Income and Expenditure Analysis of COmmercial Banks

Abstract

The banking system has undergone significant changes during the last 15 years. With deregulation and soft interest schemes,the scope of intervention by RBI has reduced while the market forces are the key determinants.Competition,changing investment climate,technological revolution,changing investor preferences and emerging new business opportunities have put tremendous pressures on interest spreads.Banks are now forced to think of ways and means of generating revenues from unconventional sources rather than limit themselves to conventional borrowing and lending activities. The challenge for banks today is how to manage with thinning spreads. This is particularly important because with dilution in banks’equity, analysts and shareholders closely track their performance. Thus, with falling interest rates, consequently falling interest spreads and rising provisions for NPAs, greater attention needs to be paid to reduce transaction costs. For a strong and resilient banking and financial system, banks need to go beyond peripheral issues and tackle significant issues like improvements in profitability, efficiency and technology, while achieving economies of scale through consolidation and exploring cost-effective solutions. An attempt is thus made to analyse Income, Expenditure, Net Interest Margin and Return on Assets of Public Sector Banks, Old Private Sector and New Private Sector Banks from 2000-01 to 2009-10