1.

1 ORIGIN OF BANKING:

The term bank was derived from the Italian word ‘Banco’, the Latin word ‘Banque’ and the
French term ‘Banque’ which means Bench. An office for monetary transaction taken over on the
bench and desks used as counters then. The German word ‘Banck’which means joint stock fund
or a common fund raised from large no of public.

Banking is an old as the Indian civilization. Banking i.e. lending money existing in the
Babylonians period early as 2000BC. The Babylonians had developed a system of bank. under
which they temples for lending and they lent money against the gold; silver, which were left with
them as a safe custody.

In India money lending existed in the ancient period. The ancient Hindu sculpture referred to the
existence of the money lending activities in Vedic period. Vaishyas mainly did the business of
banking. These vyshyas were moneylenders or traders. The ancient epic Hindu law written by
Manu and Kautilyas artashastra we can famous book were we could find banking.

Bank is a familiar term used in day-to-day activities. It is commonly known to all

for the banking function, which it does banking function is to borrow money and lend money.
Presently it is familiarly known for its miscellaneous services like to pay phone bill electricity
bill due of letter of credit etc. Banking as a kind of business is recent origin but it has the vast
history.

1.2 DEFINITION OF BANK:

According to Indian banking regulation act of 1949 sec5 (1) (c) defines the term Banking
Company as any company, which transacts business of banking in India.
Sec5 (1)(b) defines banking as accepting for the purpose of lending or investments of deposits of
money from the public repayable on demand or otherwise and withdrawal by cheque, drafts,
order or other wise
History Of Banking In India

Without a sound and effective banking system in India it cannot have a healthy economy. The
banking system of India should not only be hassle free but it should be able to meet new
challenges posed by the technology and any other external and internal factors.

For the past three decades India's banking system has several outstanding achievements to its
credit. The most striking is its extensive reach. It is no longer confined to only metropolitans or
cosmopolitans in India. In fact, Indian banking system has reached even to the remote corners of
the country. This is one of the main reason of India's growth process.

The government's regular policy for Indian bank since 1969 has paid rich
dividends with the nationalisation of 14 major private banks of India.

Not long ago, an account holder had to wait for hours at the bank counters for getting a draft or
for withdrawing his own money. Today, he has a choice. Gone are days when the most efficient
bank transferred money from one branch to other in two days. Now it is simple as instant
messaging or dial a pizza. Money have become the order of the day.

The first bank in India, though conservative, was established in 1786. From 1786 till today, the
journey of Indian Banking System can be segregated into three distinct phases. They are as
mentioned below:

• Early phase from 1786 to 1969 of Indian Banks

• Nationalisation of Indian Banks and up to 1991 prior to Indian banking sector Reforms.
• New phase of Indian Banking System with the advent of Indian Financial & Banking
Sector Reforms after 1991.

To make this write-up more explanatory, I prefix the scenario as Phase I, Phase II and Phase III.

Phase I

The General Bank of India was set up in the year 1786. Next came Bank of Hindustan and
Bengal Bank. The East India Company established Bank of Bengal (1809), Bank of Bombay
(1840) and Bank of Madras (1843) as independent units and called it Presidency Banks. These
three banks were amalgamated in 1920 and Imperial Bank of India was established which started
as private shareholders banks, mostly Europeans shareholders.
In 1865 Allahabad Bank was established and first time exclusively by Indians, Punjab National
Bank Ltd. was set up in 1894 with headquarters at Lahore. Between 1906 and 1913, Bank of
India, Central Bank of India, Bank of Baroda, Canara Bank, Indian Bank, and Bank of Mysore
were set up. Reserve Bank of India came in 1935.

During the first phase the growth was very slow and banks also experienced periodic failures
between 1913 and 1948. There were approximately 1100 banks, mostly small. To streamline the
functioning and activities of commercial banks, the Government of India came up with The
Banking Companies Act, 1949 which was later changed to Banking Regulation Act 1949 as per
amending Act of 1965 (Act No. 23 of 1965). Reserve Bank of India was vested with extensive
powers for the supervision of banking in india as the Central Banking Authority.

During those days public has lesser confidence in the banks. As an aftermath deposit
mobilisation was slow. Abreast of it the savings bank facility provided by the Postal department
was comparatively safer. Moreover, funds were largely given to traders.

Phase II

Government took major steps in this Indian Banking Sector Reform after independence. In 1955,
it nationalised Imperial Bank of India with extensive banking facilities on a large scale specially
in rural and semi-urban areas. It formed State Bank of india to act as the principal agent of RBI
and to handle banking transactions of the Union and State Governments all over the country.

Seven banks forming subsidiary of State Bank of India was nationalised in 1960 on 19th July,
1969, major process of nationalisation was carried out. It was the effort of the then Prime
Minister of India, Mrs. Indira Gandhi. 14 major commercial banks in the country was
nationalised.

Second phase of nationalisation Indian Banking Sector Reform was carried out in 1980 with
seven more banks. This step brought 80% of the banking segment in India under Government
ownership.

The following are the steps taken by the Government of India to Regulate Banking
Institutions in the Country:
 • 1949 : Enactment of Banking Regulation Act.
• 1955 : Nationalisation of State Bank of India.
• 1959 : Nationalisation of SBI subsidiaries.
• 1961 : Insurance cover extended to deposits.
• 1969 : Nationalisation of 14 major banks.
• 1971 : Creation of credit guarantee corporation.
• 1975 : Creation of regional rural banks.
• 1980 : Nationalisation of seven banks with deposits over 200 crore.

After the nationalisation of banks, the branches of the public sector bank India rose to
approximately 800% in deposits and advances took a huge jump by 11,000%.

Banking in the sunshine of Government ownership gave the public implicit faith and immense
confidence about the sustainability of these institutions.

Phase III

This phase has introduced many more products and facilities in the banking sector in its reforms
measure. In 1991, under the chairmanship of M Narasimham, a committee was set up by his
name which worked for the liberalisation of banking practices.

The country is flooded with foreign banks and their ATM stations. Efforts are being put to give a
satisfactory service to customers. Phone banking and net banking is introduced. The entire
system became more convenient and swift. Time is given more importance than money.

The financial system of India has shown a great deal of resilience. It is sheltered from any crisis
triggered by any external macroeconomics shock as other East Asian Countries suffered. This is
all due to a flexible exchange rate regime, the foreign reserves are high, the capital account is not
yet fully convertible, and banks and their customers have limited foreign exchange exposure.

Banking services in India

With years, banks are also adding services to their customers. The Indian
banking industry is passing through a phase of customers market. The
customers have more choices in choosing their banks. A competition has been established within
the banks operating in India.

With stiff competition and advancement of technology, the services provided by banks has
become more easy and convenient. The past days are witness to an hour wait before withdrawing
cash from accounts or a cheque from north of the country being cleared in one month in the
south.

This section of banking deals with the latest discovery in the banking instruments along with the
polished version of their old systems.

1.3 IMPORTANCE OF BANKING IN INDIA:

Banks plays significance in the economic development of a country. They touch every aspect of
the modem economy. Some of the important roles played by the banks for the development of
Indian economy is as follows:
1) Bank mobilize the small, scattered and ideal saving of the people and make available for
the productive purpose i.e. they help in the process of capital formation.
2) By offer ring attractive interest on saving of the people deposited with them, banks
promote the habit of thrift and saving among them
3) Banks a convient and economic means of payment and transfer of funds i.e. cheques DD,
bank drafts
4) Banks help the movement of funds from regions where they are not very useful to regions
where they can be more usefully employed.
5) Though the supply of money (bank money and credit money) banks exert a powerful
influence on the interest rates in the money market
6) Banks help trade and commerce, industry and agriculture by meeting their financial
requirements.

7) Banks directs flow of funds into productive channels. while lending money they
discriminate in favour of essential activities and against non-essential activities.
 8) In the modem economy people who save and people who undertakes investments are
different hence there is a need for financial intermediaries like banks that should help the
flow of funds from savers to investors.
9) Through the process of creation of money banks acquire the control over the supply of
money in the country. Through their control over the supply of money, they influence the
economic activity, employment, income and the general prices in the economy

1.4 INDIAN BANKING SYSTEM

The Indian banking system can be broadly classified into Nationalized, private banks and
specialized banking institutions, the RESERVE BANK OF INDIA acts as a centralized body
monitoring any discrepancies And shortcoming in the system, since the nationalization of banks
in 1969 the public sector banks like The City Co-operative Bank Ltd. Etc. have acquired a place
of prominence and has since then seen tremendous progress.

The need to become highly CUSTOMER FOCUSED has forced the slow moving public
sector banks to adopt a fast track approach, the varieties of products and services through e-
banking has increased the scope of our banking system.

The conservative banking practices allowed Indian banks to be insulted partially

from the Asian currency crisis. Indian banks are now quoting all higher valuation when
compared to banks in other Asian countries (Viz, Hong Kong, Singapore, Philippines etc,) that
have major problem’s linked to huge Non-performing assets (NPA’s) and payment defaults. the
co-operative banks are growing its revenue through the efficient branch networks mainly focused
on the retail segments (like car finance, housing loans, track finance etc,).

The Indian banking has finally worked up to face the competitive dynamics of the new
Indian market and is addressing the relevant issues to take on the multifarious challenges of
globalization, Banks that employ INFORMATION TEHCNOLOGY SOLUTIONS are perceived
to be “FUTURISTICS” and “PROACTIVE” players capable of meeting the multifarious
requirements of the large customers base.

Now the private banks have been fast on the uptake and are reorienting their strategies
using E-BANKING as a medium, the E-BANKING has emerged as the new an challenging
frontier of marketing with the conventional physical world being just as applicable like in any
other marketing medium.

The Indian banking has come from a long way from being a sleepy business institution to
a highly proactive and dynamics entity. This transformation has been largely brought about by
the large close of liberalization and economic reforms that allowed banks to expose new business
opportunities rather then generating revenues from conventional streams, (i.e. borrowing and
lending). The banking in India is highly fragmented with 30 banking units contributing to almost
50% of deposits and 60% of advances.

Indian nationalized banks (I.e. government owned) continue to be the major lenders in the
economy due to their sheer size and penetrative networks which assures them high deposit
mobilization.

SOME OF THE IMPORTANT INFORMATION UNDER THIS TOPIC IS AS

FOLLOWS;

A.) PRE-NATIONALISATION (1947-1969)

 Before nationalization of banks from our independence day

• The Total number of bank branches was 8,262

• The Total deposits mobilization was RS.4, 669 Crores

B.) POST NATIONALISATION (1969- TODAY)

After Nationalization of banks to today

• The Total number of branches are 68,000

• The Total deposits mobilization are RS.15, 81,288 Crores

NOTE:- THE ABOVE STATISTICAL INFORMATION GIVEN IS AS ON JULY 2007.

RISK ASSOCIATED WITH TODAY’S BANK ARE AS FOLLOWS

1) Loss of money and Goodwill due to mismanagement

2) Closure of banks

3) Depositors loose money

4) Shrinkage of economy
REGULATORY AUTHORITIES

To control the risk associated of today’s bank there are some Important AUTHORITIES.
namely,

1) Central or State government (GOI)

2) Reserve bank of India (RB I)

3) Securities and exchange board of India (SEBI)

 4) Export — import bank (EXIM)

ACTS COVERING THE ABOVE REGULATIONS ARE AS FOLLOWS:-

A)Reserve Bank of India 1934

B)Banking Regulation Act 1949

C)Securities and Exchange Board of India 1992

D) Foreign Exchange Management Act 1999 (Amendment)

E) Indian Banking Association Code for Banking Practice.

REGULATORY MEASURES ARE AS GIVEN BELOW:-

1) ACCOUNTING STANDARDS

2) BENCH MARKS FOR LENDING

3) PRUDENTIAL NORMS COVERING

(a) CAPITAL NORMS

(b) INCOME RECOGNISATION AND

ASSET CLASSIFICATION

(c) BANKS EXPOSURE LIMITS

(d) DISCLOSURE NORMS, TRANSPERENCY IN BANK BALANCE

SHEET.

(e) GUIDELINES FOR INVESTMENTS

(f) CORPORATE GOVERANCE.

REGULATORY MEASURES were brought because OF:- -

1) To strengthening the financial system of the Indian banking system

2) To protect the interests of the depositors mainly.

3) To improve the economy.

4) Hedge against the loss

5) To project better image of the Indian banks at the international level

Banks In India

In India the banks are being segregated in different groups. Each group has their own benefits
and limitations in operating in India. Each has their own dedicated target market. Few of them
only work in rural sector while others in both rural as well as urban. Many even are only catering
in cities. Some are of Indian origin and some are foreign players.

All these details and many more is discussed over here. The banks and its
relation with the customers, their mode of operation, the names of banks
under different groups and other such useful informations are talked about.

One more section has been taken note of is the upcoming foreign banks in India. The RBI has
shown certain interest to involve more of foreign banks than the existing one recently. This step
has paved a way for few more foreign banks to start business in India.

Major Banks in India

• ABN-AMRO Bank • Indian Overseas Bank

• Abu Dhabi Commercial • IndusInd Bank
Bank • ING Vysya Bank
• American Express Bank • Jammu & Kashmir Bank
 • Andhra Bank
• Allahabad Bank
• Axis Bank (Earlier UTI
Bank)
• Bank of Baroda
• Bank of India
• Bank of Maharastra
• Bank of Punjab
• Bank of Rajasthan
• Bank of Ceylon
• BNP Paribas Bank
• Canara Bank
• Catholic Syrian Bank
• Central Bank of India
• Centurion Bank
• China Trust Commercial
Bank
• Citi Bank
• City Union Bank
• Corporation Bank
• Dena Bank
• Deutsche Bank
• Development Credit Bank
• Dhanalakshmi Bank
• Federal Bank
• HDFC Bank
• HSBC
• ICICI Bank
• IDBI Bank
• Indian Bank
Indian Banks Association
The Indian Banks Association (IBA) was formed on the 26th September,
1946 with 22 members. Today IBA has more than 156 members
• JPMorgan Chase Bank
• Karnataka Bank
• Karur Vysya Bank
• Laxmi Vilas Bank
• Oriental Bank of
Commerce
• Punjab National Bank
• Punjab & Sind Bank
• Scotia Bank
• South Indian Bank
• Standard Chartered Bank
• State Bank of India (SBI)
• State Bank of Bikaner &
Jaipur
• State Bank of Hyderabad
• State Bank of Indore
• State Bank of Mysore
• State Bank of Saurastra
• State Bank of
Travancore
• Syndicate Bank
• Taib Bank
• UCO Bank
• Union Bank of India
• United Bank of India
• United Bank Of India
• United Western Bank
• Vijaya Bank
comprising of Public Sector banks, Private Sector banks, Foreign banks having offices in India,
Urban Co-operative banks, Developmental financial institutions, Federations, merchant banks,
mutual funds, housing finance corporations, etc.

The functioning of IBA

• To promote sound and progressive banking principles and practices.

• To render assistance and to provide common services to members.

• To organise co-ordination and co-operation on procedural, legal, technical, administrative

and professional matters.

• To collect, classify and circulate statistical and other information.

• To pool together expertise towards common purposes such as reduction in costs, increase
in efficiency, productivity and improve systems, procedures and banking practices.

• To project good public image of banking through publicity and public relations.

• To encourage sports and cultural activities among bank employees.

Financial And Banking Sector Reforms

The last decade witnessed the maturity of India's financial markets. Since
1991, every governments of India took major steps in reforming the
financial sector of the country. The important achievements in the
following fields is discussed under serparate heads:
 • Financial markets
• Regulators
• The banking system
• Non-banking finance companies
• The capital market
• Mutual funds
• Overall approach to reforms
• Deregulation of banking system
• Capital market developments
• Consolidation imperative

Now let us discuss each segment seperately.

Financial Markets

In the last decade, Private Sector Institutions played an important role. They grew rapidly in
commercial banking and asset management business. With the openings in the insurance sector
for these institutions, they started making debt in the market.

Competition among financial intermediaries gradually helped the interest rates to decline.
Deregulation added to it. The real interest rate was maintained. The borrowers did not pay high
price while depositors had incentives to save. It was something between the nominal rate of
interest and the expected rate of inflation.

Regulators

The Finance Ministry continuously formulated major policies in the field of financial sector of
the country. The Government accepted the important role of regulators. The Reserve Bank of
India (RBI) has become more independant. Securities and Exchange Board of India (SEBI) and
the Insurance Regulatory and Development Authority (IRDA) became important institutions.
Opinions are also there that there should be a super-regulator for the financial services sector
instead of multiplicity of regulators.

The banking system

Almost 80% of the business are still controlled by Public Sector Banks (PSBs). PSBs are still
dominating the commercial banking system. Shares of the leading PSBs are already listed on the
stock exchanges.

The RBI has given licences to new private sector banks as part of the liberalisation process. The
RBI has also been granting licences to industrial houses. Many banks are successfully running in
the retail and consumer segments but are yet to deliver services to industrial finance, retail trade,
small business and agricultural finance.

The PSBs will play an important role in the industry due to its number of branches and foreign
banks facing the constrait of limited number of branches. Hence, in order to achieve an efficient
banking system, the onus is on the Government to encourage the PSBs to be run on professional
lines.

Development finance institutions

FIs's access to SLR funds reduced. Now they have to approach the capital market for debt and
equity funds.

Convertibility clause no longer obligatory for assistance to corporates sanctioned by term-

lending institutions.

Capital adequacy norms extended to financial institutions.

DFIs such as IDBI and ICICI have entered other segments of financial services such as
commercial banking, asset management and insurance through separate ventures. The move to
universal banking has started.

Non-banking finance companies

In the case of new NBFCs seeking registration with the RBI, the requirement of minimum net
owned funds, has been raised to Rs.2 crores.

Until recently, the money market in India was narrow and circumscribed by tight regulations
over interest rates and participants. The secondary market was underdeveloped and lacked
liquidity. Several measures have been initiated and include new money market instruments,
strengthening of existing instruments and setting up of the Discount and Finance House of India
(DFHI).

The RBI conducts its sales of dated securities and treasury bills through its open market
operations (OMO) window. Primary dealers bid for these securities and also trade in them. The
DFHI is the principal agency for developing a secondary market for money market instruments
and Government of India treasury bills. The RBI has introduced a liquidity adjustment facility
(LAF) in which liquidity is injected through reverse repo auctions and liquidity is sucked out
through repo auctions.
On account of the substantial issue of government debt, the gilt- edged market occupies an
important position in the financial set- up. The Securities Trading Corporation of India (STCI),
which started operations in June 1994 has a mandate to develop the secondary market in
government securities.

Long-term debt market: The development of a long-term debt market is crucial to the financing
of infrastructure. After bringing some order to the equity market, the SEBI has now decided to
concentrate on the development of the debt market. Stamp duty is being withdrawn at the time of
dematerialisation of debt instruments in order to encourage paperless trading.

The capital market

The number of shareholders in India is estimated at 25 million. However, only an estimated two
lakh persons actively trade in stocks. There has been a dramatic improvement in the country's
stock market trading infrastructure during the last few years. Expectations are that India will be
an attractive emerging market with tremendous potential. Unfortunately, during recent times the
stock markets have been constrained by some unsavoury developments, which has led to retail
investors deserting the stock markets.

Mutual funds

The mutual funds industry is now regulated under the SEBI (Mutual Funds) Regulations, 1996
and amendments thereto. With the issuance of SEBI guidelines, the industry had a framework for
the establishment of many more players, both Indian and foreign players.

The Unit Trust of India remains easily the biggest mutual fund controlling a corpus of nearly
Rs.70,000 crores, but its share is going down. The biggest shock to the mutual fund industry
during recent times was the insecurity generated in the minds of investors regarding the US 64
scheme. With the growth in the securities markets and tax advantages granted for investment in
mutual fund units, mutual funds started becoming popular.

The foreign owned AMCs are the ones which are now setting the pace for the industry. They are
introducing new products, setting new standards of customer service, improving disclosure
standards and experimenting with new types of distribution.

The insurance industry is the latest to be thrown open to competition from the private sector
including foreign players. Foreign companies can only enter joint ventures with Indian
companies, with participation restricted to 26 per cent of equity. It is too early to conclude
whether the erstwhile public sector monopolies will successfully be able to face up to the
competition posed by the new players, but it can be expected that the customer will gain from
improved service.

The new players will need to bring in innovative products as well as fresh ideas on marketing
and distribution, in order to improve the low per capita insurance coverage. Good regulation will,
of course, be essential.

Overall approach to reforms

The last ten years have seen major improvements in the working of various financial market
participants. The government and the regulatory authorities have followed a step-by-step
approach, not a big bang one. The entry of foreign players has assisted in the introduction of
international practices and systems. Technology developments have improved customer service.
Some gaps however remain (for example: lack of an inter-bank interest rate benchmark, an
active corporate debt market and a developed derivatives market). On the whole, the cumulative
effect of the developments since 1991 has been quite encouraging. An indication of the strength
of the reformed Indian financial system can be seen from the way India was not affected by the
Southeast Asian crisis.

However, financial liberalisation alone will not ensure stable economic growth. Some tough
decisions still need to be taken. Without fiscal control, financial stability cannot be ensured. The
fate of the Fiscal Responsibility Bill remains unknown and high fiscal deficits continue. In the
case of financial institutions, the political and legal structures hve to ensure that borrowers repay
on time the loans they have taken. The phenomenon of rich industrialists and bankrupt
companies continues. Further, frauds cannot be totally prevented, even with the best of
regulation. However, punishment has to follow crime, which is often not the case in India.

Deregulation of banking system

Prudential norms were introduced for income recognition, asset classification, provisioning for
delinquent loans and for capital adequacy. In order to reach the stipulated capital adequacy
norms, substantial capital were provided by the Government to PSBs.

Government pre-emption of banks' resources through statutory liquidity ratio (SLR) and cash
reserve ratio (CRR) brought down in steps. Interest rates on the deposits and lending sides almost
entirely were deregulated.

New private sector banks allowed to promote and encourage competition. PSBs were encouraged
to approach the public for raising resources. Recovery of debts due to banks and the Financial
Institutions Act, 1993 was passed, and special recovery tribunals set up to facilitate quicker
recovery of loan arrears.
Bank lending norms liberalised and a loan system to ensure better control over credit introduced.
Banks asked to set up asset liability management (ALM) systems. RBI guidelines issued for risk
management systems in banks encompassing credit, market and operational risks.

A credit information bureau being established to identify bad risks. Derivative products such as
forward rate agreements (FRAs) and interest rate swaps (IRSs) introduced.

Capital market developments

The Capital Issues (Control) Act, 1947, repealed, office of the Controller of Capital Issues were
abolished and the initial share pricing were decontrolled. SEBI, the capital market regulator was
established in 1992.

Foreign institutional investors (FIIs) were allowed to invest in Indian capital markets after
registration with the SEBI. Indian companies were permitted to access international capital
markets through euro issues.

The National Stock Exchange (NSE), with nationwide stock trading and electronic display,
clearing and settlement facilities was established. Several local stock exchanges changed over
from floor based trading to screen based trading.

Private mutual funds permitted

The Depositories Act had given a legal framework for the establishment of depositories to record
ownership deals in book entry form. Dematerialisation of stocks encouraged paperless trading.
Companies were required to disclose all material facts and specific risk factors associated with
their projects while making public issues.

To reduce the cost of issue, underwriting by the issuer were made optional, subject to conditions.
The practice of making preferential allotment of shares at prices unrelated to the prevailing
market prices stopped and fresh guidelines were issued by SEBI.

SEBI reconstituted governing boards of the stock exchanges, introduced capital adequacy norms
for brokers, and made rules for making client or broker relationship more transparent which
included separation of client and broker accounts.

Buy back of shares allowed

The SEBI started insisting on greater corporate disclosures. Steps were taken to improve
corporate governance based on the report of a committee.
SEBI issued detailed employee stock option scheme and employee stock purchase scheme for
listed companies.

Standard denomination for equity shares of Rs. 10 and Rs. 100 were abolished. Companies given
the freedom to issue dematerialised shares in any denomination.

Derivatives trading starts with index options and futures. A system of rolling settlements
introduced. SEBI empowered to register and regulate venture capital funds.

The SEBI (Credit Rating Agencies) Regulations, 1999 issued for regulating new credit rating
agencies as well as introducing a code of conduct for all credit rating agencies operating in India.

Consolidation imperative

Another aspect of the financial sector reforms in India is the consolidation of existing institutions
which is especially applicable to the commercial banks. In India the banks are in huge quantity.
First, there is no need for 27 PSBs with branches all over India. A number of them can be
merged. The merger of Punjab National Bank and New Bank of India was a difficult one, but the
situation is different now. No one expected so many employees to take voluntary retirement from
PSBs, which at one time were much sought after jobs. Private sector banks will be self
consolidated while co-operative and rural banks will be encouraged for consolidation, and
anyway play only a niche role.

In the case of insurance, the Life Insurance Corporation of India is a behemoth, while the four
public sector general insurance companies will probably move towards consolidation with a bit
of nudging. The UTI is yet again a big institution, even though facing difficult times, and most
other public sector players are already exiting the mutual fund business. There are a number of
small mutual fund players in the private sector, but the business being comparatively new for the
private players, it will take some time.

We finally come to convergence in the financial sector, the new buzzword internationally. Hi-
tech and the need to meet increasing consumer needs is encouraging convergence, even though it
has not always been a success till date. In India organizations such as IDBI, ICICI, HDFC and
SBI are already trying to offer various services to the customer under one umbrella. This
phenomenon is expected to grow rapidly in the coming years. Where mergers may not be
possible, alliances between organizations may be effective. Various forms of banc assurance are
being introduced, with the RBI having already come out with detailed guidelines for entry of
banks into insurance. The LIC has bought into Corporation Bank in order to spread its insurance
distribution network. Both banks and insurance companies have started entering the asset
management business, as there is a great deal of synergy among these businesses. The pensions
market is expected to open up fresh opportunities for insurance companies and mutual funds.

It is not possible to play the role of the Oracle of Delphi when a vast nation like India is
involved. However, a few trends are evident, and the coming decade should be as interesting as
the last one.

CHAPTER -3

CO-OPERATIVE BANKS

INTRODUCTION

In 1904, the co-operative movement was started in India with a view to provide
agriculturists with finance required for agricultural operations at low rates of interest.

Co-operative banks are an important constituents of the Indian Financial System,

judging by the role assigned to them, the expectations they are supposed to fulfill, their number,

and the range of offices they operate. The co-operative movement originated in the’ west, but the

importance which such banks have assumed in India is rarely paralleled any where else in the

world.

Meaning Of Co-Operative Bank:

District Central Co-operative banks are operating in a specified area. Generally they are located

in the district head quarters or some prominent town of the district, they are organized on the

basis of limited liability.

District Central Co-Operative banks are found in the states of the membership, of

which are open to primary credit societies as well as some individuals, they are called mixed

Central Co-Operative banks (individuals are admitted as members with a view to avail of their

finance and managerial ability) mixed Central Co-Operative Banks are found in the states of

Tamil Nadu, Andhra Pradesh, Karnataka, Assam etc.

Co-Operative Banks are promoted to meet the banking requirements of consumers not

only in urban areas but also in the rural areas. The Co-Operative Banks function like commercial

banks receiving deposits and lending money. In the rural area these banks supply finance to

agriculture. while in urban areas they provide finance to buy consumer goods. They provide

short and medium term loans. They are formed on the co-operative principles and as such they

are more service-oriented. The co-operative banks provide credit at lower rates of interest to

people of small means, like small cultivators and artisans, petty shop keepers etc.
 The Co-Operative Banks perform several functions connected with agriculture, industry,

trade transport etc. They provide crop loans to agriculturists, in order to purchase seeds,

fertilizers etc. They also arrange for warehousing, grading and marketing. They also provide

consumption credit to certain extent. Several functionaries in the fields of economic activities are

forming co-operative banking institutions in order to seek protection from the exploitation of

capitalists.

Co-Operative Banks function in a given area, while commercial banks function over a

wider area not limited by the boundaries of state or district.

Most of the commercial banks have a number of branches spread over the entire country.

Most of these banks function in semi-urban rural areas. In recent year, they are being established

in metropolitan centers too, to cater the needs of small income groups, co-operative banks have

been classified into land development banks or land mortgage banks and urban credit oriented

banks.

Co-Operative banks are distinct entities by themselves with separate jurisdiction and

independent Board Of Directors. The Co-Operative banks are organized on a co-operative basis

and are governed by their members according to the co-operative laws. They are under the

control of their respective state governments. Certain provisions of the banking regulation act

also apply to co-operative banks. Co-Operative banks in India are federal in their structure. At

the lower ladder, there are primary Co-Operative Societies and on the top, there is the State Co-

Operative Bank.

Primary Credit Societies:

A co-operative credit society can be started with 10 or more persons. Normally belonging to a

village, the value of each share is generally nominal so as to enable even the poorest former to
become a member. Loans are given for short periods, normally for one harvest season, for

carrying on agricultural operations. The village co-operative society, known as the primary credit

society, was expected to attract deposits from among the well-to-do members of the village and

thus promote thrift and self help.

State Co-Operative Banks:

State Co-Operative Banks are at the top of Co-Operative credit structure. It is known as

Apex Bank. Its members are Co-Operative Societies. It rediscounts the bills of district central

Co-Operative Banks. All the States in India have established State Co-Operative Banks. The

State Co-Operative Banks apart from functioning as a Central Bank to Co-Operative Credit

Societies, functions as commercial bank, accepting deposits, giving loans and advances on the

security of gilt edged securities. fixed deposit receipts etc.

Central Co-Operative Banks:

The Central Co-Operative Banks are federations of primary Credit Societies in a

specified area, normally a district and are usually located in the district headquarters or some

prominent town of the district. Central Co-Operative Banks have three sources of fund viz their

own capital and reserves, deposits from the public and loans from the State Co-Operative Banks.

They lead to the village primary societies to enable the latter to their members.

Agricultural Credit Banks:

Agricultural Credit Banks provide both short and long term loans. They provide short

term loans to purchase the grains, etc. whereas long term loans are given on two basis i.e., for the

initial development purpose and the other on security / mortgage of land. Today these banks are

called land development banks.

Non-Agricultural Credit Banks:

Non-Agricultural Credit Banks provide loans other than for the agricultural purpose i.e.,

Industrial Co-Operatives and Consumer Co-Operatives. The loans given to the Industrial Co-

Operatives are for the purchase of assets etc. and the loans given in the Consumer Co-Operatives

are for housing banks, urban banks, employee credit societies, Specialized Co-Operative

Societies.

Urban Co-Operative Banks:

Urban co-operatives are similar to commercial banks in their operations. Generally, urban

cooperative banks are lending and borrowing institutions like commercial banks. Their

operations are confined to a particular municipal area. An Urban Co-Operative Bank provides

loans only to its members on the security of life insurance policies, fixed deposit receipt/on

personal guarantee.

These banks accept savings, fixed deposits and current deposits. All major cities in India

are having a good number of co-operative banks. Though they are allowed to open branches,

they are not as popular as the branch of commercial bank.

RBI And The Co-Operative Banks:

In recent years. the relation between RBI and Co-Operative banks has become very close.

The latter can get direct accommodation from the RBI by discounting agricultural and other

eligible bills at concessional rates of interest.

Scheduled and Non-Scheduled Banks:

A scheduled bank is defined as a bank established with the Banking Regulation Act under

Section 42(6) of the RBI Act of 1934.

“A banking Company may claim inclusion if it functions to the satisfaction of the RBI and if it

has a minimum paid-up Capital of Rs. 5 lakhs”.

If a bank is established in accordance with the Act, it can claim refinancing facilities from the

RBI. Infact, all the Banks in India come under the banking regulation Act of 1949 and its

amendments have to follow the provisions in the act both in letter and spirit. All those banks

which are not included in the 2nd Schedule of the RBI are also called Non-Scheduled Banks.

There were 92 Scheduled Banks and 474 Non-Scheduled Banks at the end of 1952. through the

process of merger and amalgamation, the number of Non-Scheduled banks was reduced and at

the end of 1989, there were only 3 Non-Scheduled Banks.

According to section 42, the deposits of the bank should be more than 100 crores for a period of

3Years continuously to attain the status of a Scheduled Bank.

TYPES OF CO-OPERATIVE BANKS:

RBI
 NABARD

SCB’S SLDB’S UCB’S

DCCB’S CLDB’S

PAC’S PLDB’S BRANCHES OF

SLDB’S

NABARD : National Bank of Agriculture and Rural Development.

SCB’s : State Co-Operative Bank.

SLDB’s : Urban Co-Operative Bank.

DCCB’s : District Central Co-Operative Bank.

PAC’s : Primary Agricultural Credit Societies.

CLDB’s : Central Land Development Bank.

PLDB’s : Primary Land Development Bank.

STRUCTURE OF CO-OPERATIVE ORGANIZATIONS

STATE CO-OPERATIVE BANK (APEX BANK)

 Agricultural Non Agricultural Urban Credit
Credit Co-Op Co-Op.Banks Oriented Co-OP.
Banks Banks

Short term Long term Industrial Consumer

Lending Lending Co-Op. Co-Op.

State level State land Credit Non-Credit

(Apex Bank) Bank

District Primary land -Housing Banks

Central land devlpt mortgage -Urban Banks
Co.OP Bank Bank -Banks Employee’s Credit Schemes
-

-Specialized Co-Operatives

FSS MP Grain Primary

Co-OP. Bank Co-Op.
Societies Banks

Features Of Co-Operative Banks:

Co-Operative Banks are a part of the vast and powerful superstructure of Co-Operative

institution, which are engaged in the tasks of production, processing, marketing, distribution

servicing and banking in India. The beginning of Co-Operative Movement in this country dates
back to about 1904 when official efforts were initiated to create a new type of institution based

on the principles of Co-Operative Organization and management which were considered to be

suitable for solving the problems peculiar to Indian Conditions. When the national economic

planning began in India, Co-Operative Banks were made on integral part of the institutional

frame work of community development and extension services, which was assigned the

important role of delivering the fruits of economic planning at the gross root levels. In other

words, they become a part of the arrangements for decentralized plan formulation and

implementation for the purpose of rural development in general, and agricultural and rural

development has fluctuated during 1950-1990. Till 1969, they increasingly substituted the

informal sector lenders.

Characteristics Of Co-Operative Bank:

Some distinguishing characteristics of the nature of Co-Operative banks are as follows:

• They are organized and managed on the principles of Co-Operation. Self help and
mutual help. They function with the rule of "one member one vote”.

• Co-Operative Banks perform all the main banking functions of deposit mobilization,
supply of credit and provision of remittance facilities.
• Co-Operative Banks do banking business.
• Some of the well developed Co-Operative Banks are Scheduled Banks.
• Co-Operative Banks accept all types of deposits including current. savings and fixed
or time deposits from individuals both members and non members.
• Co-Operative Banks are financial intermediaries.
Co-Operative Banks In India

The Co operative banks in India started functioning almost 100 years ago. The Cooperative bank
is an important constituent of the Indian Financial System, judging by
the role assigned to co operative, the expectations the co operative is
supposed to fulfil, their number, and the number of offices the cooperative bank operate. Though
the co operative movement originated in the West, but the importance of such banks have
assumed in India is rarely paralleled anywhere else in the world. The cooperative banks in India
plays an important role even today in rural financing. The businesses of cooperative bank in the
urban areas also has increased phenomenally in recent years due to the sharp increase in the
number of primary co-operative banks.

Co operative Banks in India are registered under the Co-operative Societies Act. The cooperative
bank is also regulated by the RBI. They are governed by the Banking Regulations Act 1949 and
Banking Laws (Co-operative Societies) Act, 1965.

Cooperative banks in India finance rural areas under:

• Farming
• Cattle
• Milk
• Hatchery
• Personal finance

Cooperative banks in India finance urban areas under:

• Self-employment
• Industries
• Small scale units
• Home finance
• Consumer finance
• Personal finance

Some facts about Cooperative banks in India

• Some cooperative banks in India are more forward than many of the state and private
sector banks.

• According to NAFCUB the total deposits & lendings of Cooperative Banks in India is
much more than Old Private Sector Banks & also the New Private Sector Banks.
 • This exponential growth of Co operative Banks in India is attributed mainly to their much
better local reach, personal interaction with customers, their ability to catch the nerve of
the local clientele.

CHAPTER - 4

BRIEF HISTORY AND PROFILE OF THE BANGALORE CITY CO-OPERATIVE

BANK LIMITED.
 The Bank has been making steady and consistent progress on all spheres having

established on 6th April, 1907 with its head office at Pampamahakavi Road, Chamarajpet,

Bangalore. with an intension to provide loan and give high interest on deposit to the customer’s

and members. The bank was established under the Co-Operative Society Act bearing registration

on number 314/CS, on 8th April,1907 from the Registrar of Co-Operative Societies in Karnataka

and the license was granted by RHI vide no. UBD/KA/642 dated 11th November, 1986 for

conducting banking business.

The BCC Bank is one among the top Urban Co-Operative Banks in the country. The bank

was honoured as the best urban co-operative bank in the period of 1926, 1927 and 1928 by the

Mysore province. During 2002 and 2004 Kamataka State Government has honoured the bank as

best Urban Co-Operative Bank.

The Bank has been extending credit facility and also inculcating the habit of savings among the

small traders, foot path vendors, fruit and vegetable vendors, hawkers coming under priority

sector. The Bank has made advances to large number of 3 wheelers self employed owners and

thus has extended self employment opportunities to large number of people with small means.

Bank Completing 100 years in 2007

Aims / Objectives:

As per by laws of the bank

ο Accepting deposits for the purpose of promoting saving habits in the minds of the
public and the member.
ο Providing various types of loan facilities to members and associate members.
 ο To open new branches with permission from RBI and Register of Co-Operative
Societies.
ο To provide short term and medium term Creditwothy farmers.
ο To carry out banking business.
ο To serve as a balancing center in the state.
ο To function as leader of Co-Operatives in Karnataka.

Functions:

1. Provisions of short term loans to carry out seasonal agriculture and for the

purpose of Sale of Agricultural Products.

2. Provisions for medium term loans for irrigation, poultry farming, animal

husbandry etc.

3. Acceptance of deposits.

4. Provision of Remittance and payment facilities.

5. Collection of cheques, drafts etc. for the customers.

6. Acceptance of valuables for safe custody.

The Main Operations Of The Bank: (Customer Services)

• Withdrawals

• Cash Receipts

• Sanctions and disbursement of loans

• Locker facilities
• Clearing Cheques

• Updating Pass Book

• Issuing New Cheque Book

• Issuing Demand Draft

• Pay Order

• Mail Transfer

• Telegraphic Transfers

• Opening Of Fixed Deposit Account

The Bank Has Prescribed Certain Time Norms On Banking Transactions

For the benefit of the clients. These prescribed norms are listed below

• Pass book will be updated immediately within 24hrs.

• Customers can purchase a Demand Draft within 30 minutes.

• Nomination facility is made available.

• Cheque Books are issued on demand from depositors

Following Are Some Of The Norms And Regulation Provided By The Bank For The
Benefit Of Customers:

• Avail nomination facilities to account holders including Saving Bank Account and
Current Account Holder.
 • Bank will exchange mutilated currency notes as per RBI guidelines.

• Bank will give standing instruction for the payment of bills, rents. interest and insurance
etc.

• Bank provides required and important guidelines to the lockerholders.

• The bank will observe customers day as decided by the Board of Directors.

The Bank also provides nomination facilities:

• Saving Bank Account Holder

• Current Account Holder
• Term Deposit Account Holder
• Current Account Holder
• Safe Deposit Account Holder
• Individual / Joint Account Hold

MOBILISATION OF RESOURCES

• Customer profile :- They has maintained a profile of important customers and the branch

has achieved to a great extent by getting new connections from other institutions and individuals.

• Deposit mix :- Assuming the area profile of the bank, the mix of the branch is around

40% which is trying to achieve higher percentage.

• Low cost demand deposit :- The bank has secured new mileage in this field and the

branch manager feels that by giving incentives and recognition to the employee for getting

deposits to the bank may play an important role in the growth of deposits.

• Popularity of deposit scheme :- The different deposit schemes like Fixed-deposit,

Rajatha cash certificate, Arunodhaya cash certificate and Niranthara yogakshema deposits are

becoming very popular, the bank is striving to popularize these schemes.

For e.g Rajatha cash certificate are being popular by providing monthly. quarterly, half-yearly
and yearly interest and also for provision for double in 6 years.

• Customer service :- By the large services provided by the bank is good and there are no

complaints from the customers as such. In fact, good services in BCC bank is one of the reasons

for attracting more customers. Bank is regularly conducting customers meet over the

recommendations by the sub committees and board meeting.

• Deployment of funds :- As the bank is situated in residential area, the lending rate has

been less. But by introducing new schemes like Rajatha cash certificate, etc, the lending

has been increasing.

The bank is also making sincere efforts to bring a significant change in the deployment of funds.

The mediums, which the bank disburse the loans and advances include:

• Retail Traders

• Wholesalers

• Transport Operations

• Government Sponsored Schemes

• Security Loans

ORGANISATION CHART
 BOARD OF DIRECTORS

GENERAL MANAGER

DEPUTY GENERAL

ASSISTANT GENERAL

ACCOUNTANT

ASSISTANT ACCOUNTANT

JUNIOR SENIOR CLASS IV

ASSISTANT ASSISTANT OFFICERS
 BOARD OF DIRECTORS

President : Sri. Avaihalli Chandrappa.R.

Vice President : Smt. L. Bhagyalakshmamma

Directors : Mr. T.P. Yoga

Mr. G.S. Dayashankar

Mr. M. Obannaraju

Mr. B.K. Ashwathnarayana

Dr. Devaraj.T.M.

Mr. M. Hanumaiah

Mr. T.D. Dhananjaya

Mr. K. Krishnamurthy

Mr. U.P. Puranik

Mr. N. Thimmaiah

Mr. N. Raghavendhra

Mr. Anjanappa

Mr. K. Krishnappa
Future plans of BCC bank

• Mobilization of savings, deposits, loans etc.

• Extension of area of operation of the bank to the entire Karnataka.

• Opening of branches at all district head-quarters and minorities concentrated

centers.

• Introduction of more value added services such as home banking, Tele banking

services, net working services and E-banking.

• Expansion of credit for medium scale Industries.

• Foreign Exchange Business.

• Innovative schemes for financing priority sector/weaker section.

• Opening of currency chest and small coin depot.

• Launching of mobile banking.

 Chapter 5

Functional areas of the Bangalore co operative bank are as follows

1. Deposits

For investment of surplus funds or to create a fund for future needs like children’s’ education and
marriage, construction of house, business, etc one can find plenty of opportunities to deposit
money banks under various deposit schemes. Now a day’s almost all banks are computerized,
core banking/ network banking system is introduced which helps the people to deposit money at
their own convenient locations.

The Bangalore co operative bank provides information of its various deposit schemes which the

customers can avail of with the bank.

I. Savings Deposit

Money kept at a bank, microfinance institution the public, institutions, organizations, co

operatives etc is known as deposits. Among the variety of traditional deposits, saving deposits is

one of the basic components for credit operation. One of the objectives of saving deposit

particularly for the poor (urban, rural) is to promote the thriftiness and develop the culture of

saving.

Average Quarterly Balance

Rs. 1000 /- with or without Cheque Book

Free ATM card.

Interest

3.5% p.a. with quarterly rest.

Penalty / Service Charges

Non-Maintenance of minimum average quarterly balance of Rs 1000/- require to pay Rs 50/-

 per month.

If account is closed within 6 months.

Without cheque book - Rs. 10 /-

With cheque book - Rs. 15 /- plus Rs. 2 per unused cheque.

II. Savings for Kids (CUBS)

See Your Dreams Come true by investing your pocket money into the 'CUBS' Deposit Scheme

Benefits
"Free Gift" for all account holders.

Earn Interest @ 3.5 p.a. every quarter possess specially designed passbook.

Minimum Balance:
Account opening - Rs. 50/- with further deposit of Rs. 10/-
Rs. 500/- after one year of opening account.

Features:
1. You should be a minor/student (up to the age of 21 years) to become 'CUBS' account holder
2. Initial deposit of Cubs account is Rs 50/- and subsequent deposits in multiples of Rs 10/- no
periodic compulsion for subsequent Deposit.
3. Starting with a small amount of Rs. 50/-, a CUB Account holder has to save Rs. 500 /- over a
period of one year.
4. Facility to deposit cash in school premises on predetermined days.
5. After completion of 14 years of age minor/student can operate the account
Cheque book facility not available
6. No charges for non-maintenance of minimum balance for first year.

III. Current Deposit

Current deposit is an account used for the day-to-day handling of money that is keeping it
secure, accessing it and paying bills.
Minimum Average Balance

Eligibility - Individual, Businessmen, Organizations

Minimum Balance of Rs 5000/-

Free ATM cards.

 Non-Maintenance of minimum average quarterly balance require to pay service charges of
Rs. 200/- per month.

If account is closed within 6 months Rs. 30/- plus Rs. 2/- per unused cheques.

IV. Fixed Deposits

Fixed deposit is the same as a term or time deposit. Money may be placed with a bank, merchant
bank, building society or credit union for a fixed term at a fixed rate of interest which remains
unchanged during the period of the deposit. Depositors may have to accept an interest penalty if
they break the deposit, i.e., ask to take the money out before the agreed period has expired.

Term Deposit - Interest Payout Schemes

(Interest - Half Yearly, Quarterly, Monthly ) and Cumulative Schemes

Eligibility
Individuals (singly or jointly), Minor by guardian, Organizations, Co-op. Societies

Minimum Balance
Rs. 1000/- and further rise in multiples of Rs. 100/-

Rate Of Interest
Bulk deposit for individuals, coop soc and trusts will be considered at 15.00 lakhs, for
partnership firms, Educational Institutes at 25.00 lakhs and Corporate and Banks at Rs.50.00
lakhs. { CURRENT INTEREST RATES }

Special Features/Facilities

TDS applicable Form 15H/15G required to be submitted for exemption of TDS.

Nominal member of the bank will also be exempted from TDS.
Deposit Rs. 76567 for 36mths and earn Rs. 100000
Deposit Rs. 64870 for 60mths and earn Rs. 100000

Charges / Penalty

In case of payment before maturity Interest up to 30 days will be nil

above 30 days: 1% less than applicable rate of Interest for the actual period for which deposit is
kept with the Bank.
V. Recurring Deposit

Eligibility
Individuals (singly or jointly), Minor by guardian, Organizations, Co-op. societies

Minimum Balance
Minimum monthly installment is Rs. 5/- further rise in multiples of Rs.5/-
For lakhpati scheme monthly installment
Rs.1345 for 60 months and Rs.2434 for 36 months

Special Features/ Facilities

No TDS

Monthly Installment Period (in Months) Maturity Value

Rs. 1345 60 Rs. 100006
Rs. 1756 48 Rs. 100023
Rs. 2434 36 Rs. 100020
Rs. 3793 24 Rs. 100007
Rs. 6322 15 Rs. 100013

Penalty/Service Charges
Penalty for delayed monthly installment
Rs. 1.50 per Rs.100 p.m. if the deposit is up to 5 years
In case of payment before maturity. Interest up to 30 days will be nil

above 30 days: 1% less than applicable rate of Interest for the actual period for which deposit is
kept with the Bank

VI. Salary Earners Scheme

Eligibility: Salaried Individuals (up to age of 55 years)**

Minimum Balance: No requirement

Special facility / features:

Overdraft facility equivalent to average net monthly salary maximum up to Rs. 50000/-
Free ATM Card.
Free Any where Banking.
Free Utility bills payment facility.
Free personalized advice on Life and Non- Life
Easy Loan up to Rs. 2.00 Lakhs under Multi-purpose Loan Scheme with 0.50% concession on
applicable rate.
Preferred weight age to avail other loan schemes of the Bank.

LOANS&ADVANCES:-
Banks have variety of schemes under Personal Finance to satisfy varying needs of the banking
public. Banks provide credit in the form of overdraft or loans. Overdraft facility is generally
provided on current account. Overdraft is a service provided by a bank to utilize money even
when there is no balance in the customer’s account. It is a form of credit and one has to pay
interest for the overdraft drawn. It is an arrangement made to cover the cash shortages. The rates
differ from bank to bank and depend on the time period also. It is not suitable for long period of
time. Bank loan is the money which one borrows from the bank for a specific purpose for
specific period with agreement for interest and repayment periods etc.

The following are the various kinds of loans which are made available to the customers by
The Bangalore city Co operative bank:-

• Long term loans:-

 Loans on immovable property

 Vehicle loans (three wheelers, cars, trucks and buses)

 Site purchasing loan

 Industrial loan

 House construction loan

• Medium term loans:-

 Security loans

 Business improvement loan

 Gold ornaments loan

 Vehicle loan (two wheelers)

 IVP/NSC/LIC Bonds loan

• Short term loans:-

 Over draft on current account

 Over draft on deposits

  Loan on deposits

• Loans and advances provided to its staff

 Festival advances

 Staff vehicle loans

 Special salary advance

 House building loan

 Staff consumption loans (house hold goods)

Long term loans:-

A. Loan on immovable property:-

Quantum of loan: up to 25 lakhs

 Up to Rs 4,99,999- 13% interest

 More than 5 lakhs- 13.5% interest

Period of loan:-

 The duration of loan is 180 months (15years)

Objective:-

 Loan taken on immovable property is fulfilling the long term finance for persons who
needed to their personal purpose.

B. Vehicle loan (three wheelers, cars, trucks and buses):-

Quantum of loan:

 70% of the loan is given on the full amount of the vehicles.

Period of loan:

 The period loan any vehicle other than auto rickshaws- 60 months (5years).

 For auto rickshaws the period is- 36 months (3years).

Objective:-
  To make vehicles affordable to every one.

 To become self employed and which gradually reduces unemployment.

C. Site purchasing loan:-

Quantum of loan:-

 70% of the actual site value

Period of loan:

 The loan period of loan is 60 months (5 years).

Objective:

 To facilitate house and business building construction.

D. Industrial loan:-

Quantum of loan:-

 Maximum up to 5 lakhs.

Period of loan:-

 Loan to be repaid in 60 months (5years).

Objective:-

 For starting up of the industry.

 For purchase of machinery/building & other implements.

Medium term loans:-

A. Security loan:-

Quantum of loan:-

 Maximum up to Rs 50000

Period of loan:-

 For 36 months at 16% interest.

Objective:-

 To meet the personal causes of the people surety loans is taken behalf other persons.
B. Business improvement loan:-

Quantum of loan:-

 Maximum amount up to Rs 50000.

Period of loan:-

 The loan is up to the period of 50 months.

Objective:-

 To improve business with the financial assistance.

 To encourage the small investors to improve their business.

C. Gold ornaments loan:-

Quantum of loan:-

 Maximum up to 3 lakhs on ornaments as 1 gram gold amount to Rs 500.

Period of loan:-

 The loan is up to the period of 25 months (2years approximately).

Interest rate:- 10% per annum

Documents and affidavits:-

 Loan beneficiary details in the prescribed application form.

 Address proof.

 Promissory note.

 Receipts regarding ownership of jewelry.

D. Vehicle loan (two wheelers):-

Quantum of loan:-

 70% of loan is given on the actual value of the vehicle.

Period of loan:-

 Period of loan is maximum of 36 months (3years).

Objective:-

 Purpose of new two wheeler (scooter , motorcycles ,moped) of reputed make for
personal use only.

E. IVP/NSC/LIC Bond Loans:-

Quantum of loan:-

 Maximum 70% on premium paid on IVP/NSC/LIC bonds.

Interest rate:-

 Interest up to 15%

Interest amount rate may change from period to period as per the directions of the Reserve
bank and administrative board.

Way of treating and transferring:-

 IVP/NSC bonds get loans on the market value.

 The person has to transfer the bonds to the bank and register in the concerned department
and get the letter or document showing transfer to the bank

LIC Procedures:-

 In common policy assignment letter related every policy holders, signature with the
written letter and a letter should be written to the insurance company by policy holders.

 This should be enlisted in the Insurance company.

  A Receipt regarding the last installment paid by the policy holder and gets the surrender
value details from the policy company.

 Surrender value is taken for the evaluation of the policy.

SHORT TERM LOANS:-

A. Overdraft on Current Account:-

Objectives:-

 For urgent need of money for business.

 To enhance the relationship between customers and banks.

Eligibility:-

 The account holder should have maximum amount and maximum times of transaction

 The account holder has to be a person holding from many years.

 The person in past should have maintained good balance.

Permission:-

 The account holder can get this privilege by consulting respective manager.

 Manager has to clarify with his senior authority.

Rate of Interest:-

 The Rate of Interest is prescribed on amount of overdraft.The interest amount is balance

of account

B. Overdraft on Deposits:-

Objective:-

 To meet the personal needs of customers.

 To develop a good relationship between customer and bank.

Eligibility:-

 An account holder should have maintained a good balance in his past

 He should have a good record of transaction and maintain good balance

 Permission:-

 Account holder should approach the manager and respective department head

 The management will decide whether to allow or not

Amount of Overdraft:-

 Overdraft will be up to the permitted level by the management. The interest is also
decided by them.

C. Loans on deposits:-

Objective:-

 To meet the personal needs of customers.

 To develop a good relationship between customer and bank.

Eligibility:-

 An account holder should have maintained a good balance in his past

 He should have a good record of transaction and maintain good balance

Permission:-

 Account holder should approach the manager and respective department head

 The management will decide whether to allow or not

 Amount of Interest and loan

 Loan will be up to the permitted level by the management.

 The interest is also decided by them.

LOANS AND ADVANCES PROVIDED TO ITS STAFF:-
Certain loans and advances are provided for their staff for the welfare and meet their
urgent needs.

A. Festival advance:-

Objective:-

 To meet the expenses of the festival

 To celebrate the festival and maintain the culture of different religion

Repayment:-

 The amount is processed in their salaries.

B. Staff vehicle loans:-

Objective:-

 For the transportation of its staff.

 For their personal purpose.

Repayment:-

 The amount is processed in their salaries with a low rate of interest.

C. House building loan:-

Objective:-

 Staff to own their house

 To secure themselves

Repayment:-
  The amount is processed in their salaries with a low rate of interest.

D. Staff consumption loan (household loan):-

Objective:-

 For the purchase of household goods

 To meet their household necessities.

Repayment:-

 The amount is processed in their salaries

 A low rate of interest is decided by the administration.

Amount of Loan:-

 As decided by the higher authority.

Analysis And Evaluation Of Data

The Bangalore City Co-Operative Bank is one of the leading banks with various activities.
It has made a name in the Co-Operative Movement, it has large number of members.

This study is to analyse the financial viability and cash management of the bank and its
activities. This study is carried by analyzing the financial statement.
 There are 3 Significant factors in the financial strength of the bank and the financial
activity.

• Deposit Growth

• Loan Growth

• Profit Position

• Deposit Growth:

Table Showing The Deposits Growth

Amount in lakhs

Year 2003 2004 2005 2006

Deposit
Growth 22333.96 23073.88 22353.20 21218.45

Interpretation:
The above table represents the deposit growth in the bank. It is increasing over the period of
years. As on the year ending 3lst March, 2003 the deposit in the bank was Rs. 22333.96 lakhs
and as on year ending 31st March,2004 the deposit was Rs.23073.88 lakhs. There was an
increase 739.92. The deposit was increased by Rs. 22353.20 in 2005 & decrease in 2006 by Rs.
21218.45.

This shows that the bank financial position is very sound. It is a clear indication to the
deposit holders of the bank that the deposits are safe.
 DEPOSIT GROWTH

23500

23000
AMOUNT IN LAKHS

22500

22000
Deposit Growth
21500

21000

20500

20000
2002-03 2003-04 2004-05 2005-06

FINANCIAL YEAR

• Loan Growth:

Table showing Loan Position

Amount in lakhs
 Year 2003 2004 2005 2006

Loan
16554.52 15135.92 14018.40 13259.48
Position

Interpretation:

The above table represents the loan position of the bank. It was increased in 2002-03 but there
was a decrease in the year 2004 onwards.

As on the year ending 31st March, 2003 the loan position of the bank was Rs.16554.52 lakhs and
as on year ending 31St March, 2006 the loan position was Rs. 13259.48 lakhs. There was an
decrease of loan position upto Rs. 3295.04 lakhs.

The loan position of the bank should be increased so as to help for the members of the bank.
 LOAN GROWTH

18000
16000
AMOUNT IN LAKHS

14000
12000
10000
LOAN GROWTH
8000
6000
4000
2000
0
2002-03 2003-04 2004-05 2005-06

FINANCIAL YEAR

• Profit Position:
Table showing Profit position

Amount in lakhs

Year 2003 2004 2005 2006

Profit
303.74 301.65 247.38 261.27
Position

Interpretation:

The above table represents the profit position of the. bank. As on the year ending 31st
March,2003 the profit position of the bank was Rs. 303.74 lakhs
and it was decreased in the year 2004 upto Rs. 301.65 lakhs. So there was an
decrease of profit position of the bank upto Rs. 2.09 lakhs.
As on the year ending 2006 the profit of the bank was increased upto Rs 13.89 lakhs. And
on the year ending 2005 it was decreased upto Rs.54.27 lakhs.

It is suggested that the bank should minimize the operating expenses.

 PROFIT POSITION

350

300
AMOUNT IN LAKHS

250

200 PROFIT
150 POSI TI ON
100

50

0
2002-03 2003-04 2004-05 2005-06

FINANCIAL YEAR
Investment:

The bank incurred Rs.68,66,32739 on investment. These items have been

listed below.

Indian Safety Deposits in Rupees

1. State Govt. Safety Deposits 7,94,77,000

2. Kamataka State Apex Bank (FD) 11,75,75,000

3. Bangalore District And Taluk Co-Op. Bank (FD) 8,43,90,000

4. Kamataka Govt. Financial Institution Bonds 1,30,00,000

5. Bangalore District And Taluk Level Central

Co-op. Bank Share 1,000

6. Indian Formers And Fertilizers Share 20,00,000

7. Suvama Co-Op. Bank Ltd. (FD) 50,00,000

8. Sri Subramanyeshwara Co-Op. Bank Ltd. 1,00,00,000

9. The Grain Merchants Co-Op. Bank Ltd. 5,00,00,000

10. Krishna Bhagya Nigam Fixed Deposit 2,23,50,000

11. Kamataka State Co-Op. Agriculture and Taluk

Development Land Bank 2,00,00,000

12. The Bangalore Central Co-Op. Bank 1,00.00,000

13. Karnataka State Industrial Co-Op. Bank 2.50,00,000

14. Shyama Rao Vittal Co-Op. Bank 1,00,00,000

 15. Indira Vikas Patra 17,04,849

16. Thyagaraja Co-Op. Bank Ltd. 3,70,00,000

17. Karnataka Electricity Board 77,75,000

18.Amanath Co-Op. Bank 2,50.00,000

19. The Mahila Co-Op. Bank Ltd. 2,40,00,000

20. Sardar Sarovar Narmada Board Fixed Deposit 2 5,00,000

21.Ananda Co-Op. Bank Ltd. 10,00,000

22. Karnataka Govt. Co-Op. City Bank Board 5.69,890

23. Sir. M. Vishweshwaraiah Co-Op. Bank 1,00,00,000

24. Bangalore Mercantile Co-Op. Bank Ltd. 1,00,00,000

25.Kaveri Urban Co-Op. Bank Ltd. 75,00,000

26. Karnataka Govt. Consumer Co-Op. Board 10,00,000

27. Deepak Co-Op. Bank 50,00,000

TOTAL 68,66,32,739

It is observed that the bank has invested its surplus in a secured place i.e., the Central Govt.,
State Govt., Security Bonds, Fixed Deposit in Karnataka State Co-Operative Apex Bank etc.
however, the large amount is invested in Karnataka Rajya Co-operative Apex Bank.
From the above data it is confirmed that the bank has developed most soundly. In addition to the
above the bank is investing in other CoOperative Banks like Indira Gandhi Vikas Patra, Other
Co-Operative Bank and in State Co-Operative institutes.

Ratio Analysis:

A Ratio is a simple arithmetical expressions of the relationship of one number to another.

It may be defined as the indicated quotient of two mathematical expression.

Ratio analysis is a technique of analysis and interpretation of financial statements. It is

the process of establishing and interpreting various ratios for helping in making certain decisions.

However, ratio analysis is not an end in itself. It is only a means of better understanding of

financial strengths and weaknesses of a firm.

Importance of the Ratio Analysis:

• Helps in decision making.

• Helps in Financial forecasting and planning.

• Helps in communicating.

• Helps in co-ordination.

• Helps in control.

Limitations of Ratio Analysis:

• Limited use of a single ratio.

• Lack of adequate standards.
• Internet limitations of accounting.
• Change of accounting procedure.
• Window Dressing.
• Personal Bias.
• Uncomparable.
 • Absolute figures distortive.
• Price level changes.
• Ratios no substitute.

Key steps involved in Ratio Analysis:

• To select the information relevant to the decision under consideration from the statement
and calculate appropriate ratio.

• Compare the calculated ratios with the ratios of the same firm relating to past or with
industry ratios.

• Interpretation, drawing of inferences and report writing i.e.. conclusions are drawn after
comparison.

Types of Ratio:

The Types of Ratios which are used for the analysis and interpretation of financial viability of
BCC Bank are:

I. Liquidity and Solvency Ratio:

1. Current Ratio
2. Liquid Ratio
3. Cash Position Ratio or Absolute Liquid Ratio
4. Cash Balance to Total deposits

II. Capital Structure Ratio :

 5. Debt Equity Ratio
6. Return on Investments
7. Current assets to networth
8. Current Liabilities to networth

1. Current Ratio:

Current Ratio is called by different names such as 2:1 ratio, Working capital ratio,
solvency (short-term) ratio. This ratio helps to know the solvency and liquidity of the firm.

It is expressed as
Current Ratio = Current Assets
Current Liabilities

C.A: Cash + Bank balance in RBI + balance in other banks + investment + advances.

C.L : Deposits in banks + in other accounts + SB account + borrowings + Other liability and
provision.

Table Showing Current Asset Ratio:

Year 2003 2004 2005 2006

Current
1613958128 2156565120 2708266875 2642977224
Assets
Current
380586057 413410690 386450046 420707755
Liabilities

Ratio 4.24 5.21 7.08 6.23

 CURRENT RATIO

8
7
6
5
RATIO

4
CURRENT
RATI O
3
2
1
0
2003 2004 2005 2006

YEAR

The ideal Current Ratio 2:1, that mean the total current assets must be double than current

liabilities. In all 4years, the current assets of the bank is more than the current liabilities and also
the proportion of ratio is increased during the year 2005 compared to 2003 & 2004 by 0.97 &

1.87. but in 2006 it is decreased to 0.85 compared to 2005. this shows the bank was more liquid

in the year 2005.

2. Liquid Ratio:

Liquid Ratio is also known as Quick Ratio or Acid test Ratio, is a more rigorous test of liquidity
than the current ratio. The term liquidity refers to the ability of a pay its short term obligations as
and when they become due.

This ratio is therefore supposed to be an improved, stringent, version of the current ratio in
measuring the liquidity of an enterprise.

It is expressed as

Liquid Ratio = Liquid assets

Quick Liabilities

Liquid Asset =cash + Bank balance + balance in other banks + investment + advances.

Quick Liabilities = Deposits in banks + other liability and provision.

Table showing the Liquid Ratio:

Year 2003 2004 2005 2006

 Liquid
1613958128 2156565120 2708266875 2642977224
Assets
Quick
380586057 413410690 386450046 420707755
Liabilities

Ratio 4.24 5.21 7.08 6.23

LIQUID RATIO

8
7
6
5
RATIO

4 LI QUI D RATI O
3
2
1
0
2003 2004 2005 2006

YEAR
The ideal quick ratio is 2:1, that means the total quick assets must be more than quick liabilities.

In this respect bank enjoys favourable position in the year 2004 & 2005. however in 2005 the

bank was very liquid compared to other years. The position of liquidity is favourable in 2005. As

such we can say bank has sufficient quick assets to meet its short term obligations.

3. Cash Position Ratio:

Cash Position Ratio is nothing but absolute liquid ratio. It is expressed as:

Cash Position Ratio = Cash on hand and bank

Current Liability

Table Showing the Cash Position Ratio :

Year 2003 2004 2005 2006

Cash
70816153 75351928 77254517 70991146
Balance
Current
380586087 413410690 386450046 420707755
Liabilities
Ratio 0.18 0.18 0.19 0.17
 CASH POSITION RATIO

0.195

0.19

0.185
RATIO

0.18 CASH POSI TI ON

0.175 RATIO
0.17

0.165

0.16
2003 2004 2005 2006

YEAR

The cash position ratio ideal ratio is 1:2. this ratio is a conservative yardistick about the cash

position of the enterprise.

4. Cash Balances to Total Deposit Ratio:

It is expressed as;

Cash Balances to Total Deposit Ratio = Cash Balance * 100

Total Deposits
Table showing Cash Balances to Total Deposit Ratio:

Balance

Total
2234853725 2307388038 2235325108 2121841240
Deposit

Ratio 3.16% 3.26% 3.45% 3.34%

 CASH BALANCE TO TOTAL DEPOSIT RATIO

3.50%
3.45%
3.40%
3.35%
3.30% CASH BALANCE
RATIO

3.25% TOTOTAL
3.20% DEPOSI T RATI O
3.15%
3.10%
3.05%
3.00%
2003 2004 2005 2006

YEAR

The cash to deposit ratio requirements by statutory regulation by RBI is 3%. In case of all the 4

years the cash balance to total deposit ratio is above 3%. This individuals that the deposit holders

amount are safe and secured.

5. Debt Equity Ratio:

Debt Equity Ratio is calculated to know the extent of outsiders funds and shareholder fund used
in acquiring the asset for the firm. In other words, it is calculated to measure the relative claims
of outsiders and shareholders against the asset of the firm. It is also called as external — internal
equity ratio or debt to networth ratio.

It is expressed as:

Debt Equity Ratio = Debt

Equity

Debt: Borrowings

Equity: Capital + Revenue and other Reserves.

Table showing the Debt Equity Ratio:

Year 2003 2004 2005 2006

Debt 22570698 33760614 35216207 26662966

Equity 138952069 196992499 264553392 367470632

Ratio 0.16 0.17 0.13 0.07

 DEBT EQUITY RATIO

0.18
0.16
0.14
0.12
RATIO

0.1 DEBT EQUI TY

0.08 RATIO
0.06
0.04
0.02
0
2003 2004 2005 2006

YEAR

The standard Debt Equity Ratio is 1:2, that means the debt of the enterprise should not exceed 2

times the equity. In this respect, the current position the bank is very low. This ratio actually

measures the state of long term creditors as against the equity.

 6. Return On Investment:

Return on Investment is the ratio of adjusted net profit to capital employed it is expressed in
percentage. The return on capital employed may be based on gross capital or net capital
employed.

Net Capital Employed = Fixed Asset + Investment + Working Capital (Current Assets —
Current Liabilities)

Gross Capital Employed= Fixed Asset + Investments + Current Assets.. It is expressed as:

Return On Investment = Profit *100

Capital employed

Table showing Return on Investment:

Year 2003 2004 2005 2006

Profit 30374217 30165209 24738004 26127461

Capital
264553392 367470632 2621486773 2531158360
employed

Ratio 11% 8.20% 9.43% 10.13%

 RETURN ON INVESTMENT RATIO

12%

10%

8%
RATIO

6%
RETURN ON
INVESTMENT
4%

2%

0%
2003 2004 2005 2006

YEAR

Return On Investment can also be called as return on capital employed and also overall

profitability ratio. This ratio is used to measure the productivity of capital employed in the

business. In otherwords it indicates the overall profitability of the bank. The ideal ratio is 15%.

In all the 4 years the Return On Investment is less than ideal ratio i.e. 15%. Therefore this

shows the return on investment is declining.

 7. Current Assets to Networth Ratio:

This ratio is calculated to measure the proportion of Current Assets financed by owner’s fund.
It is expressed as

Current Assets to Networth Ratio = Current Assets

Net Worth

NetWorth = Capital + Reserve and Surplus

Table showing Current Assets to Networth Ratio:

Year 2003 2004 2005 2006

Current
1613958128 2156565120 2208266814 2642977245
Assets

Networth 264553392 367470632 363351103 469179426

Ratio 6.10 5.86 6.07 5.63

 CURRENT ASSETS TO NETWORTH RATIO

6.2
6.1
6
5.9 CURRENT
RATIO

5.8 ASSETSTO
5.7 NETWORTH
5.6 RATI O
5.5
5.4
5.3
2003 2004 2005 2006

YEAR

The Current Assets to Networth Ratio indicates the proportion of cuerrent assets financed by

owners. There is no standard ratio for this ratio. Though there is no standard ratio we can

compare whether it is high or low.

There was a decline of 0.44 in 2006 compared to 2005.

 8. Current Liabilities to Networth Ratio:

This Ratio indicates the contribution of short term liability to owner equity.

It is expressed as:

Current Liabilities to Networth Ratio = Current Liabilities

Networth

Table showing Current Liabilities to Networth Ratio:

Year 2003 2004 2005 2006

Current
380586057 413410690 386450046 420707755
Liabilities

Networth 264553392 367470632 363351103 469179426

Ratio 1.43 1.12 1.06 0.91

 CURRENT LIABILITIESTO NETWORTH
RATIO

1.6
1.4
1.2
CURRENT
1
RATIO

0.8
LI ABI LI TIESTO
0.6
NETWORTH
0.4
RATI O
0.2
0
2003 2004 2005 2006

YEAR

Current Liabilities to Networth Ratio indicates the contribution of short term liabilities to owners

equity. The desired level of this ratio is 1/3rd of 33(1/3) of the actual ratio is high. It indicates that
there may be difficulty in discharging liabilities. In this respect the ratio are favourable to the

bank. Since the actual ratio was less than 33(1/3)%.

Cash Budget

Budget:

A budget is the monetary and quantitative expression of business plans and policies to
be pursued in the future period of time.

According to CROWN and HOWARD, “A budget is a predetermined statement of management

policy during the given period which provides a standard for comparison with the results actually
achieved”.

CASH BUDGET

The “Cash Budget is an analysis of flow of cash in a business over a future, short or long
period of time. It is a forecast of expected cash intake and outlay”.

The cash budget, as a cash management tool, would throw light on the net cash position

of a firm. After knowing the cash position, the management should workout the basics strategies

to the employed to manage its cash.

 Cash budget is the most significant device to plan for and control cash receipts and payments.
A cash budget is a summary statement of the firm’s cash inflows and outflows over a projected
time period. It gives information on the timing and magnitude of expected cash flows and cash
balances over the projected period. This information helps the financial manager to determine the
future cash needs of the firm, plan for the financing of these needs and exercise control over the
cash and liquidity of the firm.

The cash receipts from various sources are anticipated. The estimated cash collections for
sales, debts, bills receivables, interests, dividends and other incomes and sale of investments and
other assets will be taken into account. The amounts to be spent on purchase of materials,
payment to creditors and meeting various other revenue and capital expenditure needs should be
considered. Cash forecast will include all possible sources from which cash will be received and
the channels in which payments are to be made so, that a consolidated cash position is
determined.

The cash budget should be co-ordinated with other activities of the business. The functional
budgets may be adjusted according to the cash budget. The available funds should be fruitfully
used and the concern should not suffer for want of funds.
Cash Budget of BCC Bank on yearly basis

For the years 2005 and 2006

Particulars 2005 2006

Rs. Rs.
Receipts:
Balance b/d 1305677 195598851

Interest Received 207318506 227624637

Interest on Investment 89446337 73254675

Other Items 145347063 116967651

Rent Received
166719.1 173366
Total 455335402 613619180
Payments:

Interest Paid 230843211 201642237

Establishment
25347638 24934083
Expenses
Administrative
2038658 2043570
Expenses
Conveyance
133810 133810
Expenses
Insurance Tax
1373233.8 1953847
Total
259736551 230707547
Closing balance 195598852 382911633
Interpretation
The above Cash Budget is prepared on yearly basis, as the information obtained was on the
yearly basis. From this cash budget it can be concluded that the bank has a steady liquid status as
it is meeting its current obligations from the internally generated sources.

Working Capital

Meaning : In simple words, “working capital refers to that part of the firm’s capital which is
required for financing short term or current assets such as cash, marketable securities, debtors &
inventories”.

Inwords of Shubin, “ working capital is the amount of funds necessary to cover the cost of
operating the enterprise”.

Importance of Working Capital :

Working Capital is the life blood & nerve centre of a business. No business can run
successfully without an adequate amount of working capital. The main advantage of maintaining
adequate amount of working capital are as follows:

 Adequate working capital helps in maintaining solvency of the business.

 Sufficient working capital ensures regular supply of raw materials continuous
production.
 Exploitation of favourable market conditions.
 Quick & regular return on investments.
 Regular payment of salaries, wages & other day to day commitments.
 Adequate working capital also enables a concern to avail cash discounts.
 Adequate working capital enables a concern to face business crisis in emergencies.
 Adequate working capital creates an environment of security, confidence, high morale &
creates overall efficiency in a business.
Limitations or Disadvantages of working capital

 It cannot buy its requirements in bulk & cannot avail of discounts, etc.
 The rate of return on investment also falls with the shortage of working capital.
 It becomes difficult for the firm to exploit favourable market conditions due to lack of
working capital.
 A concern which has inadequate working capital cannot pay its short term liabilities in
time.
 It becomes impossible to utilize efficiency the fixed assets due to non availability of
liquid funds.

Objectives of Working Capital

 To pay wages & salaries

 To provide credit facilities to the customers
 To maintain the inventories of work in progress, raw material, finished stock.
 To meet the selling costs as packing, advertising etc.
Table showing working capital

Amount in lakhs
Year 2003 2004 2005 2006
Working Capital 25346.23 27015.21 23218.16 22223.69

WORKING CAPITAL

30000

25000
WORKING CAPITAL

20000

15000
WORKI NG
CAPI TAL
10000

5000

0
2003 2004 2005 2006

FINANCIAL YEAR

Interpretation :
The above table represents the Working Capital of the bank is increasing over the period of
years.
As on the year ending 31st March 2005 the amount of working capital was Rs. 23218.16 lakhs &
as on the year ending 31st March 2006 the amount of working capital was Rs. 22223.69 lakhs.
There was decrease of working capital of Rs. 994.47 lakhs.

CHAPTER 6

SUMMARY OF FINDINGS, SUGGESTIONS AND CONCLUSIONS

The final stage in the statistical enquiry relates to the interpretation of the data i.e., drawing
logical and meaningful conclusion from the condensed data. Interpretation is concerned with
establishing relationships within the collected data partially over lapping analysis.

Interpretation is essential for the simple reasons that the usefulness and the utility of research
findings lie in proper order. It is through interpretation that the research can well understand the
abstract principle, the work beneath its findings. It leads to the establishment of explanatory
concepts that can serve as a guide for future research studies. Based upon the above
consideration this chapter gives a summary of data analysed in the previous chapter and on the
basis these findings appropriate suggestions are given.

The aim of drawing conclusion is to act as evidence and support the facts emerging from the
financial investigation.
Findings of Financial Performance:

On the analysis of financial statements of the Bangalore City Co-operative Bank Ltd. for the

years 2003-2006. The followings are recorded

 The depositor have decreased from Rs. 22353.20 to Rs. 21218.45 lakhs which shows
the depositors rate have gradually decreased in the year 2005 & 2006. This shows the

popularity of the bank and the stability of the bank finance.

 The bank has decreased the quantum of loans from Rs. 165.55 lakhs to Rs. 132.59
lakhs from the year 2002-03 to 2005-06. This shows there is low financial transaction

in the bank.

 It is seen that the investment is well made by the central Co-operative bank both in
central and state government schemes and bond. The bank has also invested in Fixed

Deposit not only in Karnataka State Apex Bank but also other bank. This helps

mutual development of Co-operative bank and also increased income from

investment.

 The net profit in 2006 is Rs. 2.61 crores which is an indicator of stabilized bank
activity.

 The bank is giving more importance to consolidation but not expansion since other
 nationalized banks are giving importance to expansion programmes.

 The bank has several schemes of advancing more to small scale industries. However,
the procedure for advances to small scale industries are very complicated, time

consuming and also lengthy procedure.

 The bank has various schemes to help the members

 Increased Fixed Deposit

 Increase Net Profit

 Provide Gold Security

 Training to Staff

 Loan to Business

Findings for Cash Budget

 Reducing borrowing of bank.

 Better Management of debits.

 Optimum Utilization of Funds.

 Improvement of Liquidity.

 Interest Saving.
Suggestions for Financial and Cash Performance of the bank:

 The importance of banking business including return on deposit must be made through
various channels of advertisement.

 The bank can increase its income through investment in other banks and lend more loans
and attract clients by increased rate of interest.

 The bank can increase the result of operation by advancing loans and assistance to
primary sector of economy.

 More number of branches and extension counts must be opened all over the Karnataka.

 The bank must also strengthen the follow up and control mechanism. The bank
management must review the credit policy and credit supervision.

 The bank must follow flexible credit scheme.

 The bank must maintain harmonious relationship with its members and customers as for
as possible.

 The bank must maintain good relationship with those unexpected loans and draft clients
by laying down certain norms before the allotment of funds are made.
 Cash Management should be tailor made so that it best serves the interest of the
customers and the bank.

 False Commitment by the executes about interest rate, and foreclosure should be avoided.

 MIS should be made more user friendly.

 The flow of cash should be properly managed.

 The bank should decide about the appropriate level of cash balances. The cost of excess
cash and danger of cash deficiency should be matched to determine the optimum level of
cash balance.

 The surplus cash balances should be properly invested to earn profits. The firm should
decide about the division of such cash balance between alternative short term investment
opportunities such as Bank Deposits, Marketable Securities or incorporate lending.

 The finance manager has to plan the acquisition and utilization of cash.
Conclusion:

The financial Statements used for Financial Viabilities and Cash Management have been
prepared on historical cost basis. All the items of the balance sheet and profit and loss account
are taken out of the audited accounts only. It shows that the object of the bank in publishing its
statements are taken care of. All concepts and conventions of the accounting are taken in to
consideration for preparing the accounts of the bank. Provisions and contingencies are
maintained as per the guidelines of the RBI. The financial analysis and cash management
performance of the bank is made by using various techniques like ratio analysis, Cash budget and
working capital as published report of annual report of annual accounts gives clear and correct
information about funds and also cash balance. Thus the financial analysis and cash management
performance of the bank is very sound and its performing well in second sector of the economy.

The project titled “Financial Viability and Cash Management” of the BCC Bank was carried out
by taking its important objectives.
After evaluating and analyzing the Financial Viability and Cash Management of bank. It is found
that the liquidity of the bank is very sound.