A comparative study on Working Capital Management efficiency of associates of State Bank of India Rathin Kumar Bardhan AIBM, Siliguri rathinkumarb@alphia.org

Abstract: The study is an attempt to analyze the efficiency of working capital management of seven associate banks of state bank of India during 1990-91 to 2003-04. Instead of using common working capital ratios, performance index, utilization index and overall efficiency index are calculated to measure efficiency of working capital management. Again, assuming arithmetic mean of seven banks’ indices as target level, one more attempt was taken to test the speed of achieving that target level of efficiency by an individual bank during the study period. The study indicates that overall performance of associate banks were not bad, but performance of individual

banks fluctuated very much during study period. Part-1:Introduction: The working capital is the life-blood and nerve centre of a business firm. The importance of working capital in any industry needs no special emphasis. No business can run effectively without a sufficient quantity of working capital. It is crucial to retain right level of working capital. Working capital management is one of the most important functions of corporate management. A business enterprise with ample working capital is always in a position to avail advantages of any favorable opportunity either to buy raw materials or to implement a special order or to wait for enhanced market status. Working capital can be utilized for the payment of lease, employee's payroll, and pretty much any other operating costs that are involved in the everyday life of business. Even very successful business owners may need working capital funds when the unexpected circumstances arise. The overall success of the company depends upon its working capital position. So, it should be handled properly because it shows the efficiency and financial strength of company. Working capital management is highly important in firms as it is used to generate further returns for the stakeholders. When working capital is managed improperly, allocating more than enough of it will render management non-efficient and reduce the benefits of short term investments. On the other hand, if working capital is too low, the company may miss a lot of profitable investment opportunities or suffer short term liquidity crisis, leading to degradation of company credit, as it cannot respond effectively to temporary capital requirements. Efficient management of working capital means management of various components of working capital in such a way that an adequate amount of working capital is maintained for smooth running of a firm and for fulfillment of objectives of liquidity and profitability. But, it is very difficult for the management too to estimate working capital properly because, amount of working capital varies across firms over the periods depending upon the nature of the business, nature of raw material used, process technology used, nature of finished goods, degree of competition in the market, scale of operation, credit policy etc. Therefore, a significant amount of fund is required to invest permanently in the form of different current assets. Keeping in view the pragmatic importance of working capital management in finance, an attempt is made in this study to look into the working capital management of seven associates of State Bank of India.The specific purposes of the study are:To examine the efficiency of working capital management practices of state bank of India’ associates. To test how fast the banks have been able to improve their respective level of efficiency in working capital management with respect to a targeted level (average among the banks).

The rest of this paper is organizes as follows:In Part –II, some literature on working capital has been reviewed. In Part –III of the paper a small states about the banks has been enclosed. Part –IV covers the database and methodology adopted in the study. Empirical analysis of the data processed is presented in Part – V. Conclusions are included in Part –VI.

Part –II: Literature Review: The corporate finance literature has traditionally focused on the study of long-term financial decisions. However, short-term assets and liabilities are important components of total assets and needs to be carefully analyzed. Management of these short-term assets and liabilities warrants a careful investigation since the working capital management plays an important role for the firm’s profitability and risk as well as its value (Smith 1980). The optimal level of working capital is determined to a large extent by the methods adopted for the management of current assets and liabilities. A research study on working capital management of paper industries in India was conducted by R. Sivarama and Prasad (2001). Their Sample consisted of 21 selected paper mills, including 9 large, 5 medium and 7 small scales for the period from 1983-84 to 1992-93. They reported that the chief executives properly recognized the role of efficient use of working capital in liquidity and profitability, but in practice they could not achieve it. Again they reported a clear reveal of a suboptimum utilization of working capital in paper industry. A study on working capital management of horticulture industry in himachal Pradesh by Joginder Singh Dulta (2001) observed the size of current assets and current liabilities with all variations, registered a slight increase, but due to inefficient use of the various components of working capital of Himachal Pradesh Horticulture Produce Marketing and Processing Corporation Ltd, the current liabilities increased proportionately at a faster rate than current assets and net working capital position was worsened continuously. P. Saravanan (2001) had undertaken a research on working capital management in non-banking finance companies. Data from 1987-88 to 1996-97 for 10 non-banking finance companies had been analyzed. He observed that, medium and large size non-banking companies have efficiently made use of bank credit to finance their working capital requirements. Dr. D. Mukhopadhyay conducted a research study to examine working capital management practices and the problems faced by the firms in working capital management process particularly in heavy engineering industries. A sick engineering firm named "M/S Heavy Engineering Company Limited” had been selected and data from 1993-94 to 2002-03 had been analyzed. He reported that, the company has under its possession huge real estate including land and the firm holds legacy of culture and heritage of more than two hundred years of existence in industrial map of the country and as a consequence, it has built up "Goodwill" to a remarkable extent. Thus the company may make revaluation of real estate including land and other assets and make valuation of goodwill and disposal of idle assets and selling off certain percentage of company goodwill can enable the company infuse fresh blood in the form of working capital to run the show. Jain, Yadav, Surendra (2007), made a study on Working capital management practices of public sector enterprises in India. The study was based on an analysis of 13 year period data from 1991 to 2003 of 137 public sector enterprises and stated that, a business organization has to be conscious that inadequate working capital can disrupt its operations leading illiquidity. At the same time excessive working capital is also not desirable since it adversely affects profitability. Sushma Vishnani and Bhupesh Kr. Shah (2007) had taken an Empirical Study on impact of Working Capital Management Policies on Corporate Performance by examining coefficient of correlation and regression analysis between profitability ratios and some key working capital policy indicator ratios of 23 Indian Consumer Electronics companies during the period 1994–95 to 2004–05. They concluded that, no established relationship between liquidity and profitability exists for the industry as a whole. The various companies of the industry depicted different type

of relationship between liquidity and profitability, although majority of them revealed positive association between liquidity and profitability. But working capital management policies and practices have profound impact on a company’s profit performance. Recently (2008), a study on liquidity management of TISCO Ltd. had been taken by Sudipta Ghosh. Data from 1996 to 2000-01 had been analyzed. He indicated that, although the degree of association between liquidity and profitability of the company was positive, the degree of influence of liquidity on its profitability was low and insignificant. A research study was undertaken by Dr. Santanu Kumar Ghosh and Santi Gopal Maji to examine the efficiency of working capital management practices of 20 large cement companies during 1992-93 to 2001-02. They had analyzed data following an alternative ratio model developed by Prof. Hrishikesh Bhattacharya (1997). Here, I also followed same technique to analyze and interpret data.

Part –III: About the Banks:State Bank of Bikaner and Jaipur: State Bank of Bikaner and Jaipur was established in 1963 after amalgamation of erstwhile State Bank of Jaipur (established in 1943) with State Bank of Bikaner (established in 1944) as a subsidiary of State Bank of India. The Bank took over the business of the Govind Bank Pvt. Ltd. on 25.04.1966. The Bank's main area of operation is Rajasthan, with presence at all important centers in the country. The Bank follows transparent corporate governance policies and is preparing itself for smooth migration to Basel II. On technology front, during 2005-06, the Bank migrated all branches to Core Banking Solution (CBS). The Bank has installed 336 ATMs and all ATMs are the part of over 5500 ATMs of State Bank Group. The Bank has been earning profit continuously since its inception and the Bank's business crossed the level of Rs. 49,245 crores with a net profit of Rs. 305.80 crores at the end of March, 2007.State Bank of Hyderabad:State Bank of Hyderabad of India was established on August 8, 1941. It was then known as Hyderabad State Bank. The bank was the central bank of the erstwhile princely State of Hyderabad during pre-independence days. Hyderabad State Bank was responsible for managing Osmania Sikka-the currency of Hyderabad state in those days. The first branch of Hyderabad State Bank opened at Gunfoundry, Hyderabad on April 5, 1942. Hyderabad State Bank came under operational control of Reserve Bank of India (RBI) in 1953. The bank became RBI's subsidiary. Hyderabad State Bank was also renamed State Bank of Hyderabad in the same year. It became an associate of State Bank of India on October 1, 1959. Current business turnover is Rs. 88600 crores in the Financial Year ending March 31, 2008.State Bank of Mysore:State Bank of Mysore was established in the year 1913 as Bank of Mysore Ltd. under the patronage of the erstwhile Govt. of Mysore, at the instance of the banking committee. Subsequently, in March 1960, the Bank became an Associate of State Bank of India. State Bank of India holds 92.33% of shares. The Bank's shares are listed in Bangalore, Chennai, and Mumbai stock exchanges.State Bank of Patiala: State Bank of Patiala was founded by Late Bhupinder Singh, Maharaja of erstwhile Patiala state, with one branch by the name of 'Chowk Fort to the year 1917.’Patiala State Bank' was state owned and setup for the explicit purpose of fostering growth of agriculture, trade and industry. The constitution, scope and operations of the Bank underwent a sea change with the formation of the Patiala and east Punjab States Union (PEPSU) in 1948.The Bank was then reorganized and brought under the control of Reserve Bank of India.  Another milestone in history of the Bank was its becoming a subsidiary of the State Bank of India on 1st April,1960 when it was named as the State Bank of Patiala and since then it has grown significantly both in size and volume of

business. During these glorious years, the Bank has been playing an important role in banking sphere. The bank has now added a golden chapter to its history by fully computerizing all its branches on 24th January 2003 and became the first fully computerized Public Sector Bank in the country.

Bank of Saurashtra:The origins of State Bank of Saurashtra can be traced to Bhavnagar Darbar Bank, which was established in the year 1902. In 1948, when princely states were integrated to form Saurashtra state, the Bhavnagar Darbar Bank was formed into a statutory corporation, called State Bank Of Saurashtra, and the four Darbar Banks - Rajkot State Bank, Porbandar State Bank, Palitana Darbar Bank and Vadia State Bank - were merged with it with effect from 1st July, 1950 as its branches. In 1960, the State Bank of Saurashtra joined the State Bank family as one of its fully owned subsidiaries. At the close of 1950, the Bank had only 9 branches and deposits of Rs.7 crores. By 31.03.2005, the total deposits amounted to Rs. 12613.04 crores and total advances reached the level of Rs. 6714.07 crores. Presently, the Bank has a network of 423 branches spread over 15 states and the Union Territory of Daman and Diu.State Bank of Travancore: State Bank of Travancore (SBT) was originally established as Travancore Bank Ltd. in 1945 sponsored by the erstwhile Princely State of Travancore. Under a special statute of the Indian Parliament (SBI subsidiary Banks Act 1959) it has been made an Associate of the State Bank of India and a member of the State Bank Group. Now it has network of 712 branches with total business of Rs. 66644 Crores.State Bank of Indore:State Bank of Indore popularly known as Indore Bank in Malwa Region, originally known as Bank of Indore Ltd. was incorporated under a special charter of His Highness Maharaja Tukojirao Holker-III, the then ruler of this region. In terms of State Bank of India (Subsidiary Banks) Act, 1959 the Bank of Indore Ltd. became a subsidiary of State Bank of India w.e.f. 1st January 1960 and was renamed as State Bank of Indore The Bank acquired business of The Bank of Dewas Ltd. in 1962 and The Dewas Senior Bank Ltd. in 1965 and was up-graded to class 'A' category bank in 1971. Ever since, the Bank has been making steady progress and at the end of September 2008, the business turnover has crossed Rs.45000 crore.

Part –IV: database and methodology:The present study is based on seven associate banks of State Bank of India. These banks constitute an important role to make the State Bank of India as the largest Bank in Asia. The relevant secondary data have been collected from online Reserve Bank of India Database for the period of 14 years from the year 1990-91 to 2003-04. For measuring the efficiency of working capital management, I have used some unusual techniques instead of using some common working capital management ratios. For measuring the overall efficiency of working capital management, I have followed following steps:Step 1: Calculations of Performance index of working capital management: I have calculated performance indices of seven banks for 14 years using the formula suggested by Prof. Hrishikas Bhattacharya (1997), in ‘Total management by ratios’.

PIwcm=

Where,

Is= Sales index defined as: ,

Wi= Individual group of current assets

N= Number of current assets group And, i= 1, 2, 3…N

Here, I have taken total income instead of sales. Again, I have considered other assets as current assets because; individual current assets are shown under other assets (schedule-11). Total current assets are divided in 5 components:

Inter office Adjustment (net): The inter-office adjustments balance (if in debt) has been shown under this head. Only net position of interoffice accounts, inland as well as foreign, is shown here. For arriving at the net balance of inter-office adjustment accounts, all connected inter-office accounts have been aggregated and the net balance, if in debit, only has been shown.

Interest accrued: Interest accrued but not due on investments and advances and interest due but not collected on investments are the main components of this item.

Tax paid in advance/tax deducted at source: The amount of tax deducted at source on securities, advance tax paid, etc. to the extent that these items are not set off against relative tax provisions has been included here.

Stationery and stamps: Only exceptional items of expenditure on stationery like bulk purchase of security paper, loose leaf or other ledgers, etc. which are shown as quasi-asset to be written off over a period of time has been shown here.

Others: This includes non-banking assets and items like claims which have not been met, for instance, clearing items, debit items representing addition to assets or reduction in liabilities which have not been adjusted for technical reasons, want of particulars, etc. advances given to staff by a bank as employer and not as a banker, etc.

Step 2: Calculations of the utilization index of working capital: I have calculated working capital utilization index using following formula:

UIwcm=

Where,

A=

It indicates the ability of the firm in utilizing its current assets as a whole for the purpose of generating income.Step 3: Efficiency Index of working capital management (EIwcm) is the product of Performance Index and Utilization Index. EIWCM= PIwcm X UIwcm

Step 4: To estimate group’s targeted indices, I have used equal weighted mean of all the banks indices for my study period. Step 5: Here, I have calculated Beta values (β) and R square (R2) of Performance indices, Utilization indices and Efficiency Indices of individual banks using following ordinary least square (OLS) model to find individual banks’ efficiency to achieve targeted level.

Yi = + Xi +

Where,

Yi= Zt-Zt-1 and Xi= -

Zt = index at time‘t’ for individual bank and = average index

of the group of banks at time‘t’.Beta values of individual banks are the indicators of speediness in improving its efficiency

in achieving the bank group targeted level. β=1 indicates the degree of individual bank’s

efficiency in managing working capital is same as the average efficiency level of bank group as a whole. Β>1 indicates efficiency of particular bank in managing working capital is better than average of bank group.

R square (R2) implies that percentage of variations in Y can be explained by the regression equation. The closure the value of R2=1, greater the explanatory power of the predicted equation.Here, R2 is the indicator of percentage of variation in individual bank’s index explained by variation in percentage of bank group’s index.

Part – V: Empirical analysis: Performance index of WCMPerformance Index represents average performance index of the various components of current assets. If performance index of a firm is more than 1, it indicates the firm managed their working capital efficiently. It means the proportionate rise in sales (income) is more than the proportionate rise in current assets. Average performance indices of seven banks (Table-6) show that the performance indices were more than 1 in 7 periods out of 14. In 1992, average of performance index of seven banks shows very good condition (3.279). On the other hand, the year 1990-91 proved to be the worst year for those seven banks as average shows .613. A year wise comparison reveals that the number of efficient firms varied from 0 to 6. In 1991, no bank could cross performance level (≥1). In the year 1994-95, 1998-99 and 1999-2000, only one bank could cross the level. But in the year 1991-92, six banks out of seven had managed their current assets efficiently and crossed performance level. Among the other years, during 1993-94 and 2002-03, 4 banks had managed working capital well and helped the average of the banks to get second position according to performance index. Year 1996-97, 1997-98 and 2000-01 is in third position according to number of banks crossed performance level. 3 banks had managed working capital in efficient way during those years. During other years, i.e., 1992-93, 1995-96, 2001-02 and 2003-04 banks’ performance as a whole was not so good, as only 2 banks could cross the level of performance. Individual bank wise analysis reveals that, State Bank of Travancore performed working capital management better way as 7 years out of study period of 14 years, the bank’s performance index crossed 1. State Bank of Indore’s performance over study period was not good. Out of 14 years of study, they crossed the performance level 3 times only. In comparison, State Bank of Patiala and state Bank of Saurashtra could do better, as they managed their working capital efficiently for 4 times. According to the number of times the banks crossed performance level, State Bank of Mysore is in second position crossing the level 6 times. Other two banks, i.e. State Bank of Bikaner and Jaipur and State Bank of Hydrabad got third position by managing various components of current assets better for 5 times. But, in the year 1991-92, when most of the firm performed well, State Bank of Bikaner could not perform well to manage currents assets. Again, fluctuation in performance index is another interesting observation I found. Like, State Bank of Indore’s performance index was .515 in 1990-91. Just at the next year (1991-92), it raised to 7.156. Reasons are,1) income in 1991-92 increased by Rs. 7283 lakhs 2) tax paid in advance reduced by 1524 lakhs. 3) Stamps and stationary reduced by 2188 lakhs. Utilization index of WCM: Utilization index is the indicator of the ability of the bank in utilizing its current assets as a whole for the purpose of generating Income. If proportionate increase in income is greater than proportionate increase in current assets, Index would be greater than 1, which is the sign of improvement and vice versa. In the study period, overall group performance of the banks was not so good. Out of 14 years, the group average for 8 years was greater than 1. Table 2 and Table 6 show 2003 is the best year for the group of banks. In this year, 6 banks out of 7 banks’ index is showing greater than 1. Only State Bank of Bikaner could not cross the level. Again, in the year 1990-01 and 1998-99, group’s average was not satisfactory. Only 2 banks could perform well. So, Average indices of group of banks for these years are bellow 1 i.e., .95 and .91.

Bank wise analysis shows that, state bank of Travancore is at the top in utilizing current assets to increase income. Out of 14 years data, 10 years indices of them are showing greater than 1. State bank of Patiala is at last. Only for 5 years they could efficiently handle current assets to increase income. Again, I observed, range in utilization indices of state bank of Hydrabad is higher than others. In 1990-91, its utilization index was 4.73 (highest), but just after two years (1992-93) it came down to .47 only. Comparing all the banks, State bank of Mysore’s fluctuation in utilization index was less. Efficiency index of WCM: Efficiency Index is the product of Performance index and Utilization index. It is the measure of ultimate efficiency in working capital management. 2002-03 is the year when group of banks’ efficiency was best out of my study period of 14 years. In this year, 6 out of 7 banks efficiently managed working capital and indices crossed 1. 1990-91 is the worst year for the group of banks. In this year, no bank could perform well. Highest index was found only .95 (State Bank of Saurashtra) and lowest index was found in this year .24 (State Bank of Bikaner). 1999-2000 was also not the good performed year for the group. Indices of all the banks except State Bank of Patiala were less than 1. Bank wise analysis indicates State Bank of Travancore as Efficient bank. Out of 14 years, they crossed efficiency level (efficiency index) 8 times. Again, though the year 1991-92 was not the very good year for the group, but State Bank of Patiala and State Bank of Indore very efficiently managed working capital. Their efficiency indices for this year were 12. 42 and 11.55 respectively. 1995-96 was the worst year for the state bank of Saurashtra as they could not manage working capital efficiently and scored .23 only which is the lowest efficiency index in all the banks for complete study period. Analysis of Regression: In statistics, regression analysis is a collective name for techniques for analysis of numerical data consisting of values of a dependent variable and of one or more independent variables. The dependent variable in the regression equation is modeled as a function

of the independent variables. I have taken ‘change in average index value’ (Xi= - ) of bank

group as Independent variable and ‘change in index for individual banks’ (Yi= Zt-Zt-1) as dependent variable. Therefore, Regression coefficient Betas are interpreted as the amount of effect (change) in the ‘change in index for individual banks’ (dependent variable) that is associated with a change in one unit of the ‘change in average index value’ (independent variable) and R square or Coefficient of Determination is indicating percentage of total variation of ‘change in index for individual banks’ is explained by the ‘change in average index value’. Based on beta (β) values, a rank list has been prepared (Table10). From that table, it is apparent that State Bank of Patiala is in first position followed by State Bank of Indore. In performance index State Bank of Indore ranked 1(β= 2.26) and State Bank of Patiala ranked 2 (β= 2.12). But, in Utilization index, State Bank of Patiala was in much better position in improving their utilization of working capital compared to group position than State Bank of Indore. So, State Bank of Patiala ranked 1(β=2.25) and State Bank of Indore ranked 2 (β=1.42). It leads State Bank of Patiala to rank first position in efficiency index (β= 2.91) and state Bank of Indore to rank 2 (2.80). Since Efficiency index is the product of performance index and utilization index, negative slop of regression equation of State Bank of Bikaner and Jaipur affected efficiency index also. Beta values of performance indices and Utilization indices of the bank are -0.056 (ranked 7) and .64 (ranked 6) respectively and beta of efficiency indices is -.07 (rank 7). However, analysis of R squared or Coefficients of Determination of regression statistics of performance indices is indicating that, 77% percent of total variation of ‘change in index for State Bank of Indore is explained by the ‘change in average index value’. Similarly, State Bank of Patiala and State Bank of Sourastra’s Coefficients of Determinations are

indicating greater explanatory power of the predicted equations (R squared=74% and 66% respectively). On the other hand, percentage of variations in ‘change in indices for State bank of Bikaner, Hydrabad, Mysore and Travancore are not highly explained by the ‘change in average index value’ (Coefficients of Determinations are varied from .008 to .138). Analysis of R squared or Coefficients of Determination of regression statistics of utilization indices is indicating that, percentage of variations in all the banks are not highly explained by the ‘change in average index value’ (Coefficients of Determinations are varied between .013 to .479). Analysis of R squared or Coefficients of Determination of regression statistics of efficiency indices is indicating there is a clear division of banks according to explanatory power of the predicted equations. State bank of Indore (R²=.889), State Bank of Patiala (R²=.781) and State Bank of Saurashtra (R²=.625) are under the group whose explanatory power is higher and other banks are under the group of very low explanatory power varied from .0004 to .279. Part –VI: Conclusions: In this study I investigated the efficiency of managing working capital of seven associate banks of State Bank of India for the period from 1990-91 to 2003-04. But traditional methods of analyzing working capital ratios are not used here. Three index values, Performance index, Utilization index and efficiency index have been used to find individual bank’s efficiency in working capital management. Regression analysis also has been done to find the comparative speed of achieving targeted level of efficiency by individual banks during the study period. From this study, it is observed that the associates’ average efficiency level was satisfactory. Average of average values of all the years for the group of banks is showing good position (greater than 1). But it does not mean that most of the banks performed well through out the period. Rather, all the banks except state bank of Travancore were not satisfactory. In my study period no bank has shown steady improving state of efficiency in managing working capital. Fluctuation was a common trend for all the banks. In the case of achieving the target level (all the banks’ average) of efficiency by the banks, State Bank of Patiala was the most successful bank followed by State bank of Indore, Saurashtra, Hydrabad, Travancore, Mysore and Bikaner and Jaipur. Observing banks’ beta values, suggestion can be given to all the banks except state bank of Patiala and Indore to take necessary steps in order to improve their efficiency in managing working capital. Again, a further study can be conducted to find the problems of the individual banks in managing working capital efficiently.

Table-1: Performance indices of seven banks

Years Bikaner Hydrabad Mysore patiala Sourastra travancore indore No of firm having >1

1990-91 0.186156569 0.456469757 0.935244499 0.54783931 0.846085907 0.806873052 0.515087838 01991-92 0.38741508 1.426952602 1.26308965 6.932148996 3.683512059 2.102153986 7.155573134 61992-93 0.813323648 0.546291668 1.118901888 0.688748384 0.58329603 5.374324755 0.568040484 21993-94 1.050017344 0.604594053 0.764656782 1.079980213 0.728718947 1.011498371 1.106058938 41994-95 1.057707952 0.84829904 0.760021632 0.621278862 0.954249075 0.575115484 0.692576195 11995-96 0.707042543 0.772477839 1.183518954 0.818362537 0.606264981 4.179255889 0.725051183 21996-97 0.876284883 0.692253773 0.833643094 1.223271376 1.100023027 1.047674603 0.929709071 31997-98 1.092720044 2.171160467 0.978314024 0.937516212 1.373929253 0.774143349 0.879208835 31998-99 0.645109967 0.678892979 0.809787889 0.921365646 0.694333966 8.571666999 0.911831319 11999-00 0.849178955 0.750028196 0.792774975 1.500960739 0.642824751 0.482223294 0.811042721 12000-01 0.95756114 1.117179597 1.045307022 0.882865407 0.756677752 0.710399622 1.054473046 32001-02 1.303831282 0.824245579 2.241172596 0.9232113 0.864178762 0.96065184 0.518664164 22002-03 0.81527875 1.137256866 1.027660014 0.787750558 1.011480807 1.269086268 0.9113336 42003-04 3.067237702 1.111671397 0.704709901 0.935591791 0.846085907 0.810290566 0.679026226 2Number of times

>15 5 6 4 4 7 3

 

Table-2: Utilization indices of seven banks

Years Bikaner Hydrabad Mysore patiala Sourastra travancore indore No of firm having >1

1990-91 1.297136299 0.674295616 0.960523264 0.979832 1.121089457 0.98173907 0.634358 21991-92 0.738933697 1.670234949 0.746218768 1.791132 0.986644875 1.29964228 1.6134957 41992-93 0.954170581 0.473872358 1.248538876 0.447442 1.423361415 1.62841317 0.7128983 31993-94 0.96864511 0.534217504 0.91844436 2.924571 0.949908893 1.31383962 0.8718936 21994-95 1.042768982 1.755602199 0.947119312 0.623563 1.178584477 0.53704703 1.38352 41995-96 0.563131011 1.44616041 1.545600895 0.89606 0.371196977 1.18185454 0.8244128 31996-97 0.952048695 1.039341112 0.679732613 1.827329 1.614896687 1.09913268 1.1921577 51997-98 1.61890054 1.946132307 0.892000009 0.849933 1.5759896 1.12617256 1.0827059 51998-99 0.797059646 0.885183323 1.211386434 0.757087 0.793625055 0.71332087 1.1878539 21999-00 1.155480651 0.691231016 0.827174159 1.562884 0.551376482 1.14396361 0.9387249 32000-01 1.108780623 0.886234576 1.657866728 0.81993 0.863708032 0.80181342 1.2339458 32001-02 0.817647996 0.825837479 1.44713673 0.72977 1.052533929 1.17839905 0.5256344 32002-03 0.836292648 1.076170129 1.12101813 2.286948 1.332961323 1.37336384 2.1176616 62003-04 1.702574727 1.075257001 0.65470506 0.835073 1.112680019 1.03066508 1.0174038 5Number of times

>16 7 6 5 8 10 8

 

Table-3: efficiency indices of seven banks

Years Bikaner Hydrabad Mysore Patiala Saurashtra Travancore Indore No of firm having >1

1990-91 0.24147044 0.3077956 0.898324099 0.53679 0.948538 0.792139 0.32675 0

1991-92 0.28627406 2.3833461 0.942541202 12.41639 3.634318 2.732048 11.54549 5

1992-93 0.7760495 0.2588725 1.396992506 0.308175 0.830241 8.751621 0.404955 2

1993-94 1.01709417 0.3229847 0.702294709 3.158479 0.692217 1.328947 0.964366 3

1994-95 1.10294504 1.4892757 0.719831165 0.387407 1.124663 0.308864 0.958193 3

1995-96 0.39815758 1.1171269 1.829247955 0.733302 0.225044 4.939273 0.597741 3

1996-97 0.83426588 0.7194878 0.566654399 2.235319 1.776424 1.151533 1.10836 4

1997-98 1.76900507 4.2253655 0.872656118 0.796826 2.165298 0.871819 0.951925 3

1998-99 0.51419112 0.6009447 0.980966063 0.697554 0.551041 6.114349 1.083122 2

1999-00 0.98120985 0.5184428 0.655762973 2.345828 0.354438 0.551646 0.761346 1

2000-01 1.06172524 0.9900832 1.732979732 0.723888 0.653549 0.569608 1.301163 3

2001-02 1.06607504 0.6806929 3.243283182 0.673732 0.909577 1.132031 0.272628 3

2002-03 0.68181163 1.2238819 1.152025507 1.801545 1.348265 1.742917 1.929896 6

2003-04 5.22220139 1.1953325 0.461377138 0.53679 0.948538 0.835138 0.690844 2Number of times

>16 6 5 5 5 8 5

 

Table-4: Maximum and Minimum values of respective index (1990-91 to 2003-04)

Sl. No. Name of the bank Performance index Utilization index Efficiency indexMaximum Minimum Maximum Minimum Maximum Minimum

1 STATE BANK OF BIKANER & JAIPUR

3.067237702 1.050017344 1.61890054 0.563131011 1.769005069 0.241470443(2003-04) 1993-94 (1997-98) ((1995-96) (1997-98) (1990-91)

2 STATE BANK OF HYDRABAD 2.171160467 0.456469757 4.7283836 0.4738724 4.2253655 0.2588725(1997-980 (1990-91) (1990-91) (1992-93) (1997-98) (1992-93)

3 STATE BANK OF MYSORE 2.241172596 0.760021632 1.657866728 0.679732613 1.829247955 0.566654399(2001-02) (1994-95) (2000-01) (1996-97) (1995-96) (1996-97)

4 STATE BANK OF PATIALA 6.932148996 0.54783931 2.924571 0.447442 12.41639 0.308175(1991-92) (1990-91) (1993-94) (1992-93) (1991-92) (1992-93)

5 STATE BANK OF SOURASTRA 3.683512059 0.58329603 1.614896687 0.371196977 3.634318 0.225044

(1991-92) (1992-93) (1996-97) (1995-96) (1991-92) (1995-96)6 STATE BANK OF

TRAVANCORE8.571666999 0.482223294 1.628413 0.537047 8.751621 0.308864

(1998-99) (1999-2000) (1992-93) (1994-95) (1992-93) (1994-95)7 STATE BANK OF INDORE 7.155573134 0.515087838 2.1176616 0.5256344 11.54549 0.272628

(1991-92) (1990-91) (1992-93) (1991-92) (1991-92) (2001-02)

Table -5: Number of efficient banks (>1)

Index 1990-91

1991-92

1992-93

1993-94

1994-95

1995-96

1996-97

1997-98

1998-99

1999-00

2000-01

2001-02

2002-03

2003-04

Performance index

0 6 2 4 1 2 3 3 1 1 3 2 4 2

Utilization index

2 4 3 2 4 3 5 5 2 3 3 3 6 5

Efficiency index

0 5 2 3 3 3 4 3 2 1 3 3 6 2

Table-6: Average indices of all the banksIndex 1990-91 1991-92 1992-93 1993-94 1994-95 1995-96

PI 0.613394 3.278692 1.384704 0.906504 0.787035 1.28457UI 0.949853 1.263757 0.9841 1.211646 1.066886 0.97549EI 0.57883 4.848663 1.81813 1.169483 0.870168 1.4057

1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-040.95755 1.17243 1.89043 0.83272 0.93207 1.09085 0.99426 1.164951.20663 1.29883 0.9065 0.98155 1.05318 0.93957 1.4492 1.061191.19886 1.6647 1.50602 0.88124 1.00471 1.13972 1.41148 1.41289

Table 7: Regression results (Performance index)Name of the Bank Constant T Stat Beta (β) T Stat R²

BIKANER & JAIPUR 0.224 1.234 0.056 -0.303 .0076HYDRABAD 0.058 0.310 0.263 1.388 0.138MYSORE 0.036 0.227 0.177 1.108 0.093PATIALA -0.110 -0.305 2.119 5.770 0.735SOURASTRA -0.0212 0.107 0.981 4.838 0.661TRAVANCORE -0.046 -0.047 1.253 1.249 0.115INDORE -0.140 -0.399 2.263 6.317 0.769

Table 8: Regression results (Utilization index)Name of the Bank Constant T Stat Beta (β) T Stat R²

BIKANER & JAIPUR 0.729 0.487 0.642 1.542 0.165HYDRABAD 0.006 0.032 0.937 1.885 0.228MYSORE 0.034 0.224 0.168 0.398 0.013PATIALA 0.111 0.380 2.254 2.775 0.391SOURASTRA 0.012 0.081 0.893 2.204 0.288TRAVANCORE 0.022 0.185 0.687 2.121 0.273INDORE 0.035 0.227 1.418 3.321 0.479

Table 9: Regression results (efficiency index)Name of the Bank Constant T Stat Beta (β) T Stat R²

BIKANER & JAIPUR 0.380 1.039 -0.071 -0.281 0.007HYDRABAD 0.026 0.065 0.592 2.160 0.280MYSORE 0.031 0.111 0.023 0.122 0.001PATIALA -0.255 0.397 2.910 6.544 0.781SOURASTRA -0.003 -0.011 0.670 4.476 0.625TRAVANCORE 0.543 0.051 0.053 0.072 0.000INDORE -0.233 -0.565 2.796 9.827 0.889

Table 10: Rank of banks according to Beta values

Name of the bank PI UI EI STATE BANK OF BIKANER & JAIPUR 7 6 7STATE BANK OF HYDRABAD 5 3 4STATE BANK OF MYSORE 6 7 6STATE BANK OF PATIALA 2 1 1STATE BANK OF SOURASTRA 4 4 3STATE BANK OF TRAVANCORE 3 5 5STATE BANK OF INDORE 1 2 2

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