Volume 3 ISSN 0975-0746 1 | Business Perspectives rtyuiopasdfghjklzxcvbnmqwertyu Volume 3 ISSN 0975-0746 2 | Business Perspectives Volume 3 ISSN 0975-0746 Volume 3 (2010-2011) Published in December 2013 ISSN 0975-0746 BUSINESS PERSPECTIVES JOURNAL OF THE DEPARTMENT OF COMMERCE UNIVERSITY OF KALYANI 3 | Business Perspectives Volume 3 ISSN 0975-0746 BUSINESS PERSPECTIVES Volume 3 (2010-2011) Published in December 2013 Editors Professor Sunil Kumar Gandhi Professor Subhas Chandra Sarkar Associate Editors Dr. Debangsu Das Dr. Subhamoy Das Dr. Pradip Kumar Smanta Dr. Amalendu Bhunia Dr. Biswambhar Mandal Managing Editor Dr. Amalendu Bhunia Advisors to the Editorial Board (in Alphabetic Order) Prof. Amit Kr. Mallik, formerly of University of Burdwan Prof. Amitava Sarkar, Director, IISWBM, West Bengal University of Technology Prof. Arindam Gupta, Vidyasagar University Prof. Arun Kr. Basu, University of Calcutta Prof. Bhabatosh Banerjee, formerly of University of Calcutta Prof. H. K. Singh, Banaras Hindu University Prof. Jaydeb Sarkhel, University of Burdwan Prof. Kalyan Kumar Roy, I.I.S.W.B.M Prof. Kartik Ch. Pal, Vidyasagar University Prof. Pralay Kanti Haldar, Tripura University Prof. Ranjan Kr. Bal, Utkal University Prof. Uttam Kumar Dutta, West Bengal State University Editorial Assistant : Sri Soumya Ganguly Views and opinions expressed or implied in this Journal are those of the authors, and the Editorial Board of the Department of Commerce, University of Kalyani is not responsible for the same. 4 | Business Perspectives Volume 3 ISSN 0975-0746 Volume 3 (2010 – 2011) Published in December 2013 ISSN 0975-0746 EDITORIAL It gives me great pleasure to state that we have, through our integrated effort, been able to bring out the third issue of the BUSINESS PERSPECTIVES. Meanwhile we have obtained the ISSN code (0975-0746) for our journal from the appropriate authority. The allotment of such a number in the shortest possible time has encouraged us to maintain the quality of our journal. We are thankful to the said authority for this. We had received a large number of articles and the number of articles approved for publication by our reviewers out of those is also a substantial one. However, due to space constraint we could not accommodate each and every of those articles. The inconvenience caused is regretted. We hope to incorporate those articles in the coming issues. I take this opportunity to invite our esteemed readers, scholars and friends to please go through the articles & send their comments and also to send their research articles for publication in the future issues of this journal. In bringing out this issue, the co-operation extended by all the faculty members of our department is thankfully acknowledged. We also acknowledge the co-operation extended by the printing solution provider, Print&Press, without whose active help we could not have published the journal in time. Amalendu Bhunia Kalyani Managing Editor December, 2013 5 | Business Perspectives Volume 3 ISSN 0975-0746 6 | Business Perspectives Volume 3 ISSN 0975-0746 BUSINESS PERSPECTIVES Volume 3 (2010-2011) December 2013 CONTENT Page No. Profitability and its Internal Determinants: A Study of Indian 9 Banks J.K. Das & S.N. Bhattacharya Governance in NGOs: A Study of Selected NGOs in Northern 26 West Bengal B. Bagchi & D.R. Dandapat Financial Performance Analysis: A Comparative Study on the 36 Selected Cement Companies in India S. C. Sarkar An Analysis of the Development of Corporate Governance in 45 India S. Das A brief history of Powerloom industry in West Bengal: A study 53 U. Paul & D.N. Konar Growth Performance-A Comparative Study between SBI and 66 ICICI Bank A. Bhunia & P. Saha Right to Education Act: Perspective & Challenges 77 B. Mandal NGO Governance-A Study in West Bengal 85 S. Pakira Profitability Analysis – A Case Study of Public Sector General 99 Insurance Companies in India M. Bhattacharya Mismanaged Industrialization concerning Man-Made Disaster in 110 Bhopal Gas Tragedy S. Chakraborty 7 | Business Perspectives Volume 3 ISSN 0975-0746 8 | Business Perspectives Volume 3 ISSN 0975-0746 PROFITABILITY AND ITS INTERNAL DETERMINANTS : A STUDY OF INDIAN BANKS J K Das Associate Professor, Department of Commerce, University of Calcutta, West Bengal & S. N. Bhattacharya Faculty in Finance, RGIIM, Shillong Abstract The paper analyses the importance of fee based income vis-à-vis fund based income and explores the internal determinants of the above two sources of income. For the purpose, this paper uses aggregate bank level data from 1998 to 2009. Several factors like risk, operating cost, size and technology change are examined empirically to find out the significance of these factors in bringing about a variation in the income structure of the bank. Results show that the relative contribution of non-interest revenue streams grows rapidly with bullish capital market. The paper concludes that banks should try to reach to optimum level through experimenting different combination of technology use and human resource for profit maximizing. There is enough room for diversification for the state run banks to focus on revenue generation from the fee based services to improve non-interest margin. The size of the bank is not positively significant in improving profitability position of Indian banks. Keywords: Fee based income, fund based income, net interest margin, non-interest revenue. 1. Introduction India has witnessed phenomenal transformation in the banking sector in the last two decades. Banking today has been redefined and re-engineered with entry of new generation banks, changes in the process, methods and techniques of banking, introduction of new products and services, collaboration between banking and insurance companies, improvement in service quality, increased focus on retail banking and branchless banking, change in customer expectations, outsourcing of resources (human and non-human), volatility in interest rates, increase in non-interest and fee based income, corporate governance and business transformation, mergers, acquisitions and consolidations. Restructuring of the banking system in India became apparent from 1990‘s and was planned to encourage competition in the banking sector, mobilize savings and lead to a more efficient allocation of resources. Traditionally, banks were involved in accepting deposits from public at a lower rate and issuing loans at a higher rate and thereby making profit on interest margin. Banking sector reforms aimed at liberalization of interest rates and credit allocation, introduction of new indirect monetary policy, strengthening prudential regulation, opening the financial sector to foreign financial institutions and promotion of the capital market. Liberalisation of services sector and reforms in the banking sector allowed the banks to transcend their normal business operation and venture into activities like investment banking, leasing, merchant banking, factoring, hire purchase, micro financing, derivative trading and mutual 9 | Business Perspectives Volume 3 ISSN 0975-0746 funds etc., through separate subsidiaries. The Indian banking industry was quick to realise the growth potential of the financial service industry and begun focussing more on non-traditional activities that generate fee income, service charges, trading revenue, and other types of non-interest income. Enhanced profitability and operational efficiency became essential for survival and growth of any bank, including the government-owned public sector banks. The entry of new generation private sector banks, which were equipped with the latest technology on par with the foreign banks operating in India, had given another dimension to the industry competition. The public sector banks like Punjab National Bank, Bank of Baroda, Canara Bank etc., were aggressively looking for branch expansions beyond the national boundaries. In order to gain in size, maximize economies of scale and scope by providing single platform for various financial services and to focus more sharply on competitive strengths, mergers and acquisitions were undertaken in the Indian banking sector on large scales. In response to the increased competition from Scheduled Commercial Banks (SCBs), Kotak Mahindra, a non-banking financial company (NBFC) has been converted into a scheduled commercial bank, Ashok Leyland Finance has merged with IndusInd Bank, Centurion Bank of Punjab Limited has been taken over by HDFC Bank. ICICI Bank acquired Investitsionno-Kreditny Bank in Russia and Bank of Rajasthan has merged with ICICI Bank very recently. These are just a few examples signifying the transformation in the banking sector. The strong customer base and wide reach of the banking houses were considered as potential distribution channels by the service sector. The government also identified the banking channel a convenient mode for collection of taxes and duties. Since liberalisation, Indian banks have adopted universal banking structures (in different forms and degrees) as a strategic response to increased competition in both domestic as well as global market. Through diversification banks tried to eliminate the unevenness of geographical reach, bring about product-process innovation, exploit economies of scale and scope, bring in advanced technology and diversify risk along with mobilization of additional capital. It helped commercial banks to earn fee income from investment banking, merchant banking, insurance agency, securities brokerage, and other non- traditional financial services