Wdccb Working Capital

Working capital

Finance is a blood of business. Financial Management helps in achieving group goals. It

reduces the cost and optimum utilization of funds and maximum efforts.

Financial management also referred to as corporate finance and managerial finance. It

involves planning, allocation of resources and control. There are three broad areas of financial

decision they are capital budgeting, capital structure and working capital management and

dividend decisions.

Working capital is one of the most important requirements of any business concern.

Working capital can be compared with the blood of human beings, as human cannot survive

without blood, in the same way no business concern can survive without capital.

1. In managing fixed assets, time is an important factor discounting and compounding

aspects of time play an important role in capital budgeting and a minor part in the

management of current assets.

2. The large holdings of current assets, especially cash, may strengthen the firm’s liquidity

position, but is bound to reduce profitability of the firm as ideal car yield nothing.

3. The level of fixed assets as well as current assets depends upon the expected sales, but it

is only current assets that add fluctuation in the short run to a business.

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MEANING OF WORKING CAPITAL

Every business needs funds for two purposes for its establishment and to carry out its day

to day operations. To carry out day-to-day operations such as for purchase of raw materials,

payment of wages and other day-to-day expenses, funds are required. These funds are known as

working capital.

In other words working capital refers to the funds invested in current assets.

IMPORTANCE OF WORKING CAPITAL MANAGEMENT

Because of its close relationship with day to day operations of business, a study of

working capital and its management is of major importance to internal, as well as external

analysis. It is being increasingly realized that inadequacy or mismanagement of working capital

in leading cause of business failures.

Neglect of management of working capital may result in technical insolvency and even

liquidation of a business unit.

With receivables and inventories tending to grow and with increasing demand for bank

credit in the wake of strict regulations of credit in India by the central bank, mangers need to

develop a long term prospective for managing working capital. Inefficient working capital

management may cause either inadequate or excessive working capital which is dangerous.

A firm may have to face the following adverse consequences from inadequate working

capital:

Growth may be stunned. It may become difficult for the firm to undertake profitable

projects due to non availability of funds.

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Implementation of operating plans may become difficult and consequently the firms

profit goals may not be achieved.

Operating inefficiencies may creep in due to difficulties in meeting even day to day

commitments.

Fixed assets may not be efficiently utilized due to lack working funds, thus lowering the

rate of return on investments in the process.

Attractive credit opportunities may have to be lost due to paucity of working capital.

COMPONENTS OF WORKING CAPITAL

From the accounting point of view, working capital is the difference between current

assets and current liabilities.

CURRENT ASSETS

Cash is required to pay salaries, office expenses and to pay creditors for purchases stock

of raw materials in adequate quantities to ensure uninterrupted production.

Stock of finished goods in sufficient quantities to meet the demand from customers.

Debtors that is people to whom we sell goods on credit basis for increased sales.

Prepaid expenses that is the expenses paid in advance such as insurance, rent, salaries and so on

Bills Receivables these are the bills of exchange received for the money lent or to be received

for a short period.

CURRENT LIABILITIES

Creditors, that is the people from whom we purchase on credit basis

Accruals that is , those expenses in respect of which, the liability has arisen. In other words the

expenses have fallen due and hence to incurred, such as interest, salaries, taxes and so on.

Bills payable these are the bills of exchange against which money is to be paid within a short

period.

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NEED FOR WORKING CAPITAL

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

This is possible only when the company earns sufficient profits. The amount of such profits

largely depends upon the magnitude of sales. However do not into cash instantaneously. These

are always a time gap between the sale of goods and their actual realization in cash. Working

capital is required in order to sustain the sales activities in this adequate working capital is not

available for this period.

The company will not be in a position to purchase raw materials, pay wags and other

expenses required for manufacturing the goods. Therefore sufficient amount of working capital

is to be maintained at any point of time.

ADEQUACY OF WORKING CAPITAL

A firm must have adequate working capital i.e., as much as needed by the firm. It should

neither be excessive nor inadequate. Both the situation are harmful to the concern. Excessive

working capital means the firm has idle funds, which earn no profits for the firm inadequate

working capital ultimately results in production interruptions and lowering down of the

profitability.

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It will be interesting to understand the relationship between working capital, risk and

return in manufacturing concern. It is generally accepted that higher levels of working capital

because the risk and have the potential of increasing the profitability also.

CONCEPTS OF WORKING CAPITAL

There are two concepts of Working Capital

1. Gross Working Capital

2. Net Working Capital

1. Gross Working Capital

In the broad sense, the term working capital refer to the gross working capital and

represents the amount of funds invested in current assets. Thus the gross working capital is the

capital invested in the total current assets of the enterprise. Current assets are these assets, which

in the ordinary course of the business can be converted into cash with in a short period of

normally one accounting year.

Examples of the current assets are cash in hand, bank balance, bills receivable, sundry

debtors, short term loans and advance, stocks, temporary investments, prepaid expenses, accrued

incomes.

NET WORKING CAPITGAL

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In a narrow sense, the term working capital refers to the net working capital. Net

working capital is the difference between current assets and current liabilities the net working

capital can be positive or negative. Current liabilities are those liabilities, which have taken due

and hence to be incurred in short period normally one accounting year.

Examples of current liabilities are Bills payable, sundry creditors or accounts payable,

accrued or outstanding expenses, short term loans and advances, dividends payable bank

overdraft, provisions.

DETERMINING WORKING CAPITAL REQUIREMENTS

1. NATURE OF BUSINESS

The nature of business has an important bearing on its working capital needs. Some

ventures like retail stores, construction companies etc., require an abundance of working capital.

In order cases, such as power generations and supply, the current assets play a minor and

secondary role.

2. SIZE OF BUSINESS

A large firm operation on a large scale and thus requires more working capital as

compared to a smaller firm in the same line of business.

3. MANUFACTURING AND OPERATION CYCLE

The term manufacturing cycle refers to the time span between procuring raw materials up

to the stage of production of finished goods. Operating cycle refers to the time that elapses

between purchase of materials and final cash received by the sale of goods. The longer the

operating cycle, larger will be the working capital requirements because the funds are tied up

during the manufacturing process.

4. BUSINESS CYCLES

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Net Working Capital = Current Assets – Current Liabilities

Business cycles refers to economic phases like boon, recession, depression, recovery etc.,

these market conditions change the demand for products and services in all the industries. In

boon times, there is un using in business activity the need for working capital also grows,

particularly the temporary working capital. Similarly during depression, when there is fall in

activity level, the need for working capital also declines.

5. SEASONAL VARIATIONS

For seasonal industries like woolen garments, ice cream etc., having seasonal fluctuations

in demand, the working capital requirements also change with changes in demand. In such

industries, during active season, there is necessary to provide additional working capital to meet

additional inventories and book debts as well as higher costs for increased production. Similarly,

during slack season, the demand for products falls and volume of business. Accordingly low

amount of working capital is needed.

6. GROWTH AND EXPANSION

Growth and expansion plans of business call for larger call for larger amount of working

capital. Infant, the need for increased working capital fund does not follow the growth in

business but proceed it in other words, working capital requirements are assessed in advance of

implementation of growth and expansion of business operations.

7. CHANGES IN PRICE LEVEL

Working capital requirements are affected by price level changes, when price increases

long.

8. CREDIT POLICY

Business makes purchases and sales an cash basis credit term generated to its customers

and the same extended to the film by the suppliers will affect the working capital requirements of

a firm. More of credit sales result in more receivable which means more working capital is

required. On the other hand, if suppliers of goods liberal credit terms, the need of working

capital is less.

9. DIVIDEND POLICY

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If a company pays higher dividends, it consumes cash resources which affect working

capital to that extent. But if the firm does not pay dividend, and retains profits, the working

capital of the firm increases. Therefore, in planning working capital requirements, dividend pay-

out ratio is a very important factor.

10. DEPRECIATION POLICY

It is commonly said that depreciation, the profit and therefore the tax liability is reduced,

resulting in higher cash profits. Higher depreciation also reduces the amount of distributable

profit and therefore lower dividend payouts. Is brief, higher change of depreciation on fixed

assets make case position of the company more comfortable. The management has to prepare its

depreciation.

WORKING CAPITAL CYCLE

In a manufacturing concern, the working capital cycle starts with the purchase of raw

material and ends with the realization of cash from the sale of finished products. This cycle and

stores, its conversion into stocks of finished goods through work in progress with progressive

increment of labour and service costs, conversion of finished stock into sales, debtors and

receivables and ultimately realization of cash and this cycle continues again from the cash to

purchase of raw materials and soon.

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DEBTORS(RECEIVABLES)

CASHFINISHED

GOODS

RAWMATERIALS

WORK – IN – PROGRESS

The speed with which the working capital completes one cycle determines the

requirements of working capital longer than period of the cycle larger is the requirement of

working capital.

RESEARCH METHODOLOGY

Research means it is an academic activity and as such the term should be used in

technical sense. Research methodology implies a systematic attempt by the researcher to obtain

knowledge about the subject under study. This in fact is a systematic way to show the problem

and it is important components of the study without which a research may not be able obtain the

facts and figures from employee.

OBJECTIVES OF THE STUDY

The main purpose of the study is to project into the various aspects of financial

management of WARANGAL DISTRICT CO-OPERATIVE CENTRAL BANK LTD. The

study focuses on the following objectives:

To study the existing system of working capital management in WARANGAL

DISTRICT CO-OPERATIVE CENTRAL BANK LTD.

To know the liquidity position of the WARANGAL DISTRICT CO-OPERATIVE

CENTRAL BANK LTD.

To know how the working capital is being financed.

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To know the various norms to be followed by WARANGAL DISTRICT CO-

OPERATIVE CENTRAL BANK LTD for inventories, accounts receivable, investment

debtors.

To find out the ability of the bank to meet its current obligations.

To know the profitability position using with ratios.

Suggesting a better way to improve working capital management.

SCOPE OF THE STUDY

The study mainly focuses on WARANGAL DISTRICT CO-OPERATIVE CENTRAL

BANK LTD.

The study focuses on ratios to find profitability position of the WARANGAL DISTRICT

CO-OPERATIVE CENTRAL BANK LTD.

The study is confined to evaluation of the last five years annual reports only.

The study mainly focuses on working capital management.

The information obtained from the primary and secondary sources were limited to

WARANGAL DISTRICT CO-OPERATIVE CENTRAL BANK LTD.

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LIMITATIONS OF THE STUDY

The amount used in the reports is taken from the annual reports, published at the end of

the respective years.

The result does not reflect the day to day transaction.

The study was confined to a period of 5 years.

As most of the data is from secondary sources, so the results are not accurate.

This analysis was confine to District Co-Operative Central Bank Ltd only.

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COLLECTION OF DATA

Methodology is a systematic procedure of collecting information in order to analyze and verify a

phenomenon. The collection of data through two principles sources

Primary Data

Secondary Data

Primary Data

It is the information collected directly without any reference. In the study, it was mainly

interaction with concerned officer and staffs members and some of the information was gathered

by personal observation.

Secondary Data

The secondary data was collected from already published sources such as pamphlets

annual reports, internal records and internet sites.

The data include:

Collection of required data from annual reports of WARANGAL DISTRICT CO-

OPERATIVE CENTRAL BANK LTD

Reference books of financial management

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PROFILE OF THE WDCCB LTD

INTRODUCTION

The District Co-Operative Central Bank Ltd., Warangal No.20976 is deemed to

have been registered as a Co-operative Society under the area of Andhra

Pradesh Co-operatives Act of 1964. The Warangal District Co-operative Bank

Ltd., has come into existence on 04-08-1917. The area of operation of the bank

is confined to entire Warangal District comprising 51 Revenue Mandals out of

which 21 Mandal Head quarters are covered with the Bank’s Branches. The

Bank is having 23 branches including Central Office Branch covering 136 PACS

financed by the Warangal District Co-operative Bank.

OBJECTIVES

Its Objectives shall be:

Primarily to finance the Primary Agricultural Credit Societies (PACS) registered or

deemed to have been registered under the AP Co-operative Society Act 7 of

1964 and secondarily to finance all other Co-operative Societies in the District to

service members of erstwhile PADBs including disbursement of second and

subsequent installments of loans directly to such members, and recovery of

such loans of members till they are cleared and arrange for issue of fresh long-

term loans through PACS.

To finance individual, firms, companies and corporations etc., by admitting them

as ‘B’ class members for purposes approved by higher financing agencies from

time to time either individually or jointly with other financing institutions.

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To raise funds by way of deposits, loans, cash credits, overdraft and advances

form Apex Bank, Government and other financing agencies.

To open Regional Offices, branches or Sub-Offices with the prior permission of

the Registrar both for banking purposes and issue and recovery of ST, MT and LT

loans to guarantee the loans and advances to be made to the member societies

by other agency.

To advise develop, assist and coordinate and supervise and inspect the

functioning of the PACS and also to assist and supervise the functioning of other

affiliated and indebted societies.

To buy, sell (or) deal with securities, debentures (or) bonds (or) scrip (or) other

forms (or) securities on its behalf of members (or) other Co-operative

institutions.

To maintain a library of Co-operative and banking literature. To Act on agent of

government (or) Apex Bank (or) any institution in financing loans for agricultural

and rural development and allied activities and to accept and administer any

fund for such purposes.

To carry on the general business of banking nor repugnant of the provisions of

the AP Co-operative societies Act 7 of 1964 and the rules framed there under or

the Banking Regulations Act, 1949 as applicable to Co-operative societies and

rules made there under.

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All such other things and acts as are necessary, conducive and incidental to

attainment of the foregoing and generally to promote the cause of cooperation

in the district.

BOARD OF MANAGEMENT OF THE BANK

The management of the bank shall vest in a Board consisting of such members

and with such composition of members as prescribed in the A.P.C.S Act and

Rules. At present the Board is consists of 19 members.

POWER OF THE BOARD

The entire administration of the Bank shall cast in the Board. Amongst other the

powers of the Board shall be:

To admit ‘A’ class members and allot shares.

To raise funds in the form of deposits, loans etc., for the objectives of the bank.

To grant loans and advances to members and determine policy for issue of loans

to normal members and also issue guidelines of loaning policy of PACS also.

To sanction or approve investment of the funds of the Bank except in

subscribing of additional shares in higher financing agencies.

To authorize the officials of the bank to operate on the bank accounts jointly.

To scrutinize and put up the annual budget to the general body.

To prescribe or regulate from time to time the strength of office and field

establishment and their salaries and allowances, and other service conditions of

employees subject to such guidelines as issued by the RCS.

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To convene special meeting of Board of General Body of affiliated societies, vest

power in the Board to requisition the meeting of the Managing committee or

General body of affiliated societies.

To arrange to maintain such accounts ands register as are prescribed under the

Act and the rules and as suggested by Register Apex Bank, NABARD.

To take legal action against members of societies in case of failure of the

managing committee of societies to take legal action.

To institute, conduct defend, compound, compromise or abandon legal

proceedings by or against the Bank.

To sanction loans to employees as per loaning policy to be determined and with

prior approval of Registrar.

To purchase vehicles for the sake of the bank as per special by-laws governing

their purchase and maintenance of such vehicles as approved by Registrar.

To transact all other business incidental to the administration of the bank.

ACCOUNTS AND RECORDS

Accounts to By-law 55-A of APCS Act:

‘The Chief Executive Officer of every bank by whatever name and designation

he is called, or the president of the bank shall be bound to keep, maintain or

cause to maintain such accounts and books relating to that bank in such manner

as may be prescribed. He shall be responsible for correct and up-to-date

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maintenance of such accounts and books for producing or causing production of

the seen when called for in communication to audit, inquiry or inspection”.

The Warangal District Co-operation Bank Ltd., maintains books of accounts and

records inform prescribed by the registrar and RBI with addition as Board of

Directors find it necessary.

The registrar may prescribe such other statements as from time to time. The

statement shall be made as on 30th June of every year and copy of each shall be

sent to the registrar with in 30 days after close of the Co-operative year ending

30th June.

DEPOSITS

Deposits may be received at any time with in the limits determined under the

APCS, Act rules on such rate of interest on deposits are subject to rules and

regulations fixed by Board of Directors and also to directives issued by Reserve

Bank of India on behalf from time to time.

THE VARIOUS DEPOSITS RECEIVED BY THE BANK

Dhana Lama Deposits

Fixed deposits

Current deposits

Savings deposits

Sway am Uradhi deposits (day deposits)

Thrift deposits

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Recurring deposits

Security deposits

LOAN AND ADVANCES

The loans and advances may be granted to members on security subject to the

direction issued by Reserve Bank of India from time to time and securities

approved by Board of Directors, the security such as:

Personal security and/surety/ securities of other members/members; collateral

security of movable and immovable property, gold or silver ornaments or

consumer durable; Industrial mercantile, Agricultural and other marketable

commodities or machinery under pledge, hypothecation or charge of the

society; any other tangible.

THE DIFFERENT TYPES OF LOANS AND ADVANCES TO MEMBERS

Agricultural Loans

Loans on Deposits

Festival Loans

Vehicle Loans

Gold and jewel Loans

Loans to Owners of Bank

ORGANIZATION DESIGN (CHART) OF THE WDCCB

The major functions and their inter-relationships of important structural aspects

of the WDCCB are given in chart. The chart can be considered as vertical chart

as the line of command flows from top to bottom in a vertical line the chart is as

follows.

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FUNDS AND RETURNS

FUNDS

The Bank will be ordinarily obtaining funds from the following sources:

Share capital

Deposits

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Other borrowings from various sources

Entrance fee and miscellaneous receipts

Grants from Government and other agencies

RETURN

The bank shall prepare annual returns in such form as may be prescribed the

registrar and apex bank.

Statement showing receipts and disbursement.

A Profit and loss account

A balance sheet and which were under the Madras Province and the Nizam

Government respectively. All the societies, which were established prior to the

formation of the state, have come under the fold of Andhra Pradesh Co-

operative Societies Act of 1964. In order to implement the provisions of the Act

a separate department is constituted and registrar is made in charge for it.

PRESENT STRUCTURE OF CO-OPERATIVE BANKS IN ANDHRA PRADESH

AS PER 1997

No. of PACs No. of DCCBS No. of SCOB

6695 22 1

State and District Co-operative Banks are providing rural credit through primary

agricultural credit societies to the 50 laths of people. Among them 75% are

small and marginal farmers. In A.P 50% of rural credit is provided by Co-

operative Banks.

BOARD OF DIRECTORS

Sino. Name of the Committee Member

Designation Representative of Committee Member

1. K.Muralidhar Rao President PACs Vanchanagiri

2. G.Chennal Reddy Vice-President PACs Jangaon

3. G.Raghava Reddy Director PACs Kazipet

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4. N.Narismha Reddy Director PACs Nidigonda

5. T.Narsimga Reddy Director PACs Duggondi

6. K.Sridevi Director PACs Kampally

7. Gulam Afzal Director PACs Jangaid

8. P.Laxma Reddy Director PACs Mah’bad

9. P.Anil Reddy Director PACs Vangapahad

10. A.Ramesh Director PACs Gurijala

11. K.Chinna Bhadraiah Director PACs Nachinapally

12. S.Krishna Prasad Director PACs Tadvai

13. P.Krishna Prasad Director PACs Bachannapet

14. Y.Janaki Director PACs Vardhannapet

15. J.Badru Naik Director PACs Shayampet

16. K.Murildhar Reddy Director PACs FSCs Kodakandla

17. J.Mohan Rao Director PACs NGO’s Kodakandla

18. Rajender Yadav Director PACs SBCS Vangapahad

19. J.Saraiah Director PACs SBCs Unikicherla

20. P.Sreenivas Director PACs Potharajpally

21. D.Shankar Director PACs Govindapuram

22. Ganesh Prasad Govt. Nominee PACs Head DCCB, Wgl.

23. V.Giridhar Bank G.M PACs DCCB, Warangal.

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SWOT ANALYSIS OF THE BANK

STRENGTHS

Providing safety, security, liquidity to all our customers

Enjoying Brand equity, customer loyalty, huge network

Dealing with transparency and maintaining ethical values

Committed / experienced / intelligent work force

Healthy Industrial relations / dedicated work culture

CBS platform and full networking of branches

Committed to social obligations yet running on commercial lines

Doing Govt. business – Looked upon as Government’s Bank / Nizam Bank

The only Bank having distinction of earning profit since its inception

WEAKNESSES

Unable to improve market share

Unable to attract younger generation customers

Unable to improve low cost deposits

Lack of skills in specialist areas

Lack of market orientation

OPPORTUNITIES

Scope for improving profitability by Cross selling

Implementing total financial inclusion – Maximize use of technology to increase volumes

Use of alternate channels for reducing cost of transactions, improving customer

satisfaction.

Moving towards profitable new areas from traditional business

Door Step Banking services

Performance Incentives and rewards-HR initiative

THREATS

Liberal entry of Foreign banks in India after April, 2009.

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Cut throat competition between various commercial / new generation banks and

NBFC’s / NGO’s.

Various economic, Govt. policies detrimental to Banking industry

DEPOSITS

The deposits of the bank are broadly classified in to two categories based on their

repayment obligation to the depositor. If the deposits are repayable on demand they are called as

Demand Deposits and if they are placed with the Bank for a specific tenure then they are called

Time Deposits or Term Deposits.

DEMAND DEPOSITS

Savings Bank Account – for personal savings accounts for individuals.

Current Account – for commercial undertakings, institutions and individuals.

Current Account plus – Current Account with Cheque Return Protection

Term Deposits (Time Deposits)

A time or term deposit is one which is received by a Bank for a fixed period and

which is withdraw able only after the expiry of the said fixed period. They are classified

as time liability and matured deposits are classified as Demand liability. A time deposit

account can normally be opened for a maximum period of 120 months and a minimum

period of 15 days (For deposits more than Rs. 15 laks – 7 days). While effecting payment

is made to the credit of an account or the receipt is in the name of a Co-operative Society

which is exempted from Stamp duty.

DIFFERENT SCHEMES

United Housing Finance Scheme for BSUP/IHSDP-BSUP means Basic Service to the

Urban Poor/IHADP Integrated Housing and Slum Development Program.

United Car Loan Scheme-it provides loan up to Rs.12lac for new and Rs.6lac for old cars.

Short Term Deposit – Deposit for a period less than six months

Recurring Deposit – Cumulative monthly deposit Scheme

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Recurring Deposit Plus – RD Plus Saral (Personal loan)

United Nari Samman Yojona-provides loan to working and self-employed women aged

18 years and above.

Multi Option Deposit – Deposit in units & piece meal maturity possible

Corporate Liquid Term Deposit – Deposit in units (high value) & piece meal maturity

possible

Certificate Of Deposits – Transferable – Rs.1Lakh in multiples of Rs.1lakh

Some of the ACCOUNTS are given below:

SAVINGS BANK ACCOUNTS

SAVINGS PLUS SCHEME

CURRENT ACCOUNT

Current Account can be opened by Individuals, sole proprietorship/ partnership firms,

private and public limited companies. HUFs/Specified Associations, Societies, Trusts, Clubs,

Executors, Administrators and Liquidators, Govt. Depts., Universities, Banks etc.

For individuals – Rural: Rs.2500 Non-Rural: Rs.5000

For Non-Individuals – Rural: Rs.5000 Non-Rural: Rs.10000

No interest is paid on deposit amount

No limit for number of cheques No limit for amount of cheques

Folio charges will be levied @ Rs.60 per page

CURRENT ACCOUNT PLUS

Quarterly Average Minimum Balance is Rs. 1lakh for metro centers, Free ATM cum

debit Card, Internet Banking, 50 Multi-city cheques, Bankers’ Cheques, duplicate statement of

account, Cheque books. Allow Overdraft with Supervisory override Penalty for closing account

before 12 months is Rs.2,500.

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RECURRING DEPOSIT

Minimum monthly cumulative deposit Rs.100/- in additional multiples of Rs.10/-

Minimum period of deposit 12 months

Maximum period of deposit 120 months

Initially depositor has to decide his/her monthly contributed i.e. installment

RECURRING DEPOSIT PLUS

All individuals above 18 years in sole name or jointly with others

Minimum period of deposit is 24 months

Maximum period of deposit is 120 months

Minimum amount of deposit is Rs.1000/- per month and in multiple of Rs.10/-

MULTI OPTION DEPOSIT ACCOUNT

Minimum deposit is Rs.10,000/- and held in 10 units of each Rs.1000/-

Additional amount in multiples of Rs.1,000 with a minimum of Rs.5,000/-

Premature payment of units permitted and the remaining units rank for agreed interest

Units paid prematurely will attract penal provisions of such premature payment

Minimum period of deposit are 12 months

Maximum & 60 months

CORPORATE LIQUID TERM DEPOSIT

Minimum deposit is Rs.50,000/- and held in 10 units of each Rs.5,000/-

Additional amount in multiples of Rs.5,000 with a minimum of Rs.25000/-

Premature payment of units permitted and the remaining units rank for agreed interest

Units paid prematurely will attract penal provisions of such premature payment

Minimum period of deposit is 15 days


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TAX SAVER SCHEME

Minimum period of deposit is 5 years

Maximum period of deposit is 10 years

Minimum deposit is Rs.1000/- and maximum deposit is Rs.1.00lakh

Deposit qualifies for savings Exemption under section 80C of income Tax Act

SHORT TERM DEPOSIT

Minimum amount of deposit is Rs.1000 and in multiples of Rs.10

Minimum period of deposits

For deposits up to Rs. 15lakhs – days

For deposits more than 15lakhs – 7 days

Maximum period of short term deposits is less than 6 months

Interest will be paid on maturity

FIXED DEPOSITS

Minimum amount of deposit is Rs.1000 and in multiple of Rs.100



Interest payable at monthly/quarterly/half yearly/yearly intervals

SPECIAL TERM DEPOSITS

Minimum amount of deposit is Rs.1000 and in multiples of Rs.100



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Interest is reinvested at quarterly intervals and will be paid on maturity of the deposit

MISCELLANEOUS DEPOSITS

PENAL INTEREST ON PREMATURE OF DEPOSITS

For deposits more than one lakh & up to 1 crore – 1% less

For deposits more than one crore – 0.5% less

For deposits less than one lakh – No penalty

No premature penalty for staff

ADVANCES

SCHEME FOR FINANCING AGRICULTURE:

Medicinal & Aromatic Plants.

Gram Nivas Scheme.

Sahayog Nivas Scheme.

Kisan Credit Card Scheme.

Agricultural Clinics Scheme.

Kisan Star Card Scheme.

General Purpose Credit Card Scheme.

FINANCING SELF HELP GROUPS:

Indiramma Housing Program.

Debt Swapping Scheme to Rural SHGs.

Tractor Finance.

Scheme For Debt Swapping of Borrowers (for farmers).

Financing Co-Operatives through PACS/FSCS.

Mortgage Loans to Agriculturists.

Relaxation of Security Norms for Crop Loans up to RS.1.00 lakh.

Scheme for Financing Private Cold Storages for on lending to Farmers.

Loans against Private Warehouse Receipts – Modifications.

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Simplification of Lending Procedures.

Per Advances Products (products for Women, Employees.)

MICRO SMALL AND MEDIUM ENTERPRISES

MSME sector is classified into two sectors – Manufacturing Enterprises and Services

Enterprise. Each sector is divided into three categories again: Those are Micro, Small and

Medium Enterprises. The existence SBF products like Retail Trade, Small Business and SWRTO

are continued to be in existence and included in MSME sector.

If the original investment in equipment is up to Rs.10.00lakh, it comes under the purview of

Micro (services) Enterprises and if it is above Rs.10.00lakh and up to Rs.2.00crore, it is

considered as Small (services) Enterprise as and more than Rs.2crore and up to Rs.5.00crore and

up to Rs.10.00crore, it is considered as Medium (services) Enterprises.

If the original investment in Plant & Machinery is up to Rs.25.00lakh, it will come under the

purview of Micro (manufacturing) Enterprises and if it is above Rs.25.00lakh and up to

Rs.5.00crore, it is considered as small (manufacturing) Enterprise and more than

Rs.5.00crore and up to Rs.10.00crore; it is considered as Medium (manufacturing) Enterprise.

SPECIAL FEATURES OF MSME SECTOR:

No margin for loans up to Rs.25, 000/-. 25% margin for loans above Rs.25, 000/-.

No collateral security up to Rs.5.00 lakh. Up to Rs.50.00 lakh, the collateral security

may be waived with the permission of controller.

Some of the ADVANCES are given below:

LAGHU UDYAMI CREDIT CARD

COLLETERAL FREE LOANS

DOCTORS PLUS

TOURISM FINANCE

CAR LOANS TO SMEs

28

SME CREDIT PLUS

TYPES OF CUSTOMERS

Individuals

Single Account of an Individual

Joint Accounts of Individuals

Minors

Married Woman

Insolvent

Lunatic

Drunkards

Pardhanashin woman

Other than Individuals

Partnership Firms

HUF (Hindu Undivided Family)

Clubs / Associations

Trusts

Co-operative Societies

Joint Stock Companies

Executors / Administrators

Liquidators

29

STATEMENT OF CHANGES IN WORKING CAPITAL FOR

THE YEAR ENDING 2005-2006

(Rs.in Crore)

PARTICULARS2005(Rs)

2006(Rs)

WORKING CAPITAL

INCREASE(Rs)

DECREASE(Rs)

Current assets

Cash and balance with RBI

Balance with Bank and money at call & short notice

Other assets

1,252.18

255.54

47.82

1,434.23

1,343.01

613.61

182.05

1,087.47

565.79

1,835.31

100.10

1,416.99

318.2

2

Total Current Asset (A) 1,555.54 3,390.85

Current liabilities

Borrowings

Other Liabilities and provisions

196.52

455.54

296.62

1,872.53

Total Current Liabilities (B) 652.06 2,169.15

Net working capital = (A-B) 903.48 1,221.70

Increase in working capital 318.22

Total 1,221.70 1,221.70 1,835.311,835.31

30

Interpretation:

From the above table it can be observed that

1. Cash and balance with RBI was increased by Rs 182.05 crore, because of increase in the

balances current and other accounts.

2. Balance with bank and money at call and short notice was increased by Rs 1,087.47

crore, due to increase in current accounts.

3. There was an increase in other assets by Rs 565.79 crore, due to increase in interest

accrued in early years.

4. The Borrowings were increased by Rs100.10crore because of increase in borrowings

from others.

5. Other liabilities and provisions increased by Rs 1,416.99 crore, due to increase in general

provisions on standard assets.

6. Overall networking capital was increased by Rs318.22crore, due to increase in current

assets.

31



(Rs. in Crore)

PARTICULARS2006(Rs)

2007(Rs)

WORKING CAPITALINCREASE

(Rs)DECREASE

(Rs)Current assets



Other assets

1,434.23

1,343.01

613.61

2,686.41

1,598.55

661.43

1,252.18

255.54

47.82

103.1

455.54

996.9

Total Current Asset (A) 3,390.85 4,946.39

Current liabilities

Borrowings


296.62

1,872.53

399.72

2,328.07

Total Current Liabilities (B) 2,169.15 2,727.79

Net working capital = (A-B) 1,221.7 2,218.6


Total 2,218.6 2,218.6 1,555.54 1,555.54

32

Interpretation:


1. Cash and balance with RBI was increased by Rs 1,252.18 crore because of increase in the

balances current and other accounts.

2. Balance with bank and money at call short notice was increased by Rs 255.54 crore, due

to increase in current accounts.

3. There was an increase in other assets by Rs 47.82 crore, due to increase in interest

accrued, tax detected at source.

4. The Borrowings were increased by Rs103.1crore because of increase in borrowings from

others.

5. The liabilities and provisions increased by Rs 455.54 crore, due to decrease in general



assets.

33



(Rs. in Crore)

PARTICULARS2007(Rs)

2008(Rs)


(Rs)DECREASE

(Rs)Current A ssets



Other assets

2,686.41

1,598.55

661.43

5,249.42

622.73

1,443.24

2,563.01

781.81

975.82

762.35

1,188.81

417.84

Total Current Assets (A) 4,946.39 7,315.39

Current liabilities

Borrowings


399.72

2,328.07

1,162.07

3,516.88




Total 2,636.44 2,636.44 3,344.82 3,344.82

34

Interpretation:


1. Cash and balance with RBI was increased by Rs 2,563.01 crore because of increase in the

balances in current accounts.

2. Balance with bank and money at call short notice was decreased by Rs 975.82 crore, due

to decrease in money at call and short notice.

3. Other assets increased by Rs 781.81 crore, due to increase in interest accrued.

4. The borrowings were increased by Rs762.35 crore because of increase in borrowings

from others.

5. Other liabilities and provisions wasincreased by Rs 1,188.81 crore, due to increase in

general provisions on standard assets.

6. Overall networking capital was increased by Rs417.84 crore, due to increase in current

assets.

35



(Rs. in Crore)

PARTICULARS2008(Rs)

2009(Rs)


(Rs)DECREASE

(Rs)Current A ssets



Other assets

5,249.42

622.73

1,443.24

4,532.27

1,877.94

1,688.53

1,255.21

245.29

705.3

717.15

453.41

1,035.24


Current liabilities

Borrowings

Other Liabilities and

Provisions

1,162.07

3,516.88

456.77

3,970.29

Total Current Liabilities

(B)

4,678.95 4,427.06


Increase in working capital 1,035.24

Total 3,671.68 3,671.68 2,205.8 2,205.8

36

Interpretation:


1. Cash and balance with RBI was decreased by Rs717.15 crore because of decrease in the

balances of current accounts.

2. Balance with bank and money at call short notice were increased by Rs 1,255.21 crore,

due to increase in money at call and short notice.

3. Other assets increased by Rs 245.29 crore, due to increase in tax detected at source in

early years.

4. The borrowings were increased by Rs705.3crore, because of increase in borrowings from

others.

5. Other liabilities and provisions were increased by Rs 453.41 crore, due to increase in

general provisions on standard assets.

6. Overall networking capital was increased by Rs1,035.24crore, due to increase in

currentAssests.

37



(Rs. in Crore)

PARTICULARS2009(Rs)

2010(Rs)


(Rs)DECREASE

(Rs)Current A ssets



Other assets

4,523.27

1,877.94

1,688.53

6,235.02

1,670.78

1,584.65

1,702.75

207.16

103.88

458.57

42.34

890.8


Current liabilities

Borrowings


456.77

3,970.29

915.34

4,012.63




Total 4,562.48 4,562.48 1,702.75 1,702.75

38

Interpretation:


1. Cash and balance with RBI was increased by Rs1,702.75 crore, because of increase in the

balances in current accounts.

2. There was an decrease in other assets by Rs207.16crore, due to increase in tax detected at

source in early years.

3. The borrowings were increased by Rs458.57crore, because of increase in borrowingsfrom

others.

4. Other liabilities and provisions were increased by Rs 42.34 crore, due to increase in general



assets.

39

LIQUDITY RATIOS:

Liquidity refers to the ability of a concern to meet its current obligations and when they

become due. To measure the liquidity of a firm, the following ratios are calculated.

1. Current ratio

2. Quick ratio

Current ratio:

Current ratio may be defined as relationship between the current assets and the current

liabilities. These ratio is also known as working capital ratio, it measures of general liquidity and

is most widely used to make the analysis of a short term financial position or liquidity of a firm.

It is calculated by dividing the total current assets by the current liabilities.

Standard:

As convention a minimum of 2:1 is referred as rule of thumb.

Formula:

Current Ratio =Current Assets

Current Liabilities

Calculation of Current Ratio (Rs in Crore)

Year Current assets in Rs. Current liabilities in Rs. Current ratio

2005-06 3,390.85 2,169.15 1.56:1

2006-07 4,946.39 2,727.79 1.81:1

2007-08 7,315.39 4,678.95 1.56:1

2008-09 8,098.74 4,427.06 1.83:1

2009-10 9,490.45 4,927.97 1.93:1

Average 6,648.36 3,786.18 1.76:1

40

Graph showing the current ratio:

Interpretation

From the above table it can be observed that.

1. In the year 2009-10 the current ratio was 1.93:1, so the liquidity position is good in

that year.

2. The remaining year’s current ratio was not up to the standard ratio. Because the

current liabilities are increasing.

3. The average current ratio for the five year is 1.76:1, which is satisfactory.

4. The overall liquidity position of the bank is good.

41

LIQUID OR QUICK RATIO:

The term liquidity refers to the ability of a firm to pay its short term obligations as and when they

become due .Liquid ratio may be defined as the relationship between liquid assets and current or

liquid liabilities. An asset is said to be liquid if it can be converted into cash with in a short

period with out loss of value.

Standards

As a convention, a quick ratio of 1:1 is considered as satisfactory.

Formula:

Liquid Ratio =Liquid Assets

Current Liabilities

Calculation of Liquid ratio (Rs. in crore)

Year Liquid assets in Rs. Current liabilities in RS. Liquid ratio

2005-06 1,434.23 2,169.15 0.66:1

2006-07 2,686.41 2,727.79 0.98:1

2007-08 5,249.42 4,678.95 1.12:1

2008-09 4,532.27 4,427.06 1.02:1

2009-10 4,707.02 4,927.97 0.95:1

Average 3,721.87 3,786.18 0.98:1

42

LIQUID OR QUICK RATIO:

Interpretation

From the above table it can be observed that.

1. In the year 2007-08 the liquid ratio was 1.12:1, so the liquidity position is good in that

year.

2. The remaining year’s liquids ratio’s were decreasing, due to increasing current liabilities.

3. The average liquid ratio for the five year is 0.98:1.

4. The average liquid ratio of the bank is below the standard ratio.

43

DEBT - EQUITY RATIO :

The debt equity ratio is calculated to measure the extent to which debt financing has used in

a business; the ratio indicates the proportionate claims of owner and outsiders against the firm’s

asset. Debt usually refers to long term debts and equity includes equity share preference share

and reserves and surplus.

Formula:

Debt equity ratio =

Debt

Equity

Years Debt Equity Ratio (%)

2005-2006 29,546.39 1,828.80 16.15

2006-2007 37,566.38 2,415.29 15.55

2007-2008 48,132.79 2,661.27 18.08

2008-2009 54,992.67 2,608.81 21.07

2009-2010 69,095.66 3,451.29 20.02

AVERAGE 47,864.78 2,593.09 18.45

44

INTERPRETATION: 1. If we observe the above debt equity ratio table, it is realized that the debt-equity ratio

was fluctuating during the period of study.

2. The average debt equity ratio is 18.45% during the period of study.

3. If we compare the average debt equity ratio with the standard ratio, the company is

maintaining high debt equity ratio. Higher ratio indicates that the bank has been maintaining

risky financial policies.

45

FIXED ASSETS TO NET WORTH RATIO:

This ratio establishes the relationship between fixed assets and the net worth of the

company. The net worth is nothing but “shareholders fund”.

This ratio indicated the extent to which shareholders funds are sunk into fixed

assets. If the ratio is less than 1% it implies that owners funds are more than total fixed assets

and the shareholders provides a part of working capital. When the ratio is more than 1% it

implies that owners fund are not sufficient to finance the fixed assets and the firm has to depend

upon the outsiders to finance the fixed assets.

Formula:

FIXED ASSETS TO NETWORTH RATIO =

FIXED ASSETS

NET WORTH

(Rs in crore)

Years Fixed Assets Net Worth Ratio (%)

2005-2006 204.36 1,828.80 0.11

2006-2007 592.08 2,415.29 0.24

2007-2008 622.38 2,661.27 0.23

2008-2009 623.35 3,077.76 0.20

2009-2010 650.42 3,902.93 0.16

AVERAGE 538.518 2,777.21 0.19

46

INTERPRETATION:

1. If we observe above fixed assets to net worth ratio table it has increased from 2005-

2010(i.e., 0.11% to .16%).

2. The average fixed assets to net worth ratio is 0.19% during the period of study

3. If we compare the average fixed assets to net worth ratio with standard ratio the bank is

maintaining healthy fixed assets to net worth ratio as the share holder’s funds are sufficient

to finance the fixed assets.

47

EQUITY RATIO:

This ratio establishes the relationship between shareholders fund to the total assets

of the company. This ratio is also known “proprietary ratio” or “shareholders total equity ratio”

or “Net worth to total assets ratio”.

Higher the ratio or the share of the shareholders in the total capital of the company better is

the long-term solvency position of the firm.

Formula:

EQUITY RATIO =

SHARE HOLDERS FUND

TOTAL ASSETS

(Rs in crore)

Years Shareholders found Total assets Ratio

2005-2006 1,828.80 33,247.73 0.05

2006-2007 2,415.29 42,309.75 0.05

2007-2008 2,661.27 54,310.95 0.04

2008-2009 2,608.81 62,040.72 0.04

2009-2010 3,451.29 77,011.22 0.04

AVERAGE 2,593.092 53,784.07 0.04

48

INTERPRETATION:

1. If we observe the above equity ratio table it has decreased from 2006-2010(i.e., 0.05

times to 0.04 Times).

2. The average equity ratio is 0.04 Times during the period of study

3. The long-term solvency position of the company is not satisfactory during the period of

study.

49

CONCLUSIONS

1. During the period of study the borrowings are fluctuating.

2. During the study period the cash balance with RBI are mostly increasing.

3. Balance with bank and money at call and short notice were also fluctuating during the

study period.

4. Provisions and other liabilities were increasing during the study period.

5. The non-performing assets of the bank are fluctuating.

6. The overall working capital has been increased.

7. According to current ratio, the liquidity position of the bank is satisfactory.

8. The liquid ratio of the bank is below the standard ratio.

50

SUGGESTIONS

1. The bank has to increase the cash balances to improve the liquidity position.

2. The bank is advised to maintain proper funds towards reserves and surplus.

3. Bank authorities should motivate the staff for achieving higher recovery of loans.

4. The bank has to maintain adequate cash balance to avoid misuse of cash.

5. The bank has to encourage the customers, to improve the savings.

6. The bank is advised to maintain adequate working capital.

51

BIBLIOGRAPHY

FINANCIAL MANAGEMENT : I.M.PANDEY

WORKING CAPITAL MANAGEMENTAND CONTROL : S.N. MAHESHWARI

AN INTRODUCTION TO ACCOUNTANCY : R.K. SHARMA, SHASHIK,GUPTHA

WEBSITES www.google.com

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