The Public Sector Banks (PSBs) and the new private banks (NPBs) constitute about 90 per cent of the assets, thus, representative of the banking system. Within the PSB space, the major players are the 19 nationalised banks (NBs) and the SBI.
SBI and NBs
The erstwhile Imperial bank, a private bank, was nationalised in 1955 and was christened State Bank of India. SBI operates as the substitute for RBI where the central bank does not have a physical presence. SBI has the largest branch network and its government business operations are massive. Unlike SBI, the major private banks of the day were nationalised in two tranches in 1969 and 1980, to further inclusive banking. They, like SBI, pursue both socialistic and commercial objectives
NPBs
New private sector banks as a category was a creation of the mid-1990s when the government wanted to infuse technology in the banking system. The new private sector banks have come up as a big force in the banking system as they do not have any legacy to carry. They are, from their very inception, technologically well equipped to meet the multifaceted needs of modern day business. Though the NBs and SBI have done a good bit of catching up in the past 15 years on the technology front, there is marked difference in the clientele catered to by the PSBs and NPBs. The NBs and the SBI have major presence in the rural and semi-urban areas and they cater to all class of customers whereas the NPBs serve the high-end customers.
Return on Assets Comparison
If we consider the Return on Assets (RoA), the most important indicator of profitability, the new private banks have outsmarted both the nationalised banks and SBI in 2011. While RoA for SBI declined from 0.88 per cent in 2009-10 to 0.71 per cent in 2010-11 that for nationalised banks declined marginally from 0.99 per cent to 0.98 per cent and the same for NPBs increased significantly from 0.86 per cent in 2009-10 to 1.39 per cent in 2010-11.
Deposits and Credit Growth Comparison
While the business growth of the NBs and NPBs were of the same order of 26.2 per cent, SBI's growth in business was muted in 2010-11 at 17.7 per cent. When we consider the composition of business mix, both deposits and credit of NBs grew around 26 per cent while for the NPBs, credit growth at 28 per cent was significantly higher than their deposit growth of 24.5 per cent in 2010-11. For SBI, credit growth was around 20 per cent whereas deposit growth was much slower at 16 per cent. The investment portfolio of SBI declined marginally whereas that for NBs and NPBs increased by 16 per cent and 22 per cent respectively
CASA deposits Comparison
The CASA deposits for the NBs vary from as 20 per cent to 40 per cent with the average being 31 per cent as on March 2011. For the NPBs, the range of CASA deposits is still wide, varying between 10 and 51 per cent. The average being 34.25, marginally higher than that for NBs. The SBI has the highest CASA ratio of 48.6 per cent as on March 2011. With CASA share not being significantly higher than those of NBs, it must be the case that the NPBs as a group are able to lend at better rates than their NBs peers.Base rate of Interest is indirectly proposional to CASA ratio.This means that when a bank has higher CASA ratio, it can keep the base rate of interest low
Asset Management - NPA - Comparision
The NBs as a group score much better in asset management compared with the NPBs and SBI. Asset quality measure by the gross NPA was much lower for NBs at 1.88 per cent compared with 2.24 per cent for NPBs and 3.28 per cent for SBI. However, the improvement in asset quality measured by the reduction in the GNPA was the most for NPBs, followed by SBI and the NBs
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