INTRODUCTION:

Current time bank is crucial part of business and it is furnished

services to connecting businessmen for urging dealing. Banking has played a

very important role in the economic development of all the nations of the

world. In fact, banking is the lifeblood of modern commerce is. So depend

upon banking that any cessation of banking activity. Even for a day or two.

This completely paralyzes the economic life of a nation.

1.1 OVERVIEW OF BANKING INDUSTRY:

The word bank has been derived from the Latin word bancus or from

banque. Which mean a bench in English? The early bankers transacted their

business at benches in a market place. When banker failed his bench was

broken up by the people. According to some authorities derived from the

German word bank was meaning a joint stock fund Italianated into banco

when the German were masters of a great part of Italy, In India, the Hilton

young commission recommended that word bank or banker should be

interpreted as meaning every person, firm or company accepting deposits of

money subject to withdrawal by cheque, draft or order.

The Indian Banking Companies Act. 1949 define a “Banking company

as a company which transacts the business of banking in any State of India.”

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INTRODUCTION OF

BANK

In the economic development of a nation banks occupy an important

place. Banking institutions from an important part of the money market

comprises both organized as well as unorganized sectors. The unorganized

sector includes moneylenders and indigenous bankers and largely caters to

the needs if persons living in villages and small town. It is estimated that

about one third of the total credit requirements of the country are met by the

unorganized sector. Financial Institution in the organized sector have grown

significantly in the last institutions in the organized sector of the Indian

Money Market commercial bank and co-operative banks have been in

existence for a petty long time.

Besides the co-operative banks. Commercial banks and regional Rural

Banks. A variety of specialized financial institutions have been setup in the

country to cater to the specific needs of trade, commerce, agriculture,

industry and other activities.

In the field of agricultures finance and allied activities. Co-operative

credit societies and central co-operative have been in operation since long.

After nationalization in a 1969. Commercial banks also have expanded their

activities to rural areas and provide finance for agriculture and allied

activities.

Thus quantitatively as well as qualitatively there banking instructions

have increased their services tremendously in recent years.

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1.2 STRUCTURE OF CO- OPERATIVE BANK:

CO-OPERATIVE BANKS:

Farmers in India are scattered all over the country and need short-term

small borrowing for agricultural purpose. This need is not fulfilled by

commercial banks, which are unsuited for financing agriculture accepted as

security by commercial banks. Therefore special types of banks are

necessary for the financing of agriculture. Co-operative banks are best

suitable for this purpose. The objective of co-operative banks is to offer

banking facilities to persons of limited means requiring credit for productive

purpose in the use of the land and labor at their disposal. The co-operative

banking structure in India may be divided into their component part.

1. Primary Co-operative Banks “or” Credit Society (PCS)

The primary co-operative credit society is an association of borrows

and non-borrows residing in a particular locality. The funds of the society

are derived from the share capital and deposits of members and loans from

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Primary Co-operative Bank

Central Co-operative Bank

State Co-operative Bank

central co-operative banks. The borrowing power of the members as well as

of the society is fixed. The loans are given to members for the purpose of

cattle, folder fertilizer, pesticides, implements, etc.

2. Central Co-operative Banks (CCB):-

There are the federations of primary credit societies in a district and

are of two types- those having a membership of primary societies only and

those having a membership of societies as well as individuals. The funds of

the bank consist of share capital, deposits and overdrafts from state co-

operative banks and joint stocks. These banks finance member societies

within the limits of the borrowing capacity of societies. They also conduct

all the business of a join-stock bank.

3. State Co- Operative Banks (SCB):-

The state co-operative bank is a federation of central co-operative

banks and acts as a watchdog of the co-operative banking structure in the

state. Its funds are obtained from share capital from the Reserve Bank of

India. The state co-operative banks lend money to central co-operative banks

and primary societies and not directly to farmers. The principle one being

the institution of provincial co-operative banks to serve as apex banks in the

hierarchy of co-operative pyramid.

1.2.1 Role of Co-operative Banks in India and its structure:

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Co-operative banking came into vogue in India in 1904 when the first

Co-operative Credit Society Act was passed. The main function of a co-

operative Credit Society was to provide cheap credit to the members who are

small people with small means and small needs and finance. Another object

was to inculcate the saving habit among the agriculturists and make them

take advantage of co-operation from fellow members of the society. We

could bring green revolution in agriculture sector only due to co-operative

activities.

There is a state co-operative bank in each state co-operative as an

apex institution, advancing short term and medium term agriculture credit is

three tier one: a state co-operative bank (SCB) at an apex level in each state,

the at the district level and the primary and society (PCS) in the village, and

urban banks (UB) and other non-agricultural credit societies (NACS) in

cities and towns. The structure of co-operative banks.

As I discussed the co-operative societies came into existence when the

co-operative societies act, 1904 was enacted. These societies, however could

not mobilize enough resources as compared to the loans demanded by its

members. This led to the enactment a new act in 1912. The various sections

of this act are as follow:

1) To keep watch over the activities of the primary co-operative societies

and to assist them the required monetary help and them guidance

district central co-operative banks are established.

2) Establishing of non-leading societies along with the loan-giving

(lending) societies.

3) The difference between the village societies and urban societies is

removed and the type of societies maintain are only of two types.

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(i) Societies having limited responsibility.

(ii) Societies having unlimited responsibilities.

In 1919, the Nontague Chemsford Act made co-operative societies

and banks co-operative society acts have been passed by all the state

government.

From April 11966 the co-operative banks came under the preview of

banking lagh a paid up capital of Rs. 1 lakh or more have come under

the control of Reserve Bank of India. From above discussion, we see

that the co-operative banks in India have shown very good progress

since their establishment but in spite of showing very much progress

there still exists a number of defects in such co-operative societies and

banks. This has led qualitative improvement to suffer.

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INTRODUTION OF VARACHHA CO-OPERATIVE

BANK LTD

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2.1 HISTORY

The Varachha Co-operative Bank submitted the application for

beginning of the bank and also registered to the Surat District Registraction

Department on 27th January, 1995 with registered no SA2914 and the

registered office of the bank is at Affil Tower, Lambe Hanuman Road,

Surat-395006. Within the period of five-month obtaining license from

Reserve Bank of India, on 1st July, 1995 with license number as UBD

Guj1153 P after finishing has started it’s working on dated 16th August 1995.

By gliting of lamp with inauguration of the bank was done by the Swami

Sachidanand.

Board of Director:

Shree Pravinbhai V. Pansuriya (CHAIRMEN)

Shree Bhupendrabhai K. Ribadiya (VICE CHAIRMEN)

Dr. Lavjibhai M. Nakrani (CHAIRMEN OF LOAN COMMITTEE)

Shree Dhirubhai N. Ghevariya (CHAIRMEN OF STAFF COMMITTEE)

Shree Kanjibhai R. Vadariya (DIRECTOR)

Shree Vallabhbhai P. Savani (DIRECTOR)

Shree Narendrabhai M. Kukadiya (DIRECTOR)

Shree Jivarajbhai K. Patel (DIRECTOR)

Shree Prabhudas T. Patel (DIRECTOR)

Shree Kanubhai V. Savaliya (DIRECTOR)

Shree Babubhai V. Mangukiya (DIRECTOR)

2.2 SCENARIO OF ORGANIZATION

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2.3 DEVELOPMENT:-

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CHAIRMENP.B. Dhakecha

VICE CHAIRMENBhupendrabhai K. Ribadiya

MANAGING DIRECTORBhavanbhai B. Navapara

BOARD OF DIRECTOR

GENERAL MANAGERA.D.Bhalani

Branch Manager

B. C. Sorathia

Kamrej Branch

M.D. Kanani

Ring Road Branch

K.A. Dobariya

Kapodra Branch V.B. Dhanani

Katargam Branch

A.V. Patel

Kadodara Branch

D.I. Dodiya

The development of The Varachha Co- Operative Bank was

continuously increasing after two and half year from establishing of Head

Office. We can know more above bank from given a table of Branch

establishment. The Varachha Co- Operative Bank was not need take loan

from government sector and other. For Developing and Vested it’s branch so

progress table as under.

Branch Address Date

KAMREJBhavani Complex, Kamrej Char

Rasta, Surat.07-06-1998

RING

ROAD

Sai Darshan Market, Kamela

Darwaja, Ring Road, Surat.04-07-1999

Establishing of three branch in one year on 2000-2001

Branch Address Date

KADODARAThakorji Complex, Kadodara Char

Rasta, Surat.02-07-2000

KAPODRA

“Visvas Bhavan” Nr. Shiddh Kutir

Temple, Kapodra, Varachha Road,

Surat-6.

28-01-2001

KATARGHAM

Sardar Complex, Nr. Anath

Asram, Katargam Main Road,

Surat.

26-01-2001

Amazing development of bank. To achieve in year 2000-2001.

Because period of one year. The Varachha Co-operative bank was set up the

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three Braches within the short time to it’s evident to rapid development of th

Varachha Co-operative Bank.

2.4 THE VARACHHA CO-OPERATIVE BANK

ESPECIALLY BANKING SERVICES:

1. Tele-Banking Cum Fax Services:

By using tele-baking services, customer can take information about

personal account ledger (PLA) and it’s transaction. And bye using fax

services. Customer can take statement of last fifteen day on fax services.

2. Vat Machine:

“Visual Account Teller Machine” i.e. called VAT Machine.

Customer can see his statement, balance sheet, and other information by just

entering his account number and PIN number and this facility is very

popular in customers.

3. M.I.C.R. Cheque.

“Magnetic Ink Character Recognition” that is known as M.I.C.R.

This crucial technology is also adopted by The Varachha Co-Operative Bank

for rapidly work with a view to speeding up the cheque clearing process both

local as well as intercity, under this system; the cheques are processed at

high. Speed on machines. Bank issue cheque, draft and other payment

instrument in M.I.C.R. Format using the special quality paper and printing

specifications. On M.I.C.R. instrument there is code line at the bottom

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containing information printed in magnetic ink, which is required for

mechanical processing. The code line contains the following information.

First six number indicate the cheque number

Next three number indicate city code

Next three number indicate bank code

Next three number indicate branch code

After some space three is the number for transaction code

M. I. C. R. cheque should not be a folded pin, staples, etc. should only

be used on top left hand corner of the cheque. Signature of the drawer,

rubber stamp, etc. should be affixed above the code line. Nothing should be

written on the code line. In place of the counterfoils M.I. C. R. chequebooks

provide for Record Slip. At the ends, which are used for recording the details

of every cheque, issued.

4. Teller Payment Service:

Cashier furnishes this service if amount is not exceeding of 20,000 in

Current Account and 10,000 in Saving Account so customer can draw

directly through this service.

5. Other services:

a) Senior citizen

For senior citizen Bank gives half percent more in Fixed Deposit to

them whose age is above 60 years

b) Full Day Banking Services:

Monday to Friday 10:00 a.m. to 6:00 p.m.

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Saturday 10:00 a.m. to 2:00 p.m.

c) Safe Deposit Vault services:

Just open in Branch

Kapodara Branch

Katargam Branch

Kamrej Branch

d) N.R.I. (Non Resident in India)

N.R.I. individual can open his account in The Varachha Co-operative

Bank because The Varachha Co-operative Bank is granted through Reserve

Bank of India.

e) G.E.B. Bill collection services

Organization of centers for G.E. B. Bill payment for more suitability

for the customers. Facilities provided by the bank in Kamrej, Kadodra

Branch and Kapodra Branch.

f) Insurance provided by the bank to its deposit holder and loan taker.

2.5 VARIOUS TYPES OF DEPOSIT ACCOUNTS IN

VARACHHA BANK:-

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Bank Account:

The bank accepted deposits from the public and offers facilitates to

the public according to their requirements and economic status. Though

bank accepts deposits as a fund-raising device. Its primary aim is to serve

the society as financial institution and lend its might to strengthen the capital

market. Keeping all these in video a bank usually offers three types of

accounts in which it accepts deposits.

1) Fixed Time Deposit Account

2) Saving Deposit Account

3) Current Account

Details in Deposit Accounts:

1) Fixed Time Deposit Account:-

Fixed deposit account are made with the bank for a fixed period which

is specified at the time of making the deposit. This account attracts those

customers who have money to invest for a longer period but do not want to

take much of risk.

The interest rate varies from one period to another. A deposit of 15

days attracts a smaller rate of interest and deposits for 5 or more years the

highest rate.

Fixed deposit accounts are usually opened by the following kinds

people.

1) Middle Income People.

2) Religious Societies

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3) Trustee

4) Educational Institutions

5) Others who want to invest but at no risk at all.

2) Saving Deposit Account:-

The banks with a view to developing the people’s habit of savings the

bank accept saving deposits. Normally people having fixed income

belonging to middle class, deposit their savings in their accounts and the

banks provide them facilities so that they may earn interest.

Saving account open with minimum amount is Rs.1000 and the

interest rate is 3.5%.

3) Current Account:-

Current accounts are also known as demand deposit accounts current

account is running an active account which may be operated upon any

number of times during a working day. There is no restriction on the number

and the amount of withdrawals from a current account. Current account

deposit is known as banker’s demand liability and in order to fulfill its

liabilities he keeps sufficient cash ready every moment.

Function of Current Account

Individual Account

Proprietary Account

Private account

Hindu Undivided Family (HUF)

To encourage saving habits in general public and mobilize savings in

the country for her development plans. So the bank offering.

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(i) Recurring Deposit Accounts:

The recurring deposit account has gained wide popularity these days.

Under this the depositor is required to deposit a fixed amount of money

every month for specific period of time. Each installment may vary from

Rs.5 to Rs.500 or more per month and the total period of account varies

from 12 months to 10 years. After completion of the specified period, the

customer gets back all his deposits along with the cumulative interest

occurred on them.

This type of accept is very popular amongst the salary people since it

provides them an opportunity to raise the enough funds. So that they can

utilize it in the purchase of some useful household good, the purchase of

which otherwise it impossible.

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2.6 MANAGEMENT TOWARDS PROVISION FOR PROFIT

DISTRIBUTION

Net Profit

Deducted Provision

Reserve Fund 25 %

Share Dividend 15 %

Dividend Equalization Fund 02 %

Education Fund -

Building Fund -

Total -

Distribution Profit = DP

Rest Profit = Net profit – (DP)

Rest Profit

Deduction as per sub-

rule:

Accident annual fund 5 %

Other activity fund 20 %

Donation fund 10 %

Rebate Interest Fund 20 %

Jubilee Festival Fund 10 %

Staff Benefit Fund 10 %

Member welfare Fund 20 %

Co-operative Propaganda

Fund

05 %

Total 100 %

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2.7 BANKERS:-

Bankers Location

The Gujarat State Co-operative Bank Limited Ahmedabad

The Surat District Co-operative Bank Ltd. Surat

State Bank of India – Chawlk Bazar – Nanpura Surat

State Bank of Travankor – Ring Road Surat

State Bank of Saurastra Surat

State Bank of Mysore Surat

Indus Ind Bank Limited Surat

H.D.F.C. Bank Ltd. Surat

I.C.I.C.I. Bank Ltd. Surat

2.8 BANK PROVIDES VARIOUS TYPES OF LOANS:

1) Mortgage Loan

2) Security Loan on Bank’s Share Certificate

3) Vehicle Loan

4) Cash Credit Loan

5) Machinery Loan

6) Term Loan

7) Self-employee Loan

8) Loan on National Saving Certificate

9) TUF Loan (Textile Upgradation Fund )

10) Gold Loan

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2.9 OBJECTIVE OF THE VARACHHA CO-OPERATIVE

BANK

To encourage thrift and mutual Co-operating among its members.

To create funds to be lend at moderate of interest to the members of

the bank in accordance with the processor specified in these byelaws

To undertake the management of trust and for that to accept any office

of trustee, executors or office to perform duties of such a confidence

nature either independently or jointly with some other person as the

board deems fit.

To undertake every kind of banking and sharaffi business and also to

undertake giving bank guarantee and letter of credit on behalf of

members.

To do every kind of trust and agency business and particularly do the

work investment of funds, sale of properties and of recovery or

acceptance of money.

To give possible help and necessary guidance to traders, artisans etc.

who are members of this bank in the conduct of their business.

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2.10 PROGRESS OF THE VARACHHA BANK:

(Rows 2to 6 are in Crores)

No Contents 03/98 3/99 3/00 3/01 3/02 3/03

1.No. of Share Holders

5566 5955 6429 6887 7342 8142

2.Share Capital

0.95 1.31 1.82 2.51 3.11 3.44

3.Total Deposit

17.02 37.54 62.45 101.03 123.04 129.79

4.Total Loans

10.39 22.53 39.94 55.21 67.32 67.25

5. Net Profit 1.11 1.34 2.09 3.67 4.70 4.3

6.Working Capital

23.33 44.60 72.43 115.83 146.41 159.35

7.No. of Depositor

14680 24530 40013 58222 66109 75435

8.No. Of Loan accepter

1232 1868 4216 5098 5727 5055

9. Dividend 15% 15% 15% 15% 15% 15%

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3.1 INTRODUCTION OF RATIO ANALYSIS: -

The relationship of these two figure expressed mathematically is

called a ratio. The ratio reefers to the numerical or quantities relationship

between two variables or times. A ratio is calculated by dividing one item of

the relationship with the other. The ratio analysis is one of the most useful

and common methods of analyzing financial statement. Ratio enables the

mass of data to be summarized and simplified. Ratio analysis is an

instrument for diagnosis of the financial health of an enterprise.

3.2 MEANING OF RATIO:-

A ratio is only a comparison of the numerator with the denominator.

The tern ratio reefers to the numerical or quantitative relationship between

two figures and obtained by dividing the former by the latter.

Ratio analysis is an important and age old technique of financial

analysis. The data given in financial statements ratio are relative form of

financial data and very useful techniques to cheek upon the efficiency of a

firm. Some ratio indicates the trend or progress or downfall of the firm.

3.2.1 Importance of ratio:

Ratio analysis of firm’s financial statement is of interest to a number

of parties mainly. Shareholders, creditor, financial executives etc.

shareholders are interested with earning capacity of the firm: creditors are

21

RATIO ANALYSIS

interested in knowing the ability of firm to meet financial obligation and

financial executives are concerned with evolving analytical tools that will

measures and compare costs, efficiency liquidity and profitability with a

view to making intelligent decisions.

Aid to measure general efficiency: Ratios enable the

mass of accounting data to be summarized and simplified

Aid to measure financial solvency: They point out firm’s

liquidity position to meet its short-tern obligation and long-tern

solvency.

Aid in forecasting and planning: ratio help to prepare the

future plan of action etc.

Facilitate decision-making: it throws light on the degree

of efficiency of the management and utilization of the assets that is

why it is called surveyor of efficiency.

Aid in corrective action: the highlight the factors

associated with successful and unsuccessful firms.

Aids in intrude firm comparison: inter firm comparison

are facilities. It is an instrument for diagnosis of financial health of

enterprise.

Evaluation of efficiency: ratio analysis is an effective

instrument which, when properly used is useful to assess important

characteristics of business liquidity, solvency, profitability etc.

Effective tool: ratio analysis helps in making effective

control of the business measuring performance; control of cost etc.

ratio ensures secrecy.

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3.2.2 Limitation of ratio analysis

Ratio analysis is as already mentioned, a widely used tool of financial

analysis. It is because ratios are simple and easy to understand. But they

must be used very carefully. They suffer from various limitations.

Some of the limitations of ratio analysis are given below:

Difference in definition: comparisons are made difficult

due to difference in definitions of various financial terms.

Limitations of according records ratio: Ratio analysis is

based on financial statement, which are themselves subject to

limitations.

Lack of proper standards: it is very difficult to ascertain

the standard ratio in order to make proper comparison. Because it

differs from firm to firm, industry to industry.

Changes in accounting procedure: it different firms for

their valuation follow methods then comparison will practically be

of no use.

Limited use of single ratio: a single ratio would not be

able to convey anything. It too many ratio are calculated they are

likely to confuse instead of revealing meaningful conclusions

Personal bias: Ratios have to be interpreted and different

people may interpret the same ratio in efferent ways. The analyst

has to carry further investigation and exercise. His judgment in

arriving at a correct diagnosis.

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3.3. CLASSIFICATION BY PURPOSE:

This is a classification based on the purpose for which an analyst

computes these ratios. The modern approach of classifying the ratios is

according to purpose or objects of analysis. Normally, ratios are used

for the purpose of assessing the profitability and sound financial

position. Thus, ratios according to the purpose are more meaningful.

There can be several purposes, which can be listed.

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Classification by Purpose

Profitability ActivitySolvency

Short term Long term

- Current Ratio- Cash position Ratio

- Proprietary Ratio- Debt – Equity Ratio - Solvency Ratio

Gross profit Ratio Net profit RatioExpense RatioOperating profit RatioReturn on capital employed RatioReturn on Equity Ratio

Capital turnover RatioCreditor TurnoverDebtor TurnoverFixed Assets Turnover

3.3.1 Solvency ratio

(1) S

h or

t -

term

I. Current Ratio

II. Cash position Ratio

(I) Current ratio: -

Current ratio is the most common ratio measuring liquidity being

related to working capital analysis; it is also called the working capital ratio.

Current ratio expresses relationship between current assets and current

liability.

It is calculated by dividing current assets by current liability.

Current ratio = current assets Current liabilities

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Solvency ratio

Short term Long tern

Current ratioCash position ratio

Proprietary ratioDebt-equity ratioSolvency ratio

Current

assets2001 2002 2003

Cash 101022946 91865667 145366689

Bank 82752538 60395420 100068900

Advance 324052618 435799975 424613713

Other advances 22341179 38793552 69260211

Bills receivables 5060596 3979987 3500508

Interest receivables 20780224 17586799 22042524

Total 556010102 648421400 764852545

Current liabilities

Bills payable 5060596 3979987 3500508

Interest payable 105537341 151404137 170012452

Current deposit 117193537 177498738 216847619

Saving deposit 159518565 221739279 251737366

Interest liabilities 12762863 16825205 10115704

Other liabilities 16985292 17438244 30137518

Total 417058194 588885590 682351167

Ratio 1.33 1.10 1.12

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Chart:

Interpretation: -An ideal current ratio is 2:1 considered as a safe margin of solvency

2:1 i.e. the current assets are two times the current liabilities. When ratio is

2:1. The creditors will be able to get their payments in full.

Here, it is shows the bank has been always between 1.12 to 1.33

which is quite satisfactory but can be improv by better profit and also by

decreasing in liabilities.

(II) Cash position ratio: -

It is a variation of quick ratio. When liquidity is highly retracted in

terms of cash and cash equivalents this ratio should be calculated. The

inventory and the debtors are excluded from current assets, to calculate this

ratio.

Cash position ratio= (cash + marketable security) Current liability

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2001 2002 2003

Cash 101022946 91865667 145366689

Marketable securities 82752539 60395420 100068900

Total 183775485 152261087 245435589

Current Liability 417058194 588885590 682351167

Ratio 0.44 0.26 0.36

Chart:

Interpretation: -

In cash position ratio 1:1 is satisfactory result. In 2001 to 2003 all

year’s ratio is lower than 0:75:1. It means the bad position for the bank. In

cash position ratio cash is increase in 2003 compare with 2001. And also

marketable securities increase in 2003.

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(2) Long-term

I. Proprietary Ratio

II. Debt-Equity Ratio

III. Solvency Ratio

(I) Proprietary ratio:

Proprietary ratio relates the shareholders funds to total assets. It is a

variant of the debt equity ratio. This ratio a variant of the debt equity ratio.

This ratio shows the long-term or future solvency of the business. It is

calculated by dividing shareholders funds by the total assets:

Proprietary ratio= shareholders fund Total assets

Share holders fund 2001 2002 2003

Capital 25050000 31060400 34402600

Reserve fund 59506159 104411717 172655919

Subsidiary fund - - -

P & L a/c 36709773 47001569 47280228

Total 121265932 182473686 254338747

Total asset 1166383894 1468522340 1600488521

Ratio 0.10 0.12 0.16

Chart:

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Interpretation: -

This ratio shows the general strength of the bank. It is very important

to creditors as is help them to find out the proportion of share holder fund in

the total asset used in business. Higher ratio indicates a secured position to

creditor i.e. 0.16 and lower ratio indicates greater risk to creditor i.e. 0.10.

From 2001 to 2003, the ratio is increase.

(II) Debt-equity ratio:

Debt equity ratio is determined to ascertain soundness of the long-

term financial policies of the company. This ratio relates all external

liabilities to owner’s recorded claims.

Debt-equity ratio = Long-term debt Shareholder’s fund

Long term debt 2001 2002 2003

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Fixed deposit 628059766 679807291 659343265

Other borrowing - 17355772 4455342

Total 628059766 697163063 663798606

Share holders fund 121265932 182473686 254338747

Ratio 5.18 3.82 2.61

Chart:

Interpretation: -

In indicates the margin of safety to long-term creditors low debt-

equity is larger safety margin for creditors and high ratio is unfavorable from

the firm’s point of view and creditors point of view the claims of creditor are

greater than the of owners.

(III) Solvency ratio: -

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Solvency ratio is also known as debt ratio. It is a difference of l00and

proprietary ratio. This ratio is found out between total assets and external

liabilities out between total asserts and external liabilities external liabilities

means all long period and short period liabilities.

Solvency ratio= Outside liabilities

Total assets

= Total liabilities – shareholder’s fundTotal assets – NPA

particular 2001 2002 2003

Outside liabilities

Total liabilities 1166383894 1468522340 1600488521

Less: Share holders fund 121265934 182473686 254338747

Total 1045117960 1286048654 1346149774

Total assets 1166383894 1468522340 1600488521

Ratio 0.89 0.87 0.84

Chart:

Interpretation: -

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In this ratio, total assets are far more than external liabilities. The

banks treated solvent. In solvency ratio in 2001 is 0.89 and decrease in 2003

is 0.84, it means that outside liabilities is always less than total assets.

3.3.2 Profitability ratio

I. Net profit Ratio

II. Expense Ratio

III. Operating Profit Ratio

IV. Return on capital employed ratio

V. Return on equity shareholder’s funds.

I. Net profit ratio:

The ratio expresses the relationship between profit & net sales.

The main objective of computing this ratio is to determiner the overall

profitability due to various factors such as operational efficiency trading on

equity and hence it is very useful to preparatory.

Net profit ratio = Net profit x 100Net sales

2001 2002 2003

Net Profit 36709774 47001569 47280228

Net Sales:

Interest receivable 143706779 189693181 203890471

Commission 3656668 4271246 5805746

Total 147363447 193964427 209696217

Ratio 24.91% 24.23% 22.55%

Chart:

33

Interpretation: -

In the Net profit ratio, higher the ratio of net operating profit to sales

better is the operating efficiency and profitability when used with net profit

ratio and operating ratio.

In this ratio in 2001 is 24.90% and slightly decrease in 2003 is

22.55% 1t is more useful for the further condition of the bank.

II. Expenses Ratio:

34

This ratio indicates the efficiency or otherwise in the incurrence of

administrative expense. It is expressed as a percentage.

The purpose of this ratio is that income is rise than expenditure it is

also raised.

Expenses ratio = Total expenses X 100 Total incomes

Total expenses 2001 2002 2003

Staff, salaries, allowance 5914459.7 7509958 8790948

Director fees - - -

Legal fees 58050 34650 84531

Rent, tax, insurance 1677238 3546764 3596769

Postage, telegram 559554 666025 651445

Audit fees 41115 84425 193950

Stationary, printing 1952370 1102094 1461752

Other expenses 2323893 5899959 5467498

Total 12526680 18843874 20246895

Total income 148944409 196044763 211774038

Ratio 8.41% 9.61% 9.56%

Chart

35

Interpretation:

In this ratio the expenses are reduced it is best for firm and higher

ratio it is bad for all the future position and lower ratio greater profitability.

In this ratio the percentage of 2001 is 8.39% it is good position In

2003 the ratio is high from 8.39% to 9.56%.

The expenses ratio is increasing in % but it is not increasing highly.

III. Operating Profit Ratio

This ratio measures the relationship between operating profits and net

sales.

The main purpose of computing this ratio is to determine the

operational efficiency of the management.

Operating profit Ratio: operating profit x 100 Net sales

36

Operating profit 2001 2002 2003

Profit 36709774 47001569 47280228

Provision 4873700 4894792 29959203

Depreciation 3791403 13411085 6018823

Total 45374877 65307446 83258254

Net sales 147363447 193964427 209696217

Ratio 30.79% 33.66% 39.70%

Chart:

37

Interpretation:

This ratio increases in 3 years the ratio of 2003 is 39.70%. 1t means

lower position for 2001 is good but high in 2002 more efficient and increase

factor for higher gross profit, lower operating profit. Lower operating ratio

shows the higher operating profit.

III. Return on capital employed ratio: -

This ratio measures a relationship between net profit before interest &

tax and capital employed.

The purpose of computing this ratio is to find out how efficiency the

long term funds supplied by the creditors and shareholder have been used.

Return on capital employed ratio

= Net profit before interest & tax X 100Capital employed

2001 2002 2003

Operating profit 45374877 65307446 83258254

Capital employed

Capital 25050000 31060400 34402600

Reserve fund 59506159 104411717 172655919

Subsidiary partnership fund - - -

Total 84556159 135472117 207058519

38

Ratio 53.66% 48.21% 40.21%

Chart:

Interpretation: -From the return on capital ratio is lower in year 2002, 2003. In this

ratio operating profit is lower than capital employed. The ratio is high that

means the more efficient use of capital employed, but the ratio is getting

decreased. So here we can say that the bank has to try to increase the ratio.

V. Return on equity shareholder fund: -

This ratio measures a relationship between net profit after interest and

tax and shareholder’s fund. This ratio establishes the profitability from the

shareholders point of view.

This purpose of computing this ratio to find out how efficiently the

funds supplied by the equity shareholders have been used.

Return on shareholders fund ratio

= Net profit after tax & interest X 100Shareholders fund

39

2001 2002 2003

Net profit 36709774 47001569 47280228

Shareholders fund 121265934 182473686 254338747

Ratio 30.27% 25.76% 18.59%

Chart:

Interpretation: -From 2001 to 2003, all year shareholder fund and profit are

increasing. It is the final income i.e. available for distribute as dividend to

40

shareholder. Shareholder fund include shareholder capital and all reserves

and surplus belonging to shareholder from 2001 to 2003, the ratio is

decreasing in percentage. In 2001, the ratio is 30.27%, then in next year the

ratio is 25.76% and in last year the ratio is 18.59%. So I suggest that bank

take corrective action about it.

3.3.3 Activity ratio

I. Creditor turnover ratio

II. Debtor turnover ratio

III. Fixed assets turnover ratio

41

I. Creditors turnover ratio

This is also known as accounts payable or creditors velocity. This

ratio establishes a relationship between net credit purchase and average trade

creditors.

Longer the period of outstanding payable is lesser is the problem of

working capital of the firm but when the firm does not pay off its creditors

within time it may have adverse effect on the business.

The purpose of computing this ratio is to determine the efficiency of

the firm with the creditors is managed.

Creditor turnover ratio= Net credit purchase Average trade creditor

In bank creditor turnover ratio

= Creditors + interest payable + bills payable

42

Interest paid

Creditors 2001 2002 2003

I. F.D. 628059766 679807291 659343264

II. S.D. 159518566 221739278 251737365

III. C.D. 117193537 177498738 216847619

Bills payable 5060596 3979987 3500508

Interest payable 105537341 151404137 170012452

Total 1015369807 1234429431 1301441209

Interest paid 91042853 111893442 108268889

Ratio 11.15times 11.03times 12.02times

Chart:

Interpretation:

43

In this ratio creditors are decreases in all year. In year 2001,

11.14times and increase in 2003 year is 12.02 times. It will be good for the

bank. A higher ratio shows that the creditors are not paying in time. A lower

ratio shows that business is not taking the full advantage of credit period

allowed by creditors.

II. Debtors turnover ratio

This is also called as debtor’s velocity or receivable turnover. This

ratio establishes a relationship between net credit sales and average trade

debtors.

The purpose of computing this ratio is to determine the efficiency of

the firm with which the trade debtors are managed

If the firm has not been able to collect its debtors within a reasonable

time its, funds unnecessarily locked up in receivables. In such case short

term loans have to be arranged for paying off its current liabilities. This

depends on quality of debtors.

Debtor’s turnover ratio: Net credit sales Average trade debtors

In bank debt equity ratio:

Debtors + bills receivable + interest receivablesInterest receivables

2001 2002 2003Debtors(i) Short term loan 324052618 435799975 424613713(ii)Medium-term loan 225997182 235499752 246013956(iii) Long-term loan 2056307 1866669 1935631Bills Receivable 5060596 3979988 3500507Interest Received 20780224 17586779 22042524

44

Total 577946927 694733163 698106331Interest Received 143706779 189693182 203890471Ratio 4.02 times 3.66 times 3.42 times

Chart:

Interpretation:

In the debtors turnover ratio debtors are decrease as compare to above

year but interest receive for bank is decrease in 2002 it also indicates that

ratio is decrease or lower than above year.

IV. Fixed Assets Turnover RatioIt is also known as to fixed assets ratio. This ratio establishes a

relationship between net sales and fixed assets.

45

The purpose of computing this ratio is to determine the efficiency and

profit earning capacity of the firm.

Fixed assets Turnover Ratio = Net sales Net fixed Assets

2001 2002 2003

Net Sales 147363447 193964427 209696217

Net Fixed Assets

Furniture & fixture 15027239 18696536 15303200

Telephone deposits 167000 141000 145000

Gas deposits 3100 3100 4700

Vehicles 294807 218386 119598

Total 15492146 19059022 15572498

Ratio 9.51 10.18 13.47

Chart:

46

Interpretation: -

It indicates the firms’ ability to generate sale per rupee of investment

in fixed assets higher the ratio greater is the intensive utilization of fixed

Assets. Lower ratio measures under utilization of fixed Asset.

3.3.4 Credit Deposit Ratio

The purpose of credit Deposit Ratio that to find the current Position of

Bank. Total Deposit (T.D + Interest Payable)

Credit Deposit Ratio = Total Advances X 100Total Deposits

2001 2002 2003Total Advances 552106108 673166396 672563299Total Deposits 1010309209 1230449444 1297940701 Ratio 54.65% 54.71% 51.82%

Chart:-

47

Interpretation:

Generally this ratio should be maintained at 60% to 70%. And 75% is

boarder line that is at should not exceed 75%. In the past 3 years, ratio is

between in 60% to 70% that means perfectly use of loan able fund.

III.3.5 Spread Ratio

The purpose of spread Ratio is find the Received interest & paid

interest.

Spread Ratio: (Interest Received-Interest paid) x 100

Interest Received

2001 2002 2003

Interest Received 143706779 189693181 203890471

Interest paid 91042853 111893442 108268889

Total 52663926 77799739 95621582

Ratio 36.65% 41.01% 46.89%

48

Chart:

Interpretation:

Spread Ratio is required minimum30% to 35%. This Ratio is good

because higher than 30% to 35%. Interest received is higher than fatest paid

in last three years.

II.3.6 Over dues Ratio

Over dues Ratio = Total over dues Total loan

2001 2002 2003

Total over dues 34133397 33680000 32120116

Total loan 552106108 673166396 672563299

49

Ratio 6.18% 5% 4.76%

Chart:

Interpretation:

This ratio should maintain below in 10%. If this ratio is above 15%

that means bank comes in categories of week but these ratio of bank already

below 10%. Overdue of year 2003 is less than 2002.

3.3.7 Profit margin

To find the profit margin that means net profit dividing by total incomes.

Profit margin= Net profit x 100 Total income

2001 2002 2003

Net profit 36709774 47001569 47280228

50

Total income 148944409 196044763 211774039

Ratio 24.67% 23.97% 22.33%

Chart:

Interpretation:

Generally this ratio is required under 10 to 15%. If this ratio is higher

than 15% that means it is good for bank.

3.3.8 Non interest income ratio

Non interest income ratio= Non interest income x 100 Total income

2001 2002 2003

Non interest income

Exchange & commission 3656668 4271255 5805746

51

Other income 1580962 2080327 2077822

Total 5237630 6351580 7883567

Total income 148944409 196044762 211774039

Ratio 3.52% 3.24% 3.72%

Chart:

Interpretation:

This ratio should maintain between 3 % to 5 %, which means it is

good for bank. This ratio of bank is always under its limit i.e. 3% to 5%

3.3.9 Loan to Deposit Ratio

Loan to Deposit Ratio = Total Loan x 100

52

Total Deposit

2001 2002 2003

Total Loan 552106108 673166396 672563299

Total Deposit 904771869 1079045308 1127928249

Ratio 61.02% 62.39% 59.63%

Chart:

53

Interpretation:

Cash Reserve Ratio (CRR) & Statutory Liquidity Ratio (SLR) has to

be maintained under section 18 & 24 banking regulation act, 1947. Bank can

advances total of deposits of 30 to 40% & make advances 60 % to 70%

Varchha bank has maintains this ratio. This ratio was maintaining under 60

to 70 % last year of the Varachha bank. It is satisfactions as per ratio point of

view.

3.3.10 Profit on loan & advance ratio

Net profit X 100Total loan

2001 2002 2003

Net profit 36709774 47001569 47280228

Total loan 552106107 673166396 672563299

Ratio 6.65% 6.98% 7.03%

Chart:

54

Interpretation:

The ratio of 2001 and 2002 a rounding 5 % but increase in 2003 is

7.03% that means total loans are increase in last 2 years compare with net

profit. Percentage of outstanding loan of bank maintained nearly 5 %. It goes

to 6.65% in the year 2001 that is a sufficient.

3.3.11 Total income to income of interest on loan Ratio:

Income of interest on loan x 100Total income

55

2001 2002 2003

Income of interest on loan 143706779 189693182 203890470

Total income 148944409 196044763 211774039

Ratio 96.48 % 96.76% 96.27 %

Chart:

Interpretation

The bank’s income on interest of loan is around 96 %. That means it

is good for bank. In 2002, the bank’s income of interest on loan is 96.76 %

and slightly decreases in 2003 that is 96.27 %. Bank require try to increase

in its income of interest on loan.

3.3.12 Interest expense Ratio:

Total Interest Paid X 100 Total Expenditure

56

2001 2002 2003

Total Interest Paid 91042853 111893442 108268889

Total Expenditure 112234636 149043194 164493810

Ratio 81.11% 76.67% 65.82%

Chart:

Interpretation:

The ideal ratio is declare by RBI under 70% to 75%. If this ratio is

higher than 75%. Bank should try to decrease this position create in 2001 but

after 2001 this ratio maintain under 70% to 75% that means bank get the

control on this ratio.

57

An ideal current ratio is 2:1 the ratio 2:1 is

considered as a safe margin of solvency due to the fact that if the current

assets are reduced to half i.e. 1 instead of 2 then also creditors will be

able to get their payments in full.

58

FINDINGS

Here it shows that the bank has been always

between 1.1-1.45, which is quite satisfactory but can be improved by

better turnover & profit and also by decreasing liabilities.

The Debt Equity ratio is determined to ascertain the

soundness of long-term financial policy of the bank. In case the ratio is 1.

It is consider being quite satisfactory.

So it shows that the bank was able to acquire enough

external equity in all year that is a good sign for future.

Bank’s interest expenses ratio is higher in 2001 that

is interest paid on overdraft and deposit was high.

Overdue ratio decrease in 2003 i.e. total overdue

decrease in 2003 it is a good for bank.

Working capital is increase in year to year for

maintaining day to day expenses.

Credit deposit ratio is always less than 60%. Total

advances are less than total deposit. Ideal ratio is 60% to 70%.

Bank’s non-performing assets are increase in year to

year due to development of bank.

Bank should try reducing its operating expense and increasing its income.

Bank should establish inter branch connectivity with all branches.

The bank should update its website for better marketing so Customer See

the bank’s progress.

59

SUGGESTION

To increase awareness in people mind The Varachha Co-operative Bank

should design it’s add campaign and select right source of propaganda

like media. Viz., etc.

In the competition area bank should give facility of ATM to customer.

Management Accounting

-R.S. N. Pillai and Bagvati (S.Chand)

Banking and Insurance

-N.D. Gami, J.B.Patel, Sunil H. Rajani (New Popular Prakasan)

Annual Report of Bank

60

BIBLIOGRAPHY

Profit & Loss Account

Particular 2001 2002 2003ExpenseInterest on deposit and borrowing 91042852 111893442 108268889Salaries allowance & Provident Fund

5914459 7509957 8790948

Director Fees - - - Rent, Tax, Insurance, Electricity 1677238 3546764 3596769Law Fees 58050 34650 84531Postage, Telegram, Telephone 559554 666025 651445

61

Exp.Audit Fee 41115 84425 193950Depreciation Fund 3791403 4567387 6048823Stationary, Printing 1952370 1102094 1461752Non Banking Expense - - 5536118Other Expense 7197592 19638450 29890582Profit 36709773 47001569 47280228Total 148944409 196044763 211774037

IncomeInterest & Discount 143706779 189693182 203890471Commission Exchange 3656668 4271254 5805746Donation - - -Non Banking Income - - -Other Income 1580962 2080327 2077822Total 48944409 196044763 211774037

Balance Sheet

Particular 2001 2002 2003LiabilityShare capital 25050000 31060400 34402600Reserve fund 59506159 104411716 172655919Subsidiary Fund - - -Deposit:

- Temporary Deposit 628059765 679807291 659343264 - Saving Deposit 159518565 221739278 251737365 - Current Deposit 117193537 177498738 216847619Call & Short Time Deposit - - -

62

Borrowing - 5000000 4455342Bills Payable 5060596 3979987 3500507Interest Overdue 12762863 16825205 10115703Interest payable 105337341 151404137 170012452Other liability 16985291 17438243 30137518Profit and Loss A/c 36709773 47001569 47280228Total 1166383894 1468522340 1600488516

AssetsCash 101022945 91865667 145366688Bank 82752538 60395420 100068900Call & Short time Investment - - -Investment 339447100 530055100 540055100Subsidiary Fund Invest - - -Loans and Advances - Short term 324052618 435799975 424613712

- Moderate term 225997182 235499752 246013956- Long term 2056307 1866669 1935631

Interest receivable 20780224 17586799 22042523Bills Receivable 5060596 3979987 3500507Branch adjustment - - -Building premises 27845962 33988220 32328089Furniture & Fixture 15027239 18696536 15303200Other Asset 22341179 38793552 69260210Total 1166383894 1468522340 1600488516

.

63