Priyanka Jha* |
Corresponding Author: Priyanka Jha, Sarvepalli Radhakrishnan (SRK) University, India |
Revised: 21 September 2020; |
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Background: The country’s economy is directly linked to the
financial system. This depends mainly on performance of banking sectors in that
particular country. In India, the banking industry has been categorized into-
a) Public sector banks (b) Private sector banks. Hence, it is very important to
analyze the services of both public and private sector banks to know the
financial situation of a particular country.
Objective: In this paper, an effort has been produced to know
the economic condition in India with a comparison of performing and
non-performing assets among the two major Public sector banks, such as State
bank of India (SBI) and Punjab national bank (PNB) and two major Private sector
banks, such as
Industrial Credit and
Investment Corporation of India (ICICI) and AXIS bank, for operating
period 2011-2018.
Method: The financial ratio analysis (FRA) method has been
used to draw an overview about financial performance (profitability, liquidity
and credit performance) among these banks. The secondary data has been used for
this study and this is collected from the annual financial reports of
respective banks for the period 2011-12 to 2017-18. We employ a parametric
technique (One-way ANOVA) to evaluate their financial performance.
Result: We observed that, there are significant changes in
terms of performing assets (such as credit deposit ratio, interest income to
total income, other income to total income, Net profit margin, total assets
turnover, dividend pay-out ratio, and debt–equity ratio) and Non- Performing
assets (such as Gross NPAs / Gross advances ratio, Gross NPAs/ Total assets
ratio; Net NPAs/Net advances ratio and Net NPAs/ Total assets ratio, Total
provision ratio, Shareholder’s risk ratio) in the performance of public sector
bank as compare to private sector bank. In addition to, the average no. of
borrowers (of total assets) is significantly lower in PNB bank, ICICI bank, and
AXIS bank as compare to SBI bank and this is comparable among PNB, ICICI, and
AXIS bank. However, the amount outstanding and the provision thereon (of total
assets) is significantly higher in PNB bank as compare to SBI bank, ICICI bank,
and AXIS bank and this is also comparable among SBI bank, ICICI bank, and AXIS
bank.
Conclusion: Based on the findings, the study reveals that the
public sector banks (particularly SBI bank) are able to gain the faith of its
clients and more preferable for loans and advances as compare to private sector
bank. But in case of dividend pay-out ratio, debt- equity ratio and Interest
expended to interest earned, private sector bank (particularly ICICI bank) is
sounder than public sector bank. With the help of this present study, customer
can get useful insight to expend their money among these banks. This study
finding can be helpful to improve the banking situation (public and private
sector bank) in India.
Keywords: Public sector
banks, Private sector bank, Indian bank, Financial performance.