``An indicator of competitiveness in banking are the intermediation cost -- operating expenses as a proportion of total assets. There was a sizeable decline in the intermediation costs, with wage bill declining to 1.66 per cent from 1.75 per cent,'' the RBI said in its report.

While that may be good news amid all the opposition to voluntary retirement schemes (VRS) to be offered by banks, worrisome is the fact that spreads continue reel under pressure.

The spread of state-run banks fell to 2.70 per cent during 1999-2000. The spread of State Bank of India (SBI) and other state-run banks declined by 9 per cent and 10 per cent respectively. ``The spread of state-run banks fell to 2.70 per cent due to the fall in interest income,'' the RBI said.

But competition is doing better -- the spread of foreign banks improved by 38 basis points to 3.85 per cent, while that of the older private-sector banks improved to 2.33 per cent from 2.25 per cent. In the case of new private-sector banks, though, spreads fell to 1.87 per cent from 1.98 per cent.

Further, the spread for state-run banks as a group would have been still lower had it been adjusted for the interest income received on recapitalised bonds. Post-adjustment for interest earned on recapitalisation bonds, cumulative net-profits of 19 recapitalised bank stood at Rs 639.13 crore from 2,437 crore.

The period 1999-2000 was good for scheduled commercial banks (SCBs): There was a marked improvement in net profits that were reported as compared to the previous fiscal. The overall net profit increased by as much as 62.7 per cent. In absolute terms, the net profit amounted to Rs 7,306.4 crore, up from Rs 4,490.3 crore in the previous fiscal.

Improvement in overall net profit was buoyed by improved performance of the SBI group -- the total net profits of its shares stood at 36.6 per cent (32.6 per cent). But, share of nationalised banks declined to 33.4 per cent (39.8 per cent) during the period. As for private sector banks, their share increased to 16.8 per cent (15.8 per cent) and that of foreign banks grew to 13.3 per cent (11.8 per cent).

Total income of SCBs increased by 15.3 per cent to Rs 1,15,386 crore (Rs 1,00,062 crore). Income of state-run banks also increased by around 15.3 per cent to Rs 90,900.4 crore (Rs 78,850.4 crore).

Operating profits for the SCBs increased by 33.4 per cent to Rs 18,423.4 crore (Rs 13,810.7 crore), while that of state-run banks increased by 23.7 per cent to Rs 13,064 crore (Rs 10,560.8 crore). Old private sector banks recorded an increase of 80.4 per cent to Rs 1,428.9 crore (Rs 792.2 crore) in operating profit.