INTRODUCTION:

New generation banks, with the use of technology and professional management, have gained a reasonable position in the banking industry. In this competitive environment, it becomes essential to measure the performance of the banks; especially, the performance of the public sector banks. The present study is an attempt to measure the financial performance of the Indian nationalized banks. Financial performance of a bank indicates the strength and weakness of banks by adequately establishing a relationship between the items of the balance sheet and profit and loss account. The acronym "CAMEL" refers to the five components of a bank's condition that are assessed: Capital adequacy, Asset quality, and Management Efficiency, Earnings Quality, and Liquidity position. A CAMEL is primarily a ratio-based model for evaluating the performance of banks. The purpose of the CAMEL framework is to assess a bank’s overall condition and to identify its strengths and weaknesses.

REVIEW OF LITERATURE:

A number of studies have been examining the performance of Banking Industry with respect to CAMEL. Kenton Zumwalt studies the bank soundness with the help of CAMEL ratings. The study uses a unique data set provided by Bank Indonesia to examine the changing financial soundness of Indonesian banks during this crisis. Bank Indonesia's non-public CAMEL ratings data allow the use of a continuous bank soundness measure rather than ordinal measures. In addition, panel data regression procedures that allow for the identification of the appropriate statistical model are used.

Kapil (2005) examined the relationship between the CAMEL ratings and the bank stock performance. The viability of the banks was analyzed on the basis of the Off-site Supervisory Exam Model- CAMEL Model. The M for Management was not considered in this paper because all Public Sector Banks, (PSBs) were government regulated, and also because all other four components - C, A, E and L- reflect management quality. The remaining four components were analyzed and rated to judge the composite rating. Satish, Jutur Sharath and Surender adopted CAMEL model to assess the performance of Indian banks. The authors analyzed the performance of 55 banks for the year 2004-05, using this model. They concluded that the Indian banking system looks sound and Information Technology will help the banking system grow in strength in future. The Banks’ Initial Public Offer will be hitting the market to increase their capital and gearing up for the Basel II norms

Singh, D., and Kohli, G. (2006). The banking and financial sector in India underwent a significant liberalization process in the early 1990s, which led to reforms in the banking and financial sector and changed the Indian banking structure. During the period from 1992 to 1997, interest rates were liberalized and banks were allowed to fix lending rates. By 1977 CRR was reduced to 9.5% and SLR was reduced to 25%. As a sequel to these reforms, new private sector banks were allowed entry in the market. Many of these private sector banks brought with them new technologies. Private sector banks started product innovation and competition. Even then Indians prefer nationalized banks for their services. The failure of Global Trust Bank made Indian depositors to question the sustainability of private sector banks. This paper attempts to undertake a SWOT analysis of 20 old and 10 new private sector banks. These banks have also been ranked on the basis of financial data for the years 2003-2005. The study has used CAMEL model for evaluating these banks. Gupta and Kaur conducted the study with the main objective to assess the performance of Indian Private Sector Banks on the basis of Camel Model and gave rating to top five and bottom five banks. They ranked 20 old and 10 new private sector banks on the basis of CAMEL model. They considered the financial data for the period of five years i.e. from 2003-07. Derviz (2008) investigated the determinants of the movements in the long term Standard and Poor’s and CAMEL bank ratings in the Czech Republic during the period when the three biggest banks, representing approximately 60% of the Czech banking sector's total assets, were privatized (i.e., the time span 1998-2001).

STATEMENT OF PROBLEM:

CAMEL approach is a significant tool to assess the relative financial strength of a bank and to suggest necessary measures to improve weaknesses of a bank. In India, RBI adopted this approach in 1996 followed on the recommendations of Padmanabham Working Group (1995) committee. The Reserve Bank has adopted more or less, the CAMELS approach for regulation of financial institutions. Since Financial Institutions are vested with a developmental role as well and with the responsibility of supervision of other institutions, evaluation of their developing, coordinating and supervisory role is also undertaken.

OBJECTIVES OF THE STUDY:

F To measure and evaluate the financial performance of the ten nationalized banks

F To describe the CAMEL model in depth.

F To compare and analyze the performance of the ten nationalized banks with the help of the CAMEL Model.

F To understand the financial performance of the banks.

F To analyze the bank's performance through the CAMEL model and give suggestion for improvement if necessary.

SCOPE AND LIMITATIONS OF THE STUDY:

It is hoped that the findings of the study would be of interest to the future researchers. Many internal and external factors affecting the performance of the banks can be analyzed to make the future studies more prominent and compressive.

The main limitation of the study is that only considered a sample of public sector banks. The study is based on secondary data; no primary data have been used for the present study. Only a quantitative analysis of performance of Indian nationalized banks carried out in the study, and the qualitative factors are manager competency, market share of the banks, exposure to international markets ignored.

RESEARCH METHODOLOGY:

Research methodology adopted is qualitative with secondary data analysis, where data is taken from annual reports of the banks, prowess, ace analyzer, analyst journal, bank’s balance sheets, profit and loss statements, journals, bank’s prospectus, bank’s annual reports etc.

Research Type: Qualitative

Research Design: Descriptive

Type of Data: Secondary

Data Collection:

The study mainly uses the secondary data for the purpose of the analysis. The absolute data from ten nationalized banks on capital adequacy, asset quality, management efficiency, earning quality and liquidity ratios are collected from various sources such as annual reports of the banks, Prowess, Ace Analyzer, Analyst journal and average of each ratio calculated for the period 2006-2013.

Table 1: Capital Adequacy (31^st March 2006 – 31^st March 2013)

BANKS	Capital Adequacy Ratio (%)		Debt / Equity (Times)		Advance/Assets Ratio (%)		Group
BANKS	Average	Rank	Average	Rank	Average	Rank	Average	Rank
Allahabad Bank	12.10	10	0.68	2	59.68	7	6.30	5
Andhra Bank	17.56	2	0.73	3	62.08	2	2.30	1
Bank Of Baroda	15.28	8	0.81	4	60.06	6	6.00	4
Bank Of India	16.37	6	1.67	10	61.13	3	10.00	8
Bank Of Maharashtra	16.44	4	1.12	8	59.05	8	7.00	6
Canara Bank	13.38	9	0.91	5	60.71	5	6.30	5
Central Bank Of India	15.84	7	0.93	6	58.63	9	7.30	7
Indian Bank	18.06	1	0.42	1	58.44	10	4.00	2
Punjab National Bank	17.35	3	0.95	7	60.84	4	5.00	3
Syndicate Bank	16.38	5	1.30	9	63.55	1	5.00	3

Observation:

F It can be observed from the table 1 that all banks maintain a higher capital adequacy ratio (CAR) than the prescribed level. It is found that Indian bank secured the top position with highest average CAR of 18.06%, followed by Andhra Bank 17.56%, Punjab National Bank 17.35%. Allahabad bank is at the bottom most position with a least average CAR of 12.10%.

F In terms of Debt to Equity ratio Indian bank is at the top most position with an average of 0.42 followed by Allahabad Bank 0.68.

F In case of Advances to Assets ratio, Syndicate Bank is at the first position with highest average of 63.55%, followed by Bank 62.05% and Bank of India Bank 61.13%.

Interpretation:

On the basis of only Capital Adequacy ratio parameter, the higher is the better and the highest ratio secured the first rank. For e.g. Indian Bank has a Capital Adequacy ratio 18.06, the highest among the entire ten public sector bank. Hence, Indian Bank secured first rank in terms of capital adequacy ratio. In case of Debt to Equity lower is the better and the lowest ratio secured the first rank. For e.g. Indian Bank has a Debt to Equity ratio 0.42, the lowest among the entire ten public sector bank. Hence, Indian Bank secured first rank in terms of Debt to Equity. In case of Advances to Assets ratio, the higher is the better. Hence, Syndicate Bank is at the first position with highest average of 63.55%. On the basis of group average of four sub-parameters of total capital adequacy of Andhra Bank is securing the first position with group average of 2.3, followed by Indian Bank with group average of 4.00 and Punjab national bank and Syndicate Bank with group average of 5.00. Bank of India secures tenth position due to its poor performance in CAR.

Table 2: Asset Quality (31^st March 2006 – 31^st March 2013)

BANKS	Net NPAs to Total Assets		Net NPAs to Net Advances		Total Investments to Total Assets		Change (%) NPA’s		Group
BANKS	Average	Rank	Average	Rank	Average	Rank	Average	Rank	Average	Rank
Allahabad Bank	0.74	7	1.07	6	29.7	8	18	5	6.5	7
Andhra Bank	0.39	2	0.54	1	25.52	5	18.55	6	3.5	2
Bank Of Baroda	0.38	1	0.56	2	23.25	1	2.37	3	1.75	1
Bank Of India	0.73	6	1.08	7	24.00	2	34.1	9	6	5
Bank Of Maharashtra	0.75	8	1.09	8	29.63	9	30	8	8.25	10
Canara Bank	0.80	9	1.18	9	24.62	4	15.26	4	6.51	8
Central Bank Of India	1.15	10	1.69	10	28.70	7	-4.05	2	7.25	9
Indian Bank	0.47	3	0.72	3	30.57	10	-4.93	1	4.25	3
Punjab National Bank	0.60	4	0.86	5	26.79	6	120	10	6.25	6
Syndicate Bank	0.61	5	0.85	4	24.52	3	25.13	7	4.75	4

Observation:

F It can be observed from the table 2 that Bank of Baroda is in the first position with an average Net NPAs to Total Assets of 0.38, followed by Andhra Bank 0.39, Indian Bank 0.47. Central Bank of India is in the last position with an average of 1.15, highest among all the ten public sector banks.

F In case of Net NPAs to Net Advances, Andhra Bank is in the top position with a minimum average of 0.54 followed by Bank of Baroda 0.56, Indian Bank 0.72. Central Bank of India is securing 10^th rank due to its highest Net NPAs to Net Advances ratio.

F In terms of Total Investments to Total Assets, Bank of Baroda is in the first position with an average of 23.25 followed by Bank of India 24.00, Syndicate bank 24.52. Indian Bank is at the last position with highest average of 30.57.

F Indian bank is in the first position of percentage change in NPAs with an average of -4.93%, followed by Central Bank of India -4.05%, Bank of Baroda 2.37%, while Punjab national bank stood at last position due to 120% Change of NPA’s.

Interpretation:

On the basis of Net NPAs to Total Assets parameter, the lower is the better and the lowest ratio secured the first rank. For e.g. Bank of Baroda has a Net NPAs to Total Assets of 0.38, the lowest among the entire ten public sector bank. Hence, Bank of Baroda secured first rank in terms of Net NPAs to Total Assets. In case of Net NPAs to Net Advances again lower is the better and the lowest ratio secured the first rank. For e.g. Andhra Bank has a Net NPAs to Net Advances 0.54, the lowest among the entire ten public sector bank. Hence, Andhra Bank secured first rank in terms of Net NPAs to Net Advances. In terms of Total Investments to Total Assets, Bank of Baroda is in the first position with an average of 23.25 due to minimum Total Investments to Total Assets. Indian bank is in the first position of percentage change in NPAs with a minimum average of -4.93%. On the basis of group averages of sub-parameters of asset quality, Bank of Baroda is at the top position with group average 1.75, followed by Andhra Bank 3.5, Indian Bank 4.25. Bank of Maharashtra positioned at last due to its highest group average of 8.25 in terms of all four asset quality parameters.

Table 3: Management Efficiency (31^st March 2006 – 31^st March 2013)

BANKS	Total Advance to Total Deposit Ratio (%)		Profit Per Employee (Cr)		Business Per Employee (Cr)		Return On Net Worth (%)		Group
BANKS	Average	Rank	Average	Rank	Average	Rank	Average	Rank	Average	Rank
Allahabad Bank	68.29	8	0.054	6	8.25	5	21.81	3	5.50	7
Andhra Bank	72.49	4	0.063	3	8.80	4	20.14	6	4.25	3
Bank Of Baroda	70.16	5	0.070	1	9.93	1	16.59	8	3.75	1
Bank Of India	72.69	3	0.05	7	9.50	2	21.60	5	4.26	4
Bank Of Maharashtra	68.61	7	0.026	9	7.09	8	15.84	9	8.25	9
Canara Bank	69.98	6	0.059	4	9.20	3	20.04	7	5.00	6
Central Bank Of India	67.12	10	0.022	10	6.11	10	12.15	10	10.00	10
Indian Bank	67.77	9	0.064	2	6.73	9	22.19	2	5.60	8
Punjab National Bank	72.86	2	0.059	5	7.53	7	21.79	4	4.50	5
Syndicate Bank	72.91	1	0.040	8	7.66	6	23.05	1	4.00	2

Observation:

F Table 3 depicts that Syndicate Bank is in the first position with a maximum average of Total Advance to Total Deposit Ratio of 72.91%, followed by Punjab national bank 72.86%, Bank of India 72.69%. Central Bank of India is securing the last rank due to the average of 67.12%.

F In terms of profit per employee, Bank of Baroda secured the first rank with a maximum average of 0.070 followed by Indian Bank 0.064, Andhra Bank 0.063. Central Bank of India is at the bottom most position with a minimum average of 0.022.

F At the front of Business per employee, Bank of Baroda is in the first place with a maximum average of 9.93, followed by Bank of India 9.50, Canara Bank 9.20. Central Bank of India is at the bottom most position with a minimum average of 6.11.

F Syndicate Bank is at the top position in terms of Return on Net Worth with the highest average of 23.05%, followed by Indian bank 22.19%, Allahabad bank 21.81%. Central Bank of India is at the last position with an average of 12.15%.

Interpretation:

On the basis of Total Advance to Total Deposit Ratio parameter, the higher is the better and the highest ratio secured the first rank. For e.g. Syndicate Bank has a maximum Total Advance to Total Deposit Ratio of 72.91%, the highest among the entire ten public sector bank. Hence, Syndicate Bank secured first rank in terms of Total Advance to Total Deposit Ratio. In case of Profit Per Employee again higher is the better and the highest ratio secured the first rank. For e.g. Bank of Baroda has a profit per employee 0.54, the highest among the entire ten public sector bank. Hence, Bank of Baroda secured first rank in terms of profit per employee. In terms of Business per employee, Bank of Baroda is in the first place with a maximum average of 9.93. Syndicate Bank is at the top position in terms of Return on Net Worth with the highest average of 23.05%. On the basis of group averages of four sub-parameters of management efficiency, Bank of Baroda is at the top position with group average of 3.75, followed by Syndicate Bank with a group average of 4.00 and Andhra bank with a group average of 4.25 and Central Bank of India with a group average of 10.00 due to its poor performance in all sub parameters of management efficiency.

Table 4: Earnings Quality (31^st March 2006 – 31^st March 2013)

BANKS	Operating Profit to Average Working Funds		Percentage Growth in Net Profit (%)		Net Profit to Average Assets		Group
BANKS	Average	Rank	Average	Rank	Average	Rank	Average	Rank
Allahabad Bank	4.15	6	25.23	6	1.049	4	5.3	4
Andhra Bank	4.96	4	23.63	7	1.062	3	5	3
Bank Of Baroda	4.23	5	55.36	2	0.876	8	5	3
Bank Of India	5.23	3	50.96	3	0.914	7	4.3	2
Bank Of Maharashtra	1.56	9	156.36	1	0.516	9	6.3	5
Canara Bank	5.33	2	22.65	8	0.956	6	5.3	4
Central Bank Of India	1.49	10	20.62	9	0.435	10	10	7
Indian Bank	5.69	1	45.87	4	1.325	2	2.3	1
Punjab National Bank	3.56	7	27.77	5	1.36	1	4.3	2
Syndicate Bank	2.85	8	20.47	10	0.985	5	8	6

Observation:

F Table 4 depicts that the Indian Bank rated top in case of Operating Profit to Average Working Funds with a maximum average of 5.69 followed by Canara bank 5.33, Bank of India 5.23. Central Bank of India is at the bottom most position with minimum average of 1.49.

F In case of Percentage Growth in Net Profit Bank of Maharashtra is at the first position with a maximum average of 156.36%, followed by Bank of Baroda 55.36%, Bank of India 50.96%. Syndicate Bank is in the last place due to minimum Percentage Growth in Net Profit i.e. 20.47%.

F In case of Net Profit to Average Assets Punjab National Bank stood at the top place with a maximum average of 1.36, followed by Indian Bank 1.325, Andhra Bank 1.062. Central Bank of India is at bottom most position due to the minimum average Net Profit to Average Assets 0.435.

Interpretation:

On the basis of Operating Profit to Average Working Funds parameter, the higher is the better and the highest ratio secured the first rank. For e.g. Indian Bank has a maximum Operating Profit to Average Working Funds of 5.69, the highest among the entire ten public sector bank. Hence, Indian Bank secured first rank in terms of Operating Profit to Average Working Funds. In case of Percentage Growth in Net Profit Bank of Maharashtra is at the first position with a maximum average of 156.36%. In case of Net Profit to Average Assets Punjab National Bank stood at the top place with a maximum average of 1.36. On the basis of group averages, Indian Bank is at the top position with group average 2.3 followed by Punjab National Bank and Bank of India 4.3. In terms of overall earnings quality Central Bank of India is securing tenth rank due to its lowest Operating Profit to Average Working Funds, Percentage Growth in Net Profit, Net Profit to Average Assets.

Table 5: Liquidity (31^st March 2006 – 31^st March 2013)

BANKS	Liquid Assets to Demand Deposits (%)		Liquid Assets to Total Deposits (%)		Liquid Assets to Total Assets (%)		Group
BANKS	Average	Rank	Average	Rank	Average	Rank	Average	Rank
Allahabad Bank	125.33	10	9.80	10	8.56	9	9.6	8
Andhra Bank	155.36	6	13.50	4	12.57	2	4	3
Bank Of Baroda	209.23	1	15.58	1	15.36	1	1	1
Bank Of India	192.25	3	14.24	2	12.3	4	3	2
Bank Of Maharashtra	150.25	7	11.40	8	10.37	6	7	7
Canara Bank	168.68	5	11.33	9	10.26	7	7	7
Central Bank Of India	179.36	4	12.25	6	11.33	5	5	5
Indian Bank	196.85	2	11.49	7	10.19	8	5.6	6
Punjab National Bank	142.65	8	13.99	3	12.37	3	4.6	4
Syndicate Bank	131.96	9	12.91	5	12.37	3	5.6	6

Observation:

F Bank of Baroda is in the first place in terms of Liquid Assets to Demand Deposits ratio with maximum average of 209.23%, followed by Indian bank 196.85%, Bank of India 192.25%. Allahabad Bank availed tenth position with the minimum average of 125.33% in Liquid Assets to Demand Deposits.

F In case of Liquid Assets to Total Deposits ratio, Bank of Baroda secured first position with highest average of 15.582%, followed by Bank of India 14.24%, Punjab national Bank 13.99%. Allahabad Bank is at the bottom most position with minimum average of Liquid Assets to Total Deposits 9.802%.

F In the context of Liquid Assets to Total Assets ratio of Bank of Baroda is again on top with the average 15.36% followed by Andhra Bank 12.568%, and. Punjab National Bank and Syndicate Bank stood at the same 12.365%. Allahabad Bank is at the last position due to 8.563% Liquid Assets to Total Assets ratio.

Interpretation:

On the basis of Liquid Assets to Demand Deposits Ratio, the higher is the better and the highest ratio secured the first rank. For e.g. Bank of Baroda has a maximum Liquid Assets to Demand Deposits Ratio of 209.23%, the highest among the entire ten public sector bank. Hence, Bank of Baroda secured first rank in terms of Liquid Assets to Demand Deposits Ratio. In case of Liquid Assets to Total Deposits ratio, again higher is the better and the highest ratio secured the first rank. For e.g. Bank of Baroda has a Liquid Assets to Demand Deposits Ratio of 15.582%, the highest among the entire ten public sector bank. Hence, Bank of Baroda secured first rank in terms of Liquid Assets to Demand Deposits Ratio. In terms of Liquid Assets to Total Assets, Bank of Baroda is in the first place with a maximum average of 15.36%. On the basis of group averages of the sub-parameters, Bank of Baroda stood at the top position with group average 1 followed by Bank of India 3, Andhra Bank 4. Allahabad Bank placed at the tenth position with a maximum average of 9.6.

Table 6: Composite ranking of overall performance (31^st March 2006 – 31^st March 2013)

Banks	Capital Adequacy	Asset Quality	Management Efficiency	Earnings Quality	Liquidity
Banks	C	A	M	E	L	Average	Rank
Allahabad Bank	6.3	6.5	5.5	5.3	9.6	6.64	8
Andhra Bank	2.3	3.5	4.25	5	4	4.81	3
Bank Of Baroda	6	1.75	3.75	5	1	3.5	1
Bank Of India	10	6	4.26	4.3	3	5.51	6
Bank Of Maharashtra	7	8.25	8.25	6.3	7	7.36	9
Canara Bank	6.3	6.51	5	5.3	7	6.02	7
Central Bank Of India	7.3	7.25	10	10	5	7.91	10
Indian Bank	4	4.25	5.6	2.3	5.6	4.35	2
Punjab National Bank	5	6.25	4.5	4.3	4.6	4.93	4
Syndicate Bank	5	4.75	4	8	5.6	5.47	5

As stated in the initial part of the study, CAMEL model is used to rate the banks according to their performance.

Observation:

The table 6 is an attempt to examine and compare the performance of the 10 public sector banks of India with respect to Capital Adequacy, Asset Quality, Management efficiency, Earning Quality, Liquidity i.e. CAMEL. Table 6 depicts that Bank of Baroda is ranked in first position with a composite average of CAMEL 3.5, followed by Indian Bank 4.35, Andhra Bank 4.81, Punjab National Bank 4.93 and Syndicate Bank 5.47. Central bank of India is in the tenth position with an average of 7.91.

CONCLUSION:

Economic development of any country is mainly influenced by the growth of the banking industry in that country. The study has been conducted to examine the economic sustainability of a sample of ten banks in India using CAMEL model during the period 2006-13. The analysis is based on the CAMEL Model. Public sector banks have significantly improved indicating the positive impact of the reforms in liberalizing interest rates, rationalizing directed credit and Investments and increasing competition. The study has brought many interesting results, Andhra Bank stood at top position in terms of capital adequacy. In front of the asset quality Bank of Baroda is at the top most position. In the context of management efficiency, Bank of Baroda positioned at first. In terms of earnings quality Indian Bank sustained the top position. Bank of Baroda rated top in case of liquidity position. The overall performance table clearly shows that the Bank of Baroda is ranked at top position, followed by Indian Bank, Andhra Bank, Punjab National Bank, Syndicate Bank, Bank of India.

REFERENCES:

Zumwalt, K. (2002). The Changing Relationship Between CAMEL Ratings and Bank Soundness during the Indonesian Banking Crisis. Review of Quantitative Finance and Accounting, 19(3), 247-260

Kapil, S. and Kapil, K, N, (2005). CAEL’s Ratings and its Correlation to Pricing Stocks - An Analysis of Indian Banks. University Journal of Bank Management, 4(1), 64-78.

Singh, D., and Kohli, G. (2006). Evaluation of Private Sector Banks in India: A SWOT Analysis. Journal of Management Research, 6(2), 84-101.

Gupta, R. (2008). A CAMEL Model Analysis of Private Sector Banks in India. Journal of Gyan Management, 2(1), 3-8.

Satish D, Jutur Sharath and Surender V Indian Banking Performance and Development 2004-05, Chartered Financial Analyst, 11 (10), 6-15.

Derviz, A., and Podpiera, J. (2008). Predicting Bank CAMEL and SandP Ratings: The Case of the Czech Republic. Emerging Markets, Finance and Trade, 44(1), 117.

Received on 06.06.2014 Modified on 20.07.2014

Asian J. Management 5(4): Oct.- Dec., 2014 page 374-379