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An Empirical Study of Asset Liability Management Approach by the Indian Banks
-- Suman Chakraborty and Subhalaxmi Mohapatra
The banking scenario in India in the 1980s and now, presents a perfect study of contrast. Due to
several reforms, banks are now moving away from the traditional lines of service and in the process, are exposed
to more risks. One of the ways for managing the risks is Asset Liability Management (ALM). ALM is an
attempt to match the assets and liabilities in terms of their maturities and interest rate sensitivities so that the
risk arising from such mismatches mainlyinterest rate risk and liquidity riskcan be contained within
the desired limit. As far as ALM in Indian banking system is concerned, it is still in a nascent stage. Against
this backdrop, the objective of the paper is to study and analyze the status of ALM approach in the
Indian banking system. For this purpose, a sample consisting of nationalized, private, and foreign banks operating
in the Indian environment was taken and the multivariate statistical technique, canonical correlation has
been done to capture the nature and strength of relationship between the assets and liabilities in these banks.
From the analysis, it is derived that a majority of banks have a good ALM framework in place. The study
also indicates a strong relationship between fixed assets and net worth for all groups of banks.
© 2009 IUP. All Rights Reserved.
Investigating the Key Criteria for Micro Loan Provider Selection: The Case of the Poor in Kedungjati, Indonesia
-- Dave Webb, Nunik Kristiani and Doina Olaru
The potential of micro loan products to reduce poverty has received wide acclaim in the literature.
Nonetheless, some critics question whether these products have truly met the needs of the poorest of the poor i.e.,
`Bottom of the Pyramid' (BOP) customers. This paper argues that one factor contributing to any such failure in
delivery is that formal micro finance
institutions, such as commercial banks, non-government organizations
and cooperatives, as well as informal traditional moneylenders, all suffer from a lack of basic marketing
information about the BOP market. More
specifically, in this case, the question is what
is it that drives customers to select one micro loan product provider over another. In
response, results from this study highlight that among
others it is the institutional characteristics associated with image and reputation that are of paramount
importance. These issues and related considerations are discussed in this paper.
© 2009 IUP. All Rights Reserved.
Cost-Benefit Analysis of Commercial Banks in the Global Age: Strategies for Fund Management
-- R K Uppal and Rimpi Kaur
Today's major problem of all the banks is how best to utilize their funds to earn maximum income with
the reduction in costs so as to compete and survive in the emerging global competitive environment.
The commercial banks mobilize a major part of their funds through deposits and borrowings, with
deposits having a dominating share. These funds are disbursed in investments and advances to get returns in
the form of interest and dividends. The present paper deals
with cost-benefit analysis of bank funds and concludes that the public sector banks and private sector banks are the beneficiary to mobilize
funds through borrowings rather than go for public deposits as the cost of borrowings is almost half the cost
of deposits. Similarly, in the case of utilization of these funds, the public sector banks are the beneficiary
if they concentrate more on investments in different instruments rather than disburse loans to their
customers as return on investments is higher, but foreign banks and private sector banks get more returns on
advances; hence, they are at an advantage if they disburse loans rather than invest elsewhere. Correlation
coefficient among cost of funds and return is positive and significant in almost all the bank groups. Finally, the
paper comments on the present policies of the banks and suggests some future strategies for the management
of funds to increase income and reduce cost thereof.
© 2009 IUP. All Rights Reserved.
Data Envelopment Analysis of State and
District Cooperative Banks in India: Exploratory Results
-- N Ganesan
The efficiency of 30 State Cooperative Banks (SCBs) and 20 District Central Cooperative Banks (DCCBs) in
India are examined during the period 2002-06. By using direct empirical method, the performance of SCBs and
DCCBs is discussed. The self-efficiency of each SCB and DCCB in each state is measured using Data Envelopment
Analysis (DEA). The SCBs and DCCBs are peered into region-wise and then, the efficiency score is obtained for each
SCB and DCCB within the peer group. The efficiency score among the regions is also measured. The objective of
the study is not to compare the performance of SCBs and DCCBs as they are uncomparable with the present data.
This study emphasizes on the performance of SCBs and DCCBs in terms of its technical efficient score. However,
the scope of efficiency is limited to technical efficiency only.
© 2009 IUP. All Rights Reserved.
Repayment and Overdues Determinants of Agricultural Credit: Some Results
for Commercial and Cooperative Banks
-- S Gandhimathi and S Vanitha
The present study attempts to analyze the extent of repayment and overdues and also the causes for overdues
at the farm-household level, identify the factors which discriminated the borrowers into non-defaulters and
defaulters, and assess the probability of willful and non-willful defaulting. One hundred sample borrowers of commercial
and cooperative banks were selected for the present study. To identify the factors which discriminated the
borrowers into non-defaulters and defaulters, discriminant analysis was carried out. Logistic regression analysis was
applied to find out the probability of the farmers becoming willful and non-willful defaulters. Utilization of credit and
non-farm income were the dominant factors in classifying the borrowers into defaulters and non-defaulters.
Farm income and consumption expenditure were the significant factors to determine willful defaulting. One unit
of increase in the factors such as farm income and consumption expenditure would lead to one unit increase
in willful defaulting. The sources of credit availed and interest rate were the significant factors to determine
the amount of non-willful defaulting.
© 2009 IUP. All Rights Reserved.
Customer Retention in the Greek Banking Industry: Some Survey Evidence
-- Evangelia K Blery, Stamatina Mitsi, Mirsini-Anna
Perdiki,
Eleni Rouva and Katerina Finitsi
The aim of this article is to identify the influence of service quality on customer loyalty in the Greek banking
sector. Service quality was measured using the SERVQUAL model, including importance weights. Repurchase
intention and positive word-of-mouth were used as behavioral components to measure customer loyalty. However, it
should be noted that customers stated repurchase intention does not always ensure their actual repurchase behavior.
Data were collected through a survey research and 120 customers of Greek banks were personally interviewed.
The findings showed that there are relationships between service quality, customers stated repurchase intention and
their recommendations to third parties in the Greek banking sector. The SERVQUAL model proved to be a
reliable measure for service quality. Consideration was limited to the identified factors, but also several other
variables influencing customer loyalty exist. Thus, the intermediate steps between formulating a service quality level
and influencing customers to remain loyal need sturdier theoretical underpinning and significant empirical support.
© 2009 IUP. All Rights Reserved.
Banks' Stock Performance During 2007-2008: Some Evidences
-- Roopam Kothari and Narendra Sharma
The Indian stock market experienced a great volatility in the year 2007-08 and banks led this volatility.
This study looks at the performance of banking stocks vis-a-vis S&P CNX Nifty in the period commencing from
July 1, 2007 to June 30, 2008. For this purpose, the Bank Nifty was taken for comparing the banking sector
with benchmark S&P CNX Nifty. For carrying out the study, Market Adjusted Abnormal Return (MAAR) on
weekly basis was applied to know the relative performance of the banking stocks and applied t-test for the analysis.
For a better understanding, the abnormal returns generated by the public
and private sector banks are compared separately. The results were
substantiated with the news analysis.
© 2009 IUP. All Rights Reserved.
Profitability of the Indian Scheduled Commercial Banks: A Case Analysis
-- A Ramachandran and N Kavitha
In view of the importance of improving the profitability performance of the banking sector in recent
years, a census study has been adopted by covering all the Indian scheduled commercial banks, which have
been divided into three groups viz., the SBI group, the Nationalized Banks group and the Private Banks
group with two sessions, i.e., Period I and Period II by dividing the 10 year-study period into the first five years
and the last five years. The step-wise multiple regression analysis was adopted for the study. An analysis of
the SBI group reveals that in both the periods of study, the variable provisions and contingencies to
total expenses occupied a prominent place. The nationalized banks group showed a position of provisions
and contingencies to total expenses in the first half of the study period and Capital Adequacy Ratio (CAR)
during the second half of the study period. In relation to the private banks group, it has changed from other
interest expenses ratio to capital adequacy ratio.
© 2009 IUP. All Rights Reserved.
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