International Journal For Technological Research In Engineering Volume 3, Issue 4, December-2015 ISSN (Online): 2347 - 4718

AN ANALYSIS ON THE PERFORMANCE OF PRIVATE AND PUBLIC SECTOR IN

Vidisha Shah Research Scholar, Pacific Academy of Higher Education & Research University, Udaipur, India.

Abstract: Banks are backbone of any economy. With the 8. of Mysore were set up In 1921. debut of multinational private sector banks, banking sector 9. All presidency banks were amalgamated to Imperial is facing stiff competition and Public sector banks are which was run by European facing stiff challenges from the private sector banks and are Shareholders. under tremendous pressure to cope up with the facilities 10. Reserve bank of Indi was established in April in provided by the multinational banks. The article discusses 1935. about the comparative analysis on performance of new 11. The was nationalized and private sector banks and the public sector banks of India was given the name ―‖ in 1955. during the period 2011-2015 on many key parameters such 12. The General Banks of India is the first bank in India as the P/E Ratio, Dividend Payout ratio, Return on equity was established in the year 1786. ratio, Capital adequacy ratio, Credit deposit ratio. The 13. The bank of Bengal established by The East India above period is chosen since it is very important to know Company in 1809 The in 1840 and how different banks performed during the recession and The in 1843. These three banks are inflation duration. . We have done a field study taking called presidency Banks. ICICI bank as private sector bank and SBI Bank as public 14. Bank of Hindustan was established in 1870. sector bankto better understand the above argument. 15. The bank completely run by the Indians was KEY WORDS: private sector bank, public sector bank, established in 1865. performance indicators. 16. is the head quarter at lahor which established in 1894. I. INTRODUCTION 17. Between 1906 and 1913, Bank of India, Central The bank plays an important role in the economic Bank of India, , , development of any country. Finance is life blood of any , and Bank of Mysore were set up In industry. DifferentCounty’seconomy can developed through 1921. development of banks. India is the top 5 fastest growing 18. 16. All presidency banks were amalgamated to economic county in the world. Whole of the world is looking Imperial Bank of India which was run by European towards India as prospective dominant player in the world's Shareholders. markets. The banks today have touched with every person. 19. Reserve bank of Indi was established in April in Whether the person wants to keep his money at midnight, to 1935. book the tickets for rail or air journey, to pay insurance 20. The Imperial Bank of India was nationalized and premium, telephone bills, electricity bills; to purchase or sale was given the name ―State bank of India‖ in 1955. of any securities from capital market, to take loan for 21. The General Banks of India is the first bank in India business, for education, for house, everywhere the bank is was established in the year 1786. present. 22. The bank of Bengal established by The East India Company in 1809. The bank of Bombay in 1840 History of Indian Banking System and The bank of Madras in 1843. These three banks 1. The General Banks of India is the first bank in India are called presidency Banks. was established in the year 1786. 23. Bank of Hindustan was established in 1870. 2. The bank of Bengal established by The East India 24. The bank completely run by the Indians was Company in 1809. The bank of Bombay in 1840 and Allahabad bank established in 1865. The bank of Madras in 1843. These three banks are 25. Punjab national bank is the head quarter at lahor called presidency Banks. which established in 1894. 3. Bank of Hindustan was established in 1870. 26. Between 1906 and 1913, Bank of India, Central 4. The bank completely run by the Indians was Bank of India, Bank of Baroda, Canara Bank, Allahabad bank established in 1865. Indian Bank, and Bank of Mysore were set up In 5. Punjab national bank is the head quarter at lahor 1921. which established in 1894. 27. All presidency banks were amalgamated to Imperial 6. Between 1906 and 1913, Bank of India, of India which was run by European Bank of India, Shareholders. 7. Bank of Baroda, Canara Bank, Indian Bank, and 28. Reserve bank of Indi was established in April in

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International Journal For Technological Research In Engineering Volume 3, Issue 4, December-2015 ISSN (Online): 2347 - 4718

1935.  SBI General Insurance 29. The Imperial Bank of India was nationalized and was given the name ―State bank of India‖ in 1955. Conception of Private sector The private- sector banks in India are made of both private Conception of Public sector banks and public sector banks. The greater part of private Public sector banks are governed by government. The sector bank banks are held by private shareholders not by majority stake is held by government. The Central government. Indian banking system was dominated by Government entered the banking businesswith the emergence Public sector banks since 1969.in this phase major private of which renamed the bank of Bengal in banks were nationalized by Indian government. Old and 1806.old commercial banks merge with madras, imperial private sector banks have re-emerged in 1990s.during the bank of India which becomes state bank of India in 1955. A period of liberalization these banks were grown faster using 60% stake was taken by the and the the latest technology, and tools-techniques. Through the new bank was named as the India. The total deposits in the private word customers believe that the services provided by banks nationalized in 1969 amounted to 50cr. This move them are more personal basis than Public banks. increased the presence of nationalized banks in India, with Services include: protecting and growing assets in the 84% of the total branches coming under government control. present, providing specialized financing solutions, planning There are 27 public sector banks in India. Out which 19 were retirement and passing wealth on to future generations. nationalised banks, 6 state bank groups 1 IDBI and 1bhartiya Financial regulators of India divide the private sector banks mahila bank. Commercial banks started with the emergence into two different groups. Oldprivate sector banks and of bank of Calcutta which renamed the bank of Bengal in newprivate sector banks. ICICI Bank is a multinational bank 1806.old commercial banks merge with madras, imperial and company. ICICI bank was established bank of India which becomes state bank of India in in 1994 .they provide financing to Indian industry. An 1955.today state bank of India enjoys privilege position as an initially the bank is known as the industrial Credit an agent of RBI.SBI has largest network in all over the world. Investment Corporation of India Bank, be66fore it. at present SBI has 48 overseas offices in 28 countries. SBI forms 400 this bank is known as ICICI bank. It provides a large number branches in the rural area and provide banking facilities to of banking products and financial services to corporate and them in the duration of 1951 to 1955. Nationalized banks retail customers. ICICI bank has 3845 branches and 12012 increase up to 19 during the 1993 with merger of ―New ATM in all over country. In the present time this bank is the bank of India‖ and ―Punjab National Bank‖. In June 1969 second largest bank of India. ICICI Bank introduced internet branches of public sector banks was increased and reached up banking operation in 1998. to 6669, in March 1990 it was reached 41847. Public sector banks enjoy predominant position in the Indian banking Objectives of Banks industry. 20% market share of State Bank of India in deposit All the banks are established to achieve the common and loans among Indian commercial banks. Also provide objectives as well as specific objectives. The common financial services in the foreign country. SBI has 16000 objectives of banks are as follows: branches including 190 foreign offices which is spread over  Promoting the saving habits 34 countries. Through this SBI became largest banking and  Providing funds to business for economic growth of financial services company in India by assets. In the financial country. year 2012-13, its revenue was INR 200,560 Corers where in  Development of basic industries of large and small domestic operations contributed to 95.35% of revenue, also, industries, consumer industries. domestic operations contributed to 88.37% of total profits.  Earning sufficient profit. SBI has associated banks as well as non-banking institutions. They are as follows: SBI has five associate banks: II. LITERATURE OF REVIEWS  State Bank of Bikaner & Jaipur  The previous researches are useful for any present research.   On the basis of previous research you can find the Gap   between them. The research was aim to compare the   performances of public sector bank and private sector bank.   It is absolutely necessary for a researcher to review the SBI hasthe non-banking subsidiaries: existing literature. by doing this may put greater emphasis on  SBI Capital Markets Ltd those aspects of research problem which have not been duly  SBI Funds Management Pvt Ltd covered by earlier researchers. Throughliterature review the comparison between the earlier research and the present  SBI Factors & Commercial Services Pvt Ltd research study. Some important studies conducted in India  SBI Cards & Payments Services Pvt. Ltd. and abroad are discussed in subsequent paragraphs. (SBICPSL) Reichheld and Sasser (1990) in their study, ―Zero  SBI DFHI Ltd Defection: Quality Comes to Service‖ have examined  SBI Life Insurance Company Limited relationship between customer retention and profitability and

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International Journal For Technological Research In Engineering Volume 3, Issue 4, December-2015 ISSN (Online): 2347 - 4718

found out that customer retention helps in improving profitability of a concern. They have suggested a ―Zero OBJECTIVES OF THE STUDY Defection of Profitable Customers‖ approach to attain higher  To analyse the performance of public sector and profitability. Mylonakis, J., P.G. Mlliaries, G.J. Siomkos private sector bank. (1998) in their study, ―Marketing Driven Factors  To make the comparative study on the public sector Influencing Savers in the Hellenic Bank Market‖ have and private sector bank. analysed the factors which influence the choice of a bank. It has been concluded that convenience, bank’s reputation or RESEARCH HYPOTHESIS image, quality of services, range of products, interest rates  H0 There is no significant difference between and fees (prices), as well as responsiveness to consumer’s performance of public sector and private sector needs are some important factors. Prime location and bank’s bank. ability to meet consumer’s changing needs are also very  H1 There is significant difference between relevant. Sureshchandar (2002).- The relationship between performance of public sector and private sector service quality and customer satisfaction in Indian banking bank. sector were found to be independent but closely related. Both constructs were found to vary significantly in core services RESEARCH METHODOLOGY ie, human element, systematization of service delivery, The present study aims at assessing the performance of the tangibles and social responsibility. Debashis and public and private sector bank in banking industries of India. Mishra(2005)-The study measured customer satisfaction in Under public sector bank state bank of India selected and branch services provided by nationalized banks in northern under private sector bank ICICI bank were selected. To India . 1200 customers were given questionnaires and it was accomplish the objectives of the study, the research has made found that computerization, accuracy in transactions, attitude use of secondary data. Secondary data has been gathered of staff and availability of staff influenced customer from the published annual reports of selected companies and satisfaction. Least important factor was promotion of the various published and unpublished government reports, products and various schemes. magazines, newspapers, websites etc. The data so collected has been analysed with the help of accounting ratios and Jaiswal K.S and Neetu Singh (2007) in their study, ―Retail statistical tables, figures and charts etc. Banking: Indian Scenario‖, have elaborated that customer retention and customer share are the two very important ANALYSIS AND FINDINGS aspects for a concern apart from attracting new customers. Some of the ratios that were discussed included: Customer share is the ratio of a customer’s purchase of a  P/E Ratio category of products or services from supplier X to the  DividendPayout ratio customer’s total purchase of products or services of that  Return on equity ratio category from all suppliers. This, thus, discard dead or nearly  Capital adequacy ratio dead accounts from customer retained category. The authors  Credit deposit ratio have also elaborated upon demographics, value, attitude, It would be an interesting idea to look and compare the belief, knowledge, needs and motivation as a base for private sector and public sector bank. We will also see how designing CRM and successful marketing. Padhy P K and B the same ratios have changed over the past few years. N Swar(2009)- The role of technology in banking and its impact on perceived service quality in public, private and P/E Ratio foreign banks in Orissa using a s ample size of 300 customers was studied. It was found that the foreign banks are very close to expectations of customers followed by ICICI and AXIS. Service quality in public sector banks was found to be very low. Sachin Mittal&Rajnish Jain(2010)- The role of banking industry and effect of IT based services on customer satisfaction was studied in this paper. The study highlights customer satisfaction levels among young customers in banking industry. A survey indicates the gaps between customer‟s expectations and perception with respect to IT based banking services. Findings indicated need to improve The P/E ratio is the most widely used ratio in the valuation the IT based services for enhancing customer satisfaction. of stocks. the P/E ratio measures how long it takes to earn The studies mentioned above clearly points out to the back the price you pay, the P/E ratio can be applied to the importance of having a structured study on this where banks stocks across different industries. That is why it is the one of in different categories are compared with respect to the the most important and widely used indicators for the service quality aspect which will help them to find out their valuation of stocks. Therefore, lower-P/E stocks are more core competencies and to capitalize on them and at the same attractive than higher P/E stocks so long as the P/E ratio is time find out the areas where they can improve. positive. Also for stocks with the same P/E ratio, the one

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International Journal For Technological Research In Engineering Volume 3, Issue 4, December-2015 ISSN (Online): 2347 - 4718

with faster growth business is more attractive. It is clearly evident from the above chart that sbi’s P/E Ratio is lower than the ICICI Bank. SBI shows more attractive as compare to ICICI bank as per lower P/E Ratio.

Dividend Payout Ratio 

A bank's capital ratio is the ratio of qualifying capital to risk adjusted (or weighted) assets. The RBI has set the minimum capital adequacy ratio at 9% for all banks. A ratio below the minimum indicates that the bank is not adequately capitalized to expand its operations. The ratio ensures that the bank do not expand their business without having adequate capital. It must be noted that it would be difficult

Dividend Payout Ratio measures the percentage of the for an investor to calculate this ratio as banks do not disclose company’s earnings paid out as dividends In dividends the details required for calculating the denominator (risk investing, Payout Ratio and Dividend Growth Rate are the weighted average) of this ratio in detail. As such, banks two most important variables for consideration. A lower provide their CAR from time to time. Both private and Payout ratio may indicate that the company has more room to public have been expanding operations at a strong pace. As increase its dividends. On observing the above chart, we can such, their CAR ratios are well above the prescribed limit of notice that private banks such as ICICI Bank’s dividend 9%. Private Banks such as ICICI Bank have in fact Payout ratio less fluctuating than SBI bank.SBI’s dividend increased their CAR over the past five years in compare to Payout ratio is constantly increase till 2014 but in 2015 it SBI bank. decline but ICICI bank pay steady dividend to their investors. Credit Deposit Ratio Return on Equity

 This ratio indicates that how much of the advances lend by the banks from deposits. it is the proportion of loan created by banks from the deposits received. The higher the ratio, the higher the loan created from deposits. These deposits in

Return on equity is calculated as net income divided by its terms of current and saving as well as fixed deposits. This average Return on Equity (ROE) measures the rate of return ratio indicates that the utilization of available resources. If we see the following chart, ICICI Bank distinctly stands out on the ownership interest (shareholder's equity) of the from its peers. A strong reason for the same would be its common stock owners. It measures a firm's efficiency at aggressive nature. SBI has seen their ratios increase generating profits from every unit of shareholders' equity constantly over the years. but in compare to SBI , ICICI bank (also known as net assets or assets minus liabilities). ROE increase gradually. shows how well a company uses investment funds to generate earnings growth. ROEs between 15% and 20% are III. CONCLUSION & SUGGESTIONS considered desirable. On observing the above chart, we can notice that private banks such as in 2011SBI bank is better Looking at the above mentioned parameters, it would be than ICICI bank as is ROE is higher than ICICI bank.in 2012 quite easy to differentiate the aggressive bank from the and2013 SBI’s ROE is higher than the ICICI bank. But in conservative one. During good times or bad times 2014 and 2015 ICICI is better than SBI Bank. ICICIperformed well in capital adequacy ratio and credit Capital Adequacy ratio deposit ratio. And SBI give their best performance in P/E Ratio, Return on equity ratio and well to improve their

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International Journal For Technological Research In Engineering Volume 3, Issue 4, December-2015 ISSN (Online): 2347 - 4718

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