Description
Banks play an active role in the economic development of a country. Their ability to make a positive
contribution in igniting the process of growth depends on the effective banking system. The banking sector
reforms were aimed at making banks more efficient and viable. As one who had a role in initiating these
reforms, we can say that the period of transition was not that easy. But as a consequence of these reforms the
banking system has emerged more sound and safe. The capital adequacy of the Indian banks is now on par with
international standards. The level of net NPAs has come down to very manageable levels. An issue that is in the
forefront of banking reforms currently is that of bank consolidation. The present study is devoted to analyze the
financial performance of HDFC Bank and ICICI Bank.
SCHOLARS WORLD-INTERNATIONAL REFEREED MULTIDISCIPLINARY JOURNAL OF CONTEMPORARY RESEARCH EISSN 2320-3145, ISSN 2319-5789
www.scholarsworld.net [email protected] Volume.1, Issue.2, July 2013 [107]
COMPARATIVE FINANCIAL PERFORMANCE
OF HDFC BANK AND ICICI BANK
DR. K. SRINIVAS,
Principal,
KGR Institute of Technology and Management,
Rampally, Keesara, Hyderabad (India)
L. SAROJA,
Sr.Leturer,
Depatmentof Commerce, S.P. College,
Secundrabad, Andhra Pradesh (India)
ABSTRACT
The nationalization phase of the early 1970s brought some of the elite banks under the
government’s control. The next decade heralded the second phase of nationalization with the
merging of old private sector banks. The 1990s saw partial liberalization of the banking industry
and the emergence of new private sector banks as well as international banks. During the next
few years, fears of liberalization were put to rest and in the past decade the banking system has
gained much from it. Liberalization brought out the best in the industry inducing competitive
spirit among various banks.
The present research paper is aimed to analyze and compare the Financial Performance of HDFC
and ICICI Bank and offer suggestions for the improvement of efficiency in select banks. For the
purpose of analysis of comparative financial performance of the select banks, world-renowned,
CAMELS model with t-test is applied. CAMELS stand for Capital Adequacy, Asset Quality,
Management, Earning Quality, Liquidity and Sensitivity.
The capital adequacy and Tier I capital ratio of ICICI and HDFC bank is more than the Basel
Accord. We conclude that both the banks are good with respect capital adequacy because it is
above the Basel norms. The efficiency of HDFC Bank management is good because its NPAs are
less than 0.5 for the study period from 2013 to 2012. The net profit, operating profit, return on
net-worth, spread, liquidity and loans to total assets of HDFC bank has more compared with
ICICI bank. Hence HDFC bank earns more profits compared with ICICI bank.
The total advances to customer deposit, debt-equity and burden of HDFC have less compared
with ICICI bank, and hence long term solvency is well in ICICI bank. The CAMELS’ analysis
and t-test concludes that there is no significance difference between the ICICI and HDFC bank’s
financial performance but the ICICI bank performance is slightly less compared with HDFC.
Keywords: Elite Banks, CAMELS Model, ICICI and HDFC bank, financial performance
SCHOLARS WORLD-INTERNATIONAL REFEREED MULTIDISCIPLINARY JOURNAL OF CONTEMPORARY RESEARCH EISSN 2320-3145, ISSN 2319-5789
www.scholarsworld.net [email protected] Volume.1, Issue.2, July 2013 [108]
INTRODUCTION:
Banks play an active role in the economic development of a country. Their ability to make a positive
contribution in igniting the process of growth depends on the effective banking system. The banking sector
reforms were aimed at making banks more efficient and viable. As one who had a role in initiating these
reforms, we can say that the period of transition was not that easy. But as a consequence of these reforms the
banking system has emerged more sound and safe. The capital adequacy of the Indian banks is now on par with
international standards. The level of net NPAs has come down to very manageable levels. An issue that is in the
forefront of banking reforms currently is that of bank consolidation. The present study is devoted to analyze the
financial performance of HDFC Bank and ICICI Bank.
MEANING AND DEFINITION:
Bank is an institution that deals in money and its substitutes and provides crucial financial services. The principal
type of baking in the modern industrial world is commercial banking and central banking.
Banking Means "Accepting Deposits for the purpose of lending or Investment of deposits of money from the public,
repayable on demand or otherwise and withdraw by cheque, draft or otherwise."
The concise oxford dictionary has defined a bank as "Establishment for custody of money which it pays out on
customers order." Infact this is the function which the bank performed when banking originated.
"Banking in the most general sense, is meant the business of receiving, conserving & utilizing the funds of
community or of any special section of it."
OBJECTIVES OF THE STUDY:
The present paper is aimed to examine the following objectives:
1. To analyze and compare the Financial Performance of HDFC and ICICI Bank.
2. To offer suggestions for the improvement of efficiency in HDFC and ICICI Bank.
METHODOLOGY:
Source of Data:
The study is based on secondary data. The data were collected from the official directory and data base of Centre
for Monitoring Indian Economy (CMIE) namely PROWESS. The published annual reports of the selected banks
taken from their websites, magazines and journals on finance have also been used a sources of data.
To assess the comparative financial performance of select banks, the study adopted the world-renowned
CAMEL model (with minor modifications) with t-test.
Period of Study:
The study covers a period of ten years from 2003 – 2012.
Sampling:
The new private sector banks consist of eight banks. For the present study covers two important banks one is
Housing Development Financial Corporation (HDFC) and another one Industrial Credit Investment Corporation
of India (ICICI).
Hypotheses:
From the above objectives of the following hypothesis is formulated to test the financial efficiency of the select
banks:
Ho = “There is no significant difference between financial performance of HDFC and ICICI Bank.”
Scope of the Study:
The research paper covers two important new private sector banks Housing Development Financial Corporation
(HDFC) and Industrial Credit Investment Corporation of India (ICICI) Bank only.
LIMITATIONS OF THE STUDY:
The major limitation of the present study is that the analysis is restricted to one particular sector such as
banking. It is confined to only measure the financial performance of select banks. The inherent limitation is
secondary data. The published data is not uniform and not properly disclosed by the banks. Hence, this may be
taken as another limitation.
SCHOLARS WORLD-INTERNATIONAL REFEREED M
www.scholarsworld.net
COMPARATIVE FINANCIAL PERFORMANCE OF HDFC BANK AND ICICI BANK:
The nationalization phase of the early 1970s brought some of the elite banks under the go
The next decade heralded the second phase of nationalization with the merging of old private sector banks. The
1990s saw partial liberalization of the banking industry and the emergence of new private sector banks as well
as international banks. During the next few years, fears of liberalization were put to rest and in the past decade
the banking system has gained much from it. Liberalization brought out the best in the industry inducing
competitive spirit among various banks. During thi
employment, embraced technology and ventured into related new businesses. Some of them have even re
branded themselves to cater to the ever
management mechanisms and added fresh capital, which is very important to the banking industry.
With the development of the banking sector, it is interesting to know how the selected banks have performed. The
present study carried out a closer analysis of two banks based on their annual results. For the purpose of analysis
of comparative financial performance of the select banks, world
stand for Capital Adequacy, Asset Quality, Management, Earning Quality,
crucial parameters, which reflect the operating performance, soundness, liquidity of the
following is analysis of comparative financial performan
I. Capital Adequacy:
This ratio is used to protect depositors and promote the stability and efficiency of financial systems around the
world. Two types of capital are measured: tier one capital, which can absorb losses without a bank being
required to cease trading, and tier two capital, which can absorb losses in the event of a winding
provides a lesser degree of protection to depositors. CAR is similar to leverage; in the most basic formulation, it
is comparable to the inverse of debt
instead of debt-to-equity; since assets are by definition equal to debt plus equity, a transformation is required).
Unlike traditional leverage, however, CAR recognizes that assets can have different levels of risk.
1. Capital Adequacy Ratio: CRAR:
Capital adequacy ratios (CARs) are a measure of the amount of a bank's core capital expressed as a percentage
of its risk-weighted asset and it is also known as "Capital to Risk Weighted Assets Ratio (CRAR)."
Capital adequacy ratio is defined as:
TIER 1 CAPITAL = (paid up capital + statutory reserves + disclosed free reserves)
subsidiary + intangible assets + current & b/f losses)
TIER 2 CAPITAL = A) Undisclosed Reserves + B) General Loss res
and subordinated debts where Risk can either be weighted assets (
minimum total capital requirement. If using risk weighted assets,
The percent threshold varies from bank t
conforming to the Basel Accords) is set by the national banking regulator of different countries.
TABLE
Years
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Source: Various issues of CMIE, RBI and Bank Annual Reports
MULTIDISCIPLINARY JOURNAL OF CONTEMPORARY RESEARCH EISSN 2320
[email protected] Volume.1, Issue.2,
COMPARATIVE FINANCIAL PERFORMANCE OF HDFC BANK AND ICICI BANK:
The nationalization phase of the early 1970s brought some of the elite banks under the go
The next decade heralded the second phase of nationalization with the merging of old private sector banks. The
1990s saw partial liberalization of the banking industry and the emergence of new private sector banks as well
al banks. During the next few years, fears of liberalization were put to rest and in the past decade
the banking system has gained much from it. Liberalization brought out the best in the industry inducing
competitive spirit among various banks. During this period the banks were restructured, shed the flab of over
employment, embraced technology and ventured into related new businesses. Some of them have even re
branded themselves to cater to the ever-demanding customers. Also the banks put in place effecti
management mechanisms and added fresh capital, which is very important to the banking industry.
With the development of the banking sector, it is interesting to know how the selected banks have performed. The
lysis of two banks based on their annual results. For the purpose of analysis
of comparative financial performance of the select banks, world-renowned, CAMELS model is applied. CAMELS
stand for Capital Adequacy, Asset Quality, Management, Earning Quality, Liquidity and Sensitivity. They are the
crucial parameters, which reflect the operating performance, soundness, liquidity of the
following is analysis of comparative financial performance with CAMELS model and t-test.
This ratio is used to protect depositors and promote the stability and efficiency of financial systems around the
world. Two types of capital are measured: tier one capital, which can absorb losses without a bank being
two capital, which can absorb losses in the event of a winding
provides a lesser degree of protection to depositors. CAR is similar to leverage; in the most basic formulation, it
is comparable to the inverse of debt-to-equity leverage formulations (although CAR uses equity over assets
equity; since assets are by definition equal to debt plus equity, a transformation is required).
Unlike traditional leverage, however, CAR recognizes that assets can have different levels of risk.
:
Capital adequacy ratios (CARs) are a measure of the amount of a bank's core capital expressed as a percentage
weighted asset and it is also known as "Capital to Risk Weighted Assets Ratio (CRAR)."
TIER 1 CAPITAL = (paid up capital + statutory reserves + disclosed free reserves)
subsidiary + intangible assets + current & b/f losses)
TIER 2 CAPITAL = A) Undisclosed Reserves + B) General Loss reserves + C) hybrid debt capital instruments
and subordinated debts where Risk can either be weighted assets ( ) or the respective national regulator's
minimum total capital requirement. If using risk weighted assets,
The percent threshold varies from bank to bank (10% in this case, a common requirement for regulators
conforming to the Basel Accords) is set by the national banking regulator of different countries.
TABLE- 1CAPITAL ADEQUACY RATIO: CRAR
Years HDFC ICICI
2003 11.12 11.10
2004 11.66 10.40
2005 12.16 11.80
2006 11.41 13.40
2007 13.08 11.69
2008 13.60 13.96
2009 15.69 15.53
2010 17.44 19.41
2011 16.22 19.54
2012 16.52 18.52
Source: Various issues of CMIE, RBI and Bank Annual Reports
EISSN 2320-3145, ISSN 2319-5789
Volume.1, Issue.2, July 2013 [109]
COMPARATIVE FINANCIAL PERFORMANCE OF HDFC BANK AND ICICI BANK:
The nationalization phase of the early 1970s brought some of the elite banks under the government’s control.
The next decade heralded the second phase of nationalization with the merging of old private sector banks. The
1990s saw partial liberalization of the banking industry and the emergence of new private sector banks as well
al banks. During the next few years, fears of liberalization were put to rest and in the past decade
the banking system has gained much from it. Liberalization brought out the best in the industry inducing
s period the banks were restructured, shed the flab of over-
employment, embraced technology and ventured into related new businesses. Some of them have even re-
demanding customers. Also the banks put in place effective risk
management mechanisms and added fresh capital, which is very important to the banking industry.
With the development of the banking sector, it is interesting to know how the selected banks have performed. The
lysis of two banks based on their annual results. For the purpose of analysis
renowned, CAMELS model is applied. CAMELS
Liquidity and Sensitivity. They are the
crucial parameters, which reflect the operating performance, soundness, liquidity of the select banks. The
test.
This ratio is used to protect depositors and promote the stability and efficiency of financial systems around the
world. Two types of capital are measured: tier one capital, which can absorb losses without a bank being
two capital, which can absorb losses in the event of a winding-up and so
provides a lesser degree of protection to depositors. CAR is similar to leverage; in the most basic formulation, it
s (although CAR uses equity over assets
equity; since assets are by definition equal to debt plus equity, a transformation is required).
Unlike traditional leverage, however, CAR recognizes that assets can have different levels of risk.
Capital adequacy ratios (CARs) are a measure of the amount of a bank's core capital expressed as a percentage
weighted asset and it is also known as "Capital to Risk Weighted Assets Ratio (CRAR)."
TIER 1 CAPITAL = (paid up capital + statutory reserves + disclosed free reserves) - (equity investments in
erves + C) hybrid debt capital instruments
) or the respective national regulator's
o bank (10% in this case, a common requirement for regulators
conforming to the Basel Accords) is set by the national banking regulator of different countries.
Source: Various issues of CMIE, RBI and Bank Annual Reports
SCHOLARS WORLD-INTERNATIONAL REFEREED MULTIDISCIPLINARY JOURNAL OF CONTEMPORARY RESEARCH EISSN 2320-3145, ISSN 2319-5789
www.scholarsworld.net [email protected] Volume.1, Issue.2, July 2013 [110]
TABLE- 2 CAPITAL ADEQUACY RATIOS: CRAR
t-Test: Two-Sample Assuming Equal Variances
11.12 11.1
Mean 14.1978 14.9167
Variance 5.27402 12.3333
Observations 9 9
Pooled Variance 8.80365
Hypothesized Mean Difference 0
Df 16
t Stat -0.514
P(T
Banks play an active role in the economic development of a country. Their ability to make a positive
contribution in igniting the process of growth depends on the effective banking system. The banking sector
reforms were aimed at making banks more efficient and viable. As one who had a role in initiating these
reforms, we can say that the period of transition was not that easy. But as a consequence of these reforms the
banking system has emerged more sound and safe. The capital adequacy of the Indian banks is now on par with
international standards. The level of net NPAs has come down to very manageable levels. An issue that is in the
forefront of banking reforms currently is that of bank consolidation. The present study is devoted to analyze the
financial performance of HDFC Bank and ICICI Bank.
SCHOLARS WORLD-INTERNATIONAL REFEREED MULTIDISCIPLINARY JOURNAL OF CONTEMPORARY RESEARCH EISSN 2320-3145, ISSN 2319-5789
www.scholarsworld.net [email protected] Volume.1, Issue.2, July 2013 [107]
COMPARATIVE FINANCIAL PERFORMANCE
OF HDFC BANK AND ICICI BANK
DR. K. SRINIVAS,
Principal,
KGR Institute of Technology and Management,
Rampally, Keesara, Hyderabad (India)
L. SAROJA,
Sr.Leturer,
Depatmentof Commerce, S.P. College,
Secundrabad, Andhra Pradesh (India)
ABSTRACT
The nationalization phase of the early 1970s brought some of the elite banks under the
government’s control. The next decade heralded the second phase of nationalization with the
merging of old private sector banks. The 1990s saw partial liberalization of the banking industry
and the emergence of new private sector banks as well as international banks. During the next
few years, fears of liberalization were put to rest and in the past decade the banking system has
gained much from it. Liberalization brought out the best in the industry inducing competitive
spirit among various banks.
The present research paper is aimed to analyze and compare the Financial Performance of HDFC
and ICICI Bank and offer suggestions for the improvement of efficiency in select banks. For the
purpose of analysis of comparative financial performance of the select banks, world-renowned,
CAMELS model with t-test is applied. CAMELS stand for Capital Adequacy, Asset Quality,
Management, Earning Quality, Liquidity and Sensitivity.
The capital adequacy and Tier I capital ratio of ICICI and HDFC bank is more than the Basel
Accord. We conclude that both the banks are good with respect capital adequacy because it is
above the Basel norms. The efficiency of HDFC Bank management is good because its NPAs are
less than 0.5 for the study period from 2013 to 2012. The net profit, operating profit, return on
net-worth, spread, liquidity and loans to total assets of HDFC bank has more compared with
ICICI bank. Hence HDFC bank earns more profits compared with ICICI bank.
The total advances to customer deposit, debt-equity and burden of HDFC have less compared
with ICICI bank, and hence long term solvency is well in ICICI bank. The CAMELS’ analysis
and t-test concludes that there is no significance difference between the ICICI and HDFC bank’s
financial performance but the ICICI bank performance is slightly less compared with HDFC.
Keywords: Elite Banks, CAMELS Model, ICICI and HDFC bank, financial performance
SCHOLARS WORLD-INTERNATIONAL REFEREED MULTIDISCIPLINARY JOURNAL OF CONTEMPORARY RESEARCH EISSN 2320-3145, ISSN 2319-5789
www.scholarsworld.net [email protected] Volume.1, Issue.2, July 2013 [108]
INTRODUCTION:
Banks play an active role in the economic development of a country. Their ability to make a positive
contribution in igniting the process of growth depends on the effective banking system. The banking sector
reforms were aimed at making banks more efficient and viable. As one who had a role in initiating these
reforms, we can say that the period of transition was not that easy. But as a consequence of these reforms the
banking system has emerged more sound and safe. The capital adequacy of the Indian banks is now on par with
international standards. The level of net NPAs has come down to very manageable levels. An issue that is in the
forefront of banking reforms currently is that of bank consolidation. The present study is devoted to analyze the
financial performance of HDFC Bank and ICICI Bank.
MEANING AND DEFINITION:
Bank is an institution that deals in money and its substitutes and provides crucial financial services. The principal
type of baking in the modern industrial world is commercial banking and central banking.
Banking Means "Accepting Deposits for the purpose of lending or Investment of deposits of money from the public,
repayable on demand or otherwise and withdraw by cheque, draft or otherwise."
The concise oxford dictionary has defined a bank as "Establishment for custody of money which it pays out on
customers order." Infact this is the function which the bank performed when banking originated.
"Banking in the most general sense, is meant the business of receiving, conserving & utilizing the funds of
community or of any special section of it."
OBJECTIVES OF THE STUDY:
The present paper is aimed to examine the following objectives:
1. To analyze and compare the Financial Performance of HDFC and ICICI Bank.
2. To offer suggestions for the improvement of efficiency in HDFC and ICICI Bank.
METHODOLOGY:
Source of Data:
The study is based on secondary data. The data were collected from the official directory and data base of Centre
for Monitoring Indian Economy (CMIE) namely PROWESS. The published annual reports of the selected banks
taken from their websites, magazines and journals on finance have also been used a sources of data.
To assess the comparative financial performance of select banks, the study adopted the world-renowned
CAMEL model (with minor modifications) with t-test.
Period of Study:
The study covers a period of ten years from 2003 – 2012.
Sampling:
The new private sector banks consist of eight banks. For the present study covers two important banks one is
Housing Development Financial Corporation (HDFC) and another one Industrial Credit Investment Corporation
of India (ICICI).
Hypotheses:
From the above objectives of the following hypothesis is formulated to test the financial efficiency of the select
banks:
Ho = “There is no significant difference between financial performance of HDFC and ICICI Bank.”
Scope of the Study:
The research paper covers two important new private sector banks Housing Development Financial Corporation
(HDFC) and Industrial Credit Investment Corporation of India (ICICI) Bank only.
LIMITATIONS OF THE STUDY:
The major limitation of the present study is that the analysis is restricted to one particular sector such as
banking. It is confined to only measure the financial performance of select banks. The inherent limitation is
secondary data. The published data is not uniform and not properly disclosed by the banks. Hence, this may be
taken as another limitation.
SCHOLARS WORLD-INTERNATIONAL REFEREED M
www.scholarsworld.net
COMPARATIVE FINANCIAL PERFORMANCE OF HDFC BANK AND ICICI BANK:
The nationalization phase of the early 1970s brought some of the elite banks under the go
The next decade heralded the second phase of nationalization with the merging of old private sector banks. The
1990s saw partial liberalization of the banking industry and the emergence of new private sector banks as well
as international banks. During the next few years, fears of liberalization were put to rest and in the past decade
the banking system has gained much from it. Liberalization brought out the best in the industry inducing
competitive spirit among various banks. During thi
employment, embraced technology and ventured into related new businesses. Some of them have even re
branded themselves to cater to the ever
management mechanisms and added fresh capital, which is very important to the banking industry.
With the development of the banking sector, it is interesting to know how the selected banks have performed. The
present study carried out a closer analysis of two banks based on their annual results. For the purpose of analysis
of comparative financial performance of the select banks, world
stand for Capital Adequacy, Asset Quality, Management, Earning Quality,
crucial parameters, which reflect the operating performance, soundness, liquidity of the
following is analysis of comparative financial performan
I. Capital Adequacy:
This ratio is used to protect depositors and promote the stability and efficiency of financial systems around the
world. Two types of capital are measured: tier one capital, which can absorb losses without a bank being
required to cease trading, and tier two capital, which can absorb losses in the event of a winding
provides a lesser degree of protection to depositors. CAR is similar to leverage; in the most basic formulation, it
is comparable to the inverse of debt
instead of debt-to-equity; since assets are by definition equal to debt plus equity, a transformation is required).
Unlike traditional leverage, however, CAR recognizes that assets can have different levels of risk.
1. Capital Adequacy Ratio: CRAR:
Capital adequacy ratios (CARs) are a measure of the amount of a bank's core capital expressed as a percentage
of its risk-weighted asset and it is also known as "Capital to Risk Weighted Assets Ratio (CRAR)."
Capital adequacy ratio is defined as:
TIER 1 CAPITAL = (paid up capital + statutory reserves + disclosed free reserves)
subsidiary + intangible assets + current & b/f losses)
TIER 2 CAPITAL = A) Undisclosed Reserves + B) General Loss res
and subordinated debts where Risk can either be weighted assets (
minimum total capital requirement. If using risk weighted assets,
The percent threshold varies from bank t
conforming to the Basel Accords) is set by the national banking regulator of different countries.
TABLE
Years
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Source: Various issues of CMIE, RBI and Bank Annual Reports
MULTIDISCIPLINARY JOURNAL OF CONTEMPORARY RESEARCH EISSN 2320
[email protected] Volume.1, Issue.2,
COMPARATIVE FINANCIAL PERFORMANCE OF HDFC BANK AND ICICI BANK:
The nationalization phase of the early 1970s brought some of the elite banks under the go
The next decade heralded the second phase of nationalization with the merging of old private sector banks. The
1990s saw partial liberalization of the banking industry and the emergence of new private sector banks as well
al banks. During the next few years, fears of liberalization were put to rest and in the past decade
the banking system has gained much from it. Liberalization brought out the best in the industry inducing
competitive spirit among various banks. During this period the banks were restructured, shed the flab of over
employment, embraced technology and ventured into related new businesses. Some of them have even re
branded themselves to cater to the ever-demanding customers. Also the banks put in place effecti
management mechanisms and added fresh capital, which is very important to the banking industry.
With the development of the banking sector, it is interesting to know how the selected banks have performed. The
lysis of two banks based on their annual results. For the purpose of analysis
of comparative financial performance of the select banks, world-renowned, CAMELS model is applied. CAMELS
stand for Capital Adequacy, Asset Quality, Management, Earning Quality, Liquidity and Sensitivity. They are the
crucial parameters, which reflect the operating performance, soundness, liquidity of the
following is analysis of comparative financial performance with CAMELS model and t-test.
This ratio is used to protect depositors and promote the stability and efficiency of financial systems around the
world. Two types of capital are measured: tier one capital, which can absorb losses without a bank being
two capital, which can absorb losses in the event of a winding
provides a lesser degree of protection to depositors. CAR is similar to leverage; in the most basic formulation, it
is comparable to the inverse of debt-to-equity leverage formulations (although CAR uses equity over assets
equity; since assets are by definition equal to debt plus equity, a transformation is required).
Unlike traditional leverage, however, CAR recognizes that assets can have different levels of risk.
:
Capital adequacy ratios (CARs) are a measure of the amount of a bank's core capital expressed as a percentage
weighted asset and it is also known as "Capital to Risk Weighted Assets Ratio (CRAR)."
TIER 1 CAPITAL = (paid up capital + statutory reserves + disclosed free reserves)
subsidiary + intangible assets + current & b/f losses)
TIER 2 CAPITAL = A) Undisclosed Reserves + B) General Loss reserves + C) hybrid debt capital instruments
and subordinated debts where Risk can either be weighted assets ( ) or the respective national regulator's
minimum total capital requirement. If using risk weighted assets,
The percent threshold varies from bank to bank (10% in this case, a common requirement for regulators
conforming to the Basel Accords) is set by the national banking regulator of different countries.
TABLE- 1CAPITAL ADEQUACY RATIO: CRAR
Years HDFC ICICI
2003 11.12 11.10
2004 11.66 10.40
2005 12.16 11.80
2006 11.41 13.40
2007 13.08 11.69
2008 13.60 13.96
2009 15.69 15.53
2010 17.44 19.41
2011 16.22 19.54
2012 16.52 18.52
Source: Various issues of CMIE, RBI and Bank Annual Reports
EISSN 2320-3145, ISSN 2319-5789
Volume.1, Issue.2, July 2013 [109]
COMPARATIVE FINANCIAL PERFORMANCE OF HDFC BANK AND ICICI BANK:
The nationalization phase of the early 1970s brought some of the elite banks under the government’s control.
The next decade heralded the second phase of nationalization with the merging of old private sector banks. The
1990s saw partial liberalization of the banking industry and the emergence of new private sector banks as well
al banks. During the next few years, fears of liberalization were put to rest and in the past decade
the banking system has gained much from it. Liberalization brought out the best in the industry inducing
s period the banks were restructured, shed the flab of over-
employment, embraced technology and ventured into related new businesses. Some of them have even re-
demanding customers. Also the banks put in place effective risk
management mechanisms and added fresh capital, which is very important to the banking industry.
With the development of the banking sector, it is interesting to know how the selected banks have performed. The
lysis of two banks based on their annual results. For the purpose of analysis
renowned, CAMELS model is applied. CAMELS
Liquidity and Sensitivity. They are the
crucial parameters, which reflect the operating performance, soundness, liquidity of the select banks. The
test.
This ratio is used to protect depositors and promote the stability and efficiency of financial systems around the
world. Two types of capital are measured: tier one capital, which can absorb losses without a bank being
two capital, which can absorb losses in the event of a winding-up and so
provides a lesser degree of protection to depositors. CAR is similar to leverage; in the most basic formulation, it
s (although CAR uses equity over assets
equity; since assets are by definition equal to debt plus equity, a transformation is required).
Unlike traditional leverage, however, CAR recognizes that assets can have different levels of risk.
Capital adequacy ratios (CARs) are a measure of the amount of a bank's core capital expressed as a percentage
weighted asset and it is also known as "Capital to Risk Weighted Assets Ratio (CRAR)."
TIER 1 CAPITAL = (paid up capital + statutory reserves + disclosed free reserves) - (equity investments in
erves + C) hybrid debt capital instruments
) or the respective national regulator's
o bank (10% in this case, a common requirement for regulators
conforming to the Basel Accords) is set by the national banking regulator of different countries.
Source: Various issues of CMIE, RBI and Bank Annual Reports
SCHOLARS WORLD-INTERNATIONAL REFEREED MULTIDISCIPLINARY JOURNAL OF CONTEMPORARY RESEARCH EISSN 2320-3145, ISSN 2319-5789
www.scholarsworld.net [email protected] Volume.1, Issue.2, July 2013 [110]
TABLE- 2 CAPITAL ADEQUACY RATIOS: CRAR
t-Test: Two-Sample Assuming Equal Variances
11.12 11.1
Mean 14.1978 14.9167
Variance 5.27402 12.3333
Observations 9 9
Pooled Variance 8.80365
Hypothesized Mean Difference 0
Df 16
t Stat -0.514
P(T