Working Capital Management of Bank of Baroda Ltd

7/30/2019 Working Capital Management of Bank of Baroda Ltd

1/232

Working capital management of Bank of Baroda Ltd.

INTRODUCTION

Empirical observations show that the financial managers have to spend

much of their time to the daily internal operations relating to current assets

and current liabilities of the firms. As the largest portion of the managers

time is devoted to working problems, it is necessary to manage working in

the best possible way to get maximum benefit. The effective management

of the business, among other things primarily depends upon the manner in

which the short-term assets and short term sources of financing are

managed. The management of current assets consists of inventories,

accounts receivable and cash & bank balances as the major components.

There is a difference between current assets and fixed assets in terms of

their liquidity. A firm requires many years to recover the initial investments

in fixed assets such as plant and machinery and land and buildings. On the

contrary, investments in current assets are turned over many times a year.

Investments in current assets such as inventories and book debts are

realized during the firms working capital cycle, which is usually less than a

year. Working capital is that proportion of a companys total capital, which

is employed in short- term operations.

Management is an art of anticipating and preparing for risks, Uncertainties

and overcoming obstacles. An essential precondition for sound and

consistent assets management is establishing the sound and Consistent

assets management policies covering fixed as well as current assets. In


2/232

modern financial management, efficient allocation of funds has a great

scope, in finance and profit planning, for

P a g e | 1


3/232


4/232


the most effective utilization of enterprise resources, the fixed and current

assets have to be combined in optimum proportions.

DEFINITIONS OF WORKING CAPITAL:

Working Capitalis the difference between in the inflow and outflow of

funds. In other words, it is the net cash inflow. It is defined as the excess of

the current assets over current liabilities and provisions.

CONCEPTS OF WORKING CAPITAL:

Conceptually, working capital is either explained as: - Net Working Capital or

Gross Working Capital. These concepts are not exclusive; rather they have

equal significance from management viewpoint. Gross working capital refers

to the firms investment in current assets. Net working capital refers to the

difference between current assets and current liabilities.

Working capital in simple terms means the amount of funds that a company

requires for financing its day-to-day operations. Finance manager should

develop sound techniques of managing current assets.

Composition of working capital

Constituents of Current Assets

1.Cash-in-Hand and Bank

2.Bill Receivable

P a g e | 2


5/232


6/232


3.Sundry Debtors

4.Short-term investments

5.Prepaid expenses

6.Outstanding income

7.Inventories or stock as

Raw materials

Work-in-progress

Stores & Spares

Finished Goods

Constituent of Current Liabilities

1.Bills Payable

2.Sundry Creditors

3.Outstanding Expenses

4.Short-term Loans, Advances and Deposits

5.Dividend Payable

6.Bank Overdraft

7.Provision for TaxationP a g e | 3


7/232


8/232


SOURCES

The major sources of working capital are:

1.Funds from business operations

2.Other incomes

3.Sales of non-current assets

4.Long-term borrowings

5.Issue of additional equity capital or preference share capital

USES OF WORKING CAPITAL:

1.Losses from business operations

2.Purchases of non-current assets

3.Redemption of debentures and preference shares

4.Dividends to shareholders


9/232

P a g e | 4


10/232


11/232

Working capital management of Bank of Ba roda Ltd.

Equation of Net Working C apital:

It is the excess of current assets over current liabilities.

Net Working Current Current

Captial Assets Liabilitie s

IMPORTANCE OF WORKIN G CAPITAL

Working capital may be r egarded as the lifeblood of the business. Without

Insufficient working capital, any business organization cannot ru n smoothly

or successfully.

In the business the Worki ng capital is comparable to the blood of the

human body. Therefore the study of working capital is of major importance

to the internal and external analysis because of its close relationship with

the current day to day operations of a business. The inadequacy or

mismanagement of working capital is the leadin g cause of business failures.

Solvency of the Business: Adequate working capital helps in maintaining the

solvency of the business by providing uninterrupted of production.

Goodwill: Sufficient amoun t of working capital enables a firm to make

prompt payments and makes and m aintain the goodwill.

P a g e | 5


12/232


13/232


Easy loans: Adequate working capital leads to high solvency and credit

standing can arrange loans from banks and other on easy and favorable

terms.

Cash Discounts: Adequate working capital also enables a concern to avail

cash discounts on the purchases and hence reduces cost.

Regular Supply of Raw Material: Sufficient working capital ensures regular

supply of raw material and continuous production.

Regular Payment of Salaries, Wages and Other Day TO Day

Commitments: It leads to the satisfaction of the employees and raises the

morale of its employees, increases their efficiency, reduces wastage and

costs and enhances production and profits.

Exploitation of Favorable market conditions: If a firm is having adequate

working capital then it can exploit the favorable market conditions such as

purchasing its requirements in bulk when the prices are lower and holdings

its inventories for higher prices.

Ability to Face Crises: A concern can face the situation during the

depression.

Quick And Regular Return On Investments: Sufficient working capital

enables a concern to pay quick and regular of dividends to its investors and

gains confidence of the investors and can raise more funds in future.


14/232

P a g e | 6


15/232


16/232


ADEQUATE WORKING CAPITAL

1.Adequate working helps in maintaining solvency of the business by

providing uninterrupted flow of production.

2.Sufficient working capital ensures regular supply of raw materials and

continuous production.

3.A concern having adequate working capital, high solvency and good credit

standing can arrange loans from banks and others on easy and favorable

terms.

4.Sufficient capital enables a business concern to make prompt payments

and hence helps in creating and maintaining goodwill.

5.Adequate working capital also enables a concern to avail cash discounts on

the purchases and hence it reduces cost.

6.Only concerns with adequate working capital exploit favorable market

conditions such as purchasing its requirements in bulk when the prices are

lower and by holding its inventories for higher prices.

7.A company which has ample working capital can make regular payment of

salaries, wages and day-to-day commitments which raises the morale of its

employees, increases their efficiency, reduces wastage cost and enhances

production and profits.

8.Adequate working capital enables a concern to face business crises in

emergencies such as depression because during such periods, generally,

there is much pressure on working capital.


17/232

P a g e | 7


18/232


19/232


9.Sufficiency of working capital enables a concern to pay quick and regular

dividends to its investors, as there may not be much pressure to plough

back profits. This gains the confidence of its investors and creates a

favorable market to raise additional funds in the future.

10.Adequacy of working capital creates an environment of security,

confidence, and high morale and creates overall efficiency in a business.

EXCESS OR INADEQUATE WORKING CAPITAL

Every business concern should have adequate amount of working capital to

run its business operations. It should have neither redundant or excess

working capital nor inadequate nor shortages of working capital. Both

excess as well as short working capital positions are bad for any business.

However, it is the inadequate working capital which is more dangerous from

the point of view of the firm.

DISADVANTAGES OF EXCESSIVE WORKING CAPITAL

Excessive working capital means ideal funds which earn no profit for the

firm and business cannot earn the required rate of return on its

investments.

P a g e | 8


20/232


21/232


Redundant working capital leads to unnecessary purchasing and

accumulation of inventories.

Excessive working capital implies excessive debtors and defective credit

policy which causes higher incidence of bad debts.

It may reduce the overall efficiency of the business.

If a firm is having excessive working capital then the relations with banksand other financial institution may not be maintained.

Due to lower rate of return n investments, the values of shares may also fall.

The redundant working capital gives rise to speculative transactions.

INADEQUATE WORKING CAPITAL:

A concern, which has inadequate working capital, pays its short-

termliabilities in time. Thus, it will lose its reputation and shall not be able to

get good credit facilities.

It cannot buy its requirements in bulk and cannot avail discounts, etc., it

becomes difficult for the firm to exploit favorable market conditions and

undertake profitable projects due to lack of working capital.

The firm cannot pay day-to-day expenses of operations, creates

inefficiencies, increases costs, and reduces the profits of the business.

P a g e | 9


22/232


23/232


It becomes impossible to utilize efficiently the fixed assets due to non-

availability of liquid funds.

The rate of return on investment also falls with the shortage of working

capital.

FACTORS DETERMINING THE WORKING CAPITAL:

1.Nature or character of business

2.Size of business or scale of operations

3.Production policy

4.Manufacturing process

5.Seasonal variables

6.Working capital cycle7.Rate of stock turnover

8.Credit policy

9.Business cycle

10.Rate of growth of business 11.Earning capacity and dividend policy

12.Price level changes

P a g e | 10


24/232


25/232


Working capital management cycle

Cash flows in a cycle into, around and out of a business. It is the business's

life blood and every manager's primary task is to help keep it flowing and to

use the cash flow to generate profits. If a business is operating profitably,

then it should, in theory, generate cash surpluses. If it doesn't generate

surpluses, the business will eventually run out of cash and expire.

The faster a business expands the more cash it will need for working capital

and investment. The cheapest and best sources of cash exist as working

capital right within business. Good management of working capital will

generate cash will help improve profits and reduce risks. Bear in mind that

the cost of providing credit to customers and holding stocks can represent a

substantial proportion of a firm's total profits.

There are two elements in the business cycle that absorb cash -

Inventory (stocks and work-in-progress) and Receivables (debtors owing

you money). The main sources of cash are Payables (your creditors)

and Equity and Loans.


26/232

P a g e | 11


27/232


28/232


Each component of working capital (namely inventory, receivables and

payables) has two dimensions ... TIM E and MONEY. When it comes to

managing working capital -TIME IS MONEY. If you can get money to move

faster aro und the cycle (e.g. collect dues from debtors more quickly)or

reduce the amount of money tied up (e.g. reduce inventory levels relative to

sales), the business will generate more cash or it will need to borrow less

money to fund working capital. As a consequence, you could re duce the

cost of bank interest or you'll h ave additional free money available to su

pport additional sales growth or investm ent. Similarly, if you can negotiate

improved terms with suppliers e.g. get longe r credit or an increased credit

limit; you effectively create free finance to help fund future sales.

It can be tempting to pay cash, if available, for fixed assets e.g. co mputers

plant, vehicles etc. If you do pay cash, remember that this is now longer

available for


29/232

P a g e | 12


30/232


31/232


working capital. Therefore, if cash is tight, consider other ways of financing

capital investment - loans, equity, leasing etc.

Actions and their positive impact of some working capital management

decisions:

ACTIONS POSITIVE IMPACT

Collect receivables (debtors) faster You release cash from the cycle

Collect receivables (debtors) slower Your receivables soak up cash

Get better credit (in terms of duration You increase your cash resources

or amount) from suppliers

Shift inventory (stocks) faster You free up cash

Move inventory (stocks) slower You consume more cash

WORKING CAPITAL ANALYSIS

As we know working capital is the life blood and the center of a business.

Adequate amount of working capital is very much essential for the smooth

running of the business. And the most important part is the efficient

management of working capital in right time. The liquidity position of the

firm is totally effected by the management of working capital. So, a study of

changes in the uses and sources of working capital is necessary to evaluate

the efficiency with which the working capital is employed in a business. This

involves the need of working capital analysis.


32/232

P a g e | 13


33/232


34/232


The analysis of working capital can be conducted through a number of

devices, such as:

1.Ratio analysis.

2.Fund flow analysis.

3.Budgeting.

1. RATIO ANALYSIS

A ratio is a simple arithmetical expression one number to another. The

technique of ratio analysis can be employed for measuring short-

term liquidity or working capital position of a firm. The following ratios can

be calculated for these purposes:

Current ratio.

Quick ratio

Absolute liquid ratio

Inventory turnover.

Receivables turnover.

Payable turnover ratio.

Working capital turnover ratio.

Working capital leverage

Ratio of current liabilities to tangible net worth.


35/232

P a g e | 14


36/232


37/232


2. FUND FLOW ANALYSIS

Fund flow analysis is a technical device designated to the study the source

from which additional funds were derived and the use to which these

sources were put. The fund flow analysis consists of:

a.Preparing schedule of changes of working capital

b.Statement of sources and application of funds.

It is an effective management tool to study the changes in financial position

(working capital) business enterprise between beginning and ending of the

financial dates.

3. WORKING CAPITAL BUDGET

A budget is a financial and / or quantitative expression of business plans and

polices to be pursued in the future period time. Working capital budget as a

part of the total budge ting process of a business is prepared estimating

future long term and short term working capital needs and sources to

finance them, and then comparing the budgeted figures with actual

performance for calculating the variances, if any, so that corrective actions

may be taken in future. He objective working capital budget is to ensure

availability of funds as and needed, and to ensure effective utilization of

these resources. The successful implementation of working capital budget

involves the preparing of separate budget for each element of working

capital, such as, cash, inventories and receivables etc.


38/232

P a g e | 15


39/232


40/232


INDUSTRY PROFILE

Meaning of Bank

According to banking regulation act of 1949 defines the term banking

as accepting for the purpose of lending or investment of deposits of moneyfrom the public, repay on demand or otherwise and withdraw by cheques,

draft or otherwise.

Kinds or types of bank: -

Commercial bank

Industrial bank

Foreign exchange bank

Co-operative bank

Agricultural bank

Development bank

P a g e | 16


41/232


42/232


Commercial bank

These banks are also called as deposit banks as they accept deposits

from the public and lend them for short period. Commercial banks

encourage savings among general public and supply financial needs of

modern business. These banks are purely meant to finance traders and

others. Thus commercial bank accept deposits and lend to needy customers

from short terms.

Function of commercial banks

There are two functions namely primary and secondary function:

Primary function includes acceptance of deposits, advancing of loans.

Secondary function includes agency function, general utility services.

PRIMARY FUNCTIONS

Acceptance of deposits

Banks accept deposits from the public. People keep deposit of money

for safety, interest, easy to transfer cheques. So they accept following types

of deposit.


43/232

P a g e | 17


44/232


45/232


Current Account Deposits

These deposits constitute major portion of banks circulating medium of

exchange. Normally business people keep money in his accounts as they can

withdraw and issues cheques any number of times. Banks does not pay any

interest for these deposits.

Saving Bank Account Deposits

People with steady and monthly income save their excess earning

through this account. There are certain restrictions in the withdrawals. Bankpays interest at a nominal rate. Small savings are encouraged in this

account.

Fixed Deposit Account

Money is accepted foe a fixed period it cannot be withdrawn before

expiry of fixed period. The interest rate is higher than other accounts. The

longer the period is the rate of interest

Advancing of Loans


46/232

P a g e | 18


47/232


48/232


The deposits received are invested by advancing loans to needy

borrowers for higher rate of interest. This function is source of profit for

banks.

Overdrafts

This facility is extended to current account holders where they are

allowed to overdraw more than the credit standing in their account. Since

the facility is only for respectable and reliable customers, bank may not

insist on security. The security will also be taken in the form of fixed

deposits, NSCS, shares, LIC policy and so on.

Cash Credit

Under this account bank gives loans to borrowers against certain

security. The entire loan amount will not be given at one time. It will allow

the borrower to withdraw from time to time depending on the values of

stocks debt in the go- down. The interest rate is charged on the amount

withdrawn.

Discounting of the Bills of Exchange

This is a popular type of lending. If the holder of an exchange of bills

needs money immediately he can get it discounted by the bank.


49/232

P a g e | 19


50/232


51/232


The bank pays the present price of bills after deducting commission and

when the bills mature the banks can receive the payment form the party

who accepted the bill.

Direct/Term Loans

Bank also gives loans to individuals or firms against collateral security.

The amount sanctioned will be credited to his requirements. Normally,

industrialists, agriculturists and others borrow these loans to start industries

and for his working capital.

P a g e | 20


52/232


53/232


SECONDARY FUNCTIONS

Agency function

Transfer of Funds

Banks help customers in transferring of funds from one place to the other

through drafts and other instruments, collect cheques, bills, salaries,

pensions, dividends, and rents on behalf of customers form other agencies.

Undertake the payments of subscription, insurance, premiums, rents, etc.

Undertake to buy and sell securities, acts as representative for customers in

other banks or financial institutions, acts as a trustee, execute and

administrator to manage trust.

Carry out deceased customers desire, signs, transfer forms anddocuments.

Banks give advice to customers on income tax matters.

General Utility Service

The banks will safe keep valuables and documents. It collects credit

information regarding customers, transfer of foreign exchange, providing

advisory services to industry, commerce, trade, project, prospectus, order

writing the issue of shares and debentures of companies.


54/232

P a g e | 21


55/232


56/232


Banking History (Article)

Banking in India in the modern sense originated in the last decades of the

18th century. The first banks were The General Bank of India, which started

in 1786, and Bank of Hindustan, which started in 1770; both are now

defunct. The oldest bank still in existence in India is the State Bank of India,

which originated in the Bank of Calcutta in June 1806, which almost

immediately became the Bank of Bengal. This was one of the three

presidency banks, the other two being the Bank of Bombay and the Bank of

Madras, all three of which were established under charters from the British

East India Company. For many years the presidency banks acted as quasi-

central banks, as did their successors. The three banks merged in 1921 to

form the Imperial Bank of India, which, upon India's independence, became

the State Bank of India in 1955.

Reserve Bank of India

Another breakthrough happened in this phase, which was Reserve Bank of

India. The Reserve Bank of India was set up on the recommendations Royal

Commission on Indian Currency and Finance also known as the Hilton-

YoungCommission. The commission submitted its report in the year 1926,though the bank was not set up for nine years. Reserve Bank of India (RBI)

was created with the central task of maintaining monetary stability in India.

The Government on December 20, 1934 issued a notification and on January

14, 1935, the RBI came into existence, though it was formally inaugurated

only on April 1, 1935.

Main functions of RBI were


57/232

1. Regulate the issue of banknotes.

P a g e | 22


58/232


59/232


2.Maintain reserves with a view to securing monetary stability.

3.To operate the credit and currency system of the country to its advantage.

The Bank began its operations by taking over from the Government the

functions so far being performed by the Controller of Currency and from the

Imperial Bank of India. Offices of the Banking Department were established

in Calcutta, Bombay, Madras, Delhi and Rangoon. Burma (Myanmar)

seceded from the Indian Union in 1937 but the Reserve Bank continued to

act as the Central Bank for Burma until Japanese Occupation of Burma and

later unto April 1947. After the partition of India, the Reserve Bank served

as the central bank of Pakistan up to June 1948 when the State Bank of

Pakistan commenced operations

Current Banking Structure

Banks in India can be categorized into Scheduled and Non-scheduled Banks

1. Scheduled Banks

Scheduled Banks in India constitute those banks, which have been included

in the Second Schedule of Reserve Bank of India (RBI) Act, 1934. RBI in turn

includes only those banks in this schedule which satisfy the criteria laid

down vide section 42 (6) (a) of the Act. As on 30 th June 1999, there were 300

scheduled banks in India having a total network of 64,918 branches. The

scheduled commercial banks in India comprise of State bank of India and its

associates (8), nationalized banks (19), foreign banks (45), private sector

banks (32), co-operative banks and regional rural banks

2. Non-Schedule Banks


60/232

P a g e | 23


61/232


62/232


Non-scheduled bank in India" means a banking company as defined in

clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949),

which is not a scheduled bank" .Banks in India can also be classified in a

different way.

Public Sector Banks

Private Sector Banks

Foreign Banks

Regional Rural Banks (RRBs)

The above mentioned classification overlaps with the previous one. Public

Sector, Private Sector and Foreign Banks fall the category of scheduled

banks. Currently, India has 88 scheduled commercial banks (SCBs) - 27

public sector banks (that is with the Government of India holding a stake),

31 private banks (these do not have government stake; they may be publicly

listed and traded on stock exchanges) and 38 foreign banks.

They have a combined network of over 53,000 branches and 17,000 ATMs.

According to a report by ICRA Limited, a rating agency, the public sector

banks hold over 75% of total assets of the banking industry, with the private

and foreign banks holding 18.2% and 6.5% respectively


63/232

P a g e | 24


64/232


65/232


RESEARCH METHODOLOGY

Introduction:

Business organization get funds from various sources and apply them into

long term and short term assets. The funds applied to meet the short term

needs of the organization are generally referred to as working capital. A

study on working capital management enables us to understand short term

financial position and performance of the company.

Title of the Study:

A study on WorkingCapital Management with reference to Bank of

Baroda Ltd.

Statement of problem:

Working capital is considered as the life blood of the business. Its effective

provision can do much to ensure the success of a business enterprise. The

firm should maintain a sound working capital position and should have

adequate finds to run the business operations. A company with a favourable

working capital is always in a position to take advantage of any beneficialbusiness opportunity that may arise at any given point of time. Hence the

purpose of this study is to review the management of working capital of

Bank of Baroda, one of the fastest growing banks in the country.


66/232

P a g e | 25


67/232


68/232


Objective of the study:

1.To study the working capital management of the company with respect to 5

years cash, inventory and receivables management.

2.To study the performance of the company for the given 5 years with the help

of ration analysis.

3.To identify liquidity of the bank.

4.To study the method of financing of working capital

5.To identify, understand and interpret the problems of working capital and put

forward suggestions.

Research methodology:

5 years of balance sheet and profit and loss account stated in the annual

reports were used for analysis. Working capital and concerned ratios were

used as tool of analysis. Based on the computation, the financial position

and performance of the business was evaluated and suggestions were

made. Regarding the financing of working capital both the methods wereevaluated by extracting information from the balance sheet of five years,

then the best alternative was chosen on which the banks position regarding

the financing of working capital was known.


69/232

P a g e | 26


70/232


71/232


Reference period:

The study covered in this case study is for 5 financial years:

2011-12

2010-11

2009-10

2008-09

2007-08

Period of study: November 2012 to February 2013

Scope of study:

The study of working capital management of Bank of Baroda is wide as the

figures are taken pan-India. All the Rupees figures are in Crores.

Data Collection:

The requirement of data for the study was collected from the secondarysources of information. The secondary data has been obtained from the

financial statement of the Bank in the form of balance sheet and profit and

loss account. The analysis and interpretation has been thus derived with the

help of secondary data available.


72/232

P a g e | 27


73/232


74/232


Tools of analysis:

Ratio analysis, Fund flow analysis (Schedule of changes), Trend Percentage

(Cash balances)

Limitation of the study:

1.The prime limitation is that the study used mainly secondary data for the

analysis of the performance of the company.

2.Limited time was also a hindrance in the detailed study as it is difficult for a

student to work in an organization as well as study.

3.The study also suffers from cost constraints.

CHAPTER SCHEME

SL

NO. CHAPTER DESCRIPTION

This chapter

explains the

different aspects

of the industry. It

1. Introductionalso gives the

theoretical

background of

the various

aspects of the

selected problem.

P a g e | 28


75/232


76/232


This chapter

reveals the

statement of theproblem,

Researchobjectives, data

2. collectionDesign

methodology,

scope, limitations

of the study and

the chapter

scheme.

The history,

management,

policies, vision,

3.Company mission, purpose

Profile and other details

of the company is

mentioned in this

chapter.

This chapter is

concerned with

Analysis anddeducing results

4. from the analysisInterpretation

and thereby

drawing

inferences.

Summary of This chapter is

5.Findings concerned with

Suggestions singling out of the

and findings from the

P a g e | 29


77/232


78/232


Conclusions project study.

Bibliography Sources of the study

Annexure Documents referred

P a g e | 30


79/232


80/232


Company Profile Bank of Baroda

Bank of Baroda (BOB) is a financial services company that provides banking

services. It offers personal banking, business banking, corporate banking,

merchant banking and treasury banking services. The bank primarily

operates in the US, the UK and Asia Pacific regions. It is headquartered in

Baroda, India and employs about 38,960 people. The company recorded

revenues of INR 87,458.4 million (approximately $1,943.3 million) in the

financial year ended March 2010 (FY2010), an increase of 11% over FY2009.

Operating profit was INR 49,352.6 million (approximately $1,096.6 million)

in FY2010, an increase of 14.6% over FY2009. Its net profit was INR 30, 583.3

million (approximately $679.6 million) in FY2010, an increase of 37.3% over

FY2009.

In 1908, Maharaja Sayajirao Gaekwad III Maratha of the Maratha Empire set

up Bank of Baroda (BOB). Two years later, BOB established its first branch in

Ahmedabad.

BOB grew domestically, until after World War II. Then in 1953 it crossed the

Indian Ocean to serve the communities of Indians in Kenya and Indians in

Uganda by establishing a branch each in Mombasa and Kampala. The nextyear it opened a second branch in Kenya, in Nairobi, and in 1956 it opened a

branch inDar-es- Salaam.

Then in 1957 BOB took a giant step abroad by establishing a branch in

London. London was not only the center of the British Commonwealth, but

also the most important international banking centre.


81/232

P a g e | 31


82/232


83/232


Domestically, 1959 saw BOB complete its first domestic acquisition when it

took over Hind Bank.

Timeline of Bank of Baroda

1960s

1961: BOB merged in New Citizen Bank of India. This merger helped it

increase its branch network in Maharashtra.

BOB also opened a branch in Fiji.

1962: BOB opened a branch in Mauritius.

1963: BOB acquired Surat Banking Corporation in Surat, Gujarat.

1964: BOB acquired two banks, Umbergaon Peoples Bank in southern

Gujarat and Tamil Nadu Central Bank in Tamil Nadu state.

1964: BOB lost its branch in Narayanjanj (East Pakistan) due to the Indo-

Pakistanwar. It is unclear when BOB had opened the branch.

1965: BOB opened a branch in Guyana.

1967: The Tanzanian government nationalized BOBs three branches there

and transferred their operations to the Tanzanian government-

owned National Banking Corporation.

1969: The Government of India nationalized 14 top banks, including BOB.

P a g e | 32


84/232


85/232


BOB incorporated its operations in Uganda as a 51% subsidiary, with the

government owning the rest.

1970s

1972: BOB acquired The Bank of Indias operations in Uganda.

1974: BOB opened a branch each in Dubai and Abu Dhabi.

1975: BOB acquired the majority shareholding and management control of

Bareilly Corporation Bank (est. 1928) and Nainital Bank (est. in 1954), both

in Uttar Pradesh. Since then, Nainital Bank has expanded to Uttarakhand

State.

1976: BOB opened a branch in Oman and another in Brussels. The Brussels branch

was aimed at Indian firms from Mumbai (Bombay) engaged in diamond cutting

and jewellery having business in Antwerp, a major center for diamond cutting.

1978: BOB opened a branch in New York and another in the Seychelles.

1979: BOB opened a branch in Nassau, the Bahamas.

1980s

BOB opened a branch in Bahrain and a representative office in Sydney,

Australia.


86/232

BOB, Union Bank of India and Indian Bank established IUB International

Finance, a licensed deposit taker, in Hong Kong. Each of the three banks

took an equal share.

P a g e | 33


87/232


88/232


1985: BOB (20%), Bank of India (20%), Central Bank of India (20%) and

ZIMCO (Zambian government; 40%) established Indo-Zambia Bank (Lusaka).

BOB also opened an Offshore Banking Unit (OBU) in Bahrain.

1988: BOB acquired Traders Bank, which had a branch network in Delhi.

1990s

1990: BOB opened an OBU in Mauritius, but closed its representative office

in Sydney.

1991: BOB took over the London branches of Union Bank of India and

Punjab & Sind Bank (P&S). P&Ss branch had been established before 1970

and Union Banks after 1980. The Reserve Bank of India ordered the

takeover of the two following the banks' involvement in the Sethia fraud in

1987 and subsequent losses.

1992 BOB incorporated its operations in Kenya into a local subsidiary with a

small tranche of shares quoted on the Nairobi Stock Exchange.

1993: BOB closed its OBU in Bahrain.

1996: BOB Bank entered the capital market in December with an Initial

Public Offering (IPO). The Government of India is still the largest

shareholder, owning 66% of the bank's equity.

1997: BOB opened a branch in Durban.

P a g e | 34


89/232


90/232


1998: BOB bought out its partners in IUB International Finance in Hong

Kong. Apparently this was a response to regulatory changes following Hong

Kongs reversion to the Peoples Republic of China. The now wholly owned

subsidiary became Bank of Baroda (Hong Kong), a restricted license bank.

BOB also acquired Punjab Cooperative Bank in a rescue.

BOB also incorporate wholly owned subsidiary BOB Capital Markets Ltd.for

Broking Business.

1999: BOB merged in Bareilly Corporation Bank in another rescue. At the

time, Bareilly had 64 branches, including four in Delhi.

In Guyana, BOB incorporated its branch as a subsidiary, Bank of Baroda

Guyana.

BOB added a branch in Mauritius, but closed its Harrow Branch in London.

2000s

2000: BOB established Bank of Baroda (Botswana).

2002: BOB acquired Benares State Bank (BSB) at the Reserve Bank of Indias

request. BSB was established in 1946 but traced its origins back to 1871 and

its function as the treasury office of the Benares state. In 1964, BSB had

acquired Bareilly Bank (est. 1934), with seven branches; it also had taken

over Lucknow Bank in 1968. The acquisition of BSB brought BOB 105 new

branches.


91/232

2002: Bank of Baroda (Uganda) was listed on the Uganda Securities

Exchange (USE).

P a g e | 35


92/232


93/232


2003: BOB opened an OBU in Mumbai.

2004: BOB acquired the failed Gujarat Local Area Bank, and returned to

Tanzania by establishing a subsidiary in Dar-es-Salaam. BOB also opened a

representative office each in Kuala Lumpur, Malaysia, and Guangdong,

China.

2005: BOB built a Global Data Centre (DC) in Mumbai for running its

centralized banking solution (CBS) and other applications in more than 1,900

branches across India and 20 other counties where the bank operates. BOB

also opened a representative office in Thailand.

2006: BOB established an Offshore Banking Unit (OBU) in Singapore.

2007: In its centenary year, BOBs total business crossed 2.09 lakh crores, its

branches crossed 1000, and its global customer base 29 million people.

2008: BOB opened a branch in Guangzhou, China (02/08/2008) and in

Kenton, Harrow United Kingdom.

BOB opened a joint venture life insurance company with Andhra Bank and

Legal and General (UK) called Indias First Life Insurance Company

2010s

2010: Malaysia awarded a commercial banking license to a locally

incorporated bank to be jointly owned by Bank of Baroda, Indian Overseas

Bank and Andhra Bank. The new bank, India BIA Bank (Malaysia), will reside

in Kuala Lumpur, which has a large population of Indians. Andhra Bank will


94/232

hold a 25% stake in the joint- venture; BOB will own 40% and IOB the

remaining 35%.

P a g e | 36


95/232


96/232


BOB opened a branch in New Zealand

2011s

2011: BOB opened an Electronic Banking Service Unit (EBSU) was opened at

Hamriya Free Zone, Sharjah (UAE). It also opened four new branches in

existing operations in Uganda, Kenya (2), and Guyana. BOB closed its

representative office in Malaysia in anticipation of the opening of its

consortium bank there. BOB received In Principle approval for the

upgrading of its representative office in Australia to a branch.

The Malaysian consortium bank, India International Bank Malaysia (IIBM),

finally opened in Kuala Lumpur, which has a large population of Indians.

BOB owns 40%, Andhra Bank owns 25%, and IOB the remaining 35% of the

share capital. IIBM seeks to open five branches within its first year of

operations in Malaysia, and intends to grow to 15 branches within the next

three years.

Bank of Barodas Customers

Individual

Stock Broking Entities

HUF (Hindu Undivided Family)

Proprietorship Concerns

Public Limited Companies

Private Limited Companies

Corporate Partnership Firms


97/232

P a g e | 37


98/232


99/232


BRANCH NETWORK

Branch Network (as of 2/2/2013)

Area No. of Branches

Metro 885

Urban 751

Semi-Urban 1125

Rural 1385

Total (Indian) 4146

Foreign (Overseas) 93

Total (Global) 4239

Controlling Offices

Zonal Offices 13

Regional Offices 56

Human Resources (Staff as of 01.04.2011)

Officers 15725

Clerks 15602

Sub Staff 7986

On Contract 3

Total 39313


100/232

P a g e | 38


101/232


102/232


Global PresenceBRANCHES

Australia

Bahamas

Bahrain

Belgium

China

Fiji Islands

Hong Kong

Mauritius

Republic of South

Africa

Seychelles

Singapore

Sultanate of Oman

United Arab Emirates

United Kingdom

SUBSIDIARIES

Botswana


103/232

Ghana

Guyana

Kenya

New Zealand

Tanzania

Trinidad &

Tobago

Uganda

JOINT VENTURE

Zambia

Malaysia

REPRESENTATIVE OFFICES

ThailandP a g e | 39


104/232


105/232


BANK OF BARODAs Organisational StructureP a g e | 40


106/232


107/232


About Bank of Baroda

The heritage

It all started with a visionary Maharaja's uncanny foresight into the future of

trade and enterprising in his country. On 20th July 1908, under the

Companies Act of 1897, and with a paid up capital of Rs 10 Lacs started the

legend that has now translated into a strong, trustworthy financial body,

THE BANK OF BARODA.

It has been a wisely orchestrated growth, involving corporate wisdom, social

pride and the vision of helping others grow, and growing itself in turn.

The founder, Maharaja Sayajirao Gaekwad, with his insight into the future,

saw "a bank of this nature will prove a beneficial agency for lending,

transmission, and deposit of money and will be a powerful factor in thedevelopment of art, industries and commerce of the State and adjoining

territories."

The ethics

Between 1913 and 1917, as many as 87 banks failed in India. Bank of Baroda

survived the crisis, mainly due to its honest and prudent leadership. This

financial integrity, business prudence, caution and an abiding care and

concern for the hard earned savings of hard working people, were to

become the central philosophy around which business decisions would be

effected. This cardinal philosophy was over years of its existence, to become

its biggest asset. It ensured that the Bank survived the Great War years. It


108/232

ensured survival during the Great Depression. Even while big names were

dragged into the Stock Market scam and

P a g e | 41


109/232


110/232


the Capital Market scam, the Bank of Baroda continued its triumphant

march along the best ethical practices.

The Heroes

No history is complete without mention of its heroes, mostly ordinary

people, who turn in extra-ordinary performances and contribute to building

an institution. Over the years, there have been thousands of such people.

The Bank salutes these "unknown soldiers" who passionately helped to

create the legend of Bank of Baroda.

There were also the leaders, both corporate and royal, who provided the

vision and guided the Bank through trail blazing years, and departing, left

behind footprints on the sands of time. This Roll of Honor will be incomplete

without mention of men, of the stature of Maharaja Sayajirao Gaekwad,

Sampatrao Gaekwad, Ralph Whitenack, Vithaldas Thakersey, Tulsidas

Kilachand and NM Chokshi.

Bank of Baroda salutes these leaders whose vision helped to create an

institution.

People Initiatives

Bank is endowed with a competent and motivated employee base which is

engaged in handling the extensive business operations of the Bank across

the globe. Strategic HR interventions like, according cross border and crosscultural


111/232

P a g e | 42


112/232


113/232


work exposure to its managers, hiring diverse functional specialists to

support line functionaries and complementing the technical competencies

of its people by imparting conceptual, managerial and leadership skills, gave

the Bank competitive advantage. People initiatives were blended with IR

initiatives to create an effectively harmonious workplace, where everyone

prospered.

Bank launched a comprehensive leadership development program Project

UDAAN during 2010-11 with the prime objective of creating leaders for the

future. Such a massive and comprehensive leadership development effort is

unparalleled in the Indian banking industry and first of its kind for any

Indianstate-owned Bank. These kinds of elaborate man management

policies have made the Bank a breeding ground for business leaders. The

Bank provided several leaders to the industry- men who went on to build

other great institutions.

New Technology Platform

Bank has made substantial progress in its end-to-end business and IT

strategy project covering the Banks domestic, overseas and subsidiary

operations. All Branches, Extension Counters in India, overseas business and

five sponsored Regional Rural Banks are on the Core Banking Solution (CBS)

platform.

Bank has been providing to its customers Internet Banking, viz., Baroda

Connect and other facilities such as online payment of direct and indirect


114/232

taxes and certain State Government taxes, utility bills, rail tickets, online

shopping, donation to temples and institutional fee payment. Bank has a

wide network of ATMs across the country and has also launched mobile

ATMs in select cities. Initiatives have

P a g e | 43


115/232


116/232


been taken to provide corporate customers with facilities like direct salary

upload, trade finance and State Tax payments etc. Bank has introduced

Mobile Banking (Baroda M-connect) and prepaid gift cards.

Bank has implemented the Global Treasury Solution in its key territories like

UK, UAE, Bahamas, Bahrain, Hong Kong, Singapore and Belgium. Bank has

taken various technological initiatives in overseas operations such as

implementation of Centralized SWIFT activity through Data Centre in

Mumbai, Payment Messaging System with Anti Money Laundering check,

Anti Money laundering Compliance and Online List Matching solution. While

Bank implemented Transaction-basedInternet Banking facility for its

customers in Uganda, Botswana, UAE, New Zealand, Kenya, Mauritius and

Seychelles, a Viewbased e-banking facility was made available in Fiji, Oman,

Tanzania and UK.

Marketing Initiatives

Ever since its rebranding in 2005, Bank has consistently promoted its major

strengths viz. large international presence; technological advancement and

superior customer service etc. Bank had introduced the sub brand BARODA

NEXT- State of the Art-Straight from the Heart to showcase how it has

utilized technology to nurture long term relationships for superior customer

experience. The sub brand has been reinforced by alternate delivery

channels such as internet banking, ATMs, mobile banking etc and robust

delivery outfits like Retail Loan Factories, SME Loan Factories, and City Sales


117/232

Office etc. Banks constant endeavor to strengthen its branch/ATM network

combined with well informed staff offering

P a g e | 44


118/232


119/232


personalized service at its various touch points have enhanced customer

interactions and satisfaction. Thus the Bank has firmly positioned itself as a

technologically advanced customer-centric bank.

Corporate Social Responsibility (CSR) Initiatives

Bank has always upheld inclusive growth high on its agenda. Bank has

established 36 Baroda Swarojgar Vikas Sansthan (Baroda R-SETI) for

imparting training to unemployed youth, free of cost for gainful self

employment & entrepreneurship skill development and 52 Baroda Gramin

Paramarsh Kendra and for knowledge sharing, problem solving and credit

counseling for rural masses across the country, as on 31.03.2011. Bank has

also established 18 Financial Literacy and Credit Counseling Centres (FLCC)

in order to spread awareness among the rural masses on various financial

and banking services and to speed up the process of Financial Inclusion, as

on 31.03.2011.

The Future

Revolutionary and discontinuous changes in the operating environment are

stark reminders that business success is 'impermanent'. Bank has achieved

substantial progress in technology and is continuously integrating multiple

platforms of technology to generate synergies. Bank continuously attempts

to adapt to the dynamic economic environment while engaging in long term

relationships to provide superior customer service.


120/232

P a g e | 45


121/232


122/232


Banks constant endeavor to delight its customers, which is built on its

strong fundamentals will make it stronger, more resilient and enable to

achieve its vision of to be the Most Admired Bank.

P a g e | 46


123/232


124/232


4.1 CURRENT RATIO

It may be defined as the relationship between the current assets and

current liabilities. The ratio is a measure of general Liquidity of the firm for a

short period of time. A ratio of 2: 1 is considered ideal.

The formula is

Current Ratio = Current Assets

Current Liabilities

Significance

1.Current ratio indicates liquidity or the short-term solvency (i.e., short term

financial position) of a concern. In other words, it indicates the ability of a

concern to meet its current liabilities (short term obligations).

2.It is also a measure of the available working capital in a concern at any time.

Therefore, it is also known as working capital ratio.

3.A relatively high current ratio is an indication that the firm is liquid and has

the ability to pay its current obligations in time as and when they become

due. On the other hand, a relatively low current ratio represents that theliquidity position of the firm is not good and the firm shall not be able to pay

its current liabilities in time without facing difficulties.

P a g e | 47


125/232


126/232


TABLE 4.1 SHOWING CURRENT RATIO OF THE BANK

Year Current Assets Current Liabilities Current Ratio

2012 64,168.54 11,400.46 5.629

2011 49,934.07 9,656.73 5.171

2010 35,467.06 8,815.97 4.023

2009 24,087.11 16,538.15 1.456

2008 22,299.28 12,594.41 1.771

Data Analysis

The ideal current ratio is 2:1. Bank of Baroda has an improving current ratio

from March 2008 to March 2012. In year, March 2008, the CR is 0.1.771. In

year, March 2009, the CR is 1.456. In year, March 2010, the CR is 4.023. In

year, March 2011, the CR is 5.171. In year, March 2012, the CR is 5.629.

P a g e | 48


127/232


128/232


GRAPH 4.1 SHOWING CURRENT RATIO OF THE BANK

Current Ratio

6

5

4

35.629

Current Ratio

2 4.023

5.171

1 1.771 1.456

0

2008 2009 2010 2011 2012

Interpretation

Bank of Barodas current ratio is increasing every year since 2009. There has

been seen a major growth between Year 2009 and 2010. The company has a

high Current ratio which shows Bank of Baroda is in a good position to pay

off its current liabilities. It can be also inferred that Bank of Baroda has lot of

Cash Idle.


129/232

P a g e | 49


130/232


131/232


4.2 ABSOLUTE LIQUID RATIO

It may be defined as the relationship between absolute Liquid assets and

current Liabilities. Absolute Liquid assets include cash in hand and at bank

and marketable securities or temporary investments.

Significance

The Absolute liquid ratio is very useful in measuring the liquidity position of

a firm. It measures the firms capacity to pay off current obligations

immediately and is a more rigorous test of liquidity than the current ratio. It

is used as a complementary ratio to the current ratio.

A ratio of 1: 1 is considered to be good. Such a ratio will imply that the firm

has enough Liquid assets to meet all current Liabilities of the firm.

The formula is

Absolute Liquid Ratio = Cash + Marketable Securities

Current Liabilities

P a g e | 50


132/232


133/232


TABLE 4.2 SHOWING ABSOLUTE LIQUID RATIO OF THE BANK

Year Cash Current Liabilities Absolute Liquid Ratio

2012 21,651.46 11,400.46 1.899

2011 19,868.18 9,656.73 2.057

2010 13,539.97 8,815.97 1.536

2009 10,596.34 16,538.15 0.641

2008 9,369.72 12,594.41 0.744

Data Analysis

In year 2008, Absolute Liquid Ratio is 0.744. In year 2009, Absolute Liquid

Ratio is 0.641. In year 2010, Absolute Liquid Ratio is 1.536. In year 2011,

Absolute Liquid Ratio is 2.057. In year 2012, Absolute Liquid Ratio is 1.899.

P a g e | 51


134/232


135/232


GRAPH 4.2 SHOWING ABSOLUTE LIQUID RATIO OF THE BANK

Absolute Liquid Ratio2.5

2

1.5

1 2.057 1.899Absolute Liquid Ratio

1.536

0.50.744 0.641

0

2008 2009 2010 2011 2012

Interpretation

The company has improving current ratio since 2009. This means the

company is getting better and better every year and is in a strong liquidity

position. The company has enough cash resources to meet its immediate

current liabilities.

P a g e | 52


136/232


137/232


LONG TERMS SOLVENCY RATIOS

Long-term solvency ratio conveys a firms ability to meet the interest cost

and repayment schedule of its Long-term obligations.

These ratios are helpful to management in proper administration of capital.

It also helps the creditors to know the capacity of a business concern to pay

debt in future.

The various ratios are:

Proprietary Ratio

Solvency Ratio

Fixed asset to net worth Ratio

P a g e | 53


138/232


139/232


4.3 PROPRIETARY RATIO

This ratio establishes the relationship between the shareholders funds and

the total assets of the firm. It establishes the claims of the shareholders on

the firms assets. This ratio indicates the extent to which the assets of the

company can be lost without affecting the interest of creditors of the

company. It usually is expressed as an Equity ratio.

Proprietary Ratio = Shareholders Funds

Total Assets

Significance

Proprietary ratio shows the extent to which shareholders own the business

and thus indicates the general financial strength of the business. The higher

the proprietary ratio, the greater is the long stability of the company and

consequently greater protection to creditors. However, a very high

proprietary ratio may not necessarily be good as if funds of outsiders are not

used for long +term financing, and may not be able to take advantage of

trading on equity.

P a g e | 54


140/232


141/232


TABLE 4.3 SHOWING PROPRIETARY RATIO OF THE BANK

Year Shareholders Funds Total Assets Proprietary Ratio

Mar-12 412.38 447,321.47 0.00092

Mar-11 392.81 358,397.17 0.00110

Mar-10 365.53 278,316.71 0.00131

Mar-09 365.53 227,406.73 0.00161

Mar-08 365.53 179,599.52 0.00204

Data Analysis

In year 2008, The Proprietary ratio is 0.00204. In year 2009, The Proprietary

ratio is 0.00161. In year 2010, The Proprietary ratio is 0.00131. In year 2011,

The Proprietary ratio is 0.00110. In year 2012, The Proprietary ratio is

0.00092.

P a g e | 55


142/232


143/232


GRAPH NO. 4.3 SHOWING PROPRIETARY RATIO OF THE BANK

P roprietary Ratio

0.00204

0.0025 0.00161

0.002 0.0011 0.00131

0.00150.00092

0.001

0.0005

0

Proprietary Ratio

Mar-12 Mar-11 Mar-10 Mar-09 Mar-08

Interpretation

As Proprietary ratio repres ents the relationship of owners funds to total

assets, higher the ratio or the sh are of the shareholders in the total capital

of the company, better the long t erm solvency position of the company.

The proprietary ratio is falling continuously. In year ending March 2008, the

ratio w as 0.0204 and in year ending March 20 12, the ratio has become

0.00092. T his shows the companys long term solv ency position is not good

enough and the company should raise more money th rough equity shares

to improve the situation.


144/232

P a g e | 56


145/232


146/232


4.4 SOLVENCY RATIO

It can be defined as the relationship between total liabilities to

outsiders and total assets of a firm.

Solvency Ratio = Total Liabilities to outsiders

Total Assets

Generally lower the solvency ratio, more satisfactory or stable is thelong-

term solvency position of a firm.

TABLE 4.4 SHOWING SOLVENCY RATIO OF THE BANK

Total Liabilities to

Year outsiders Total Assets Solvency Ratio

Mar-12 4,08,444.16 4,47,321.47 0.913

Mar-11 3,27,747.33 3,58,397.17 0.914

Mar-10 2,54,394.35 2,78,316.71 0.914

Mar-09 1,98,033.04 2,27,406.73 0.871

Mar-08 1,55,961.18 1,79,599.52 0.868

Data Analysis

In year 2008, The Solvency ratio is 0.868. In year 2009, The Solvency ratio is

0.871. In year 2010, The Solvency ratio is 0.914. In year 2011, The Solvency

ratio is 0.914. In year 2012, The Solvency ratio is 0.913.

P a g e | 57


147/232


148/232


Graph no. 4.4 SHOWING SOLVENCY RATIO OF THE BANK

Solvency Ratio

0.92

0.91

0.9

0.89

0.88

Solvency Ratio

0.87

0.86

0.85

0.84

2008 2009 2010 2011 2012

Interpretation

Generally, lower the ratio of total liabilities to total assets, more satisfactory

or stable is the long term position of a firm. The solvency ratio of Bank of

Baroda is also going in adverse direction. In year ending March 2008, the

ratio was 0.868 and in year 2012, the ratio has become 0.913. The company

should make effective measures to reduce the long term debt and instead

focus on issuing more of equity shares to improve the solvency position of

the business.


149/232

P a g e | 58


150/232


151/232


4.5 FIXED ASSET TO NET WORTH RATIO

This ratio establishes the relationship between fixed asset and shareholders

fund. This ratio indicates the extent to which shareholders funds are sunk in

the fixed asset. Generally, the purchase of fixed assets should be financed

by the shareholders equity, which includes reserve, surpluses and retained

earnings.

Fixed Asset to Net worth Ratio = Fixed Assets (After Depreciation)

Net Worth Ratio

TABLE 4.5 SHOWING FIXED ASSET TO NET WORTH RATIO OF THE BANK

Year Fixed Asset Net Worth Fixed Asset to Net Worth Rati

Mar-12 2,341.50 27,476.85 0.085Mar-11 2,299.72 20,993.11 0.110

Mar-10 2,284.76 15,106.39 0.151

Mar-09 2,309.76 12,835.54 0.180

Mar-08 2,427.00 11,043.93 0.220

Data Analysis

In year 2008, the Fixed Asset to Net worth Ratio is 0.220. In year 2009, the

Fixed Asset to Net worth Ratio is 0.180. In year 2010, the Fixed Asset to Net

worth Ratio is 0.151. In year 2011, the Fixed Asset to Net worth Ratio is

0.110. In year 2012, the Fixed Asset to Net worth Ratio is 0.085.


152/232

P a g e | 59


153/232


154/232


GRAPH NO. 4.5 SHOWING FIXED ASSET TO NET WORTH RATIO OF THE

BANK

Fixed Asset to Net Worth Ratio

0.250.22

0.2 0.18

0.151

0.15

0.11

Fixed Asset to N et Worth Ratio

0.1 0.085

0.05

0

2008 2009 20 10 2011 2012

Interpretation

If the ratio is less than 1, it implies that owners funds are more than total

fixed assets and a part of workingg capital is provided by the shareholders. If

the ratio is more than 1, it implies that owners funds are not sufficient to

finance the fixed assets and the firm has to depend upon outsiders to

finance the fixe d assets. Bank of Baroda has its Fixed Asset to Net Worth

ratio ranging from 0.22 i n year 2008 to 0.085 in year 2012. This sho ws that

the company is capable enough to finance its fixed assets and dont have to

rely on outsiders.


155/232

P a g e | 60


156/232


157/232


4.6 CURRENT ASSET TO TOTAL ASSET RATIO

Current asset to total asset ratio reveals the part of current asset to the

total asset. It helps in determining what part of the total assets is utilized for

fixed capital and for current asset.

Current Asset to total asset Ratio = Current Asset

Total Asset

TABLE 4.6 SHOWING CURRENT ASSETS TO TOTAL ASSET RATIO OF THE

BANK

Year Current Assets Total Asset Current Assets to total Assets ratio

2012 64,168.54 4,47,321.46 0.143

2011 49,934.07 3,58,397.17 0.139

2010 35,467.06 2,78,316.71 0.127

2009 24,087.11 2,27,406.73 0.106

2008 22,299.28 1,79,599.52 0.124

Data Analysis

In year 2008, the Current Assets to Total Assets ratio is 0.124. In year 2009,

the Current Assets to Total Assets ratio is 0.106. In year 2010, the Current

Assets to Total Assets ratio is 0.127. In year 2011, the Current Assets to

Total Assets ratio is 0.139. In year 2012, the Current Assets to Total Assets

ratio is 0.143.


158/232

P a g e | 61


159/232


160/232


GRAPH 4.6 SHOWING CUR RENT ASSETS TO TOTAL ASSET RATIO OF THE

BANK

Current Assets to Total Assets Ratio

0.160.139 0.143

0.14 0.124 0.127

0.12 0.106

0.1

0.08 Current Assets to Total Assets

0.06Ratio

0.04

0.02

0

2008 2009 2010 2011 2012

Interpretation

Current assets to total asse ts ratio is quite low but improving every year. Though

it is a good industry average , the company should have more current assets

which would help them to be in a better position to meet its short-term ob

ligations.


161/232

P a g e | 62


162/232


163/232


4.7 CASH TO CURRENT ASSET RATIO

The proportion of cash to current assets directly indicates the level of cash

maintained by the company. Lower the ratio, greater may be the

profitability of the concern. A downward trend in the ratio over a period of

time indicates a better control of cash whereas an upward trend reveals a

slack control over cash resources.

Cash to Current Asset = CashCurrent Asset

TABLE 4.7 SHOWING CASH TO CURRENT ASSETS RATIO OF THE BANK

Year Cash Current Assets Cash to Current Assets ratio

2012 21,651.46 64,168.54 0.337

2011 19,868.18 49,934.07 0.398

2010 13,539.97 35,467.06 0.382

2009 10,596.34 24,087.11 0.440

2008 9,369.72 22,299.28 0.420

Data Analysis

In year 2008, the Cash to Current assets ratio is 0.420. In year 2009, the

Cash to Current assets ratio is 0.440. In year 2010, the Cash to Current

assets ratio is 0.382. In year 2011, the Cash to Current assets ratio is 0.398.

In year 2012, the Cash to Current assets ratio is 0.337.

P a g e | 63


164/232


165/232


GRAPH 4.7 SHOWING CASH TO CURRENT ASSETS RATIO OF THE BANK

Cash to Current Asset ratio

0.450.42 0.44

0.3980.382

0.4 0.337

0.35

0.3

0.25

0.2Cash to Current Asset ratio

0.15

0.1

0.05

0

2008 2009 2010 2011 2012

Interpretation

The Cash to Current Asset ratio is falling. The current assets have inc reased

proportionately every year but the Cash has not increased in the sa me

proportion. The composition of cash resources in the current assets should

be increased.

P a g e | 64


166/232


167/232


4.8 NET PROFIT TO TOTAL INCOME RATIO

Net profit to Total Income ratio shows the relationship between the total

incomes earned and net profit of the year. The presence of expenditures in

the business leads to such low Net Profits.

Net Profit to Total income ratio = Net Profit

Total income

TABLE 4.8 SHOWING NET PROFIT TO TOTAL INCOME RATIO OF THE BANK

Year Net Profit Total Income Net profit to Total income ratio

Mar-12 5006.96 33096.05 0.151

Mar-11 4241.68 24695.11 0.172

Mar-10 3058.33 19504.70 0.157

Mar-09 2227.20 17849.24 0.125

Mar-08 1435.52 13864.52 0.104

Data Analysis

In year 2008, Net Profit to Total income ratio is 0.104. In year 2009, Net

Profit to Total income ratio is 0.125. In year 2010, Net Profit to Total income

ratio is 0.157. In year 2011, Net Profit to Total income ratio is 0.172. In year

2012, Net Profit to Total income ratio is 0.151.

P a g e | 65


168/232


169/232


GRAPH 4.8 SHOWING NET PROFITS TO TOTAL INCOME RATIO OF THE

BANK

Net Profit to total Income Ratio

0.2

0.180.172

0.1570.16

0.151

0.14 0.125

0.120.104

0.1Net Profit to total Income Ratio

0.08

0.06

0.04

0.02

0

2008 2009 2010 2011 2012

Interpretation

The lower the Net profit to total income ratio, the lower is the profitability

and vice versa. In year ending March 2008, the ratio is 0.104 and in year

2012, the ratio is 0.151. Bank of Baroda has low ratio due to high presence

of expenses in the income statement.


170/232

P a g e | 66


171/232


172/232


4.9 TOTAL EXPENSES TO TOTAL INCOME RATIO

Total expenses to total income ratio = Total expenses

Total income

TABLE 4.9 SHOWING TOTAL EXPENSES TO TOTAL INCOME RATIO

Total

Year Expenses Total Income Total Expenses to Total Income ratio

Mar-12 28089.10 33096.05 0.84

Mar-11 20453.42 24695.11 0.82

Mar-10 16446.37 19504.70 0.84

Mar-09 15622.03 17849.24 0.87

Mar-08 12428.99 13864.52 0.89

Data Analysis

In year 2008, the Total expenses to total income ratio is 0.896. In year 2009,

the Total expenses to total income ratio is 0.875. In year 2010, the Total

expenses to total income ratio is 0.843. In year 2011, the Total expenses to

total income ratio is 0.828. In year 2012, the Total expenses to total income

ratio is 0.849.


173/232

P a g e | 67


174/232


175/232


GRAPH NO. 4.9 SHOWING TOTAL EXPENSES TO TOTAL INCOME RATIO

Total Expe nses to Total Income ratio

0.896

0.9

0.875

0.88

0.86 0.84 3 0.849

0.84 0.828 Total Expenses to Tot al Income

ratio

0.82

0.8

0.78

2008 2009 2010 2011 2012

Interpretation

The higher the Total expenses to total income ratio, the lower is th e

profitability. Bank of Barodas ratio is quite high which shows that the

company has high presence of expenses in the income statement.

P a g e | 68


176/232


177/232


4.10 PAID-UP CAPITAL OF THE BANK OF BARODA

TABLE 4.10 SHOWING PAID-UP CAPITAL OF THE BANK

Year Paid Up capital

Mar-12 411.12

Mar-11 391.55

Mar-10 364.27

Mar-09 364.27

Mar-08 364.27

Data Analysis

In year 2008, the paid-up capital is Rs 364.27 Cr. In year 2009, the paid-up capital

is Rs 364.27 Cr. In year 2010, the paid-up capital is Rs 364.27 Cr. In year 2011,

thepaid-up capital is Rs 391.55 Cr. In year 2012, the paid-up capital is Rs 411.12

Cr.


178/232

P a g e | 69


179/232


180/232


GRAPH NO. 4.10 SHOWING PAID-UP CAPITAL OF THE BANK

Paid-up Capital

420411.12

410

400391.55

390

380

Paid-up Capital

370 364.27 364.27 364.27

360

350

340

2008 2009 2010 2011 2012

Interpretation

In year ending March 2012, the paid up capital is highest. The company has high

debt content in the capital structure. Though the companys equity is increasing

year by year, Bank of Baroda should increase the equity content in manifolds.


181/232

P a g e | 70


182/232


183/232


CASH MANAGEMENT:

Cash is your businesss lifeblood. Managed well, your company remains

healthy and strong. Managed poorly, your company goes into cardiac arrest.

Poor cash management will probably undermine your businesss short-

term stability and itslong-term survival.

Cash management is concerned with the managing of:

Cash flows into and out of the firm.

Cash flows within the firm and

Cash balance held by the firm is used to finance deficit or invest surplus cash.

P a g e | 71


184/232


185/232


4.11 CASH BALANCES

TABLE 4.11 SHOWING CASH BALANCES OF THE BANK

Year Cash

March 31, 2012 21651.46

March 31, 2011 19868.18

March 31, 2010 13539.97

March 31, 2009 10596.34

March 31, 2008 9369.72

Data Analysis

In year 2008, the Cash balance is Rs 9369.72. In year 2009, the Cash balance

is Rs 10596.34. In year 2010, the Cash balance is Rs 13539.97. In year 2011,

the Cash balance is Rs 19868.18. In year 2012, the Cash balance is Rs

21651.46.


186/232

P a g e | 72


187/232


188/232


Graph no. 4.11 SHOWING C ASH BALANCES OF THE BANK

Cash Balances

25000 21651.46

19868.18

20000

1500013539.97

10596.3 49369.72

Cash Balances

10000

5000