Approach framework

Mar 30 2011, 01:55 IST
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SummaryBanks were categorized into public sector banks, old private sector banks, new private sector banks and foreign banks.

1. Banks were categorized into public sector banks (‘PSB’), old private sector banks (‘OPSB’), new private sector banks (‘NPSB’) and foreign banks (‘FB’). With the objective of making the comparison more meaningful, banks with five branches or less as at March 31, 2010 and banks with total assets less than Rs. 5,000 crores as at March 31, 2010; were not considered for the rankings.

2. Financial information for the year ending March 31, 2010 relating to each of the banks falling into the aforesaid categories was collected from the data available from Reserve Bank of India. To ensure consistency, only the published information was used.

3. Five different major criteria were identified against which the Indian were to ranked. These criteria are: (i) Efficiency, (ii) Profitability, (iii) Growth, (iv) Credit Quality, and (v) Strength and Soundness. Considering the current banking, industrial and over-all economic scenario, pertinent weights were assigned to each of the major criterion. The rationale for selecting each of the criteria and assignment of their respective weights is discussed in above-mentioned article.

4. Six sub-criterion were selected within each of the aforesaid major criteria, which would cover the various aspects within the aforesaid criteria. Considering the current banking, industrial and over-all economic scenario, pertinent weights were assigned to each of the sub-criterion. These sub-criteria and their respective weights (in brackets) are:

(i) Efficiency (0.15)

(a) Non-Interest Income/Total Assets (0.10)

(b) Business per Employee (0.15)

(c) Profit per Branch (0.15)

(d) Operating Expenses/Total Assets (0.15)

(e) Profit per Employee (0.20)

(f) Spread/Total Assets (0.25)

(ii) Profitability (0.20)

(a) Yield on Advances (0.10)

(b) Return on Investments (0.10)

(c) Return on Assets (0.20)

(d) Cost of Deposits (0.20)

(e) Return on Networth (0.20)

(f) Cost/Income Ratio (0.20)

(iii) Growth (0.20)

(a) Total Assets Growth (0.10)

(b) Net Interest Income (‘NII’) Growth (0.10)

(c) Increase in Networth (0.10)

(d) Advances Growth (0.20)

(e) Net Profits Growth (0.20)

(f) Deposits Growth (0.30)

(iv) Credit Quality (0.20)

(a) Restructured Loans (0.10)

(b) NNPA/Networth (0.10)

(c) GNPA/Gross Advances (0.10)

(d) Increase in Gross Non-Performing

Assets (‘GNPA’) (0.20)

(e) Increase in GNPA/Increase in Gross

Advances (0.25)

(f) Increase in NNPA/Increase in

Net Advances (0.25)

(v) Strength and Soundness (0.25)

(a) Core Capital (0.10)

(b) Capital Adequacy (0.15)

(c) Borrowings/Deposit Ratio (0.15)

(d) Liquidity (0.20)

(e) Total Assets (0.20)

(f) Networth (0.20)

The rationale for selecting each of the sub-criteria and assignment of their respective weights is discussed in above-mentioned article.

5. Banks were ranked, category-wise, within each of the aforesaid sub-criteria. These sub-criteria ranks were multiplied with sub-criteria weights and the weighted sub-criteria ranks were carried over to each the major criteria. The sub-criteria ranks were then multiplied by the major-criteria weights. The resultant weighted major-criteria ranks were aggregated to

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