ABSTRACT

Banks in India are geographically widespread and are functionally diverse and are
playing a vital role in the socio-economic progress of our nation.
Post-Nationalisation there has been a great change in the outlook of Indian Banks.
There has been fundamental change in the lending policies and performance of
Indian nationalised banks.
The present study is been undertaken to analyse the performance of select
nationalised banks in India. Profitability is definitely a key measure of
performance, but in the present study several other alternative measures are used
which is vital in analysing Banks performance. With the study period of 2011 to
2015 the performance of three nationalised banks are analyzed based on efficiency,
strength and soundness, profitability and growth of banks using EPS net profit
margin, assets turn over ,current ratio and earning retention ratio.
KEYWORDS:
Nationalisation, profitability, performance

Introduction
Post independence the Government of India (GOI) adopted planned economic
development for the nation. Accordingly, five year plans came into existence since
1951. Commercial banks were in the private sector those days. In 1950-51 there
were 430 commercial banks. The Government of India had some social objectives
of planning. These commercial banks failed helping the government in attaining
these objectives. Thus, the government decided to nationalize 14 major commercial
banks on 19th July, 1969. All commercial banks having a deposit base over Rs.50
crores were nationalized. It was considered that banks were controlled by corporate
and thus failed in catering to the credit needs of poor sections of society such as
cottage industry, village industry, farmers, craft men, etc. The second phase of
nationalisation came in April 1980 when banks were nationalized.
In India the government or public sector banks have dominated over the banking
sector since 64 years. In 1954 the All India Rural Credit Survey Committee
submitted its report recommending creations of a states sponsored , integrated,
strong, state partnered, commercial banking institution with an efficient
mechanism of branches spread geographically. Such recommendations of the
committee lead to the establishment of public sector banks which emerged in the
name of state bank of India on July 1, 1955 by acquiring the substantial part of
share capital by Reserve Bank Of India of then Imperial Bank Of India. Likewise
during 1956 to1959, due to the recognition of princely state the State Bank Of
India associate bank came into the spectrum of public sector banking.
The Government publisized Banking Companies ordinance july 19 1969, to aquire
b14 bigger commercial banks with nwhich deposits were over fifty crores.
However Bank Nationalization was mainly done with the objective of spreading
banking infrastructure in Rural India and to ensure the availability of finance at
lower cost to the farmers of India.
The second phase of Nationalisation of Bank took place in 1980 during the Prime
Ministerial tenure of Inira Gandh, in which six more Banks were MNationalised
with deposits above 200 crores.

Objectives behind Nationalization of Banks in India

1. Social Welfare : It was the need of the hour to direct the funds for the needy
and required sectors of the Indian economy. Sector such as agriculture, small
and village industries were in need of funds for their expansion and further
economic development.
2. Controlling Private Monopolies: Prior to nationalization many banks were
controlled by private business houses and corporate families. It was
necessary to check these monopolies in order to ensure a smooth supply of
credit to socially desirable sections.
3. Expansion of Banking: In a large country like India the numbers of banks
existing those days were certainly inadequate. It was necessary to spread
banking across the country. It could be done through expanding banking
network (by opening new bank branches) in the un-banked areas.
4. Reducing Regional Imbalance: In a country like India where we have a
urban-rural divide; it was necessary for banks to go in the rural areas where
the banking facilities were not available. In order to reduce this regional
imbalance nationalisation was justified:
5. Priority Sector Lending : In India, the agriculture sector and its allied
activities were the largest contributor to the national income. Thus these
were labeled as the priority sectors. But unfortunately they were deprived of
their due share in the credit. Nationalisation was urgently needed for
catering funds to them.
6. Developing Banking Habits : In India more than 70% population used to
stay in rural areas. It was necessary to develop the banking habit among such
a large population.
The banking sector in India was totally traditional prior to 1991. The banks were
usually risk averse and they thought banking is an activity of collecting deposits
and lending against them. Until 1991 the word profitability was seldom considered
by Indian banking business. Up to that period the banks were established only to
serve social objectives and their performance was just task oriented but not goal
oriented
The specific reforms were the development of efficient and transparent money
markets, promotion of professional competition through free entry or exist in

financial sector, recapitalizing the financial health of banks, restructuring poor

performing banks, improvement and institutionalization of proper quality
improvement systems through development of human resources, information
technology etc
Some Nationalised banks of India are

Allahabad Bank.

Andhra Bank.

Bank of Baroda.

Bank of India.

Bank of Maharashtra.

Canara Bank.

Central Bank of India.

Corporation Bank.

Dena Bank

Indian Bank

Indian Overseas Bank

Oriental Bank of Commerce

Punjab and Sind Bank

Punjab National Bank

Syndicate Bank

Uco Bank

Union Bank Of India

United Bank Of India

Vijaya Bank

Statement of the Problem

Apart from capital adequacy, quality of productivity and profitability, the
growth of assets, social banking and customer service are areas of concern
where a wide difference in performance exists among the nationalised banks.
The business reflectors of the banks have failed to attain substantial
growth.The rise in bank processing charges, the long waiting at counters of
customers, the unhelpful attitude of the bank staff, the inordinate delay in
the collection of outstation cheques, discounting bills, the failure to respond
to the genuine instructions of the customers, the non-availability of
necessary forms and so on continue to trouble the customer. In the name of
helping the under-privileged. the banks have been helping the elite classes .
With this background, the actual performance of our nationalised banks and
the problems if any they face are to be evaluated through a scientific study

Objectives of the Study

To understand the performance of the nationalized banks
To compare the performance of various nationalized banks
To analyse thye performance of various nationalized banks

Ratio analysis of few Nationalized banks in India

Earnings Per Share
NAME OF
THE BANKS

CANARA
BANK
ALLAHABA
D BANK
BANK OF
INDIA

MARCH
2015
(in Rs.
Cr.)
56.87

MARCH
2014
(in Rs.
Cr.)
52.86

MARCH
2013
(in Rs.
Cr.)
64.83

MARCH
2012
(in Rs.
Cr.)
74.10

MARCH
2011
(in Rs.
Cr.)
90.88

10.87

21.52

23.70

37.33

29.88

25.67

42.45

46.14

46.66

45.54

Earnings per share commonly known as EPS , is the portion of a company's profit
allocated to each share which is outstanding in the company .EPS serves as an
indicator of a company's profitability.
EPS is derived by earnings available to equity shareholders/ number of equity
shares .
As in the above table we can see the various EPS ratios among different
nationalised banks from the year 2011 2015 . to analyse the above, Canara bank
has the highest EPS in 2011 which is 90.88% but shows a consecutive decrease of
74.10, 64.83, 52.86 in the year 2012, 2013, 2014 respectively, where as it shows an
increase in 2015 at 56.87.
Allahabad bank has 29.88 in 2011 and shows a significant decrease in EPS trends
as we can see it drops down to 37.33, 23.70,21.52,10.87 in the years
2012,2013,2014 and 2015 respectively.
Bank of India has an EPS of 45.54 in 2011 and has slight difference in the years
2012 and 2013 where the EPS is 46.66 and 46.14 respectively and thete is a fall in
trend of eps being 42,45 and 25.67 in 2014 and 2015 accordingly.
\

Net Profit Margin

NAME OF
MARCH
THE BANKS 2015
(in Rs.
Cr.)
CANARA
6.17
BANK
ALLAHABA 3.14
D BANK
BANK OF
3.93
INDIA

MARCH
2014
(in Rs.
Cr.)
6.16

MARCH
2013
(in Rs.
Cr.)
8.42

MARCH
2012
(in Rs.
Cr.)
10.64

MARCH
2011
(in Rs.
Cr.)
17.54

5.99

6.79

12.02

12.92

7.19

8.61

9.40

11.44

Net profit margin is the percentage of revenue that remains after all operating i.e.
day to day expenses, interest, taxes and preference dividends (but not common
stock dividends) have been deducted from total revenue.
The formula for net profit margin is:
Total Revenue Total Expenses/Total Revenue = Net Profit/Total Revenue = Net
ProfitMargin
The bank has a margin of 6.17 in the year 2015, whereas 6.16 in the year 2014, it
also shows a margin of 8.42 in the year 2013, in 2012 it was 10.64 and in the year
2011 it has a margin of 17.54.
Allahabad Bank shows a significant decrease in the margins from 2015 to 2011 ,
being 3.14,5.99,6.79,12.02,
12.92.
Bank of India also shows a decreasing trend in margins .its margins are 11.44 in
2011, 9.40 in 2012,8.61 in 2013,7.19 in 2014, 3.93 in 2015

Asset Turnover Ratio

NAME OF
THE BANKS

CANARA
BANK
ALLAHABA
D BANK
BANK OF
INDIA

MARCH
2015
(in Rs.
Cr.)
0.09

MARCH
2014
(in Rs.
Cr.)
0.09

MARCH
2013
(in Rs.
Cr.)
0.09

MARCH
2012
(in Rs.
Cr.)
0.09

MARCH
2011
(in Rs.
Cr.)
0.08

0.09

0.09

0.09

0.10

0.08

0.07

0.08

0.08

0.08

0.07

Asset turnover ratio is that ratiowhere the value of a companys revenues

generated is relative to the value of its assets. The Asset Turnover ratio can be
used as an indicator of the efficiency with which a company is utilising its assets
in generating revenue.

Asset Turnover = Revenues / Total Assets

Generally speaking, the higher the asset turnover ratio, the better the company is
performing, since higher ratios indicate that the company is generating more
revenue per assets.
To analyse the above table, Canara bank is consistent in maintaining its asset
turnover ratio, it was 0.008 in 2011 where as its 0.09 from 2102 to 2015.
Allahabad Bank maintains its asset turover ratio at 0.08 in 2011 , 0.10 in 2012 and
has maintained 0.09 from 2013 -2015.
Bank of India has 0.07 in 2011 and 2015, but has 0.08 from 2012 2014.

Current Ratio
NAME OF
THE BANKS

CANARA
BANK
ALLAHABA
D BANK
BANK OF
INDIA

MARCH
2015
(in Rs.
Cr.)
0.03

MARCH
2014
(in Rs.
Cr.)
0.03

MARCH
2013
(in Rs.
Cr.)
0.03

MARCH
2012
(in Rs.
Cr.)
0.03

MARCH
2011
(in Rs.
Cr.)
0.02

0.01

0.01

0.01

0.01

0.02

0.03

0.04

0.03

0.03

0.04

The current ratio is also knownliquidity ratio that measures a company's capacity
to pay short-term and long-termrequirements . To understand this ability, the
current ratio considers the current total assets of a company relative to that
companys current total liabilities.
The formula for calculating current ratio, is:

Current Ratio = Current Assets / Current Liabilities

The current ratio is called current because, unlike some other liquidity ratios, it
considersallcurrent assets and liabilities.The current ratio is also known as the
working capital ratio
Canara Bank has 0.02 in 2011 , 0.03 in 2012 -2015
Allahabad bank has maintained a current ratio of 0.02 in 3011 , 0.01 from 20122015.
Bank of India has maintained current ratio of 0.04 in 2011 and 2014 year, 0.03 in
the year 2012, 2013, 2015 .

Earning Retention Ratio

NAME OF
THE BANKS

CANARA
BANK
ALLAHABA
D BANK
BANK OF
INDIA

MARCH
2015
(in Rs.
Cr.)
79.99

MARCH
2014
(in Rs.
Cr.)
79.20

MARCH
2013
(in Rs.
Cr.)
79.95

MARCH
2012
(in Rs.
Cr.)
85.16

MARCH
2011
(in Rs.
Cr.)
87.90

85.01

88.39

74.69

83.93

79.93

80.57

88.23

78.30

82.60

82.15

The retention ratio is the proportion of earnings kept back in the business as
retained earnings. The retention ratio refers to the percentage of net income that is
retained to take the business further to growth level , instead of being paid out as
dividends. It is on contrary with the of payout ratio, which measures the percentage
of earnings paid out to shareholders as dividends.

The retention ratio is 100% for companies that do not pay dividends, and is zero
for companies that pay out their entire net income as dividends.
To analyse the above table, Canara Bank has earning retention ratio of 79.99 in
2015,79.20 in 2014,79.95 in 2013,85.16 in the year 2012, 87.90 in the year 2011.
Allahabad Bank has a earning retention ratio of 85.01 in the year 2015,88.39 in the
year 2014,74.69 in the year 2013,83.93 in the year 2012 and79.93in the year 2011.

CONCLUSION
The banking system is indispensable in the modern It plays a key role in the
economic development of the money market in an advanced economy. Realising
the crucial role of the banks in the national economy, the Government of India
nationalised fourteen major commercial banks in July.1969 and six more in
April.196O. As a result of this 'banking revolution 'there has been a transformation
of the old concepts, attitudes and methods of banking in India .Now the credit
institutions in the country are required to participate in the nation-building
activities and help in bringing about socio-economic changes. They are catalysts
in the development of the country to act as mobilising resources where ever they
may be and channelising them towards productive purposes.