COMPARATIVE ANALYSIS

OF FIVE COMMERCIAL
BANKS IN SIX YEARS

BY: ASHUTOSH RANA

STRAWBBERRY FIELDS HIGH SCHOOL
 ACKNOWLEDGEMENT

I would like to express my thanks of gratitude to my teacher

Ms. Sarika aggarwal and our principal Ms. Sangeeta sekhon
for giving me this golden opportunity to make this wonderful
project about the lending performances of five commercial
banks based on the changes in CRR and SLR in six years, this
project helped me learn more about the banks we deal with in
our day to day life.
Secondly, I would like to thank my family and friends who
helped me finish this project within the limited time period, I
would not have been able to complete this project without
their support.
 CONTENTS
•INTRODUCTION
1. BANKING
2. CRR AND SLR
•TYPES OF BANKS
•QUANTITATIVE AND QUALITATIVE MEASURES
•STATE BANK OF INDIA
•PUNJAB NATIONAL BANK
•ICICI BANK
•CANARA BANK
•BANK OF BARODA
•CONCLUSION
•BIBLIOGRAPHY
 INTRODUCTION
BANKING:
Banking is an industry that handles cash, credit, and other financial
transactions. Banks provide a safe place to store extra cash and credit.
They offer savings accounts, certificates of deposit and checking
accounts. Banks use these deposits to make loans. These loans include
home mortgages, business loans, and car loans. Banks are a safe place to
deposit excess cash. The Federal Deposit Insurance Corporation insures
them. Banks also pay a small percent, the interest rate, on the deposit.
Banks can turn every one of those saved dollars into $10. They are
only required to keep 10 percent of each deposit on hand. That regulation
is called the reserve requirement. Banks lend the other 90 percent out.
They make money by charging higher interest rates on their loans than
they pay for deposits. In recent years, banking has become very
complicated. Banks have ventured into sophisticated investment and
insurance products. This level of sophistication led to the banking credit
crisis of 2007.
CRR AND SLR:
CRR and SLR are the two ratios. CRR is a cash reserve ratio and SLR
is statutory liquidity ratio. Under CRR a certain percentage of the
total bank deposits has to be kept in the current account with RBI
which means banks do not have access to that much amount for
any economic activity or commercial activity. Banks can’t lend the
money to corporates or individual borrowers, banks can’t use that
money for investment purposes. So, that CRR remains in current
account and banks don’t earn anything on that.
Let us look at this combination of CRR and SLR. That is the amount
of money which remains blocked for statutory reasons and is not
available for investment in various other high earning avenues like
loans are securities markets or other bonds. That means it puts a
certain amount of pressure on the banks balance sheets. However,
at the same time that money remains safe and with that
mechanism RBI also offers safety to the depositors who have
invested money in the banks.
 TYPES OF BANKS
Commercial Banks
Commercial banks are the banks that accept money in the form of deposits
from the public and give loans and advances to its customers by charging
interest. They mobilize small savings and promote the growth of trade and
commerce. Generally, commercial banks lend money for a short period only.
They only provide working capital to the organizations. But in recent times
commercial banks are providing long-term capital also to the organizations.
There are several types of deposits which are accepted by the commercial
banks like
⦿ Savings Deposits
⦿ Current Deposits
⦿ Fixed Deposits
⦿ Seasonal Deposits
⦿ Recurring Deposits, etc
The Commercial banks give different types of loans and advances to the
businessmen like
⦿ Cash Credits
⦿ Overdrafts
⦿ Loans
⦿ Discounting Bills
Co-operative Banks
Co-operative Banks are the banks that usually provide short term, medium term,
long term credit to agricultural purposes. Co-operative Banks also provides loans
to small-scale artisans. Co-operative Banks usually provide credit facilities to
farmers, small-scale industries, etc at a cheaper rate of interest. Co-operative
Banks are mainly situated in rural areas and can also be seen in urban areas.
Central Bank
Every country has its own Central Bank. The Central bank aims at non-profit
functioning. It regulates the monetary and credit system of the country. Central
Bank acts as controller, supervisor, and regulator of the activities of commercial
banks and other financial institutions in the country. The Central bank is
considered as the apex institution of the country’s money market.
Functions of Central Bank
⦿ Note issue
⦿ Credit control
⦿ It acts as a banker to the banks
⦿ It acts as a banker to the government
⦿ It maintains the foreign exchange reserves of the country
⦿ It maintains the Gold reserves of the country
Industrial Banks
Industrial banks are also called as Investment Banks. Industrial banks provide
long-term loans to the industries. Industries require long-term capital for buying
machinery, construction of buildings, expansion of operations, etc.
Agricultural Banks
Agricultural Banks are the banks which provide agricultural credit to the farmers.
The Agricultural Development Banks provide medium term and long term credit.
Some examples of Agricultural Banks in India are Agricultural Finance Corporation,
Agricultural Refinance and Development Corporation, National Bank for Agricultural
and Rural Development (NABARD).Agricultural Banks are established by the
government to promote agricultural credit in the country.
Savings Bank
Savings Banks mainly concentrates on the mobilization of savings of the people. In
India Post offices run by Postal department act as savings banks. Since Commercial
banks are providing these facilities of savings banks to the public, the need for
separate savings bank is fading.
Foreign Exchange Banks
Foreign Exchange Banks are the banks which provide finance for foreign trade.
These banks accept deposits from the public. Foreign Exchange Banks are
specialized banks in providing credit for the foreign trade. These banks usually have
their branches in foreign countries for uninterrupted functioning of their services.
But in recent times commercial banks are also financing foreign trade.
Exchange Banks
Exchange Banks are the banks which operate by financing the imports and exports
of the country. These banks are mainly concerned with providing foreign exchange
to their customers and help to promote international trade. They also offer to
discount of foreign bills of exchange to their customers.
Private Bankers
Private Bankers are the individuals who do banking business individually or as a
partnership. It is purely an unorganized sector. Most of the private bankers do
not receive or accept any deposits from the public, they do banking business
with their own capital. They lend money to the people for high-interest rates.
Chit Funds
There are chit funds in India. They provide finance to trade and commerce.
However, they cannot be called as banks in the regular sense. The Chit fund
business is very large in a country like India. it is also an unorganized sector in
India.
QUANTITATIVE AND QUALITATIVE
MEASURES
(A) Quantitative Instruments or General Tools
The Quantitative Instruments are also known as the General Tools of monetary
policy. These tools are related to the Quantity or Volume of the money. The
Quantitative Tools of credit control are also called as General Tools for credit control.
They are designed to regulate or control the total volume of bank credit in the
economy. These tools are indirect in nature and are employed for influencing the
quantity of credit in the country. The general tool of credit control comprises of
following instruments.
1. Bank Rate Policy (BRP)
The Bank Rate Policy (BRP) is a very important technique used in the monetary
policy for influencing the volume or the quantity of the credit in a country. The bank
rate refers to rate at which the central bank (i.e. RBI) rediscounts bills and prepares
of commercial banks or provides advance to commercial banks against approved
securities. It is "the standard rate at which the bank is prepared to buy or rediscount
bills of exchange or other commercial paper eligible for purchase under the RBI Act".
The Bank Rate affects the actual availability and the cost of the credit. Any change
in the bank rate necessarily brings out a resultant change in the cost of credit
available to commercial banks. If the RBI increases the bank rate than it reduce the
volume of commercial banks borrowing from the RBI.
It deters banks from further credit expansion as it becomes a more costly affair.
Even with increased bank rate the actual interest rates for a short term lending
go up checking the credit expansion. On the other hand, if the RBI reduces the
bank rate, borrowing for commercial banks will be easy and cheaper. This will
boost the credit creation. Thus any change in the bank rate is normally
associated with the resulting changes in the lending rate and in the market rate
of interest. However, the efficiency of the bank rate as a tool of monetary policy
depends on existing banking network, interest elasticity of investment demand,
size and strength of the money market, international flow of funds, etc.
2. Open Market Operation (OMO)
The open market operation refers to the purchase and/or sale of short term and
long term securities by the RBI in the open market. This is very effective and
popular instrument of the monetary policy. The OMO is used to wipe out
shortage of money in the money market, to influence the term and structure of
the interest rate and to stabilize the market for government securities, etc. It is
important to understand the working of the OMO. If the RBI sells securities in an
open market, commercial banks and private individuals buy it. This reduces the
existing money supply as money gets transferred from commercial banks to the
RBI. Contrary to this when the RBI buys the securities from commercial banks in
the open market, commercial banks sell it and get back the money they had
invested in them. Obviously the stock of money in the economy increases. This
way when the RBI enters in the OMO transactions, the actual stock of money
gets changed.
Normally during the inflation period in order to reduce the purchasing power, the
RBI sells securities and during the recession or depression phase she buys
securities and makes more money available in the economy through the banking
system. Thus under OMO there is continuous buying and selling of securities
taking place leading to changes in the availability of credit in an economy.
However there are certain limitations that affect OMO viz; underdeveloped
securities market, excess reserves with commercial banks, indebtedness of
commercial banks, etc.
3. Cash in the Reserve Ratios (CRR)
The Commercial Banks have to keep a certain proportion of their total assets in the
form of Cash Reserves. Some part of these cash reserves are their total assets in
the form of cash. Apart of these cash reserves are also to be kept with the RBI for
the purpose of maintaining liquidity and controlling credit in an economy. This
reserve ratio is named as Cash Reserve Ratio (CRR). The CRR refers to some
percentage of commercial bank's net demand and time liabilities which
commercial banks have to maintain with the central bank. In India the CRR by law
remains in between 3-15 percent.
Qualitative Instruments or Selective Tools ↓
The Qualitative Instruments are also known as the Selective Tools of monetary
policy. These tools are not directed towards the quality of credit or the use of the
credit. They are used for discriminating between different uses of credit. It can be
discrimination favouring export over import or essential over non-essential credit
supply. This method can have influence over the lender and borrower of the
credit. The Selective Tools of credit control comprises of following instruments.
1. Fixing Margin Requirements
The margin refers to the "proportion of the loan amount which is not financed by
the bank". Or in other words, it is that part of a loan which a borrower has to raise
in order to get finance for his purpose. A change in a margin implies a change in
the loan size. This method is used to encourage credit supply for the needy sector
and discourage it for other non-necessary sectors. This can be done by increasing
margin for the non-necessary sectors and by reducing it for other needy sectors.
Example:- If the RBI feels that more credit supply should be allocated to
agriculture sector, then it will reduce the margin and even 85-90 percent loan can
be given.
2. Consumer Credit Regulation
Under this method, consumer credit supply is regulated through hire-purchase
and instalment sale of consumer goods. Under this method the down payment,
instalment amount, loan duration, etc is fixed in advance. This can help in
checking the credit use and then inflation in a country.
3. Publicity
This is yet another method of selective credit control. Through it Central Bank
(RBI) publishes various reports stating what is good and what is bad in the system.
This published information can help commercial banks to direct credit supply in
the desired sectors. Through its weekly and monthly bulletins, the information is
made public and banks can use it for attaining goals of monetary policy.
4. Credit Rationing
Central Bank fixes credit amount to be granted. Credit is rationed by limiting the
amount available for each commercial bank. This method controls even bill
rediscounting. For certain purpose, upper limit of credit can be fixed and banks are
told to stick to this limit. This can help in lowering banks credit expoursure to
unwanted sectors.
5. Moral Suasion
It implies to pressure exerted by the RBI on the Indian banking system without any
strict action for compliance of the rules. It is a suggestion to banks. It helps in
restraining credit during inflationary periods. Commercial banks are informed
about the expectations of the central bank through a monetary policy. Under
moral suasion central banks can issue directives, guidelines and suggestions for
commercial banks regarding reducing credit supply for speculative purposes.
 STATE BANK OF INDIA
State Bank of India (SBI) is an Indian multinational, public sector
banking and financial services company. It is a government-owned
corporation headquartered in Mumbai, Maharashtra. The company is
ranked 216th on the Fortune Global 500 list of the world's biggest
corporations as of 2017. It is the largest bank in India with a 23% market
share in assets, besides a share of one-fourth of the total loan and
deposits market.
The bank descends from the Bank of Calcutta, founded in 1806, via the
Imperial Bank of India, making it the oldest commercial bank in the
Indian subcontinent. The Bank of Madras merged into the other two
"presidency banks" in British India, the Bank of Calcutta and the Bank of
Bombay, to form the Imperial Bank of India, which in turn became the
State Bank of India in 1955. The Government of India took control of the
Imperial Bank of India in 1955, with Reserve Bank of India (India's central
bank) taking a 60% stake, renaming it the State Bank of India. In 2008,
the government took over the stake held by the Reserve Bank of India.
 PUNJAB NATIONAL BANK
Punjab National Bank, India’s first Swadeshi Bank, commenced its operations on April 12,
1895 from Lahore, with an authorised capital of Rs 2 lac and working capital of Rs 20,000.
Far-sighted visionaries and patriots Lala Lajpat Rai, Mr. E.C. Jessawala, Babu Kali Prasono
Roy, Lala Harkishan Lal and Sardar Dyal Singh Majithia displayed courage in giving
expression to the spirit of nationalism by establishing the first bank purely managed by
Indians with Indian Capital. During the long history of the Bank, 7 banks have merged with
PNB.
The Bank’s brand image and trust reposed by its customers have been reflected in the growing
customer base and rising business graph of the Bank. Domestic Business of the Bank has
crossed the milestone of Rs.10 lakh crore and the Bank continues to maintain its forte in low
cost CASA deposits. The Bank has been able to reach out to its customers across the nation
with nearly 7000 branches, of which nearly 62% branches are in Rural and Semi Urban Areas
(RU-SU).
MISSION PARIVARTAN, a transformational exercise for Business Excellence is currently
underway to enhance Efficiency, Productivity and Profitability for long term sustenance
and giving the Bank an edge over its competitors. An independent ‘THINK TANK’ named
‘Mission Parivartan Division’ has been formed to initiate, implement and drive change
through improvement inPeople, Products and Processes.This will enable Bank to continue
to serve the customers with the enhanced vigour and zeal to live upto its tagline “the name
you can Bank upon”.
 ICICI BANK
ICICI Bank Limited (Industrial Credit and Investment Corporation of India) is an
Indian multinational banking and financial services company headquartered in
Mumbai, Maharashtra. In 2014, it was the second largest bank in India in terms of
assets and third in term of market capitalisation. It offers a wide range of banking
products and financial services for corporate and retail customers through a variety
of delivery channels and specialised subsidiaries in the areas of investment
banking, life, non-life insurance, venture capital and asset management. The bank
currently has a network of 4867 branches and 14417 ATMs across India and has a
presence in 19 countries including India.
ICICI Bank is one of the Big Four banks of India which is also considered in the
industry as Too big to fail. The bank has subsidiaries in the United Kingdom and
Canada; branches in United States, Singapore, Bahrain, Hong Kong, Sri Lanka,
Qatar, Oman, Dubai International Finance Centre, China and South Africa; and
representative offices in United Arab Emirates, Bangladesh, Malaysia and
Indonesia. The company's UK subsidiary has also established branches in Belgium
and Germany.
ICICI Bank launched internet banking operations in 1998. In 2008, following the
2008 financial crisis, customers rushed to ICICI ATMs and branches in some
locations due to rumours of an adverse financial position of ICICI Bank. The Reserve
Bank of India issued a clarification on the financial strength of ICICI Bank to dispel
the rumours
 CANARA BANK
Canara Bank is one of the largest public sector banks owned by the Government of
India. It is headquartered in Bengaluru. It was established at Mangalore in 1906 by
Ammembal Subba Rao Pai. It is one of the oldest public sector banks in the country.
The government nationalized the bank in 1969. As of 30 October 2017, the bank had
a network of 6639 branches and more than 10600 ATMs spread across all over India.
The bank also has offices abroad in London, Hong Kong, Moscow, Shanghai, Doha,
Bahrain, South Africa, Dubai, Tanzania and New York.
Ammembal Subba Rao Pai, a philanthropist, established the Canara Hindu
Permanent Fund in Mangalore, India, on 1 July 1906.The bank changed its name to
Canara Bank Limited in 1910 when it incorporated.
Canara Bank's first acquisition took place in 1961 when it acquired Bank of Kerala.
This had been founded in September 1944 and at the time of its acquisition on 20
May 1961 had three branches. The second bank that Canara Bank acquired was
Seasia Midland Bank (Alleppey), which had been established on 26 July 1930 and
had seven branches at the time of its takeover.
The Government of India nationalised Canara Bank, along with 13 other major
commercial banks of India, on 19 July 1969. In 1976, Canara Bank inaugurated its
1000th branch. In 1985, Canara Bank acquired Lakshmi Commercial Bank in a
rescue. This brought Canara Bank some 230 branches in northern India.
 BANK OF BARODA
Bank of Baroda (BoB) is an Indian state-owned International banking and financial
services company headquartered in Vadodara (earlier known as Baroda) in Gujarat,
India. It has a corporate office in Mumbai.
Based on 2017 data, it is ranked 1145 on Forbes Global 2000 list. BoB has total assets
in excess of ₹ 3.58 trillion (making it India’s 2nd biggest bank by assets), a network
of 5538 branches in India and abroad, and 10441 ATMs as of July, 2017.The
government of India announced the merger of Bank of Baroda, Vijaya Bank and
Dena Bank on September 17, 2018 to create the country's third largest lender. The
envisaged amalgamation will be the first-ever three-way consolidation of banks in
the country, with a combined business of Rs 14.82 lakh crore, making it the third
largest bank after State Bank of India (SBI) and ICICI Bank.
The bank was founded by the Maharaja of Baroda, Maharaja Sayajirao Gaekwad III
on 20 July 1908 in the Princely State of Baroda, in Gujarat. The bank, along with 13
other major commercial banks of India, was nationalised on 19 July 1969, by the
Government of India and has been designated as a profit-making public sector
undertaking (PSU).
As many as 10 banks have been merged with Bank of Baroda during its journey so
far.
 CONCLUSION
Wednesday, 18 November 2015
Impact of Changes in the Cash Reserve Ratio and Statutory Liquidity Ratio on the
volume of loans and advances made by commercial Banks:
The data provided below in table 1 indicates the changes in the CRR and SLR during
the last few years and that in table 2 indicates the advances made by the
commercial banks.
Table 1:
As on CRR As on SLR
8-12-2006 5.5% 25-10-1997 25%
10-11-2007 7.5% 8-11-2008 24%
30-08-2008 9% 7-11-2009 25%
17-01-2009 5% 19-12-2010 24%
24-04-2010 6% 11-08-2012 23%
10-03-2012 5.5% 31-10-2013 22.5%
22-09-2012 4.75%

31-10-2012 4.25%
Advances made by commercial banks(Rs in crore)
Table 2:

Bank 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

State 4,16,768 5,42,503 6,31,914 7,56,719 8,67,579 10,45,61

Bank of 6
India
Punjab 1,19,502 1,54,703 1,86,600 2,42,107 2,93,775 3,08,725
National
Bank
ICICI 2,25,616 2,18,219 1,81,206 2,16,366 2,53,728 2,90,249
Bank
Canara 1,07,238 1,38,219 1,69,335 2,11,268 2,32,490 2,42,177
Bank
Bank of 1,06,701 1,43,251 1,75,251 2,28,676 2,87,377 3,28,186
Baroda
 BIBLIOGRAPHY
•www.wikipedia.com
•www.sbi.in
•www.pnb.in
•sunilgurung79.blogspot.com
•www.managementparadise.com
•www.thehindubusinessline.com