance policies. Bank has achieved 100% CBS enabling anytime anywhere banking to its customers. All Employees, posted in South Ex branch are doing excellent work for Bank. History of Bank of Maharashtra Maharashtra has a long history of commercial activity since ages because of its strategic location in Indian sub continent and its large natural resources. Maharashtra has been a progressive region and the Banking activity was also started in this region quite early. Historically speaking, the Bank of Bombay established in 1840 was the first Commercial Bank in Maharashtra. However, the first commercial bank set up in Maharashtra outside Mumbai was The Poona Bank established in 1889 at Pune followed by The Deccan Bank in 1890 and the Bombay Banking Company in 1898. Outbreak of the First World War leading to great depression took a heavy toll on banks in India. Between 1914 and 1935 as many as 380 banks failed in the country out of which 54 were based in Bombay province. The impact of these failures was felt more in Maharashtra region because certain banks known for a long time were also closed down.

25

DATA ANALYSIS AND INTERPRETATION Chapter-4

26

CAPITAL ADEQUACY:

1.1 Table indicating summarized capital adequacy ratio of three banks: 1.1.1 Vijaya Bank Ratios Capital Adequacy Ratio (CAR): Debt-Equity Ratio (D/E): Advance to Assets Ratio Government Securities to Total Investments

2012 13.06

2011 13.88

2010

AVG 12.5 13.14667

1.03164 0.420463 0.557833 0.669979 60.46504 59.63797 59.12914 59.74405 82.74339 72.77364 67.54132 74.35278

Source: Vijaya bank Annual report 2010-2012

1.1.2 United Bank of India Ratios Capital Adequacy Ratio (CAR): Debt-Equity Ratio (D/E): Advance to Assets Ratio Government Securities to Total Investments 2012 12.69 2011 13.05 2010 -AVG 12.8 12.84667

0.881803 0.574817 0.234526 0.563716 61.80085 59.4204 54.96607 58.72911 78.03588 72.82629 75.06286 75.30834

Source: United bank of India Annual report 2010-2012

1.1.3 Bank of Maharashtra Ratios Capital Adequacy Ratio (CAR): Debt-Equity Ratio (D/E): Advance to Assets Ratio Government Securities to Total Investments 2012 12.43 0.809872 63.69169 76.48642 2011 13.35 0.774771 61.32838 82.4389 2010 12.78 0.978499 56.73669 85.47411 AVG 12.85333 0.85438 60.58559 81.46648

Source: Bank of Maharashtra Annual report 2010-2012

27

Interpretation: Its clear that all banks are maintained higher CAR than the prescribed level. It is found that vijaya bank secured the top position with highest average CAR of 13.15 followed by Bank of Maharashtra (12.85), united bank of India (12.84). United bank of India is at the bottom most position with lest average CAR. In terms of Debt equity ratio United bank of India is at the top position with least average of 0.56 followed by Vijaya bank (0.67) and Bank of Maharashtra (0.85). In case of advances to assets, Bank of Maharashtra is at the first position with highest average of 60.58% followed by Vijaya bank (59.74) and United bank of India (58.72%). United bank of India is at the bottom most position with least average of 58.72%. Its again Bank of Maharashtra is at the top position in Government securities to Investments with highest average of 81.46, followed by united bank of India (75.31) and Vijaya Bank (74.35). Vijaya Bank is at the last position with the least average.

28

1.2 Table indicating capital adequacy ratio: Ratios Capital Adequacy Ratio (CAR): Debt-Equity Ratio (D/E): Advance to Assets Ratio Government Securities to Total Inv Vijaya Bank 13.14666667 0.669978735 59.74404929 74.35278184 UBI 12.84666667 0.563715527 58.72910567 75.30834265 BOM 12.85333333 0.854380387 60.58558675 81.46647805

1.3 Table indicating rank position of various ratios: Ratios Capital Adequacy Ratio (CAR) Debt-Equity Ratio (D/E) Advance to Assets Ratio Government Securities to Total Inv Average Rank Vijaya Bank 1 2 2 3 2 2 UBI 3 1 3 2 2.25 3 BOM 2 3 1 1 1.75 1

Interpretation: On the basis of group averages of four sub-parameters of capital adequacy Bank of Maharashtra is at the top position with group average 1.75, followed by Vijaya Bank (2) and United bank of India (2.25) which stood at the last position due to its poor performance in CAR and Adv/Ast.

29

Asset Quality:
2.1 Table indicating summarized asset quality ratio of three banks: 2.1.1 Vijaya Bank Ratios Net NPAs to Total Assets (NNPAs/TA) Net NPAs to Net Advances (NNPAs/NA) Total Investments to Total Assets (TI/TA) Percentage Change in NPAs YoY

2012

2011

2010

AVG

1.031713 0.907277 0.828172 0.922387 1.706297 1.521307 1.400616 1.54274

29.91082 30.77291 30.05813 30.24729 34.68286 27.42906 98.93945 53.68379

Source: Vijaya bank Annual report 2010-2012

2.1.2 United Bank of India Ratios Net NPAs to Total Assets (NNPAs/TA) Net NPAs to Net Advances (NNPAs/NA) Total Investments to Total Assets (TI/TA) Percentage Change in NPAs YoY 2012 2011 2010 AVG

1.054353 0.841188 1.010957 0.968833 1.70605 1.415655 1.839238 1.653648 28.48612 29.16348 33.84928 30.49962 42.00367 -2.7153 -0.05777 13.07687

Source: United bank of India Annual report 2010-2012

2.1.3 Bank of Maharashtra Ratios Net NPAs to Total Assets (NNPAs/TA) Net NPAs to Net Advances (NNPAs/NA) Total Investments to Total Assets (TI/TA) Percentage Change in NPAs YoY 2012 2011 2010 AVG

0.533497 0.809697 0.932267 0.758487 0.837624 1.320264 1.643148 1.267012 26.0305 29.42233 30.01001 28.48761 -24.1344 -6.56371 143.63 37.64396

Source: Bank of Maharashtra Annual report 2010-2012

30

Interpretation: Bank of Maharashtra is at the top position with an average NNPAs/TA of 0.75, followed by Vijaya Bank (0.92) and United bank of India (0.97) which stood at the last position. In case of NNPAs/NA its again bank of Maharashtra is at the top position with an average of 1.27 followed by Vijaya bank (1.54) and United bank of India (1.65) which stood at last position. In terms of TI/TA, Bank of Maharashtra is at the first position with an average of 28.49 followed by Vijaya Bank (30.25) and United bank of India (30.50). United bank of India is at first position with percentage change in NPAs with an average 13.07 followed by Bank of Maharashtra (37.64) and Vijaya Bank (53.68).

31

2.2 Table indicating asset quality ratio: Ratios Net NPAs to Total Asts (NNPAs/TA) Net NPAs to Net Adv (NNPAs/NA) Total Investment to Total Assets (TI/TA) Percentage Change in NPAs YoY Vijaya Bank 0.922387487 1.542740294 30.2472872 53.68378985 UBI 0.968832607 1.653647519 30.49962374 13.07686665 BOM 0.758486996 1.267011893 28.48761224 37.64395915

2.3 Table indicating rank position of various ratios: Ratios Net NPAs to Total Asts (NNPAs/TA) Net NPAs to Net Adv (NNPAs/NA) Total Inv to Total Assets (TI/TA) Percentage Change in NPAs Average Rank Vijaya Bank 2 2 2 3 2.25 2 UBI 3 3 3 1 2.5 3 BOM 1 1 1 2 1.25 1

Interpretation: On the bases of group averages of sub-parameters of assets quality, Bank of Maharashtra is at the top position with group average 1.25, followed by Vijaya Bank (2.25) and united bank of India stands at bottom with average of (2.5).

32

Management:
3.1 Table indicating summarized management ratio of three banks: 3.1.1 Vijaya Bank Ratios Total Advances to Total Deposits (TA/TD): Profit per Employee (PPE): Business per Employee (BPE):

2012 69.71692 0.049078 0.719381

2011

2010

AVG

66.5116 67.04432 67.75761 0.045889 0.043864 0.046277 0.558673 0.508439 0.595498

Source: Vijaya bank Annual report 2010-2012

3.1.2 United Bank of India Ratios Total Advances to Total Deposits (TA/TD): Profit per Employee (PPE): Business per Employee (BPE): 2012 2011 2010 AVG

70.74275 68.72963 0.040808 0.034781 0.560903 0.463319

62.08542 67.18593 0.02109 0.032226 0.379959 0.46806

Source: United bank of India Annual report 2010-2012

3.1.3 Bank of Maharashtra Ratios Total Advances to Total Deposits (TA/TD): Profit per Employee (PPE): Business per Employee (BPE): 2012 73.2533 0.033963 0.626266 2011 70.13382 0.01541 0.528805 2010 63.68421 0.032155 0.389585 AVG 69.02378 0.027176 0.514886

Source: Bank of Maharashtra Annual report 2010-2012

33

Interpretation: It is found that Bank of Maharashtra secured the top position with highest average TA/TD of 69.02 followed by Vijaya Bank (67.76), united bank of India (67.18). United bank of India is at the bottom most position with lest average TA/TD. In terms of PPE Vijaya bank is at the top position with least average of 0.046crores followed by United Bank of India (0.032crores) and Bank of Maharashtra (0.027). In case of Business per Employee, Vijaya bank is at the first position with highest average of 0.59crores followed by Bank of Maharashtra (0.51crores) and United bank of India (0.47crores).

34

3.2 Table indicating management ratio: Ratios Total Adv to Total Deposits (TA/TD) Profit per Employee (PPE) Business per Employee (BPE) Vijaya Bank 67.75761177 0.046277127 0.595497621 UBI 67.18593188 0.032226417 0.468060322 BOM 69.02377781 0.027175869 0.514885521

3.3 Table indicating rank position of various ratios: Ratios Total Adv to Total Deposits (TA/TD) Profit per Employee (PPE) Business per Employee (BPE) Average Rank Vijaya Bank 2 1 1 1.3 1 UBI 3 2 3 2.6 3 BOM 1 3 2 2 2

Interpretation: On the basis of group averages of three sub-parameters, Vijaya bank is at the top most position with group average 1.33, followed by Bank of Maharashtra (2) and United Bank of India (2.67) which is positioned at last due to its poor performance in all sub parameters of management efficiency.

35

Earnings:
4.1 Table indicating summarized earnings ratio of three banks: 4.1.1 Vijaya Bank Ratios Operating Profit to Avg Working Funds Percentage Growth in Net Profit Net Profit to Average Assets (PAT/AA)

2012 1.284898 10.91405 0.654804

2011 1.281261 3.258491 0.689633

2010 1.505167 93.26806 0.765119

AVG 1.357109 35.81353 0.703185

Source: Vijaya bank Annual report 2010-2012

4.1.2 United Bank of India Ratios Operating Profit to Avg Working Funds Percentage Growth in Net Profit Net Profit to Average Assets (PAT/AA) 2012 1.116435 20.74179 0.658711 2011 1.208134 62.51086 0.627195 2010 0.783159 74.52222 0.463654 AVG 1.035909 52.59162 0.583187

Source: United bank of India Annual report 2010-2012

4.1.3 Bank of Maharashtra Ratios Operating Profit to Avg Working Funds Percentage Growth in Net Profit Net Profit to Average Assets (PAT/AA) 2012 0.956391 139.8694 0.518012 2011 0.671134 -59.6097 0.24079 2010 0.793616 21.31898 0.675952 AVG 0.807047 33.85955 0.478251

Source: Bank of Maharashtra Annual report 2010-2012

36

Interpretation: It is found that Vijaya Bank secured the top position with highest average operating profit to avg working funds of 1.36 followed by United Bank of India (1.04), Bank of Maharashtra (0.81). Bank of Maharashtra is at the bottom most position with lest average operating profit to avg working funds. In terms of Percentage Growth in Net Profit United bank of India is at the top position with least average of 52.59 followed by Vijaya Bank (35.81) and Bank of Maharashtra (33.85). In case of PAT/AA, Vijaya bank is at the first position with highest average of 0.70 followed by united bank of India (0.58) and Bank of Maharashtra (0.48).

37

4.2 Table indicating earnings ratio: Ratios Op Profit to Avg Working Funds Percentage Growth in Net Profit Net Profit to Avg Assets (PAT/AA) Vijaya Bank 1.357108756 35.81353472 0.703185198 UBI 1.035909207 52.59162285 0.583186557 BOM 0.807046913 33.85954693 0.478251169

4.3 Table indicating rank position of various ratios: Ratios Op Profit to Avg Working Funds Percentage Growth in Net Profit Net Profit to Avg Assets (PAT/AA) Average Rank Vijaya Bank 1 2 1 1.333333333 1 UBI 2 1 2 1.666666667 2 BOM 3 3 3 3 3

Interpretation: On the basis of group averages, Vijaya bank was at the top position with group average (1.33) followed by United bank of India (1.67) and Bank of Maharashtra (3) which failed in all subparameters and stood at last place.

38

Liquidity:
5.1 Table indicating summarized liquidity ratio of three banks: 5.1.1 Vijaya Bank Ratios Liquid Assets to Demand Deposits (LA/DD) Liquid Assets to Total Deposits (LA/TD) Liquid Assets to Total Assets (LA/TA) G-Sec to Total Assets (G-Sec/TA) Approved Securities to Total Assets (AS/TA)

2012 136.6968 7.709121 6.686072 24.74923 24.75393

2011

2010

AVG

104.9926 94.90197 112.1971 7.404361 8.960283 8.024588 6.639158 7.902442 7.075891 22.39456 20.30166 22.48182 22.41071 20.31057 22.49174

Source: Vijaya bank Annual report 2010-2012

5.1.2 United Bank of India Ratios Liquid Assets to Demand Deposits (LA/DD) Liquid Assets to Total Deposits (LA/TD) Liquid Assets to Total Assets (LA/TA) G-Sec to Total Assets (G-Sec/TA) Approved Securities to Total Assets (AS/TA) 2012 74.7088 8.166018 7.133832 22.22939 22.25721 2011 2010 AVG

85.92042 95.93923 85.52282 9.413268 9.354312 8.977866 8.138268 8.28165 7.85125

21.23868 25.40823 22.95877 21.28378 25.47848 23.00649

Source: United bank of India Annual report 2010-2012

5.1.3 Bank of Maharashtra Ratios Liquid Assets to Demand Deposits (LA/DD) Liquid Assets to Total Deposits (LA/TD) Liquid Assets to Total Assets (LA/TA) G-Sec to Total Assets (G-Sec/TA) Approved Securities to Total Assets (AS/TA) 2012 2011 2010 108.0711 AVG 79.1385

67.97539 61.36904 7.506026 6.057844 6.526279 19.9098 19.9098 5.29727 24.25545 24.27015

10.57523 8.046366 9.42154 7.081696 25.65079 23.27201 25.68706 23.289

Source: Bank of Maharashtra Annual report 2010-2012

39

Interpretation: Vijaya bank is at first place in LA/DD with highest average of 112.20, followed by United bank of India (85.52) and Bank of Maharashtra (79.14). In case of LA/TD, United bank of India for first position with highest average of 8.98, followed by Bank of Maharashtra (8.05) and Vijaya bank (8.02). In contest of LA/TA, United bank of India is at top with the average 7.85, followed by Bank of Maharashtra (7.08) and Vijaya bank (7.07). Bank of Maharashtra is at the top position in G-Sec/TA with an average 23.27, followed by United bank of India (22.96) and Vijaya Bank (22.48). In terms of AS/TA, Bank of Maharashtra is at top position with an average 23.29, followed by United bank of India (23) and Vijaya Bank (22.49).

40

5.2 Table indicating liquidity ratio: Ratios L.Assets to Demand Deposits (LA/DD) L.Assets to Total Deposits (LA/TD) L.Assets to Total Assets (LA/TA) G-Sec to Total Assets (G-Sec/TA) Approved Sec to Total Assets (AS/TA) Vijaya Bank 112.1971108 8.024588375 7.075890703 22.48181694 22.49173691 UBI 85.52281597 8.977866284 7.851250313 22.9587684 23.00649244 BOM 79.13850373 8.046365944 7.081696453 23.27201012 23.28900052

79.138503

5.3 Table indicating rank position of various ratios: Ratios L.Assets to Demand Deposits (LA/DD) L.Assets to Total Deposits (LA/TD) L.Assets to Total Assets (LA/TA) G-Sec to Total Assets (G-Sec/TA) Approved Sec to Total Assets (AS/TA) Average Rank Vijaya Bank 1 3 3 3 3 2.6 3 UBI 2 1 1 2 2 1.6 1 BOM 3 2 2 1 1 1.8 2

Interpretation: On the basis of group averages of Liquidity ratio, United bank of India is at the top position with group average (1.6) followed by Bank of Maharashtra (1.8) and Vijaya bank (2.6) which failed in all sub-parameters and stood at last place.

41

Overall Ranking
6.1 Table indicating overall ranking all three banks:

Banks C A M E L AVG RANK

Vijaya Bank 2 2.25 1.3 1.3 2.6 1.93 1

UBI 2.25 2.5 2.6 1.6 1.6 2.13 3

BOM 1.75 1.25 2 3 1.8 1.96 2

Interpretation: It is clear from the table that Vijaya bank is ranked at top position with composite average 1.9033, followed by Bank of Maharashtra (1.96) and United Bank of India (2.1367) which stands at the bottom most position.

42

RESULTS AND DISCUSSION

Chapter-5

43

5.1 SUMMARY OF FINDINGS

Capital adequacy: The capital adequacy ratio of all the three banks is above the minimum requirements and above the industry average. Group averages of capital adequacy indicates Bank of Maharashtra is at the top position with group average 1.75, followed by Vijaya Bank (2) and United bank of India (2.25) which stood at the last position due to its poor performance in CAR and Adv/Ast.

Assets quality: United bank of India and Bank of Maharashtra has shown remarkable decrease in NPAs. But the NPA of Vijaya bank is increasing every year. Group averages of sub-parameters of assets quality indicates, Bank of Maharashtra is at the top position with group average 1.25, followed by Vijaya Bank (2.25) and united bank of India stands at bottom with average of (2.5). Management: Professional approach that has been adopted by the banks in the recent past is in right direction & also it is the right decision. Group averages of three sub-parameters of Management ratio indicates, Vijaya bank is at the top most position with group average 1.33, followed by Bank of Maharashtra (2) and United Bank of India (2.67) which is positioned at last due to its poor performance in all sub parameters of management efficiency.

Earnings: Vijaya bank has shown a good earning record. But Bank of Maharashtra has gone down in its performance. United bank of India performance has been average. Earnings ratio indicates, Vijaya bank was at the top position with group average (1.33) followed by United bank of India (1.67) and Bank of Maharashtra (3) which failed in all subparameters and stood at last place.

44

Liquidity: Banks should maintain quality securities with good liquidity to meet contingencies. United Bank of India are fulfilling this requirement by maintaining highest credit deposit ratio followed by Bank of Maharashtra and Vijaya bank at last. Group averages of Liquidity ratio indicates, United bank of India is at the top position with group average (1.6) followed by Bank of Maharashtra (1.8) and Vijaya bank (2.6) which failed in all sub-parameters and stood at last place.

Overall Ranking: From the study of camel framework of three public sector banks the overall ranking indicates that Vijaya bank is ranked at top position with composite average 1.9033, followed by Bank of Maharashtra (1.96) and United Bank of India (2.1367) which stands at the bottom most position.

45

5.2 SUGGESTIONS
Vijaya Bank is excellent in Earnings ratio and management ratio but lacks in other ratio like Capital, Assets, and Liquidity etc, so more focus should be targeted towards these Capital, Assets Management and Liquidity to increase the bank performance and competitive efficiency. If we compare Vijaya Bank with Bank of Maharashtra and United bank of Indias Liquidity ratio it is not quite good. So, Vijaya Bank should improve its liquidity ratio. The Major focus should be shown to Liquid assets to Total Deposits ratio, liquid assets to total assest, govt sec to total assets and approved sec to total assets.

In Vijaya bank, debt equity ratio is continuously rising over the years which are not good so they have to increase equity or reduce debts in their capital structure. Vijaya bank has to give more advances in order to earn more interest. But they should have to also keep in mind the credit worthiness of the customers.

Vijaya Bank should create more awareness among the people through Targeting youngsters as well as providing new schemes in order to attract more customers. The banks should adapt themselves quickly to the changing norms.

The system is getting internationally standardized with the coming of BASELL II accords so the Indian banks should strengthen internal processes so as to cope with the standards. The banks should try to maintain a 0% NPA by always lending and investing or creating quality assets which earn returns by way of interest and profits.

The bank should focus more on managing Liquidity as it is at the last position compared to other banks.

46

5.3 CONCLUSION
The current Banking Crisis, which is quite unprecedented, underlines the importance of regulatory issues and the effects of incompetence in this area. CAMEL, as a rating system for judging the soundness of Banks is a quite useful tool, which can help in mitigating the conditions and risks that lead to Bank failures. The report makes an attempt to examine and compare the performance of three different public sector banks of India i.e. Vijaya Bank, United Bank of India and Bank of Maharashtra. The analysis is based on the CAMEL Model. The study has brought many interesting results, some of which are mentioned as below: All the three banks have succeeded in maintaining CRAR at a higher level than the prescribed level, 9%. But Vijaya bank has maintained highest which is very good sign for bank to survive and to expand in future. In Management Quality, we have found that Business per Employee Ratio and Profit per Employee Ratio is more in Vijaya bank followed by Bank of Maharashtra and United bank of India. This shows the growth of the bank as well as efficiency of the employee, which is very good in all the banks and they will help to the bank to grow in future. After evaluating all the ratios, calculations and ratings we have given 1st Rank to Vijaya bank 2nd Rank to bank of Maharashtra 3rd Rank to United bank of India

47

BIBLIOGRAPHY Chapter-6

48

Websites:
www.rbi.org.in www.allbankingsolutions.com www.Vijaya.com www.UnitedBankofIndia.com www.bankofMaharasthra.com www.economictimes.indiatimes.com www.moneycontrol.com www.googlefinance.com

Books and Journals:

1. Bhayani, S. (2006). Performance of the New Indian Private Sector Banks: A Comparative Study. Journal of Management Research, Vol. 5, No.11, pp. 53-70. 2. Cole, Rebel A. and Gunther, Jeffery, (1995). A CAMEL Rating's Shelf Life. Available at SSRN: http://ssrn.com/abstract=1293504 3. Derviz, A., & Podpiera, J. (2008). Predicting Bank CAMEL and S&P Ratings: The Case of the Czech Republic. Emerging Markets, Finance & Trade, 44(1), 117. Retrieved April 13, 2010, from ABI/INFORM Global. (Document ID: 1454963901). 4. Godlewski, C. (2003). Banks Default Modelisation: An Application to Banks from Emerging Market Economies. Journal of Social Science Research Network, Vol.4, No.3, pp. 150-155. 5. Gupta, R. (2008). A CAMEL Model Analysis of Private Sector Banks in India. Journal of Gyan Management, Vol.2, No.1, pp. 3-8. 6. Prasuna D G (2003).Performance Snapshot 2003-04. Chartered Financial Analyst, Vol. 10, No.11, pp.6-13. 7. Said, M (2003). Liquidity, solvency, and efficiency: An empirical analysis of the Japanese banks distress. Journal of Oxford, Vol. 5, No.3, pp. 354-358. 8. Kothari, C.R., Research Methodology: Methods and techniques, Wishwa Publication, Delhi 9. The ICFAI Journal of Bank Management Vol.V,NO.3,August 2006

Annual reports:
Vijay bank 2009-2010, 2010-2011, 2011-2012 Bank of Maharasthra 2009-2010, 2010-2011, 2011-2012 United bank of India 2009-2010, 2010-2011, 2011-2012

49

ANNEXURE Chapter-7

50

Vijaya bank balance sheet as of 2010-2012

Vijaya bank Balance Sheet

------------------- in Rs. Cr. ------------------Mar '12 12 mths Mar '11 12 mths 1695.54 495.54 0 1200 3279.15 277.53 5252.22 83055.51 5418.4 88473.91 2037.88 95764.01 Mar '12 12 mths Mar '11 12 mths 1672.67 472.67 0 1200 2850.5 293.83 4817 73248.32 2025.37 75273.69 1599.93 81690.62 Mar '10 12 mths Mar '10 12 mths 933.52 433.52 0 500 2229.96 311.68 3475.16 61931.75 1938.56 63870.31 2876.63 70222.1

Capital and Liabilities: Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Net Worth Deposits Borrowings Total Debt Other Liabilities & Provisions Total Liabilities

Assets Cash & Balances with RBI Balance with Banks, Money at Call Advances Investments Gross Block Accumulated Depreciation Net Block Capital Work In Progress Other Assets Total Assets Contingent Liabilities Bills for collection Book Value (Rs) Govt Securities

4542.53 1860.32 57903.74 28643.8 1089.06 602.11 486.95 0 2326.66 95764 13864.09 3630.44 76.17 23700.85

4881.84 541.73 48718.63 25138.58 1061.78 575.78 486 0 1923.85 81690.63 12700.25 2677.49 70.31 18294.26 14256.25

4099.58 1449.68 41521.72 21107.45 1008.88 515.72 493.16 0 1550.5 70222.09 9654.29 2295.9 61.44

51

United bank of India balance sheet as of 2010-2012

United Bank of India Balance sheet

Mar '12 12 mths Capital and Liabilities: Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Net Worth Deposits Borrowings Total Debt Other Liabilities & Provisions Total Liabilities Mar '12 12 mths Assets Cash & Balances with RBI Balance with Banks, Money at Call Advances Investments Gross Block Accumulated Depreciation Net Block Capital Work In Progress Other Assets Total Assets Contingent Liabilities Bills for collection Book Value (Rs) Govt Securities 5091.79 2185.46 63043.29 29058.8 1451.51 659.79 791.72 13.28 1826.05 102010.39 9322.72 5691.45 114.65 22676.29 1161 361 0 800 3777.95 640.74 5579.69 89116.26 4920.19 94036.45 2394.25 102010.39 Mar '11 12 mths 5943.15 1384.59 53502.44 26258.95 1392.03 575 817.03 1.84 2132.53 90040.53 6573.65 3859.14 103.46 19123.42 Mar '11 12 mths 1144.42 344.42 0 800 3218.82 658.43 5021.67 77844.8 2886.54 80731.34 4287.52 90040.53 Mar '10 12 mths 4707.02 1670.78 42330.04 26067.74 1121.92 471.5 650.42 0.57 1584.65 77011.22 8325.07 3253.34 91.69 19567.19 Mar '10 12 mths 866.43 316.43 0 550 2584.86 451.64 3902.93 68180.32 915.34 69095.66 4012.63 77011.22

52

Bank of Maharashtra balance sheet as of 2010-2012

Bank of Maharashtra Balance sheet

Mar '12 12 mths Capital and Liabilities: Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Net Worth Deposits Borrowings Total Debt Other Liabilities & Provisions Total Liabilities Mar '12 12 mths Assets Cash & Balances with RBI Balance with Banks, Money at Call Advances Investments Gross Block Accumulated Depreciation Net Block Capital Work In Progress Other Assets Total Assets Contingent Liabilities Bills for collection Book Value (Rs) Govt Securities 4535.48 1208.78 56059.76 22911.36 1322.86 722.21 600.65 0 2701.35 88017.38 17016.11 3817.36 63.77 17524.08 3846 203.35 46880.77 22491.08 1319.87 653.08 666.79 0 2354.22 76442.21 12978.5 3538.05 61.02 18541.4 5315.39 1379.16 40314.7 21323.85 1248.76 589.23 659.53 0 2063.16 71055.79 16413.3 2950.43 55.84 18226.37 1177.59 589.59 0 588 3170.04 375.03 4722.66 76528.65 3824.75 80353.4 2941.33 88017.39 Mar '11 12 mths 1069.71 481.71 0 588 2457.67 443.55 3970.93 66844.74 3076.56 69921.3 2549.99 76442.22 Mar '10 12 mths 430.52 430.52 0 0 1973.32 454.57 2858.41 63304.07 2796.95 66101.02 2096.36 71055.79 Mar '11 12 mths Mar '10 12 mths

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