LITERATURE REVIEW
Many Researchers have conducted a range of studies on financial performance of banks. It was observed that most of the studies did comparision of public, private and foreign banks through financial management, profitability and productivity.
Literature in the field of banking is focused in two directions:
(i) To understand the relation between long term growth and banking sector characteristics, and
(ii) To quantify the cost of the crisis faced by the banking sector in terms of real output losses.
Levine (1997,2001) showed is their research the link between the economic growth and the banking sector. Similarly, authors like Levine (1997, 1998), Levine, Loayza, and Beck (2000), Demirgu, Rajan and Zingales (1986) through their research highlighted the fact the degree of development in the financial sector is a significant contributor to economic growth. Hogart, Reis, and Saporta (2002), Boyd, Kwak, and Smith (2005), Kroszner, Laeven, and Klingebiel (2007), Detragiacha, Rajan and Dell’Ariccia (2008) were some of the research scholars whose researches were focused on proving that, banking crisis plays an important role in the slowdown of economic growth.On the other hand, Kaminsky and Reinhart (1999), Demirgu”c-Kunt and Detragiache,(1997, 2005), Hilbers, Otker-Robe, Johnsen and Pazarbasioglu (2005) were of the view that it is not possible to separate the cause and effect in case of financial sector of the real economy. Hence the literature found which say banking sector is the cause of economic slowdown is not clear.
There were some research scholars like Benink and Benston (2005), Gupta (2005), Deutsche Bundes bank (2006), Goodhart and Tsomocos (2006) did an empirical research and concluded that macro economic policies and soundness of banking system directly relate to each other.
Many academics have been examining the reasons for failure of banking business for many years, but the research on this has started in 1930s. Fitz Patrick was one of the earliest research scholar who analysed the financial profile and risk of companies failure in the year 1932. Different authors around the world have done financial analysis on the banking sector using ratio analysis, CAMEL analysis and trend analysis.
Merger in banking sector was also the part of study for the research scholar from past many years. To scrutinize the impact of mergers, the scholars used to adopt any one approach among the two stated below:
In the first approach, The scholars used to focus on long term evaluation using financial parameters like return on capital, profitability ratios and efficiency ratio and does the finding in effect of performance of banks due to merger.
In the second approach, analysis is done on the stock price performance of both bidder and target firm after the announcement of the merger and it is assumed that the merger will create value.
Hannan and Hanweck (1988), was one of the first research scholar who used Z-statistic, Z-index or Z-score, which in simple words are said as Risk Index which symbolizes the level of risk faced by the bank. They found by analyzing the book value of bank equity that the probability of asset value is far less than its liability and concluded that there is a probability of insolvency in the bank. The method of risk index was further used by other research scholars like Liang and Savage in 1990, Eisenberg and Kwast in 1991, Sinkey and Nash in 1993, Nash and Sinkey in 1997, Na”my in 2005.
Some of the literature reviews are as follows:
1. Eisenberg and Kwast (1991) explained risk index (Z’score) as the basis on which ability of bank to absorb losses can be calculated. He also stated that there cannot be any benchmark for risk index, rather trend behavior need to be considered. If there is an upward trend then it is a favorable development and if there is downward trend then it is unfavorable.
2. Merton (1992) explained that financial innovation helps in enhancing the welfare as it will lower the cost of capital, helps in reduction of financial risk and will improve financial intermediation. The basic function of the financial system is to allocate and deploy economic resources in an uncertain environment.
3. Thabet A., Edris (1997) conducted a study in Kuwait to find out the factors which help the consumers to decide between the domestic and foreign banks. It was then concluded that the business firm while bank checks the size of bank assets, behavior towards the customer, reputation, efficiency, and availability if branches in foreign.
4. Jordan (1998) examined the Z-scores among surviving and failed banks in New England during 1989-1992 which was a period in which the country’s banking industry faced the maximum challenge for surviving. He concluded that the banks which survived during and after the period had Z’index of 13.33 i.e. have a higher average value and those banks which failed or became insolvent had Z’index of 8.71.
5. Debt and Kalpada (1998) did a study on the public sector bank and concluded that the quantitative growth of public sector bank was seen but qualitative aspects was not up to the mark.
6. Adhikari, R and Oh Soo Nam (1999) scrutinized about the necessity of financial reform after facing Financial crisis in Asia. It was found that around NPA ratio was 80% at that point of time out of which 60% was found in Indonesia and Thailand respectively.
7. Krueger, A and Tornell, A (1999) examined the effect of the Asian Financial crisis in Mexico. They concluded that alternative strategies have to be made for non’performing loans so that fiscal cost can be compensated of the banking sector.
8. Avasthi & Sharma (2000-01) have scrutinized that technological advancement has brought changes in the banking sector. It has brought a manger change in the delivery channel of retail banking. It also investigated the challenges of the banking industry and its regulation.
9. Vardhana Pawaskar (2001) analyzed the effect of the merger on the corporate performance by conducting a comparative study on pre and post merger period. She did a detailed study of the banks, which were involved in the merger between 1992 to 1995 and found their financial characteristics. It was found that the merger was the correct decision taken by banks, She did regression analysis, which showed no increase in post merger profit and also concluded that the merged firm started working better as compared to acquirer firm.
10. Siddique and Islam (2001) undertook a study on commercial banks of Bangladesh for the fiscal year 1980-1995. The study exposed that the Commercial Banks are performing well and thus, contributing to the economic development of the country. This study concluded that, although banking sector is contributing to the national economy and individual organization, but the performances of diverse categories of banks were not equally attractive.
11. Muniappan (2002) studied paradigm shift in banks from the point of view of a regulator in Indian Banking. He concluded that there is a positive effect of banking sector reforms on the performance of banks. He recommended many effective ways to strengthen the Indian banking system which includes fall of NPAs, more provisions for standards of the banks, IT. There is a need for regulatory change in the Indian banking system.
12. Chowdhury (2002) did an in-depth study of the condition of Bangladesh Banking Industry. He emphasized that to calculate the performance of bank one need to acquire knowledge related to profitability and the relationship between variable, including market size, bank risk and bank’s market size with profitability. It also focuses on the importance of performance evaluation of commercial banks in present scenario. The study concluded that Bangladesh banking industry is experiencing major changes in past two decades. He further recommended that the banks are required to bear pressure internally as well as externally so that they earn more profit in the coming years.
13. Barr et al. (2002) conducted a study and concluded that CAMEL rating criterion reviews different aspects of banking based on a variety of information sources like financial statement, funding sources budget.
14. Mathur (2002)observed that the condition and performance of Indian public sector banks are not numerically different from the private sector.
15. B. Janki (2002) did an analysis of the effect of technology on employees’ productivity. It has to be accepted that change in technology is important to upgrade operating efficiency and customer services in a public sector bank. To enhance the customer care service, new product development, strengthen risk management, etc, there will be a focus on technology. The study further concludes that technology is the only means to achieve the goal.
16. Said and Saucier (2003) used the CAMEL rating method to examine the liquidity, solvency, and efficiency of banks in Japan for the period of 1993 to 1999 and calculated the capital adequacy, assets and management quality, earning ability of banks
17. Prasuna (2003) analyzed the performance of Indian banks through the CAMEL Model. The performance of 65 banks was considered for the period 2003-04 and concluded that the competition was hard and consumers benefit from enhanced services, quality, innovative products and better bargains.
18. Montreevat, S and Rajan, R (2003) considered the financial disaster, bank restructuring and entry of foreign bank in Thailand and concluded regarding the upward trend of banks towards risk, poor lending policy and finally they have been loaded by large NPLs and remain undercapitalized.
19. Luo (2003) suggested that the overall technical competence in the profitability performance could forecast as per the acceptable levels, and non competent banks may shut down or merged with more competent ones.
20. Arora (2003) emphasized the significance of the transformation of the bank. He said that technology has a major role in facilitating transaction in the banking sector and due to the introduction of new technology products and services in the banking sector of India was initiated.
21. Jalan, B. (2003), did a study on the effect of IT revolution in the banking sector and concluded that no other industry was in gain as much as the banking & finance sector industry. Due to the advancement of the technology, banking sector was able to deal with the ever increasing competition and the rapid explosion of financial innovations.
22. Rishi and Saxena (2004) have stated that increased production is only possible by technological innovation. The study observed that technological innovation played a vital role in the industrialized countries to increase the productivity of the banking industry in the world.
23. Elizabeth Duncan, and Elliott (2004), in their paper analysed the financial institutions in Australia considering efficiency,financiang performance and customer services and showed that customer service quality scores are positively related to interest margin, return on assets and other financial parameters.
24. Nurazi and Evans (2005) scrutinized whether CAMEL (S) ratios could be helped to predict bank failure. He concluded that asset quality, adequacy ratio, management, earnings, liquidity is capable of explain bank failure.
25. Milind Sathye (2005) conducted a comparative study on the performance of public sector and private sector bank and concluded that private bank is performing better than public sector bank as far as financial parameters are concerned.
26. Merton and Bodie (2005) studied about the financial innovation and explained that financial innovation is useful in guaranteeing smooth functioning and it will also improve the efficiency of the system in general by diminishing the cost and lessening the risk. Whenever the financial system drive towards greater economic efficiency, financial innovation plays a major role.
27. Tambi (2005) evaluated the impact of mergers on the financial performance of a corporation of India. It is theoretically assumed that merger brings profitability to firm and improve the performance of the company since market power has increased. So to prove this theory, the author used the financial parameter which included Profit after Tax, Profit before interest, tax and dividend and return on capital employed. To calculate the change and compare those change t-test was used. He concluded that mergers doesn’t always prove to be positive.
28. Bhayani (2006) analyzed the financial performance of Industrial Credit & Investment Corporation of India (ICICI), HDFC, UTI and Industrial Development Bank of India (IDBI) through CAMEL Momodel approach.
29. H.W. Collier, Carl B. McGowan, and J. Muhammad (2006), the financial institutions in an evolving environment through a DuPont system of analysis. They applied the model to AFFIN Bank, Malaysia and shown its impact of the year 1999’2005 on the bank’s share price.
30. Brigham (2006) did a detailed study on financial performance of a sample bank in which he concluded that Return on Equity is 18.57% which ranges between 53.46% to -18.87%, standard deviation in this case is 0.11 and median is 17.38%, Return on Assets is 0.75% which ranges between 3.15% to -22.94%, standard deviation is 0.02 and median is 1.01%, Earnings per Share is 33.72 which ranges between 932.00 to -8,230.00, standard deviation has come upto 712.36 and median is 59.12, Cost Income Ratio is 0.45 which ranges between 4.64 to -3.69, standard deviation is 0.60 and median is 0.44, Credit Deposit Ratio is 0.78 which ranges between 1.15 to 0.12, standard deviation is 0.16, and median is 0.79, and Financial Leverage is 17.53 which ranges between 93.88 to -27.39, standard deviation 11.91, and median is 16.43.
31. Beck and Leaven (2006) calculated the Z-scores for 57 countries and disparities was found among them. Average Z’score was calculated for the period of 1997’2003 of the United States, which came upto 50. The average Z’score of all 57 countries was 24.
32. R.K. Mittal & S. Dhingra(2007) scrutinized the role of technology in the banking sector and analyzed the scenario before the Information Technology Act in India for the investment in technology and at that point of time technology in India was minimal.
33. K.C. Padhy (2007) studied the impact of latest technology in the Indian banking system and he also showed the future of the banking sector. The main competencies will provide comparative reward.
34. Vijaya Joshi (2007) examined that on the eve of banking reforms, Indian Banking Sector was financially unstable, unsuccessful and inefficient. She made a crucial examination of the changes that have taken place in the banking sector following reforms. Further, what remains to be done with respect to use of bank resources, fixed credit, deregulation of interest rates, etc. in the field of banking sector was also elaborately discussed.
35. Hesse and ”ih”k (2007) calculated the risk index for 29 individual banks and OECD countries for the period of 1994 to 2004 and concluded that cooperative banks have higher index values where the average value was 59.6 then came saving banks, which has an average value of 55.4 and commercial banks having an average value of 46., which shows that cooperative bank are more stable .
36. ”ih”k (2007), conducted a study using a 29 countries out of which 12 has experienced a total banking crisis, concluded that at the time of crisis, bank in difficulty has lower Z’scores which was around 32 and the rest of the bank had significantly high Z’scores which was around 89 .
37. Selvam. M (2007) wrote a book titled, ‘Mergers & Acquisitions in the Banking Sector with reference to the Indian Scenario’, in which he wrote the analysis done on the reaction of the stock price to the merger and acquisition taking place in the Indian scenario. He undertook both public and private sector banks and concluded that since share price has a direct effect on the market and most of the banks opened new branches which has surely affected the profitability but also created an unhealthy competition between different banks in India.
38. Pramod & Reddy (2007) conducted a study on the impact of merger on the performance of the acquirer and examined through financial ratio the pre and post merger situation of the firms. He took public limited as well as traded companies as sample during 1991 to 2003. He found a minor variation in operating performance after the merger and gave the conclusion that banking/ financial industry experienced more profitability as compared to pharmaceutical, textiles and electrical industries.
39. Pervan and Peko (2008) did an empirical research on some of the Croatian Banks and disclosed that the bank uses financial and non’financial variable for judging client failure.
40. B. Nimalathasan (2008) did ‘A comparative study on Financial Performance of banking sector in Bangladesh by applying CAMELS rating system’ and to do the relative study on different types of bank, namely National Commercial Banks; Government possessing development financial institutions, Private sector Commercial Banks and Foreign Commercial Banks, ratio analysis method was used and rated them under CAMELS rating technique which is widely used in Bangladesh. Through CAMELS rating system, it was concluded that 3 banks was rate 01 which means strong, 31 banks were rated 02 which means satisfactory, whereas 7 banks was rated 03 which means fair and number of banks rated 4 or Marginal were 5 but there were 2 banks rated 05 that means unsatisfactory rating
41. Amit Kumar Dwivedi and D. Kumara Charyulu in their paper entitled ‘Efficiency of Indian Banking Industry in the Post Reform Era’ explored that the Indian banks have two types of scheduled banks namely scheduled commercial banks and scheduled co’operative banks . Scheduled Commercial Banks include Public Banks (28), Private Banks (25), Foreign Banks (29) and Regional Rural Banks (91). In case of Scheduled Co-operative Banks, two types of banks are found, namely Scheduled Urban Co-operative banks (55), and Scheduled State Co-operative Banks (16). The Banks are also divided on the basis of Nationalization and Privatization i.e. there are 80 nationalized banks under public sector, also, State Bank of India with 8 its associates and Under Private Sector Banks, there are 17 Old Private banks and 8 new private banks. He concluded that the private banks and foreign banks have shown high efficiency over a period of time. The state owned banks, public banks and old private banks has also improved now as compared to 2005 even scheduled commercial banks improved their efficiency continuously up to 2007’08.
42. Gupta and Kaur (2008) conducted a comparative study of 20 old private sector bank and 10 new private sector bank with the use of CAMEL Model and ranked them as top five banks and bottom five banks for the period from 2003 to 2007.
43. Hua G. (2009) scrutinized the online banking acceptance in China and conducted an experiment to investigate how users’ insight about online banking is affected by the apparent ease of use of website and the confidentiality policy provided by the online banking website.
44. Gunjan (2009) studied that there is no precise proof of improvement in the competence levels of the public sector banks over the years.
45. Soral G. and Shurveer (2009) concluded that during the post liberalization period the performance of Indian banking sector was satisfactory with regard to shareholder value creation.
46. B.Sathish Kumar (2009) found that Private sector banks are best user of technology and they do optimum utilization of manpower.
47. Gunjan M Sanjeev (2009) with the use of financial parameter concluded that the financial performance of public sector banks is consistent during the period of 2003 to 2007.
48. Santosh Kumar Das (March 2010), studied on financial liberalization and banking efficiency using RBI data from statistical tables and found that there has been great changes is the organization of the banking sector. By analyzing the post reform period the study concluded that the domestic private banks have become more efficient, but public banks are more efficient than the private banks, and foreign banks seem to be the least efficient bank in India.
49. R. C. Dangwal and Reetu Kapoor (2010) conducted a study on the financial performance of commercial banks. In this study financial performance of 19 commercial banks were compared with respect to eight parameter which was then those banks were classified into excellent, good, fair and poor categories.
50. Dr. Kanhaiya Singh, Dr. U.S. Pandey and Priya Gupta (June 2011), did research on the topic ‘Technological innovation in Indian Banking Sector’. The force of advancement of technology in banking sector is examined through questionnaire method and how the use of information technology product brought change in the banking industries in India.
51. Almazari (2011) in his study calculated the financial performance of selected Jordanian commercial banks from 2005-2009. The study used simple regression analysis. Bank size, asset management and operational efficiency are considered as independent variable, whereas return on assets and interest income are dependent variable which showed the financial performance of banks. He concluded that even if banks earn higher total deposits, credit, assets and shareholder’ equity, it’s not necessary it will give profitable performance.
52. Ashraf and Rehman (2011) observed the financial performance of Islamic banking and conventional banking structure in Pakistan by using the financial parameters. He analyzed the financial performance on the basis of profitability, liquidity, earning, credit risk, and asset activity for the period of 2007-2010. The conclusion came after analyzing the performance of Islamic Bank in Pakistan was that due to increasing operating cost and inefficiency of management is leading to the low financial performance of the banks.
53. Jha and Sharma (2011) examined the performance of Axis Bank, ICICI, Bank of India, and Punjab national bank, State bank of India, IDBI and HDFC for the year 2009-10. They used three parameters to analyze the financial performance. Those are operating performance ratios, financial ratio and efficiency ratio. They used eleven ratios in total to analyze the performance. It was found that Axis bank was at par i.e. its performance is far better than any other bank on the list.
54. Shalu Rani (2011) did an examination of the position of banks in SCBs of India with respect to NPAs. She dealt with the causes and corrective measures and concluded that NPA has increased; eroding the reduction was made with the continuously increasing level of fresh NPAs and strict of norms by RBI in the passage of time. Since it is not possible to eliminate NPAs completely so it would be sensible to follow proper policy for appraisal, guidance and follow up of advances to evade NPAs
55. Kajal and Monika (2011) conducted a study to analyze how is the management of NPAs in public sector banks and private sector banks taking place. IT was concluded that the public sector needs to work harder so that they can compete the private sector bank.
56. Ramesh and Jai (2011) examined the financial performance and capability of four district central cooperative banks functioning in the Hisar division in Haryana from 1997-98 to 2008-09, the financial parameters used in the study included Z’score analysis and financial ratio which was based on profitability, liquidity, risk, efficiency, bankruptcy and solvency. It was concluded that four DCCBs with approximately fifty branches have not performed up to the mark. Moreover, it was also found that all the banks are at the bankruptcy position throughout 12 years of the study period. It was recommended that the banks need to check and rectify their operations, policies and strategies so that effective utilization of resources (human and financial) takes place.
57. K.V.N.Prasad and Dr.A.A.Chari (2011) evaluated the financial performance of public sector and private sector bank and in the study, they undertook the top four Indian Banks namely State bank of India, PNB, ICICI and HDFC. By using financial parameters, they came to the conclusion that HDFC is working far more profitably than any other banks taken as a sample.
58. Dr.D.Maheshwara Reddy and K.V.N. Prasad (2011) did a study to assess the financial performance of regional rural banks in India by using the CAMEL Model.
59. Vohra, Singhal and Jaswal (2011) did a comparative study of private and public sector bank conditions post recessionary period and concluded that public sector banks performed pretty well as compared to a private sector bank.
60. Biresh K Sahoo and Anandadeep Mandal (2011) conducted a study other performance of the bank during the post transition period and concluded that due to increase in technical efficiency a positive trend of the reform process was found.
61. Ashok Khurana, Kanika Goyal (2011) examined about requirement for better absorption of improved technological capability by numerous banks to further argument yield of the banking sector.
62. Borio, C (2011) examined the force of international crises on central banks through comparative study on the financial status of the bank in pre-crisis and post crisis world.
63. Azhagaiah & Kumar (2011), tested hypothesis relating to whether there in major improvement in the performance of Indian manufacturing corporate firms and merger using a paired t-test. They concluded the Indian corporate firm which were involved in merger and acquisition has achieved increased liquidity, operating performance, productivity, and diminished operating and financial risk. The other study in which they examined 20 acquainting firm during 2007 and concluded that after the merger, corporate firm has performed far better as compared to pre’merger period.
64. Antony Akhil (2011) conducted a study on Post-merger productivity of selected banks in India and examined the consequence of the merger in India from 1999 to 2011. From 1999 to 2011, around 18 mergers and acquisition took place in the Indian banking sector. He took six acquirer banks as sample which included three public sector and three private sector banks by by means of a paired t-test. He concluded that there is a major difference in the profitability ratios viz. Net profit ratio, Gross Profit ratios, operating ratio, return on equity. These entire ratios raised in the post merger situation.
65. Deo and Shah (2011) did a research work on sharholders’ equity after merger declaration in Indian Industry and wrote about the financial implications of the acquirer and target shareholder wealth in the IT industry that took place from January 2000 to June 2010. The study included of 28 merger announcements of both by independent and controlling bidder firms, used a constant market model to assess acquirer and target shareholder wealth. The study findings pointed out those merger announcements in the IT sector had no noteworthy impact on the bidder portfolio.
66. Paneer Selvam, R. And Radjaramane, V. (Jan. 2012), analyzed the performance of nationalized banks in India after liberalization. It is a descriptive study on the one hand and on the other hand statistical tools like arithmetic mean, standard deviation and measures of dispersion are used to do comparing. Hence, the study concludes that the performance of the public sector has improved a lot when compared to private sector banks.
67. Dr. M. Dhanabhakyam, M. Kavitha (Jan 2012) examined the financial performance of the particular public sector banks in India and covered six banks, namely Bank of India, Canara Bank, Indian Overseas Bank, Indian Bank, State Bank of India, and Union Bank of India. The study concluded that these banks are following the rules laid by the Government of India for social and economic development of the country; Secondary data are collected and covers the period between 2001to 2010 in sequential orders. Financial Parameters like ratio analysis, regression analysis, correlation analysis are used. The growth rate and financial efficiency have improved during the study period. These banks have to earn a nominal profit so that they can serve the economy by providing advances and protect the interest of investors by providing the expected return on investment in banks. The Indian banking system has to look into the strategies again so that they not only increase their earnings, but also generate a surplus through banking activities.
68. On Sept.2012, Dr. Virender Koundal, in his study on ‘Performance of Indian Banks In Indian Financial System’ tested hypothesis which covers two points, Firstly, performance of foreign banks is better than old and new private sector banks and public sector banks. Secondly, the performance of new private sector banks is better than old private sector and public sector banks. The study is based on secondary data and issues of banking statistics published by RBI. The comparison is done through ratio analysis. From this paper, it was concluded that various reforms introduced in private sector have produced positive effects on commercial banks which will help in transformation in all the categories of bank in India. Public sector banks have to work harder since they are lagging in financial parameter in comparison to private sector banks. The study has listed challenges like competition from the private sector, need of greater customer orientation, use of modernized technology, management of Non Performing Assets, adoption of New Basel Capital Accord, Issues in Human Resource Management, poor public perception, and high level of political interference which are hindering the performance of public sector banks. Hence the banks have to consider the above challenges and make reforms to improve it.
69. On Oct 2012, Dr. Mamta Ratti, in her paper titled ‘Indian Financial System and Indian Banking sector: A descriptive research study’, divided the paper into two sections. The first section explores the constituents of the financial system, concepts of bank, historical background, purposes and types. She further divided the financial system into financial institutions, financial market and financial assets. Financial Institutions are categorized into depository institutions, including commercial banks and credit union, Contractual Intermediaries includes pension funds, life insurance companies also fire and casualty insurance companies, Investment Intermediaries includes finance companies, mutual funds including money market mutual funds. Financial Markets are classified into four forms’ Nature of claim which includes debt market and equity market, Seasoning of claim which includes primary and secondary market, Maturity of claim is categorized into money market and capital market and finally is an Organisational structure which includes exchange and over the counter market. Financial Assets are divided into money market assets and capital market assets, whereas in the second section. Indian Financial System is explored in three phase’s which includes’Pre 1951 Organization, which was immature, incapable of sustaining. Then came phase 2 from 1951 to Mid Eighties, in this phase 4 characteristics were highlighted: Public Ownership of Financial System, Fortification of the structure of the Institution, Investor protection and contribution of financial institution in corporate management. Phase 3 was the time of Post Nineties, most of the developments like privatization; reorganization and investor protection took place in this era. In her research, she also explained how bank evaluated from consolidation banking (1951’1964) , then Innovative Banking (1964’1990) to Prudential Banking (Since early nineties)
70. A.B. Singh and P. Tondon (2012) examined the financial performance of SBI and ICICI Bank and found that SBI is performing well and financially sound than ICICI Bank on the other hand deposits and expenditure of ICICI bank has better managing efficiency than SBI.
71. Reddy K. Sriharsha (2012) did a comparative study of performance of banks in India using CAMEL approach. It is concluded that public sector banks have improved which indicates positive impact of the reforms in fair interest rates, wise fixed credit and Investments and increasing competition.
72. Joseph Jelsy and Vetrivel (2012) have conducted a study on financial performance on the basis of Activity Based Costing, and found that better cost predictions, loss making products are recognized. The ABC can be used for cost reduction, Decision Support System budgeting and superior performance measurement in order to enhance the financial performance of the companies.
73. Kouser and Saba (2012) did a comparative study of three banks of Pakistan, namely, pure Islamic Bank, mixed bank and conventional bank through CAMEL rating and they concluded that Islamic Bank is stronger in asset quality and have sufficient capital when compared to other two types of bank also they have better management and the earning is more in the Islamic branch of conventional bank than other banks.
74. Anurag and Priyanka (2012) analyzed the financial performance of a public sector and a private sector bank, namely, State Bank of India and ICICI. The comparison of both the bank took place on the basis of ratios like credit deposit, net profit margin, etc. On the basis of past five years study i.e., from 2007-08 to 2011-12. It was concluded that SBI is financially strong and performing better than ICICI but in case of deposits and expenditure, the management of ICICI is far better than SBI.
75. Ntow and Laryea (2012) did a comparative study from 2005’2010 on foreign and local banks in Ghana on the basis of efficiency, earning performance, liquidity and bank size. The study revealed that foreign banks are far better than local banks in case of capital adequacy ratio, quality assets, size and liquidity.
76. Dutta and Dawn (2012), in their paper analyzed the merger and acquisition taken place in the Indian Bank after liberalization on the basis of growth of total assets, profits, deposits, revenue and number of employees. The study took place for eight years, four year prior’merger period and four years of the post merger period. The study concluded that there was a significant increase in profitability ratios including Gross profit, Net Profit, Operating etc, major increase in total assets, profit, deposits, and revenue was found in the acquiring firm.
77. Dr. Namita Rajput, Ms. Ruchika Kaura and Ms. Akanksha Khanna (Jan 2013) in their research entitled ‘Indian Banking Sector towards a sustainable growth: A Paradigm Shift’ analyzed the response of Indian bank to the environmental turbulence and the action taken by banks for green banking adoption, awareness, drivers, challenges etc., through a structured questionnaire following by secondary data and published reports. Some of the recommendations given by them were as follows: Banks have to work actively for the development of sustainable finance promotion; banks need to deal with CSR more sincerely and need to take some measures to implement it. Public sector banks operating in India are liberal in following the rules of RBI, which has to be taken care of if they want to grow better.
78. Rozga Ante and Kundid Ana (2013), in their paper entitled ‘Discriminate analysis on the bank Profitability level’ explored the factors which positively affect the banking sectors. They examined that Growth of loan (GROWL), and Growth of Assets (GROWA) directly and favourable to the bank’s profitability whereas loan loss Provision (PRO) has a negative impact on profitability. If the banks go for higher equity finance it will hamper profit, whereas, higher fee income will positively influence. They also recommended that, bank should rationalize non’interest cost, increase non’interest revenue and expand bank assets by exploration of financial products and economies of scale.
79. Ivica Pervan and Tamara Kuvek (2013) did an empirical study on the relative importance of financial ratios and non financial variables in the forecast of insolvency. By using financial variables like Debt/Assets, Equity/Fixed Assets, Sales/Assets, EBIT/Annual Interest, Receivables period (days) etc. and non’financial variables. They made two models: Financial Model and Combined Models. They examined that accuracy of combined model is higher than the accuracy of financial model by 12.6% relating to insolvency can be improved by including the non’financial variables.
80. In September 2013, Adrian Costein and Florian Neager emphasized on bridging the banking sector with the real economy from a financial stability perspective. Their study included three tools, namely: probability of default model for the development and calibration, macroeconomic credit risk module and measuring the risk to financial stability. They tested the tool on the Romanian economy and concluded that the banking sector is in good shape and the up trending level of provisions can be easily used in a systematic manner.
81. Cheenu and Chitwan (2013) did a comparative study on the performance of Indian banks. They undertook public sector as well as private sector bank and found that new banks are more efficient than old banks and public sector banks are is showing less profitability as compared to a private sector bank.
82. Dr.K.Srinivas and L.Saroja (2013) conducted a comparative study to analyze the financial performance of HDFC Bank and ICICI bank. From the study it was concluded that both the banks are giving healthy competition to each other and are successful private sector banks. No major difference was found in their financial conditions, but HDFC still is better than ICICI bank as far as services is concerned.
83. Deepti Tripathi and Kishore Meghani (2014) did a comparative study of the financial performance of Axis bank and Kotak Mahindra Bank. Hence it can be observed that, the study was done on private sector banks. Through CAMEL Model and t’test, it was also found that there is no major difference in the financial performance of both the bank. But it was seen that Axis Bank is performing better than Kotak Mahindra Bank.
84. Gilbert and Charles (2014) conducted study based on profitability, competence, liquidity, asset value, and risk measure and investor analysis model called as PELARI for analyzing the financial performance. It was found that the focus of ADB’s is decreasing and it was noticed that the loans and advances for service sector was more as compared to agriculture sector which is 38% and 29 % respectively in 2012. It was also observed that bank liquidity is decreasing year by year and the Ghana banking survey (2011) confirmed that banks are illiquid.
85. Ms. Rajni (Oct.2015), compared the financial performance of the State Bank of India, PNB and Bank of Baroda using three sets of ratio, namely return on asset, total asset, operating efficiency ratio and also considered nonperforming assets. She concluded that SBI is more efficient in case of total assets, deposits and advances as compared to PNB and BOB.
86. Jayati Poddar analyzed the financial performance of SBI and BOB and did an indebt comparative study by using financial ratio and interpreted that SBI is more efficient than BOB. EPS and DPS, P/E ratio, Beta Credit Deposit of SBI is better than BOB.
From the above reviews, it is observed that financial analysis for any financial institution is done through ratio analysis, and CAMEL analysis. Financial analysis helps us to understand the profitability condition and financial condition of the bank. It also helps us to take quick decision and understand the cash flow trend of a bank. It was also observed that banking industry adopt various innovative schemes to attract customers, which help banks to sustain in the competitive environment. Further, Technology played a vital role in the banking sector to provide new ideas which resulted in major changes in the financial environment.