Earnings (ROA & ROE)

HDFC Bank leads on both Return on Assets (ROA) and Return on Equity (ROE),
demonstrating excellent profitability and optimal use of shareholder capital.
Kotak and ICICI follow with commendable performance. SBI has improved over
the years but still lags behind its private peers. CBI and IDBI exhibit poor
profitability, with IDBI even showing negative ROA and ROE in earlier years,
reflecting structural weaknesses and potential erosion of investor confidence.

Liquidity

Kotak Mahindra Bank shows the strongest liquidity position, indicating its ability
to meet short-term obligations and support lending activities without risking
insolvency. HDFC and ICICI also perform well in this regard. SBI holds a
moderate position. CBI and IDBI have the lowest liquidity ratios, suggesting a
tighter cash flow and possible stress in maintaining day-to-day banking
operations.

Sensitivity to Market Risk

Kotak Mahindra again leads in sensitivity management (based on Net Interest

Margin and related measures), indicating sound positioning against interest rate
changes and market volatility. HDFC and ICICI show healthy margins as well.
IDBI’s lower NIM reflects weaker pricing power or higher cost of funds, making
it more vulnerable to shifts in market rates.

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 OBSERVATIONS

Based on the responses to the questionnaire with senior bank officers a few major
findings of study are:

⮚ There is much greater awareness across the banking sector about the need for risk
management and the various categories of risk which banks are exposed to. A
separate credit risk department distinct from credit function has been set up in all
the surveyed banks.

⮚ Degree of readiness for integrated risk management among banks differs widely.
As there are banks which have several years risk data and sophisticated risk
models, there are also other banks, which have started the process of systematic
capturing of risk data. Degree of readiness also differs with regard to the risk
elements covered.

⮚ Banks are facing significant challenge in rolling out IT networks. The banks on
the software front could not entail investments in databases, data warehousing and
in sophisticated statistical models as aggregation and analysis of the vast amount
of data is needed for successful risk management system

⮚ Procedural Audit reporting risk management is not done.

⮚ Issues relating to internal audit system, loan review system and timeliness of
internal ratings are not observed in most of the banks.

⮚ There is a lack of conceptual clarity in some of the fields of risk

management. The following recommendations are worth mentioning:
⮚ Risk Management System should be in place to deal with current and potential risks.

⮚ The system needs to be developed in line with organization goals and objective.

⮚ There should be an active participation of senior management and main line

functional staff in setting up of risk management system, which will enhance the
acceptability of adopting the risk management measures by the employees.

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⮚ Procedural Audit of all banks reporting risk management should be done.

⮚ Appropriate internal controls and audit, risk based supervision, proper manpower
planning, selection training and development and efficient compliance officer
should be there in addressing risk management issues.

⮚ Monitoring and reviewing risk management process with dynamically changing

global environment needs to be undertaken.

⮚ Measuring and disclosing various risks requires sound MIS. A technological

application in the form of networking and data warehousing is indispensable.

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 CONCLUSION

Risk is inherent in any walk of life in general and in financial sectors in particular.
Till recently, due to regulate Environment, banks could not afford to take risks.
But of late, Banks are exposed to same competition and hence are compiled to
encounter various types of financial and non-financial risks. Risks and
uncertainties form an integral part of banking which by nature entails taking risks.

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ANNEXURE

73
 REFRENCES

 Reserve Bank of India. (2024). Annual Report (2020–2024). Retrieved from

https://www.rbi.org.in
 State Bank of India. (2020–2024). Annual Reports. Retrieved from https://sbi.co.in
 HDFC Bank. (2020–2024). Annual Reports. Retrieved from https://www.hdfcbank.com
 ICICI Bank. (2020–2024). Annual Reports. Retrieved from https://www.icicibank.com
 Central Bank of India. (2020–2024). Annual Reports. Retrieved from
https://www.centralbankofindia.co.in
 Khan, M.Y., & Jain, P.K. (2018). Financial Management. McGraw-Hill Education.
 Kothari, C.R. (2011). Research Methodology: Methods and Techniques. New Age
International.
 Machiraju, H.R. (2008). Modern Commercial Banking. New Age International.
 Singh, A., & Tandon, P. (2020). “Risk Management Practices in Indian Banks,” International
Journal of Banking and Finance, 12(3), 45–58.
 Basel Committee on Banking Supervision. (2019). Guidelines on Risk Management. Bank for
International Settlements.

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 APPENDICES

Balance sheet of State Bank of India for the year 2020-24

BALANCE SHEET
OF SBI BANK (in Mar-24 Mar-23 Mar-22 Mar-21 Mar-20
Rs. Cr.)
12 mths 12 mths 12 mths 12 mths 12 mths
EQUITIES AND
LIABILITIES
SHAREHOLDER'S
FUNDS
Equity Share Capital 892.46 892.46 892.46 892.46 892.46
Total Share Capital 892.46 892.46 892.46 892.46 892.46
Revaluation Reserve 27,555.65 27,756.26 23,377.87 23,577.35 23,762.67
Reserves and Surplus 3,48,798.43 2,98,959.73 2,55,817.73 2,29,405.38 2,07,352.30
Total Reserves and
3,76,354.07 3,26,715.99 2,79,195.60 2,52,982.73 2,31,114.97
Surplus
Total ShareHolders
3,77,246.53 3,27,608.45 2,80,088.06 2,53,875.19 2,32,007.43
Funds
Deposits 49,16,076.77 44,23,777.78 40,51,534.12 36,81,277.08 32,41,620.73
Borrowings 5,97,560.91 4,93,135.16 4,26,043.38 4,17,297.70 3,14,655.65
Other Liabilities and
2,88,809.73 2,72,457.15 2,29,931.84 1,81,979.66 1,63,110.10
Provisions
Total Capital and
61,79,693.95 55,16,978.53 49,87,597.41 45,34,429.63 39,51,393.92
Liabilities
ASSETS
Cash and Balances
with Reserve Bank 2,25,141.70 2,47,087.58 2,57,859.21 2,13,201.54 1,66,735.78
of India
Balances with Banks
Money at Call and 85,660.29 60,812.04 1,36,693.11 1,29,837.17 84,361.23
Short Notice
Investments 16,71,339.66 15,70,366.23 14,81,445.47 13,51,705.21 10,46,954.52
Advances 37,03,970.85 31,99,269.30 27,33,966.59 24,49,497.79 23,25,289.56

Fixed Assets 42,617.25 42,381.80 37,708.16 38,419.24 38,439.28

Other Assets 4,50,964.19 3,97,061.58 3,39,924.86 3,51,768.68 2,89,613.55
Total Assets 61,79,693.95 55,16,978.53 49,87,597.41 45,34,429.63 39,51,393.92

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OTHER
ADDITIONAL
INFORMATION
Number of Branches 22,542.00 22,405.00 22,266.00 22,219.00 22,141.00
Number of
2,32,296.00 2,35,858.00 2,44,250.00 2,45,652.00 2,49,448.00
Employees
Capital Adequacy
14.28 14.68 13.85 13.74 13.13
Ratios (%)
KEY
PERFORMANCE
INDICATORS
Tier 1 (%) 11.93 12.06 11.16 11.44 10.71
Tier 2 (%) 2.35 2.62 2.69 2.3 2.42
ASSETS QUALITY
Gross NPA 84,276.33 90,927.78 1,12,023.00 1,26,389.00 1,49,091.85
Gross NPA (%) 2.24 2.78 3.97 5 6
Net NPA 21,051.08 21,466.64 27,965.71 36,809.72 51,871.30
Net NPA (%) 0.57 0.67 1.02 1.5 2.23
Net NPA To
0.57 0.67 1.02 2 2
Advances (%)

Balance sheet of HDFC Bank for the year 2020-24

BALANCE SHEET OF Mar-24 Mar-23 Mar-22 Mar-21 Mar-20

HDFC BANK (in Rs. Cr.)
12 mths 12 mths 12 mths 12 mths 12 mths

EQUITIES AND
LIABILITIES
SHAREHOLDER'S FUNDS

Equity Share Capital 759.69 557.97 554.55 551.28 548.33

Total Share Capital 759.69 557.97 554.55 551.28 548.33

Revaluation Reserve 0 0 0 0 0

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