Académique Documents
Professionnel Documents
Culture Documents
Serial. No.
Chapter-1
TITLE
INTRODUCTION
1.1 Introduction of the Study
1.2- Purpose of Study
1.3 -Place of Study
1.4 -Scope of Study
1.5 -Objective of the study
1.6 Methodology
1.7 -Data collection
1.8 Tools
1.9 Limitation
Chapter-2
14
18
19
20
30
39
40
43
44
44
46
47
50
51
Chapter-5
9
10
10
11
11
12
12
12
PROJECT OVERVIEW
3.1 Introduction of Financial Statement
3.2 -Meaning and Concept of Financial Analysis
43
3.3 - Objective of Financial Statement Analysis
3.4 -Types of Financial Analysis
3.5 -Procedure of Financial Statement Analysis
3.6 -Methods and Devices of Financial Analysis
3.7 -Limitation of financial Analysis
3.8 -Overview of Ratio Analysis
Chapter-4
PROFILE OF BANK
2.1 Introduction to Banking Industry
2.2 Growth of Indian Financial Sector
2.3 Co-operative Banks in India
2.4 -About Orissa State Co-operative Bank Ltd.
2.5 Financial Highlights of OSCB Ltd.
2.6 Retail Banking of OSCB Ltd.
2.7 Introduction of Corporate Governance
Chapter-3
PAGE NO.
56
60
62
5.1 -Findings
5.2 Suggestions
Serial. No.
Chapter-6
TITLE
68
69
PAGE NO.
CONCLUSION
71
BIBLIOGRAPHY
72
CHAPTER-1
Introduction
1.1 Introduction of the Study
1.2- Purpose of Study
1.3 -Place of Study
1.4 -Scope of Study
1.5 -Objective of the study
1.6 -Methodology
1.7 -Data collection
1.8 -Tools
1.9 -Limitation
INTRODUCTION
1.1 Introduction of the Study:
Calculation of financial statement and ratio is only the clerical task whereas
the interpretation of its needs immense skill, intelligence and
foresightedness.
One of the easiest and most popular ways of evaluating performance of the
organization is to compare its present ratios with the past ones called
comparison and through development action plan.
It gives an indication of the direction of change and reflects whether the
oraganisations financial position and performance has improved,
deteriorated or remained constant over period of time.
Here much emphasis is given to historical comparison and on forecasting the
immediate future trends.
1.6- Methodology:
The research involved extensive and intensive studies of Orissa State Cooperative Bank ltd. Bhubaneswar. In this project report a sincere effort has
been made to study the financial statements analysis of the bank. During
this study, I study the financial position and performance of the bank. At last, I
have given interpretation and conclusion of the study.
1.8- Tools:
There are some of the tools, which are relevant for the study of ratio analysis
and performance of OSCB Ltd. are
Comparative statements;
Trend Analysis;
Common-size statements;
Funds flow Analysis;
Cash flow Analysis;
Cost volume profit Analysis;
Ratio analysis.
1.9- Limitation:
It is only based on mathematical interpretation of the figures and ignores the
factors such as management style, motivation of workers, leadership etc.
It is affected by the price level changes.
It does not give any clue for future.
CHAPTER-2
Profile of bank
2.1 Introduction to Banking Industry
2.2 Growth of Indian Financial Sector
2.3 Co-operative Banks in India
2.4 -About Orissa State Co-operative Bank Ltd.
2.5 Financial Highlights of Orissa State Co-operative Bank Ltd.
2.6 Retail Banking of Orissa State Co-operative Bank Ltd.
2.7 Introduction of Corporate Governance by OSCB Ltd.
Modern banking in India is said to be developed during the British era. In the 1st half of
the 18th century, the British East India Company established three banks -the Bank of Bengal in
1809, the Bank of Bombay in 1840 and the Bank of Madras in 1843. But in the course of time
these three banks were amalgamated to a new bank called Imperial Bank and later it was taken
over by the State Bank of India in 1955. Allahabad Bank was the first fully Indian owned bank.
The Reserve Bank of India was established in 1935 followed by other banks like Punjab National
Bank, Bank of India, Canara Bank and Indian Bank.
In 1969, 14 major banks were nationalized and in 1980, 6 major private sector banks
were taken over by the government. Today, commercial banking system in India is divided into
following categories.
Types of Banking:
1. Central Bank
The Reserve Bank of India is the central Bank that is fully owned by the government. It is
governed by a central board (Headed by a Governor) appointed by the Central Government. It
issues guidelines for the functioning of all banks operating within the country.
2. Public Sector Banks
A. State Bank of India and its associate banks called the State Bank Group
B. 19 Nationalized Banks
C. Regional Rural Banks mainly sponsored by public sector banks
3. Private Sector Banks
A.
B.
C.
D.
E.
4. Co-operative Sector
The co-operative sector is very much useful for rural people. The co-operative banking
sector is divided into the following categories:
A. State co-operative Banks
B. Central co-operative banks
C. Primary Agriculture Credit Societies
D.
E.
F.
G.
H.
I.
J.
IIBI
SCICI Ltd.
NABARD
Export-Import Bank of India
National Housing Bank
Small Industries Development Bank of India
North Eastern Development Finance Corporation
Banking Services:
Banking in India is so convenient and hassle free that one (individual, groups or whatever
the case may be) can easily process transactions as and when required. The most common
services offered by banks in India are as follow:
"
Bank Accounts: It is the most common service of the banking sector. An individual can
open a bank account which can be either savings, current or term deposits.
"
Loans: You can approach all banks for different kinds of loans. It can be a home loan, car
loan, and personal loan, loan against shares and educational loans.
"
Money Transfer: Banks can transfer money from one corner of the globe to the other by
issuing demand drafts, money orders or cheques.
"
Credit and Debit cards: Most of the banks offer credit cards to their customer which can
be used to purchase goods and services on credit. On the other hand debit card also used to draw
cash easily.
"
Lockers: Most banks have safe deposit lockers which can be used by the customers for
storing valuable, important documents or jewellery.
Banking Services for NRIs:
Non Resident Indians or NRIs can open accounts in almost all Indian banks. The three types of
accounts that NRIs can open are:
"
Non-Resident (Ordinary) Account - NRO A/c
"
Non-Resident (External) Rupee Account - NRE A/c
"
Non-Resident (Foreign Currency) Account - FCNR A/c
Banking and Finance:
Banking industry in India has evolved lately under the impact of the stimulus packages
announced by the Government. According to the Annual Policy 2008-09 of the Reserve Bank of
India (RBI), the central bank, key monetary aggregates have witnessed some growth in 2008-09.
This is reflected in the changing liquidity positions arising from domestic and global financial
conditions and the policy initiatives taken by the government. Also, reserve money variations
during 2008-09 have largely reflected an increase in currency in circulation and reduction in the
cash reserve ratio (CRR) of banks.
According to a study by Dun & Bradstreet (an international research body)-"India's Top Banks
2008"-there has been a significant growth in the banking infrastructure. Taking into account all
banks in India, there are overall 56,640 branches or offices, 893,356 employees and 27,088
ATMs. Public sector banks made up a large chunk of the infrastructure, with 87.7 per cent of all
offices, 82 per cent of staff and 60.3 per cent of all automated teller machines (ATMs).
The Credit Scenario
The year-on-year (y-o-y) aggregate bank deposits stood at 21.2 per cent as on January 2, 2009.
Bank credit touched 24 per cent (y-o-y) on January 2, 2009 as against 21.4 per cent on January 4,
2008. The year-on-year (y-o-y) growth in non-food bank credit at 23.9 per cent as on January 2,
2009 was higher than that of 22.0 per cent as on January 4, 2008. Increase in total flow of
resources from the banking sector to the commercial sector was also higher at 23.4 per cent as
compared with 21.7 per cent a year ago. The incremental credit-deposit ratio rose to 81.4 per cent
as on January 2, 2009, as against 63.1 per cent as on January 4, 2008. Also, during 2008-09 so
far, the total flow of resources to the commercial sector from banks stood at US$ 58.83 billion up
to January 2, 2009. Scheduled commercial banks' credit to the commercial sector expanded by
27.0 per cent (y-o-y) as on November 21, 2008, as compared with 23.1 per cent a year ago.
There has been variation in credit expansion across bank groups. Credit expansion as on January
2, 2009 for public sector banks stood at 28.6 per cent, scheduled commercial banks (SCBs)
including the regional rural banks (RRBs) at 24 per cent, foreign banks at 6.9 per cent and
private sector banks at 11.8 per cent, according to the Annual Policy for 2008-09 of Reserve
Bank of India.
Several measures initiated by the Reserve Bank have resulted in banks reducing their deposit and
lending rates between November 2008 and January 2009. The range for deposit rates for public
sector banks varied from 5.25 to 8.5 per cent, foreign at 5.25 to 7.75 per cent and private sector
banks at 4 to 8.75 per cent. In the post-crisis quarter caused due to collapse of Lehman Brothers,
large corporate like Infosys moved their deposits to State Bank of India (SBI), the country's
largest bank. Infosys has revealed that it transferred deposits of nearly US$ 200.61 million from
ICICI Bank to SBI last year.
Deposits as on January 2, 2009 for public sector banks stood at 24.2 per cent, scheduled
commercial banks (SCBs) including the regional rural banks (RRBs) at 21.2 per cent, foreign
banks at 12.1 per cent and private sector banks at 13.4 per cent, according to the Annual Policy
for 2008-09 of the Reserve Bank of India.
The prime lending rates of public sector banks stood at 12 to 12.5 per cent, private sector banks
at 14.75 to 16.75 per cent and foreign banks 14.25 to 15.50 per cent as on January 2009.
Bank loans rose 18.1 per cent on year-on-year basis as on March 13, the RBI has said in its
Weekly Statistical Supplement released on March 27, 2009. Outstanding loans rose to US$
541.82 billion in the two weeks to March 13. The non-food credit rose to US$ 530.19 billion in
the two weeks, while food credit stood at US$ 9.61 billion in the same period.
Since October 2008, the central bank has cut the cash reserve ratio, or the proportion of deposits
that banks set aside, and the repo rate, or the rate at which it lends to banks, by 400 basis points
each to inject liquidity into the system and activate a lower interest rate regime. Also, the reverse
repo rate has been lowered by 200 basis points to discourage banks from parking surplus funds
with RBI. Till April 7, 2009, the CRR had further been lowered by 50 basis points, while the
repo and reverse repo rates have been lowered by 150 basis points each. Public sector banks have
pruned their benchmark prime lending rates (BPLRs) by 150-200 basis points. Also, in April
2009, private sector banks such as Axis and Bank of Rajasthan have reduced their BPLRs by 50
basis points. Only few foreign banks such as Citibank have pared home loan rates by 50 basis
points to 13.75 per cent.
The rupee depreciated during 2008-09, reflecting varied developments in international financial
markets and portfolio outflows by foreign institutional investors (FIIs). The rupee exchange rate
was between 48.37 to 49.19 against the US dollar and 63.60-68.09 against the Euro in January
2009.
Government Initiatives
Apart from the bank rate cuts announced in the stimulus packages, cash withdrawals from bank
will not attract tax from April 1, 2009 following abolition of the banking cash transaction tax
(BCTT) in the Union Budget 2008-09. The total collection of BCTT stood at US$ 120.36 million
in 2008-09. Also, inter-ATM usage transaction became free of charges effective April 1, 2009.
Exchange rate used: 1 USD = 49.8417 INR
During 2007-08, the growth of real GDP originating from the industrial sector decelerated to 8.2
per cent as against 10.6 per cent in 2006-07. In terms of Index of Industrial Production (IIP),
industrial growth was at 8.5 per cent as against 11.5 per cent in 2006-07. Manufacturing sector
growth at 9.0 per cent during 2007-08 (12.5 per cent during 2006-07) was the lowest in the last
four years. The mining and electricity sectors also grew at a slower pace during 2007-08. In
terms of use-based classification, the performance of the capital goods sector was particularly
impressive with 18.0 per cent growth.
However, the basic goods, intermediate goods and consumer goods sectors recorded decelerated
growth of 7.0 per cent, 8.9 per cent and 6.1 per cent, respectively, during 2007-08. The
performance of the industrial sector was also affected by the subdued performance of the
infrastructure sector, registering 5.6 per cent growth during 2007-08. The services sector
recorded double digit growth consistently in the last three years. It grew by 10.7 per cent during
2007-08, on top of 11.2 per cent growth in 2006-07
The Reserve Bank during 2007-08 had to contend with large variations in liquidity not only due
to swings in cash balances of the Central Government, but also on account of large and volatile
capital flows. The Reserve Bank judiciously used the CRR, LAF and MSS to manage such
swings in liquidity conditions, consistent with the objectives of price and financial stability. As a
whole, there was a net absorption of liquidity on 171 days and net injection of liquidity on 75
days during 2007- 08. The average daily net outstanding balances under LAF varied between
injection of Rs.10,804 crore during December 2007 to absorption of Rs.36,665 crore in October
2007. Net issuances under the Market Stabilisation Scheme (MSS) during 2007-08 amounted to
Rs.1,05,691 crore.
In the foreign exchange market, the Indian rupee exhibited two-way movements in the range of
Rs.39.26-43.15 per US dollar during 2007-08. The Indian rupee depreciated to Rs.41.58 per US
dollar on August 17, 2007 from Rs.40.43 per US dollar on July 31, 2007. The exchange rate of
the rupee appreciated thereafter up to January 2008. The rupee moved in a range of Rs.39.2639.84 per US dollar during October 2007- January 2008. However, the rupee started depreciating
against the US dollar from the beginning of February 2008 on account of FII outflows, rising
crude oil prices and heavy dollar demand by oil companies. The exchange rate of the rupee was
Rs.39.99 per US dollar at end-March 2008.
businesses of cooperative bank in the urban areas also have 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:
i.
Farming
ii.
Cattle
iii.
Milk
iv.
Hatchery
v.
Personal finance
Cooperative banks in India finance urban areas under:
i.
Self-employment
ii.
Industries
iii.
Small scale units
iv.
Home finance
v.
Consumer finance
vi.
Personal finance
Some facts about Cooperative banks in India
i.
Some cooperative banks in India are more forward than many of the state and private
sector banks.
ii.
According to NAFCUB the total deposits & landings of Cooperative Banks in India is
much more than Old Private Sector Banks & also the New Private Sector Banks.
iii.
This exponential growth of Co operative Banks in India is attributed mainly to their much
better local reach, personal interaction with customers, and their ability to catch the nerve of the
local clientele.
Who's Who
MEMBERS OF THE MANAGING COMMITTEE OF ORISSA STATE CO-OPERATIVE BANK
LIMITED, BHUBANESWAR
Sri Jagneswar
President
Vice President
Managing Director
Refinance to DCCBs:
The OSCB came into existence to support the lending activities of its affiliated DCCBs.
The Bank provides refinance to them to pursue the following activities.
(i) Dispensation of farm Credit:
Product Credit:
In Orissa, 39.48 lakh farmers have been enrolled as members of the primary Agriculture Coop.
And Multi Purpose Co-operative Societies (LAMPS)/Farmers Services Societies (FSS).The Farm
credit requirement of the farmer is met by these societies by availing loans from the DCCBs. The
OSCB extends
The Indian
Banking
Refinance
facilities
to Scenario:
the DCCBs for financing the PACS. During 1999-2000, Rs. 426.23 Crores
were disbursed to 6.76 lakhs farmers in the state.
SCB (State Co-operative Bank)
CCB (Cental Co-operative Bank)
Investment Credit:
Introduction of Kisan Credit Card: - The OSCB has been facilitated dispensation of
entire farm credit through Kisan Credit Card only to enable the farmer members to
get instant credit. The DCCBs with the help of the Bank have transformed 813
primary societies as Mini Banks who have mobilized Rs. 250 crores from the rural
areas.
ii.
iii.
Face lift of the branches of DCCBs and the Mini Bank: - The Bank has been
providing regular assistance for the face-lift of the DCCB Branches and PACS. The
NABARD has also help 200 PACS with financial assistance for improvement of
infrastructure facilities.
iv.
Organization and linkage of self-help Groups:-The Banks has been patronizing and
close monitoring organization of self help groups at primary level and monitoring the
progress.
v.
vi.
Conduct of Study:- To find out the reasons for low off- take of farm
Credit, the bank had appointed all four Universities of the states. They have given
their reports basing on which corrective actions have been taken. The bank has also
undertaken a study on functioning of SHGs in West Bengal to emulate their
experience in the state.
vii.
Preparation
of
development Action
Plan
and
Signing
Of
MOU:At the behest of OSCB, the DCCBs have been preparing DAPs and Signing MOU
with the Bank and NABARD. This effort of the banks has created a cost
consciousness among the lowest tiers and their turn over has increased manifold.
viii.
Image Building: The Bank has been undertaking advertisement through hoarding
and electronics media to boost up the images of the entire credit structure.
ix.
NABARD as partner of the Bank: - The NABARD has been extending required
support
to
the
Bank
to
accomplish
its
objectives.
The assistance include liberal and confessional refinance, assistance from Coop
Development Fund, Support to the women Development cell, Technical, monitoring
and Evaluation Cell, Faculty support to the Training Institute Etc.
x.
xi.
Profits since Inception: - The Bank has been earning profit since its inception and
paying divided to its shareholders uninterruptedly.
xii.
No.
of No.
of % of coverage No.
of
Agril.
members of membership indebted
Agril. families
87.06
1997- 39.48
34.60
13.66
98
1998- 39.48
36.58
92.65
14.78
99
1999- 39.48
37.72
95.50
14.97
00
2000- 50.14
38.89
77.78
16.10
01*
2001- 50.14
39.33
78.66
16.09
02*
2002- 50.14
39.33
79.44
15.57
03
2003- 50.14
40.56
80.89
17.21
04
2004- 50.14
44.75
89.25
22.91
05
2005- 50.14
44.98
89.70
06
2.5-Financial
Highlights
Orissa State Co-operative Bank Ltd.
2006- 50.14
44.98
89.70
07
The Orissa State Co-operative Bank has made strides in many key areas and achieved all targets
setup in the Development Action Plan (DAP). The funds comprising of paid of capital and
resource, deposit and borrowing are the main resource of the bank. A Major chunk of this
resources are deployed under the loans and advances to the affiliated central Cooperative Banks,
Member society and individuals for different purpose under farm and non-farm sectors.
The Statutory investment requirement under RBI Act and BR Act are met by investment in
Central/State Governance Securities and others approved trustee securities, seasonal investible
surpluses are deployed in call and short term deposits with commercial banks, to maximize as
yield on assets.
Besides remaining vigilant over judicious deployment of funds, the banks is also making
concerted efforts to bring down the level of non earning assets of the banks and increase the
financial margin.
Seasonal investible surplus are deployed in call and short
terms deposits with commercial banks and DFHI etc. to
maximise the yields on assets. Beside remaining vigilant
over judicious deployment of funds, the bank is also
making concerted efforts to bring down the level of nonearning assets of the bank and increase the financial
margin. Also see the Profit & Dividend of OSCB
The Bank since its inception operated above the break even level and attained sustainable
viability long since. As a result the bank continued to build up its Reserves and Funds as per the
provision of the bye-laws. The total Reserves at the end of 1997-1998 stood at Rs.5752.52 Lakh
as against Rs.4711.00 Lakh in 1996-97 .Quantumwise, the reserves incresed by Rs.1041.52 Lakh
during the year, recording growth rate of 22.11 % .
(Rs. in Lakhs)
2003-04
2004-05
2005-06
2006-07
(Provisional)
Share Capital
4958.32
5168.62
6437.98
Reserve Fund 13917.91 16749.31 18492.47
Own Fund
18876.23 21917.93 24930.45
Deposits
102601.38 107850.94 121315.98
Borrowings
75573.56 69151.18 95434.17
Working
212573.39 214139.32 257252.88
Fund
7 Loans
109908.08 127898.44 168220.52
outstanding
8 Investments
83288.41 68195.11 71145.27
9 Per employee
952.96
1106.80
1385.34
business
10 Net profit
1347.51
1744.43
1969.39
11 Dividend
6%
7%
7%
6976.86
20173.87
27150.73
129586.23
125141.36
295086.90
1
2
3
4
5
6
193761.25
88822.10
1562.06
916.00
2007-08 Percentage
of growth
over
previous
year
7137.58
8.37%
21530.15
9.09%
-8.91%
156626.80
6.82%
166593.24
31.13%
-14.71%
-15.18%
56455.67
24.84%
-12.76%
-8.37%
CCBs
Particulars
1. Own fund
2. Deposits
(Rs. in Crores
2002-03
181.57
1569.25
2003-04 2004-05
212.18
231.13
1749.58 1830.35
2005-06
266.23
1940.35
3.
4.
5.
6.
7.
8.
1820.99
2897.44
49.63
1.71
13
-7.25/ +9.75
105.95
2102.26
3224.43
51.72
1.60
15
-1.95+17.25
94.77
2346.14
3577.53
53.83
1.50
17
+46.33
53.90
2746.35
4141.60
55.56
1.34
16
-2.40 +13.23
46.61
9. Accumulated Losses
Reserves:
The Bank since its inception operated above the break even level and attained
sustainable viability long since. As a result, the bank continued to build up its Reservers and
Funds as per the provision of the bye-laws. The total Reserves at the end of 1998-99 stood at
Rs.7092.22 Lakh as against Rs. 5752.52 Lakh in 1997-98. Quantumwise, the reserves increased
by Rs. 1339.70 Lakh during the year, recording growthrate of 23.29 % .
Composition of Reserves and Funds of the Bank from 1996-97 along with year-wise growth rate
are indicated below.
Rs in Lakh
1996-97
Statutory Reserve Fund 404.07
Agril,Credit
1803.83
Stabilisation
Other Reservers
2503.10
Total :
4711.00
Types of Reservers
Year
1996 - 97
1997 - 98
1998 - 99
1997-98
439.18
1998-99
484.68
1966.45
2050.64
3346.89
5752.52
4556.90
7092.22
Deposits
Deposit Mobilisation.
Year
PACS
Total Deposit
19992000
20002001
20012002
20022003
20032004
20042005
20052006
20062007
(Rs. in Crores
CCB
% of Growth Total
during
the Deposit
yr.
238.97
42
951.33
OSCB
%
of Total
Growth
Deposit
during the
yr.
24
560.06
321.58
30
1188.96
25
731.27
31
425.47
10
1406.85
18
874.82
20
432.75
1569.25
13
886.12
446.82
1761.25
12
1026.01
16
494.85
11
1853.48
1078.32
516.33
1955.75
1213.16
12
557.07
2126.80
1295.86
% of Growth
during the
yr.
34
Borrowings
Disbursement of schematic loans:
The short term cooperative credit structure is not lagging behind in financing investment credit
for acquisition of capital assets by the farmer members to increase agriculture production and
productivity by adopting modern technology. The DCCBs and PACS with the assistance of
OSCB have been financing activities like plantation and horticulture, sericulture, pisciculture,
farm mechanisation, small road transport operators, small business, small scale industries, etc.
both under farm and non farm sector. The financing for the purpose during last 8 years is given
as follows:
1999-00
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
(Rs. in Crores
Achievement
No. Amt.
9583 4124.57
16872 5670.61
17964 4013.29
12342 3952.28
15872 4516.95
29886 4941.48
24351 6453.79
29796 7930.49
Crop Loan
Dispensation of crop loan:
In Orissa, around 79% of the population depend on agriculture and allied activities for their
livelihood. Large number of farmers requires farm credit for their seasonal agricultural
operations. The short term cooperative credit structure has been providing the major chunk of
crop loan over the years and supporting the farmer members at the time of natural calamities to
raise fresh crops. The details are as under:
Market share in crop loan financing by cooperative banks versus commercial
(Rs. in Crores
banks:
Year Target as per annual credit Achievement
Market share
plan
Coop. Commercial Total Coop. Commercial Total
Coop. Commercial
Banks Banks/
Banks Banks
Banks Banks
RRBs
1998- 265.26 132.15
397.41 329.02 133.98
463.00 71%
29%
99
1999- 373.96 150.85
524.81 426.24 168.54
594.78 72%
28%
00
2000- 492.78 167.77
660.55 438.36 189.85
628.21 70%
30%
01
2001- 550.55 189.89
740.44 537.23 240.92
778.15 69%
31%
02
2002- 688.77 213.19
909.96 615.54 283.47
899.01 68%
32%
03
2003- 718.15 255.41
973.56 742.49 331.66
1074.15 69%
31%
04
2004- 903.51 467.49
1371.00 959.67 539.98
1499.65 64%
36%
05
2005- 1283.36 570.84
1854.20 1394.53 728.93
2123.46 66%
34%
06
2006- 1545.82 790.15
2335.97 1559.16 678.80
2237.96
07
(as
on
31.01.07)
Requirement / Formalities
1. Maximum 75% of the fixed Assets
2. Maximum repayable periods 10 years.
3. Interest in reduced balance method.
Working Capital Loans
1.
2.
3.
4.
Retail Business
Trader
Wholesaler
Project Solution
Requirement / Formalities
1. Maximum 75% of working capital requirement subject to Stock Holding.
2. Quarterly Interest on days balance.
5. A transparent transfer policy have been formulated and adopted in the bank. Transfers are
now being effected on the basis of the policy without any other consideration.
6. A bi-monthly house journal entitled Sampark is published with effect from January,
2001, which not only provides a forum to the employees to express their views, but also
the management is also able to explain the justification for taking important decisions.
7. Each branch of the OSCB, DCCBs as well as the PACS is being visited by a supervisory
officer every month to inspect the functioning and also impart guidance.
8. Loans Manual for the Bank has been prepared by NABCON- the consultancy arm of
NABARD.
9. Systems Audit of the Bank has been conducted by M/s Haribhakti & Co., Mumbai.
10. A comprehensive HRD policy is being evolved for the Bank by the National Institute of
Bank Management, Pune.
CHAPTER-3
PROJECT OVERVIEW
3.1 Introduction of Financial Statement
3.2 -Meaning and Concept of Financial Analysis
3.3 - Objective of Financial Statement Analysis
3.4 -Types of Financial Analysis
3.5 -Procedure of Financial Statement Analysis
3.6 -Methods and Devices of Financial Analysis
3.7 -Limitation of financial Analysis
3.8 -Overview of Ratio Analysis
3.1 Introduction of Financial Statement: Finance is defined as the provision of money when it is required. Every enterprise
needs finance to start and carry out its operation. Finance is the lifeblood of an organization. So,
finance should be managed effectively.
Financial statements are prepared primarily for decision making. Financial Statement
Analysis refers to the process of determining financial strength and weakness of the firm by
properly establishing strategic relationship between the items of the balance sheet and profit and
loss account. There are various methods and techniques used in analyzing financial statements,
such as comparative statements, trend analysis, common size statements, schedule of changes in
working capital, funds flow and cash flow analysis, cost volume profit analysis and ratio analysis
and other operative data. The analysis of financial statement is used for decision making by
various parties.
3.2MEANING AND CONCEPT OF FINANCIAL ANALYSIS:The term financial analysis , also known as analysis and interpretation of financial
statements, refers to the process of determining financial strengths and weakness of the firm by
establishing strategic relationship between the items of the balance sheet, profit and loss
account and opposite data.Analysing financial statements, according to Metcalf and Titard, is
a process of evaluating the relationship between component parts of a financial statements to
obtain a better understanding of a firms position and performance. In the words of Myers,
Financial statement analysis is largely a study of relationship among the various financial
factors in a business as disclosed by a single set-of statement, and a study of the trend of these
factors as shown in a series of statements.
The purpose of financial analysis is to diagnose the information contained in financial
statements so as to judge the profitability and financial soundness of the firm. Just like a doctor
examines his patient by recording his body temperature, blood pressure, etc. before making his
conclusion regarding the illness and before giving his treatment, a financial analyst analysis the
financial statements with various tools of analysis before commenting upon the financial health
or weaknesses of an enterprise. The analysis and interpretation of financial statements is essential
to bring out the mystery behind the figures in financial statements. Financial statements analysis
is an attempt to determine the significance and meaning of the financial statement data so that
forecast may be made of the future earnings, ability to pay interest and debt maturities (both
current and long-term) and profitability of a sound dividend policy.
The term financial statement analysis includes both analysis, and interpretation. A
distinction should, therefore, be made between the two terms. While the term analysis is used to
mean the simplification of financial data by methodical classification of the data given in the
financial statements, interpretation means, explaining the meaning and significance of the data
so simplified. However, both analysis and interpretation are interlinked and complimentary to
each other Analysis is useless without interpretation and interpretation without analysis is
difficult or even impossible. Most of the authors have used the term analysis only to cover the
meaning both analysis and interpretation as the objective of analysis is to study the relationship
between various items of financial statements by interpretation. We have also used the terms
Financial statement Analysis or simply Financial Analysis to cover the meaning of both
analysis and interpretation.
1. On the basis of Material Used: According to material used, financial analysis can be two
types
a.
EXTERNAL ANALYSIS
b. INTERNAL ANALYSIS
a. EXTERNAL ANALYSIS: This analysis is done by outsiders who do not have access to the
detailed internal accounting records of the business firm. These outsiders include investors,
potential investors, creditors, potential creditors, credit agencies, government agencies and
general public. For financial analysis, thus serves only a limited purpose. However, the recent
changes in the government regulations requiring business firms to make available more
detailed information to the public through audited published accounts have considerably
improved the position of the external analysis.
b. INTERNAL ANALYSIS: This analysis is done by persons who have access who have access
to the detailed internal accounting records of the business firm is known as internal analysis.
Such an analysis can, therefore, be performed by executives and employees of the employees
of the organization as well as government agencies which have statutory powers vested in
them. Financial analysis for managerial purposes is the internal type of analysis that can be
effected depending upon the purpose to be achieved.
2. On the basis of Modus Operandi:
According to the method of operation followed in the analysis can be two types
(a) Horizontal Analysis
(b) Vertical Analysis
(a) Horizontal Analysis:
It refers to the comparison of financial data of a company for several years. The figures of
this type of analysis are presented horizontally over a number of columns. The figures of the
various years are compared with standard or base year. A base year is a year chosen as beginning
point. It is also called Dynamic Analysis. This analysis makes it possible to focus attention on
items that have changed significantly during the period under review. Comparative statements
and trend percentages are two tools employed in horizontal analysis.
(b)Vertical Analysis:
It refers to the study of relationship of the various items in the financial statements of one
accounting period. In this type of analysis the figures from financial statements of a year are
compared with a base year selected from the same years statement. . It is also called Static
Analysis. Common size financial statements and financial ratios are the two tools employed in
vertical analysis. Since vertical analysis considers data for one time period only, it is not vary
conducive to a proper analysis financial statements. However, it may be used along with
horizontal analysis to make it more effective and meaningful.
Selection
Classification
Interpretation
The first step involves selection of information (data) relevant to the purpose of analysis of
financial statements. The second step involved is the methodical classification of the data and the
third step includes drawing of inferences and conclusions.
The following procedure is adopted for the analysis and interpretation of financial statements.
1. The analyst should acquaint himself with principles and postulates of accounting. He
should know the plans and policies of the management so that he may be able to find out
whether these plans are properly executed or not.
2. The extent of analysis should be determined so that the sphere of work may be decided. If
the aim is to find out the earning capacity of the enterprise then analysis of income
statement will be undertaken. On the other hand, if the financial position is to be studied
then balance sheet analysis will be necessary.
3. The financial data given in the statements should be re-organised and re-arranged. It will
involve the grouping of similar data under same heads, breaking down of individual
components of statements according to nature. The data is reduced to a standard form.
4. A relationship is established among financial statements with the help of tools and
techniques of analysis such as ratios, trends, common size, funds flow etc.
5. The information is interpreted in a simple and understandable way. The significance and
utility of financial data is explained for helping decision-taking.
6. The conclusions drawn from interpretation are presented to the management in the form
of reports
Comparative statements:
The comparative financial statements are statements of the financial position at different
periods of time. The elements of financial position are shown in a comparative form so as to give
an idea of financial position at two or more periods. Any statement prepared in a comparative
form will be covered in comparative statements. From practical point of view generally, two
financial statements
1. Balance Sheet
2. Income Statement
absolute data in money values and percentages can be determined to analyse the profitability of
the business. Like comparative balance sheet income statement also has four columns. First two
columns give figures of various items for two years. Third and fourth columns are used to show
increase or decrease in figures in absolute amounts and percentages respectively.
2.
3.
4.
5.
6.
3. Inherent Limitations of Accounting. Like financial statements, ratios also suffer from
the inherent weakness of accounting records such as their historical nature. Ratios of the
past are not necessarily true indicators of the future.
4. Change of Accounting Procedure. Change in accounting procedure by a firm often
makes ratio analysis misleading. e.g; a change in the valuation of methods of inventories,
from FIFO to LIFO increases the cost of sales and reduces considerably the value of
closing stocks which makes stock turnover ratio to be lucrative and an unfavourable gross
profit ratio.
5. Window Dressing. Financial statements can easily be window dressed to present a better
picture of its financial and profitability position to outsiders. Hence, one has to be very
careful in making a decision from ratios calculated from such financial statements. But it
may be very difficult for an outsider to know about the window dressing made by a firm.
6. Personal Bias. Ratio are only means of financial analysis and not an end in itself. Ratios
have to be interpreted and different people may interpret the same ratio in different ways.
7. Incomparable. Not only industries differ in their nature but also the firms of the similar
business widely differ in their size and accounting procedures, etc. It makes comparison of
difficult and misleading. Moreover comparisons are made difficult due to differences in
definitions of various financial terms used in the ratio analysis.
8. Absolute Figures Distortive. Ratios devoid of absolute figures may prove distortive as
ratio analysis is primarily a quantitative analysis and not a qualitative analysis.
9. Price Level Changes. While making ratio analysis, no consideration is made to the
changes in price levels and this makes the interpretation of ratio invalid.
10. Ratios no Substitutes. Ratio analysis is merely a tool of financial statements. Hence,
ratios become useless if separated from the statements from which they are computed.
11. Clues not Conclusions. Ratios provide only clues to analysts and not final conclusions.
These ratios have to be interpreted by these experts and there are no standard rules for
interpretation.
Classification of Ratios:
The use of ratio analysis is not confined to financial manager only. There are different
parties interested in the ratio analysis for knowing the financial position of a firm for different
purposes. In view of various users of ratios, there are many types of ratios which can be
calculated from the information given in the financial statements. The particular purpose of the
user determines the ratios that might be used for financial analysis.
Various accounting ratios can be classified as follows
Debt/Equity Ratio
Debt to total capital Ratio
Invest Coverage
Cash Flow/Debt
Capital Gearing
Profitability Ratio:
(A) In relation to Sales
1.
2.
3.
4.
5.
Return on investments
Return on capital
Return on Equity Capital
Return on Total Resources
Earnings per share
Price-Earning Ratio
CHAPTER-4
Analysis and Interpretation
4.1 -Comparative Balance Sheet
4.2 -Comparative Income Statement
4.3 -Ratio Analysis
Assets
Increase/Decrease Increase/Decrease
Rs.
Percentage
Current Assets:
Cash in hand
with RBI/SBI/Other
Banks
1095019529.56
1389999078.42
294979548.86
26.94
Current Accounts
with other Banks
5219215.66
9127364.90
3908149.24
74.88
2192908958.42
8677832820.00
6484923861.58
295.72
Investment in Govt.
Securities
for
Trading
2151138000.00
2091138000.00
(60000000.00)
(2.79)
12167837429.00
13971051846.50
1803214417.50
14.82
4251114.58
7349503.58
3098389.00
72.88
978103360.85
871631464.52
(106471896.33)
(10.89)
Bills Receivable
3813252.31
4173480.78
360228.47
9.45
Branch Adjustment
1498320.86
28665848.26
27167527.40
1813.20
Stationary in Stock
1050158.76
1096042.53
45883.77
4.37
20898765.03
21029433.80
130668.77
0.63
660364.00
807664.00
147300.00
22.30
Gold Loan
Interest Receivable
Suspense
Recoverable
House
Receivable
rent
Bills
account
purchase
9097762.54
9102314.54
4552.00
0.05
16743011.00
15776950.00
(966061.00)
(5.77)
1271.00
---
(1271.00)
(100)
2162365.61
2162365.61
---
---
DD Ex-advice
1387813.00
1387813.00
---
---
Sundry debtor
35411988.68
35423563.68
11575.00
0.03
18687202680.86
27137755554.12
84505528073.26
45.22
Premises
33528111.85
32629127.31
(898984.00)
(2.68)
Furniture &Fittings
37170507.19
34150138.26
(3020368.93)
(8.13)
70698619.04
66779265.57
(3919353.47)
(5.54)
Investment
5666979089.00
5645567938.00
(21411151.00)
(0.38)
LT Loans
2718261125.03
3266842342.09
548581217.06
20.18
MT Loans
4485775141.33
2818531526.76
(1667243615.43)
(37.16)
128198.26
131778.42
3580.16
2.79
1059112.27
856526.96
(202585.31)
(19.13)
12872202665.89
11731930112.12
(1140272554.52)
(8.86)
31630103975.79
38936464931.92
7306360965.27
23.1
Unspent postage
Audit
&
recovery
other
Other Assets:
Library
Vehicle Account
Liabilities and
Capital
Increase/Decrease Increase/Decrease
Rs.
Percentage
Current Liabilities:
Saving
Deposit
Bank
694462338.36
681158815.02
(13303523.34)
(1.91)
437312561.68
659441341.04
222128779.36
50.80
5658399000.00
8878069000.00
3219670000.00
56.90
3813252.31
4173480.78
360228.47
9.45
0.00
0.00
554822000.00
483003000.00
(71819000.00)
(12.94)
Interest Payable
505014456.00
916358147.00
411343691.00
81.45
Other Liabilities
151770520.83
156146042.37
4375521.54
2.88
8005594129.00
11778349826.21
3772755697.00
47.12
Fixed Deposit
11826847907.14
14322080095.48
2495232188.00
21.09
Borrowings
12514136802.89
16659324848.00
4145188045.11
33.12
Total Liabilities
32346578839.30
42759754769.69
10413175930.11
32.19
697685925.00
713758300.00
16072375.00
2.30
2017387326.74
2153015911.18
135628584.44
6.72
91603261.57
97231865.85
5628604.28
6.14
35153255352.61
45723760847.72
10570505493.83
30.06
Current Deposit
Short-term Loan
From
RBI/NABARD
Bill for Collection
Branch
Adjustment
Total
Current
Liabilities
Share Capital
Reserve Fund and
Other Reserve
Profit & Loss A/c
Total
Increase/Decrease Increase/Decrease
Rs.
Percentage
1395937255.58
1742121619.02
346184363.44
24.80
and
94960048.95
144470099.70
49510050.75
52.14
215659.00
577892.96
362233.96
167.97
14894381.83
18936824.89
4042443.06
27.14
1241822.90
1206672.00
(35150.90)
2.83
1590337.13
2010979.47
420642.34
26.45
159142.00
331484.00
172342.00
108.29
17964933.26
17201877.68
(763055.58)
(4.25)
3447826.96
3529339.49
81512.53
2.36
119142242.98
79578931.58
(39563311.40)
(33.20)
Total Expenditure
1649553650.59
2009965720.79
360412070.20
21.85
Balance of Profit
Total
91603261.57
1741156912.16
97231865.85
2107197586.64
5628604.28
366040674.50
6.14
21.00
1691129945.33
2085494315.36
394364370.03
23.32
8295349.24
10936979.41
2641630.17
32.00
Other receipt
41731617.59
10766291.87
(30965325.72)
(74.20)
Total
1741156912.16
2107197586.64
366040674.50
21.00
Salary
Allowances
Rent, Taxes,
Insurance
Expenses
&
Law charges
Legal expenses
&
Postage, Telegram
&
Telephone
charges
Audit fees
Depreciation
&
repair to Property
Stationary, Printing
& Advertisement
Other Expenditure
Income:
Interest & Discount
Commission,
Exchange
Brokerage
&
1. The comparative income statement reveals that there has been increase in interest
paid on deposit and borrowings by 24.80%, salary and allowances by 52.14%, rent,
tax and insurance expense by 27.14%. Postage and telegram expenses increases by
26.45%, but the other expenditure are relatively decreased. So the total expenditure
is increased by Rs.21.88%.
2. The total income of the bank has increased by 21.85% and the bank earn the profit of
Rs.97231865.85 which is 6.14% more than the previous year.
3. There is a sufficient progress in the bank and the overall profitability of the bank is
good.
The primary objective of business undertaking is to earn profit in the words of Lord
Keynes Profit is the engine that drives the Business enterprise. Profit is not only needed
for its existence but also for its expansion and diversification. The investors want an
adequate return on their investment; workers want higher wages, creditor want high security
for their interest and loan soon.
Following are the important overall profitability ratios, which relevant to the Business
Concerns are:
1. Return on Assets
2. Return on Capital Employed
3. Return on Equity Capital
4. Earning per Share(EPS)
1. Return on Assets:
It states the relationship between net profit and total assets.
Return on assets = Net Profit * 100 / Total asset
YEAR
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
NET PROFIT
64924131
74953072
84731646
134751259
174443023
169964997
91603261
97231865
TOTAL ASSET
16944362857
16743339649
17918499832
21297744258
21453862751
25773075463
29510930212
36860908079
PERCENTAGE
0.38%
0.45%
0.47%
0.63%
0.81%
0.66%
0.31%
0.33%
Interpretation:
The return on assets of OSCB is not satisfactory. The assets are not utilized properly.
2. Return on Capital Employed
It is widely used to measure the overall profitability and the efficiency of the
business.
Return on Capital Employed = Net Profit * 100 / Total capital employed
Capital Employed:
Share Capital
NET PROFIT
CAPITAL
PERCENTAGE
2000-01
2001-02
2002-03
2003-04
64924131
74953072
84731646
134751259
EMPLOYED
1206388387
3326568012
3696509930
1887613988
5.38%
2.25%
2.29%
7.14%
2004-05
2005-06
2006-07
2007-08
174443023
169964997
91603261
97231865
2191252452
2578915623
2715073251
2866774211
7.96%
6.59%
3.37%
3.39%
YEAR
Interpretation:
The return on capital employed of OSCB is in good trend.
3.Return on Equity Capital:
The equity share holders are the real owner of the company. They assume high risk in
the company.
Return on Equity Capital = Net Profit * 100 / Equity capital
YEAR
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
NET PROFIT
64924131
74953072
84731646
134751259
174443023
169964997
91603261
97231865
EQUITY CAPITAL
310104800
375228000
438206575
495832675
516861625
643789225
697685925
713758300
PERCENTAGE
20.9%
19.97%
19.33%
27.17%
33.75%
26.4%
13.12%
13.62%
Interpretation:
The return on equity share capital of OSCB provides a higher rate of dividend to its
equity share holders.
NET PROFIT
NO. OF EQUITY
PERCENTAGE
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
64924131
74953072
84731646
134751259
174443023
169964997
91603261
97231865
SHARES
5645770
4500000
4500000
4500000
4500000
4500000
4500000
4500000
Interpretation:
The EPS of OSCB is satisfactory to the equity share holders.
CHAPTER-5
11.50%
16.65%
18.83%
29.94%
38.76%
37.76%
20.35%
21.60%
5.1-FINDINGS:
I.
II.
45.22%.
The cash in hand ha increased by 26394%.
III.
IV.
V.
VI.
VII.
VIII.
IX.
X.
XI.
XII.
XIII.
XIV.
8.13% respectively.
The fixed deposit liabilities have increased by 21.09%.
The current liabilities have increased by 47.12%.
The number of defaulter is going up year after year.
Released the house journal SAMPARK.
Strengthening of Kissan Credit Card Scheme.
Introduction of Swarojagar Credit Card Scheme.
The NPA position has been come down compared to previous year.
The total income has increased by Rs.366040674.50 i.e. 21.00%.
The Bank has introduced sound practices of corporate governance.
The profit has been increased by 6.14%.
5.2-Suggestions:
From all the studies we can suggest some point to improve the
profitability of the organization.
The bank should focus more on advancing loans and money from
depositors.
It should reduce the cost of management.
It should recover its money from defaulters in a limited time.
It should control the non operation expenses and other expenditure.
It should ready for the coming competitive as all banks are going to be
privatized.
It should diversify its business and should give loans to non agricultural
sectors.
CHAPTER-6
Conclusion
Conclusion:
If properly analyzed and interpreted, financial statements can provide
valuable insight into a firms performance. Analysis of financial statements is
of interest to lenders (short term as well as long term) investors, security
analysts, managers and others. Financial statement analysis may be done for a
variety of purpose, which may range from a simple analysis of the short term
liquidity position of the firm to a comprehensive assessment of the strength and
weakness of the firm in various areas. It is helpful in assessing corporate
excellence, judging credit worthiness, forecasting bond ratings, predicting
bankruptcy and assessing market risk.
I have studied the attached Balance Sheet and Profit and Loss Account of
Orissa State Co-operative Bank Ltd. as at 31st March 2008.
BIBILIOGRAPHY
Reference Books:
1. Gupta Shashi K. & Sharma R. K.: Management Accounting ;
Kalyani Publisher, New Delhi.
2. Prasanna Chandra: Financial Management Theory and Practice;
Publishing Company Ltd, New Delhi.
3. Jawahar Lal & Srivastava Seema,:
Financial
Hill
Accounting;
www.rbi.com
www.managementparadise.com