Upload
bhagathnagar
View
225
Download
0
Embed Size (px)
Citation preview
7/30/2019 Performance Analysis of the nationalised banks selected
1/68
1
INTRODUCTION
Finance is one of the major elements, which activates the overall growth of economy.
Finance is lifeblood of economic activity. A well-knit financial system directly contributes to
the growth of the economy. An efficient financial system calls for the effective performance
of financial institutions, financial instruments, and financial markets.
MEANING OF FINANCE:
Finance is concerned with resource allocation as well as resource management,
acquisition and investment. Simply, finance deals with matters related to money and the
markets.
Finance can be defined as the art and science of managing money. All the individuals
and organization earn or raise money and spend or invest money
Finance is concerned with the process, institutions, markets and instruments
involved in the transfer of money among and between individuals, businesses and
government.
FUNCTIONS OF FINANCE:
Financing Decision. Investment Decision. Dividend Decision. Financial Analysis and Planning.
Financial decisions are related with raising of funds from different sources like equityshare holders, preference share holders and debt sources
Investment decisions are concerned with investment of financial resources into longterm assets
Dividends decisions of a company are crucial financial decisions dividend Policy of acompany significantly affect the value of the stock of the company.
7/30/2019 Performance Analysis of the nationalised banks selected
2/68
2
FINANCIAL MANAGEMENT:
Financial management is a universal phenomenon. Management is the process which
involves planning, directing, organizing, staffing and controlling human efforts to achieve
stated objectives in organization.
Everyone should know the fundamental principles or proactive of Management with
a special emphasis to business enterprise
Management is an art of getting things down through or with the people in
formally organized groups. It is a task of planning, coordinating, controlling and motivating
the efforts for other towards a specific objective.
Finance is a blood of business. Financial management helps in achieving group
goals. IT reduces the cost and optimum utilization of funds and maximum results with the
minimum efforts.
DEFINITION:
Financial management is concerned with the efficient use of an important economic
resource, namely, capital funds.
Solomon
Financial management is the operational activity of a business that is responsible for
obtaining and effectively utilizing the funds necessary for efficient operation.
- J . L. Massie
Financial management is an area of financial decision making harmonizing individual
motives & enterprise goals.
Weston &Brigham
Financial management is the application of the planning & control functions of the finance
function.
Howard & Upton
7/30/2019 Performance Analysis of the nationalised banks selected
3/68
3
Financial management is the area of business management devoted to the judicious use of
capital & careful selection of sources of capital in order to enable a spending unit to move in
the direction of reaching its goals.
J . F. Bradley
PROCESS:
FINANCIAL MANAGEMENT
Anticipating financial needs
Acquiring financial resource
Allocating funds in business
Administrating the allocation of funds
Analyzing the performance of finance
Accounting and reporting management
7/30/2019 Performance Analysis of the nationalised banks selected
4/68
4
OBJECTIVES OF FINANCIAL MANAGEMENT:
Profit Maximization Wealth Maximization Implications of Wealth maximization Balanced asset structure Liquidity Judicious planning of funds Efficiency
1] PROFIT MAXIMIZATION:-
Earning profits by a corporate or a company is a social obligation. Profit is the only
means through which the efficiency of an organization can be measured. As the business
units are exploiting the resources of the country namely, land labour, capital and other
resources. It has an obligation to make use of these resources to achieve profit. Profit
maximization increases the confidence of management in expansion and diversification
programs of the company.
2] WEALTH MAXIMISATION:-
Concept of wealth maximization refers to the gradual growth of the value of the
assets of the firm in terms of benefits it can produce. Any financial action can judged in terms
of the benefits it produces less cost of action. The wealth maximization attained by a
company is reflected in the market value of shares. In other words, it is nothing but the
process of creating wealth of an organization. This maximizes the wealth of shareholders
wealth maximizations is the net present value of a financial decision. Net present value willbe equal to the gross present value of the benefits of that action minus the amount invested to
receive such benefits (NPV=GPV of benefits investments). The concept of wealth
maximization is universally accepted because it takes care of interest of financial institutions,
owners, employees and society at large.
In India the co-operative has started officially in the year 1904 when the government of India
passed the first co-operative act. The co-operative movement was introduced in India with the
main objective of making a breakthrough in the provision of credit to the poor classes.
7/30/2019 Performance Analysis of the nationalised banks selected
5/68
5
FINANCIAL SERVICES
Financial services can be defined as the products and services offered by
institutions like banks of various kinds for the facilitation of various financial transactions
and other related activities in the world of finance like loans, insurance, credit cards,
investment opportunities and money management as well as providing information on the
stock market and other issues like market trends.
Financial services refer to services provided by the finance industry. The
finance industry encompasses a broad range of organizations that deal with the management
of money. Among these organizations are banks, credit card companies, insurance companys
consumer finance companies, stock brokerages, investment funds and some governmentsponsored enterprises.
.
FUNCTIONS OF FINANCIAL SERVICES:
1. Facilitating transactions (exchange of goods and services) in the economy.2. Mobilizing savings (for which the outlets would otherwise be much more limited)3. Allocating capital funds (notably to finance productive investment).4. Monitoring managers (so that the funds allocated will be spent as envisaged).5. Transforming risk (reducing it through aggregation and enabling it to be carried by
those more willing to bear it).
FINANCIAL SYSTEM:
Financial System can be defined at the global, regional or firm specific level. The
Firms financial system is the set of implemented procedures that track the financial
activities of the company. On a regional scale, the financial system that enables lenders and
borrowers to exchange funds. The global financial system is basically a broader regional
system that encompasses all financial institutions, borrowers and lenders within the global
economy
7/30/2019 Performance Analysis of the nationalised banks selected
6/68
6
FINANCIAL SYSTEM
Financial
Institutions
Commercial
Banks
Development
Banks
Non Banking financial
Company
Financial
Instruments
Long term
Instruments
Short term
Instruments
Financial
Market
Capital
Market
Money
Market
Financial
Services
An Overview of Financial Statements:
BANKING:
A bank is a profit seeking business firm which deals with money and credit. It accepts
deposits from the public and makes these funds available to those who need them. It helps in
the remittance of money from one place to another.
A banking company is defined as a company which transacts the business of banking in
India. A banking company in India has been defined in the banking companies act 1949 asone which transacts the business of banking which means the purpose of lending or
investment, of deposits of money from the public. Repayable on demand and withdraw able
by cheque , draft, order or otherwise.
7/30/2019 Performance Analysis of the nationalised banks selected
7/68
7
CO-OPERATIVE BANKS:
Co-operative banks are an important constituent of the Indian financial system,
judging by role assigned to them. The co- operative movement originated in the west, but the
importance which such have assumed in India is rarely paralleled anywhere else in the world.
A credit co-operative is voluntary association of members for self-help, catering to the
financial on a mutual basis. In India, the co-operative credit movement started with chief
object of catering to the banking and credit requirements if urban middle class e.g., the small
trader or businessman, the artisans, or factory worker, the salaries people with limited fixed
income in urban or semiurban areas.
Besides protecting the middle classes and men of modest means from the clutches ofthe moneylenders. The movement is also expected to indicate the habit of thrift and savings
amongst the people.
In India the co-operative has started officially in the year 1904 when the
government of India passed the first co-operative act. The co-operative movement was
introduced in India with the main objective of making a breakthrough in the provision of
credit to the poor classes.
Especially for the vast majority of agriculturists who were suffering under the heavyweight of indebtedness. With the over whelming importance assigned to food production in
our successive five-year plans, the planners and pioneers of our conviction that co-operation
is the most effective instrument for the economic growth and prosperity of our nation.
IMPORTANCE OF URBAN CO-OPERATIVE BANKS:
The co-operative movement has become a powerful instrument for rapid economic
growth. It has resulted in several benefits. The expansion of co-operative banks has resulted
in several benefits.
a) They have provided cheap credit to farmers. They discourage un productive borrowing.b) They have reduced the importance of money lenders. More than 60% of credit needs for
agriculturists are now met by co-operative banks. Thus co-operative banks have protected
the rural population from the clutches of money lenders.
c) Small and marginal formers are being assisted to increase the income.
7/30/2019 Performance Analysis of the nationalised banks selected
8/68
8
d) They have promoted saving and banking habits, among the people, especially the ruralpeople. Instead of hoarding money, the rural people lend deposit there saving in the co-
operative or commercial banks.
e) They are undertaken several welfare activities. They have also taken steps to improve themorals, polity and education.
Values:Co-operatives are based on the values of self help, self-responsibility, democracy, equality
and solidarity. In the tradition of their founders, co-operative members believe in the ethical
value of honesty, openness, social responsibility and earning for others.
Functions:a) The following are the functions of central co-operative banks
b) They finance the primary credit societies.c) They accept deposits from the public.d) They provide remittance facilities.e) They grant credit to their customers on the security of first class securities, gold etcf) They act as balancing centers by shifting the excess funds of a surplus primary society
to the defect society.
g) They supervise, inspect and co-ordinate the activities of the primary co-operativesocieties.
There are now 360 district central co-operative banks in India. They lend about rupees 14000
crores annually. The most distressing feature of the functioning of central co-operative banks
is heavy and increasing over due loans.
7/30/2019 Performance Analysis of the nationalised banks selected
9/68
9
NEED FOR THE STUDY:
For any firm it is important to achieve its business objectives and goals, in order to expand
and to diversify the financial resources. Success of a firm depends on the availability of
financial resources and also on how a firm is utilizing its financial resources.
The management uses these tools to evaluate their own efficiency and performance
during a particular year.
In present scenario to judge the exact performance of the management in increasing
their wealth A Study on Performance Analysis at KUCB is very much useful to evaluate
the strength of bank.
Keeping this in the view this study is undertaken to analyze the Performance
Analysis in the Karimnagar Co-operative Urban Bank (KUCB), Karimnagar.
The study is also beneficial to employees and offers motivation by sharing how they
are contributing for the bank growth.
The study on performance analysis of a bank is very essential for taking financial
management decisions like how to manage the finances to achieve the strategic goals and
how to increase the profitability.
This study is also beneficial to top management of the bank by providing relevant
information regarding important aspects like liquidity, annual growth rate, activity and
profitability.
SCOPE OF THE STUDY:
The scope of the study is to collecting financial data published in annual reports and
to analyze the various figures of balances sheets of different years and to compare the
percentage change within those figures and finding the annual growth rate and compounded
annual growth rate.
The study is confined to evaluation of the last 5 years financial annual reports the first
being a part report as the bank was established in the middle of the financial year.
7/30/2019 Performance Analysis of the nationalised banks selected
10/68
10
OBJECTIVES OF THE STUDY:
1) To provide reliable information about changes in growth rates of a Bank that resultfrom the activities.
2) To know the concept of performance analysis.3) To analyze the financial performance of KCUB Ltd. using performance analysis.4) To understand the concept performance analysis of the bank over 5 year period.
5) To draw conclusions and to suggest suitable measures to overcome problems, if any to
improve its performance
RESEARCH METHODOLOGY:
Data is mainly two types they are-
Primary data Secondary data
PRIMARY DATA:
Primary data has been collected by interacting with the accounting department and other
concerned executives of the KCUB Ltd.
SECONDARY DATA:
For the study the data is collected from secondary sources, the major part of data is
contributed by 5 years annual reports of the company and other journals, magazines and
manuals published by Co-Operative Bank. Some of the information related to topic was
gathered from urban bank and regulatory body of Co-Operative bank.
Secondary data is collected by the personal interaction with the employees of the
bank and also the managers. It is published data and already available for use and it saves
time. The secondary data for the project is collected from the profit and loss and balance
sheets of the KCUB (Karimnagar Co-operative Urban Bank), it is collected from the internal
sources of the organization and the study is dependent on secondary data to an extent.
7/30/2019 Performance Analysis of the nationalised banks selected
11/68
11
PERIOD OF STUDY:
To study the ratio analysis of the Karimnagar Co-operative Urban Bank, the
research had chosen five years period from 2006-07 to 2010-11 as period of study. In
the report the financial conduction of the company in all five years of the study period,
was analyzed and presented in the form of statements and tables, accompanies by
respective interpretations.
DATA METHODOLOGY OF STUDY:
The Karimangar Co-operative Urban Bank Limited [KCUB] has been collected
mainly from primary and secondary sources like.
1. The administrative officer of the KCUB
2. The annual report and other reports
3. Discussion with CEO/Manager
LIMITATIONS OF THE STUDY:
1 The study is mainly based on the secondary and primary data was used.2 While computing ratios, averages and percentages the figures are appropriated two
decimal places. Therefore sometimes the total may not exactly tally.
3 The performance shown in the project is limited to the data provided by the bank.Hence, it is limited to information provided by them.
4 Only comparative, performance analysis has been taken for the study as a tool offinancial and no other techniques is used.
5 The study is restricted to financial position of the bank.6 The study is restricted to only five years i.e.,2006-2007 to 2010-2011
7/30/2019 Performance Analysis of the nationalised banks selected
12/68
12
SCHEME OF CHAPTERISATION:
Chapter I
It deals with the introduction of finance, definitions of financial management,
financial services, financial system, about banking and importance of co-operative
banks, need of the study, objectives of the study, scope of the study, research
methodology and limitations of the study.
Chapter II
It includes conceptual frame work and banking system in India, reserve bank
of India, regional rural banks, and types of banks and the concept of performance analysis.
Chapter III
It deals with the introduction of the co-operative banks, profile of Karimnagar
Co-operative Urban Bank and the organization history structure.
Chapter IV
Includes the data analysis and interpretation.
Chapter V
Includes the conclusions and suggestions and bibliography
7/30/2019 Performance Analysis of the nationalised banks selected
13/68
13
BANKING SYSTEM IN INDIA:
Banking system occupies an important place in nations economy. A banking
institution is on dispensable in a modern bank. It plays a pivotal role in the economic
development of a country and forms the core of the money markets in an advanced country.
In India, through the money market is still characterized by the existence of both
organized and unorganized segments, institutions in the organized money.
Market has grown significantly and playing an increasingly important role. Theunorganized sector, comparing to the money lenders and indigenous bankers, caters the needs
of large number of persons especially in the country side. Among the institutions in organized
sector of the money market, commercial banks and co-operative banks have been existence
for the past few decades.
Banks and another financial institutions are a unique set of business firms whose
assets and liabilities, regulatory restrictions, economic functions and operating make them an
important subject of research, particularly in the conditions of the emerging financial sectors
in the EU accession countries from Central and Eastern Europe (CEE). Banks' performance
monitoring, analysis and control needs special analysis in respect to their operation and in
respect to their operation and performance results from the viewpoint of different audiences,
like investors/owners, regulators, customers/clients, and management themselves. Some
historical notes on the development of the Estonian banking system and the capital structure
of banks are presented in this article. Different versions of financial ratio analysis are used for
the bank performance analysis using financial statement items as initial data sources. The
usage of a modified version of DuPont financial ratio analyzes and a novel matrix approach is
discussed in the article. Empirical results of the Estonian commercial banking system
performance analysis are also presented in the article
7/30/2019 Performance Analysis of the nationalised banks selected
14/68
14
NATIONALISATION:
Banks Nationalization in India: Newspaper Clipping, Times of India, July, 20, 1969
Despite the provisions, control and regulations ofReserve Bank of India, banks in
India except the State Bank of India or SBI, continued to be owned and operated by private
persons. By the 1960s, the Indian banking industry had become an important tool to facilitate
the development of the Indian economy. At the same time, it had emerged as a large
employer, and a debate had ensued about the nationalization of the banking industry. Indira
Gandhi, then Prime Minister of India, expressed the intention of the Government of India in
the annual conference of the All India Congress Meeting in a paper entitled "Stray thoughtson Bank Nationalization." The meeting received the paper with enthusiasm.
Thereafter, her move was swift and sudden. The Government of India issued an
ordinance and nationalised the 14 largest commercial banks with effect from the midnight of
July 19, 1969. Jayaprakash Narayan, a national leader of India, described the step as a
"masterstroke of political sagacity." Within two weeks of the issue of the ordinance, the
Parliament passed the Banking Companies (Acquisition and Transfer of Undertaking) Bill,
and it received the presidential approval on 9 August 1969.
A second dose of nationalization of 6 more commercial banks followed in 1980. The
stated reason for the nationalization was to give the government more control of credit
delivery. With the second dose of nationalization, the Government of India controlled around
91% of the banking business of India. Later on, in the year 1993, the government merged
New Bank of India with Punjab National Bank. It was the only merger between nationalized
banks and resulted in the reduction of the number of nationalised banks from 20 to 19. After
http://en.wikipedia.org/wiki/Reserve_Bank_of_Indiahttp://en.wikipedia.org/wiki/State_Bank_of_Indiahttp://en.wikipedia.org/wiki/Indian_economyhttp://en.wikipedia.org/wiki/Indira_Gandhihttp://en.wikipedia.org/wiki/Indira_Gandhihttp://en.wikipedia.org/wiki/Prime_Minister_of_Indiahttp://en.wikipedia.org/wiki/Government_of_Indiahttp://en.wikipedia.org/wiki/Nationalisationhttp://en.wikipedia.org/wiki/Jayaprakash_Narayanhttp://en.wikipedia.org/wiki/Parliament_of_Indiahttp://en.wikipedia.org/wiki/President_of_Indiahttp://en.wikipedia.org/w/index.php?title=New_Bank_of_India&action=edit&redlink=1http://en.wikipedia.org/wiki/Punjab_National_Bankhttp://en.wikipedia.org/wiki/File:Bank_Nationalisation_-_India.JPGhttp://en.wikipedia.org/wiki/Punjab_National_Bankhttp://en.wikipedia.org/w/index.php?title=New_Bank_of_India&action=edit&redlink=1http://en.wikipedia.org/wiki/President_of_Indiahttp://en.wikipedia.org/wiki/Parliament_of_Indiahttp://en.wikipedia.org/wiki/Jayaprakash_Narayanhttp://en.wikipedia.org/wiki/Nationalisationhttp://en.wikipedia.org/wiki/Government_of_Indiahttp://en.wikipedia.org/wiki/Prime_Minister_of_Indiahttp://en.wikipedia.org/wiki/Indira_Gandhihttp://en.wikipedia.org/wiki/Indira_Gandhihttp://en.wikipedia.org/wiki/Indian_economyhttp://en.wikipedia.org/wiki/State_Bank_of_Indiahttp://en.wikipedia.org/wiki/Reserve_Bank_of_India7/30/2019 Performance Analysis of the nationalised banks selected
15/68
15
this, until the 1990s, the nationalised banks grew at a pace of around 4%, closer to the
average growth rate of the Indian economy.
LIBERALISATION:
In the early 1990s, the then Narasimha Rao government embarked on a policy of
liberalization, licensing a small number of private banks. These came to be known as New
Generation tech-savvy banks, and included Global Trust Bank (the first of such new
generation banks to be set up), which later amalgamated with Oriental Bank of Commerce,
Axis Bank(earlier as UTI Bank), ICICI Bank and HDFC Bank. This move, along with the
rapid growth in the economy of India, revitalized the banking sector in India, which has seen
rapid growth with strong contribution from all the three sectors of banks, namely,
government banks, private banks and foreign banks.
The next stage for the Indian banking has been set up with the proposed relaxation in
the norms for Foreign Direct Investment, where all Foreign Investors in banks may be given
voting rights which could exceed the present cap of 10%,at present it has gone up to 74%
with some restrictions.
The new policy shook the Banking sector in India completely. Bankers, till this time,
were used to the 4-6-4 method (Borrow at 4%; Lend at 6%; Go home at 4) of functioning.
The new wave ushered in a modern outlook and tech-savvy methods of working for
traditional banks.All this led to the retail boom in India. People not just demanded more from
their banks but also received more.
Currently (2010), banking in India is generally fairly mature in terms of supply,
product range and reach-even though reach in rural India still remains a challenge for the
private sector and foreign banks. In terms of quality of assets and capital adequacy, Indian
banks are considered to have clean, strong and transparent balance sheets relative to other
banks in comparable economies in its region. The Reserve Bank of India is an autonomous
body, with minimal pressure from the government. The stated policy of the Bank on the
Indian Rupee is to manage volatility but without any fixed exchange rate-and this has mostly
been true.
http://en.wikipedia.org/wiki/Narasimha_Raohttp://en.wikipedia.org/wiki/Liberalizationhttp://en.wikipedia.org/wiki/Axis_Bankhttp://en.wikipedia.org/wiki/UTI_Bankhttp://en.wikipedia.org/wiki/ICICI_Bankhttp://en.wikipedia.org/wiki/HDFC_Bankhttp://en.wikipedia.org/wiki/Economy_of_Indiahttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Economy_of_Indiahttp://en.wikipedia.org/wiki/HDFC_Bankhttp://en.wikipedia.org/wiki/ICICI_Bankhttp://en.wikipedia.org/wiki/UTI_Bankhttp://en.wikipedia.org/wiki/Axis_Bankhttp://en.wikipedia.org/wiki/Liberalizationhttp://en.wikipedia.org/wiki/Narasimha_Rao7/30/2019 Performance Analysis of the nationalised banks selected
16/68
16
With the growth in the Indian economy expected to be strong for quite some time-
especially in its services sector-the demand for banking services, especially retail banking,
mortgages and investment services are expected to be strong. One may also expect M&A s,
takeovers, and asset sales.
In March 2006, the Reserve Bank of India allowed Warburg Pincus to increase its
stake in Kotak Mahindra Bank (a private sector bank) to 10%. This is the first time an
investor has been allowed to hold more than 5% in a private sector bank since the RBI
announced norms in 2005 that any stake exceeding 5% in the private sector banks would
need to be vetted by them.
In recent years critics have charged that the non-government owned banks are tooaggressive in their loan recovery efforts in connection with housing, vehicle and personal
loans. There are press reports that the banks' loan recovery efforts have driven defaulting
borrowers to suicide.
ADOPTION OF BANKING TECHNOLOGY:
The IT revolution had a great impact in the Indian banking system. The use of
computers had led to introduction of online banking in India. The use of the modern
innovation and computerization of the banking sector of India has increased many folds after
the economic liberalization of 1991 as the country's banking sector has been exposed to the
world's market. The Indian banks were finding it difficult to compete with the international
banks in terms of the customer service without the use of the information technology and
computers.
Number of branches of scheduled banks of India as of March 2005
http://en.wikipedia.org/wiki/Retail_bankinghttp://en.wikipedia.org/wiki/File:NUMBER_OF_BRANCHES.pnghttp://en.wikipedia.org/wiki/File:NUMBER_OF_BRANCHES.pnghttp://en.wikipedia.org/wiki/File:NUMBER_OF_BRANCHES.pnghttp://en.wikipedia.org/wiki/File:NUMBER_OF_BRANCHES.pnghttp://en.wikipedia.org/wiki/Retail_banking7/30/2019 Performance Analysis of the nationalised banks selected
17/68
17
The RBI in 1984 formed Committee on Mechanization in the Banking Industry
(1984) whose chairman was Dr C Rangarajan, Deputy Governor, Reserve Bank of India. The
major recommendations of this committee was introducing MICR Technology in the all the
banks in the metropolis in India. This provided use of standardized cheque forms and
encoders.
In 1988, the RBI set up Committee on Computerization in Banks (1988) headed by
Dr. C.R. Rangarajan which emphasized that settlement operation must be computerized in the
clearing houses of RBI in Bhubaneshwar, Guwahati, Jaipur, Patna and
Thiruvananthapuram.It further stated that there should be National Clearing of inter-city
cheques at Kolkata,Mumbai,Delhi,Chennai and MICR should be made Operational.It also
focused on computerisation of branches and increasing connectivity among branches through
computers.It also suggested modalities for implementing on-line banking.The committee
submitted its reports in 1989 and computerisation began form 1993 with the settlement
between IBA and bank employees' association. IN 1994, Committee on Technology Issues
relating to Payments System, Cheque Clearing and Securities Settlement in the Banking
Industry (1994) was set up with chairman Shri WS Saraf, Executive Director, Reserve Bank
of India. It emphasized on Electronic Funds Transfer (EFT) system, with the BANKNET
communications network as its carrier. It also said that MICR clearing should be set up in all
branches of all banks with more than 100 branches.
Committee for proposing Legislation on Electronic Funds Transfer and other
Electronic Payments (1995) emphasized on EFT system. Electronic banking refers to DOING
BANKING by using technologies like computers, internet and networking, MICR, EFT so as
to increase efficiency, quick service,productivity and transparency in the transaction.
Number of ATMs of different Scheduled Commercial Banks of India as on end March 2005
http://en.wikipedia.org/wiki/File:NUMBER_OF_ATM.pnghttp://en.wikipedia.org/wiki/File:NUMBER_OF_ATM.pnghttp://en.wikipedia.org/wiki/File:NUMBER_OF_ATM.pnghttp://en.wikipedia.org/wiki/File:NUMBER_OF_ATM.png7/30/2019 Performance Analysis of the nationalised banks selected
18/68
7/30/2019 Performance Analysis of the nationalised banks selected
19/68
19
The banks in India generate their funds from two types of sources:
Long-Term Sources:
1. Tier one and Tier two Capitals in the form of equity/subordinatedebts/debentures/preference shares.
2. Internal accrual generated out of profits.3. Long-term fixed deposits generated from public and corporate clients, financial
institutions, and mutual funds, etc.
4. Long-term borrowings from financial institutions like NABARD/SIDBI.Short-Term Sources:
1.Call money market, i.e., funds generated among interbanking transactions where there isonline trading of money between bankers.
2.Fixed deposits generated from public and corporate clients, FIs, and MFs, etc.3.Market-linked borrowings from RBI.4.
Sale of liquid certificate deposits in the open market.
5.Borrowing from RBI under Repo (Repurchase option).6.Short and medium-term fixed deposits generated from public and corporate clients,
mutual funds, and financial institutions, etc.
7.Floating in current and saving accounts.8.Short-term borrowings from FIs by way of rated papers placed, etc.
RESERVE BANK OF INDIA:
The central bank plays a key role in the modern banking system. The reserve bank of
India acts as a central bank in our country. It helps in formulating and implementing the
financial policies and acts as an effective string puller of the commercial banks in licensing,
controlling, directing, assisting them. The RBI was established on 1st April 1935 under the
7/30/2019 Performance Analysis of the nationalised banks selected
20/68
20
reserve bank of India act 1934 and it has been acting as central bank of our country. The RBI
was nationalized in 1948.
About reserve bank of India:
On this occasion we have a need to know something about reserve bank of India. As
the central bank of the country the reserve bank of India performs both the traditional
functions of a central bank and a verity of development and promotional functions. The
reserve bank of India act 1934 confers upon it the power to act as note issuing authority,
bankers bank and bankers to the government.
Note issue authority:
The currency of our country consists of one rupee notes and coins issued by the
government of India and bank notes issued by the reserve bank. As required by section 38 of
the reserve.
Bank of India act, government puts into circulation one rupee and notes through
reserve bank only. The reserve bank has the sole right to issue bank notes in India. The notes
issued by the reserve bank and the one rupee notes and coins issued by the government are
unlimited legal tender. Reserve bank also bears the responsibility of exchange notes and coins
to those of other denominations required by the public
.
Banker to government:
The reserve bank of India acts as banker to the central and state governments.
According to section 20, it is obligatory for the bank transact government business including
the management of the public debt of the union section 21 requires the central government on
entrust the bank all its money remittance, exchange and banking transaction in India and in
particular deposit free of interest all is cash balance with the bank. In terms of section 21(A)
the reserve bank performs similar function on behalf of the state governments the bank
entered into agreements with central and state governments fore carrying on the functions. To
conduct ordinary banking business of the central government, the bank is not entitled to an
remuneration, it holds cash balances of the government free of interest. For the management
7/30/2019 Performance Analysis of the nationalised banks selected
21/68
21
of the public debt, the bank is entitled to change a commission. The bank is also required to
maintain currency chests of its issued department at places prescribed by the government and
to maintain sufficient notes and coins therein. The reserve bank is also authorized to make to
the central and state government, ways and means advances which are repayable within 3
months for the date of making the advance. The bank also acts as advised to the government
RBI plays a role of regulator apart from money provider in specific cases:
Right now this seems to be a short-term crisis unless the production figures of the
next month also shows negative trend like it has shown in the month of August @ 1.30%
(very low compared to the previous figures of between a band of 5 to 9%).
If IIP figure goes down continuously for the next 2 to 3 months, we have to assume,
there is a recession in the country. As the service industry may not grow at the volumes
shown previously. The industrial growth is a big hope for the future sustenance of the growth
in India.
Now let us analyze the situation of all these sources in the present scenario for the banks:
A) This is not the right time to generate the funds from long-term sources due to the bad
market scenario, so let us focus on the short-term sources.
B) Call money market is very tight. RBI borrowings and placing short term papers is not
the best way to generate funds as the mutual funds and FIs are facing acute pressure due to
withdrawals from the foreign investors including NRIs.
Hence pressure is on retail deposits and now every bank wants to concentrate on
these as a source. The rates are increasing. This is a very good time to keep money in a 2- to3-year lock deposit with nationalized banks. You may be offered 10.50 to 10.75%. It would
be 0.25-0.50% higher in case of the private/foreign and co-operative banks.
I would like to give all credit to the regulatory system in India, which has withstood to
the acute pressure on banking sector. You would remember the co-operative bank fiasco 3
years back and now foreign and private banks are under scanner. Thanks to the mature
regulatory system, we are relatively safe as far as banking in India is concerned.
7/30/2019 Performance Analysis of the nationalised banks selected
22/68
22
TYPES OF BANKS:
Commercial banks:
Commercial banks perform all kinds of banking business. Its primary function is to
accept deposits from the public and makes the funds available to those who need them. These
banks usually give short term loans and advances. They also render services such as
collection of cheques, safe custody of valuables, remittance facilities etc.
Industrial banks:
Industrial banks are also investmentbanks. They are primarily meant to cater to the
financial needs of industrial undertakings. They provide medium-term and long term credit
to the industries for the purchase of fixed assets.
Central bank: -
A central bank is the apex financial institution in the banking and financial system of a
country. It is regarded as the highest monetary authority in the country. It acts as the leader in
the money market. It supervises controls and regulates the activities of the commercial banks.
Savings bank:
Savings bank collects the small savings of the people. They pool together the scattered
savings of these banks is to encourage the habit of thrift among the people. Hence these
banks impose many restrictions on the withdrawals.
Exchange banks:
Exchange banks mainly deal in foreign exchange. They purchase and sell foreign
currencies and discount foreign bills. They finance foreign trade.
Co-operative banks:
These are a group of financial institutions organized under the provisions of the co-
operative societys act of the states. The main object of these banks is to provide cheap credit
to their members.
7/30/2019 Performance Analysis of the nationalised banks selected
23/68
23
Private Banks:
In every country there are large numbers of private banks. Individuals and firms do
banking business such private banks are also known as indigenous banks in India. Private
Banks also carry trading a part from the banking business.
Regional rural banks:
Regional rural banks were established under regional rural banks act 1975. Rural banks
may be defined as primary banking institutions. It was established to perform the banking
functions with the objective of developing the village areas.
Lead bank:
This bank adopts a district and integrates its schemes with district plans for an
effective distribution of credit along with the expanded banking facilities as per the local
needs. RBI introduced the lead bank scheme in December 1969.
The lead bank co-ordinates the activities of all the credit institutions, co-operative
banks, commercial banks and other in its allotted districts.
REGIONAL RURAL BANKS:
Regional rural banks were established under the regional rural banks act 1975.
Regional rural banks may be defined as primary banking institution. It established to serve a
compact group of villages by performing banking functions with the object of developing
village areas.
Regional rural banks operate in a limited area specified by a notification. Each RRB is
sponsored by a public sector bank. It also helps in recruitment and training of personnel in the
initial phase of the functioning of regional rural bank.
Presently a number of rural banks have gone up to 196 covering 350 districts of 23
states in India.
7/30/2019 Performance Analysis of the nationalised banks selected
24/68
24
Objectives of RRB: -
To meet the needs of the medium and small farmers, agriculture laborers for theoverall development of the villagers.
To liberalize the rural people the clutches of money lenders. To work for the people who are economically and socially backward in their status. To work for the development of agriculture as well as promotion of trade, commerce
and industry.
Functions of RRB:
According to the banking commission the rural banks should perform the following
functions.
Accepting deposits from the customers. Granting loans and advances to the needy rural people. Providing ancillary banking services on par with the commercial banks. Supplying the equipment and inputs to farmers. Helping for the overall development of villages in its area of operation. Providing assistance in the marketing of their products. To provide employment opportunities and encouraging the setting up rural industries.
The regional rural banks came into existence since the middle of seventies. Thus, with
the phenomenal geographical expansion banks and the setting up of the regional rural banks
during the recent past, the organized sector of money market has penetrated into rural areas as
well as to facilitate the banking business and to foster the growth of banking habit, two other
institutions have been set up.
The deposit insurance and credit guarantee corporation of India undertakes the twin
functions of extending the insurance cover to the depositors in bank and projects the interest
of banks by providing guarantee in respect of advances granted by them to the small scale
industries.
Development banking has its genesis in post independence period in India and has
contributed significantly to the industrial growth of the country during the period.
In the field of industrial finance, the Industrial Development Bank of India (IDBI),
setup in 1964 is the apex bank, which undertakes besides direct financing of big industrial
7/30/2019 Performance Analysis of the nationalised banks selected
25/68
25
project, refinancing of term long granted by other financial institutions including the
commercial bank. There are two prominent all-infuse institutions in the field, namely. The
Industrial Finance Corporation of India (IFCI), and the Industrial Credit and Investment
Corporation of India (ICICI). Besides the State Financial Corporations (SFC) and state
industrial development corporations (SID) have been setup to meet the requirements of small
and medium scale industries in the respect state industrial reconstruction bank of India (IRBI)
has been setup to bring back normalcy the industrial units which fall sick. All these
institutions, engaged as they are in the task of development are now designated as
development banks which are distinct from the traditional commercial banks.
Development banking has its genesis in post independence period in India has
contributed significantly to the industrial growth of the country during the period.
For financing agriculture and allied activities in the rural areas, through co-operative
credit societies and central co-operative banks have been participating since long, commercial
banks began their active participation after the nationalization of major banks in 1989. Long a
medium term credit to the agriculturists in being provided by another specialized institution,
namely the land development banks at the district level and state land development banks at
the state level.
National Bank for Agriculture and Rural Development (NABARD) is the full-fledged
apex institution in the field of agriculture and rural development.
With the establishment of export import bank of India (EXIM) on January 1, 1982, a
new APEX BANKhas come into existence in the field of financing the foreign trade of the
country.
Beside, the institutions which are mainly engaged in meeting the credit needs of
various segments of the economy, there are few other institutions, which are essentially
engaged in the business of investing in the corporate and government and semi-corporation of
India (LIC) general insurance corporation of India (GIC) and the unit trust of India channels
them into desirable securities. Hence they are called the investing institutions or institutional
investors.
To facilitate the banking business and to foster the growth of banking habit, two other
institutions have been setup. The deposit insurance and credit guarantee corporation (ECGC)
provide protection to the banks in respect of risks inherent in financing the export trade. With
the financial system may be claimed to have finest setup comparable to any advanced
country.
7/30/2019 Performance Analysis of the nationalised banks selected
26/68
7/30/2019 Performance Analysis of the nationalised banks selected
27/68
27
payment or a reduction in earnings. The result will be a higher level of problem loans. An
increase in interest rates exposes a bank with a significant concentration in adjustable rate
loans to credit risk. For a bank that is predominately funded with short-term liabilities, a rise
in rates may decrease net interest income at the same time credit quality problems are on the
increase.
DEFINITION OF 'COMPOUND ANNUAL GROWTH RATE - CAGR'
The year-over-year growth rate of an investment over a specified period of time.
The compound annual growth rate is calculated by taking the nth root of the total
percentage growth rate, where n is the number of years in the period being considered.
This can be written as follows:
Credit Risk:
Credit risk is most simply defined as the potential that a bank borrower or
counterparty will fail to meet its obligations in accordance with agreed terms. When this
happens, the bank will experience a loss of some or all of the credit it provided to its
customer. To absorb these losses, banks maintain an allowance for loan and lease losses.
In essence, this allowance can be viewed as a pool of capital specifically set aside to
absorb estimated loan losses. This allowance should be maintained at a level that is adequate
to absorb the estimated amount of probable losses in the institution's loan portfolio.
http://www.investopedia.com/terms/l/lease.asphttp://www.investopedia.com/terms/l/lease.asp7/30/2019 Performance Analysis of the nationalised banks selected
28/68
28
CONCLUSION:
A careful review of a bank's financial statements can highlight the key factors that
should be considered before making a trading or investing decision. Investors need to have a
good understanding of the business cycle and the yield curve - both have a major impact on
the economic performance of banks. Interest rate risk and credit risk are the primary factors
to consider as a bank's financial performance follows the yield curve. When it flattens or
becomes inverted a bank's net interest revenue is put under greater pressure. When the yield
curve returns to a more traditional shape, a bank's net interest revenue usually improves.
Credit risk can be the largest contributor to the negative performance of a bank, even causing
it to lose money.
http://www.investopedia.com/terms/i/invertedyieldcurve.asphttp://www.investopedia.com/terms/i/invertedyieldcurve.asp7/30/2019 Performance Analysis of the nationalised banks selected
29/68
29
INTRODUCTION TO URBAN CO-OPERATIVE BANKS:
The urban co-operative banking movement in the country has witnessed a fillip rate of
growth soon after the implementation of the provisions of banking regulation act 1949 to
cooperative I the year 1996.
From over 400 banks from 1st March, 1990. The deposit of these banks have marked
to Rs.50,00,00,000.00 cores, Bangalore city co-operative bank limited is considered to be the
first urban co-operative banks in India.
Urban co-operative Banks have their own specialized clients I the Indian banking
systems. The evaluation of this sector could not be done on the basis of resources mobilized
and advances made but it should be properly judged from the angle has to how many
customers and clients which have been brought in the main banking.
ROLE OF URBAN CO-OPERATIVE BANK:
The term Urban Co-operative Banks (UCBs), though not formally defined, refers to
primary cooperative banks located in urban and semi-urban areas. These banks, till 1996,
were allowed to lend money only for non-agricultural purposes. This distinction does not
hold today. These banks were traditionally cantered around communities, localities work
place groups. They essentially lent to small borrowers and businesses. Today, their scope of
operations has widened considerably.
The origins of the urban cooperative banking movement in India can be traced to the
close of nineteenth century when, inspired by the success of the experiments related to the
cooperative movement in Britain and the cooperative credit movement in Germany such
societies were set up in India. Cooperative societies are based on the principles of
cooperation, - mutual help, democratic decision making and open membership. Cooperatives
represented a new and alternative approach to organization as against proprietary firms,
partnership firms and joint stock companies which represent the dominant form of
commercial organization.
7/30/2019 Performance Analysis of the nationalised banks selected
30/68
30
The Beginnings:
The first known mutual aid society in India was probably the Anyonya Sahakari
Mandali organized in the erstwhile princely State of Baroda in 1889 under the guidance of
Vital Laxman also known as Bhausaheb Kavthekar. Urban co-operative credit societies, in
their formative phase came to be organised on a community basis to meet the consumption
oriented credit needs of their members. Salary earners societies inculcating habits of thrift
and self help played a significant role in popularising the movement, especially amongst the
middle class as well as organized labour. From its origins then to today, the thrust of UCBs,
historically, has been to mobilize savings from the middle and low income urban groups and
purvey credit to their members - many of which belonged to weaker sections.
The enactment of Cooperative Credit Societies Act, 1904, however, gave the real
impetus to the movement. The first urban cooperative credit society was registered in
Canjeevaram (Kanjivaram) in the erstwhile Madras province in October, 1904. Amongst the
prominent credit societies were the Pioneer Urban in Bombay (November 11, 1905), the No.1
Military Accounts Mutual Help Co-operative Credit Society in Poona (January 9, 1906).
Cosmos in Poona (January 18, 1906), Gokak Urban (February 15, 1906) and Belgaum
Pioneer (February 23, 1906) in the Belgaum district, the Kanakavli-Math Co-operative Credit
Society and the Varavade Weavers Urban Credit Society (March 13, 1906) in the South
Ratnagiri (now Sindhudurg) district. The most prominent amongst the early credit societies
was the Bombay Urban Co-operative Credit Society, sponsored by Vithaldas Thackersey and
Lallubhai Samaldas established on January 23, 1906.
The Cooperative Credit Societies Act, 1904 was amended in 1912, with a view to
broad basing it to enable organization of non-credit societies. The Mac lagan Committee of
1915 was appointed to review their performance and suggest measures for strengthening
them. The committee observed that such institutions were eminently suited to cater to the
needs of the lower and middle income strata of society and would inculcate the principles of
banking amongst the middle classes. The committee also felt that the urban cooperative credit
movement was more viable than agricultural credit societies. The recommendations of the
Committee went a long way in establishing the urban cooperative credit movement in its own
right.
7/30/2019 Performance Analysis of the nationalised banks selected
31/68
31
In the present day context, it is of interest to recall that during the banking crisis of
1913-14, when no fewer than 57 joint stock banks collapsed, there was a there was a flight of
deposits from joint stock banks to cooperative urban banks. Mac lagan Committee chronicled
this event thus:
As a matter of fact, the crisis had a contrary effect, and in most provinces, there wa s
a movement to withdraw deposits from non-cooperatives and place them in cooperative
institutions, the distinction between two classes of security being well appreciated and a
preference being given to the latter owing partly to the local character and publicity of
cooperative institutions but mainly, we think, to the connection of Government with
Cooperative movement.
Under State Purview:
The constitutional reforms which led to the passing of the Government of India Act in
1919 transferred the subject of Cooperation from Government of India to the Provincial
Governments. The Government of Bombay passed the first State Cooperative Societies Act
in 1925 which not only gave the movement its size and shape but was a pace setter of
cooperative activities and stressed the basic concept of thrift, self help and mutual aid. Other
States followed. This marked the beginning of the second phase in the history of Cooperative
Credit Institutions.
There was the general realization that urban banks have an important role to play in
economic construction. This was asserted by a host of committees. The Indian Central
Banking Enquiry Committee (1931) felt that urban banks have a duty to help the small
business and middle class people. The Mehta-Bhansali Committee (1939), recommended that
those societies which had fulfilled the criteria of banking should be allowed to work as banksand recommended an Association for these banks. The Co-operative Planning Committee
(1946) went on record to say that urban banks have been the best agencies for small people in
whom Joint stock banks are not generally interested. The Rural Banking Enquiry Committee
(1950), impressed by the low cost of establishment and operations recommended the
establishment of such banks even in places smaller than taluka towns.
The first study of Urban Co-operative Banks was taken up by RBI in the year 1958-
59. The Report published in 1961 acknowledged the widespread and financially sound
7/30/2019 Performance Analysis of the nationalised banks selected
32/68
32
framework of urban co-operative banks; emphasized the need to establish primary urban
cooperative banks in new centers and suggested that State Governments lend active support
to their development. In 1963, Varde Committee recommended that such banks should be
organized at all Urban Centers with a population of 1 lakh or more and not by any single
community or caste. The committee introduced the concept of minimum capital requirement
and the criteria of population for defining the urban centre where UCBs were incorporated.
Duality of Control:
However, concerns regarding the professionalism of urban cooperative banks gave
rise to the view that they should be better regulated. Large cooperative banks with paid-up
share capital and reserves of Rs.1 lakh were brought under the preview of the BankingRegulation Act 1949 with effect from 1st March, 1966 and within the ambit of the Reserve
Banks supervision. This marked the beginning of an era of duality of control over these
banks. Banking related functions (viz. licensing, area of operations, interest rates etc.) were to
be governed by RBI and registration, management, audit and liquidation, etc. governed by
State Governments as per the provisions of respective State Acts. In 1968, UCBS were
extended the benefits of Deposit Insurance.
Towards the late 1960s there was much debate regarding the promotion of the small
scale industries. UCBs came to be seen as important players in this context. The Working
Group on Industrial Financing through Co-operative Banks, (1968 known as Damry Group)
attempted to broaden the scope of activities of urban co-operative banks by recommending
that these banks should finance the small and cottage industries. This was reiterated by the
Banking Commission (1969).
The Madhavdas Committee (1979) evaluated the role played by urban co-operativebanks in greater details and drew a roadmap for their future role recommending support from
RBI and Government in the establishment of such banks in backward areas and prescribing
viability standards.
The Hate Working Group (1981) desired better utilization of banks' surplus funds and
that the percentage of the Cash Reserve Ratio (CRR) & the Statutory Liquidity Ratio (SLR)
of these banks should be brought at par with commercial banks, in a phased manner. While
the Marathe Committee (1992) redefined the viability norms and ushered in the era of
7/30/2019 Performance Analysis of the nationalised banks selected
33/68
33
liberalization, the Madhava Rao Committee (1999) focused on consolidation, control of
sickness, better professional standards in urban co-operative banks and sought to align the
urban banking movement with commercial banks.
A feature of the urban banking movement has been its heterogeneous character and its
uneven geographical spread with most banks concentrated in the states of Gujarat, Karnataka,
Maharashtra, and Tamil Nadu. While most banks are unit banks without any branch network,
some of the large banks have established their presence in many states when at their behest
multi-state banking was allowed in 1985. Some of these banks are also Authorized Dealers in
Foreign Exchange
Recent Developments:
Over the years, primary (urban) cooperative banks have registered a significant
growth in number, size and volume of business handled. As on 31st March, 2003 there were
2,104 UCBs of which 56 were scheduled banks. About 79 percent of these are located in five
states, - Andhra Pradesh, Gujarat, Karnataka, Maharashtra and Tamil Nadu. Recently the
problems faced by a few large UCBs have highlighted some of the difficulties these banks
face and policy Endeavours are geared to consolidating and strengthening this sector and
improving governance.
Co operative Banks in India are registered under the Co-operative Societies Act. The
cooperative bank is also regulated by the RBI. They are governed by the Banking
Regulations Act 1949 and Banking Laws (Co-operative Societies) Act, 1965.
SERVICES OF URBAN CO-OPERATIVE BANKS:
The Urban co-operative banks rendering the following services.
Acceptance of deposits. Sophisticated lending for the promotion of industrial growth worth. Particular references to small-scale industries, trade and professions. Discounting and collecting of cheques and hundies. Provision of safe deposit locket facilities and bank guarantees etc. A few of urban banks have been licensed to deal in foreign exchange.
http://finance.indiamart.com/investment_in_india/cooperative_banks_india.htmlhttp://finance.indiamart.com/investment_in_india/cooperative_banks_india.html7/30/2019 Performance Analysis of the nationalised banks selected
34/68
34
OBJECTIVES OF URBAN CO-OPERATIVE THE BANK:
The objectives of the Co-operative urban bank are as follows.
To extend financial help to weaker sections in the society. To encourage small-scale industries. To encourage Self-employment schemes. To encourage small trading people in urban areas. To help the management of the bank for effective management and flow of
co-operative credit in the district.
To help the management of the bank to augment its internal resource. Mobilization of deposits and internal resources for development and diversification of
its business activities into various sectors.
To help the bank to take necessary steps for solving various types of problemsassociated with utilization of loans.
Analysis for taking corrective measure in time. To help the bank to evolve and implement system of receiving the work. To guarantee the loans and advances made to the member societies. To buy, sell or deal with securities, debentures or bonds or scripts. To maintain a library of co-operative and banking literature. To open regional offices, branches or sub- offices with the prior permission of the
registrar both for banking purposes and also the issue and recovery of short term,
medium term and long term loans.
ADVANTAGES OF COOPERATIVES:
Advocates of producer cooperatives claim numerous comparative advantages over
what is generally referred to as a classical firm (CF). The proposed advantages extend to a
host of theoretical issues. Many overlap the separate disciplines of labor economics,
industrial management and organization theory, investment and finance, and property rights
theory.
Academicians have devoted significant amounts of research and analysis to such
issues as:
(1) The absence of"shirking" by workers in producer cooperatives;
7/30/2019 Performance Analysis of the nationalised banks selected
35/68
35
(2) Superior productivity rates that result from the extension of democratic principles into the
cooperative workplace;
(3) The lack of unnecessary supervision due to the "horizontal monitoring" performed by
cooperative members;
(4) The pursuit of cooperative employment and output strategies that is less sensitive to
business cycle fluctuations.
Still other cooperative advocates simply emphasize the overall psychological and
social influence exerted by the set of worker-control parameters. These are thought to have a
transformational quality that converts adversarial relationships common to most CFs into an
atmosphere of cooperation. The logic of cooperative theory unfolds thusly: once worker
members begin to identify their individual and collective efforts with their firm's enhanced
performance, an atmosphere of cooperative problem solving takes root. As a result of this
more communicative workplace, improvements in production methods result from an upward
or horizontal flow of information originating from the shop floor. With heightened
satisfaction spreading throughout its membership, lower worker turnover and absenteeism
result and members build task-specific expertise.
DISADVANTAGES OF COOPERATIVES:
Compared to CFs, producer cooperatives suffer from two interrelated investment
disadvantages. Both are readily acknowledged by most cooperative proponents. The first
concerns the problem of intra-firm finance or underinvestment. This tendency arises when the
disparity between a worker member's expected profit share of income and what they could
earn by investing outside the firm (say, at a bank rate of interest) becomes problematic.
A second, and related, underinvestment point concerns the apprehension of
nonmember financiers to lend to cooperatives. Since they must risk their funds within an
organizational form where they have little control, outside financiers are reluctant to lend
except on terms unfavorable to cooperatives. At the same time cooperative members are
reluctant to borrow on terms exceeding the going interest rate and wary of relinquishing
management control to outside parties who might not share a similar commitment to
cooperative forms of organization.
http://www.referenceforbusiness.com/encyclopedia/A-Ar/Absenteeism.htmlhttp://www.referenceforbusiness.com/encyclopedia/A-Ar/Absenteeism.html7/30/2019 Performance Analysis of the nationalised banks selected
36/68
36
COOPERATIVE BANKS IN INDIA FINANCE RURAL AREAS UNDER:
Farming Cattle Milk Hatchery Personal finance
COOPERATIVE BANKS IN INDIA FINANCE URBAN AREAS UNDER:
Self-employment
Industries Small scale units Home finance Consumer finance Personal finance
Private Banks:
In every country there are large numbers of private banks. Individuals and firms dobanking business such private banks are also known as indigenous banks in India. Private
Banks also carry trading a part from the banking business.
Regional rural banks:
Regional rural banks were established under regional rural banks act 1975. Rural
banks may be defined as primary banking institutions. It was established to perform the
banking functions with the objective of developing the village areas.
Lead bank:
This bank adopts a district and integrates its schemes with district plans for an
effective distribution of credit along with the expanded banking facilities as per the local
needs. RBI introduced the lead bank scheme in December 1969. The lead bank co-ordinates
the activities of all the credit institutions, co-operative banks, commercial banks and other in
its allotted districts.
http://finance.indiamart.com/investment_in_india/cooperative_banks_india.htmlhttp://finance.indiamart.com/investment_in_india/cooperative_banks_india.htmlhttp://finance.indiamart.com/investment_in_india/cooperative_banks_india.htmlhttp://finance.indiamart.com/investment_in_india/cooperative_banks_india.html7/30/2019 Performance Analysis of the nationalised banks selected
37/68
37
THE KARIMNAGAR CO-OPERATIVE URBAN BANK LTD.
HISTORY OF ORGANIZATION:
Location:
General location can be defined as a firm located at a place where the inhabitants
are interested in its success of the product can be sold profitably and the operation costs
are minimum. Roper and well-planned location of a firm is an important managerial
decision. The performance of an enterprise is considerably affected by its location.
Unscientific and unplanned location is harmful to the organization .location of the store at a
convenient lace really achieves the customer satisfaction .thus location of a firm is animportant factor for any organization as it has its effect on sales and profitability of particular
firm the KCUB is situated in Karimnagar and is established in the year 1980.
REGISTRATION AND SHARE CAPITAL:
The Karimnagar co-operative urban bank ltd. was registered in 1980 at Karimnagar.
The area of operation of this co-operative is spread over Karimnagar district.
It was registered as primary credit society under Hyderabad co-operative societal Act
XVI of 1952. It was started with a paid up capital of Rs 478295 and authorized share capital.
According to data given by KUUB it is having 10287 members up to 31st march 1995 and
also it has share capital of Rs2654110 up to 31 st march 1995 and in the current year i.e. 31st
March, 2011 it is having 19357 members and also it has share capital of Rs.12887749
The bank is functioning in its own building from 27-12-1981. KCUB is situated in
Karimnagar district itself and its area of operation is revenue district of Karimnagar. KCUB
is located at behind Municipal Corporation near venkateshwara temple Karimnagar.
The Karimnagar co-operative urban bank limited was organized and registered during
the tenure of Sri K.S. Sharma (M.A., M.Sc., I.A.S.,) District Collector, Karimnagar, who was
its founder president. The bank was registered with Regd. No.1123/TD/ on 16-12-1980,
with a membership of 1950 at the time of registration and with a paid up share capital of
Rs.4,74,070/-. The bank has started functioning from 7th May, 1981. Ever since its inception
7/30/2019 Performance Analysis of the nationalised banks selected
38/68
38
of the bank, its membership has increased to 11,102 and with the mere deposits of Rs.5.00
lakhs, and the present deposits position has been increased to Rs.990.00 lakhs.
The bank has constructed its own building at a total cost of Rs.11.79 lakhs in the land
of municipality which was provided by the Govt. The bank is functioning in its own building
from 4-9-1991.
The bank has opened a branch at Jagtial, in the year 6-11-1986 and proposals for opening
another three branches at Godhavarikhani, Metpally and Mankammathota of Karimnagar
town were also submitted to the Reserve Bank of India, during the VII plan period and the
permission is awaited.
It believes in the concept ofONE FOR ALL AND ALL FOR ONE and its logo
(symbol) as HANDSHAKE and it symbolize this.
A HANDSHAKE SYMBOLIZES PROGRESS:
A handshake is all it takes to bring home in the lives of the enthusiastic and ambitious
entrepreneur to bring that ray of hope from behind dark clouds. A handshake that promises a
careful and secure future KCUB ltd. works towards making that handshake possible.
The KCUB ltd. is like mother to a new entrepreneur who encourages the child to take
the first step firmly that is what it does to the new business entrepreneur. Few institutions can
claim the success KCUB ltd. has achieved through is scheme the works on the principle of
brotherhood and humanity; it contributes in realizing he dreams of its members for a quality
life. It shares the problem of shareholders and assists to solve it, be it or marriage in the
family. Every aspect of life is taken care of by the KCUB ltd
.
7/30/2019 Performance Analysis of the nationalised banks selected
39/68
7/30/2019 Performance Analysis of the nationalised banks selected
40/68
40
SHARE CAPITAL:
The bank has sources for its funds viz.,s own funds and borrowed funds. Own funds
consists of paid up share capital and accumulated profit or retained profit, various forms of
resources created of appropriation of profits. Borrowed funds consist of different types of
deposits accepted from members and non-members.
Normally face value of shares issued by the Bank is Rs.10/- and Rs.5/- for A class
share and B class shares respectively. So that, poor people also can become members of
the bank with rights to attend participates, vote in general body meetings and special body
meetings and to contest for elections.
STATEMENT SHOWING THE MEMBERSHIP FOR LAST FIVE YEARS:
SL.
NOPERIOD MEMBERS SHARECAPITAL
1
2
3
4
5
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
16019
16327
16801
17050
19357
9599803
11180670
12389558
13131622
12887749
Deposits:The Bank had different types of deposits accepted from the members and non-
members. The deposits are as follows.
Current deposits Saving deposits Fixed deposits Pavani deposits Recurring deposits Maruthi Cash certificates.
The bank has started with mere deposits of Rs.5.00 Lakhs and the percentage of present
position has been increased to Rs.990 Lakhs.
7/30/2019 Performance Analysis of the nationalised banks selected
41/68
41
Investments:
The Karimnagar co-operative urban bank ltd., had invested an amount of Rs.188.10
lakhs in Karimnagar District co-operative Central Bank and Commercial banks in Andhra
Pradesh State Co-operative Bank, Hyderabad is Rs.28.37 lakhs and in their co-operative
Bank Rs.28.37 and in other co-operative Banks Rs.2.65 lakhs. The bank has total deposits in
various banks in Rs.219.12 Lashes.
Loans and advances:
Loans and advantages in the form of cash in current account may be granted to
members on security or without security as prescribed by the board and RBI from time to
time.
The bank has made advances under various types of loans such as
Personal Loans Under Govt. Sponsored schemes House mortgage loans Gold Loans Normal loans (against the deposits) Staff Loans Cash credit to D.D.C. Store.
Values of KCUB:
1. Self help.
2. Self-responsibility.
3. Democracy.
4. Equality. Solidity
KCUB believes in ethical values -
Honesty Openness Social Responsibility Care for its members
7/30/2019 Performance Analysis of the nationalised banks selected
42/68
42
Functions of KCUB:
They finance the primary credit societies. They accept the deposits from the public. They provide remittance facilities. They grant credit to their customers on the security of first securities, gold etc. They act as balancing centers by shifting the excess funds of a surplus primary society
to the defect society.
They supervise, inspect and coordinate the activities of primary co-operative societies.
There are now 360 District Co-operative banks in India. They lend about 64000
Crores annually. The most distressing feature of the functioning of the Co-operative Bank is
heavy and increasing over due loans.
FINANCE:
The bank derives its working capital from the following sources-
1. Share capital
2. Deposits
3. Government loans and subsidies
4. Borrowing from the bank
The major part of the working capital is affected by the bank. Till 1969-70 the
Karimnagar dist co-operative central bank was the financier at which time the reserve bank of
India decided to enlist the finance of commercial banks for the co-operative sector. Since,
then the state bank of Hyderabad has been the financial to the bankThe bank has issuing demand drafts all over India with tie up arrangements with the
axis bank and increased income under non-fund business. Presently the bank is advancing
loans by pledging gold ornaments for commercial as well as agriculture purpose through 10
branches in the district.
7/30/2019 Performance Analysis of the nationalised banks selected
43/68
7/30/2019 Performance Analysis of the nationalised banks selected
44/68
44
Rate of Interest for Deposits:
Types and period of Deposits Rate of Interest period
Saving Deposits 3.5%
Current Deposits 0.5%
36-46 days below 4.0%
46 days less than 90 days 5.25%
91 days to 179 days 6.00%
180days and above but less than 1 years 7.5%
1 years and above but less than 2 years 8.0%
2 years and above but less than 3 years 8.5%
3 years and above 8.8.0%
F.D. Senior 0.50%(more)
Rate of interest for loans:
Types Loans Rate of interest
All types of Loan 18.00%
Gold jewelry Loan 14.00%
The above table comprises the information of rates of interest being offered customs
on various depositing in urban cooperative Bank, Karimnagar. The data presented in the able
shows that the rate of interest would be highs as the period of deposing are longer the date in
the table also reveal that the bank is offering high rate of interest i.e. 14% compares to public
sector banks i.e. 12.5%. The increased rates provide by the Karimnagar Cooperative Urban
Bank ltd. is to increasing the deposits of Urban Bank.
Investments in others:
The Karimnagar Co-operative Urban Bank Limited thus invested an amount of
Rs.316.22 lakhs in Government of India and securities.
The bank has invested an amount of Rs.5.10 lakhs in Government of India Securities
up to 2018 at rate of interest @ 6.25%.
7/30/2019 Performance Analysis of the nationalised banks selected
45/68
45
BANK MEMBERS:
1) Sri Karra rajashekar garu President2) Sri MD. Samiyoddin garu Vice president3) Sri E. Laxman garu Director4) Smt Varala Jyothi garu Director5) Sri Dhesha vedadri garu Director6) Sri Anarasu kumar Director7) Sri K. Ravi garu Director8) Sri Sarilla. Prasad garu Director9) Sri Vazeer. Ahmad garu Director10)Sri Tatikonda. Baskar garu Director11)Sri Basetti. Kishan garu Director12)Sri C. rajireddy garu Co-option member13)Sri K. venkateswar garu Co-option member14)Sri GT. Venkatreddy garu CEO
Senior Advocate Sri CH. Mutyam rao garu (BA,LLB) Charted Accountant Sri E. Rajeswar rao garu (CA) Valuation Engineer Sri Kola Annareddy garu (BE) Valuation Engineer Sri S. Baravi sharma garu (BE. civil) Gold Checker Sri T. KanakachariAnd accountant 01, assistant accountants 02, cashiers 03, counter clerks 11, typists 01,
attainders 04, watchmens 02, security guards 01, callboy 01.
7/30/2019 Performance Analysis of the nationalised banks selected
46/68
46
Table 4.1
PAID-UP SHARE CAPITAL
INTERPRETATION:
The annual growth rate of the paid-up share capital for five year period i.e., from 2006-07to 2010-11 of KCUB continuously decreasing.
During the period 2010-2011 the annual growth as became negative i.e., -1.86% From the study it is observed that in the year 2007-08 the annual growth rate is high i.e.,
16.47%.
The absolute value of the paid up share capital is decreased in the year 2010-2011 It isobserved that the compounded annual growth rate is of paid-up share capital of KCUB is
6.07%.
0.002000000.00
4000000.00
6000000.00
8000000.00
10000000.00
12000000.00
14000000.00
2006-07 2007-08 2008-09 2009-10 2010-11
Paid
up-sharecapital
(inRs.)
Years
PAID- UP SHARE CAPITAL
YEAR PAID UP SHARE CAPITAL(in Rs.)
ANNUAL GROWTH RATE(in %)
2006-07 9599803.00
2007-08 11180670.00 16.47
2008-09 12389557.00 10.81
2009-10 13131622.00 5.99
2010-11 12887749.00 -1.86
COMPOUNDED ANNUAL GROWTH RATE (in %)6.07
7/30/2019 Performance Analysis of the nationalised banks selected
47/68
7/30/2019 Performance Analysis of the nationalised banks selected
48/68
48
Table 4.3
SAVINGS DEPOSITS
YEARSAVINGS DEPOSITS
(in Rs.)
ANNUAL GROWTH RATE
(In %)
2006-07 31055700.78
2007-08 39662259.33 27.71
2008-09 42211992.29 6.43
2009-10 49480182.17 17.22
2010-11 56025257.04 13.23
COMPOUNDED ANNUAL GROWTH RATE (in %)12.52
INTREPRETATION:
In evaluating the performance of the savings deposits in KCUB of last five years(2006-07 to 2010-11) the annual growth rate is in fluctuating trend.
In the year 2008-09 the growth rate is very less when compared to other years i.e.,6.43% and in the year 2007-08 the growth rate is 27.71%.
The absolute value of the savings deposits is continuously increasing shown in thegraph clearly.
The compounded annual growth rate of savings deposits for five year period is12.52%
0
10000000
20000000
30000000
40000000
50000000
60000000
2006-07 2007-08 2008-09 2009-10 2010-11
SavingsDeposits
(inRs.)
Years
SAVINGS DEPOSITS
7/30/2019 Performance Analysis of the nationalised banks selected
49/68
49
Table 4.4
RECURRING DEPOSITS
YEARRECURRING DEPOSITS
(in Rs.)
ANNUAL GROWTH RATE
(In %)2006-07 2129173.60
2007-08 2383157.60 11.93
2008-09 2300460.60 -3.47
2009-10 2870689.61 24.79
2010-11 3192806.00 11.22
COMPOUNDED ANNUAL GROWTH RATE (in %)8.44
INTERPRETATION:
In analyzing the performance of recurring deposits the annual growth rate for the fiveyear period (2006-2007 to 2010-2011) the rate is in fluctuating trend i.e., in increasing
and decreasing trend.
During the period 2008-09 the growth rate of recurring deposits are in negative modei.e., -3.47% and in the year 2009-10 the growth rate is high i.e., 24.79%.
The absolute value of recurring deposits in the current year (2010-11) is increasedwhen compared to the previous year.
The compounded annual growth rate of recurring deposits of KCUB is -8.44%
0.00
500000.00
1000000.00
1500000.00
2000000.00
2500000.00
3000000.00
3500000.00
2006-07 2007-08 2008-09 2009-10 2010-11
Recurringdeposits
(inRs.)
Years
RECURRING DEPOSITS
7/30/2019 Performance Analysis of the nationalised banks selected
50/68
7/30/2019 Performance Analysis of the nationalised banks selected
51/68
51
Table 4.6
SUNDRY CREDITORS
YEARSUNDRY CREDITORS
(in Rs.)
ANNUAL GROWTH RATE
(in %)2006-07 3752559.95
2007-08 3207588.45 -14.52
2008-09 3670993.95 14.45
2009-10 3885342.25 5.84
2010-11 3501255.75 -9.89
COMPOUNDED ANNUAL GROWTH RATE (in %)-1.38
INTERPRETATION:
In analyzing the performance of sundry creditors of KCUB the annual growth rate forfive year period i.e., from2006-2007 to 2010-2011 the rate is in increasing and
decreasing trend.
During the period 2008-2009 the growth rate is increased to an extent i.e., 14.45% andin the period 2010-2011 it has become negative i.e.,-9.89% which is a quite
satisfactory performance.
The absolute value of the sundry creditors is decreased when compared to previousyear.
The compounded annual growth rate of sundry creditors for a five year period is -1.38%.
0.00
1000000.00
2000000.00
3000000.00
4000000.00
5000000.00
2006-07 2007-08 2008-09 2009-10 2010-11
SundryCreditors
(inRs.)
Years
SUNDRY CREDITORS
7/30/2019 Performance Analysis of the nationalised banks selected
52/68
52
Table 4.7
DEPRECIATION
YEAR
DEPRECIATION
(in Rs.)
ANNUAL GROWTH RATE
(in %)
2006-07 1408313.24
2007-08 1531704.14 8.76
2008-09 1667685.14 8.88
2009-10 2039078.13 22.27
2010-11 2424674.33 18.91
COMPOUNDED ANNUAL GROWTH RATE (in %)11.48
INTERPRETATION:
It is observed that the annual growth rate of depreciation for a five year period i.e.,from2006-2007 to 2010-2011 is increased to an extent and decreased later.
The amount of the depreciation of KCUB for a five year period is increasingcontinuously which is shown in the graph clearly.
The annual growth rate of depreciation is high in the year 2009-10 i.e.,22.27% andless in the year 2008-09 is 8.88%
The compounded growth rate of depreciation for a five year period is 11.48%
0.00
500000.00
1000000.00
1500000.00
2000000.00
2500000.00
3000000.00
2006-07 2007-08 2008-09 2009-10 2010-11
Depreciation
(inRs.)
Years
DEPRECIATION
7/30/2019 Performance Analysis of the nationalised banks selected
53/68
53
Table 4.8
RESERVE FUND
YEARRESERVES FUND
(in Rs.)
ANNUAL GROWTH RATE
(in %)
2006-07 2949417.76
2007-08 2976497.61 0.92
2008-09 2976497.61 0.00
2009-10 2976497.61 0.00
2010-11 6390860.28 114.71
COMPOUNDED ANNUAL GROWTH RATE (in %)16.67
INTERPRETATION:
It is observed that the annual growth rate of the reserve fund for a five year period i.e.,from2006-2007 to 2010-2011 of KCUB is increased to a great extent i.e.,114.71%
even there is zero growth rate in the previous year.
By observing the graph which is shown above, the value of the reserve fund of KCUBis increased to a great level.
The compounded annual growth rate of reserve fund for a five year period of KCUB is16.67%.
0.00
2000000.00
4000000.00
6000000.00
8000000.00
2006-07 2007-08 2008-09 2009-10 2010-11
ReserveFund
(inRs.)
Years
RESERVES FUND
7/30/2019 Performance Analysis of the nationalised banks selected
54/68
7/30/2019 Performance Analysis of the nationalised banks selected
55/68
7/30/2019 Performance Analysis of the nationalised banks selected
56/68
56
Table 4.11
CASH ON HAND
YEARCASH ON HAND
(in Rs.)
ANNUAL GROWTH RATE
(in %)2006-07 2874623.94
2007-08 2846093.69 -0.99
2008-09 7784943.52 173.53
2009-10 4631508.11 -40.51
2010-11 5253268.00 13.42
COMPOUNDED ANNUAL GROWTH RATE (in %)12.82
INTERPRETATION:
The annual growth rate of the cash on hand for five years i.e., from 2006-2007 to2010-2011 of KCUB is fluctuating trend.
In the year 2008-2009 the absolute value and the growth rate is increased to a greatextent respectively.
The compounded annual growth rate of cash on hand for five years is 12.82%. In the current financial year the value of cash on hand is decreased shown in the
graph.
0.00
2000000.00
4000000.00
6000000.00
8000000.00
10000000.00
2006-07 2007-08 2008-09 2009-10 2010-11
Cashonhand
(inRs.)
Years
CASH ON HAND
7/30/2019 Performance Analysis of the nationalised banks selected
57/68
57
Table 4.12
INVESTMENTS
YEARINVESTMENTS
(in Rs.)
ANNUAL GROWTH RATE
(in %)2006-07 48624476.61
2007-08 66218329.61 36.18
2008-09 81698353.61 23.38
2009-10 146359766.61 79.15
2010-11 208736589.39 42.62
COMPOUNDED ANNUAL GROWTH RATE (in %)33.83
INTERPRETATION:
The performance of investments of KCUB for five year period is from 2006-07 to2010-11 is healthy; the annual growth rate is in fluctuating trend i.e., increasing anddecreasing trend.
The absolute value of the investments is continuously increasing and in the currentfinancial year i.e., 2010-2011it is registered as highest which is clearly shown in the
graph above.
From the study it is observed that that the growth rate of investments in the year 2009-10 is registered as very high i.e., 79.15%
The compounded annual growth rate of investments of KCUB for five year period(2006-07 to 2010-11) is 33.83%.
0.00
50000000.00