SBI Finance

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INTRODUCTION

The story of insurance is probably as old as the story of mankind. Tendency of a human

being to secure themselves against loss and disaster has been from the starting of world.

They sought to avert the evil consequences of fire and flood and loss of life and were

willing to make some sort of sacrifice in order to achieve security. Though the concept of

insurance is largely a development of the recent past, particularly after the industrial era

past few centuries yet its beginnings date back almost 6000 years as per records.

Insurance business is divided into four classes:

Life Insurance Fire

Marine

Miscellaneous Insurance.

Insurance provides: Protection to investor.

Accumulation of savings.

Channeling these savings into sectors needing huge long term investment.

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FUNCTIONS OF INSURANCE

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Provide protection: The primary function of insurance is to provide protection

against future risk, accidents and uncertainty. Insurance cannot check the

happening of the risk, but can certainly provide for the losses of risk. Insurance is

actually a protection against economic loss, by sharing the risk with others.

Collective bearing of risk : Insurance is an instrument to share the financial

loss of few among many others. Insurance is a mean by which few losses are

shared among larger number of people. All the insured contribute the premiums

towards a fund and out of which the persons exposed to a particular risk is paid.

Assessment of risk : Insurance determines the probable volume of risk by

evaluating various factors that give rise to risk. Risk is the basis for determining

the premium rate also .

Provide certainty : Insurance is a device, which helps to change from

uncertainty to certainty. Insurance is device whereby the uncertain risks may be

made more certain .

Small capital to cover larger risk : Insurance relieves the businessmen from

security investments, by paying small amount of premium against larger risks and

uncertainty.

Contributes towards the development of industries : Insurance provides

development opportunity to those larger industries having more risks in their

setting up. Even the financial institutions may be prepared to give credit to sick industrial units which have insured their assets including plant and machinery.

Means of savings and investment: Insurance serves as savings and

investment, insurance is a compulsory way of savings and it restricts the

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unnecessary expenses by the insured's For the purpose of availing income-tax

exemptions also, people invest in insurance.

Source of earning foreign exchange: Insurance is an international business.

The country can earn foreign exchange by way of issue of marine insurance

policies and various other ways.

Risk free trade: Insurance promotes exports insurance, which makes the

foreign trade risk free with the help of different types of policies under marine

insurance cover .

LIFE INSURANCELife insurance is a contract under which the insurer (Insurance Company) in

Consideration of a premium paid undertakes to pay a fixed sum of money on

The death of the insured or on the expiry of a specified period of time

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Whichever is earlier? In case of life insurance, the payment for life insurance policy is

certain. The Event insured against is sure to happen only the time of its happening is not

known. So life insurance is known as Life Assurance. The subject matter of insurance is

life of human being. Life insurance provides risk coverage to the life of a person. On

death of the person insurance offers protection against loss of income and compensate the

titleholders of the policy.

Roles of life insurance

Life insurance as an investment: - Insurance products yield more than anyother investment instruments and it also provides added incentives or bonus offered by

insurance companies.

Life insurance as risk cover: - Insurance is all about risk cover and protection

of life. Insurance provides a unique sense of security that no other form of invest

can provide.

Life insurance as tax planning: - Insurance serves as an excellent tax saving

mechanism too.

Importance of life insurance:- Protection against untimely death: - Life insurance provides protection to

the dependents of the life insured and the family of the assured in case of his

untimely death. The dependents or family members get a fixed sum of money in

case of death of the assured.

Saving for old age: - After retirement the earning capacity of a person reduces.

Life insurance enables a person to enjoy peace of mind and a sense of security in

his/her old age.

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Promotion of savings: - Life insurance encourages people to save money

compulsorily. When life policy is taken, the assured is to pay premiums regularly

to keep the policy in force and he cannot get back the premiums, only surrender

value can be returned to him. In case of surrender of policy, the policyholder gets

the surrendered value only after the expiry of duration of the policy . Initiates investments: - Life Insurance Corporation encourages and mobilizes

the public savings and canalizes the same in various investments for the economic

development of the country. Life insurance is an important tool for the

mobilization and investment of small savings.

Credit worthiness: - Life insurance policy can be used as a security to raise

loans. It improves the credit worthiness of business. Social Security: - Life insurance is important for the society as a whole also.

Life insurance enables a person to provide for education and marriage of children

and for construction of house. It helps a person to make financial base for future.

Tax Benefit: - Under the Income Tax Act, premium paid is allowed as a

deduction from the total income under section 80C.

Indian insurance industryHistory:

Life insurance came to India from England in 1818 when oriental life

insurance company started in Calcutta by Europeans. After this many insurance

companies had been started in India. But these companies were looking after only the

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The global insurance industry is growing at rapid pace. Most of the markets are

undergoing globalization. Lot of mergers and acquisition are taking place in the insurance

world. The rapidity in the industry, technological improvement has resulted in pressures

on a few economic parameters. The world insurance industry is at peak of its

globalization process.

Global insurance market is increasing by an average of six percent per year

since 1990. Insurance companies have collected $2443.7 billion premium world wide

according to the global development of premium volume in 144 countries in 2005.

$1521.3 has been generated as life insurance premium and $922.7 as non life insurance

premium. The US accounted for 35% of global life and non life premium, Japan had

global share of 21%, and UK was having 10% of global share.

Influence on Indian insurance industry :In this era of globalization, insurance companies face a dynamic global environment.

Dramatic changes are taking place owing to the internationalization of activities,

appearance of new risk, new types of covers to match with new risk situations, and

unconventional and innovative ideas on customer services. Low growth rates in

developed markets, changing customers needs, and the uncertain economic conditions in

the developing world are exerting pressure on insurers resources and testing their abilityto survive. Now the existing insurers are facing difficulties from non-traditional

competitors those are entering the retail market with new approaches and through new

channels.

India has a rapidly growing middle class and this section can afford to buy

insurance products. This shows the attraction that the Indian market holds for foreign

insurers who have been putting pressure on developing countries as well as on India to

open up its market.

Life insurance penetration as a % of GDP

United kingdom 8.9%Japan 8.3%Korea 7.3%United states 4.1%

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Malaysia 3.6%India 3.0%China 1.8%Brazil 1.3%

Source: - www.indianinsuranceresearch.com

FUNCTIONING OF INSURANCE INDUSTRYInsurers business model:

Profit = earned premium + investment income - incurred loss - underwriting expenses

Insurers make money in two ways: (1) through underwriting , the processes by which

insurers select the risks to insure and decide how much in premiums to charge for

accepting those risks and (2) by investing the premiums they collect from insured.The most difficult aspect of the insurance business is the underwriting of policies. Using

a wide assortment of data, insurers predict the likelihood that a claim will be made

against their policies and price products accordingly. To this end, insurers use actuarial

science to quantify the risks they are willing to assume and the premium they will charge

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to assume them. Data is analyzed to fairly accurately project the rate of future claims

based on a given risk. Actuarial science uses statistics and probability to analyze the risks

associated with the range of perils covered, and these scientific principles are used to

determine an insurer's overall exposure. Upon termination of a given policy, the amount

of premium collected and the investment gains thereon minus the amount paid out in

claims is the insurer's underwriting profit on that policy.

An insurer's underwriting performance is measured in its combined ratio. The loss ratio

(incurred losses and loss-adjustment expenses divided by net earned premium) is added

to the expense ratio (underwriting expenses divided by net premium written) to determine

the company's combined ratio. The combined ratio is a reflection of the company's

overall underwriting profitability. A combined ratio of less than 100 percent indicates

underwriting profitability, while anything over 100 indicates an underwriting loss.

Insurance companies also earn investment profits on float. Float or available reserve

is the amount of money, at hand at any given moment that an insurer has collected in

insurance premiums but has not been paid out in claims. Insurers start investing insurance

premiums as soon as they are collected and continue to earn interest on them until claims

are paid out.

. Naturally, the float method is difficult to carry out in an economically depressed

period. Bear markets do cause insurers to shift away from investments and to toughen up

their underwriting standards. So a poor economy generally means high insurance

premiums. This tendency to swing between profitable and unprofitable periods over time

is commonly known as the "underwriting" or insurance cycle .

Finally, claims and loss handling is the materialized utility of insurance. In managing the

claims-handling function, insurers seek to balance the elements of customer satisfaction,

administrative handling expenses, and claims overpayment leakages.

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COMPARISON OF INSURANCE WITH OTHER SIMILAR

FACTORS

(1) Insurance and gambling compared

Insurance is often erroneously confused with gambling .There are two important

differences between them .First ,gambling creates a new speculative risk ,while insuranceis a technique for handling an already existing pure risk .thus ,if you bet Rs 300 on a

horse ,a new speculative technique is created ,but if you pay Rs 300 to an insurer for fire

insurance ,the risk of fire is already present and is transferred to the insurer by a contract.

No new risk is created by the transaction.

The second difference between insurance and gambling is that gambling is

socially unproductive, because the winners gain comes at the expense of the loser .In

contract; insurance is always socially productive, because neither the insurer nor the

insured is placed in a position where the gain of the winner comes at the expense of the

loser. The insurer and the insured have a common interest in the prevention of a loss.

Both parties win if the loss does occur .Moreover, consistent gambling transaction

generally never restore the losers to their former financial position .

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2.Insurance and hedging compared

The concept of hedging is to transferring the risk to the speculator through

purchase of future contracts .An insurance contract, however, is not the same thing as

hedging .Although both technique are similar in that risk is transferred by a contract, andno new risk is created, there are some important difference between them. First, an

insurance transaction involves the transfer of insurable risks, because the requirement of

an insurable risk generally can be met .However, hedging is a technique for handling

risks that are typically uninsurable ,such as protection against a decline in the price

agriculture products and raw materials.

A second difference between insurance and hedging is that insurance and hedging is that

insurance can reduce the objective risk of an insurer by application of the law of large

numbers. As the number of exposure units increases, the insurers prediction of future

losses improves, because the relative variation of actual loss from expected loss will

decline .thus, many insurance transactions reduce objective risk. In contract, hedging

typically involves only risk transfer , not risk reduction .The risk of adverse price

fluctuation is transferred because of superior knowledge of market conditions .The risk is

transferred, not reduced, and prediction of loss generally is not based on the law of large

numbers.

TYPES OF LIFE INSURANCE POLICY

Endowment policies: This type of policy covers risk for a specifiedperiod, and at the end of the maturity sum assured is paid back to

policyholder with the bonuses during the term of the policy.

Money back policies: This type of policy is for periodic payments of partialsurvival benefits during the term of the policy as long as the policy holder is alive.

Group insurance: This type of insurance offers life insurance protection under group policies to various groups such as employers-employees, professionals, co-

operatives etc it also provides insurance coverage for people in certain approved

occupations at the lowest possible premium cost.

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Term life insurance policies: This type of insurance covers risk only during theselected term period. If the policy holder survives the term, risk cover comes to an

end. These types of policies are for those people who are unable to pay larger

premium required for endowment and whole life policies. No surrender, loan or paid

up values are in such policies.

.Whole life insurance policies: This type of policy runs as long as the policyholder is alive and is covered for the entire life of the policyholder. In this

policy the insured amount and the bonus is payable only to nominee on the death of

policy holder.

Pension plan: A pension plan or annuity is an investment over a certain number of

years but does not provide any life insurance cover. It offers a guaranteed income

either for a life or certain period.

Unit linked insurance plan: ULIP is a kind of insurance plan which provides lifecover as well as return on premium paid over a certain period of

INSURANCE AND ECONOMY Indian economy is growing in reference to global market. Business of insurance

with its unique features has a special place in Indian economy.

It is a highly specialized technical business and customer is the most concern people in this business, therefore this business is able to spur the growth of

infrastructure and act as a catalyst in the overall development of Indian economy.

The high volumes in the insurance business help spread risk wider, allowing a

lowering of the rates of the premium to be charged and in turn, raising profits.

When there is a bigger base, the probabilities become more predictable, and with

system wide risks balanced out, profits improve. This explains the current

scenario of mergers, acquisitions, and globalization of insurance.

Insurance is a type of savings. Insurance is not only important for tax benefits, but

also for savings and for providing security. It can be serving as an essential

service which a welfare state must make available to its people.

Insurance play a crucial role in the commercial lives of nations and act as the

lubricants of economic activities. Insurance firms help to spread the potentially

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financial consequences of risk among the large number of entities, to mobilize

and distribute savings for productive use, facilitate investment, support and

encourage external trade, and protect economic entities against external risk.

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COMPANY PROFILE

SBI Life insurance is a joint venture between the State Bank of India and Cardiff SA of

France. SBI Life insurance is registered with an authorized capital of Rs 500 crore and a

paid up capital of Rs 350 crores. SBI owns 74% of the total capital and Cardiff the

remaining 26%. State Bank of India enjoys the largest banking franchise in India. Along

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with its 7 Associate Banks, SBI Group has the unrivalled strength of over 14,000

branches across the country, the largest in the world.

Cardiff is a wholly owned subsidiary of BNP Paribas, which is The Euro Zones leading

Bank. BNP is one of the oldest foreign banks with a presence in India dating back to

1860. It has 9 branches in the metros and other major towns in the country. Cardiff is a

vibrant insurance company specializing in personal lines such as long-term savings,

protection products and creditor insurance. Cardiff has also been a pioneer in the art of

selling insurance products through commercial banks in France and 29 more countries .In

2004, SBI Life insurance became the first company amongst private insurance players to

cover 30 lakh lives.

The company expects to carve a niche in the Indian insurance market through extensive

product innovation and aims to provide the highest standards of customer service through

a technological interface. To facilitate this, call centres have been already installed and

help lines will be installed and customers will have access to their accounts through the

Internet or through SBI branches. SBI Life insurance is uniquely placed as a pioneer to

usher banc assurance into India. The company hopes to extensively utilize the SBI Group

as a platform for cross-selling insurance products along with its numerous banking

product packages such as housing loans, personal loans and credit cards. SBIs access toover 100 million accounts provides a vibrant base to build insurance selling across every

region and economic strata in the country.

Under section 88 of insurance act 1961 an individual is entitled to a rebate of 20 per cent

on the annual premium payable on his/her life and life of his/her children or adult

children. The rebate is deductible from tax payable by the individual or a Hindu

Undivided Family. This rebate is can be availed up to a maximum of Rs 12,000 on

payment of yearly premium of Rs 60,000. By paying Rs 60,000 a year, you can buy

anything upwards of Rs 10 lakh in sum assured. (Depending upon the age of the insured

and term of the policy) This means that you get an Rs 12,000 tax benefit. The rebate is

deductible from the tax payable by an individual or a Hindu Undivided Family.

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SBI Life Insurance is currently growing at an impressive rate of 200%. As per the latest

IrDA report SBI Life ranks No. 3 amongst the private insurers. The company's market

share has increased to 10% amongst the private players and is 2.25% in the total industry.

This year, the company is aiming at a growth of 150%. The new business premium of the

company from beginning of the year to September 2006 is Rs 660 crores. The total

business premium of the company from the beginning of the year till September 2006 is

Rs 765 crores. The company aims to collect first year premium of over Rs 2,000 crores.

SBI Life follow a multi distribution channel approach and expect all channels to

contribute to the overall growth. Today, the agency channel contributes over 50% and

banc assurance channel contributes to 40% of the business. Other channels like Credit

Life and Group Corporate are also performing very well.

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DISTRIBUTION OF INSURANCE PRODUCT

Insurance has to be sold the world over. The Touch point with the ultimate customer is

the distributor or the producer and the role played by them in insurance markets is

critical. It is the distributor who makes the difference in terms of the quality of advice for

choice of product, servicing of policy post sale and settlement of claims. In the Indian

market, with their distinct cultural and social ethics, these conditions will play a major

role in shaping the distribution channels and their effectiveness. In today's scenario,

insurance companies must move from selling insurance to marketing an essential

financial product. The distributors have to become trusted financial advisors for the

clients and trusted business associates for the insurance Companies.

Challenges for insurance companies and intermediaries in India-

Building faith about company in the mind of clients.

Building personal credibility with the clients.

Different distribution channels in India:-

A multi-channel strategy is better suited for the Indian market. Indian insurance

market is a combination of multiple markets. Each of the markets requires a different

approach. Apart from geographical spread the socio-cultural and economic

segmentation of the market is very wide, exhibiting different traits and needs.

Different multi-distribution channels in India are as follows

Agents : Agents are the primary channel for distribution of insurance. The public

and private sector insurance companies have their branches in almost all parts of

the country and have attracted local people to become their agents. Today'sinsurance agent has to know which product will appeal to the customer, and also

know his competitor's products to be an effective salesman who can sell his

company, the product, and himself to the customer. To the average customer,

every new company is the same. Perceptions about the public sector companies

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are also cemented in his mind. So an insurance agent can play an important role to

create a good image of company.

Banks: Banks in India are all pervasive, especially the public sector banks.Many insurance companies are selling their products through banks. Companies

which are bank owned, they are selling their products through their parent bank.

The public sector banks, with their vast branch networks, are helpful to insurance

companies. This channel of selling insurance is known as Banc assurance.

Source: - Hindu Business Line, January 08, 2007

Brokers: Now a days different financial institution are selling insurance. These

financial institutions are known as brokers. They are taking some underwriting

charges from the insurance companies to sell their insurance products.

Corporate agents: Corporate agency is a cross selling type of channel.Insurance companies tie-up with business houses in other industries to sell

insurance either to their employees or their customers. Insurance industry, during

the past 2 years has witnessed a number of such strategic tie-ups and alliances.

Corporate agents have become a major force to reckon with in distributing

INSURANCE COMPANY ASSOCIATE BANKSICICI prudential ICICI bank, bank of India, Citibank,

Allahabad bank, Federal bank, south Indian

bank, Punjab and Maharashtra cooperative

bank SBI life State bank of

India,SBBJ,SBP,SBI,SBS,SBT etc.Birla sun life Deutsche bank, Citibank, bank of

Rajasthan, Andhra bank ING Vysya bank Vysya bank

Aviva life insurance ABN amro bank, canara bank HDFC standard life Union bank, Indian bank Met life Karnataka bank, j&k bank

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insurance products. Such as- Bajaj Allianz tied up with Maruti Udyog and Ford

for auto insurance and Tata AIG life has tied up with Tata tea, khaitans

Williamson major and bridge foundation for selling rural policies.

Internet: In this technological world internet is also a channel of sellinginsurance. This can be as direct marketing.

COMPETITORS OF SBI LIFE INSURANCE

ICICI prudential: ICICI prudential insurance is a joint venture of ICICI bank and prudential plc a leading financial service group in the UK. Total capital stands for

Rs. 37.72 billion, with ICICI Bank holding a stake of 74% and Prudential plc holding

26%. ICICI begin their operations in December 2000 after receiving approval from

IRDA. Now ICICI prudential is having over 1000 offices, over 270000 advisors and

21bancassurance partners. ICICI Prudential was the first life insurer in India to receive a

National Insurer Financial Strength rating of AAA from Fitch ratings. ICICI prudential is

working on the base of five core values-

Integrity

Customer first Boundary less

Ownership

Key features:

Understanding the needs of customers and offering them superior products

and service.

Leveraging technology to service customers quickly, efficiently and

conveniently.

Developing and implementing superior risk management and investment

strategies to offer sustainable and stable returns to policyholders.

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Providing an enabling environment to foster growth and learning for

employees.

HDFC standard life insurance : HDFC Standard Life Insurance Company Ltd. is one

of India's leading private insurance companies. It is a joint venture of Housing

Development Finance Corporation Limited, India's leading housing finance institution

and a Group Company of the Standard Life in UK. HDFC as on March 31, 2007 holds

81.9 per cent of equity venture. Gross premium income of the HDFC for the year ending

March 31, 2007 was Rs. 2, 856 crores and new business premium income was Rs. 1,624

crores. The company has covered over 8, 77,000 lives year ending March 31, 2007.

HDFC standard is having 1000 advisors in 11 towns.

Key features:

Creating corporate agents through HDFC bank in India.

Creating agents to provide total financial consultancy.

Introducing low cost group schemes for companies and NGOs.

Reliance life insurance: Reliance Life Insurance Company Limited is a part of Reliance Capital Ltd. of the Reliance - Anil Dhirubhai Ambani Group. Reliance Capital

is one of Indias leading private sector financial services companies, and ranks among the

top 3 private sector financial services and banking companies, in terms of net worth.

Reliance Capital has interests in asset management and mutual funds, stock broking, life

and general insurance, proprietary investments, private equity and other activities in

financial services. Reliance Capital Limited (RCL) is a Non-Banking Financial Company

(NBFC) registered with the Reserve Bank of India under section 45-IA of the Reserve

Bank of India Act, 1934.

Aviva life insurance: Aviva is UKs largest and the worlds fifth largest insuranceGroup. It is one of the leading providers of life and pensions products to Europe and has

substantial businesses elsewhere around the world. Aviva has a joint venture of Dabur,

one of India's oldest, and largest Group of companies. And country's leading producer of

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traditional healthcare products. In accordance with the government regulations Aviva

holds a 26 per cent stake in the joint venture and the Dabur group holds the balance 74

per cent share. Aviva has 193 Branches in India (including rural branches) supporting its

distribution network. Through its Banc assurance partner locations, Aviva products are

available in more than 2,795 locations across India. Aviva has a sales force of over 30000

financial planning advisors.

Key features: Through the Financial Health Check (FHC) Avivas sales force has been able to

establish its credibility in the market. The FHC is a free service administered by the

FPAs for a need-based analysis of the customers long-term savings and insurance

needs. Depending on the life stage and earnings of the customer, the FHC assesses

and recommends the right insurance product for them.

Introduced the concept of Banc assurance in India.

Products to provide customers flexibility, transparency and value for money.

Differentiation in fund management operations.

MetLife insurance: MetLife India Insurance Company Limited is an affiliate of

MetLife, Inc. and was incorporated as a joint venture between MetLife International

Holdings, Inc.and The Jammu and Kashmir Bank, M. Pallonji and Co. Private Limited

and other private investors. MetLife is one of the fastest growing life insurance

companies in the country. It offers a range of innovative products to individuals and

group customers at more than 600 locations through its bank partners and company-

owned offices. MetLife has more than 32,000 Financial Advisors. It has approximately

70 million customers all over world. MetLife is working on the base of six core values-

Innovation

Long term relationship

Customer centered and result focused vision

Creating high performance organization

Working with integrity, fairness and financial prudence

Partnering with internal and external customers

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Max New York life insurance: Max New York Life Insurance Company Ltd. is a

joint venture between New York Life, a Fortune 100 company and Max India Limited,

one of India's leading multi-business corporations The Company's paid up capital is Rs.

907.4 crore. Max New York life is working on the base of six core values-

Excellence,

Honesty,

Knowledge,

Caring,

Integrity

The Company practices a lot of importance on its selection process of insurance advisors

which comprises four stages - screening, psychometric test, career seminar and finalinterview. 337 agent advisors have qualified for the Million Dollar Round Table (MDRT)

membership in 2007 and Max New York Life has moved up to 21st rank in MDRT

global list.

Key features: Max New York Life has adopted prudent financial practices to ensure safety of

policyholder's funds.

Investing significantly in its training programme and each agent is trained for 152hours as opposed to the mandatory 100 hours stipulated by the IRDA before

beginning to sell in the marketplace.

Using a five-pronged strategy to pursue alternative channels of distribution which

include the franchisee model, rural business, direct sales force involving group

insurance and telemarketing opportunities, banc assurance and corporate

alliances.

Bharti Axa life insurance: Bharti Axa life insurance is a joint venture between

Bharti, one of Indias leading business groups with interests in telecom, agri business and

retail, and Axa world leader in financial protection and wealth management. The joint

venture company has a 74% stake from Bharti and 26% stake of Axa. The company

started its operations in December 2006. Now company is having over 5200 employees

across over 12 states in the country. Company is working on the base of five core values-

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Professionalism

Innovation

Team Spirit

Pragmatism Integrity

Key features: Using multi-distribution, multi product platform techniques.

Adapting AXA's best practices as a sound platform for profitable growth.

Leveraging Bharti's local knowledge, infrastructure and customer base.

Delivering high levels of shareholder return.

Building long term value with business partners by enhancing the proposition

to their customers.

Retaining the best talent in India.

Tata AIG life insurance: Tata AIG Life Insurance Company Limited (Tata AIG

Life) is a joint venture company of the Tata Group and American International Group,

Inc. (AIG). The Tata Group holds 74 per cent stake in the insurance venture with AIG

holding the balance 26 percent. Tata AIG Life provides insurance solutions to individualsand corporate. Tata AIG Life Insurance Company started to operate its business in India

on April 1, 2001. Tata AIG is having 3000 advisors all over India.

Key features: Establishing direct mailers; call-centers in 60 centers.

Creating awareness workshops in housing societies.

15-day trial period with refund, premium payment through credit card.

Bajaj Allianz life insurance: Bajaj Allianz life insurance company ltd. Is a joint

venture of Allianz AG, one of the worlds largest insurance companies and Bajaj auto,

one of the biggest two and three wheeler manufacturing companies in the world.

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Company is having over 440000 satisfied customers in India. Company is having 550

branches across the country and over 60000 advisors.

Key features: Tying up with seven regional rural banks sponsored by Syndicate Bank to tap the

rural market.

Introducing micro-insurance products and coming out with a new capital

guarantee product.

Expanding its agency force from 1.60 lakh to 2 lakh and the branch network will

also be increased from 900 to 1400.

ING Vysya life insurance: ING Vysya Life Insurance Company Limited a part of

the ING group the worlds largest financial services provider entered in the private life

insurance industry in India in September 2001.ING Vysya Life is currently present in 246

cities and has a network of over 300 branches, staffed by 7,000 employees and over

51,000 advisors, serving over 5.5 lakh customers. ING Vysya Life has a diversified

distribution channels,. While Tied Agency remains the strongest channel, the Alternate

Channels business within ING Vysya Life is one of the fastest growing distribution

channels. ING Vysya Life has strengthened its position as the unparallel leader in the life

insurance industry in cooperative banks tie ups. The company currently has tie ups with

130 cooperative banks across the country. The Alternate Channels division has Banc

assurance, ING Vysya Bank, Corporate Agents and SMINCE. ING Vysya is working on

the base of five core values-

Professionalism

Entrepreneurial

Trustworthy

Approachable

Caring

Birla sun life insurance: Birla Sun Life Insurance Company Limited (BSLI) is a joint

venture between the Aditya Birla Group and the Sun Life Financial Services of Canada.

It started operations in March 2001 after receiving its registration license from IRDA in

January 2001. Company is having more than 45 branches across India.

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Key features: Focus on unit linked insurance products supported with protection products to

maintain leadership in product innovation.

Use of multi distribution channels- Direct Sales Force, Alternate Channels andoffering convenient channels of purchase to customers.

Web-enabled IT systems for superior customer services and issuing policies on

the internet.

High degree of transparency in all business practices and procedures.

Working on operational Business Continuity Plan.

Market share of different insurance companies:

ICICI Prudential 9.1%HDFC Standard 2.4%SBI Life 3.0%Bajaj Allianz 4.2%Aviva life insurance 1.3%MetLife insurance 0.6%Reliance life insurance 1.1%Birla sun life insurance 1.0%Max new York life insurance 2.3%Bharti AXA life insurance 0.1%Tata AIG 1.6%ING Vysya 0.7%Kotak Mahindra 0.9%

Source: - www.irdaindia.org

Growth in premiums of different insurance companies:-

Companies Premium up to

oct 08(Rs.mill.)

Premium up to

oct 07(Rs.mill.)

Growth %

ICICI Prudential 431831.8 20808.5 53HDFC Standard 410675.7 6595.7 61.9SBI Life 714717.4 8142.4 80.8Bajaj Allianz 126498.1 15208.2 74.2Aviva life insurance 4586.8 3464.2 32.4

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minimum premium- 20,000 rs.

min/max age at entry - 30 days to 60 years.

sum assured- face amount + policy fund.

fund management charges- 1% for all the fund options.fixed monthly expenses- 22 rs.+ annual charges as applicable.

partial withdrawals- 2 free partial withdrawals in a year.

charges on top ups- 2%.

switching charges- 2 free switches in a year, and 100 rs. Per switching.

HDFC Standard Life Insurance

fund options- growth fund, balanced fund, defensive fund, secure fund, liquid fund.

allocation to equities- 100% in growth fund, 30-60% in balanced fund, 15-30% in

defensive fund, 0% in secure and liquid fund.

minimum premium - 10,000.

min/max age at entry- 18- 65 years.

sum assured- annual premium*term/2, to 40 times the regular premium amount.

fund management charges- .80%.fixed monthly expenses- 20 rs.

partial withdrawals allowed- above 6 partial withdrawals 250 rs. per withdrawal.

charges on top ups- 2.5% for initial 2 years, after 1%.

switching charges- 24 free switching and then 100 rs. per switching.

SBI Life Insurance

fund options- equity fund, bond fund, growth fund, balanced fund.

allocation to equities - upto 100% in equity fund, upto 20% in bond fund, 40 - 100% ingrowth fund, 40 60% in balanced fund.

minimum premium- 24,000.

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min/max age at entry- 7 65 years.

sum assured- 5 50 times the regular premium amount.

fund management charges- 1.5% for equity fund, 1.35% for growth fund, 1.25% for

balanced fund, 1% for bond fund.fixed monthly expenses - 60 rs.

partial withdrawals allowed- above 4 partial withdrawals 100 rs. per withdrawals.

charges on top ups- 1%.

switching charges- above 4 switching 100 rs. per switching.

Max New York Life Insurance

fund options- growth fund, balanced fund, conservative fund, secure fund.

allocation to equities- 20 70% in growth fund, 10 40% in balanced fund, 0 15%in conservative fund, 0% in secure fund.


min/max age at entry- 12 60 years.

sum assured- minimum sum assured 100,000 rs.

fund management charges- .90% - 1.25% of net assets in the fund.

fixed monthly expenses- 50 rs.charges on top ups - nil.

switching charges- above 2 switching per year 500 rs. Per switching.

Reliance Life Insurance

fund options- equity fund, growth fund, balanced fund, capital secure fund.

allocation to equities- upto 100% in equity fund, upto 40% in growth fund, upto 20%in balanced fund, 0% in capital secure fund.


min/max age at entry - 30 days to 65 years.

sum assured- for age of 12 years 5 times, above 12 years 5 times to unlimited.

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fund management charges- 1.75% in equity and growth fund, 1.5% in capital securefund.fixed monthly expenses- 40 rs.

partial withdrawals allowed- rs. 100 for every withdrawal.

charges on top ups- 2%.switching charges- above 1 switching 100 rs. Per switching.

Insurer Market

view

Product

focus

Distribution

strategy

Others

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ICICI

Prudential

Market growth

at 60%CAGR

in medium

term, target to

maintain share

at 30% in

private

segment.

Pension and

healthy products

likely to grow

given aging

population and

increasing life

expectancy.

Product

awareness is

slightly behind

LIC despite a

significant timedisadvantage;

health could

comprise 3 5%

of product mix in

5 years.

Significantly

diversified with

40% from non

agency force,

expanding

reach to non

metro areas.

Significant

capital

requirement for

maintain share

in a high

growth market,

both partners

willing to

contribute,

HDFC

Standard life

insurance

Expect high

double digit

market growth

Focus on regular

premium

products and

Prefer own

offices versus

franchisees,

Breakeven not

necessarily in

next 18

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PROJECT OVERVIEW

INTRODUCTION

Meaning of Working Capital

current assets less current liabilities, properly called net working capital . Working capital

is a measure of a company's liquidity. Sources of working capital are (1) net income, (2)

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increase in noncurrent liabilities, (3) increase in stockholders' equity, and (4) decrease in

noncurrent assets .

Definition of working capital

The net working capital of a business is its current assets less its current liabilities

Current Assets include:

- Stocks of raw materials

- Work-in-progress

- Finished goods

- Trade debtors

- Prepayments

- Cash balances

Current Liabilities include:

- Trade creditors

- Accruals

- Taxation payable- Dividends payable

- Short term loans

Every business needs adequate liquid resources in order to maintain day-to-day cash

flow. It needs enough cash to pay wages and salaries as they fall due and to pay creditors

if it is to keep its workforce and ensure its supplies.

Maintaining adequate working capital is not just important in the short-term. Sufficient

liquidity must be maintained in order to ensure the survival of the business in the long-

term as well.

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Even a profitable business may fail if it does not have adequate cash flow to meet its

liabilities as they fall due. Therefore, when businesses make investment decisions they

must not only consider the financial outlay involved with acquiring the new machine or

the new building, etc, but must also take account of the additional current assets that are

usually involved with any expansion of activity.

Increased production tends to engender a need to hold additional stocks of raw materials

and work in progress. Increased sales usually means that the level of debtors will

increase. A general increase in the firms scale of operations tends to imply a need for

greater levels of cash.

Decisions relating to working capital and short term financing are referred to as working

capital management . These involve managing the relationship between a firm's short-

term assets and its short-term liabilities . The goal of Working capital management is to

ensure that the firm is able to continue its operations and that it has sufficient cash flow to

satisfy both maturing short-term debt and upcoming operational expenses.ing capital

management

CONCEPTS OF WORKING CAPITAL

There are two concepts of working capital:-

Gross Working Capital: It represents the total current assets and is also referred to ascirculating capital because current capital as current assets, are circulating in nature.

39
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Net Working Capital: It is a measure of liquidity and it can be defined in two ways.

The most usually implied definition of net working capital is that it represents the

difference between current assets and current liabilities. Some people also define it as

excess of current assets over the current liabilities.

It is that portion of the firms current assets, which is financed by long-term funds.

Net working capital as a measure of liquidity is generally not very useful to compare the

performance of different units due to difference in scales of operation, efficiency, and

creditability in the market etc., between the different firms. However it is a very useful

measure for internal control purposes. It can also be used to compare the liquidity

position of the same unit over a period of time. This will help in maintaining the

acceptable level of net working capital.

Implementing an effective working capital management system is an excellent way for

many companies to improve their earnings. The two main aspects of working capital

management are ratio analysis and management of individual components of working

capital. A few key performance ratios of a working capital management system are the

working capital ratio, inventory turnover and the collection ratio. Ratio analysis will lead

management to identify areas of focus such as inventory management, cash management,

accounts receivable and payable management.

CONCEPT OF CAPITAL OF SBI LIFE

Capital and Liabilities: Mar '07 Mar '08 Mar '09 Mar '10 Mar '11

Total Share Capital 526.30 526.30 526.30 631.47 634.88Equity Share Capital 526.30 526.30 526.30 631.47 634.88Share Application Money 0.00 0.00 0.00 0.00 0.00Preference Share Capital 0.00 0.00 0.00 0.00 0.00Reserves 23,545.84 27,117.79 30,772.26 48,401.19 57,312.82

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Revaluation Reserves 0.00 0.00 0.00 0.00 0.00Net Worth 24,072.14 27,644.09 31,298.56 49,032.66 57,947.70Deposits 367,047.53 380,046.06 435,521.09 537,403.94 742,073.13Borrowings 19,184.31 30,641.24 39,703.34 51,727.41 53,713.68Total Debt 386,231.84 410,687.30 475,224.43 589,131.35 795,786.81

Other Liabilities & Provisions 49,578.89 55,538.17 60,042.26 83,362.30 110,697.57Total Liabilities 459,882.87 493,869.56 566,565.25 721,526.31 964,432.08

Mar '07 Mar '08 Mar '09 Mar '10 Mar '11 Assets 12 mths 12 mths 12 mths 12 mths 12 mths

Cash & Balances with RBI 16,810.33 21,652.70 29,076.43 51,534.62 55,546.17CallBalance with Banks, Money 22,511.77 22,907.30 22,892.27 15,931.72 48,857.63

Advances 202,374.45 261,641.53 337,336.49 416,768.20 542,503.20Investments 197,097.91 162,534.24 149,148.88 189,501.27 275,953.96Gross Block 6,691.09 7,424.84 8,061.92 8,988.35 10,403.06

Accumulated Depreciation 4,114.67 4,751.73 5,385.01 5,849.13 6,828.65Net Block 2,576.42 2,673.11 2,676.91 3,139.22 3,574.41Capital Work In Progress 121.27 79.82 141.95 234.26 263.44Other Assets 18,390.71 22,380.84 25,292.31 44,417.03 37,733.27Total Assets 459,882.86 493,869.54 566,565.24 721,526.32 964,432.08Contingent Liabilities 131,325.40 191,819.34 259,536.57 736,087.59 614,603.47

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Bills for collection 44,794.10 57,618.44 70,418.15 93,652.89 152,964.06Book Value (Rs) 457.39 525.25 594.69 776.48 912.73

TYPES OF WORKING CAPITAL

A. Permanent Working Capital

B. Temporary Working Capital

Permanent Working Capital:

The operating cycle is a continuous feature in almost all the going concerns and

therefore creates the need for working capital and their efficient management. However

the magnitude of working capital required will not be constant, but will fluctuate. At any

time, there is always a minimum level of current assets which is constantly and

continuously required by a business unit to carry on its operations. This minimum amount

of current assets, which is required on a continuous and uninterrupted basis is after

referred to as fixed or permanent working capital. This type of working capital should befinanced (along with other fixed assets) out of long term funds of the unit. However in

practice, a portion of these requirements also is met through short term borrowings from

banks and suppliers credit.

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For eg., In a manufacturing unit, basic raw materials required for production has to be

available at all times and this has to be financed without any disturbance.

Temporary Working Capital

Any amount over and above the permanent level of working capital is variable,

temporary or fluctuating working capital. This type of working capital is generally

financed from short term sources of finance such as bank credit because this amount is

not permanently required and is usually paid back during off season or after the

contingency. As the name implies, the level of fluctuating working capital keeps on

fluctuating depending on the needs of the unit unlike the permanent working capital

which remains constant over a period of time.

COMPETITORS

CompetitionLast Price Market Cap.

(Rs. cr.)Net InterestIncome

Net Profit Total Assets

SBIL 2,199.00 139,610.16 63,788.43 9,121.24 964,432.08ICICI PRU 847.00 26,706.12 19,326.16 3,090.88 246,918.62BAJAJ ALLIANZ LIFE 408.00 21,427.15 16,347.36 3,007.35 225,501.75BIRLA SUN LIFE 510.00 18,577.59 15,091.58 2,227.20 227,406.73TATA AIG 269.75 13,625.56 11,889.38 1,726.55 160,975.51ING VAISYA 330.50 13,550.50 17,119.06 2,072.42 219,645.80BHARTI HEXA 117.65 8,527.26 11,631.62 858.53 172,402.33

AVIVA LIFE INS. 162.45 6,981.61 6,830.33 1,245.32 84,121.74IOB 115.20 6,276.10 9,641.40 1,325.79 121,073.40Oriental Bank 249.00 6,238.44 8,856.47 905.42 112,582.58

DETERMINANTS OF WORKING CAPITAL

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Working capital management is an indispensable functional area of management.

However the total working capital requirements of the firm are influenced by the large

number of factors. It may however be added that these factors affect differently to the

different units and these keep varying from time to time. In general, the determinants of

working capital which are common to all organizations can be summarized as under:

a. Nature and Size of Business

b. Production Cycle

c. Business Cycle

d. Production Policy

e. Credit Policy

f. Growth & Expansion

g. Proper availability of raw materials

h. Profit level

i. Inflation

j. Operating Efficiency

7. SOURCES OF WORKING CAPITAL

The working capital necessary and what constitutes working capital have been analyzed

in depth. Now we look out what are the ways we can generate working capital.

a. Trade Credits

b. Bank Credit

c. Current provisions and non-bank short term borrowings: and

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d. Long term sources ie., equity share capital, preference share capital and

other long term borrowings.

Short term source of funds are generally available at comparatively lower costs but

theoretically these funds can be called back any moment and therefore it is more

appropriate to meet at least two thirds of the permanent working capital requirements

from the long term

sources. The advantages of long term sources is, it reduces risk as there is no need to

repay the loans at frequent intervals and funds can be employed gainfully and it increases

liquidity.

INTRODUCTION TO WORKING CAPITAL MANAGEMENT

The perfect world does not requires or concentrates about current assets or current

liabilities because there would not be uncertainty, no transaction costs, information

search costs, scheduling costs or production and technology constraints. The unit cost of

production would not vary with the quantity produced. Capital, Labour and products

markets shall be perfectly competitive and would reflect all available information. Thus

in such an environment, there would be no advantage for investing in short term assets.

Whereas, the world in which we live is not perfect.

It is characterized by considerable amount of uncertainty regarding the demand, market

price, quality and availability of own products and those of suppliers. There are

transaction costs for purchasing or selling goods or securities. Information is costly to

obtain and is not equally distributed. There are spreads between the borrowing and

lending rates for investments and financing of equal risk. Similarly each organization is

faced with its own limits on the production capacity and technology it can employ. There

are fixed as well as variable costs associated with producing goods. In other words, the

markets in which real firms operate are not perfectly competitive.

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These real world facts introduce problems and require the necessity of working capital.

The most important areas in the day to day management of the firm, is the management

of working capital. Working capital management is the functional area of finance that

covers all the current accounts of the firm. It is concerned with management of the level

of individual current assets as well as the management of total working capital. Working

capital management involves the relationship between a firm's short-term assets and its

short-term liabilities.

The goal of working capital management is to ensure that a firm is able to continue its

operations and that it has sufficient ability to satisfy both maturing short-term debt and

upcoming operational expenses. The management of working capital involves managing

inventories, accounts receivable and payable, and cash.

For example, an organization may be faced with an uncertainty regarding availability of

sufficient quantity of crucial inputs in future at reasonable price. This may necessitate the

holding of inventory ie., current assets. Similarly an organization may be faced with an

uncertainty regarding the level of its future cash inflows and insufficient amount of cash

may incur substantial costs. This may necessitate the holding of a reserve of short term

marketable securities, again a short term capital asset. The unpredictable and uncertain

global market plays a vital role in working capital. Though the globalization of economyand free trading of products envisages the continuous availability of products but how

much its cost effective and quality based varies concern to concerns.

Working capital refers to the funds invested in current assets, ie., investment in stocks,

sundry debtors, cash and other current assets. Current assets are essential to use fixed

assets profitably. The term current assets refers to those assets which in the ordinary

course of business can be converted into cash within one year without undergoing

diminish in value and without disrupting the operations of the firm. The current assets are

cash, marketable securities, accounts receivable and inventory. Current liabilities are

those which are to be paid within a year out of the current assets or earnings of the

concern. The current liabilities are accounts payable, bills payable, bank overdraft and

outstanding expenses.

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The financial manager plays a vital role in management of working capital. The financial

management of any business organization involves the three following vital functions:

1. Management of Long Term Assets

2. Management of Long Term Capital

3. Management of Short Term Assets and Liabilities

In most of the organizations the first & second one which refers to Capital Budgeting and

Capital Structure respectively will be maintained and cope up with organization growth.

The third one which refers to Working Capital Management requires more skills for

sustaining and steady growth rate for any organization.

The working capital management includes decisions

i. How much stock/inventory to be hold

ii. How much cash/bank balance should be maintained

iii. How much the firm should provide credit to its customers

iv. How much the firm should enjoy credit from its suppliers

v. What should be the composition of current assets

vi. What should be the composition of current liabilities

For eg., a machine cannot be used without raw material. The investment on the purchase

of raw material is identified as working capital. It is obvious that a certain amount of

funds is always tied up in a raw material inventories, work in progress, finished goods,

consumable stores, sundry debtors and day to day cash requirements. However the

businessman also enjoys credit facilities from his suppliers who may supply raw material

on credit. Similarly, a businessman may not pay immediately for various expenses. For

instance, the labourers are pain only periodically. Therefore, a certain amount of funds is

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automatically available to finance the current assets requirements. However, the

requirements for current assets are usually greater than the amount of funds payable

through current liabilities. The satisfactory level of working capital is the main object of

working capital management. Any organization which fails to maintain satisfactory level

of working capital may be forced to bankruptcy. The current assets should always be

large enough to cover its current liabilities in order to ensure a reasonable margin of

safety. Thus the interaction between current assets and current liabilities is the main aim

of working capital management.

The basic objective of financial management is to maximize shareholders wealth. This

objective can be achieved when the company earns sufficient profits. The amount of

profits largely depends on the magnitude of sales. But, sales do not convert into cashinstantly. There is time lag between the sale of goods and the receipt of cash. Working

capital is required to purchase the materials, pay wages and other expenses in order to

sustain sales activity the time lag. The time gap between the sale of goods and realization

of cash is called operating cycle. What operating cycle stands for?

a. Conversion of cash into raw materials

b. Conversion of raw materials to finished goods

c. Conversion of finished goods into receivables

Conversion of receivables into cash

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Working Capital Management

A managerial accounting strategy focusing on

maintaining efficient levels of both components of working capital,

current assets and current liabilities, in respect to each other.

Working capital management ensures a company has sufficient

cash flow in order to meet its short-term debt obligations and

operating expenses.

Implementing an effective working capital management system is

an excellent way for many companies to improve their earnings.

The two main aspects of working capital management are ratio

analysis and management of individual components of working

capital.

A few key performance ratios of a working capital management

system are the working capital ratio, inventory turnover and the

collection ratio. Ratio analysis will lead management to identify

areas of focus such as inventory management, cash

management, accounts receivable and payable management.

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Decision criteria

By definition, working capital management entails short term decisions - generally,

relating to the next one year period - which are "reversible". These decisions are therefore

not taken on the same basis as Capital Investment Decisions (NPV or related, as above)

rather they will be based on cash flows and / or profitability.

One measure of cash flow is provided by the cash conversion cycle - the net number of

days from the outlay of cash for raw material to receiving payment from the customer. As

a management tool, this metric makes explicit the inter-relatedness of decisions relating

to inventories, accounts receivable and payable, and cash. Because this number

effectively corresponds to the time that the firm's cash is tied up in operations and

unavailable for other activities, management generally aims at a low net count.

In this context, the most useful measure of profitability is Return on capital (ROC). The

result is shown as a percentage, determined by dividing relevant income for the 12

months by capital employed; Return on equity (ROE) shows this result for the firm's

shareholders. Firm value is enhanced when, and if, the return on capital, which results

from working capital management, exceeds the cost of capital , which results from capital

investment decisions as above. ROC measures are therefore useful as a management tool,

in that they link short-term policy with long-term decision making. See Economic value

added (EVA).

50
http://en.wikipedia.org/wiki/Cash_conversion_cyclehttp://en.wikipedia.org/wiki/Materialhttp://en.wikipedia.org/wiki/Return_on_capitalhttp://en.wikipedia.org/wiki/Return_on_equityhttp://en.wikipedia.org/wiki/Cost_of_capitalhttp://en.wikipedia.org/wiki/Economic_value_addedhttp://en.wikipedia.org/wiki/Economic_value_addedhttp://en.wikipedia.org/wiki/Cash_conversion_cyclehttp://en.wikipedia.org/wiki/Materialhttp://en.wikipedia.org/wiki/Return_on_capitalhttp://en.wikipedia.org/wiki/Return_on_equityhttp://en.wikipedia.org/wiki/Cost_of_capitalhttp://en.wikipedia.org/wiki/Economic_value_addedhttp://en.wikipedia.org/wiki/Economic_value_added


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Management of working capital

Guided by the above criteria, management will use a combination of policies and

techniques for the management of working capital. These policies aim at managing the

current assets (generally cash and cash equivalents , inventories and debtors ) and the

short term financing, such that cash flows and returns are acceptable.

Cash management . Identify the cash balance which allows for the business to meet day to

day expenses, but reduces cash holding costs.

Inventory management. Identify the level of inventory which allows for uninterrupted

production but reduces the investment in raw materials - and minimizes reordering costs -

and hence increases cash flow; see Supply chain management ; Just In Time (JIT);

Economic order quantity (EOQ); Economic production quantity (EPQ).

Debtors management. Identify the appropriate credit policy , i.e. credit terms which will

attract customers, such that any impact on cash flows and the cash conversion cycle will

be offset by increased revenue and hence Return on Capital (or vice versa ); see Discounts

and allowances .

Short term financing. Identify the appropriate source of financing, given the cash

conversion cycle: the inventory is ideally financed by credit granted by the supplier;

however, it may be necessary to utilize a bank loan (or overdraft), or to "convert debtors

to cash" through " factoring ".

51
http://en.wikipedia.org/wiki/Asset#Current_assetshttp://en.wikipedia.org/wiki/Cashhttp://en.wikipedia.org/wiki/Cash_and_cash_equivalentshttp://en.wikipedia.org/wiki/Inventoryhttp://en.wikipedia.org/wiki/Debtorhttp://en.wikipedia.org/wiki/Cash_managementhttp://en.wikipedia.org/wiki/Supply_chain_managementhttp://en.wikipedia.org/wiki/Just_In_Time_(business)http://en.wikipedia.org/wiki/Economic_order_quantityhttp://en.wikipedia.org/wiki/Economic_production_quantityhttp://en.wikipedia.org/wiki/Credit_(finance)http://en.wikipedia.org/wiki/Discounts_and_allowanceshttp://en.wikipedia.org/wiki/Discounts_and_allowanceshttp://en.wikipedia.org/wiki/Loanhttp://en.wikipedia.org/wiki/Factoring_(finance)http://en.wikipedia.org/wiki/Asset#Current_assetshttp://en.wikipedia.org/wiki/Cashhttp://en.wikipedia.org/wiki/Cash_and_cash_equivalentshttp://en.wikipedia.org/wiki/Inventoryhttp://en.wikipedia.org/wiki/Debtorhttp://en.wikipedia.org/wiki/Cash_managementhttp://en.wikipedia.org/wiki/Supply_chain_managementhttp://en.wikipedia.org/wiki/Just_In_Time_(business)http://en.wikipedia.org/wiki/Economic_order_quantityhttp://en.wikipedia.org/wiki/Economic_production_quantityhttp://en.wikipedia.org/wiki/Credit_(finance)http://en.wikipedia.org/wiki/Discounts_and_allowanceshttp://en.wikipedia.org/wiki/Discounts_and_allowanceshttp://en.wikipedia.org/wiki/Loanhttp://en.wikipedia.org/wiki/Factoring_(finance)


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OBJECTIVES OF WORKING CAPITAL MANAGEMENT

The main objective is to ensure the maintenance of satisfactory leve of saworking capital

in such a way that it is neither inadequate nor excessive. It should not only be sufficient

to cover the current liabilities but ensure a reasonable margin of safety also.

1. To minimize the amount of capital employed in financing the current assets. This also

leads to an improvement in the Return of Capital Employed.

2. To manage the current assets in such a way that the marginal return on investment in

these assets is not less than the cost of capital acquired to finance them. This will ensure

the maximization of the value of the business unit.

3. To maintain the proper balance between the amount of current assets and the current

liabilities in such a way that the firm is always able to meet its financial obligations,

whenever due. This will ensure the smooth working of the unit without any production

held ups due to paucity of funds.

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DATA ANALYSIS AND INTERPRETATION

1.Do you have knowledge about insurance?

Yes

No

1. Do you have knowledge about insurance.

Yes

99%

No

1%

Yes

No

2. Do you have purchase any insurance policy.

Yes

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No

2. Do you have purchase any insurancepolicy.

Yes

22%

No

78%

Yes

No

If Yes

3. Which co.?

Company Percentage

LIC 65%

ICICI PRU 8%

BAJAJ ALLIANZ 5%

BIRLA SUN LIFE 1%

AVIVA 1%

OTHERS 20%

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3. Which co.

66%

10% 10%5% 5%

14%

0%10%20%30%40%50%60%

70%

LIC ICICI PRU BAJAJ ALLIANZ

BIRLA SUNLIFE

AVIVA OTHERS

Companies

P e r c e n

t a g e

1.Which insurance policy

General Insurance

Life Insurance

4. Which insurance policy

LifeInsurance

58%

GeneralInsurance

42%General Insurance

Life Insurance

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1.Do you know we are giving more security with high rate of returns?

Yes

No

5. Do you know we are giving moresecurity with high rate of returns?

No95%

Yes

5%Yes

No

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(6) Quarries regarding policy in your co.

Returns 12%

Claims on time 22%

Services 35%

Others 31%

14%

24%

33%29%

0%5%

10%

15%20%25%30%35%

Percentage

Returns Claims on time Services Others

Queries

5. Quarries regarding policy in your co.

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If No

1.Whats your annual earning?

Earning Percentage

Less than 1,00,000 52

1-3 lakh 22

3-5 lakh 17

More than 5 lakh 9

52

23 178

0

20

40

60

Percentage

Earning

1. Whats your annual earning?

1. Whats your annual earning?

52 23 17 8

Less 1-3 lakh 3-5 lakh More

1.How you have make secure yourself and your family?

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Property 12%

Fixed deposit 36%

Educate children 22%

Not secure 30%

2. How you have make secure yourself andyour family?

30%22%

36%

12%

0%5%

10%15%20%25%30%35%40%

Property Fixed deposit Educatechildren

Not secure

Securities

P e r c e n

t a n g e

3. Do you know we are giving more security with high rate of returns?

Yes 5 persons

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No 70 persons

3. Do you know we are giving more security withhigh rate of returns?

Yes7%

No93%

Yes

No

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4.Which facility does you like most provided by us?

Facility PercentageRate of return 46

Wavier of premium 22

Timely claim settlement 26

Easy exit 2

Others 4

3. Which facility does you like mostprovided by us?

46

2226

2 4

0

10

20

30

40

50

Rate of return Wavier of premium

Timely claimsettlement

Easy exit Others

Facilities

P e r c e n t a g e

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Insurance companies are deploying their products mostly based on

customer needs and demands. Insurance companies are not doing

enough market researches to know the potential of the market.

Most of the insurance companies are differentiating themselves from

the competitors by providing better service quality. Some companies

are differentiating themselves providing better pricing of the product.

Branch managers of most of the companies think that providing better

service quality is the best tool to compete in the market. Better service

quality may be in the form-

1. Issuing policy in time.

2. Providing claims in time.

3. Making customers aware about their status of policy.

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RECOMMENDATIONS

SBI Life should start recruiting advisors through placement agencies.

By practicing this SBI Life will get more capable advisors who can

work efficiently. Inactive advisors kind of thing would not happen.

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SBI Life should also promote the term and endowment insurance

products including ULIP products. Because these are basic insurance products. Promote products as life insurance products not an as

investment products.

Somewhat the brand name of SBI is harming the SBI Life insurance,

because most of the people are not happy with the service provide by

SBI bank, so it is necessary to change the mentality of the people that

SBI Life insurance is different from SBI bank. SBI Life should

promote their product features rather than promoting their brand

name.

To increase awareness in rural market SBI Life should do some

activities in villages and small towns. This can be done by putting

kiosk in fairs and festival melas organizing in villages.

SBI Life can sell their products through charitable institutions.

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SBI Life should sell their products through head of the villages or

through panchayat in villages. People in villages believe on the head

and panchayat so selling insurance will be easier in villages.

SBI Life can introduce some special policies for the farmers to tap the

rural market, and pricing for these kinds of products should be less so

farmers can easily afford to take policies.

As SBI Life is coming in general insurance so it can introduced

products like cattle insurance and water pump insurance. It will also

help to promote the products of SBI Life insurance.

Make aware about SBIs products by seminars conducted by

mangers and senior dignitaries to clear the myth related to it twice a

year.

Regular advertisement in media & newspaper can educate about our

product, and keep in touch with public in Jodhpur.

By communicating our competitive advantages, we can grab the

belief of public in insurance sector.

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Many clients of other policies are not satisfied by their services we

can make them agree to purchase our policies by effective sales

management.

Still market is full of opportunities; only a realistic strategy or plan

is needed to be implemented.

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QUESTIONNAIRE

1. Name ____________________________

2. Age Group (Tick appropriate One)

20-25 25-30 3 0-35 35-40 40-45

45-50 50(Above)

3. Sex

Male Female

4. Educational Qualification _____________________________

5. Do You Know About Life Insurance/General Insurance

(Y/N) If Yes

___________________________________________________

6. Do You Have any Life Insurance Policy (If Yes, Mention It)?

________________________________________________

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11.What are changes do you like to have in Life Insurance Company

and their policy, comment?

___________

_______________________________________________________

12.What is your suggestion to the Life Insurance Company and their

policy?

Address Phone No.

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APPENDIX

A.S.I : AREA SERVICE IN CHARGEA.S.M : AREA SALES MANAGER

B.S.I : BRANCH SERVICE IN CHARGE

CAC : COMMERCIAL AIR CONDITIONING

SYSTEM

C.S NET : CUSTOMER SERVICE NET

D.S.C : DIRECT SERVICE CENTRE

L.H.D : LOGISTIC HEAD OF DEPARTMENT

R.E.F : REFRIGERATOR.

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BIBLIOGRAPHY

Website

www.sbi.com

Books Philip Kotler Marketing Management.

C.R.Kothari Research Methodology.

K. Ashwathappa Human Resoures Management.

Stephen Robins Organizational Behaviour.

Hawkins Marketing Research.

Consumer Behaviour.

SBI Life Product Module.

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SBI Finance

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