INTERNSHIP PROJECT REPORT ON

PROFIT PLANNING FOR BRANCHES

SUBMITTED TO

CHRIST UNIVERSITY INSTITUTE OF MANAGEMENT BANGALORE In partial fulfilment of the requirements for the award of Degree of MASTER OF BUSINESS ADMINISTRATION

A PROJECT REPORT
ON PROFIT PLANNING FOR BRANCHES

SUBMITTED BY BISHA .S PURSUING MBA FINANCE ENROLLMENT NO: 1020739

Faculty Guide Prof. KAMBAM VEDANTAN Designation:

Company Guide Mrs. SOWMYA JITENDRA Designation: Assistant Manager Company : Lakshmi Vilas Bank

Companys letter head

This is to certify that Mr. _______________________, a student of ______________ ( Course) of CHRIST INSTITUTE OF MANAGEMENT, Bangalore, has undergone project based training at ------------------ in the ______________ Department from ___________ to _________. His conduct during the training / Project period was found to be ___________________

Place: Date: Signatory

Declaration

I, BISHA .S, declare that the project entitled PROFIT PLANNING FOR BRANCHES (Lakshmi Vilas Bank, Zonal officde), done during the period from April-May is my own effort and work.

This Project is done in partial fulfilment of the requirements for the award of the degree of MASTER OF BUSINESS ADMINISTRATION by CHRIST UNIVERSITY, BANGALORE.

Place: Date: Signature

Acknowledgement

I am very much thankful to Mr. ___________________, Deputy General Manager , who has given me his kind permission to do this project. My gratitude is due to Mrs. Sowmya Jitendra, Asst.Manager, who has guided me and given her valuable time & knowledge during my stay at the company. I am deeply grateful to Sri. Kambam Vedantan, my Faculty Guide, who provided valuable insights and guidance at every stage of the project.

Signature.

INDEX
Chp Particulars Pg No.

1 2

Executive Summary Industry Overview - Introduction - Globalization Of Banking - Major Events in the History Of Banking - Banking In India - Structure Of Organized Banking, India - Banking Reforms

Company Profile - Brief History & Background - Vision & Mission - Types Of Deposits - Types Of Loans - Interest rates - Major Competitors

Research Design & Methodology - Type Of Research - Target Audience - Methodology - Tools Used

Data Analysis & Interpretation - Primary Research - Secondary Research

6 7

Recommendations & Suggestions Bibliography

Executive Summary

Synopsis:
The project titled as Profit Planning For Branches is done as a part of my MBA curriculum. This project was conducted in Lakshmi Vilas Bank, Zonal office, Bangalore

which controls over 58 branches. The study was undertaken in the Planning & Development Department of the company. The entire project is divided into three segments namely : (i) Rural Segment (ii) Semi-Urban Segment (iii) Urban & Metropolitan Segment. The Bank controls Rural Branches, Semi-Urban Branches and Urban & Metropolitan Branches. Each of these segments were studied individually and their performance was recorded. Each segment has different opportunities and limitations. Based on these details recommendations are provided to increase the profitability of each segment individually which contributes to the overall profitability of the Bank.

Problem Identification :
Lakshmi Vilas Bank became a Scheduled Commercial Bank in August 1958. Ever since then the Bank is expanding its business by opening new branches in the neighbouring states of Tamil Nadu. The problem is to identify those products and services that would increase the profitability of each segment. However, it may be noted that the profitability of a firm is maximized by two ways i.e either by increasing revenue or decreasing cost. The study aims in identifying those areas that would either contribute to the increase in sales or decrease in cost without affecting the current working of the company.

Objectives :
Primary Objective :- The primary objective of this study is to identify the various areas that would contribute to the development of a Financial Service Institution like a bank. For this purpose, the important areas covered are : * The segment that has contributed the most.

* The product & services that has helped improve the profitability of the firm. * Expectations of the customer from the bank.

Secondary Objective :- The secondary objective of the project is to gain an insight of the working of an organization and thereby increase my professional knowledge, skills and understanding through real life experience. To identify how a firm analysis the data and facts, and the methodology used to take decisions. To identify how each department contributes to the profitability of the firm and the inter-dependency of the different departments in a firm.

Location Of The Study :

Lakshmi Vilas Bank, Zonal Office, First floor, Door no.4,4/1 to 4/8, Meanee Avenue road, Old tank road, Ulsoor, Bangalore - 560 042

Duration Of The Study :

April 6th May 31st

Work Profile :
I had to work with the Planning And Development department of Lakshmi Vilas Bank. My job was to assist the P&D team and understand how the team is working to differentiate their products & services from their competitors. Also I had to analysis those segments and schemes that has contributed to the growth of the Company.

Methodology :

Primary Data :- These were collected through Interviews and discussions with the Employees of different departments. Questionnaire responses obtained from customers and non-customers of the bank. Secondary Data :- These were obtained through Annual Reports, Browsing Intranet website of the company, Browsing internet websites, News Articles, The Offer Document of the company.

Limitations To The Study :

i. The scope of the study may be limited to various factors like the non-availability of complete data as the Bank maintains confidentiality with respect to its customer details and the Banks strategies to increase profitability. ii. As a result of this, the recommendations provided by me might not always be implemented. iii. There may be errors sustained during the selection of the respondents. iv. The validity of the study may be affected due to the reluctance of the respondent to provide complete information and the information may be biased due to the use of Questionnaire to collect customer preferences.

Expected Outcome Of The Study :

The study is expected to obtain a detailed insight on how a Bank plans its products and services in order to differentiate itself from that of its competitors. Also aims at identifying the different areas where the Company can improve on to maintain a sustainable growth and profit maximization. Also identifying those areas where the company can reduce its cost without affecting the current working of the company.

INTRODUCTION

A.INDUSTRY OVERVIEW :
Bank is an institution that provides financial services. The first banks were the merchants of ancient world that made loans to farmers and traders that carried goods between cities. The first records of such activity dates back to around 2000 BC in

Assyria and Babylonia. Later in ancient Greece and during the Roman Empire lender based in temples would make loans but also added two important innovations that of accepted deposits and changing money. During this period there is similar evidence of the independent development of lending of money in ancient China and separately in ancient India. Banking in the modern sense of the word can be traced to medieval and early Renaissance Italy, to the rich cities in the north like Florence, Venice and Genoa. The Bardi and Peruzzi families dominated banking in 14th century Florence, establishing branches in many other parts of Europe. Perhaps the most famous Italian bank was the Medici bank, set up by Giovanni Medici in 1397. The development of banking spread through Europe and a number of important innovations took place in Amsterdam during the Dutch Republic in the 16th century and in London in the 17th century. During the 20th century developments in telecommunications and computing resulting in major changes to way banks operated and allowing them dramatically increase in size and geographic spread. Earliest Forms of Banking : The history of banking is closely related to the history of money but banking transactions probably predate the invention of money. Deposits initially consisted of grain and later other goods including cattle, agricultural implements, and eventually precious metals such as gold, in the form of easy-to-carry compressed plates. Temples and palaces were the safest places to store gold as they were constantly attended and well built. As sacred places, temples presented an extra deterrent to would-be thieves.

Emergence Of Merchant Banks : The original banks were "merchant banks" which
were first invented in the Middle Ages by Italian grain merchants. As the Lombardy merchants and bankers grew in stature based on the strength of the Lombard plains cereal crops, many displaced Jews fleeing Spanish persecution were attracted to the trade. They brought with them ancient practices from the Middle and Far East silk routes. Originally intended for the finance of long trading journeys, these methods were applied to finance the production and trading of grain.

The Jews could not hold land in Italy, so they entered the great trading piazzas and halls of Lombardy, alongside the local traders, and set up their benches to trade in crops. They had one great advantage over the locals. Christians were strictly forbidden the sin of usury, defined as lending at interest (Islam makes similar condemnations of usury). The Jewish newcomers, on the other hand, could lend to farmers against crops in the field, a high-risk loan at what would have been considered usurious rates by the Church; but the Jews were not subject to the Church's dictates. In this way they could secure the grain-sale rights against the eventual harvest. They then began to advance payment against the future delivery of grain shipped to distant ports. In both cases they made their profit from the present discount against the future price. This two-handed trade was time-consuming and soon there arose a class of merchants who were trading grain debt instead of grain. The Jewish trader performed both financing (credit) and underwriting (insurance) functions. Financing took the form of a crop loan at the beginning of the growing season, which allowed a farmer to develop and manufacture (through seeding, growing, weeding, and harvesting) his annual crop. Underwriting in the form of a crop, or commodity, insurance guaranteed the delivery of the crop to its buyer, typically a merchant wholesaler. In addition, traders performed the merchant function by making

arrangements to supply the buyer of the crop through alternative sourcesgrain stores or alternate markets, for instancein the event of crop failure. He could also keep the farmer (or other commodity producer) in business during a drought or other crop failure, through the issuance of a crop (or commodity) insurance against the hazard of failure of his crop. Merchant banking progressed from financing trade on one's own behalf to settling trades for others and then to holding deposits for settlement of "billette" or notes written by the people who were still brokering the actual grain. And so the merchant's "benches" (bank is derived from the Italian for bench, banca, as in a counter) in the great grain markets became centers for holding money against a bill (billette, a note, a letter of formal exchange, later a bill of exchange and later still a cheque). These deposited funds were intended to be held for the settlement of grain trades, but often were used for the bench's own trades in the meantime. The term bankrupt is a corruption of the Italian banca rotta, or broken bench, which is what happened when someone lost his traders' deposits. Being "broke" has the same connotation. In the 19th century, the rise of trade and industry in the US led to powerful new private merchant banks, culminating in J.P. Morgan & Co. During the 20th century, however, the financial world began to outgrow the resources of family-owned and other forms of private-equity banking. Corporations came to dominate the banking business. For the same reasons, merchant banking activities became just one area of interest for modern banks. Discounting Of Interest : A sensible manner of discounting interest to the depositors against what could be earned by employing their money in the trade of the bench soon developed; in short, selling an "interest" to them in a specific trade, thus overcoming the usury objection. Once again this merely developed what was an ancient method of financing long-distance transport of goods. Medieval trade fairs, such as the one in Hamburg, contributed to the growth of banking in a curious way: moneychangers issued documents redeemable at other fairs, in exchange for hard currency. These documents could be cashed at another fair in a different country or at a future fair in the same location. If redeemable at a future date, they would often be discounted by an amount comparable to a rate of interest. Eventually, these documents evolved into bills of exchange, which could be redeemed at any office of the issuing banker. These bills made it possible to transfer large sums of money without the complications of hauling large chests of gold and hiring armed guards to protect the gold from thieves.

Globalisation: In the late 18th century there was a massive growth in the banking

industry. Banks played a key role in moving from gold and silver based coinage to paper money, redeemable against the bank's holdings. Within the new system of ownership and investment, the state's role as an economic factor grew substantially. World Bank and the development of payment technology : During the post second world war period and with the introduction of the Bretton Woods system in 1944, two organizations were created: the International Monetary Fund (IMF) and the World Bank. Encouraged by these institutions, commercial banks started to lend to sovereign states in the third world. This was at the same time as inflation started to rise in the west. The Gold standard was eventually abandoned in 1971 and a number of the banks were caught out and became bankrupt due to third world country debt defaults. This was also a time that saw an increasing use of technology to retail banking. In 1959 a standard for machine readable characters (MICR) was agreed and patented in the

United States for use with cheques which led to the first automated reader/sorting machines. In the 1960 the first Automated Teller Machines (ATM) or Cash machines were developed and first machines started to appear by the end of the decade. Banks started to became heavy investors in computer technology to automate much of the manual processing which saw the start of a shift by banks having a large number of clerical staff in favour of new automated systems. By the 1970s the first payment systems started to be develop that would lead to both Electronic payment systems for domestic and international payments. The international SWIFT network was established in 1973 and domestic payment systems were developed around the world by banks working together with governments.

Major Events In The History Of Banking :

1100 - 1300 - Knights Templar run earliest Euro wide /Mideast banking. 1542 - 1551 - The Great Debasement refers to the English Crowns policy of coinage debasement during the reigns of Henry VIII and Edward VI. 1602 First joint-stock company, the Dutch East India Company founded. 1602 - The Amsterdam Stock Exchange was established by the Dutch East India Company for dealings in its printed stocks and bonds. 1609 - The Amsterdamsche Wisselbank (Amsterdam Exchange Bank) was founded. 1690s - The Massachusetts Bay Colony was the first of the Thirteen Colonies to issue permanently circulating banknotes. 1694 - The Bank of England was set up to supply money to the King. 1695 - The Parliament of Scotland creates the Bank of Scotland. 1716 - John Law opens Banque Gnrale 1717 - Master of the Royal Mint Sir Isaac Newton established a new mint ratio between silver and gold that had the effect of driving silver out of circulation (bimetalism)and putting Britain on a gold standard. 1720 The South Sea Bubble and John Law's Mississippi Scheme, which caused a European financial crisis and forced many bankers out of business. 1775 The first building society, Ketley's Building Society, was established in Birmingham, England. 1781 The Bank of North America was found by the Continental Congress. 1791 - The First Bank of the United States was a bank chartered by the United States Congress. The charter was for 20 years. 1800 Rothschild family founds Euro wide banking. 1816 - The Second Bank of the United States was chartered five years after the First Bank of the United States lost its charter. This charter was also for 20 years. The bank was created to finance the country in the aftermath of the War of 1812. 1862 - To finance the American Civil War, the federal government under U.S. President Abraham Lincoln issued a legal tender paper money, the "greenbacks". 1874 - The Specie Payment Resumption Act provided for the redemption of United States paper currency ("greenbacks"), in gold, beginning in 1879. 1913 - The Federal Reserve Act created the Federal Reserve System, the central banking system of the United States of America, and granted it the legal authority to issue legal tender.

193033 - In the wake of the Wall Street Crash of 1929, 9,000 banks close, wiping out a third of the money supply in the United States.[37] 1933 - Executive Order 6102 signed by U.S. President Franklin D. Roosevelt forbid the hoarding of Gold Coin, Gold Bullion, and Gold Certificates by U.S. citizens, except for a small amount. This effectively ended the convertibility of dollars to gold for US citizens. 1971 - The Nixon Shock was a series of economic measures taken by U.S. President Richard Nixon which cancelled the direct convertibility of the United States dollar to gold by foreign nations. This essentially ended the existing Bretton Woods system of international financial exchange. 1986 The "Big Bang" (deregulation of London financial markets) served as a catalyst to reaffirm London's position as a global centre of world banking. 2007 - Start of the Late-2000s financial crisis that saw the a credit crunch that led to the failure and bail-out of a large number of the worlds biggest banks. 2008 Washington Mutual collapses. It was the largest bank failure in history.

Banking In India :
Banking in India originated in the last decades of the 18th century. The first banks were The General Bank of India, which started in 1786, and Bank of Hindustan, which started in 1790; both are now defunct. The oldest bank in existence in India is the State Bank of India, which originated in the Bank of Calcutta in June 1806, which almost immediately became the Bank of Bengal. This was one of the three presidency banks, the other two being the Bank of Bombay and the Bank of Madras, all three of which were established under charters from the British East India Company. For many years the Presidency banks acted as quasi-central banks, as did their successors. The three banks merged in 1921 to form the Imperial Bank of India, which, upon India's independence, became the State Bank of 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.

History : Indian merchants in Calcutta established the Union Bank in 1839, but it failed
in 1848 as a consequence of the economic crisis of 1848-49. The Allahabad Bank, established in 1865 and still functioning today, is the oldest Joint Stock bank in India. (Joint Stock Bank: A company that issues stock and requires shareholders to be held liable for the company's debt) It was not the first though. That honour belongs to the Bank of Upper India, which was established in 1863, and which survived until 1913, when it failed, with some of its assets and liabilities being transferred to the Alliance Bank of Simla.

When the American Civil War stopped the supply of cotton to Lancashire from the Confederate States, promoters opened banks to finance trading in Indian cotton. With large exposure to speculative ventures, most of the banks opened in India during that period failed. The depositors lost money and lost interest in keeping deposits with banks. Subsequently, banking in India remained the exclusive domain of Europeans for next several decades until the beginning of the 20th century. Foreign banks too started to arrive, particularly in Calcutta, in the 1860s. The Comptoire d'Escompte de Paris opened a branch in Calcutta in 1860, and another in Bombay in 1862; branches in Madras and Puducherry, then a French colony, followed. HSBC established itself in Bengal in 1869. Calcutta was the most active trading port in India, mainly due to the trade of the British Empire, and so became a banking center. The first entirely Indian joint stock bank was the Oudh Commercial Bank, established in 1881 in Faizabad. It failed in 1958. The next was the Punjab National Bank, established in Lahore in 1895, which has survived to the present and is now one of the largest banks in India. Around the turn of the 20th Century, the Indian economy was passing through a relative period of stability. Around five decades had elapsed since the Indian Mutiny, and the social, industrial and other infrastructure had improved. Indians had established small banks, most of which served particular ethnic and religious communities. The presidency banks dominated banking in India but there were also some exchange banks and a number of Indian joint stock banks. All these banks operated in different segments of the economy. The exchange banks, mostly owned by Europeans, concentrated on financing foreign trade. Indian joint stock banks were generally undercapitalized and lacked the experience and maturity to compete with the presidency and exchange banks. This segmentation let Lord Curzon to observe, "In respect of banking it seems we are behind the times. We are like some old fashioned sailing ship, divided by solid wooden bulkheads into separate and cumbersome compartments." The period between 1906 and 1911, saw the establishment of banks inspired by the Swadeshi movement. The Swadeshi movement inspired local businessmen and political figures to found banks of and for the Indian community. A number of banks established then have survived to the present such as Bank of India, Corporation Bank, Indian Bank, Bank of Baroda, Canara Bank and Central Bank of India. The fervour of Swadeshi movement lead to establishing of many private banks in Dakshina Kannada and Udupi district which were unified earlier and known by the name South Canara ( South Kanara ) district. Four nationalised banks started in this district

and also a leading private sector bank. Hence undivided Dakshina Kannada district is known as "Cradle of Indian Banking". During the First World War (1914-1918) through the end of the Second World War (1939-1945), and two years thereafter until the independence of India were challenging for Indian banking. The years of the First World War were turbulent, and it took its toll with banks simply collapsing despite the Indian economy gaining indirect boost due to war-related economic activities. At least 94 banks in India failed between 1913 and 1918 as indicated in the following table:

Years

Number of banks that failed

Authorised capital (Rs. Lakhs)

Paid-up Capital (Rs. Lakhs)

1913 1914 1915 1916 1917 1918

12 42 11 13 9 7

274 710 56 231 76 209

35 109 5 4 25 1

Nationalization: Despite the provisions, control and regulations of Reserve Bank of

India, banks in India except the State Bank of India or SBI, continued to be owned and operated by private persons. By the 1960s, the Indian banking industry had become an important tool to facilitate the development of the Indian economy. At the same time, it had emerged as a large employer, and a debate had ensued about the nationalization of the banking industry. Indira Gandhi, then Prime Minister of India, expressed the intention of the Government of India in the annual conference of the All India Congress Meeting in a paper entitled "Stray thoughts on Bank Nationalisation." The meeting received the paper with enthusiasm. Thereafter, her move was swift and sudden. The Government of India issued an ordinance and nationalised the 14 largest commercial banks with effect from the midnight of July 19, 1969. Jayaprakash Narayan, a national leader of India, described the step as a "masterstroke of political sagacity." Within two weeks of the issue of the ordinance, the Parliament passed the Banking Companies (Acquisition and Transfer of Undertaking) Bill, and it received the presidential approval on 9 August 1969.

A second dose of nationalization of 6 more commercial banks followed in 1980. The stated reason for the nationalization was to give the government more control of credit delivery. With the second dose of nationalization, the Government of India controlled around 91% of the banking business of India. Later on, in the year 1993, the government merged New Bank of India with Punjab National Bank. It was the only merger between nationalized banks and resulted in the reduction of the number of nationalised banks from 20 to 19. After this, until the 1990s, the nationalised banks grew at a pace of around 4%, closer to the average growth rate of the Indian economy.

Liberalization: In the early 1990s, the then Narasimha Rao government embarked on
a policy of liberalization, licensing a small number of private banks. These came to be known as New Generation tech-savvy banks, and included Global Trust Bank (the first of such new generation banks to be set up), which later amalgamated with Oriental Bank of Commerce, Axis Bank(earlier as UTI Bank), ICICI Bank and HDFC Bank. This move, along with the rapid growth in the economy of India, revitalized the banking sector in India, which has seen rapid growth with strong contribution from all the three sectors of banks, namely, government banks, private banks and foreign banks.

The next stage for the Indian banking has been set up with the proposed relaxation in the norms for Foreign Direct Investment, where all Foreign Investors in banks may be given voting rights which could exceed the present cap of 10%,at present it has gone up to 74% with some restrictions. The new policy shook the Banking sector in India completely. Bankers, till this time, were used to the 4-6-4 method (Borrow at 4%;Lend at 6%;Go home at 4) of functioning. The new wave ushered in a modern outlook and tech-savvy methods of working for traditional banks. All this led to the retail boom in India. People not just demanded more from their banks but also received more. Currently (2007), banking in India is generally fairly mature in terms of supply, product range and reach-even though reach in rural India still remains a challenge for the private sector and foreign banks. In terms of quality of assets and capital adequacy, Indian banks are considered to have clean, strong and transparent balance sheets relative to other banks in comparable economies in its region. The Reserve Bank of India is an autonomous body, with minimal pressure from the government. The stated policy of the Bank on the Indian Rupee is to manage volatility but without any fixed exchange rate-and this has mostly been true. With the growth in the Indian economy expected to be strong for quite some timeespecially in its services sector-the demand for banking services, especially retail banking, mortgages and investment services are expected to be strong. One may also expect M&As, takeovers, and asset sales. In March 2006, the Reserve Bank of India allowed Warburg Pincus to increase its stake in Kotak Mahindra Bank (a private sector bank) to 10%. This is the first time an investor has been allowed to hold more than 5% in a private sector bank since the RBI announced norms in 2005 that any stake exceeding 5% in the private sector banks would need to be vetted by them. In recent years critics have charged that the non-government owned banks are too aggressive in their loan recovery efforts in connection with housing, vehicle and

personal loans. There are press reports that the banks' loan recovery efforts have driven defaulting borrowers to suicide.

Structure Of The Organized Banking Sector In India :

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 information 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 Abu Dhabi Commercial Bank American Express 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 BankIndian Overseas Bank IndusInd Bank ING Vysya Bank Jammu & Kashmir Bank JPMorgan Chase Bank Karnataka Bank Karur Vysya Bank Lakshmi 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 Western Bank Vijaya Bank Kotak Mahindra Bank Yes Bank

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 are in the following fields 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

COMPANY PROFILE

A) BRIEF HISTORY & BACKGROUNDB OF THE COMPANY :

The Lakshmi Vilas Bank Limited (LVB) was founded eight decades ago ( in 1926) by seven people of Karur under the leadership of Shri V.S.N. Ramalinga Chettiar, mainly to cater to the financial needs of varied customer segments. The bank was incorporated on November 03, 1926 under the Indian Companies Act, 1913 and obtained the certificate to commence business on November 10, 1926, The Bank obtained its license from RBI in June 1958 and in August 1958 it became a Scheduled Commercial Bank. During 1961-65 LVB took over nine Banks and raised its branch network considerably. To meet the emerging challenges in the competitive business world, the bank started expanding its boundaries beyond Tamil Nadu from 1974 by opening branches in the neighbouring states of Andhra Pradesh, Karnataka, Kerala, Maharashtra, Madhya Pradesh, Gujarat, West Bengal, Uttar Pradesh, Delhi and Pondicherry. Mechanization was introduced in the Head office of the Bank as early as 1977. At present, with a network of 273 branches,1 satellite branch and 8 extension counters, spread over 16 states and the union territory of Pondicherry, the Bank's focus is on customer delight, by maintaining high standards of customer service and amidst all these new challenges, the bank is progressing admirably. LVB has a strong and wide base in the state of Tamil Nadu, one of the progressive states in the country, which is politically stable and has a vibrant industrial environment. LVB has been focusing on retail banking, corporate banking and banc assurance. The Bank's business crossed Rs.15561.01 Crores as on March 31, 2010. The Bank earned a Net profit of Rs. 30.66 Crores. The Net owned Funds of the Bank reaches Rs. 739.00 Crores. With a fairly good quality of loan assets the Net NPA of the bank was pegged at 4.11 % as on March 31, 2010.

B)

Vision : To be a sound and dynamic banking entity providing financial services of

excellence with Pan India presence.

C)

Mission : To develop a range of quality financial services and products to create

value for customers, shareholders and the society; to motivate people to achieve excellence in performance leading to sustained profitable growth and build a vibrant organization.

D.) Types Of Deposits Offered :

1.Savings :
i.

Savings Bank : LVB Savings Bank is intended to promote the healthy habit of saving and for the steady growth of one's money in the bank. LVB recognizes that Savings Bank customers are the pulse of all banking activity and that a satisfied customer at the SB counter is the best advertisement to the bank. Savings Bank is the landing ground for all deposits and its customers are the opinion leaders. Hence LVB attaches a lot of importance to the efficient functioning of the savings department.

ii. No-Frills SB Account : "No-Frills SB ACCOUNT", is available primarily to low

income group people of the society, downtrodden men and women, students, senior citizens, weaker sections of the society, financially and economically backward people, who are mainly residing in rural and semi urban centers of our country. The main idea behind the NO-FRILLS SB ACCOUNT is to reach out a sizable section of the population, who have been deterred and discouraged in availing Banking services for one reason or the other.
iii. Lakshmi Power : Multicity savings bank account is named as Lakshmi Power.

The savings bank product is meant for High Net-Worth Individuals. Features of Multicity Cheque Facility Accounts:

Details Average monthly balance Limit of Cash withdrawals a) At base branch b) Non Base Branch (only self withdrawals) Collection of clearing cheques(Local) a) At base branch b) Non Base Branch Clearing cheque return charges for a)Inward clearing return b)Outward clearing return c)OCC(OBC) return

Charges Rs.3000/No Limit Rs.25000/- No third party withdrawal Free of Charges Free upto Rs.1,00,000/- p.m & thereafter Re.1/- per Rs.1000/Rs.50 + interest(PLR + 3.5%) Rs.15/- 50% of collection chargesminimum Rs.50

Service Charges for outstation cheques drawn Rs.1.50 per Rs.1000 subject to on centres(Where we have branches)given for minimum of Rs.10 per instrument + collection a)At base branch b)At Noncourier charges Rs.10/- per cheque base branch Outstation cheques drawn on centres(Where we are not having branches)given for collection at base as well as non-base branch Limit of Cash Remittance a) At base branch b) At Non Base Branch Service Charges for DD/PO Charges as above plus other Bank charges No Limit Free upto Rs.50000/-p.m at any branches.Thereafter Re.1/- per 1000/DD upto Rs.25000/- free above that Rs.1.50 per 1000 with a minimum of Rs.25 per DD Free upto Rs.25000 only.Beyond that Rs.50 upto Rs.1,00,000 per month.Above Rs.1 lac normal DD charges Upto Rs.5 Lakhs Rs.25/- per transaction Above Rs.5 Lakhs Rs.50 per transaction NIL Free Rs.25 per cheque per occasion Rs.30 per month Free Free Free Rs.5 per sheet Rs.25 per cheque/record per occasion

Charges for payment between CBS branches. For clearing debits at Non base branches.

Outward RTGS Remittance Inward RTGS Other Charges: a)Cheque book b)Stop payment (Only at base branch) c)Statement of A/C Daily Weekly Fortnightly Monthly Duplicate Retrieval of old records

iv. Lakshmi Savings Gold : Lakshmi Savings Gold account offers special privileges

to their customers who maintain an Average Monthly Minimum Balance of Rs. 10,000 and above.
v. Lakshmi Savings Star Gold : Lakshmi Savings Gold account offers special

privileges to our customers who maintain an Average Monthly Minimum Balance of Rs. 20,000 and above.
vi. Lakshmi Balance Free account : is available in all the branches, specially meant

for salaried persons. The employer firm/organization should have account with the bank. Salary of the employees shall be credited directly to the employees account. It shall be a Zero balance account. ATM withdrawal of Rs.25000/- per day Free Net Banking
i.

Lakshmi Savings Youth Power : This is a special account meant children/youth between the age of 12-24. The minimum balance of Rs.100.

2. Current Account:
i. Lakshmi Supreme: Multicity current account is termed as Lakshmi Supreme. The current account will be for Business Organisations and Small & Medium Enterprise. ii. Lakshmi Current Diamond : Lakshmi Current Diamond account offers special privileges to our customers who maintain an Average Monthly Minimum Balance of Rs.5 Lakhs and above. iii. Lakshmi Current Diamond Plus : Lakshmi Current Diamond account offers special privileges to our customers who maintain an Average Monthly Minimum Balance of Rs.10 Lakhs and above. iv. Lakshmi Current Silver : Lakshmi Current Silver account offers special privileges to our customers who maintain an Average Monthly Minimum Balance(AMMB) of Rs. 1 Lakh and above. v. Lakshmi Current Subham Account : All existing Current Account norms applies to this account. The AMMB(Average Monthly Minimum Balance) is Rs.20,000. vi. Lakshmi Current Krupa : All existing Current Account norms applies to this account. The AMMB(Average Monthly Minimum Balance) is Rs.50,000.

3. Fixed Rate Deposit :

i. Fixed Deposit : Suitable for planned expenditure or savings. Deposit period ranges from 15 days to 10 years with assured regular Monthly/ Quarterly income. Minimum Deposit Amount is Rs. 100/- with no ceiling for the maximum amount. Deposit account can be opened individually/ jointly and also in the name of minors. Quarterly payment of interest or at discounted value at monthly rests. Loan facility and Nomination facility available. ii. Dhanachakra : Automatic compounding of accrued interest which yields higher returns, making your investments grow faster. Ideal for planning your financial commitments for the future- Children's higher education/ your Son's / Daughter's marriage/ Celebration of festivals etc. iii. Recurring Depositsrin: Save in dribbles - receive a lump sum. Suitable for Tax planning, Annual payment commitments like Insurance premium, long-term requirements like purchase of consumer articles/ durables, house construction, children's education etc. iv. Lakshmi Lakhpathy recurring Deposit : Recurring deposit with additional benefit of General insurance cover of Rs. 1.20 Lacs on specified items. Any individual above 18 years - singly or jointly are eligible. v. Lakshmi Freedom Deposit : The scheme has several unique features, which are customer friendly and an attractive form of investment. vi. Lakshmi Tax Saver Deposit : The scheme has several unique features, which are customer friendly and an attractive form of investment.

E.) Types Of Loans :

1. Lakshmi Business Credit : This is a convenient loan scheme designed for the trading community for quick and hassle free loans to meet their financial needs. Lakshmi Business Credit can be availed by all kinds of traders such as Department stores, Wholesalers, Retailers, Distributors, Jewellers and Grocery Merchants etc. 2. Lakshmi Home Loan : Individuals and HUFs (operating through Kartas) with sufficient income and who can produce satisfactory proof of such income by way of salary certificates, Income Tax certificates etc. can avail loans under the scheme. 3. Initial Public Offer (IPO) : The purpose of this is for subscribing to the initial public offering of the companies. Loan amounts to Minimum Rs 0.50 Lakhs & Maximum Rs. 10.00 Lakhs. Rate of interest is 15.75 % p.a. (Fixed) Interest collected upfront for a minimum period of 20 days and is not refundable in any case.

4. Lakshmi Rental Loan : Borrowers may utilize the loan facility to meet their personal expenditure requirements for investments or for general corporate purposes. 5. Lakshmi Personal Vehicle Loan : Salaried persons who are permanent employees of:

State/Central Government Public Sector Undertakings/Corporations Private Sector Companies of Repute Reputed Establishments are eligible to apply for these loans.

6. Lakshmi Easy Loan : To meet personal and domestic expenses, make fresh investments including tax- planning investments, pay income tax, invest in business, etc. 7. Lakshmi Gold Power : To meet the personal/agricultural/business requirements of Individuals, Business entities, etc. The product is available as Overdraft against pledge of gold jewels. The loan amounts to a Minimum: Rs.0.50 Lakhs. & Maximum: Rs.5.00 to 50.00 Lakhs. Based on the advance value per gram of gold as fixed by the Bank from time to time in respect of jewel advances and due appraisal by the Bank appraiser. 8. Vidhya Lakshmi Loan : To meet expenses connected with the pursuit of higher secondary education, specific courses of study at recognized institutions, including professional/job-oriented courses, which offer reasonable opportunity for employment.

F.) Interest Rates :

Facility/product-wise interest rates under the Base Rate system which is effect from 03-06-2011. Sector: Industry, Trade & Services Sl. No. Loan facility/product

1. WC credit facilities & Base Rate + product - specific operating costs + Cred Term Loan credit Risk & Tenor Risk facilities 2. Advances under Lakshmi Business Base Rate + 3.25% to 3.75% (PER: 13.75% p.a. to 14.25%

Credit (LBC) scheme Sector: Bill Advances Sl. Loan No facility/product . 1. Bills Purchased Documentary (BPD), Bills Purchased (Supply Bills) & (Drawee Bills) & UBD (Clean) Interest Rate

Base Rate + product - specific operating costs + Credit Risk & Tenor Risk Premia

2. Sight Bills At Base Rate (PER: Purchased under 10.50% p.a.) LCs BP (Ag. LC) 3. Usance Bills Usance period: Discounted under Up to 90 days: LCs - UBD Base Rate + 1.00% (Ag.LC) (PER: 11.50% p.a.) 91 to 180 days: Base Rate + 1.50% (PER: 12.00% p.a.) 4. Bills Purchased Base Rate + 7.35% (Clean) BPC: (PER: 17.85% p.a.) Interest to be charged on returned cheques Sector: Agriculture Sl. Loan No facility/product . 1. Agri. Cash Credit & Agri. Term Loans (excluding Short Term Crop Loans and Lakshmi Kisan Credit Card) Interest Rate

Loan facilities: Up to Rs.50,000: Base Rate + 3% (PER: 13.50 % p.a.) Above Rs.50,000 and up to Rs.2.00 lacs: Base Rate + 3.50% (PER:

14.00% p.a.) Above Rs.2.00 lacs and up to Rs.20.00 lacs: Base Rate + 4% (PER: 14.50% p.a.) Above Rs.20.00 lacs: Base Rate + 4.50% (PER: 15.00% p.a.) 2. Short Term Crop Loans and Lakshmi Kisan Credit Card Loan facilities: Up to Rs.50,000: Base Rate + 1.50% (PER: 12.00% p.a.) Above Rs.50,000 and up to Rs.2.00 lacs: Base Rate + 3.50% (PER: 14.00% p.a.) Above Rs.2.00 lacs and up to Rs.20.00 lacs: Base Rate + 4% (PER: 14.50% p.a.)

3. Jewel Deposit Base Rate (PER: Loan (JDL-Agri.) 10.50% p.a.) 4. Lakshmi Gold Power (Agri.) Base Rate + 1% (PER: 11.50% p.a.)

Sector: Export Credit: Sl. Loan No facility/product . 1. Pre-shipment Credit Interest Rate

Up to 270 days: Base Rate + 2.75% (PER: 13.25% p.a.) 271 to 360 days: Base Rate + 6.75% (PER: 17.25% p.a.) Sight bills &Usance bills up to 180 days: Base Rate + 2.75% (PER: 13.25% p.a.)

2. Post- shipment Credit

3. Export Credit Base Rate + 2.75% against incentive (PER: 13.25% p.a.) receivables, etc. 4. Deferred Credit Beyond 90 days: Base Rate + 7.35% (PER: 17.85% p.a.) Overdue Preshipment Credit & PCLs beyond 360 days: Base Rate + 7.35% (PER: 17.85% p.a.) Overdue Postshipment Credit & Export Bills up to 180 days: Base Rate + 2.75% (PER: 13.25% p.a.) Overdue Postshipment Credit & Export Bills beyond 180 days: Base Rate + 7.35% (PER: 17.85% p.a.)

5. Export credit not otherwise specified (ECNOS)

Sector: Personal segment loans Sl. Loan No facility/product . Interest Rate

1. Lakshmi Home Loans of up to Loans Variable Rs.30.00 lacs: rate loans Loans repayable in 5 years: Base Rate + 1.50% (PER: 12.00% p.a.) Loans repayable in 5 to 15 years: Base Rate + 1.75% (PER: 12.25% p.a.) Loans of above Rs.30.00 lacs: Loans repayable in 5 years: Base Rate + 1.75% (PER: 12.25% p.a.)

Loans repayable in 5 to 15 years: Base Rate + 2% (PER: 12.50% p.a.) 2. Lakshmi Home Loans Fixed rate loans (with provision for interest rate reset once in every 3 years) Loans of up to Rs.30.00 lacs: Loans repayable in 5 years: 11% p.a. Loans repayable in 5 to 15 years: 11.25% p.a. Loans of above Rs.30.00 lacs: Loans repayable in 5 years: 11.25% p.a. Loans repayable in 5 to 15 years: 11.50% p.a.

2. Lakshmi Personal New vehicles: Base Vehicle Loans Rate + 5.25% (PER: 15.75% p.a.) Used 4-wheelers: Base Rate + 7.35% (PER: 17.85% p.a.) 3. Advances to Base Rate + 7.35% individuals (PER: 17.85% p.a.) against corporate debt instruments and units of approved mutual funds 4. Lakshmi Easy Loan (OD/DL against govt. securities) Base Rate + 5.25% (PER: 15.75% p.a.)

5. Advances to Base Rate + 7.35% individuals (PER: 17.85% p.a.) against shares & debentures 6. IPO finance to individuals 7. Vidya Lakshmi Base Rate + 5.25% (PER: 15.75% p.a.) Up to Rs.4.00 lacs:

Loans Boy Students

Base Rate + 6.25% (PER: 16.75% p.a.) Above Rs.4.00 lacs: Base Rate + 7.25% (PER: 17.75% p.a.) Up to Rs.4.00 lacs: Base Rate + 5.75% (PER: 16.25% p.a.) Above Rs.4.00 lacs: Base Rate + 6.75% (PER: 17.25% p.a.)

8. Vidya Lakshmi Loans Girl Students

9. Jewel Deposit Base Rate + 3.50% Loan (JDL - Non- (PER: 14.00% p.a.) Agri.) 10. Lakshmi Gold Power (NonAgri.) Sector: Others Sl. Loan No facility/product . 1. Loans/overdrafts against our Banks deposits (Domestic Rupee deposits & NRE deposits) to depositors against own deposits Interest Rate Base Rate + 4.00% (PER: 14.50% p.a.)

For loan amounts up to 75% of the deposit amount: 1% over the interest rate paid on the relative deposit. For loan amounts above 75% & up to 90% of the deposit amount: An additional interest rate of 1% will be chargeable for the amount of the loan drawn in excess of 75% of the deposit amount. Base Rate + applicable spread/customer specific charges or 2% over the interest

2. Loans/overdrafts against our Banks deposits (Domestic Rupee deposits & NRE

deposits) to borrowers other than depositors against thirdparty deposits

rate paid on the relative deposit, whichever is higher.

3. Drawals against Base Rate + 7.35% un-cleared effects (PER: 17.35% p.a.) 4. Purchase of local Base Rate + 7.35% clearing (PER: 17.35% p.a.) instruments 5. Overdues by way Base Rate + 7.35% of devolved LCs + 2% (PER: 19.35% (LCBR) and p.a.) invoked LGs 6. Micro credit to SHGs Base Rate + 4% (PER: 14.50% p.a.)

7. Loan facilities Base Rate + 4.25% under Govt. (PER: 14.75% p.a.) sponsored schemes, SGSY, PMEGP and SJSRY 8. Lakshmi Rental Loan to individuals Base Rate + 5.75% (PER: 16.25% p.a.)

9 Lakshmi Rental Base Rate + Loan to product - specific firms/corporates operating costs + Credit Risk & Tenor Risk Premia 10. Advances to Rice WC credit facilities Mills at selected (other than Goods centers loan & KCC limits): Base Rate + 2.25% (PER: 12.75% p.a.) Goods loan & KCC limits: Base Rate + 2.75% (PER: 13.25% p.a.) TL facilities: Base Rate + 2.75% (PER: 13.25% p.a.)

11. Advances to WC credit facilities Timber traders at below Rs.25.00 selected centers lacs: Base Rate + 6.75% (PER: 17.25% p.a.) WC credit facilities above Rs.25.00 lacs: Base Rate + 5.75% (PER: 16.25% p.a.) 12. Advances to WC credit facilities Sago units at (other than Goods selected centers loan & KCC limits): Base Rate + 3.75% (PER: 14.25% p.a.) Goods loan & KCC limits: Base Rate + 3.50% (PER: 14.00% p.a.) TL facilities: Base Rate + 4% (PER: 14.50% p.a.)

Major Competitors

Research Design & Methodology

Type Of Research : The research conducted was primary research and secondary research. Primary research was conducted through questionnaire and interview with respondents and staff at Lakshmi Vilas Bank. The secondary research was conducted by browsing material available by Lakshmi Vilas Bnak and the Internet including news articles, reports given by Economic Times. Target Audience : Bank is a institution which helps people save their income. The target for the questionnaire was Male in the age group of 24- 46 years with disposable income. Also audience was selected based their necessary of loans. Sample size was 50. Methodology : The methodology administered was questionnaire format. A well-structured questionnaire was used to understand the customers requirement from a bank and their awareness of Lakshmi Vilas Products. Tools Used : Primary tools were questionnaire Also financial statements for a period of 5 years were used. Other tools used were articles, magazines, pages on the web.

Data Analysis & Interpretation

Questionnaire
1. Name : __________________________

2. Gender :

[ ] Male [] [] [] [] [] 18 23 24 - 29 30 35 35 45 45 +

[ ] Female

3. Age Group :

4. Occupation :

[ ] Student [ ] Government Sector Employee [ ] Private Sector Employee [ ] Business [ ] Others

5. Annual Income Bracket (INR): [ ] 50,000 1,00,000

[ ] 10,000 3, 00,000 [ ] 3, 00,000 5, 00,000 [ ] 5, 00,000 + 6. Which type of account do you hold? (Multiple Choices are allowed) [ ] Savings A/c [ ] Current A/c [ ] Fixed Deposit A/c [ ] Recurring Deposit A/c 7. What are the types of services you opt for in a Bank apart from Deposits? [ ] Loans & Advances [ ] Net Banking and Mobile Banking [ ] Money transmission like fund transfer etc. [ ] Foreign Services [ ] Financial Services like discounting of bills etc. [ ] Demat A/c facilities [ ] Services Of place or time ATM [ ] Status Credit cards, Debit cards 8. What factors you look into while applying for a loan from a bank? (rank on the basis of 1-most important and 7-least important) __Interest rates __Moratorium period __Flexibility in terms & conditions __Repayment schedule __Security __Margin Money

__Application Turn-Over Time

9. Select your most preferred Bank. __ Lakshmi Vilas Bank __ Kotak Mahindra Bank __ Dhanalakshmi Bank __ South Indian Bank __ City Union Bank

10. On what basis do you choose the institution you want to bank with? ( Rank them on the basis of 1- top priority and 6 least priority ) __ Interest rates on Deposits and Loans & Advances __ Quality of Services __ Quickness in response to queries __ Brand Name __ Availability of Branches nearby __ ATM

11. Have you used Lakshmi Vilas Bank for any transactions? [ ] Yes [ ] No

12. Are you aware of the interest rates on deposits of Lakshmi Vilas Bank? [ ] Yes [ ] No [ ] Have a vague idea

13. How often have you come across advertisements by Lakshmi Vilas Bank? [ ] Never [ ] Rarely [ ] Sometimes [ ] Often

14. Are you aware that Lakshmi Vilas Bank operates in 15 states? [ ] Yes

[ ] No

data Analysis and Interpretation

1. Gender

Gender Male Female

Respondent Percentag s e 32 64% 18 36%

Analysis of Data: The data is more skewed towards the men as the men constitute 64% of the sample size whereas the women constitute only 36%. Interpretation: The result of the study is male dominated.

2.

Age :

Age Group 18 - 23 24 - 29 30 - 35 36 - 45 46 +

Respondents 3 11 18 10 8

Percentage 6% 22% 36% 20% 16%

Analysis Of Data: The maximum respondents fall into the age bracket of 30-35(36%), followed by 24-29(22%) and the by 36-45(20%).

Interpretation: This shows that majority of the respondents are middle-aged group. This is the age when people take major financial decisions for their families wellbeing. People belonging to this age group have shown the most interest to respond to the questionnaire. Followed by this is the youth aged between 24-29. At this age people start planning on how to save their income and also decide on their future life. Most of the respondents in this group are the students. People consider banks as those financial institutions which help in nourishing their desires.

3. Occupation :

Occupation Student Govt. Sector Employee Private Sector Employee Business Others

Respondents 9 10 17 11 3

Percentage 18% 20% 34% 22% 6%

Analysis of Data: The majority of the respondents are the ones who are employed in Private Sector (34%). Then there are the Businessmen who constitute around 22% of the respondants. Interpretation: The target sample was the Businessmen, Private Sector and Government sector employees. This is because they are the major customers of Lakshmi Vilas Bank.

4.

Annual Income Bracket :

Annual Income Bracket 1,00,000 3,00,000 3,00,000 5,00,000 5,00,000 - 8,00,000 8,00,000 - 10,00,000 10,00,000 +

Respondents 4 13 27
4 2

Percentage 8% 26% 54% 8% 4%

Analysis of Data: The majority of the respondents are those who have an annual income bracket of Rs.5, 00,000 -Rs.8, 00,000 i.e. 54% of the respondents. Then we can see that 26% of the respondents are people within the income group of Rs.3, 00,000-Rs.5, 00,000. Interpretation: The result of the study will be skewed to those people whose annual income ranges between Rs.3, 00,000-Rs.5, 00,000.

5. Which type of account do you hold?

Type Of A/c Saving A/c Current A/c Fixed Deposit A/c Recurring Deposit A/c

Respondents 50 11 23 7

Percentage 100% 22% 46% 14%

Analysis of Data: All the respondents of this questionnaire have a savings A/c. Then most of them have a Fixed Deposit A/c i.e. 46% of the respondents. And it is observed that all the Self-employed or businessmen have current A/c. A few people have Recurring deposit A/c.

Interpretation: Bank is an institution which was started with the intention of helping people save their money. It still continues to be an institution of savings. All the respondents have savings A/c. Most of the respondents have more than one savings A/c. Also it is noticed that nearly half of the respondents have Fixed Deposit A/c. One of the reasons of this will be interest rates they earn at the end of the period.

6. What are the types of services you opt for in a Bank apart from Deposits?

Services Loans & Advances Net Banking and Mobile Banking Money transmission like fund transfer etc. Foreign Services Financial Services like discounting of bills etc. Demat A/c facilities Services Of place or time ATM Status Credit cards, Debit cards

Respondent s 33 34 23 12 9 34 49 46

Percentag e 66% 68% 46% 24% 18% 68% 98% 92%

Analysis of Data: Almost all of the respondents i.e. 98% look for ATM services, then the next service customers opt for are the Credit & Debit card facility. Also it is noticed that more than half of the respondents opt for services like loans & advances, net banking & mobile banking and demat facilities. Interpretation: Apart from the deposit facility, people mainly opt for those services like ATM and Debit & credit cards for convenience and ease and which saves their time. Then the most important facilities services they are looking for is the Loans & Advances, Net banking and Mobile Banking and Demat facilities.

7. What factors you look into while applying for a loan from a bank?
Factors for choosing bank Rank Rank Rank Rank Rank Rank Rank

for loan Interest rates Moratorium period Flexibility in terms & conditions Repayment schedule Security & Collateral Margin Money Application Turn-Over Time

1 32 12 0 0 0 0 6

2 13 4 0 13 12 0 8

3 5 14 0 10 8 4 9

4 0 9 4 9 18 1 9

5 0 8 20 12 0 1 9

6 0 3 14 1 7 21 4

7 0 0 12 5 5 23 5

Analysis of Data: Almost 64% of the respondents have ranked interest rates to be the most important. 24% have ranked moratorium period and 12% have ranked application turn-over period as most important. Around 26% have ranked repayment schedule and interest rates as the 2nd most important factor. 46% of the respondents have ranked margin period as the least important. 24% of the respondents have ranked Flexibility of terms & conditions as the least important. Interpretation: For selecting the bank to apply for a loan, the most important factors the people look into are the interest rates for repayment. Most of the people especially Businessmen look into the application turnover period. The next important factor would be the moratorium period. The factor that is given the least important is the margin money.

8. Select your most preferred Bank. Most Preferred Bank Lakshmi Vilas Bank Kotak Mahindra Bank Dhanalakshmi Bank South Indian Bank City Union Bank Total Num 10 11 6 19 4 50 Percentage 20% 22% 12% 38% 8% 100%

Analysis of Data: The majority of the respondents chose South Indian Bank with 38% preferring the bank. This is followed by Kotak Mahindra Bank and Lakshmi Vilas Bank with 22% and 20% Interpretation: People prefer South Indian bank primarily due to its advertisement. South Indian Bank has also better customer service and interest rates that are appealing to the customers.

11. Have you used Lakshmi Vilas Bank for any transactions?

Transactions yes no Total

Num 16 34 50

Percentage 32% 68% 100%

Analysis of Data: The majority of the respondents have not used Lakshmi Vilas Bank. Respondents who have not used the bank is 68%. Only 32% have used Lakshmi Vilas Bank for one or more transactions. Interpretation: The result of the study shows that Lakshmi Vilas Bank has no presence in the market due to lack of awareness by potential customers. Though a Industrial bank, businesses also use other competitor banks due to better service and higher awareness.

12. Are you aware of the interest rates on deposits of Lakshmi Vilas Bank?

Interest Rates Yes No Have a Vague Idea Total

Num 8 19 23 50

Percentage 16% 38% 46% 100%

Analysis of Data: The majority of the respondents have a vague idea about the interest rates. As seen 46% of the respondents have a vague idea. 38% do not have an idea about the interest rates and finally only 16% have an idea. Interpretation: The result of the study shows that interest rates are not well known to customers. This is mainly due to lack of advertisements or promotional campaign.

13. How often have you come across advertisements by Lakshmi Vilas Bank?

Advertisements Never Rarely Sometimes Often Total

Num 8 27 13 2 50

Percentage 16% 54% 26% 4% 100%

Analysis of Data: The majority of the respondents have rarely seen the advertisements, about 54%. This was followed by sometimes 26%, Never 16% and often only 4%. Interpretation: The result of the study shows that advertisments are not thoroughly planned or spend on to create impact or any awareness. Most of the respondents have either seen advertisements rarely or never. Hence it is difficult to connect to the bank.

14. Are you aware that Lakshmi Vilas Bank operates in 15 states? Presence yes no Total Num 13 37 50 Percentage 26% 74% 100%

Analysis of Data: 74% of the respondents have no idea that Lakshmi Vilas Bank have vast network of Branches. This was followed by 26% who replied in affirmation that they are aware. Interpretation: The result of the study shows that the bank has no presence or impact to consumers. Due to lack of efficient marketing, the bank is not well known to potential customers.

Secondary Research

Financial Analysis :

The period under review is 2006-2010. The Earnings Before Interest [EBIT] has been increasing every year. It is observed that the EBIT is increased by 37% from 2008 to 2009 and 2009 to 2010. This shows that the companys performance has shown a great improvement year after year. FYE 2009 shows a remarkable leap in both the PBT and PAT in the 5 year period under review. The data shows that the company rose from Rs.11.73Crores to 47.64Crores in 2008. And tremendously increased its profits during the year 2009 earning a profit of Rs.78.87Crores and their profit after tax was recorded as Rs.50.3Crores. However in the year 2010, the PBT fell to 30.58Crores. This is because their total expenditure has almost doubled than the previous year.

The banks interest income made a steady increase year after year. Their interest income has shown an increase from Rs.322Crores to Rs.909Crores. This continuous increase is a result of good investments followed by Lakshmi Vilas Bank. The Bank also was able to make this improvement as a result of the increase in the total loans which has increased by approx.23% yearly.

Key Financial Ratios of Lakshmi Vilas Bank(in Crores) Investment Valuation Ratios Mar '06 Face Value Dividend 10.00 2.50 Mar '07 10.00 0.70 Mar '08 10.00 1.50 Mar 09 10.00 2.50 Mar '10 10.00 0.60

Per Share Operating Profit Per Share (Rs) Net Operating Profit Per Share (Rs) Free Reserves Per Share (Rs) Bonus in Equity 5.93 2.65 10.96 17.85 16.09

180.62

93.11

115.13

150.06

101.14

29.45

23.40

25.62

25.82

35.98

14.78

26.44

25.65

25.87

13.04

Profitability Ratios Mar '06 Interest Spread Adjusted Cash Margin(%) Net Profit Margin Return on Long Term Fund(%) Return on Net Worth(%) Adjusted Return on Net Worth(%) Return on 3.23 7.73 Mar '07 3.73 5.27 Mar '08 45.76 4.91 Mar 09 4.21 8.00 Mar '10 5.36 4.72

6.02 80.74

3.76 78.49

4.37 102.84

6.66 128.48

3.02 93.47

8.63

5.12

6.04

11.08

4.14

7.74

4.33

4.73

10.50

4.13

0.46

81.18

85.64

93.02

75.79

Assets Excluding Revaluation s Return on Assets Including Revaluation s 0.46 81.18 85.64 93.02 75.79

Profit And Loss Account Ratios Mar '06 Interest Expended / Interest Earned Other Income / Total Income Operating Expense / Total Income Selling Distribution Cost Compositio n 67.24 Mar '07 69.71 Mar '08 75.47 Mar 09 76.65 Mar '10 72.60

5.46

2.77

2.69

2.96

2.62

33.41

30.43

21.86

18.67

16.70

0.20

0.27

0.20

0.23

0.18

Balance Sheet Ratios Mar '06 Capital Adequacy Ratio 10.79 Mar '07 12.43 Mar '08 12.73 Mar 09 10.29 Mar '10 14.82

Advances / Loans Funds(%)

74.69

76.53

71.65

80.30

74.72

Expenditure FYE 2006-2010

Findings & Recommendations

From Questionnaire:
Everyone in this era wants to save a part of their income for their future. Therefore almost all the people have a savings bank account. The next common account people open is the fixed deposit account. And of course most of the businessmen have a current account. The publics first priority to choose their bank is the interest rates. However, the brand image of the company plays a role as people believe that the Brand image signifies that the company is a safe bet. By considering the questionnaire, I would say that increase the interest rates by few base points could gain customers. However, Lakshmi Vilas bank have the better interest rates on their deposits. But 38% of the respondents are not aware of the banks interest rates at all. 46% of the respondents have replied that they have a vague idea about the interest rates. This is because they are aware of the base rates and interest rates on their Bank in which they hold an account. So, they consider that the interest rates of Lakshmi Vilas Bank will be more or less nearing those rates they know or may be with a standard deviation 1% maximum. More than half of the respondents say that they have rarely seen any banners of Lakshmi Vilas Bank. From this I would say that though the bank has taken

a step to pull in more customers, the awareness among the people is very less. Also, most of the people choose their banks based on their availability of branches nearby. Around 74% of the respondents replied that they are not aware that Lakshmi Vilas Bank operates in 15 states. From all this I would say that the bank could use any of the following methods to spread awareness :- using the television or radio, Banners not just in areas where the bank is located, but all the other places. But considering the cost of all these methods, I think it is better to choose a target and buy their database and send regular updates to them. This has a one time cost only. People usually consider many Banks before they apply for loans & advances. Majority of the targeted people have applied for education loans either for themselves or their wards. One of the most important requirement they look for is the interest rates and then the moratorium period. General : The various cost cutting strategies are : Interest on deposits Increasing CASA % Short term fixed deposits Short term float funds Bringing down other cost Staff cost Stationery cost Communication cost Transaction cost Profit Maximization : Increasing interest income Focusing on high yielding advances Recovery of NPA Changing current interest and periodical revision of interest rates Auditing of income and expenditure of the bank Increasing fee based income

 Third party products Focusing on LC & Bank guarantees Increasing merchant banking & investment banking business Augmenting foreign exchange profit Increasing other service charges

Bibliography
Web sites/ links:

www.nseindia.com www.myiris.com www.equitymaster.com www.investopedia.com www.moneycontrol.com www.capitaline.com www.lvbank.com