Bank capital acts as the ultimate
buffer against losses that a
bank may suffer. The minimum capital to risk-weighted asset
ratio (CRAR) has been specified at 8% by the Basel Committee on Banking
Supervision (BCBS) under both the Basel I and Basel II frameworks. In the Indian
context, the overall capital adequacy of the Scheduled Commercial Banks
(SCBs) at 13.2%, as at end-March 2009, was well above the Basel norms of 8%
and the stipulated norm of 9% for banks in India. As at end-March 2009,
the CRAR of 78 banks was over 10%, while that of only one bank was between
9% and 10%. The CRAR of Indian banks was comparable with most
emerging markets and developed economies.
Banks in India strengthen their capital base by way of tapping
funds from the equity and debt markets. Of late, the equity route is the most
preferred route of most of the banks, given the buoyancy in the Indian capital
market. Out of 53 Indian SCBs, equity shares of 39 banks are listed on
stock exchanges. Bank stocks have become hot favorites among the investor
community. Scrips of banks such as SBI, ICICI Bank and HDFC Bank form
part of the Sensex. In this backdrop, an attempt has been made here to
analyze the performance of bank stocks during 2004-09. For the purpose, share
prices of 35 banks, out of 39 listed banks, are considered. Banks such as State
Bank of Bikaner & Jaipur, State Bank of Mysore, State Bank of Travancore
and City Union Bank are outside the purview of the study due to the issue of
split shares by them and the resultant difficulty in comparison of share prices.
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