How We Did It

The Fortune India-Grant Thornton Bharat study of India's Best Financiers covered 78 banks in India with a standalone balance sheet size of more than ₹10,000 crore as on March 31, 2022, divided into six categories:

1. Large domestic banks

Domestic banks with standalone balance sheet sizes above ₹5,00,000 crore. This category comprised 10 banks, including 3 private sector banks and 7 PSBs.

2. Medium-sized domestic banks

Domestic banks with standalone balance sheet size greater than ₹1,00,000 crore and less than or equal to ₹5,00,000 crore. The category consisted of 15 banks, including 10 private sector banks and 5 PSBs.

3. Small-sized domestic banks

Domestic banks with standalone balance sheet size over ₹10,000 crore and less than or equal to ₹1,00,000 crore. The category included 7 private banks.

4. Small finance banks

Included 7 small finance banks with standalone balance sheet sizes exceeding ₹10,000 crore.

5. Foreign banks

Comprised of 15 foreign banks with standalone balance sheet size of more than ₹10,000 crore.

6. Regional rural banks

Consisted of 24 regional rural banks (RRBs) with annual reports available on their websites for both FY21 and FY22, with a standalone balance sheet size of more than ₹10,000 crore.

The banks were evaluated based on six broad parameters: Business growth, asset quality, efficiency, profitability, capital adequacy, and investor perception, encompassing a total of 33 sub-parameters. Data on the sub-parameters were collected from annual reports, quarterly financial results, and statistical tables published by the Reserve Bank of India (RBI).

For categories 1-3, data for FY22 and 9M FY23 were considered. For categories 4,5 and 6, only FY22 data was considered, due to unavailability of published data for 9M FY23 uniformly across all banks.

Business growth: Consisted of six sub-parameters, including growth in deposits, advances, revenue, non-interest income, operating profit and net profit. These parameters were considered for both FY22 and 9M FY23. This carried a weightage of 20%.

Asset quality: Consisted of four parameters, including gross NPA (%), movement of gross NPA(%), net NPA (%), movement of net NPA (%). The same parameters were considered for 9M FY23. Asset quality was assigned a weightage of 20%.

Efficiency: Parameters included cost-to-net income (C2NI) ratio, movement in C2NI ratio, cost-to-average assets (C2AA) ratio, movement in C2AA ratio, ratio of cash and government securities to demand deposits and liabilities, credit-to-deposit ratio, revenue per branch and employee, and profit per branch and employee. It was assigned a weightage of 15%.

Profitability: The four sub-parameters included return on assets (%), return on equity (%), net profit margin (%) and net interest margin (%). It was assigned a weightage of 15%.

Capital adequacy: This included four sub-parameters — average CRAR (%), movement in CRAR (%), average Tier 1 capital adequacy ratio (%) and movement in Tier 1 capital adequacy ratio (%). These parameters were considered for both FY22 and 9M FY23. This was assigned a 15% weightage.

Investor perception: It had five sub-parameters, including price-to-book value ratio, movement in PB ratio, price to earnings ratio, movement in PE ratio and market cap growth. These sub-parameters were considered for 9MFY23 as well. Weights were assigned as per the importance of the sub-parameters in deciding investor perception. It had a weightage of 15%.

To identify the best among public sector banks, in addition to the above parameters, EASE 5.0 score was also taken into account. For foreign banks, market focus was considered as an additional parameter instead of investor perception since none of the foreign banks are listed in India. This parameter had a weighted score based on the total balance sheet size and the ratio of advances to total assets. The weights assigned to asset quality and efficiency were adjusted for foreign banks as many of them had limited or negligible lending activities within the Indian market. Regarding the ranking of RRBs, the 15% weight for investor perception was distributed among business growth, profitability, and efficiency as RRBs are not listed.

The scores for each parameter were standardised using a min-max scale, and banks were ranked within each parameter. The standardised scores for each parameter were then multiplied by their respective weights to obtain area-wise scores. The area-wise scores (e.g., asset quality) were multiplied by their respective area weights to arrive at scores for FY22. A similar process was applied to calculate the scores for 9M FY23. Overall scores were determined by assigning a weight of 60% to FY22 scores and 40% to 9M FY23 scores. Banks in each category were ranked based on the final scores. Min-max scaling was conducted separately for domestic SCBs (Cat 1-3), small finance banks (Cat 4), foreign banks (Cat 5), and RRBs (Cat 6). The scores obtained reflect a bank's relative performance within its specific scoring group and are not directly comparable across different groups.

The special category on financial inclusion encompassed the compre- hensive evaluation of banks based on three fundamental areas: Distribution and reach, priority sector lending and performance on government schemes. This evaluation process involved assessment of 24 sub-parameters specifically related to the three major areas, which were sourced from both the banks and RBI data. To determine the rankings, the min-max methodology was employed, similar to the category-based ranks. Additionally, the special category of digital banking entailed the evaluation of participating banks based on three crucial parameters: Digital engagement, channels and products. In this assessment, a total of 35 sub-parameters related to digital banking were evaluated, drawing information from both the banks and RBI data. To determine the rankings for this category, a rank-based scoring method was deployed, resulting in a comprehensive and objective rank list. The findings were presented before the esteemed jury which evaluated the methodology and arrived at the top performers in each category. The jury included Anand Sinha, former deputy governor, RBI; Anil K. Khandelwal, founder, Anugyan and former CMD, Bank of Baroda; Cyril Shroff, managing partner, Cyril Amarchand Mangaldas; Gayathri Parthasarathy, India financial services sector leader and global FS technology leader, PwC India; Ravindra Dholakia, director, RBI and former professor, IIM Ahmedabad, and Subhash Chandra Garg, former finance and economic affairs secretary, Government of India, and chief policy advisor, Subhanjali.