Commercial Banks in Indian Mutual Fund Industry: A Study on Profitability of Banks Vis-à-vis Their Mutual Fund Business

The present study examined the performance of public sector commercial banks in mutual fund industry in terms of profitability for the period from March 2007 to March 2016. Banks, which were used as an agent by the government to bring changes in the economic scenario of the country and for which most of the larger banks were nationalised in a phased manner, were not performing well during the 1980s and their profits and deposits started to decline. As a result, the Government of India amended the Banking Regulation Act in 1984, to give a wider scope to the banks in terms of business. Many public sector banks started their own sponsored mutual fund companies after 1987 as they had some pre-existing advantages. The data relating to the present study has been collected from corporate Capitaline Plus database and also from the various publications made by the Reserve Bank of India and others from time to time. The data has been analysed by using various profitability ratios and ratio of mutual fund profit to bank profit to reach the conclusion. The study disclosed that the private banks performed better than the public sector commercial banks during the study period. JEL Classification: G21, L25, M13

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Investing Productively: The Banking Sector

New India ◽

10.1093/oso/9780197531556.003.0009 ◽

2020 ◽

pp. 145-178

Author(s):

Arvind Panagariya

Keyword(s):

Public Sector ◽

Detailed Analysis ◽

Banking Sector ◽

Public Sector Banks ◽

Formal Economy ◽

Reserve Bank ◽

Private Banks ◽

The Government ◽

Public Money ◽

Indian Banks

Banks collect savings by households via deposits and channel them to the most productive investors in the form of credit. What happens to bank credit has a determining impact on growth, especially in the formal economy. A key feature of Indian banks has been repeated episodes of accumulation of non-performing assets followed by their recapitalization by the government using public money. These episodes have been concentrated in public sector banks (PSBs), which continue to account for two-thirds of banking assets. This chapter offers a detailed analysis of these episodes and argues that it is time for the government to give serious thought to privatization of PSBs. PSBs are subject to regulation by both the government and the Reserve Bank of India (RBI), but RBI has limited powers over them. On average, private banks outdo PSBs along nearly all dimensions in terms of efficiency.

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Public Sector Banks in India : Growth of NPAs and Restructuring Aspects

International Journal of Scientific Research in Science and Technology ◽

10.32628/ijsrst218464 ◽

2021 ◽

pp. 368-381

Author(s):

Parmod K Sharma ◽

Dr. Babli Dhiman

Keyword(s):

Public Sector ◽

Top Management ◽

Regulatory Capital ◽

Too Big To Fail ◽

Public Sector Banks ◽

Administrative Control ◽

Reserve Bank ◽

Stake Holder ◽

The Government ◽

Reserve Bank Of India

The recent restructuring of Public Sector Banks (PSBs) has generated immense interest in the economic world and the various stakeholders which include investors, depositors, borrowers, the staff working in these banks and the top management of the merging entities. Whereas the depositors look for safety of their monies, the borrowers of merging entities look for new loan products at cheaper rates and faster delivery. The investors will look for resumption of dividend payouts at higher rates and capital appreciation of their investments and the staff looks for better working conditions. The top management will expect more freedom to operate and manage their respective banks more efficiently to grow and earn higher profits. The merger of strong banks was recommended by the first Narasimham Committee in 1991. It has taken almost 28 long years for the Government of India to act on this very critical suggestion of the committee. It is widely believed that this belated step has been initiated due to huge pile of Non Performing Assets (NPAs) with Public Sector Banks and the resultant need for their frequent recapitalization. It is a moral hazard and bad economics for any government to regularly recapitalise PSBs being the major stake holder and having total administrative control of their boards and the top management. To enable PSBs meet the regulatory capital as per international norms and the provisioning requirements enforced by Reserve Bank of India, use of tax payer’s money (collected for economic development of the country) is questionable. However it is made clear by the government that the merger is intended to make PSBs bigger and internationally competitive and to build up their capacity to access capital markets for raising resources. A perspective of growth of NPAs and the resultant impact on the financial deterioration of PSBs over a time horizon can give answers to the need for restructuring of Public Sector Banks as repeat of such actions by the government may again be necessitated in future. The improvement in financial performance parameters of PSBs over next few years will answer if act of restructuring by the Government of India results in internationally strong ‘too big to fail banks’ .

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Merger of Public Sector Banks in India Under the Rule of Reason

Journal of Emerging Market Finance ◽

10.1177/0972652717722085 ◽

2017 ◽

Vol 16 (3) ◽

pp. 259-273 ◽

Cited By ~ 1

Author(s):

Rani S. Ladha

Keyword(s):

Public Sector ◽

Rural Areas ◽

Banking Sector ◽

Performance Metrics ◽

Banking Industry ◽

Jel Classification ◽

Public Sector Banks ◽

Rule Of Reason ◽

The Government ◽

And Performance

This article models the idea of rule of reason of the antitrust literature and applies the model to analyse the possible consolidation of the Indian banking industry through merger and acquisition activities. It offers a strategic perspective for public sector banks whereby the banks either meet societal goals or become savvy international players through mergers. India being an emerging economy, the banking industry faces two critical initiatives: (i) proactive servicing of the rural areas and priority sectors and (ii) a serious presence in the international markets to compete with larger global banks. The model developed in this article suggests ways to evaluate and examine mergers in the banking sector in India to support both these initiatives. It proposes that the government could use the threat of merger to induce reluctant public sector banks to meet the critical domestic agenda and performance metrics. Those that meet the societal goals may continue to have the benefit of the status quo. Those that do not are required to merge to form an entity that can internationally compete in raising equity and deposits and providing loans and services. JEL Classification: G34, G38, K21

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