Project on Comparison of Public and Private Sector Banking

Only available on StudyMode
  • Topic: Basel II, Bank, Capital requirement
  • Pages : 23 (6852 words )
  • Download(s) : 172
  • Published : March 25, 2013
Open Document
Text Preview
Genesis
The banking sector has been undergoing a complex, but comprehensive phase of restructuring since 1991, with a view to make it sound, efficient, and at the same time it isforging its links firmly with the real sector for promotion of savings, investment and growth.Although a complete turnaround in banking sector performance is not expected till thecompletion of reforms, signs of improvement are visible in some indicators under theCAMELS framework. Under this bank is required to enhance capital adequacy, strengthenasset quality, improve management, increase earnings and reduce sensitivity to variousfinancial risks. The almost simultaneous nature of these developments makes it difficult todisentangle the positive impact of reform measures.In 1994, the RBI established the Board of Financial Supervision, which operates as a unit of the RBI. The entire supervisory mechanism was realigned to suit the changing needs of astrong and stable financial system. The supervisory jurisdiction of the BFS was slowlyextended to the entire financial system barring the capital market institutions and theinsurance sector. Its mandate is to strengthen supervision of the financial system byintegrating oversight of the activities of financial services firms. The BFS has alsoestablished a sub-committee to routinely examine auditing practices, quality, and coverage.In 1995, RBI had set up a working group under the chairmanship of Shri S. Padmanabhan toreview the banking supervision system. The Committee gave certain recommendations and based on such suggestions a rating system for domestic and foreign banks based on theinternational CAMELS model combining financial management and sensitivity to marketrisks element was introduced for the inspection cycle commencing from July 1998. Itrecommended that the banks should be rated on a five point scale (A to E) based on the linesof international CAMELS rating model. CAMELS rating model measures the relativesoundness of a bank. bj ectives of the Pro

 j
ect Study
³To study the Financial Performance of the
b
anks.´
y
 
To study the strength of using CAMELS framework as a tool of Performanceevaluation for Commercial banks y
 
To describe the CAMELS model of ranking banking institutions, so as to analyze the performance of various bank. R 
ationale
 In the recent years the financial system especially the banks have undergone numerouschanges in the form of reforms, regulations & norms. The attempt here is to see how variousratios have been used and interpreted to reveal a bank¶s performance and how this particular model encompasses a wide range of parameters making it a widely used and accepted modelin today¶s scenario. Data Collection

y
 
Primary Data
:
Primary data was collected from the Banks¶ balance sheets and profitand loss statements. y
 
Secondary Data
:
Secondary data on the subject was collected from ICFAI journals,Banks¶ annual reports and RBIM ethodology
As long as the methodology is concerned, we have made use of a framework calledCAMELS FRAMEWORK. There are so many models of evaluating the performance of the banks, but I have chosen the CAMELS Model for this purpose. I have gone through several books, journals and websites and found it the best model because it measures the performance of the banks from each parameter i.e. Capital, Assets, Management, Earnings,Liquidity and Sensitivity to Market risks.CAMELS evaluate banks on the following six parameters :


 
Capital Adequacy (CRAR)‡
 
Asset Quality (GNPA)‡
 
Management Soundness (MGNT)‡
 
Earnings & profitability (ROA)‡
 
Liquidity (LQD)‡
 
Sensitivity to Market Risks ()

websitDuring an on-site bank exam, supervisors gather private information, such as details on problem loans, with which to evaluate a bank's financial condition and to monitor itscompliance with laws and regulatory policies. A key product of such an exam is asupervisory rating of the bank's overall condition, commonly...
tracking img