dhanalaxmi bank Final project Report by ykartheekguptha

8/3/2019 dhanalaxmi bank Final project Report by ykartheekguptha

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BACKGROUND OF THE STUDY

Organization is a set of people working together for accomplishment of a common objective.The roles and responsibilities are stated clearly without any Ambiguity. The positions occupiedby different individuals are presented in the form of organizational structure.

NEED FOR THE STUDY

This Study is to fulfill the requirement of PGDM degree course of AIMA - New Delhi.

Organizational structure is essential for continuity of the mission & coordinates & controls thebusiness activities effectively. The training is undertaken during October and November 2011and the main purpose of the training is to apply the theoretical aspects of the course in thecorporate environment and gain firsthand experience and expose our self to policies, ethics,culture, practices, procedures, facts about the work culture and policies of the company.

1.0 INTRODUCTION

Finance is the life blood of trade, commerce and industry. Now-a-days, bank money actsas the backbone of modern business. Development of any country mainly depends upon thebanking system.

The term Bank is derived from the French word Banco which means a Benchor Money exchangetable. In olden days, European money lenders or money changers used to display (show) coins ofdifferent countries in big heaps (quantity) on benches or tables for the purpose of lending orexchanging.

A Bank is a financial institution which deals with deposits and advances and other relatedservices. It receives money from those who want to save in the form of deposits and it lendsmoney to those who need it.


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In India the banks are being segregated in different groups. Each group has their own benefitsand limitations in operating in India. Each has their own dedicated target market. Few of themonly work in rural sector while others in both rural as well as urban. Many even are only cateringin cities. Some are of Indian origin and some are foreign players.

Banks have developed around 200 years ago. The natures of banks have changed as the time haschanged. The term bank is related to financial transactions. It is a financial establishment whichuses, money deposited by customers for investment, pays it out when required, makes loans atinterest exchanges currency etc. however to understand the concept in detail Bank need to seesome of its definitions. Many economists have tried to give different meanings of the term bank.

1.1 Definition & Meanings of a Bank:

According to Prof. Sayers, "A bank is an institution whose debts are widely accepted insettlement of other bank's debts to each other." In this definition Sayers has emphasized thetransactions from debts which are raised by a financial institution.

According to the Indian Banking Company Act 1949, "A banking company means any companywhich transacts the business of banking. Banking means accepting for the purpose of lending ofinvestment of deposits of money from the public, payable on demand or other wise and withdrawable by cheque, draft or otherwise."

Bank is an institution which deals in money and credit. It accepts deposits from the public andgrants loans and advances to those who are in need of funds for various purposes. Banking is anactivity which involves acceptance of deposits for the purpose of lending or investing. Inaddition to accepting deposits and lending funds, banking also involves providing various otherservices along with its main banking activity. These are mainly agency services, but include

several general services as well. A banker is one who undertakes banking activities, acceptingdeposits and lending money for different purposes.

A Bank is a financial institution that is licensed to deal with money and its substitutes byaccepting time and demand deposits, making loans, and investing in securities. The Bankgenerates profits from the difference in the interest rates charged and paid. It can also explainedas an establishment authorized by a government to accept deposits, pay interest, clear checks,make loans, act as an intermediary in financial transactions, and provide other financial servicesto its customers.


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1.2 Features of a Bank:

Bank is a financial institution which may be a person, firm, or a company. It deals with otherpeople's money by accepting deposits from customers and lending loans to customers. Featuresare:

a. Acceptance of Deposit:A Bank accepts money from the people in the form of deposits which are usually repayable ondemand or after the expiry of a fixed period. It gives safety to the deposits of its customers. Italso acts as a custodian of funds of its customers.

b. Giving Advances:A Bank lends out money in the form of loans to those who require it for different purposes such

as home loans, car loans, educational loans etc. Bank charges a certain percentage of interest forproviding loans for their customers.

c. Payment and Withdrawal:A Bank provides easy payment and withdrawal facility to its customers in the form of chequesand drafts; it also brings Bank money in circulation. This money is in the form of cheques, drafts,etc.

d. Agency and Utility Services:A Bank provides various Banking facilities to its customers. They include general utility services

and agency services.e. Agency Services:

Agency services are those services which are rendered by commercial banks as agents of theircustomers. They include:

Collection and Payment of Cheques and Bills on Behalf of the Customers Collection of Dividends, Interest and Rent, etc. on Behalf of Customers, If So Instructed by

Them

Purchase and Sale of Shares and Securities on Behalf of Customers

Payment of Rent, Interest, Insurance Premium, Subscriptions etc. on Behalf of Customers, IfSo Instructed

Acting as a Trustee or Executor Acting as Agents or Correspondents on Behalf of Customers for Other Banks and Financial

Institutions at Home and Abroad


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f. General Utility Services:General utility services are those services which are rendered by commercial banks not onlyto the customers but also to the general public. These are available to the public on payment

of a fee or charge. They include:

Issuing Letters of Credit and Travelers Cheques Underwriting of Shares, Debentures etc Safe-keeping of Valuables in Safe Deposit Locker Underwriting Loans Floated by Government and Public Bodies Supplying Trade Information and Statistical Data Useful to Customers Acting as a Referee Regarding the Financial Status of Customers Undertaking Foreign Exchange Business

g. Profit and Service Orientation:A Bank is a profit seeking institution having service oriented approach. Bank charges small sumsof money for their services rendered to their customers. The difference between the interest paidto the depositors and interest & charges received from the customers is the profit for the bank.

h. Ever Increasing Functions:Banking is an evolutionary concept. There is continuous expansion and diversification as regardsthe functions, services and activities of a Bank. The growth, developments and improvements areever increasing functions as those functions are increasing in a day today basis.

i. Connecting Link:A Bank acts as a connecting link between borrowers and lenders of money. Banks collect moneyfrom those who have surplus money and give the same to those who are in need of money.

j. Banking Business:A Bank's main activity should be to do business of banking which should not be subsidiary to

any other business. Their Main Function must be banking and they should give major preferenceto banking instead of any other businesses or functions.

k. Name Identity:A Bank should always add the word "Bank" to its name to enable people to know that it is aBank and that it is dealing in money by accepting deposits and lending loans and advances.


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1.3 Functions of Banks

The functions of banks are divided into two categories:

I. Primary FunctionsII. Secondary Functions1.3.1 Primary Functions:

The primary functions of a commercial bank include:

Accepting Deposits Granting Loans and Advances

Accepting Deposits:

The most important activity of a commercial bank is to mobilize deposits from the public. Bankswho have surplus income and savings find it convenient to deposit the amounts with banks.Depending upon the nature of deposits, funds deposited with bank also earn interest. Thus,deposits with the bank grow along with the interest earned. If the rate of interest is higher, publicare motivated to deposit more funds with the bank. There is also safety of funds deposited withthe bank.

Different Modes of Acceptance of Deposits:

Banks receive money from the public by way of deposits. The following types of deposits areusually received by banks:

Current Deposit Saving Deposit Fixed Deposit Recurring Deposit Miscellaneous Deposits


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Grant of Loans and Advances:

The second important function of a commercial bank is to grant loans and advances. Such loansand advances are given to members of the public and to the business community at a higher rateof interest than allowed by banks on various deposit accounts. The rate of interest charged on

loans and advances varies depending upon the purpose, period and the mode of repayment. Thedifference between the rate of interest allowed on deposits and the rate charged on the Loans isthe main source of a banks income.

a. Loans:A loan is granted for a specific time period. Generally, commercial banks grant short-term loans.But term loans, that is, loan for more than a year, may also be granted. The borrower maywithdraw the entire amount in lump sum or in installments. However, interest is charged on thefull amount of loan. Loans are generally granted against the security of certain assets. A loanmay be repaid either in lump sum or in installments.

Different Methods of Granting Loans by Bank:

The basic function of a commercial bank is to make loans and advances out of the money whichis received from the public by way of deposits. The loans are particularly granted to businessmenand members of the public against personal security, gold and silver and other movable andimmovable assets. Commercial banks generally lend money in the following form:

Cash Credit Loans Bank Overdraft Discounting of Bill

b. Advances:An advance is a credit facility provided by the bank to its customers. It differs from loan in thesense that loans may be granted for longer period, but advances are normally granted for a shortperiod of time. Further the purpose of granting advances is to meet the day to day requirementsof business. The rate of interest charged on advances varies from bank to bank. Interest ischarged only on the amount withdrawn and not on the sanctioned amount.

Modes of Short-term Financial Assistance:

Banks grant short-term financial assistance by way of cash credit, overdraft and bill discounting.


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Cash CreditCash credit is an arrangement whereby the bank allows the borrower to draw amounts up to aspecified limit. The amount is credited to the account of the customer. The customer canwithdraw this amount as and when he requires. Interest is charged on the amount actually

withdrawn. Cash Credit is granted as per agreed terms and conditions with the customers.

OverdraftOverdraft is also a credit facility granted by bank. A customer who has a current account with thebank is allowed to withdraw more than the amount of credit balance in his account. It is atemporary arrangement. Overdraft facility with a specified limit is allowed either on the securityof assets, or on personal security, or both.

Discounting of BillsBanks provide short-term finance by discounting bills that is, making payment of the amount

before the due date of the bills after deducting a certain rate of discount. The party gets the fundswithout waiting for the date of maturity of the bills. In case any bill is dishonored on the duedate, the bank can recover the amount from the customer.

1.3.2 Secondary FunctionsBesides the primary functions of accepting deposits and lending money, banks perform a numberof other functions which are called secondary functions. These are as follows:

Issuing Letters of Credit, Travelers Cheques, Circular Notes etc Undertaking Safe Custody of Valuables, Important Documents, and Securities By Providing

Safe Deposit Vaults or Lockers

Providing Customers With Facilities of Foreign Exchange Transferring Money From One Place to Another; and From One Branch to Another Branch

of The Bank

Standing Guarantee on Behalf of Its Customers, For Making Payments For Purchase ofGoods, Machinery, Vehicles etc

Collecting and Supplying Business Information Issuing Demand Drafts and Pay Orders Providing Reports on the Credit Worthiness of Customers


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1.4 Distinguish between Banks and Money Lenders:

In order to distinguish between banks and money lenders, it is necessary to known who is amoney lender. A money lender is an individual who lends money to meet the cash requirementsof people. He may or may not be a professional money lender. A professional money lender is

one who is exclusively engaged in money lending activity. He may occasionally accept depositsand provide agency services to his customers.

A nonprofessional money lender, on the other hand, is either a merchant, or a trader, or amember of the business community, whose main activity is not money lending. Such moneylenders engage in money lending as a side activity. A money lender normally meets the cashrequirements of the public. He gives loans for consumption purposes such as marriages and othersocial functions.

The rate of interest charged by him is generally very high. He may give loans against the securityof jewellery, household items, property and assets as well as against personal security. Practicesadopted by money lenders are known to be manipulative in nature. For instance, they do not

furnish receipt of payments made, manipulate books of accounts, and realize more money thanthe original loan. The money lending practices of money lenders are considered to beexploitative and socially undesirable.

Advantages of Commercial Banks:

In view of their functions and services, commercial banks play a crucial role in the developmentof business activities. Business activities cannot run smoothly without banking services.Following are the advantages of commercial banks in a modern society.

Money deposited in commercial banks can be withdrawn on demand by cheque. Paymentscan also be made by cheque. Thus, business firms are not required to maintain large cashbalances with them. They are also not required to make large payments in cash. Moreover,payments by cheque provide documentary proof of the transaction

Financial assistance is provided by commercial banks by way of cash credit, overdraft, loansand advances on discounting of bills of exchange. Availability of short-term funds helpsbusiness enterprises to overcome the problem of liquidity due to the time lag between currentexpenses and realization of sale proceeds

Various agency services provided by commercial banks are prompt and reliable. For all theseservices banks charge only a nominal fee or commission. Trade and industries get the benefitof these services available at a reasonable charge

Banks offer attractive rates of interest for savings by the public which help to mobilize fundsfor lending and investment. Banks encourage the habit of thrift among them, and attractdeposits, whereby scattered household savings of the banks are pooled and made availablefor productive purposes


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Many general utility services are available to the public through banks, such as acting asreferee, accepting bills of exchange, providing locker facility, etc. These are of greatadvantage in meeting recurrent as well as occasional needs of business firms and individuals

Foreign trade cannot be carried on smoothly without banking services. Banks receive andmake payments, provide credit and deal in foreign exchange. Most commercial bankscurrently have separate foreign exchange divisions


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1.5 History of Banking in India:

Without a sound and effective banking system in India it cannot have a healthy economy. Thebanking system of India should not only be hassle free but it should be able to meet newchallenges posed by the technology and any other external and internal factors.

For the past three decades India's banking system has several outstanding achievements to itscredit. The most striking is its extensive reach. It is no longer confined to only metropolitans orcosmopolitans in India. In fact, Indian banking system has reached even to the remote corners ofthe country. This is one of the main reason of India's growth process.

The government's regular policy for Indian bank since 1969 has paid rich dividends with thenationalization of 14 major private banks of India.

Not long ago, an account holder had to wait for hours at the bank counters for getting a draft orfor withdrawing his own money. Today, he has a choice. Gone are days when the most efficient

bank transferred money from one branch to other in two days. Now it is simple as instantmessaging or dial a pizza. Money have become the order of the day.

The first bank in India, though conservative, was established in 1786. From 1786 till today, thejourney of Indian Banking System can be segregated into three distinct phases. They are asmentioned below:

Early phase from 1786 to 1969 of Indian Banks Nationalisation of Indian Banks and up to 1991 prior to Indian banking sector Reforms. New phase of Indian Banking System with the advent of Indian Financial & Banking

Sector Reforms after 1991.

To make this write-up more explanatory, I prefix the scenario as Phase I, Phase II and Phase III.

PhaseI:

The General Bank of India was set up in the year 1786. Next came Bank of Hindustan andBengal Bank. The East India Company established Bank of Bengal (1809), Bank of Bombay(1840) and Bank of Madras (1843) as independent units and called it Presidency Banks. Thesethree banks were amalgamated in 1920 and Imperial Bank of India was established which startedas private shareholders banks, mostly Europeans shareholders.

In 1865 Allahabad Bank was established and first time exclusively by Indians, Punjab NationalBank Ltd. was set up in 1894 with headquarters at Lahore. Between 1906 and 1913, Bank ofIndia, Central Bank of India, Bank of Baroda, Canara Bank, Indian Bank, and Bank of Mysorewere set up. Reserve Bank of India came in 1935.

During the first phase the growth was very slow and banks also experienced periodic failuresbetween 1913 and 1948. There were approximately 1100 banks, mostly small. To streamline thefunctioning and activities of commercial banks, the Government of India came up with The


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Banking Companies Act, 1949 which was later changed to Banking Regulation Act 1949 as peramending Act of 1965 (Act No. 23 of 1965). Reserve Bank of India was vested with extensivepowers for the supervision of banking in india as the Central Banking Authority.

During those days public has lesser confidence in the banks. As an aftermath deposit

mobilisation was slow. Abreast of it the savings bank facility provided by the Postal departmentwas comparatively safer. Moreover, funds were largely given to traders.

PhaseII:

Government took major steps in this Indian Banking Sector Reform after independence. In 1955,it nationalised Imperial Bank of India with extensive banking facilities on a large scale speciallyin rural and semi-urban areas. It formed State Bank of india to act as the principal agent of RBIand to handle banking transactions of the Union and State Governments all over the country.

Seven banks forming subsidiary of State Bank of India was nationalised in 1960 on 19th July,

1969, major process of nationalisation was carried out. It was the effort of the then PrimeMinister of India, Mrs. Indira Gandhi. 14 major commercial banks in the country wasnationalised.

Second phase of nationalisation Indian Banking Sector Reform was carried out in 1980 withseven more banks. This step brought 80% of the banking segment in India under Governmentownership.

The following are the steps taken by the Government of India to Regulate Banking Institutions inthe Country:

1949: Enactment of Banking Regulation Act. 1955: Nationalisation of State Bank of India. 1959: Nationalisation of SBI subsidiaries. 1961: Insurance cover extended to deposits. 1969: Nationalisation of 14 major banks. 1971: Creation of credit guarantee corporation. 1975: Creation of regional rural banks. 1980: Nationalisation of seven banks with deposits over 200 crore.

After the nationalisation of banks, the branches of the public sector bank India rose toapproximately 800% in deposits and advances took a huge jump by 11,000%.

Banking in the sunshine of Government ownership gave the public implicit faith and immenseconfidence about the sustainability of these institutions.


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PhaseIII:This phase has introduced many more products and facilities in the banking sector in its reformsmeasure. In 1991, under the chairmanship of M Narasimham, a committee was set up by hisname which worked for the liberalisation of banking practices.

The country is flooded with foreign banks and their ATM stations. Efforts are being put to give asatisfactory service to customers. Phone banking and net banking is introduced. The entiresystem became more convenient and swift. Time is given more importance than money.

The financial system of India has shown a great deal of resilience. It is sheltered from any crisistriggered by any external macroeconomics shock as other East Asian Countries suffered. This isall due to a flexible exchange rate regime, the foreign reserves are high, the capital account is notyet fully convertible, and banks and their customers have limited foreign exchange exposure.


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1.6 Indian Banking System

1.6.1 Introduction

A Bank is a commercial or state institution that provides financial services, including issuing

money in form of coins, Banknotes or debit cards, receiving deposits of money, lending moneyand processing transactions. A commercial Bank accepts deposits from customers and in turnmakes loans based on those deposits. Some Banks (called Banks of issue) issue Banknotes aslegal tender. Many Banks offer ancillary financial services to make additional profit. Forexample: selling insurance products, investment products or stock broking.

The Evolution of Banking in India could be traced back to the establishment of Bank of Bengal(Jan 2, 1809), the first joint stock Bank sponsored by the Government of Bengal and governed bythe royal charter of the British India Government. It was followed by establishment of Bank ofBombay (Apr 15, 1840) and Bank of Madras (Jul 1, 1843). These three Banks, known as thepresidency Banks, marked the beginning of the limited liability and joint stock banking in Indiaand were also vested with the right of note issue.

In 1921, the three presidency Banks were merged to form the Imperial Bank of India, which hadmultiple roles and responsibilities and that functioned as a commercial Bank, a Banker to thegovernment and a Bankers Bank. Following the establishment of the Reserve Bank of India

(RBI) in 1935, the central Banking responsibilities that the Imperial Bank of India was carryingout came to an end, leading it to become more of a commercial Bank. At the time ofindependence of India, the capital and reserves of the Imperial Bank stood at Rs 118 mn,deposits at Rs 2751 mn and advances at Rs 723 mn and a network of 172 branches and 200 suboffices spread all over the country.

In 1951, in the backdrop of central planning and the need to extend Bank credit to the rural areas,

the Government constituted All India Rural Credit Survey Committee, which recommended thecreation of a state sponsored institution that will extend Banking services to the rural areas.Following this, by an act of parliament passed in May 1955, State Bank of India was establishedin Jul, 1955. In 1959, State Bank of India took over the eight former state-associated Banks as itssubsidiaries. To further accelerate the credit to flow to the rural areas and the vital sections of theeconomy such as agriculture, small scale industry etc., that are of national importance, SocialControl over Banks was announced in 1967 and a National Credit Council was set up in 1968 toassess the demand for credit by these sectors and determine resource allocations. The decade of1960s also witnessed significant consolidation in the Indian Banking industry with more than500 Banks functioning in the 1950s reduced to 89 by 1969.

For the Indian Banking industry, Jul 19, 1969, was a landmark day, on which nationalization of14 major Banks was announced that each had a minimum of Rs 500 mn and above of aggregatedeposits. In 1980, eight more Banks were nationalized. In 1976, the Regional Rural Banks Actcame into being, that allowed the opening of specialized regional rural Banks to exclusively caterto the credit requirements in the rural areas. These Banks were set up jointly by the centralgovernment, commercial Banks and the respective local governments of the states in which theseare located. The period following nationalization was characterized by rapid rise in Banksbusiness and helped in increasing national savings. Savings rate in the country leapfrogged from10-12% in the two decades of 1950-70 to about 25 % post nationalization period. Aggregate


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deposits which registered annual growth in the range of 10% to 12% in the 1960s rose to over20% in the 1980s. Growth of Bank credit increased from an average annual growth of 13% in the1960s to about 19% in the 1970s and 1980s. Branch network expanded significantly leading toincrease in the Banking coverage.

Indian Banking, which experienced rapid growth following the nationalization, began to facepressures on asset quality by the 1980s. Simultaneously, the Banking world everywhere wasgearing up towards new prudential norms and operational standards pertaining to capitaladequacy, accounting and risk management, transparency and disclosure etc. In the early 1990s,India embarked on an ambitious economic reform programme in which the Banking sectorreforms formed a major part. The Committee on Financial System (1991) more popularly knownas the Narasimhan Committee prepared the blue print of the reforms.

1.6.2 A few of the major aspects of reforms include:

Moving Towards International Norms In Income Recognition and Provisioning and OtherRelated Aspects of Accounting

Liberalization of Entry and Exit Norms Leading to The Establishment of Several NewPrivate Sector Banks and Entry of a Number of New Foreign Banks

Freeing of Deposit and Lending Rates (Except the Saving Deposit Rate) Allowing Public Sector Banks Access To Public Equity Markets For Raising Capital and

Diluting The Government Stake

Greater Transparency and Disclosure Standards In Financial Reporting Suitable Adoption of Basel Accord On Capital Adequacy Introduction of Technology In Banking Operations etcThe reforms led to major changes in the approach of the Banks towards aspects such as

competition, profitability and productivity and the need and scope for harmonization of globaloperational standards and adoption of best practices. Greater focus was given to derivingefficiencies by improvement in performance and rationalization of resources and greater relianceon technology including promoting in a big way computerization of Banking operations andintroduction of electronic Banking.

The reforms led to significant changes in the strength and sustainability of Indian Banking. Inaddition to significant growth in business, Indian Banks experienced sharp growth in


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profitability, greater emphasis on prudential norms with higher provisioning levels, reduction inthe non performing assets and surge in capital adequacy. All Bank groups witnessed sharpgrowth in performance and profitability. Indian Banking industry is preparing for smoothtransition towards more intense competition arising from further liberalization of banking sectorthat was envisaged in the year 2009 as a part of the adherence to liberalization of the financial

services industry.

Reserve Bank of India is established in 1935. It has Central Board of Directors with 20 members.It is the only one local board for each of the regions. It undertakes traditional central Bankingfunctions. It also does all Regulatory functions as well as promotional functions.

1.6.3 Composition of Indian banking system:

Reserve Bank of India

Commercial Banks

Development Banks

Regional Rural Banks

Co-operative Banks

NABARD (National Bank for Agriculture and Rural Development)

Land Development Banks

Exim Banks


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1.6.4 Evolution of Banking in India:

1809 - Bank of Bengal

1840 - Bank of Bombay

1843 - Bank of Madras

Presidency Banks:

1921 - Imperial Bank of India

1935 - Reserve Bank of India

1955 - State Bank of India

1969 - Nationalization of 14 Banks

1980 - Second Dose of Nationalization

1990s - Narasimham Committee Reforms

2003 - ICICI Merger


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1.7 INTRODUCTION TO MUTUAL FUND AND ITS VARIOUS

ASPECTS.

Mutual fund is a trust that pools the savings of a number of investors who share a common

financial goal. This pool of money is invested in accordance with a stated objective. The

joint ownership of the fund is thus Mutual, i.e. the fund belongs to all investors. The

money thus collected is then invested in capital market instruments such as shares,

debentures and other securities. The income earned through these investments and the

capital appreciations realized are shared by its unit holders in proportion the number of

units owned by them. Thus a Mutual Fund is the most suitable investment for the common

man as it offers an opportunity to invest in a diversified, professionally managed basket of

securities at a relatively low cost. A Mutual Fund is an investment tool that allows small

investors access to a well-diversified portfolio of equities, bonds and other securities. Each

shareholder participates in the gain or loss of the fund. Units are issued and can be

redeemed as needed. The funds Net Asset value (NAV) is determined each day.

Investments in securities are spread across a wide cross-section of industries and sectors

and thus the risk is reduced. Diversification reduces the risk because all stocks may not

move in the same direction in the same proportion at the same time. Mutual fund issues

units to the investors in accordance with quantum of money invested by them. Investors of

mutual funds are known as unit holders.


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ADVANTAGES OF MUTUAL FUND

Portfolio Diversification

Professional management Reduction / Diversification of Risk Liquidity

DISADVANTAGE OF MUTUAL FUND

No control over Cost in the Hands of an Investor No tailor-made Portfolios Managing a Portfolio Funds Difficulty in selecting a Suitable Fund Scheme


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1.7.1 HISTORY OF THE INDIAN MUTUAL FUND INDUSTRY

The mutual fund industry in India started in 1963 with the formation of Unit Trust of India,

at the initiative of the Government of India and Reserve Bank. Though the growth was

slow, but it accelerated from the year 1987 when non-UTI players entered the Industry.

First Phase1964-87

Unit Trust of India (UTI) was established on 1963 by an Act of Parliament by the Reserve

Bank of India and functioned under the Regulatory and administrative control of the

Reserve Bank of India.. The first scheme launched by UTI was Unit Scheme 1964. At the

end of 1988 UTI had Rs.6,700 crores of assets under management.

Second Phase1987-1993 (Entry of Public Sector Funds)

1987 marked the entry of non- UTI, public sector mutual funds set up by public sector

banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of

India (GIC). the mutual fund industry had assets under management of Rs.47,004 crores.

Third Phase1993-2003 (Entry of Private Sector Funds)

1993 was the year in which the first Mutual Fund Regulations came into being, under

which all mutual funds, except UTI were to be registered and governed. The erstwhile

Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual

fund registered in July 1993.


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The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and

revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI

(Mutual Fund) Regulations 1996. As at the end of January 2003, there were 33 mutual

funds with total assets of Rs. 1,21,805 crores.

Fourth Phasesince February 2003

In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was

bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of

India with assets under management of Rs.29,835 crores as at the end of January 2003,

representing broadly, the assets of US 64 scheme, assured return and certain other schemes

The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is

registered with SEBI and functions under the Mutual Fund Regulations. consolidation and

growth. As at the end of September, 2004, there were 29 funds, which manage assets of

Rs.153108 crores under 421 schemes.


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1.7.2 CATEGORIES OF MUTUAL FUND:


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Mutual funds can be classified as follow :

Based on their structure:

Open-ended funds: Investors can buy and sell the units from the fund, at any pointof time.

Close-ended funds: These funds raise money from investors only once. Therefore,after the offer period, fresh investments can not be made into the fund. If the fund

is listed on a stocks exchange the units can be traded like stocks (E.g., Morgan

Stanley Growth Fund). Recently, most of the New Fund Offers of close-ended

funds provided liquidity window on a periodic basis such as monthly or weekly.

Redemption of units can be made during specified intervals. Therefore, such funds

have relatively low liquidity.

Based on their investment objective:

Equity funds: These funds invest in equities and equity related instruments. With

fluctuating share prices, such funds show volatile performance, even losses. However,

short term fluctuations in the market, generally smoothens out in the long term, thereby

offering higher returns at relatively lower volatility. At the same time, such funds can yield

great capital appreciation as, historically, equities have outperformed all asset classes in the

long term. Hence, investment in equity funds should be considered for a period of at least

3-5 years. It can be further classified as:


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i) Index funds- In this case a key stock market index, like BSE Sensex or Nifty is

tracked. Their portfolio mirrors the benchmark index both in terms of composition and

individual stock weightages.

ii) Equity diversified funds- 100% of the capital is invested in equities spreading across

different sectors and stocks.

iii|) Dividend yield funds- it is similar to the equity diversified funds except that they

invest in companies offering high dividend yields.

iv) Thematic funds- Invest 100% of the assets in sectors which are related through some

theme.

e.g. -An infrastructure fund invests in power, construction, cements sectors etc.

v) Sector funds- Invest 100% of the capital in a specific sector. e.g. - A banking sector

fund will invest in banking stocks.

vi) ELSS- Equity Linked Saving Scheme provides tax benefit to the investors.

Balanced fund: Their investment portfolio includes both debt and equity. As a result, on

the risk-return ladder, they fall between equity and debt funds. Balanced funds are the ideal

mutual funds vehicle for investors who prefer spreading their risk across various

instruments. Following are balanced funds classes:

i) Debt-oriented funds -Investment below 65% in equities.

ii) Equity-oriented funds -Invest at least 65% in equities, remaining in debt.


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Debt fund: They invest only in debt instruments, and are a good option for investors

averse to idea of taking risk associated with equities. Therefore, they invest exclusively in

fixed-income instruments like bonds, debentures, Government of India securities; and

money market instruments such as certificates of deposit (CD), commercial paper (CP) and

call money. Put your money into any of these debt funds depending on your investment

horizon and needs.

i) Liquid funds- These funds invest 100% in money market instruments, a large portion

being invested in call money market.

ii) Gilt funds ST- They invest 100% of their portfolio in government securities of and T-

bills.

iii) Floating rate funds - Invest in short-term debt papers. Floaters invest in debt

instruments which have variable coupon rate.

iv) Arbitrage fund- They generate income through arbitrage opportunities due to mis-

pricing between cash market and derivatives market. Funds are allocated to equities,

derivatives and money markets. Higher proportion (around 75%) is put in money markets,

in the absence of arbitrage opportunities.

v) Gilt funds LT- They invest 100% of their portfolio in long-term government securities.

vi) Income funds LT- Typically, such funds invest a major portion of the portfolio in

long-term debt papers.


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vii) MIPs- Monthly Income Plans have an exposure of 70%-90% to debt and an exposure

of 10%-30% to equities.

viii) FMPs- fixed monthly plans invest in debt papers whose maturity is in line with that of

the fund.

1.7.3 INVESTMENT STRATEGIES

1. Systematic Investment Plan: under this a fixed sum is invested each month on a fixed

date of a month. Payment is made through post dated cheques or direct debit facilities. The

investor gets fewer units when the NAV is high and more units when the NAV is low. This

is called as the benefit of Rupee Cost Averaging (RCA)

2. Systematic Transfer Plan: under this an investor invest in debt oriented fund and give

instructions to transfer a fixed sum, at a fixed interval, to an equity scheme of the same

mutual fund.

3. Systematic Withdrawal Plan: if someone wishes to withdraw from a mutual fund then

he can withdraw a fixed amount each month.


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1.7.4 RISK V/S. RETURN:


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1.8 Company Profile

1.8.1 Introduction

Dhanlaxmi Bank was incorporated in November 1927 with its head office at Thrissur, Kerala bya group of 7 entrepreneurs with a capital of Rs. 11,000/- and 7 employees. Dhanlaxmi Bank withits 83 years of banking experience and with its rich heritage has earned the trust and goodwill ofclients and due to their strong belief in the need to seek innovation, deliver best service anddemonstrate responsibility, they have grown from strength to strength. With over 730 touchpoints across India; their focus has always been on customizing services and personalizingrelations.

1.8.2 Vision & Mission

To become a strong and innovative Bank with integrity and social responsibility and to

maximize customer satisfaction and the satisfaction of its employees, shareholders and thecommunity


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1.8.3 Achievements:

Serviced business Worth Rs 21,595 Crores as on 31 March 2011, Comprising Deposits of Rs12,530 Crores and Advances of Rs 9,065 Crores

Earned a Net Profit of Rs. 26.1 Crores for the Financial Year Ended 31st March 2011, With aCapital Adequacy Ratio of 11.8% (Basel II) During the Same Period

Put in Place the Real Time Gross Settlement (RTGS) and National Electronic Fund Transfer(NEFT) Systems to Facilitate Large Value Payments and Settlements Online in Real Time,on a Transaction-by-Transaction Basis

Set up NRI Boutiques (Relationship Centres) Across Nine Locations in Kerala and TamilNadu, With Plans to Open specialized NRI Outlets at Potential locations With Emphasis on

Impeccable Service Levels

Bank is a Major Player in Micro Credit in Kerala and the Bank's Outstanding Under MicroCredit was Rs. 266 crores at the End of March 2011

Attained ISO 9001-2000 Certification for the Bank's Corporate Office at Thrissur andIndustrial Finance Branch at Kochi

1.8.4 Affiliations:

Major Exchange Houses:

UAE Exchange Centre LLC

Al Ahalia Money Exchange BureauForeign Correspondent Banks:

Deutsche Bank Trust Company Americas Wachovia Bank NA - A Wells Fargo Company CommerzBank AG National Westminster Bank PLC

Insurance Partner:

Bajaj Allianz


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1.8.5 Milestones:

1927 - Founded on 14 November, 1927, at Thrissur, Kerala 1975 - Set up the First Branch Outside the Home State of Kerala, at Chennai Mount Road 1977 - Designated as Scheduled Commercial Bank by the Reserve Bank of India (RBI) 1980 - 100- Strong Branch Network 1986 - Total business of Rs. 100 crores 1996 - First Public Issue. Total business of Rs. 1,000 crores 2000 - Installed the First ATM 2002 - First Rights Issue, Platinum Jubilee Year 2007 - Total Business of Rs. 5,000 Crores. 80th Anniversary Year 2008 - Total Business of Rs. 7,500 Crores. Second Rights Issue 2009 - Opened 45 new Branches and 102 New ATMs 2010 - Raised Rs. 381 Crores Through QIP in July 2010, Opened 20 New Branches and 280

New ATMs, Launched New Brand Identity; Created Platform for a Unified Image

2011- Launched its 275th Branch in Jan 2011; ATM Network Expanded to 460, Total AssetBase for the Bank was Rs.14, 268 Crores, as on 31.03.2011

1.8.6 Business Strategy (Dec 2010 Onwards)

Focus on Incremental Asset Creation in the Retail and SME Segments Enhancing Income From Distribution of Third Party Products Increase in Retail and Low Cost Liabilities Franchise Enhance Productivity per Branch / per Employee Growth in Non Fund Income


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1.9 Product Profile

ProductProfile

PersonalBanking

CorporateBanking

NRI

Banking

Micro &Agri

Banking

FinancialPlanning


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1.9.1 Different Products

Dhanlaxmi Bank has the following product profile:

a. Personal Banking:Private banking is a term for banking, investment and other financial services provided by banksto private individuals investing sizable assets. The term "private" refers to the customer servicebeing rendered on a more personal basis than in mass-market retail banking, usually viadedicated bank advisers. It should not be confused with a private bank, which is simply a non-incorporated banking institution. Personal Banking services provided by Dhanlaxmi Bank are:

Accounts Saving Account Current Account Term Deposit

Loans Property Loans Car Loans Commercial Loans Personal Loans Loan Against Securities Education Loans

Gift Card Credit Card

Gold Card Platinum Card

Debit Card Debit Card Debit Card Offers Register for Verified by VISA


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Depository Services Locker Facilities Forex Services

Foreign Currency Cash Cheque Deposits Foreign Currency DD Remittances

Online services Bill Payment Insta Pay Shopping E-IT Return Filing

Insurance Mobile Banking

b. Corporate Banking:Financial services specifically offered to corporations, such as cashmanagement, financing, underwriting, and issuing of stocks, bonds, or otherinstruments. Financial institutions often maintain specific divisions for handlingthe needs of corporate clients, separate from consumer or retail banking activities forindividual accounts.

Cash Management Services Credit

Industrial Advance Trade Advance


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Import Export Assistance Agriculture Assistance

Corporate Salary Account Forex and Trade Services

Export Services Import Services Forex Services

c. NRI Banking:With a view to attract the savings and other remittance into India through banking channels fromthe person of Indian Nationality / Origin who are residing abroad and bolster the balance ofpayment position, the Government of India introduced in 1970 Non-Resident(External) AccountRules which are governed by the Exchange Control Regulations.

Account & Deposit Accounts for Returning NRIs (Resident Foreign Currency Account) Foreign Currency Non-Resident Fixed Deposit NRO Account Recurring and Term Deposit NRE Account

Money Transfer NRI property loans

Lease Rental Discounting Loan Against Property Commercial Property Loan Home Loan


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Investment Opportunities Micro & Agri Banking

Kissan Vahana:Kissan Vahana is a specially structured two-wheeler loan for farmers withsignificant benefits for their agricultural operations

Agri- Gold Loan: The Agri Gold Loan is extended to individuals against security of goldornaments owned by them for the purpose of agricultural activities

Micro Credit- SHGs: Micro Credit involves the provision of thrift, credit and other financialservices and products of lower value to the poor in rural, semi urban and urban areas forenabling them to raise their income levels and improve their living standards

Kissan Card: The Dhanam Kissan Card directly addresses a farmers short-term andcontingent credit needs

Micro Credit - MFI: Dhanlaxmi Bank's micro-credit scheme was introduced in 1998 to aidthe efforts of Micro Finance Institutions in empowering women and helping in povertyalleviation


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1.10 Competitors Profile

Major Competitors of Dhanlaxmi Bank are:

HDFC BANK ICICI BANK

AXIS BANK

YES BANK FEDERAL BANK


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Market Capitalization:

BANKS MARKET CAP

HDFC Bank 100204.67

ICICI Bank 100109.7

Axis Bank 44313.31

Yes Bank 9680.1

Federal Bank 6336.45

Dhanlaxmi Bank 2348.05

Competitors Analysis:The following banks are the major competitors of Dhanlaxmi bank because:

38.10%

38.07%

16.85%

3.68%2.41% 0.89%

MARKET CAP

HDFC Bank ICICI Bank

Axis Bank Yes Bank

Federal Bank Dhanlaxmi Bank


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They Have Established Early and Have More Experience Than Dhanlaxmi Of Their Capital Structure Of Their Productivity Of Their Quality of Services Of Their Improved Customer Care They Have More Improved and Experienced Labor Force

HDFC Bank:

The Housing Development Finance Corporation Limited (HDFC) was amongst the first toreceive an in principle approval from the RBI to set up a Bank in the private sector as part of

RBIs liberalization policy.

The Bank was incorporated in August 1994, with its registered office in Mumbai, India. Iscommenced its operations in January 1995. Since its inception in 1977, the corporation hasmaintained a consistent and healthy growth in its operations to remain the market leader inmortgages. With its experience in the financial markets, strong market reputation, large

shareholder base and unique consumer franchise, HDFC was ideally positioned to promote aBank in the Indian Environment. The shares are listed on the Bombay Stock Exchange and theNational Stock Exchange as well as New York Stock Exchange and Luxemburg StockExchange.

ICICI Bank:

Indias second largest bank with 2,533 branches and 6,700 ATMs, ICICI Bank offers a widerange of Banking products and financial services to corporate and retail customers through avariety of delivery channels and through its specialized subsidiaries in the areas of investmentBanking, life and non-life insurance, venture capital and asset management.

The Bank currently has subsidiaries in the U.K, Russia and Canada and branches in U.S,Singapore, Bahrain, Hong Kong, Sri Lanka, Qatar, Dubai, China, South Africa, Bangladesh,Thailand, Malaysia and Indonesia.

ICICI Banks equity shares are listed in India on Bombay Stock Exchange and the NationalStock Exchange of India Limited and its American Depository Receipts (ADR) are listed on theNew York Stock Exchange (NYSE).


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AXIS Bank:

Axis Bank was the first of the new private Banks to have begun operations in 1994 after thegovernment of India allowed new private Banks to be established. The Bank was promotedjointly by the administrator of the specified undertaking of the Unit Trust of India (UTI), Life

Insurance Corporation of India (LIC) and the General Insurance Corporation of India (GIC) andother PSU Insurance Companies. The Bank as on 30th June 2011 is capitalized to the extent of411.88cr with the public holding at 52.87%.

The Banks registered office is at Ahmadabad and its central office is located at Mumbai. TheBank has a very wide network of more than 1281 branches and 6270 ATMs, which is one of thelargest ATM networks in the country. The Bank has strengths in both retail and corporateBanking and is committed to adopting the best industry practices internationally in order toachieve excellence.

YES Bank:

Yes bank, Indias new age private sector bank was incorporated in 2003 by Rana Kapoor andlate Ashok Kapoor. It is the only bank that has been awarded a Greenfield license by the RBI. Itoffers a full range of products and services in the area of corporate and institutional Banking,financial markets, investment Banking, corporate finance, business and transaction Banking,retail and Wealth management. Total Income: Rs. 46650.182 million (year ending 2011).NetProfit: Rs. 7271.378 million (year ending 2011)

FEDERAL Bank:

Federal Bank was founded as Travancore Federal Bank in the year 1931. Thirteen years later, in1944, Shri K.P. Hormis took over the controlling interest in the bank. It was in 1947, that thebanks name was changed to Federal Bank Limited. Its registered office is in Aluva, Kerala. It is

arguably the numero uno in Kerala. The fourth largest bank in India in terms of capital base.

These banks with their quality services, improved customer care, professional experience andpowerful resources & capital termed to be the major threats and competitors for DhanlaxmiBank.


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2.0 Organization Structure

2.1. Introduction:

Every organization functions on some basic principles and a particular structure. Working bythe principles of a particular organizational structure enables the achievement of a common

goal, i.e., growth and development of the organization and the employees that comprise it.Assigning tasks, dividing and executing them, and working together to attain specific goals ispossible in any organizational culture that functions on a structured hierarchy. There aredifferent types of organizational structures namely, the flat organizational structure, matrixorganizational structure, a divisional organizational structure, pre-bureaucratic, bureaucratic,and post-bureaucratic structure, and a functional organizational structure.

Every organization should have a defined organizational structure. A Well thought out andstrategic structure helps support good processes for communication and clarifies lines ofauthority and reporting relationships to assure that work processes flow in a defined process.An organization structure shows lines of authority and reporting relationships. Having this

mapped out helps to ensure efficient work flow and project management as well as eliminationof duplicate systems and processes.

Organization structures are defined by using different criteria. Things to think about are what isthe functional grouping of work processes and are there natural groupings of teams, work groupsor units. This is a decision from senior management on how they would like work activities to beorganized and carried out. This also identifies natural reporting relationships and chain ofcommand. Reporting relationships can be both vertical as well as horizontal.

Organizational structure is perhaps the least understood and most under-appreciated topic inbusiness. James Schermerhorn, Jr.Professor, Ohio University

Organizational Structure is a topic seldom contemplated by most people working inorganizational settings. Everybody goes to work every day, go to assigned locations, and performtheir jobsand everyone doesnt ever think about how their organization is arranged. However,Organizational Structure is critical both for a company and its employees. Everybody shouldthink very carefully about the organizational structure of the companies for which they work orof companies for which they intend to work. In the long run, Organizational Structure can spellthe difference between success and failure for a company, as well as for the individuals whowork there. Organizational structure refers to how authority and responsibility for decisionmaking are distributed in the entity. Top managers make judgments about how to organizesubunits and the extent to which authority will be decentralized. Although the currentcompetitive environment is conducive to strong decentralization, top managers usually retain

authority over operations that can be performed more economically centrally because ofeconomies of scale.


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2.2. The Different Organization Structures Are:

Matrix Structure Functional Structure Product Structure Customer Structure Geographic Structure Bureaucratic Structure Team Structure Network Structure Virtual Structure2.3. The Structure of Dhanlaxmi Bank:

MANAGING DIRECTOR

COUNTRY HEAD

NATIONAL SALES MANAGER

(Sales)

REGIONAL HEAD

(Branch)

REGIONAL SALES

MANAGER

BRANCH HEAD

AREA SALES

MANAGER

BRANCH SALES

MANAGER

SALES

EXECUTIVE

BRANCH OPERATION

MANGER

PO/CSO

ZONAL

HEAD


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2.4. Organizational Structure Analysis of Dhanlaxmi Bank:

Dhanlaxmi Bank is Using Mixed Organization Structure It Is Mixture of Functional, Matrix, and Divisional Organizations

A matrix structure provides for reporting levels both horizontally as well as vertically.Employees may be part of a functional group (i.e. production) but may serve on a teamthat supports new product development

Functional organizational structures are the most common. A structure of this typegroups individuals by specific functions performed. Common departments suchas human resources, accounting and purchasing are organized by separating each of

these areas and managing them independently of the others

Divisional structure also called a "product structure"; the divisional structure groupseach organizational function into a division. Each division within a divisional structurecontains all the necessary resources and functions within it. Divisions can be categorizedfrom different points of view. One might make distinctions on a geographical basis or onproduct/service basis

Matrix Structure is Mostly Used by Companies With a Wide Range of Projects It Is More Useful When Project Has More Than One Purpose In Matrix Structure people are Organized on a Sub-project Basis The Matrix Structure Integrates Various Aspects of the Other Structures It Uses Both Horizontal and Vertical Ways of Communication In Matrix Structure Each Team of people Assigned to Manage a Product Group Might Have

an Individual(s) Who Also Belonged to Each of the Functional Departments, and Vice-versa

Matrix Management is a Technique of Managing an Organization (or, More Commonly, partof an organization) Through a Series of Dual-reporting Relationships Instead of a MoreTraditional Linear Management Structure


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2.5. Advantages of Matrix Organizational Structure:

Extreme Flexibility in Way Organization Adapts to Project Work Coordinates Resources in a Way That Applies Them Effectively to Different Projects Staff Can Retain Membership on Teams and Their Functional Department Colleagues Improves Decision Making Encourage Team Spirit Identification With Region/Product

Fixes Accountability For Performance

Increases Coordination of Functions Manager Can Develop Broad Skills Manager Has Control Over Basic Functions Good at Responding well to an Immediate Project Need Flexibility Responsibility for Success of Project Clearly Identified Releases Top Management From Micromanaging Operations, So That the Management Can

Focus on the Overall Company Strategy Rather Than Detailed Nuts and Bolts Familiarity of the Team Established Administrative System Staff Availability Scheduling Efficiency Clear Authority It Facilitates Rapid Response to Change in Two or More Environments. Flatter and More Responsive Than Other Types of Structures Because They Permit More

Efficient Exchanges of Information


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2.6. Disadvantages of Matrix Organizational Structure:

Potential Incompatibilities Confusion Conflicts Duplication of Efforts Department Orientation


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3.0 Functional Departments

FunctionalDepartments

SalesDepartment

OperationsDepartmen

t

AccountsDepartment

CreditDepartment

ForexDepartment


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Dhanlaxmi Bank has five departments. They are:

Operations Department Sales Department Accounts Department Credit Department Forex Department

Dhanlaxmi Bank does not have HR and Finance Departments for all of their branches. These twofunctions are being controlled and managed directly from the head office which is in

THRISSUR, KERALA.

3.1 Operations Department:

Operations Department consists of following functions;

a. Pre-planning Obtain the following:

Prior internal audit work papers Prior internal audit report(s) and management replies Staff assignments for the audit Time budget

Review work program and prior reports. Interview division management and personnel todetermine the procedures utilized in each department. Obtain documented policies andprocedures, if available

Coordinate audit with external auditors and compliance auditors as necessary to understandtheir role in the audit (if any), and the responsibilities of each group

Review prior internal audit work papers and reports extracting and/or noting any pertinentdata or report items yet to be implemented


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b. Item Processing: Request the following and prove totals to the corresponding daily statement on a scope basis:

Official Checks Expense Checks Certified Checks Money Orders Dealer Finance

Determine that reconciliations are being properly performed and reviewed Determine if official checks have been paid with no credit. Follow-up on any such items

outstanding for more than XXX Week(s)

Select a sample of official checks and trace official check signatures to the signature cardfile. Determine a process is in place for updating official check signatures on a timely basis

Determine that all checks outstanding in excess of X months have been moved into adormant account

Perform a review of the dormant check account. Determine that a proper reconciliation isbeing performed. Determine if there are any accounts or documents over XXX years old thathave not been remitted to the state. If so, ascertain the reason

Review the process in place for reconciling the municipal accounts. Determine if properprocedures are in place

Review the procedures performed in operations relating to the Federal Reservereconciliation. Determine that there is adequate and timely follow-up performed onoutstanding items

Perform a review of the procedures in place for high dollar verification. Select a sample ofitems in excess of $xxxx to determine if operations is complying with procedures

Review the procedures in effect for follow-up on non-sufficient funds return items.


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3.1.1 Customer Accounting:

Obtain a complete understanding of the Deposit Auto Loan Journal. Determine how it is usedto reconcile deposits (demand deposit accounts, time, and cash reserves) on a daily basis

Collect supporting documentation for all entries required for reconcilement. Obtainexplanation for all reconciling items and trace through to resolution

Review the Deposit Unposted Transaction Report. Determine if proper follow up proceduresare in place to clear items on a timely basis

Review automatic teller machine (ATM) settlement. Trace all reconciling items to resolution.Review rejected items

3.1.2 Retail Services:

Obtain the listing of outstanding collections and review for proper documentation Review the procedures in effect over restraining notices and tax levies. Select a sample and

verify that they are handled in accordance with proper procedures Restraining notices cannot exceed one year Tax levies should be paid after XX days

Determine that the bank follows policies and procedures in accordance with the Right toFinancial Privacy Act. Complete questionnaire. Note the number of records released by theBank since mm/dd/yy

Review a sample of these records for completeness. A representative list of items to befound:o Copy of request for researcho Copy of letter sent to court/agencyo Certified mail card to prove it was received

Determine how management ensures that bank personnel know the conditions underwhich they may provide to any federal government authority access to, or copies of, theinformation contained in the financial records of any customer

How is bank records required to be maintained on government agency requests forcustomer records and is that requirement adequately conveyed to all affected bankpersonnel?

Are bank policies, procedures, and training adequate, on an ongoing basis, to ensurecompliance with the Right to Financial Privacy Act?

Obtain latest abandoned property report filed with the State. Determine procedures in effectover remittance of abandoned property

Ensure the bank is following proper account disclosures for their customers and proper fundsavailability policy

ATM Hot Card Requestcards that have been lost, stolen, or have been subject tounauthorized use are hot carded to the date via a fax. Select a sample of hot card requestforms received by retail services over the last 12 months Review the form to determine if it was properly completed Determine if date was notified the same day the card was reported lost/stolen. If not,

ascertain if the delay was caused by the branch or retail services Review the procedures relating to reporting ATM transaction irregularities to retail services

Ensure that the bank reports the results of preliminary investigation within XX days


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Ensure a written confirmation request form was sent to the customer If customer followed up with written confirmation, retail services are required to give a

provisional credit and resolve the matter within 45 days. Trace credit to customersaccount. If no written confirmation was received then the bank does not have to give aprovisional credit

Review the ATM cash proof. Determine the procedures in effect for review, follow up andresolution of the overages/shortages

Review procedures in effect in the operations area for ensuring that proper back-upwithholdings are set up when necessary

Review the procedures in place for properly filing reclamations. (Returning social securitydeposits and checks upon death of depositor, etc)

Obtain the reconciliations prepared by the department relating to travelers checks (e.g. Visaand American Express). Review the procedures in effect for reconciling these accounts to thevendor statements and controlling the distribution of the checks to the various branches

3.1.3 ATM Section:

Obtain an understanding of the controls over the ATM branch administration. Indicate in amemo the procedures that are followed relating to maintenance, upgrades, etc. of ATMs.

Determine if a log is kept for maintenance calls. Review for frequent calls for the same ATM3.1.4 Support:

Review the rate change process. Obtain copies of the rate change fax. Determine that the ratechange was properly approved. Determine that the rate change was properly entered onto thesystem

Ascertain that the Bank is in compliance with Truth in Savings Regulations

Select a sample of each type of deposit account (money market, time deposits, etc)Recalculate the APR rate calculations to determine that they are in compliance within theacceptable tolerance levels as specified by Truth in Savings Regulations

Obtain the latest proof prepared by comptrollers. Determine that branch reconciling items arebeing cleared on a timely basis by the support group. Ensure that a clear path of resolution ismaintained in the files and that an aging of unresolved items is maintained

Determine the progress that has been made on the unreconciled items for the periodmm/dd/yy through mm/dd/yy. Ensure that a clear path of resolution is maintained in the files.Determine the action plan for recovering funds, if necessary

3.1.5 General Ledger and Suspense Accounts:

Obtain a listing of all general ledger suspense accounts for which the operations area hasresponsibility for reconciling Determine how often departmental proofs are prepared and confirm that an officer

regularly reviews the proofs Determine that aging of all suspense items are performed timely


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Verify the balances in the general ledger accounts as of the audit date Trace clearance of reconciling items to subsequent suspense listing Trace item to subsequent posting to general ledger

Obtain a listing of all accounts for which the operations area maintains responsibility.Review the activity in the accounts and determine that these accounts are properly reviewed.

A list of these accounts should include: Origination fees Other fee income Teller clearing account Other assetscash items

3.1.6 Disaster Recovery and Business Resumption

Request whether a contingency plan exists for the department. Determine that key employees areaware of the plan in case it needs to be put in effect.

3.1.7 Summary and Report

Re-review previous audit report and managements replies and determine that all items wereproperly addressed by department management. If appropriate, include any remainingoutstanding items in the new audit report

All current exceptions should be discussed with management prior to completion of thefieldwork

Review the work papers and draft the report Discuss the report draft with management3.2 Sales Department

The sales department of the bank is responsible for improving the sales of the bank. They areresponsible for reaching out to new/potential customers and canvassing them to open Bankaccounts or to apply for loans and other products like credit cards etc. If the sales department isnot working efficiently, the bank may not be able to expand its customer base. The salesdepartment is responsible for reaching out to clients and expands the customer base of the bank.They come up with plans to attract new customers, convince them to make business with thebank, keep them happy and satisfied etc. The sales department of the bank is responsible forimproving the sales of the bank. They are responsible for reaching out to new/potentialcustomers and canvassing them to open bank accounts or to apply for loans and other productslike credit cards etc. If the sales department is not working efficiently, the bank may not be ableto expand its customer base. This is the opposite function to purchasing. The sales team recordsto whom the organization has sold its products, when and for what price they were sold. Thisdata will come from the sales order. They may also be responsible for defining these outputproducts.

Ultimately the main goal of any sales assistant of executive is to sell to the customer; thereforethey will be most interested in getting you to buy the product that is on offer. Alternatively thesales department is also there to advise as well as suggest ideas and is there to help the customerselect the best product which is the most appropriate for them. This is done by the sales advisorgiving the customer the appropriate information for them to be able to base their choice on.


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Role of Sales Department:

Creating positive customer relations Communicate with customers at all time Process and monitor customer needs

3.3 Accounts Department

Maintenance of nooks of accounts and preparation of financial statements of the bank inaccordance with the IAS, as adopted by the bank

Coordination and facilitation for Business planning and budgeting function in the Bank andperiodic reporting to the management and to the Board

Maintenance of foreign currency accounts/ investments and execution of Internationalpayments and receipts

Maintenance of account relating to International Organizations and Donor Agencies Currency issuance and its overall managementThe primary responsibilities of the accounts department consist of:

General Ledger Budgeting Cash and Investment Management Asset Management Grants and Contracts Administration Purchasing Accounts Receivable and Billing Cash Receipts


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Accounts Payable Cash Disbursements Payroll and Benefits Financial Statement Processing External Reporting of Financial Information Bank Reconciliation Compliance with Government Reporting Requirements Annual Audit Lease Insurance3.4 Credit Department

In the large banks it would be impractical, if not impossible, for the cashier, in addition to hisother duties, to keep track of every local borrower and the bank may employ a "credit man," whospecializes in credits. The next step is the organization of a credit department, usually in charge

of one of the officers of the bank.

The credit department collects and files every available bit of information concerning peopleor firms that borrow money

This material consists of financial reports, press clippings, personal interviews, and statements ofcondition and, in fact, every item that has even a remote bearing upon the standing of borrowers.It requires technical training of a high order properly to classify and analyze this data, but thefundamental idea is to acquire the same knowledge of the true facts that a country bank cashierhas with respect to his neighbor.

A simple but practical definition of credit is "the ability to buy with a promise to pay," in otherwords, to obtain present value for a promise to pay in the future. He who has "good credit" cancommand either goods or money because of the faith or belief that others have in his promise.The word "credit" is derived from the Latin "credo." It is not only essential that the borrowerhave the ability to pay his note when it is due - he must also have the desire or inclination to pay.Credit is primarily based upon confidence which has as its basis three things.

First and foremost is character, the "moral risk" which is indispensable in every case


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Then comes capacity, the borrowers ability and business methods Thirdly, Bank Shave capital which, while essential, is distinctly secondary to character and

capacity, a combination which is very apt to attract capita

The banker, naturally, in selecting his customers knows that he may be asked to extend credit.

He first satisfies himself that the factors of character and capacity are such as to justifyconfidence. This information is obtained from personal knowledge of the borrower, and byinformation obtained through other banks, through "the trade" and by agency reports. Tradeinquiries are directed to bank selling goods to and competitors of the borrower. If all thisinformation is satisfactory, the capital factor is studied in the borrowers financial statement ofcondition, which balance sheet should be taken off at regular intervals.

It must show a sufficiently "liquid" position to satisfy the banker that his loan can and will berepaid when due. To show this, there must be an ample margin of quick assets (those readilyconvertible into cash) over current liabilities to enable the borrower, despite any naturalshrinkage of values in liquidation, readily to meet his obligations. This ratio is often called the 2

to 1 ratio, but differs in proportion according to the character of the business in question. Theability to loan money wisely and to those who are entitled to it - in short, the ability todistinguish between a safe risk and an unsafe one - is the quality that marks the good banker.

3.5 Forex(Foreign Exchange) Department

The foreign exchange department is responsible for dealing with and managing the purchase andsale of foreign currencies and is a highly specialized business. All banks, private or state owned,have foreign exchange departments that work closely with the foreign exchange markets in eachcountry trading with other financial centers worldwide. The greatest share of currency trading isspecific to a banks own account although a small proportion will be on behalf of its personal

customers. Foreign Exchange department in a bank has following functions:

Exports

Pre-shipment Advances Post-shipment Advances Export Guarantees Advising/Confirming Letter of Credit Facilitating Project Exports Bills for Collection


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Imports

Opening Letters of Credit Advance Bills Import Loans and Guarantees.

Exchange Dealings

Rate Computation Nostro/Vostro Accounts Forward Contracts Derivatives Exchange Position and Cover Operations

Remittances

Issue of DD, MT, TT etc Encashment of Cheques, DD, MT, TT etc Issue and Encashment of Travelers' Cheques Sale and Encashment of Foreign Currency Notes Non-resident DepositsStatistics

Submission of Returns Collection of Credit Information


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4. 0 SWOT analysis

STRENGTHS WEAKNESSES

OPPORTUNITIES THREATS

SWOTANALYSIS


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4.1. Strengths:

Strong Network in Kerala & South IndiaDhanlaxmi has a very strong network in Kerala and other three states of South India as it is

started in Thrissur, Kerala

ExperienceDhanlaxmi Bank has 83 years of wide experience in banking sector

Unlimited Transactions Through ATM From Any Bank Without Charge:Unlike most of the banks Dhanlaxmi is among the very few banks which offer this servicewithout any charge

ATM Card Can be Used Internationally:Dhanlaxmi Banks ATM card can be used outside India for transactions subject to some nominalcharges

Attractive Fixed Deposit Rates (10.25%):Dhanlaxmi Bank has one of the most attractive interest rates among the private sector banks onfixed deposits

Capital Adequacy:Capital adequacy of 13.4% with a Tier-I ratio of 10.7% as at Dec 31, 2011. Here Capitaladequacy ratio (CAR) is a ratio of a bank's capital to its risk. It is also called Capital to Risk

(Weighted) Assets Ratio (CRAR)


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4.2. Weaknesses:

Late entry in to North, East & West Indian Markets:Dhanlaxmi Bank was always concentrating mostly in south India. Recently they have startedtheir operations in the north, east& West which were very late since many big players in theindustry have already captured most of the market

Dhanlaxmi Bank Was Only Focusing in Kerala & South India Earlier:Since Dhanlaxmi Bank started its operations in the north, east & West recently, Dhanlaxmi as abrand does not have much awareness in those areas

Less No. of Branches and ATMs As Compared to Competitors:As compared to its competitors, Dhanlaxmi Bank has very less no. of branches (275) and ATMs(456) which restricts their operations


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4.3. Opportunities:

Expansion Option in North , East & West India:The north, east& west part of India is yet to be explored on a larger basis by Dhanlaxmi Bank.They have a huge opportunity if adequate awareness is created among the customers

Customers Have Become More Service-oriented:Earlier customers used to go blindly for PSUs. But now they have become more serviceoriented. Customers will select a bank which provides quality services for them

Customers Keep Fluctuating From Banks to Banks:In relation with the above point, customers keep changing their bank based on the services andproducts provided


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4.4. Threats:

Big Players in the Industry:Banks like ICICI, HDFC, SBI etc are the major threats for Dhanlaxmi Bank in their operations

A False Rumor of Reliance Taking Over the Bank:There has been a false rumor that Anil Ambanis Reliance Industries have taken over DhanlaxmiBank. The rumor has come up because the present M.D & CEO of Dhanlaxmi Bank was theright hand of Anil Ambani. When Amitabh Chaturvedi became the CEO of Dhanlaxmi Bank,rumor began to spread over

Nationalized Banks are Growing Fast:There is a tough competition for the private sector banks from the PSUs. PSUs have beengrowing rapidly and many still believe only in those banks since the government is involved inits operations

Economic Conditions In India:The poor economic conditions in Indian markets badly affected not only to Dhanlaxmi Bank butalso for the entire banking sector as well

RBIs Policy Regarding CRR:The RBI, to cut down the inflation which is prevailing in the market, increases the CRR of thebanks, which in turn reduces the liquidity of the banks forcing them to increase the lending rates,to which customers get offended


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5.0 Special Task

5.1 Title of the Study:

A Study of Preferences of the future investors in mutual funds

5.1.1 Statement of problem

In the capital market, there are different instruments are being traded in the capital market for theinvestors and the speculators to invest in the market. There are different instruments in themarket for trading like shares, mutual funds, commodities and insurance. Everything has its ownRisk and return in the investments. In this problem we have studied about the investorscharacteristics in the buying of the mutual funds in the market in different sectors and categories.

5.1.2 Type of study

Evaluation study is carried out to know the investors characteristics and preferences in theinvestment in the mutual funds

5.1.3 Scope of Study

The scope of the study is vast. The study can be extended to offer the following benefits:

The study would enable us to know the functioning of selling the mutual funds in themarket in the recent era

To know the Customer preferences and the behavior To know how the companys preferences of the customer

5.1.4 Objectives of Study

To have an overview of Mutual funds customers behaviour To study the functioning of Stock market with respect to companies decisions To draw the conclusion and offer suggestions for the investors for better investment

5.1.5Tools for data Collection

The accuracy of collection data is a greater significance for drawing correct and valid conclusionfor the investigation. The sources can be classified into two:

Primary data Secondary data


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a. Primary data

The Primary data is used, by collecting the data through the Questionaire

b. Secondary data

Major sources of secondary data that can be collected from various websites and magazines

5.1.6 Tools of analysis

After collecting the data its variable having defined character, were tabulated and analyzed withthe help of line graphs in Microsoft excel and formulas. On the basis of this analysis findingswere chalked out and based on that suggestions were made.

5.1.7 Limitations of Study

1. Time Constraint: In a period of only 30 days it is very difficult to understand the wholemarket scenario

2. The detail information of companies


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5.2 Data Interpretation

Are you interested in investment?

yes 36 86%

no 6 14%

People may select more than one checkbox, so percentages may add up to more than 100%.

What kind of investments you prefer most?

Saving account 19 50%

Fixed deposits 9 24%

Insurance 8 21%

Post Office-NSC, etc 2 5%

Mutual Fund 10 26%

Shares/Debentures 11 29%

Gold/ Silver 17 45%

Real Estate 7 18%

Other 2 5%



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While investing your money, which factor you prefer most?

Liquidity 8 21%

Low Risk 20 51%

High Return 22 56%

Company reputation 7 18%


Have you ever invested your money in mutual fund?

Yes 9 21%

NO 33 79%People may select more than one checkbox, so percentages may add up to more than 100%.

If YES

In which kind of mutual you would like to invest?

Public 14 74%

Private 10 53%



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How do you come to know about Mutual Fund?

Advertisement 7 17%

Peer Group 3 7%

Banks 6 14%

Financial Advisors 3 7%

Which mutual fund scheme have you used?

Open-ended 6 14%

Close-ended 3 7%

Liquid fund 4 10%

Mid- Cap 0 0%

Growth fund 1 2%

Regular Income fund 1 2%

Long-Cap 2 5%

Sector fund 0 0%


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If NO

If not invested in Mutual Fund then why?

Not aware of MF 6 17%

Higher risk 5 14%

Not any specific reason 25 69%

People may select more than one checkbox, so percentages may add up to more than 100%

Continue

Which feature of the mutual funds attracts you most?

Diversification 7 17%

Better return and safety 18 43%

Regular Income 5 12%

Tax benefit 6 14%

Other 6 14%


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In which Mutual Fund you have invested?

HDFC 7 37%

Reliance 0 0%

UTI 2 11%

ICICI prudential funds 8 42%

JM mutual fund 1 5%

Kotak 0 0%

Other 4 21%


When you invest in Mutual Funds which mode of investment will you prefer?

Systematic Investment Plan (SIP) 17 46%

One Time Inv

dhanalaxmi bank Final project Report by ykartheekguptha

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