SYNOPSIS

A STUDY ON

Financial Performance of Selected Private Sector Banks

[Submitted in Partial Fulfilment of MBA IV Semester January-May 2013] As a part of the Curriculum of MASTER OF BUSINESS ADMINISTRATION From

Bhai Parmanand Institute of Business Studies

Affiliated to Guru Gobind Singh Indraprastha University

SUBMITTED BY: Name- Bhim Singh Roll No.03711403911 MBA IV SEMESTER SUBMITTED TO: ( Prof V.K Aggarwal)

GOVERNMENT OF NCT OF DELHI BHAI PARMANAND INSTITUTE OF BUSINESS STUDY

ABSTRACT 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 of which Small Scale Industries amount percentage to total approval from the RBI their interest rates are slightly costly as compared to Public sector banks. Historically, the private sector banks played a crucial role in the growth of joint stock banking in India. The first half of the 20th century witnessed phenomenal growth of private sector banks. As a result in 1951, there were 566 private banks of which 474 were non-scheduled and 92 scheduled classified on the basis of their capital size. The role of private sector banking started declining when the Government of India entered banking business with the establishment of State Bank of India in 1955 and subsequently two rounds of bank nationalization one in July 1969 (14 major banks), another in April 1980 (take over of 6 banks). Consequently, the presence of public sector banks has increased.

Introduction
Banks play a vital role in the economic development of a country; their

performance undertakes or determines the pace of development of economy. Mostly they engage in the money transactions including accepting deposits from the customers and lending them to the needy ones in the form of loans. The last 2 decade witnessed many positive developments in the Indian banking sector, especially after arrivals of Private Banks. Some banks established an outstanding track record of innovation, growth and value creation. The financial performance of banking sector always puts an impact on the performance of the economy. The growth of banks mainly depends on its conventional business services like deposits and loans. The expenditure made by the banks either in borrowing funds or acquiring assets should be cautiously done. The variables like growth, profitability and nonperforming assets (NPAs) are used to compare the performance of the banks. The recent global financial crisis has triggered fall of many economies, contributed by financial losses and large non performance assets in banking sector. Hence the stability of banking sector is pivotal for the growth of any economy. Banking is major sector of the economy that has achieved renewed focus after financial sector reforms and the entry of private sector banks. This sector is the foundation of modern economic development and linchpin of development strategy .It forms the core of the financial sector of an economy. Through mobilization of resources and their better allocation, commercial banks play an important role in the development process of underdeveloped countries. Commercial banks improve the allocation of resources by lending money to priority sector of the economy. A sound financial system is indispensable for the growth of a healthy and vibrant economy. The banking sector, being a crucial constituent of financial system is the life line of any modern economy. It is one of the important financial pillars of the financial system which plays a vital role in the success

/failure on an economy. Banks are one of the oldest financial intermediaries in the financial system. They play an important role in the mobilization of deposits and disbursement of credit to various sectors of the economy. The banking system is the fuel injection system which spurs economic efficiency by mobilizing savings and allocating them to high return investment. Research confirms that countries with a well-developed banking system grow faster than those with a weaker one. The banking system reflects the economic health of the country. The strength of economy of any country basically hinges on the strength and efficiency of the financial system, which, in turn, depends upon a sound and solvent banking system. A sound banking system efficiently deploys mobilized savings in productive sectors and a solvent banking system ensures that the bank is capable of meeting its obligation to the depositors. A sound banking system proves to be one of the pillars of economic, social and industrial growth of a country. In the recent past, the bank regulators have introduced a number of measures to link the regulation of commercial banks to the level of risk and financial liability of these banks. The regulators have recommended bank supervision through CAMEL (capital adequacy, asset quality, management quality, earnings and liquidity) rating model to assess the performance of banks. This supervisory system to assess the performance has brought about substantial and considerable improvement over the earlier systems in terms of economic, administrative and recovery mechanism efficiency.

Objectives of the study :

The main objectives of the study are:

1) To give suitable recommendations for improvement of financial performance of the sample banks. 2) To measure the financial performance of the selected Indian Private Sector Banks. 3) To compare the financial performance of the selected Indian Private Sector Banks. 4) To compare the cash flow of selected private sector's banks.

Limitations of the study:

There can be even being the printing mistakes in the secondary data by which the wrong result could be generated. Analysis is based on the secondary data which can be incorrect or in complete. The topic is so broad to cover all the fields in such a short period of time.

Importance of Financial Performance:

Financial performance is the concluding results of a firm's policies and operations in monetary terms. If gives true reflection of return on investment, return on assets, value added, etc. It can be evaluated through careful and critical analysis of financial statements. Banks are the main participants of any financial system, because they play a vital role in an inclusive growth of economy. India is one of the most preferred banking destinations as its economy is not only growing at +8 percent annually, but it is also going through a transformation to the next level of maturity. After liberalization & economic reforms Indian banking sector underwent major changes and it has been totally changed especially after arrival of private and foreign sector banks. The performance of the banking sector is more closely linked to the economy than perhaps that of any other sector. The growth of the Indian economy is estimated to have slowed down significantly from 8.39 percent in FY11 to 6.88 percent in FY12. This slowdown could be attributed to a number of factors: Continuing problems in Europe and economic slowdown in the United States affecting foreign investments coming into India Policy paralysis in view of the governments inertia on various policy issues and reforms Fiscal indiscipline leading to fiscal deficit High inflation leading to high interest rate Rupee devaluation which further deteriorates the current account deficit

Research Methodology:
Research Methodology decides the territory of proposed study and gives information to the readers about adopted process of analysis for the respective study. This includes aims for which the study is undertaken. This also clarify time, scope, data sources etc. of proposed study. Another significant aspect is tools and techniques which are used for the study. In brief this chapter helps to the researcher to decide his path of research work. The research is based on secondary data. The present study is a descriptive research study based on analytical research design. The secondary data from the annual reports of relevant banks for a period of 5 years (2008-2012) have been taken. The data is collected through the secondary sources.

DATA COLLECTION TOOLS:

This research study is based on secondary data. Secondary data have been collected through annual reports, authentic records and publications of RBI and website of individual banks and RBI website.

PERIOD FOR STUDY :

The period of the study is five years i.e. from march 2008 to march 2012.

SAMPLE SIZE
The study is exploratory in nature and it is based on the selected sample of the banks from the private sector banks. For comparative study a total of 5 banks have been selected on the basis of their turnover figure.

REFERENCES

Reserve Bank of India (RBI), Trend and Progress of Banking in India 2008,2009, 2010.2011 and 2012. Last five years Annual reports of all 5selected banks. Jain, PK, Financial Management Chandra, Prasanna, Financial Management Singh, Dr. Narendra, Advanced Financial Management, Himalaya Publishing House Private Limited. WWW.GOOGLE.COM WWW.INVESTOPEDIA.COM WWW.MONEYCONTROL.COM