BW Best Bank Jury: Banking On Excellence

The epicentre of business are our banks. They allocate scarce capital to the areas that require it the most. They create the multiplier effect. They act as the catalyst to growth. And we all know that if India has to grow faster, we need bigger larger and better banks.

Towards that ideal, the PwC and BW Businessworld’s Best Bank Jury gathered together to pick the choicest of the banks to encourage banks to not only preserve and grow their capital, but also to nudge the India story on the fast-track.

Illustrious persons in the field of finance constituted the jury: G N Bajpai, Former Chairman, SEBI; V K Mehrotra, Former Chairman, LIC; V Srinivasan, CFO, Godrej Consumers; Rajesh Mokashi, MD, Care Ratings; Dhanpal Jhaveri, Managing Partner, Everstone Capital, and Jaspal Bindra, Chairman, Centrum Capital.

The objective was a comprehensive analysis of scheduled commercial banks operating in India. PwC conducted a study on the progress banks have made since financial year 2014, up to 2016. 52 commercial banks were selected on the basis of various parameters and categorised according to size in terms of capital, as well as others, as below.

These were growth, sustainability of operations and risk. The survey provided the actual figures the jury needed to evaluate, and make their task of justifying their decisions easier.

The detailed analysis explains that all scheduled banks with five branches or more than Rs 5,000 crore as on 31.3.16 and in continuous operations through FY 2014-16 were surveyed. Of the 52 banks thus chosen and analysed, 25 were public-sector banks, 20 private-sector banks and seven foreign banks.

Rajesh Mokashi acknowledged the strenous work done in analysing the best banks. He said: “We have had six to eight weeks of work on the nominees, carefully selected on the basis of growth and other criteria. Hence, we need to look at all the categories and all the banks from a qualitative perspective.”

Four categories were discussed in regard to public and private-sector banks. There was a separate award for foreign banks that have been successful in India. Public and private-sector banks with a balance sheet of less than Rs 125,000 crore (small), those with a balance sheet of Rs 125,000 crore – 250,000 crore (mid-size), those with a balance sheet above Rs 250,000 crore (large) and foreign banks with a balance sheet greater than Rs 5,000 crore.

The foreign banks, however, fell in a separate category because they operate under more restricted regulatory conditions. PwC explained that the data used for the analysis was collated from publicly available sources: the Reserve Bank of India, the Indian Banks Association and bank’s annual reports.

The four major dimensions involve sub-parameters and weights to describe how a bank was ranked. Growth was given a 25 per cent weighting and was sub-categorised as growth in demand deposits (5 per cent), in loans and advances (2.5 per cent), in core fee income (3.75 per cent), in operating profit (5 per cent), in total deposits (2.5 per cent), in net worth (3.75 per cent) and in net interest income (2.5. per cent).

Size was given a 20 per cent weighting, sub-categorised as demand deposits (6 per cent), loans and advances (5 per cent), balance sheet (5 per cent), number of branches (2 per cent) and number of employees (2 per cent).

Sustainability of operations included asset quality, productivity and efficiency. Asset quality was given a 10 per cent weighting, sub-categorised into NPA growth, NPA provision coverage and Net NPA/ Net advances. Productivity was given a weighting of 5 per cent, comprising the cost-to-average-assets ratio, operating-profit per branch and operating-profit per employee.

Efficiency comprised 15 per cent of the weighting and was sub-categorised as cost-to-income, ratio of operating profit to total income, return on average assets, non-interest income, return on average net worth, net interest income to average working funds, net interest income and average assets.

One of the most challenging sub-divisions to assess was the one that involved risk. The risk factor is how much risk a bank is willing to take and how capable it is in taking a risk. The risk factor was given a weighting of 25 per cent, calculated on the basis of the capital-adequacy ratio, tier 1 to total shareholder’s capital and volatility of earnings from financial year 2014 to 2016.

Based on these parameters, the banks were stacked in ascending order of scores within their asset-sized groups. After a review by BW Businessworld and PwC for accuracy and consistency, the final rankings were discussed and validated by the external jury.

There are four categories for the Best Bank Awards; 10 awards were to be distributed accordingly, sub-categorised as Overall “Best Bank” (one award each for large, mid-sized, small and foreign bank). Another category, the fastest-growing bank, also carries one award each for the same bank-size categories and foreign bank. Other awards are Banker of the Year, selected from the nominees of the best banks and a Lifetime Achievement Award for seminal contribution to banking in India.

At the jury meet, members had detailed discussions about the position of all banks and the scores settled on. The process was lengthy and rigorous, involving attention to detail for every bank and category.

G. N. Bajpai shared a few words about the evaluation process on behalf of the jury. “We must evaluate from the point of view that our own image is at stake along with any bank’s reputation, rather than just evaluating and giving out awards for fancy.”

The Best Bank Jury concluded their decisions and explained that the process was exciting and rigorous. The analysis proved to be a major means for the jury in making its decision, backed by strong reason. A few banks after more reasoning were re-categorised and re-ranked but that did not make a huge difference. The BW Businessworld and PwC analysis and research provided accurate details and data for the jury to make its decision regarding public and private sector banks along with foreign banks operating in the country.

This year, the jury laid great emphasis on qualitative growth, and rigorously analysed the data. Hence, it decided that there would be just a few award winners, given the complexity of the environment of the last couple of years, particularly with relation to non-performing assets. Also, it unanimously altered one of the types of awards to include the qualitative aspects of growth the banks have achieved. Hence, the Fastest Growing Banks is now The Best Growing Banks.

We are delighted that after long and intense deliberation, the jury shortlisted the winners of the BW PwC Best Bank Awards. Keep a watch on this space for the winners.