final report
TRANSCRIPT
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
7
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:-
9
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