Ashu Final Project Sbi.docx

A PROJECT REPORT ON A STUDY ON IMPACT OF GST ON COMMON MAN WITH RESPECT TO THANE REGION A Project Submitted to University of Mumbai for partial completion of the degree of Bachelor in Commerce (Accounting and Finance) Under the Faculty of Commerce By

SHIVANI MOHAN CHAVAN Under the Guidance of PROF. DR. SHRADDHA M. BHOME

ROLL NO:- 15 SATISH PRADHAN DNYANSADHANA COLLEGE, THANE OFF EASTERN EXPRESS HIGHWAY, DNYANASADHANA MARG, THANE-400604 ACADEMIC YEAR: 2018 -19

1

CERTIFICATE This

is

to

certify

that

ASHWINI AMBRE

of

B.COM

(ACCOUNTING AND FINANCE ) Semester III, Batch (20182019)

has

successfully completed

the

project

on

“A

COMPARATIVE STUDY OF PERFORMANCE OF SBI AND ICICI MUTUAL FUND” under the guidance of

Mrs. SHRADDHA

BHOME

Date:Place:-THANE

Director

2

Project Guide / Internal Examiner External Examine

DECLARATION

I, ASHWINI AMBRE the student of MMS Semester III, Batch (2018-19) hereby declare that I have completed the project on successfully.

A

COMPARATIVE

STUDY

OF

PERFORMANCE OF SBI AND ICICI MUTUAL FUND” The information submitted is true and original to the best of my knowledge.

Date:-

Place:-THANE

Yours faithfully,

ASHWINI AMBRE 3

ACKNOWLEDGEMENT I take this apportunity to express my gratitude and extend my thanks to all those who helped and guided me to make this endeavor successful. I express my sincere thanks to Director Sir for giving us the facilities and resources in bringing project successfully. I would also like to thank our project guide (Mrs. SHRADDHA BHOME) who helped me in the completion of project. I cannot end this page without thanking my family and friends for their support and encouragement while undertaking this project.

SIGNATURE AND NAME OF THE STUDEN

4

INDEX SR.NO.

CONTENS

1

Title Page

2

Certificate

3

Declaration

4

Acknowledgement

5

Index

Chapter 1

Introduction

1.1

Introduction Of Mutual Fund

1.2

History

1.3

Why Selected Mutual Fund

1.4

Features Of Mutual Fund

1.5

Advantages & Disadvantages Of Mutual

PG.NO

Fund 1.6

Chapter 2

Chapter 3

Types Of Mutual Fund

Reviews of litrauture

Research Methodology

3.1 3.2 3.3

5

LIST OF TABLES Sr.no

Contents

Page no

1

1.1 Credit Deposit Ratio

2

1.2 Interest Expense To Total Expenses

3

1.3 Interest Income To Total Income

4

1.4 Other Income To Total Income

5

1.5 Net Profit Margin

6

1.6 Net Worth Ratio

7

1.7 Growth Of Profit

8

1.8 Growth In Total Income

9

1.9 Total Expenditure

10

1.10 Total Advance

11

1.11

Total Deposit

6

CHAPTER 1 1.1 INTRODUCTION OF MUTUAL FUND

A mutual fund is nothing more than a collection of stocks and/or bonds. You can think of a mutual fund as a company that brings together a group of peopleand invests their money in stocks, bonds, and other securities. Each investorowns shares, which represent a portion of the holdings of the fund. You can make money from a mutual fund in three ways: 1) Income is earned from dividends on stocks and interest on bonds. A fund pays out nearly all of the income it receives over the year to fund owners in the form of a distribution. 2) If the fund sells securities that have increased in price, the fund has a capital gain. Most funds also pass on these gains to investors in a distribution. 3) If fund holdings increase in price but are not sold by the fund manager, the fund's shares increase in price. You can then sell your mutual fund shares for a profit. Funds will also usually give you a choice either to receive a check for distributions or to reinvest the earnings and get more shares. The first introduction of a mutual fund in India occurred in 1963, when the Government of India launched Unit Trust of India (UTI). Until 1987, UTI enjoyed a monopoly in the Indian mutual fund market. Then a host of other government-controlled Indian financial companies came up with their own funds. These included State Bank of India, Canara Bank, and Punjab National Bank. This market was made open to private players in 1993, as a result of the historic constitutional amendments brought forward by the then Congress-led government under 7

the existing regime of Liberalization, Privatization and Globalization (LPG). The first private sector fund to operate in India was Kothari Pioneer, which later merged with Franklin Templeton.

CONCEPT OF MUTUAL FUND: A mutual fund is a common pool of money into which investors place their contributions that are to be invested in accordance with a stated objective. The ownership of the fund is thus joint or “mutual”; the fund belongs to all investors. A single investor’s ownership of the fund is in the same proportion as the amount of the contribution made by him or her bears to the total amount of the fund. Mutual Funds are trusts, which accept savings from investors and invest the same in diversified financial instruments in terms of objectives set out in the trusts deed with the view to reduce the risk and maximize the income and capital appreciation for distribution for theembers. A Mutual Fund is a corporation and the fund manager’s interest is to professionally manage the funds provided by the investors and provide a return on them after deducting reasonable management fees.

DEFINITION: “A mutual fund is an investment that pools your money with the money of an unlimited number of other investors. In return, you and the other investors each own shares of the fund. The fund's assets are invested according to an investment objective into the fund's portfolio of investments. Aggressive growth funds seek long-term capital growth by investing primarily in stocks of fast-growing smaller companies or market segments. Aggressive growth funds are also called capital appreciation funds”.

1.2 Why selected mutual fund ? The risk return trade-off indicates that if investor is willing to take higher risk then correspondingly he can expect higher returns and vise versa if he pertains to lower risk 8

instruments, which would be satisfied by lower returns. For example, if an investors opt for bank FD, which provide moderate return with minimal risk.But as he moves ahead to invest in capital protected funds and the profit-bonds that give out more return which is slightly higher as compared to the bank deposits but the risk involved also increases in the same proportion. Thus investors choose mutual funds as their primary means of investing, as Mutual funds provide professional management, diversification, convenience and liquidity. That doesn’t mean mutual fund investments risk free. This is because the money that is pooled in are not invested only in debts funds which are less riskier but are also invested in the stock markets which involves a higher risk but can expect higher returns. Hedge fund involves a very high risk since it is mostly traded in the derivatives market which is considered very volatil

1.3 ADVANTAGES OF MUTUAL FUNDS: If mutual funds are emerging as the favorite investment vehicle, it is because of the many advantages they have over other forms and the avenues of investing, particularly for the investor who has limited resources available in terms of capital and the ability to carry out detailed research and market monitoring. The following are the major advantages offered by mutual funds to all investors: 1. Portfolio Diversification: Each investor in the fund is a part owner of all the fund’s assets, thus enabling him to hold a diversified investment portfolio even with a small amount of investment that would otherwise require big capital. 2. Professional Management: Even if an investor has a big amount of capital available to him, he benefits from the professional management skills brought in by the fund in the management of the investor’s portfolio. The investment management skills, along with the needed research into available investment options, ensure a much better return than what an investor can manage on his own. Few investors have the skill and resources of their own to succeed in today’s fast moving, global and sophisticated markets. 9

3. Reduction/Diversification Of Risk: When an investor invests directly, all the risk of potential loss is his own, whether he places a deposit with a company or a bank, or he buys a share or debenture on his own or in any other from. While investing in the pool of funds with investors, the potential losses are also shared with other investors. The risk reduction is one of the most important benefits of a collective investment vehicle like the mutual fund. 13 4. Reduction Of Transaction Costs: What is true of risk as also true of the transaction costs. The investor bears all the costs of investing such as brokerage or custody of securities. When going through a fund, he has the benefit of economies of scale; the funds pay lesser costs because of larger volumes, a benefit passed on to its investors. 5. Liquidity: Often, investors hold shares or bonds they cannot directly, easily and quickly sell. When they invest in the units of a fund, they can generally cash their investments any time, by selling their units to the fund if open-ended, or selling them in the market if the fund is close-end. Liquidity of investment is clearly a big benefit. 6. Convenience And Flexibility: Mutual fund management companies offer many investor services that a direct market investor cannot get. Investors can easily transfer their holding from one scheme to the other; get updated market information and so on. 7. Tax Benefits: Any income distributed after March 31, 2002 will be subject to tax in the assessment of all Unit holders. However, as a measure of concession to Unit holders of open-ended equityoriented

funds, income distributions for the year ending March 31, 2003, will be taxed at a concessional rate of 10.5%. In case of Individuals and Hindu Undivided Families a deduction upto Rs. 9,000 from the Total Income will be admissible in respect of income from investments specified in Section 80L, 10

including income from Units of the Mutual Fund. Units of the schemes are not subject to Wealth-Tax and Gift-Tax. 8. Choice of Schemes: Mutual Funds offer a family of schemes to suit your varying needs over a lifetime. 14 9. Well Regulated: All Mutual Funds are registered with SEBI and they function within the provisions of

9. Well Regulated: All Mutual Funds are registered with SEBI and they function within the provisions of strict regulations designed to protect the interests of investors. The operations of Mutual Funds are regularly monitored by SEBI. 10. Transparency: You get regular information on the value of your investment in addition to disclosure on the specific investments made by your scheme, the proportion invested in each class of assets and the fund manager's investment strategy and outlook.

1.4 DISADVANTAGES OF INVESTING THROUGH MUTUAL FUNDS: 1. No Control Over Costs: An investor in a mutual fund has no control of the overall costs of investing. The investor pays investment management fees as long as he remains with the fund, albeit in return for the professional management and research. Fees are payable even if the value of his investments is declining. A mutual fund investor also pays fund distribution costs, which he would not incur in direct investing. However, this shortcoming only means that there is a cost to obtain the mutual fund services. 2. No Tailor-Made Portfolio: Investors who invest on their own can build their own portfolios of shares and bonds and other securities. Investing through fund means he delegates this decision to the fund managers.

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The very-high-net-worth individuals or large corporate investors may find this to be a constraint in achieving their objectives. However, most mutual fund managers help investors overcome this constraint by offering families of funds- a large number of different schemes- within their own management company. An investor can choose from different investment plans and constructs a portfolio to his choice. 15 3. Managing A Portfolio Of Funds: Availability of a large number of funds can actually mean too much choice for the investor. He may again need advice on how to select a fund to achieve his objectives, quite similar to the situation when he has individual shares or bonds to select. 4. The Wisdom Of Professional Management: That's right, this is not an advantage. The average mutual fund manager is no better at picking stocks than the average nonprofessional, but charges fees. 5. No Control: Unlike picking your own individual stocks, a mutual fund puts you in the passenger seat of somebody else's car 6. Dilution: Mutual funds generally have such small holdings of so many different stocks that insanely great performance by a fund's top holdings still doesn't make much of a difference in a mutual fund's total performance. 7. Buried Costs: Many mutual funds specialize in burying their costs and in hiring salesmen who do not make those costs clear to their clients.

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CHAPTER 3 REVIEW OF LITERATURE

( A) RESEARCH PAPER 1 ) Lensen's Alpha (2012) Jensen's Alpha is also a reward to risk measure. However, it uses a different concept of risk. This measure's framework is taken from the capital asset pricing model (CAPM). In this model, among the assumptions, it is taken that every investor holds a diversified portfolio. This allows investors to diversify away some of their investment risk, leaving them exposed only to 'systematic' or non-diversifiable market-related risk. Jensen's Alpha uses onlsystematic risk for scaling a portfolio's return. Alpha measures the deviation of a portfolio's return from its equilibrium level, defined as the deviation of return from the risk, adjusted expectation for that portfolio's return. For ranking purposes, the higher the alpha, the better is the performance. The fund beats the market, on a systematic risk adjusted basis, if Jensen's Alpha is greater than zero, and vice versa.

2) The Sharpe Index (2009) The Sharpe ratio is a risk-adjusted measure developed by the Nobel Laureate William Sharpe. Markowitz (2009), the founder of Modern Portfolio Theory (MPT), suggested that investors choose optimum portfolios on the basis of their expected return and risk characteristics. As noted above, the overall risk of a portfolio is measured by the standard deviation of its returns. Sharpe used this concept to build a "reward to variability" ratio which has become known as the Sharpe Index. The metric is calculated using standard deviation and excess return (i.e. return above a risk free investment) to determine reward per unit of risk. The higher the Sharpe ratio, the better is the fund's historical risk-adjusted performance. In 13

theory, any portfolio with a Sharpe index greater than one is performing better than the market benchmark.

3) Lensen's Alpha (2012) Jensen's Alpha is also a reward to risk measure. However, it uses a different concept of risk. This measure's framework is taken from the capital asset pricing model (CAPM). In this model, among the assumptions, it is taken that every investor holds a diversified portfolio. This allows investors to diversify away some of their investment risk, leaving them exposed only to 'systematic' or non-diversifiable market-related risk. Jensen's Alpha uses onlsystematic risk for scaling a portfolio's return. Alpha measures the deviation of a portfolio's return from its equilibrium level, defined as the deviation of return from the risk, adjusted expectation for that portfolio's return. For ranking purposes, the higher the alpha, the better is the performance. The fund beats the market, on a systematic risk adjusted basis, if Jensen's Alpha is greater than zero, and vice versa.

3) Treynor Index (2012) A third performance measure is the Treynor index. This is calculated in the same manner as the Sharpe index, using excess returns on the fund, but the excess return on the fund is scaled by the beta of the fund, as opposed to the funds' standard deviation of returns.

4) Gupta (1981) It had laid the foundation of performance evaluation with his study on performance of Indian equities. This pioneering study in the Indian context has been a major contribution in the field and is regarded as the benchmark on the rate of return on equities for the specified time. He laid the basis of rate of return concept in performance evaluation.

5 )Immediately thereafter, Jain (1982) evaluated performance of Unit Trust of India (UTI) during 1964-65 to 1979-80, including the profitability aspects of UnitScheme 1964, Unit Scheme 1971 and Unit Scheme 1976. He concluded that its real rate of return have been low indicating overall poor performance of UTI schemes. There has been no significant increase in the profitability over the years. His work is

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considered as the first notable work on performance evaluation of mutual funds in India. In 1986, UTI floated the first diversified equity fund in India, namely, Master share under the banner of its subsidiary, UTI (Mutual Fund) subsidiary, 1986. Thereafter considerable interest has been shown by the analysts, academicians and researchers to examine the financial performance of equity mutual funds in India from the perspective of investors and the fund managers.

6 )Barua and Verma (1991) evaluated the performance of 'MasterShare', India's first 7-year close-end equity mutual fund of UTI. They employed the Capital Asset Pricing Model (CAPM) and computed the risk adjusted performance by employing Sharpe, Treynor, and Jensen ratios. The bench mark selected was the 'Economic Times Ordinary Share Price Index. The study concludes that, 'Master Share' has performed better in systematic risk, not in terms of total risk. 7 ) Saba Asish and Rama Murthy Y Sree (1993-94) identified that return, liquidity, safety and capital appreciation played a predominant role in the preference of the schemes by investors.

8 ) Radha (1995) offers certain guidelines to the investors in selecting found that investors have certain primary objectives and gave importance to them while making investment plans. Capital appreciation was considered as the most important objective. It was also observed that investors 'investment objectives differed depending on their occupation and income.

9) Shankar (1996) points out that the Indian investors view Mutual Funds as commodity products and AMCs, to capture the market, should follow the consumer product distribution model. 10 ) Srinivasan (1997) ,Delicited opinion on investors' choices over the investment avenues and found that the majority of investors favoured fixed deposits in banks, followed by post office schemes, insurance schemes, bonds issued by government organizations and equity shares. Mutual fund schemes were the least preferred. The survey also elicited information on the important factors that influence an investor to prefer one investment to another. Guaranteed return coupled with capital appreciation was the main expectation of most investors. 15

11 ) Somasundaram (1998) found that investors consider safety of investment followed by regular return and capital appreciation as important objectives while making an investment decision. Private sector employees gave more importance to returns, while government employees looked for tax benefits while choosing an investment option.

12) Sundar (1998) conducted a survey to get an insight into the mutual fund operations of private institutions with special reference to Kothari Pioneer. The survey revealed that the awareness about MF concept was poor during that time in small cities like Vishakapatnam. Agents playa vital role in spreading the Mutual Fund culture; opened schemes were much preferred. Age and income are the two important determinants in the selection of the fund/scheme; brand image and return are the prime considerations while investing in any Mutual Fund.

13 ) Khorana and Servaes (1999) in their study reported that the decision to introduce a new type of fund is affected by a number of variables, including investor demand for the fund's attributes.

14) Chakarabarti and Rungta (2000) stressed the importance of brand effect in determining the competitive position of the AMCs. Their study reveals that the brand image factor, though not easily captured by computable performance measures, influences the investor's perception and hence his fund/scheme selection.

15) Shanmugham (2000) conducted a survey of 201 individual investors to study the information sourcing by investors, their perceptions of various investment strategy dimensions and the factors motivating share investment decisions, and reports that among the various factors, psychological and sociological factors dominate the economic factors in share investment decisions.

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CHAPTER 3 RESEARCH METHODOLOGY

2.1 INTRODUCTION TO THE TOPIC: Research Design Descriptive Research Design is used for the study and it is essentially a fact-fi nding approach. It aims to explain the characteristics of an individual or group characteristics and to determine the frequency with the same things occurs.

Sample Design Deliberate sampling technique is used for the study. This sampling method involves purposive or deliberate selection of particular units of the world for constituting a sample that represents the population

Data Collection The data were collected through annual report from sources that are secondary in nature such as internet, magazines, websites, books, and journals 2.2 OBJECTIVES TO THE STUDY  To study the financial performance of SBI and ICICI Bank.  To study compare the financial performance of SBI and ICICI Bank.

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 To compare the financial performance of State Bank of India and ICICI Bank.  To know and compare the profitability position of State Bank of India and ICICI Bank.

 To know and compare the managerial effIciency of State Bank of India and ICICI Bank.  To offer findings and suggestions to enhance the fInancial performance of State Bank of India and ICICI Bank.

2.3 HYPOTHESIS OF STUDY

1. H01: There is no signifi cant difference between performance of SBI and ICICI Bank in terms of Deposits.

2. H02: There is no signifi cant difference between performance of SBI and ICICI Bank in terms of Advances. 2.4. SIGNIFICANCE OF STUDY

 This study will pave the way to the academic as well as general public about the overall efficiency at which the largest commercial banks are serving.  This study will also help to understand the financial performance of both public sector and private sector.  This study will throw light on the different aspects where the State Bank of India and ICICI Bank excel and how the banks will provide an opportunity in balancing its activities to achieve the best performance. 19

2.5 LIMITATION TO STUDY Due to constraints of time and resources, the study is likely to suffer from certain limitations. Some of these are mentioned here under so that the findings of the study may be understood in a proper perspective. The limitations of the study are:  The study is based on the secondary data and the limitation of using secondary data may affect the results.  The secondary data was taken from the annual reports of the SBI and ICICI Bank. It may be possible that the data shown in the annual reports may be window dressed which does not show the actual position of the banks. Financial analysis is mainly done to compare the growth, profitability and financial soundness of the respective banks by diagnosing the information contained in the financial statements. Financial analysis is done to identify the financial strengths and weaknesses of the two banks by properly establishing relationship between the items of Balance Sheet and Profit & Loss Account. It helps in better understanding of banks financial position, growth and performance by analyzing the financial statements with various tools and evaluating the relationship between various elements of financial statements.

2.6 RESEARCH METHODOLOGY

Data Collection

Secondary data: The data were collected through annual report from sources that are secondary in nature such as internet, magazines, websites, books, and journal

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3.2 REVIEW OF BOOKS  Sadhak H., Mutual Fund-Investment and Marketing Practices in India, New Delhi: Sage Publication, 2010, p.107  Femando, Deepthi, Klapper, Leora F., Sulla, Victor and Vittas, Dimitri, "The Global Growth of Mutual Funds" ,World Bank Policy Research Working Paper No. 3055, May 2010, pp.27-30 http://ssrn.com/abstract Sadhak H., op.cit, pp.  68-117 .Ajith Kumar Singh, "Mutual Fund Regulations -The Journey So Far", August, 2011, pp. 38-41. Fernando, Deepthi, Klapper, et al., op.cit, pp. 9-10 Khorana, Ajay, Servaes, Henri and Tufano, Peter, "Explaining the Size of the Mutual Fund Industry Around the World", Darden School of Business No.03-04, January 2004, http://ssrn.com/abstract=573503  Huhmann, B. A., "Does Mutual Fund Advertising Provide Necessary Investment Information?" International Journal of Bank Marketing, 23 (4), pp.296-316 .  Agrawal, Deepak, "Measuring Performance of Indian Mutual Funds," Prabhandan Taniknigui, 1(1), September, 2012, p.ll, ssrn.com/abstract=1311761.  Nazir, Mian Sajid ., Nawaz, Muhammad Musarat, "The Determinants of Mutual Fund Growth in Pakistan," International Research Journal of Finance and Economics, ISSN 1450-2887 Issue 54 , 2010, pp. 75-83 , http://eurojournals.com/finance.

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 Friend et. al, "A Study of Mutual Funds" U.S. Securities and Exchange Commission,USA, (2012). Treynor Jack L, "How to Rate Management of Investment Funds", Harvard

 Business Review, Vol. 43(1), 2011, pp. 63-75. Sharpe William, E., "Mutual Fund Performance," 39, 1966,pp.119-138.

Treynor and Mazuy., "Can Mutual Funds

Outguess The Markets", Harvard Business Review, Vol. 44,2008, pp.131-136.  Jensen Michael C., "The Performance of Mutual Funds In the Period 1945-1964", Journal of Finance, 23, 2011, pp. 389-416. Smith, Keith, V., Tito, Dennis, A., "Riskreturn Measures of Post-Portfolio Performance", Journal of Financial and Quantitative Analysis. 4, 2012, pp.

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CHAPTER 3 DATA ANALYSIS AND INTERPRETATION

1. CREDIT DEPOSIT RATIO:Credit-Deposit Ratio is the proportion of loan-assets created by a bank from the deposits received. Credits are the loans and advances granted by the bank. In other words it is the amount lent by the bank to a person or an organization which is recovered later on. Interest is charged from the borrower. Deposit is the amount accepted by bank from the savers and interest is paid to them.

TABLE 1.1 - CREDIT DEPOSIT RATIO (IN PERCENT) YEAR

SBI

ICICI

2007-08

77.57

84.99

2008-09

74.97

91.44

2009-10

73.56

90.04

2009-10

76.32

87.81

24

2011-12

78.50

92.30

MEAN

76.184

89.302

CGR

1.19

8.51

Source: Annual Reports of SBI and ICICI from 2007-08 to 2011-12 FIG. NO. 1.1:- CREDIT DEPOSIT RATIO

Table 1.1 depicts that over the course of five financial periods of study the mean of Credit Deposit Ratio in ICICI was higher (89.302%) than in SBI (76.184%). But the Compound Growth Rate in SBI lowers 1.19% than in ICICI (8.51%). In case of SBI the credit deposit ratio was highest in 2011-12 and lowest in 2009-10. But in case of ICICI credit deposit ratio was highest in 2011-12 and lowest in 2007-08. This shows that ICICI Bank has created more loan assets from 25

its deposits as compared to SBI.

2. INTEREST EXPENSES TO TOTAL EXPENSES:Interest Expenses to Total Expenses reveals the expenses incurred on interest in proportion to total expenses. Banks accepts deposits from savers and pay interest on these accounts. This payment of interest is known as interest expenses. Total expenses include the amount spent in the form of staff expenses, interest expenses, overhead expenses and other operating expenses etc.

TABLE 1.2:- INTEREST EXPENSES TO TOTAL EXPENSES (IN PERCENT

YEAR

SBI

ICICI

2007-08

61.85

66.135

2008-09

63.27

64.10

2009-10

61.62

60.71

2010-2011

54.93

60.70

2011-2012

57.90

65.19

MEAN

59.9

63.36

CGR

-6.38

-1.46

26

Source: Annual Reports of SBI and ICICI from 2007-08 to 2011-12

FIG.NO.1.2:- INTEREST EXPENSES TO TOTAL EXPENSES

The table 1.2 shows that the ratio of interest expenses to total expenses in SBI was highly volatile it increased from 61.85 per cent to 63.27 per cent during the period 2007-08 to 200809. Afterwards it was decreased till 2010-11 and then again increased to 57.90 per cent. The ratio of interest expenses to total expenses in ICICI was also decreased from 66.135 per cent to 64.10 per cent during the period 2007-08 to 2008-09. It remain stable from 2009-10 to 2010-2011 but Further it was increased to 65.19 per cent in 2011-12 . It has been found that the share of interest expenses in total expenses was higher in case of SBI as compared to ICICI, which shows that people preferred to invest their savings in SBI than ICICI.

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3. INTEREST INCOME TO TOTAL INCOME:Interest Income to Total Income shows the proportionate contribution of interest income in total income. Banks lend money in the form of loans and advances to the borrowers and Receive interest on it. This receipt of interest is called interest income. Total income includes interest income, non-interest income and operating income.

TABLE 1.3:-INTEREST INCOME TO TOTAL INCOME IN SBI AND ICICI (IN PER CENT)

YEAR

SBI

ICICI

2007-08

83.89

77.61

2008-09

79.29

8.40

2009-10

77.90

82.58

2010-11

78.51

84.49

2011-12

80.92

88.12

MEAN

78.84

84.49

CGR

4.26

5.04

28

The table 1.3 represents that the ratio of interest income to total income in SBI and ICICI both is quite stable and volatile over the years. The growth rate of SBI is 5.04 while that of ICICI is 4.26. Thus, the proportion of interest income to total income in SBI was higher than that of ICICI, which shows that people preferred SBI to take loans and advances.

4. OTHER INCOME TO TOTAL INCOME:29

Other income to total income reveals the proportionate share of other income in total income. Other income includes non-interest income and operating income. Total income includes interest income, non-interest income and operating income.

FIG.NO.1.4 OTHER INCOME TO TOTAL INCOME IN SBI AND ICICI (IN PERCENT) YEAR

SBI

ICICI

2007-08

16.10

22.38

2008-09

16

20.70

2009-10

17

22.09

2010-11

16

21.48

2011-12

11

19.07

MEAN

15.22

21.44

CGR

-31.6

-14.7

30

Source: Annual Reports of SBI and ICICI Bank from 2007-08 to 2011-12

The table 1.4 shows that the ratio of other income to total income was decreased from 16.10 per cent in 2007-08 to 11.00 per cent in 2011-12 in case of SBI. However, the share of other income in total income of ICICI was also decreased from 22.38 per cent in 2007-08 to 19.07 per cent 2011-12. The table shows that the ratio of other income to total income was relatively higher in ICICI (21.44%) as compared to SBI (15.22%) during the period of study.

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5. NET PROFIT MARGIN:Net Profit Margin reveals the financial results of the business activity and efficiency of management in operations. The table 5.8 shows the net profit margin in SBI and ICICI during the Period 2005-06 to 2009-10

TABLE-1.5:-NET PROFIT MARGIN IN SBI AND ICICI (IN PERCENT)

YEAR

SBI

ICICI

2007-08

12.64

11.81

2008-09

13.11

11.45

2009-10

10.54

13.64

2010-11

8.55

17.52

2011-12

9.73

17.45

MEAN

10.91

14.37

CGR

23.02

47.7

32

)

Source: Annual Reports of SBI and ICICI from 2007-08 to 2011-12

FIG. NO.1.5 NET PROFIT MARGIN IN SBI AND ICICI

The table 1.5 reveals that the ratio of net profits to total income of ICICI was varied from 11.81 per cent to 17.45 percent whereas in case of SBI it is not stable. It increased to 13.11 percent from 12.64 percent in 2008-09 then further decreased to 10.54 percent in 2009-10 and 8.55 percent in 2010-11 and finally increased to 9.73 percent in 2011-12 during the period of 5 years of study. However, the net profit margin was higher in ICICI (14.37%) as compared to SBI (10.91%) during the period of study. But it was continuously decreased from 2007-08 to 201112 in ICICI. Thus, the ICICI has shown comparatively lower operational efficiency than SBI.

6. NET WORTH RATIO:33

Net worth Ratio is used for measuring the overall efficiency of a firm. This ratio establishes the relationship between net profit and the proprietor‟s funds

TABLE 1.6 NET WORTH RATIO (IN PERCENT)

YEAR

SBI

ICICI

2007-08

13.70

8.94

2008-09

15.74

7.58

2009-10

13.91

7.79

2010-11

12.84

9.35

2011-12

14.36

10.70

MEAN

14.11

8.87

CGR

4.87

19.68

34

Source: Annual Reports of SBI and ICICI from 2007-08 to 2011-12

FIG.NO.1.6 NET WORTH RATIO

It is clear from the table 1.6 that the net worth ratio of SBI was increased from 13.70 per cent to 14.36 per cent during 2007-08 to 2011-12, and decreased in 2009-10 and 2010-2011. Whereas the ratio was increased from 8.94 per cent to 10.70 per cent in ICICI. The table showed that the net worth ratio was higher in SBI (14.11%) as compared to ICICI (8.87%) during the period of study, which revealed that SBI has utilized its resources more efficiently as compared to ICICI.

35

7. GROWTH OF PROFIT:Net profit Ratio is used for measuring the profitability of the firm. It is calculated by dividing net profit by net sales multiplied by 100. It establishes the relationship between the net profit and sales.

TABLE 1.6 GROWTH OF PROFIT IN SBI AND ICICI (IN CRORES)

YEAR

PROFIT

%CHANGE

PROFIT

%CHANGE

2007-08

6729

-

4157.73

-

2008-09

9121

35.5%

3758.13

-9.61

2009-10

9161

49%

4024.98

7.10

2010-11

8265

-9.8%

5151.38

27.9

2011-12

11707

42%

6465.26

25.50

MEAN

8996.6

-

4711.49

-

CGR

5.26

-

4.36

-

Source: Annual Reports of SBI and ICICI from 2007-08 to2011-12

FIG.NO.1.6 GROWTH OF PROFIT IN SBI AND ICICI

36

The table 1.8 highlights that the mean value of net profit was higher in SBI (Rs. 8996.6 crores) as compared to that in ICICI (Rs. 4711.9 crores) during the period of study. Further the growth rate of Net Profits was also higher in SBI (73.97%) than that in ICICI (55.49%) during the study period. The table also shows that the annual growth rate of profit in SBI was highest in the year 2009-10 and was negative (-9.8%) in the year 2010-11. In ICICI, the annual growth rate of profit was highest in the year 2010-11(27.9%) and was negative in the year 2008-09 (-9.61%).

8. TOTAL INCOME:37

The total income indicates the rupee value of the income earned during a period. The higher value of total income represents the efficiency and good performance.

TABLE 1.8 GROWTH IN TOTAL INCOME OF SBI AND ICICI (IN CRORES) YEAR

INCOM E

%CHANGE

INCOME

% CHANGE

2007-08

58,348.74

-

39,667.19

-

2008-09

76,479.78

31%

39,210.31

-1.15%

2009-10

85,962.07

12.3%

33,999.36

-15.8%

2010-11

96,329.45

12.06%

33,082.96

0.25%

2011-12

120,872

25.4%

41,450.75

25.2%

MEAN

87,598.58

37282.114

CGR

107.15

4.49

Source: Annual Reports of SBI and ICICI from 2007-08 to 2011-12

FIG.NO.1.8 GROWTH IN TOTAL INCOME OF SBI AND ICICI

38

The table 1.9 highlights that the mean value of total income was higher in SBI (Rs. 87,598.58 crores) as compared to that in ICICI (Rs. 37282.114 crores) during the period of study. However the rate of growth regarding total income was higher in SBI (107.15 %) than in ICICI (4.49 %) during the period of study.

9. TOTAL EXPENDITURE:

The total expenditure reveals the proportionate share of total expenditure spent on the 39

development of staff, interest expended and other overheads. The higher value of total

TABLE 1.9:- TOTAL EXPENDITURE OF SBI AND ICICI (IN CRORES) YEAR

EXPENDITURE

%

EXPENDITURE

CHANGE

% CHANGE

2007-08

51,619.622

-

35,509.47

-

2008-09

67,358.55

30.4%

35,452.17

0.16%

2009-10

76,796.02

14.01%

28,974.37

-18.2%

2010-11

88,959.12

15.83%

27,931.58

-3.59%

2011-12

109,186.99

22.73%

34,985.50

25.25%

MEAN

78,784.06

-

32570.61

-

CGR

111.52

-

-1.47

-

Source: Annual Reports of SBI and ICICI from 2007-08 to 2011-12

FIG.NO.1.9 TOTAL EXPENDITURE OF SBI AND ICICI

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The table 1.10 discloses that the mean value of total expenditure was higher in SBI (Rs. 78,784.06 crores) as compared to that in ICICI (Rs. 32570.61 crore) during the period of study. But the rate of growth regarding expenditure in ICICI was (-1.47 %) than that in SBI (111.52%) during the same period. It is clear that ICICI is successful in decreasing their total expenditure as compared to SBI. The table also highlights that the annual growth rate of expenditure in SBI was highest (30.04) in the year 2008-09 and was lowest (14.01) in the year 2009-10. In ICICI, the annual growth rate of expenditure was negative in the year 2009-10 and 2010-11 i.e. (-18.20) and (-3.59) respectively. Hence it is clear that ICICI is more efficient as compared to SBI in terms of managing expenditure.

10. ADVANCES:41

Advances are the credit facility granted by the bank. In other words it is the amount borrowed by a person from the Bank. It is also known as „Credit‟ granted where the money is disbursed and recovery of which is made later on.

TABLE 1.9- TOTAL ADVANCES OF SBI AND ICICI (IN CRORES)

YEAR

ADVANCES

%

ADVANCES %

CHANGE

CHANGE

2007-08

416,768.20

-

225,616.08

-

2008-09

542,503.20

30.16%

218,310.85

-3.25%

2009-10

631,914.15

16.48%

181,205.60

-16%

2010-11

756,719.45

19.75%

216,365.90

19.40%

2011-12

867,578.89

14.6%

253,727.66

17.26%

MEAN

646,578.89

-

224,645

-

CGR

108.16

-

12.45

-

Source: Annual Reports of SBI and ICICI from 2007-08 to 2011-12

FIG.NO.1.10- TOTAL ADVANCES OF SBI AND ICICI

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Table 1.9 presents that the mean of Advances of SBI was higher (646,578.89) as compared to mean of Advances of ICICI (224,645). Rate of growth was also higher in SBI (108.16 %) than in ICICI (12.45%). Table also shows the per cent Change in Advances over the period of 5 years. In case of SBI Advances were continuously increased (with a decreasing trend) over the period of study. However Advances in ICICI were decreased till 2009-10 but these were increased in the subsequent years.

11. DEPOSITS:Deposit is the amount accepted by bank from the savers in the form of current deposits, savings deposits and fixed deposits and interest is paid to them. 43

TABLE 1.11-TOTAL DEPOSITS OF SBI AND ICICI (IN CRORES)

YEAR

DEPOSITS

% CHANGE

DEPOSITS

% CHANGE

2007-08

50 403.9

-

244,431.05

-

2008-09

742,073.13

38.08%

218,347.82

-10.6%

2009-10

804,116.23

8.36%

202,016.60

-7.40%

2010-11

933,932.81

16.14

225,602.11

11.6%

2011-12

1,04,647.36

11.7%

255,499.96

13.2%

MEAN

812,234

-

229,179

-

CGR

94.20

-

4.52

-

Source: Annual Reports of SBI and ICICI from 2007-08 to 2011-12

FIG. NO.1.11:- TOTAL DEPOSITS OF SBI AND ICICI

44

Table 1.11 presents that the mean of Deposits of SBI was higher (812,234) as compared to mean of deposits of ICICI (229,179%). However the rate of growth was higher in SBI (94.20%) than that in ICICI (4.52%) during the period of study. Table also shows the per cent Change in Deposits over the period of 5 years. In case of SBI Deposits were continuously fluctuating over the period of study. However deposits in ICICI were decreased in 2008-09 and 2009-10 but these were increased in the year 2010-11 and 2011-12 with 11.6% and 13.2% respectively.

CHAPTER-5

45

SUGGESTION AND CONCLUSIONS: The study found that the mean of Credit Deposit Ratio in ICICI was higher (89.302 %) than in SBI (76.184%).  This shows that ICICI Bank has created more loan assets from its deposits as compared to SBI. The share of interest expenses in total expenses higher in ICICI (63.36 %) as compare to SBI (59.99 %) and the proportion of interest income to total income was higher in case of SBI(84.49 % ) as compared to ICICI (78.84%), which shows that people prefer ICICI to invest their savings and SBI to take loans & advances.  The ratio of other income to total income was relatively higher in ICICI (21.44 %) as compared to SBI (15.22 %). The Net Profit Margin of ICICI is higher (14.37 %) whereas in SBI it was (10.99 %), which shows that ICICI has shown comparatively better operational efficiency than SBI. The growth rate of net profit is 73.97% in SBI which is higher than ICICI which is 55.49% This shows that SBI performed well as compared to ICICI. The mean value of total income was higher in SBI (87,598.58) as compared to that in ICICI (37,282.114).  Net worth ratio was also higher in SBI (14.11 %) than ICICI (8.87 %), which revealed that SBI has utilized its resources more efficiently as compared to ICICI.  The mean value of total expenditure was higher in SBI (Rs. 78,784.06 crores) as compared to that in ICICI (Rs.32,570.61) and the combined growth rate of expenditure was negative (-1.47%)  in the case of ICICI whereas in SBI it is 111.52%. Deposits in SBI were continuously increased.  However deposits in ICICI were decreased (with a declining trend) till 2009-10 but these were increased in the subsequent years.  In case of SBI Advances were continuously increased (with decreasing trend) with the combined growth rate of (108.16 %), However Advances in ICICI were decreased (with a declining trend) till 2009-10 but these were increased thereafter with combined growth rate of (12.45 %).  It shows that ICICI has suffered with funds or avoid providing advances through 200708 to 2009-10. Hence, on the basis of the above study or analysis banking customer has more trust on the public sector banks as compared to private sector banks.

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BIBLIOGRAPHY

 Maheshwari & Maheshwari, Banking Law and Practices, Himalaya Publishing Pvt Ltd, Allahabad, pp.152.

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 Pandey, I.M. Financial Management, Vikas Publishing. House Pvt. Ltd. 2002, pp. 633.  Study material, Financial Management Unit 17, IGNOU, New Delhi. pp.6  Trend and progress of banking, RBI, pp.22-23  Gaylord A Freeman, “ The Problem of Adequate bank Capital”, quoted by Howard D. Crosse in his book on Management Policies for Commercial Banks, pp. 158.  Development Research Group Study, No. 22, Department of Economic Analysis and Policy, Reserve Bank of India, Mumbai September 20, 2000.  Financial year report of SBI 2007-08 to 2011-12.  SBI bulletin publication 2012.

Financial year report of ICICI Bank 2007-08 to 2011-12.

 ICICI Bank bulletin publication 2012  RBI statistical table relating to banks 2011-12. Information Memorandum  SBI and ICICI Bank annual report 2007-12.

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