Case study of SBI & HDFC Bank
Mrs Meenu Kaur*
The last three decades of 20th Century witnessed the emergence of a number of issues that spared debates and discussion among economist. Financial sector is the major area of macro economy that has received renewed focus in recent years; the banking sector has been the cynosure of academia. The traditional face of banking is also undergoing a change from that of a mere intermediator to the one of a provider of a quick, cost effective, efficient & consumer centric services.
The Indian banking system progressed by leaps and bounds after nationalization. Banking in India recorded an unparallel achievement in spreading banking to rural and semi urban area. But in spite of this achievement the banking sector performed poorly as regards their productivity and efficiency. Verma committee has cited non or marginal growth of income from non fund activities as one of the reason for weaknesses of these banks. The main motive of banks is to maintain solvency, profitability and liquidity. Under solvency have to maintain its liabilities and assets and on the other hand liquidity is necessary for public confidence. But liquidity and profitability cannot go together i.e. if banks are going to maintain its liquidity then its not possible for them to achieve profitability. For profitability banks should invest its fund in such a way that it earns maximum income.
** Lecturer in Management at Balraj Singla group of institute, Patiala. * Lecturer in Management at Balraj Singla group of institute, Patiala.
So that Verma Committee suggested that banks would have to minimize their risk and for this, banks should not depend only upon conventional sources of income rather they try to shift towards non traditional sources or off balance sheet activities. Non traditional or off balance activities are vehicles of information and risk sharing services and cannote those activities that involve contingent claims, commitments or contracts which generate income to a bank but its transaction not appearing on balance sheet like conventional accounting procedure. Off balance sheet activities are of two types.
Contingent ClaimsFinancial Services
LoanGuaranteesSwap& Hedging Investment Banking
Commitments Transactions Activity
FiduciaryAgency Function Counter TradeSafe Keeping
In order to achieve the main target of banks profitability, the present paper deals with Mutual Funds which is one of the financial services of Off balance sheet activities. Mutual fund is an instrument of investing money. It is a group of investors operating through a fund manager to purchase a diverse portfolio of stocks or bonds. The biggest advantage of mutual funds is diversification. Diversification means spreading out money into different type of investments. When one investment is down another might be up. Diversification of investment holding reduces the risk tremendously.
Objective of the study
1. Working out the trends of various types of mutual funds (Income from off balance sheet activities of State bank of India (SBI) and Housing development Finance Corporation (HDFC) bank over the period under consideration. 2. Examining the compound growth rate of different forms of mutual funds of SBI and HDFC over the period under study.
Plan of the paper & Methodology
The present paper deals with comparative study of mutual funds SBI (Public sector bank) and HDFC (Private sector bank). The period of the paper is from 2002 to 2006. The data used in this paper pertain to SBI and HDFC Bank in India.
In the present paper simple statistical tools like trends and growth rates have been used. The trends were estimated...