Project on Rdcc Bank

RDCC BANK LTD.RAICHUR

HET’S IMS COLLEGE

Project On

“CREDIT APPRAISAL ON WORKING CAPITAL”

Submitted in partial fulfillment of the requirements for the award of

MBA

With specialization in

marketing

Submitted by

Mr. vijay kumar.m

Reg.No: MBA/08/68

Under the Guidance of

Mr. SohilNaragundkar

Indian Institute of Business Management

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S NO Index Page NO

Chapter 1 Rationale for the study 6-7

Chapter 2 Objective of the study

Title of the Project

Objective of the study

Scope of the study

8-9

Chapter 3 Profile of the Company 10-21

Chapter 4 Theoretical Perceptive 22-27

Chapter 5 Research Methodology

Research Design

Data collection methods

28-29

Chapter 6 Data analysis and interpretations 30-59

Chapter 7 Findings 60-61

Chapter 8 Limitations 62-63

Chapter 9 Expected contribution from the study 64-65

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Declaration

I the student studying in MBA sixth Tri-semester here by declare that the project work entitled “a

study on retailers perception on Hyderabad industries limited”

successfully completed and submitted by me. Under the guidance of

Mr.ShoilNaragundkar Prof, HET’s INSTITUTE OF MANAGEMENT STUDIES. This is my

original work and has not been submitted earlier to any other Institution.

The report is for the fulfillment of the sixth-semester MBA. The

Matter in this report is based on the data collected by me at” CREDIT APPRAISAL ON

WORKING CAPITAL

in RAICHUR.

Signature

Vijay kumar.m

Place:

Date: 10 /08/2010

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AKNOWLEDGEMENT

I take this opportunity to express my profound gratitude and deep regards to my guide Prof. Ms.

SohilNaragundkar

for his exemplary guidance, monitoring and constant encouragement throughout the course of

this thesis. The blessing, help and guidance given by him time to time shall carry me a long

way in the journey of life on which I am about to embark.

I also take this opportunity to express a deep sense of gratitude to

(D.R.C.S. & Incharge Managing Director) of RAICHUR DISTRICT CENTER CO-

OPERATIVE BANK LTD. for his cordial support, valuable information and guidance, which

helped me in completing this task through various stages.

Lastly, I thank almighty, my parents, and friends for their constant encouragement without

which this assignment would not be possible.

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1

RATIOANLE FOR THE STUDY

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Rationale for the study

This project focuses on “Credit appraisal on working capital” In order to do the justice to the

topic, there is a brief introduction of credit appraisal this includes the different types of credit

sectors.

Further, the concept of credit appraisal has been elaborated upon, which includes various

factors for appraising credit to working capital .

Primary aim of the project “ Credit appraisal on working capital” at the Raichur District Central

Co-op Bank Ltd, Raichur. Was to analyses existing practices of co-operative banks for credit

appraisal on working capital.

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2

Objective of the study

Title of the Project

“CREDIT APPRAISAL ON WORKING CAPITAL”

objectives of the project

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1) Study the credit appraisal in co- operative banks.

2) Study the credit appraisal on working capital.

3) Study the credit appraisal to different companies

Scope of the study

Date of study: june 2010.

Place of study:Raichur city

As my project work is based on credit appraisal in the Raichur District Central Co-op Bank Ltd,

Raichur. I had put my self very much into the job to reach the depth of credit appraisal in

different sectors. I involved myself directly interacting with various executives of loans and

investment department.

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3

Profile of the Industry

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An Industry Profile

Banking Regulation Act-1949

Definition Of Co-Operative Bank

Values Of Co- Operative Bank

Principles Of Co-Operative Bank

Banking Regulation Act, 1949:

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(As applicable to co-operative societies)

The Banking Regulation Act,1949(as applicable to co-operative societies) which had come into

force from 1st March 1966, has vested the Reserve Bank with various statutory powers of

control and supervision over the Co-operative Banks. The powers in regard to incorporation,

management etc. of these banks, continue to vest in the Registrars of Co- operatives societies

of the States concerned. Further the provisions of the B.R. Act 1949 shall be in addition to, and

not, save as expressly provided in the Act, in derogation of any other law for the time being in

force. This means that the Co-operative Banks are required not only to comply with the

provision of the B.R. Act, but also other laws applicable to them. In respect of matters

specifically provided for in the B.R. Act the provisions of the said Act will prevail over the

provisions of the Co-operative societies Acts.

According to this Act, a “Primary Co-operative Bank” means a Co-operative Society other

than a Primary Agriculture Credit Society:

1) The primary object or principal business of which is the transaction of banking business

2) The paid- up share capital and reserves of which are not less than one lakh of rupees.

3) The bye- laws of which gives only permit as a share holder or a member varies co-op

institutions which are working in Raichur district. Like Primary Agriculture Co-op societies which

are back bone of DCC Bank, Taluka Agricultural produces marketing co-op societies, Urban Co-

op Banks & co-op societies.

Definition of Co- operative Banks:

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A co-operative is an autonomous association of smaller co-op institutions or persons united

voluntarily to meet their common economic, social and cultural needs and aspirations through

a jointly owned and democratically controlled enterprise.

Values of Co- operative Banks:

1) Self – responsibility

2) Democracy

3) Solidity

In tradition of their founders, co-operative members believe in the ethical values of honesty,

openness, social responsibility and caring for others.

Principles of Co- operative Banks:

1) Voluntary and open membership only for co-op societies which are working in Raichur

district only.

2) Democratic member control.

3) Member Economic Participation.

4) Autonomy and independence.

5) Education, Training, and Information.

6) Cooperation among Cooperatives.

7) Concern for Community.

VISION AND MISSION:

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Protection of collected fund.

Useful investment of fun

Better customer service.

Building transparency in all dealings.

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SPECIAL FEATURES:

Fully computerized for efficient services.

Secured deposits and high returns.

“ EASY HOME LOANS” and many other attractive loan schemes.

Bank Profile:

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RAICHUR DISTRICT CENTER CO-OPERATIVE BANK LTD.

Head Office: Rajendra Gunj Circle, Raichur-584102.

Established: 1919

First President: Late A. B. Patil (1960-67) (After State re-organisation1959)

Present President: Sharane Gowda Bayyapur

The Raichur District central Co-op Bank Ltd, Raichur is a district level rural credit bank

established in 1919 for the sake of people to help agricultures. Up to Independence in 1947,

bank was worked under Hyderabad Nizam Sarkar Govt.

After Independence up to state re-organization bank were worked in 11 talukas namely

Raichur, Manvi, Deodurga, Lingasugur , Sindhanur, Koppala Kushtigi, yalburga, Gangavati,

Alampur & Gadval under the Hyderabad state. In 1959 Raichur District separated from

Hyderabad State included in Karnataka State than called Mysore state. Gadval & Alampur

talukas separated from RDCC Bank, because these two talukas included in newly formed

Andhra Pradesh.

In 1959 than Deputy Commissioner of Raichur took over the charge as the President of RDCC

Bank.

In 1960 A. B. Patil became the first president of RDCC Bank.

In the year 2001 Raichur district divided in to two district namely Raichur district & Koppal

district. Koppal district includes Gangavati, yalburga, kushtagi, but RDCC Bank were not divided.

So present it has operations in two district.

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Fund collection is necessity of bank but this bank’s prime goal is protection of collected fund

and useful investment. With the suitable directions given by Board of Directors and with

efficient management, the bank is moving forward with success. Today it contains nineteen

branches. Out of its nineteen branches today four branches are having their own building.

Other building are well planned and furnished.

All of its nineteen branches well equipped computerized facilities are available.

This bank not only gives importance to co-operative sector but also gives importance to

education, health and social programs and also encourages them. Without any discrimination it

helps people according to their qualification. It helps the patients suffering from kidney

problem, heart problem, cancer and other diseases. It is due to this bank that high- educational

system and eye- specialist centre are established in Raichur town.

Board of Directors:

The present members in board of directors of Raichur District Center Co-Operative Bank Ltd,

Raichur.

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Sharanegowda Bayyapur ( President)

Ramesh vaidya ( Director)

K. Sharanappa ( Director )

Pampanagowda Badarli ( Director )

S. B. Reddy ( Director )

Halappa achar ( Director )

Shyamrao Kulkarni ( Director )

Vishwanath patil ( Director )

Rajshekhar Naik ( Director )

Amregowda ( Director )

M. Venkagowda ( Director )

Pratap Patil maski ( Director )

R.TimmayyaShetti (Apex Bank rep.)

B.H. Patil (Co-op societies joint

registrar)

Rajashri B. Agsar (Co-op Societies sub-Registrar)

D.S. Velu (NABARD Raichur, Spl.

Invity director )

H.K. Chandrashekar (D.G.M. Apex Bank Bangalore,

Spl. Invity director)

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BRANCHES:

Sl.no Branches

1 Head Office Raichur

2 Gunj Branch Raichur

3 City Talties Road Raichur

4 Gajgarpet Raichur

5 Nijalingappa Colony Raichur

6 Station Area Raichur

7 I.D.S.M.T. Layout Raichur

8 Manvi

9 Sindhanur

10 Gangavati

11 Koppala

12 Yalburga

13 Kuknur

14 Kushtagi

15 Hanumasagar

16 Lingasugur

17 Devadurga

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18

19

Kavital

Koppala Station Area

SERVICES:

Loans

Solar loan

Housing loan

Furniture loan

Gold loan

Business loan

Vehicle loan

Machinery loan

Car loan

Savings

Samruddhi deposit

Scheme

Lakhpati RD a/c

Kalpataru cash

certificate

Saving bank

advantage a/c

Other services

Any branch

banking

Free demand drafts

SB a/c with

insurance cover of

1Lakh

200 Insurance

products

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Loans And Advances :

Raichur District Central Co-op Bank Ltd, Raichur providing following kinds of loans and

advances:

Housing Loan : Bank lend hosing loan for construction of new house or repair of

existing one to its customers.

Interest Rate : 9.5%

Furniture loan : Bank lend furniture loan to its customer for have furniture to their home.


Business Loan: Bank lend business loan for start new business, or develop existing one

to its customers.

Interest Rate : 12%

Vehicle Loan : Bank lend vehicle loan for purchase new vehicle to its customers.

Interest Rate :12.5%

Machinery Loan : Bank lend machinery loan to its customers for have electrical

equipments , computers, laptop etc.


Car Loan : Bank lend car loan to its customers for have new car.


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Savings:

Raichur District Central Co-op Bank Ltd, Raichur providing following savings schemes to

its customer:

Samruddhi Deposit scheme : Its maturity period is one year .

Interest Rate : 8%

Lakhpati RD account : customer have RD account facility they can deposit money up to

one lakh rupees.

Kalpataru cash certificate : A cash certificate which duration is five years.

Savings bank advantage A/c : Customers have facility of have savings bank account with

Rs. 100.

Interest Rate : 5%

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4

Theoretical Perceptive

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CREDIT APPAISAL FOR WORKING CAPITAL

MEANING OF WORKING CAPITAL:

The term working capital refers to the current asset holding of an enterprise. This is

also sometimes called the Gross Working Capital. For a manufacturing enterprise, the

average levels of holding of raw material, goods in process, finished goods , receivables,

cash and other current assets together constitute a working capital . How does it differ

from the other forms of capital employed in a business ? Let us consider a example of

a house owner . The house owner purchases the house and furniture for the purpose of

having a comfortable life . However , merely owning a house and various pieces of

furniture is not a sufficient condition for running the daily chores of the household .

Fixed capital and working capital :

We may therefore broadly classify the funds employed in a business enterprise into two

components viz. fixed capital and working capital .

Fixed capital is invested in fixed assets which enable an enterprise manufacture goods for

sale and earning profit . on the other hand , working capital is employed in purchasing

those items , which are transformed into saleable goods by the production process .

Working capital refers to the merchandise itself . The difference between the fixed capital

and and working capital may be expressed in another manner . The assets representing

working capital rapidly convert from one form to another in a short period of time. Thus, cash

converts into raw material , raw material converts into goods in process and finally into finished

goods. The finished goods can be sold in market and in the process is converted back to cash

again.

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All these forms of current assets constitute working capital

Operating cycle concept of working capital:

The operating cycle concept of working capital envisages measurement of the average time

taken by an enterprise in manufacturing the goods and selling them for cash so that the funds can

be deployed for starting another batch of production . The system completes one cycle when

cash is realized out of the sale proceeds of finished goods from the receivable / debtors .

Working capital has different components , the most important being the raw material .

Manufacturing enterprises ensure that there always remain a minimum level of stock of raw

material , which takes care of any abrupt discontinuity in supply. The raw material is then

pressed into production . The processing time largely depends on the nature and specification

of the final product .

Again , because the process of delivery takes some time , the enterprise may have to ensure that

a minimum level of finished goods always remains available. This would take care of any

sudden influx of order that may have to be supplied immediately . Finally , though the products

have been delivered according to schedule , not all the supplies are paid for immediately . A

portion of sale proceeds may remain locked for sometime in the form of receivables. The

receivables holding period is the time allowed by manufacturer / supplier of the finished products

to its customers for making payments. The receivables are realized by the enterprise on expiry of

the credit period allowed by it .

Thus, every rupee invested in current assets at the beginning of the cycle comes back to the

promoter with the profit element added , after a lapse of a specific period of time . This length of

time is popularly known as the operating cycle or the working capital cycle. The cycle may be

diagrammatically represented in the following manner :

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Cash

Raw material

Goods in process

Finished goods

Receivables


Measuring operating cycle :

The operating capital concept raises a fundamental issue – how to measure this time ? It is not

possible to physically track every element of raw material pressed into production , and observe

its movement across every stage of processing through the final production . When it comes out

in the shape of finished goods. The operating cycle is therefore measured in terms of days of

average inventory held for every major category of working capital component. The holding

ratios play a very important role at this stage. The holding periods of the individual WC

components are computed in the manner on analysis of financial statements. The aggregate of

all these holding periods represents the length of the operating cycle.

The following diagram makes the point clear :

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RM purchaed


Working capital policy :

The working capital management policy of an enterprise is inextricably linked to its approach

towards current asset funding . From the point of view of currency, the assets of an enterprise

may be broadly divided into two categories i.e. current and non – current assets . The capital

assets are funded by long term sources of finance , generally in a combination of long term loans

from banks / DFI s and a margin contributed by the promoters. On the other hand , current assets

may further be classified into two components ( I ) a core component and ( ii) a fluctuating

component.

A manufacturing enterprise has to maintain a minimum level of inventory at any point of time

in order to run the production at specified level . Fall of inventory below this level may trigger a

discontinuity in production and the required synchronization between the various stages of

production may get lost. We may call this minimum level of current assets as the permanent or

core current asset level.

The fluctuating current assets refer to the portion above this level that undergoes a change

continually on account of changes in demand , seasonality of product etc . during the various

period of the year.

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5

Research Methodology

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Research Methodology

Research Design

The findings of the project included following steps:

I. Collection of data:-

I. Primary Data: The data collected through face to face interaction with

Managers and Executives.

II. Secondary Data: The data collected through magazines, internet.

II. Analysis of data :-I. Pie charts,

II. Annual reports of bank.

Data collection methods

1. Literature survey: In this method I went through the documents & files given to me by the

company.

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6

Data analysis and interpretations

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PROGRESS AT A GLANCE:

Rupees in Lakhs

S.N

Details 2006-07 2007-08 2008-09 2009-10(UnAdited)

1 Membershipa) Govt.

b) Co-op Societies

Total

1

782

783

1

787

788

1

791

792

1

792

7922 Branches 16 16 18 18

3 Share Capitala) Govt.

b) Co-op Societies

Total

381.87

630.13

1012.00

381.87

648.85

1030.72

381.87

795.72

1277.59

381.87

908.03

1289.90

4 Reserve & other fundsa) Reserve fun

b) Other fund

Total

22.04

669.61

691.65

23.87

670.76

694.63

51.08

757.40

808.48

101.55

813.23

914.785 Deposits

a) Individual Deposits

b) Institutions Deposits

c) Societies Deposits

Total

44223.17

1829.30

4171.05

10423.52

5477.13

1817.63

5200.55

12495.31

6794.58

1945.82

6627.61

15368.01

9068.49

2212.48

7806.16

19087.136 Loan Borrowed

a) Short term loan

b) Mid term loan (non form)

c) Mid term loan

d) Computer loan

5887.47

196.60

412.95

0.82

7409.00

143.05

303.23

0.77

9670.49

104.05

195.99

0.77

9091.87

81.81

140.75

0.76

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total 6497.84 7856.05 9971.79 9315.19

7 Loans & Advances a) Short term loan

b) Oil seed loan

c) KCC loan

d) Midterm agriculture loan

e) Renewed midterm loan

f) Security loan

g) Mortgage loan

h) Long term loan

i) Short term (non-agri)

j) Mid & long term loan (non-agri)

k) Housing loan

l) Vehicle loan

m) Liquidated societies loan arrears

Total

67.10

35.58

9341.38

233.98

29.14

893.77

754.21

259.93

594.09

471.99

81.09

54.05

9.37

12825.68

60.04

35.23

8625.24

296.28

28.33

981.18

268.02

411.93

555.53

530.19

90.22

54.01

38.14

11974.34

59.88

35.23

11670.22

380.33

24.62

1157.75

1230.99

564.01

759.08

867.13

187.03

79.90

32.83

17045.00

65.17

35.32

13718.48

513.57

23.54

1248.71

2133.90

782.44

1317.72

767.98

280.93

99.86

28.31

21015.33

8 Investments 4802.95 8211.59 8709.28 7949.87

9 Own fund 1703.65 1725.35 1986.07 2204.68

10 Working Capital 18625.01 23028.25 27325.87 32340.57

11 Profit & loss -158.5 335.58 336.98 -332.66

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PROPORTION OF PROFIT & LOSS:

Rupees in Lakhs

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YEAR Profit

2006-07 -158.5

2007-08 335.58

2008-09 336.98

2009-10 -332.66


year 2006-07 2007-08 2008-09 2009-10

-400

-300

-200

-100

0

100

200

300

400

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FINANCIAL PERFORMANCE:

The Financial performance of RDCC Bank Ltd, Raichur for the year 2008-2009 & forecast for the

year 2009-10, under the various parameters are as discussed here below:

Rupees in Lakhs:

Sl.no

Income & Expenditure 2007-08 2008-09 Forecast For the year 2009-10

1 Interest income 1699.67 1783.22 2545.16

2 Non interest income 52.26 52.35 104.84

3 Interest expenses 752.67 1043.97 1598

4 Net interest income (1+2-3) 999.26 791.16 1052

5 Staff expenses & others 669.09 454.63 700

6 Provisions & Contingencies ---- ---- ----

7 Profit 330.17 336.97 352.00

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Bank under profit of Rs. 336.97 Lakhs for the year 2008-09 against to 2007-08 little high. In

2007-08 bank was under profit of Rs. 330.17 Lakhs due to payment of exceed in payment of

interest by the bank. In the same time in the year 2007-08 salary expenses was Rs.669.09 Lakhs,

where as the salary expenses was decreased to Rs. 454.63Lakhs in the year 2008-09 .

Non interest by the banking operating income, bank earned Rs. 52.26 Lakhs & 52.35

Lakhs for the year 2007-08 & 2008-09 accordingly.

Bank audit for the year 2009-10 is going on. Bank’s forecasted profit for the year 2009-

10 is Rs. 352 Lakhs. Bank expected interest income for the said year Rs. 2545.16 Lakhs and

from other non-interest income by Rs. 105.84 lakhs whereas, expected expenditure of interest

Rs. 1598 Lakhs, Salary and other expenses is Rs. 700 Lakhs.

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RECOVERY PERFORMANCES:

The bank has recovered a loan amount of Rs. 8180.25 Lakhs as on 31.03.2009. Details

are as shown below:

Agriculture Loan

Sl. No.

Details Demand Recovery Balance %

1. Short Term Loan 60.12 0.16 59.96

2. Short Term Oil Seed Loan 36.38 -- 36.38

3. KCC Loan 8551.31 7208.44 1342.87

4. Mid Term Loan 117.35 81.62 35.73

5. Mid Term Converted Loan

18.04 3.71 14.33

6. Long Term Loan 32.75 30.31 2.44

Total 8815.95 7324.24 1491.71 83.08

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Non-Agriculture Loan

Sl. No.

Details Demand Recovery Balance %

1. Short Term Loan 459.53 439.90 19.63

2. Mid Term Loan 493.88 416.11 77.77

Total 953.41 856.01 97.40

3. Non-Renewal CC & OD Loan

18.75 -- 18.75

4. Credits of Societies under Liquidation

32.83 -- 32.83

Total (1+2+3+4) 9820.94 8180.25 1640.69 83.29

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INVESTMENTS:

As on 31-3-2009 bank invested Rs.8709.28 Lakhs in various organizations.

Rs. 301.57 Lakhs invested in state & Central Government bonds, Rs. 354.40 Lakhs in NABARD,

Rs. 4723.23 Lakhs in Karnataka Co-op Apex Bank ltd, Bangalore. Rs. 3328.88 Lakhs in local

commercial bank for daily transaction. And also bank purchased shares from IIFCO for the

worth of Rs. 1Lakhs.

WORKING CAPITAL:

Bank Working Capital was Rs. 22090.86 Lakhs as on ending 31-3-2008, it is increased in the year

2008-09 to Rs. 27325.87 Lakhs as on year ending 31-3-2009.

In the year 2008-09 bank sanction the loan Rs. 11057.48 lakhs for short term agricultural loan,

Rs. 175.25 Lakhs as mid term loan, Rs. 432.42 lakhs long term loan & for non- agricultural sector

Rs. 7147.47 lakhs. Bank advanced in agricultural sector like Horticulture, irrigation, Agri land

development, tanks formation dairy development & rural key loan etc.

Bank formed 3200 self service wings in Raichur & Koppala districts out of these SSG 1965

groups were sanctioned loan upto 31-3-2009. As per the direction of central Govt, State Govt .

& NABARD. Bank given the priority for SSG. Bank given more attention to upliftment of Rural,

BPL, women SSG.

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NPA:

In the year 2001 NPA were 11.42%, but in decreased by 2008-09 to 3.09%. where as RBI &

NABARD fixed NPA to max 5%.

BORROWINGS:

NABARD bank is main borrower of the bank. bank borrowed the Rs. 9670.49 lakhs in the year

2008-09. And payable to NABARD bank for the year 2007-08 was Rs. 7856.05 Lakhs. Bank

refunded the total loan to NABARD through Apex bank which to be paid as on 31-3-2009 there

is no out standing loan payable to NABARD.

AUDIT AND CONTROLS:

The audit and inspection serves the objective of ensuring safe and sound practices and policies.

The concurrent audit of the bank which covers all the 19 branches has enabled early

identification of defects/ deficiencies for initiating necessary actions for rectification and

setting right the deficiencies. In the area of house keeping the bank continues to do well with

the balancing of books and inter bank/ branch accounts been drawn up to March 31, 2009.

Now as per the NABARD direction bank is under going the audit through the Charted

Accountant those who are appointed by NABARD. Previously the was done by Karnataka Govt.

co-op audit department

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HUMAN RESOURCES: Total staff strength of the bank as at the end of March 2009 stood at132.

The collective efforts of management and the employees enabled the bank to show progressive

growth during the year and the relationship continued to be harmonious.

With a thrust to strengthen and improve competency, bank has been imparting training to the

staff discharging their duties at various levels to enable them to perform their duties and

responsibilities more effectively in a highly competitive customer driven environment. Bank has

also been encouraging its employees to take up various examinations conducted by Indian

Institute of Banking and Finance.

The bank is also encouraging its staff to enroll them for various specialized courses more

particularly on Anti Money Laundering and Know Your Customer (AML & KYC), Trade Finance,

Risk Management etc.

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BOARD OF DIRECTORS:

The Board of Directors at the end of March 2009 comprised of 15 & 2 members are special

invites. 17 members of the Board of Directors were held during the year. The board has

constituted various sub committees, which met regularly and transacted various business

entrusted to them. All the members on board contributed

Their knowledge, expertise and experience in their respective fields towards all round

development of the bank.

As per the directions of NABARD bank, DCC bank must have the Professional knowledge 3

directors from the field of Charted Accountant, Business developer & Professional development

those who are highly skilled. Bank is going to co-opt 3 directors from the same field in forth

coming year.

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ANALYSIS OF OPENING WORKING CAPITAL :

When a business enterprise approaches a bank for providing certain credit facilities , a enterprise

is required to submit the important financial statements and any further information relating to its

activity, as required by lending bank. The lender undertakes an analysis of above statements

before he takes a decision on the credit proposal.

Analysis of profit and loss and balance sheet :

The following methods are applied for analysis of the statement :

For analysis of profit and loss statement

Percent of sales method

Incremental sales method

Time series analysis

For analysis of balance sheet

Percentage balance sheet method

Trend percentage

Ratio analysis

Fund flow analysis

Cash flow analysis

Analysis of operating ( profit & loss) statement by percent of sales method :

In this method the individual cost component are expressed as percentage of net sales

during the year.

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Analysis of operating statement by incremental sales method :

The management of the enterprise has made endeavors to neutralize the impact of increasing

cost of consumption of raw material by ensuring that other inputs and factor of production are

made cost effective in best possible manner.

Analysis of balance sheet by ratios:

The balance sheet ratios are :

Liquidity ratio :

It used in considering in working capital.

Current ratio :

This is done by comparing the short term assets of enterprise with its short term liabilities .

Current ratio = current assets

Current liabilities

Quick ratio :

It measure degree of liquidity of an enterprise may be gauged by weighing the liquid component

of current asset and CL.

Quick ratio = Current assets – Inventory

Current liability

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Holding ratios :

Bankers attach a great degree of importance of these ratios .

a) Raw material holding = stock of raw material x 365

Annual consumption of raw material

b) Stock in process stock in process level x 365

Cost of production

c) Finished goods holding = finished goods level x 365

Cost of sales

d) Receivable holding level = BR level x 365

e) trade creditors level = trade credit level x 365

annul purchase

f) advances paid to suppliers = advances to future supplies x 365

annual purchase

g) advances received against future sale = advance received againstle s x

365/ annual gross sale

Balance sheet particulars

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Important holding ratios are :

Particular 2007 2008

Stock 1.27 1.5

Receivable 1.57 1.35

Advances to suppliers 0.63 0.86

Trade credit 1.44 1

Calculation of ratios :

a) Stock in process holding = stock in process level * 365

Cost of production

b) Receivable holding level = Bills receivable level * 365

Annual purchase

c) Advances to suppler = Advances paid against * 365

future supplies

______________________________

Annual purchase

d) Trade creditors holding = trade creditos level * 365

Level Annual purchase

The working capital of the KIRAN TRADER’s is calculated in the following manner after taking

into account account the related components of current assets and liabilities :

in Rs. ooo’s

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Projected level of stock 1.5 of consumption 2634

Projected level of

receivables

1.35 of sales 2516

Projected level of advance

payment made to suppliers

0.86 of purchases 1590

Less: trade credit available 1.55 of purchases 2860

Working capital required 3880

Working capital required = 2634+ 2516+ 1590 – 2860 = 3880 ( 38,80,000)

Bank has to demand a 30 % margin against paid up stock and a 40% margin against receivables /

trade debtors . The individual credit limits may therefore be worked out as under :

WC Credit limit against paid – up stock = ( 4224000 – 2860000) x 70%

= 955000.= 950000

WC Credit limit against receivables = 2516000 x 60% = 1509000

= 1000000

Here bank decide to put to put a ceiling of Rs. 10,00,000 . on credit limit against receivables.

Margin requirement is 38,80,000 – 1950000 = 19,30,000.

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ACHIEVEMENTS AND AWARDS:

Won “ Best Co- operative Bank “ Award in 2005- 2006. By Apex Bank.

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7

Findings

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Findings :

I find the following points:

1) Banks apply holding method to lend money for Kiran Traders.

2) Bank apply 1.3 current ratio for lend credit money which is above Rs 1 crore .

3) Bank apply Tandon Committee suggestion for lending money with some alteration.

4) Bank’s lending rates are very competitive in nature

5)Bank lend only 20% of working capital requirement .

6)Trader ready to contribute 5% for working capital.

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Limitations

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Managers and employees were relevant in providing information. The information collected and analyzed is restricted to the researcher’s knowledge and

ability. Busy schedule of the bank is constraints for the study.

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Expected contribution from the study

By doing project in Raichur District Center Co-op Bank Ltd, Raichur. I come to the

conclusion that

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1) Bank achieving very good financial performance

2) Bank’s lending rates are very competitive in nature.

3) Banks growth rate is very high as compare to other co-operative banks.

4) Banks administration is very good .

5) It is playing a vital role in the rural credit in Raichur

BIBLIOGRAPHY:

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D.D. Mukherjee – Credit appraisal and analysis

I.M.Pandey - Financial Management

Rdcc Bank Annul Reports

Website:

www.rbi.org.in

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http://www.rbi.org.in/

Project on Rdcc Bank

Documents

Transcript of Project on Rdcc Bank