A Comparative Study on Financial Performance of banking sectors

Banking sector plays a serious role within the country’s economy. The Indian banking industry is one of the quickest growing industry in India. The Indian industry has witnessed radical changes and massive growth throughout the previous couple of years. “CAMEL” ratio is calculated so as to target money performance. The CAMEL stands for Capital adequacy, Asset quality, Management, Earnings and Liquidity. The present paper explains the performance of selected banks (HDFC bank and BOB). Last 5 years are taken for this study i.e., 01/04/2015 – 31/03/2020. The study is predicated on secondary information sources and for this purpose, relevant information is collected from the Annual Report of the individual banks for the above-named study period.


Introduction
A sound and efficient banking system is a boon to the developing economy. The banking system in India should be more effective to meet new challenges and technologies of everyday life. It has come up with public sector banks, private sector banks and cooperative banks for different purposes. RBI being India's central bank and regulatory body under the jurisdiction of ministry of finance, is responsible for the issue and supply of Indian currency and the regulation of the Indian Banking system. It works for the promotion of economic development. RBI was nationalized in 1949. Currently, in this study CAMELS rating system is taken up as a tool to analyse the financial performance of "BANK OF BARODA and HDFC BANK". [1][2][3][4][5] 2. Objective  To compare the financial performance of Bank of Baroda and HDFC Bank using CAMEL ratios.
 To analyse the capital adequacy and asset quality of the chosen banks.

Statement of the problem
In the recent years, the financial system particularly the banks have undergone various changes in the type of reforms, laws & norms. CAMELS' framework for the performance analysis of banks is an addition to the present. The try here is to envision however various ratios are used and understood to reveal a bank's performance and the way this explicit model encompasses a good vary of parameters creating it a widely used and accepted model in today's state of affairs.

Scope of the study
To study the importance of using CAMELS framework for performance analysis in banking system. The camel model would be useful for the govt authorities to diagnose the monetary performance of the banks through its six components and counsel them steps for its property.

Research type
Here, the research type would be descriptive research through comparative study i.e., analysis of banks financial statements to understand the position of one bank in comparison with another. The present study has aimed at comparing the performance of banks through camel framework.

5.2Area of study
The study environment will be the Banking industry. 2 banks have been taken for the study. Bank of Baroda (second top public bank) and HDFC Bank (first top private bank) have been chosen.

Period of the study
The period taken up for the study would be 5 years, viz, .1.4.2015 to 31.3.2020.

Data source
Secondary data has been considered for the study, which has been collected from the annual reports and audited financial statements of the banks.
6. Limitations of the study  Only five years have been considered for the study.
 Only two banks have been taken up for the study. Studied the financial reforms on the soundness of the Indian banking through its impact on the asset quality. The study identified the key players as risk management, NPA levels, effective cost management and financial inclusion. [6][7][8][9][10][11].

Chart.1. CRAR 8.1 Interpretation
Indian scheduled commercial banks are received to maintain a CRAR of 9% while Indian public sector banks are emphasized to maintain a CRAR of 12%. In case of HDFC bank, CRAR has been constant from march 2016 to march 2018 and it has been declined in 2019 and in 2020 it has increased to 18.00. In case of BOB, there has been a very slight but steady increase over the 5 years. On comparing, we find that both banks have interchanging fared better than the others in the

Interpretation
This ratio shows a bank's aggressiveness in lending which ultimately result in better profitability. HDFC bank shown an increasing trend in its total assets as well as total advances over the 5 years. BOB's ratio was decreasing from 57.16% to 25.15%. but it managed to maintain a constant percent over the next 3 years. HDFC bank maintained a greater advance to asset ratio,

Interpretation
This ratio depicts the risk-taking ability of the bank. Higher the ratio, lower will be the risk in bank's investment. HDFC bank's ratio gradually increases till 2017 -2018. And it increases to 22.7%in 2019 -2020 after a slight fall to 21.5% in 2018 -2019. In the case of BOB, in the year 2016 -2017 it showed a sudden increase from 14.57% to 43.93%, but at once showed a decrease to 10.79% in2018 -2019. Again, it started up with a rise to 11.47% in 2019 -2020. HDFC bank maintained a higher ratio assuring lower risk in its investments over the 5 years.

Interpretation
Net NPA reflects the performance of banks. Higher the ratio, higher will be the credit risk. HDFC bank showed an increased percentage from 2017-2018 and 2018 -2019. But after that it showed a slight fall in its performance indicating lesser risk. BOB showed an increased percent over the 5 years than HDFC though there is a fall in the last 2 years. HDFC holds the lesser risk position when compared to BOB.

Capital Adequacy Ratio
 Even though HDFC bank showed a decreased in its percentage, it has a higher CRAR than BOB.
 In the case of debt capital, BOB depends more on the debit capital and has a higher ratio than HDFC bank.
 HDFC bank maintained a higher aggressive lending policy than BOB.
 HDFC bank maintained a higher ratio than BOB assuring loser risk in its investments.
 In short, HDFC bank maintains a better capital base than BOB and well adequate for the requirements.

Asset Quality
 BOB shown lesser efficiency in recovering its debts.
 HDFC is in the lesser risk position when compared to BOB.
 The asset quality of HDFC bank is more satisfying than BOB

Suggestion
 BOB would have tried to be conservative for better capital base to be adequate for the requirements of RBI.
 HDFC bank would have maintained more assets than BOB. But its investment in government securities shows the risk bearing capacity.

Conclusions
This study is on the comparative financial performance of BOB and HDFC bank using camel analysis. Both the banks are in a stable and safe position. On comparing, HDFC bank has better asset quality and capital adequacy than BOB. From the present study, HDFC bank is a better performer than BOB in terms of capital adequacy, compared to BOB. The significance of CAMEL ratios and its rating methodology can be published as a part of the annual report of the banks to get a better understanding of the following position, their management efficiency by the invertor and the public.