Executive Summary

Check whether there is any significant difference in NPA ratio between SBI and
HDFC The Indian banking sector is under scrutiny following several sign ificant
changes in the monetary policy maker. Banks' interest rates have go ne up as the
Reserve Bank of India (RBI) has increased interest rates to help depreciate the
Indian rupee. This can manifest as an increase in non-performing assets (NPAs)
and a decrease in profits. Factors affecting the c ompany's revenue include internal
equipment and other factors. The aim of this article is to compare and evaluate the
financial performance of India's la rgest commercial banks and private sector
companies and understand NPA trends in secondary data analysis. Both banks'
earnings are affected by co mpany-
specific valuations and risk factors. SBI's revenue ratio is seen as higher risk than
HDFC's. Efficiency metrics are a key driver of profit at HDFC, India's lar gest
private equity firm, but not at SBI. The asset usage of the two banks is almost the
same. SBI, India's largest bank, has a higher NPA ratio. Performa nce indicators
have proven to be the most important aspect of SBI. A two-sample T test, which
assumes equal variance, has also been used in the last 3 years. Economical power.
The United States cannot have a strong financi al system without a solid cash bank.
Banks play an important role in rural ec onomic development. They collect people's
unspent money and make it fina

1
ncially viable. They use the system to borrow money and buy securities and await
new calls. Acceptance and Discounts on Other Terms Allows the use of other
indoor and outdoor labels. Banks also help raise capital. India's bank ing sector has
achieved impressive results in the last three years. It is no lon ger limited to just
cities, but has also spread to the most remote parts of the world. This is one of the
catalysts of India's development. The financial sect or is now one of the most
important services in India. Delivery of goods is cr ucial to the success of the
business. The bank's interest is transferred from t he buyer to the customer owner.
The penetration of information technology into the banking industry has changed
the way people draw. There has bee n a significant change in the scope of banking
services and many products and online transactions have emerged. It is stated that
the decrease in cust omer activities is mainly due to ATM operators, telephone
banking and digit al payments. The convenience of online transactions eliminates
the need for customers to access and manage their bank accounts.
Bank refers to a financial institution and financial instrument that accepts de posits
and converts deposits into loans through loans. Or carrying out indire ct activities
through capital markets. The government of India or the state g overnment holds
the majority stake (i.e. more than 50%). Shares of these b anks are traded on the
stock exchange. Public sector banks in India include State Bank of India, Bank of
Baroda, Bank of Maharashtra, Bank of India etc. There are. (Types of Institutions,
2020)
Private Sector Banks -
Private banks are banks that are mostly owned by banks rather than the sta te.
Private banks in India include RBL Bank, HDFC Bank, ICICI Bank, Hawa B ank etc.
There are. (Private Sector Bank)
Indian Banking Sector

2
The Reserve Bank of India (RBI) stated that the Indian banking sector is profi table
and well managed. The country's financial and economic standards ar e higher than
other countries in the world. According to Business, Market a nd Liquidity Risk
Research, Indian banks are generally strong and performin g well during the global
economic crisis.
The Indian banking sector has recently introduced new business models su ch as
bank transfer and microfinance banking. RBI's new measures could go a long way in
helping improve the domestic economy. In addition to credit u nions, there are
96,000 cooperative and rural banks, including regional ban ks, and 1,485
municipal banks. As of September 2020, the total number of ATMs in India is
210,049 and is expected to reach 407,000 by 2021. Interes t payments on loans or
advances are overdue by 90 days (NPA Conditions Define
Non-Existent Asset Types -
Standard Assets: Assets that provide fixed income. Therefore, there are no special
requirements for standard features.
Substandard assets - include loans and advances classified as non-performing
assets for more than one year. entities. (NPAs and NPA Type, 2 020
The Road Ahead
Quick delivery and regular adjustments in real estate investments should su pport
companies. -
Older large companies will get loans from banks and provide better service.

3
 Chapter 1: Introduction of the Topic

1 .1 Rationale of the Study

A thorough examination of a bank's financial statements will reveal important factors to

consider before making an investment decision. Investors should be aware of the market cycle and
interest rates, as these can have a direct impact on a bank's financial results..

Reasons to choose Ratio Analysis for SBI and HDFC

Provides a clear idea of the profitability, liquidity and long-term solvency of the company.

Ò Ratio analysis is an effective way to evaluate a company's performance and compare it to other
similar companies to measure financial stability.

Ò It is useful to analyze a firm's performance over a given period of time.

Ò It is time and cost effective.

Ò A comprehensive method for comparing the NPA ratios of both companies

Reasons to choose SBI and HDFC bank

Ò In the current scenario as of June 2020, if we consider the two largest Indian banks, one from
the private sector segment and the other from the public sector segment, there is no doubt that
HDFC Bank from the private sector and SBI from the Public sector segment are looking at their
balance sheet, reach and customer base.

4
1.2 Introduction to Banking Sector

India is not most effective the world's biggest independent democracy, but it's also a hastily
developing economic powerhouse. No united states may have a strong financial system without
a sound and green banking gadget. Banks play a critical role in a rustic's financial boom. They
collect human's unused financial savings and cause them to eligible for funding. they are in the
technique of granting loans and buying investment securities, new call for deposits are also
hooked up. Accepting and discounting bills of alternate lets in for alternate both inside and
outdoor the us of a. Banks additionally assist to enhance capital mobility. India's banking system
has a long listing of superb accomplishments over the last 3 many years. it is now not
constrained to the towns, however has spread to even the most faraway components of the
world. that is one of the elements in the back of India's development. The banking industry is
now one among India's maximum essential service industries. the supply of offerings is
important to the economic system's achievement. Banks' interest has grew to become far from
client acquisition to customer retention. The advent of information technology into the banking
region has changed the way human’s paintings. The banking area's coverage has passed through
radical transformations, various client-oriented merchandise, together with internet banking,
are to be had. patron’s workload has been decreased mainly due to ATM carriers, telebanking,
and digital bills. The net's comfort Banking lets in a consumer to get right of entry to and manage
his financial institution account without having

5
Definition of a Bank

A bank is a financial institution and financial intermediary that accepts deposits and channels
those deposits into lending activities, either through loans or indirectly through the capital
markets.

Types of Banks:

Banks are classified as Public or Private depending on their ownership.

PUBLIC SECTOR BANKS-

Public sector banks (PSBs) are the major form of banks in India in which the Government of India
or state governments own a majority stake (ie more than 50%). The shares of these banks are
traded on stock exchanges. Public sector banks in India include State Bank of India, Bank of
Baroda, Bank of Maharashtra, Bank of India and others. (types of banks, 2020)

PRIVATE SECTOR BANKS-

A private bank is a bank whose majority shares are owned by the bank's shareholders rather
than the government. Private banks in India include RBL Bank , HDFC Bank, ICICI Bank, Hawa
Bank and others. (Private Sector Bank)

Indian Banking Sector

The Reserve Bank of India (RBI) has maintained that the Indian banking sector is adequately
capitalized and regulated. The country's financial and economic standards

6
are higher than any other country in the world. According to the Credit, Industry and Liquidity
Risk Survey, Indian banks are generally resilient and performed well during the global recession
Innovative banking models like transfer banking and microfinance banking have recently been
introduced in the Indian banking sector. RBI's new initiative could go a long way in helping
restructure the domestic banking sector.

Market Size

The Indian banking system consists of 12 public sector banks, 22 private banks, 46 foreign
banks, 56 regional rural banks, 1,485 urban cooperative banks and 96,000 rural cooperative
banks besides cooperative credit institutions. As of September 2020, the total number of
ATMs in India is 210,049 and is expected to reach 407,000 by 2021. (Banking Industry in
India, 2021

NON PERFORMING ASSESTS of a Bank

Definition: A non-performing asset (NPA) is a loan or advance on which principal or interest

payments have remained overdue for a period of 90 days. (NPA definition

Types of NPAs-
Standard Assets: This is a type of performing asset that generates a steady stream of income
and repayments as they become due. These assets have a normal risk profile and are not NPAs
in the traditional sense. As a result, the standard features do not require any special
requirements

Sub-Standard Assets – These include loans and advances classified as non-performing assets for
more than one year.
Doubtful Assets- These are assets that are considered non-current for more than 12
months.

Loss Assets- This is a non-performing asset of the lending institution. (NPA and Types of NPA,
2020

7
Road Ahead
Increased investment in infrastructure, speedy delivery of projects and ongoing reforms are
expected to boost the banking sector. All these factors indicate a strong future for the Indian
banking sector, as fast-growing companies will get loans from banks.

In addition, technological advancements have made mobile and internet banking possible. The
banking industry is increasingly focusing on providing better customer service and improving
technology infrastructure to improve the overall customer experience and offer a competitive
edge bank.

Payzapp and SmartBUY two digital products. (HDFC Bank)

SBI Bank

About SBI

State Bank of India is the regulator of the public financial sector and financial
services in India, headquartered in Laban, Mumbai, Maharashtra. . 8] It is th e
largest bank in India with a market share of 23% in assets and 25% in total loans and
deposits. In 1955, the Imperial Bank of India, later renamed the St ate Bank of India,
was established. The bank's name was changed to State Bank of India. (State Bank
of India)

Business

SBI is one of the largest banks in India with 245,652 employees as of 31 Mar ch
2021 25. SBI is one of the largest banks in the country with 245,652 empl oyees as
of 31 March 2021 It is the largest bank and 25.92% of them are wo men and 63,673
(5096) disabled employees. As of the same day, there are 2,828 employees at SBI.
Domestic business accounts for 95.35% of sales. I n the same year, housework
accounted for 88.36% of total income. SBI, wh ich operates 11,303 branches under
the Pradhan Mantri Jan Dhan Yojana la unched by the government in August 2014,
has opened more than 30 millio n accounts since September, including 21,000 in
remote cities and 15,500 i n cities. .
National

India, SBI have over 24,000 branch Sales in fiscal 2012-13 were US$2. 05 trillion (US$28
billion), with domestic operations accounting for 95.35% of sales. In the same fiscal year,
8
domestic activities accounted for 88. 36% of total revenue. SBI operates 11,303camps in the
Pradhan Mantri Jan Dhan Yojana started by the government in August 2014 and opened over 3
million account by September, including 2. 1 0million accounts in villages areas and 1. 55 million
accounts in cities areas. .

International

As of 2014-
15, the bank has 191 foreign offices in 36 countries, making it India's largest bank in the gl obal
economy. Loans, Credit Cards, Fixed Deposits, Loans, Home Loans, Commercial Lo ans, Credit
Cards, Home Loans, Vehicle Loans, Gold Loans, Loans Mudra etc.

Products and Services Offered

SBI offers a wide range of products and services such as savings accounts, credit cards, term
deposits, personal loans, home loans, business loans, debit cards, home loans, car loans, gold
loans, Mudra loans, etc.

1.3 Justification of the Topic

Ratio The analysis is a good way to measure the financial growth of the company and is well
done. This can provide a clear picture of the company's profitability, performance a nd long-
term solutions. It will also help in comparing banks and subsequent changes in capital, pr
ofitability and NPA records over the years. Analyzing the ratio is the best way to compar e the
company's performance over a period of time; hence, the researchers chose to co mpare the
analysis with SBI (largest public sector bank) and HDFC Bank. (Largest bank)

9
Chapter II: Literature Review

2.1 International review

Below are several factors that affect the revenue in the company (Sufian an d

Habibullah, 2010 (Dietrich and Wanzenried, 2011). ). These factors can be divided

into internal decisions made by the company, such as bank size, cap ital, risk

management, expense management and diversification (Molyneux and Thornton,

1992); such as business concentration, business size and ow nership, inflation,

interest rates, gross domestic product (GDP) (Athanasogl ou, Brissimis and Delis,

2008); Numerous studies have examined the impact of important internal factors on

profits. (Smirlock & Brown, 1986) examined the impact of demand deposits as a

feature of all deposits. According to th e findings, demand for deposits appears to

have a positive relationship with returns. According to Miller and Nolas (1997),

loan losses and charge-

offs have a negative impact on the profitability of large banks. These results

show the composition of assets and liabilities related to net depreciation. Th

erefore, companies' asset and liability mix decisions can affect payment out comes.

Therefore, banks with higher salaries and benefits need higher inter est rates to be

profitable. (With M. Miller, A.G. Noras, 1997)

10
(Ganesan, 2001) studied the profitability of public sector banks in India and f ound

that interest rate, interest rate, other income, deposit per branch, loan share for

total assets and progress ratio for core assets are important for th e results. driven.

(El-

Bannay, 2004) investigated this. Does investment in information technolog

y have an impact on UK banking income? The findings show that the profita bility

of a bank is affected by the number of ATMs it installs. (BODLA & VER MA,

2006) tried to interpret the key determinants of income of public secto r banks in

India and the findings showed that non-

interest income drilling, labor costs, equipment and capital are important. N et

profit is inextricably linked to contingencies and interest rates. (Naceur, S and

Goaied, 2001) A study of Tunisian banks from 1980 to 2000 found that banks with

lower capital and management costs were again more profitable and profitable.

They also found that bank size has a negative impact on pro fitability, especially in

the retail sector. The expansion increased the bank's p rofitability. In addition, the

income of private banks is also high. They are mo re successful than government

institutions. (SUFIAN, 2009) investigated th e factors affecting the profits of local

and foreign companies in Malaysia bet ween 2000 and 2004. The risk of failure is

higher. High operating costs and a high percentage of non-

11
interest income have proven beneficial. The impact of macroeconomic varia bles

such as concentration, expansion and inflation on bank profitability is c overed by

external factors that determine bank profitability (Rajan and Zing ales, 1998).

(Atanasoğlu, Brissimis and Delis, 2008); (Chirwa, 2003) used ti me series data

from 1970 to 1994 to examine the relationship between busi ness models,

consumer behavior and corporate profits in Malawi. long term relationship.

(SUFIAN, 2009) found that economic growth has a negative i mpact on the

profitability of banks in Malaysia. High inflation positively affec ts the profits of

these banks. (Molyneux & Thornton, 1992) conducted a res earch study in 18

European countries. and find a significant relationship bet ween return on equity

and interest rates for each country, bank account, an d member of government.

2.2 National review

Avani Ojha and Hemchandra Jha used various research methods to study t he

impact of NPA on the performance of SBI and PNB and established the a ssumption

that NPA plays an important role as the overall research. . > Ban ks can report

NPAs by target, borrower, country, etc. They recommend tha t they analyze the

data regularly. Santhanakrishnan prepared a report on NP As of State Bank of India

for the purpose of capital utilization between Marc

12
h 2002 and 2011-

12, examined all NPAs, investigated the impact of NPAs and suggested step s to

monitor NPAs. Values and standard deviations are given to test the hyp othesis and

the results are as expected. Banking organizations have change d a lot since the

1990s and credit management has become more important. and conducted the

"Comparative Study of SBI and ICICI Bank 2014-

17". Data for the period until 2017. It has been determined that the managem ent of

non-erforming assets (NPA) is a challenge for all banks in the banking sector

When one year's data is examined, it appears that this is the biggest proble

m. It is an increase in revenue for both banks. in non-

performing assets and reduced profitability. It's easy to lose. And worse. (R AJ,

Jain, Bansal and Verma, 2018) SwathiM.S. and Sridhar.K.

They conducted research on non-

performing assets from 2007 to 2013 and identified public sector banks, pri vate

sector banks and other types of banks. To solve product failure. Secon dary data

published by banks at the end of every quarter and year and the a nnual report of the

Reserve Bank of India. The data is reviewed. They investi gate the causes and

factors affecting NPAs. According to CCTV, Wellfield's default by many bankers

is the main reason, and other factors found in their investigation include lax credit

standards, business problems, currency dive

13
rsification, inflation and debt, and stagnation in the economy. Lok Adalat, en

actment of SARFAESI Act, asset restructuring

The first mention of bankers was connected with "Shroffs", "Seths", "Sahuka rs",

"Mahajans". In a historical article Srivastava (2001) mentions the life of t he first

documents of bankers. "History of Banking in India" is a book on the history of

banking in India. He added that these small businesses were mana ged by local

banks. Small to small areas of activity. This is a shame for the b orrowers who have

big businesses. Larger and more specialized than previ ous businesses, they do

more business than the average bank. (Srivastava, 2001) Tiwari (1959) studied the

growth and development of the Indian bank ing system. He said Allahabad Bank

(established in 1865) was the first bank to accommodate all Indians, followed by

Punjab National Bank (1894). Betw een 1906 and 1913, Bank of India, Reserve

Bank of India and many other ban ks were established. Bank of Baroda, Canara Bank,

Bank of India and Bank o f Mysore are some famous banks. in India. It is important

for its developmen t and reflects the “financial revolution”. The first step is to

create a group of people who will create change in the bank. Narasimhama Group

was forme d in 1989 to implement these changes. br>

CRR (cash rate ratio) 3-

14
6%. The preparation and reinterpretation of the main points is still ongoing. The

establishment of new private companies is prohibited. The branch licen se is also

cancelled. Narasimham Committee Report. Strong and weak publi c companies fail.

The committee also helps public health competition and pr ivate banks by

approving good handshake plans. The share of deposits in G DP increased from

48.6% in 1990 to 60.4% in 2010. The credit score increa sed from 29.5 to 39% in

2002. (Radha, 2003) According to the article titled “Comparative Study of Non-

Performing Assets in Indian Banking Sector” by Malayadri and Sirisha (2011),

advances have increased and NPAs have decreased, thus the ratio of publi c and

private sector banks is improving. Good performance. Asset Quality T hey also

concluded that the findings show an improvement in the managem ent of non-

performing assets in banks. Supervisory authorities use prudent standards

and measures. (Malayadri, Sirisha, and Pacha, 2011) Prasad and Veena (201 1 ), in

their article titled "Non-

Performing Asset Reduction Strategies of Indian Commercial Banks", report ed that

non-

performing assets do not have a negative impact on asset returns because they do

not do so. Create NPA assets.

As a result, bank revenues decreased and waste disposal was restricted. (B

15
havani, G.V., Bina and D. 2011) In June 2011, Kajal Chaudhary and Monica S harma

conducted a NPA study comparing public and private sector banks. Close and

regular monitoring of the final use of approved funds is required t o detect misuse

of funds. This process can be repeated every three months to ensure recovery of all

accounts that have become NPA. (Chaudhary and Sharma, 2011) Prof. Siraj. KK

also has Shiraz. K.K. (Doctorate). P. SUDARSA NAN PILLAI says NPA (February

2014) is a disease affecting the bank. This affects liquidity and profitability and

threatens asset quality and bank surviv al. The study concludes that non-

performing assets (NPAs) continue to pose a significant threat and other fa

ctors arising from the rise in NPAs have raised concerns about the credit ris k

management performance of Indian banks. (PILLAI and K.K. 2012) Chetan Dudhe

(August 2017) found a positive relationship between non-performing assets and

earnings. Every country has a bad loan problem, and financial institutions need to

develop new strategies to return loans quickly. Non-

performing assets (NPAs) affect the economic and psychological health of f

inancial institutions. (Dude, 2017)

16
 CHAPTER III: METHODOLOGY

ï Compare and Evaluate SBI and HDFC Bank's financial performance. annual changes. > Ho2 =
No relationship between SBI and HDFC net NPA compared to last three years. Fin ancial
performance. 2022-23
Use examples to analyze and compare financial performance. ¤ Duration of the study -
Duration of the study will cover the financial data of the last 3 years - 2020-21, 2021-22,
2022-23 of SBI and HDFC Bank.

3.2 Research Hypothesis

Ho1 = there is no significant relationship between the gross NPA ratio of SBI and
HDFC over the last three years.

Ho2 = there is no significant relationship between the net NPA ratio of SBI and
HDFC over the last three years.

17
3.3 Scope of the Study

This study help to measured, evaluate and compared the money performance of SBI and

HDFC.

The study is based on secondary data collected from annual reports, websites, journals,

documents and other public data of reputed banks.

This study will be conducted over three years: 2020-21, 2021-22, 2022-23

Use ratios to analyze and compare financial performance trends.

Means and t-tests are also used to analyze bank profitability.

3.4 Research Design

DURATION OF STUDY- The period of this study will cover last 3 years of the financial data-
2020-21, 2021-22, 2022-23

DATA COLLECTION PROCEDURE- Secondary Data will be used in this study to compare the
financial statements of both the banks over the last three years.

DATA COLLECTION METHODS- Data has been collected through Ratio Analysis.

STATISTICAL TOOLS AND TESTS USED- The statistical tool used in the study is Mean and
inferential statistic T-test has been conducted to know the significant relation between the NPA
Ratios of both the banks.
3.5 Limitations of the Study

This study is limited to selected and limited indicators, and the study period is only three years.
The review is based on secondary data, and the downside is that companies can li e or fabricate
their financial information.

18
 CHAPTER IV:
DATA REPRESENTATION AND INTERPRETATION
4.1 Data Representation and Interpretation

SBI and HDFC Bank 2020 -

Ratio analysis 21, 2021 The summary of the annual report for -22 and 2022-23 is as
follows:

I Non-Performing Asset Ratio-

Non-performing assets (NPA) means non-

performing assets. Interest for more than 90 days. Including: -

Ⅲ Total non-performing assets value

Total non-performing assets -

Total asset failure refers to all liabilities of the company. The person who de faults
on the contract must pay the principal and interest.

Total non-
performing loans are the sum of all loans on which an organization is in defa ult by
financial institutions that provide loans. These together form total non
-performing assets

Total non-performing assets - Total non-

performing assets refer to all debts that the organization has failed to collect or
those owed to the organization have failed to collect. must pay the princi pal
amount and interest to fulfill its contracts

Total loan defaults are the result of all loans on which the organization has d
efaulted by individuals who have defaulted on loans received from financial i
nstitutions. br>

19
 Formula-

Gross NPARatio= (A1 + A2 + A3 ……………………. + An)/Gross Advances

( A1 stands for loans given to person number one, A2 for loans given to person number two etc)

YEAR SBI HDFC

2020-21 4.98 1.32

2021-22 3.97 1 . 17

2022-23 2.78 1 . 12

Average 3.91 1.38

(Table 1 shows the % of Gross NPA of SBI and HDFC for last three years)

Graph 1 shows the % of Gross NPAs of SBI and HDFC for last three years)

20
Interpretation: The gross NPA ratio of SBI stood at 4.98 in 2020-21 while that of HDFC was 1.32
in the same year. In 2021-22 the ratio of SBI dropped down to 3.97 and that of HDFC increased to
1.32 . In the year 2022-23 the ratio of SBI further dropped down to
2.78 while that of HDFC was 1.12

So the average Gross NPA ratio of SBI stood at 3.91 while that of HDFC was much lesser at 1.38,
which clearly shows that SBI’s asset quality is in very poor shape.

21
  NET NON PERFORMING ASSESTS RATIO

Net non-performing assets are the total non-performing assets minus the amount of provisions.

This is the actual loss that the organization incurs if the loan defaults.

Formula-

Net NPARatio = (Total Gross NPA) – (Provision for Unpaid Debts)/Gross Advances

YEAR SBI HDFC

2020-21 1.50 0.40

2021-22 1.02 0.32

2022-23 0.67 0.27

AVEGAGE 1.06 0.33

Table 2 shows the % of Net NPA of SBI and HDFC for last three years)

22
(Table 2 shows the % of Net NPA of SBI and HDFC for last three years)

Interpretation: In the year 2020-21 , the Net NPA ratio of SBI stood at while 5.73 that of HDFC
was much lesser i.e. 0.40. In year 2021-22, the ratio of SBI further dropped to 1.02 and that of
HDFC was at 0.32. In 2022-23, the ratio again dropped to 0.67 and 0.27 respectively, which
shows the Net NPAs gradually started decreasing.

The average gross NPA ratio of SBI was at 1.06 and that of HDFC was at 0.33. Therefore it shows
that HDFC has better overall financial health and it is better than SBI in managing their net NPAs.

23
II Efficiency Ratios

Efficiency ratios measure a company's ability to effectively use its assets and manage its liabilities,
either now or in the near term.

This ratio measures how effectively a company uses its assets to generate revenue and its ability to
manage those assets.

Bank efficiency ratios can be used to determine how efficient a bank is.

This indicates the financial health of the institution.

Fixed asset turnover ratio
is a type of efficiency ratio that measures sales volume relative to the cost of fixed assets.

This shows how well the organsation uses its fixed assets to adding sales mostly high fixed asset
turnover ratio means high utilization of fixed assets, and a low turnover ratio means inefficient or
incomplete utilization of fixed assets.

Fixed Asset Turnover Ratio = Net Sales / Average Fixed Assets

YEAR SBI HDFC

2020-21 0.08 0.08
2021-22 0.07 0.08
2022-23 0.07 0.08
Average 0.07 0.08

(Table 3 showing Fixed Asset Turnover Ratio of SBI and HDFC for the last three years)

24
nterpretation: The fixed asset turnover ratio of both SBI and HDFC stood at 0.08 in the year
2020-21, in 2021-22, the ratio of SBI was at 0.07 while that of HDFC remained same at 0.08. In
2022-23, the ratio again remained same as 0.07 and 0.08 respectively.

The average Fixed Assets Turnover ratio of SBI was 0.07 and that of HDFC was 0.08 which shows
that both the banks are inefficiently using their fixed assets.

III Leverage Financial Ratios

Leverage ratio measures the amount of capital financed by debt. In other words, financial leverage
ratio is used to evaluate the level of debt of a company.

Debt to Equity Ratio

Debt ratio Debt ratio is a type of leverage ratio that calculates the ratio of total debt and
financial debt to equity capital.

The ideal debt to equity ratio is 2:1 (because the cost of debt is lower than the cost of equity).

Debt to equity ratio = Total liabilities / Shareholder’s equity

YEAR SBI HDFC

2020-21 15.79 8.58
2021-22 16.89 6.97
2022-23 17.08 7.56
Average 16.59 7.70
(Table 4 showing Debt to Equity Ratio of SBI and HDFC for the last three years

25
 of

of
HDFC

2020-
2021-22
2022-23

(Graph 4 showing Debt to Equity Ratio of SBI and HDFC for the last three years)

Interpretation: In the year 2020-21, the debt to equity ratio of SBI is very high at 15.79 and that
of HDFC is 8.58. In 2021-22, the DER of SBI increased to 16.89 while that of HDFC decreased
to 6.97. Lastly in 2022-23, the ratio further increased to 17.08 and 7.56 respectively.

The average debt to equity of SBI stood at 16.59 and that of HDFC stood at 7.70. It suggests
that SBI is at higher default risk than HDFC and both of the banks are financing a significant
amount of their potential growth through borrowing.

26
IV Profitability Ratios

Profitability ratios measure a company's ability to generate profits relative to its sales, balance sheet
assets, operating expenses, and equity capital.

VI Operating Profit Ratio

Common financial profitability ratios are: • Operating profit margin Operating profit margin is a
profitability or productivity ratio that compares a company's operating profits to its net sales to
determine operating efficiency.

Operating Profit Ratio = Operating income / Net sales

YEAR SBI HDFC

2020-21 8.14 22.33
2021-22 8.95 15.87
2022-23 -6.65 12.66
Average 3.48 16.95

25

20

5 HDFC

2020- 22 2022-23
5

Interpretation: In 2020-21, the operating profit ratio of SBI is 8.14 and that of HDFC is much

27
 higher at 22.33. In the year 2021-22, the ratio of SBI stood at 8.95 and that of HDFC at 15.87. In
2022-23, SBI had a negative operating profit ratio which shows its overhead costs are too high
and they can only survive as long as their cash reserves will allow. If they begin to run out of cash
in hand, they may have to sell assets in order to cover their expenses and remain in operation.

The average operating profit ratio of SBI student 3.48 and that of HDFC stood at 16.95 which
suggest that SBI has low operating profit margin while HDFC has very high operating profit
margin.

Gross Profit Ratio

The gross profit ratio compares the gross profit of a company to its net sales to show how much
profit a company makes after paying its cost of goods sold.

Gross Profit Ratio = Gross profit / Net sales

YEAR SBI HDFC
2020-21 6.81 21.20
2021-22 7.62 14.72
2022-23 -7.93 11.62
Average 2.16 15.84
(Table 6 showing Gross Profit Ratio of SBI and HDFC for the last three years)

Interpretation: In 2020-21, the gross profit ratio of SBI stood at 6.81 while that of HDFC stood at
21.20. In 2021-22, ratio of SBI increased to 7.62 while that of HDFC decreased to
14.72. In 2022-23 SBI had a negative gross profit ratio of -7.93 which shows that the sales are not
enough to cover the costs incurred to manufacture the goods or provide the services.

The average gross profit ratio of SBI stood at 2.16 while that of HDFC was much higher at
15.84 and it suggests that HDFC is successfully producing profits over and above cost.

28
Net Profit Ratio
Net profit margin Also called net profit ratio, it establishes the relationship between net profit
generated and net profit (net sales) generated from operations.
Net profit margin is a profitability ratio expressed as a percentage, so multiply it by 100. NP ratio
helps determine the overall performance of a business and is also an indicator of how well a
company's trading activities are performing.

Net Profit Ratio = (Net profit ÷ Net sales) x 100

YEAR SBI HDFC

2020-21 -2.96 21.79
2021-22 0.35 21.29
2022-23 5.63 22.86
Average 1 22
(Table 7 showing Net Profit Ratio of SBI and HDFC for the last three years)

25

20

HDFC
5

2020- 22 2022-23
5

(Graph 7 showing Net Profit Ratio of SBI and HDFC for the last three years)

29
Interpretation: The net profit ratio of SBI stood at -2.96 at while that of HDFC stood at 21.79 in 2020-
21 the ratio of SBI was at 0.35 while that of HDFC was at 21.29. In 2021-22 the net profit ratio of
SBI increased to 5.63 while that of HDFC increase to 22.86.
The average net profit ratio of SBI stood at 1 while that of HDFC stood at 22 which show thatSBI is
making less money than it is spending and HDFC's overall efficiency is quite good.

Liquidity Ratios-

Liquidity ratios are financial ratios that measure a company's ability to pay both short-term and
long-term liabilities.

Current Ratio

Common liquidity ratios include: • Current ratio Current ratio is a liquidity ratio that measures a
company's ability to repay short-term liabilities or liabilities that are due within one year.
This ratio measures the financial health of the company.

Current Ratio = Current Assets / Current Liabilities

YEAR SBI HDFC

2020-21 1.36 0.89
2021-22 1.83 0.89
2022-23 1.78 0.80
Average 1.66 0.86
(Table 8 showing Current Ratio of SBI and HDFC for the last three years)

30
2
1.8
1.
6
1.4
1.2 SBI
HDFC
1
0.8
0.6
0.4
0.2 2020-21 2021-22 2022-23
0

(Graph 8 showing Current Ratios of SBI and HDFC for the last three years)

Interpretation: In 2020-21 the current ratio of SBI stood as 1.36 and that of HDFC stood at 0.89.
In 2021-22, the ratio of SBI was 1.83 and that of HDFC was 0.89. In 2022-23, the ratio stood at
1.78 and 0.80 respectively.

The average of current assets ratio of SBI was 1.66 and that of HDFC was at 0.86 which shows
that SBI is more capable in paying its short term obligations.

4.2 Hypothesis Testing

T-test at significance level of 0.05 was used to analyze the financial performance of SBI and
HDFC bank.
Ho1 = there is no significant relationship between the gross NPA ratio of SBI and HDFC over the
last three years.

31
 SBI HDFC
3.65666
Mean 7 0.383333
0.00043
Variance 3.376133 3
Observations 3 3
Pooled Variance 1.688283
Hypothesized Mean 0
Difference
df 4
t Stat 3.085412
P(T<=t) one-tail 0.018369
t Critical one-tail 2.131847
0.03673
P(T<=t) two-tail 8
t Critical two-tail 2.776445

RESULT: A two sample t test assuming equal variances was conducted to check if there was
significant difference between the gross NPA ratio of SBI and HDFC bank over the last three
years.
There was statistically significant difference between the average gross NPA ratios of SBI and
HDFC bank. Since p<0.05(p=0.03), H01 is rejected and therefore we it is proved that there is
significant relationship between the gross NPAratio of SBI and HDFC bank over the last three
years.

32
Ho2 = there is no significant relationship between the net NPA ratio of SBI and HDFC over the last
three years.

SBI HDFC

Mean 8.196667 1.306667

Variance 5.997733 0.002533

Observations 3 3

Pooled Variance 3.000133

Hypothesized Mean 0

Difference

df 4

t Stat 4.871857

P(T<=t) one-tail 0.004104

t Critical one-tail 2.131847

P(T<=t) two-tail 0.008209

t Critical two-tail 2.776445

RESULT: A two sample t test assuming equal variances was conducted to check if there was significant
difference between the net NPA ratio of SBI and HDFC bank over the last three years.

There was statistically significant difference between the average net NPA ratios of SBI and
HDFC bank. Since p<0.05(p=0.008), H02 is rejected and therefore we it is proved that there is
significant relationship between the net NPAratio of SBI and HDFC bank over the last three
years.

33
 CHAPTER V

RESULTS & DISCUSSIONS

5.1 Major Findings

NPA of SBI has been more than HDFC in the last three years, which is clearl y
evident. br>In the last three years, 2020-
21 was the worst year for SBI, with HDFC having the highest NPA ratio and net
NPA ratio in 2021-22 and 2022-23 respectively. >
Fixed Asset Turnover Ratio -
In Table 3, we see that the average fixed asset turnover rate of SBI and HD FC is
almost the same in the last three years, which indicates that both bank s are not
using their fixed assets efficiently. br>
Leverage Ratio -

Debt/Equity Ratio -
Used to measure the debt of the company to satisfy both banks. SBI's aver age
price to equity ratio is 16. 59 and HDFC is 7.70 which means SBI has hig her risk
than HDFC. Three years ago, we had seen that the highest debt wa s due to SBI in
2021-22 and the highest debt was due to HDFC in 2020-
21. 5 It is clearly seen that SBI's operating profit is very low while HDFC's op
erating profit is very good; This indicates that the company has enough cas h to
cover its variable and fixed costs. Demand - periodic obligations. 5.
* Finally, a two-sample t-
test assuming equal variance was conducted to determine whether there is a
significant difference in NPA ratio between SBI Bank and HDFC Bank in th e last
three years. There is a significant difference in HDFC's NPA ratio. and equipment
34
failure. This will reduce their NPAs. So we are reducing NPA. Reducing
additional operating costs and direct and indirect expenses will make the company
profitable. 2.

See if you can repay the emergency loan. 3.

Sell fixed assets that do not generate income for the business (use cash to r educe
existing liabilities

5.2 Discussions and Suggestions

As we know the debt equity proporation of SBI is higher than HDFC so it should trying to
restructure its debt and NPAs.
The take should be decreased to the level that it is not high than 4-5 times of equity. It will
decreased their NPAs.
It Also this will result in superior financial health of the organsation Banks should limit its
huge lending to trusted organsation or person getting back so that becomes comparatively
faster and easier which would consequently result in less NPAs.
We can increase the gross profit ratio of SBI by generating more revenue by managing the costs
of company efficiently.
Working on the products and services of the bank and making different changes in little time will
increase the revenue.
Reducing extra operating expenses and direct overhead expenses will increase the profit margin of
the Banks.
HDFC Bank’s current ratio can be improved as follows: 1. Postponing
capital purchases that require cash payments. 2. Let’s find out if you
can repay the emergency loan. three.
Selling fixed assets that do not bring profit to the business (using cash to reduce current liabilities

35
Annexure
* State Balance Sheet of Bank of India [SBI]
* Profit and Loss
* HDFC BANK Balance Sheet
* Profit and Loss

MAR 23 MAR 22 MAR 21 36

BALANCE SHEET
OF Balance sheet of State
STATE BANK OF
INDIA(in Rs. Cr.) Bank of India [SBI
12 mths 12 mths 12 mths
EQUITIES AND
LIABILITIES
SHAREHOLDER'S
FUNDS
Equity Share
Capital 892.46 892.46 892.46
TOTAL SHARE 892.46 892.46 892.46
CAPITAL
Revaluation
Reserve 23,762.6724,653.94 24,847.99
Reserves and 207,352.3
Surplus 0 195,367.42 193,388.12
231,114.9
Total Reserves and 7 220,021.36 218,236.10
Surplus
232,007.
TOTAL 43 220,913.82 219,128.56
SHAREHOLDERS
FUNDS
3,241,6202,911,386.02,706,343.
Deposits .73 1 29
314,655.6
Borrowings 5 403,017.12 362,142.07
Other Liabilities and 163,110.10145,597.30 167,138.08
Provisions
3,951,393 3,680,914. 3,454,752.
TOTAL CAPITAL .92 25 00
AND LIABILITIES
ASSETS
Cash and Balances 166,735.7
with 8 176,932.42 150,397.18

37
Reserve Bank of India

Balances with Banks 84,361.23 45,557.69 41,501.46

Money at Call and Short
Notice
1,046,954.5
Investments 2 967,021.95 1,060,986.72
2,325,289.5
Advances 6 2,185,876.92 1,934,880.19

Fixed Assets 38,439.28 39,197.57 39,992.25

Other Assets 289,613.55 266,327.70 226,994.20

3,951,393.9 3,454,752.0
TOTAL ASSETS 2 3,680,914.25 0

OTHER
ADDITIONAL
INFORMATION

Number of Branches 22,141.00 22,010.00 22,414.00

Number of Employees 249,448.00257,252.00 264,041.00

Capital Adequacy
Ratios 13.00 13.00 13.00
(%)

KEY
PERFORMANCE
INDICATORS

Tier 1 (%) 11.00 11.00 10.00

Tier 2 (%) 2.00 2.00 2.00

ASSETS QUALITY

Gross NPA 149,091.85 172,753.60 223,427.46

Gross NPA (%) 6.00 8.00 11.00

38
Net NPA (%) 2.23 3.00 6.00

Net NPA To Advances 2.00 3.00 6.00

(%)

CONTINGENT
LIABILITIES,
COMMITMENTS

Bills for Collection 55,758.16 70,022.54 74,027.90

1,214,994.6
Contingent Liabilities 1 1,116,081.46 1,162,020.69

PROFIT& LOSS A/C

MAR 20 23MAR MARCH

MARCH 19 MAR22 18
PROFIT & LOSS ACCOUNT OF STATE
BANK OF INDIA(in Rs. Cr.)
12 mths 12 mths 12 mths

INCOME
179,748.8 161,640.2
Interest / Discount on Advances / Bills 4 3 141,363.17

Income from Investments 68,204.72 74,406.16 70,337.62

Interest on Balance with RBI and Other Inter- 2,920.41 1,179.07 2,250.00
Bank funds

Others 6,449.63 5,643.19 6,548.53

257,323. 242,868. 220,499.
TOTAL INTEREST EARNED 59 65 32

Other Income 45,221.48 36,774.89 44,600.69

39
 302,545. 279,643. 265,100.
TOTAL INCOME 07 54 00

EXPENDITURE
159,238.7
Interest Expended 7 154,519.78 145,645.60

Payments to and Provisions for Employees 45,714.97 41,054.71 33,178.68

Depreciation 3,303.81 3,212.31 2,919.47

Operating Expenses (excludes Employee Cost
& Depreciation) 26,154.91 25,420.72 23,845.30

69,687.7 59,943.4
TOTAL OPERATING EXPENSES 75,173.69 4 5

Provision Towards Income Tax 2,803.14 491.13 673.54

Provision Towards Deferred Tax 7,510.99 954.12 -9,654.33

Other Provisions and Contingencies 43,330.37 53,828.55 75,039.20

53,644.5 54,573.8 66,058.4
TOTAL PROVISIONS AND 0 0 1
CONTINGENCIES
288,056. 278,781.3 271,647.4
TOTAL EXPENDITURE 96 1 6
-
NET PROFIT / LOSS FOR THE YEAR 14,488.11 862.23 6,547.45
-
NET PROFIT / LOSS AFTER EI & PRIOR 14,488.11 862.23 6,547.45
YEAR ITEMS

Profit / Loss Brought Forward -15,226.06-15,078.57 0.32

-
- 12,954.8
TOTAL PROFIT / LOSS AVAILABLE FOR -737.94 14,216.34 3
APPROPRIATIONS

APPROPRIATIONS

40
Transfer To / From Statutory Reserve 4,346.43 258.67 0.00

Transfer To / From Capital Reserve 3,985.84 379.21 3,288.88

Transfer To / From Revenue And Other 308.20 371.84 -1,165.14

Reserves

Dividend and Dividend Tax for The Previous 0.00 0.00 0.00
Year

Equity Share Dividend 0.00 0.00 0.00

Tax On Dividend 0.00 0.00 0.00

-
Balance Carried Over To Balance Sheet 10,498.30 -15,226.06 -15,078.57
-
- 12,954.8
TOTAL APPROPRIATIONS -737.94 14,216.34 3

OTHER INFORMATION

EARNINGS PER SHARE

Basic EPS (Rs.) 16.23 0.97 -7.67

Diluted EPS (Rs.) 16.23 0.97 -7.67

DIVIDEND PERCENTAGE

Equity Dividend Rate (%) 0.00 0.00 0.00

41
BALANCE SHEET OF HDFC BANK

BALANCE SHEET OF HDFC MAR 23 MAR 22 MAR 21

BANK (in Rs. Cr.)

12 mths 12 mths 12 mths

EQUITIES AND LIABILITIES

SHAREHOLDER'S FUNDS

Equity Share Capital 548.33 544.66 519.02

TOTAL SHARE CAPITAL 548.33 544.66 519.02

Revaluation Reserve 0.00 0.00 0.00

Reserves and Surplus 170,437.70 148,661.69 105,775.98

Total Reserves and Surplus 170,437.70 148,661.69 105,775.98

TOTAL SHAREHOLDERS FUNDS 170,986.03 149,206.35 106,295.00

Deposits 1,147,502.29 923,140.93 788,770.64

Borrowings 144,628.54 117,085.12 123,104.97

Other Liabilities and Provisions 67,394.40 55,108.29 45,763.72

1,244,540.6
TOTAL CAPITAL AND LIABILITIES 1,530,511.26 9 1,063,934.32

42
ASSETS
Cash and Balances with Reserve Bank of
India 72,205.12 46,763.62 104,670.47

Balances with Banks Money at Call and 14,413.60 34,584.02 18,244.61

Short Notice

Investments 391,826.66 290,587.88 242,200.24

Advances 993,702.88 819,401.22 658,333.09

Fixed Assets 4,431.92 4,030.00 3,607.20

Other Assets 53,931.09 49,173.95 36,878.70

1,244,540.6
TOTAL ASSETS 1,530,511.26 9 1,063,934.32

OTHER ADDITIONAL
INFORMATION

Number of Branches 5,416.00 5,103.00 4,787.00

Number of Employees 116,971.00 98,061.00 88,253.00

Capital Adequacy Ratios (%) 19.00 17.00 15.00

KEY PERFORMANCE INDICATORS

Tier 1 (%) 17.00 16.00 13.00

Tier 2 (%) 1.00 1.00 2.00

ASSETS QUALITY

Gross NPA 12,649.97 11,224.16 8,606.97

Gross NPA (%) 1.00 1.00 1.00

Net NPA 3,542.36 3,214.52 2,601.02

Net NPA (%) 0.36 0.00 0.00

43
Net NPA To Advances (%) 0.00 0.00 0.00

CONTINGENT LIABILITIES,
COMMITMENTS

Bills for Collection 51,584.90 49,952.80 42,753.83

Contingent Liabilities 1,128,953.40 1,024,715.12 875,488.23

44
Profit & loss A/C

PROFIT & LOSS ACCOUNT OF HDFC

BANK (in Rs. Cr.) MAR MAR 22 MAR

12 mths 12 mths 12 mths

INCOME

Interest / Discount on Advances / Bills 91,787.88 77,544.19 62,661.79

Income from Investments 20,633.32 19,997.46 16,222.37

Interest on Balance with RBI and Other Inter- 1,828.93 635.70 523.88
Bank funds

Others 562.52 794.70 833.31

45
 114,812.6 98,972.0 80,241.3
TOTAL INTEREST EARNED 5 56

Other Income 23,260.82 17,625.88 15,220.30

138,073.4 116,597.9 95,461.6

TOTAL INCOME 7 4 6

EXPENDITURE

Interest Expended 58,626.40 50,728.83 40,146.49

Payments to and Provisions for Employees 9,525.67 7,761.76 6,805.74

Depreciation 1,195.85 1,140.10 906.34

Operating Expenses (excludes Employee Cost &

Depreciation) 19,976.01 17,217.51 14,978.30

30,697.5 22,690.
TOTAL OPERATING EXPENSES 3 26,119.37 38

Provision Towards Income Tax 9,833.15 12,129.61 10,107.25

Provision Towards Deferred Tax 516.69 -1,008.12 -896.68

Other Provisions and Contingencies 12,142.39 7,550.08 5,927.49

22,492.2 15,138.0
TOTAL PROVISIONS AND 3 18,671.57 6
CONTINGENCIES

77,974.9
TOTAL EXPENDITURE 111,816.15 95,519.77 3

46
NET PROFIT / LOSS FOR THE YEAR 26,257.32 21,078.17 17,486.73

NET PROFIT / LOSS AFTER EI & PRIOR 26,257.32 21,078.17 17,486.73

YEAR ITEMS
32,668.9
Profit / Loss Brought Forward 49,223.30 40,453.42 4

TOTAL PROFIT / LOSS AVAILABLE FOR 75,480.62 61,531.58 50,155.67

APPROPRIATIONS

APPROPRIATIONS

Transfer To / From Statutory Reserve 6,564.33 5,269.54 4,371.68

Transfer To / From Capital Reserve 1,123.85 105.34 235.52

Transfer To / From Revenue And Other 0.00 0.00 0.00

Reserves

Dividend and Dividend Tax for The Previous 0.00 0.00 3,390.58
Year

Equity Share Dividend 6,540.31 4,052.59 0.00

Tax On Dividend 0.00 0.00 0.00

Balance Carried Over To Balance Sheet 57,492.40 49,223.30 40,453.42

TOTAL APPROPRIATIONS 75,480.62 61,531.58 50,155.67

47
OTHER INFORMATION

EARNINGS PER SHARE

Basic EPS (Rs.) 48.01 78.65 67.76

Diluted EPS (Rs.) 47.66 77.87 66.84

DIVIDEND PERCENTAGE

Equity Dividend Rate (%) 250.00 750.00 650.00

48
References

Works Cited
(2013, April). Retrieved from [Link]:
[Link]
domain/item/what-is-a-bank

Arora, H. (2017, september 21 ).g

lechrome. Retrieved from [Link]
o
sector-reforms-in-india-narasimhan-committee-12-nachiket-mor-committee-p-j-nayak-
committee/.

49
 SURVEY QUESTIONS
Personal Information
1. Gender
☐ Male
☐ Female
☐ Other
2. Age
☐ Below 25 years
☐ 25–35 years
☐ 36–45 years
☐ Above 45 years
3. Occupation
☐ Student
☐ Government Employee
☐ Private Employee
☐ Businessperson
☐ Other __________
4. Which bank do you mainly use?
☐ SBI
☐ HDFC Bank
☐ Both
5. How long have you been associated with the bank?
☐ Less than 1 year
☐ 1–3 years
☐ 3–5 years
☐ More than 5 years
6. What type of account do you hold?
☐ Savings Account
☐ Current Account
☐ Salary Account
☐ Fixed Deposit Account

50
Rate the following factors on a scale of 1 to 5:
Particulars
1 Very Poor
2 Poor
3 Average
4 Good
5 Excellent
7. Customer Service
☐
☐
☐
☐
☐
8. Staff Behaviour
☐
☐
☐
☐
☐
9. Speed of Transactions
☐
☐
☐
☐
☐
10. ATM Availability
☐
☐
☐
☐
☐
11. Branch Accessibility
☐
51
☐
☐
☐
☐
12. Complaint Handling
☐
☐
☐
☐
☐
13. Loan Processing Services
☐
☐
☐
☐
☐
14. Internet Banking Services
☐
☐
☐
☐
☐
15. Mobile Banking App Services
☐
☐
☐
☐
☐
16. Which bank provides better customer service?
☐ SBI
☐ HDFC Bank
☐ Both Equal
52
17. Which bank offers better digital banking facilities?
☐ SBI
☐ HDFC Bank
☐ Both Equal
18. Which bank has a more user-friendly mobile app?
☐ SBI
☐ HDFC Bank
☐ Both Equal
19. Which bank offers faster service?
☐ SBI
☐ HDFC Bank
☐ Both Equal
20. Which bank do you trust more?
☐ SBI
☐ HDFC Bank
☐ Both Equal
21. Which bank provides better overall banking experience?
☐ SBI
☐ HDFC Bank
☐ Both Equal
22. Overall, how satisfied are you with your bank?
☐ Highly Satisfied
☐ Satisfied
☐ Neutral
☐ Dissatisfied
☐ Highly Dissatisfied
23. Would you recommend your bank to others?
☐ Yes
☐ No
☐ Maybe

53