Performance of Public Sector Commercial Banks Lending to Sensitive Sector in India – A Study
Introduction
The banks play a very crucial role in the process of economic development and so the availability of banking infrastructure is considered as one of the prerequisites for rapid and balanced development of the country. The banks in India have an important responsibility of channelizing the funds with most important sector to fulfill the predetermined objective. There is a rabid expansion in banking, deposit mobilization and credit development due to which there is a change in the scope of banking operations in the credit development mainly boosting industry and agriculture in India.
Banks play an important role in the modem economy by providing necessary credit to different sectors of the economy. Sectoral distribution of bank credit provides an understanding of the contribution of bank credit towards economic growth and financial stability. Credit to Sensitive Sectors means financing to Capital market, Real estate and Commodities. These are deemed sensitive for the stability of the banking system on account of the price fluctuations in the related asset/product markets. Credit to these sensitive sectors together constituted 19.6 per cent of the total bank credit at end-March 2010, with the real estate sector individually accounting for 16.6 per cent of this share.
Statement of the Problem
Fundamentals of the Indian economy continue to be strong, although there are some downside risks in the short run, suggesting that the demand for credit would also remain strong. While banks need to meet all the legitimate credit requirements of industry, they have to recognize that there are also some critical sectors such as sensitive sector. The high growth in credit during was broad-based in line with the expansion in economic activity across all the major sectors of the economy.
The credit growth to sensitive sectors moderated partly in response to the measures taken by the Reserve Bank in this regard, it continued to be high. Despite the sizeable increase in the growth of bank credit during the current financial year so far, there has been a perception of credit pressures. Constraints in access to external financing as also reprising of risks and higher spreads resulted in additional demand for domestic bank credit from corporate with attendant hardening of interest rates across the spectrum. Moreover, domestic equity markets were significantly affected by the global de-leveraging of assets and the adverse sentiments from overseas markets, which made it difficult to raise capital in the markets. Financing to sensitive sector helps for development Indian economy. Therefore the present study analyzes the performance of public sector commercial banks in lending to sensitive sector in India.
Objectives of the Study
The following are the objectives of the study:
- To analyze the performance of lending to sensitive sector by State Bank Groups in India.
- To analyze the performance of lending to sensitive sector by Nationalized Banks in India.
- To analyze compare the performance of financing to sensitive sector by State Bank Groups, Nationalized Banks and Public Sector Commercial Banks in India.
Methodology of the Study
The study is based on the secondary data. The data required for the study are collected from RBI Annual Reports, Journals, Reports on Trend and Progress of Banking of India, Government Publications, Books and Web sites.
Period of the Study
This study covers a period of eleven years from 2000-2001 to 2010-2011.
Plan of Analysis
Tables are prepared from relevant published source. Tables have been used to present the data in a suitable form.
The researcher has used the following tools for analyzing the data.
- Percentage Analysis
- Kruskal -Wallis Test
Performance of Public Sector Commercial Banks Lending to Sensitive Sector in India
The sensitive sector is classified into three parts. They are Capital market, Real Estate and Commodity. The particulars about the performance of public sector commercial banks lending to sensitive sector in India is displayed in Table 1
Table 1
Performance of Public Sector Commercial Banks Lending to Sensitive Sector in India – Sector wise
(Amount in Crores)
| Year | Capital Market | Real Estate | Commodity | Total
Sensitive Sector |
| 2000-2001
2001-2002
2002-2003
2003-2004
2004-2005
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011 |
1479.34
(10.35) 1299.06 (9.57) 1032.26 (6.71) 1185.37 (6.90) 9390.18 (11.46) 13467.98 (8.28) 20620.85 (9.09) 31002.00 (10.35) 33119 (9.01) 37501 (8.85) 44023 (8.50) |
5622.42
(39.32) 6043.71 (44.51) 7987.87 (51.96) 9936.62 (57.85) 71370.26 (87.07) 147980 (90.97) 205957.20 (90.76) 267694 (89.40) 334311 (90.99) 386412 (91.15) 473735 (91.50) |
7196.18
(50.33) 6234.45 (45.92) 6354.53 (41.33) 6053.51 (35.25) 1206.51 (1.47) 1227.54 (0.76) 351.15 (0.16) 734 (0.25) 897 (0.24) –
– |
14297.94
(100) 13577.22 (100) 15374.66 (100) 17175.50 (100) 81966.95 (100) 162677.69 (100) 226929.20 (100) 299430 (100) 367431 (100) 423913 (100) 517757 (100) |
Source: Annual Reports of Trend and Progress of Banking in India
Note: The figures in the Bracket are per cent to total.
Table 1 Show that the performance of public sector commercial banks lending to sensitive sector in India has increased from Rs. 14297.94 Crores in 2000-2001 to Rs.517757Crores in 2010-2011. The share of capital market was decreased from 10.35 percent to 8.50 percent during the study period. The share of Real Estate has increased from 39.32 percent in 2000-2001 to 91.50 percent in 2010-2011. The share of commodity has decreased from 50.33 percent in 2000-2001 to 0.24 percent in2008-2009. The lending to total sensitive sectorof public sector commercial banks in has increased more than 36.21 times during the study period.
Performance of State Bank Groups Lending to Sensitive Sector in India
The performance of State Bank Groups lending to Sensitive sector in India is enumerates in Table 2
Table 2
Performance of State Bank Groups Lending to Sensitive Sector in India
(Amount in Crores)
| Year | Capital Market
(Rs.) |
Real Estate
(Rs.) |
Commodity
(Rs.) |
Total Sensitive Sector (Rs.) |
| 2000-2001
2001-2002
2002-2003
2003-2004
2004-2005
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
|
116.52
(3.95) 166.72 (7.59) 73.18 (3.51) 81.32 (4.10) 2398.85 (9.35) 3375.22 (6.82) 4098.71 (6.17) 8429.00 (8.95) 8674 (8.54) 9975.00 (7.82) 11611.00 (6.44) |
1354.27
(45.95) 620.26 (28.22) 756.61 (36.23) 853.29 (43.02) 23244.27 (90.65) 46143.21 (93.18) 62325.21 (93.18) 85768.00 (91.05) 92945.00 (91.46) 117665.00 (92.18) 168675.00 (93.56) |
1476.37
(50.10) 1411.03 (64.20) 1258.36 (60.26) 1049.05 (52.88) –
–
–
–
–
–
– |
2947.16
(100) 2198.01 (100) 2088.15 (100) 1983.66 (100) 25643.12 (100) 49518.43 (100) 66453.92 (100) 94197.00 (100) 101619.00 (100) 127641.00 (100) 180286.00 (100) |
Source: Annual Reports of Trend and Progress of Banking in India
Note: The figures in the Bracket are per cent to total.
Table 2 bring that the performance of State Bank Groups lending to Sensitive Sector in India has increased from Rs.2947.16 crores in 2000-2001 to Rs.180286 crores in 2010-2011. The share of Capital Market has increased from 3.95 percent to 6.44 percent during the study period. The share of Real Estate has increased from 45.95 percent in 2000-2001 to 93.56 percent in 2010-2011. The share of Commodity has increased from 50.10 percent in 2000-2001 to 52.88 percent in 2003-2004. The lending to total sensitive sector of State Bank Groups in India has increased more than 61.17 times during the study period.
Performance of Nationalized Banks Lending to Sensitive Sector in India
The performance of State Bank Groups lending to sensitive sector in India is explained in Table 3
Table 3
Performance of Nationalized Banks Lending to Sensitive Sector in India
(Amount in Crores)
| Year | Capital Market (Rs.) | Real Estate (Rs.) | Commodity
(Rs.) |
Total Sensitive Sector (Rs.) |
| 2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11 |
1362.82
(12.01) 1132.34 (9.95) 959.08 (7.22) 1104.05 (7.27) 4888.28 (9.02) 8616.43 (7.72) 13922.38 (8.82) 19597.00 (9.69) 24446.00 (9.20) 27526.00 (9.29) 32412.00 (9.60) |
4268.15
(37.60) 5423.45 (47.66) 7231.26 (54.42) 9083.33 (59.79) 48125.99 (88.76) 101836.96 (91.18) 143631.99 (90.96) 181926.00 (89.95) 241366.00 (90.80) 268746.00 (90.71) 305060.00 (90.40) |
5719.81
(50.39) 4823.42 (42.39) 5096.17 (38.36) 5004.46 1206.51 (2.23) 1227.54 (1.10) 351.15 (0.22) 734.00 (0.36) 897.00 (0.34) –
–
|
11350.78
(100) 11379.21 (100) 13286.51 (100) 15191.84 (100) 54220.78 (100) 111680.93 (100) 157905.52 (100) 202258.00 (100) 265812.00 (100) 296272.00 (100) 337471.00 |
Source: Annual Reports of Trend and Progress of Banking in India
Note: The figures in the Bracket are per cent to total.
Comparison of Sensitive Sector Lending by Public Sector Commercial Banks in India
In order to analyse the comparison of public sector commercial banks in lending to sensitive sector, the Kruskal – Wallis Test has been used. The Kruskal – Wallis Test is a non-parametric test. This test can be used with ordinal data as well as internal or ratio data. This test does not require the assumptions of normality and equal variances. The Kruskal – Wallis Test is based on the sum of ranks for each of the samples by using the following formula:
| where k | = | Number of population groups = 3 (SBI Group, Nationalised Commercial Banks and Public Sector Commercial Banks) |
| ni | = | Number of items in sample i |
| nT = Sni | = | Total number of items in all samples |
| Ri | = | Sum of the ranks for sample i |
The Kruskal – Wallis Test is used when k³ 3
The use of the Kruskal – Wallis Test requires the performance of commercial banks in lending to sensitive sector such as, Capital Market, Real Estate, Commodity and Total Sensitive Sector.
In order to compute the ‘w’ value for this study, ranks are assigned to all 33 performance of each of the three classifications of public sector commercial banks. The lowest value receives the rank of 1, whereas the highest value receives the rank of 33. Tied performance scores, if any, are assigned average rank values.
In order to know where there is any statistically significant difference in the various components of sensitive sector lending of public sector commercial banks in India.
Hypothesis: There is no significant difference between in the various components of sensitive sector lending by public sector commercial banks in India during the period under study.
For testing the above hypothesis the Kruskal – Wallis test value is calculated. The application of Kruskal – Wallis test is given in the following Table 4.
Table 4
Comparison of Sensitive Sector Lending by Public Sector Commercial Bank in India (Kruskal – Wallis Test)
(Amount in Crores)
| Year | SBI (Rs.) | Rank | Nationalised Bank (Rs.) | Rank | Public Sector Bank (Rs.) | Rank |
| 2000-01
2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 |
2,947.16
2,198.01 2,088.15 1,983.66 25,643.12 49,518.4.3 66,453.92 94,197.00 1,01,619.00 1,27,641.00 1,80,286.00 |
4
3 2 1 13 14 16 18 19 21 24 |
11,350.78
11,379.21 13,286.51 15,191.84 54,220.78 1,11,680.93 1,57,903.52 2,02,258.00 2,65,812.00 2,96,272.00 3,37,471.00 |
5
6 7 10 15 20 22 25 27 28 30 |
14,297.94
13,577.22 15,374.66 17,175.50 79,863.90 1,61,199.36 2,24,359.44 2,96,455.00 3,67,431.00 4,23,913.00 5,17,757.00 |
9
8 11 12 17 23 26 29 31 32 33 |
Form table 4 it is clear that the calculated value W for the various component of Sensitive Sector lending of Public Sector Commercial Banks in India are greater than the table value of X2 (5% at 18.3) and at the ( 1% at 23.2) level of significance. Therefore the null hypothesis framed for the purpose of this study is accepted. Hence it is conclude that there is no significance difference between in the various components of sensitive sector lending of public sector commercial banks in India.
Conclusion
In that conclusion the over all performance of Public sector commercial banks in India lending to sensitive sector like capital market , Real estate and commodity has increased to Rs14,297.94 crores in 2000-2001 to Rs.5,17,757.00 crores. The performance of State Bank Group (SBI Groups) in India lending to those sector has increased to Rs. 2,947.16 crores in 2000-2001 to Rs.1,80,286 crores . The performance of nationalized banks in India lending to those Sensitive Sector has increased to Rs.11,350.78 crores 2000-2001 to Rs.3,37,471.00 crores in the year 2010-2011.
The results of Kruskal – Wallis Test indicate that there is no significant difference in the performance of public sector commercial banks of different classification in lending to sensitive sector during the period under study.
References
- Trend and Progress of Banking in India
- Annual Reports – RBI
- RBI – Bulletin
Author
Dr. S.JEYAKUMAR
M.Com., MBA., MHRM., M.Phil., Ph.D., PGDCA
Assistant Professor, Department of Commerce
SRI S.R.N.M. COLLEGE , SATTUR – 626 203
Virudhunagar District, Tamilnadu
Published : Banking Finance Magazine – March, 2013