India 's An Efficient Financial Sector

Union Bank of Colombo PLC (“UBC or “the Bank”) was established in the year 1995 as the eighth local commercial bank in Sri Lanka. UBC was Sri Lanka’s rapid fastest expanding growing banks within the recent new entrants that offered a wide range of financial solutions with the latest technology innovations during its initial period. At the inception, the Bank was focusing on a niche market mainly consisting of a high net worth clientele. UBC continued to increase its accessibility and reach, through its network expansion and technology driven products, which were innovative and in most cases was “first” in the industry. (Refer Appendix IV). UBC continues to deliver convenience and

The overall development of an economy is a major factor that has significant impacts on the development of the economy's financial markets. Since well-functioning financial systems offer good and easily accessible information, they lower the costs of transaction. This in turn enhances resource allocation and strengthens economic growth. The financial services industry consists of various systems such as stock markets and banking systems that enhance growth and help in poverty reduction. However, commercial banks tend to dominate the financial system during low levels of economic development while stock markets become more active and effective during periods of high levels of economic development ("Financial Sector", n.d.). The other important systems in the financial services industry include sound macroeconomic policies, shareholder protection, and good legal systems.

The Japanese banking industry has recovered well from the 2009 crisis to consistently post moderate growth. This trend is forecast to continue through to 2017. Japan is the second largest banking industry in Asia - Pacific, accounting for over 26% of the region’s total assets. The Japanese banking industry had total assets of $11,065.8bn in 2012, representing a compound annual growth rate (CAGR) of 2.1% between 2008 and 2012. (MarketLine, 2013)

(Dr). T. Velnampy and J. AloyNiresh wrote an article with topic “The Relationship between Capital Structure & Profitability “. The article focuses on the fact that an unplanned capital structure could lead to inefficient use of the funds whereas a strategically planned capital structure maximizes the use of the fund and helps to adapt to economic changes. The authors shows the relationship between the capital structure and profitability of listed banks of Sri Lanka. Descriptive statistical tools were used to define and summarize the behavior of each variable over the period of time .The results of the descriptive analysis shows that the mean of debt/equity ratio is 825.2% which indicates that the debt of banks are 8.25 times more than the total equity which is abnormal in the market as 2 times is perceived to be the maximum ratio for other sectors if the firm is to maintain a safe position. This shows that banks in Sri Lanka depend heavily on debt rather than equity. This can also be seen from the mean value of debt to total fund ratio which is 89% which indicates that banks capital structure is made up of 89% of leverage and only 11% of

“ Concentration has made the financial sector more fragile by creating a few large institutions that dominate more than half of the sector. The top 18 banks currently hold about 60 percent of total assets with the top 4 holding about 40 percent (this is even higher than pre-crisis levels)—compared with only 23 percent of total bank assets in 1992. Further, as compared with 1992, these are now “universal banks,” permitted to engage in a wide range of financial activities, from commercial banking to investment banking and to insurance.

Efficiency and Profitability of Canadian banks were previously studied at the branch and the institutional levels. Since in general it is extremely difficult to access branches banking data, thus, the institutional level will be inspected once again, mainly for its easiness. Assessing the performance of Canadian banks will be throughout years 2008 and 2013 on the largest banks ranked in terms of assets by applying the non-parametric mathematical programming approach; the DEA approach and two of the most popular standard financial ratios; the return on assets (ROA) and the return on equity (ROE). Output-oriented approach will be adopted as many researchers obtained efficiency estimates under input-oriented approach. This is probably due to the conjecture that managers have more power on inputs than outputs. For the selection of inputs and outputs the intermediation approach will be followed as it is favored among other approaches for assessing the bank as whole. Relevant data will be extracted from the world banking information database named "Bankscope". Bankscope is easily accessible to obtain the needed data directly from the financial statements of banks.

Formerly discovered, efficiency and profitability are positively correlated. Hence, when the profitability of banks ameliorates their efficiency improve along. In contrast to Shaffnit et al. (1997), the impact of profitability and efficiency on each other is trivial (Akmal and Saleem, 2008). Initially, once we come across the study of banking efficiency, what usually pops into the heads is; why the efficiency of banks matters to managers, regulators, shareholders, and consumers. The reply to the above query is diverse for each of them as it relies on their standpoints (Kumar and Gulati, 2008).

List of abbreviations List of tables Acknowledgements Abstract 1. 2. 3. 4. 5. 6. 7. 8. Introduction Problem statement Objectives and hypothesis of the study Literature review Structure and performance of the financial sector in

A wide range of theoretical literature explores the relationships between banks and economic growth. In an ideal world researchers would construct cross-country variables that would describe banks profitability, corporate governance in place, resource mobilization and allocation and risk management. Unfortunately until now no standardized measures for a broad spectrum of countries have been developed. That is the main reason why most of the researchers today uses variables that describe the over-all size of the banking sector by which they proxy for the „financial depth“ (Goldsmith, 1969; Mckinnon 1973).

The Sri Lankan banking industry plays a dominant role in the country’s financial sector, predominantly with regard

Until 1991, the banking in India was largely staid, straight laced and traditional. The bankers were prudent and cautious as they seldom took risks and were concerned with the normal banking activities of accepting deposits and lending against them. Labeled as "Agents of Social Change", their outlook was rigidly controlled by the policies of the Government, which were centered more on poverty alleviation and the upliftment of the downtrodden. The 1969 and 1980 's nationalization of banks, bringing private banks under the state control, had the objective of realizing this government dream. Even as late as 1991-92, the profitability was a forbidden word in banking business. The banks were established to fulfill social objectives and their performance was rated from their 'task fulfillment ' initiatives rather than from their commercial successes. Lending to the priority sectors, opening of rural branches, achievements in the implementation of Government sponsored schemes and adherence to the policies and programmes of the Government were the parameters considered for evaluating the performance of a bank. No one gave a thought to the actual state of affairs in many banks, which was dismal with huge unrealizable debts, many unviable branches, lethargic staff and very ineffective customer service (Singh, 2007).

This paper investigates the efficiency of public and private sector banks in Peshawar. For this purpose, we have taken the secondary data from income statement, balance sheet and other financial reports of banks for the year for the year 2010, 2011 and 2012.We have used ratio analysis technique on financial statements of the two banks to find out the efficiency that which sector banks is more efficient. Both banks are considered very big and important financial institution for providing services to government employee and general publics. The all ratios result reveals that ABL is more efficient than the NBP and on the basis of these findings it accepts the hypothesis that “The private sector banks are more efficient than public sector banks in Peshawar” and reject the hypothesis “The public sector banks are more efficient than private sector banks in Peshawar”. we realize in this study that the private sector banks in Peshawar have better management and control over it as compare to public sectors bank. we suggest that Investors should invest in private sector banks rather t public sector banks in Peshawar and Recommended some good suggestions for the betterment of Public sectors banks.

In a year’s time, the number of banks in India will rise by more than 45%. Until 2014 there were 25 public sector banks (PSBs) and 20 private banks, i.e. a total of 45 banks. With the Reserve Bank of India (RBI) having granted licenses to 2 private banks, 11 payment banks and 8 small finance banks, the number will rise to 66 in about 18 months when these banks get functioning. Contrast this with the period from 1990 to 2014 when only 9 banks were given licenses, but in 2014-15 alone, 21 licenses have been granted; it spells a serious change in market dynamics.

Moreover, many of the deeper rooted problems of the Indian economy in the early nineties

Forces for change in Indian Banking: Underlying forces for change Developments in communication systems, coupled with blurring of differences between banks and non - banks and globalization have aggravated the competitive environment. Technology became a key differentiator for the new private sector banks. The technological superiority helped these private sector banks to have upper edge over public sector banks. The traditional source of income (Net Interest margin = Interest Earned – Interest Expended) was compressed due to the pressure of competition. As a