new competitive strategies for the survival of psbs

8/14/2019 New Competitive Strategies for the Survival of PSBs

1/18

New Competitive Strategies For The Survival Of Public Sector Banks

In The Post-Liberalized & Globalized Era

Dr. R.K. Uppal* Rimpi Kaur**

* Head, Dept. of Economics, D.A.V. College, Malout (Punjab)

**Research Scholar, Punjabi University, Patiala

E-mail [email protected]

Mb. 98729-61700, 01637-261188 (R)

_____________________________________________________________________________

_

In the Indian banking industry public sector banks occupies a vital place but their performance

is very critical even in the post banking sector reforms period. There are so many issues,

challenges, threats; they are facing for their survival in the era of globalization. The present

paper compares and analyzes the profitability of four major bank groups i.e. SBI & its

associates (G-I), Nationalized Banks (G-II), New Private Sector Banks (G-III) and Foreign

Banks (G-IV) in the second post banking sector reforms era and concludes that there is a

significant difference in the profitability of various major bank groups. The average profitability

is the highest in the foreign banks (1.06 pc) and new private sector banks (0.96 pc) but the

public sector banks are far behind in many parameters. From the correlation matrix, it is

examined that the lower profitability of public sector banks is due to the significant and negative

effect of burden whereas opposite in case of new private sector banks having their profitability

higher due to the lowest burden and positive impact of interest income and interest expended.

The paper suggests some strategies like (competitive strategies, customer focus, latest

technology, effective HRM, capital planning, profit accountability, merger and acquisition and

autonomy) which are necessary for the survival of public sector banks in the liberalized and

globalized environment.

_____________________________________________________________________________

_Introduction

The economic crises of 1990s gave birth to the new economic macro level thinking to improve

the economic health of the Indian economy. Economic reforms were introduced to solve these

severe crises. Financial sector reforms, particularly banking sector reforms gave new sound and

1
mailto:[email protected]:[email protected]


2/18

healthy direction to the Indian economy. Under the regime of LPG, new competitive strategies

emerged and proved very beneficial for overall economic development of the country.

Financial sector is the milestone in the path of economic development of the country. Public

sector banks are the backbone of Indian financial system, accounting a lions share in the

resources of the system. They crossed many milestones since 1969, serving as an average

population of 14000; these banks today touch almost every section of the society. But,

fortunately or unfortunately, liberalization & globalization policies made very critical position of

these banks in the new millennium. Some public sector banks are facing very serious problems

as their survival has become very difficult in the competitive world. One side, they are facing

many challenges and threats from their counterparts i.e. foreign banks and new private sector

banks but on the other side, they are motivated from their excellent strategies. Some banks are

merged with each other to face the emerging new inter and intra-group competition. Recently,

RBI is also working on these lines that there should be only four or five public sector banks to

face the global competition.

The present paper critically analyzes the survival issues of public sector banks and suggests some

new competitive strategies to face the new competition in the global age.

The whole paper is divided into five sections. After brief introduction, section II workout the

methodology, hypotheses and objectives of the present paper. Section III discusses the main

findings whereas section IV suggests some strategies for the survival of public sector banks. The

last section concludes the paper.

II

Objectives

1. To study and analyzes the financial performance of selected major bank groups.

2. To study and analyze the effect of various selected independent variables on profitability

of selected major bank groups.

3. To explore the challenges or major issues for the survival of public sector banks and

suggest some strategies to improve their financial position.

Hypotheses

1. There is an insignificant difference between the profitability of SBI & Its Associates and

New Private Sector Banks and the profitability of SBI & Its Associates and Foreign

Banks

2


3/18

2. There is an insignificant difference between the profitability of Nationalized Banks and

New Private Sector Banks and the profitability of Nationalized Banks and Foreign Banks

3. There is an insignificant difference between the profitability of New Private Sector Banks

& Foreign Banks

Research Methodology

The present paper is concerned with the Indian Banking Industry. Out of five bank groups, four

bank groups have been studied and their comparative profitability is analyzed in the post-second

banking sector reforms period.

G-I comprises SBI & its Associate Banks

G-II comprises Nationalized Banks (NBs)

G-III comprises New Private Sector Banks (NPSBs)

G-IV comprises Foreign Banks (FBs)

The following variables have been studied to compare the profitability of these bank groups:

1. Net Profits as %age of Total Assets Y1

2. Interest Income as %age of Total Assets X2

3. Interest Expended as %age of Total Assets X3

4. Spread %age of Total Assets X4

5. Non-Interest Expenditure as %age of Total Assets X5

6. Non-Interest Income as %age of Total Assets X6

7. Burden as %age of Total Assets X7

Some statistical techniques like average, standard deviation, correlation, R-square (coefficient of

determination) & t-test are studied to make the study more authentic. All the statistical results are

calculated with the help of SPSS 10.00 version.

III

Findings

Net Profits as %age of Total Assets (Y1)

This ratio indicates that to what extent net profits of the banks contribute to their total assets. It

highlights the financial performance of the banks. The below given table-I analyzes the trends in

the profitability of the selected bank groups during 1998-2004.

As per this data, the profitability of all the bank groups depicts increasing trend in all the years

except new private sector banks, where it shows decreasing trend till 2001-02 and then started to

increase. On an average, profitability of foreign banks is the highest i.e. 1.06 pc whereas new

3


4/18

private sector banks are at the second position with 0.96 pc profitability still much better than the

public sector banks where G-I indicates 0.79 pc and G-II shows 0.69 pc. Fluctuations in terms of

coefficient of variations is the highest in G-V i.e. 47.17 pc whereas G-III shows 33.33 pc

fluctuations.

The profitability of new private sector banks is higher than that of public sector banks, because

burden is the least during the study period in G-III, although the spread is also minimum in this

bank group because interest expended by this group is proportionately higher as compared to

interest earned whereas the situation is opposite in case of public sector banks. Interest expended

is so because deposits of this bank group are increasing at tremendous rate of growth shows its

strong financial performance, that can be invested more in advances and other profitable

investments and hence make them capable to earn more profits in terms of interest, dividend etc.

and make them financially strong. Although, spread is lower in this bank group but still it

deserves higher profitability as compared to public sector banks.

Table-I: Net Profits as Percentage of Total Assets (Percent)

Years G-I G-II G-III G-IV

1997-98 0.99 0.59 1.49 0.91

1998-99 0.48 0.35 0.98 0.92

1999-00 0.78 0.42 0.91 1.15

2000-01 0.56 0.63 0.82 1.10

2001-02 0.77 0.68 0.49 0.14

2002-03 0.91 0.98 1.20 1.562003-04 1.03 1.18 0.83 1.64

Average 0.79 0.69 0.96 1.06

S.D. 0.21 0.30 0.32 0.50

C.V. (%) 26.58 43.48 33.33 47.17Note: Computed from the tables given in Annexure-I

Empirical Study of Selected Bank Groups Profitability

SBI & Its Associate Banks (G-I)

Average profitability of this bank group is only 0.79 pc, because this table shows that its profits

are significantly but negatively correlated with burden (X7) by 0.89 value. It proves that burdenis pushing the profitability of this bank group into negative direction. The important point to note

is the interest income as %age of total assets (X2) and interest expended as %age of total assets

(X3) both are affecting the profitability negatively but have negligible affect only. Other variables

are positively but insignificantly correlated with profitability.

4


5/18

In spite of this, other independent variables are also correlated with each other, where X2

(interest income as percentage of total assets) is significantly and positively correlated with X 3

(interest expended as percentage of total assets) by 0.97 which proves that when interest

expended is increased due to increasing deposits, its interest income ultimately increased because

of availability of more funds to invest in profitable investments and advances. Similarly, it is

significantly but negatively correlated with X5 (non-interest expenditure as percentage of total

assets) by 0.78 and with X6 (non-interest income as percentage of total assets) by 0.92. Interest

expended as percentage of total assets (X3) is significantly but negatively correlated with X5

(non-interest expenditure as percentage of total assets) by 0.82 and with X6 (non-interest

income as percentage of total assets) by 0.95.

Table-II: Correlation Co-efficient Matrix 1997-2004 (SBI and its Associate Banks)

Variables Y1 X2 X3 X4 X5 X6 X7Y1 1.00

X2 -0.42 1.00

X3 -0.53 0.97** 1.00

X4 0.58 -0.09 -0.32 1.00

X5 0.09 -0.78* -0.82* 0.33 1.00

X6 0.71 -0.92** -0.95** 0.34 0.69 1.00

X7 -0.89** 0.46 0.46 -0.13 0.08 -0.67 1.00Note: **Correlation is significant at the 0.01 level (2-tailed)

* Correlation is significant at the 0.05 level (2-tailed)

Overall, low profitability of this bank group is due to negative effect of burden which depicts

poor management of expenditure especially non-interest expenditure.

Nationalized Banks (G-II)

The profitability of nationalized banks is also lower than new private sector banks & foreign

banks because here also profitability is negatively effected by X2 (interest income as percentage

of total assets), X3 (interest expended as percentage of total assets) and X7 (burden as percentage

of total assets) at significant values of -0.76, -0.89 & -0.81 respectively. Whereas it is positively

and significantly affected by X4 (spread as percentage of total assets) by 0.90 and X6 (non-

interest income as percentage of total assets) by 0.95 but still show low profitability due to the

stronger effect of burden.

There is also a correlation of independent variables with each other like X 2 shows significant and

positive correlation with X3 at 0.97 and with X7 at 0.83 but having a negative correlation with X6.

X3 is significantly but negatively correlated with X6 by 0.86 whereas positively with X7 by 0.81.

5


6/18

Similarly, X4 is significantly and positively correlated with X5 and X6 whereas X6 is significantly

but negatively correlated with X7.

Table-III: Correlation Co-efficient Matrix 1997-2004 (Nationalized Banks)

Variables Y1 X2 X3 X4 X5 X6 X7

Y1 1.00X2 -0.76* 1.00

X3 -0.89* 0.97** 1.00

X4 0.90** -0.53 -0.73 1.00

X5 0.74 -0.31 -0.53 0.91** 1.00

X6 0.95** -0.78* -0.86* 0.79* 0.70 1.00

X7 -0.81* 0.83* 0.81* -0.47 -0.27 -0.85* 1.00Note: **Correlation is significant at the 0.01 level (2-tailed)


New Private Sector Banks (G-III)

The profitability of this bank group, although lower than foreign banks, but still strong as

compared to public sector banks. The strong point of their higher profitability is the least burden

i.e. proper management of their expenditure. The profitability of this group is positively and

significantly correlated with X2 and X3 by 0.79. This is so because deposits are at the peak in this

bank group and helping them to earn a handsome interest income by investing these funds into

profitable investments.

Table-IV: Correlation Co-efficient Matrix 1997-2004 (New Private Sector Banks)


X2 0.79* 1.00

X3 0.79* 0.99** 1.00

X4 0.69 0.87* 0.78* 1.00

X5 0.61 0.49 0.45 0.67 1.00

X6 0.75 0.42 0.42 0.47 0.90** 1.00

X7 -0.32 0.17 0.07 0.46 0.20 -0.25 1.00Note: **Correlation is significant at the 0.01 level (2-tailed)


On the other hand, in case of correlation between the independent variables, X2 is significantlyand positively correlated with X3 & X4. Similarly, X3 is significantly and positively correlated

with X4 that means interest income and interest expended both are positively increasing the

spread of this bank group, which further contribute to its higher profitability. X5 is significantly

and positively correlated with X6 whereas X7 has negligible affect on its profitability.

6


7/18

Overall, profitability of this bank group is higher due to more spread supported by more interest

income and expenditure and lowest burden.

Foreign Banks (G-IV)

Foreign banks profitability is the highest in Indian Banking Industry whereas all the variables

except X4 has negative correlation with its profitability but negligible.

On the other hand, X2 is significantly and positively correlated with X3 and X7, similarly variable

X3 and X5 are significantly and positively correlated with X7. From this data, it can be concluded

that burden has positive correlation with X2, X3 & X5 affecting these variables significantly. Still

the profitability of this bank group is sound which proves that financial performance is excellent

in this group due to their efficient management.

Table-V: Correlation Co-efficient Matrix 1997-2004 (Foreign Banks)


X2 -0.47 1.00

X3 -0.73 0.93** 1.00

X4 0.63 0.31 -0.06 1.00

X5 -0.56 0.52 0.49 0.12 1.00

X6 -0.07 -0.56 -0.48 -0.28 0.39 1.00

X7 -0.55 0.90** 0.83* 0.31 0.82* -0.22 1.00Note: **Correlation is significant at the 0.01 level (2-tailed)


Regression Analysis (R-Square)

R-square determines the extent to which an independent variable affects the dependent variable.

The data shows that in case of G-I, variable X7 has the highest extent to affect the profitability of

this bank group i.e. 78.50 pc that means with the increase/decrease of one unit in burden it will

change its profitability by 78 pc whereas X6 i.e. non-interest income is effecting the profitability

by 50 pc.

In case of G-II, X6 is dominant, affecting the profitability by 89 pc positively and secondly

variable X4 is also positively affecting the profitability by 81 pc. In this bank group spread and

non-interest income are dominant to affect the profitability.

Profitability of G-III is positively affected by X2 & X3 at 62 pc rate whereas burden has only 10

pc effect on the profitability. Hence, it shows that X2, X3 and X7 are playing an important role in

the increasing profitability of this bank group.

In case of G-IV, variable X3 is dominant and affecting the profitability by 53 pc whereas X6 has

no effect on the profitability of this bank group.

7


8/18

Overall, it can be concluded that low profitability of public sector banks is due to higher burden

and higher profitability of new private sector banks is due to handsome interest income and

lower burden. Hence, financial performance of new private sector banks and FBs is sound as

compared to that of public sector banks.

Table VI: Impact of Various Selected Variables on Group Profitability of Major

Bank Groups- R2

VariablesG-I G-II G-III G-IV

r R2 r R2 r R2 r R2

X2 -0.419 0.175 -0.764 0.584 0.790 0.624 -0.471 0.222

X3 -0.529 0.280 -0.887 0.787 0.789 0.622 -0.731 0.534

X4 0.577 0.333 0.900 0.810 0.693 0.480 0.627 0.393

X5 0.086 0.007 0.741 0.549 0.612 0.374 -0.559 0.312

X6 0.709 0.503 0.946 0.895 0.753 0.567 -0.070 0.005

X7 -0.886 0.785 -0.809 0.654 -0.318 0.101 -0.549 0.301

Testing of Hypotheses

The data witnessed that average profitability of public sector banks is significantly lower than

new private sector banks and foreign banks. New private sector banks are also following the

foreign banks by covering this gap. Hence, our hypotheses are rejected because there is a

significant difference between the profitability of public sector banks from new private sector

banks and foreign banks. We may conclude that the difference in profitability of public sector

banks from that of new private sector banks and foreign banks is significant and cannot be

ignored. There is a need to make some effective strategies to improve the profitability of public

sector banks too.

Table-VII: Analysis of Widening Gap Between the Profitability of Major Bank Groups

Bank

Groups

Mean

DifferenceS.D. S.E. t-value d.f.

Sig.

(2-tailed)

G-I & III -0.1714 0.3113 0.1176 -1.457 6 0.195

G-I & IV -0.2714 0.4662 0.1762 -1.540 6 0.174

G-II & III -0.2700 0.4434 0.1676 -1.611 6 0.158

G-II & IV -0.3700 0.4208 0.1590 -2.326 6 0.059

G-III & IV -1.0000 0.4680 0.1769 -0.565 6 0.592

8


9/18

Emerging Issues From These Findings

From the above analysis it can be concluded that the performance of public sector banks is far

behind the new private sector banks and foreign banks. Following are some issues come into

light:

1. Increasing burden of all public sector banks, resulting in decreasing profitability.

2. Lack of consideration to non-interest income areas.

3. Increasing non-interest expenditure especially establishment cost because of overstaffing

and less productive staff.

4. Lesser use of latest technology.

5. Poor HRM policies.

6. More and more banks are declared as weak banks.

7. Lack of adequate capital.

IV

New Competitive Strategies to Tackle These Issues, threats and challenges

The economic liberalization process has increasingly exposed the banking sector along with the

other sectors of the economy to international competition. In order to meet the challenges of

global competition, it has become necessary to change with the changing times, at least to the

extent as demanded by the market. Accordingly, several measures of improvement have been

recommended and implemented time to time such as nationalization of banks, introducing

reforms, IT Act 1999 etc. New private sector banks and foreign banks have witnessed a

remarkable growth in the banking industry but our century old public sector banks with large

branch network, wide customer base and rich experience are suddenly perceived as inefficient,

overstaffed, bureaucratic organizations which the customers are ready to desert at the first

opportunity. We have analyzed above that public sector banks are facing with the problem of

lower profitability due to excessive burden, which is because of excessive non-interest

expenditure comprising of excessive establishment cost again effect of overstaffing. This all

affect the overall financial performance of these banks badly, which depicts poor management of

expenditure by these banks. Hence, the following are some major challenges faced by these

banks need to be solved:

1. Question of Survival in Competition (Effective Competitive Strategies): The winds

of liberalization have opened up new vistas in the banking industry resulting in the

generation of intensely competitive environment. The foreign banks and new private

9


10/18

sector banks have witnessed a remarkable growth but on the other side, public sector

banks are at the edge to survive because new private sector banks and foreign banks with

huge capital base, latest technology, innovative and globally tested products/services are

fetching the customers attention and earning handsome money.

Strategy:

To make our public sector banks competitively strong, competitive strategies should be

formulated to meet the new international competition. For this, they should follow the

strategies of new private sector banks and foreign banks as benchmark.

Public sector banks should make their own effective competitive strategies taking

into consideration the strategies of new private sector banks and foreign banks.

Introduce latest technology.

Introduce innovative and globally accepted products/services.

Appoint experienced, skilled and tech-friendly professionals to formulate the

competitive strategies.

2. Ignorance of Customers Customer Focus: Customers are the only profit center in

todays business, but the public sector banks dont want to be careful for this. They

ignore the customer requirements and staff is just concerned with their salaries nothing

else. Customer is a king in todays market. All the public sector banks (except some

banks) never try to focus on their needs and hence loose their market share. The

customers are shifting from public sector banks to new private sector banks particularly

our young generation.

Strategy:

The Guru Mantra to survive in the competitive market is effective, attractive and

satisfactory customer services. Public sector banks should also focus on customer needs

and serve them accordingly.

Firstly, they should make their policies and strategies customer focused.

Identify the potential customers, their needs and preferences and then accordingly

improve the services.

Improve delivery system by improving the attitude and behaviour of the staff also.

10


11/18

Reduce transaction cost at least affordable by the poor customers too.

For the whole purpose, staff should be trained.

Public sector banks with their huge workforce have to strive hard to change the entire

organizational culture in order to measure up to customer expectations.

3. Obsolete Technology (Latest Technology): Why our public sector banks are lagging

behind our new private sector banks and foreign banks? Because they are fully IT-

oriented, provide innovative services/products through latest technology. Our public

sector banks, having vast branch network in rural, poor and uneducated areas, to whom

the level of automation and efficiency of services are immaterial. Still, these areas lack

the basic infrastructure, so how it is possible to introduce e-services/technology. Hence

there is a need to make them capable at least to compete with our new private sector

banks.

Strategy:

Technology is no longer a matter of choice but compulsion to survive in the globalized

market.

Public sector banks should also adopt the latest technology to provide e-services

as need of the hour. It will also help to reduce their burden of extra establishment

expenditure.

Technology should be cost-effective, customer-driven and especially

implementable in the real working.

Appoint young employees with fresh and creative minds expert in latest

technology and trained the other ones also.

Public sector banks should also be connected in single server network so that one

branch/bank can communicate with others easily and quickly and make the services

flexible.

As we all know, any change in any form is painful, so these programmes cannot besucceed without going through the pains of restructuring and sacrifices either of material

or of men.

4. Poor Human Resource Management (Effective HRM): The profitability of any

organization depends on the productivity of its people, as they are the real strength of that

organization. New private sector banks and foreign banks have understood this mantra

11


12/18

and hence appointing people with fresh and creative minds with full of knowledge of

latest technology. Approximately 90 pc of their staff is young with fresh brains. But

public sector banks are overloaded with much experienced senior staff but with old hands

who never ready to change accordingly. Now days, it is the need of the hour to develop

and manage the human resources to make them adaptable to the changing environment. It

is a big challenge for these banks that how to manage their human capital to make it

productive, because unproductive staff is only burden on the business and hence weaken

these banks as compare to private sector and foreign banks.

Strategy:

Technology is an aid for human resources to perform their activities efficiently not a

substitute thereof. So, how to achieve the goals with the human capital through

technology is a vital challenge for the public sector banks:

Constitute separate Human Resource Development department in each bank.

Provide on the job training to the inefficient (technology) staff to make them

capable to understand and work with the latest technology.

Appoint fresh professional having experience in handling bank services

through the latest technology.

Make the recruitment, selection, performance appraisal and control policies

transparent.

Performance of the staff should be evaluated quarterly or monthly to update

their knowledge in case of any deficiency.

Introduce VRS in a planned way.

5. Inadequate Capital Capital Planning: There is a sign of decline not only in profits of

public sector banks but they are undercapitalized too. If the NPAs are adjusted against

tier-I capital, none of the public sector banks, baring a few i.e. PNB, Corporation Bank

etc., will reach the prescribed minimum CAR (Capital Adequacy Ratio) of 10 pc. Manybanks (new private sector banks & foreign banks) have started to access domestic as well

as foreign markets to raise the additional capital. But our public sector banks are failed to

raise additional capital due to inadequate capital planning and some critical restrictions

by the government.

Strategy: To raise their capital following strategies are suggested:

12


13/18

Public sector banks should come up with the active capital planning based on

budgeting to ensure growth within the means generated by internal accruals.

Cost of capital has to be factored into the product pricing policy adopted by

the banks.

The top management should be pragmatic enough to allocate capital to

positive and higher risk adjusted returns and withdraw from loss-making

products/services.

Public sector banks should provide free access to market to raise additional

capital without government interference.

If the banks are unable to fulfill the conditions laid down by the RBI, they will have no

other option but to close down. As more government funds to these banks leading more

government deficit, so government have now come to decide finally on privatizing public

sector banks to reduce deficit financing.

7. Greater Emphasis on Profitability not on Accountability (Profit Accountability):

Public sector banks give more stress on profitability not on the accountability. If the

required profit target is achieved, nobody is accountable to reward and similarly in case it

is not achieved then also nobody is accountable for punishment. Only branch units are

given profit targets, not for functional heads and hence no accountability. In new private

sector and foreign banks targets are given to persons and hence they are responsible for

their performance individually.

Strategy:

To cope up with this problem public sector banks should make proper policies for profit

accountability.

Public sector banks should fix accountability with targets on each concerned

unit and person of the banks.

Award the people who have achieved his target and take some necessary steps

to improve the performance of others who have not been able to perform up to the

mark.

8. Weak Banks/Branches with heavy Losses (Mergers & Acquisitions): There are

several banks and some branches of the banks going continuously in losses, which are

weak, not able to survive in the market. Its overall affect on public sector banks

performance is becoming poor and poor.

13


14/18

Strategy: The banks should close the branches having greater losses but the branches

whose financial position is still good to some extent, can be converted into profitable

branches by merging them into efficient banks who are capable to manage them. Merger

and acquisition is a possible solution to meet the international competition. Public sector

banks can also opt for the same. The main motive of the merger and acquisition should be

to multiply their strength with distinct advantages. The need is to make the M & A policy

more clear and stronger.

Merger of some branches of the banks with other banks should be allowed.

Merger of some transactions can also be opted if it is profitable, rather to go

for full merger.

Merger and acquisition should be in favour of all the concerned

banks/branches.

In the span of twelve months period, Indian banking has witnessed to major acquisitions

like HDFC and Times Bank, Standard Charted Bank and Grindlays Bank, ICICI and

Madura Bank etc, which resulted in improved performance of these banks. Hence, public

sector banks should also come ahead to save themselves.

9. Excessive Interference by the Government (Autonomy): Even after liberalization,

still there are restrictions imposed by the RBI on the scheduled commercial banks. This

non-autonomy to the public sector banks is a hindrance in their development. On theother hand, foreign banks and new private sector banks have the full autonomy in day-to-

day operations and that is why their performance is significantly better than public sector

banks.

Strategy:

Public sector banks need operational freedom and autonomy. There should not be a

bureaucratic control of the owners. In a liberalized environment public sector banks need

to conduct its affairs based on the market signals. So, we can say, to compete in

the global market public sector banks should be given full autonomy. RBI should provide

full autonomy in the following areas:

All the public sector banks should be given full autonomy to enter the

insurance sector.

14


15/18

All banks should be allowed for free merger and acquisitions.

All banks should be allowed to curtail the rural branches.

Managers/experts from the private sector banks should be allowed to serve the

public sector banks without any condition.

Autonomy to fix quota for priority sector advances.

Politicians should not be allowed to interfere in the functioning of these

banks.

V

Conclusion

We may conclude from the above discussion that various issues are relevant not only for the

survival but to ensure sustainable growth of public sector banks in the new millennium too. If the

proper planning is made to develop the public sector banks only then they will survive in the

future. Public sector banks should make competitive strategies to compete with the other private

sector banks in the liberalized and globalized era. To face the global competition, public sector

banks should adopt the IT and for this they should change their work culture according to the

changing environment.

Future Area of Research

Globalization of banking services & their effect on bank efficiency

Emerging new competition & dynamic role of banks

CRM Relation with bank efficiency

E-banking Attitude of bank customers

Structural changes in Indian Economy & changing role of banks

Annexure - I

Table I: Interest Income as Percentage of Total Assets (Percent)


1997-98 8.66 8.61 8.70 9.69

1998-99 8.41 8.70 8.73 9.48

1999-00 8.52 8.64 7.17 9.16

2000-01 8.47 9.09 8.17 9.86

2001-02 8.62 8.77 4.51 8.47

2002-03 8.26 8.39 8.13 7.67

15


16/18

2003-04 7.46 7.43 6.66 6.59

Table II: Interest Expended as Percentage of Total Assets (Percent)


1997-98 5.68 5.97 6.55 5.991998-99 5.69 6.06 6.83 6.24

1999-00 5.81 6.10 5.33 5.54

2000-01 5.68 6.19 6.03 5.98

2001-02 5.91 6.03 3.33 5.93

2002-03 5.50 5.39 6.43 4.33

2003-04 4.62 4.38 4.68 3.13

Table III: Spread as Percentage of Total Assets (Percent)


1997-98 2.98 2.64 2.15 3.701998-99 2.72 2.64 1.90 3.24

1999-00 2.71 2.54 1.84 3.62

2000-01 2.79 2.90 2.14 3.88

2001-02 2.71 2.74 1.18 2.54

2002-03 2.76 3.00 1.90 3.34

2003-04 2.84 3.05 1.98 3.46

Table IV: Non-Interest Expenditure as Percentage of Total Assets (Percent)


1997-98 3.49 3.15 2.95 5.54

1998-99 3.65 3.31 2.39 4.60

1999-00 3.34 3.27 2.42 4.81

2000-01 3.53 3.71 2.67 5.40

2001-02 3.28 3.55 1.91 5.30

2002-03 3.47 3.69 3.37 4.42

2003-04 3.80 3.73 3.26 4.77

Table V: Non-Interest Income as Percentage of Total Assets (Percent)

Years G-I G-II G-III G-IV1997-98 1.50 1.13 2.29 2.75

1998-99 1.41 1.02 1.47 2.28

1999-00 1.41 1.15 1.49 2.34

2000-01 1.30 1.14 1.35 2.62

2001-02 1.34 1.49 1.20 2.90

2002-03 1.62 1.67 2.57 2.64

2003-04 1.99 1.86 2.11 2.95

16


17/18

Table VI: Burden as Percentage of Total Assets (Percent)


1997-98 1.99 2.05 0.66 2.79

1998-99 2.24 2.29 0.92 2.32

1999-00 1.93 2.12 0.93 2.47

2000-01 2.23 2.27 1.32 2.78

2001-02 1.94 2.06 0.69 2.40

2002-03 1.85 2.02 0.80 1.78

2003-04 1.81 1.87 1.15 1.82

References

Avasthi, G.P.M. (2000-01), IT in Indian Banking: Challenges for Regulations,Prajnan, Vol.

XXIX, No. 4

Bhatt, P.R. (1999), Profitability of Commercial Banks in India,Indian Journal of

Economics (March), pp. 202-14

Bhattacharya, S.K. (1998), The Need for Optimizing the Banking Industry Structure, The

journal of the Indian Institute of Bankers (January-March)

Das, A. (2002), Risk & Productivity Change of PSBs,EPW (February 2), Vol.

XXXVII, No. 5, pp.437-48

Kohli, S.S. (2001), Indian Banking Industry: Emerging Challenges,IBA Bulletin

(March), Vol. XXIII, No. 3

Murthy, P.V.R. (1996), Cost and Profitability of PSBs, (New Delhi: Mohit Publications)

Shrivastava, M.P. (2004), Indian Banking in the New Millennium, (New Delhi: Anmol

Publications)

Singh, S.K. (2002), Banking and Financial Sector Reforms in India, (New Delhi: Deep

& Deep Publications)

Singh, R.P. (1999), Working of the Nationalized Banks, (New Delhi: Radha

Publications)

Uppal, R.K. (2006), Indian Banking Industry & IT, (New Delhi: New CenturyPublications)

17


18/18

18

new competitive strategies for the survival of psbs

Documents