FINANCIAL INCLUSION IN INDIA.docx

A PROJECT REPORT ONFINANCIAL INCLUSION IN INDIA

OF

TOP THREE BANKS OF INDIA

M.J.P. ROHILKHAND

SESSION (2011-2012) Invertis Institute of Management studies

NAME

Guided By: (Dr.Angrish Agarwal)

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CERTIFICATE

This is certify that student of Invertis Institute of Management studies has completed his field work report on the topic of FINANCIAL INCLUSION IN INDIA TOP THREE BANKS OF INDIA and has submitted the field work report in partial fulfillment of Bachelor of business Administration of the college for the academic year 2011-2012.

He has worked under our guidance and direction. The said report is based on bonafide information.

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INVERTIS INSTITUTE OF MANAGEMENT STUDIES

DECLARATION

I hereby declare that project titled FINANCIAL INCLUSION IN INDIA TOP THREE BANKS OF INDIA is an original piece of research work carried out by me under the guidance and supervision of prof. Dr. Angrish Agarwal. The information has been collected from genuine & authentic sources. The work has been submitted in partial fulfillment of the requirement of Bachelor of business administeration to our college.

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ACKNOWLEDGEMENT

Perseverance inspiration and motivation have always played a key role in success of any venture. I hereby express my deep sense of gratitude to all the personalities involved directly and indirectly in my project work.

I would thank to God for their blessing and my parents also for their valuable suggestion and support in my project report.

I would also like to thank our friends and those who have helped us during this project directly or indirectly.

Last but not the least; I would like to express my sincere gratitude to all the faculty members who have taught me in my entire B.B.A curriculum and our Prof. Dr. Angrish Agarwal who has always been a source of guidance, inspiration and motivation. However, I accept the sole responsibility for any possible errors of omission and would be extremely grateful to the readers of this project report if they bring such mistakes to my notice.

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INDEX

Sr.No

Subjects

Page

1.Introduction7

2.Bank Profile10

i SBI11

ii ICICI15

iii PNB19

3.Products & Services24

4.Balance Sheet38

5.Ratio Analysis42

6.Objectives60

7.Importance62

8.Advantages, Limitations 64

9. Conclusion67

10Bibliography69

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INTRODUCTION

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INRTODUCTION

After preparation of the financial statements, one may be interested in knowing the position of an enterprise from different points of view. This can be done by analyzing the financial statement with the help of different tools of analysis such as ratio analysis, funds flow analysis, cash flow analysis, comparative statement analysis, etc. Here I have done financial analysis by ratios. In this process, a meaningful relationship is established between two or more accounting figures for comparison.

Financial ratios are widely used for modeling purposes both by practitioners and researchers. The firm involves many interested parties, like the owners, management, personnel, customers, suppliers, competitors, regulatory agencies, and academics, each having their views in applying financial statement analysis in their evaluations. Practitioners use financial ratios, for instance, to forecast the future success of companies, while the researchers' main interest has been to develop models exploiting these ratios. Many distinct areas of research involving financial ratios can be discerned. Historically one can observe several major themes in the financial analysis literature. There is overlapping in the observable themes, and they do not necessarily coincide with what theoretically might be the best founded areas.

Financial statements are those statements which provide information about profitability and financial position of a business. It includes two statements, i.e., profit & loss a/c or income statement and balance sheet or position statement.

The income statement presents the summary of the income earned and the expenses incurred during a financial year. Position statement presents the financial position of the business atthe end of the year.

Before understanding the meaning of analysis of financial statements, it is necessary to

understand the meaning of analysis and financial statements.

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Analysis means establishing a meaningful relationship between various items of the two financial statements with each other in such a way that a conclusion is drawn. By financial statements, we mean two statements- (1) profit & loss a/c (2) balance sheet. These are prepared at the end of a given period of time. They are indicators of profitability and financial soundness of the business concern.

Thus, analysis of financial statements means establishing meaningful relationship between various items of the two financial statements, i.e., income statement and position statement

Parties interested in analysis of financial statements

Analysis of financial statement has become very significant due to widespread interest of various parties in the financial result of a business unit. The various persons interested in the analysis of financial statements are:-

Short- term creditors

They are interested in knowing whether the amounts owing to them will be paid as and when fall due for payment or not.

Long term creditors

They are interested in knowing whether the principal amount and interest thereon will be paid on time or not.

Shareholders

They are interested in profitability, return and capital appreciation.

Management

The management is interested in the financial position and performance of the enterprise as a whole and of its various divisions.

Trade unions

They are interested in financial statements for negotiating the wages or salaries or bonus agreement with management.

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Taxation authorities

These authorities are interested in financial statements for determining the tax liability.

Researchers

They are interested in the financial statements in undertaking research in business affairs and practices.

Employees

They are interested as it enables them to justify their demands for bonus and increase in remuneration.

You have seen that different parties are interested in the results reported in the financial statements. These results are reported by analyzing financial statements through the use of ratioanalysis.

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BANKPROFILE

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1. STATE BANK OF INDIA

Type -Public (BSE, NSE:SBIN) & (LSE:SBID)

Founded -Calcutta, 1806 (as Bank of Calcutta)

Headquarters-

Corporate Centre, Madam Cama Road,Mumbai 400 021 India

Key people - Pratip Chaudhuri, Chairman

State Bank of India (SBI) (LSE: SBID) is the largest bank in India. It is also, measured by the number of branch offices and employees, the second largest bank in the world. The bank traces its ancestry back through the Imperial Bank of India to the founding in 1806 of the Bank of Calcutta, making it the oldest commercial bank in the Indian Subcontinent. The Government of India nationalized the Imperial Bank of India in 1955, with the Reserve Bank of India taking a 60% stake, and renamed it the State Bank of India. In 2008, the Government took over the stake held by the Reserve Bank of India. SBI is ranked #292 globally in Fortune Global 500 list in 2011.

SBI provides a range of banking products through its vast network in India and overseas, including products aimed at NRIs. With an asset base of $370 billion and its reach, it is a regional banking behemoth. SBI has laid emphasis on reducing the huge manpower through Golden handshake schemes and computerizing its operations.

SBI has 21,500 branches, including branches that belong to its associate banks, has the largest branch network in India. It has a market share among Indian commercial banks of about 20% in deposits and advances.

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International presence

Regional office of the State Bank of India (SBI), India's largest bank, in Mumbai. The government of India is the largest shareholder in SBI.

State Bank of India has 172 foreign offices in 37 countries across the globe. It has branches of the parent in Colombo, Dhakka, Frankfurt, Hong Kong, Johannesburg, London and environs, Los Angeles, Male in the Maldives, Muscat, New York, Osaka, Sydney, and Tokyo. It has offshore banking units in the Bahamas, Bahrain, and Singapore, and representative offices in Bhutan and Cape Town.

SBI operates several foreign subsidiaries or affiliates. In 1990 it established an offshore bank, State Bank of India (Mauritius). It has two subsidiaries in North America, State Bank of India (California), and State Bank of India (Canada). In 1982, the bank established its California subsidiary, which now has seven branches. The Canadian subsidiary was also established in 1982 and also has seven branches, four in the greater Toronto area, and three in British Columbia. In Nigeria, it operates as INMB Bank. This bank was established in 1981 as the Indo-Nigerian Merchant Bank and received permission in 2002 to commence retail banking. It now has five branches in Nigeria. In Nepal SBI owns 55% of Nepal SBI Bank, which has branches throughout the country. In Moscow SBI owns 60% of Commercial Bank of India, with Canara Bank owning the rest. In Indonesia it owns 76% of PT Bank Indo Monex. State Bank of India already has abranch in Shanghai and plans to open one up in Tianjin.

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BOARD OF DIRECTORS

1Pratip Chaudhuri (Chairman)

2Hemant G. Contractor (Managing Director)

3Diwakar Gupta (Managing Director)

4A Krishna Kumar (Managing Director)

5Dileep C Choksi (Director)

6S. Venkatachalam (Director)

7D. Sundaram (Director)

8Parthasarathy Iyengar (Director)

9G. D. Nadaf (Officer Employee Director)

10Rashpal Malhotra (Director)

11D. K. Mittal (Director)

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2. INDUSTRIAL CREDIT & INVESTMENT CORPORATION

OF INDIA (ICICI)

ICICI was formed in 1955 at the initiative of the World Bank, the government of India and Indian industry representatives. The principal objective was to create a development financial institution for providing medium-term and long-term project financing to Indian businesses. Until the late 1980s, ICICI primarily focused its activities on project finance, providing long-term funds to a variety of industrial projects. With the liberalization of the financial sector in India in the1990s, ICICI transformed its business from a development financial institution offering only project finance to a diversified financial services provider that, along with its subsidiaries and other group companies, offered a wide variety of products and services. As Indias economy became more market-oriented and integrated with the world economy, ICICI capitalized on the new opportunities to provide a wider range of financial products and services to a broader spectrum of clients.

ICICI Bank was incorporated in 1994 as a part of the ICICI group. ICICI Banks initial equity capital was contributed 75.0% by ICICI and 25.0% by SCICI Limited, a diversified finance and shipping finance lender of which ICICI owned 19.9% at December 1996. Pursuant to the merger of SCICI into ICICI, ICICI Bank became a wholly-owned subsidiary of ICICI. ICICIs holding in ICICI Bank reduced due to additional capital raising by ICICI Bank and sale of shares by ICICI, pursuant to the requirement stipulated by the Reserve Bank of India that ICICI dilute its ownership of ICICI Bank. Effective March 10, 2001, ICICI Bank acquired Bank of Madura, an old private sector bank, in an all-stock merger.

The issue of universal banking, which in the Indian context means the conversion of long- term lending institutions such as ICICI into commercial banks, had been discussed at length over the past several years. Conversion into a bank offered ICICI the ability to accept low-cost demand deposits and offer a wider range of products and services, and greater opportunities for earning non- fund based income in the form of banking fees and commissions. ICICI Bank also considered various strategic alternatives in the context of the emerging competitive scenario in the Indian banking industry. ICICI Bank identified a large capital base and size and scale of operations as key success factors in the Indian banking industry. In view of the benefits of transformation into a bank and the Reserve Bank of Indias pronouncements on universal banking, ICICI and ICICI Bankdecided to merge.

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At the time of the merger, both ICICI Bank and ICICI were publicly listed in India and on the New York Stock Exchange. The amalgamation was approved by each of the boards of directors of ICICI, ICICI Personal Financial Services, ICICI Capital Services and ICICI Bank at their respective board meetings held on October 25, 2001. The amalgamation was approved by ICICI Banks and ICICIs shareholders at their extraordinary general meetings held on January 25, 2002 and January 30, 2002, respectively. The amalgamation was sanctioned by the High Court of Gujarat at Ahmedabad on March 7, 2002 and by the High Court of Judicature at Bombay on April 11, 2002. The amalgamation became effective on May 3, 2002. The date of the amalgamation for accounting purposes under Indian GAAP was March 30, 2002.

The Sangli Bank Limited, an unlisted private sector bank merged with ICICI Bank with effect from April 19, 2007. On the date of acquisition, Sangli Bank had over 190 branches and extension counters, total assets of Rs. 17.6billion (US$ 440 million), total deposits of Rs. 13.2billion (US$ 330 million), total loans of Rs. 2.0 billion (US$ 50million).

In 2008, following the 2008 financial crisis, customers rushed to ATM's and branches in some

locations due to rumors of adverse financial position of ICICI Bank. The Reserve Bank of India issued

a clarification on the financial strength of ICICI Bank to dispel the rumors.

Corporate governanceGroup Anti Money Laundering PolicyThe ICICI Group AML Policy establishes the standards of AML compliance and is applicable to all activities.Code of ConductICICI Bank has formulated a Code of Business Conduct and Ethics for its directors and employees. ICICI merge the bank of rajasthan in 2010.

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BOARD OF DIRECTORS

1. Mr. K. V. Kamath, Chairman

2.Mr. Sridar Iyengar

3. Dr.Swati Piramal

4. Mr.Homi .R. Khusrokhan

5. Mr. Arvind Kumar

6.Mr. M. S. Ramachandran

7. Mr. Tushaar Shah

8.Mr. V.sridar

9.Ms. Chanda Kochhar, Managing Director & CEO

10.Mr. N. S. Kannan, Executive Director & CFO

11.Mr. K. Ramkumar , Executive Director

12.Mr. Rajiv Sabharwal , Executive Director

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3. PUNJAB NATIONAL BANK (PNB)

Punjab National Bank (PNB) was registered on May 19, 1894 under the Indian Companies Act with its office in Anarkali Bazaar Lahore. The Bank, founded by Dyal Singh Majithia and Lala Harkishen Lal, is the second largest government-owned commercial bank in India with about 5000 branches across 764 cities. It serves over 37 million customers. The bank has been ranked 248th biggest bank in the world by Bankers Almanac, London. Total Business of the bank for financial year 2007 is estimated to be approximately US$60 billion. It has a banking subsidiary in the UK, as well as branches in Hong Kong and Kabul, and representative offices in Almaty, Shanghai, and Dubai.

We are a leading public sector commercial bank in India, offering banking products and services to corporate and commercial, retail and agricultural customers. Our banking operations for corporate and commercial customers include a range of products and services for large corporations, as well as small and middle market businesses and government entities. We offer a wide range of retail credit products including housing loans, personal loans and automobile loans. We cater to the financing needs of the agricultural sector and have created innovative financing products for farmers. We also provide significant financing to other priority sectors including small scale industries. Through our treasury operations, we manage our balance sheet, including the maintenance of required regulatory reserves, and seek to maximize profits from our trading portfolio by taking advantage of market opportunities.

Our revenue, which is referred to herein and in our financial statements as our income, consists of interest income and other income. Interest income consists of interest on advances (including the discount on bills discounted) and income on investments. Income on investments consists of interest and dividends from securities and our other investments and interest from interbank loan and cash deposits we keep with the RBI. Our securities portfolio consists primarily of Government of India and state government securities. We meet our statutory liquidity reserve ratio requirements through investments in these and other approved securities. We also hold debentures and bonds issued by public sector undertakings and other corporations, commercial paper, equity shares and mutual fund units.Our interest expense consists of our interest on deposits as well as borrowings. Our interest

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Income and expense are affected by fluctuations in interest rates as well as the volume of activity. Our interest expense is also affected by the extent to which we fund our activities with low interest or non-interest deposits, and the extent to which we rely on borrowings.Our non-interest expense consists principally of operating expenses such as expenses for wages and employee benefits, rent paid on premises, insurance, postage and telecommunications expenses, printing and stationery, depreciation on fixed assets, other administrative and other expenses. Provisioning for non-performing assets, depreciation on investments and income taxis included in provisions and contingencies

We use a variety of indicators to measure our performance. These indicators are presented in tabular form in the section titled Selected Statistical Information on page []. Our net interest income represents our total interest income (on advances and investments) net of total interest expense (on deposits and borrowings). Net interest margin represents the ratio of net interest income to the monthly average of total interest earning assets. Our spread represents the difference between the yield on the monthly average of interest earning assets and the cost of the monthly average of interest bearing liabilities. We calculate average yield on the monthly average of advances and average yield on the monthly average of investments, as well as the average cost of the monthly average of deposits and average cost of the monthly average of borrowings. Our cost of funds is the weighted average of the average cost of the monthly average of interest bearing liabilities. For purposes of these averages and ratios only, the interest cost of the unsecured subordinated bonds that we issue for Tier 2 capital adequacy purposes (Tier 2 bonds) is included in our cost of interest bearing liabilities. In our financial statements, these bonds are accounted for as other liabilities and provisions and their interest cost is accounted for under other interest expenses.Since 1969, when we became a public sector bank, we have managed to continue to grow our business while maintaining a strong balance sheet. As of September 30, 2004, our total deposits represented 85.9% of our total liabilities. On average, interest free demand deposits and low interest savings deposits represented 43.8% of these deposits in the first six months of fiscal 2005.These low-cost deposits led to an average cost of funds excluding equity for the first six months of fiscal 2005 of 4.7%. As of September 30, 2004, our gross and net non-performing assets constituted

7.65% and 0.30% of our gross and net advances, respectively. In fiscal 2004 our total income was Rs. 96.5 billion and our net profit was Rs. 11.1 billion before adjustment and Rs. 10.6billion after adjustment as part of the restatement of our financial statements for this Issue. In the first six months of fiscal 2005 our total income was Rs. 51.9 billion and our net profit was Rs. 7.4billion. Between fiscal 2002 and 2004, our total income grew at a compound annual rate of12.5%, our

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unadjusted and adjusted net profit grew at a compound annual rate of 40.4% and37.4%, respectively, and our total deposits and total advances grew at a compound annual growth rate of17.1% and 17.2%, respectively.

We intend to maintain our position as a cost efficient and customer friendly institution that Provides comprehensive financial and related services. We seek to achieve this by continuing to adopt technology which will integrate our extensive branch network. We intend to grow by cross selling various financial products and services to our customers and by expanding geographically in India and internationally. We are committed to excellence in serving the public and also maintaining high standards of corporate responsibility. In line with our philosophy of aiding Indiasdevelopment we have opened branches in many rural areas.

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BOARD OF DIRECTORS

1.

Shri K.R.Kamath Chairman and Managing Director

2.

Shri Jasbir Singh Director

3.

Shri Pradeep Kumar Director

4.

Smt. Usha Ananthasubramanian Executive Director

5.

Shri B.B. Chaudhry Non Official Parttime Director

6.

Shri Rakesh Sethi Executive Director

7.

Shri M.P. Singh Director

8.

Shri Mushtaq Ataullah Antulay Non Official Parttime Director

9.

Shri Anurag Jain Nominee Director

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PRODUCTS& SERVICES

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1. SBI BANKING

Personal Banking

Agricultural & Rural Banking

NRI Services

International Banking

Corporate Banking

Services

Govt. Business

SME

Personal Banking Deposit Schemes Personal Finance Corp Salary Package Services

Agricultural Agricultural Banking Micro CreditRegional Rural

Banks

NRI Services

Type of Accounts

International Trade Finance Merchant Banking CorrespondentBanking

Corporate Banking Corporate Accounts Mid Corporate GroupProject FinanceProducts & Services

Services

Internet Banking

Mobile Banking

ATM Services

Govt. Business Govt.Accounts.

SME

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Demat Services

PERSONALBANKING

Public Provident Fund.

SBI Term DepositsSBI Loan For Pensioners

SBI Recurring Deposits Loan Against Mortgage Of Property

SBI Housing LoanLoan Against Shares & Debentures

SBI Car LoanRent Plus Scheme

SBI Educational LoanMedi-Plus Scheme

SBI Personal LoanRates Of Interest

AGRICULTURAL

State Bank of India Caters to the needs of agriculturists and landless agricultural labourers through a network of 6600 rural and semi-urban branches. There are 972 specialized branches which have been set up in different parts of the country exclusively for the development of agriculture through credit deployment .These branches include 427 Agricultural Development Branches (ADBs) and 547 branches with Development Banking Department (DBDs) which cater to agriculturists and 2 Agricultural Business Branches at Chennai and Hyderabad catering to the needs of hi tech commercial agricultural projects.

Our branches have covered a whole gamut of agricultural activities like crop production , horticulture , plantation crops, farm mechanization, land development and reclamation, digging of wells, tube wells and irrigation projects, forestry, construction of cold storages and godowns, processing of agri-products, finance to agri-input dealers, allied activities like dairy , fisheries, poultry, sheep-goat, piggery and rearing of silk worms.

The branch also has farmer's meet in villages to explain to farmers about various schemes offered by the bank. To give special focus to agriculture lending Bank has set up agri business unit. Bank has also agri specialists in various disciplines to handle projects/ guide farmers in their agri

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ventures. Advances are given for very small activity covering poorest of the poor to hi-tech activities involving large fund outlays.

We are the leaders in agri finance in the country with a portfolio of Rs. 18,000 cars in agri advances to around 50 lac farmers.

NRI SERVICESWorld Class Services from a Bank you can Trust Indians everywhere should become enlightened International citizens. Wherever you are, whichever country you live, enrich that nation, not only in financial terms, but also with your sweat knowledge and dignity since that is the tradition of the country from where you came. At the same time, remember we have a common umbilical connectivity to our motherland, India.

INTERNATIONAL BANKING

International banking services of State Bank of India are delivered for the benefit of its Indian customers, non-resident Indians, foreign entities and banks through a network of 84 offices/branches in 32 countries as on 31 March 2008, spread over all time zones. The network is augmented by a cluster of Overseas and NRI branches within India and correspondent links with over 522 banks, the world over. Bank's Joint Ventures and Subsidiaries abroad further underline the Bank's international presence.

The services include corporate lending, loan syndications, merchant banking, handling Letters of Credit and Guarantees, short-term financing, collection of clean and documentary credits and remittances.

The Bank has carved a niche for itself in the Euro land with branches located in Antwerp, Paris and Frankfurt. Indian banks and corporates are able to avail single-window Euro services from the Bank's Frankfurt branch.

CORPORATE BANKING

SBI is a one shop providing financial products / services of a wide range for large, medium and small customers both domestic and international.

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Working Capital Financing

Assistance extended both as Fund based and Non-Fund based facilities to Corporate, Partnership firms, Proprietary concerns

Working Capital finance extended to all segments of industries and services sector such as IT Term Loansto support capital expenditures for setting up new ventures as also for expansion, renovation etc.Deferred Payment Guarantees

to support purchase of capital equipments. Corporate LoansFor a variety of business related purposes to corporate. Export CreditTo Corporate / Non Corporate

Strategic Business Units

(i) Corporate Accounts Group (CAG) (ii)Project Finance(iii) Lease Finance

An exclusive unit providing one s shopping to Corporate

A dedicated set up specialised in financing of infrastructure and other large projects

Exclusive set up for handling large ticket leases. PricingSBI's Prime Lending Rates (PLR) is among the lowest

Presently Bank has two PLR's

SBAR for loans payable on demand and up to one year for loans payable beyond one year.

SERVICES

Listed on the left are Services, SBI offers to its customers.

DOMESTIC TREASURY

SBI VISHWA YATRA FOREIGN TRAVEL CARD

BROKING SERVICES

REVISED SERVICE CHARGES

ATM SERVICES28

INTERNET BANKING

E-PAY

E-RAIL

RBIEFT

SAFE DEPOSIT LOCKER

GIFT CHEQUES

GOVERNMENT BUSINESS

State Bank of India's linkage with Government business is widespread. No wonder that out of 9315 branches in India, about 7000 branches are conducting Government Business. The large networkofourbranchesprovideseasyaccesstothecommonmantodepositthe following Government dues and pension payments.

SME (small scale industries)

State Bank of India has been playing a vital role in the development of small scale industries since 1956.The Bank has financed over 8 lakhs SSI units in the country. It has 55 specialised SSI branches, 99 branches in industrial estates and more than 400 branches with SIB divisions.

The Bank finances for Small Business activities which are of special significance to a large number of people as many of these activities can be started with relatively lower investment andwith no special skills on the part of the entrepreneurs.

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2. ICICI BANKING

PERSONAL BANKING

Safety, Flexibility, Liquidity, Returns!ICICI Bank offers a wide Variety of Deposit Products to suit yourbanking requirements.

Simplified Documentation, Quick Processing, HassleFree!!!

Exclusive, Economical, Expert Advice!!!ICICI Bank's power-packed, feature-rich investment options for meeting all yourinvestment needs.

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World Class Service and

Acceptance!!!

A truly world class service as ICICI Bank cards have both national and internationalacceptance.

Secure, Reliable, Convenient!!! Convenience has always been synonymous withICICI Bank and keeping in line we offer the facility of buying Insurance policiesonline.

Banking at your fingertips!!! Why be inline when you can be online for paying your utility bills, mobile bills, prepaid mobile recharge, Shopping, Credit card, insurance premium and lots more.

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INTERNATIONAL BANKING

In 2001, we identified international banking as a key opportunity, aiming to cater to the cross-border needs of clients and leveraging our domestic banking strengths to offer products internationally. We have made significant progress in the international business since we set up our first overseas branch in Singapore in 2003. ICICI Bank currently has subsidiaries in the United Kingdom, Russia and Canada, branches in Singapore, Bahrain, Hong Kong, Sri Lanka, Dubai International Finance Centre, Qatar Financial Centre and the United States and representative offices in the United Arab Emirates, China, South Africa, Bangladesh, Thailand, Malaysia and Indonesia. The Banks wholly owned subsidiary ICICI Bank UK PLC has nine branches in the United Kingdom and a branch each in Belgium and Germany. ICICI Bank Canada has eight branches including three in Toronto. ICICI Bank Eurasia LLC has six branches including threebranches in Moscow and one in St. Petersburg.

Our international strategy is focused on building a retail deposit franchise, diverse wholesale funding sourcesand strong syndication capabilities to support our corporate and investment banking business; achieving the status of a non-resident Indian (NRI) community bank in key markets; and expanding private banking operations for India-centric asset classes. During fiscal2008, we focused on deepening our presence in existing overseas locations and expanding our operations in key markets. In line with our strategy to establish a presence in large markets with significant savings pools, we entered into Germany through a branch established by ICICI Bank UK PLC. We have been able to successfully leverage our technology advantage to create a growing international deposit base. Total deposits of ICICI Bank UK PLC and ICICI Bank Canada increased by 76.0% from Rs. 191.28billion at March 31, 2007 to Rs. 335.86 billion at March 31, 2008. We also received approval for and commenced branch operations in the United States.

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We have established a strong franchise among NRIs by offering a comprehensive product suite, technology enabled access, a wide distribution network in India and alliances with local banks in various markets. Currently, we have over 500,000 NRI customers. We have undertaken significant brand-building initiatives in international markets and have emerged as a well- recognised financial services brand for NRIs. We continue to maintain a market share of 25% in inward remittances to India. During fiscal 2008, we launched innovative products like instant money transfer and enhanced our focus on customer relationship management and process automation. Additionally, we also undertook the development of low cost remittance products in non-India geographies with correspondent tie-ups for disbursements in over 100 such geographies.

Through our international private banking services, we offer various products to mass affluent and high net worthclients based on their financial needs and risk appetite. The offerings range from simple deposits and loans to more sophisticated structured products, private equity and products giving exposure to the real estate sector in India.

CORPORATE BANKING

Our corporate banking strategy is based on providing comprehensive and customised financial solutions to our corporate customers. We offer a complete range of corporate banking products including rupee and foreign currency debt, working capital credit, structured financing,syndication and transaction banking products and services.

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Our corporate and investment banking franchise is built around a core relationship team that has strong relationships with almost all of the countrys corporate houses. The relationship team is product agnostic and is responsible for managing banking relationships with clients. We have also put in place product specific teams with a view to focus on specific areas of expertise in designing financial solutions for clients. Through our relationship teams working in tandem with product solution teams, we have deepened our client relationships across our product portfolio or esulting in significant growth in income and wallet share among all our top corporate clients, as compared to the previous year.

We have created an integrated Global Investment Banking Group, which is responsible for working with the relationship team in India and our international subsidiaries and branches, for origination, structuring and execution of investment banking mandates on a global basis. We have also restructured our delivery team for transaction banking products by creating dedicated sales teams for trade services and transaction banking products. This has been done with the intent to increase our market share from transaction banking products, which will translate into recurring fee income for the Bank. We have also focused on increasing market share in trade finance by leveraging and further strengthening correspondent banking relationships.

,SME BANKING

During fiscal 2008, our small enterprises customer base increased by 26% to about 1.1 million accounts. We have introduced our service offerings in over 400 new branches, increasing our coverage to over 1,000 branches. During the year, we have focused on product specialisation including investment banking for SMEs. We have continued to focus on shaping the small and medium enterprises sphere in India through initiatives such as the Emerging India Awards, the SME CEO Knowledge Series - a platform to mentor and assist SME entrepreneurs, and the SME Dialogue - a weekly feature in a leading financial newspaper sharing SME best practices and success stories. During the year, we have launched several new products and services like the SMEtoolkit an online business and advisory resource for SMEs.

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RURAL BANKING AND AGRI-BUSINESS

We believe the rural economy has high growth potential and offers large credit growth opportunities. Towards this end, our suite of products and services is targeted to address the needs of both the farm and non-farm sectors. Our retail product suite encompasses loans for crop production, purchase of farm equipment; commodity based finance as well as various savings, investment and insurance products. We also offer micro-finance and jewel loans. We have also focused on enhancing credit to farmers by leveraging on corporate partnerships. For example, we have partnered with various dairies to provide financing to farmers for purchase of milch cattle. We also provide credit and banking services to SMEs active in the agricultural value chain. To enhance our service quality and product delivery capabilities we have developed a large network of rural branches which is further augmented by non-branch channels.

Rural banking in India is still at a nascent stage and the deployment of technology channels and modern banking methods for rural lending continues to be an evolving process. In line with our learning from our rural banking operations, we undertook a comprehensive review of and realigned our channel architecture, credit underwriting processes and account management systems. We have put in place a robust risk management structure to Mitigate and manage credit, operational andfraud risks. Through this, we aim to create a strong foundation for scaling up of our rural business.

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3 PNB BANKING

AND COMMERCIAL SECTOR CORPORATE LENDING ACTIVITIES

Term loans

Cash credit and other working capital facilities

Bill discounting

Export credits

Other credit and financing products

SERVICES RESIDENT INDIANS TO NON-

We provide personal financial services for NRIs. We have established a branch in Kabul and Representative offices in other cities overseas in order to facilitate services being provided to NRIs. We offer foreign currency accounts to NRIs under our Foreign Currency Non-Resident Scheme and rupee accounts for NRIs under our Non-Resident External and Non-Resident Ordinary Schemes. We have introduced our Global Foreign Currency Scheme and Global Rupee Deposit Scheme, which offer benefits and concessions to NRIs and their relatives provided a minimum balance of Rs. 250,000 or US$5,000 is maintained in the account. We also offer various products for facilitating remittances from NRIs to India. We recently entered into an arrangement to facilitate money transfers through Western Union, which is a global leader in money transfer services. We have also entered into an agreement with Times Online Money Ltd., a Times of India group company, with a view to establishing an internet based international remittance service. In addition, we also provide housing loans to NRIs.

RETAIL BANKING

In retail banking, our principal competitors are the large public sector banks, as well as existing and new private sector banks and foreign banks in the case of retail loan products. The other public sector banks have large deposit bases and large branch networks, including the State Bank of India which has 13,593 branches. Private sector and foreign banks compete principally by offering a wider range of products as well as greater technological sophistication in some cases.36

Foreign banks, while having a small market penetration overall, has a significant presence among non-resident Indians and also competes for non-branch based products such as auto loans and creditcards.

In particular, we face significant competition primarily from private sector banks and to a lesser degree from other public sector banks, in the housing, auto and personal loan segments. In mutual fund sales and other investment related products, our principal competitors are brokers, foreign banks and new private sector banks.

PRODUCTS AND SERVICES FOR AGRICULTURE CUSTOMERS

Agriculture contributes 22% to Indias GDP and supports approximately two-thirds of Indias population. In fiscal 2004, we surpassed the stated national goal that banks should provide at least18% of their net bank credit (which is gross credit minus Foreign Currency Non-Resident Bank deposits) to this segment, for which we received an award from Indias Finance Minister. Our average credit growth rate in this segment has been 32.2% over the last four years. As of the last reporting Friday of September 2004, agricultural loans constituted 18.8% of our net bank credit.

SMALL SCALE INDUSTRIES

We provide financing to small scale industries or SSIs. SSIs are defined as manufacturing, processing and servicing businesses with up to Rs. 50 million invested in plant and machinery for certain industries such as hosiery, hand tools, drugs and pharmaceuticals and stationery items and up to Rs. 10 million invested in plant and machinery for other small scale industries. SSIs are also considered a priority sector for directed lending purposes. See the section titled Business-Directed Lending below. As of the last reporting Friday in September 2004, SSI loans constituted 11.3% of our net bank credit. As of the last reporting Friday in September, 2004 we had an outstanding loan portfolio of Rs. 57.3 billion in this segment compared to Rs. 48.5 billion as of the last reporting Friday in September 2003, representing growth of approximately 18.1%.We have also received awards and recognition from the Government of India relating to our efforts infinancing SSI businesses.

37

BALANCE

SHEET

38

1. STATE BANK OF INDIA

BALANCE SHEET

AS ON 31-MARCH-2011

AssetsRs(mn)%BT

Net Own Assets33291.420.46

Net Lease Assets(After Lease Adj A/c)443.390.01

Investment1895012.7126.26

Advances4167681.9657.76

Cash & Money at call674663.359.35

Other Current Assets443749.846.15

Balance Sheet Total(BT)7215263.12100.00

LiabilitiesRs(mn)%BT

Equity Share Capital6314.700.09

Reserves484011.916.71

Deposits5374039.4174.48

Borrowings517274.117.17

Other Cash liab/prov.833622.9811.55


Non Performing Assets(NPA) %1.87-

Capital Adequacy Ratio(CAR) %13.47-

39

2. ICICI

BALANCE SHEET AS ON 31-MARCH-2011

AssetsRs(mn)%BT




Advances2256160.8356.43




LiabilitiesRs(mn)%BT


Reserves453575.3111.35

Deposits2444310.5061.14






40

3. PUNJAB NATIONAL BANK

BALANCE SHEET

AS ON 31-MARCH-2011Assets

Rs(mn)%BT




Advances1195015.6660.51




Liabilities

Rs(mn)%BT


Reserves104673.495.30

Deposits1664572.2684.29






41

RATIO

ANALYSIS

42

PROFITABILITY RATIO

A class of financial metrics that are used to assess a business's ability to generate earnings as compared to its expenses and other relevant costs incurred during a specific period of time. For most of these ratios, having a higher value relative to a competitor's ratio or the same ratio from a previous period is indicative that the company is doing well.Some examples of profitability ratios are profit margin, return on assets and return on equity. It is important to note that a little bit of background knowledge is necessary in order to make relevant comparisons when analyzing these ratios. For instances, some industries experience seasonality in their operations. The retail industry, for example, typically experiences higher revenues and earnings for the Christmas season. Therefore, it would not be too useful to compare a retailer's fourth-quarter profit margin with its first-quarter profit margin. On the other hand, comparing a retailer's fourth-quarter profit margin with the profit margin from the same period a year before would be far more informative.

OPERATING MARGIN

A ratio used to measure a company's pricing strategy and operating efficiency. Operating margin is a measurement of what proportion of a company's revenue is left over after paying for variable costs of production such as wages, raw materials, etc. A healthy operating margin is required for a company to be able to pay for its fixed costs, such as interest on debt. It Is Also known as "operating profit margin."

Calculated as:

Operating margin gives analysts an idea of how much a company makes (before interest and taxes) on each dollar of sales. When looking at operating margin to determine the quality of a company, it is best to look at the change in operating margin over time and to compare the company's yearly or quarterly figures to those of its competitors. If a company's margin is increasing, it is earning more per dollar of sales. The higher the margin, the better.

.

43

RATIO AT 31-MARCH 2011

Sr.No.

Name of Bank

Percentage

1

SBI

22.69 %

2

ICICI

14.45 %

3

PNB

21.47 %

BAR-GRAPH

INTERPRETATION

It shows that operating efficiency of SBI is better than PNB and ICICI. While operating efficiency of ICICI is lower than PNB and SBI. So rank of operating efficiency of banks can be given as SBI, PNB and ICICI.

44

GROSS PROFIT MARGIN

A financial metric used to assess a firm's financial health by revealing the proportion of money left over from revenues after accounting for the cost of goods sold. Gross profit margin serves as the source for paying additional expenses and future savings. It is also known as "gross margin".

Calculated as:

This metric can be used to compare a company with its competitors. More efficient companies will usually see higher profit margins.


Sr.No.

Name of Bank

Percentage

1

SBI

21.49 %

2

ICICI

12.99 %

3

PNB

20.67%

BAR-GRAPH

INTERPRETATION

This ratio shows financial position of company. Here, financial position of SBI is better than

PNB and ICICI. So SBI is at first rank by its financial position than PNB and ICICI.45

NET PROFIT MARGIN

The net profit margin ratio indicates profit levels of a business after all costs have been taken into account. It is worth analysing the ratio over time. A variation in the ratio from year to year may be due to abnormal conditions or expenses. Variations may also indicate cost blowouts which need to be addressed.A decline in the ratio over time may indicate a margin squeeze suggesting that productivity improvements may need to be initiated. In some cases, the costs of such improvements may lead toa further drop in the ratio or even losses before increased profitability is achieved.

The calculation used to obtain the ratio is:

Net Profit Margin = Net Profit x 100

Sales


Sr.No.

Name of Bank

Percentage

1

SBI

11.67 %

2 ICICI

10.51 %

3

PNB

12.68 %

BAR-GRAPH

46

INTERPRETATION

This ratio is key performance indicators for business. Key performance means the profit level of company; from above graph we can say that performance of PNB is better than SBI and ICICI. So profit level of PNB is at first rank than comes SBI and ICICI.

RETURN ON NETWORTH

Return on Net worth (RONW) is used in finance as a measure of a companys profitability. It reveals how much profit a company generates with the money that the equity shareholders haveinvested. Therefore, it is also called Return on Equity (ROE)

It is expressed as: RONW = Net Income x 100 Shareholders Equity

The numerator is equal to a fiscal years net income (after payment of preference sharedividends but before payment of equity share dividends).The denominator excludes preference shares and considers only the equity shareholding. So, RONW measures how much return the company management can generate for its equity shareholders.

RONW is a measure for judging the returns that a shareholder gets on his investment as a shareholder, equity represents your money and so it makes good sense to know how wellmanagement is doing with it.

47


Sr.No.

Name of Bank

Percentage

1

SBI

13.72 %

2

ICICI

8.94 %

3

PNB

19.00 %

BAR-GRAPH

INTERPRETATION

This ratio is useful for comparing the profitability of a company to that of other firms in the same industry. Here, profitability of PNB is more than SBI and PNB. So we can say that PNB is at first rank by its profitability than comes SBI and ICICI

48

LEVERAGE RATIO

Any ratio used to calculate the financial leverage of a company to get an idea of the company's methods of financing or to measure its ability to meet financial obligations. There are several different ratios, but the main factors looked at include debt, equity, assets and interest expenses.A ratio used to measure a company's mix of operating costs, giving an idea of how changes in output will affect operating income. Fixed and variable costs are the two types of operating costs; depending on the company and the industry, the mix will differ.The most well known financial leverage ratio is the debt-to-equity ratio.

DEBT-EQUITY RATIOAmeasureofacompany'sfinancialleveragecalculatedbydividing itstotal liabilities by stockholders' equity.

Note: Sometimes only interest-bearing, long-term debt is used instead of total liabilities in the calculation. It is also known as the Personal Debt/Equity Ratio, this ratio can be applied to personal financial statements as well as companies'.

A high debt/equity ratio generally means that a company has been aggressive in financing its growth with debt. This can result in volatile earnings as a result of the additional interest expense.

If a lot of debt is used to finance increased operations (high debt to equity), the company could potentially generate more earnings than it would have without this outside financing. If this were to increase earnings by a greater amount than the debt cost (interest), then the shareholders benefit as more earnings are being spread among the same amount of shareholders. However, the cost of this debt financing may outweigh the return that the company generates on the debt through investment and business activities and become too much for the company to handle. This can lead to bankruptcy, which would leave shareholders with nothing.

The debt/equity ratio also depends on the industry in which the company operates. For example, capital-intensive industries such as auto manufacturing tend to have a debt/equity ratio above 2, while personal computer companies have a debt/equity of under 0.5. 49


Sr.No.

Name of Bank

Percentage

1

SBI

10.96 %

2

ICICI

5.27 %

3

PNB

15.44 %

BAR-GRAPH

INTERPRETATION

This ratio indicates what proportion of equity and debt the company is using to finance its assets. From above diagram we can say that PNB has a high debt-equity ratio means it is aggressive in financing its growth with debt. Than after SBI has a low debt-equity ratio as comparison with PNB and ICICI comes at third rank in debt-equity ratio. 50

FIXED ASSETS TURNOVER RATIO

Measure of the productivity of a firm, it indicates the amount of sales generated by each dollar spent on fixed assets, and the amount of fixed assets required to generate a specific level of revenue. Changes in the ratio over time reflect whether or not the firm is becoming more efficient inthe use of its fixed assets.

Formula: Sales revenue average fixed assets.RATIO AT 31-MARCH 2011

Sr.No.

Name of Bank

Percentage

1

SBI

6.31 %

2

ICICI

5.61 %

3

PNB

4.35 %

BAR-GRAPH

INTERPRETATION

This ratio shows specific level of revenue by the amount of fixed assets. SBI has a high level of revenue in comparison with ICICI and PNB. After SBI, ICICI has a high level of revenue and then comes PNB at last. 51

LIQUIDITY RATIO

A class of financial metrics that is used to determine a company's ability to pay off its short- terms debts obligations. Generally, the higher the value of the ratio, the larger the margin of safety that the company possesses to cover short-term debts.

Common liquidity ratios include the current ratio, the quick ratio and the operating cash flow ratio. Different analysts consider different assets to be relevant in calculating liquidity. Some analysts will calculate only the sum of cash and equivalents divided by current liabilities because they feel that they are the most liquid assets, and would be the most likely to be used to cover short-term debts in an emergency.

A company's ability to turn short-term assets into cash to cover debts is of the utmost importance when creditors are seeking payment. Bankruptcy analysts and mortgage originators frequently use the liquidity ratios to determine whether a company will be able to continue as a going concern.

CURRENT RATIO

This ratio is a rough indication of a firm's ability to service its current obligations. Generally, the higher the current ratio, the greater the "cushion" between current obligations and your Company's ability to pay them. The composition and quality of current assets is a critical factor in the analysis of your Company's liquidity.

It is calculated as: Total current assets divided by total current liabilities.


Sr.No.

Name of Bank

Percentage

1

SBI

0.07 %

2

ICICI

0.10 %

3

PNB

0.02 %

52

BAR GRAPH

INTERPRETATION

Current ratio of ICICI is higher than SBI and PNB, means ICICI has a high ability to pay for its liabilities and than secondly comes SBI and PNB has a low ability to pay for liabilities in comparison with ICICI and PNB. QUICK RATIO

It is also known as the "Acid Test" ratio; it is a refinement of the current ratio and is a more conservative measure of liquidity. The ratio expresses the degree to which your current Company's current liabilities are covered by the most liquid current assets. Generally, any value of less than 1 to 1 implies a "dependency" on inventory or other current assets to liquidate short-term debt.It is calculated as : Cash plus trade receivables divided by total current liabilities.


Sr.No.

Name of Bank

Percentage

1

SBI

6.15 %

2

ICICI

6.42 %

3

PNB

9.40 %

53

BAR-GRAPH

INTERPRETATION

PNB has a high quick ratio means it has enough current assets to cover its current liabilities, while SBI and ICICI have a low quick ratio in comparison with PNB.

PAYOUT RATIOS

The amount of earnings paid out in dividends to shareholders. Investors can use the payout ratio to determine what companies are doing with their earnings.Calculated as:

For example, a very low payout ratio indicates that a company is primarily focused on retaining its earnings rather than paying out dividends.

DIVIDEND PAYOUT RATIO Dividend payout ratio is the fraction of net income a firm pays to its stockholders in dividends:

54

The part of the earnings not paid to investors is left for investment to provide for future earnings growth. Investors seeking high current income and limited capital growth prefer companies with high Dividend payout ratio. However investors seeking capital growth may prefer lower payout ratio because capital gains are taxed at a lower rate. High growth firms in early life generally have low or zero payout ratios. As they mature, they tend to return more of the earnings back to investors. Note that dividend payout ratio is a reciprocate ratio to dividend cover, which is calculated as EPS/DPS.


Sr.No.Name of BankPercentage

1

SBI

22.64 %

2

ICICI

33.12 %

3

PNB

23.40 %

BAR-GRAPH

55

EARNING RETENTION RATIO

The percent of earnings credited to retained earnings. In other words, the proportion of net income that is not paid out as dividends.

Calculated as:

It can also be calculated as one minus the dividend payout ratio.


Sr.No.

Name of Bank

Percentage

1

SBI

77.33 %

2

ICICI

66.35 %

3

PNB

76.59 %

BAR-GRAPH

56

INTERPRETATION

Earning retention ratio is the opposite of the dividend payout ratio. SBI and PNB have a high

earning retention ratio, so the Investors who are seeking high current income and limited capital

growth should be invest in SBI and PNB. ICICI has a low earning retention ratio, so the

investors whoare seekingcapital growth should be investin ICICI BANK.

PERSHARE RATIOS

EARNIG PER SHARE

The portion of a company's profit allocated to each outstanding share of common stock. Earnings per share serve as an indicator of a company's profitability.

Calculated as:

When calculating, it is more accurate to use a weighted average number of shares outstanding over the reporting term, because the number of shares outstanding can change over time. However, data sources sometimes simplify the calculation by using the number of sharesoutstanding at the end of the period.

57Diluted EPS expands on basic EPS by including the shares of convertibles or warrants outstanding in the outstanding shares number.

Earnings per share are generally considered to be the single most important variable in determining a share's price. It is also a major component used to calculate the price-to-earnings valuation ratio.

An important aspect of EPS that's often ignored is the capital that is required to generate the earnings (net income) in the calculation. Two companies could generate the same EPS number, but one could do so with less equity (investment) - that company would be more efficient at using its capital to generate income and, all other things being equal, would be a "better" company. Investors also need to be aware of earnings manipulation that will affect the quality of the earnings number. It is important not to rely on any one financial measure, but to use it in conjunction with statement analysis and other measures.


Sr.No.

Name of Bank

Percentage

1

SBI

117.33 %

2

ICICI

42.56 %

3 PNB 70.38%

58

BAR GRAPH

INTERPRETATION

This ratio is an indicator of a company's profitability. From above graph we can say that SBI has a high profitability than PNB and ICICI. So, PNB comes at second position and ICICI comes at thirdposition in profitability.

59

OBJECTIVES

60

OBJECTIVES

Analysis of financial statements is an attempt to assess the efficiency and performance of an enterprise. For that there are some objectives which are described as under.

1. EARNING CAPACITY OR PROFITABILITY

The overall objective of a business is to earn a satisfactory return on the funds invested in it. Financial analysis helps in ascertaining whether adequate profits are being earned on the capital invested in the business or not. It also helps in knowing the capacity to pay the interest and dividend.

2. COMPARATIVE POSITION IN RELATION TO OTHER FIRMSThe purpose of financial statements analysis is to help the management to make a comparative study of the profitability of various firms engaged in similar business. Such comparison also helps the management to study the position of their firm in respect of sales expenses, profitability and using capital.etc.

3. EFFICIENCY OF MANAGEMENT

The purpose of financial statement analysis is to know that the financial policies adopted by the management are efficient or not. Analysis also helps the management in preparing budgets by forecasting next years profit on the basis of past earnings. It also helps the management to find out shortcomings of the business so that remedial measures can be taken to remove these shortcomings.

4. FINANCIAL STRENGTH

The purpose of financial analysis is to assess the financial potential of business. Analysis also helps in taking decisions;

(a) Whether funds required for the purchase of new machinery and equipments are provided from internal resources of business or not.

(b) How much funds have been raised from external sources.

5. SOLVECNY OF THE FIRMThe different tools of analysis tells us whether the firm has suffucient funds to meet its short- term and long-term liabilities or not.

61

IMPORTANCE

62

IMPORTANCE

Ratio analysis is an important technique of financial analysis. It is a means for judging the financialhealthofabusinessenterprise.Itdeterminesandinterpretsthe liquidity, solvency , profitability, etc. of a business enterprise.

It becomes simple to understand various figures in the financial statements through the use of different ratios. Financial ratios simplify, summarize, and systemize the accounting figures presented in financial statements.

With the help of ratio analysis, comparison of profitability and financial soundness can be made between one industry and another. Similarly comparison of current year figures can also be made with those of previous years with the help of ratio analysis and if some weak points are located, remedial measures are taken to correct them.

If accounting ratios are calculated for a number of years, they will reveal the trend of costs, sales, profits and other important facts. Such trends are useful for planning.

Financial ratios, based on a desired level of activities, can be set as standards for judging actual performance of a business. For example, if owners of a business aim at earning profit@ 25% on the capital which is the prevailing rate of return in the industry then this rate of

25% becomes the standard. The rate of profit of each year is compared with this standard and the actual performance of the business can be judged easily.

Ratio analysis discloses the position of business with different viewpoint. It discloses the position of business with liquidity viewpoint, solvency view point, profitability viewpoint, etc. with the help of such a study, we can draw conclusion regardings the financial health ofbusiness enterprise.

63

ADVANTAGES& LIMITATIONS

64

ADVANTAGES

Ratio analysis is an important and age-old technique of financial analysis. The following are some of the advantages of ratio analysis:

1. Simplifies financial statements: It simplifies the comprehension of financial statements.

Ratios tell the whole story of changes in the financial condition of the business.

2. Facilitates inter-firm comparison: It provides data for inter-firm comparison. Ratios highlight the factors associated with with successful and unsuccessful firm. They also reveal strong firms and weak firms, overvalued and undervalued firms.3. Helps in planning: It helps in planning and forecasting. Ratios can assist management, in its basic functions of forecasting. Planning, co-ordination, control and communications.4. Makes inter-firm comparison possible: Ratios analysis also makes possible comparison of the performance of different divisions of the firm. The ratios are helpful in deciding about their efficiency or otherwise in the past and likely performance in the future.5. Help in investment decisions: It helps in investment decisions in the case of investors and

lending decisions in the case of bankers etc.

65

LIMITATIONS

The ratios analysis is one of the most powerful tools of financial management. Though ratios are simple to calculate and easy to understand, they suffer from serious limitations.

1. Limitations of financial statements: Ratios are based only on the information which has been recorded in the financial statements. Financial statements themselves are subject to several limitations. Thus ratios derived, there from, are also subject to those limitations. For example, non-financial changes though important for the business are not relevant by the financial statements. Financial statements are affected to a very great extent by accounting conventions and concepts. Personal judgment plays a great part in determining the figures for financial statements.2. Comparative study required: Ratios are useful in judging the efficiency of the business only when they are compared with past results of the business. However, such a comparison only provide glimpse of the past performance and forecasts for future may not prove correct since several other factors like market conditions, management policies, etc. may affect the future operations.3. Problems of price level changes: A change in price level can affect the validity of ratios calculated for different time periods. In such a case the ratio analysis may not clearly indicate the trend in solvency and profitability of the company. The financial statements, therefore, be adjusted keeping in view the price level changes if a meaningful comparison is to be made through accounting ratios.4. Lack of adequate standard: No fixed standard can be laid down for ideal ratios. There are no well accepted standards or rule of thumb for all ratios which can be accepted as norm. It renders interpretation of the ratios difficult.5. Limited use of single ratios: A single ratio, usually, does not convey much of a sense. To make a better interpretation, a number of ratios have to be calculated which is likely to confuse the analyst than help him in making any good decision.6. Personal bias: Ratios are only means of financial analysis and not an end in itself. Ratios

have to interpret and different people may interpret the same ratio in different way.

7. Incomparable: Not only industries differ in their nature, but also the firms of the similar business widely differ in their size and accounting procedures etc. It makes comparison of ratios difficult and misleading

66

.

CONCLUSION

67

CONCLUSION

Ratios make the related information comparable. A single figure by itself has no meaning, but when expressed in terms of a related figure, it yields significant interferences. Thus, ratios are relative figures reflecting the relationship between related variables. Their use as tools of financial analysis involves their comparison as single ratios, like absolute figures, are not of much use.

Ratio analysis has a major significance in analysing the financial performance of a company over a period of time. Decisions affecting product prices, per unit costs, volume or efficiency have an impact on the profit margin or turnover ratios of a company.

Financial ratios are essentially concerned with the identification of significant accounting data relationships, which give the decision-maker insights into the financial performance of a company.

The analysis of financial statements is a process of evaluating the relationship between component parts of financial statements to obtain a better understanding of the firms position and performance.

The first task of financial analyst is to select the information relevant to the decision under consideration from the total information contained in the financial statements. The second step is to arrange the information in a way to highlight significant relationships. The final step is interpretation and drawing of inferences and conclusions. In brief, financial analysis is the process of selection, relation and evaluation.

Ratio analysis in view of its several limitations should be considered only as a tool for analysis rather than as an end in itself. The reliability and significance attached to ratios will largely hinge upon the quality of data on which they are based. They are as good or as bad as the data itself. Nevertheless, they are an important tool of financial analysis.

68

BIBLIOGRAPHY

69

BIBLIOGRAPHY

Web sites:

www.sbi.com

www.icici.com

www.pnb.com

Books referred:

Basic Financial Management- M Y Khan

P K Jain

Financial Management-Prasanna Chandra

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Documents

FINANCIAL INCLUSION IN INDIA.docx