1

CHAPTER I

INTRODUCTION

HISTORICAL BACKGROUND:

The law relating to banking, as we find in India today, is the outcome of

the gradual process of evolution. Before 1949, the Indian Companies Act,
1913, contained special provisions relating to banking companies, which were
felt inadequate and were subsequently incorporated in the comprehensive
legislation passed in 1949. Since its enforcement in 1949, Banking Regulation
Act was suitably amended a number of times to insert new provisions and to
amend the existing ones to suit the needs of changing circumstances and to
plug the loopholes in the main legislation. The Banking Laws (Amendment
Act, 1968, introduced Social Control on banking by inserting regulatory
provisions of far – reaching significance. The Banking Laws (Amendment)
Act, 1983 inserted a few new sections besides amending some of the
important ones.

ENTRY OF PRIVATE SECTOR BANKS:

In January 1993. RBI had issued guidelines for licensing of new

banks in the private sector. It had granted licenses to 10 banks, which are
presently in business. Based on a review of experience
 2

gained on the functioning of new private sector banks, revised guidelines were
issued in January 2003.
Following are the major revised provisions.

(a) Initial minimum paid up capital shall be Rs.200 crore which will be
raised to Rs. 300 crore with in three years of commencement of
business.
(b) Contribution of promoters shall be a minimum of 40 percent of the
paid up capital of the bank at any point of time. This contribution of 40
percent shall be locked in for five years from the date of licensing of
the bank.
(c) While augmenting capital to Rs.300 crore within three years promoters
shall bring in at least 40% of the fresh capital, which will also be locked
in for five years.
(d) NRI participation in the primary equity of a new bank shall be to be
maximum extent of 40%.

Abolition of selective credit controls (scc):

SCC introduced in India in 1956, pertains to regulation of credit for

specific purposes. The technique of SCCs used by the RBI include fixing
minimum margins for lending against securities ceiling on maximum
advances to individual borrowers against stocks of certain commodities and
minimum discriminatory rates of interest prescribed
 3
for certain kinds of advances SCCs have been used mainly to prevent the
speculative holding of essential commodities like food grains to prevent price
rise. Selective credit control has been abolished in the post liberalisation
period.

Other Measures:
Credit restrictions for purchases of consumer durables have been
removed / related similarly coverage of priority sector has been enlarged by
the inclusion of software, agro processing industries and venture capital these
measures have given the banks the much needed flexibility to manage their
asset portfolios.

Challenges & Opportunities of Banking Sector:

Banking in India has undergone a complete transformation in the past

few decades. This sector is going through major changes as a consequence of

economic reforms. The changes affected the ownership pattern of banks,

availability of funds, the cost of funds as well as opportunities to earn, range

of services (both fee based and fund based) and management of priority sector

lending. As a consequence of liberalization in interest rates, banks are

operating on reduced spread. The biggest opportunity for the Indian banking

system is the Indian consumer. Demographic shifts in terms of life style

aspiration are changing the profile of Indian consumer. The Indian consumer

now seeks to fulfill his life style aspirations at a younger age with optimal
 4
combination of equity and debt to finance consumption and asset creation.

This is leading to growing demand for competitive sophisticated retail

banking services. The consumer represents a market for a wide range of

products and services. He needs a housing finance to construct his house, an

auto loan for his car, a credit card for ongoing

purchase, a bank account, along term investment plan to finance his child’s

higher education a pension plan for his retirement a life insurance policy and

so on. Moreover this typical customer does not live in 10 cities of India he is

present in towns, villages with increased awareness. Consumer good

companies are a trading lapin this potential. It is for the banks to take the most

of the opportunity to deliver solutions to this market.

CENTURION BANK

Bank refers to Centurion Bank Limited, a banking company in

corporate in India under the Companies Act, 1956 and having its registered
office at Shanta Durga Niwas, M. G Road, Panaji, Goa 403001, and India. The
term Includes the successors and assigns of the Centurion Bank Limited and
any branch/ office there of

“Internet Banking, Internet Banking Service”, refers to the service

mentioned in clause I here in above.
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THE BRANCH PROFILES

The branch profiles were evolved using extreme cases on efficiency

and satisfaction. The Vellore branch of the Centurion bank comes under the
most satisfying branch. This branch has been rated as the best in terms of
customer satisfaction from service. It had good amount of business deposit
competition from Nationalised banks and ICICI. This branch attracted raided
of customers as the Vellore town is attracting more purpose for various parties
of the country for the medical people for various facts of the country for the
medical treatment at CMC Hospital. The branch offered facilities for the
operator of accounts advances and lockers. The branch was also distributing
loans to the worker section of the society under differential rate of interest.

The branch manage was a young and helpful man. He had been only
recently promoted from the clerical group. The customers respected him but
the customers did often not take him seriously because of his young age.
Employees had positive attitude towards customers. They had shown interest
in the growth of businesses at the branch in order to earn a good image. The
employees perceived the organisational climate as good and open. They also
had higher scores on the motivation to work competence adoptability job
involvement and
bank identification. The general employee attitude towards the manger was
reported to be nurturance.

The customers expressed satisfaction from service only if they felt

impersonal touch of being cared for at being attended to. Secondly it approved
for the customers point of view the two factors was an important component
 6
of efficient service. If the service was rendered quickly, it was efficient at if
not it was not efficient. This was linked to the type of customer services at the
location of bank.

The bank was incorporated on June 30, 1994, under an overall

economic reform program initiated by the Government of India 1991, when
the RBI granted nine new licenses for the establishment of commercial banks
in the private sector. It obtained certificate of incorporation on July 20, 1994
and subsequently received the banking license (BOM:57) from vide their
letter no. DBOD/4577/16-01-104/95 dated January 13, 1995.

The bank was founded by the erstwhile TCFC and its associates along
with Keppel Tattle Bank Ltd. (which was earlier the Keppel Bank of
Singapore) through Kephinance Investment (Mauritius) Ple. Ltd. Besides the
promoters, the equity share capital was subscribed by ADB, manila and IFC
Washington.

The bank started operations with its registered office at T-2, Shabana
chambers, Panaji, Goa which shifted to Durga Niwas, M.G Road, Panaji, Goa
in January 1995.

In Financial Year 2002, TCFC was merged with Centurion Bank

Limited vide a scheme of arrangement under the Companies Act. The scheme
was sanctioned by the Honorable High court of judicature at Bombay and Goa
bench at Panaji on April 09, 2002 and April 16, 2002 respectively. The merger
increased the branch network by adding 40 marketing offices of TCFC to our
existing 30 branches at that time. The merger also marked the entry of the
 7
bank into retail financing, ahead of the other peer banks, and strengthened
presence of the bank in southern India.
The bank under look a re branding exercise and introduced new
products like global debit cards, cash management services and depository
services. The bank was among the first banks to enter the profitable 2-wheeler,
commercial vehicles and construction equipment financing businesses. In
February 2004, the bank planned a rights issue to augment its capital for
growth purposes. The issue was not subscribed due to adverse capital market
condition prevailing at that time.While the merger with TCFC helped shift the
focus of the bank towards retail asst financing, the bank also inherited a
legacy of stressed corporate assets in the form of leases and hire purchases
contracts and contingent liabilities in the form of disputed tax demands. The
bank came across reconciliation differences that required provisioning in the
fiscal 2005 accounts. This eroded the bank’s capital and constrained its
growth. On October 9, 2004 the board appointed Mr. V. Janakiraman the
former MD of the State Bank of India and an experienced banker as the CMD
to guide the bank towards an alternative strategy. The appointment of Mr. V.
Janakiraman was duly approved by the Reserve Bank of India in accordance
with the provisions of section 35B of the BR Act, 1949 non December 31,
2004. The erstwhile, TCFC promoter directors resigned from the board in
March 2005 after Mr. Janakiraman assumed charge in January 2005. The
board also appointed Mr. C.G. Somaiya, former Comptroller and Auditor
General of India Mr.Kamlesh Vikamsey, chartered accountant, and presently
the vice president of the Institute of Charted Accountants of India (ICAI) as
non-executive directors in March 2005. The new management with the
reconsolidated board introduced stringent accounting norms and instituted
 8
better corporate goverance. Thereafter the board engaged in discussions with
several potential investors to infuse additional capital
in the bank. These efforts culminated in a proposal from Sabre for re-
capitalisation of the bank using private financial investors and infusion
of fresh capital through a court scheme coupled with the merger of the Bank
of Muscat Banglore, being accepted.

The bank presented a composite scheme of arrangement under section

100 (for reduction of capital) and sections 391 to 394 of the companies Act,
1956 for the approval of the High Courts at Mumbai and Banglore, Karnataka
and the RBI and they have approved the same on September 12, 2006,
October 27 2006 and January 20, 2007 respectively. The scheme of
arrangement inter - alia involved re-organishing the bank’s share capital,
merger of operations of Bank Muscat, Banglore with the bank and infusion of
capital as a result of the scheme of arrangement till date Rs. 245 crores have
been infused in the form of equity improving the bank’s CAR to 9.51% as on
September 30 2007. The scheme also entailed vesting the entire shareholding
of the bank’s erstwhile promoter TCFC in the Centurion Bank stock trust for
the benefit of the bank.

MAIN OBJECTIVES OF THE BANK:

The main objectives of the bank, as set out in its memorandum of

association inter-alia include:

1. To establish and carry on business of banking at the registered office of

the company and at such branches, agencies, or offices in the State of
 9
Goa, and any other part of India or else here, as may from time to time
be determined by the directors of the company.
2. To carry on the business of accepting for the purpose of lending or
investment, deposits of money from the public, repayable on demand or
otherwise, and withdraw able by cheque, draft or otherwise.
3. To borrow raise or take up money; to lend or advances money either
upon or without security; to draw, make, accept, negotiate, discount,
buy, sell, collect and deal in bills of exchange, hundies, promissory
notes, coupons, drafts, bills of lading, railway receipts, warrants, bonds,
debentures, certificates, scrip’s and other instrument, and securities
whether transferable or negotiable or not; to grant and issue letters of
credit, traveler’s cheques and circular notes; to buy sell and deal in
bullion and specie; to buy and sell foreign exchange including foreign
bank
notes: to acquire, holds issue on commission underwrite and deal
in stock funds shares debentures debenture stock obligations securities
and investments of all kinds to purchase and sell bonds scripts or other
forms of securities on behalf of constituents or others; to negotiate loans
and advances ; to receive money all kinds of bonds, scripts or valuable
on deposit or for safe custody or otherwise to provide safe deposit
vaults to collect money and securities.
4. To carry on the business of factoring by purchasing and selling debt
receivables and claims including discounting and rendering bill
collection, and debt collection and other factoring g services.
 10
The object clauses of the memorandum of associations of the company
enable the company to undertake its existing activities and the activities for
which the funds are being raised through the present offer.

Business of the bank & its products and services Overview:

The bank is among the new private sector banks with a strong
technology and service culture. As on March 31, 2007, the bank had a network
of fully networked branches covering 45 cities. 148 ATMs. 20extension
counters and 23 marketing offices, the bank now have licenses to convert 14
of these into full service branches). Apart from this distribution network, the
bank provides various other facilities such

as the ability to operate accounts from any of its branches on a real time basis
make payments and transfer funds instantly. The bank has presences in the
major business centers in the country. The bank also has a pan India presence
with a strong presence in the southern and western India.

The bank’s key focus remains a successful retail banking strategy,

which is evident from its strong retail customer base of around 495,000
deposit accounts, over 300,000 asset account holders and over 379,000 ATM /
debit cardholders as on 31 March 2007, through constant product introduction
and superior service, the deposit mix of the bank has evolved in favor or retail
deposits which constitute about 80% of the total deposits as at March 31,2007
similarly 75% of the banks advances are to retail customers.

On the assets side the bank has strengths in two-wheeler, where the
bank is amongst the top three players in the organized market and in the
 11
financing of commercial vehicles and construction equipment. The bank also
offers personal loans and loans against financial assets. Retail loans in India
account for less than 5% of GDP and the percentage of retail loans to total
loans in India also remains at a scientifically low level when measured against
its aging peers. This presents an opportunity for the bank to further expand its
retail business and differentiate itself from its competitors.

The bank has a suite of products and services on the liability side
including a variety of deposit products, a global debit card, internet banking,
mobile messaging, e-payments, depository and cash management services
large at individuals and small businesses.

On the corporate banking side, the bank extends the entire range of fund
based and non-fund based commercial banking products to select corporate
customers. It uses its strengths in channel financing to offer a gamut of
services to meet the entire working capital retirements of dealers and
distributors of leading corporate. Further the bank intends to leverage its
existing relationships to cross self a range of fees based products including
transaction banking and clearing services to its corporate customers.

The bank is equipped with an integrated treasury backed by

experienced dealers; well supported by information, communication and risk
management systems. Treasury plays an active roe in the management of the
bank’s liabilities, mismatches in structural and interest rate sensitive asset /
 12
liability flows and in generating low cost funds. The bank offers various
treasury services to its corporate customers including foreign exchange
services and currency swaps to help effectively manage their interest rate and
foreign currency exposures.

Bank refers to Centurion Bank Limited, a banking company in

corporate in India under the Companies Act, 1956 and having its registered
office at Shanta Durga Niwas, M G Road, Panaji, Goa 403001, and India. The
term includes the successors and assigns of the centurion Bank Limited and
any branch / office there of
“Internet Banking, Internet banking service” refers to the service mentioned in
clause I here in above.
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Fig. No. 1.1

The organization structure of the company is as follows:

Board

Executive committee board

CEO & MD Mr. Shailendra Bhandari

Regional head Functional heads

COD / CFO company secretary/audit &

East, Gujarat & MP, Maharashtra & compliance/ hr&n adminstration /IT/
Goa, North & south operations & vigiliance / strategic
planning

E corporate banking head corporate

credit country head retail head
retail assets
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STATEMENT OF THE PROBLEM:

Urbanization is and the inevitable phenomenon and that it should be

facilitated rather than restricted it is clear that past attempts to restrain.
Urbanization has more often that not exacerbated the problem and increase
district inequalities.

It is here the Centurion Bank in India can play a vital role by

canalizing the scattered savings of the India masses to fuel the process of
urbanization and sometimes reduce the magnitude of inequalities in the
country. However it is believed that the banks presently functioning in the
country are highly closed institutions less bothered to be problems of common
man, highly security conscious, and very much ill managed.

OBJECTIVES OF THE STUDY:

The objectives of the study in its precise from be stated as follows:

1. To study the various dimensions of Centurion Banks role in fostering the

development of urban areas in general.
2. To study and evaluate the working of the Centurion Bank.
3. To critically evaluate the working of the Centurion Bank with reference to
various urban development schemes.
 15
4. To summaries and suggest measures for the improvement of their working
if necessary.
5. To critically evaluate the various welfare measures adopted by the bank for
the welfare of staff.
6. To investigate the causes for the performance of banks.
7. To know the Administrative setup & performance of bank.

METHODOLOGY:

There were 157 branches in the country at the time of the study. Of
these 35 banks are functioning in Tamilnadu out of these a many as eight were
functioning in the district of Vellore. Of these eight banks the Centurion bank
was chosen for the following reasons.

1. It is one of the new banks in – Tamilnadu.

2. It is one among the top 200 banks in the state.
3. It has functioned for yearly 10 years in the district of Vellore with a
growing population.
4. Proximity to the researcher:

The present study has been carried out as a case by selecting the
Centurion bank as a representative institution.

PERIOD OF STUDY

The present study covers a period of 10 years i.e. from 1999

to 2008 In financial statement and financial performance covers a

period of 4 years i.e. 2004 to 2008.

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SOURCES OF INFORMATION:

Information for the present study was collected through both

secondary sources such as published records balance sheets reports manuals
books. Journals, websites and newspapers etc.,

TOOLS OF ANALYSIS:

In analysing the information these collected from secondary

sources tools such as statisfied tables percentages comparative statements,
preparation of schedules, Balance Sheet, profit and loss account, Ratio
analyses and financial highlights etc., have been used.

IMPORTANCE OF THE STUDY:

Being early adopter technology, whether the centurion bank has

acquired competitive advantage by increasing sophistication, flexibility and
cuplexibility of product and servicing and effective use of technology critical
for managing the risks associated with the business.

How far the Centurion Bank has developed a well-trained work force,
flexible responsive to customers as well as organisational dewarb. Whether
the employees are expected to deliver the vision of the organisational
demands
 17
How the Centurion Bank faces the increasal competition between the
domestic player & foreign banks. How a the Centurion Bank has understood
the customer, fulfill the customer needs and achieve high level of customer
relation largely technology knowledge and human resources to provide quality
products and services,

1. How for the Centurion Bank has delivered the value to all
stakeholders.
2. How for Centurion Bank has developed various welfare sachems for
the benefit of its employees.

LIMITATIONS OF THE STUDY:

1. The present study confines itself to be part played by a Centurion Bank at

Melvisharam Branch. The social geographical, economic and general
features of the area under study may not be same for all other urban centers of
be country and hence, the results of the study may not be applicable in total to
banks role in centers of the country.

2. An intensive survey of the selected beneficiaries would have been more

revealing, hence appropriate in assessing the impart of banks role in the field.

3. The scheme wise credit analysis also could not be made for want of time.
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CHAPTER ARRANGEMENTS:

This study is presented in five chapters.

The first chapter deals Introduction, Importance of the study, Statement
of the Problem, Objectives of the study, Scope of the study, Methodology of
the study, Limitations of the study and Chapter arrangements.
The second Chapter deals Financial Institutions, Banking and
Education.
The third Chapter provides a Performance Of Centurion Bank,
Proposed Amalgamation Of Bank Of Punjab Limited With Centurion Bank
Limited, Dividend, And Management Discussions and Analysis
The fourth Chapter is the core one Preparation of schedule, notes for
accounting policies, balance sheet, profit and loss account, cash flow
statement, ratio analysis and financial highlights are some of the tools for
analysis.
The fifth and final chapter presents the Summary, conclusion and
suggestions for scope of the future research in this field. Following the
concluding chapter, a bibliography of books, articles and journals related to
the study is given.
 19

Conclusion:

This introductory chapter outlined the background of the study its

objectives, methodology and limitations of the study and the chapter
arrangement of the dissertation. The next chapter provides a brief review
Financial Institutions and Banking Information on banking services in Vellore
District.
.
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CHAPTER – II

FINANCIAL INSTITUTIONS AND BANKING

The first chapter outlined the background of the study its objectives,
methodology and limitations of the study and the chapter arrangement of the
dissertation. In this chapter provides a brief Financial Institutions and Banking
Information on banking services in Vellore District

Information on banking services in Vellore District

Lead Bank for the District: Indian Bank

Indian Bank is the Lead Bank for the District. It coordinates among the
Government Departments, the Banks and the Non Governmental
Organisations, which are involved in the implementation of various schemes
for the overall development of the district

1. No. Of Banks in the District - 32

Nationalised commercial banks - 18

(Including State Bank of India and associates)

Private Commercial Banks - 11

Co-operative Banks - 3
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TABLE - 2.1

THE TABLE SHOWN NUMBER OF BRANCHES

Commercial Banks Co-operative Banks Total

Rural 104 21 125
Semi-Urban 65 26 91
Urban 34 5 39
Total 203 52 255

Fully computerised Nationalised banks in the District: 14

3. Investment options for NRI Investors:

1. Foreign Currency Non-Resident (FCNR) Account:

(a) Deposits can be opened for any period from 6 months to

maximum of 36 months in any of the four designated currencies viz. Std. Pd.,
US $, DM, Japans Yen.

(b) Deposits can be made by remittances from abroad or by funds

held in existing Non-Resident External Accounts. Non-Resident (External)
Rupee Account. Account can be opened by remittances from abroad /deposit
of foreign exchange brought Into India/transfer from existing self-NRE /
FCNR accounts.

4. Non-Resident Non-Repatriable Rupee Deposit Scheme (NR-NR-RDS):

 22
(a) Deposits can be made either out of fresh funds from abroad or by
transfer from existing FCNR/NRE accounts.

(b) Deposits cannot be repatriated; but, can be renewed/rolled over any

number of times. However, once withdrawn or invested in other schemes, it
will not qualify for renewal.

5. Types of Services rendered to customers by Banks:

(a) Remittances: Transfer of funds through Demand Draft, Mail

Transfer, and Telegraphic Transfer etc

(b) Locker facilities: Banks offer Safe Deposit Lockers to customers

for safe keeping of their valuables.

6. Computerisation in Banks:

There are 14 fully computerised nationalised Bank branches in the

District offering various customised services to the people. Besides, several
others are partially computerized.

7. Participation in Social Welfare Schemes of the Government All the banks in

the district participate in the various Anti-poverty and Employment generation
oriented programmes of the Central and State Governments such as
Swarnjayanti Gram Swarozgar Yojana (SGSY),

Prime Minister's Rozgar Yojana (PMRY), Swarna Jayanthi Shahari Rozgar

Yojama (SJSRY), Individual Entrepreneur Scheme (IES) of the Tamilnadu Adi
Dravidar Housing Development Corporation (TAHDCO), Rural Housing etc.
Besides providing financial assistance the Banks also arrange for technical
 23
support, counseling and consultancy services to the borrowers. During the past
three years.

The Banks have deployed credit under Government sponsored programmes as

below (Rs. In Lacs):

2003-01 2004-02 2005-2003

IRDP 839 739 -
SGSY - - 227
PMRY 381 446 333

EDUCATION

Development of Collegiate Education In The District

The Vellore District is one of the leading districts of the state.

Where the development of the education has been consistently good and
commendable. The American Arcot mission, who was established in Vellore
center in 1853, has the distribution of pioneering the cause of higher education
by establishing The American Arcot Mission College. / Affiliated
to the University of Madras as early as 1898. These later come to be known as
Voorhees College. The Sacred Heart College,

Tirupattur the Auxilium College, (for women) at Katpadi are other

Christian institutions dedicated themselves to the cause of education.

Govt.of TamilNadu with an ambitious scheme and ardent desire to

promote higher education, setup series of Arts Colleges throughout the
state. The Muthurangam Govt. Arts College, Vellore. Thirumagal mills Govt
 24
Arts College, Gudiyatham Arigar Anna Arts College for women, Walajah have
been established in the rural end poor students.

The private participation in the growth of higher education in the

District is also over whelming. The D.K.M. College for women Vellore is a
fine example. Some Muslim Philanthropists and educationists, realising the
need to wide open opportunities for the muslim youth to
learn higher education, have established educational centers. The Islamiah
college, Vaniayambadi, C. Abdul Hakeem college, Melvisharam, Mazhrul
-uloom college, Ambur, the Muslim minority Institutions are also contributing
their might in promoting higher education in the District. The Arabic College
in Vellore town is another important educational centre for higher education.

The district is not lagging behind in providing professional education.

The Christian Medical College, Vellore. Which is one of the
international repute, is offering even P.G. courses in some
specialised branches. Starting an Engineering College, the Govt. Also
has fulfilled the aspiration of the student community of this district. In view of
the financial constraints, in the Last few years, the Govt., has encourage
self financing Institutions. The Vellore engineering College, Vellore , which
has many academic distinction to its credit,

The Priyadershini engineering college., Vaniyampadi, have come into

existence as a result. The phenomenal growth of these educational
institutions in the district only testifies the growing demand and the keen
interest evinced by the student community for higher and professional
Education.
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TABLE - 2.2

THE TABLE SHOWN COLLEGES FOR GENERAL EDUCATION

Institution Name No. of Students Teachers

Institutions
Boys Girls Total

Government
Colleges
4 1665 2443 4108 167
Aided Colleges
8 5478 2386 7864 410
Self Financed
Colleges 2 0 583 583 31

TOTAL 14 7143 5412 12555 608

CONCLUSION:

In this chapter provides a brief Financial Institutions and Banking

Information on banking services in Vellore District. The next chapter deals
with performance of centurion bank, amalgamation of bank of Punjab Limited
with Centurion Bank Limited, management discussion and analysis,
Committees of the Board, and Centurion Bank employees Trust
 26
CHAPTER – III

PERFORMANCE OF CENTURION BANK:

This chapter deals with performance of centurion bank, amalgamation

of bank of Punjab Limited with Centurion Bank Limited, Management
discussion and analysis, Committees of the Board, and Centurion Bank
employees Trust.
The accepted practice in the management of a business enterprise is to
undertake activities that lead to the company continuing growth and
profitability. The balance sheet does not reveal all the facts of a company’s
performance; it leaves many vital questions unanswered. A company would do
well to evaluate its performance through an assessment of customer
perceptions and attitudes towards the company as a whole and the customer
response to its products or service offerings in particular. This needs to be
done periodically on a long-term basis.
The measure of a company’s worth lies in what its customers think of it.
A company could do well to evaluate its performance through an assessment
of customer perception and attitudes towards the company as a whole and the
customer responses to its products or service offering in particular.
Mahatma Gandhi’s worlds should serve as a reminder “The
customer….. Is not an outsider to our business [But] the purpose of It”
These words are often quoted but, unfortunately, less often followed.
 27
MEASURES OF BUSINESS PERFORMANCE:

For example when we go to a good restaurant we do not need to know

the average age of it staff, the under of both at pass in the kitchen or the
design of the logo. We are paging for its quality of food and service. So also
as far as any organization is concerned the customer is only interested in the
quality of what is being offered on a plate.

Ultimately, customer preferences determine the corporate goal. All

activities of the organisation must become subservient to this goal, if the
organisational performance as a whole is to be rated in terms of absolute
excellence.

Within the organization, the setting of team goals and working down
from these to individual goals is really a matter of convenience or
pragmatism. Individual and team performances are collectively assessed as
corporate performance, in terms of the customer’s response to the goods and
services offered, all individual and team performance are vital, but they must
be interrelated and seen a part of total performance.

Three Levels Of Performance:

The role of a manager is like that of a conductor in western music,

which blends and harmonises the notes and sounds of diverse instruments to
create a symphonic performance.
The orchestra follows the script of music composed by a master other
than the conductor, but the manger of an enterprise often has to compose his

own music in an effort to maintain the harmony of people working towards a

common goal.
 28
Getting people to perform in harmony becomes the basis for good
organisational performance. The uniformity of perception and the common
understanding of a need is the very basis of collective drive in reaching a
common goal. If this foundation is strong then the organization will have the
in built resilience to absorb shocks from variables like technological change,
national or global economic vicissitudes government regulations and so on.
A manager can also be highly intellectual or a great performer, but in
the external world an identity or value base is perceived only in relation to his
company. As such performance as an individual or as a member of a team is
ultimately accepted only as a part of the corporate performance. Once this
concept is accepted, personal goals will soon become related to that of the
organisation.
The success of this effort is purely due to the fact that we coordinated
our actions, synergising the achievements of individuals, team and the entire
organisation.

History is witness to many great performers in various fields of activity

who pursued their mission with great intensity and consistency. Today one can
name many excellent performers who are pushing forward the frontiers of
technical, commercial and industrial enterprise.

Such pursuits of performance are based on a deep desire to achieve

excellent at every milestone, on every plateau and every peak. Everyone seeks
excellence in life, yet how many actually work towards achieving it?

In any organized effort, and definitely so in the business environment,

there usually are a number of teams working towards a common
organizational goal. In this process, there is tremendous excitement when a
 29
particular effort results in an achievement that can be considered excellent.
This is often far above the specification or standard set earlier, or far superior
to the performance of other people engaged in similar tasks at the sane time.
Challenging standards is a routine part of performance for excellence.

Excellence is therefore superior performance within a time frame,

whether compared to one’s own past performance or against competition. The
same is true of teams as well as organisations.

Organisations with excellent individual performance and excellent team

performance are bound to be recognised as excellent companies. The whole
managerial pursuit of performance is to maintain a level of excellence in as
many areas as possible and for as long as possible.

The concept of customer can encompass a variety of individuals, from

the actual users of the product to shareholders, employees, suppliers and
dealers. Performance is different things to these different people. However,
my focus is on the actual users of products or services.

Customer satisfaction is more than a mere slogan. In fact, it is one of

the fundamental tents of management. In simple terms, any business unit
attempts of effectively invest resources to satisfy customers through
empowered people in the face of market competition so as to realize a
profitable return on its investments.
 30
Fig No: 3.1
Any business can be simply described as:

Effective investing
resources

Through Employee
empowering people motivation

To satisfy customer Customer

requirements satisfaction

In competition with
others Market share

To achieve a
profitable return ROA
 31

Customer Satisfaction Is Integral To Management

Customer satisfactions leads to increase customer loyalty, which in turn

drives up market growth and share, and this makes for a positive return on
assets (ROA). The growth of assets enables investments in technology and
productivity to remain viable.

The traditional focus of management is on financial parameters and

financial parameters only. Short - term imbalance may make it necessary to
focus heavily on these, or any other individual segments of business. I feel
that long-term business decline and failure, however, is often due to he neglect
of customer satisfaction as a key priority.
 32

Fig No: 3.2

Customer satisfaction flow cycle:

Customer
satisfaction

Drivers
Investment and Drives Market
Investment Share
Efficiency Drivers
ROA

Market share
ROA

Drivers
Revenue
and ROA
 33

Measures of Customer Satisfaction

In our organisations, we highlight five key parameters while conducting

customer surveys, in order to understand the perceptions from which
ultimately we derive our customer satisfaction rating. These are:

• Overall customer satisfaction with the company and its products;

• Rating in the industry on the basis of overall customer satisfactions;
• Satisfaction with value for money;
• Confidence to provide others with recommendations; and
• Loyalty in terms of repeat purchases.

Each of the above parameters is analysed continuously through the

year, and company polices and practices are revised regularly to ensure a
progressively larger number of customers and higher ratings in subsequent
surveys. The exercise is based on the simple premise that business has to
along itself with customer demands and needs without which it cannot be
viable in the long - term.

Experience shows that conducting and administering surveys is easy.

The greatest challenge to management is integrating the ability to analyse the
underlying reasons for the result of successive surveys, and to follow up by
making necessary changes to standard company practices.
 34

Customer delights a strategic decision:

Customer area satisfied when their requirements are met. A noted

Japanese management scientist, N. Kano of the University of Tokyo,
identified three characteristics of customer requirements: basic, performance
and delight.
Fig.No: 3.3
The three characteristics of customer requirements:

Very Satisfied Performing beyond

Commitment

Attractive Quality
Claimed
Features
Unsatisfied Needs

Satisfied Needs
Performance Quality

Expected
Feature
Basic Quality

Very dissatisfied
 35

Basic relates to requirements that the customer takes for granted.

Customer expects the products they use to display such basic, hidden or
assured characteristics. When we travel on an aircraft, we expect the flight to
be safe. This is hardly a subject for negotiation with the airline. Meeting such
a requirement may not necessarily create satisfaction, although not meeting it
may result in creating considerable dissatisfaction!

Performance parameters relate to customer requirements that are

negotiated and agreed. For examples, if an airline releases a flight schedule,
the passenger expects the flights to take off and land at the specified times.
Meeting these stated or negotiated requirements may create customer
satisfaction, but not meeting them will certainly lead to customer
dissatisfaction.

Finally, wherever the organisation performance far beyond

expectations, so as to create pleasant surprises, the customer feels truly
delighted.

Most organisations are not even aware of the impact of their actions on
the customer and the effects these generate. Enormous amounts of time and
effort are often spent on upgrading technology, investment in publicity and
sales promotion, as Well as cosmetic changes such as designer uniforms for
employees.
 36

Changes, whether necessary or facile, minor or major, simple or

expensive, do not impress the customer when they are not purposefully
directed. This happens only when a dedicated effort towards understanding
their genuine needs is made. The result is performance that exceeds their
requirements in a meaningful and relevant fashion. Without this effort,
organisations continue to over - commit and under - deliver, ending up
surprised that the customer should want to protest and write letters full of
complaints.

CAPITALS AND RESERVES

The shareholders at the tenth Annual General meeting held on 4 th

September, 2007 approved the cancellation of 150 crore equity share of Re.1/-
each of the Bank that were lying un issued out of the authorized capital. After
the effect of the aforesaid cancellation, the authorized Capital of the Bank
now stands reduced to Rs.150crores comprising of 150crores equity shares of
Re. 1/- each.

The Banks Capital and Reserves as on 31st March 2008 stood at

Rs.468.56 crores. This is well above the minimum capital requirement of
Rs.300 crores stipulated by the Reserve Bank of India in the guidelines on
ownership of private sector banks issued in February 2008, after the exercise
of the green shoe option on 6th April, 2008 by the lead managers to the GDR
issue, the Capital and Reserves as adjusted for the issue expenses stood at Rs.
511.44 crores.
 37
Subordinate Bonds of a value of Rs. 100 crores outstanding as on 31st
March 2008 and carrying a coupon rate of 12.95% were redeemed in May
2008 on the date of maturity.

In December 2007, the shareholders approved by means of special

Resolutions (through a postal ballot procedure), two separate Employee Stock
Option Plans (ESOPs). The first scheme called the Key Employees Stock
Option plan-2007 (key ESOP-2007) covers key employees and non-executive
directors of the bank while the second scheme called the General Employees
Stock Option Plan-2007 (General ESOP-2007) covers all permanent
employees of the bank including non-executive directors.

TABLE – 3.1

TABLE SHOWN THE CAPITAL ADEQUACY RATIO

RS.
S.NO QUARTERS
(INCRORES)
1 4QFY07 4.4
2 1QFY08 5.1
3 2QFY08 9.5
4 3QFY08 10.2
5 4QFY08 23.1

QFY – Quarter of Financial Year

 38
CHART – 3.4

CAPITAL ADEQUACY RATIO (%)

25

20
Rs. (in crores)

15
23.1
10

5 9.5 10.2

4.4 5.1

0
4QFY07 1QFY08 2QFY08 3QFY08 4QFY08
QUATORS

The statutory disclosures as required by the revised SEBI guidelines on

ESOPs are given in the annexure to this report.

Post infusion of capital of Rs.312.89 crores through the GDR issue

(adjusted for the green shoe option exercised by the lead manager to the GDR
issue in April 2008 and net of issue expenses), the Capital Adequacy stood at
23.1% as on March 31,2008 as compared to 4.4% as on March 31,2007.
 39
PROPOSED AMALGAMATION OF BANK OF PUNJAB LIMITED
WITH CENTURION BANK LIMITED

After the year under report, on 29th June 2008 your Directors have,
subject to the approval of the shareholders and the sanction of the Reserve
Bank of India in terms of section 44A of the Banking Regulation Act, 1949,
approved a proposal for the amalgamation of Bank of Punjab Limited with
your Bank. The synergies in terms of geographical presence, products, human
resources and financial strength of both the banks will provide an opportunity
to your bank to consolidate its position amongst the leading private sector
banks in the country. The multiplier effect on the growth and profitability of
the merged entity will add significant value to shareholders, customers and
employees of your Bank.

Based on the audited financials of both the banks as on 31 st March

2008, some of the parameters of the combined entity would be as follows:

1 Number of Banking Offices 235

.
(Rs. In Crores)
2 Total Assets 9,338.53
.
3 Deposits 7,837.00
.
4 Advances 4,610.94
.
5 Total Business (3+4) 12,447.94
.
6 Total Market Capitalization of both the banks as at 1,815.38
. 30th June 2008.
 40

DIVIDEND

Though the Bank declared a profit for the year ended March 31,2008
thus heralding the beginning of a new phase, the Directors have decided not to
recommend any dividend for the year in order to conserve capital resources
and build for the future.

MANAGEMENT DISCUSSIONS AND ANALYSIS

The Indian macro economic environment remains conductive for high

growth and sustained buoyancy. Although interest rates have risen in the
current financial year and signs of liquidity tightening appear to be on the
horizon, foreign investments in the Indian equity markets have been robust.
The inflationary conditions have improved considerably as compared to last
year and the high base effect will ensure benign inflation numbers in the first
half of the current financial year.

The foreign exchange reserves position continent is healthy. Although

the Rupee appears to be overvalued on a REER basis, on an adjusted basis
(adjusted for exports in software and services) it still remains competitive.
Credit off take has been robust with the rapidly increasing investment in
infrastructure to support industrial growth. Higher demands in the housing and
consumer durable sectors have helped to fuel the demand for retail credit.
 41
In the aforementioned economic scenario, banks generally have a
greater role to play there by providing them with plenty of business
opportunities and means to enhance value to their customers your bank with
its predominantly retail focus and its established retail franchise is will
positioned to increase its market share in the retail segment and also penetrate
into newer areas with a view to increasing value for its various stakeholders.

Operating and Financial Performance

The strengthening of the management team and the improved

productivity through setting up of well established systems and procedures
during the year have yielded significant operational improvements which has
helped the Bank in achieving a faster turn around.

The operating profit for the Bank was Rs.23.16 crores during the
current year as compared to Rs. 12.13 crores earned in the previous year
despite there being no treasury income in 2007-05 as compared to the income
of Rs.22.74 crores in 2006-04. The Bank has eared an after tax profit of Rs.
25.11 crores during the year as compared to a loss of Rs.105.14 crores during
the previous year. The provisions & contingencies for the year resulted in a
credit fo Rs. 1.95 crores as compared to Rs. 117.27 crores accounted as a
charge during the previous year. Improved recoveries out of previous years
non performing accounts and close monitoring of the NPAs have resulted in
the net NPA ratio improving to 2.5% as on March 31,2008 from 4.3% as on
March 31,2007. During the year the Bank has maintained the momentum on
assets build-up and consequently the retail assets have grown 69.3% (pre-
securitisation) and customer assets (post-securitisation) have registered an
 42
increase of 41% .The average deposits cost has declined t 5.1% from 6.3%
Due to the fact that the composition of the Bank’s advances is predominantly
retail, the bank has improved it’s net interest margin (5.8% over 4.6%).

The Bank has reached a settlement with the sales tax department by which
the previous years disputed tax liabilities have been paid off through an
amnesty scheme.

We are actively following up with the tax authorities to expedite resolution

of all outstanding income tax matters.

a) GROSS INTEREST INCOME

The Bank earned a total interest income for the year ended march 31,
2008 of Rs.346.09 crores marginally higher than Rs.333.79 crores earned for
the previous financial year. Of this income the interest income on advances for
the year was higher at Rs. 268.15 crores as compared to Rs. 202.47 crores
earned for the previous year representing an increase of 32.4%. The average
advances for the year increased by 38.7% over the previous year, mainly due
to growth in retail assets at the same time, the average yield on advances
dropped to 12.3% from 13.2% prevalent in the previous year. The interest
income on investments was lower for the year ended March31, 2008 at Rs.
54.12 crores as compared to rs. 83.93 crores for the previous year representing
reduction of 35% corresponding, the average Investments held had reduced to
Rs. 1186 crores for the year from Rs 1560 crores in the previous year. The
average yield on investments declined during the year to 5.5 from 7.1% during
the previous year in line with the market trend.
 43

b) INTEREST EXPENDED

Total interest expenses for the year-ended march 31, 2008 decreased
by 117.5% to Rs. 168.21 crores from Rs. 203.82 crores in the previous year.
The Interest cost on deposits for the year has reduced to Rs.146.13 crores for
the year from Rs. 180.79 crores for the previous year. The average deposits
during the year has decreased marginally to Rs. 2907 crores as against Rs.
2960 crores in the previous year. The share of retail deposits (savings, current
and term) on an average was 74.4% during the year (previous year 80.1%).
The Bank’s strategy to increase the retail share continues through several
Innovative measures. The average deposit cost for the year has dropped to
5.1% as compared to 6.3% in the previous year.

c) NET INTEREST INCOME

The Net Interest Income for the year ended March 31, 2008 witnessed
an Increased of 37% to Rs.177.88crores from Rs.129.97crores in the previous
year. This increase is primarily due to sustained improvement in Net Interest
Margins (nearly 80% of the Bank’s loan book is retail which is higher yielding
as compared to corporate loans) Increased volumes achieved during the year.
Coupled with declining Interest cost. Consequently the net Interest margin has
improved from previous years 4.6% to 5.8% for the year.
 44

TABLE – 3.2

TABLE SHOWN NET INTEREST MARGIN

S.NO QUARTERS INCOME

Rs. (in crores)
1 4QFY07 5.1
2 1QFY08 5.7
3 2QFY08 5.8

4 3QFY08 6.1
5 4QFY08 5.5

QFY – Quarter of Financial Year

 45

CHART – 3.5

NET INTERST MARGION

6.2

5.8
RS.(IN CRORES)

5.6

5.4
6.1

5.2 5.8
5.7

5.5
5

5.1
4.8

4.6
4QFY07 1QFY08 2QFY08 3QFY08 4QFY08

QUARTER
 46
d) OTHER INCOME (NON-INTEREST)

Other Income (non interest) grew marginally to Rs. 64.46crores for

the year-ended march 31,2008 from Rs.62.98 crores in the previous year.
Income from the treasury operations (Trading profit /Loss as adjusted for
amertisation and revaluation losses and forex profit) for the year resulted in
net loss of Rs.2.60 crores as compared to a net gain of Rs. 19.88 crores
booked in the previous year. Due to rising Interest rates during the year.
Opportunities in the market for booking large profits in trading of securities
have considerably diminished. The retail loans service income grew robustly
in the year to Rs.23.60 crores from RS. 8.84 crores in lthe previous year as a
result of an Increased volume of retail disbursements of Rs.1.829 crores
(previous year Rs. 1020 crores) during the year, In FY 04-05 The Bank added
new income Streams such as insurance and mutual funds which have helped
to generate an income of Rs. 4.76 crores. Concerted efforts in recoveries
helped to post an amount of Rs.6.40 crores as recoveries for the year,
(previous year Rs.2.35 crores) Fees, commissions and exchange incomes
posted healthy increases over the previous year.

e) OPERATING EXPENSES

The Bank’s operating (non – interest) expenses increased 31% to

Rs.189.45 crores during the year-ended march 31, 2008 from Rs.144.68 crores
in the previous year. Staff costs Increased to Rs.42.70 crores from Rs.31.29
crores in the previous year as the Bank’s staff strength increased to 1374 from
112 as on March 31, 2007. Expenses on advertisement and publicity have
risen to Rs.7.72 crores (previous year Rs.4.15 crores) in fandem with the high
 47
growth in retail loans distribursed during the year. Expenses incurred on
infrastructure, establishment of additional distribution channels and expenses
pertaining to marketing of retail loans have also contributed to the increase in
operating expenses during the year.

F) OPERATING PROFIT

The Bank has earned an operating profitofRs.23.16 crores for the year
ended March 31, 2008 as against Rs. 12.13 crores profit earned during the
previous year.

5. PROVISIONS AND CONTINGENCIES

The Bank has made adequate provisions for non-performing assets and
for diminution in the value of investment as per regulatory norms. In respect
of retail loans and certain other classes of loans The bank follows an
accelerated provisioning method where by 100% of the value of the assets is
provided by the time the account has remained delinquent for a period of nine
months.

There has been a reversal of provisions for the year 2007-05

amounting to Rs.1.95 crores as compared to a charge of Rs, 117.27 crores in
the previous financial year. Details of provisions made for major items are as
follows.

1. Provision for NPAs at Rs.7.63 crores (previous year Rs.96.91d crores)

2. Provision for disputed income tax demands of earlier years Rs. Nil
(previous year charge Rs.33.05 crores)
 48
3. Reversal of provision for disputed sales tax demands on lease
transactions of earlier years Rs.2.70 crores (previous year charve of Rs.
5 crores.)
4. Reversal of provisions for depreciation on Investment Rs.1.07 crores
(previous year reversal of Rs. 15.38 crores)
5. Reversal of provisions of Rs. 5crores against value of shares held in
trust (previous year nil)

6. NET PROFIT

The Bank has declared a net profit of Rs. 25.11 crores for the year
ended March 31, 2008 as against a loss of Rs.105.14 crores in the previous
years.
 49
TABLE – 3.3

TABLE SHOWN THE NET PROFIT / LOSS

S.NO QUARTERS RS. (In Crores)

1 4QFY07 -97.7
2 1QFY08 3.2
3 2QFY08 5.3
4 3QFY08 7.1
5 4QFY08 9.6
QFY – Quarter of Financial Year

CHART – 3.6

The Net profit /loss

20 9.6
3.2 5.3 7.1
0
4QFY07 1QFY08 2QFY08 3QFY08 4QFY08
-20
Rs. (in crores)

-40

-60

-80

-100
97.7
-120
QUARTERS

RS. (INCRORES)
 50

APPROPRIATIONS
The following appropriations were made,
 An amount of Rs.6.28 crores t the statutory Reserve
 An amount of Rs. 8.83 crores to the Investment fluctuation Reserve.

ASSETS

The total assets of the Bank Increased to Rs.4, 490.29 crores as on

march 31,2008 from Rs. 3,417.48 crores in the previous year. The customer
asses (loans, leases) amounted to Rs.2, 194 crores as on March 31,2008
(previous year Rs.1, 556.41 crores.) The gross non performing assets,
provisions and net NPAs as n March 31,2008 were Rs.156.41 crpres (previous
year Rs.221.41 crores) Rs.101.36 crores (previous year Rs.152.51crores and
Rs.55/05 crores (previous year Rs. 68.90 crores) respectively. The net NPAs
reduced to 2.5 of net advances as on March 31, 2008 from 4.3% for the
previous year.
 51
TABLE – 3.4

TABLE SHOWN THE RETAIL LOANS

S.NO QUARTERS RS. (In Crores)

1 4QFY07 1245
2 1QFY08 1393
3 2QFY08 1644
4 3QFY08 1873
5 4QFY08 2107
QFY – Quarter of Financial Year

CHART – 3.7

THE RETAIL LOANS

2500

2000
RS. (INCRORES)

1500
2107
1873

1000
1644
1393
1245

500

0
4QFY07 1QFY08 2QFY08 3QFY08 4QFY08
QUARTERS
 52
TABLE – 3.5

TABLE SHOWN THE NET NPAS (%)

QUARTERS
S. No PERCENTAGE (%)
1 4QFY07 4.3
2 1QFY08 4.4
3 2QFY08 3.4
4 3QFY08 3.4
5 4QFY08 2.5
QFY – Quarter of Financial Year

CHART – 3.8

THE NET NPAs (%)

5
4
PERCENTAGE (%)

3
2
1
4.3 4.4 3.4 3.4 2.5

0
4QFY07 1QFY08 2QFY08 3QFY08 4QFY08
QUARTERS

LIABILITIES
 53

Total Deposits of the Bank grew to Rs. 3530.39 crores as on March

31,2008 from Rs.3028.79 crores in the previous year. Retail deposits
constituted 66% of the total deposits as on March 31,2008 as against 80%
for the previous year. Current accounts (CA) and saving accounts (SA)
Deposits Constituted 29 of the total Deposits for the year ended March
31,2008 (previous year 27.5%)

TABLE – 3.6

TABLE SHOWN THE DEPOSITS

S.NO QUARTERS RS. (In Crores))

1 4QFY07 3029
2 1QFY08 3005
3 2QFY08 2813
4 3QFY08 2989
5 4QFY08 3530

QFY – Quarter of Financial Year

CHART – 3.9
 54

THE DEPOSITS
3750

3250

2750

2250
3530
RS. (INCRORES)

1750 3029 3005 2989

2813

1250

750

250
4QFY07 1QFY08 2QFY08 3QFY08 4QFY08

QUARTERS

STATUTORY DISCLOSURES
 55
1) Particulars of Employees pursuant to section 217(2A) of the companies
Act, 1956

The information required under the provisions of section 217 (2A)

of the companies Act, 1956 and companies (particulars of Employees) Rules,
1975 as amended by the companies (particulars of Employees) Amendment
Rules 2005 is given in the annexure appended here to and forms part of this
report, however, in terms of section 219(1) (b) (IV) of the Act, The report and
accounts excluding the aforesaid annexure are being sent to the members.
Interested members may write to the company secretary at the Registered
office of the Bank for obtaining a copy of the said annexure

2. Particulars of conservation of energy and technology absorption as per

section 217 (1) (e)

The provisions of section 217 (1) (e) of the companies Act, 1956 relating
to conservation of energy and technology absorption do not apply to your
bank. The bank has however extensively used information technology in its
operations.

3. Director’s Responsibility statements under section 217 (2AA)

In terms of the provisions of section 217 (2AA) of the companies
(Amendment) Act, 2003 the Directors state that:

I. The applicable accounting standards have been followed in the

preparation of annual accounts and proper explanation have been furnished
relating to material departures.
 56

II. Accounting policies have been selected and applied consistently and
reasonably, and prudent judgment and estimates have been made so as to give
a true and fair view of the state of affairs of the bank as at the end of financial
year on 31st March, 2008 and of the profit and loss of the bank for the
financial year 2007-08.

III. Proper and sufficient care has been taken for the maintenance of
adequate accounting records in accordance with the provisions of the
companies (Amendment) Act 2003 for safeguarding the assets of the bank and
for preventing and detecting fraud and other irregularities.

IV. The annual accounts have been prepared on a going concern basis.

BOARD OF DIRECTORS:

The board of directors of the bank comprises 10 directors.

TABLE – 3.7

TABLE SHOWN LIST OF BOARD OF DIRECTORS

 57
S.No Name Designation
1. Mr. Rana Talwar (Non-executive director chirman)
2. Mr. Shailendra (Executive managing director)
Bhandari
3. Mr. Teo Soon Hoe (represendingkephinance investment
(Mauritius ) pte ltd.
4. Mr.S. Venkiteswaran Independent
5. Mr. Kamlesh Independent
vikamsey
6. Mr. S.K. Jain Independent
7 Mr. Y.k. Modi Independent
8. Mr. Rajiv Maliwal Represending sabre capital world
wide Inc
9. Mr. I.S. George Representing bank muscant (SAOG)
10. Mr.k.k. Abdu Razak Representing bank Muscat (SAOG)
Alternative directors
11. Mr. Ahmed Mr.J.S. george representing bank
Mohamed Al Abri Muscat (SAOG))

12 Mr. Abdul Razak Ali Mr.k.k Abdul Razak representing

lssa bank Muscat (SAOG))
 58
REMUNERATION OF DIRECTORS:

The bank’s remuneration policy is broadly in line with the trends in the
banking sector.

During the year 2007-05 Mr.Shailendra Bhandari, Managing director

was paid an amount of Rs. 133.55 lakhs towards basic salary and allowances.
In addition to the above Mr. Bhandari is entitled to the following perquisites
and benefits:

a). PERQUISITES:

Memberships of one club, free furnished accommodation together with

gas, electricity and water, free use of bank’s car and re-imbursement of salary
and perquisites of driver of a sum not exceeding Rs.10000 per month leave
travel allowances of Rs.200300 per annum.

b). OTHER BENEFITS:

Provident fund @ 12% of basic salary superannuating @ 15% of basic

salary, gratuity @ half a months salary for every completed year of service
payable only after 5 years of service, medical allowance of Rs. 15000 p.a
medical cover including hospitalization for self and 3 dependent, two
telephones and one mobile.
 59
COMMITTEES OF THE BOARD

The board of directors of the bank has constituted eight committees of

directors viz. Executive committee, audit committee, securities transfer,
allotment & grievance redressed committee, risk policy committee, corporate
governance committee, nomination committee, compensation committee and
customer service committee.

Policy formulation and control functions vest with the board of

directors, whereas operational matters are delegate to the above committees.
Composition of the committees of directors, terms of reference etc. are given
below:

a. Executive committee of the board:

The executive committee of the board (ECB) comprises Mr. Rana

talwar , Mr. S. Venkiteswaran, Mr . S. K. Jain, Mr.J. S.George, Mr. Rajiv
Maliwal, Mr.Y.K. Modi and Mr. Shailendra Bhandari. Mr. Rana Talwar is the
chairman of the Executive committee of the board.

The Executive committee of the board discharges functions like

sanction of expenditure, both capital and revenue, within the budget approved
by the board, delegating power to committees of executives and all other
functions pertaining to the operations of the bank, as delegated by the board.
Executive committee of the board held 4 meeting
During the year, attendance of the present directors at those meetings
is given below:
 60
Name of the Director No of meetings attended
Mr. Rana Talwar 4
Mr. S. Venkiteswaran 1
Mr.S. k. jain 3
Mr.J.S.George 4
Mr.Rajiv maliwal 4
Mr.Y.K. Modi (w.e.f 30.6.2007) 1
Mr.Shallendra Bhandari 4

b. Adult committee of the board:

The adult committee of the board (ACB) comprises Mr. Kamlesh

Vikamsey (a chartered accountant), Mr. S.K. Jain, Mr.K.K. Abdul Razak,
Mr.Rajiv Maliwal and Mr.Y K.Modi, Mr Vikarmsey is the chairman of the
ACB the company secretary is the sectary to the audit committee.

The terms of reference of the ACB are in accordance with the

requirements of the RBI guidelines and the liking agreement.
 61
ACB held 7 meeting during the year attendance of the present directors at
those meetings is given below.

Name of the Director Name of the meetings attended

Mr. KamleshVikamsey 5
Mr. S.K.Jain 6
Mr.K.K. Abdul Razak 6
Mr. Rajiv Maliwal (w.e.f1.7.2007) 5
Mr. Y.K. Modi 3

C. Securities transfer allotment & grievance redressal committee;

The securities transfer allotment grievance redressal; committee

comprises Mr.S. Venkiteswaran ,Mr.Kamlesh Vikamesy, Mr.Rajiv Maliwal
and Mr.Shaenda Bhandari Mr.Venkiteswaran is the chairman of the committee
Mr.N.E.Venkiteswaran company secretary is the compliance officer.

During the year 814 shareholder quaires complains were received and
809 of them have been conclusively resolved there were 6 quarries complaints
in process as on 31st march 205, which have since been disposed off. As on
31st March there was no pending share transfer proposal i.e. where the
stipulated time period of 30 days had elapsed.

D. Risk policy committee.

 62
The risk policy committee consists of Mr.S.K. Jain Mr. Kamlesh
Vikamsey Mr.J.S George Mr.Rajiv Maliwaland Mr.Shailendra
Bhandarimr,.S.K Jain is the chairman of the committee.

The terms of reference of the risk policy committee include formulating

the credit risk policy of the bank sanction of credit facilities within the ambit
of the credit policy approved by the board, review of the risk profile of the
various assets of the bank and review and follow up from time to time of the
actions initiated to be initiated by the bank with reference to specific cases the
risk policy committee has also been designated by the board of directors as the
special committee of the board for monitoring exclusively frauds involving
amount of Rs. 1 crore and above in terms of the directives issued by the
reserve bank of India in this regard.

Risk policy committee held 4 meeting during the year attendance of the
present directors at those meetings is given below.

Name of the Director Name of the meetings attended

Mr. KamleshVikamsey 3
Mr. S.K.Jain 3
Mr.J.S. George 4
Mr. Rajiv maliwal 4
Mr.Shailendra Bhandari 4
 63

E. Corporate goverence committee.

The corporate governace committee (CGC) consists of Mr.S

Venkiteswaran Mr.Teosoon Hoe, Mr.Kamlesh Vikamesy and Mr. K.K
Abdulrazak Mr.S Venkiteswara is the chairman of the committee.

Terms of reference of the committee include considering grant of stock

options to employees stock option scheme(s) approved by the shareholders.

The Committee held 2 meetings during the year on11th October 2007
th
and10 January 2008.Mr. Rana Talwar, Mr.J.S.George and Mr. Shailendra
Bhandari Were present at both the meetings of the committeewhile Mr.
Kamlesh Vikamsey attended only one meeting.

f. Nomination Committee:

The nomination committee comprises Mr. Rana Talwar

Mr.S.Venkiteswaran Mr.S.K.Jain Mr.K.K.Abdul Razak and Mr.Shailendra
Bhandari Mr.Rana Talwar is the chairman of the committee.

The nomination committee ooks into aspects relating to appointment of

chairman and whole time directors reconstitution of the board of directors
performance evaluation and appointment of tap management personnel and
related issues.
 64

G. Compensation committee.

The compensation committee consists of Mr.Rana Talwar Mr.Kamlesh

Vikamesy Mr.J.S George and Mr. Shailendra Bhandari Mr. Ranatawlar is the
chairman of the committee. Terms of reference of the committee include
considering grant of stock option scheme approved by the shareholders. The
committee held 2 meetings during the year on 11th October 2007 and 10th

January 2008. Mr.rana talwar Mr.J.S. George and Mr.Shailendhra

Bhandari were present at both the meetings of the committee while
Mr.Kamlesh Vikamsey attended only one meeting.

H. Customer service committee.

The customer service committee has been constituted on 4 th

September 2007 as per the recommendation of the reserve bank of India the
committee consist of Mr.S. Venkiteswaran, Mr.Bajivmaliwal and Mr.
Shailenda Bhandari.

The terms of reference of the committee include looking into the

aspects relating to enchanting the quality of customer service and improving
the level of customer satisfaction for all categories of clients at all times.
 65
GENERAL BODY MEETINGS:

TABLE – 3.8

TABLE SHOWN SCHEDULES OF THE ANNUAL GENERAL

MEETINGS

S.No Particulars Day, Date and Time Venue

1. 6th AGM th
Monday 29 May 2003 at Hotel mandori
10.30 A.M panaji GOA
430 001
2. 7th AGM th
Saturday 25 August 2004 Hotel mandori
at 2.45 P.M panaji GOA
430 001
3. 8th AGM Monday 11 th
November Hotel mandori
2005 at 3.00 P.M panaji GOA
430 001
4. 9th AGM th
Monday 8 Sep.2006 at Hotel mandori
11.30 A.M panaji GOA
430 001
5. 10th AGM th
Saturday 4 sep. 2007 at Goa marriof
11.00 A.M resort panaji
403001 Goa
6. 11th AGM th
Monday 5 sep 2008 at Goa marriof
3.00 P.M resort panaji
403001 Goa
 66
13. Centurion Bank Employees Trust.

The bank had established a trust for the benefit of its employees in the
year 1994-95. The trust was allotted 12,50,000 equity shares of the bank in
1999 out of interest free advance granted by the bank. As per the scheme of
allotment of shares approved by the executive committee of the board, the
specified category of employees are entitled to apply for and obtain allotment
of the numbers of shares specified in the scheme for that category. Under the
schema 4,27,500 shares have been allotted at par to employees up to 31st
march 2007. No allotments were made during the year.

During the year, the trust has under the rights issue of equity shares
of the bank. Been allotted 1,64,46,488 shares against its entitlement for equity
shares held and rights renunciation purchased. The aggregate investments cost
of Rs. 1137.86 lacs to the trust in respect of equity shares allotted was funded
by a loan from the bank to the trust at market related interest rate.

Staff Retirement Benefits.

Provident fund contributions made by the employees and the bank are
managed by a separate trust established for the said purpose. The bank’s
contributions towards the provident fund is account as an expense in the year
incurred.gratuity liability of the bank is covered by a group gratuity and
insurance scheme of the life insurance corporation of India (LIC). The bank’s
annual contribution under the group gratuity scheme is based on LIC’s
actuarial valuation and is charged to the profit and loss account of the period
to which it relates.
 67
The bank’s has a superannuating scheme for all its employees,
management and administers by the LIC. The bank annually contributes a sum
equivalent to 15% of the basic salary to the LIC. The bank’s contribution
towards this liability is accounted as an expense in the year incurred. Leave
encashment entitlement is provided for on accrual basis.

Earnings per share:

The bank reports basic and diluted earnings per equity share in
accordance with the Accounting Standard-20 (AS-20) on earnings, per share
issued by the ICAI. Basic earnings per equity share has been computed by
dividing net profit/ (loss) after tax by the weighted average number of equity
shares outstanding during the period diluted earning per equity share has been
computed using the weighted average number of equity shares and dilative
potential equity shares outstanding during the period.

Wealth Management

The bank has launched financial planning advisory services for mass
affluent customers where risk profiling and financial need analysis is carried
out to arrive at a customer’s financial portfolio. This way the customer is
advised a particular portfolio suiting his her age and risk appetite.

1) The mutual fund business has been expanded by the empanelment of a

total of 22 mutual fund houses by the end of the year the bank targets
an increased penetration of business through its extensive branch
network.
2) Portfolio Management Service (PMS)
 68

An agreement has been signed with ask Raymond James to distribute pms to
the banks customers having a portfolio above Rs.50 lacs
3) Insurance

The bank state life insurance distribution in October 2007. The

first two quarters has witnessed the premium and revenue generated far
exceeding the targets life insurance training has been organized in all regions,
which focuses on product knowledge and sales. The marketing and
distribution of the product have been strengthened and product managers have
been specially recruited for this area.
 69
LIABILITIES

In order to attract more savings and current account deposits, the bank
has launched special programmes like gold universal access. Account
whereon can withdraw cash at any other Bank’s ATM (where MasterCard is
cirrus applicable) without any additional charge. Similarly, the bank has
launched four various current account with multiple facilities and benefits like
cash & cheque pick up from customer’s place.

LOANS:

The Bank launched its mortgage business in February 2008, in three

locations by offering products such as Home loans, Loans against property
and loans for purchase of commercial property. During the year two wheeler
disbursements and book size both registered impressive growth of 84% over
the previous year. The Banks market share amongst the organized financiers
has improved to 17% for the year from 14% during the previous year.

In CV-CE financing the growth in disbursements over the previous year

was 59% and the book size grew by 61%. While the bank has been growing
its retail assets at high rates, it as also put in place securities a portion of its
two-wheeler and CV-CE portfolio. Securitisation has aided the bank in
reducing its balance sheet risk, improve capital adequacy and enhance its
ROE.
The personal loan disbursements grew by 84% over the previous year
and the book size by 95%. A two pronged distribution channel was set up for
up-selling the bank’s products to exiting asset finance customers, branch
 70
customers and in the open market. A 500 member strong universal banking
offices (UBO) team was set up at allocations with product training completed
across the country. Booking of personal loans commenced through centralized
operations (COPS) route and independent credit and risk teams were set up at
most locations.

Risk Management

The bank has polices clearly enunciated for corporate and retail
credit. Detailed norms for various categories of lending have been laid down.
The bank monitors its exposure to different segments of industries. The retails
loans portfolio is widely distributed.

Internal Control and Audit

The internal audit department of the bank undertakes regular internal

audit and inspection of the operations of the bank through its various branches
/ officers. The concurrent audit of the branches / officers was undertaken by
independent chartered accountant firms, covering approximately 67% of the
total business of the bank.

The bank has built up a system of internal controls. Audit trails and
individual rating of the branches based on different parameters such as
business performance, operations, earnings, compliance, house keeping, etc.
The bank’s Audit Committee of the Board (ACB) periodically reviews the
internal and concurrent audit functions.
 71
During the year all the branch/ offices, which were subject to regular
internal audit, were also covered under “Risk Based Internal Audit [RBIA]”
system as per the guidelines issued by the reserve bank of India from time to
time. A risk matrix was drawn up for every branch / office indicating the level
of risk measured for various activities.
The bank has an information security officer who exclusively monitors
information’s technology related system and security aspects as per regulatory
and internal guidelines issued from time to time branch network.

The bank has network of 99 outlets including branches and extension

counters covering 59 Cities, 154 ATMs and 47 asset finance divisions on
march 31,2008.
1. It has set up four service branches and one centralized operations office to
relieve the load of branches, enabling enhanced productivity and utilization
i.e. marketing and relationship. Trade finance operations have been brought
under operations to have better management and customer delivery.

2. Central monitoring and reconciliation’s units are set up to have centralized

mentoring of branch transactions. Human resources the bank had
on its rolls 1374 employees as on march 31,2008. The human resources
department launched its-learning platform this year, which is being used for
imparting knowledge on banking, the bank’s products and processes to its
employees.’ art of living” workshops are being organized across the bank for
about 500 centurions, to enable them to realize their potential and de-stress
themselves
 72
The top management team has been revitalized. We have successfully
recruited 520 banking professionals with proven track record this year. 90
management trines included in the above count] have been recruited this year.
Scheme like referral scheme like and internal job posting have been launched
successfully to source and deploy the right talent in the bank

To recognize extraordinary contributions of the employees the “Aha!”

scheme was introduced an annual performance appraisal exercise is carries
out, which reflects good hr practices of sharply differentiating between the
performances of employees. As per performance ratings, the employees have
been awarded increments and target variable incentives this year. For some of
the good performances a salary correction is made in order to match their
salaries with that of the market.

Conclusion:

This chapter deals with performance of centurion bank,

amalgamation of bank of Punjab Limited with Centurion Bank Limited,
Management discussion and analysis, Committees of the Board, and
Centurion Bank employees Trust. The next chapter provides a brief of analysis
of preparation of schedule, Notes for accounting policies , Balance sheet for
four years, profit and loss account , cash flow statement, Ratio analysis and
financial highlights.
 73
CHAPTER - IV
PREPARATION OF SCHEDULE

This chapter provides a brief of analysis of preparation of schedule,

Notes for accounting policies, Balance sheet for four years, profit and loss
account, cash flow statement, Ratio analysis and financial highlights.

Significant Accounting Polices:

1. Basis of preparation

The financial statements have been prepared on a historical cost

convention and on the accrual basis of accounting unless otherwise started and
comply with the accounting standards, statutory provisions and generally
accepted practices prevailing within the banking industry in India.

The preparation of financial statements requires the management to

make estimates and assumptions that are considered in the reported amounts
of assets and liabilities (including contingent liabilities) as of the date of
financial statements and the reported income and expense during the reporting
period. Management believes that the estimates used in the preparation of the
financial statements are prudent and reasonable. Actual results could differ
from these estimates any revision to financial estimates are recognized
prospectively in the financial statements, when revised.
 74

2. Recognition of income and expenditure

Income and expenditure are accounted for on accrual basis expect as

otherwise stated income on non performing assets including lease and hire
purchase assets recongnised on realisation basis as per the reserve bank of
India (RBI) guidelines.

In case of assets covered by consent decrees, receipts are first adjusted

against principal amounts outstanding. Thereafter any further receipts are
recognized as income.

Income by way of exchange, commission, brokerage etc., is

recognized on realization basis. Commission on guarantees is recognized as
income over the period of the guarantees. Income on lease/ hire purchase
finance.

Income from assets given on lease prior to 1 st April 2004, is recognized

on the basis of interest rate implicit in such leases in accordance with the
guidance note issued by the Institute of Chartered Accountants of India (ICAI)
no assets has been given on lease after 1st April 2004.

Income from loan cum hypothecation/ hire purchase finance is

recognized on the basis of interest rates implicit in these transactions.
Income from distribution of life insurance products is recognized on receipt
on confirmation of business from the insurance company.
 75

3. Foreign exchange transactions:

Foreign currency assets and liabilities (monetary items) as at the end of

the year are reported at the year end-closing rates notified by the foreign
exchange dealers association of India (FEDAI) and the resultant gains or
losses are accounted in the profit and loss account

Forward exchange contracts intended for trading or speculation and

outstanding at the balance sheet date, are revalued at the year-end forward
rates for the residua maturity period and the resultant gains and losses are
accounted in the profit and loss account. Such forward rates are derived from
the yearend forward rates notified by FEDAM. The premium discount on
other forward contracts is amortized to the profit and loss account over the
contract period. All forward exchange contracts are reflected as contingent
liabilities at the contracted rate. Income and expenditure items are accounted
for at the exchange rates ruling on the date of transactions.
 76
4. Investments:

Investments are reported in the balance sheet under six groups, viz.
government other approved securities shares debentures and binds
investments in subsidiaries joint ventures and other investments.In terms of
RBI guidelines the investment portfolio is classified as under:

Held to maturity investment that the bank intends to hole to maturity.

Held for trading investments that are held for resale within 90 days
from the date of purchase.

Available for sale all other securities the classification of investments is

determined at the time of other acquisition subsequent transfers from one
classification to the other are done at the least of the acquisition cost book
value and market value prevailing on the date of the transfer and the resultant
depreciation if any is provided for.

a) Valuation

Held to maturity Investment is carried in the books at their acquisition

cost. Any premium on acquisition of security over its face Value is amortized
over the balance period remaining to its maturity. Available for sale and held
for trading Investments are marked to market in each group, viz government
securities other approved securities shares debentures and bonds investments
in subsidiaries joint ventures and other investment as shown in schedule –8
net appreciation in each group if any is ignored and net depreciation if any is
provided for by debiting the profit and loss account.
 77
Treasury bills are valued at carrying cost. Cost of investments excludes
broken period interest paid on acquisition of investments. Market value of
investments classified in available for sale and held for trading categories
where current quotations are not available is determined as per the norms laid
down by RBI as under:

Market value of unquoted government securities is determined based

on the yield to maturity (YTM) rate for government securities of equivalent
maturity published by fixed income money market and derivates association
of India (FIMMDA).

In case of unquoted bonds debentures and preference shares where

interest dividend is received regularly the market price is determined based on
YTM for governments securities with suitable markup for credit risk
applicable to the credit rating of the instrument the credit risk mark up for
various credit ratings and maturity are determined on the basis of the credit
spread matrix published by

FIMMDA.

Unquoted bonds, debentures and preference shares where dividend

interest is not received regularly are valued on the basis of prudential norms
prescribed by RBI as applicable to advance.
Unquoted equity shares are carried at lower of cost and break up value
ascertained from the latest available balance sheet.

Units of mutual funds and securitisation receipts are valued at lower

of cost and net asset value. Subordinated pass through certificates held by the
 78
bank in respect of its securities portfolio, are carried at cost as reduced by
expected delinquency losses.

5. Provisioning an Advance:

Advances are classified into standard substandard doubtful and

loss assets and appropriate provision as applicable to each category is made in
terms of RBI guidelines. In respect of retail loans and certain other loans, the
bank follows and accelerated provisioning method whereby 100% of the
assets value is provided by the time the account is delinquent for 9 months.

A general provision of 0.25% is made on standard assets portfolio on a

global basis as per prudential guidelines of RBI.

6. Fixed Assets

Fixed assets are carried at cost less accumulated depreciation as

adjusted for impairment if any in terms of accounting standard –28 on
impairment of assets. Assets taken on finance lease after 1-4-2004 are
included under fixed assets own assets in compliance with the accounting
standard-19 (AS-19) accounting for leases issued by the ICAI. Assets given on
lease prior to 1.4.2004 have been accounted for in accordance with the
guidance note issued by the ICAI no assets were given on lease after 1.4.2004
In respect of assets for own use depreciations is provided on straight line
method (slm) at the rates and in the manner specified in schedule XIV to the
companies act, 1956 expect the assets specified as under where depreciation is
provided on SLM at rates which are higher than those specified in schedule
XIV tto the companies act 1956.
 79

In respect of assets given on lease prior to 1st April 2004. Depreciation

is provided on written down value method at rates specified in schedule XIV
of t have companies act, 1956 ease equalizations and lease terminal
adjustment are accounted in accordance with the guidance note issued by the
ICAI. That the bank took over from the erstwhile TCFC depreciation is
provided on the following basis

(a) Leased assets acquired on or after 1st April 1989 are depreciated by a

method derived from the guidance note issued by the ICAI under which
100% of the cost of the asset is depreciated over the primary lease period
using the weighted average interest rate implicit in the leases calculated for
each of the accounting periods and applied to the weighted disbursements
during each such period to calculate the principal recovery which is
provided as depreciation for the year. As per those method the useful life
and the primary leased period of al categories of leases assets is considered
to be five years on an average.

(b) On assets sold/ terminated depreciation is provided only up to the end of

the previous financial year. The profit or loss on sale/ termination of such
assets is accounted for in the year of such sale/ termination based on the
book value as at the end of the previous financial year.

Provisions on non-performing leased assets are made as per RBI

guidelines. Premium paid on leasehold land is amortized over the initial lease
period.
 80

9. Taxes
Income taxes comprise the current tax provision and the net change in
the deferred tax asset or liability in the year. Provisions for current tax is
computed are accordance with applicable tax laws. Deferred tax assets and
liabilities are recognized for the timing differences, where there are carry
forward losses or unabsorbed depreciation as per tax laws, deferred tax assets
are recognized only if there is a reasonable certainty of their realization.

10. Share and debenture issue expenses.

Share and debenture issue expenses are adjusted against securities

premium account.

11. Net profit / (loss)

The net profit/ (loss) in the profit and loss account is after
adjustment of all usual and necessary provisions including provisions for
taxes.

12. Change in accounting policy:

Forward contracts other than those intended for trading or

speculation and outstanding as at the balance sheet date were in earlier years
revalued on the balance sheet date and the resultant gains or losses were
recognized in the profit and loss account. During the year the bank has
changed the method of accounting such contracts by amortizing to the profit
 81
and loss account the premium or discount on such contracts over the contract
period instead of their revaluation, The aforesaid change does not have
material impact on the profits of the year and reserves at the end of the year.

II. NOTES TO ACCOUNTS

1. Share Capitals and Securities Premium:

a) Authorized Capital:

In the annual general meeting held on 4 th September 2007. The

shareholders of the bank approved the cancellation of 150 crores equity shares
of Re.1/- each of the bank lying unused out of the authorized capital. After
effecting the aforesaid cancellation, authorized capital of the bank now stands
at Rs.150 crores comprising of 150 crores equity shares of Re.1/-each.

b) Rights issue:

In accordance with the scheme of arrangements under sections 391 to

394 with section 81(1A) and sections 100 to 103 act, 1956 amongst bank
Muscat (SAOG) centurion bank ltd, and shareholders of Centurion Bank Ltd.
Which was approved by the shareholders of the bank and sanctioned by the
honorable high court of judicature at Bombay Goa bench and the honorable
high court of Karnataka, a rights issue of 22, 69,88,077 equity shares of the
bank of Re1/- each at a premium of Rs, 3/- was made. The securities transfer
allotment and grievances committee of the board of directors in their meeting
held on 15th Oct, 2007 have allotted 22,69,44,320 equity shares under the
rights issue’s.
 82

Pursuant to a CDR issue made by the bank, the securities transfer,

allotment and grievance’s committee of the board of directors (the committee)
in their meeting held on 29th March, 2008 issued to the depository 218749500
equity shares of Re.1/- each at a total premium of Rs.28473 lacs
(approximately Rs.13.02 per share) the depository has in turn issued CDRS to
the overseas investors at a price of US$ 4.80 per GDR with each GDR
representing 15 underlying equity shares of the bank.

Pursuant to the exercise of the option by the lead mangers to the CDR
issue, the bank further issued to the depository 3,12,51,000 equity shares of
Re.1/- each for an aggregate premium of Rs. 4063 lacs 6th April 2008 refer
table after schedule-2.

c) Convertible warrants:

Under the scheme of arrangement referred to in note 1.2 the bank has
issued on 6th February 2007, 13,50,00,000 warrants convertible in to
13,50,00,000 equity shares of the face value of Re.1/- per share at a premium
of Rs.3/- per share. The warrants can be exercised at any time upon
completion of the capital infusion of Rs.21900 lacs envisaged in the scheme
of arrangement but prior to 60 months from the date of issue of the warrants
these warrants are outstanding as on 31st March 2008 and have not been
converted into equity shares.

In December 2007, two employee stock option plans (ESOPS) were

approved by the shareholder through postal ballot. One scheme covers key
employees of the bank (key ESOP scheme). The remuneration committee is
 83
empowered to identity the key employees and directors for the coverage under
the scheme. The other scheme (General ESOP scheme) coves all the
permanent employees of the bank including directors as may be decided by
the remuneration committee. Under the terms of the shareholders approval,
the aggregate value of option granted the ESOPS must not exceed 10% of the
paid up capital of the bank

Under the key ESOP scheme:

600 lacs options were granted to ‘sabre’ at an exercise of Rs.4/- per

share on 11th October 2007 (the date of approval of the key ESOP scheme by
the remuneration committee) when the intrinsic value of the banks share’s
proposal for recapitalisation and restructuring of the bank that was approved
by the board of directors of the bank. Of the above 2,02,00,000 options were
issued on 31st March 2008 to directors nominated by share.

(a) 110.50 lacs options were granted on 10th January 2008 to other key

employees at an exercise price of Rs.4/- per share when the intrinsic value
of the bank’s share was Rs.19.50. These options were offered to the
employees on 28th March 2008.

The difference between the intrinsic value of the bank’s share and the
exercise price of the option is treated as deferred employees compensation
expenses and is amortized as employee compensation expenses to the profit &
loss account over the period commencing from the date of issue of the option
to the date of their vesting.
 84
Under the general ESOP scheme, 83,50,000 options (including 6,00,000
options to the managing directors) were granted to employees at an exercise
price of Rs. 19.50, which is also the intrinsic value. Of these 75,54,700
options (including 5,40,000 options to the managing director) were revoked
on 2nd April, 2008 and 1,25,00,000 options (including 5,40,000 options to the
managing directors) were granted to employees at an exercise price of
Rs.15.25. Options under all the schemes vest in a grated manner over five
years with 40%, 30% vesting at the end of each year after completion of three
years.

2. Borrowings:

The Bank has repaid certain liabilities taken over from the trust while
TCFC, in respect of which the release of charge on specific assets is in
progress.

Subordinated Debt Bank has raised subordinated debt of:

a. Rs. 10000 lacs in the financial year 2002-00 in the form of bonds
maturing on 3rd May 2008.

b. Rs. 4300 lacs in May 2007 by issue of 430 subordinated bonds in

the nature of promissory notes/ Debentures as under.

(i). 280 bonds of Rs. 10,00,000/- each bearing interest of 6.85% p.a and
redeemable on 15th May 2010.
ii. 150 bonds of Rs 10,00,000/- each bearing inserts of 7.05% p.a and
redeemable on 15th May, 2014
 85

c. Rs 3500 lacs in January 2008 by issue of 350 bonds in the nature of

promissory notes / debenture as under:

I) 20 bonds of face value of Rs. 10, 00,000/- each bearing interstate

floating rate 1 year G.Sec plus 200 bps annum and redeemable on 25th
may 2010.
II) 290 bounds of face value of Rs. 10,00,000/- each bearing interest of
8.50% p.a and redeemable on 25th may 2010.
III) 40 bonds of face value of Rs.10, 00,000/- each bearing interest of 8.75%
p.a and redeemable on 25th may 2014.
These bonds quality for classification as tier II capital as per formula lay down
by RBI

3. Advances and provisioning

In the case of advances classified as non- performing while making

provisions as per RBI guidelines, the bank has taken into account the
realizable value of securities based on whether it has first second or
subsequent charge on such securities as well as approved value’s assessment
of the value of such properties mortgaged to the bank. The bank has also taken
into account value of claims lodged with ECGC or any other agencies as per
RBI guidelines.
In respect of proposals to restructure assets referred to the corporate
debt Re-strutting cell (CDR) and awaiting approval the bank is carrying a
 86
provision of Rs.152.80 lacs (previous year Rs.348 lacs)for the potential loss of
income for past and future period on prudent basis.
‘Others’ in the other liabilities & provisions (schedule 5) include general loan
loss provisions of Rs. 656 lacs (previous year Rs.656 lacs) against standard
assets.

Advances under priority sector as on 31st March, 2008 include amount

aggregating Rs.30609 lacs (previous year Rs.23771 lacs) that have been
estimates as outstanding in respect of qualifying borrowers for purchases of
two wheelers and personal loans based on a study conducted.

Securitisation of Loans:

During the year, the Bank securities out retail loans of the carrying
value of Rs.45836.12 lacs to special purpose vehicle (SPVs) which resulted in
gains of Rs. 2790.55 lacs being the net present value of future cash flows
determined at the negotiated yield less the book value as adjusted for
delinquencies estimated based on past average. the gains are included as
interest income in schedule. 13. The bank continues to service the loans
transferred to these SPVs by acting as a collection agent. The bank has
provided credit enhancements in the form of cash collaterals and by
subordination of cash flows to sender passes through certificates.

4. Fixed assets and depreciation:

Other fixed assets include Rs.558 lacs representing book value of

certain properties acquired by the bank in respect of which some formalities
relating to transfer in the name if the banks are pending.
 87

The premises owned by the bank cost Rs.698.27 lacs, written down
value (WDV) Rs. 112.71 lacs together with the movable assets cost
Rs.1065.47 lacs and WDV Rs.253.85 lacs were during the year, gutted by a
fire. The said premise was a part of a co-operative society. Out of the WDV
OF THE PREMISES, Rs.112.71 being the estimates WDV of the
superstructure together with the WDV of the other movable assets destroyed
in the year, and are included as on sale of fixed assets/ wire offs under
schedule 14.

The balance WDV of the premises of Rs. 516.46 lacs is carried

forward as the carrying value of the banks share in the undivided land on
which the superstructure stood. The conveyance of the land in favor of the co-
operative society is pending. The bank has preferred a claim for the insured
value of the assets destroyed (which is higher than the WDV of the assets
written off) on the insurance company for the loss suffered. Pending
acceptance/ settlement, the claim has been accounted to the extent of the loss
as per book. The credit for the claim is netted off from the profit/loss on sale
of fixed assets/ white offs in schedule 14. Accounting adjustments, as further
required will be made on settlement of the claim.

5. Amount recoverable under the financial support agreement.

Under the financial support agreement (FSA) dated 8th April 2002
executed by TCFC finance ltd (TFL), AN AMOUNT OF Rs.4000 lacs was
recoverable from TFL against which TFL had pledged 40,000,000 equity
shares of the bank owned by them (TFL shares). As per the scheme of
arrangement referred to in note. 1.2 the TFL shares have on 19th January 2007,
 88
vested in the centurion bank stock trust nominated by the bank’s board of
directors for the benefit of the bank upon which event TFL stood discharged
in terms of the FS. The amount of Rs.4000 lacs that was recoverable from
TFL, was carried under “other assets- others” (schedule-11) as the value of
benefit realizable from the said shares held in trust.

During the year, the trust raised a sum of Rs.480 lacs by way of sale
of the rights entitlement on the said shares. After the said sale, the carrying
value of the benefit realizable from the shares stands reduced to Rs.3520 lacs.

The bank had, in an earlier year made a provision of Rs. 500 lacs
against the realizable value of the balance TFL shares following a fall in
market value of the said shares. As at the year-end the market value of the
shares held in trust were Rs.5980 lacs, which was higher than the carrying
value of the benefit realizable from the shares. The provision of Rs.500 lacs
has been reversed during the year.

6. Disputed tax Demands:

In respect of disputed incomes tax demands of earlier years in

appeal not provided for, the bank based on the assessment of an independent
firm of chartered accountants, is of the opinion that it has a good chance of
succeeding in these cases.

In respect of the bank’s appeal that were pending before the income tax
appellate tribunal against income tax demands for the earlier years
aggregating Rs.3994 lacs, the tribunal has, during the year, set aside the issues
involved to the file of the assessing officer. During the year, an application for
 89
settlement commission, this is pending admission. An application for
settlement before the settlement commissioner in respect of appeals pending
before the appellate authority against income tax demands of Rs.16809.46
lacs, was also filed during the year, which is also pending admission.

“Tax paid in advance/tax deducted at source” appearing under

schedule 11-“other assets “ includes an amount of Rs. 5473.27 lacs (previous
year Rs.4112 lacs) paid by the bank/adjusted by the income tax department in
respect of disputed tax demands as reduced by the provision made therefore.
In respect of disputed sales tax demands of earlier years, the bank
has, during the year, settled its dues with the department under an amnesty
scheme. On such settlement provision to the extent of Rs.270 lacs made in
earlier years was no longer required and has been written back during the year.

7. Provisions and contingencies:

In view of brought forward losses as per books of accounts and

unabsorbed depreciations as per tax calculations, the bank does not expect any
income tax liability for the year.

8. Appropriations to Reserves.

Appropriation to capital and investments fluctuation reserves; As per

extant RBI guidelines, bank are required to build up investments fluctuation
reserve (IFR) of a minimum of 5 per cent of investment in ‘held for trading’
(HFT) and ‘Available for sale’ (AFS) categories, by march 31, 2006. For the
first time the bank has during the year appropriated Rs.883 lacs to the IFR.
 90
Creation of Debenture Redemption Reserve:

As per the circular issued by the ministry of law in April 2005 banking
companies are not required to create debenture redemption reserve under
section 117 c of the companies act. 1956 in respect of debenture issued by
them. Accordingly, no amount has been appropriated to the said reserve.

BALANCE SHEET

It is a statement prepared with an aim to know the exact financial

position of the business on the last date of the financial year. All nominal
accounts, e.g., salaries, wages, carriage, commission, rent etc. in the trial
balance are transferred to trading and profit and loss account. Now accounts
left out are the real accounts and personal accounts of customers are grouped
under the heading ‘sundry debtors’. These balances of real and personal
accounts are grouped as assets and liabilities and are arranged in a proper way
and the resultant statement is called a balance sheet or position statement.
Assets are shown on the right hand side and liabilities on the left hand side.
 91

TABLE – 4.1

BALANCE SHEET FOR 4 YEARS

THE TABLE SHOWN ASSETS AS ON 31ST MARCH 2008

(Rs. In lacks)
Assets Schedule March March March March
2005 2006 2007 2008
Cash & balance with
RBI 6 30592 21984 26095 33190
Balance with bank and
money at call and short 7 33226 26863 7074 13104
notice
Investments 8 122722 99925 118210 147964
Advances 9 163409 131372 155641 219395
Fixed assets 10 32199 23034 18468 13643
Other assets 11 34429 35369 29399 33872

Total 416577 338547 354887 461168

Contingents liabilities 12 143366 140576 112567 158877
Bills for collection 11027 16325 24124 26433
Significant accounting 18
polices
Notes to accounts 19
 92
TABLE – 4.2

THE TABLE SHOWN LIABILITIES AS ON 31 ST MARCH 2008

(Rs. In lacks)
Capital & Schedule March2005 March2006 March2007 March2008
liabilities
Capital 1 15247 15247 5675 10132
Reserves & 2 2335 2335 13620 48863
surplus
Employees
stock - - - 9
option
outstanding
(Net)
Deposits 3 353499 283471 302879 353038
Borrowings 4 11143 6048 4397 4375
Other
liabilities 5 34353 31446 354887 44751
&
provisions

Total 416577 338547 354887 461168

PROFIT AND LOSS ACCOUNT

Gross profit or gross loss so calculated is taken to the second part

of the account called Profit And Loss Account. All the remaining expenses
and losses are shown on the debit side and incomes and gains on the credit
side of this account. The difference of the sides is either net profit or net loss,
which is taken to the capital account of the proprietor, Net profit is added to
the capital and net loss is deducted from the capital.
 93
TABLE – 4.3

THE TABLE SHOWN PROFIT AND LOSS ACCOUNT FOR THE

YEAR ENDED 31 ST MARCH 2005 TO 2008
Particulars Schedule March2005 March2006 March2007 March2008
Income
Interest earned 13 48218 37134 33379 34609
Other income 14 7076 7988 6298 6446

Total A 55294 45122 39677 41055

Expenditure
Interest 15 37869 26930 20382 16821
expended
Operating
expenses (other 16 9897 11148 14468 18945
than
depreciation)
Depreciation 6087 4875 3614 2973

Total B 53853 42953 38464 38739

Operating profit
A-B=C 1441 2169 1213 2316
Provisions &
contingencies 17 10842 4705 11727 2511
Net (p/l) for the 9401 2536 10514 195
year
(Add) provision
for impairment 781
of assets

Total 9401 2536 11295 2511

 94
Appropriation:
Transfer to
statutory
reserves
Transfer to
investments
fluctuation
reserve
Less adjusted
on reduction of
capital
Balance
brought forward
from earlier
years
Balance carried
over to balance
sheet
Earnings per
equity share:
Face value Re.1
per share basic

Cash Flow Statement:

In fund flow statement all financial resources and all financial

applications are included while in cash flow statement the movement of cash
is only considered. At the time of preparing fund flow statement all current as
well as non-current items are considered while at the time of preparing cash
flow statement only inflow and outflow of cash is considered.
 95
TABLE – 4.4
THE TABLE SHOWN CASH FLOW STATEMENT FOR THE
YEAR ENDED 31ST MARCH 2006
Particulars 2005 2006
Cash flows from
operating activities
Net profit before
income tax, 2168.50 1440.82
provisions &
Contingencies
Adjustment for:
Depreciation
charged
For the year lease 5806.25 7366.28
equitation charge
employee stock
option expenses
amortization on
investments in
HTM category

Loss on sale of
assets (including 1.414.19 7220.44 283.95 7650.23
loss on lease
termination)
Total 9388.94 9091.05
Adjustment for:
Incr/decr in invest 22643.1 92020.06
9
Incr/decr in 27287.7 30908.62
advances 7
Incr/decr in borrow 5095.07 99186.34
Incr/decr in 70027.8 24147.6 73946.45
deposits 1 1
Incr/decr in other
assets 4518.10 1.086.65
Incr/decr in other
liabilities &
 96
provisions 3473.74 822.00
Total 14758.6 43021.71
7
Direct taxes paid 1933.86 838.68
Net cash flow from
operating activities 16692.5 43860.39
3
Cash flow from
investing activities:
Purchase of fixed
assets (including 923.52 4677.56
capital work In
progress)
Proceeds from sale
of fixed assets 2644.33 1720.81 209.96 4467.60

Net cash used in

investing activities 14971.7 48327.99
2
Cash flow from
financing activities:
Proceeds from
issue of share
Dividend paid.
Net cash flow from
financing activities
Net (incr/decr) in
cash and cash
equivalents 14971.7 48327.99
2
Cash and cash
equivalent as on 1st 63819.0 112147.05
April 2005 6
Cash and cash
equivalent as on 48847.3 63819.06
31st march 2006 4
 97

TABLE – 4.5
THE TABLE SHOWN CASH FLOW STATEMENT FOR THE
YEAR ENDED 31ST MARCH 2008
 Adjustment for:
98
Incr/decr in invest 30421 9820
Incr/decr in 64516 19067
advances
Incr/decr in borrow 22 1652
Incr/decr in deposits 50160 866
Particulars
Incr/decr iin other 2007 2008
Cash assets
flows from 4045 2053
Incr/decr
operating iin other
activities
liabilities
Net profit before &
income provisions tax, 16804
2316 -32040 41881213 33540
provisions &
Total
Contingencies 24644 27066
Directfor:
Adjustment taxes paid 571 1140
Net cash flow from
Depreciation 2973 3614
operating activities 25215 28206
charged
Cash flows from
For theinvesting
year activities
Leasepurchase
equitation 1117
of fixed 1149
charge assets (including
Employee
capital stock
work in
option progress)
expenses 9 1083 - 848
amortization
Proceeds fromon sales
investments in 774 1236
of fixed assets 153 465 58 790
Net Cash flow from
HTM category
Loss investing
on sale activates:
of 25062 28206
assets (including 207 5080 33 5261
loss on lease
Net
termination) (incr/decr) in
cash and cash 13127 15679
Total 7396 6474
equivalents
Cash and cash
equivalents as on 1st 33168 48847
April 2007
Cash and cash
equivalents as on 46295 33168
31st march 2008
Cash flow from
financing activities 13317
proceeds from issue 38189
of shares
Dividend paid 38189 13317
Net cash flow from
financial activates
 99

RATIO ANALYSIS:
 100
Ratio means an expression of one number with relation to another.
Dividing one number by another forms it. Accounting ratio analysis means to
determine the characteristics of financial statements for forecasting the
solvency position, liquidity and future earning capacity of the concern.

Being ratio is calculated from published accounts, which suffers

from numbers of imitations, ratio suffers from imperfections. Ratio is only
quantitative in form and lack qualitative characteristics necessary for making
decisions. There are no standard formulae available for constructing ratios,
ratios calculated are based on historical information and cannot be suitably
used for un-predictable.
 101
Fig. No: 4.1
CLASSIFICATION OF RATIOS

FINANCIAL STATEMENTS RATIOS

BALANCE SHEET PROFIT AND LOSS ACCOUNT

RATIO RATIO
a. Current ratio (or) a. Gross profit ratio
Working capital ratio b. Operating ratio
a. Liquidity ratio (or) c. Net profit ratio
Acid test ratio (or) d. Expenses ratio
Quick ratio
b. Debt equity ratio
c. Proprietary ratio
d. Capital gearing ratio

COMBINED RATIO
a. Debtor-turnover ratio
b. Inventory turnover ratio
c. Net profit to fixed assets ratio
d. Working capital turnover ratio
e. Receivable/debtors turnover ratio
f. Creditor turnover ratio
g. Return on capital employed
h. Return on shareholders
‘investment/fund.
i. Return on equity capital
j. Return on total assets
 102
LIQUIDITY RATIOS

CURRENT RATIO:
Current assets
Current ratio =
Current liabilities

Year Ratio
2005 9.16:1
2006 9.03:1
2007 10.85:1
2008 9.39:1

QUICK RATIO:
Current Asset - Stock in Hand
Quick Ratio =
Current liabilities

Year Ratio
2005 9.16:1

2006 9.03:1

2007 10.85:1

2008 9.39:1
 103
DEBT EQUITY RATIO

Loans
Debt Equity Ratio =
Capital + Net Profit

Year Ratio
2005 18.58:1
2006 14.35:1
2007 14.77:1
2008 5.76: 1

RETURN ON INVESTMENT

Net profit
Return on Investment =
Capital + Net Profit

Year Ratio
2005 7.58: 1
2006 10.98: 1
2007 5.91: 1
2008 3.78: 1
 104
RETURN ON WORKING CAPITAL

Net Profit
Return on Investment =
Working Capital

Year Ratio
2005 0.39: 1
2006 0.72: 1
2007 0.38: 1
2008 0.56: 1

FINANCIAL HIGH LIGHTS:

TABLE - 4.6

THE TABLE SHOWN ON SHARE CAPITAL

S.No Year Rs.

1 1999 10125
2 2000 10125
3 2001 10125
4 2002 11872
5 2003 15247
6 2004 15247
7 2005 15247
8 2006 15247
9 2007 5675
10 2008 10132
 105

From the above table shows, the share capital in 1999-2001 is Rs.10125 no
increase the share capital. It is increase for the year 2002 of Rs.1747 crores
and the coming year of 2003,01,02,03 is Rs.15247crores, increased for Rs.
5122 crores. It is decrease for the year 2004 of (Rs 15247. -5675) crores,
decreases for Rs. 9572 crores. The bank approved the cancellation of 150
croes equity shares of Re.1/- each of the bank lying unused out of the
authorized capital. After effecting the aforesaid cancellation, authorized
capital of the bank now stands at Rs. 150 crores comprising of 150 crores
equity shares of Re. 1/- each. And last financial year 2008 is increase for Rs.
4457 crores. Merger of business of banglore branch of bank Muscat (BM)
with the bank and BM contributing totsl capital of Rs. 75 crores including the
value of the business of banglore branch. Infusion of Rs.79 crores by
allotment of shares to Sabre and other existing and new investors.
 106
CHART – 4.2

SHARE CAPITAL
16000

14000

12000
RS.(IN LACS)

10000

15247

15247

15247

15247
8000
11872

6000
10125

10125

10132
10125

4000

5675
2000

0
Y1999 Y2000 y2001 y2002 y2003 y2004 y2005 y2006 y2007 y2008

YEARS

Rs.
 107
TABLE - 4.7

THE TABLE SHOWN ON NET WORTH

S.No Year Rs.

1 1999 11210
2 2000 12056
3 2001 13130
4 2002 17410
5 2003 20054
6 2004 21726
7 2005 5542
8 2006 2016
9 2007 6156
10 2008 46856

From the above table shown the net worth in 1999, Rs.11210 crores in
2000, Rs. 12056 crores increased (11210-12056) Rs. 846 crores . in 2001,
Rs.13130 crores in 2002, Rs. 17410 crores increased (13130-17410) Rs. 4280
crores . in 2003, Rs.20054 crores in 2004, Rs. 21726 crores increased (20054-
21726) Rs. 1702 crores . in 2005, Rs. 5542 crores in 2006, Rs.2016 crores,
certain corporate accounts hae turned non-performing during the year due to
various problem faced by these borrowers. The increase in NPA level has,
however to be viewed in the contest of the considerable decresses in total
advances. The bank continues its thrust on mobilising low cost and relatively
stable retail deposits.
 108
CHART – 4.3

NET WORTH
y2008 46856

y2007 6156

y2006 2016

y2005 5542

y2004 21726
YEARS

y2003 20024

y2002 17410

y2001 13130

Y2000 12056

Y1999 11210

0 5000 10000 15000 20000 25000 30000 35000 40000 45000 50000
RS. (In Lakes)
Rs.
 109
TABLE - 4.8
THE TABLE SHOWN ON TOTAL ASSETS

S.No Year Rs.

1 1999 35532
2 2000 129524
3 2001 158513
4 2002 310434
5 2003 522434
6 2004 587971
7 2005 402585
8 2006 322981
9 2007 341748
10 2008 449029

From the above table shown the net worth in 1999, Rs.35532 crores in
2000, Rs. 129524 crores increased (35532-129524) Rs.93992 crores . In 2001,
Rs.158513 crores in 2002, Rs. 310434 crores increased (158513-310434) Rs.
151921 crores. In 2003, Rs.522434 crores in 2004, Rs. 587971 crores
increased (522434-587971) Rs. 65537 crores, in 2005, Rs. 402585 crores in
2006, Rs.322981 crores, in pursuance of the policy of shifting from the low
yielding corporate loans tio hioger yielding retail assets, the corporate loan
book was gradually reduced. The bank continues to be a leader in finacing of
two wheelers, commercial vehicles and construction equipment despite the
entry of other major players and fierce competition in this field. These retail
products have historically demonstrated healthy asset quality and low
delinquency rates with a view to further broad base the retail portfolio, the
bank has now focused on a personal loan product after carefully assessing the
customer demand and other aspects. In 2007, Rs.341748 crores and 2008, Rs.
449029 crores duly increased.
 110

CHART – 4.4

TOTAL ASSETS
600000

500000

400000
Rs.(In Laks)

300000
587971
522434

449029
200000
402585

341748
322981
310434

100000
35532

158513
129524

0
Y1999 Y2000 y2001 y2002 y2003 y2004 y2005 y2006 y2007 y2008

YEAR
 111
TABLE - 4.9

The Table Shown On Deposits / Advances / Gross Income

Year Deposits Advances Gross Income

Y1999 21527 18778 4433
Y2000 103155 73521 11395
Y2001 124705 84483 20404
Y2002 214081 135039 43917
Y2003 386708 183981 53159
Y2004 425743 202840 64539
Y2005 353499 162597 55294
Y2006 283471 131372 45122
Y2007 302879 155641 39677
Y2008 353038 219395 41055

CHART –4.5

Deposits / Advaces / Gross Income

450000
400000
350000
300000
Rs (In laks)

250000
200000
150000
100000
50000
0
Y1996 Y1997 Y1998 Y1999 Y2000 Y2001 Y2002 Y2003 Y2004 Y2005
YEARS
deposits advances gross income
 112

Net interest income:

The net interest income during 2004-05 was Rs. 103.49 crores as
against Rs. 102.04 crores during 2005-06 and 2006-07 was Rs.129.97 crores.
It has increased of 37% to Rs. 177.88 crores in 2007-08. it is noteworthy that
despite the falling interest rate scenario and reduction in advances. This was
achived through a judicious change in the composition of assets and liabilities.

TABLE - 4.10
THE TABLE SHOWN ON GROSS PROFIT (BEFORE
DEPRECIATION)

S.No Year Rs.

1 1999 1223
2 2000 2750
3 2001 4744
4 2002 9402
5 2003 10769
6 2004 12061
7 2005 7528
8 2006 7044
9 2007 4827
10 2008 5289

CHART – 4.6
 113

GROSS PROFIT (BEFORE DEPRECIATION)

14000
12000
10000
8000
Rs.(In lacs)

6000

12061
10769
9402
4000

7528
7044
1223

5289
4827
4744

2000
2750

0
Y1999 Y2000 Y2001 Y2002 Y2003 Y2004 Y2005 Y2006 Y2007 Y2008

YEAR
 114
TABLE - 4.11

THE TABLE SHOWN ON NET PROFIT/LOSS

S.No Year Rs.

1 1999 964
2 2000 1624
3 2001 2007
4 2002 2144
5 2003 3433
6 2004 702
7 2005 (16184)
8 2006 (2536)
9 2007 (10514)
10 2008 2511

CHART – 4.7

NET PROFIT/LOSS

4000
1624
964

3433

702

-2536

2000
2511
2144
2007

0
-2000 Y1999 Y2000 Y2001 Y2002 Y2003 Y2004 Y2005 Y2006 Y2007 Y2008
-4000
-10514

-6000
-16184

-8000
-10000
-12000
-14000
-16000
 115

TABLE - 4.12
THE TABLE SHOWN ON NUMBER OF BRANCHES

S.No Year Rs.

1 1999 10
2 2000 20
3 2001 30
4 2002 33
5 2003 35
6 2004 49
7 2005 57
8 2006 60
9 2007 61
10 2008 75

CHART – 4.8

NUMBER OF BRANCHES
80
70
60
Rs (In Lacs)

50
40
30
20
10
10
20 30 33 35 49 57 60 61 75
0
Y1999 Y2000 Y2001 Y2002 Y2003 Y2004 Y2005 Y2006 Y2007 Y2008

YEAR
 116

TABLE - 4.13

THE TABLE SHOWN ON NUMBER OF EMPLOYEES

S.No Year Rs.

1 1999 100
2 2000 160
3 2001 248
4 2002 635
5 2003 710
6 2004 821
7 2005 965
8 2006 945
9 2007 1112
10 2008 1374

CHART – 4.9

NUMBER OF EMPLOYEES

1400
1200
Rs.(In Lacs)

1000
800
600
248

400
160
100

200
1374
1112
710
635

965

945
821

0
Y1999 Y2001 Y2003 Y2005 Y2007

YEARS

TABLE - 4.14
 117

THE TABLE SHOWN ON DIVIDENDS

S.No Year Rs.

1 1999 -
2 2000 7.5
3 2001 9
4 2002 10
5 2003 11
6 2004 -
7 2005 -
8 2006 -
9 2007 -
10 2008 -

CHART – 4.10

DIVIDENDS

12

10
Rs.(In Lacs)

6 11
10
9
4 7.5

0
Y1999 Y2000 Y2001 Y2002 Y2003 Y2004 Y2005 Y2006 Y2007 Y2008

YEARS

LOOKING FORWARD TO A WIDER REACH

 118
We believe families that reach out, Stay together and grow together,
which is why, we’ve done all we can to build 175 locations across 45 cities,
that reach 7.5 lakh people, But we won’t rest. Not until the time we are sure
nobody reaches out to their families and offers them better services than we
do.

LOOKING FORWARD TO ENHANCED LIFESTYLES

When you believe in kinship, as deeply as we do, do all you can to

keep you family happy which is why our products are the best and our
processes, the simplest. Last year alone, Centurion bank offered a two-
wheeler loan every three minutes we fulfill dreams. We change lives, that’s
part of our value system.

LOOKING FORWARD TO STRONGER RELATIONSHIPS

There’s thing about kinship, you fanatically stand up for who you
believe is your own. That is how it is with relationship at centurion bank. We
are bound to customer by a bond that is as thick as blood. We built these
bonds on the back of mutual trust and healthy values. The older it grows, the
more mature it gets.

STRONG FOUNDATIONS LIMITLESS FUTURE

 119

Determined and persistent efforts have made centurion bank survive the
challenges thrown at it. The bank continues to make efforts and investments in
acquiring the best technology and building the infrastructure worthy of a
world-class retail bank. With sizeable nationwide reach, a large customer base
strong technology infrastructure and a motivated management team with
global retail banking experience at the helm, the future stretches ahead of us
with limitless possibilities.

CONCLUSION

This chapter provides a brief of analysis of preparation of schedule,

Notes for accounting policies, Balance sheet for four years, profit and loss
account, cash flow statement, Ratio analysis and financial highlights. The next
chapter provides a Summary, Conclusion and Suggestions.
 120
CHAPTER - V

SUMMARY & CONCLUSION

The previous chapter provides a brief analysis of preparation of

schedule, Notes for accounting policies, Balance sheet for four years, profit
and loss account, cash flow statement, Ratio analysis and financial highlights.
This chapter, the final one, is to present the make certain conclusion.

PRIME LENDING RATES A HURDLE:

One of the glaring deficiencies of the banking system in the reform era
is the pricing of loans by the public sector banks in are irrational manner. Both
the concept and the reliance on the prime lending rates (PLRs) have been new
to Indian when first introduced, PLRs, a mechanism by which individual
banks determine the interest rate structure, served only a neutral purpose. With
the freeing rate of interest in the reform era, banks acquired the discretion to
charge their customers on their own assessment of risk involved. To reckon
with the increasing competition not only among them selves, but also from the
rest of the financial sector, the banks loaned their corporate customs at sub –
PLR rates. More than 70% loans have been sanctioned at less than sub – PLR
rates.
 121
CORPORATE CUSTOMERS DICTATE BANKS:

These corporate customers dictate the banks as they have other option
to raise funds. As a result, the banks are forced to levy higher rates on loans to
small industries and agriculture, the two sectors that rely more than over on
bank funds.

DEPOSITORS SUFFER:

Evidently, bank’s practice of favoring corporate with loans at very

attractive rates has had its repercussions on their liabilities too and the
depositors have been getting raw deal deposits rates do not cover inflation.
Subsiding one class of borrowers while penalising. The socially important
sector as well as depositors has to end. For them most corporate loans are
‘safe’. Individual managers who continue to remain risk adverse need to be
motivated through more enlightened personnel policies.

CUSTOMER SERVICE SATISFACTION - THE PRIME DRIVER:

Customer is nucleus around which bank structures ought to take &

shape, operate and develop. Policies and procedures should be used as tools to
manage the physical resources, but more importantly the human resources as
banking services are rendered by human being to human being. Important to
customer service in banks are the systems and organizational arrangements, as
well as the characteristic and behaviour of employees and customers.

This research examines the performance of centurion bank with regard

to the utilization of resources, customer satisfaction from service and the
 122
employee behaviour, their attitudes towards customer by using the published
data by the bank.

POSITIONAL DIFFERENCE – A HURDLE:

Employee diversities were significant by their position the type of

branch at which they were placed. The differences between officers at the
clerks were significant one some dawn graphical psychological disposition,
namely: region of origin has of work, educational qualification, earnings,
adoptability interpersonal styles of nurturance and relationship oriented. The
position effects were observed to be the second most powerful effects. The
clerical group had an under range of educational qualifications there the
officers. Many of the older officers had started as clerks and belong to the
region in which the bank originated and has had its headquarters. Officers
spent, spent relatively longer hours at work than clerks: reported a higher
earning were more adoptable and preferred nurturance and task related slyter.

Difference between officers and clerk, were also observed in the

differential importance attached by the employees to the work values in the set
work commitment was indicated as the most chosen value individualizing was
the second most preformed value. Officers differed from clerks in the
preference for work commitment personalized relation and rest.

BRANCH PROFILE:

The branch profiles were evolved using extreme cases on efficiency and
satisfaction. The Vellore branch of the Centurion bank comes under the most
satisfying branch. This branch has been rated as the best in terms of customer
 123
satisfaction from service. It had good amount of business deposit competition
from nationalised banks and ICICI. This branch attracted routine of customers
as the Vellore town is attracting more purpose for various parties of the
country for the medical people for various facts of the country for the medical
treatment at CMC Hospital. The branch offered facilities for the operator of
accounts advances and lockers. The branch was also distributing loans to the
worker section of the society under differential rate of interest.

PROFILE OF THE BRANCH MANAGER:

The branch manager was a young and help for man. He had been only
recently promoted for the clerical group. The customers respected him but the
customers did often not take him seriously because of his young age.
Employees had positive attitude towards customers. They had known interest
in the growth of businesses at the branch in order to

earn a good image. The employees perceived the organizational climate as

good and open. They also had higher scores on the motivation to work
competence adoptiditly job involvement and bank identification. The general
employee attitude towards the mangers was reported to be nurturance.

QUICK SERVICE & PERSONALIZED SERVICE THE NEED OF THE

DAY:

The customers expressed satisfaction from service only if they felt

impersonal touch of being cared for at being attended to. Secondly it approved
for the customers point of view the two factors was an important component
of efficient service. If the service was rendered quickly, it was efficient at if
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not it was not efficient. This was linked to the type of customer services at the
location of bank.

SCOPE FOR FURTHER RESEARCH:

1. Customer service is an indicator of banks effectiveness. It is important

to examine the following question systematically. Who controls the

quality of customer service? How is it controlled? How can it be
intervened? Answers to these questions may provide some useful
directions to bank managements in their efforts to respire customer
service. A study may be made to find the answer to the above question
by selecting five branches at a time.

2. Can customer shake up the employee for the inertia at get better
service? Both the customers and employees have to be fair to each other
in their dewads expectation and obligation and to exercise grant control
on the customer service competition away banks has improved quality
of service. It has lead to improved efficiency in two ways (i) by
extending the range of services offered (ii) by improving the effacing of
rendering service. A study about the respect of competition among
banks maybe mode to find out the improvement in services and quality
of services at the banks.

3. A study of job behvaiour of bank employee maybe made to know the

physiological impact about the computerization of bank. Has developed
human research? Does the banks policy lacks intensive motivation.
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