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Performance of Banks during pre and Basel II period:

A comparative study of PNB and ICICI Bank

Amitabh Bhowmick

Research Scholar,

Institute of Management Studies,

Banaras Hindu University, Varanasi

&

Shashi Srivastava

Assistant Professor,

Institute of Management Studies,

Banaras Hindu University, Varanasi

Abstract

A study of PNB and ICICI Bank has been undertaken to analyze the performance of both the

banks during the pre and Basel II period. The parameters of analysis were classified under three

broad categories i.e. Profitability, productivity and the assets quality. Analysis of identified

parameters showed a decrease in operating profit ratio in PNB from the year 2011 to 2014

whereas it increased in ICICI Bank during the same period with a significant difference was

observed between the pre and Basel II period. The net interest margin remained almost the same

in PNB during the pre and Basel II period. It was found irregular in ICICI Bank.ROA and ROE

increased in ICICI Bank during the entire period of Basel II. BPE increased and significantly

differed when the pre and Basel II period were compared in PNB. PPE was higher in ICICI

Bank when compared with PNB during the entire pre and post-Basel II period. It significantly

differed in PNB. Cost to income ratio has decreased in both the banks, whereas it significantly

differed in ICICI Bank. Gross NPA to gross advances ratio and net NPA to net advances ratio

increased in PNB during the Basel II period but the reverse was found in ICICI Bank.

Key words: OPR (Operating Profit Ratio), ROA (Return on Assets), ROE (Return on Equity),

BPE (Business per Employee) and PPE (Profit per Employee), NIM (Net Interest margin) and

PNB (Punjab national bank).

Introduction

Risk is defined in the way of achievement that can create hindrances in the way of achievement

of certain objectives. Internal as well as external factors are responsible for creating risk in

different forms. In banking perspectives, the risk arises from the occurrence of some expected or

unexpected events in the economy or the financial markets. Risk may also emerge from

Journal of Information and Computational Science

Volume 9 Issue 11 - 2019

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personnel supervision or mala fide intention, which creates asset value erosion and subsequently

decreases the intrinsic value of the bank.

Indian banks followed the Basel II norms with the objectives of prudent capital regulation,

supervision, and market discipline, and to enhance further risk management capabilities and

financial stability. Mavaluri, Boppana and Nagarjuna (2006) proposed that the performance of

banking in terms of profitability, productivity, asset quality and financial management has

become crucial in stabilizing the economy. They discovered that banks in the public sector were

more effective than other banks operating in India. So a study to analyze how banks manage

their counteracting function of profitability and stability within the country‘s central bank‘s

supervisory control was felt necessary. The study on the impact of various financial parameters

which reflect as the determinant risk factors embedded in the Basel II Accord i.e. Credit risk,

Market risk and Operational risk – on banks ‘credit risk-adjusted ratio (CRAR). The study is also

focused on how regulatory framework, supervisory role, and disclosure norms are useful in their

performances. The purpose of the analysis is also to understand the extent to which these various

factors constrain a bank's ability to comply with the Basel mandate.

As per the Reserve Bank of India (RBI), India's banking industry is adequately capitalized and

well regulated. The financial and economic circumstances of the country are far superior to any

other nation around the globe. Credit, market and liquidity risk surveys indicate that Indian banks

are usually resilient and have well withstood the worldwide downturn.

Since the Indian banking sector has been designed to comply with the Basel Agreements with the

authoritative validity of the RBI, these Regulations are aimed at easing targeted credit

restrictions under the priority lending arrangements of the sector, reducing statutory pre-

emptions, deregulation of interest rates and encouraging prudential standards.

The adherence to capital adequacy standards measured in terms of the capital adequacy ratio

(CAR) set out in the Basel Agreements to balance the profitability and stability of the banks has

led to a significant shift in the composition of the banks ' portfolios.

The next section provides a concise literature review. In the following section, an outline of the

methodology used in the research has been explained. This is followed by two sections that

provide a detailed study on Basel II concerning Punjab National Bank and ICICI bank,

description of the data followed by framing of objectives, and tests. The study will constitute a

comparative performance study of PNB and ICICI Bank during the pre and Basel II period.

The results have been reported in the finding section along with the conclusion.



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Literature Review

Khalid Ashraf Chisty (2011) investigated the impact of capital adequacy norms on performance

of private commercial banks. He further compared the performance measures in terms of Return

on Assets (ROA) of different private sector banks in India. Singh, Manmeet and Vyas, R.K.

(2011) conducted a research on private and public sector banks and international banks operating

in India evaluating the impact of portfolio risk on performance of the banks under study. The

research derived the conclusion that portfolio risk plays an important role in earning higher

returns to banks on the basis of a comparative study of the banks in turn analyzing the degree of

risk, particularly portfolio risk, capital adequacy ratio and return on assets. Profitability of banks

can be improved by Capital Adequacy as it reduces the cost of funding to banks. Ratna Barua

etal (2013) examined performances of Indian banks during Basel I and Basel II. Size,

profitability, and strength and soundness parameters used to determine the performance of the

SCBs for three categories of banks viz. PSU banks, private banks and foreign banks. Manvinder

Tandon, Bimal Anjum and Julee (2014) advocated that PNB had the highest return on Net Worth

(mean) which was a sign that management of PNB was using leverage to increase profits and

profit margins. SBI and PNB had the highest Return on Capital Employed (mean) which

indicated that SBI and PNB were realizing highest return from its capital employed. SBI had the

highest Dividend payout ratio (Mean). BOB had the highest ROA (mean). SBI had the highest

EPS (mean) and BOB has the highest capital adequacy (mean). G Ramesh Babu (2014) found

that investing valuation ratios demonstrated that SBI has a strong financial position. The

profitability ratios indicated that return on long term and return on net worth clearly proved the

financial soundness of SBI. Management efficiency ratio (MER) showed that the growth and

survival prospects of SBI are excellent.

Research Methods:

The following research methods have been adopted for the study.

Sample size: Two banks i.e. PNB representing the public sector bank and ICICI Bank

representing private sector bank have been taken for the present study.

Data collection: Secondary data have been collected from annual reports of both the banks

from the year 2003 to 2014.

Tools used for analysis: Paired t test has been used to analyse whether the variations in the

parameters of both the time frame were significant or not.

The following parameters have been selected for the purpose of comparative analysis.



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Table 1: List of parameters

S. No. Financial Parameters

1 Profitability

1.1 Ratio of Operating Profit to Total Assets/ Operating Profit Ratio (in %)

1.2 Ratio of Net Interest Income to Total Assets/ Net Interest Margin (NIM) (in

%)

1.3 Return on Assets (ROA) (in %)

1.4 Return on Equity (ROE) (in %)

2 Productivity (Efficiency & Effectiveness)

2.1 Business Per Employee (BPE) (in Rs. Million)

2.2 Profit Per Employee (PPE) (in Rs. Million)

2.3 Ratio of Intermediation Cost to Total Assets/ Cost to Income Ratio (in %)

2.4 Total Complaints received (in numbers)

3 Asset Quality

3.1 Gross NPAs to Gross Advances Ratio (GNPAs) (in %)

3.2 Net NPAs to Net Advances Ratio (NNPAs) (in %)

1. Profitability:

1.1Ratio of Operating Profit to Total Assets/ Operating Profit Ratio (in %)

The operational efficiency of any financial institution is measured by this ratio. A high ratio will

indicate operational efficiency of an institution whereas low ratio signifies operational weakness

and the firm is not making profits as per its capacity.

Table 2: Ratio of Operating Profit to Total Assets/ Operating Profit Ratio (in

%) during pre and Basel II period.

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

PNB 2.62 1.00 2.10 2.15 2.35 2.22 2.55 2.70 2.68 2.54 2.33 2.21

ICICI

bank

1.29 0.78 2.02 1.86 1.97 2.14 2.29 2.62 2.35 2.32 2.57 2.93

(Source: Annual reports of PNB and ICICI Bank)

The ratio of Operating Profit to Total Assets or Operating Profit Ratio is the highest earned by

ICICI bank in Post Basel II period. Further, significant decrease in this ratio is observed in PNB

in the Post Basel II phase. The high level of this ratio indicates the competence of bank while

performing regular operations. Higher the operating profit ratio, higher is the operational

efficiency of the firm. Therefore, ICICI bank is considered to be efficient in terms of earning



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higher operating profits during Basel II period except in the year 2011 and 2012 as compared to

PNB. Also, it emphasizes that they utilize their assets in the best possible manner to earn profits

for its banks.

The operating profit ratio from 2003 to 2014 is being plotted as under;

Figure 1: Operating profit ratio in PNB and ICICI Bank during pre and Basel II

From the above graph it is observed that the ratio of Operating Profit to Total Assets or

Operating Profit Ratio is the highest earned by ICICI bank in the year 2014. Further, decrease in

this ratio is noticed in PNB during Basel II period. This ratio indicates the competence of bank

while performing regular operations. Therefore, ICICI Bank is considered to be efficient in terms

of increasing operating profits during Basel II period except in the year 2011 and 2012.

Paired t- test has been conducted to observe the difference in operating profit ratio between pre

and Basel II.

Table 3: Paired sample test between pre and Basel II in PNB with respect to

operating profit ratio.

Paired Differences

t df

Sig. (2-

tailed)

Mean

Std.

Deviation

Std.

Error

Mean

95% Confidence

Interval of the

Difference

Lower Upper

PNB Pre

Basel –

Basel II

-.42833 .67573 .27587 -1.13747 .28081 -1.553 5 .181

The above analysis indicates non- significant difference between pre and Basel II period with

respect to operational ratio in PNB.

0

1

2

3

4

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

PNB

Icici

Bank



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Table 4: Paired sample test between pre and Basel II in ICICI Bank

with respect to operating profit ratio.

Paired Differences

t df

Sig. (2-

tailed)

Mean

Std.

Deviation

Std.

Error

Mean

95% Confidence

Interval of the

Difference

Lower Upper

ICIC

I

bank

Pre

Basel –

Basel II

-.83667 .54592 .22287 -1.40957 -.26376 -3.754 5 .013

Significant difference is observed between pre and Basel II in ICICI Bank with respect to

operating profit ratio.

1.2 Net Interest Margin (in %) in PNB and ICICI Bank

It is one of the most important indicators of profitability and growth of a financial institution. It

depends on how much the banks are earning on their assets and how much they are paying for

their liabilities.

The net interest margin of PNB and ICICI Bank is being tabulated as under,

Table 5: Net interest margin (in %) during pre and Basel II period.

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

PNB 3.6 3.5 3.51 3.44 3.39 3.06 3.52 3.57 3.96 3.84 3.52 3.44

ICICI

bank

1.43 1.8 1.94 2.25 1.89 1.96 4.25 3.81 2.21 2.26 2.58 2.77


The ratio of Net Interest Income to Total Assets or Net Interest Margin (NIM) has increased

in ICICI bank during Basel II era. NIM has observed an increase in ICICI Bank from Pre

Basel II to Basel II period except in the year 2007 i.e. the period of great depression. Higher

this ratio indicates higher profitability for the bank. It also signifies that bank is capable



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enough to earn returns on its advances and investments to cover its operational costs. PNB has

maintained the ratio almost similar during the entire period of study.

The figures are represented in the shape of graph as under,

Figure 2: NIM in PNB and ICICI Bank from 2003 to 2014

NIM has been more in PNB throughout the entire period except in the year 2009 and 2010. ICICI

Bank has improved their NIM by adopting earning more income than expenses made on deposits

by maintain big difference in interest rates.

Table 6: Paired sample test of NIM in PNB of pre and Basel II period

Paired Differences

t df

Sig. (2-

tailed)

Mean

Std.

Deviatio

n

Std.

Error

Mean

95% Confidence

Interval of the

Difference

Lower Upper

Pair

1

PRE – Basel

II

-

.22500 .21510 .08782 -.45074 .00074 -2.562 5 .051

NIM for Pre and Basel II period shows no significant difference in PNB.

Table 7: Paired t test between pre and Base II period of NIM in ICICI Bank

Paired Samples Test

Paired Differences

t df

Sig. (2-

tailed)

Mean

Std.

Deviatio

n

Std.

Error

Mean

95% Confidence

Interval of the

Difference

Lower Upper

0

1

2

3

4

5

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

PNB

ICICI

bank



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Paired Samples Test

Paired Differences

t df

Sig. (2-

tailed)

Mean

Std.

Deviatio

n

Std.

Error

Mean

95% Confidence

Interval of the

Difference

Lower Upper

Pair

1

PRE – Basel

II

-

1.1016

7

1.08772 .44406 -2.24316 .03983 -2.481 5 .056

NIM for Pre and Basel II period shows non- significant difference in ICICI Bank.

1.3 ROA (in %) in PNB and ICICI Bank

It is an important indicator of profitability of a financial institution. High percentage of ROA will

indicate high conversion of its assets in to net income of the company.

Table 8: ROA (in %) during pre and Basel II period.

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

PNB 0.98 1.08 1.17 1.09 1.03 1.15 1.39 1.44 1.31 1.17 1.01 0.65

ICICI

bank

1.15 1.4 1.59 1.3 1.09 1.12 1 1.1 1.35 1.5 1.66 1.76


The ratio has increased in ICICI Bank during the Basel II period. This indicates that ICICI Bank

has earned maximum return on their assets which includes its investments and has gained

significant profits. Further, it emphasizes superior managerial and financial performance of

ICICI Bank throughout the period of Basel II. We find variations in ROA during the pre-Basel

and Post Basel II periods. The figures can be represented in the following graph;

Figure 3: Pattern of ROA in PNB and ICICI Bank during pre and Basel II.

0

0.5

1

1.5

2

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

PNB

ICICI bank



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It is observed from the above graph that ROA of PNB has decreased during Basel II. It has

started declining since 2010.

It is observed from the above graph that ROA of PNB has decreased during Basel II. It

has started declining since 2010.

Table9 : Paired Samples Test of ROA in PNB for pre and Basel II period

Paired Differences

t df

Sig. (2-

tailed)

Mean

Std.

Deviatio

n

Std. Error

Mean

95% Confidence

Interval of the

Difference

Lower Upper

Pair

1

PRE –

Basel II

-

.07833 .32781 .13383 -.42234 .26568 -.585 5 .584

Hence we find no significant difference between pre and Basel II period in PNB.

Table 10 : Paired Samples Test of ROA in ICICI bank for pre and Basel

II

Paired Differences

t df

Sig. (2-

tailed)

Mean

Std.

Deviation

Std. Error

Mean

95% Confidence

Interval of the

Difference

Lower Upper

Pair

1

PRE –

Basel II

-

.12000 .41429 .16914 -.55478 .31478 -.709 5 .510

We find no significant difference between pre and Basel in ICICI Bank with respect to ROA

1.4 ROE (in %) in PNB and ICICI Bank

It is the measure of return on share holders’ funds. It is similar to ROA. The difference exists in

the type of resources responsible for the net income of the financial institutions. The net income

derived from shareholders investments is evaluated as ROE whereas from other resources

constitute ROA.



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Table 11: ROE (in %) in PNB and ICICI bank during pre Basel and Basel II

period

2003 2004 2005 2006 2007 200

8

200

9

2010 201

1

2012 2013 201

4

PNB 14.9

7

23.6

3

21.4

1

16.4

1

15.5

5

18.

01

22.

92

22.9

2

22.

6

19.8 15.7 9.6

9

ICIC

I

bank

18.3 21.8 18.8

6

14.3

3

13.1

7

11.

63

7.7 7.9 9.5

8

11.0

9

12.9

4

13.

73


ROA has increased in ICICI Bank during the Basel II period, whereas it has decreased in PNB.

The table also shows variations in ROA during the pre Basel II period in ICICI Bank.

The figures can be framed in the following graph;

Figure 4: Pattern of ROE in PNB and ICICI bank during pre and Basel II

period.

The trend of ROA has been similar from the year 2003 to 2007 in both the banks. There has been

a sharp fall of ROA in ICICI Bank from 2007 to 2009, the period of great depression. During this

period, ROA has increased in PNB, showing no effect of great depression in public sector banks.

Table 12: Paired Samples Test for ROE of PNB during pre and Basel II

Paired Differences

t df

Sig. (2-

tailed)

Mean

Std.

Deviatio

n

Std. Error

Mean

95% Confidence

Interval of the

Difference

Lower Upper

Pair

1

PRE -

BaselII

-

.60833 5.35984 2.18814 -6.23314 5.01647 -.278 5 .792

The paired sample test show non- significant difference at 5% degrees of freedom for ROE.

0

10

20

30

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

PNB

ICICI

bank



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Table 13: Paired Samples Test for ROE of ICICI Bank during pre and

Basel II

Paired Differences

t df

Sig. (2-

tailed)

Mean

Std.

Deviation

Std. Error

Mean

95% Confidence

Interval of the

Difference

Lower Upper

Pair

1

Pre –

Basel II

5.8583

3 6.33606 2.58669 -.79096 12.50762 2.265 5 .073

The above table shows non- significant difference between pre and Basel II period at 5% degrees

of freedom for ROE.

2. Productivity (Efficiency and effectiveness)

2.1 BPE in PNB and ICICI bank

It is the measure to examine how productive is a financial institution. It evaluates the efficiency

of a business concern.

Table 14: BPE of PNB and ICICI Bank during pre and Basel II period.

200

3

2004 2005 2006 2007 2008 2009 201

0

2011 2012 2013 2014

PNB 30.8 23.2

5

27.6

9

33.0

9

40.7

4

50.4

5

65.4

9

80.8 101.7

8

113.

2

116.5

1

128.

3

ICIC

I

bank

76 89 88 90.5 102.

7

100.

8

126.

2

95 77.6 87.4 92.8 93.9


BPE has increased in PNB during Post Basel II time period. It can be interpreted that BPE

reflects higher efficiency of banking operations due to better productivity of its employees.

Further, higher BPE also indicates higher growth projections in future. The data is plotted in a

graph to observe the trend in business per employee in both the banks as under.



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Figure 5: Pattern of BPE in PNB and ICICI bank during pre and Basel II

period

It is evident from the above graph that BPE has increased in PNB during Basel II. A decrease in

BPE in ICICI Bank during Basel II may be attributed to increase in work force.

In order to observe the difference in the productivity of Banks on BPE parameter between pre

and Basel II, paired t test was conducted.

Table 15: Paired Samples Test between pre and Basel II period of BPE

in PNB

Paired Differences

t df

Sig. (2-

tailed)

Mean

Std.

Deviatio

n

Std.

Error

Mean

95% Confidence

Interval of the

Difference

Lower Upper

Pair

1

PRE –

Basel II

-

6.66767E

1

17.60333 7.18653 -

85.15023 -48.20310 -9.278 5 .000

Significant difference is observed in business per employee between pre and Basel II period in

PNB.

Table16 : Paired Samples Test between pre and Basel II period of BPE in

ICICI Bank

Paired Differences

t df

Sig. (2-

tailed)

Mean

Std.

Deviation

Std.

Error

Mean

95% Confidence

Interval of the

Difference

Lower Upper

0

50

100

150

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

PNB

ICICI

bank



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Table16 : Paired Samples Test between pre and Basel II period of BPE in

ICICI Bank

Paired Differences

t df

Sig. (2-

tailed)

Mean

Std.

Deviation

Std.

Error

Mean

95% Confidence

Interval of the

Difference

Lower Upper

Pair

1

PRE –

Basel II

-

4.3166

7

23.27070 9.50023 -28.73777 20.10444 -.454 5 .669

Non- significant difference observed in ICICI Bank with respect to business per employee

between pre and Basel II period.

2.2 PPE in PNB and ICICI Bank

Profit per employee is an assessment of the efficiency of a company. It determines how the

employees of an organisation are contributing towards the profits.

The data on profit per employee are being plotted in tabular form as under;

Table 17: PPE in PNB and ICICI Bank during pre Basel and Basel II

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

PNB 0.1 0.19 0.24 0.25 0.27 0.37 0.56 0.73 0.84 0.84 0.81 0.5

ICICI

bank

1.1 1.2 1.1 1 0.9 1 1.1 0.98 0.9 1.11 1.34 1.36


Non- uniform trend is observed in PPE from the year 2003 to 2014 in both the banks. These data

has been framed in graph as under in order to study its pattern during this period.

Figure 6: Pattern of PPE in PNB and ICICI Bank during pre and Basel II

0

0.5

1

1.5

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

PNB

ICICI bank



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There has been an increase in PPE from the year 2011 to 2014 in ICICI Bank whereas it

decreased from year 2012 to 2014 in PNB. Earlier during pre Basel period, there has been an

increase in PPE in PNB.

The results of paired t test are as under,

Table 18 : Paired Samples Test of pre and Basel II for PPE in PNB

Paired Differences

t df

Sig.

(2-

tailed)

Mean

Std.

Deviation

Std. Error

Mean

95% Confidence

Interval of the

Difference

Lower Upper

Pair

1

PRE –

Basel II

-

.47667 .17694 .07223 -.66235 -.29098 -6.599 5 .001

Significant difference is observed in PNB with respect to PPE when the pre and Basel II period

is compared statistically.

Table 19:Paired Samples Test of pre and Basel II for PPE in ICICI

Bank

Paired Differences

t df

Sig.

(2-

tailed)

Mean

Std.

Deviatio

n

Std. Error

Mean

95% Confidence

Interval of the

Difference

Lower Upper

Pair

1

PRE –

Basel II

-

.08167 .27701 .11309 -.37237 .20904 -.722 5 .503

Non- significant difference is observed in ICICI Bank for profit per employee.

2.3 Cost to income ratio in PNB and ICICI Bank

It is one of the key issues associated with balance sheet performance analysis. The investors

perceive efficiency of a financial institution on the basis of this ratio.

The data on the cost to income ratio is being arranged in tabular form as under,



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Table 20: Showing Cost to Income Ratio (in %) in PNB and ICICI Bank

during the pre and during Basel II period.

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

PNB 0.73 0.68 2.87 2.23 2.16 1.95 1.89 1.75 1.89 1.67 1.74 1.81

ICICI

bank

2.76 2.70 2.25 2.39 2.24 2.19 1.81 1.58 1.72 1.75 1.76 1.82

(Source: Annual reports of PNB and ICICI

Bank)

ICICI Bank could manage to lower the cost during pre Basel II era where as it could maintain

almost similar level during the entire period of Basel II period. Similarly PNB could maintain

almost same level of cost to income ratio during Basel II era.

Figure 7: Cost to income ratio (in %) in PNB and ICICI Bank during pre and

Basel II

Here, lower the costs, higher is the income earned. Further, lower this ratio indicates higher

efficiency of banking operations and managerial efficiency to make maximum income out of

minimum costs incurred on banking business. Both the banks have maintained same level of cost

to income ratio during Basel II.

Table 20: Paired Samples Test of pre and Basel II for cost to income

ratio (%) PPE in PNB

Paired Differences

t df

Sig. (2-

tailed)

Mean

Std.

Deviation

Std.

Error

Mean

95% Confidence

Interval of the

Difference

Lower Upper

PNB Pre

Basel -

Basel II

-.02167 .88968 .36321 -.95533 .91200 -

.060 5 .955

0

1

2

3

4

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

PNB

ICICI

bank



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Non- significant difference is observed in cost to income ratio when pre and Basel II period is

compared in PNB.

Table 21: Paired Samples Test between pre and Basel II period of cost to

income ratio in ICICI Bank

Paired Differences

t df

Sig. (2-

tailed)

Mean

Std.

Deviation

Std.

Error

Mean

95% Confidence

Interval of the

Difference

Lower Upper

Pair 1 Pre Basel

– Basel II .68167 .29212 .11926 .37510 .98823

5.71

6 5 .002

The results of paired t test refer significant difference in cost to income ratio when pre and Basel

II periods are compared in ICICI bank.

2.4 Total complaint received in PNB and ICICI Bank

The number of customer complaints indicates the efficacy in the working of a financial

institution. Since the financial institutions are based on its customers, satisfaction of customers

results in increasing business and profits. The data on number of complaints obtained from

different sources are being framed in a table as under;

Table 22: Showing Total Complaints received (TCR) (in numbers) during

pre and during Basel II in PNB and ICICI Bank.

200

3

200

4

200

5

200

6

2007 200

8

2009 2010 201

1

201

2

201

3

201

4

PNB 931 775 820 293 1,83

7

200

6

2210 2800 294

6

353

5

332

5

367

9

ICIC

I

bank

752 953 120

2

783 5048 757

6

1145

3

1032

8

689

5

477

1

457

1

532

5

(Source: Annual reports of PNB and ICICI

Bank)



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Lesser the number of complaints received means the customers are satisfied and banks are

effective in providing better service to customers. So, from the summarized table it can be

interpreted that the performance of PNB is better in terms of providing services to its customers.

The trends in number of complaints in both the banks are illustrated in the form of a graph as

under.

Figure 8: Total complaints received in PNB and ICICI Bank during pre and

Basel II

Total Complaints Received was less in PNB than ICICI Bank during pre and Basel II period.

Higher number of complaints received in ICICI bank could be due to customers wanted the

knowledge of products and services of the bank.

Table 23: Paired Samples Test of total complaint received with respect to

pre and Basel II in PNB

Paired Differences

t df

Sig.

(2-

tailed)

Mean

Std.

Deviatio

n

Std.

Error

Mean

95% Confidence

Interval of the

Difference

Lower Upper

Pair 1 Pre

Basel –

Basel II

-

1.97217E

3

699.0466

1

285.3845

8

-

2705.7711

0

-

1238.5622

4

-

6.911 5 .001

0

5000

10000

15000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

PNB

ICICI bank



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Table 24 :Paired Samples Test of TCR in ICICI bank with respect to pre

and Basel II

Paired Differences

t df

Sig.

(2-

tailed)

Mean

Std.

Deviation

Std. Error

Mean

95% Confidence

Interval of the

Difference

Lower Upper

ICICI

bank

Pre

Basel –

Basel II

-

4.50483E

3

5181.6948

7

2115.4180

7

-

9942.6886

1

933.0219

4

-

2.130 5 .086

Significant difference is noticed in number of complaints when the pre and Basel II period is

compared in PNB. Hence the hypothesis is not rejected.

The paired t test shows non- significant difference between pre and Basel II period with respect

to total complaint received in ICICI Bank.

3. Asset Quality

3.1 Gross NPAs to Gross Advances Ratio (GNPAs) (in %)

This is a key ratio related to health and financial stability of a financial institution. It refers the

amount of bad assets of a bank. The data collected on this score have been tabulated as under,



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Table 25: Gross NPAs to Gross Advances Ratio (GNPAs) (in %) of PNB and

ICICI Bank during pre and Basel II period.

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

PNB 11.40 9.08 5.96 4.10 3.45 2.74 1.77 1.71 1.79 3.15 4.27 5.25

ICICI

bank

15.79 10.81 2.98 1.51 2.08 3.30 4.32 6.52 5.80 4.83 3.22 3.03

(Source: Annual reports of PNB and

ICICI Bank)

There has been a decrease in the ratio of Gross NPA to Gross advances during pre Basel II in

PNB which later increased in the last phase of Basel II..Lower the ratio signifies that the loan

assets of the banks are of good quality and has lesser credit risk; there are chances that the same

loan is repaid by the borrower to the bank on due date. Hence, lower the ratio indicates better

performance of banks with better quality of assets. In ICICI Bank this ratio had shown variations

during Pre and during Basel II but it has effectively lowered down the ratio from 2010 to 2014.

The pattern of ratio of gross NPA to gross advances for the period from year 2003 to 2014 in

PNB and ICICI Bank has been represented in a graph as under,

Figure 9: Gross NPAs to Gross Advances Ratio (GNPAs) (in %) of PNB and

ICICI Bank during pre and Basel II period.

The above graph shows that there has been a decrease in gross NPA to gross advances ratio in

PNB till 2010 and thereafter it has increased during the Basel II. This is because of adoption of

proper classification norms under the supervision of RBI. This ratio has decreased in ICICI Bank

from 2011 till the remaining period of Basel II. This is mainly due to strict control over credit

risk management and compliance aspect of the bank.

The hypotheses were framed to find out statistical difference in the ratio of gross NPA to gross

advances when compared for pre and Basel II period in these banks,

0

5

10

15

20

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

PNB

ICICI

bank



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Table 26: Paired Samples Test of gross NPA to gross advances ratio

with respect to pre and Basel II in PNB

Paired Differences

t df

Sig. (2-

tailed)

Mean

Std.

Deviati

on

Std.

Error

Mean

95% Confidence

Interval of the

Difference

Lower Upper

Pair 1 Pre Basel

– Basel II 3.13167 4.76390 1.94485

-

1.86774 8.13107 1.610 5 .168

Non- significant difference is observed at 5% level of confidence in ratio of gross NPA to gross

advances when pre and Basel II period is compared in PNB. Thus hypothesis is not rejected.

Table 27: Paired Samples Test of gross NPA to gross advances ratio

with respect to pre and Basel II in ICICI Bank

Paired Differences

t df

Sig. (2-

tailed)

Mean

Std.

Deviatio

n

Std.

Error

Mean

95% Confidence

Interval of the

Difference

Lower Upper

Pair 1 Pre Basel –

Basel II

1.4583

3 5.61341 2.29167

-

4.43258 7.34925 .636 5 .553

Ratio of gross NPA to gross advances shows non- significant difference at 5% confidence level

when the pre and Basel II period is compared in ICICI Bank. Hence the hypothesis is not

rejected.

3.2 Net NPAs to Net Advances Ratio (NNPAs) (in %)

It measures the assets quality in banking books. It is the amount net of Gross NPA when the

provisions are deducted.

The data on ratio of net NPA to net advances have been collected from various sources and are

placed in a tabular form as under,



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Table 28: Showing ratio of Net NPAs to Net Advances (NNPAs) (in %) of PNB

and ICICI Bank during Basel II period.

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

PNB 3.86 0.98 0.20 0.29 0.76 0.64 0.17 0.53 0.85 1.52 2.35 2.85

ICICI

bank

5.21 2.21 1.65 0.72 1.02 1.55 2.09 2.12 1.11 0.73 0.20 0.97


It clearly indicates that both these banks had loan assets with better quality, lesser credit risk. It

also implies that these banks have better performance throughout the study period. Further,

NNPAs had noted a decrease in PNB in Pre Basel II era, where as it has increased during post

Basel II period indicating deteriorating quality of assets. ICICI Bank could manage the ratio

though there is a slight variation in the ratio during Basel II era, which is a positive sign for the

bank.

The figures on ratio of net NPA to net advances have been framed in the following graph,

Figure10: Net NPAs to Net Advances Ratio (NNPAs) (in %) of PNB and

ICICI during pre and Basel II period.

This ratio has behaved similarly with the ratio of Gross NPA to Gross advances ratio. There has

been a decreasing trend in the ratio from 2010 to 2013 in ICICI Bank and thereafter it increased

due to increase in NPAs. In PNB, this ratio has increased during Basel II.

0

2

4

6

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

PNB

ICICI

bank



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Table 29: Paired Samples Test of net NPA to net advances ratio with

respect to pre and post Basel II period in PNB

Paired Differences

t df

Sig. (2-

tailed) Mean

Std.

Deviati

on

Std.

Error

Mean

95% Confidence

Interval of the

Difference

Lower Upper

Pair 1 Pre

Basel –

Basel II

-.25667 2.13405 .87122 -2.49622 1.98289 -.295 5 .780

The result of test shows non- significant difference between pre and Basel II period in ratio of

net NPA to net advances in PNB.

Table 30: Paired Samples Test of net NPA to net advances ratio with

respect to pre and Basel II period in ICICI bank

Paired Differences

t df

Sig. (2-

tailed)

Mean

Std.

Deviati

on

Std.

Error

Mean

95% Confidence

Interval of the

Difference

Lower Upper

Pair

1

Pre Basel

– Basel II .85667 1.15237 .47045 -.35267 2.06600 1.821 5 .128

Paired t test indicates non-significant relationship between pre and Basel II period when ratio of

net NPA to net ratio is compared in ICICI bank.



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Conclusion

The above analyses show that significant difference is observed between pre and Basel II period

in PNB when productivity parameters like business per employee, profit per employee and total

complaint received were compared. It indicates that PNB increased its business as well as profits

by efficiently utilising its human resources during the Basel II period. There has been a

significant difference in total complaints received during pre and Basel II period in PNB. It

shows that adoption of new technology in public sector banks during Basel II in banking

operations had significantly increased the customers’ queries.

Operational profit ratio and cost to income ratio had significant difference when pre and Basel II

period were compared in ICICI Bank. This exhibits the efficient working of ICICI Bank that

could bring significant difference during Basel II in both the profitability and productivity

variables.

The results suggest that though PNB was able to increase its business volume by delivering

satisfactory customer services, however, it could not control the deteriorating asset quality during

the Basel II period. ICICI bank has effectively managed gross NPA to advances ratio and net

NPA to net advances ratio by using several methods like securitisation, written off and

restructuring of bad assets during Basel II.

References

G Ramesh Babu et al. (2014): Evaluating Financial Performance of SBI through

Financial Ratios. INTERNATIONAL JOURNAL OF BUSINESS, MANAGEMENT AND

ALLIED SCIENCES (IJBMAS), Vol.1.Issue.2.2014.

Khalid Ashraf Chisty (2011): The impact of capital adequacy requirement on

profitability of private banks in India, International journal of research in commerce and

management, Vol.no.2, Issue no.7. Pp.122-129.

Manvinder Tandon, Bimal Anjum and Julee (2014): A Study on Financial Performance

of Selected Indian Banks, International Journal of Research in Management, Science &

Technology (E-ISSN: 2321-3264) Vol. 2, No. 3, December 2014.

Mavaluri, Boppana and Nagarjuna (2006): "Measurement of efficiency of banks in

India" University Library of Munich, Germany, MPRA Paper 17350, Aug 2006.

Ratna Barua etal (2013): Structure, Conduct and Performance Analysis of Indian

Commercial Banks, South Asian Journal of Macroeconomics and Public Finance 5(2)

157–185 © 2016 SAGE Publications India Private Limited .SAGE Publications.

Singh, Manmeet and Vyas, R.K. (2011): The Impact of Capital Adequacy Requirements

on Performance of Scheduled Commercial Banks,Asia –Pacific Business Review, 4(2),

74-81.

*********



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