04-08-2012, 11:25 AM
Performance of Indian Public Sector Banks and Private Sector Banks: A Comparative Study
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Abstract
The economic reforms in India started in early
nineties, but their outcome is visible now. Major changes took
place in the functioning of Banks in India only after
liberalization, globalisation and privatisation. It has become
very mandatory to study and to make a comparative analysis
of services of Public sector Banks and Private Sector banks.
Increased competition, new information technologies and
thereby declining processing costs, the erosion of product and
geographic boundaries, and less restrictive governmental
regulations have all played a major role for Public Sector
Banks in India to forcefully compete with Private and Foreign
Banks. this paper an attempt to analyze how efficiently Public
and Private sector banks have been managing NPA. We have
used statistical tools for projection of trend.
INTRODUCTION
The last decade has seen many positive developments in
the Indian banking sector. The policy makers, which
comprise the Reserve Bank of India (RBI), Ministry of
Finance and related government and financial sector
regulatory entities, have made several notable efforts to
improve regulation in the sector. The sector now compares
favourably with banking sectors in the region on metrics
like growth, profitability and non-performing assets (NPAs).
A few banks have established an outstanding track record of
innovation, growth and value creation. Banking in India was
defined under Section 5(A) as "any company which
transacts banking, business" and the purpose of banking
business defined under Section 5(B),"accepting deposits of
money from public for the purpose of lending or investing.
REVIEW OF LITERATURE
1) Roma Mitra, Shankar Ravi (2008), A stable and efficient
banking sector is an essential precondition to incr.ease the
economic level of a country. This paper tries to model and
evaluate the efficiency of 50 Indian banks. The
Inefficiency can be analyzed and quantified for every
evaluated unit. The aim of this paper is to estimate and
compare efficiency of the banking sector in India. The
analysis is supposed to verify or reject the hypothesis
whether the banking sector fulfils its intermediation
function sufficiently to compete with the global players.
The results are insightful to the financial policy planner as
it identifies priority areas for different banks, which can
improve the performance. This paper evaluates the
performance of Banking Sectors in India.
PUBLIC SECTOR BANKS
Public sector banks are the ones in which the government
has a major holding. They are divided into two groups i.e.
Nationalized Banks and State Bank of India and its
associates. Among them, there are 19 nationalized banks
and 8 State Bank of India associates. Public Sector Banks
dominate 75% of deposits and 71% of advances in the
banking industry. Public Sector Banks dominate
commercial banking India.
PRIVATE SECTOR BANKS
Private sector banks came into existence to supplement
the performance of Public sector banks and serve the needs
of the economy better. As the public sector banks were
merely in the hands of the government, banks had no
incentive to make profits and improve the financial he Main
difference is only that Public follow the RBI Interest rules
strictly but Private banks could have some changes but only
after the approval from the RBI! Private sector banks are the
banks which are controlled by the private lenders with the
approval from the RBI their interest rates are slightly costly
as compared to Public sector banks.
CONCLUSION
It is right time to take suitable and stringent measures to
get rid of NPA problem. An efficient management
information system should be developed. The bank staff
involved in sanctioning the advances should be trained
about the proper documentation and charge of securities and
motivated to take measures in preventing advances turning
into NPA. Public banks must pay attention on their
functioning to compete private banks. Banks should be well
versed in proper selection of borrower/project and in
analyzing the financial statement.