1. INDUSTRY PROFILE

The Industrial atmosphere in our country is witnessing a drastic change with the

ongoing globalization and financial sector reform. It is prudent to ensure the

availability of credit to various segments. The existence of a well-organized and

efficient banking system is a prerequisite for economic growth. Banks and Financial

Institutions play a significant role in the growth of Indian economy.

The present banking system in India was evolved to meet the financial needs of trade

and industry. Its constituents are of varying origin and sizes. At the apex is the

Reserve Bank of India, the Central bank of the country followed by State Bank of

India, which was created by nationalizing the Imperial Bank of India, twenty major

Nationalized scheduled banks other Joint Stock banks formed in the latter half of 19th

century. Co-operative banks in 1904 and also Regional Rural Banks to assist the rural

folk.

A major portion of the total banking business in India is handled by the State Bank of

India its subsidiaries and Nationalized banks. The banking system can be classified

into five phases. During pre-independence phase Indian banking system was having

2876 branches serving an average population of 82,000 people with 860 crores of

deposits and 470 crores of advances.

After Independence, due to rapid industrial finance. Banking Companies Act 1949

was enacted. It was happen during the foundation phase. In 1969 fourteen banks

were nationalized with the view to extending the credit to all segments of other

economy. The period from 1968 to 1984 was the period of expansion, which

witnessed the birth of Regional Rural Banks in 1975, and NABARD in 1982. During

1985 to 1990, the expansion of bank branches came to a halt and it was a period of

consolidation. By the year 1991, the situation was ripe for drastic reforms. Reform

measures such as introduction of new accounting and prudential norms are heading

towards well structured banking system. This phase is the second banking evolution

or the Reformatory Phase. During the year 2001 to 2002 there was a significant

1

improvement in the performance of commercial banking system in terms of both

operating as well as net profits.

As part of the process commercial banks have adopted several initiatives to

strengthen their business Commercial banks are concerned with accepting deposits

of money from the public at large, repayable on demand or otherwise and

withdrawal by cheques, draft, and order or otherwise and employing the deposits so

pooled in the form of loans and investments to meet the financial needs of business

and the society as a whole. Usually long term and short term finances are made

available for borrowers.

The period exceeding five years is regarded as long term and fund required for a

period of less than one year is short term. Short-term funds are required to meet

variable or temporary working capital requirements. Borrowing from banks is a very

significant source of short-term finance. Long-term finance is required for procuring

fixed assets, establishment of new business etc and is provided by financial

institutions like Industrial finance Corporation of india Industrial Credit and

Investment Corporation of India, Industrial Development Bank of India etc.

2

Commercial Banks

Regional Rural Banks Co-operative Banks

Public sector Banks Private sector Banks

State co-operative Banks

State Bank Group

Nationalized Banks

Domestic Banks

Foreign Banks Dist .Co-op.Banks

UCB PACBState Bank of India

Associates

The following chart indicates the structure of banking system in India

Figure 1.1

Reserve Bank of India

3

They act as mirrors that reflect the performance of the economy as whole. The two

basic financial reports that reflects the performance of the banks are the Balance

Sheet and Profit and Loss Accounts

To analyze the performance of the banks, it is instructive to take a brief overview of

the principal assets and liabilities as presented in the bank's Balance Sheet and also its

revenues and expenses from the income statement.

Introduction of co-operative banks

A co-operative bank is a financial entity which belongs to its members, who are at the

same time the owners and the customers of their bank. Co-operative banks are often

created by persons belonging to the same local or professional community or sharing

a common interest. Co-operative banks generally provide their members with a wide

range of banking and financial services (loans, deposits, banking accounts etc.).

Co-operative banks differ from stockholder banks by their organization, their goals,

their values and their governance. In most countries, they are supervised and

controlled by banking authorities and have to respect prudential banking regulations,

which put them at a level playing field with stockholder banks. Depending on

countries, this control and supervision can be implemented directly by state entities or

delegated to a co-operative federation or central body.

Co-operative banking is retail and commercial banking organized on a co-operative

basis. Co-operative banking institutions take deposits and lend money in most parts

of the world. Co-operative banking, includes retail banking, as carried out by credit

unions, mutual savings and loan associations, building societies and co-operatives, as

well as commercial banking services provided by manual organizations (such as co-

operative federations) to co-operative businesses.

The structure of commercial banking is of branch-banking type; while the co-

operative banking structure is a three tier federal one.

A State Co-operative Bank works at the apex level (ie. works at state level).

The Central Co-operative Bank works at the Intermediate Level, (ie. District

Co-operative Banks ltd. works at district level)

Primary co-operative credit societies at base level (At village level)

4

History of Co-operative banks in India.

For the co-operative banks in India, co-operatives are organized groups of people and

jointly managed and democratically controlled enterprises. They exist to serve their

members and depositors and produce better benefits and services for them.

Professionalism in co-operative banks reflects the co-existence of high level of skills

and standards in performing, duties entrusted to an individual. Co-operative bank

needs current and future development in information technology. It is indeed

necessary for cooperative banks to devote adequate attention for maximizing their

returns on every unit of resources through effective services. Co-operative banks have

completed.

100 years of existence in India. They play a very important role in the financial

system. The cooperative banks in India form an integral part of our money market

today. Therefore, a brief resume of their development should be taken into account.

The history of cooperative banks goes back to the year 1904. In 1904, the co-

operative credit society act was enacted to encourage co-operative movement in

India. But the development of cooperative banks from 1904 to 1951 was the most

disappointing one.

The first phase of co-operative bank development was the formation and regulation of

cooperative society. The constitutional reforms which led to the passing of the

Government of India Act in 1919 transferred the subject of "Cooperation" from

Government of India to the Provincial Governments. The Government of Bombay

passed the first State Cooperative Societies Act in 1925 "which not only gave the

movement, its size and shape but was a pace setter of co-operative activities and

stressed the basic concept of thrift, self help and mutual aid." This marked the

beginning of the second phase in the history of Co-operative Credit Institutions. There

was the general realization that urban banks have an important role to play in

economic construction. This was asserted by a host of committees. The Indian Central

Banking Enquiry Committee (1931) felt that urban banks have a duty to help the

small business and middle class people.

The Mehta-Bhansali Committee (1939) recommended that those societies which had

fulfilled the criteria of banking should be allowed to work as banks and

recommended an Association for these banks. The Co-operative Planning Committee

(1946) went on record to say that urban banks have been the best agencies for small

5

people in whom Joint stock banks are not generally interested. The Rural Banking

Enquiry Committee (1950), impressed by the low cost of establishment and

operations recommended the establishment of such banks even in places smaller than

taluka towns.

The real development of co-operative banks took place only after the

recommendations of All India Rural Credit Survey Committee (AIRCSC), which

were made with the view to fasten the growth of cooperative banks.

The co-operative banks are expected to perform some duties, namely, extend all

types of credit facilities to customers in cash and kind, advance consumption loans,

extend banking facilities in rural areas, mobilize deposits, supervise the use of loans

etc. The needs of cooperative bank are different. They have faced a lot of problems,

which has affected the development of co-operative banks. Therefore it was

necessary to study this matter.

RBI Policies for co-operative banks

The RBI appointed a high power committee in May 1999 under the chairmanship of

Shri.K. MadhavaRao, Ex-Chief Secretary, Government of Andhra Pradesh to review

the performance of Urban Co-operative Banks (UCBs) and to suggest necessary

measures to strengthen this sector. With reference to the terms given to the

committee, the committee identified five broad objectives:

To preserve the co-operative character of UCBs

To protect the depositors' interest

To reduce financial risk

To put in place strong regulatory norms at the entry level to sustain the operational

efficiency of UCBs in a competitive environment and evolve measures to

strengthen the existing UCB structure particularly in the context of ever increasing

number of weak banks

To align urban banking sector with the other segments of banking sector in the

context of application or prudential norms in to and removing the irritants of dual

control regime.

6

The primary co-operative credit society is an association of borrowers and non-

borrowers residing in a particular locality. The funds of the society are derived from

the share capital and deposits of members and loans from central co-operative banks.

The borrowing powers of the members as well as of the society are fixed. The loans

are given to members for hose 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, loans and overdrafts from state co-operative banks

and joint stocks. These banks provide finance to member societies within the limits

of the borrowing capacity of societies. They also conduct all the business of a joint

stock bank.

State co-operative banks

The state co-operative bank is a federation of central co-operative bank and acts as a

watchdog of the co-operative banking structure in the state. Its funds are obtained

from share capital, deposits, loans and overdrafts from the Reserve Bank of India.

The state cooperative banks lend money to central co-operative banks and primary

societies and not directly to the farmers. The Land development banks are organized

in 3 tiers namely; state, central, and primary level and they meet the long term credit

requirements of the farmers for developmental purposes. The state land development

banks oversee, the primary land development banks situated in the districts and thesis

areas in the state. They are governed both by the state government and Reserve Bank

of India. Recently, the supervision of land development banks has been assumed by

National Bank for Agriculture and Rural development (NABARD). The sources of

funds for these banks are the debentures subscribed by both central and state

government. These banks do not accept deposits from the general public.

Urban Co-operative Banks

The term Urban Co-operative Banks (UCBs), though not formally defined, refers to

primary co-operative banks located in urban and semi- urban areas. These banks, till

1996, were allowed to lend money only for non-agricultural purposes. This distinction

does not hold today. These banks were traditionally centered on communities,

localities, work place groups. They essentially lend to small borrowers and

businesses. Today, their scope of operations has widened considerably.

7

The origins of the urban co-operative banking movement in India can be traced to the

close of nineteenth century. Inspired by the success of the experiments related to the

cooperative movement in Britain and the co-operative credit movement in Germany,

such societies were set up in India. Co-operative societies are based on the principles

of cooperation, mutual help, democratic decision making, and open membership.

Cooperatives represented a new and alternative approach to organization as against

proprietary firms, partnership firms, and joint stock companies which represent the

dominant form of commercial organization. They mainly rely upon deposits from

members and non- members and in case of need, they get finance from either the

district central co-operative bank to which they are affiliated or from the apex co-

operative bank if they work in big cities where the apex bank has its Head Office.

They provide credit to small scale industrialists, salaried employees, and other urban

and semi-urban residents.

District Co -operative Bank

District Co-op bank means a central society the principal objective of which is to

raise funds to be lent to its members with jurisdiction over on revenue district and

having as its members any primary societies and Federal and Central societies having

head quarters in such District. State Co op bank is the apex bank of district co- op

bank.

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Functions of co-operative banks

Co-operative banks also perform the basic banking functions of banking but

they differ from commercial banks in the following respects

Commercial banks are joint-stock companies under the companies' act of

1956, or public sector bank under a separate act of a parliament whereas co-

operative banks were established under the co-operative society's acts of

different states.

Commercial bank structure is branch banking structure whereas cooperative

banks have a three tier setup, with state co-operative bank

apex level, central district co-operative bank at district level, and primary co-

operative societies at rural level.

Only some of the sections of banking regulation act of 1949 (fully applicable

to commercial banks), are applicable to co-operative banks, resulting only in

partial control by RBI of co-operative banks and

Co-operative banks function on the principle of cooperation and not entirely

on commercial parameters.

Problems of Co-operative Banks

Duality of control system of co-operative banks, however, concerns regarding the

professionalism of urban cooperative banks gave rise to the view that they should be

better regulated. Large co-operative banks with paid-up share capital and reserves of

Rs.l lakh were brought under the purview of the Banking Regulation Act 1949 with

effect from 1st March, 1966 and within the ambit of the Reserve Bank's supervision.

This marked the beginning of an era of duality of control over these banks. Banking

related functions viz. licensing, area of operations, interest rates etc.) were to be

governed RBI and registration, management, audit and liquidation, etc. governed by

State Governments as per the provisions of respective States. In 1968, UCB's were

extended the benefits of deposit insurance. Towards the late 1960s there was debate

regarding the promotion) of the small scale industries. UCB's came to be seen as

important players n this context. The working group on industrial financing through

Co-operative Banks, (1968 known as Damry Group) attempted to broaden the scope

of activities of urban co-operative banks by recommending

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These banks should finance the small and cottage industries. This was reiterated by

the Banking Commission in 1969.

The Madhavdas Committee (1979) evaluated the role played by urban co-operative

banks in greater details and drew a roadmap for their future role recommending

support from RBI and Government in the establishment of such banks in backward

areas and prescribing viability standards.

The Hate Working Group (1981) desired better utilization of bank's surplus funds and

that the percentage of the Cash Reserve Ratio (CRR) & the Statutory Liquidity Ratio

(SLR) of these banks should be brought at par with commercial banks, in a phased

manner. While the Marathe Committee (1992) redefined the viability norms and

ushered in the era of liberalization, the MadhavaRao Committee (1999) focused on

consolidation, control of sickness, better professional standards in urban co-operative

banks and sought to align the urban banking movement with commercial banks.

A feature of the urban banking movement has been its heterogeneous character and

its uneven geographical spread with most banks concentrated in the states of Gujarat,

Karnataka, Maharashtra, and Tamil Nadu. While most banks are unit banks without

any branch network, some of the large banks have established their presence in many

states when at their behest multi-state banking was allowed in 1985. Some of these

banks are also Authorized Dealers in Foreign Exchange.

Co-operative Society in Kerala

The growth of Cooperative movement in Kerala was insignificant during pre-

independent era. Only 1669 cooperatives were functioning in the state with a total

working capital ofRs.92.21 lakhs. The membership and paid up share capital were

Rs.2.05 and Rs. 31.79 lakhs respectively. Credit and non-credit operations during the

period were also nominal. Loan disbursed during the year 1946 was Rs. 10.62 lakhs

only. Performance in the area of Consumer, Marketing etc. were also not remarkable

when compared to the exquisite achievements during the succeeding years.

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Classification of societies

There are seven major types of classification as shown below; Credit Society

Marketing and Processing Society

Consumer farming Society

Producers Society

Hospital Society

SC/ST Society

Educational Society

Labor Contract Society

Vanitha Society

Miscellaneous Society

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2. COMPANY PROFILE

2.1 BACKGROUND AND INCEPTION OF THE COMPANY

The Malappuram District co-operative Bank Limited came into existence on 01-07-

1970 as a Central Co-operative bank in the Malappuram District in the Kerala State.

Before 1970, it was one of the branch viz. Malappuram branches of Malabar Central

Co-operative Bank. The Malabar Central Co-operative bank was one of the Central

co-operative bank of Malabar District of old Madras state up to the Constitution of

the Kerala State on 01-11-1956. After the constitution of Kerala State, Malabar area

became part of the Kerala State, and Malabar Co-operative Central bank continued

its function as central co-operative bank in the Kerala state with its Head Quarter at

Kozhikode. In the year 1970 the Malappuram District co-operative bank began its

function as central co-operative bank of the Malappuram District with its Head

Quarters at Malappuram.

Mission of MDC bank ltd.

Act as a leader for over all development of the district mobilizing deposits, and other

finances of Agriculture, Industries, Trade & Commerce and weaker section and to

achieve self viability.

Objectives of MDC bank ltd.

To act as the connecting link between primary credit societies and state co-

operative banks.

To provide loans to primary societies at a reasonable rate of interest.

To supervise, control and direct the activities of the primary societies.

To undertake ordinary banking business such as receiving deposits, giving

loans, discounting bills and collecting cheques.

To mobilize the savings of the public

.

2.2 NATURE OF THE BUSINESS CARRIED

A Co-operative bank is an institution established on Co-operative basis dealing in

ordinary banking business. Defines a Co-operative Bank as “a mutual society

formed, composed and governed by working people themselves for encouraging

regular savings and granting small loans on easy terms of interest and repayment”.

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Like other banks, the co-operative banks are founded by collecting funds through

shares, accept deposits and grant loans.

Following are the important functions of State Co-operative Banks.

a. To lend funds to the central co-operative banks which in turn advance, loans to

primary credit society.

b. It serves as banking centers among central banks.

c. It borrows funds from the RBI and lends the same the central co-operative banks

to be used for financing the primary credit society.

d. It accepts deposit from general public.

e. It acts as a link between money market and co-operatives

f. It guides advices and exercise general supervision and control over the activities

of the CCB.

g. It co-ordinates the activities of different central co-operative banks.

h. It helps not only co-operative credit institution but also promotes other co-

operative societies and there by promote the co-operative movement in general.

2.3 VISION, MISSION AND QUALITY POLICY.

VISION

As a most preferred urban bank in Kerala in terms of value, principles in fostering

customer aspirations, to build quality assets on strong and vibrant technology

platform. The bank assures customer delight maximum and to become a major

contributor to the stable economic growth of the region.

MISSION

Act as a leader for over all development of the district mobilizing deposits, and other

finances of Agriculture, Industries, Trade & Commerce and weaker section and to

achieve self viability.

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QUALITY POLICY

The Malappuram district co-operative bank aims at maximum service quality

through better customer interaction and extended relationships.

2.4 PRODUCTS AND SERVICE PROFILE

Pension Deposits

Education Loan Deposit

Marriage Loan Deposit

Money back scheme

CREDIT SCHEMESS

Consumer Loan

Debenture Loan

House Loan

Vehicle Loan

Business Loan

Govt. Security Loan

Cash credit and Overdraft

AGRICULTURE CREDIT SCHEMES

Kizan Cash Credit

2.5 AREA OF OPERATION

The Malappuram district co-operative Bank is having 46 branches within the

Malappuram district. The bank aims and is having its operation in the district reach

only. The early start and sincerity in its operation has made the bank a far reach

among the competitors. The bank presently is not having any international or

national operations. 46 branches are as under

Some branches are located in these all areas:

1. Malappuram (Head Office)

2. Manjeri

3. Tirur

4. Ponnani

5. mankada

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6. Pookkottumpadam

7. Edakkara

8. Pandikkadu

9. Dearer

10. Edavanna

11. Karulayi

12. Tour Branch

13. Nilambur Branch

14. Wandoor Branch

15. Pothukal

16. Tuvvur

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2.6 OWNERSHIP PATTERN

BOARD OF DIRECTORS

Members

355 societies were affiliating this bank. Among these there are 211 ‘A’ class

members, 1 ‘B’ class members and 143 associated members. These associated

members have no voting rights.

i. ‘A’ Class Members: The ‘A’ class members of MDCB are the co-operative

bank / societies. They are the real owners of the bank.

ii. ‘B’ Class Members: The ‘B’ class members of MDCB are the State

Government.

iii. ‘C’ Class Members: The ‘C’ class members of MDCB are the other co-

operative societies. They are the nominal members of the bank and they have

no power.

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SL. NO NAME DESIGNATION

1 Advt. UA Latheef President

2 Sri. Abdul hameed. P Director

3 Sri. Abdulla master. M Director

4 Sri. Moideenkurukkoli. Director

5 Sri. K. shivashankaran. Director

6 Sri. Ramachandran. VC Director

7 Sri. A. Ahammedkutty. Director

8 Sri. Abu sideeq. P Director

9 Sri. Abdulrahman. T Director

10 Sri. Aboobackersideeq. CP Director

11 Sri. P.V.M. Abdulrahman. Director

12 Sri. P.T. Ajayamohan Director

13 Sri. Jayaprakash Director(SC/ST-reservation)

14 Srimathi. Sahida. P Director (Ladies -reservation)

15 Srimathi. C. Vijayalakshmi Director(government-candidate)

16 Sri. E.N. Mohandas Director(government-nominee)

17 Dr. P.A. Rahim Director(government-nominee)

PRESENT POSITION OF THE BANK

At the time of constitution of the bank in 1970, the number of branches was four,

Number of staff was 91, Number of members was 163 and Working Capital was

32.40 lakhs. Now i.e. in 2011 it are 46 branches, 380 members and Working Capital

of 585.07 lakhs.

2.7 COMPETITORS INFORMATION

State Bank Of Travancore

Indian Bank

Canara Bank

State Bank Of India

South Indian Bank

ICICI Bank

2.8 INFRASTRUCTURAL FACILITY

The malappuram District co-operative bank Ltd. is having46 branches across the

district. The Head Office located in malappuram is situated in the heart of the city,

which is operating in 4 storey building of which ground floor is dedicated for car

parking and a canteen run by the bank itself. The II floor is meant for reception and

conference hall. The bank is operating 4 floors.

The head office is having furniture worth Rs. 125000and is installed with 54

computers and allied technology resources worth Rs. 20, 00,000.

2.9 ACHIEVEMENTS & AWARDS

a) During the year 1994-95 and 1996-97 the bank was the recipient of awards from

the State Government for its outstanding performance in Deposit Mobilization.

b) The malappuram District co-operative bank LTD got the 1st place in Kerala and

the 10th place in India as the ‘Best performing Co-operative Bank Award’

which was conducted by Indian achiever’s Forum in 1995-96.

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2.10 WORK FLOW DIAGRAM

Figure 2.1

2.11 FUTURE GROWTH & PROSPECTS

For the financial year 2011-12 bank is expecting an investment increase of Rs. 75

crores. Of which by 30/09/11 an investment increase of Rs.61.23 crores has been

achieved. Regarding loans an increase of Rs.35 crores has been expected of which by

30/09/11 an increase of Rs. 10.

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3. Mc KINSEYS 7-S MODEL

The 7-s-Model is better known as McKinsey 7-s. The two persons who developed

this model are Tom Peters and Robert Waterman, have been consultants at McKinsey

& Co at that time. They published their 7-s Model in their articulate “Structure is Not

Organization” (1980) in their books. “The art of Japanese Management” (1981) and

“In Search of Excellence” (1982).

The Mckinsey’s 7s plays a vital role for the success of any organization. There are

hard and soft components. The figure below shows the framework.

Figure 3.1

STRATEGY:

The malappuram District co-operative bank Ltd is one of the pioneers in this industry

in providing short term loans and long terms loans to farmers and medium scale

industries. As a part of its marketing studies it makes its advertising in malappuram

District co-operative bank LTD g through newspapers.

The following are the strategies used by The Malappuram District co-operative bank

LTD to compete with its rivals.

Business Developments

This is a strategy in which existing customers are attracted. This strategy follows the

entrepreneur recognitions like that of penny sectors, and then attracting with various

schemes

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Identify needs

This is also one strategy of urban Bank which is used to identify the actual needs of

the market. This will help the band to cover the demands of the markets by coming

with various schemes and this organization has succeeded in knowing the consumer

demands.

STRUCTURE:

Figure 3.2

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General Manager

Deputy General Manager

Manager

Senior Accountant

Junior Accountant

Clerk/ Cashier

Daily Deposit Peons

SYSTEM:

The bank has a specified department for its MIS. This department is solely

responsible for providing update information of all branches, all departments etc

required by the management time to time on continuous basis as and when required.

MIS Department

In the first floor of the bank head office. MIS department is located. This

department helps in the flow of information by the means of various software

networking techniques.

Performance Appraisal

This is also known as order executive. In this system employees can watch over their

performance level and required level during the process of transfer, promotion,

demotion, this system has helped better performance of work.

Attendance system

This system is very popular system for the purpose of maintaining attendance.

STYLE:

Bank follows a top down participative style of management. It believes in team

work. For each task teams are constituted to attain specific goals. Urban bank

believes that quality can be achieved by providing quality financial and related

services on a continuous basis. In order to motivate the employees, it encourages

them to actively participate in setting organization growth targets, objectives and to

take their own decisions at various levels.

STAFF:

The bank is having 320 permanent staffs, 52 temporary employees in the head

office and 10collection agents. The permanent staffs are gathered through separate

examination conducted by the bank from those of required qualification.

SKILLS:

The banks require different skills for different types works at different levels. Highly

qualified professionals in the bank have major skills like technical, finance,

economical and public relation skill. The bank also looks for the development of

their staff skills. The various programs organized by bank for this purpose could be

classified into in house and outside.

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On the job training

The bank has the internal job training by means of guidance by their senior staffs.

The bank also provides the on job training like:

1. Group assignment over some project

2. Job rotation

3. Under supervision works

Off the job training

1. In house training.

2. There are various programs performed as off the job training in malappuram.

The training provided is classified as

1. Communication skill training.

2. Computer skills

3. Project skills

4. Secretarial skills

SHARED VALUES:

A shared value is satisfying the farmers and small and medium scale industries first.

Mission the bank is committed to continuously nurture, develop and service the small

sector thought the need based products and services. The value that the bank upholds

most is “Farmers Satisfaction”. This bank focuses over their farmers and industrial

demands and wants. They also come up with various schemes like housing loans,

vehicle loans

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4. SWOT ANALYSIS

The process of examining the organization and its environment is

known as SWOT analysis. It means analysis and assessment of

comparative strength and weakness of organization in relation to

competitors, environmental opportunities and threats which a company

may be likely to face. SWOT analysis is as such systematic study and

identification of those aspects and strategy that best suit the individual

companies’ position in a given situation

Table shows the important SWOT factors of the bank

STRENGTHS WEAKNESS

* Eff ic ient board of d irec tors

*Qual i f ied and experienced human resource

*Bet ter customer service

*Working in the las t f ive years showing

t rend of growth

*Bet ter working environment

* NPA showing decreasing t rend as

compared to the gross advances

NPA showing

*Low product range

*Poor sales force

*Lop –sided capi ta l s t ruc ture

*Poor reserves

*Poor receivables management

*Credi t –deposit rat io cover

almost 100%

*Computer izat ion not proper ly used

*Huge amount of past accumulated losses

OPPORTUNITIES THREATS

* Favorable change in consumer at t i tude

*Increasing popula tion

*Increasing t rend of saving habit

*Attrac ting customers through

promotional measures

*Providing modern fac i l i t ies

* Competi t ion from private banks

*Loans overdue shows increasing t rend

*Pol i t ical instabi l i ty

*Economic instabi l i ty

*Government policy regarding dept re l ie f

*Li tt le support f rom state legis lat ion in

recover ing banks dues from defaulter’s

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5. ANALYSIS OF FINANCIAL STATEMENTPROFIT AND LOSS ACCOUNT

PARTICULARS 2006-07 2007-08 2008-09 2009-10 2010-2011

INCOME

Interest Earned 6526.8 7867 9838 12635 13131

Other Income 91.54 181.45 338.34 1583.76 486.65

TOTAL 6618.43 8048.64 10176.28 14219.07 13617.65EXPENDITURE

Interest Expended 3898.43 5243.20 7052.58 9973.15 8861.61

Operating Expenses 1375.18 2659.72 2849.7 2917.23 1039.74

Provisions and

Contingencies

1228.8 16.12 128.7 1319.56 3716.30

TOTAL 6502.41 7919.04 10030.98 14209.94 13617.65

PROFITS/LOSS

Net profit for the year 116.02 129.6 145.3 9.13 52.79

TOTAL 6618.43 8048.64 10176.28 14219.07 13617.65

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BALANCE SHEET

PARTICULARS 2006-07 2007-08 2008-09 2009-10 2010-11

CAPITAL AND LIABILITIES

Capital 551.81 553.87 552.80 568.23 585.06

Reserves& Surplus 5248.01 6097.92 6874.85 6413.66 7812.46

Deposits 73152 85536 122154 137370 120998

Borrowings 1055.84 5748.56 4988.85 1938.82 1988.47

Other liabilities 4846.68 5650.86 6764.5 8894.21 26029.96

TOTAL 84854.3 103587.21 141335 155184.92 157413.95

ASSETS

Cash & Bank 5718.81 8055.64 11191.8 11658.51 11566.55

Investments 25851.99 38282.29 60328.69 54463.19 43470.06

Advances 51740.45 55914.14 68971.67 88817.29 101541.65

Fixed Assets 1388.91 1174.77 622.07 322.722 734.65

Other Assets 1543.09 1335.14 842.84 245.93 101.04

TOTAL 84854.34 103587.21 141335 155184.9 157413.95

Ratio analysis

25

1. RETURNS ON ASSET

The return on asset percentage shows how profitable a company’s assets are

gathering in generating revenue the ideal ratio is 1%.

Net profit

A. Return on asset =  --------------------------

Total assets

Table 5.1

(Rs in Lakhs)

Year Net profit Total Assets Return on assets

(%)

2009-10 09.13 155184.92 0.005

2010-11 52.79 157413.95 0.033

INTERPRETATION

This ratio shows the net profits generated by the bank on its total assets. The total

asset shows an increasing trend. In the year 2010-2011 this ratio increased to 00.28%

shows the better productivity of assets. However, the next years it shows declining

trend.

2 PROFIT MARGINS

26

Profit margin mainly used for internal comparison. It helps to control cost and

expenses. If it keeps on increasing, it is good for the business.

Net profit

Profit margin =      -----------------------

Total income

Table 5.2

(Rs in Lakhs)

Year Net profit Total income Profit margin

(%)

2009-10 09.13 14219.07 0.06

2010-11 52.79 13617.65 0.38

INTERPRETATION

It is one of the important profitability ratios, which provide net margin earned by the

bank. It was high in 2009-2010 with 0.06 after profit margin shows decreasing trend

and it reaches to 0.38 in 2010-2011

3. PROPRIETARY RATIO

It reveals the company’s capital structure. The ratio is important to both company

and investors.

Share capital + Reserve & Surplus

27

Proprietary ratio = -------------------------------------------------

Total Assets

Table 5.3

(Rs in Lakhs)

year Share capital Reserve & surplus Total Assets Proprietary ratio (%)

2009-10 568.23 6413.66 155184.92 04.49

2010-11 585.06 7812.46 157413.95 05.33

INTERPRETATION

Total asset, share capital and reserves and surplus show an increasing trend. This ratio

shows fluctuation and high in 2010-11 with 05.33increases.

4. STAFF PRODUCTIVITY RATIO

Staff productivity ratio is one of the parameters of efficient management. It evaluates

staffs efficiency with respect to deposits and advances.

28

Deposits + Advances

Staff productivity = -------------------------------

No. of employees

Table 5.4

(Rs in Lakhs)

Year Deposits Advances No. of employees Staff productivity

2009-10 137370.31 88817.30 358 631.88

2010-11 120998.55 101541.65 380 585.63

INTERPRETATION

The staff productivity has an increasing trend. There is an increase in deposits and

advances. In 2009-2010, there is a increase in employees but the productivity keep on

increasing. It shows the efficiency of existing employee. This ratio was low in 2010-

2011 with 585.6

5. OPERATING INCOME PER EMPLOYEE 

It is the contribution of each employee to total income. It shows how efficiently each

employee manages expenses.

29

                                                 Total income

Operating income per employee =       --------------------------

No. of employees

Table 5.5

(Rs inLakhs)

Year Total income No. of employees Operating income per employee

2009-10 14219.07 358 39.71

2010-11 13617.65 380 35.83

INTERPRETATION

Operating income per employee shows a decrease in 2009-10. After 2009-10, there is

an increasing trend in the operating income per employee. In 2010-2011 operating

income reached in the low of 35.83.

6. OTHER INCOME TO TOTAL INCOME

The higher this ratio indicates increasing proportion of fee based income.

Other income

Other Income to Total Income = -----------------------

30

Total income

Table 5.6

Year Other Income Total Income Other Income to

Total Income (%)

2009-10 208.03 14219.07 1.46

2010-11 244.21 13617.65 1.79

Rs in Lakhs

INTERPRETATION

This ratio shows with increasing trend up to 2009-10 with 1.46%. In the year 2010-

11 it increase to 0.33%. The higher this ration indicates increasing proportion of fee

based income. Bank has to improve this ration because it is mainly fee based income

adopting new technologies and other sources.

7. NET NPA RATIO

It helps to evaluate how much of non-performing asset is there in the bank with

advances.

Net NPA

31

NET NPA ratio =      -----------------------

Net advances

Table 5.7 (Rs in Lakhs)

Year Net NP Advances Net NPA ratio

(%)

2009-2010 15332.76 88817.30 17.26

2010-2011 8634.36 101541.65 8.50

INTERPRETATION

In net advances shows an increasing trend while net NPA is declining. Here NPA is

decreasing it is good for the bank because NPA is not good for a bank.

8. NET NPATO TOTAL EQUITY 

It helps to evaluate how much of non-performing asset is there in the bank with total

equity.

Net NPA

Net NPA to Total Equity = -----------------------------------

ShareCapital+Reserve&Surplus  

(Rs in Lakhs)

32

 Table 5.8

Year Net NPA Share

Capital

Reserves&surplus Net NPA to Total

Equity (%)

2009-10 137370.31 88817.30 358 631.88

2010-11 120998.55 101541.65 380 585.63

INTERPRETATION

Net NPA is declining while share capital is increasing. This ratio is high in 2009-10

with 219.60. After it shows a declining trend it is good for the bank. 

  9. NET NPA TO TOTAL ASSETS

It helps to evaluate how much of non-performing asset is there in the bank with total

assets.

Net NPA

Net NPA to Total Asset =   ------------------------

Total Assets

33

Table 5.9

(Rs in Lakhs)

Year Net NPA Total Assets Net NPA to Total Asset

(%)

2009-2010 15332.76 155184.9 9.88

2010-2011 8634.36 157413.95 5.48

INTERPRETATION

Total assets are increasing throughout while NPA is declining. Net NPA to total assets

have a declining trend. But in 2010-2011 it was increased to 9.88 %, Later it shows

declining trend and reaches to 5.48 %. Therefore, it is good for the bank

6. LEARNING EXPERIENCE

Learning is an ongoing process; learning is not limited to anyone in the world.

Learning depends on the person who is learning.

In reality a person can enhance his knowledge only when he is exposed to real world

situations. The degree gives us the theoretical knowledge but it's not enough to face

34

the corporate life because does not gives at the entire knowledge as it lacks in

practical knowledge, so there must be an arrangement for the students to expose

themselves to the corporate world.

The bank study of project work at'' The Malappuram District Co-operative Bank Ltd''

was wonderful experience in term of bank exposure and learning experience. Bank

study in Co-operative Urban Bank helped me to know many things regarding

transaction. Before going to Co-operative Bank, I was unaware of co-operative bank.

It helped me to know various types of deposits in bank.

This summer gave me an exposure to the corporate environment and helped me to

understand different bank concepts. This 10 week has helped me to learn the

following aspects.

I got detailed information of the CAMEL system of the bank.

The main aspect I learned in bank is the relationship between the manager and

employees.

I observed good working condition, technologies and management process.

I came to know how the team works helps the bank. Group work is always

worthier than working alone. There must be a proper coordination between the

manager and the employees which will lead the bank towards achievement of its

goal.

7. GENERAL INTRODUCTION

The development of “Banking” is evolutionary in nature. There is no single answer to

the question of what is banking. Because, a bank performs a multitude of functions

and services which cannot be comprehended into a single definition. For a common

man, a bank means a storehouse of money, for a businessman it is an institution of

finance and for a worker it may be depository for his savings.

35

It may be explained in brief as “Banking is what a bank does”. But it is not clear

enough to understand the subject in full. The oxford dictionary defines a bank s

“establishment for the custody of money which it pays out on a customer’s order”.

But this definition is also not enough, because it considers the deposit accepting and

repayment functions only. The meaning of bank can be understood only by its

functions just as a tree is known by its fruits. As any other subjects, it has its own

origin, growth and development.

Thus the co-operative bank can be defined as “an institution established on the co-

operative principle and engaged in the normal banking business of accepting deposits

from the public for the purpose of lending and repay it in demand or otherwise”. Here

the present study is undertaken to analyze and evaluate the financial performance of

“Malappuram District Co-operative Bank Limited” by using various tools of analysis

and interpretations.

The study is of analytical research. The financial performance that deals with the

financial management is to provide the depth view in the financial position and the

types of financial position and the types of financial techniques used in the company.

The money dealing in finance, in the academic angle of studies, made to chose the

topic, to be sound and best for the company.

VIEW FROM EXPERTS:

Dr. A.S. Narag (1989), A financial statement is an organized collection of data,

according to logical consistent accounting procedures. It purposes is conveying an

understanding of some financial aspects of a business firm.

It may show a position at a moment of time as in the case of balance sheet, or may

reveal a series of activities over a given period of time, as in the case of an annual

statement

36

The American Institute of Certified Public Accounts, summarized that the

“Financial statements are prepared for the purpose of presenting a periodical

review (or) report on the progress by the management and deal with the (a) the

status of investments in the business and (b) the results achieved during a period

under review”. The statements disclosing status of investment is known as

Balance sheet and the statement showing the result is known as Profit & Loss a/c.

According to John N. Mayer, Financial statement analysis is largely a study of

relationship among the various financial factors in a business, as disclosed by a

single set of statements and study of these factors as shown in a series of

statements.

Steps involved in financial statements analysis:

The process of financial statements analysis consists of the following six steps.

1. Determination of scope and objectives of analysis:

2. Study of financial statements;

3. Rearrangement of the data;

4. collection of relevant information;

5. analysis of data by analytical techniques; and

6. Interpretation, presentation and preparation of reports.

7.1 STATEMENT OF THE PROBLEM

Liquidity and solvency is of paramount importance to bank. A customer who would

be placing his money with the bank would be very much interested in the financial

health and performance of a bank. Government will also be interested in the financial

strength and weakness of a bank, because the failure of the bank would be having the

cascading effect on the financial system of the country. Because of these, the

37

financial performance of the bank is most important to the stake holders. This study

makes an in-depth financial performance analysis, so as to get an insight in to the

financial strength and weakness of Malappuram District Co operative Bank, survive

and contribute more to the ever changing banking industry

In this study, the financial performance analysis of bank is done on the basis of the

CAMEL rating system which is found to be more effective in evaluating the

performance of the bank. This study has been endeavoring to analyze the financial

performance of the bank by using the scope of CAMEL Rating System. The CAMEL

rating system is a system of evaluating the performance of bank based on six

parameters i.e. Capital adequacy, asset quality, Management, Earnings quality, and

Liquidity. Since Capital adequacy norms are not requires to be followed by Co

operative bank, only the other parameters

7.2 OBJECTIVES OF THE STUDY

To find out how. Asset quality, Management, Earnings quality, and Liquidity

affect the performance of the banks.

To evaluate the profitability of Malappuram District Co-operative bank.

To evaluate how much effectively we can implement CAMEL rating in Co-

operative sector bank.

To evaluate the performance of the Malappuram Dist. Co Operative Bank Ltd

Based on the above mentioned parameters

7.3 SCOPE OF THE STUDY

Since finance is the life blood of any business, it should be managed giving special

attention. The first aspect to be attended is the estimation of how much funds a

business organization requires and its purpose. Unless the financial forecast can be

prepared on sound basis, the business is likely to run in to difficulties arising from

insufficiency or excess of capital funds. In second place, it needs to be seen how the

amount estimated for meeting the business requirements.

38

In the competitive world of business the function of fund management plays an

important role in ensuring fair return on investment, generating and building up

reserves and surpluses for growth and expansion etc. This study covers the financial

performance analysis of the Malappuram District Co-operative Bank Ltd.

The main source of information required for the analysis is the annual report of the

Bank. The annual report comprises the Income and Expenditure Statement, the

Balance Sheet, Report to the Directors and Auditors report.

7.4 RESEARCH METHODOLOGY 

Definition:-

The advance Learner’s dictionary of current English, can be defined as “a careful

investigation or inquiry specially through search for in any branch of knowledge”

Radman and miry define research methodology as a “systematized efforts to gain

new knowledge”

Meaning:-

Research methodology means it is a way to systematically solve the research

problem. It is necessary for the researcher to know, not only the research methods or

techniques but also the methodology.

RESEARCH DESIGN

Analytical method is used as the research design in this study.

SOURCE OF DATA

Data were collected from various books of accounts and financial Statements of the

bank. Various sources such as articles and text books, brochures, information from

websites proved very useful.

TOOLS USED FOR ANALYSIS

The selected data has been analyzed using basic statistical tools like ratio analysis

39

(CAMEL) and trend analysis. Charts and formulas have been used for analysis in this

study. Since Capital Adequate norms are not required to be followed by Co-operative

bank, only the other Para meters are examining.

A Study on the Financial Performance Analysis of Malappuram District Co-Bank

2011. Ratio analysis and Trend analysis are being used for this purpose .Hence, it is

essentially a fact finding study.

The annual report of the bank constitutes the most important source of data for

judging working results and financial positions. The financial statement comprising

of the balance sheet, profit and loss account, of five financial years, analyzed and

interpreted arrive at conclusion

Data collection

The data are collected from the “Secondary Data” through annual report, balance

sheet and profit and loss accounts of the bank.

7.5 PERIOD OF STUDY:

The period considered for the purpose of the study was for six years, that is from2006

to 2011

7 . 5 L I M I T A T I O N S The study is limited only on the head office of the bank. No touches with other

branches.

The duration given for the project was not sufficient to do an elaborate study.

The researcher’s inadequacy of experience also might have influenced the study to

an extent.

The data used for analysis and interpretation is secondary data of last five years.

40

As the data, ratio, averages all are based on year ending figure it shall not reflect

the real position due to abnormal increase in deposits, loans and advances, cash

and bank balances etc.

The tools used for the study such as ratio analysis, comparative statements and

trend analysis have its own limitations.

The available data are taken from only in their annual reports and various

Schedule prepared at the end of the year.

8. ANALYSIS AND INTERPRETATIONThis study has been endeavoring to analyze the financial performance of the bank by

using the scope of CAMEL Rating System. The CAMEL rating system is a system of

evaluating the performance of bank based on six parameters i.e. Capital adequacy,

asset quality, Management, Earnings quality and Liquidity.

CAPITAL ADEQUACY

41

A financial institution is expected to maintain capital commensurate with the nature

and extent of risks to the institution and the ability of management to identify,

measure, monitor, and control these risks. The effect of credit, market, and other

risks on the institution's financial condition should be considered when evaluating

the adequacy of capital. The types and quantity of risk inherent in an institution's

activities will determine the extent to which it may be necessary to maintain capital

at levels above required regulatory minimums to properly reflect the potentially

adverse consequences mat these risks may have on the institution's capital.

ASSET QUALITY

The asset quality rating reflects the quantity of existing and potential credit risk

associated with the loan and investment portfolios, other real estate owned, and other

assets, as well as off-balance sheet transactions. The ability of management to

identify, measure, monitor, and control credit risk is also reflected here. The

evaluation of asset quality should consider the adequacy of the allowance for loan

and lease losses and weigh the exposure to counterparty, issuer, or borrower default

under actual or implied contractual agreements. All other risks that may affect the

value or marketability of an institution' assets, including, but not limited to,

operating, market, reputation, strategic, or compliance risks should also be

considered. A review or evaluation assessing the credit risk associated with a

particular asset. These assets usually require interest payments - such as a loans and

investment portfolios. Asset quality refers to the degree of financial strength and risk

in bank's assets, typically advances and investments. An asset which ceases to

generate income for the bank is called non performing asset.

MANAGEMENT

The capabilities of the board of directors and management, in then- respective roles,

to identify, measure, monitors, and control the risks of an institution's activities and to

ensure a financial institution's safe, sound, and efficient operation in compliance with

applicable laws and regulations is reflected in this rating. Generally, directors need

not be actively involved in day-to-day operations; however, they must provide clear

guidance regarding acceptable risk exposure levels and ensure that appropriate

42

policies, procedures, and practices have been established. Senior management is

responsible for developing and implementing Policies, procedures, and practices that

translate the board's goals, objectives, and risk limits into prudent operating

standards.

EARNINGS QUALITY

This rating reflects not only the quantity and trend of earnings, but also factors that

may affect the sustainability or quality of earnings. The quantity as well as the quality

of earnings can be affected by excessive or inadequately managed credit risk that may

result in loan losses and require additions to the allowance for loan and lease losses,

or by high levels of market risk that may unduly expose an institution's earnings to

volatility in interest rates. The quality of earnings may also be diminished by undue

reliance on extraordinary gains, nonrecurring events, or favorable tax effects.

LIQUIDITY

In evaluating the adequacy of a financial institution's liquidity position, consideration

should be given to the current level and prospective sources of liquidity compared to

funding needs, as well as to the adequacy of funds management practices relative to

the institution's size, complexity, and risk profile. In general, funds management

practices should ensure that an institution is able to maintain a level of liquidity

sufficient to meet its financial obligations in a timely manner and to fulfill the

legitimate banking needs of its community. Practices should reflect the ability of the

institution to manage unplanned changes in funding sources, as well as react to

changes in market conditions that affect the ability to quickly liquidate assets with

minimal loss. In addition, funds management practices should ensure that liquidity is

not maintained at a high cost, or through undue reliance on funding sources that may

not be available in times of financial stress or adverse changes in market conditions.

NPA TO TOTAL ASSET= NPA/TOTAL

Table 8.1 Rs in Lakh

YEAR NPAs ASSET PERCENTAGE

2006-2007 6435.61 84854.34 7.58%

2007-2008 5657.90 103587.21 5.46%

2008-2009 5702.63 141335.00 4.03%

2009-2010 15332.76 155184.92 9.88%

43

2010-2011 8634.36 157413.95 5.48%

Figure No 8.1

NPAs to Total Assets

2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-20110

2

4

6

8

10

1210.02

7.58

5.464.03

9.88

5.48

percentage

Interpretation

The percentage of NPA to total asset shows decrease in nature from 2006 to 2009,

which means the significant improvement in the asset quality. But in the last two

Years a drastic improvement in the Ratio

NPA to Advances

44

Asset quality with regards to advances depends mainly on the classification of

advances in accordance with the prudential accounting norms of income recognition,

asset classification and provisioning, distribution pattern of advances to various

sectors.

NPA to Advances=NPA/Advances

Table 8.2

YEAR NPA ADVANCES PERCENTAGE

2006-2007 6435.61 51740.45 12.44%

2007-2008 5657.90 55914.14 10.12%

2008-2009 5702.63 68971.67 8.27%

2009-2010 15332.76 88817.29 17.26%

2010-2011 8634.36 101541.65 8.50%

NPA to Advances

Figure 8.2

2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-20110

5

10

15

20NPA TO ADVANCE

Interpretation

The percentage of NPA to Advances has increased at an alarming rate from 17.26 to

08.50% signifying serious erosion in value of the asset. Compared to the

international level of 1%, the ratio of 18.4% for 2006 is very much unsatisfactory,

but 2011 it become low and then now decreased to 08.50%in 2011 low percentage of

NPA to total advances indicates that the recovery performance of the bank is

satisfactory.

Advances Yield

45

Yield on advance, is another important ratio, which helps us to measure the ability of

bank to generate maximum returns through its core business. Loans and advances is

a most important asset item. Like any lending business, interest income forms the

major and important revenue item for a bankAdvances Yield Ratio= Interest Income

on Advances / Advances

YEAR INTEREST INCOME ON

ADVANCESADVANCES PERCENTAGE

2006-2007 6326.89 51740.45 12.23%

2007-2008 7867.19 55914.14 14.07%

2008-2009 9837.95 68971.67 14.26%

2009-2010 12635.24 88817.29 14.23%

2010-2011 13131.83 101541.65 12.93

Table 8.3

Advances yield

Figure 8.3

2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-201102468

10121416

10.7612.23

14.07 14.26 14.2312.93

Interpretation

Advances yield ratio shows an increasing trend over the 2005 to 2007. Advance

Yield Ratio has increased from 10.76% in 2005 to 14.07% in 2007. Thereafter it has

increased remained flat for the period 2007- 2011 even in the increasing interest rate

scenario. This shows that the productivity or yield on asset is better.

Returns on assets

46

Table 8.4

Returns on assets

Figure 8.4

2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-20110

0.05

0.1

0.15

0.2

0.25

0.3

0.35

RETURN ON ASSET

Interpretation

Return on asset ratio shows a decreasing trend over the years. Ratio decreases from

0.31 in 2006 to 0.03 in 2011.

Total Advances to total Deposit

47

YEAR NETPROFIT ASSET RATIO

2005-2006 219.09 71100.17 0.31%

2006-2007 116.02 84854.34 0.14%

2007-2008 129.61 103587.21 0.13%

2008-2009 145.33 141335.000 0.1%

2009-2010 9.13 155184.92 0.01%

2010-2011 52.79 157413.95 0.03%

The ratio is indicative of the percentage of funds lent by the bank out of the total

amount raised through deposits. Higher ratio reflects ability of the bank to make

optimal use of the available resources. Total deposits include demand deposits,

saving deposit and deposits in other banks.

Total Advances to total Deposit

Table 8.5

Total Advances to total Deposit

Figure 8.5

2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-20110

102030405060708090

63.5970.73

65.7356.46

64.66

83.92

Interpretation

Total Advances to Total Deposits Ratio shows a mixed trend over the year. During

the same period, the spread has also shows the mixed trend. The advances of the

bank has steadily increased from Rs 38701.37 lakhs in 2005-2006 to Rs 88817.29

lakhs in 2009-2010,an increase of almost 129%.The deposit of bank has also

increased significantly from Rs 60858.70 lakhs in 2005-2006 to Rs 120998.55 lakhs

m 2010-2011, an increase of almost 125%.

Business per employee

48

YEAR ADVANCES DEPOSITS PERCENTAGE

2006-2007 51740.45 73152.33 70.73%

2007-2008 55914.14 85536.28 65.73%

2008-2009 68971.67 122154.04 56.46%

2009-2010 88817.29 137370.31 64.66%

2010-2011 101541.65 120998.55 83.92%

As the competition increases, human resources become one of the key areas where

banks can develop unique competitive advantage Thus, measurement of the staff

productivity becomes essential to comment on the performance of the bank.

Business per Employee= Advances + Deposit/ No. Of Employee

YEAR ADVANCES DEPOSITS TOTAL EMPLOYEE

(NOS)

BUSINESS

PER EMPLOYEE

2006-2007 51740.45 71532.33 124892.8 373 334.83

2007-2008 55914.14 85536.28 141450.4 371 381.26

2008-2009 68971.67 122154.04 191125.7 377 506.96

2009-2010 88817.29 137370.31 226187.6 358 631.80

2010-2011 101541.65 120998.5 222540.2 380 585.63

Table 8.6

Business per employee

Figure 8.6

2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-20110

100200300400500600700

278.1334.83

381.26

506.96

631.8585.63

Interpretation

Business per employee shows an increasing trend over the past 5 years. Business per

employee is showing a steady increase from 278.1 lakhs in 2006 to 585.63 lakhs in

2011, an increase of almost 127%. This significant improvement in business per

employee is an indicator of the efficiency of the management.

49

Profit per Employee

This ratio is another indicator, of the efficiency of the management. It is arrived

at by dividing the Profit earned by the bank by total number of employees.

YEAR NET

PROFIT

EMPLOYEE (NO.) PROFIT PER

EMPLOYEE

2005-2006 219.09 358 61198.32

2006-2007 116.02 373 31104.56

2007-2008 129.61 371 34935.31

2008-2009 145.33 377 38549.07

2009-2010 9.13 358 2550.28

2010-2011 52.79 380 13892.10

Profit per Employee= Net Profit/ No. Of Employees

Table 8.7

Profit per Employee

Figure8.7

2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-20110

10000

20000

30000

40000

50000

60000

7000061198.32

31104.5634935.31

38549.07

2550.28

13892.1

Interpretation

Ratio having mixed trend in past 5 years, but a drastic fall from 2006 to 2010 that is

form 61198.32 to 13892.1 which indicate employee productivity become low.

YEAR TOTAL INCOME EMPLOYEE TOTAL

50

(NOS) INCOME PER

EMPLOYEE

2005-2006 5690.28 358 15.89

2006-2007 6618.43 373 17.74

2007-2008 8048.64 371 21.69

2008-2009 10176.28 377 26.99

2009-2010 14219.07 358 39.72

2010-2011 13617.65 380 35.83

Total income per employee

This ratio is another indicator of efficiency of management. Total income to

employee is arrived at by dividing total income by total no. of employees.

Total Income per Employee = Total Income/ No. Of Employees

Table 8.8

Total Income per Employee

Figure 8.8

51

Interpretation

Total income per employee become increasing trend in the last 5 year, which

changes from 15.89 in 2006 to 35.83 in 2011 which is almost 135%, indicate much

improvement ratio.

Branch Productivity

Business means the sum of advances and deposits. Higher branch productivity is

an evidence of effective management.

Branch Productivity= Total Business/ No. Of Branches

Table 8.9

52

2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-201105

1015202530354045

15.89 17.7421.69

26.99

39.7235.83

YEAR BUSINESS NO OF

BRANCHES

BRANCH

PRODUCTIVITY

2005-2006 99560.07 38 2620.00

2006-2007 124892.78 41 3046.17

2007-2008 141450.42 42 3367.87

2008-2009 191125.71 46 4154.91

2009-2010 226187.6 46 4917.12

2010-2011 273497.80 46 5945.60

Branch Productivity

Figure 8.9

2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-20110

1000

2000

3000

4000

5000

6000

7000

26203046.17 3367.87

4154.914917.12

5945.6

Interpretation

Even though the total branch has increased from 38 in 2006 to 46 in 2011.branch

productivity has increased from 2620 lakh in 2006 to 5945.6 lakh in 2011showing an

improved efficiency

Branch profitability

This ratio shows. The profit per branch. Business means the sum of advances and

deposits

Branch profitability= Net profit/ No. of branches

Table 8.10

53

YEAR PROFIT NO OF

BRANCHES

BRANCH

PRODUCTIVITY

(in RS)

2005-2006 219.09 38 576552.63

2006-2007 116.02 41 282975.61

2007-2008 129.61 42 308595.24

2008-2009 145.33 46 315934,78

2009-2010 9.13 46 19847.83

2010-2011 52.79 46 11476.08

Branch profitability

Figure 8.10

2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-20110

100000

200000

300000

400000

500000

600000

700000576552.63

282975.61 308595.24 315934.78

19847.83 11476.08

Interpretation

Branch profitability shows a heavy decrease from 5.76 lakh of 2006 to 0.19 lakh in

2010. This decline in branch productivity is a sign of improper management.

Asset Utilizations

Asset utilization is an indicator of the efficient usage of the bank's assets. A lower

ratio necessitates review of the investment and credit policies .it is arrived at

dividing total income by total asset.

Asset Utilizations = Total Income/ Total Asset

Table 8.11

54

Asset Utilizations

Figure 8.11

2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-20110123456789

108 7.8 7.77 7.2

9.16 8.65

Interpretation

The asset utilization of the bank is continuously dropping over the years from 2006

to 2009, and then increased to 8.65% in 2011. This shows the bank's assets are much

productive, and need some more improvement in efficiency in utilization of assets.

DEPOSIT YEAR

2005-2006 2006-2007 2007-2008 2008-2009 2009- 2010 20102011

FIXED 43543.04 53839.58 52744.00 84370.32 90955.82 71839.41

SAVINGS 13852.24 15248.65 16701.16 22076.00 25680.62 24378.28

CURRENT 3448.46 4049.11 4801.99 7580.98 5809.80 7027.55

55

YEAR TOTAL

INCOME

ASSET PERCENTAGE

2005-2006 5690.28 71100.17 8.00%

2006-2007 6618.43 84854.34 7.80%

2007-2008 8048.64 103587.21 7.77%

2008-2009 10176.28 141335.00 7.20%

2009-2010 14219.07 155184.92 9.16%

2010-2011 13617.65 157413.95 8.65%

OTHERS 15 15 11289.13 8126.76 14954.07 17753.31

TOTAL 60857.74 73152.33 85536.28 122154.07 137370.31120998.55

Deposits

Banks are highly leveraged organizations, relying mainly on debt and the chief

sources of funds are deposit that is raised.

Showing type of deposits for the years

Table 8.12

Showing type of deposits for the years

Figure 8.12

2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-20110

20000400006000080000

100000120000140000160000

60857.7473152.33

85536.28

122154.07137370.31

120998.55

Interpretation

During the 2006-2011, total deposit has increased from 60857.74 to 120998.55lakh

that is more than 100%. This significant improvement shows the efficiency of

management.

Change In deposits

Table- 8.13

YEAR DEPOSIT %CHANGE IN %CHANGE FROM CHANGR FROM

56

DEPOSIT BASE YEAR PREVIOUSE

YEAR

2006-2007 73152.33 120.20 20.20 20.20

2007-2008 85536.28 140.55 40.55 20.35

2008-2009 122154.07 200.72 100.72 60.17

2009-2010 137370.31 225.72 125.72 25.00

2010-2011 120998.55 273.49 173.49 47.77

Change In deposits

Figure 8.13

2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-20110

50

100

150

200

250

300

100120.2

140.55

200.72225.72

273.489999999999

PERCENTAGE CHANGE IN DEPOSITS

Interpretation

Deposit in the bank increasing in good rate implies the customers are having trust of

the bank, and efficiency management. Any lending business, interest income forms

the major and most important revenue for a bank. Apart from the interest income,

banks will also have certain income in the form of fees, commission, exchange etc.

Income

Like any lending business, interest income forms the major and most important

revenue for a bank. Apart from the interest income, banks will also have certain

income in the form of fees, commission, exchange etc.

57

Income

Table 8.14

Year Interest income Commission

&Discount

Others Total

2005-2006 5272.46 41.29 376.52 5690.27

2006-2007 6326.89 44.27 247.26 6618.44

2007-2008 7867.19 44.17 137.3 8048.64

2008-2009 9837.95 55.19 283.15 10176.29

2009-2010 12635.25 56.23 1527.59 14219.07

2010-2011 13131.84 48.29 437.52 13617.65

Income

Figure 8.14

2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011

5272.46 6326.89 7867.199837.9499999

996312635.25 13131.84

417.81291.53

181.47338.34

1583.82 485.81

INCOMEOther Intrest Income

Interpretation

Like any lending business, interest income forms the major and most important

revenue for the bank. But bank has improved its other income from 417.81 lakh to

485.81 lakh during 2006 to 2011 which implies a good sign.

9 . F I N D I N G SASSET QUALITY

The quality of the assets of the bank has decreased significantly over that. The yield

on advances is flat for the past three years indicating productivity of this asset. The

58

yield on investments has also code has decreased. All these points to a significant

reduction in asset quality - Specific findings on asset quality are given below;

NPA TO TOTAL ASSET

The percentage of NPA to total asset shows decrease in nature from 2006 to 2009,

which means the significant improvement in the asset quality. But in the last year a

drastic improvement in the Ratio

NPA TO ADVANCES

The percentage of NPA to Advances has increased at an alarming rate from 8.27% to

17.26% signifying serious erosion in value of the asset. Compared to the international

level of 1%, the ratio of 18.4% for 2006 is very much unsatisfactory, but till 2009 it

become low and then decreased to 8.50% in 2011. High percentage of NPA to total

advances indicates that the recovery performance of the bank is satisfactory.

INVESTMENT YIELD RATIO

The investment yield ratio of the bank is increased over the years, the yield on

investments has improved from 4.24% in 2006 to 7.77% in 2010.Compared to the

yield on advances (4.24% for 2006), and the yield on investment (7.77% for 2011) is

high. This high yield on investments indicates that the quality of the investment as

well as the efficiency in portfolio management is improving.

MANAGEMENT

The efficiency in management has improved considerably, except in asset utilization

and NPA management. Business has improved considerably. At the same time asset

utilization has dropped and NPA has increased considerably. Specific findings on

management efficiency are given below;

TOTAL ADVANCES TO" TOTAL DEPOSITS

Total Advances to Total Deposits Ratio shows a mixed trend over the year. During

the same period, the spread has also shows the mixed trend. The advances of the bank

has steadily increased from Rs 38701.37 lakhs in 2005-2006 to Rs 88817.29 lakhs in

2010-2011,an increase of almost 129%.The deposit of bank has also increased

59

significantly from Rs Ps 60858.70 lathes in 2005-2006 to Rs 120998.55 lakhs m

2010-2011, an increase of almost 125%.

These significant improvements in business indicate improved efficiency of the

management. The advances to deposit ratio has almost same in 2006 to2011. The

ratio of 64.66% in 2009-2010 indicates that the bank was able to convert 64.66% of

its deposit to advances.

TOTAL INCOME PER EMPLOYEE

Total income per employee become increasing trend in the last 5year, which change

from 15.89 in 2006 to 39.72 in 2011 which is almost 137%, indicate much

improvement in the ratio

BRANCH PRODUCTIVITY

Even though tine total branch has increased from 38 in 2006 to 46 in 2010, branch

productivity has increased from 2620 lakh in 2006 to 4917012 lakh in 2011 Showing

an improved efficiency.

BRANCH PROFITABILITY

Branch profitability shows a heavy decrease from 5.76 lakh of 2006 to 0.19 lakh in

2011. This decline in branch productivity is a sign of improper management

ASSET UTILIZATION

The asset utilization of the bank is continuously dropping over the years from 2006

to 2010, and then increased to 9.16% in 2011. This shows the bank's assets are much

productive, and need some more improvement in efficiency in utilization of assets.

LIQUIDITY

Total asset has increased from 71100.17 lakh in 2006 to 157413.95 lakh in 2011,

bank has a saving deposit of 6081.99 lakh in other banks 2006and 12731.97 In fact

the liquidity of the bank has significantly improve over the years.

9. SUGGESTIONS

• The NPA to assets is as high as 9.88% in 2010 indicating poor assets quality of

advances. Currently NPA is 9.88% which is very high compared to the international

norms of 1% .As loans and advances are the important earning assets of a bank, it is

60

very important that the bank should ensure the quality of the asset. The bank has to

take drastic steps to reduce the level of NPA by adopting aggressive recovery

process. The credit standard as well as the credit review process should also be much

improved.

Advances yield ratio shows an increasing trend over the five years. Bank has to

take necessary steps to improve its yield on advances

The investment yield ratio of the bank is increasing over the years, indicating

good port folio management. Bank has to improve its skill in port folio

management and asset selection.

One of the drivers of the profitability is the asset utilization. The asset utilization

of Co-operative bank shows a mixed trend. If the asset utilization has

considerably reduced over the years will result in lower profitability. So steps

should be taken by the bank to improve its asset utilization.

Spread is the major source of income. So the bank should take actions for

increasing the spread.

In order to become more competitive in the present scenario Cooperative Bank

can enter into new avenues of growth. It can enter into non fund activities such as

insurance, portfolio management mutual funds, investment banking etc.

CONCLUSION

The Indian banking industry is going through highly competitive field than ever

before. The new generation privet banks are claiming the network services like

nationalized bank. They are also approaching the customers very aggressively. In

61

addition to these, Co operative sector banks also seeking a space, where they can

survive and contribute, in the modem banking industry. They are also accepting

today's banking trends from fit to all needs now the bank is flexible to needs. Now all

most all the district and state level co operative banks are computerized. In the study

it is found that the efficiency of management has improved considerably exempt in

reduce the NPA and maintain an optimum level of liquidity. In the study it is found

that the bank's liquidity position is not satisfactory.

PROFIT AND LOSS ACCOUNT

PARTICULARS 2006-07 2007-08 2008-09 2009-10 2010-2011

INCOME

Interest Earned 6526.8 7867 9838 12635 13131

62

Other Income 91.54 181.45 338.34 1583.76 486.65

TOTAL 6618.43 8048.64 10176.28 14219.07 13617.65EXPENDITURE

Interest Expended 3898.43 5243.20 7052.58 9973.15 8861.61

Operating Expenses 1375.18 2659.72 2849.7 2917.23 1039.74

Provisions and

Contingencies

1228.8 16.12 128.7 1319.56 3716.30

TOTAL 6502.41 7919.04 10030.98 14209.94 13617.65

PROFITS/LOSS

Net profit for the year 116.02 129.6 145.3 9.13 52.79

TOTAL 6618.43 8048.64 10176.28 14219.07 13617.65

63

BALANCE SHEET

PARTICULARS 2006-07 2007-08 2008-09 2009-10 2010-11

CAPITAL AND LIABILITIES

Capital 551.81 553.87 552.80 568.23 585.06

Reserves& Surplus 5248.01 6097.92 6874.85 6413.66 7812.46

Deposits 73152 85536 122154 137370 120998

Borrowings 1055.84 5748.56 4988.85 1938.82 1988.47

Other liabilities 4846.68 5650.86 6764.5 8894.21 26029.96

TOTAL 84854.3 103587.21 141335 155184.92 157413.95

ASSETS

Cash & Bank 5718.81 8055.64 11191.8 11658.51 11566.55

Investments 25851.99 38282.29 60328.69 54463.19 43470.06

Advances 51740.45 55914.14 68971.67 88817.29 101541.65

Fixed Assets 1388.91 1174.77 622.07 322.722 734.65

Other Assets 1543.09 1335.14 842.84 245.93 101.04

TOTAL 84854.34 103587.21 141335 155184.9 157413.95

64

BIBLIOGRAPHY

BOOKS

Ashok Sehgal and Deepak Sehgal, Advanced Accounting 2,

TaxmannAllted Services Pvt. Ltd.

E. Gorden, k. Natarajan, Financial Markets and services, Himala publishing

House.

B S Raman, Banking theory and practices, United publishers

C.R Kothari, Research Methodology methods and techniques,

Viswaprakashan Pt. Ltd.

Shashi. K Gupta and Nisha Aggarwal, Financial Services, Kalyani

Publishers.

REPORTS

Annual reports of the Malappuram District Co-operative Bank

WEBSITES USED

www.knowthestuff.com

www.investmentz.com

www.sify.business.com

www.rbi.org

www.allbankingsolutions.com/camels.htm

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