This is the eight edition of the Best Banks survey, brought out by BW Businessworld, with PricewaterhouseCoopers (PwC) providing knowledge support. The survey entails a comprehensive analysis of the scheduled commercial banks operational in India, based on their performance on select parameters over a period of three years, FY2013 to FY2015.
A total of 53 scheduled commercial banks (including 25 public sector banks, 19 private sector banks and 9 foreign banks) were identified for a detailed analysis based on the following eligibility criteria: a minimum asset size of Rs 5,000 crore as on 31 March 2015; a branch network of five or more; should have been continuously operational for a minimum of three years up to March 2015. These banks have been categorised into four distinct groups on the basis of their book size so as to ensure fair identification of merit: Large banks (balance sheet size over Rs 200,000 crore); mid-size banks (between Rs 85,000 and Rs 200,000 crore); small banks (less than Rs 85,000 crore); and foreign banks (more than Rs 5,000 crore).
For evaluation, each bank was stacked under four primary categories — growth, size, sustainability of operations and risk. Each of these category has several parameters with assigned weights. The banks are ranked on the basis of their performance on each parameter. The aggregate score for each bank is arrived at by multiplying its rank with the assigned weights under each of the four categories. The aggregate score of a bank is thus the sum total of its weighted ranks. Since the scores are derived from the ranks, the banks are arranged in ascending order of their respective scores within their peer group, which determines the overall best bank in each group. In order to determine the fastest-growing bank, the weighted scores for the banks are calculated from the ‘growth’ category.
External Panel Assessment
The list of the top five banks in each group, based on their aggregate scores, was presented to an external jury which deliberated on the analysis of the data, the methodology used and the rankings and decided the list of winners in each group. The jury took into consideration factors such as base effect, sustainability of growth, efficient use of capital and overall quality of risk management. The deliberations also included qualitative factors like market intelligence, quality of management, shareholder value creation and corporate governance, including succession planning. The jury arrived at a consensus to continue with the decision of the jury last year to omit the ‘Fastest Growing Foreign Bank’ category since many foreign banks have gone through slow growth or negative growth as a considered strategic call. After careful deliberation and moderation of the facts collated from the data analysis, the jury came up with the final winner in each category.
Parameters and Scores
Growth, the first dimension, is assigned a weightage of 25 per cent in the final score aggregation. It encapsulates the CAGR over 2013-2015 of parameters like total deposits, demand deposits, loans in advances, core fee income, operating profit, net worth and net interest income. The second dimension, Size, is assigned a weightage of 20 per cent and considers the overall balance sheet size (total assets), loans and advances and demand deposits of the bank. It also includes parameters such as number of employees and branches, with lower weightage, in order to account for the overall outreach of the bank’s network. Sustainability of operations, the third dimension, continues to be assigned the highest weightage of 30 per cent since it takes into account the inherent robustness of the bank to withstand adverse externalities. Asset quality, efficiency and productivity are the three pillars of sustainability and are assigned a weightage of 10 per cent, 15 per cent and 5 per cent, respectively. Risk, the fourth dimension, is assigned an overall weightage of 25 per cent and encapsulates the capital adequacy ratio (CAR), tier 1 capital to shareholders’ capital ratio and a risk index which is a measure of the volatility of earnings of a bank.
(This story was published in BW | Businessworld Issue Dated 08-02-2016)
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