1. A
RESEARCH REPORT
ON
“IMPACT OF REFORMS
ON
PUBLIC SECTOR BANKS IN INDIA”
SUBMITTED TO:
SRM UNIVERSITY, MODINAGAR(UP)
IN THE PARTIAL FULFILLMENT FOR THE DEGREE OF
Masters in Business Administration
(Session 2010 – 2012) – M.B.A. 4th Semester
Under supervision of: Submitted by:
Ms. Nidhi Arora Kumar Pawan Kumar Pandey
Faculty Regn.No. – 3511030060
SRM UNIVERSITY MBA(2010-12) batch
SRM UNIVERSITY

2. INTRODUCTION

3. OBJECTIVES OF
THE STUDY

4. LITRATURE
REVIEW

5. RESEARCH
METHODOLOGY

6. LIMITATIONS
OF THE
STUDY
CONCLUSION

7. BIBLIOGRAPHY

8. ANNEXURES

9. //DECLARATION//
I hereby certify that the work which is presented in this project report entitled
“IMPACT OF REFORMS ON PUBLIC SECTOR BANKS IN INDIA” in
partial fulfillment of the requirement for the award of the degree of Masters
in Business Administration (MBA), SRM Uni.versity, SRM, is an authentic
record of my original work carried out during the 4th semester.
I have not submitted the matter embodied in the project report for the award
of any other degree.

10. Place: Modinagar Name: Pawan Kumar Pandey
Date: / / Reg. No. 3511030060

11. ACKNOWLEDGEMENT
“Gratitude is not a thing of expression; it is more a matter of feeling.”
There is always a sense of gratitude which one express for others for their help and
supervision in achieving the goals. I too express my deep gratitude to each and everyone
who has been helpful to me in completing the project report successfully.
I would also like to thank almighty God for blessing showered on me during the
completion of Dissertation Report.
First of all, I am highly thankful to for allowing me to pursue my Dissertation Report on
”Impact Reforms On Public sector Banks in India”..
I give my regards and sincere thanks to Ms. Nidhi Arora Kumar (Project guide)who
has devoted her precious time in guiding me & helping me complete it within time.
I feel self-short of words to thanks my parents and friends who had directly or
indirectly instrumental in the completion of the project. I am indebted to all respondents
for their time passion during the long conversations.
(Pawan Kumar Pandey)
EXECUTIVE SUMMARY

12. The core processes of a company may change over time in accordance with the shifting
requirements of business competitiveness.
The financial development was given impetus with the adoption of social control over
banks in 1967 and subsequently nationalization of 14major scheduled banks in July in 1969.
Since then the banking system has formed the core of the Indian financial system. In the three
decades following the first round of nationalization, aggregate deposits of scheduled banks have
increased at a compound annual growth rate of 17.8%durin the period of (1969-99) while bank
credit expanded at the rate of 16.3% PA. with the branches of more than 67000 of which 48.7%
being rural, touching the lives of millions of people everyday, the Indian banking sector
constitutes the most significant segment of the financial system of India.
It is against the background of these circumstances, that the development of a sound
banking system was considered essential for the future growth of the financial system. Financial
sector reforms were initiated in the country in 1992 with a view to improving the efficiency in
the process of financial intermediation, enhancing the effectiveness in the conduct of monetary
policy and creating conductive environment for the integration of domestic financial sector with
the global system.
The banking system is, by far, the most dominant segment of the financial sector,
accounting as it does, for over 80 per cent of the funds flowing through the financial sector. The
aggregate deposits of the scheduled commercial banks (SCBs) rose from Rs.5,05,599 crore in
March 1997 to Rs.11,03,360 crore in March 2002 representing a rise of 17 per cent. During the
same period, the credit portfolio (food and non-food) of SCBs grew from Rs.2,78,401 crore to
Rs. 5,89,723 crore, i.e. by 16 per cent. The net profits of SCBs witnessed a noticeable upturn
from Rs.6,403 crore in 2000-01 to Rs.11, 572 crore in 2001- 02. The extent and coverage of the
banking system can be gauged from the fact that the number of branches of SCBs grew from
8045 in 1969 to 66,186 in June 2002. While rural branches constituted 49 per cent of the total in
2002, semi-urban branches accounted for 22 per cent, urban branches accounted for 16 per cent
and metropolitan branches accounted for 13 per cent.
Financial sector reforms introduced in the early 1990s as a part of the structural reforms
have touched upon almost all aspects of banking operations. For a few decades preceding the
onset of banking and financial sector reforms in India, banks operated in an environment that

13. was heavily regulated and characterised by sufficient barriers to entry, which protected them
against too much competition. This regulated environment set in complacency in the manner in
which banks operated and responded to the customer needs. The administered interest rate
structure, both on the liability and the assets sides, allowed banks to earn reasonable spread
without much efforts. Despite this, however, banks’ profitability was low and NPLs level was
high, reflecting lack of efficiency. Although banks operated under regulatory constraints in the
form of statutory holding of Government securities (statutory liquidity ratio or SLR) and the cash
reserve ratio (CRR) and lacked functional autonomy and operational efficiency, the fact was that
most banks did not operate efficiently.
While the broad objectives of the financial sector reforms, thus, were to enhance
efficiency and productivity, the process of reforms were initiated in a gradual and properly
sequenced manner so as to have a reinforcing effect. The approach has been to consistently
upgrade the financial sector by adopting the international best practices through a consultative
process. Financial sector reforms were carried out in two phases. The first phase of reforms was
aimed at creating productive and profitable financial institutions operating within the
environment of operational flexibility and functional autonomy. The focus of the second phase of
financial sector reforms starting from the second-half of 1990s has been on strengthening of the
financial system consistent with the movement towards global integration of financial services.

14. CONTENTS
 INTRODUCTION
 PROFILE OF STUDY
 RATIONAL OF STUDY
 LITERATURE REVIEW
 OBJECTIVE OF THE STUDY
 RESEARCH METHODOLOGY
• SAMPLING AND SAMPLING DESIGN
• ANALYTICAL TOOLS
• STATISTICAL TOOLS
 DATA COLLECTION
 HYPOTHESIS TESTING
 CONCLUSION AND RECOMMENDATION
 LIMITATIONS OF THE STUD
 BIBLIOGRAPHY
 ANNEXURES

15. INTRODUCTION
Financial sector reforms introduced in the early 1990s as a part of the structural
reforms have touched upon almost all aspects of banking operations. For a few decades
preceding the onset of banking and financial sector reforms in India, banks operated in an
environment that was heavily regulated and characterised by sufficient barriers to entry,
which protected them against too much competition. This regulated environment set in
complacency in the manner in which banks operated and responded to the customer
needs. The administered interest rate structure, both on the liability and the assets sides,
allowed banks to earn reasonable spread without much efforts. Despite this, however,
banks’ profitability was low and NPLs level was high, reflecting lack of efficiency.
Although banks operated under regulatory constraints in the form of statutory holding of
Government securities (statutory liquidity ratio or SLR) and the cash reserve ratio (CRR)
and lacked functional autonomy and operational efficiency, the fact was that most banks
did not operate efficiently.
Indian banking system operated for a long time with high reserve requirements
both in the form of Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR). This
was mainly to accommodate the high fiscal deficit and its monetisation. The efforts in the
recent period have been to lower both the CRR and SLR. The SLR has been gradually
reduced from a peak of 38.5 per cent to 25 per cent. The CRR was reduced from its peak
level of 15.0 per cent maintained during 1989 to 1992 to 4.5 per cent of NDTL in June
2003. Although the Reserve Bank continues to pursue its medium-term objective of
reducing the CRR, in recent years, on a review of macroeconomic and monetary
conditions, the CRR has been revised upwards to 6.0 per cent (to be effective from March
3, 2007).

16. IMPACT OF REFORMS ON THE BANKING SECTOR
These reform measures have had major impact on the overall efficiency and
stability of the banking system in India. The present capital adequacy of Indian banks is
comparable to those at international level. There has been a marked improvement in the
asset quality with the percentage of gross non-performing assets (NPAs) to gross
advances for the banking system reduced from 14.4 per cent in 1998 to 7.2 per cent in
2004.
With the commencement of the New Economic Policy, a few new generation
techno-savvy banks such as ICICI bank and HDFC bank came into operation and
changed the whole banking concept in India was considered fairly mature in terms of
variety of services provided assets quality.. We can measure the performance of Indian
public sector banks by using the some significant indicators such as Non-performing
assets, profitability, capital position and assets quality.
It is difficult to obtain permissions to start a bank. Foreign banks are practically banned
from opening new branches. Even domestic banks have to take permission from the RBI,
to open one branch at a time. Many rules have been designed to favour public sector
banks. These weaknesses in policy have led to poor competition in banking. Table 6
compares the biggest 10 banks in the country in 2004-05 against the situation 13 years
earlier, in 1991-92. The 10-firm concentration ratio did drop significantly, from 92.86%
to 62.99%. This suggests high growth on the part of smaller banks. However, the names
of the biggest banks are remarkably alike. The new names of 2004-05 are shown in
boldface. Of these, ICICI was always a big bank, and is not in the list for 1991-92 purely
on account of not being classified as a bank. Apart from this, there are only two new
names in 2004-05. The domination of the public sector is also highly visible. There are
no private or foreign banks in the 2004-05 list, other than ICICI Bank

17. PUBLIC SECTORE REFORMS
Commercial banking constitutes the largest segment of the Indian financial
system. Despite the general approach of the financial sector reform process to establish
regulatory convergence among institutions involved in broadly similar activities,
given the large systemic implications of the commercial banks, many of the
regulatory and supervisory norms were initiated first for commercial banks and were later
extended to other types of financial intermediaries. After the nationalisation of major
banks in two waves, starting in 1969, the Indian banking system became
predominantly government owned by the early 1990s. Banking sector reform
essentially consisted of a two pronged approach. While nudging the Indian banking
system to better health through the introduction of international best practices in
prudential regulation and supervision early in the reform cycle, the idea was to increase
competition in the system gradually. The implementation periods for such norms
were, however, chosen to suit the Indian situation. Special emphasis was placed on
building up the risk management capabilities of the Indian banks. Measures were also
initiated to ensure flexibility, operational autonomy and competition in the banking
sector. Active steps have been taken to improve the institutional arrangements
including the legal framework and technological system within which the financial
institutions and markets operate. Keeping in view the crucial role of effective supervision
in the creation of an efficient and stable banking system, the supervisory system has been
revamped.
Further Reform Areas
 Extension of Risk management practices: Banks use statistical models to
measure and manage the financial risks to which they are exposed. Since models
cannot incorporate all possible risk outcomes and generally are not capable of
capturing event risks and sudden/dramatic changes, banks need to supplement
models with stress test.

18.  Basel II implementation: The RBI intended to implement Basel II
recommendations with effect from march31, 2008. All SCBs are encouraged to
adopt it not later than March 31, 2009. The Basel committee on Banking
Supervision had undertaken the fifth quantitative impact study to assess the
impact of adoption of the revised framework.
 Mortgage Guarantee Companies: As amounted in the budget, the RBI has now
placed in public domain draft guidelines on mortgage guarantee companies. This
will be a new category under the NBFC sector and the activities will ne in
thenature of mortgage guarantees and not mortgage insurance. Mortgage
insurance falls with in the jurisdiction of the insurance regulator.
 FSAP-Self Assesment: a commitment on financial sector assessment to
undertake a self-assesment of financial sector stability and development has been
constituted. For the purpose of carrying out the task under the terms of reference,
the committee has decided to set up four advisory panels which will be assisting
the committee in its assessment exercise and will be drawn from non official
experts relevant areas related to financial stability assessment and stress testing
transparency standards, financial regulation and supervision and institutions and
market structure respectively.
 Draft Guidelines on Accounting Aspects: Recognizing the importance of a
robust accounting framework in the banking sector, the RBI had undertaken an
exercise a few years back to assess the gaps in compliance by banks with the
accounting standards issued by the Institute of Chartered Accountants Of India.

19. PERFORMANCE OF THE PUBLIC SECTOR UNDER
THE REFORM PROCESS
BANKING SECTOR
Banking sector reform has established a competitive system driven by market
forces. The process, however, has not resulted in disregard of social objectives such as
maintenance of the wide reach of the banking system or channelisation of credit towards
disadvantaged but socially important sectors. At the same time, the reform period
experienced strong balance sheet growth of the banks in an environment of operational
flexibility. A key achievement of the banking sector reform has been the sharp
improvement in the financial health of banks, reflected in significant improvement in
capital adequacy and improved asset quality. This has been achieved despite
convergence of the prudential norms with the international best practices. 2 There have
also been substantial improvements in the competitiveness of the Indian banking
sector reflected in the changing composition of assets and liabilities of the banking sector
across bank groups. In line with increased competitiveness, there has been improvement
in efficiency of the banking system reflected inter alias in the reduction in interest
spread, operating expenditure and cost of intermediation in general .
Contemporaneously there have been improvements in other areas as well
including technological deepening and flexible human resource management . A
more detailed discussion on the performance analysis of the banking sector under
the reform process is given below.

20. Special features of the reforms in the financial sector
 The reforms were not driven by any banking crisis nor were they an outcome of
any external support package. They were undertaken much before the importance
of the financial sector to prevent crisis was recognized by international agencies
and other countries in early 1990s before the Asian financial crisis.
 The reforms were carefully sequenced in terms of instruments and objectives.
Thus, prudential norms and supervisory strengthening were introduced early in
the reform cycle, followed by interest rate deregulation and gradually lowering of
statutory preemptions. The more complex aspects of legal and accounting
measures were ushered in subsequently when the basic tenets of the reforms were
already in place. More recently, the regulatory framework has also focused on
ensuring good governance through “fit and proper” owners, directors and senior
managers of the banks. The preference has been for diversified ownership.
 While the focus of the first generation of reforms was to create an efficient,
productive and profitable financial services industry, the second phase of
financial sector reforms, beginning from the second-half of the 1990s, was aimed
at strengthening of the financial system and introduction of structural
improvements.
 The need to prepare the financial system in a more globalised environment
and to promote financial stability in the face of domestic and external shocks was
on top of agenda of reforms. With increasing globalisation of the Indian economy,
the reform process witnessed a significant move towards adoption of international
best practices in several crucial areas of importance such as prudential norms,
banking supervision, data dissemination and corporate governance.
 With a view to increasing competition in the banking sector new private sector
banks were licensed. A prerequisite for grant of the licence was that these banks
had to be fully automated from day one. The results are self-evident as these
banks have become high-tech banks. This has had a “demonstration” effect on the
entire system. The Government ownership in nationalized and State Bank of India

21. was brought down by allowing them to raise capital from the equity market up to
49/45 per cent of paid-up capital.
 A unique feature of the reform of public sector banks, which dominated the Indian
banking sector, was the process of financial restructuring. Banks were
recapitalised by the government to meet prudential norms through recapitalisation
bonds. The mechanism of hiving off bad loans to a separate government asset
management company was not considered appropriate in view of the moral
hazard. The overhang of non-performing loans had to be managed by the banks
themselves.
 The subsequent divestment of equity and offer to private shareholders was
undertaken through a public offer and not by sale to strategic investors.
Consequently, all the public sector banks, which issued shares to private
shareholders, have been listed on the exchanges and are subject to the same
disclosure and market discipline standards as other listed entities.
 The cost of recapitalization to GDP has been low relative to experience in other
countries. On a cumulative basis it worked out to about one percent of the GDP.
Furthermore, the market value of equity held by Government now far exceeds the
recapitalization cost. With a view to carry the reform process further, as
announced in the Budget last year the Government decided to convert the recap
bonds issued as special securities (basically non-negotiable) to marketable
securities indistinguishable from other Government securities . The process has
already started and in 2006-07 the Government converted nearly Rs 80 billion to
SLR securities. The balance special securities will be phased out over a period.
 Banks were also allowed to diversify into various financial services and are now
offering a whole range of financial products like universal banks.

22. RATIONAL OF THE STUDY
The Reforms in the Indian Banking system have assumed large proportions and
are a continuing deterrent to the smooth flow of credit to the productive sector of industry
and agriculture.
The high level committee on financial system constituted by RBI to make
recommendation on financial sector reforms also observed that serious problem are
plaguing the financial sector which is reflected in decline in productivity and efficiency
and erosion of profitability due to deterioration in the quality of loan portfolio restricting
income generation and enhancement of capital funds, accompanied by inadequate loan
loss provisions.
A high figure of loan defaults put question marks on the credit appraisal. Along
with other causes, improper evaluation of the credit requirements or repaying capacity of
the borrowers results in under financing or over financing and affects the cost and
revenue structure of the activity and may render the activity unviable. Non-recovery
affect the profitability of banks.

23. LITERATURE REVIEW
Literature Review is the way to express background of ideas that come to mind
during the research formulation. I asked various employees of the bank about the new
technological initiative taken by the banks.
The research being conducted was "to evaluate the impact of reforms on public sector
& commercial banks."
Once the problem is formulated, the researcher undertakes an extensive literature review
connected with the problem.
BOOKS
1) “C.R Kothari 4: The information regarding the basics of research and research
methodology, what are the different types of research designs, problem statement,
sources of data collection and methods of data collection are given in this
section.6
2) “S.P Gupta 6: The information regarding the statistical tools and their limitations
in different fields the research is given in this section. This section explains, why
to use correlation and the situations in which correlation can be used, and
meaning of correlation . This section also explains the Trend Analysis Technique..
3) S.C. Gupta3: Information regarding various statistical & analytical tools is given
in this section.
4) Wilkinson & Bhandarkar5: In this section various parts of research and research
methodology is given which tells about the techniques of doing research.
5) Tripathi P.C1: this book helped me in knowing about the change.
6) Gupta C.B.-7, "Management theory and practice”: this book helped me in
finding the factors affecting the organization’s change.

24. OBJECTIVES OF THE STUDY
• The major objective of the study is to assess the impact of reform measures on the
efficiency, profitability and overall performance of banks vis-à-vis bank groups in
public and private sector.
• To make a comparative analysis of the performance of public and private sector
commercial banks during the course of implementation of banking sector reforms.

25. RESEARCH METHODOLOGY
SECONDARY DATA
The secondary data on the other hand, are those which have already been collected by
someone else and which have already been passed through the statistical processes. When
the researcher utilizes secondary data then he has to look into various sources from where
he can obtain them. For e.g. Books, magazine, newspaper, Internet, publications and
reports. In the present study I have made use of secondary data collected from various
websites, Journals & Various RBI’s Bulletins etc...
STATISTICAL TOOLS
Introduction:-
An educated citizen needs an understanding of basic statistical tool to
function in a world that is becoming increasingly dependant on quantitative
information. Statistics means numerical description to most people. In fact the term
statistics is generally used to mean numerical facts and figures such as agriculture
production during a year, rate of inflation and so on. However as a subject of study,
statistics refers to the body of principles and procedures developed for the collection,
classification, summarization and interpretation of numerical data and for the use of
such data.
MEANING:-
Broadly speaking, the term statistics has been generally used in two senses:-
 Plural Sense
 Singular Sense

26. Plural sense refers to the numerical data. Singular Sense refers to a Science in
which we deals with the techniques of collecting, classifying, presenting, analyzing
and interpreting the data, the concept in its singular sense, refers to Statistical
Method.
PURPOSE:-
Without the assistance of Statistical Method, an organization would find it
impossible to make sense of the huge data. The purpose of statistics is to:-
• Manipulate
• Summarize
• investigate
the data so that useful decision making information results could be found out. In fact,
every business manager needs a sound background of statistics. Statistics is a set of
Decision Making techniques which aids businessman in drawing inferences from the
available data.
STATISTICAL TOOLS:-
Statistical tools are the basic measures, which helps in defining the relation
between different items, present, past and future trend of the future trend of the
particular business etc. A wide variety of statistical tools are available and any of
them can be used by any businessman depending upon the nature of his trade.
Various statistical tools are:-
1. Correlation
2. Regression
3. Index Numbers
4. Probability Distribution
5. Hypothesis Testing

27. DATA COLLECTION
Performance Analysis –Banking
(a) Reach & Deepening
 Wide reach of banking system maintained after reforms,
 Despite slight decline share of direct flow towards disadvantaged sectors
continued
 Considerable increase in per branch business since the initiation of
reforms
 Substantial deepening of financial sector
14,000
12,253
12,000
10,000
(Rupees)
8,542
8,000 7,275
6,000
4,242 4,555
4,000
2,368 2,320
2,000 1,434
738457
88 68
0
1969 1980 1991 1995 2000 2003
Per capita Deposit Per capita Credit
70
64
60
53.5
51.8
50 48.1 48
(Rupees)
39.2
40 37 36
35.4
33.7 33.7
30
20 16 16
15.5
15 15 15
14
10
0
1969 1980 1991 1995 2000 2003
Populat ion per Offic e (‘000s) Priorit y Sec t or Advanc es (per c ent ) Deposit s (per c ent of NI)

28. Performance Analysis –Banking –
(b) Balance Sheet
(per cent of assets)
90
81.5 80.5
79.8
80 77.7 76.4
70
60
50 46.8
43.6 45
42.1
40.6
40
30
1991-92 1995-96 2000-01 2002-03 2003-04
Deposits Loans and advances
(per cent of assets)
45
40.8 41.7
40 38
35
31
30 28.9
25
20
15
10 8.9 8.1
5 3.5
0
1991-92 1995-96 2000-01 2002-03 2003-04
Total Investments Non-SLR Investment
• Deposits remained stable and predominant source of funds.
• Share of loans in total liabilities declined in mid-1990s, but revived in recent
years
• Strong increase in investment activities
• Despite sharp decline in SLR large Gilt holdings
• Despite some increase non-SLR investment remains low

29. Performance Analysis –Banking –
(c) Capital Structure (1)
100
90 87
84
81
RESEARCH
80
70
60
(per cent)
METHODOLOGY
50
40
30
33
42
20
12
8 9 7
10 4
3 2 1 2 2
0
1995-96 1999-00 2001-02 2002-03
CRAR below 4 CRAR 4-9 CRAR 9-10 CRAR above 10
• Distinct improvement in CRAR of banks
• In public sector banks recapitalisation by government initially (about 1% of GDP)
Capital Structure (2)
Vijaya Bank 46.1
Corporation Bank 42.8
State Bank of India 40.3
Union Bank of India 39.2
Indian Overseas Bank 38.8
Andhra Bank 37.5
Oriental Bank of Commerce 33.5
Bank of Baroda 33.2
Bank of India 30.5
Dena Bank 29
Allahabad Bank 28.8
Canara Bank 26.8
Syndicate Bank 26.5
State Bank of Travancore 25
State Bank of Bikaner & Jaipur 25
UCO Bank 25
Bank of Maharashtra 23.2
Punjab National Bank 20
State Bank of Mysore 7.7
State Bank of Indore 2
0 10 20 30 40 50
Share of Private Sector (per cent)

30. (d) Asset Quality
18
15.7
16
14
(per cent)
12 11.4
10 8.8
8 7 7.3
6 4.9
4
4
2
0
1996-97 2000-01 2002-03 2003-04
Gross NPL/Advances Gross NPL/Assets
• Marked improvements in asset quality
• Public sector banks showed more credible performance in NPL management than
private sector banks
(e) Competition
Share in Assets
100.0
82.5 78.4
74.5
80.0
60.0
Per cent
40.0
18.5
20.0 9.4 8.2 9.1 12.6 7.0
0.0
1995-96 2000-01 2002-03
Foreign Banks Private Sector Banks Public Sector Banks

31. (f) Efficiency
Net Profits as % of Total Assets
2.00 1.70
1.60
1.50 1.20 1.201.30
1.00 1.10
0.90 0.90
1.00 0.70
0.60
0.40
0.50
0.00
Pub. Sec. Banks Old Pvt. Banks New Pvt. Banks Foreign Banks
1996-97 2001-02 2002-03
• Clear improvement in profitability in the post-reform period
• Reduction in spread and operating expenditure
• Improvement in efficiency across the bank groups

32. Regression
Linear regression is without doubt the most frequently used statistical method. A
distinction is usually made between simple regression (with only one explanatory
variable) and multiple regression (several explanatory variables) although the overall
concept and calculation methods are identical.
The principle of linear regression is to model a quantitative dependent variable Y though
a linear combination of p quantitative explanatory variables, X1, X2, …, Xp. The
determinist model (not taking randomness into account) is written for observation i as
follows:
Non-SLR Loans and
Deposits TotalINVESTMENT INVESTMENT ADVANCES
1991-92 77.7 28.9 .. 46.8
1992-93 78.4 30.5 .. 45
1993-94 80.3 35.4 5 38.7
1994-95 78.9 33.6 4.6 40.5
1995-96 76.4 31 3.5 42.1
1996-97 79.9 33.3 5 41
1997-98 81 34.2 7.1 40.8
1998-99 81.1 35.7 8.6 38.8

33. 1999-00 81.1 37.3 9.1 40.2
2000-01 81.5 38 8.9 40.6
2001-02 78.5 38.2 8.7 42
2002-03 79.8 40.8 8.1 43.6
2003-04
* 80.5 41.7 7.2 45
Here in this table deposits are independent variables and Investment and Loans and
advances are dependant on deposits therefore we can use Regression analysis for this data
with the help of XLSTAT.
TotalINVESTMENT Deposits
1991-92 28.9 77.7
1992-93 30.5 78.4
1993-94 35.4 80.3
1994-95 33.6 78.9
1995-96 31 76.4
1996-97 33.3 79.9
1997-98 34.2 81
1998-99 35.7 81.1
1999-00 37.3 81.1
2000-01 38 81.5
2001-02 38.2 78.5
2002-03 40.8 79.8
2003-04
* 41.7 80.5
Evaluating
the
information
brought by
the variables
(H0 =
Y=Moy(Y))
:
Sum of Mean Fisher's
Source DF squares square F Pr > F
Model 1 65.542 65.542 6.209 0.030
Residuals 11 116.121 10.556
Total 12 181.663

34. Data and regression line Standardized residuals
50 O bs 13
45 O bs 12
40 O b s 11
O bs 10
35
O bs 9
30
O bs 8
25
O bs 7
20
O bs 6
15
O bs 5
10
O bs 4
5
O bs 3
0
O bs 2
76 77 78 79 80 81 82
O bs 1
D e po s it s
-2 -1.5 -1 -0.5 0 0.5 1 1.5 2
O b s e rvatio ns P re d ic tio ns
C o nf. o n p re d (95.00% ) C o nf. o n m e an (95.00% ) S ta nda rdize d re s idua ls
Loans and
ADVANCES Deposits
1991-92 46.8 77.7
1992-93 45 78.4
1993-94 38.7 80.3
1994-95 40.5 78.9
1995-96 42.1 76.4
1996-97 41 79.9
1997-98 40.8 81
1998-99 38.8 81.1
1999-00 40.2 81.1
2000-01 40.6 81.5
2001-02 42 78.5
2002-03 43.6 79.8
2003-04
* 45 80.5
Evaluating
the
information
brought by
the variables
(H0 = Data and regression line
Y=Moy(Y)) Standardized residuals
: 60
O b s 13
50 O b s 12
Sum of Mean Fisher's
O b s 11
40Source DF squares square Fb s 10
O Pr > F
Model 1 19.223 19.223 3.821
O bs 9 0.077
30
Residuals 11 55.345 5.031 O bs 8
O bs 7
Total
20 12 74.568 O bs 6
O bs 5
10
O bs 4
O bs 3
0
76 77 78 79 80 81 82 O bs 2
D e po s it s O bs 1
-2 -1.5 -1 -0.5 0 0.5 1 1.5 2
O b s e rvatio n s P re d ic tio ns
C o nf. o n p re d (95.00% ) C o nf. o n m e an (95.00% ) S t a nda rdize d re s idua ls

36. Trend Analysis Of NPA’s in Public Sector Banks During Period
(1992-02)
1:Gross NPAs to Gross Advances:
Year Gross NPAs / Gross Advances Trend Line
1. 1992-93 23.2 -
2. 1993-94 24.8 22.5
3. 1994-95 19.5 20.8
4. 1995-96 18.0 18.43
5. 1996-97 17.8 17.26
6. 1997-98 16.0 16.56
7. 1998-99 15.9 15.33
8. 1999-00 14.0 14.1
9. 2000-01 12.4 12.5
10. 2001-02 11.1 -
Note: Series – 1: Gross NPAs to Gross Advances
Series – 2: Trend Line
ANALYSIS
During the year 1992-93 to 2001-02, there has been a sharp decline in Gross NPAs to
Gross Advances. The Trend Line also shows a continues decreasing trend. From this, it
can be concluded that over the next three years (i.e 2002-03 to 2004-05), Gross NPAs to
Gross Advances of public sector banks would decrease.
2. Gross NPAs to Total Advances:

37. Year Gross NPAs / Total Advances Trend Line
1. 1992-93 11.8 -
2. 1993-94 10.8 10.43
3. 1994-95 8.7 9.23
4. 1995-96 8.2 8.23
5. 1996-97 7.8 7.66
6. 1997-98 7.0 7.16
7. 1998-99 6.7 6.56
8. 1999-00 6.0 6.00
9. 2000-01 5.3 5.4
10. 2001-02 4.9 -
FINDI
Note: Series – 1: Gross NPAs to Total Advances
Series – 2: Trend Line
ANALYSIS
During the year 1992-93 to 2001-02 , there has been considerable decline in GNPAs to
Total Assets. The Trend Line too says the same story. Therefore the GNPAs to Total
Assets of public sector banks will decline in the next three years to come (i.e 2002-03 to
2004-05).
3. Net NPAs to Net Advances:
Year Net NPAs / Net Trend Line
Advances
1. 1992-93 11.3 -

38. 2. 1993-94 12.87 11.62
3. 1994-95 10.7 10.82
4. 1995-96 8.9 9.6
5. 1996-97 9.2 8.76
6. 1997-98 8.2 8.5
7. 1998-99 8.1 7.9
8. 1999-00 7.4 7.4
9. 2000-01 6.7 6.63
10. 2001-02 5.8 -
Note: Series - 1: Net NPAs to Net Advances
Series – 2: Trend Line
ANALYSIS
During the year 1992-93 to 2001-02, there has been a steady and considerable decrease in
percentage of Net NPAs to Net Advances. The Trend Line also shows that there is a
decreasing trend and Net NPAs over next three years (i.e 2002-03 to 2004-05) would
decrease considerably.
4. Net NPAs to Total Assets:
Year Net NPAs / Total Assets Trend Line
1. 1992-93 4.6 -
2. 1993-94 5.1 4.56
3. 1994-95 4 4.23
4. 1995-96 3.6 3.76
5. 1996-97 3.7 3.53

39. 6. 1997-98 3.3 3.36
7. 1998-99 3.1 3.1
8. 1999-00 2.9 2.9
9. 2000-01 2.7 2.66
10. 2001-02 2.4 -
Note: Series -1: Net NPAs to Total Assets
Series – 2: Trend Line
Analysis
During the year 1992-93 to 2001-02, there has been a marginal decline in Net NPAs to
Total Assets. The Trend Line shows that there has been a steady decline and it can be
inferred that over next three years (i.e 2002-03 to 2004-05), Net NPAs to Total Assets of
public sector banks would decrease but at a marginal rate.
FINAL ANALYSIS
The future picture of Commercial banks more so the public sector banks seem to be rosy.
As the Trend Line suggests that the NPAs of public sector banks will decline marginally
both in terms of Gross and Net figures over next three years. This may be due to higher
provisions, which the public sector banks have been providing. The real issue to be
identified is though the NPAs, as a percentage seems to be declining over the years but
the absolute figures seems to be increasing. In this vein it would be interesting to see the
NPAs both in terms of absolute figures and in terms of percentage of public sector banks
in the coming three years.
ANCOVA
ANCOVA (ANalysis of COVAriance) can be seen as a mix of ANOVA and linear
regression as the dependent variable is of the same type, the model is linear and the

40. hypotheses are identical. In reality it is more correct to consider ANOVA and linear
regression as special cases of ANCOVA.
Interactions between quantitative variables and factors
One of the features of ANCOVA is to enable interactions between quantitative variables
and factors to be taken into account. The main application is to test if the level of a factor
(a qualitative variable) has an influence on the coefficient (often called slope in this
context) of a quantitative variable. Comparison tests are used to test if the slopes
corresponding to the various levels of a factor differ significantly or not.
Loans and
ADVANCES Deposits
1991-92 46.8 77.7
1992-93 45 78.4
1993-94 38.7 80.3
1994-95 40.5 78.9
1995-96 42.1 76.4
1996-97 41 79.9
1997-98 40.8 81
1998-99 38.8 81.1
1999-00 40.2 81.1
2000-01 40.6 81.5
2001-02 42 78.5
2002-03 43.6 79.8
2003-04
* 45 80.5
Summary for the
dependent
variable:
Total no. of No. of No. of values Sum of Standard
Variable values values used ignored weights Mean deviation
Loans and 41.93
ADVANCES 13 13 0 13 1 2.493
Evaluating the information brought by the variables (H0 = Y=Moy(Y)):
Fisher's Pr >
Source DF Sum of squares Mean square F F
Model 11 73.588 6.690 6.826 0.291
Residuals 1 0.980 0.980
Total 12 74.568

41. Loans and ADVANCES / Standardized residuals
Factor Deposits
0.8
47
0.6
46
45
0.4
44
43 0.2
42
0
41
38 40 42 44 46
40 -0.2
39
38 -0.4
-0.6
D e po s its -0.8
L o ans and A D VA N C E S

42. CORRELATION
Three correlation coefficients are proposed to compute the correlation between a set of
quantitative variables, whether continuous, discrete or ordinal (in the latter case, the
classes must be represented by values that respect the order):
Pearson correlation coefficient: this coefficient corresponds to the classical linear
correlation coefficient. This coefficient is well suited for continuous data. Its value ranges
from -1 to 1, and it measure the degree of linear correlation between two variables. Note:
the squared Pearson correlation coefficient gives an idea of how much of the variability
of a variable is explained by the other variable. The p-values that are computed for each
coefficient allow testing the null hypothesis that the coefficients are not significantly
different from 0. However, one needs to be cautions when interpreting these results, as if
two variables are independent, their correlation coefficient is zero, but the reciprocal is
not true.
Spearman correlation coefficient (rho): this coefficient is based on the ranks of the
observations and not on their value. This coefficient is adapted to ordinal data. As for the
Pearson correlation, one can interpret this coefficient in terms of variability explained,
but here we mean the variability of the ranks.
Kendall correlation coefficient (tau): as for the Spearman coefficient, it is well suited for
ordinal variables as it is also based on ranks. However, this coefficient is conceptually
very different. It can be interpreted in terms of probability: it is the difference between
the probabilities that the variables vary in the same direction and the probabilities that the
variables vary in the opposite direction.

43. Correlation between Earnings & Expenses of Public Sector Banks
Year Total
Scattergram of the data
Earnings Total
Expenses 2000
1800
1955 1 1600
0 1400
1975 4
4 1200
1990 42
42 1000
1995 304 800
297
2000 1,149 600
1077
400
2002 1,510
1395 200
2003 1,724
1553 0
2004 2,345 0 500 1000 1500 2000 2500
1895 T o ta l E a rnings
Pearson's correlation coefficient test (parametric test):
Observed value 0.996
Two-tailed p-value < 0.0001
Alpha 0.05
Decision:
At the level of significance Alpha=0.050 the decision is to reject the null hypothesis of
absence of correlation. Result of correlation is high Degree Positive Correlation
In other words, the correlation is significant.
CONCLUSION AND RECOMMENDATION

44.  Since the financial reforms of 1991, there have been significant favourable
changes in India’s highly regulated banking sector. This study has
assessed the impact of the reforms by examining seven hypotheses.
 It concludes that the financial reforms have had a moderately positive impact on
reducing the concentration of the banking sector (at the lower end) and improving
performance.
 The empirical estimation showed that regulation lowered the profitability and cost
efficiency of public-sector banks at the initial stage of the reforms, but such a
negative impact disappeared once they adjusted to the new environment.
 Moreover, allowing banks to engage in non-traditional activities has contributed
to improved profitability and cost and earnings efficiency of the whole banking
sector, including public-sector banks.
 Lending to priority sectors and the public-sector has not had a negative effect on
profitability and cost efficiency, contrary to our expectations.
 Further, foreign banks (and private domestic banks in some cases) have generally
performed better than other banks in terms of profitability and income efficiency.
This suggests that ownership matters and foreign entry has a positive impact on
banking sector restructuring.
 A further reduction of SLR and more encouragement for non-traditional activities
(under the bank subsidiary form) may also make the banking sector more resilient
to various adverse shocks.
 For the continuous growth of the Indian economy, continuation of the banking
and financial reforms will always be a critical issue.
 It boosts investment and growth throughout the economy.
 The response of the banks to the reforms has been impressive. The banks have
been adjusting very well to the new environment.
 The level of NPA of public sector banks remained high; a noteworthy
development has been their significant reduction in relation to net advances in
recent years.

45. LIMITATIONS OF THE STUDY
As we all know that every work that has to be performed by someone includes some
hurdles or says limitation. There are always some problems in each and every work. If
there were no problems the performing each task is so easy that everyone that does not
have any knowledge about the can also performs that work without and hurdle.
So the following are the some limitations or problems that are faced during the
dissertation report.
1. Lack of knowledge:- about conducting the research makes it very difficult for
us to perform out task. As it was our first time that we indulge in dissertation
report. The lack of experience made the task difficult.
2. Shortage of time:-As the time period that is given to us for doing dissertation
study was also too less. In a short time period that is very difficult that we can
get the knowledge about each and everything related to our project.
3. Secondary data:-I used secondary data in my study that is not a reliable
source of information for doing research work.
4. Limited Area:- The study is restricted to the limited areas of search.
5. Nature:- The study is suggestive in nature and not much conclusive.
6. Unavailability of information:- Some of the information in banks is not to
be disclosed to any resource of information. Even I was unable to access that
information.

46. BIBLIOGRAPHY
BOOKS
 “C.R Kothari 4: The information regarding the basics of research and
research methodology, what are the different types of research designs,
problem statement, sources of data collection and methods of data
collection are given in this section.6
 “S.P Gupta 6: The information regarding the statistical tools and their
limitations in different fields the research is given in this section. This
section explains, why to use correlation and the situations in which
correlation can be used, and meaning of correlation . This section also
explains the Trend Analysis Technique..
 S.C. Gupta3: Information regarding various statistical & analytical tools is
given in this section.
 Wilkinson & Bhandarkar5: In this section various parts of research and
research methodology is given which tells about the techniques of doing
research.
 Tripathi P.C1: this book helped me in knowing about the change.
 Gupta C.B.-7, "Management theory and practice”: this book
helped me in finding the factors affecting the organization’s change.

47. JOURNALS
 Finance India15, September 2005 pp-957-961:- Impact of NPAs on strategic
banking variables i.e. impact on profitability, Productivity, Capital Adequacy,
Credit Deployment and Mobilisation.
 Chartered Financial Analysis17, December 2005 pp-52:- Concept of
SARFAESI Act.
 Southern Economist20, February 2006 pp-15:- Details of Corporate Debt
Restructuring Scheme.
 Management Accountant24, May 2006 pp- 359:- Early Warning System
 Chartered Financial Analysis29, October 2005 pp-64 :-Types of banking risk
 Chartered Financial Analysis32, October 2007 pp-31-31:-Growth and structural
change in banking sector
 Chartered Financial Analysis34, November 2007 pp-8-9:-Concept of
Borrower’s Special Investigation Audits
 Economic and political weekly30, October 16, 2004 pp-10:-Meaning and
concept of financial reforms.
 Chartered Secretary24, Feburary 2003, V.S.Datey pp-22-24 :- Importance of
credit rating
 Treasury Management , December 2004, MPM Vinay Kumar pp-14-1610 :-
Adverse effect of Financial norms.
 Chartered Financial Analysis, August 2004, B.P.Dhaka pp-47-5211 :- Reason
behind huge level of NPAs in the Indian Banking System
 Paradigm, July 2005 pp-12-1412 :- Indian economy and Banking
 Management Accountant, September 2007 pp-48-5013 :- Accounts which need
not be classified as NPAs
 Business Today, May 2006 pp-3414 :- Measures in case of non payment of NPAs
 Chartered Financial Analysis-29, December 2005 pp-25-28 :- Norms for
treating various advances as NPAs

48.  Financial Risk Management, February 2006 pp-50-55:- Narsimhan
Committee’s recommendation
 Data quest35 , April 2005 pp-19 Gross NPAs expressed as % of gross advances
 RBI Bulletin, July 1999 pp-34-36 :- RBI guidelines on income generation
 IBA Bulletin, January 2004 pp-17-19:- Magnitude of gross NPAs post and prior
to the reforms.
 Chartered Financial Analysis, February 2004 pp-12-140 :-Qualitative aspects
of the micro level impact of reforms.