Profitability and productivity in nationalised sector banks vs private sector banks - last five years comparison

The purpose of this paper is to compare the Profitability and Productivity of Nationalised Sector Banks with that of Private Sector Banks.

This study has been conducted on the basis of five banking parameters, which are Business per employee, Profit per employee, Deposits, Advances and NPA ratio.

Analysis of the above five banking parameters for the last five years, that is during 2005–06 to 2009–10 show that Nationalised sector banks are certainly performing better than private sector banks. Business per employee in private sector banks has gone up by 18.99% whereas in Nationalised sector banks it has gone up by 147.32%. Profit per employee in private sector banks has gone up by 59.78% whereas in Nationalised sector banks it has gone up by 157.40%. Deposits in Private sector banks have grown by 92.04% whereas in Nationalised sector banks they have grown by 139.22%. Advances in private sector banks have grown by 102.10% whereas in Nationalised sector banks they have grown by 150.90%. The Nationalised sector banks have been successful in controlling their NPA ratio, in private sector banks it have gone up from 1.01% to 1.03% whereas in Nationalised sector banks it has reduced from 1.16 to 0.91. And hence this analysis has clearly shown that the Nationalised sector banks are outperforming Private sector banks in all the five fields. CONCLUSION The Nationalised sector banks are doing better than private sector banks and this is mainly because of the Nationalised sector banks diversification to retail loans and MSME (Micro, Small and Medium Enterprises) loans. The retail and MSME loans on the one side increase the margins and on the other side are helpful in controlling the NPAs. The Nationalised sector banks understand the Indian market better than the private banks. They have a nationwide presence and can follow local sentiments; the general public has greater confidence in the Nationalised sector banks. Lastly and more significantly the Nationalised sector banks have been able to adapt well post liberalization. They have reduced their work force, outsourced where ever economical and computerize all the banking functions, now even the smallest Nationalised sector bank offers ATM/debit cards, RTGS fund transfer, internet banking, telephone banking etc. The staff in Nationalised sector banks is now motivated and they realise the importance of a good performance whereas the private bank staff is generally offered contractual employment and therefore, they lack the sense of belongingness with their organization, which is generally seen in Nationalised sector banks. The DSA (Direct Sales Agent) culture in private sector banks is also tarnishing their image.