The data used to rank the banks was taken from published annual reports of the banks for the period 2010/11 to 2013/14. The rankings covered 65 scheduled commercial banks. Lenders whose financial statements were unavailable or those that have not completed four years of operations in India as on March 31, 2014, did not qualify for the study. To determine the rankings based on the provision coverage ratio parameter, banks with zero non-performing assets (NPAs) were assigned the highest rank in that category ('Provision coverage ratio'). The three broad ranking parameters were divided into 28 sub-parameters, compared to 29 last year. One parameter, operating profit to employee ratio, was dropped because of non-availability of data for foreign banks. The three broad parameters are:
There were five sub-parameters in this category. These were (a) growth over 2012/13 in deposits, alongside three-year compound annual growth rate (CAGR); (b) growth over 2012/13 in loans and advances, alongside three-year CAGR; (c) growth over 2012/13 in fee income (commissions, exchange, brokerage plus miscellaneous income), alongside three-year CAGR; (d) growth over 2012/13 in operating profit, alongside three-year CAGR; and (e) absolute rise in market share of deposits and of current and savings account (CASA).
There were three sub-parameters: the size of total deposits; the size of operating profit; and the size of balance sheet for 2013/14.
There were four overarching sub-parameters, each with further sub-divisions:
>> Quality of assets: Total NPA growth ratio: additions to NPAs during the year as a percentage of average net advances; Provision coverage: provisions for NPAs as a percentage of gross NPA closing balance; net NPAs as a ratio of net advances: gross NPAs net of provisions expressed as a percentage of net advances; restructured assets as a percentage of total average loans and advances; outstanding restructured assets as on March 31 as a percentage of outstanding loans and advances.
>> Productivity and efficiency: The cost to income ratio: operating expenditure as a percentage of operating income; the cost to average asset ratio: operating expenditure as a percentage of average assets; the absolute increase in return on assets: basis points increase in return on assets (net profit over total assets) from 2012/13 to 2013/14; the percentage increase in the ratio of operating profit to total income from 2012/13 to 2013/14.
>> Quality of earnings: Return on assets: the ratio of net profit to total assets for 2013/14; fee income as a percentage of total income; the return on capital employed: the reported net profit divided by average net worth; net interest income as a percentage of average working funds (average total assets minus average total other liabilities).
>> Capital adequacy: Capital adequacy ratio: capital-to-risk weighted assets ratio for 2013/14; Tier-I capital: total of equity capital and disclosed reserves.
The banks were grouped into four sets. For this grouping, the information on the number of branches based on the RBI's Profile of Banks, 2012/2013 was considered.
Set A: Thirty banks with balance sheet size greater than or equal to Rs 1,00,000 crore.
Set B: Twenty banks with more than 10 branches as of March 31, 2013, and balance sheet size less than Rs 1,00,000 crore.
Set C1: Seven banks with 10 or less branches as of March 31, 2013, and balance sheet size more than or equal to Rs 10,000 crore.
Set C2: Eight banks with less than 10 branches as of March 31, 2013, and balance sheet size less than Rs 10,000 crore.
To compute a bank's total score, it was assigned a score for each of the 28 sub-parameters, based on its ranks on the parameters. The score under each parameter was then multiplied by the parameter's weightage. The results are aggregated to arrive at the total score.