Camel Rating

ACKNOWLEDGMENT
Words are the dress of thoughts, appreciating and acknowledging those who
are responsible for successful completion of the project.
Our sincerity gratitude goes to Prof. SHILPA THAKUR who helped us to

work on this project and provided us all the help, guidance and
encouragement to complete this project.
The encouragement and guidance given by Mr VINAY GUDDI

(Corporation Bank) have made this a personally rewarding experience. We
thank him for his support and inspiration, without which, understanding the
intricacies of the project would have been exponentially difficult.
We are sincerely grateful MULUND COLLEGE OF COMMERECE

Institute Of who provided us the opportunity and inspiration needed to
prepare this training report in congenial manner.
EXECUTIVE SUMMARY
In today’s scenario, the banking sector is one of the fastest growing sector
and a lot of funds are invested in Banks. Also today’s banking system is
becoming more complex. So, we thought of evaluating the performance of
the banks. There are so many models of evaluating the performance of the
banks, but we have chosen the CAMELS Model to evaluate the performance
of the banks. We have read a lot of books and found it the best model
because it measures the performance of the banks from each parameter i.e.
Capital, Assets, Management, Earnings and Liquidity.
After deciding the model, we have decided to take two public bank and two
private bank for comparison. We have collected annual reports of all the
banks. And we have calculated ratios for all the banks and interpreted them.
After that we have given weightage to each parameter of the CAMELS

Model. According to their importance and our understandings, we have
allocated weightage to the each ratios of the each parameter. From the
weighted results of each ratio, we got percentage on the bases of the
performance of the bank. On the basis of total derived, we have given
ranking to the banks.
INTRODUCTION
CAMELS RATING SYSTEM
The CAMELS rating system is a recognized international rating system that

bank supervisory authorities use in order to rate financial institutions
according to six factors represented by the acronym "CAMELS."
Supervisory authorities assign each bank a score on a scale, and a rating of
one is considered the best and the rating of five is considered the worst for
each factor. Banks that are given an average score of less than two are
considered to be high-quality institutions. Banks with scores greater than
three are considered to be less-than-satisfactory institutions.
The performance of an economy is very much associated with the

performance of the financial Sector of that economy. The financial sector of
our country is gaining strength over the years and its contribution to growth
is overwhelming. Banks are considered the main component of our Financial
Sector. A good performance of banking sector itself indicates the overall
good performance of the sector, which ultimately leads to improved
performance of economy. The functions of present day commercial banks
have diversified manifold.
The CELS ratings or Camels rating is a supervisory rating system
originally developed in the U.S. to classify banks overall conditions. It is
applied to every bank and credit union in the U.S. (approximately 8,000
institutions) and is also implemented outside the U.S. by various banking
supervisory regulators.
Banking supervision has been increasingly concerned due to significant

loan losses and bank failures from the 1980s till now. In the light of the
banking crisis in recent years worldwide, CAMEL is a useful tool to
examine the safety and soundness of banks, and help mitigate the potential
risks which may lead to bank failures. The research has been conducted as a
case study of American International Assurance Vietnam (AIA). It aims to
determine whether the CAMEL framework plays a crucial role in banking
supervision. Furthermore, the purpose is to identify the benefits as well as
drawbacks which the
CAMEL system brings to AIA. The research problem was explored by

quantitatively analyzing a bank’s overall performance. The paper firstly
starts to collect theory relevant to the empirical research, and then draws
conclusions from the findings by relating them back to the literature stated in
the early stage. Although this study is based on collected data and
numerical figures, it is a qualitative study. The findings revealed that
CAMEL rating system is a useful supervisory tool in the U.S. CAMEL
analysis approach is beneficial as it is an internationally standardized rating
and provides flexibility between on-site and off-site examination; hence, it is
the main model in assessing banks’ performance in AIA. On the other hand,
it has disadvantages of not following the Vietnamese bank closely, ignoring
the interaction with bank’s top management and overlooking the provisions
as well as allowance for loan loss ratios. CAMEL rating is used as a private
rating framework in bank analysis for its own investment purposes rather
than that used by regulatory bodies in supervising the banks. It may be
similar in the way that applying CAMEL rating in AIA aims at protecting
itself as a depository from losses.
The banking sectors are treated as the back-bone of an economy. There

are several types of banks in Bangladesh. In today’s scenario, the banking
sector is one of the fastest growing sector and a lot of funds are
invested in Banks. Also today’s banking system is becoming more complex.
So, we thought of evaluating the performance of the banks. There are so
many models of evaluating the performance of the banks, but we have
chosen the CAMELS Model to evaluate the performance of the banks.
CAMEL is an acronym for six components of bank safety and soundness.
Performance of the banking sector under CAMELS involves analysis and

evaluation of these six crucial dimensions of banking operations. The
CAMELS methodology was originally adopted by North American bank
regulators to evaluate the financial and managerial soundness of U.S.
commercial lending institutions.
CAMEL rating, was adopted by the Federal Financial Institution

Examination Council On November 13 1979, and then adopted by the
National Credit Union Administration in October 1987. It has proven to be
an effective internal supervisory tool for evaluating the soundness of a
financial firm, on the basis of identifying those institutions requiring special
attention or concern .
The CAMEL rating system is based upon an evaluation of five

critical elements of a credit union's operations: Capital Adequacy, Asset
Quality, Management, Earnings and Asset/Liability Management. This
rating system is designed to take into account and reflect all significant
financial and operational factors examiners assess in their evaluation of a
credit union's performance. Credit unions are rated using a combination of
financial ratios and examiner judgment. Since the composite CAMEL rating
is an indicator of the viability of a credit union, it is important that examiners
rate credit unions based on their performance in absolute terms rather than
against peer averages or predetermined benchmarks. The examiner must use
professional judgment and consider both qualitative and quantitative factors
when analyzing a credit union's performance. Since numbers are often
lagging indicators of a credit union's condition, the examiner must also
conduct a qualitative analysis of current and projected operations when
assigning CAMEL ratings.
Although the CAMEL composite rating should normally bear a close
relationship to the component ratings, the examiner should not derive the
composite rating solely by computing an arithmetic average of the
component ratings. Following are general definitions the examiner should
use for assigning the credit union's CAMEL composite rating:
The components of a bank's condition that are assessed:
 (C)capital adequacy
 (A) Assets
 (M)Management capability
 (E)Earning
 (L)Liquidity (also called asset liability management)
 (S)Sensitivity (sensitivity to market risk, especially interest rate risk)
Ratings are not released to the public but only to the top management to
prevent a possible bank run on an institution which receives a CAMELS
rating downgrade. Institutions with deteriorating situations and declining
CAMELS ratings are subject to ever increasing supervisory scrutiny. Failed
institutions are eventually resolved via a formal resolution process designed
to protect retail depositors.
COMPOSITE RATINGS
The rating system is designed to take into account and reflect all significant
financial and operational factors examiners assess in their evaluation of an
institutions performance. Institutions are rated using a combination of
specific financial ratios and examiner qualitative judgments. The following
describes some details of the CAMEL system in the context of examining a
credit union.
Rating 1
Indicates strong performance and risk management practices that

consistently provide for safe and sound operations. Management clearly
identifies all risks and employs compensating factors mitigating concerns.
The historical trend and projections for key performance measures are
consistently positive. Banks and credit unions in this group resist external
economic and financial disturbances and withstand the unexpected actions of
business conditions more ably than banks and credit unions with a lower
composite rating. Any weaknesses are minor and can be handled in a routine
manner by the board of directors and management. These banks and credit
unions are in substantial compliance with laws and regulations. Such
institutions give no cause for supervisory concern.
Rating 2
Reflects satisfactory performance and risk management practices that

consistently provide for safe and sound operations. Management identifies
most risks and compensates accordingly. Both historical and projected key
performance measures should generally be positive with any exceptions
being those that do not directly affect safe and sound operations. Banks and
credit unions in this group are stable and able to withstand business
fluctuations quite well; however, minor areas of weakness may be present
which could develop into conditions of greater concern. These weaknesses
are well within the board of directors' and management's capabilities and
willingness to correct. These banks and credit unions are in substantial
compliance with laws and regulations. The supervisory response is limited to
the extent that minor adjustments are resolved in the normal course of
business and that operations continue to be satisfactory.
Rating 3
Represents performance that is flawed to some degree and is of supervisory

concern. Risk management practices may be less than satisfactory relative to
the bank's or credit union's size, complexity, and risk profile. Management
may not identify and provide mitigation of significant risks. Both historical
and projected key performance measures may generally be flat or negative to
the extent that safe and sound operations may be adversely affected. Banks
and credit unions in this group are only nominally resistant to the onset of
adverse business conditions and could easily deteriorate if concerted action
is not effective in correcting certain identifiable areas of weakness. Overall
strength and financial capacity is present so as to make failure only a remote
probability. These banks and credit unions may be in significant
noncompliance with laws and regulations. Management may lack the ability
or willingness to effectively address weaknesses within appropriate time
frames. Such banks and credit unions require more than normal supervisory
attention to address deficiencies.
Rating 4
Refers to poor performance that is of serious supervisory concern. Risk

management practices are generally unacceptable relative to the bank's or
credit union's size, complexity and risk profile. Key performance measures
are likely to be negative. Such performance, if left unchecked, would be
expected to lead to conditions that could threaten the viability of the bank or
credit union. There may be significant noncompliance with laws and
regulations. The board of directors and management are not satisfactorily
resolving the weaknesses and problems. A high potential for failure is
present but is not yet imminent or pronounced. Banks and credit unions in
this group require close supervisory attention.
Rating 5
Considered unsatisfactory performance that is critically deficient and

in need of immediate remedial attention . Such performance, by itself or
in combination with other weaknesses, directly threatens the viability of the
bank or credit union. The volume and severity of problems are beyond
management's ability or willingness to control or correct. Banks and credit
unions in this group have a high probability of failure and will likely require
liquidation and the payoff of shareholders, or some other form of emergency
assistance, merger, or acquisition.
CAMEL ratings reflect the excellent banking conditions and performance

over the last several years. There is a need for bank employees to have
sufficient knowledge of the rating system, in order to guide the banking
growth rate in the positive direction. Lack of knowledge among employees
regarding banking performance indicators affects banks negatively as these
are the basis for any banking action.
CAPITAL ADEQUACY
Capital base of financial institutions facilitates depositors in forming their
risk perception about the institutions. Also, it is the key parameter for
financial managers to maintain adequate levels of capitalization. Moreover,
besides absorbing unanticipated shocks, it signals that the institution will
continue to honour its obligations. The most widely used indicator of capital
adequacy is capital to risk-weighted assets ratio (CRWA). According to
Bank Supervision Regulation Committee (The Basle Committee) of Bank
for International Settlements, a minimum 8 percent CRWA is required.
Capital adequacy ultimately determines how well financial institutions can
cope with shocks to their balance sheets. Thus, it is useful to track capital-
adequacy ratios that take into account the most important financial risks—
foreign exchange, credit, and interest rate risks—by assigning risk
weightings to the institution’s assets.
Capital cushions fluctuations in earnings so that credit unions can continue

to operate in periods of loss or negligible earnings. It also provides a
measure of reassurance to the members that the organization will continue to
provide financial services. It serves to support growth as a free source of
funds and provides protection against insolvency. While meeting statutory
capital requirements is a key factor in determining capital adequacy, the
credit union’s operations and risk position may warrant additional capital
beyond the statutory requirements. Maintaining an adequate level of capital
is a critical element.
Determining the adequacy of a credit union's capital begins with a qualitative
evaluation of critical variables that directly bear on the institution's overall
financial condition.
The examiner should also consider the interrelationships with the other
areas:
Capital level and trend analysis;
 Compliance with earnings transfers requirements and risk-based net
worth requirements;
 Composition of capital;
 Interest and dividend policies and practices;
 Adequacy of the Allowance for Loan and Lease Losses account;
Quality, type, liquidity and diversification of assets, with particular
reference to classified assets;
 Loan and investment concentrations;
 Growth plans;
 Ability of management to control and monitor risk, including credit
and interest rate risk;
 Earnings: Good historical and current earnings performance enables a
credit union to fund its growth, remain competitive, and maintain a
strong capital position;
 Liquidity and funds management;
 Economic Environment.
 Capital Risk Adequacy Ratio:

CRAR is a ratio of Capital Fund to Risk Weighted Assets. Reserve Bank of
India prescribes Banks to maintain a minimum Capital to risk-weighted
Assets Ratio (CRAR) of 9 % with regard to credit risk, market risk and
operational risk on an ongoing basis, as against 8 % prescribed in Basel
documents.
Total capital includes tier-I capital and Tier-II capital. Tier-I capital includes
paid up equity capital, free reserves, intangible assets etc. Tier-II capital
includes long term unsecured loans, loss reserves, hybrid debt capital
instruments etc. The higher the CRAR, the stronger is considered a bank, as
it ensures high safety against bankruptcy.
CRAR = Capital/ Total Risk Weighted Credit Exposure

 Debt Equity Ratio:
This ratio indicates the degree of leverage of a bank. It indicates how much
of the bank business is financed through debt and how much through equity.
This is calculated as the proportion of total asset liability to net worth.
‘Outside liability’ includes total borrowing, deposits and other liabilities.
‘Net worth’ includes equity capital and reserve and surplus. Higher the ratio
indicates less protection for the creditors and depositors in the banking
system.
Debt Equity Ratio = Borrowings/ (Share Capital + reserves)
 Total Advance to Total Asset Ratio:

This is the ratio of the total advanced to total asset. This ratio indicates banks
aggressiveness in lending which ultimately results in better profitability.
Higher ratio of advances of bank deposits (assets) is preferred to a lower one.
Total advances also include receivables. The value of total assets is
excluding the revolution of all the assets.
Total Advance to Total Asset Ratio = Total Advances/ Total Asset
 Government Securities to Total Investments:

The percentage of investment in government securities to total investment is
a very important indicator, which shows the risk taking ability of the bank. It
indicates a bank’s strategy as being high profit high risk or low profit low
risk. It also gives a view as to the availability of alternative investment
opportunities. Government securities are generally considered as the most
safe debt instrument, which, as a result, carries the lowest return. Since
government securities are risk free, the higher the government security to
investment ratio, the lower the risk involved in a bank’s investments.
Government Securities to Total Investments = Government Securities/
Total Investment
ASSET QUALITY
Asset quality determines the robustness of financial institutions against loss
of value in the assets. The deteriorating value of assets, being prime source
of banking problems, directly pour into other areas, as losses are eventually
written-off against capital, which ultimately jeopardizes the earning capacity
of the institution. With this backdrop, the asset quality is gauged in relation
to the level and severity of non-performing assets, adequacy of provisions,
recoveries, distribution of assets etc. Popular indicators include
nonperforming loans to advances, loan default to total advances, and
recoveries to loan default ratios.
The solvency of financial institutions typically is at risk when their assets

become impaired, so it is important to monitor indicators of the quality of
their assets in terms of overexposure to specific risks, trends in
nonperforming loans, and the health and profitability of bank borrowers—
especially the corporate sector. Share of bank assets in the aggregate
financial sector assets: In most emerging markets, banking sector assets
comprise well over 80 per cent of total financial sector assets, whereas these
figures are much lower in the developed economies. Furthermore, deposits
as a share of total bank liabilities have declined since 1990 in many
developed countries, while in developing countries public deposits continue
to be dominant in banks. In India, the share of banking assets in total
financial sector assets is around 75 per cent, as of end-March 2008.
There is, no doubt, merit in recognizing the importance of diversification in

the institutional and instrument-specific aspects of financial intermediation
in the interests of wider choice, competition and stability. However, the
dominant role of banks in financial intermediation in emerging economies
and particularly in India will continue in the medium-term; and the banks
will continue to be “special” for a long time. In this regard, it is useful to
emphasise the dominance of banks in the developing countries in promoting
non-bank financial intermediaries and services including in development of
debt-markets.
Even where role of banks is apparently diminishing in emerging markets,

substantively, they continue to play a leading role in non-banking financing
activities, including the development of financial markets. One of the
indicators for asset quality is the ratio of non-performing loans to total loans
(GNPA). The gross non-performing loans to gross advances ratio is more
indicative of the quality of credit decisions made by bankers. Higher GNPA
is indicative of poor credit decision-making.
NPA: Non-Performing Assets
Advances are classified into performing and non-performing advances

(NPAs) as per RBI guidelines. NPAs are further classified into sub-standard,
doubtful and loss assets based on the criteria stipulated by RBI. An asset,
including a leased asset, becomes nonperforming\ when it ceases to generate
income for the Bank.
An NPA is a loan or an advance where:
1. Interest and/or instalment of principal remains overdue for a period of

more than 90 days in respect of a term loan.
2. The account remains "out-of-order'' in respect of an Overdraft or Cash
Credit (OD/CC).
3. The bill remains overdue for a period of more than 90 days in case of
bills purchased and discounted.
4. A loan granted for short duration crops will be treated as an NPA if
the instalments of principal or interest thereon remain overdue for two
crop seasons.
5. A loan granted for long duration crops will be treated as an NPA if the
instalments of principal or interest thereon remain overdue for one
crop season
The Bank classifies an account as an NPA only if the interest imposed
during any quarter is not fully repaid within 90 days from the end of the
relevant quarter. This is a key to the stability of the banking sector. There
should be no hesitation in stating that Indian banks have done a remarkable
job in containment of non-performing loans (NPL) considering the overhang
issues and overall difficult environment. For 2008, the net NPL ratio for the
Indian scheduled commercial banks at 2.9 per cent is ample testimony to the
impressive efforts being made by our banking system. In fact, recovery
management is also linked to the banks’ interest margins. The cost and
recovery management supported by enabling legal framework hold the key
to future health and competitiveness of the Indian banks. No doubt,
improving recovery-management in India is an area requiring expeditious
and effective actions in legal, institutional and judicial processes.
Asset quality is rated in relation to:

 The quality of loan underwriting, policies, procedures and practices;
 The level, distribution and severity of classified assets;
 The level and composition of nonaccrual and restructured assets;
 The ability of management to properly administer its assets, including
the timely identification and collection of problem assets;
 The existence of significant growth trends indicating erosion or
improvement in asset quality;
 The existence of high loan concentrations that present undue risk to
the credit union;
 The appropriateness of investment policies and practices;
 The investment risk factors when compared to capital and earnings
structure; and the effect of fair (market) value of investments vs. book
value of investments
 Total Loans/Total Shares

 Total Loans/Total Assets
 Fair (Market) Value / Book value
 Gross NPA ratio:
This ratio is used to check whether the bank's gross NPAs are increasing
quarter on quarter or year on year. If it is, indicating that the bank is adding a
fresh stock of bad loans. It would mean the bank is either not exercising
enough caution when offering loans or is too lax in terms of following up
with borrowers on timely repayments.
 Net NPA ratio:

Net NPAs reflect the performance of banks. A high level of NPAs suggests
high probability of a large number of credit defaults that affect the
profitability and net-worth of banks and also wear down the value of the
asset.
MANAGEMENT
Management of financial institution is generally evaluated in terms of capital

adequacy, asset quality, earnings and profitability, liquidity and risk
sensitivity ratings. In addition, performance evaluation includes compliance
with set norms, ability to plan and react to changing circumstances, technical
competence, leadership and administrative ability. In effect, management
rating is just an amalgam of performance in the above-mentioned areas.
Sound management is one of the most important factors behind financial
institutions’ performance. Indicators of quality of management, however, are
primarily applicable to individual institutions, and cannot be easily
aggregated across the sector. Furthermore, given the qualitative nature of
management, it is difficult to judge its soundness just by looking at financial
accounts of the bank.
Management is the most forward-looking indicator of condition and a key

determinant of whether a credit union is able to correctly diagnose and
respond to financial stress. The management component provides examiners
with objective, and not purely subjective, indicators. An assessment of
management is not solely dependent on the current financial condition of the
credit union and will not be an average of the other component ratings.
Total Advance to Total Deposit Ratio:

This ratio measures the efficiency and ability of the banks management in
converting the deposits available with the banks (excluding other funds like
equity capital, etc.) into high earning advances. Total deposits include
demand deposits, saving deposits, term deposit and deposit of other bank.
Total advances also include the receivables. Total Advance/ Total Deposit
Business per Employee:

Revenue per employee is a measure of how efficiently a particular bank is
utilizing its employees. Ideally, a bank wants the highest business per
employee possible, as it denotes higher productivity. In general, rising
revenue per employee is a positive sign that suggests the bank is finding
ways to squeeze more sales/revenues out of each of its employee.
Total Income/ No. of Employees
Profit per Employee:
This ratio shows the surplus earned per employee. It is arrived at by dividing
profit after tax earned by the bank by the total number of employee. The
higher the ratio shows good efficiency of the management.
Profit after Tax/ No. of Employees

Business strategy and financial performance
The credit union's strategic plan is a systematic process that defines

management's course in assuring that the organization prospers in the next
two to three years. The strategic plan incorporates all areas of a credit union's
operations and often sets broad goals, e.g., capital accumulation, growth
expectations, enabling credit union management to make sound decisions.
The strategic plan should identify risks within the organization and outline
methods to mitigate concerns.
As part of the strategic planning process, credit unions should develop

business plans for the next one or two years. The board of directors should
review and approve the business plan, including a budget, in the context of
its consistency with the credit union's strategic plan. The business plan is
evaluated against the strategic plan to determine if it is consistent with its
strategic plan. Examiners also assess how the plan is put into effect. The
plans should be unique to and reflective of the individual credit union. The
credit union's performance in achieving its plan strongly influences the
management rating.
Information systems and technology should be included as an integral part of

the credit union's strategic plan. Strategic goals, policies, and procedures
addressing the credit union's information systems and technology ("IS&T")
should be in place. Examiners assess the credit union's risk analysis, policies,
and oversight of this area based on the size and complexity of the credit
union and the type and volume of e-Commerce services' offered. Examiners
consider the criticality of e-Commerce systems2 and services in their
assessment of the overall IS&T plan.
Prompt corrective action may require the development of a net worth

restoration plan ("NWRP") in the event the credit union becomes less than
adequately capitalized. A NWRP addresses the same basic issues associated
with a business plan. The plan should be based on the credit union's asset
size, complexity of operations, and field of membership. It should specify
the steps the credit union will take to become adequately capitalized. If a
NWRP is required, the examiner will review the credit union's progress
toward achieving the goals set forth in the plan.
Internal controls
An area that plays a crucial role in the control of a credit union's risks is its
system of internal controls. Effective internal controls enhance the
safeguards against system malfunctions, errors in judgment and fraud.
Without proper controls in place, management will not be able to identify
and track its exposure to risk. Controls are also essential to enable
management to ensure that operating units are acting within the parameters
established by the board of directors and senior management.
Seven aspects of internal controls deserve special attention:
1. Information systems. It is crucial that effective controls are in place

to ensure the integrity, security, and privacy of information contained
on the credit union's computer systems. In addition, the credit union
should have a tested contingency plan in place for the possible failure
of its computer systems.
2. Segregation of duties. The credit union should have adequate
segregation of duties and professional resources in every area of
operation. Segregation of duties may be limited by the number of
employees in smaller credit unions.
3. Audit program. The effectiveness of the credit union's audit program
in determining compliance with policy should be reviewed. An
effective audit function and process should be independent, reporting
to the Supervisory Committee without conflict or interference with
management. An annual audit plan is necessary to ensure that all risk
areas are examined, and that those areas of greatest risk receive
priority. Reports should be issued to management for comment and
action and forwarded to the board of directors with management's
response. Follow-up of any unresolved issues is essential, e.g.,
examination exceptions, and should be covered in subsequent reports.
In addition, a verification of members' accounts needs to be
performed at least once every two years.
4. Record keeping. The books of every credit union should be kept in
accordance with well-established accounting principles. In each
instance, a credit union's records and accounts should reflect its actual
financial condition and accurate results of operations. Records should
be current and provide an audit trail. The audit trail should include
sufficient documentation to follow a transaction from its inception
through to its completion. Subsidiary records should be kept in
balance with general ledger control figures.
5. Protection of physical assets. A principal method of safeguarding
assets is to limit access by authorized personnel. Protection of assets
can be accomplished by developing operating policies and procedures
for cash control, joint custody (dual control), teller operations, and
physical security of the computer.
6. Education of staff. Credit union staff should be thoroughly trained in
specific daily operations. A training program tailored to meet
management needs should be in place and cross-training programs for
office staff should be present. Risk is controlled when the credit union
is able to maintain continuity of operations and service to members.
7. Succession planning. The ongoing success of any credit union will be
greatly impacted by the ability to fill key management positions in the
event of resignation or retirement. The existence of a detailed
succession plan that provides trained management personnel to step in
at a moment's notice is essential to the long-term stability of a credit
union. A succession plan should address the Chief Executive Officer
(or equivalent) and other senior management positions (manager,
assistant manager, etc.).
Other management issues
Other key factors to consider when assessing the management of a credit

union include, but are not limited to:
 Adequacy of the policies and procedures covering each area of the credit
union's operations (written, board approved, followed);
 Budget performance compared against actual performance;
 Effectiveness of systems that measure and monitor risk;
 Risk-taking practices and methods of control to mitigate concerns;
 Integration of risk management with planning and decision-making;
 Responsiveness to examination and audit suggestions, recommendations,
or requirements;
 Compliance with laws and regulations;
 Adequacy of the allowance for loan and lease losses account and other
valuation reserves;
 Appropriateness of the products and services offered in relation to the
credit union's size and management experience;
 Loan to share ratio trends and history;
 Market penetration;
 Rate structure; and
 Cost-benefit analysis of major service products.
The board of directors and management have a fiduciary responsibility to

the members to maintain very high standards of professional conduct:
1. Compliance with all applicable state and federal laws and regulations.
Management should also adhere to all laws and regulations that
provide equal opportunity for all members regardless of race, color,
religion, sex, national origin, age, or handicap.
2. Appropriateness of compensation policies and practices for senior
management. Management contracts should not contain provisions
that are likely to cause undue hardship on the credit union. The board
needs to ensure performance standards are in place for the
CEO/Manager and senior management and an effective formal
evaluation process is in place and being documented.
3. Avoidance of conflict of interest. Appropriate policies and procedures
for avoidance of conflicts of interest and management of potential
conflicts of interest should be in place.
4. Professional ethics and behavior. Management should not use the
credit union for unauthorized or inappropriate personal gain. Credit
union property should not be used for anything other than authorized
activities. Management should act ethically and impartially in
carrying out appropriate credit union policies and procedures.
EARNINGS
Earnings and profitability, the prime source of increase in capital base, is
examined with regards to interest rate policies and adequacy of provisioning.
In addition, it also helps to support present and future operations of the
institutions. The single best indicator used to gauge earning is the Return on
Assets (ROA), which is net income after taxes to total asset ratio.
Strong earnings and profitability profile of banks reflects the ability to

support present and future operations. More specifically, this determines the
capacity to absorb losses, finance its expansion, pay dividends to its
shareholders, and build up an adequate level of capital. Being front line of
defence against erosion of capital base from losses, the need for high
earnings and profitability can hardly be overemphasized. Although different
indicators are used to serve the purpose, the best and most widely used
indicator is Return on Assets (ROA). However, for in-depth analysis,
another indicator Net Interest Margins (NIM) is also used. Chronically
unprofitable financial institutions risk insolvency. Compared with most other
indicators, trends in profitability can be more difficult to interpret—for
instance, unusually high profitability can reflect excessive risk taking.
Return on Assets (ROA):
An indicator of how profitable a company is relative to its total assets. ROA

gives an idea as to how efficient management is at using its assets to
generate earnings. Calculated by dividing a company's annual earnings by its
total assets, ROA is displayed as a percentage. Sometimes this is referred to
as "return on investment".The continued viability of a credit union depends
on its ability to earn an appropriate return on its assets. It enables a credit
union to fund expansion, remain competitive, and replenish and/or increase
capital. In evaluating and rating earnings, it is not enough to review past and
present performance. Future performance is of equal or greater value,
including performance under various economic conditions. Examiners
should evaluate "core" earnings: that is the long-run earnings ability of a
credit union discounting temporary fluctuations in income and one-time
items. A review for the reasonableness of the credit union's budget and
underlying assumptions is appropriate for this purpose. Key factors to
consider when assessing the credit union's earnings are:
Operating Profit by Average Working Fund:
This ratio indicates how much a bank can earn from its operations net of the
operating expenses for every rupee spent on working funds. Average
working funds are the total resources (total assets or total liabilities)
employed by a bank. It is daily average of total assets/ liabilities during a
year. The higher the ratio, the better it is. This ratio determines the operating
profits generated out of working fund employed. The better utilization of the
funds will result in higher operating profits. Thus, this ratio will indicate how
a bank has employed its working funds in generating profits.
Operating Profit/ Average Working Fund
Net Profit to Average Asset:

Net profit to average asset indicates the efficiency of the banks in utilizing
their assets in generating profits. A higher ratio indicates the better income
generating capacity of the assets and better efficiency of management. It is
arrived at by dividing the net profit by average assets, which is the average
of total assets in the current year and previous year.
Thus, this ratio measures the return on assets employed. Higher ratio
indicates better earning potential in the future.
Net Profit/ Average Asset
Interest Income to Total Income:

Interest income is a basic source of revenue for banks. The interest income
total income indicates the ability of the bank in generating income from its
lending. In other words, this ratio measures the income from lending
operations as a percentage of the total income generated by the bank in a
year. Interest income includes income on advances, interest on deposits with
the RBI, and dividend income.
Interest Income/ Total Income
Other Income to Total Income:

Fee based income account for a major portion of the bank’s other income.
The bank generates higher fee income through innovative products and
adapting the technology for sustained service levels. The higher ratio
indicates increasing proportion of fee-based income. The ratio is also
influenced by gains on government securities, which fluctuates depending on
interest rate movement in the economy.
LIQUIDITY
An adequate liquidity position refers to a situation, where institution can

obtain sufficient funds, either by increasing liabilities or by converting its
assets quickly at a reasonable cost. It is, therefore, generally assessed in
terms of overall assets and liability management, as mismatching gives rise
to liquidity risk. Efficient fund management refers to a situation where a
spread between rate sensitive assets (RSA) and rate sensitive liabilities
(RSL) is maintained. The most commonly used tool to evaluate interest rate
exposure is the Gap between RSA and RSL, while liquidity is gauged by
liquid to total asset ratio.
Initially solvent financial institutions may be driven toward closure by poor
management of short-term liquidity. Indicators should cover funding sources
and capture large maturity mismatches
The “L” of CAMEL represents the concept of Asset/Liability Management

- the identification, monitoring and control of:
Interest rate risk sensitivity and exposure
Liquidity risk and control
Technical competence in asset/liability management techniques

Cash maintained by the banks and balances with central bank, to total asset
ratio (LQD) is an indicator of bank's liquidity. In general, banks with a larger
volume of liquid assets are perceived safe, since these assets would allow
banks to meet unexpected withdrawals.
 Liquidity Asset to Total Asset:

Liquidity for a bank means the ability to meet its financial obligations as
they come due. Bank lending finances investments in relatively illiquid
assets, but it fund its loans with mostly short term liabilities. Thus one of the
main challenges to a bank is ensuring its own liquidity under all reasonable
conditions. Liquid assets include cash in hand, balance with the RBI, balance
with other banks (both in India and abroad), and money at call and short
notice. Total asset include the revaluations of all the assets
Liquidity Asset/ Total Asset
Government Securities to Total Asset:
Government Securities are the most liquid and safe investments. This ratio
measures the government securities as a proportion of total assets. Banks
invest in government securities primarily to meet their SLR requirements,
which are around 25% of net demand and time liabilities. This ratio
measures the risk involved in the assets hand by a bank
Government Securities/ Total Asset
 Approved Securities to Total Asset:

Approved securities include securities other than government securities. This
ratio measures the Approved Securities as a proportion of Total Assets.
Banks invest in approved securities primarily after meeting their SLR
requirements, which are around 25% of net demand and time liabilities. This
ratio measures the risk involved in the assets hand by a bank.
Approved Securities/ Total Asset
 Liquidity Asset to Demand Deposit:

This ratio measures the ability of a bank to meet the demand from deposits in
a particular year. Demand deposits offer high liquidity to the depositor and
hence banks have to invest these assets in a highly liquid form.
Liquidity Asset/ demand Deposit
 Liquidity Asset to Total Deposit:

This ratio measures the liquidity available to the deposits of a bank. Total
deposits include demand deposits, savings deposits, term deposits and
deposits of other financial institutions. Liquid assets include cash in hand,
balance with the RBI, balance with other banks (both in India and abroad),
and money at call and short notice.
On-site bank examination
Pittway and Sinker (1980) have generally discussed that on-site bank
examination has been the backbone of the supervisory process conducted by
both U.S. Federal and state banking agency. It includes the regular visit on
banks followed by the interviews with management, evaluating the accuracy
of the financial statements, accounting records, Internal controls and the
compliance with law and regulations. At the end of the exam, the bank
supervisors assign the composite rating for those supervised banks based on
the summary of findings collected through the on-site inspection. Such
composite rating is basically determined in line with the CAMEL rating
system.
Banking supervision in U.S. is primarily conducted by the Federal Reserve

in addition to its role as of monitoring the monetary policy. On the contrary,
such role is assigned to a single financial supervisory agency rather than to
the central bank, in United Kingdom and Japan. The banking supervision
mainly ensures that the commercial banks operate in a safe and sound
manner, and do not take the excessive risks. It also makes sure that those
banks operate in accordance with federal banking regulations. The Fed
examines the safe and sound of financial stability in banks through the on-
site bank examination with the support of the CAMEL rating, and in
complement with the off-site Monitoring (Bernanke, 2007).
The annual on-site bank inspection was officially mandated for most
commercial banks under the adoption of the Federal Deposit Insurance
Corporation Improvement Act of 1991 (FDICIA). Nevertheless, it is not
necessary to conduct the bank examination every twelve months because it is
performed every twelve to twenty-four months according to their inspection
priority. Such priorities are given to financially problematic banks and
thereby lower priority given to banks which are well-capitalized and have
acceptable earnings.
However, the work of Gilbert et al. (2002) argued that despite the fact that
on-site examination is an effective tool; it is costly and burdensome since the
supervisors have to be involved in daily operations and it may take a long of
time. Thus, it is supported with the off-site surveillance. Moreover, Cole and
Gunter (1998) found that the CAMEL rating improved forecast accuracy, but
only of the examination which had occurred during the previous six months.
2.2 Off-site banking surveillance
The financial market, admittedly, changes rapidly over years so bank

examination is required to be conducted more frequently. It results in the
bank supervisor relying more often on the off-site surveillance to
complement the on-site inspection. However, it provides up-to-date and
reliable financial information, and offers the basis for financial evaluation of
the bank between examinations. Off-site surveillance highlights the risk
exposure based on the annual or quarterly financial data, and it helps the
banks ‘supervisors schedule the exams on those suspected banks. Gilbert et
al. (2002) suggest that most of the off-site surveillance is based on the call
reports (reports of condition and income filled by Banks) which is produced
by the bank supervisory agencies, for the quarter prior to the examination.
Off-site monitoring is conducted between on-site examinations in the
supervisory cycle. The bank supervisors go through the results of on-site
inspection and suggest the potential full-scope examinations, if necessary;
and they also compares the bank’s performance to that of its peer in the
industry. Two commonly used off-site tools are supervisory screens and
econometric models:
• Supervisory screens include financial ratios from periodic balance sheets

and income statements, which play an important role in off-site surveillance.
Econometric models gather information from financial ratios. These models
rely on statistical tests rather than human judgment to summarize the bank
condition.
Off-site surveillance is also helpful due to the fact that it is less costly than
the on-site supervision program, and new information can be updated
frequently through quarterly financial statements and the basis for financial
assessment between examinations is given.
NEED OF CAMEL RATING SYSTEM BANKING
In 1979, the bank regulatory agencies created the Uniform Financial

Institutions Rating System (UFIRS). Under the original UFIRS a bank was
assigned ratings based on performance in five areas: the adequacy of Capital,
the quality of Assets, the capability of Management, the quality and level of
Earnings and the adequacy of Liquidity. Bank supervisors assigned a 1
through 5 rating for each of these components and a composite rating for the
bank. This 1 through 5 composite rating was known primarily by the
acronym CAMEL.
A bank that received a CAMEL of 1 was considered sound in every respect

and generally had component ratings of 1 or 2 while a bank with a CAMEL
of 5 exhibited unsafe and unsound practices or conditions, critically deficient
performance and was of the greatest supervisory concern. While the
CAMEL rating normally bore close relation to the five component ratings, it
was not the result of averaging those five grades. Rather, supervisors
consider each institution's specific situation when weighing component
ratings and, more generally, review all relevant factors when assigning
ratings.
CAMEL ratings reflect the excellent banking conditions and performance
over the last several years. There is a need for bank employees to have
sufficient knowledge of the rating system, in order to guide the banking
growth rate in the positive direction. Lack of knowledge among employees
regarding banking performance indicators affects banks negatively as these
are the basis for any banking action.
CAMELS RATING SYSTEM IN BANKING
Banking is one of the more closely supervised industries in the United

States,
Reflecting the view that bank failures have stronger adverse effects on
economic activity than other business failures. The federal government and
the state governments grant authority to bank supervisors to limit the risk of
failure assumed by banks. Supervisors impose sanctions on the banks that
they have identified as being in poor financial condition. Effective bank
supervision, therefore, requires accurate information about the condition of
banks.
Bank supervisors use on-site examination and off-site surveillance to

identify the banks most likely to fail. The most useful tool for identifying
problem institutions is on- site examination, in which examiners travel to a
bank and review all aspects of its safety and soundness. On-site examination
is, however, both costly and burdensome: costly to supervisors because of its
labor-intensive nature and burdensome to bankers because of the intrusion
into their day-to-day operations. As a result, supervisors also monitor bank
condition off-site. Off-site surveillance yields an ongoing picture of bank
condition, enabling supervisors to schedule and plan exams efficiently. Off-
site surveillance also provides banks with incentives to maintain safety and
soundness between on-site visits. Supervisors rely primarily on two
analytical tools for off-site surveillance: supervisory screens and
econometric models. Supervisory screens are combinations of financial
ratios, derived from bank balance sheets and income statements that have, in
The Role of a CAMEL in Bank Surveillance
Supervisors draw on their experience to weigh the information content of

these ratios.
One of the contributions of economists to bank supervision has been the

estimation and simulation of econometric models designed to provide
supervisors with early warning of the banks that are most likely to develop
serious problems in the future.
Econometric models use the information about the condition of banks in

their financial statements to derive one number. In most early warning
models, that number is the probability that a bank will fail in a future period.
In a recent article the authors compared the accuracy of supervisory screens
and econometric models in predicting which banks would fail in future
periods, and in predicting which banks would have their supervisory ratings
downgraded to problem bank status (Gilbert, Meyer and Vaughan, 1999).
Our analysis and other research demonstrate that econometric models
dominate supervisory screens as predictors of bank failure and downgrades
of supervisory ratings.
The Federal Reserve System uses the System to Estimate Examination

Ratings, or SEER model, as one of its principal off-site surveillance tools.
Surveillance staff at the Board of Governors uses one form of this model, the
risk rank model, to compute a probability of failure for each bank. Because
bank failures have been so rare during the last decade, the coefficients on
this model have been “frozen” since 1991. Each quarter supervisors at each
of the twelve Reserve Banks receive information from the surveillance staff
of the Board of Governors about the probabilities of failure by the banks that
are supervised by Federal Reserve staff. Probabilities of failure are
calculated using the latest call report data for each bank and the “frozen”
coefficients of the model estimated to predict bank failure.
CAMEL RATING SYSTEM IN BANK
Each bank is assigned a uniform composite rating based on six elements.

The system provides a general framework for evaluating the banks. It is a
standardized method which allows the assessment of the quality of banks
according to standard criteria providing a meaningful rating. CBI does not
take into consideration the Sensitivity to Market Risks.
RATING PROVISION
Each element is assigned a numerical rating based on five key components: z

1 Strong performance, sound management, no cause for supervisory concern
z 2 Fundamentally sound, compliance with regulations, stable, limited
supervisory needs z 3 Weaknesses in one or more components,
unsatisfactory practices, weak performance but limited concern for failure z
4 Serious financial and managerial deficiencies and unsound practices. Need
close supervision and remedial action z 5 Extremely unsafe practices and
conditions, deficiencies beyond management control. Failure is highly
probable and outside financial assistance needed Based on the ratings of
each element, a composite rating of 1 through 5 is assigned to the bank. All
the factors reflected in the key components ratings are considered in
assigning the composite rating.
COMPARISION BETWEEN BANKS
PRIVATE BANK
3.1.1: KARUR VYSYA BANK LIMITED
Karur Vysya Bank Limited, universally known as KVB has made a mark in
commercial banking arena right from 1916 when it was set up by two great
visionaries and famous sons of Karur, Late M A Venkatarama Chettiar and
Late Athi Krishna Chettiar. The main aim for setting up this bank was to
instill the habit of savings and also for providing financial support to traders
and small agriculturists in and around Karur (the textile town in Tamil
Nadu). The journey for the bank started off with a meager capital of Rs.1
lakh. But over the years, KVB has met all the market dynamics and
challenges and created a strong base for itself.
Presence of Karur Vysya Bank
The Bank, in its initial days, bore a regional flavor in its transactions but
slowly made a mark and expanded. At present, it has around 285 branches
spanning 13 States and 2 Union Territories. The Bank has been prudential
and has followed all the statutory regulations to make a mark in its area of
operations. They have been maintaining a strong Capital Adequacy Ratio of
more than 15% as against the compulsory rule of 9% set by the RBI. This is
sure to take care of the asset growth of the bank.
Financial highlights of the KVB
 Total business of KVB stood at Rs.25664.29 cr., with total deposits of

Rs. 15101.39 cr. and total advances of Rs. 10562.90 cr. as at
31.03.2009. It was the first
 Tamil Nadu based private sector bank to have crossed the Rs. 25000
cr. total business mark.
 The net owned funds of KVB stood at Rs. 1350.16 cr with healthy
capitalization levels, with high share of Tier I capital at 96.53%. This
indicates that they have strength on owned funds. The Tier II capital
forms only a paltry part (3.47%), having provision for standard assets
only.
 It has one of the lowest net NPA ratios in India @ 0.25%
 Till date the bank has been only earning profits with no interruption in
the declaration of dividend.
 The bank has declared 100% dividend since 2003-04. For 2005-06,
2007-08 and 2008-09, the company declared a dividend of 120%
KOTAK MAHINDRA BANK
Kotak Mahindra Bank is one of India's leading financial private banking

institutions. It offers banking solutions that covers almost every sphere of
life. Some of its financial services include commercial banking, stock
broking, mutual funds, life insurance and investment banking. Established
under the brand of Kotak Mahindra Finance Ltd in 1984, it was given the
license to carry on with banking business by the Reserve Bank of India in
February 2003. It is the first company in the Indian banking history to
convert to be converted from a private financial institution to a bank.
Kotak Mahindra Bank: Branches and Business
Within a small span of 6 years, the bank has spread it wings in several sphere
of finances. Presently, spread in 82 cities in India, the bank caters to the
needs of its 5.9 million customers spread throughout the length and breadth
of country and even abroad. By the end of FY 2007-2008, the Kotak
The entire Kotak Mahindra group has a net worth of over Rs. 6,327 crore
and at the end of FYP 2007-2008,it was reported that the consolidated profit
of Kotak Mahindra Bank individually was Rs 991.2 crore which was 84%
higher than the consolidated profit of Rs 538.2 crore in FY07. Kotak
Mahindra Bank has 75 ATMs at 41 locations in the country which are 24x7
accessible. Before the free transactions facility of RBI was made mandatory
to all the ATM operating banks in India from April 1, 2009, Kotak Mahindra
Bank had underwent under a treaty with the HDFC Bank to provide free
network free of cost to most of its customers through its 1335 ATMs spread
in the country to ensure comfort to its customers.
Kotak Mahindra Bank: Facilities and Customer Care
The facilities of Kotak Mahindra Bank are wide spread. It's banking sector
acts as a central platform for customer relationships across the entire Kotak
Mahindra group's various businesses. The bank marks its presence in the
commercial vehicles, retail finance, corporate banking and treasury and
housing finance segments. It offers you several facilities like personal
banking, commercial banking, insurance and investment banking.
Apart from traditional facilities like deposits accounts, savings account,
current account, term deposits, personal loans, home loans the bank has
spread its wing in the investment services by providing its customer facilities
like Demat, mutual fund and insurance. The bank has also opted for net
banking, mobile banking and phone banking for convenience of its
customers.
PUBLIC BANKS
BANK OF BARODA
Bank of Baroda (BoB) is the third largest Public Sector bank in India, after
STATE BANK OF INDIA and PUNJAB NATIONAL BANK. BOB has
total assets in excess of Rs. 2.27Lakhs crores, or Rs. 2,274 billion, a network
of over 3000 branches and offices, and about 1100+ ATMs. It offers a wide
range of banking products and financial services to corporate and retail
customers through a variety of delivery channels and through its specialized
subsidiaries
and affiliates in the areas of investment banking, credit cards and asset
management.
It all started with a visionary Maharaja's uncanny foresight into the future of
trade and enterprising in his country. On 20th July 1908, under the
Companies Act of 1887, and with a paid up capital of Rs 10 Lacs started the
legend that has now translated into a strong, trustworthy financial body,
THE BANK OF BARODA. It has been a wisely orchestrated growth,
involving corporate wisdom, social pride and the vision of helping others
grow, and growing itself in turn. The founder, Maharaja Sayajirao
Gaekwad, with his insight into the future, saw "a bank of this nature will
prove a beneficial agency for lending, transmission, and deposit of money
and will be a powerful factor in the development of art, industries and
commerce of the State and adjoining territories."
In the present scenario, Bank of Baroda's public shareholding is as high as

46.19 percent with a total equity capital of 365.53 crore. This is held by
Retail Investors, Banks and Financial Institutions, Employees, FIIs and
OCBs, Mutual Funds, Insurance Companies and Others.
CORPORATION BANK
The Corporation Bank in India started its journey in the name of the Canara
Banking Corporation (Udupi) Ltd in 1906 with a sum of Rs. 5000 only in a
small town of Udupi near the city of Mangalore in Karnataka.
Corp Bank received RBI license in 1952 and saw a merger with the Bank of
Citizens in 1961. In the month of April 1980, it was given a status of
nationalized bank. From the time of its establishment till today, the bank has
never looked back. Currently it is one of the well-recognized Public Sector
Banks in India.Today, Corporation Bank India is identified with dynamic
services of its young and dedicated staffs, who know no bounds. It runs more
than 600 ATMs extending across 21 States and 2 Union Territories. It shares
ATM network with Andhra Bank, ING Vysya Bank Ltd. and IndusInd Bank
Ltd.
Branches of Corporation Bank India
The branches of the Corporation Bank India are located at all the key
destinations like Bangalore, Belgaum, Bhopal, Chandigarh, Chennai,
Coimbatore, Delhi, Goa, Mumbai, Gujarat, Hassan, Hubli, Hyderabad,
Kerala, Kolkata, Lucknow, Pune, Udupi and Vijayawada.
Awards and Recognition of Corporation Bank India
In its journey to cater successfully to the needs of valuable customers,

Corporation Bank has bagged many awards and accolades. Some of them are
as follows:
 National Award for Assistance to Exporters

 Gem & Jewellery Export Promotion Council Award (it won this award
5 times in a row from 1981 to 1985)
 Shiromani Award for Banking
 Best Bank Award for Excellence in Banking Technology
 Best Bank Award for Innovative Usage and Application on INFINET
(Indian Financial Network)
 Best Bank Award for Delivery Channels
 Runner-up Awards in the categories of "Best Online and Multi-
channel Banking Team" and "Outstanding achiever of the year-
corporate".
Corporation Bank has been recognized as one of the Best Public Sector
Banks in India by Business Today on 26 February 2006. Prior to this, Forbes
Global announced it one of the Best 200/100 companies in Asia/Pacific and
Europe. Outlook Money called it Best Public Sector Bank in India and The
Asian Banker said it to be the strongest bank in India and second strongest in
Asia.
CAMELS rating system help the banks to enhance required capital

adequacy, strengthen asset quality, improve management, increase earnings
and reduce sensitivity to various financial risks. Keeping this in mind, they
will able to make improvements and deteriorates the problems effectively.
It will be helpful for the reader to know the specific details of the model
which in turn lead to identify the strengths and weaknesses of the banks.
By having a standardized CAMELS model for all banks, it becomes easy to

compare different banks.As this model uses all significant ratios of banks, it
will be useful for the reader to know how effectively bank manages each
ratio and whether it meets its pre-determined criteria for each ratio as per
RBI rules and regulations.
KARUR VYSYA BANK (Values in lakhs)
CAPITAL
1. Capital Adequency Ratio
Ratio (%) 14.92%
2. Debt Equity Ratio
Debt= Deposits + borrowings + unsecured debts
debt 1512443
Equity = Capital + Reserves and surplus
equity 135016.6
Ratio = Debt/ equity
Ratio (%) 11.2019

ASSETS (Values in lakhs)
1. Gross NPA To Net Advances
gross NPA 20586
Ratio= Gross NPA/ Net Advances
Ratio (%) 1.977544
2. Net NPA To Net Advances
Net NPA= 2582
Ratio = Net NPA / Net Advances
Ratio (%) 0.248034
3.Total Loans To Total Shares
Total loans 960136.7
No. of shares 539.99
Ratio = Total Loans/ Total Shares
Ratio (%) 1778.064
4.Total Loans To Total Assets
Total assets 1706074
Ratio = Total Loans/Total Assets
Ratio (%) 56.27754
5.Fair market value To Book Value
market value 199.38

book value 250.3
Ratio (%) Fair market value/Book value 79.65641
MANAGEMENT (Rupees in Lakhs)
1.Market Value To Equity Capital
face value 10
Ratio = Market value/Equity capital 19.938
2.Total Advances To Total Deposits
total deposits 1510139
Ratio = Total advances/Total deposits
Ratio (%) 68.93326
3.Business Per Employee
Business= Advances+ deposits
Business= 2551127
no of employees= 3941
Ratio = Business/No.of Employees
Ratio (%) 647.3299
4.Profit Per Employee
Profit = Net Profit
Profit 23584.15
Ratio = Profit/No.of Employees
Ratio (%) 5.984306
EARNINGS (Values in Lakhs)
1.Operating profit To Average Working Funds
Average Working funds = 1576270
operating prfit 41802
Ratio = Operating profit/Average Working Funds
Ratio (%) 2.651957
2.Interest Spread
Interest earned 144608.9
Interest spend 103568.1
Interest Spread = Interest Earned - Interest expenditure
Spread 41040.86
3.Net profit To Average Assets
Average Assets = Opening Assets+Closing Assets/2
avg.assets 1582188
Ratio = Net Profit/Average Assets
Ratio (%) 1.490603

4.Interest Income To Total Income
Total Income 171129.9
Ratio= Interest Income/Total Income
Ratio (%) 84.50246
5.Non-Interest Income To Total Income
Non-interest income 26520.92
Ratio = Non-interest Income/ Total Income
Ratio (%) 15.49754
6.Operating Expense To Average Assets
Operating Expenses 25759.64
Ratio = Operating expense/Average Assets
Ratio (%) 1.628102

LIQUIDITY (Values in Lakhs)
1.Liquid Assets To Total Assets
Liquid Assets = Cash with RBI+ Cash for short notice
Liquid Assets 137416.6
Ratio = Liquid assets/Total assets
Ratio (%) 8.05455
2.Government Securities To Total Assets
Govt. securities 381548.1
Ratio = Government securities/Total assets
Ratio (%) 22.3641
3.Approved Securities To Total Assets
Approved Securities 1359.05
Ratio = Approved securities/Total assets
Ratio (%) 0.079659
4.Liquid Assets To Demand Deposits
Demand Deposits 149677
Ratio = Liquid assets/Demand deposits
Ratio (%) 91.80877
5.Liquid Assets To Total Deposits
Ratio = Liquid assets/Total deposits
Ratio (%) 9.0996

CORPORATION BANK
CAPITAL RATIOS (Values in Lakhs)
Ratio (%) 13.66%
debt = 7855631
equity = 489651
Ratio (%) 16.04
3. Advances to Assets
Advances 4851216
Ratio = Advances/ Total Assets
Ratio (%) 55.82
4. Securities To Total Investments
Securities = Government securities+ approved securities
Securities 1764165
Investments 2493777
Ratio = Securities/Total Investments
Ratio (%) 70.74

ASSETS (Values in Lakhs)
1. Gross NPA To Net Advances
gross NPA 55922
Ratio = Gross NPA/ Net Advances
Ratio (%) 1.15
2. Net NPA to Net Advances
Net NPA 13830
Ratio (%) 0.29
3.Total Loans To Total shares
Total loans 4892712
No. of shares 614.4
Ratio (Rs.) 7963.398
Ratio (%) 56.30
5.Fair Market Value To Book Value
market value 176.58
Book Value 341.36
Ratio (%) 51.73

MANAGEMENT (Values in Lakhs)
Face value 10
Ratio (%) Market value/Equity capital 17.66
2.Total Advances To Total Deposits
Total deposits 7398391
Ratio (%) 65.57
Business= Advances+ deposits
Business= 12249607
no of employees= 12465
Ratio (Rs.) 982.72
Profit = Net Profit
Profit 89277
Ratio (Rs.) 7.16

EARNINGS (Values In Lakhs)
Average Working funds = 6950000
operating prfit 179661
Ratio (%) 2.58505
2.Interest Spread
Spread 72.13
avg.assets 7675175
Ratio (%) 1.16
Total income 717457
Ratio (%) 84.57
Non-interest income 110721

Ratio (%) 15.43
operating expenses 100158
Ratio (%) 1.30

LIQUIDITY (Values in Lakh)
Liquid assets 1053970
Ratio (%) 12.13
Govt. securities 1755238
Ratio (%) 20.20
Approved securities 1706165
Ratio (%) 19.63
4.Liquid Assets To Demand Deposits
demand deposits 1317419
Ratio (%) 80.00262
5.Liquid Assets To Total Deposits
Ratio (%) 14.25

BANK OF BARODA
CAPITAL (Values in Lakhs)
Ratio (%) 14.05%
Debt 20516486
Equity 1283554
Ratio (%) 15.98412
3. Advances To Assets
Advances 14398590
Ratio (%) 63.31646
Securities 4084894
Invetments 5244588
Ratio (%) 77.88781

1. Gross NPA to Net Advances
Gross NPA 184292
Ratio (%) 1.279931
Net NPA 45115
Ratio (%) 0.313329
Total Loans 13003751
No. Of Shares 227406.7
Ratio (%) 57.18
Total Assets 22740673
Ratio (%) 57.18279
Market Value 227.05
Book Value 352.37
Ratio(%) = Fair market value/Book value 64.43511

Face Value 10
Ratio(%) = Market value/Equity capital 22.705
2.Total advances To Total Deposits
Total Deposits 19239695
Ratio (%) 74.83793
Business = Advances+ deposits
Business 33638285
No Of Employees 36838
Ratio (Rs.) 913.1409
Profit = Net Profit
Profit 222720.2
Ratio (Rs.) 6.045936

Average Working funds 19366972
Operating Profit 334295
Ratio (%) 1.726109
2.Interest Spread
Interest earned 1509158
Spread 512341
Avg.Assets 20350312
Ratio (%) 1.094431
Total Income 1784924
Ratio (%) 84.55027

Non-interest Income 275765.8
Ratio (%) 15.44973
Operating Expenses 357606.2
Ratio (%) 1.757252

Liquid Assets 2408712
Ratio (%) 10.59209
Govt. Securities 4084894
Ratio (%) 17.96294
Approved Securities 96665.27
Ratio (%) 0.425077
4.Liquid Assets To Demand deposits
Demand Deposits 1445122
Ratio (%) 166.6787
5.Liquid Assets To Total deposits
Ratio (%) 12.51949

KOTAK MAHINDRA BANK
CAPITAL (Values in Lakhs)
Ratio (%) 19.86%
Debt= Deposits + borrowings +unsecured debts
Debt 2237894
Equity 390552.7
Ratio (%) 5.730071
3. Advances To Assets
Advances 1662534
Total Assets 2871187
Ratio (%) 57.90405
Securities 814993.3
Invetments 911018.1
Ratio (%) 89.45962
1. Gross NPA to Net Advances
Gross NPA 73071
Ratio (%) 4.395159
Net NPA 39684
Ratio (%) 2.386959
Total loans 1619143
No. of shares 3456.69
Ratio (%) 468.4084
Ratio (%) 56.39279

Market Value 277.98
Book Value 112.98
Ratio(%) = Fair market value/Book value 246.0435
face value 10
Ratio(%) = Market value/Equity capital 27.798
2.Total advances To Total Deposits
Total Deposits 1564493
Ratio (%) 106.2666
Business= Advances + deposits
Business 3227027
No Of Employees 8400
Ratio (Rs.) 384.1699
Profit = Net Profit
Profit 27609.72
Ratio (Rs.) 3.286871

Average Working funds 2814695
Operating Profit 68000
Ratio (%) 2.415893
2.Interest Spread
Spread 151854.7
Average Assets = Opening Assets + Closing Assets/2
Avg.Assets 2851212
Ratio (%) 0.96835
Total Income 342300
Ratio (%) 89.54554
Non-interest Income 35786.26

Ratio (%) 10.45465
operating expenses 119642.3
Ratio (%) 4.196191

Liquid Assets = Cash with RBI + Cash for short notice
Liquid Assets 114067
Ratio (%) 3.972815
Govt. Securities 814993.3
Ratio (%) 28.38524
Approved Securities 0
Ratio (%) 0
4.Liquid Assets To Demand deposits
Demand Deposits 341816.1
Ratio (%) 33.37086
5.Liquid Assets To Total deposits
Ratio (%) 7.290985

REASONS FOR WEIGHTAGE
1. Capital
In Capital ratios, we have given 0.5 to capital adequacy ratio as it is

the most important ratio which has significant impact on capital of the
bank. Second most important ratio which affects the capital ratio is
debt – equity ratio and rest of them are of low impact.
2. Assets
In assets Ratio, we have highest importance to Net GPA which shows

clear picture how well company is performing with its assets.
Secondly Gross NPA is given is not given so much importance
compared to Net NPAs. Other ratios like fair value to market value,
totals loans to total assets are given equal importance.
3. Management
In management ratios, there is no specific ratio which has specific

importance. All ratios have equal impact so here we have equal
weightage to all the ratios.
4. Earnings
In Earnings ratios, there is no specific ratio which has specific

5. Liquidity
In Liquidity ratios, there is no specific ratio which has specific

CAPITAL RATIOS
Capital Debt Securities To

Adequacy Equity Advances Total
PARTICULARS Ratio Ratio to Assets Investments
CORPORATION BANK 13.66 16.04 55.82 70.74
KARUR VYSYA BANK 14.92 11.20 61.02 81.19
BANK OF BARODA 14.05 15.98 63.32 77.89
KOTAK MAHINDRA
5.73 57.90 89.46
BANK 19.86
WEIGHTAGE 0.5 0.3 0.1 0.1 TOTAL
CORPORATION BANK 6.83 4.81 5.58 7.07 14.67
KARUR VYSYA BANK 7.46 3.36 6.10 8.12 18.32
BANK OF BARODA 7.03 4.80 6.33 7.79 16.35
KOTAK MAHINDRA
BANK 9.93 1.72 5.79 8.95 22.95
100.00
80.00
60.00
40.00
20.00
0.00
Capital Debt Equity Advances to Securities To
Adequency Ratio Assets Total
Ratio Investments
CORPORATION BANK KARUR VYSYA BANK

BANK OF BARODA KOTAK MAHINDRA BANK
NOTES
1. As per capital adequacy ratio, the minimum ratio is 9% i.e. every bank
has to maintain with RBI. Here Kotak Mahindra Bank out stands from
other banks.
2. In case of Debt- Equity ratio, Kotak Mahindra bank has the lowest
debt – equity ratio compared to other banks.
3. Advances to Assets ratio shows how efficient capital is managed, so
here we have Bank of Baroda on the top position.
4. Securities to Total Investment show the quick fund of the bank which
can be encashed at any point of time. Here, again kotak Mahindra
bank is having highest ratio against other bank.
5. So, overall Kotak Mahindra Bank is in first position followed by
Karur Vysya bank, Bank Of Baroda and Corporation Bank.
6. If we compare only Public banks, Bank Of Baroda is on top position
followed by Corporation Bank.
ASSETS RATIOS
ASSETS RATIOS
Total Fair
Gross NPA Net NPA to Loans Market
PARTICULARS To Net Net To Value To
Advances Advances Total Book
Assets Value
KARUR VYSYA BANK 1.98 0.25 56.28 79.66
BANK OF BARODA 1.28 0.31 57.18 64.44
KOTAK MAHINDRA
4.40 2.39 56.39 246.04
BANK
KARUR VYSYA BANK 0.20 0.12 11.26 15.93 26.87
BANK OF BARODA 0.13 0.16 11.44 12.89 24.04
KOTAK MAHINDRA
BANK 0.44 1.19 11.28 49.21 58.85
300.00
250.00
200.00
150.00
100.00
50.00
0.00
Gross NPA To Net Net NPA to Net Total Loans To Fair Market Value
Advances Advances Total Assets To Book Value

Notes:
1. The net non-performing assets to loans (advances) ratio is used as a

measure of the overall quality of the bank’s loan book. Higher ratio
reflects rising bad quality of loans. But here NPA percentage of Karur
Vysya Bank is just 0.25% which shows bank is performing well and it
is able to recover its debt. The Bank has maintained high standard in
asset quality through appropriate risk management measures and
recovery measures as evidenced by lower NPA levels. Here as
compared to its peers it has lowest ratio which is better.
2. The loans to assets ratio measures the total loans outstanding as a
percentage of total assets. The higher this ratio indicates a bank is
loaned up and its liquidity is low. The higher the ratio, the more risky
a bank may be to higher defaults. Here the ratio for all the banks is
almost same.
3. Market value ratios are strong indicators of what investors think of the
firm’s past performance and future prospects. It basically shows
Goodwill or Reputation of the bank in the market. Here Kotak
Mahindra Bank is highly reputed in the minds of investors.
MANAGEMENT RATIOS
MANAGEMENT RATIOS MANAGEMENT RATIOS
Market Business
Total Profit Per
Value Per
Advances Employee
PARTICULARS To Employee
To Total (IN
Equity ( IN
Deposits LACS)
Capital LACS)
KARUR VYSYA BANK 19.94 68.93 647.33 5.98
BANK OF BARODA 22.71 74.84 913.14 6.05
KOTAK MAHINDRA
27.80 106.27 384.17 3.29
BANK
TOTAL
0.25 (IN
WEIGHTAGE 0.25 TOTAL 0.25 0.25 LACS) %age
CORPORATION BANK 4.41 16.39 20.81 245.68 1.79 247.47 33.56
KARUR VYSYA BANK 4.98 17.23 22.22 161.83 1.50 163.33 22.15
BANK OF BARODA 5.68 18.71 24.39 228.29 1.51 229.80 31.16
KOTAK MAHINDRA
BANK 6.95 26.57 33.52 96.04 0.82 96.86 13.13
737.46
PARTICULARS TOTAL 1 TOTAL 2 Final Total
CORPORATION BANK 20.81 33.56 54.37
KARUR VYSYA BANK 22.22 22.15 44.37
BANK OF BARODA 24.39 31.16 55.55
KOTAK MAHINDRA BANK
33.52 13.13 46.65
Notes:
1. Business per employee/ profit per employee

These ratios indicate the productivity level of the bank’s employees.
Since state run banks are operating with large employee base, the
productivity ratio for these banks lags behind when compared with
new generation private sector banks. Here Corporation bank has ratio
of 982, Karur Vysya Bank has ratio of 647, BOB has 913 and Kotak
Mahindra Bank has 384.
2. Market Value to equity Capital

This Ratio indicates the price of the shares in the market compared to
the actually face value of the shares. It shows the premium on each
shares people are ready to pay because of the reputation and value of
the company. Here, Kotak Mahindra Bank is having almost 27 times
the market value whereas Corporation Bank is having only 17 times
which is lowest of all four banks.
3. Total Advances to Total Deposits

It indicates Money Lend by the Bank compared to Money borrowed
by the bank. Higher the ratio indicates the Efficiency of the Bank.
Kotak Mahindra Bank is having 106% whereas Bank of Baroda is
having 74%, Karur Vysya Bank is having 68% and Corporation Bank
is having 65%.
4. Over all if we compare Management Ratio, Bank of Baroda is on

the top position where as Corporation Bank is in second position.
There is very Minor difference between the two banks. They are
well performing in Profit per employee and Business per
employee.
5. If we compare only Private Banks, Kotak Mahindra Bank is
performing comparatively better than Karur Vysya Bank.
EARNING RATIOS
Operating
Interest
profit To Net profit To
Interest Income To
PARTICULARS Average Average
Spread Total
Working Assets
Income
Funds
KARUR VYSYA BANK 2.65 71.62 1.49 84.50
BANK OF BARODA 1.73 66.05 1.09 84.55
KOTAK MAHINDRA
2.42 50.46 0.97 89.55
BANK

KARUR VYSYA BANK 0.66 17.90 0.37 21.13 40.07
BANK OF BARODA 0.43 16.51 0.27 21.14 38.36
KOTAK MAHINDRA
BANK 0.60 12.61 0.24 22.39 35.85
100.00
80.00
60.00
40.00
20.00
0.00
Operating Interest Net profit To Interest
profit To Spread Average Income To
Average Assets Total Income
Working
Funds
CORPORATION BANK
KARUR VYSYA BANK
BANK OF BARODA
KOTAK MAHINDRA BANK
Notes:
1. Operating profit to Average Working Funds shows the return on

working funds. Higher the ratio indicates the profitability of the
bank. Here Karur Vysya Bank is having 2.65%, where as its peers
are having lower than it has. So Karur Vysya Bank is more profit
making Bank.
2. Higher the Interest spread will be better for the bank as it shows the
better offering of bank in the market. Here Corporation Bank has
the highest Interest Spread as compared to its peers.
3. Net Profit To Average Assets shows return on assets of the banks.
Higher the return, better for the bank. Here Karur Vysya bank is
having highest return on the assets.
4. The main income of any bank is interest. This ratio shows the
percentage of income generated in bank through Interest. Here
Kotak Mahindra Bank is having 89.55% of income through interest
followed by Corporation Bank, Bank Of Baroda and karur Vysya
Bank.
5. Here overall Corporation Bank is performing well in earnings ratio

and it is leading as compared to its competitors.
6. If we compare only private banks then Karur Vysya Bank is well

performing than Kotak Mahindra Bank.
LIQUIDITY RATIOS
LIQUIDITY RATIOS
Liquid Liquid
Approved Liquid
Assets Government Assets
Securities Assets
PARTICULARS To Securities To To
To Total To Total
Total Total Assets Demand
Assets Deposits
Assets Deposits
CORPORATION
12.13 20.20 19.63 80.00 14.25
BANK
KARUR VYSYA
8.05 22.36 0.08 91.81 9.10
BANK
BANK OF BARODA 10.59 17.96 0.43 166.68 12.52
KOTAK MAHINDRA
3.97 28.39 0.00 33.37 7.29
BANK
WEIGHTAGE 0.2 0.2 0.2 0.2 0.2 TOTAL
CORPORATION
BANK 2.43 4.04 3.93 16.00 2.85 29.24
KARUR VYSYA
BANK 1.61 4.47 0.02 18.36 1.82 26.28
BANK OF BARODA 2.12 3.59 0.09 33.34 2.50 41.64
KOTAK MAHINDRA
BANK 0.79 5.68 0.00 6.67 1.46 14.60
180.00
160.00
140.00
120.00
100.00
80.00
60.00
40.00
20.00
0.00
Liquid Assets Government Approved Liquid Assets Liquid Assets
To Total Securities To Securities To To Demand To Total
Assets Total Assets Total Assets Deposits Deposits

Notes:
1. Liquid Assets To Total Assets ratio shows the percentage of liquid

assets out of the total assets. Higher the ratio indicates better liquidity
of the bank. Here Corporation Bank is having better liquidity as
compared to other banks.
2. Government securities are considered to be the quick assets of the

bank which can be encashed easily. Here, kotak Mahindra bank is
having 28.39% of the assets as government securities and is the
highest among others.
3. Same as government securities, approved securities also can be

encashed easily. Here Corporation bank is having highest approved
securities i.e. 19.63% compared to others. Kotak Mahindra Bnak is
not having any approved securities.
4. Liquid Assets To Total Deposits ratio indicates the Percentage of

liquid assets bank against deposits. Here Bank Of Baroda is having the
highest ratio i.e. 166.68% as compared to its competitors. So it shows
that it is having an ample amount of liquidity to pay the deposits.
TABLE SHOWING CAMEL RATING COMPARSION
CAMEL RATING
CAPIT ASSE MANAGE EARNI LIQUID

PARTICULARS AL TS MENT NGS ITY
CORPORATION
14.67 21.35 54.37 40.11 29.24
BANK
KARUR VYSYA
18.32 26.87 44.37 40.07 26.28
BANK
BANK OF BARODA 16.35 24.04 55.55 38.36 41.64
KOTAK
22.95 58.85 46.65 35.85 14.6
MAHINDRA BANK
TOT RA
0.2 0.2 0.2 0.2 0.2
WEIGHTAGE AL NK
CORPORATION
BANK 2.93 4.27 10.87 8.02 5.85 31.95 3
KARUR VYSYA
BANK 3.66 5.37 8.87 8.01 5.26 31.18 4
BANK OF BARODA 3.27 4.81 11.11 7.67 8.33 35.19 2
KOTAK
MAHINDRA BANK 4.59 11.77 9.33 7.17 2.92 35.78 1
CHART SHOWING CAMEL RATING FOR DIFFERENT
BANKS
70
60
50
40
30
20
10
0
CAPITAL ASSETS MANAGEMENT EARNINGS LIQUIDITY

INTERPRETATION
Rank 1 – Here kotak Mahindra Bank indicates strong performance and risk
management practices that consistently provide for safe and sound
operations. The historical trend and projections for key performance
measures are consistently positive. It is not performing well in Liquidity
ratio but it performs strong in other ratios which covered up its weak
performing area.
Rank 2 – Here Bank of Baroda reflects satisfactory performance and risk

management practices that consistently provide for safe and sound
operations. It maintains very well in management and liquidity ratio which
has become its strength. In order to lead, it should focus more on Capital and
Assets.
Rank 3 – Corporation Bank represents performance that is flawed to some

degree and is of supervisory concern. Performance is marginal. Risk
management practices may be less than satisfactory. In order to improve
their position, it should maintain the capital and Assets ratio so that it will be
able to compete with their competitors.
Rank 4 –Karur Vysya Bank refers to poor performance that is of serious

supervisory concern. Risk management practices are generally unacceptable
and the Bank should try to improve its operations. It is performing Good in
Earnings but Management and Liquidity of the bank is not up to the mark
and should give more importance to these factors in order to be at the par
with other banks.
CONCLUSION
The current Banking Crisis, which is quite unprecedented, underlines the

importance of regulatory issues and the effects of incompetence in this area.
CAMEL, as a rating system for judging the soundness of Banks is a quite
useful tool, that can help in mitigating the conditions and risks that lead to
Bank failures.The report makes an attempt to examine and compare the
performance of four different banks of India i.e. Corporation Bank, Kotak
Mahindra Bank, Karur Vysya Bank and Bank Of Baroda. The analysis is
based on the CAMEL Model. The study has brought many interesting
results, some of which are mentioned as below:
All the three banks have succeeded in maintaining CRAR at a higher level
than the prescribed level, 9%. But KOTAK MAHINDRA BANK has
maintained highest i.e.19.86%. It is very good sign for the bank to survive
and to expand in future.
In Management Quality, we have found that Business per Employee Ratio

and Profit per Employee Ratio is more in CORPORATION BANK AND
BANK OF BARODA. This shows the growth of the bank as well as
efficiency of the employee, which is very good in both the banks and they
will help to the bank to grow in future.
After evaluating all the ratios, calculations and ratings we have given 1st
Rank to KOTAK MAHINDRA BANK, 2nd Rank to BANK OF BARODA,
3rd Rank to CORPORATION BANK
BIBLIOGRAPHY
www.bankofbaroda.com
www.kotak.com/bank/personal-banking
www.corpbank.com
www.kvb.co.in
www.allbankingsolutions.com
www.wikinvest.com
www.rbi.org.in
www.basel2implementation.com
http://ezinearticles.com/?Banks-and-Camels&id=2565867

Camel Rating

Uploaded by

Copyright:

Available Formats

Camel Rating

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Camel Rating

Uploaded by

Copyright:

Available Formats

ACKNOWLEDGMENT

Our sincerity gratitude goes to Prof. SHILPA THAKUR who helped us to

The encouragement and guidance given by Mr VINAY GUDDI

We are sincerely grateful MULUND COLLEGE OF COMMERECE

After that we have given weightage to each parameter of the CAMELS

CAMELS RATING SYSTEM

The CAMELS rating system is a recognized international rating system that

The performance of an economy is very much associated with the

Banking supervision has been increasingly concerned due to significant

CAMEL system brings to AIA. The research problem was explored by

The banking sectors are treated as the back-bone of an economy. There

Performance of the banking sector under CAMELS involves analysis and

CAMEL rating, was adopted by the Federal Financial Institution

The CAMEL rating system is based upon an evaluation of five

The components of a bank's condition that are assessed:

Indicates strong performance and risk management practices that

Reflects satisfactory performance and risk management practices that

Represents performance that is flawed to some degree and is of supervisory

Refers to poor performance that is of serious supervisory concern. Risk

Considered unsatisfactory performance that is critically deficient and

CAMEL ratings reflect the excellent banking conditions and performance

Capital cushions fluctuations in earnings so that credit unions can continue

 Capital Risk Adequacy Ratio:

CRAR = Capital/ Total Risk Weighted Credit Exposure

Debt Equity Ratio = Borrowings/ (Share Capital + reserves)

 Total Advance to Total Asset Ratio:

Total Advance to Total Asset Ratio = Total Advances/ Total Asset

 Government Securities to Total Investments:

The solvency of financial institutions typically is at risk when their assets

There is, no doubt, merit in recognizing the importance of diversification in

Even where role of banks is apparently diminishing in emerging markets,

NPA: Non-Performing Assets

Advances are classified into performing and non-performing advances

An NPA is a loan or an advance where:

1. Interest and/or instalment of principal remains overdue for a period of

Asset quality is rated in relation to:

 Total Loans/Total Shares

 Net NPA ratio:

Management of financial institution is generally evaluated in terms of capital

Management is the most forward-looking indicator of condition and a key

Total Advance to Total Deposit Ratio:

Business per Employee:

Total Income/ No. of Employees

Profit per Employee:

Profit after Tax/ No. of Employees

The credit union's strategic plan is a systematic process that defines

As part of the strategic planning process, credit unions should develop

Information systems and technology should be included as an integral part of

Prompt corrective action may require the development of a net worth

Seven aspects of internal controls deserve special attention:

1. Information systems. It is crucial that effective controls are in place

Other key factors to consider when assessing the management of a credit

The board of directors and management have a fiduciary responsibility to

Strong earnings and profitability profile of banks reflects the ability to

Return on Assets (ROA):

An indicator of how profitable a company is relative to its total assets. ROA

Operating Profit/ Average Working Fund

Net Profit to Average Asset: