Banking Services in India-583

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CERTIFICATE

This is to certify that the dissertation project entitled Financial

statement analysis submitted by Miss. Nandita Dutta ,is a 6th

semester student of Department of Business Management BITS

affiliated to Fakir Mohan University, Vyasa Vihar, Balasore, Orissa,

for the partial fulfilment of B.B.A Degree is a record of bonafide

research work carried out by her under my supervision and

guidance. The project workembodies Miss. Nandita Duttaoriginal

contribution and it has not been submitted anywhere else before.

I wish him all the success and bright future.

Dhirendra Kumar Jena

Lecturer in BITS

M.Com, MBA, Msc (IT)

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PREFACE

World over, dramatic changes are taking place in banks and banking

operations. The Financial Performance of the bank must be judged in the context

of changing scenario. The complexities of banking operation in the recent years

have undergone significant changes due to innovations in the banking products

cross border dealings.

The banks have become a part and parcel of economic activities of the

people Understanding of the development of the banks, structural system and

organizations, basic concept and their functions is of paramount importance for

the students of management.

In the case of Balasore-Bhadrak Central Co-operative Bank, various

types of ratios have been used for different years, which are compared and shown

in trend. The structure, the ongoing development, and requisite information of

various aspects of this bank have been amply described in this project. Numeroustables, figures, diagrams, examples and interpretations of various ratios are

throughout in this project.

Date: Miss. Nandita Dutta

Place:

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ACKNOWLEDGEMENT

Before I get in to the thick of the things, I would like to add a few heartfelt

words for the people played a significant role for timely and systematic

preparation of the project.

In particular I would like to extend my respectful gratitude to Mr.

DHIRENDRAJENA,Faculty of Finance under whose guidance I carried out my

project work. This project report will be tedious and tiring job with out his

valuable suggestion and co-operation.

Last but not the least, special thanks to my parents, friends and staff

members ofBALASORE BHADRAK CENTRAL CO-OPERATIVE BANKfor

providing valuable information and due support in the process of preparing the

report.

Miss. Nandita Dutta

Roll No.-63204B10001

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DECLARATION

I do here by declared that the project on FINANCIAL STATEMENT

ANALYSIS of BALASORE BHADRAK CENTRAL CO-OPERATIVEBANK is submitted by me to BALASORE INSTITUTE OF TECHNICAL

STUDIES, Balasore towards partial fulfillment of the requirement of the BBA

project. I have made all sincere and dedicated effort to make this project

purposeful.

All the findings of my work are true in their nature and not based on any earlier

successful attempt made in any other report.

I further declare that the project work is bonafied report to the best of my

knowledge ad information. The honorable authority may take necessary action

against me if they find the report misleading and false.

Miss. Nandita Dutta

Roll No.-63204B10001

BALASORE INSTITUTE OF TECHNICAL STUDIES,

Balasore

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CONTENTS

Page-No

Preface -2-Acknowledgement -3-

Declaration -4-

CHAPTER-1 6-12

Co-operative Banking in India

CHAPTER-2 13-33

Bank Profile

Chart

CHAPTER-3 34-43

Ratio Theoretical Frame Work

Methodology

Objective of the Study

Scope of the Study

Limitations

CHAPTER-4 44-56

Ratio Analytical Frame Work

CHAPTER-5 57-60

Findings

Suggestion

Conclusion

BIBLIOGRAPHY 61-62

ANNEXURE 63-74

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CHAPTER-1 Co-operative banking in India

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Co-operative Credit Institutions

CO-OPERATIVE BANK IN INDIA

In the general sense, the term Co-operation means, the idea of living together

and working together. Co-operation is a form of business organization. It is the

only system of voluntarily organization suitable for poor people. In this system, the

persons voluntarily associate together as human beings on a basis of equality, for

the promotion of their economic interests.

Thus, the Co-operative Bank can be defined as an institution established on

the Co-operative principles and engaged in the normal banking business of

accepting deposits from the public for the purpose of lending and repay it on

demand or otherwise.

Organization Structure of the Co-operative Credit Institution

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Rural Co-operativeCredit institution Urban Co-operative Banks


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The Co-operative Movement in Indian Banking was started with the objective of

providing finance to the agriculturist and thus relieving him from the clutches of

the village money lenders, i.e., to solve the problem of rural indebtness by

supplying credit at low rates of interest. In India, the Co-operative Societies Act

was passed in 1904. A new Co-operative Societies Act was passed in 1912.

Though the movement has completed more than 90 years, the progress has been

slow.

STRUCTURE OF CO-OPERATIVE BANKING IN INDIA

The Co-operative Credit Institutions in India can be classified as under:

Co-operative Credit Structure in India

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Short-TermStructure

Long-TermStructure

PrimaryAgricultural

Credit Societies

District CentralCo-operative

Banks

State Co-operativeBanks

Primary Co-operativeAgriculture and RuralDevelopment Banks

State Co-operativeAgricultural and RuralDevelopment Banks


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From the chart, it can be seen that the organization of the Co-operative Credit

Societies is pyramidal in nature. It has a three- tier structure.

i) Primary Credit Societies at the bottom.

ii) Central Co-operative Bank at the middle.

iii) State Co-operative bank at the top.

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That is, the primary societies are functioning in the various towns and

villages, the Central Banks at the district headquarters and the State Co-

operative Banks at the State Capitals forming the apex of the system. The

Reserve Bank of India assist the co-operative structure by providing

concessional finance through NABARD in the form of General Lines ofCredit for lending to agricultural activities. Thus, the whole system is

integrated with the Banking structure of the country.

The primary Agricultural Credit Societies: A Primary society is an

association of borrowers and non-borrowers residing in a particular locality

and taking interest in the business affairs of one another. As membership is

practically open to all inhabitants of a locality, people of different status are

brought together into the common organization. The affairs of those

organization are managed by honorary secretaries and presidents assisted by

board of directors, all these officials being elected from amongst theshareholders of the principle of one man, one vote. Most of the societies are

organized and working on the principles of unlimited liability. The society

may be started with ten or more persons of a village. In March 2001, nearly

10, 00, 00,000 (Ten Crore) as on that date. Their deposit base is very poor at

rs. 13481 crore as at end March 2001. Total outstanding loans of all PACS are

totally dependent on CCbs for their financial need. NABARD has also been

extending funds to develop the infrastructure of PACs.

Capital

The primary society derives its funds from entrance fees, share capital, reservefunds deposit or loans from non-members, from central and provincial co-

operative banks and from the Government. The deposits of the society may be

either fixed, savings or recurring. Unfortunately, the deposits of primary

societies are not sufficiently large. The society provides short-term credit to its

members ordinarily on the personal security of the borrower with the personal

surety or sureties of other members. It may also lend on mortgages.

Central Co-operative Banks:A central co-operative Bank is a federation of

primary societies in a specified area. Where membership of a Central Co-

operative Bank is restricted to primary societies only, it is known as a

banking union. Now days, individuals are also admitted as members of all

Central Co-operative Banks. Central Co-operative Banks are generally

situated at the headquarters of district and have on their boards of

management, individuals of sufficient influence and business capacity in

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addition to representatives of primary societies. The CCBs form an important

in the short-term structure of Co-operative Credit Institutions. AS at March

2001 there were 367 district central co-operative Banks with 12580 branches

in various states in India.

Capital

A Central Co-operative Bank obtains its funds from share capital, reserve

funds, deposits (current, savings, fixed, recurring) and loans from the State

Co-operative Bank or other joint stock banks. Sometimes primary societies

deposit their surplus funds with the Central Co-operative Banks to which they

are affiliated and this forms another source of funds for the Central Co-

operative Banks.

State Co-operative banks:

At the top of the co-operative banking, there are State Co-operative Banks,

organized with the object attracting deposits from the rich urban classes.

These banks are also more suitably equipped to serve as channel between the

co-operative movement and the joint stock banks. There are at present 30 such

banks. The constitutions of banks differ from one another, but generally

speaking, the membership comprises representatives of Central banks as well

as individual shareholders. A logical development of these banks would have

been establishment of all-India Co-operative Bank. but there is no such

instution,although the Indian state co-operative banks association has been

coordinating their activities and performing certain services to all thesebanks.NABARDE maintains contact with the state co-operative banks. In

addition to offering them rediscount facilities, collect and disseminate useful

information regarding co operative movement. As at the end march 2002,

there where 30 SCBs with 831 branches in India. The total deposits of all

SCBs as at end march 2001 aggregated to rs.32626 crore as compared to

rs.29557 crore in March 2000. Among the States, Maharashtra mobilized

maximum deposits of rs.9136/- crore, followed by Tamil Nadu at ra.2475

crore. Tamil Nadu came third rs.1635/- crore of deposits in March 1997 of the

30 SCBs in 2001, 23 made profits while 6 made losses during 2000-01.

Capital and operation of the Bank

The State Co-operative banks attract deposits from the richer urban classed

and grant financial accommodation to Central Co-operative Banks and

through them to primary societies. They form the only link between the co-

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operative organization on the on hand and the money market and joint stock

banks on the other. They are the balancing factors as between Central Co-

operative Banks; for the transfer the surplus funds available with some Central

Banks to the needy ones. The State Co-operative Banks derive their funds

from share capital, reserve fund, deposit form the public, loans from the State

Bank, joint stock banks, and deposits of Central Banks affiliated to them.

Generally speaking, it may be stated that the organization of the State Co-operative Banks is very efficient and, in spite of competition from joint stock

banks, they do very good business. They are prohibited from transacting all

types of commercials banking business and so their funds are not at present

being fully employed. With the growth of Co-operative movement these funds

may in due course be more effectively and efficiently employed within the

movement.

Co-operative Banks

Banks established under the co-operative system are called Co-operative

Banks. These are State Co-operative Banks, Central Co-operative Banks and

Primary Co-operative Banks. SCB is an apex level bank for a state. CCBs are

apex level baks for each district. Primary Co-operative Banks are rural or

Semi-Urban Level Co-operative Banks.

Co-operative Credit Societies

These are financial institutions whose primary object is to provide credit

facilities, i.e., loans and advances to its members only. These societies areformed in large organizations or Government Department or at certain

regions. The members are those working in the particular organization/region.

They collect subscriptions, deposits, etc., from members and loans from co-

operative banks and extend credit facilities to its members only.

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Primary Agricultural Credit Societies

These are similar to credit societies, but these credit societies can extend

loans to its members only for the purpose of agriculture connected activities.

Credit Societies are not permitted to undertake all banking business. In other

words, they cant provide cheque book facility to members and they cant deal

with persons other than their members. While the RBI has overall control on

all financial institutions, operational guidelines and control over co-operative

banks need to have a minimum paid-up capital of rs.1 lakh only.

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CHAPTER-2

BANK PROFILEBITS 14


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CHART

INTRODUCTION

Agriculture, banking and co-operatives the main story of Rural India with its

vast chunk of farmers have made repaid strides in Balasore, the granary of

Orissa. And District Central Co-operative Bank(DCCB) has come a long way

in combing the three into one with a meager working capital of just about

Twenty six thousand rupees, the BAlasore Central Co-operative Bank got

registered in the February, 1916 and was later amalgamated with Bhadrak

Central Co-operative Bank in 1956 when the working capital was a more 10

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lakhs where as it is a whopping 633 crore now. And the total advances to

various secrors amazing.

Keeping pace with the changing times and emerging technologies, all itsThirty Branches along with The Head office have been fully computerized

and 97 PACS out of 38 are not way behind.

HISTORY

Way back in 1907, Co-operative movement made its presence felt in the

District of Balasore with the launching of its first ever Co-operative Societywhen the province of Orissa was still a part of Bengal. Here in an extract from

the first Annual Report of the Balasore Co-operative Bank Ltd, Balasore for

the year 1916-17.

The first Co-operative Society in the District was in the year 1907 in the

Sadder Sub- Division long before the Co-operative movement was established

in the province, then a part of the province of Bengal. From 1907-1912 there

was mother society and in 1912, a society was started in the Khasmahals of

Bhadrak Division. Towards the middle or the year 1914, an informal

conference of local gentlemen was held under the presidency of Raj Bahadur

Monomohan Roy ( then Babu M.M Roy), then collector or the District for the

purpose of discussing the measures to be adopted for giving an impetus to the

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Co-operative movement in the Sadder Sub-Division of the district. The

present Register, then Deputy Register also attended. It was then decided that

an honorary organizer be appointed. In October 1914, Babu Prafulla Chandra

patnaik was appointed honorary organizer Mr. Kilby had then taken charge of

the District, Before march, 1915 Seven Societies were organized which were

financed by the Honorable Raja of Kanika and Babu upendra naraindutta

gupta.

However, it was felt towards the end of the year 1915 that when we had so

many villages in which the principle of joint and several liability had been

worked so long that the creation of a Central Bank would have to precede the

consideration of village societies.

Mr. Collins, Register of Co-operative Societies on leave now. After personally

visiting some of the Societies, advised the starting of a Co-operative Central

Bank. The Honorary Organizer then drew up the Bye-Laws and prospectus on

the basis of model Bye-Laws and prospectus and organized the Central Bank.

An application for its registration sent on the 12th January 1916.

It was only registered as NO.134 of 1915-16 under Act II or 1912 on the 19 th

February 1916. Although the Bank had been registered, it didnt commence to

work till the last or june 1916. The operations of Bank are confined to the

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Sadder Sub-didvision of Balasore only. The report further signed it is too

early yet to try to observe anything on this point, but we believe the societies

have been much benefited by the facilities them for purchasing bullocks, by

bringing into play the spirit of fair and honest dealing between man and man,

a spirit we are doing our best to foster.

Rudiments of Co-operations are not unknown in the village communities

though the principle of joint credit is unfamiliar to the people of this part of

the country. The council or elders, even now exercise considerable power in

the village. It isnt unnatural that Co-operative movement should spread in the

congenial soil and the popularity of the movement and the appreciating by the

villagers of the benefits and daily in evidence by the increasing eagerness of

village people sector to become members of existing society or to open

nuances. Improvidence and illiteracy are the two be setting evils of the people

and the Co-operative movement by teaching thrift and punctuality, by giving

impetus to education and improvement in agriculture, by introducing

systematized payment of loans can contribute it. It will have amply justified

its inauguration. And since then there has been no looking back.

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NAME AND ADDRESS OF THE BANK

i) The Balasore Bhadrak Central Co-operative Bank Ltd. (formerly The

Balasore District Cooperative Central Bank Ltd.) is registered as

cooperative Society under the Orissa Cooperative Societies Act1962

ii) (Orissa Act-2 of 1963) & its address shall be At O.T> Road,

po.Balasore Dist.Balasore-756001.

iii) It may be referred in this Byelaws briefly THE CENTRAL BANK

AREA OF OPERATION

The area of operation of the bank shall extend the whole of

Balasore and Bhadrak Revenue Districts. It may open Branches in any part of

these Districts with prior sanctions of the Registrar, Co-Operative Societies,

Orissa.

OBJECTS

i) To raise funds for financing Co-operative Societies registered or

deemed to be registered under the Act and duly affiliated to it,

individuals and other body corporate enrolled as nominal or associate

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member of the Bank subject to the provisions of the Orissa Co-

operative Societies Act, Rules framed and orders issued there.

ii) To develop, assist and co-ordinate the work of the affiliated Societies

and secure for them financial help whenever, necessary, arrange for

their supervision and inspection.

iii) To organize Co-operative Societies for the promotion of thrift, self

help and mutual aid among agriculturists and other persons for

promotions of economic interest of its members in accordance with

Co-operative principles.

iv) To organize Self Help Groups and to promote Micro finance among the

economical poors directly or through affiliated PACS and LAMPCS.

v) To develop and strengthen Co-operative Movement in the Districts of

Balasore and Bhadrak.

vi) To provide training facilities to its own employees and

employees/directors/ members of affiliated Societies and to establish

training centre for the purpose.

vii) To arrange for supply of printing stationeries, books, forms,

register iron chests etc. as required by the affiliated Societies.

viii) To carry on general business of banking as defined in the

Banking Regulation Act.

ix) To caryy on solicing or procuring insurance business both for life and

non-life as referral agent to boost non-fund business of the Bank.

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x) To caryy on Treasury business for profitable investment of Banks

fund.

xi) To undertake such other works to promote the cause of co-operation

and to do all such things as may be necessary or desirable for

accomplishment of the aforesaid objects.

xii) To regulate the activities of employee of its affiliated Credit

Societies.

xiii) To undertake any other business that will be required growth of

the Central Bank in the contest of changing scenario of the Banking

Sector.

MEMBERSHIP

i) Every Co-operative Society central or primary within the area of

operation of the Central Bank.

ii) All the members of the committee including Co-opted Members but

excluding the members nominated or appointed U/s 28(1-b),31(1) or

32(1) of the Act of the primary Societies affiliated to the Central

Bank shall be deemed to be the members of the Central Bank in term

of section 16(1-a) of the Act so long as they continue as members of

the Managing Committee of their respective society.

iii)The State Government.

iv) The Central Government.

v) The Orissa State Co-operative Bank Ltd.

vi) Orissa Khadi & Village Industry Board.

vii) Anybody corporate as a nominal or associate member subject to

compliance of provisions under the O.C.S. Act and Rules.

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viii) An individual including professionals like Chartered Accountant

& experts in the fields of the Banking, Agriculture, Co-operation

and Economics as nominal or associate members.

ix) Self Help Groups as nominal members.

x) Any Local Authority.

FUNDS

The Central Bank shall ordinarily obtain its funds from following

sources:

i) Share subscription.

ii) Deposits.

iii)Borrowings.

iv) Loans from Government.

v) Other borrowings including debentures.

vi) Grant and subsides from Government.

vii) Admission and other fees.

viii) Contribution towards cost of supervision and collection.

ix) Donation

x) Miscellaneous.

SHARE CAPITALThe Authorized Share Capital of Central Bank shall be Rs.

100,00,00,000/- ( Rupees One hundred Crores)made up of

9,00,00(Nine lakh) sharea of Rs.1000/- each allotted to regular

members and 10,00,000(ten lakh) shares of Rs.100/- each allotted to

nominal members.

TRANSFER AND WITHDRAWAL OF SHARES

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i) No members shall be permitted to transfer any share

except in accordance with the provisions of the Act and Rules.

ii) No member, shall any time be permitted to withdraw any

share except for the purpose of affiliating itself to another

Central Bank or when it is liquidated or with the written

permission of the Registar.

DEPOSITS

The Bank pays different rates of interest depending upon the

nature and term deposit.

Hence, deposit costs depend upon deposit mix of Bank.

BORROWINGS

To meet the objects the central Bank may borrow money by way

of deposit and loan for such period and on such terms as fixed by the

Managing Committee/ Finanace bank from time to time, upto 30(thirty)

times of paid up share capital plus free Reserves.

INVESTMENTS

The funds of the Central Bank shall be utilized for the purpose of

granting loans for Agriculture, Non-agriculture and Non-Farm Sector or

any other as decided by the Committee.

a) To Co-operative Societies registered or deemed to have been

registered under the act and affiliated to the Bank.

b) .

(i) To individuals, Private Limited Companies/ Body Corporate

who are nominal/ associate members of the Bank for different

purposes against adequate and proper securities within the

ambit of the directives/ orders of R.B.I./ NABARD/O.S.C.B.

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Ltd. And R.C.S. Orissa received from time to time observing

all formalities.

(ii) The Central Bank may also invest its funds in the manner and

schemes as approved by NABARD/OSCB/ Government

approved schemes and the Committee from time to time.

(iii) It shell be competent for the bank to act as an agent for the

disbursement of any type of loans obtained from the

government or any other institution on such terms and

condition as may be agreed upon with the approval of the

Registrar.

(iv) Central bank may invest fund beyond SLR in Government

securities/approved trust Securities/Mutual funds and sharemarket as per RBI/NABARD guidelines.

MAXIMUM LIMIT OF LOANS

a) The central bank shell not lend to any society any sum which with the societys

other indebt ness will exceeds the maximum borrowing power of that society as

fixed from time to time or determined by registrar by a general order to any class of

societies or by Specific orders to any society.

b) Bank may finance loan to nominal member including individuals

under farm. Non-Farm, Non-Agriculture sectors as per the approved scheme of

NABARD/RBI/OSCB and the management of the bank up to a limit fixed in the

scheme.

RATE OF INTEREST OF LOANS

The rate of interest shall be charged on loan according to the decision of the

managing committee of the bank from subject to guidelines issued by RBIO from

time to time.

SANCTION OF LOANS TO MEMBER

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i) It shall be duty of the committee or such sub-committee to which power

have been delegated by the committee to deal with any application for loan

received from its members, to obtain full information if necessary from the

registrar regarding such societies and to see that loan are granted them with

due care and caution

ii) The committee or sub committee shall settle all terms in regard to period of

repayment of loan granted to them, the installment of repayment and the

rate of interest etc. in conformity with the instruction issued by the

RBI/NABARD/Registrar from time to time.

iii) The committee or sub-committee authorizes Secretary or his sub-ordinate

officer for sanction of loan with limit fixed for each.

EXTENSION OF LOAN

The committee shall power to extend from time to time the period fixed for

repayment of loan in case of cooperative societies and individual subject to approval

of R.C.S. (O). However, the committee may grant extension of time of repayment of

individual loans for the interest of the bank recommendation as per the banking

norms as and when required.

REPAYMENT OF LOANS

i) It shall be open to borrower to repay a loan wholly or partly before the due

date according to its convenience.

ii) If the due date for repayment of loan falls on holidays, the next day

working day shall be deemed to be the due date for repayment of such loan

or installment of loan and the member shall be treated to have committed

default on the following date of due date.

LOAN COMMITTEE

To expedite disposal of loan application, the managing committee may form a loan

committee consisting of 5(five) member. The President, the Secretary and 3(three)

other member elected by the committee will constitute the sub-committee. The

managing committee may delegate its powers under (a) (xxi) of the central bank to

deal with the matter .3(three) member will form the quorum for the meeting of the

sub committee. Ordinarily 3(three) clear days notice shall be given to the member

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for holding this meeting. All proceedings by the loan committee shall be placed

before the managing committee for ratification. Incase urgency where there may not

be sufficient time to convene a meeting the business may be circulating papers to the

members of the loan committee. Any decision arrived by the circulation shall be

placed in the next meeting if the committee for ratification.

GENERAL BODY

THE GENERAL BODY OF THE CENTRAL BANK SHELL CONSISTS OF:

i) Nominated member of the committee.

ii) Members societies as per the provision of the O.S.C. Act and Rules in this

regard and

iii) The member co-opted members (but not nominated) of the committee ofprimary societies which are affiliated to the Central Bank.

The following among other matters be dealt with by the General Body:

i) Consideration of Audit Report and Annual Report

ii) Election of member of the Committee if any prescribed matter.

iii) Reviewing the loan advance to the member of the committee or any of

their near relatives having common economic interest and if necessary to

direct action for recovery of such loan.

iv) Approval of the programmed of the Activities of the Central Bank

prepared by the committee for ensuring year.

v) Disposal of net profit

vi) Expulsion of member if any.

vii) Consideration of any other matter which may be brought forward

accordance with the Bye-laws

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viii) The general Body of the Central Bank shell be held at least once in

cooperative tear being convened by the committee.

ix) The committee shall convene special meeting of the general body member.

x) No business other then that specified in such requisition shall be discussed

in such requisitioned meeting.

ANNUAL STATEMENT

The central Bank shall prepared by Bank annually in such form as may be prescribed

as per B.R. Act, NABARD Act and Registrar from time to time and submit the same

to proper quarters as required in time.The statement of final accounts prepared by central Bank shall placed before the

auditor general of cooperative societies, got to be issued by the A.G.C.S. in time

every year.

PROFIT

i) The Annual net profit of the central Bank declared distributed by the Auditor

general, cooperative societies shall be disposed of the following manner.

a) Not less then 25%shall be carried to the reserve fund.

b) Such portion profit as may be prescribed under the Act and Rules to the

cooperative Education fund.

c) 15(fifteen) % shall be carried to the Agricultural Credit Stabilization Fund.

d) Out of the reminder a dividend may paid up to a maximum of 12% per

annum to members proportionally to the amount of paid up share capital

held during the year subject to norm stipulated by the NABARD and

Registrar. Provided that if the member or in case of deceased member or

executor of liquidated Societies failed to received the dividend due to them

after issue of three notice from the Central Bank within a period three

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years, on completion of the third year the dividend due to such member

shell forfeit and forfeited amount shall be credited to Reserve Fund of the

Central Bsank.

e) The reserve fund shall belong to the bank as a whole. No member can

claim as share in it. It shall be invested in any of the securities specified in

section -20 of the Indian Trust Act 1882(ii of 1882) and shall not be drown

up except with the Registrar.

REDRESSAL OF NPA LOANS AND BAD DABTS

a) The Central Bank can formulate one time settlements (O.T.S.) scheme forrecovery NPA loan from the affiliated societies and individual as a case may

as per guideline fixed by the committee of management subject to the

approval of the Govt/R.C.S.(O).

b) If any sum belonging to the central bank is either stolen or other wise lost and

found irrecoverable or if any loan due to central Bank is found otherwise

irrecoverable either wholly or in part it shall be open to the General Body to

write off such amount against such source of funds subject to approval of

Auditor general of Cooperative Societies.

MISCELLANEOUS

No amendment shall be made except at a meeting of the General Body. And in

accordance with Rules framed under the Act. The amendment shall not take effect

until it is registered by the authority, i.e., the Deputy Registrar of Co-operative

Societies, Balasore. All matters not specifically provided in these provided in rules

of Business to be framed under these Bye-law, shall be decided according to the

terms of the Act and Rules framed and orders issued there under. Should any doubt

arises as to the construction or meaning of the provision of the Act or any Rule

framed under the Act or any order issued there under any Bye-law of Central Bank

or its affiliated societies in regard to any matter not provided for in these Bye-laws

or as to the validity or effect to the proceeding of a meeting of the Executive

Committee, the Managing Committee or General Body, the President shall refer the

same to the Registrar Co-operative Societies, Orissa whose decision shall be final.

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INSPECTION AND SUPERVISION

i) The Central bank shall have the right to inspect the societies affiliated to

it and such Inspection may be done by deputing to any Officer of the

Central Bank.

ii) The Central bank have power to call for from Societies affiliated to it

such Societies for the purpose of such inspection.

iii) To inspect and to ascertain by enquiry if the Bye-laws are being properly

observed by the societies.

iv) To obtain and review periodical report on the working of such societies.

v) To call for list of defaulting borrowers in Societies affiliated to it.

vi) To direct the Societies concerned to take proper action and to take steps

to see that such orders are carried out.

vii) To make subsidiary rules for regulating the work or supervision.

viii) To direct to take such legal action for recovery of its or the Central

Bank dues.

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ix) To direct for production of any Books or records of the book.

VISION 2010

i) In all villages there must be S.H.G. & T.F.G. with Credit Linkage.

ii) At least one SBD passbook in each family in all villages.

iii) To make all PACS profit making vibrant co-operative institution.

iv) All agricultural family will be in co-operative fold.

v) Dividend to all share holders.

vi) Total financial inclusion in Balasore and Bhadrak District.

vii) To provide state or Art core Banking service in all Branches having

ATM connectivity with major Bank or the country.

viii) To be a model scheduled Co-operative Bank in the country with sound

Corporate Governance System in place.

Performance indicator in BBCC Bank

Yea

r

Total

Shar

e

Capit

al

Ow

n

Fun

d

Depo

sit

Borro

Wing

s

Cost of

Manag

ement

(T.COS

T)

Investm

ent

Capital

Adequa

cy

Ratio

CD

Rati

o

Loa

n

Out

stan

din

g

08-

09

24.67 26.1

8

239.0

8

133.0

8

1.52 95.15 18.01% 131

%

312

72.4

2

09-

10

29.88 32.7

4

261.9

0

195.7

8

1.23 116.63 13.70% 146

%

382

86.7

9

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210-

111

33.20 38.1

2

299.0

1

211.2

6

1.44 131.29 12.78% 146

%

437

92.2

6

211-

12

35.39 48.2

5

347.9

5

208.6

2

1.51 144.69 13.69% 136

%

472

13.9

212-

13

40.18 53.8

0

441.7

6

252.8

8

1.24 262.05 14.06% 110

%

489

69.4

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Total share capital

0 10 20 30 40 50 60

08-09

2009-10

2010-2011

2011-12

2012-13

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Rs. In Crores


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0

200

400

600

800

1000

2008-

09

2009-

10

2010-

11

2011-

12

2012-

13

DepositsRs. In Crores


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0

10

20

3040

50

20

04-05

20

05-06

20

06-07

20

07-08

20

08-09

Own Fund

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Rs. In Crores


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133.28

195.78211.26 208.62

252.88

0

50

100

150

200

250

300

2008-09 2009-10 2010-11 2011-12 2012-13

Brrowings Rs. In Crores

Cost of Management (T.COST)

0

0.5

1

1.5

2

2008-09 2009-10 2010-11 2011-12 2012-13

Rs. In Crores

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0

50

100

150

200

250

2004-

05

2008-

09

2009-

10

2010-

11

2011-

12

2012-

13

Investment Rs. In Crores

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131%146% 146%

136%

110%

0%20%40%60%

80%100%

120%

140%160%

2004-

05

2008-

09

2009-

10

2010-

11

2011-

12

2012-

13

CD Ratio


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306.91

211.53 227.95250.04 257.65

0

50

100

150

200

250300

350

2008-092009-10 20010-

11

2011-12 20012-

13

Profit

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CHAPTER-3

Ratio Theoretical Frame Work Methodology

Objectives

Scope

Limitations

FINANCIALSTATEMENT ANALYSIS

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Financial Statementscontain a wealth of information. If properly analyzed and

interpreted, they can provide valuable insight in to the firms performance.

Analysis of Financial Statements is of vital interest to the lenders (short term as

well as long term), investors, security analysis, managers and others. The

relationships between various items in the financial statements are expressed by

means of ratios.

A Ratio is a simple arithmetical expression of the relationship of one number to

another. It may be defined as the indicated quotient of two mathematical

expressions. According to Accountants Handbook by Wixon, Kell and Bedford,

a ratio is an expression of the quantitative relationship between two numbers.

According to Kohler, a ratio is the relation , of the amount, a, to another , b,

expressed as the ratio of a to b; a:b (a is to b); or as a simple fraction, integer,

decimal, fraction or percentage. In simple language ratio is one number

expressed in terms of another and can be worked out by dividing one number into

the other. Ratio analysis is a technique of analysis and interpretation of financial

statements. It is the process of establishing and interpreting various ratios for

helping in making certain decisions. However, ratio analysis is not an end in

itself. It is only a means of better understanding of financial strengths and

weaknesses of a bank. Calculation of mere ratios does not serve any purpose,

unless several appropriate ratios are analyzed and interpreted. The ratios may be

used as a symptom like blood pressure, the pulse rate or the or the body

temperature and their interpretation depends upon the caliber and competence of

the analyst.

The followings are the four steps involved in the ratio analysis:

(I) Selection of relevant data from the financial statements depending upon

the objective of the analysis.

(II) Calculation of appropriate ratios from the above data.

(III) Comparison of the calculated ratios with the ratios of the same firm in the

past, or the ratios developed from projected financial statements or the

ratios of some other banks or the comparison with ratios of the industry to

which the bank belongs.

(IV) Interpretation of the ratios.

Interpretation of the Ratios

The interpretation of ratios is an important factor. Though calculation of ratios is

also important but it is only a clerical task where as interpretation needs skill,

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intelligence and farsightedness. The inherent limitations of ratio analysis should

be kept in mind while interpreting them. The impact of factors such as price level

changes, change in accounting policies, window dressing, etc. should be kept in

mind when attempting to interpret ratios. The interpretation of the ratios can be

made in the following ways:

(a) Single Absolute Ratio(b) Group of Ratios

(c) Historical Comparison

(d) Projected Ratios

(e) Inter-bank Comparison

Use and Significance of Ratio Analysis

The ratio analysis is one of the most powerful tools of financial analysis. It is

used as a device to analyze and interpret the financial health of enterprise. Just

like a doctor examines his patient by recording his body temperature, blood

pressure, etc. before making his conclusion regarding the illness and before

giving his treatment, a financial analyst analyses the financial statements with

various tools of analysis before commenting upon the financial health or

weaknesses of an enterprise. A ratio is known as a symptom like blood pressure,

the pulse rate or the temperature of an individual. It is with help of ratios that the

financial statements can be analyzed more clearly and decisions made from such

analysis.

Managerial Uses of Ratio Analysis

1. Helps in decision-making: Financial statements are prepared primarily for

decision-making. But the information provided in financial statement is not an

end in itself and no meaningful conclusion can be drawn from these statements

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alone. Ratio analysis helps in making decisions from the information provided in

these financial statements.

2. Helps in Financial Forecasting and Planning:Ratio Analysis is of much help

in financial forecasting and planning. planning is looking ahead and the ratios

calculated for no. of years work as a guide for the future. Meaningful conclusion

can be drawn for future from these ratios. Thus, ratio analysis helps in forecastingand planning.

3. Helps in Communicating: The financial strength and weakness of a firm are

communicated in a more easy and understandable manner by the use of ratios.

The information contained in the financial statements is conveyed in a

meaningful manner to the one for whom it is meant. Thus, ratios help in

communication and enhance the value of the financial statements.

4. Helps in Co-ordination:Ratios even help in co-ordination which is of utmost

importance in effective business management. Better communication of

efficiency and weakness of an enterprise results in better co-ordination in the

enterprise.

5. Helps in Control: Ratio analysis even helps in making effective control of the

business. Standard ratios can be based upon Performa financial statements and

variances or deviations, if any, can be found by comparing the actual with the

standards so as to take a corrective action at the right time. The weaknesses or

otherwise, if any, come to the knowledge of the management which helps ineffective control of the business.

6. Other Uses: These are so many other uses of the ratio analysis. It is an essential

part of the budgetary control and standard costing. Ratios are immense

importance in the analysis and interpretation of financial statements as they bring

the strength or weakness of a firm.

7. Unity to Employees:The employees are also interested in the financial position

of the concern especially profitability. Their wage increases and amount of fringe

benefits are related to the volume of profits earned by the concern. The

employees make use of information available in financial statements. Various

ratios relating to bank like per employees business, per branch productivity,

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factor separation analysis, capital adequacy ratio etc. enable employees to put

forward their view point for the increase of wages and other benefits.

8. Unity to Government:Government is interested to know the overall strength of

the Bank. Financial statements published by Bank units are used to calculate

ratios for determining short-term, long-term and overall financial position of the

concerns; profitability indexes can also be prepared with the help of ratios. Govt.may base its future policies on the basis of bank information available from

various units. The ratios may be used as indicators of overall financial strength of

public as well as other sectors. In the absence of the reliable economic

information, governmental plans and policies may not be successful.

9. Tax Audit Requirements:Section 44 AB was interested in the Income Tax Act

by the Finance Act, 1984. Under this section every assesses engaged in any

business and having turnover or gross receipts exceeding Rs. 40 lakh is required

to get the accounts audited by a Chartered Accountant and submit the tax audit

report before the due date for filling the return of income under section 139(1). In

case of a professional, a similar report is required if the gross receipts exceed Rs.

10 lakh.

10.Utility to Creditors: The creditors or suppliers extend short-term credit to the

concern. They are interested to know whether financial position of the Bank

warrants their payments at a specified time or not. The bank pays short-term

creditors out of its current assets. If the current assets are quite sufficient to meet

current liabilities then the creditor will not hesitate in extending credit facilities.

11. Utility to Share holders: Investors in the concern will like to assess the

financial position of the concern where he is going to invest. His first interest will

be the security of his investment and then a return in the form of dividend or

interest. For the first purpose he will try to assess of fixed assets and then loans

raised against them. The investor will feel satisfied only if the concern has

sufficient amount of assets. Long-term solvency ratios will help him in assessing

financial position of the concern. Profitability ratios, on the other hand, will be

useful to determine profitability position. Ratio analysis will be useful to the

investors in making up his mind whether present financial position of the concern

warrants further investment or not.

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The District Central Co-operative Bank, Balasore calculates several ratios for

knowing the overall performance and also the current financial position of the Bank.

These ratios are listed below.

a) Average Working Fund.

b) Average Cost of Fund.c) Average Yield on Advances.

d) Average Yield on Assets.

e) Transaction Cost.

f) Risk Cost.

g) Non-Interest Income.

h) Net Interest Income.

i) Operating Margin/ Financial Margin.

j) Profitability/ Net Financial Margin.

k) Credit Deposit Ratio.

l) Return on Assets.

m)Net NPA to Advances.

n) Capital Adequacy Ratio (CAR).

o) Per Employees Business.

p) Per Branch Productivity.

q) Solvency Ratio.

r) Factor Separation Analysis.

s) Break-even Level.

METHODOLOGY

This methodology used to collect the required information or data are discussed with

different manager guided by them and visiting various department of Balasore

Bhadrak Central Co-operative Bank, Balasore.

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SOURCES OF INFORMATION

Secondary data: secondary data are those data which refer those form already

gathered and available data in contrast with the primary data there may be internal

sources within the firm. Externally these sources may include in the book or

periodical, published report, data, services etc.

For the completion training has consulted the secondary data which include:

1) Book of the project

2) Published report relevant to the topic

3) Record of the bank

4) Periodicals & files

5) Commercials data & Brochures provided

Various methods to be used to know the financial position of Balasore Bhadrak

Central Co-operative Bank, Balasore.

1) Average Working fund.

2) Average Cost of fund.

3) Average Yield on Advances.

4) Average Yield on Assets.

5) Transaction Cost.

6) Risk Cost.

7) Non interest Income.

8) Net Interest Income.9) Operating Margin/ Financial Margin.

10) Profitability/ Net Financial Margin.

11) Credit Deposit Ratio.

12) Return on Assets.

13) Net NPA to Advances.

14) Capital Adequacy Ratio (CAR)

15) Per Employees Business.

16) Per Branch Productivity.

17) Solvency Ratio.

18) Factor Separation Analysis.19) Break-even Level.

OBJECTIVES OF THE STUDY

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The project objective consists of the business benefit that organization expects to

achieve as a result of spending time and exerting effort to complete a project.

PROJECT OBJECTIVE:

The present study has been undertaken with the following specific objective:

To study the financial analysis carried out by Balasore Bhadrak

Central Co-operative bank.

To study the products and services offered by the bank.

To study the financial health of the bank in terms of its margin. And, to study the Capital Adequacy Ratio maintained by the

bank.

SCOPE OF STUDY

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The scope of the study is to get a true and clear understanding of the financial

analysis done in banks.

This study gives an impetus to analytically examine the changes being put

forward by the current changes in the present financial market.

LIMITATIONS

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i) The study is limited to 5 years only.

ii) Majority of data are collected from secondary sources.

However, some important primary information is beingcollected from bank officials.

iii) Datas have been analyzed in the report under some assumption

such as total working fund is assumed to be average working

fund with lack of information.

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CHAPTER-4

Ratio Analytical Frame

Work

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DATA ANALYSIS AND INTERPRETATION

BITS

RATIO 2008-09 2009-10 2010-11 2011-12 2012-13

Working

fund (avg.)

4,751,851 5,703,403 6,333,126 6,904,240 8,506,595

Avg. cost

fund

6.81 5.75 4.87 4.55 4.54

Avg. yieldon advances

10.72 9.02 7.67 7.90 7.32

Avg. yield

on assets

8.87 7.48 6.64 7.10 6.44

Transaction

Cost

1.52 1.23 1.44 1.51 1.24

Risk Cost 2.62 2.88 2.59 2.50 2.32

Non-

interest

income

.13 .14 .16 .17 .19

Net interest

income

2.05 1.72 1.76 2.55 1.89

Operating

Margin

2.06 1.73 1.77 2.55 1.90

Profitability .65% .37% .35% .14% .22%

CD Ratio 131% 146% 146% 136% 110%

Return on

Assets

6.45 3.70 3.59 1.45 2.21

Net NPA to

advances

17.32% 5.41% 5.69% 5.68% 4.83%

Capital

Adequacy

Ratio

(CAR)

18.01% 13.70% 12.78% 13.69% 14.06%

Per

Employees

Business

188 220 252 281 318

Per Branch

Productivity

1780.03 2079.90 2377.24 2645.43 2997.84

Solvency

Ratio

5.53% 5.78% 6.00% 7.05% 6.36%

Break Even

Level

6.16 10.72 11.05 27.42 15.31

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INTRODUCTION

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The Bank acting as financial intermediaries, mobilize saving of the society and get

their resources through borrowings for providing credit to the needy sector. They

have to pay salaries to their staff, pay interest on their deposit and borrowing and of

course incur overhead expenses in the business operation. Moreover they are

required to make provisions for any potential loss of their assets. Finally, they need

to pay a reasonable amount of dividend to their share holders, who are the real

owners.

Hence, Banks will have to earn profit and only a profit earning bank can maximize

the wealth of its shareholders.

FACTORS AFFECTING PROFITABILITY

Profit is excess of income over expenditure during any accounting period, where as

profitability is a relative term which is expressed as percentage to average working

fund in case of banks.

The followings are some important factors that determine the profitability of a

Bank

I) Amount of working funds deployed

II) Cost of funds

III) Yield on funds

IV) Management cost (Operating cost)

V) Risk cost

Amount of working funds deployed

Working funds are the fund deployed by a Bank. The amount of working fund so

deployed can be found out by subtracting the aggregate amount of contra items

from total liabilities of the Balance Sheet.

Working Fund =Total Liabilities Bills for collection and Bill Receivable as per

contra

Contra items include =Bills collection, I.B.lodged, O.B. lodged, Branch Adjustment

Year 2008-09 2009-10 2010-11 2011-12 2012-13

WorkingFund

(avg.)

4,751,851 5,703,403 6,333,126 6,904,240 8,506,595

* Average working fund is taken as total working fund. (Rupees in Thousands)

Interpretation

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The bank pays different rates of interest depending upon the nature and term deposit.

Hence, deposit costs depend upon the deposit mix of bank. For instants the Average

cost of Deposit for the year 2011-12 is Rs. 6.92 per Rs. 100 of deposits.

c)Borrowings

Borrowings in this case comprises of Short term loan, Medium term loan and Longterm loan. Again, this borrowing is by way of from higher financing agencies, inter-

bank borrowings or refinance from RBI, NABARD, SIDBI, etc. The average cost of

borrowing is Rs. 3.52 per Rs. 100 in year 2011-12.

III) Yield on Funds

The funds mobilized by a bank through different sources are utilized for

Compliance with Statutory Requirements relating to CRR and SLR

Investment in Non SLR Avenue Granting Loans and Advances

Deploying on other Assets

a) Cash in Hand:As Cash in hand yields no returns, the bank should maintain

only minimum cash balance required for day to day business. In fact, this will

reduce the security risk or the Bank. Similarly, current account kept with SBI

and subsidiaries, other notified commercial banks normally yield no income.

b) Investment: It includes all the fixed deposit with banks, short-term deposit,investment in central & State Government Securities, Shares of Co-operative

Institution etc. The Bank has to maintain some of its investment for the

purpose CRR/SLR. The return yield on this investment comprises of interest

and dividend actually received. For instance 2011-12 the average yield on

investment is Rs. 7.18 per Rs. 100.

c) Loans and Advances: These portfolio provides the most profitable avenue

for deployment of funds by the Bank.

Average Yield on Advances =

Interest received on advances (as per p/l account)/Average outstanding

advances Including NPA*100

*NPA =provision, provision against standard assets +Outstanding advances (S.T.

Loan &cash credits, M.T. Loan & cash credit, L.T. Loan & cash credit)

Year 2008-09 2009-10 2010-11 2011-12 2012-13

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Avg.

Yield on

advances

(%)

10.72 9.02 7.67 7.90 7.32

Average Yield on Assets =Total Interest received (as per p/l account)/Average Working Fund*100

Year 2008-09 2009-10 2010-11 2011-12 2012-13

Avg.

Yield on

Assets

(%)

8.87 7.48 6.41 7.10 6.44

Interpretation

Average Yield on Assets & the rate of advances is a major indicator about the

Banks average return which Companies of interest income as well as non-interest

income. Analyzing the Average Yield on Assets & Average Yield on Advances

from 2008-09 to 2012-13. We found, it had been reduced. It means the share of

non-interest earnings or low interest earning assets will be more disbursement of

loans increased over this period of time.

IV) Management Cost (Transaction Cost)

These are also called operating cost include all cost other than cost of

funds and provision. In fact, transaction cost, risk cost, non-interest

income, etc. are some of the factors which may affect the profitability

of the Bank.

Transaction Cost =Total transaction Cost/Average Working

Fund *100

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Total Transaction Cost = Salary & Allowances + Rent, taxes,

insurance, lighting + postage, telegrams + Stationary, printing & other

expenses

Year 2008-09 2009-10 2010-11 2011-12 2012-13

TransactionCost 1.52 1.23 1.44 1.51 1.24

Interpretation

By analyzing transaction cost, we found it varies in a zigzag way over a period of 5

years. This is mostly due to changes in the amount of other expenses over these

periods.

V) Risk CostIt is calculated to estimate the likely Annual loss on assets as a ratio of Rs. 100

of Average fund deployed. Risk Cost include provision made towards Bad &

Doubtful debt

= Total of provision made in B/S towards NPA/Average Working Fund *100

*Total provision made towards NPA =Provisions, Provision against Standard

Assets

Year 2008-09 2009-10 2010-11 2011-12 2012-13

Risk Cost 2.62 2.88 2.59 2.50 2.32

InterpretationBy analyzing Risk Cost, We found over a period of 5 years the amount of provision

mad in Balance Sheet (other Liability) had been decreased. Risk Cost decreases

which indicates lower likely losses on assets.

VI) Financial MarginJust as trading or manufacturing organization computes its gross profit to assess its

Activities; banks also ascertain their gross profit, which is called spread. It is

calculated as a difference between weighted average yield on assets and weighted

average cost of funds.

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Interpretation

In 2008-09 the Financial Margin is 2.06 which has reduced to 1.77 in the year 2006-

07 part reason, is that banks average yield on assets is reduced.(refer to average yield

on assets, calculate as above). Beside this risk cost from 2008-09 to 2006-07 has

been increased, resulting in increased weighted average cost of fund. It is as well as

net interest income. Net Interest Income = Total Net Interest Income/Average

Working Fund *100

* Net Interest Income =Total Interest Income Total Interest Expenditure

Year 2008-09 2009-10 2010-11 2011-12 2012-13

Net

Interest

Income

2.05 1.72 1.76 2.55 1.89

VII) Burden

The total non-interest expenditure (total transaction cost) is generally more than

miscellaneous Income. The difference between the two is called Burden. In fact,

while making the pricing of loans this difference is loaded in to the rate of interest.

The concept of Burden says the important of non-interest income for a bank. A high

level of non-interest income can not only recover the entire operating cost, but also it

can enable a bank to pay high level of compensation to its employees as in the case

of private sector bank. Further, if the non-interest income of the bank is high enough

to leave a surplus after paying of interest cost as well.

Non- interest income = Total non-interest income/Average Working Fund *100

* Non-interest income = other receipts + commission Exchange

BITS

Year 2008-09 2009-10 2010-11 2011-12 2012-13

Financial

Margin

2.06 1.73 1.77 2.55 1.90

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Year 2008-09 2009-10 2010-11 2011-12 2012-13

Non-

interest

income

0.13 0.14 0.16 0.17 0.19

VIII) Net Financial Margin (NFM)

Net Financial Margin =Net Profit/Average Working Fund *100

Year 2008-09 2009-10 2010-11 2011-12 2012-13

NFM .65% .37% .35% .14% .22%

Interpretation

Analyzing NFM we found that it means profit as percentage of working fund. It has

decreased over the years. It means operating expenses would have increased or

deposit would have increased or deposits would have increased more, lessing down

the profit margin. It needs to be increased.

IX) CD Ratio

CD Ratio (Credit Deposit Ratio) = Loan Outstanding (total)/Deposits (total)

*100

Year 2008-09 2009-10 2010-11 2011-12 2012-13

CD Ratio 131% 146% 146% 136% 110%

InterpretationIt is very high. The CD Ratio of 60-70% is acceptable.

X) Return on Assets (ROA)

Return on Assets =NPAT/Total Assets

*NPAT =Net Profit after Tax (Balance as Profit &Loss A/c)

Year 2008-09 2009-10 2010-11 2011-12 2012-13

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ROA 6.45 3.70 3.59 1.45 2.21

InterpretationReturn on Assets has decreased drastically. It means our assets couldnt generate

good Return. It shows poor assets management.

XI) Net NPA to Advances

Net NPA to Advances Ratio = Net NPA/ Loans & Advances *100

*Net NPA =Gross NPA Provision

* Gross NPA = Substandard Assets + Doubtful debts + Loss Assets

Year 2008-09 2009-10 2010-11 2011-12 2012-13

Net NPA

toAdvances

(%)

17.32 5.41 5.69 5.68 4.83

Interpretation

This Ratio indicates the Percentage of loss assets to the total amount of advances

made in the particular here. Analyzing the information above except the year 2008-

09. It had reduced marginally from 2005-006 onwards. This may indicate that Bank

had gone for stringent collection policies.

XII) Solvency Ratio

Solvency indicates the ability of the Bank to meet its long term commitments. From

the table above we can see that the Bank is able enough to meet its interest payment

on its debt. From 2008-09 it had increased considerable.

Solvency Ratio =Total Liabilities to Outsiders/ Total Assets *100

Total Liabilities to Outsiders =Total Liabilities (Deposits + Borrowings

+Adjustment Head + O.D. Interest Reserve + interest payable +other liabilities)

Year 2008-09 2009-10 2010-11 2011-12 2012-13

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Solvency

Ratio (%)

5.53 5.79 6.00 7.05 6.36

XIII) Break Even Level

Break Even Level (BEL)= (Transaction Cost + Risk Cost) - Non- interest income/Net Financial Margin*100

Year 2008-09 2009-10 2010-11 2011-12 2012-13

Break

Even

Level (%)

6.16 10.72 11.05 27.42 15.31

Interpretation

This is the level of business (in terms of working funds) at which the total income of

the Bank is just adequate to meet all its cost. In case, the present level of working

fund is more than BEL, the bank would be in profit & the actual profit can be

derived as

Profit = (actual working funds BEL working fund) * Net financial

margin

XIV) Factor Separation Analysis

In factor separation analysis all the items of the banks income statement are taken

and divided by Average Working Funds. Those are given in the table below.

Particulars 2008-09 2009-10 2010-11 2011-12 2012-131. Director

&local

committee

-4.8 5.02 .96 1.55

2. Low charges 2.48 -6.19 5.06 1.82

3. Depreciation

& repair

properties

-1.56 6.97 -8.69 2.7

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4. Other

receipts

.56 7.76 .01 -0.13

Fig I Factor Separation Analysis (Graph)

Interpretation

The purpose is to find out the contribution of each of the items towards profitability.

These we can do by taking the ratios for two successive years, i.e., = Items/Average

Working Fund and the difference between ratios for 2 years under each item

represents contribution of some important items towards profitability.

XV) Capital Adequacy Ratio (CAR) Capital Adequacy Ratio =Capital/ Total Risk Weighted Asset *100

Year 2008-09 2009-10 2010-11 2011-12 2012-13

Capital

Adequacy

Ratio (%)

18.01% 13.70% 12.78% 13.69% 14.06%

* Refer to Annexure

Interpretation

Capital Adequacy Ratio is the amount of capital that a bank has to maintain always

in proportion to its Risk Weighted Asset in the balance sheet. In fact this is

prescribed by the RBI from time to time and this the requirement under BASEL

norms as well. Every bank operating in India has to maintain the required Tier I and

Tier II capital so as to avoid any future contingencies, which may lead to insolvency,

ultimately affecting the public. By analyzing Capital Adequacy Ratio, from 2008-09

to 2006-07 it had increased. Again in the next two years it gets decreased. Overall

the bank indicates good Capitalization.

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-10

-8

-6

-4

-2

0

2

4

6

8

10

2008-

09

2009-

10

2010-

11

2011-

12

2012-

13

director & localcommittee fee

law charges

depreciation &repair properties

other receipts


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XVI) Per Employees business

Per Employees Business = Deposits (total) + Loan & Advances (total)/ Total

Staff

Year 2008-09 2009-10 2010-11 2011-12 2012-13Per

Employees

Business

188 220 252 281 318

* Total Staff = 292

Interpretation

Per employee business has been increased over the period under consideration,

which indicates that productivity of total no. of employees as a whole has risen. Thisindicates the better human resource management over these periods.

XVII) Per Branch Productivity

Per Branch Productivity = Total Deposits + Loans & Advances/ Total

Branch

Year 2008-09 2009-10 2010-11 2011-12 2012-13

Per Branch

Productivity

1780.03 2079.90 2377.24 2645.43 2997.84

* Total Branch =31

InterpretationPer branch productivity is a measure of total business done by a single branch in a

particular year. On studying the trend, we found that the series has been increased,

indicating strong financial position of each branch. It in fact, says about the

aggregate turn over (business) of the bank.

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CHAPTER-5

Findings

Suggestion

Conclusion

Findings

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I) Analyzing Capital Adequacy Ratio (CAR) the figure is highest for the year

2006-07. That is 18.30% which is well above excepted norms for the bank.

II) Per employees & per branch productivity has increased from 2008-09 to

2012-13 for the banks.

III) Average cost of fund which is one of the parameter to judge the banks

profitability has reduced during the study period under consideration.

IV) Yield on Advances mostly in case of banks depends upon the lending rate

which is again determined by the market forces. Average yield on

advances had reduced during the period under consideration in this case.

SUGGESTION

I) The bank should try to increase the revenue from other assets (in the form

of non-interest income) as it may help the bank to cover the operating cost.

More over it helps the bank in this competitive scenario to attract more

talents by paying them higher compensation compare to its counter part.

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II) As the bank is operating & registered under co-operative societies act, its

major thrust should be to work on the principle of co-operation & mutual

trust. In fact the bank is the medium to include a large segment of

population who remain excluded from the formal payment system &

financial market. Especially, when the financial market is developing &

globalizing. In other words the bank can play a lead role in the financialinclusion.

III) The bank should try to create more credit for the priority sectors in the

form of micro-finance or through Primary Agriculture Credit Societies

(PACS). Simultaneously it must see that Net NPA position should

decreased through appropriate credit evaluation & better collection effort.

IV) Management cost being one of the major indicators of the profitability of

bank is around 1.5% of the total working fund for the five year period, the

bank can decrease this cost with the implementation of MIS (management

Information System) & Information Technology Services.

V) The banks should innovative liabilities product in order to attract more

funds from the supplier of funds.

CONCLUSION

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This Bank has traditionally enjoyed various resources such as vast sources of funds,

skilled manpower, ever expanding branches, huge no. of members registered, no. of

societies affiliated etc.

However, organizational set up, local & rural focused culture & over all as a co-

operative kind of society makes the bank uncompetitive compared to its business

oriented commercial banks.

Hence, in order to stay ahead in the competition with commercial banks &

simultaneously to cater the rural needs as well, the bank should devise innovative

strategies to cut down the cost & to boost the profit in coming future years.

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BIBLIOGRAPHY

BIBLIOGRAPHY

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Shekhar Lekshmy, Shekhar K.C, Banking Theory and Practice,

Nineteenth edition2005, Vikas Publishing House pvt. Ltd.

Prasanna Chandra, Financial Management, Sixth edition 2004, TATA

Mc GRAW HILL

.

Sharma & Gupta, Financial Management, Second edition 2009, Kalyani

Publishers.

Natarajan S, Parameswaran R, Indian Banking, Second edition 2004, S.

Chand & Company Ltd.

BYE-LAWS (EN-BLOC AMENDMENT) of the Balasore-Bhadrak

Central Co-operative Bank Ltd., Balasore.

By the Web side, WWW.dccb_bls . com

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ANNEXURE

AVERAGE YIELD OF ASSETS

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2008-09 to 2012-13

BITS

Particulars Amount Relative

share

Earning

per 100

Weigh

ted

Avera

ge

Yield

of

AssetsCash & Bank

Balances

2,738.84 2.06 N.A N.A

Investment 95147.81 71.45 7.64 5.46

Loans & Advances 31272.42 23.48 11.52 2.70

Other Assets 4,005.43 3.01 N.A N.A

2008-09 1,33,164.5 100.00 8.16

Cash & Bank

Balances

3,141.46 5.50 N.A N.A

Investment 11,662.75 20.44 5.69 1.16Loans & Advances 38,286.79 67.09 9.40 6.30


2009-10 57,068.52 100.00 7.46

Cash & Bank

Balances

3,609.99 5.69 N.A N.A

Investment 13,128.63 20.70 5.50 1.13

Loans & Advances 43,792.59 69.03 7.96 5.49


2010-11 63,435.2 100.00 6.62

Cash & Bank

Balances

3,550.87 5.14 N.A N.A

Investment 14,469.02 20.94 7.18 1.50

Loans & Advances 47,213.90 68.34 8.19 5.60


2011-12 69,089.77 100.00 7.10

Cash & Bank

Balances

4,595.99 5.40 N.A N.A

Investment 26,204.90 30.78 6.74 2.07

Loans & Advances 48,969.40 57.52 8.04 4.62Other Assets 5,353.67 6.30 N.A N.A

2012-13 85,123.96 100.00 6.69

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AVERAGE COST OF FUNDS2008-09 to 2012-13

Particulars Amount Relative

Share

Cost per

100

Weighted

Average

Cost of

Fundss

Own fund 2,618.13 5.50 N.A N.ADeposits 23,908.56 50.30 1.00 5.03

Borrowings 13,327.60 28.04 6.31 1.77

Other liabilities 7,682.17 16.16 N.A N.A

TOTAL(2012-13-

09)

47,536.46 100.00 7.31 6.80

Own fund 3,274.45 5.74 N.A N.A

Deposits 26,190.28 45.89 8.26 3.79

Borrowings 19,578.04 34.31 5.72 1.96

Other liabilities 8,025.83 14.06 N.A N.ATOTAL(2010-11) 57,068.6 100.00 13.98 5.75

Own fund 3,892.34 6.14 N.A N.A

Deposits 29,901.91 47.17 7.28 3.43

Borrowings 21,126.44 33.30 4.31 1.43


TOTAL(2011-12) 63,438.21 100.00 11.59 4.86

Own fund 4,825.69 6.98 N.A N.A

Deposits 34,794.59 50.36 6.92 3.48Borrowings 20,861.82 30.20 3.52 1.06


TOTAL(2011-12) 69,089.77 100.00 10.43 4.54

Own fund 5,38,070,15

7

6.32 N.A N.As

Deposits 4,417,563,6

37.80

51.90 6.76 3.51

Borrowings 2,528,797,4

70.26

29.70 3.42 1.01

Other liabilities 1,027,966,6

81

12.08 N.A N.A

TOTAL(20`12-13) 8,512,397,9

45

100.00 4.52

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FACTOR SEPARATION ANALYSIS

EXPENDITURE 2008-

09

2009-10 2010-11 2011-12 2012-13

Interest Paid On

Deposits &Borrowings

.07 .06 .05 .05 .05

Salary &

Allowances

.01 .01 .01 .01 .01

Director & Local

Committee Member

Fees & Allowances

2.54 7.34 2.32 1.36 2.91

Rent, Taxes,

Insurance, Lighting,

etc.

1.03 1.00 1.15 1.03 9.62

Law Charges 4.17 1.69 7.88 2.82 1.00

Postage, Telegram

& Telephone

Charges

1.21 1.28 1.43 1.31 9.76

Audit Fees 2.18 1.67 1.30 3.11 9.16

Depreciation &

Repair Of

Properties

6.61 8.17 1.20 9.89 7.49

Stationary, Printing

& Advertisement

2.81 3.12 3.73 2.86 2.89

Other Expenditures 1.16 6.46 8.04 3.03 4.34

Balance Of Profit 4.60 1.75 - 7.53 7.63

INCOME

Interest Received

On Loans &

Investment

.09 .07 .07 .07 .07

Commission,

Exchange

Brokerage

3.59 5.38 5.54 6.71 6.76

Other Receipts 9.41 8.85 1.09 1.08 1.21

Loss if any 5.16 - - - -

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Structure of Adequacy Ratio (CAR)

SL.NO

.

PARTICULARS 2008-

09

2009-10 2010-11 2011-12 2012-

13

I Capital Funds

A Tier I CapitalElements

(a) Paid- up share

capital

2,46,65

2,225

2,98,833

,631

3,32,028,

803

3,53,88

7,406

4,01,4

99,90

3

(b) Statutory Reserves 1,240,5

35

6,027,05

9

11,386,3

07

19,256,

330

21,76

4,200

Capital Reserves

(d) Other disclosed

free reserves

1,14,52

6,054

22,584,6

80

45,819,2

23

1,09,42

5,062

1,16,9

29,934

(e) Undistributed

profit

19,146,

098

21,152,9

67

22,795,2

85

10,031,

477

18,84

1,342

TOTAL 3,81,56

4,912

3,48,571

,337

4,12,029,

618

4,92,60

0,275

5,59,3

35,37

9

Less intangible

assets & losses

0 0 0 0 0

FINAL TOTAL 381,56

4,912

348,571,

337

412,029,

618

492,600

,275

559,3

35,37

9

B Tier II Capital

Elements

(a) Undisclosed

reserves

0 0 0 0 0

(b) Revaluation

reserves

0 0 0 0 0

General

Provisions & LossProvisions

226,35

8,832

226,358,

832

215,670,

419

228,779

,348

253,3

44,301

(d) Subordinated

debts

0 0 0 0 0

TOTAL 226,35

8,832

226,358,

832

215,670,

419

228,779

,348

253,3

44,30

1

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C Grand Total

(A+B)

607,92

3,744

574,930,

169

627,700,

037

721,379

,623

812,6

79,68

0

II RISK ASETS

(a) Adjusted value of

funded risk assets

on B/S items (partB) (I)

3,374,6

90,380

4,911,37

8.623

5,268,92

5,308

5,780,8

52,634

5,780,

852,6

34

(b) Adjusted value of

non- funded & off

balance sheet

items (part C)

0 0 0 0 0

Total Risk

Weighted Assets

(A+B)

3,374,6

90,380

4,196,98

6,748

5,268,92

5,308

5,780,8

52,634

5,780,

852,6

34

III Percentage ofcapital funds to

risk weighted

assets I-c-II-c

18.01% 13.70% 13.69% 14.06% 14.06%

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RISK WEIGHTED ASSETS ON BALANCE SHEET ITEMS

SL.

NO

.

DESCRIPT

ION OF

ASSETS

RISK

WEIGH

TED (%)

2008-

09

2009-

10

2010-11 2011-

12

201

2-

13

1 Cash in hand 105,02

0,935

150,43

5,238

193,729,1

80

178,07

0,518

212,

612,

342

2 Balance with

(a) RBI 0%

(b) Banks

(current a/c)

20% 33,772

,688

32,742,

282

33,453,91

2

35,403

,262

49,5

34,4

30

3 Money at

call and

Notice4 All claims

on Banks

F.D.

certificate of

deposit

bonds etc.

(F/D with

OSCB)

20% 171,75

9,544

212,99

6,130

238,527,8

46

260,71

8,432

492,

868,

698

5(a) Investmentin Govt.

Guarantee &

other trustee

securities

0%

(b) Investment

in

Bonds/Debe

ntures of

public

financialinstitutions

20%

All other

investments

100% 76,680

,300

85,294,

300

105,224,3

00

128,30

9,300

141,

146,

500

6 Advances

(a) Guaranteed

by Govt.

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(b) To staff 0%

Against

Deposits

0%

(d) Against LIC

policies, &

IVP & KVP

0%

(e) ToBanks/Guara

nteed by

Banks

50%

(f) Guaranteed

by

DICCC/EC

GC

(g) All other

advances(All loans

other than

the above)

100% 2,928,

562,484

3,649,0

35,455

4,233,235,

797

4,589,

649,105

4,76

5,930,07

6

7 Fixed assets

(net of

depreciation)

100% 18,854

,366

22,396,

295

23,659,65

3

22,929

,701

19,3

93,6

12

8 Other

Assets

(a) Tax

deducted atsource

(b) Interest

accrued on

Govt.

Guarantee

loans

Claims on

RBI

All otherassets

(including

branch

adjustments,

on-banking

assets,

interest

100% 40,040,063

44,087,0-48

83,547,935

53,844,990

92,186,9

76

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accrued on

non-

guaranteed

loans, etc.)

Total of

part B:

374,69

0,380

4,196,9

86,748

4,911,378,

623

5,268,

925,30

8

5,78

0,85

2,634

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