Upload
abbasalita6
View
308
Download
9
Embed Size (px)
Citation preview
ACKNOWLEDGEMENT
My expression of gratitude and heart felt thanks goes to:
The principal of Maharaja College for Women, Perundurai
Dr. Mrs. INDRALEKHA for having given me opportunity to undergo this project.
Mr.P.PARAMANANDAM, MBA., MA(Psy)., MA (Soc)., MA(Eng), M.Sc.,
M.ED., BLIS, PGDHRM, PGDMM, for having providing me the necessary facilities to
do the project.
Mr. S. M.UVANESWARAN, MBA, M.Phil., Guide for his cooperation and
unparallel encouragement shown towards compilation of this project work.
Mr.UMABATHY, Secretary of SHEVAPET Urban Cooperative Bank Ltd., for
having permitted me to undertake the project in the bank.
Mr. MANIKKAM, Asst. Secretary of Shevapet Urban Cooperative Bank Ltd., ,
guiding me and giving me the necessary information.
Mr. NATARAJAN and other staff members of bank who helped me in doing this
project.
My parents and friends who have been my greatest source of inspiration of every
stage of my project.
All the blessings of the Almighty added meaning and gave life to my project.
Contents
Chapter Title Page No.
1 INTRODUCTION
About Cooperative Bank Overview
Research Problem
Objectives of the Study
Research Methodology
Limitations of the Study
2 PROFILE OF THE BANK
About Shevapet Cooperative Bank
Objectives of the Bank
Classifications of Deposits
Types of Loans
3 ANALYSIS AND INTERPRETATIONS
Ratio Analysis
Trend Forecasting
4 SUMMARY OF FINDINGS AND SUGGESTIONS
5 CONCLUSION
APPENDIX
BIBLIOGRAPHY
LIST OF TABLES
Table No.
Title Page No.
1 Current Ratio
2 Liquid Ratio
3 Absolute Liquid Ratio
4 Long Term Debt to Net working capital
5 Fixed Assets to Net Worth
6 Current Liability to Proprietors Funds
7 Debtors to Current Assets
8 Total investment to long term liability
9 Total loan to net worth
10 Cash to current asset
11 Cash on Hand
12 Balance with Other Banks
13 Investments
14 Loans and Advances
15 Fixed Assets
16 Bills for Collection
17 Share Capital
18 Reserves and Surplus
19 Deposits & Borrowings
20 Bills for Collection
21 Interest and Discounts
22 Commission, brokerage and Exchange
23 Interest on deposits and borrowings
24 Salaries, allowances and provident fund
25 Rent, tax, lighting etc
26 Audit fees
27 Profit
LIST OF CHARTS
Charts No.
Title Page No.
1 Current Ratio
2 Liquid Ratio
3 Absolute Liquid Ratio
4 Long Term Debt to Net working capital
5 Fixed Assets to Net Worth
6 Current Liability to Proprietors Funds
7 Debtors to Current Assets
8 Total investment to long term liability
9 Total loan to net worth
10 Cash to current asset
11 Cash on Hand
12 Balance with Other Banks
13 Investments
14 Share Capital
15 Reserves and Surplus
16 Deposits & Borrowings
17 Interest and Discounts
18 Interest on deposits and borrowings
19 Profit
CO-OPERATIVE BANK OVERVIEW
Indian Financial System
The Indian financial system is broadly classified into organized sector and
unorganised sector. The organized sector consists of the commercial banks, cooperative
banks, regional rural banks and development banks, which come under the effective
purview of the RBI and Government. The unorganized sector is largely beyond
regulatory and governmental authorities. The organized section is fully regulated and
controlled by the RBI.
Banking Intermediaries
The organized section may be grouped as banking intermediaries and financial
intermediaries. Banking intermediaries are,
1. Commercial Banks
2. Cooperative banks
3. Cooperative savings banks
Banking Institutions
Banking Institutions Regional Rural banks Cooperative banks
Public sectorbanks
Private sectorbanks
Indian Foreign
State BankGroup
Nationalisedbanks
Financial Services
subsidiaries
State Bankof India
Subsidiarybank
SBI CapitalMarket Ltd
1. Commercial banks
Most of the commercial banks in India were started on the British pattern in the
beginning of the 19th century. The commercial banks were incorporated under the Indian
Companies Act, 1936. The peculiarity of the Indian commercial banking is that the banks
were started funded and managed by industrialists.
Chart showing Indian Financial System
Commercial Bank in India
Scheduled banks Non-scheduled banks
Indian Banks Foreign Banks
Private Sector Banks Public sector banks
SBINationalised
BanksAssociated
SCIRRB
Primary objective of any commercial bank is to earn profit. A commercial bank
receives money from the depositors and lends it to trade, industry and commerce. The
difference between the lending rate and the borrowing rate is profit. The RBI directors
govern the interest rates. The banks also carry on the business of banking as per the
regulations prescribed by the RBI.
Chart showing Indian Commercial Banks
Cooperative Banks
India is an agriculture country. About 70% of our country’s population depends
upon agriculture for their livelihood. The Indian farmer is poor, illiterate and heavily
indebted non availability of adequate and timely agricultural credit results in low
productivity and make agriculture more capital intensive. The objective of such
organisation is to facilitate rural credit and to promote thrift and self help among the
economically weaker sections in the country.
Like commercial banks, the cooperative banks also receive deposits and lends
money. But they lend money to their members and make incidental profits although their
objective is not profiting earning.
Cooperative banks in India can be divided into two sectors. Agricultural and non-
agricultural sectors. The agriculture cooperative banks are primary cooperative banks at
the village level, central co-operative banks at the district level and the state cooperative
banks are at the state level.
The non-agricultural cooperative banks include urban cooperative banks and
housing cooperative bank. A special feature of agricultural cooperative bank is its three
tier structure.
Village / primary Co-operative Banks
The primary cooperative banks credit societies are functioning at the village level.
The village cooperative society attracts deposits from among the well to do members and
non-members of the village and to promote thrift and self help. They are making
advances to weaker sections, particularly the small and marginal farmers.
The Central Co-operative Banks
These banks are managed by a Board of Directors consisting of 12 -15 members
elected by the member of societies. They have been functioning as an intermediary
between the primary cooperative societies and the state cooperative banks. Their main
objective is to raise finance through deposits from the public and lend it to the primary
credit societies at the village level.
State Co-operative Banks
Every state has a state cooperative bank. In links the cooperative movement of the
state with the money market and RBI on one hand and the central cooperative banks and
the credit societies on the other. It also serves as a clearinghouse for the cheques of
cooperative banks.
Urban Co-operative Banks
It resembles the commercial banks. This kind of bank is set up in the urban
centres. The bank receives deposits from its members and the public and lends its
members. An urban co-operative bank is restricted to lend money to its customer residing
in the municipal or co-operative limits, depending on its bylaws.
These may be more than one commercial banks in a particular municipal area. But
some urban co-operative banks, depending on their byelaws admit firms and local
authorities as its members. These banks accepting time and demand deposits.
RESEARCH PROBLEM
Co-operative banking is India can be divided into two important areas. They are,
i. Agricultural co-operative banks and
ii. Non Agricultural co-operative banks
Urban co-operative banks comes under the on non-agricultural banks, Shevapet
urban co-operative bank limited No. S.392 Salem is also one among the non-agricultural
co-operative banks. It provides loans and receive deposits both members and non-
members of the bank. The bank facing financial crunch in their transactions. Hence the
researcher has selected this bank to study the financial performance of the bank and give
suggestions to improve the bank.
OBJECTIVES OF THE STUDY
1. To examine the liquidity position of the co-operative bank.
2. To study the ability of the bank to meet its current obligations
3. To study about the banking and its administration
4. To study about the banks future financial position through forecasting
technique
5. To provide suggestions and recommendations to improve the bank’s
performance.
RESEARCH METHODOLOGY
A study of financial performance at bank has conducted to find out the financial
soundness of the bank. This project study of financial performance is covered for a period
of 5 years from 1995 – 96 to 1999-2000.
Primary data was collected through the interviews with the managers and staffs
and the secondary data from annual accounts, past records and various books, etc.
The main aim of the study is to know the financial soundness of the bank. The
tools used in this analysis are ratio analysis and trend analysis.
LIMITATIONS OF THE STUDY
1. This study is based on the secondary sources and published
data for a period of 5 years.
2. Due to time constraints only past 5 years was considered
for this analysis
3. The drawn conclusion may not applicable to other co-
operative banks.
4. Time value of money not being used.
5. Forecasted values may not be suitable in future.
PROFILE OF THE BANK
The Shevapet Urban co-operative bank Ltd., No.S.392 is registered as a
cooperative society under Act VI of 1932, Madras. Its operation shall be confined to
Salem Municipal limits and upto the area of all village lying within the radius of 15
kilometres. For any revision in this regard prior approval from the RBI is necessary.
Membership
Loan on the security of immovable property may be granted to `A’ class members
residing in the above area of operation of the bank. Loan on the security of jewels may be
advanced to `B’ class members residing in Salem District. The liability of the members of
the society shall be limited to the share capital subscribed by them. The state government
may be admitted as `A’ class member. The redeemable in accordance with the terms and
conditions stipulated by the government and the registrar.
Capital
The capital of the bank at present be 50,50,000/- made up of 5,00,000/- `A’ class
shares of Rs.10 each and 50000/- `B’ class shares of Rs.1 each. The value of each A&B
class shares shall be paid in one lump sum on allotment. However SC, ST and Weaker
sections may be pay the `A’ class share in 2 instalments.
Management
The executive management of the affairs of the society shall vest in the Board of
Directors. The BOD shall consist of not more than nine members. The board of directors
shall meet once a month. Member of BOD absent himself from the four consecutive
ordinary meeting of the boards, he shall cease to be a member of BOD but may be
instated by the BOD’s.
The secretary shall be responsible for the executive administration of the society,
subject to the control of the president. The cashier, the accountant and the secretary all
the three will be jointly responsible for the cash and jewels and other valuables of the
bank. The appraiser shall be responsible for the jewels, which he handed over the
secretary or cashier or accountant in sealed pockets.
The secretary shall have power to admit `B’ class member and allow withdraw of
their share capital and subject to rectification by the BOD at their next meeting.
General Body
They deal with following matters.
1. The election and removal of BOD
2. The annual reports due to the registrar of co-operative societies.
3. The expulsion of a member.
4. The consideration of any complaint which any individual member may prefer
against the BOD
5. The returns that may be prescribed by the local government.
Objectives of the Bank
1. To borrow funds from members or others to be utilized for loans to
members for useful purposes.
2. To act as an agent for the joint purchase of the domestic and other
requirements of its members.
3. Generally to encourage thrift, self help and cooperative among members.
4. To carry on such other banking business as may be to the healthy growth
of the co-operative movement.
5. To act as an agent of life insurance corporation for the transmission of
money to policy makers.
Reserve Fund
The reserve funds shall belong to the society as a whole and its intended to meet
unforeseen losses. No members can claim a share in it. It shall be invested in such a
manner as the registrar of co-operative societies prescribed and shall not be drawn upon
except with his sanction.
The society shall prepare annually in such form as may be prescribed by the
registrar.
A statement showing the receipts and payments for the year
Profit and Loss account
Balance Sheet
Other statements as may be prescribed by the registrar
SUBSIDIARY REGULATION FRAMED TO SERVICE CONDITION OF
THE EMPLOYEES OF THE BANK
1. This facility of advance will be for the confirmed employees of the bank
who desire to purchase scooter or motorcycle or any two-wheel power driven
vehicle or by-cycle.
2. The loans will be made for the purchase of new brand machines.
3. The maximum amount of advance should not exceed Rs.6000/- incase of
scooter, motorcycle, or Rs.600 in case of by-cycle.
4. The loan is repayable in 40 monthly installments in the case of by-cycle or
in 60 monthly installments in the case of scooter or motorcycle.
5. The interest shall be changed at 9% per annum on the loan outstanding the
shall be recovered along with monthly installments.
6. No employee can be sanctioned a loan for more than one vehicle at a time.
7. The vehicle shall not be transferred or sold or disposed off till the loan due
to bank is cleaned.
8. Bank sanction housing loan to the permanent employees of the bank is
accordance with the subsidiary regulation framed by board and approved by the
deputy registrar.
Benefits to Workers
The workers who are working in a bank, the bank provided various facilities with
low interest rate compared to consumers.
1. Housing loan - 9%
2. Consumer loan - 12%
3. Vehicle loan - 13.5%
4. Personal loan - 15%
The consumer can to get these loans with 17% interest rate
Recent Position
On 25.5.2001 onwards the bank is running by special officer. In those days board
ran bank. The bank is aiming to open various branches. But now-a-days banks non-
performing assets are increasing. If NPA is increases above 15% the government do not
allow to open further branches.
Classification of Deposits
The bank is providing various deposits to consumers
1. Fixed deposit
2. Recurring deposit
3. Current deposit
4. Savings deposit
5. Home safe deposit
6. Day deposit
7. Cash certificate
Fixed deposit
A fixed deposit is the deposit of a fixed amount of money or a fixed period of
time. No deposit shall be received for a sum less than Rs.10 for a period
less than 15 days.
Interest on fixed deposits shall be payable at such scale and manner as the
BOD may fix from time to time that the maximum shall not exceed 12%
per annum subject to the directive issued from time to time by the RBI
under the banking regulation act 1949.
Interest on fixed deposit shall be paid quarterly or at such shorter intervals as
may have agreed upon at the time of deposits.
Recurring Deposits
A recurring deposit is a deposit made by a person who undertake to pay to the
bank every month a fixed amount of one rupee or multiple thereof for a period of 12 to
240 months.
Current Deposit
The BOD may permit any individual member or non-member or any institution
other than the co-operative society, local board, municipality, civil court to open a current
account with the bank. Interest shall be calculated on current account as per the rate fixed
by RBI and shall be payable at such scale and manner as the BOD may fix from time to
time on the daily balances.
Saving deposit
The secretary may permit any person to open a savings deposit account with the
bank. The interest shall be calculated on the savings deposit at not more than 6.5% per
annum to be fixed by the BOD from time to time on the minimum balance to credit of the
account during the period from the 10th to the last day of each month. Such interest shall
be adjusted to the respective accounts half yearly. Every savings depositor will be
supplied with a passbook at free of cost.
Home safe Deposit
A home safe deposit is a deposit made by a person who undertakes the deposit at
his convenience in a home safe any amount that he can take and pay the contents, every
month for a period of 12 months. Interest @3.5% per annum the total amount together
with the interest occurred will be payable to the depositor in the 13th month.
Day Deposit
A day deposit is made by a person who undertakes to pay to the bank by daily a
fixed sum of Rs.1/- or multiple share for the period of 3 months to 61 months.
The deposit will carry interest at the rate fixed by RBI and such scale and manner
prescribed by the BOD from time to time on the balances as on the first day of every
month. The deposit amount will be repayable with interest.
Cash certificate Deposits
Investment in cash certificate scheme is a contract whereby a depositor agrees to
receive back the principal amount together with interest (compounded quarterly) occurred
after a certain period agreed to at the time of deposit. Interest earned there on under this
scheme is reinvested at quarterly rests to yield compound interest.
Cash certificate are available for a minimum amount of Rs.1000. Minimum
period of deposit is 12 months.
Types of Loan
The bank is providing various loans to consumers in the form of medium term,
short term and long term loans.
Short-term Loans
1. Jewel Loan
The Shevapet Urban Co-operative bank issue jewel loans to members and
associate members only. Jewel loans rate of interest is 18% and repayment period is one
year a borrower is not repay for the loan within one year period, and above period
additional 2% interest to be calculated.
Each jewel the bank has taken to be the insurance. The bank has following jewel
verification. The bank has following jewel verification method.
1. Touch stone method
2. Acid test method
Micro credit Loans
The bank issue micro credit loans to ladies and associated members only. The rate
of interest on this loan is very low and so giving helping hand to lady merchants only. For
example, vegetables, fruit stall, petty traders, coconut shop, etc. This loan is helpful to
ladies to improve their life and develop the small business. Loans issue amount ranges
from a minimum of Rs.500 to a maximum of Rs.5000.
Consumer Loans
It is otherwise called consumption loans. Consumption loans include loans for
general consumption, medical expenses, marriage ceremonies, funerals, births, religious
ceremonies, etc. Maximum amount that can be borrowed is Rs.3000, which can be paid
by installments within 60 months. The rate of interest is 17%.
Medium term Loans
1. Mortgage Loan
Mortgage is a contract of conveyance of interest in a particular property to form
as a security. The borrower rendering any property on mortgage is called mortgager and
lenders (banks) to whom the interest in such property is transmitted is known as
mortgages. The terms of the transfer of interest in a property from the mortgage to the
mortgages are specified in a document called mortgages deed.
Mortgage loan issued to `A’ class members only. Minimum of Rs.5000 and
maximum of Rs.25000 is offered at the interest rate of 20%. House and vacant size is a
valuable asset offered as a security by way of mortgage.
2. Cottage Industries
Cottage industries are those units engaged in manufacturing, processing
preservation of servicing activities involving, utilization of locally available natural
resources and for human skill and normally under by the beneficiaries in their homes.
The maximum amount of cash credit limit for any individual borrower shall not exceed
Rs.25, 000.
It shall however be competent to the BOD to sanction a higher limit wherever
justified with the prior approval of the registrar.
Long-term Loans
1. Small scale Industries Loan
Small scale industries units are those engaged in the manufacturer, processing or
preservation of goods and whose investment in plant and machinery original cost does
not exceed Rs.5/- each. Agents selling goods on commission basis, booking, clearing and
forwarding agents, estate agents, press cum publishing houses , hair dressing, saloons,
restaurants, hotels, canteens, etc.
The maximum amount of cash credit limit for any individual borrower shall not
exceed Rs.1,00,000 in respect of small scale industries. The BOD can sanction a higher
limit after getting the prior approval of the registrar.
2. Housing Loans
Loans granted for construction, additions, alterations, repairs etc would be
categorized as housing loans. Bank sanction housing loan to the permanent employees of
the bank in accordance with the subsidiary regulation framed by board and approval by
the deputy registrar. Minimum rate of interest 9% for employees and 17% for customers.
BANK STRUCTURE
General body
President
Board of Director
Managing Director
Secretary
Manager
Record keeper
Assistant secretary
Senior Assistant manager
Appraiser (Jewels)
RATIO ANALYSIS
Meaning of Ratio
According to accountant’s hand book by wixon, kell and bed fold a ”ratio is an
expansion of the quantitative relationship between two numbers”.
Guidelines for use of Ratios
Following guidelines or factors may be kept in mind while interpreting various
ratios.
1. Accuracy of Financial Statements
The reliability of ratios is linked to the accuracy of information in these
statements, before calculating then ratios one should see whether proper concepts and
conceptions have been used for preparing financial statements or not.
2. Objective purpose of Analysis
If the purpose is to study current financial position and important for the analysis
of ratio. Different objects may require the study of different ratios.
3. Selection of Ratios
Another precaution in the ratio analysis is the proper selection of appropriate
ratios. The ratios should match the purpose for which these are required.
4. Use of Standards
Ratios are compared with certain standards one will not be able to reach at
conclusions. These standards may be rule of thumb as in case of current ratio (2:1) and
acid test ratio (1:1) may be industry standards.
5. Ratio provide only a Base
The ratios are only guidelines for the analyst, he should not base his decisions
entirely on them.
Uses and Significance of ratio Analysis
The ratio analysis is one of the most powerful tools of financial analysis. It is used
as a device to analyse and interpret the financial health of enterprise. A financial analyst
analyses the financial statement with various tools of analysis before commenting upon
the financial health or weakness of an enterprise. The supplier of goods on credit, banks,
financial institutions investors, share holders and management all make use of ratio
analysis as a tool in evaluating the financial position and performance of a firm for
granting credit, providing loans for making investments in the firm.
Limitations of Ratio Analysis
Ratio analysis suffers from certain limitations. They are discussed below
1. Inadequacy of Standards
Ratios are useful only if they are compared with some standards. But adequate
standards like industry averages are not easily available.
2. Limitations of financial Statements
Ratios are based only on the information recorded in the financial statements.
Financial statements suffer from a number of limitations. Hence, the ratios derived from
them are also subject to those limitations.
3. Difficulty in Comparison
In actual practice, it is difficult to have similar companies for comparison. Even
similar companies are available, their accounting periods may differ. This makes inter
firm companies extremely difficult.
4. No fixed Standards
No fixed standards can be laid down for ideal current ratio is said to be 2:1. How
ever in case of firms, which have adequate credit arrangement with their bankers, it may
be perfectly ideal to have a ratio of 1:1.
ANALYSIS AND INTERPRETATION
Liquidity Ratios
Liquidity ratios measure the firms ability to meet current obligations. Liquidity
refers to the ability of a concern to meet its current obligation as and when these become
due. The short-term obligations are meet by releasing amounts from current, floating or
circulating assets. Interpretation of liquidity ratios provides considerable insight into the
present cash solvency of the firm and its ability to remain solvent in time of advertisities.
The various liquidity ratios used in the study are
1. Current Ratio
2. Liquid Ratio
3. Absolute Liquid Ratio
1. Current Ratio
Current ratio may be defined as the relationship between current assets and
current liabilities. It is a measure of general liquidity and is most widely used to make the
analysis of short-term financial position or liquidity of a firm.
It is calculated as
Current AssetsCurrent Ratio = ----------------------------
Current Liabilities
2. Liquid Ratio
Liquid ratio is also known as acid test or quick ratio is a mere vigorous test of
liquidity than the current ratio. The term liquidity refers to the ability of a firm to pay its
short-term obligations as and when they become due-liquid ratio may be defined as the
relationship between liquid assets and current liabilities. Particularly quick or liquid
assets include all current asset except stock and prepaid expenses.
Quick assetLiquid ratio = ----------------------------
Current Liabilities
3. Absolute Liquid Ratio
Absolute liquid assets include cash in hand and at bank and marketable securities.
Although debtors and bills receivable are generally more liquid than inventories, there
may be doubts regarding their realization into cash immediately or in time. The standard
norm is 0.5:1
Absolute Liquid AssetAbsolute Liquid Ratio = -------------------------------------- Current Liabilities
4. Long Term Debt to networking capital ratio
It is the relationship between the long-term liabilities to net working capital long
term debt includes debentures and loans. Net working capital in the excess of current
assets over current liabilities.
Long term debtLong term debt to Networking capital Ratio = --------------------------------
Net Working Capital
5. Fixed Assets to net worth Ratio
The ratio establishes the relationship between fixed assets and shareholders funds.
This ratio indicates the extend to which share holders funds are sunk into the fixed assets.
If the ratio is less than 100%, it implies that owner funds are more than total fixed assets
and a part of the working capital is provided by the share holders. When the ratio is more
than 100% it implies that owners funds are not sufficient to finance the fixed assets and
the bank has to depend upon outsiders to finance the fixed assets.
Fixed AssetFixed Asset Ratio = ----------------------------------
Share holders Funds
6. Current Liabilities to proprietors fund
The ratio of current liability to proprietors funds establishes the relationship
between current liabilities to the proprietors funds and indicates the amount of long term
funds raise by the shareholders as against the short-term borrowings.
Current liabilities
Current Liability to proprietors = ------------------------------- Share holders Fund
7. Debtors to current asset ratio
The main objective of management is to maximize the value of the firm. For
successful management of receivables, it is necessary that the management should ensure
a satisfactory collection period. Bad debt losses should be kept minimum.
DebtorsDebtors to current asset ratio = ---------------------------------- X 100
Current Asset
8. Total Investment to long-term Liability Ratio
This ratio is calculated by dividing the total of long-term funds by the long-term
liabilities. As a general rule the proportion of long-term liabilities should not be very
high.
Share holders fund + long term liabilities
Total Investment to long term liability ratio = ------------------------------------------Long Term Liabilities
9. Total loans to net worth Ratio
It is inverse of more familiar debt equity ratio. It is found by dividing loans by net
worth. Non-bankrupt companies maintain more than twice as much equity as debt.
Total loansTotal loans to net worth = ----------------------------------------
Net worth
10.Cash to current asset ratio
In this ratio, cash and current assets are compared. It helps to know how
much amount of cash are available in total current assets.
CashCash to current asset ratio = ----------------------------
Current asset
RATIO ANALYSIS
TABLE - 1
CURRENT RATIO
Year Current Asset (Rs) Current Liability (Rs) Ratio
95 – 96 16,05,26,964 5,14,70,199 3.12 : 1
96 – 97 19,81,76,711 5,95,39,725 3.33 : 1
97 – 98 25,04,11,735 7,55,24,548 3.32 : 1
98 – 99 26,68,13,868 9,41,50,547 2.83 : 1
99 – 00 32,48,81,974 11,30,95,945 2.87 : 1
Source : Secondary data
Current AssetCurrent Ratio = -----------------------------
Current Liabilities
Inference
The current ratio should be 2 : 1. So this is above the standard norm. If the
current ratio is higher, longer the amount of rupees available to meet current obligations
& safety of funds of short term creditors. The above table shows that in the year 98–99 &
99-00 the ratio was decreased. Because, main reason for this reduction is bad debts &
creditors values were increased. So the bank should take necessary step to recover the
bad debts and outstanding amounts.
TABLE - 2
LIQUID RATIO
Year Liquid Asset (Rs) Current Liability (Rs) Ratio
95 – 96 16,04,18,275.90 5,14,70,199 3.11 : 1
96 – 97 19,80,88,940.00 5,95,39,725 3.32 : 1
97 – 98 25,02,93,997.00 7,55,24,548 3.31 : 1
98 – 99 26,65,20,977.00 9,41,50,527 2.82 : 1
99 – 00 32,46,20,375.00 11,30,95,945 2.86 : 1
Source : Secondary data
Liquid AssetLiquid Ratio = ------------------------------------------------
Current Liability / Liquid Liability
Inference
The Standard norm of the liquid ratio is 1:1. it indicates the financial condition of
the bank. The above table shows that the liquid ratio is above the standard norm. So it is
satisfactory. During the year 98-99 the ratio is lower when compared to other years.
TABLE - 3
ABSOLUTE LIQUID RATIO
Year Absolute Liquid Asset (Rs) Current Liability (Rs) Ratio
95 – 96 6,55,08,138 5,14,70,199 1.2
96 – 97 8,64,95,957 5,95,39,725 1.4
97 – 98 14,27,04,714 7,55,24,548 1.9
98 – 99 15,84,70,519 9,41,50,527 1.7
99 – 00 21,77,75,018 11,30,95,945 1.9
Source : Secondary data
Absolute Liquid Asset Absolute liquid Ratio = ---------------------------------------
Current Liabilities
Inference
The standard Norm is .5 : 1. The average liquid ratio is 1.62 which is above the
standard norm of .5 : 1. So it is satisfactory. The ratio increased constantly year by year
and suddenly it met a fall in 98-99. Because current liability increases amount is higher
than absolute liquid asset amount increases.
TABLE - 4
LONG-TERM DEBT TO NET WORKING CAPITAL
Year Long term debt (Rs) Net Working Capital (Rs) Ratio
95 – 96 19,07,79,487 10,90,56,765 1.74
96 – 97 24,19,23,726 13,86,36,986 1.74
97 – 98 32,17,32,984 17,48,87,187 1.84
98 – 99 40,76,47,212 17,26,63,341 2.36
99 – 00 45,29,54,508 21,17,86,029 2.14
Source : Secondary data
Long Term DebtLiquid Ratio = ----------------------------------
Net Working Capital
Inference
From this we can infer that the long term debt value has increased continuously
from year by year. But in net working capital there is some fluctuations. So that the ratio
value is affected by such fluctuations. During the year 99 –00 the ratio has decreased to
2.14 from 2.36. From this we can conclude that the long term debt is more than the net
working capital.
TABLE - 5
FIXED ASSET TO NET WORTH
Year Fixed Asset (Rs) Net Worth (Rs) Ratio
95 - 96 10,36,74,068 2,21,39,795 4.68
96 - 97 12,63,51,549 2,26,89,306 5.56
97 - 98 17,38,02,950 2,60,83,651 6.66
98 - 99 26,69,95,155 3,12,16,850 8.55
99 – 00 27,82,39,833 3,58,18,622 7.77
Source : Secondary data
Fixed AssetsFixed Assets Ratio = -------------------------------
Share holders Funds
Inference
This ratio indicates the extend to which share holders funds are sunk into fixed
assets. If the ratio is less than 100%, it implies that owners funds are more than total
assets. When the ratio is more than 100%, it implies that the owners funds are not
sufficient to finance fixed asset and the bank has to depend upon the outsiders funds to
finance the fixed assets.
From the above table it shows that the bank has not sufficient share holders
compare to the fixed assets. Here there is a necessity for more outsiders funds to finance
the fixed assets because the bank is not having sufficient share holders funds.
TABLE – 6
CURRENT LIABILITIES TO PROPRIETORS FUNDS
Year Current Liability (Rs) Proprietors Funds (Rs) Ratio
95 – 96 5,14,70,199 2,21,39,795 2.32
96 – 97 5,95,39,725 2,26,89,306 2.62
97 – 98 7,55,24,548 2,60,83,651 2.89
98 – 99 9,41,50,527 3,12,16,850 3.01
99 – 00 11,30,95,945 3,58,18,622 3.15
Source : Secondary data
Current liabilityCurrent Liability to proprietors = -------------------------------
Proprietors Funds
Inference
From the above ratios, the total current liabilities to proprietors funds is varying
from 2.32 to 3.15. So in the year 1999-2000 current liabilities to proprietors’ funds is
increased to 3.15. This must be controlled to repay the proprietors funds to them
TABLE - 7
DEBTORS TO CURRENT ASSETS
Year Debtors (Rs) Current Asset (Rs) Ratio %
95 - 96 2,41,765 16,05,26,964 .15%
96 - 97 3,63,513 19,81,76,711 .18%
97 - 98 10,77,694 25,04,11,735 .43%
98 - 99 11,49,750 26,68,13,868 .43%
99 – 00 6,48,293 32,48,81,974 .20%
Source : Secondary data
DebtorsDebtors to current Asset = ----------------------------- X 100
Current Asset
Inference
In the year 97 and 98 the ratio is increased from 0.18% to 0.43% because of
debtors values has increased. But during the year 99-00 the debtor’s value is decreased so
that ratio has decreased to 0.20%
TABLE - 8
TOTAL INVESTMENT TO LONG-TERM LIABILITY
Year Total Investment(Rs) Long-Term Liability(Rs) Ratio
95 – 96 21,29,19,282 19,07,79,487 1.12
96 – 97 26,46,13,032 24,19,23,726 1.09
97 – 98 34,78,16,635 32,17,32,984 1.08
98 – 99 43,88,64,062 40,76,44,212 1.07
99 – 00 48,87,73,130 45,29,54,508 1.05
Source : Secondary data
Share Holders Funds + Long Term Liability
Total investment to Long-Term liability = ----------------------------------------------- Long-Term Liability
Inference
The total investment to Long-term liability ratio of the bank for the year
95,96,97,98 and 99 is 1.12,1.09,1.08,1.07 and 1.08 respectively. There is no big change
in the ratios. But the ratio is decreasing constantly compared to previous years. It has
been considered not satisfactory by the bank.
TABLE - 9
TOTAL LOAN TO NET WORTH
Year Total Loan(Rs) Net worth(Rs) Ratio
95 – 96 17,35,70,409 2,21,39,795 7.84
96 – 97 20,56,10,845 2,26,89,306 9.06
97 – 98 23,94,29,324 2,60,83,651 9.18
98 - 99 32,18,73,192 3,12,16,850 10.31
99 – 00 32,48,43,847 3,58,18,622 9.07
Source : Secondary data
Total LoansTotal Loan to Net worth = -----------------------------
Share holders Funds
Inference
From the above table it indicates that total loan to net worth ratio as constantly
increasing from 95-96 to 98-99 the ratios from 7.84 to 10.31. During the year 98-99 the
ratios is higher when compared to other years. Main reason for this is both total loan and
net worth value is higher compared to other years.
TABLE -10
CASH TO CURRENT ASSET
Year Cash (Rs.)Current Asset
(Rs)Ratio
95 - 96 1,22,20,943 16,05,26,964 .076
96 - 97 1,65,42,851 19,81,76,711 .083
97 - 98 1,55,41,717 25,04,11,735 .062
98 - 99 1,73,10,863 26,68,13,868 .065
99 – 00 2,01,30,062 32,48,81,974 .062
Source : Secondary data
Cash Cash to current assets = -----------------------------
Current assets
Inference
Current assets constantly increased from 95-96 to 99-2000. but in cash there in lot
of fluctuations from 95-96 to 99 - 00 . During 96 –97 cash shows increasing trend. But
during 97-98 cash values has decreased. Again last 2 years cash values has increased.
From this we can conclude that, average cash position is 3.8%only in total current asset.
So bank should increase the cash value.
TREND FORECASTING
An arrangement of statistical data in accordance with time of occurrence or in a
chronological order is called a time series or trend forecasting. From the comparison of
past data with current data we may seek to establish what development may be expected
in future. The analysis of time series is done mainly for the purpose of forecasts and for
evaluating the post performance.
It can be calculated as,
Y = a + bx,
Where as,
y xy a = ---------- b = ----------
N x2
Where Y0 is used to designate the trend values to distinguish them from the actual
Y values,
a is the Y intercept or the computed trend figure of the Y variable when x=0.
b represents the slope of the trend line or the amount of change in the Y variable
that is as associated with a change of one unit in X variable.
TREND ANALYSIS
TABLE -11
CASH ON HAND
Year Actual (Rs. In crores) Projected (Rs. in Crores)
1996 1.22 1.26
1997 1.65 1.43
1998 1.55 1.64
1999 1.73 1.88
2000 2.01 1.92
2001 2.11
2002 2.32
2003 2.51
2004 2.62
2005 2.80
Source : Secondary data
Inference
The above table shows that the actual figures of cash on hand and forecasted
figures are closed to each other during the year 96. During 1997 and 2000 the actual
values of cash on hand is high when compared with forecasted figures. This will help the
bank to know the cash position in future.
TABLE - 12
BALANCE WITH OTHER BANKS
Year Actual (Rs. in crores ) Projected (Rs. in crores)
1996 5.19 4.53
1997 6.93 8.10
1998 12.63 11.67
1999 14.10 15.24
2000 19.46 18.81
2001 22.38
2002 25.95
2003 29.52
2004 33.09
2005 36.66
Source : Secondary data
Inference
The above table shows that the actual values of balance with other banks are
steadily increased during this 5 years. So that the forecasted figures also increased
constantly. During 1997 and 1999 the actual value of balance with other banks is
minimum when compared to forecasted figures. The predicted values shows that the bank
has an opportunity to have more balance with other banks in future.
TABLE –13
INVESTMENTS
Year Actual( Rs. in crores) Projected (Rs. in crores)
1996 .78 0.6
1997 .85 1.0
1998 1.23 1.4
1999 1.51 1.8
2000 2.40 2.2
2001 2.6
2002 3
2003 3.4
2004 3.8
2005 4.2
Source : Secondary data
Inference
During the year 1996 and 2000 the actual value of investment is high compared to
projected figures. During the year 97,98and 99 the actual value is less than projected
figures. The Banks investment value has been increased in future. So bank can find
various sources to invest their surplus funds to earn profit.
TABLE – 14
LOANS AND ADVANCES
Year Actual (Rs. in crores) Projected (Rs in crores)
1996 17.35 16.9
1997 20.56 21.1
1998 23.94 25.3
1999 32.18 29.5
2000 32.48 33.7
2001 37.9
2002 42.1
2003 46.3
2004 50.5
2005 54.7
Source : Secondary data
Inference
During the year 1996 and 1999 the actual values of loans & advances is high
when compared to projected figures. During 97,98 & 2000 the actual value is lower than
projected values. The bank has an opportunity to give more loans and advances in future.
TABLE -15
FIXED ASSETS
Year Actual (Rs. in crores) Projected (Rs in crores)
1996 .215 .176
1997 .129 .158
1998 .128 .14
1999 .128 .122
2000 .128 .104
2001 .086
2002 .068
2003 .050
2004 .032
2005 .014
Source : Secondary data
Inference
The actual value of fixed assets has decreased from 96 to 97 amount of Rs. 0.215
crore to 0.129 crore. From 98 onwards actual value of fixed asset is maintained at
constant level. So these changes will affect the projected figures. In future, fixed assets
values has constantly decreased. So that bank should have to take necessary step to invest
high amount in the fixed assets.
TABLE -16
BILLS FOR COLLECTION
Year Actual (Rs. in crores) Projected (Rs in crores)
1996 .024 .023
1997 .020 .029
1998 .022 .035
1999 .074 .041
2000 .037 .047
2001 .053
2002 .059
2003 .065
2004 .071
2005 .077
Source : Secondary data
Inference
The above table shows that the actual value of bills for collection is in fluctuating
manner. So it will be difficult to forecast the future values. That is during the year 1999
the actual value is higher than the forecasted values but in the year 97,98 and 2000 the
actual values is lesser than the projected figures. In future the bank can expect more
amount in bills for collection.
TABLE - 17
LIABILITIES
SHARE CAPITAL
Year Actual (Rs. in crores) Projected (Rs in crores)
1996 1.04 .96
1997 1.05 1.13
1998 1.15 1.32
1999 1.49 1.47
2000 1.69 1.64
2001 1.81
2002 1.98
2003 2.15
2004 2.32
2005 2.49
Source : Secondary data
Inference
The above table shows that the projected share capital amount has increased to
2.49 crore because the actual value of share capital has constantly increased. So projected
figures are also steadily increased. We can conclude that the bank has a better chance to
invest more amount in share capital in the following years.
TABLE - 18
RESERVES AND SURPLUS
Year Actual (Rs. in crores) Projected (Rs in crores)
1996 1.34 1.25
1997 1.74 1.63
1998 1.98 2.01
1999 2.46 2.39
2000 2.87 2.77
2001 3.15
2002 3.53
2003 3.91
2004 4.29
2005 4.67
Source : Secondary data
Inference
The above table shows that the actual value of reserves and surplus has steadily
increased. The bank can expect projected figures of the reserves and surplus are also
increase in the future. This indicates that the bank is in a necessary position to take
appropriate step to reduce reserves and surplus.
TABLE -19
DEPOSITS AND BORROWINGS
Year Actual (Rs. in crores) Projected (Rs in crores)
1996 22.16 21.2
1997 27.30 28.9
1998 36.18 36.6
1999 45.75 44.3
2000 51.60 52.0
2001 59.7
2002 67.4
2003 75.1
2004 82.8
2005 90.5
Source : Secondary data
Inference
Even though the actual value of deposits and borrowings were increasing year
after year, the percentage increases has a great difference between them. But there is no
much difference between actual and projected values of deposits and borrowings. From
the forecasting technique the bank can expect more amount in deposits and borrowings
in the following years.
TABLE - 20
BILLS FOR COLLECTION
Year Actual (Rs. in crores) Projected (Rs in crores)
1996 2.42 2.0
1997 2.04 2.8
1998 2.27 3.6
1999 7.44 4.4
2000 3.76 5.2
2001 6.0
2002 6.8
2003 7.6
2004 8.4
2005 9.2
Source : Secondary data
Inference
The actual figures of bills of collection has very much fluctuation i.e during 1996
the value of bills of collection has decreased in the year 1997 and then during 1999 this
value has increased. During 2000 the value of bills of collection has decreased. Such
fluctuation will affect the projected figures..The bank must concentrate to reduce the
amount in bills for collection in future.
TREND FORECASTING FOR INCOME AND EXPENDITURE
INCOME
TABLE - 21
INTEREST AND DISCOUNTS
Year Actual (Rs. in Lakhs) Projected (Rs in Lakhs)
1996 384.37 363.4
1997 519.26 536
1998 684.12 708.6
1999 896.47 881.2
2000 1058.82 1053.8
2001 1226.4
2002 1399
2003 1577.6
2004 1744.2
2005 1916.8
Source : Secondary data
Inference
During the year 1997 and 1998 the actual figures of interest and discount has
decreased, when compared to projected figures. In case of 2000 the actual value of
interest and discount and projected values seems to be related to each other. The
forecasted figures had increased constantly. We can conclude that the bank has an
opportunity to increase their income by interest and discount.
TABLE - 22
COMMISSION, BROKERAGE AND EXCHANGE
Year Actual (Rs. in Lakhs) Projected (Rs in Lakhs)
1996 .57 .45
1997 .46 .57
1998 .62 .69
1999 .82 .81
2000 .96 .93
2001 1.05
2002 1.17
2003 1.29
2004 1.41
2005 1.53
Source : Secondary data
Inference
The above table shows that during 1997 the actual value of commission,
brokerage and exchange is low when compared to other years. But in the case of 1999
and 2000 the values of actual and projected are seems to be related to each other. This
forecasting technique shows that the bank has a chance to get more amount in
commission, brokerage and exchange in future.
EXPENDITURE
TABLE – 23
INTEREST ON DEPOSITS AND BORROWINGS
Year Actual (Rs. in Lakhs) Projected (Rs in Lakhs)
1996 236.04 227.49
1997 327.06 344.22
1998 456.52 460.95
1999 603.82 577.68
2000 681.32 694.41
2001 811.14
2002 927.87
2003 1044.60
2004 1161.30
2005 1278.06
Source : Secondary data
Inference
The above table shows that the actual value of interest on deposits and borrowings
and projected values seems to be related each other in the year 1998 when compared to
other years. During the year 1997, 1998 and 2000 the interest and deposit and borrowings
is minimum when compared to forecasted figures. But in the year 1996and 1999 the
actual value of deposit and borrowings is maximum when compared to forecasted
figures. With the help of above table the bank authorities can plan the future year
requirements.
TABLE - 24
SALARIES, ALLOWANCES AND PROVIDENT FUND
Year Actual (Rs. in Lakhs) Projected (Rs in Lakhs)
1996 33.45 22.9
1997 38.65 39.5
1998 42.97 56.1
1999 59.91 72.7
2000 105.82 89.3
2001 105.9
2002 122.5
2003 139.1
2004 155.7
2005 172.3
Source : Secondary data
Inference
The above table shows that the actual values of salaries, allowances and provident
fund and the model generated figures seems to be related to each other in the year 1997.
During the year 1998 and 1999 the actual expenses of salaries, allowances and provident
fund is minimum but in the year 1996 and 2000 the expenses is high when compared to
projected figures.
TABLE – 25
RENT, TAX, LIGHTING ETC
Year Actual (Rs. in Lakhs) Projected (Rs in Lakhs)
1996 5.91 4.09
1997 4.22 5.87
1998 6.52 7.65
1999 9.41 9.43
2000 12.19 11.21
2001 12.99
2002 14.77
2003 16.55
2004 18.33
2005 20.11
Source : Secondary data
Inference
The actual figure of rent, taxes, insurances and lighting has got more fluctuations
during the first 3 years. ie. During 1996 the actual rent, taxes lighting is 5.91lakhs
reduced to 4.22 lakhs in 1997. But suddenly it raised to 6.52 lakhs. During 1999 actual
and projected values are closed to each other. So if there is any fluctuation in actual
values, it becomes difficult to project the future values.
TABLE – 26
AUDIT FEES
Year Actual (Rs. in Lakhs) Projected (Rs in Lakhs)
1996 .85 .89
1997 .90 .96
1998 1.17 1.03
1999 1.11 1.10
2000 1.13 1.19
2001 1.26
2002 1.34
2003 1.42
2004 1.49
2005 1.57
Source : Secondary data
Inference
The actual figures of auditors fees is varying from one year to another. Because
first 3 years there is an increased trend in actual value but during 1999 auditors fees
values has reduced, during 2000 the actual value increased from 1.11 lakh to 1.13 lakhs.
During the year 1999 the actual and projected values are seems to be each other.
TABLE – 27
PROFIT
Year Actual (Rs. in Lakhs) Projected (Rs in Lakhs)
1996 36.19 31.2
1997 27.05 35.3
1998 42.09 39.4
1999 43.23 43.5
2000 48.60 47.6
2001 51.7
2002 55.8
2003 59.9
2004 64
2005 68.1
Source : Secondary data
Inference
During the year 1997 the actual value of profit is low when compared to all the
years. During the year 1999 the actual and projected years are closed to each other. From
the year 1998 to 2000 the actual profit has increased from one year to another year. So
projected figures has increased steadily. From this the bank will expect more profit in
future.
FINDINGS
1. Average current ratio was 3.09 which is above the standard norm of 2:1 and so it
was found to be satisfactory.
2. Average absolute liquid ratio was 1.62, which is above the standard norm of
0.5:1, and it was found to be satisfactory.
3. If net worth is lesser than fixed asset, the share holders can not make more
investment in fixed asset. So because of this reason the bank will be depending
on outsider’s funds to finance fixed assets.
4. In total current asset, the average cash value is 6.96%
5. In total current asset, the average debtors is .28%
6. Based on the trend forecasting of the cash on hand, the cash is expected to be
increasing in the future.
7. Total loans are very high than the shareholders funds.
8. According to the forecasting technique most of the actual income and
expenditures are equal to the forecasted values.
9. Only through interest and discounts, the bank has earning their large amount of
income
10. If the borrowings of the bank is reduced which in turn will reduce the interest
borrowings that will increase the profits.
11. At present banks non-performing assets are increased. If non-performing asset is
more than 15%, the government will not allow to open further branches.
12. The banks liquidity position is low in the year 1998-99. Because the banks bad
debts amounts has increased.
13. The bank is prefer short-term borrowings as more when compared to share
holders funds.
14. Compared to share holders funds, the loans offered to customers are very high.
SUGGESTIONS
1. The bank should maintain complete records without failure.
2. Fixed assets of the bank should be revalued annually.
3. Proper technique should be adopted for planning and control of cash in order to
regularize and optimize the use of cash balances.
4. Payment of interest should be reduced by minimizing the borrowings of long-term
debt.
5. The bank should take proper action to reduce the non-performing assets.
6. The bank should keep a constant eye on its expenses and especially the interest
and borrowings since they constitute and major portion of loans and advances.
7. The bank should maintain proper internal audit system.
8. The bank should be computerized to decrease the work load and increase the
work efficiency and also for time consumption.
9. The bank should appoint qualified persons to do the job efficient manner.
10. The bank should follow strict policy regarding the collection of loan amounts.
CONCLUSION
A Study was conducted in the Shevapet Urban Cooperative Bank Ltd., No.
S.392. Salem. This Study helped the analyst to gain exposure in the following fields.
Ratio Analysis
Trend Forecasting
This study is on the overall financial position of The Shevapet urban Co-
operative bank Ltd., No.S. 392. Salem helped me to identify the liquidity position,
finance required to meet day to day operations, forecasting for the future plans.
Based on the analysis findings from this study, recommendations were made to
the bank to enable them to plan their future financial position for their strength addition.
BIBLIOGRAPHY
1 DAVAR S.R Law and practice of banking
2 GUPTA S.P Statistical methods
3 KOTHARI C.R Research methodology
4 Dr. MAHESWARI S.N Financial accounting
5 DR.NIRMALAPRASAD.K &
CHANDRA DASS.J
Banking and Financial System
6 DR.NATHUR.B.S Co-operation in India
7 PANDEY.I.M Financial Management
8 PILLAI AND BAGAVATHI Statistics
9 PRASANNA CHANDRA Fundamental of Financial Management
10 SHARMA,R.K
SHASHI, K. GUPTA
Management Accounting
11 SRINIVAS, M Organisation and Management of
Co-Operation Banks
12 SUNDARAM K.P.M
AND VARSHNEY,P.N
Banking and Law Practice
13 S.U.C.B. ANNUAL REPORT
FORECASTING
CASH ON HAND
YearsCash on hand
(y)Deviation from
1998 (x)XY X2
1996 1.22 -2 -2.44 4
1997 1.65 -1 -1.65 1
1998 1.55 0 0 0
1999 1.73 1 1.73 1
2000 2.01 2 4.02 4
Y= 8.16 Y= 0 XY=1.66 X2=10
Since X= 0;
Y XYa = -------------------- b = -----------------
N X2
8.16a = -------------------- = 1.63
5
1.66b = -------------------- = .167
10
Hence
Y = a + bx
For 1996th year, X will be (-2)
Y 1996 = a + b (-2)
=1.63+ .167(-2)
= 1.26
For 1997th year, X will be (-1)
Y 1997 = a + b (-1)
=1.63+ .167(-1)
= 1.43
For 1998th year, X will be (0)
Y 1998 = a + b (0)
=1.63+ .167(0)
= 1.63
For 1999th year, X will be (1)
Y 1999 = a + b (1)
=1.63+ .167(1)
= 1.83
For 2000th year, X will be (2)
Y 2000 = a + b (2)
=1.63+ .167 (2)
= 1.92
For 2001st year, X will be (3)
Y 2001 = a + b (3)
=1.63+ .167(3)
= 2.11
For 2002nd year, X will be (4)
Y 2002 = a + b (4)
=1.63+ .167(4)
= 2.32
For 2003rd year, X will be (5)
Y 2003 = a + b (5)
=1.63+ .167(5)
= 2.51
For 2004th year, X will be (6)
Y 2004 = a + b (6)
=1.63+ .167(6)
= 2.62
For 2005th year, X will be (7)
Y 2005 = a + b (7)
=1.63+ .167(7)
= 2.80
Years Forecasted Values
1996 1.26
1997 1.43
1998 1.64
1999 1.83
2000 1.92
2001 2.11
2002 2.32
2003 2.51
2004 2.62
2005 2.80