A

Project Report
On
Comparative performance analysis of The Lasalgaon Merchant
Co-operative bank Ltd, Lasalgaon &State Bank Of India.
IN
The Lasalgaon Merchant Co-operative bank Ltd, Lasalgaon
Submitted to
University of Pune
In Partial fulfilment Of the requirement of
The Degree of
MASTER OF BUSINESS ADMINISTRATION
Under the guidance of
Prof. Ravindra Gawali
Submitted By:SHARAD MANIK CHANDWADE

Declaration

I, the under signed, hereby declare that this dissertation entitled Comparative performance
analysis of The Lasalgaon Merchant Co-operative bank Ltd, Lasalgaon &State Bank Of India.
is a genuine and confide work prepared by me and submitted to the PUNE UNIVERSITY
through

AMRUTVAHINI

INSTITUTE

OF

ADMINISTRATION for the partial fulfilment of

MANAGEMENT

&

BUSINESS

THE MASTERS degree in Business

Administration. The present work is of original nature and the conclusions drawn therein are
based on the Data collected by myself. To the best of my knowledge, the matter presented in this
dissertation has not been Submitted for the award of any Degree, Diploma or Membership Either
to this or any Other Institute / University.

Place: Date:-

(Sharad M.Chandwade)
(Student)

ACKNOWLEDGMENT
I hereby take immense pleasure to express my gratitude towards The Lasalgaon Merchant
Cooperative bank Ltd, Lasalgaon for giving me an opportunity for the summer project
at their esteemed organization. I express my hearty thanks to AMRUTVAHINI
INSTITUTE OF MANAGEMENT & BUSINESS ADMINISTRATION and University of Pune
for providing the platform for getting the practical knowledge during 2010-2012 I
remain indebted to my respected guide Prof .Gavali Sir and all my teachers for
helping, guiding and mentoring me to complete this work. I would like to thank the
LMCB Bank,Lasalgaon for giving me the opportunity to do my sixty days summer
project training in their esteemed organization. I am highly obliged to Mr. Rasal Sir
(Chief executive officer) for granting me to undertake my training at bank.I express
my thanks to Mr.Rasal Sir (Chief executive officer ) under whose able guidance and
direction, I was able to give shape to my training.

INDEX
Sr.No.
1
2

CHPTER TITLE
INTRODUCTION
INDUSTRY PROFILE
2.1 HISTORICAL BACKGROUND IN INDIA
2.2 MEANING AND DEFINITION OF BANK
2.3 TYPES OF BANKS
2.4 BANK ING SECTOR IN INDIA
2.5 BANK ING SCERERIO
2.6 HISTORY OF RBI
2. 7 FUNCTIONS OF RESERVE BANK OF
INDIA
2.8 CO-OPERATIVE BANKS
2.9 NABARD
COMPANY PROFILE
3.1 HISTORY OF THE ORGANIZATION
3.2 FOUNDER PROMOTERS OF THE BANK
3.3 OBJECTIVES OF THE ORGANIZATION
3.4 ORGANIZATION STRUCTURE
3.5 GENERAL INFORMATION OF THE BANK
3.5 GROWTH AND DEVELOPMENT OF THE
BANK
THEORETICAL BACKGROUND
4.1 DEFINITION OF RATIO ANALYSES
4.2 IMPORTANCE OF RATIO ANALYSES
4.3 PROFITABILITY ANALYSES
4.4 ROLE OF PROFITABILITY ANALYSES
RESEARCH METHODOLOGY
5.1 DEFITION OF RESERECH
5.2 SOURCES OF DATA
5.3 SAMPLING DESIGN
5.4 SWOT ANALYSES
5.5 OBJECTIVES OF THE STUDY
5.6 SCOPE OF THE STUDY
5.7 LIMITATION OF THE STUDY

Page No.
1

6
7

DATA ANALYSES & INTERPRETATION

FINDINGS,CONCLUSIONS,

8
9

RECOMMENDATIONS
7.1 FINDINGS
7.2 CONCLUSIONS
7.3 RECOMMENDATIONS
BIBLIOGRAPHY
ANNEXURE

CHAPTER 1
INTRODUCTION-

In the 21st century banking industry plays a very important role in the development of the
Indian economy. We cant think about any economy without the banking industry. The importance
of the bank in the modern economy cannot be neglected. They occupy a very important place in
the field of commerce and industry of any country. No country can achieve commercial and
industrial progress in the absence of sound banking system.
In the banking industry co-operative bank plays a very important role. Co-operative banks are
mainly established for the purpose of providing finance for the agricultural sector. Most of the
finance to the agricultural sector are provided by the co-operative banks. But today most of the
co-operative bank faces the problem of unrecovery of debt, increase in the NPA i.e non
performing assets etc due to the [profitability of the co-operative banks are getting decreased.
The main object of the this project is to find out the profitability of co-operative banks and
nationalized banks and analyzed it & check whether the profitability of co-operative banks are
competible with the nationalized banks.

CHAPTER 2
INDUSTRY PROFILE:

HISTORICAL BACKGROUND IN INDIA

From the early Vedic period the giving and taking of credit in one form or the other have
existed in Indian Society. The bankers are the pillars of the Indian society. Early days bankers
were called as indigenous bankers. The development of modern banking has started in India
since the days of East India Company. These banks mostly had no capital of their own and
depended entirely on deposits in India.
Indian banking comprises of players who include public sector banks, State bank of India
and its associates, private sector banks, both of old and new sectors, both of old and new
generations, scheduled banks, cooperative banks, regional rural banks, foreign banks etc.
The banking industry worldwide is transformed concomitant with a paradigm shift in the Indian
economy from manufacturing sector to nascent service sector. Indian banking as a whole in
undergoing a change. Indian banks have always proved beyond doubt their adaptability to mould
themselves into agile and resilient organizations.
The first bank in India, General Bank of India was established in 1786. From 1786 till
today, the journey of Indian banking system can be segregated into three distinct phases.
They are as follows

Early phase from 1786 to 1969 of Indian Banks.

Nationalization 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.

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
9

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
mobilization 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 nationalized 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 nationalized in 1960 on 19th July,
1969, major process of nationalization 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
nationalized.
Second phase of nationalization Indian Banking Sector Reform was carried out in 1980 with
10

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 : Nationalization of State Bank of India.

1959 : Nationalization of SBI subsidiaries.

1961 : Insurance cover extended to deposits.

1969 : Nationalization of 14 major banks.

1971 : Creation of credit guarantee corporation.

1975 : Creation of regional rural banks.

1980 : Nationalization of seven banks with deposits over 200 crore.

After the nationalization 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 liberalization 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.
11

Meaning & definition of Bank:

A bank is a financial institution where an individual can deposit money. Banks provide a system
for easily transferring money from one person or business to another. Using banks and the many
services they offer saves an incredible amount of time, and ensures that the funds of micro as
well as macroeconomic agents "pass hands" in a legal and structured manner. There are also
other types of financial institutions that operate just like banks.
According to section 5(b) of the Banking Regulation Act the term banking is defined as
accepting for the purpose of lending or investment of deposits of money from the public,
repayable on demand or otherwise and withdraw able by cheque, draft, order or otherwise.
Functions of the bank:Functioning of bank is among the more complicated of corporate operations. Since banking
involves dealing directly with money. Governments in most countries regulate this sector rather
stringently. In India, the regulation traditionally has been very strict and in the opinion of certain
quarters, responsible for the present condition of the banks, where NPAs are of a very high order.
The process of financial reforms, which started in1991 has cleared the cobwebs somewhat but lot
remains to be done. The multiplicity of policy and regulation that a bank has to work with, makes
its operations even more complicated, sometimes bordering on illogical. This section attempts to
give an overview of the functions in as simple manner as possible.
Banking Regulation Act of India,1949 defines Banking as accepting. For the purpose of
lending or investment of deposits of money from the public, repayable on demand or otherwise
and withdraw able by cheque draft, order or otherwise, Deriving from this definition and
viewed solely from the point of view of the customers, banks essentially perform the following
functions.
1) Accepting deposits from public
2) Lending money to public
3) Transferring money from one place to another
4) Credit creation
5 Acting as trustees
12

6) Keeping valuable in custody

7) Investment decision and analysis
8) Government business
9) Other types of lending and transaction

TYPES OF BANK:CENTRAL BANK:- A central bank, reserve bank,or monetary authority is the entity
responsible for the monetary policy of the national currency and money supply.
COMMERCIAL BANK:- A commercial bank performs all kind of banking functions such as
accepting deposits , advancing loans,credit creation &agency function.
INDUSTRIAL BANK:- Ordinarily industrial banks performs three main functions- firstly
Aceptance of long term deposite : since the industrial bank give long term loans, they cannot
accept short term deposit from the public. Secondly , meeting the credit requirements of
companies. Thirdly it does some other functions-the industrial banks tender advice to big
industrial firms regarding the sale &purchase of shares & debentures.
AGRICULTURAL BANKS:- As the commercial & the industrial banks are not in position to
meet the credit requirement of agricultural, there arises need of setting up special types of banks
to finance agriculture. Firstly farmers require short term loans to buy seeds, fertilizer, ploughs
,and other inputs.
FOREIGN EXCHANGE BANK:- Their main function is to make international payments
through the purchase and sale of exchange bills .As is well known ,the exporters of a country
prefer to receive the payments for their exports in their own currency .Hence their arises the
problem of converting the currency of one country into the currency of another .The foreign
exchange banks try to solve this problem.
BANKING SECTOR IN INDIA:CENTRAL BANK:- The reserve bank of India is the central bank i.e fully owned by the
government. It is governed by a central board appointed by the central government .It issues
guidelines for the functioning of all banks operating within the country.
PUBLIC SECTOR BANKS:A) State bank of India and its associate banks called the state bank group
13

B 20 nationalized banks
C) Regional rural banks
PRIVATE SECTOR BANKS:A) Old generation private banks
B ) New generations private banks
C) Foreign banks operating in indie
D) Scheduled co-operative banks
E) Non-scheduled banks
CO-OPERATIVE SECTOR:A) State co-operative banks
B) Central co-operative banks
C) Primary agricultural credit societies
DEVELOPMENTS BANKS:IFCI, IDBI, ICCCI , IIBI,
NABARD
EXPORT-IMPORT BANK OF INDIA
NATIONAL HOUSING BANK
SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA
NORTH EASTERN DEVELOPMENT FINANCE CORPORATIO
HIGHLIGHTS OF THE BANK PERFORMANCE:The year gone by was an exceptional year for the Bank in terms of most parameters. Net profit
surged by 60% from Rs. 701 crores to Rs. 1123 crores and the global business mix crossed the
milestone mark of Rs. 200,000 crores to touch Rs. 207,000 crores. While deposits grew by
27.6% to Rs. 119882 crores, the share of low cost deposits hovered at 40% and your bank
continues to be one of the few banks with such a large share of low cost deposits. Credit
expansion was a robust 30% touching an aggregate level of Rs.86791 crores. The growth has
been quite broad based encompassing various segments such as agriculture, industry, SME and
retail. Foreign branches accounted for a smart rise of 34% in advances.
Priority Sector not only constitutes the Bank's social commitment, but is recognized today
14

as a profitable business opportunity. With almost two third branches in rural and semi urban
areas, the bank has ably risen to the occasion. While agriculture clocked a growth of 25% and
constituted 18.5% of net bank credit, priority sector grew by almost 23% and accounted for
45.5% of net bank credit. The Bank could for the first time record net NPA below 1%. In fact on
the back of robust cash recoveries of Rs. 752 crore and upgradation of Rs. 132 core, gross NPA
slid by Rs. 379 crore to Rs. 2100 crore. Recoveries together with prudent provisioning saw Net
NPA falling sharply to Rs. 632 crore from Rs. 970 crore resulting in a healthy loan loss coverage
ratio.
BANKING SCENERIO:The future of the banking sector appears quite promising though there are quite a few
challenges to contend with. The customer is more discerning and has a much wider access to
technology and knowledge. Hence the imperative need to roll out innovative customized
products which will be the key differentiator amongst banks. Time and distance have shrunk and
the internet has greatly facilitated global reach and therefore, evolution of delivery channels and
interactive services have been a boon to banking. The core banking solution platform is being
increasingly adopted by the banks to fully realize the opportunity thrown up by technology.
Unlike the previous year, credit growth of the system was not as profound but quite robust
nonetheless and resources though not really scarce, were a bit expensive. RBI initiated various
measures such as increase of reverse repo rate, higher CRR prescriptions etc. which were aimed
at moderating credit growth. To certain sector specific instructions have also been issued by RBI
to rein in expansion of Bank credit to such sectors.All this ushered in a period of increasing cost,
declining yields and consequently pressure on margins. Healthy rebalancing of the credit
portfolio was the answer to this syndrome.

15

HISTORY OF RBI
The central bank of the country is the Reserve Bank of India (RBI). It was established in April
1935 with a share capital of Rs. 5 crores on the basis of the recommendations of the Hilton
Young Commission. The share capital was divided into shares of Rs. 100 each fully paid which
was entirely owned by private shareholders in the begining. The Government held shares of
nominal value of Rs. 2,20,000.
Reserve Bank of India was nationalised in the year 1949. The general superintendence and
direction of the Bank is entrusted to Central Board of Directors of 20 members, the Governor
and four Deputy Governors, one Government official from the Ministry of Finance, ten
nominated Directors by the Government to give representation to important elements in the
economic life of the country, and four nominated Directors by the Central Government to
represent the four local Boards with the headquarters at Mumbai, Kolkata, Chennai and New
Delhi. Local Boards consist of five members each Central Government appointed for a term of
four years to represent territorial and economic interests and the interests of co-operative and
indigenous banks.
The Reserve Bank of India Act, 1934 was commenced on April 1, 1935. The Act, 1934 (II of
1934) provides the statutory basis of the functioning of the Bank.
The Bank was constituted for the need of following:

16

To regulate the issue of banknotes

To maintain reserves with a view to securing monetary stability and

To operate the credit and currency system of the country to its advantage.

Functions of Reserve Bank of India

The Reserve Bank of India Act of 1934 entrust all the important functions of a central bank the
Reserve Bank of India.
Bank of Issue
Under Section 22 of the Reserve Bank of India Act, the Bank has the sole right to issue bank
notes of all denominations. The distribution of one rupee notes and coins and small coins all over
the country is undertaken by the Reserve Bank as agent of the Government. The Reserve Bank
has a separate Issue Department which is entrusted with the issue of currency notes. The assets
and liabilities of the Issue Department are kept separate from those of the Banking Department.
Originally, the assets of the Issue Department were to consist of not less than two-fifths of gold
coin, gold bullion or sterling securities provided the amount of gold was not less than Rs. 40
crores in value. The remaining three-fifths of the assets might be held in rupee coins,
Government of India rupee securities, eligible bills of exchange and promissory notes payable in
India. Due to the exigencies of the Second World War and the post-was period, these provisions
were considerably modified. Since 1957, the Reserve Bank of India is required to maintain gold
and foreign exchange reserves of Ra. 200 crores, of which at least Rs. 115 crores should be in
gold. The system as it exists today is known as the minimum reserve system.
Banker to Government
The second important function of the Reserve Bank of India is to act as Government banker,
agent and adviser. The Reserve Bank is agent of Central Government and of all State
Governments in India excepting that of Jammu and Kashmir. The Reserve Bank has the
obligation to transact Government business, via. to keep the cash balances as deposits free of
interest, to receive and to make payments on behalf of the Government and to carry out their
exchange remittances and other banking operations. The Reserve Bank of India helps the
Government - both the Union and the States to float new loans and to manage public debt. The
17

Bank makes ways and means advances to the Governments for 90 days. It makes loans and
advances to the States and local authorities. It acts as adviser to the Government on all monetary
and banking matters.
Bankers' Bank and Lender of the Last Resort
The Reserve Bank of India acts as the bankers' bank. According to the provisions of the Banking
Companies Act of 1949, every scheduled bank was required to maintain with the Reserve Bank a
cash balance equivalent to 5% of its demand liabilites and 2 per cent of its time liabilities in
India. By an amendment of 1962, the distinction between demand and time liabilities was
abolished and banks have been asked to keep cash reserves equal to 3 per cent of their aggregate
deposit liabilities. The minimum cash requirements can be changed by the Reserve Bank of
India.
The scheduled banks can borrow from the Reserve Bank of India on the basis of eligible
securities or get financial accommodation in times of need or stringency by rediscounting bills of
exchange. Since commercial banks can always expect the Reserve Bank of India to come to their
help in times of banking crisis the Reserve Bank becomes not only the banker's bank but also the
lender of the last resort.
Controller of Credit
The Reserve Bank of India is the controller of credit i.e. it has the power to influence the volume
of credit created by banks in India. It can do so through changing the Bank rate or through open
market operations. According to the Banking Regulation Act of 1949, the Reserve Bank of India
can ask any particular bank or the whole banking system not to lend to particular groups or
persons on the basis of certain types of securities. Since 1956, selective controls of credit are
increasingly being used by the Reserve Bank.
The Reserve Bank of India is armed with many more powers to control the Indian money
market. Every bank has to get a licence from the Reserve Bank of India to do banking business
18

within India, the licence can be cancelled by the Reserve Bank of certain stipulated conditions
are not fulfilled. Every bank will have to get the permission of the Reserve Bank before it can
open a new branch. Each scheduled bank must send a weekly return to the Reserve Bank
showing, in detail, its assets and liabilities. This power of the Bank to call for information is also
intended to give it effective control of the credit system. The Reserve Bank has also the power to
inspect the accounts of any commercial bank.
As supereme banking authority in the country, the Reserve Bank of India, therefore, has the
following powers:
(a) It holds the cash reserves of all the scheduled banks.
(b) It controls the credit operations of banks through quantitative and qualitative controls.
(c) It controls the banking system through the system of licensing, inspection and calling for
information.
(d) It acts as the lender of the last resort by providing rediscount facilities to scheduled banks.
Custodian of Foreign Reserves
The Reserve Bank of India has the responsibility to maintain the official rate of exchange.
According to the Reserve Bank of India Act of 1934, the Bank was required to buy and sell at
fixed rates any amount of sterling in lots of not less than Rs. 10,000. The rate of exchange fixed
was Re. 1 = sh. 6d. Since 1935 the Bank was able to maintain the exchange rate fixed at lsh.6d.
though there were periods of extreme pressure in favour of or against
the rupee. After India became a member of the International Monetary Fund in 1946, the Reserve
Bank has the responsibility of maintaining fixed exchange rates with all other member countries
of the I.M.F.
Besides maintaining the rate of exchange of the rupee, the Reserve Bank has to act as the
custodian of India's reserve of international currencies. The vast sterling balances were acquired
and managed by the Bank. Further, the RBI has the responsibility of administering the exchange
controls of the count.
19

Co-operative Banks
INTRODUCTION
Co-operative banks are an important constituent of the Indian financial system, judging by
the role assigned to them, the expectations they are supposed to fulfills, their number, and
the number of offices they operate. The co-operative movement originated in the West, but
the importance that such banks have assumed in India is rarely paralleled anywhere else in
the world. Their role in rural financing continues to be important even today, and their
business in the urban areas also has increased in recent years mainly due to the sharp
increase in the number of primary co-operative banks.

ORIGIN AND GROWTH OF CO-OPERATIVE BANKS

Co-operative banks are a part of the vast and powerful superstructure of co-operative
institutions which are engaged in the tasks of production, processing, marketing,
distribution, servicing, and banking in India. The beginning of co-operative banking in this
country dates back to about 1904 when official efforts were initiated to create a new type of
institution based on the principles of co-operative organization and management, which
were considered to be suitable for solving the problems peculiar to Indian conditions. In
rural areas, as far as agricultural and related activities were concerned, the supply of credit,
particularly institutional credit, was woefully inadequate, and unorganized money market
agencies, such as money lenders, were providing credit often at exploitatively high rates of
interest. The co-operative banks were conceived in order to substitute such agencies, provide
adequate short-term and long-term institutional credit at reasonable rates of interest, and to
bring about integration of the unorganized and organized segments of the Indian money
market.
When the national economic planning began in India, co-operative banks were made an
integral part of the institutional framework of community development and extension
services, which was assigned the important role of delivering the fruits of economic
planning at the grassroots levels. In other words, they became a part of the arrangements for
20

decentralized plan formulation and implantation for the purpose of rural development in
general, and agricultural development in particular. Today co-operative banks continue to be
a part of a set of institutions which are engaged in financing rural and agricultural
development. This set-up comprises the RBI, NABARD, commercial banks, regional rural
banks, and co-operative banks. The relative importance of co-operative banks in financing
agricultural and rural development has undergone some changes over the years. Till 1969,
they increasingly substituted the informal sector lenders. After the nationalization of banks
and the creation of RRBs and NABARD, however, their relative share has somewhat
declined. All the institutional sources contributed about 4 per cent of the total rural credit till
1954. The contribution increased to 62 per cent by 1990. The share of
co-operative banks in this institutional lending has declined from 80 per cent in 1969 to
about 42 per cent at present. The percentage of rural population covered by the agricultural
credit co-operatives was 7.8 in 1951, 36 in 1961, and about 65 per cent at present.
Cooperative banks in India finance rural areas under:
Farming
Cattle
Milk
Hatchery
Personal finance
Cooperative banks in India finance urban areas under:
Self-employment
Industries
Small scale units
Home finance
Consumer finance
Personal finance

21

FEATURES OF CO-OPERATIVE BANKS

Some distinguishing characteristics of the nature of co-operative banks are as follows:
(i) They are organized and managed on the principles of co-operation, self-help, and mutual
help. They function with the rule of "one member, one vote".
(ii) They function on "no profit, no loss" basis. For commercial banks also, profitability is no
longer the main objective, but in their case this change has been brought about as a result of
social or public policy, while co-operative banks, by their very nature, do not pursue the goal
of profit maximization.
(iii) Co-operative banks perform all the main banking functions of deposit mobilization,
supply of credit and provision of remittance facilities. However, it is said that the rang~, of
services offered is narrower and the degree of product differentiation in each main type of
service is much less in the case co-operative banks, compared to commercial banks. In other
words, co-operative banks are characterized by functional specialization. It should be added
that this is true with much less force now, because many changes have taken place in the cooperative banking system since the Banking Commission arrived at the above-mentioned
conclusion. For example,\co-operative banks now provide housing loans also. The UCBs
provide working capital loans \and term loans as well. The State Co-operative Banks
(SCBs), Central Co-operative Banks (C0)3s) and Urban Co-operative Banks (UCBs) can
normally extend housing loans up to Rs one 1akh to an individual. The scheduled UCBs,
however, can lend up to Rs three lakh for housing purpose. The UCBs can provide advances
against shares and debentures also.
(iv) As said earlier, co-operative banks do banking business mainly in the agricultural and
rural sector. However, certain types of banks viz., UCBs, SCBs and CCBs operate in semiurban, urban, and metropolitan areas also. The urban and non-agricultural business of these
22

banks has grown over the years. The co-operative banks demonstrate a shift from rural to
urban, while the commercial banks, from urban to rural.

PROBLEMS AND POLICY

As in the case of commercial banks, the quantitative growth of co-operative banks has not
been accompanied by a qualitative growth. There have always been a number of
weak..'1esses in their performance. Many of these weaknesses were identified by the All
India Rural Credit Survey Committee (AIRCSC) in the early 1950s. By that time, cooperative banks had been in the business for 45 years and the AIRCSC had concluded that
co-operatives had failed, but that they must succeed. As a result, special measures were
introduced by the government and the RBI to revive and strengthen co- operative banks.
Even after a span of 35 years, an assessment of the cooperative banks shows that" ... many
of the weaknesses of the co-operative credit system identified by the Rural Credit Survey
Committee continue to persist even today.
In the same vein, the Khusro Committee asserts: "No credit system has been subjected to as
much experimentation at the dictates of those outside the system as the co-operative credit
system has been The history of co-operative credit system has been the history of alternating
periods of growth, stagnation and reorganisation and yet quantitatively the achievements of
the co-operative systems have by no means been insignificant. Thus looking to the stake of
the movement even in the limited sphere of credit, the classic assertion of the Rural Credit
Survey made 35 years ago still seems valid that Co-operation has failed but Co-operation
must succeed.
Main weakness of Co-operative Banks
The main weaknesses of co-operative banks are as follows:
(a) The vital link in the co-operative credit system namely, the PACSs, themselves remain
23

very weak. They are too small in size to be economical and viable; besides too many of them
are dormant, existing only on paper.
(b) With the expanding credit needs of the rural sector, the commercial banks have come in
actively to meet the credit requirements of this sector, and this has aggravated the difficulties
of co-operative banks. The theory that co-operative banks would be buoyed up by the
competition from other financial institutions does not appear to have worked.
(c) Co-operative banks are not doing well in all the states; only a few account for a major
part of their business. For example, 75 per cent of total deposits mobilised by SCBs was
from only seven states in 1987-Andhra Pradesh, Gujarat, Karnataka, Madhya Pradesh,
Maharashtra, Tamil Nadu, and Uttar Pradesh.
(d) These banks still rely very heavily on refinancing facilities from the government, the
RBI, and NABARD. They have yet not been able to become self-reliant in respect of
resources through deposit mobilization.
(e) They suffer from dangerously low or weak quality of loan assets, and from highly
unsatisfactory recovery of loans.
(f) They suffer from infrastructural weaknesses and structural flaws. They do not look like
banks and do not inspire confidence in the potential members, depositors and borrowers.
(g) They suffer from too much officialisation and politicization. Undue governmental
interventions have prevented them from developing steadily as a self-reliant and resilient
credit system. Most of them are headed by politicians.
(h) They unduly depend on government capital rather than member capital. (i) There is no
active participation of their members in their working, which can come about if they work
with members' money rather than government largesse.

24

(j) They have been resorting to unethical practices. There are many regulators for them, but
still there are many lacunae in their regulation. In fact, the existence of multiple regulatory
authorities has come in the way of effective regulation, control, and monitoring of COBs.

GOVERNMENT INITIATIVES TO STRENGTHEN THE DEVELOPMENT OF COOPERATIVE BANKS

Even before the submission of the Khusro Committee Report, the government and the RBI
had initiated certain measures to strengthen the development of co-operative banks. Some of
these policy initiatives were as follows:
(i) The NABARD had formulated a scheme for the reorganization of PACSs and the
implementation of this scheme had started in those states which have accepted it.
(ii) The programme for development of selected P ACSs into truly multi-purpose cooperative societies has been implemented in many states and Union Territories.
(iii) In addition to such programmes, certain state governments like Andhra Pradesh,
Madhya Pradesh West Bengal had also initiated development programmes to strengthen the
working of the co-operative credit institutions at the base level.
(iv) On the basis of their financial position as on 30 June 1987, 175 CCBs and 7 SCBs in the
country were identified as 'weak' banks and brought under the programme of rehabilitation
which, however, did not really work quite well.
(v) With a view to enabling weak banks which were either ineligible or were on the verge of
becoming ineligible for refinance SUPP011, a 12-Point Action Programme had been
formulated and circulated by NABARD to all the state governments.
25

National Bank for Agriculture and Rural Development

History
NABARD was established on the recommendations of Shivaraman Committee, by an act of
Parliament on 12 July 1982 to implement the National Bank for Agriculture and Rural
Development Act 1981. It replaced the Agricultural Credit Department (ACD) and Rural
Planning and Credit Cell (RPCC) of Reserve Bank of India, and Agricultural Refinance and
Development Corporation (ARDC). It is one of the premiere agencies to provide credit in rural
areas.

Role
NABARD:

26

1. serves as an apex financing agency for the institutions providing investment and
production credit for promoting the various developmental activities in rural areas
2. takes measures towards institution building for improving absorptive capacity of the
credit delivery system, including monitoring, formulation of rehabilitation schemes,
restructuring of credit institutions, training of personnel, etc.
3. co-ordinates the rural financing activities of all institutions engaged in developmental
work at the field level and maintains liaison with Government of India, State
Governments, Reserve Bank of India (RBI) and other national level institutions
concerned with policy formulation
4. undertakes monitoring and evaluation of projects refinanced by it.
NABARD's refinance is available to State Co-operative Agriculture and Rural Development
Banks (SCARDBs), State Co-operative Banks (SCBs), Regional Rural Banks (RRBs),
Commercial Banks (CBs) and other financial institutions approved by RBI. While the ultimate
beneficiaries of investment credit can be individuals, partnership concerns, companies, Stateowned corporations or co-operative societies, production credit is generally given to individuals.
NABARD has its head office at Mumbai, India
NABARD operates throughout the country through its 28 Regional Offices and one Sub-office,
located in the capitals of all the states/union territories.Each Regional Office[RO] has a Chief
General Manager [CGMs] as its head, and the Head office has several Top executives like the
Executive Directors[ED], Managing Directors[MD], and the Chairperson. It has 336 District
Offices across the country, one Sub-office at Port Blair and one special cell at Srinagar. It also
has 6 training establishments.
NABARD is also known for its 'SHG Bank Linkage Programme' which encourages India's banks
to lend to self-help groups (SHGs). Because SHGs are composed mainly of poor women, this has
evolved into an important Indian tool for microfinance. As of March 2006 2.2 million SHGs
representing 33 million members had to been linked to credit through this programme.[4]

27

NABARD also has a portfolio of Natural Resource Management Programmes involving diverse
fields like Watershed Development, Tribal Development and Farm Innovation through dedicated
funds set up for the purpose.
Rural Innovation
NABARD's role in rural development in India is phenomenal.[5] National Bank For Agriculture
& Rural Development (NABARD) is set up as an apex Development Bank by the Government
of India with a mandate for facilitating credit flow for promotion and development of agriculture,
cottage and village industries. The credit flow to agriculture activities sanctioned by NABARD
reached Rs 1,574,800 million in 2005-2006. The overall GDP is estimated to grow at 8.4 per
cent. The Indian economy as a whole is poised for higher growth in the coming years. Role of
NABARD in overall development of India in general and rural & agricultural in specific is
highly pivotal.
Through assistance of Swiss Agency for Development and Cooperation, NABARD set up the
Rural Infrastructure Development Fund. Under the RIDF scheme Rs. 512830 million have been
sanctioned for 2,44,651 projects covering irrigation, rural roads and bridges, health and
education, soil conservation, water schemes etc. Rural Innovation Fund is a fund designed to
support innovative, risk friendly, unconventional experiments in these sectors that would have
the potential to promote livelihood opportunities and employment in rural areas.[6] The assistance
is extended to Individuals, NGOs, Cooperatives, Self Help Group, and Panchayati Raj
Institutions who have the expertise and willingness to implement innovative ideas for improving
the quality of life in rural areas. Through member base of 250 million, 600000 cooperatives are
working in India at grass root level in almost every sector of economy. There are linkages
between SHG and other type institutes with that of cooperatives.
The purpose of RIDF is to promote innovation in rural & agricultural sector through viable
means. Effectiveness of the program depends upon many factors, but the type of organization to
which the assistance is extended is crucial one in generating, executing ideas in optimum
commercial way. Cooperative is member driven formal organization for socio-economic
purpose, while SHG is informal one. NGO have more of social color while that of PRI is
28

political one. Does the legal status of an institute influences effectiveness of the program? How
& to what an extent? Cooperative type of organization is better (Financial efficiency &
effectiveness) in functioning (agriculture & rural sector) compared to NGO, SHG & PRIs.[7]
Recently in 2007-08, NABARD has started a new direct lending facility under 'Umbrella
Programme for Natural Resource Management' (UPNRM). Under this facility financial support
for natural resource management activities can be provided as a loan at reasonable rate of
interest. Already 35 projects have been sanctioned involving loan amount of about Rs 1000
million. The sanctioned projects include honey collection by tribal in Maharashtra, tussar value
chain by a women producer company ('MASUTA'), eco-tourism in Karna

National Bank for Agriculture and Rural Development

Logo of NABARD Headquarters in Mumbai

Headquarters
Established

Mumbai, Maharashtra, India

12 July 1982 [1]

Managing Director Dr K G Karmakar [2]

Currency
Reserves
Website

29

81,220 crore (US$18.03 billion) (2007)

www.nabard.org

NABARD is the apex development bank in India

CHAPTER 3
COMPANY PROFILE

30

History of the organization:

There was need to meet financial requirement of middle class &small businessman. In 1944
Mr. Ramkisan Daga & other member got together & registered The Lasalgaon Merchant Cooperative Bank LTD , Lasalgaon.
Location
The Bank is situated in the lasalgaon.
Address- Apekshapurti , 79,M.G. Road, Lasalgaon -422306
Post box no-16
TAL- Niphad , Dist Nashik

Founder promoters of the bank:

31

Ramkisan Motilal Daga

Jayraj Brahmechal

Shriram Shankar Palod

Bansilal Chunilal Daga

Bandulal Balaram Kasat

Radhakisan Mayaram Daga

Ramkisan Rambakal Kambali

Motilal Harlal Kathi

Jagganath Jathmal Daga

Objectives of the organization:

Main aim of the bank is to provide financial assistance to members by way of loans.

To inspire the shareholder for the saving.

To provide the loans to the shareholders who need it.

To make available other banking facilities other than financing.

32

Organization Structure:

SHAREHOLDERS

BOARD OF DIRECTOR

CKIEF EXECUTIVE OFFICER

SENIOR OFFICER
33

JUNIOR OFFICER

CLERK

General information of the bank

Name of the bank- The Lasalgaon Merchant Co-operative Bank Ltd. Lasalgaon

Address

- Apekshapurti ,79,M.G. Road, Lasalgaon -422306

Post box no-16
TAL-Niphad ,Dist Nashik

Register number& Date : -8978 dated-17-11-1944

Reserve Bank
License number

- UBD/MH/796P Date-23-12-1986

Bank Code Number -0550

34

Total Office Staff - 28

GROWTH AND DEVELOPMENT OF THE BANK:PAID UP CAPITAL:(Figures in lakhs)

YEAR
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11

35

PAID UP CAPITAL
80.14
83.12
88.61
94.12
101.55
108.15

RESERVE FUND:(Figures in lakhs)

YEAR
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11

36

RESERVE FUND
355.37
352.34
388.42
390.93
271.91
266.64

DEPOSITS:(Figures in lakhs)
YEAR
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11

37

DEPOSITS
2034.97
2239.79
2444.99
2967.45
3301.23
3500.13

LOANS:(Figures in lakhs)
YEAR
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11

38

LOANS
1501.70
1492.06
1640.18
1823.77
2001.77
2179.48

INVESTMENTS:(Figures in lakhs)
YEAR
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11

39

INVESTMENTS
836.76
845.81
784.90
1060.84
1229.84
1462.90

PROFIT/LOSS:(Figures in lakhs)
YEAR
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
40

PROFIT/LOSS
5.13
-42.17
18.05
22.71
63.24
38.14

41

CHAPTER 4
THEORITICAL BACKGROUND

Definition of ratio analysis:

A tool used by individuals to conduct a quantitative analysis of information in a company's
financial statements. Ratios are calculated from current year numbers and are then compared to
previous years, other companies, the industry, or even the economy to judge the performance of
the company. Ratio analysis is predominately used by proponents of fundamental analysis.
Ratio can be defined as numerical or an arithmetical relationship between two figures. It is
expressed when one figure derived by other.

42

IMPORTANCE OF RATIO ANALYSIS:

1) Accounting ratios reveal the financial position of the business firm. This helps banks
,insurance companies as well as other financial institutions . The ratios also helpful to investors
for finding the profitability of the firm.

2) The ratios are very useful in intra firm comparisons are necessary to find out the exact
position of the firm as compared to other firm in the same industry. Compare the performance of
a firm current year with that of previous years.

3) If accounting ratios are calculated for a number of years, a trend can be established. This help
in setting future plans and forecasting.

4) Accounting ratios are of great assistance in locating the weak spots in the business. This
weakness may exist in spite of satisfactory performance otherwise.

Profitability analysis:
These ratios given an idea abut the profitability of a business firm Profit and profitability differ
from each other as profit is the difference between income and expenditure while profitability is
measured by comparing the profit with some other parameter like sales, capital employed, total
assets. The ratios reviling are the ratios under this category are usually expressed in percentage.
A class of financial metrics that are used to assess a business's ability to generate earnings as
compared to its expenses and other relevant costs incurred during a specific period of time. For
most of these ratios, having a higher value relative to a competitor's ratio or the same ratio from a
previous period is indicative that the company is doing well.
43

Role of profitability analysis:

The financial manager has to take rational decisions from time to time keeping in view the
objectives of the company. Always the decision must be based on the analytical tool.
Profitability analysis is the most useful technique in this regard .A profitability analysis relies
on the comparison or relationship of the data which enhances the utility or the practical value of
the accounting information Profitability analysis today is performed by various users of financial
statements. Investors and management perform the analysis to understand how profitably or
productively the assets of the company are used. Lenders and Suppliers of goods look for the
ability of the firm to repay the dues on time. For instance, as a deposit holder of a bank, you
would be interested in liquidity of the bank and would expect the bank to pay you the amount
when you need.
Profitability analysis, which provides historical linkage between various financial components
,is useful. Suppose the top management fixes a goal to increase the net income by another
20%for the coming year .Using profit to sales linkage, we can estimate additional turnover
required to achieve the goals.

44

CHAPTER 5
RESEARCH METHODOLOGY

DEFINITION OF RESEARCH:-

Research can be defined as A process that is followed by a person to answer either his/her own
queries or somebody else queries about a particular object, person, subject etc.
The person that does the research is known as researcher and the thing about which he/she is
doing research is known as area of research.

45

Research is, thus, an original contributions to the existing stock of knowledge making for its
advancement .It is the pursuit of truth with the help of study. observations, comparisons and
experiment.
Procedures used in making systematic observations or otherwise obtaining data, evidence, or
information as part of a research project or study .

SOURCES OF DATA:-

PRIMARY DATA SOURCE:- This data is gathered for the first time problem solution.
Primary data are collected from the employee of the bank through the
Interaction and by asking some questions.

SECONDARY DATA SOURCE:- Secondary data consists of information that already exists to
serve the purpose. Secondary data are available in lower cost & another benefit of secondary data
is quicker availability. Here the relevant secondary data was collected through the available
literature from organization in the from of annual reports & other information is collected
through the internet.

SAMPLING DESIGN:The design for this study is judgment sampling.

SAMPLE SIZE : Two banks
DATA TYPE : Secondary data
46

DATA COLLECTION METHOD:

The data for the study were collected from the published annual reports of banks.

SWOT ANALYSIS:The overall evaluation of a businesss strengths, weaknesses, opportunities, and threats is called
SWOT analysis. SWOT analysis consists of an analysis of the external and internal
environments.
STRENGTH: The bank is spread into limited area due to its limited area it is easy to monitor minor
requirements of the customers which may else ignored by other banks.
The bank has the branches in the nearby villages where the branches of other banks are
not yet opened which gives the benefits to the bank.
As the bank is co-operative bank, bank gets the advantages of getting the priority by
different co-operative societies for transaction & loans.
Due to the co-operative in nature people has faith in the bank.
Adherence to co-operative values & principles.
The main priority of the bank of the Lasalgaon Merchant Co-operative Bank is
member service rather than profit.
WEAKNESSESS: Due to the limited area, the bank has less resources as compared to other banks.
The LMCB banks staff lacks the professionalism.
Political interference in the management of the bank due to this proper decisions are not
taken.
The LMCB bank is not having the facilities like internet banking and mobile banking.
The LMCB bank is not having the facilities of ATM.
47

 Lack of knowledge about the many aspects of the banking regulation to the employees.
OPPORUNITIES: Providing ATM facilities to the member bank can increase its business.
The LMCB bank is having the opportunities to open new branches in the nearby villages
where branches of the other banks are not yet opened.
The LMCB bank can make available the facilities like internet banking & mobile
banking.
Being co-operative bank this bank gets priority over the other banks from the cooperative societies.
As a co-operative bank, bank can give 1% more interest on deposits to attract the deposits
from the public.
THREATS: The main threat to the LMCB bank is increasing the numbers of branches of nationalized
bank &commercial banks.
Easy policies of the other banks.
Instant services are provided by some other banks.
Online banking, mobile banking &ATM facilities of the nationalized bank.
Facilities like Zero Balance Account by the State Bank Of India.

OBJECTIVES OF THE STUDY:

1) To know the profitability of The Lasalgaon Merchant Co-operative Bank Ltd .Lasalgaon.
48

2) To evaluate the profitability of The Lasalgaon Merchant Co-operative Bank Ltd. For
determination of financial soundness.

3) To compare the performance of co-operative bank (i.e. The Lasalgaon Merchant Co-operative
Bank Ltd.) with the nationalized bank (i.e. State Bank of India)

4) To find out the whether there is a growth in the co-operative banks performance.
5) To find out the factors which are affecting the financial performance of the co-operative &
nationalized bank.

SCOPE OF THE STUDY:1) The project will be helpful to the bank to know its performance.

49

2) The project will also helpful to the banks to know about its ability to earn profit.

3) The study will helpful for the management to take the necessary decision about the bank
policy.

4) The study will helpful for the banks to identify the drawbacks of the bank & this project will
help to remove these drawbacks.

5) The study throws light on the performance of co-operative banks compare to nationalised
banks.

LIMITATION OF THE STUDY:1) To get the financial data from the organization is not an easy task.
50

2) Due to confidentiality some of the information are not provided by the banks.

3) Maximum secondary data is used for the study.

4) The study was conducted for the limited period. The profitability of the bank was studied only
for the 5 years. Due to this we may not get the proper results.

5) The sample size is only 2 banks due to this we may not obtain the desired results.

6) The study was conducted in the rural area. It might be chances that the results in urban area is
different.

51

CHAPTER6
DATA ANALYSIS & INTERPRETATION:-

NET PROFIT RATIO:FORMUALA NET PROFIT /TOTAL RECEIPT*100

Table No: 1
YEAR

FIGURES

LMCB

FIGURES (IN CRORE)

BANK
2007
2008
52

- 42,16,574/ 2,08,42,398
18,05,050 / 2,97,73,602

(%)
-20.23
6.06

SBI BANK
(%)

4,541.31 / 46,937.79
6,729.12 / 58,348.74

9.68
11.53

2009
2010
2011

22,70,755 / 3,00,22,370
63,23,847 / 3,86,52,173
38,14,536 / 4,06,40,369

7.56
16.36
9.38

9,121.23 / 76,479.78
9,166.05 / 85,962.07
7,370.35 / 96,329.45

11.92
10.66
7.65

Fig No: 1

Analysis &Interpretation:Net profit Ratio reveals overall firms efficiency in the operating the business & the net return
available to the owners. The net profit ratio of LMCB bank in the year 2010&11 is more than
SBI. In the year 2007 the LMCB bank suffered from the loss. In the year 2008&09,the net profit
ratio of LMCB bank is less than the SBI

RETURN ON NET WORTH:FORMNUALA:-NET PROFIT/OWNERS CAPITAL*100

Table No: 2
YEAR FIGURES

LMCB

2007
2008
2009

BANK (%)
-9.68
3.78
4.68

53

- 42,16,574/ 4,35,45,645
18,05,050 / 4,77,02,390
22,70,755 / 4,85,05,054

FIGURES (IN CRORE)

SBI BANK

4,541.31 / 31,298.56
6,729.12 / 49,032.66
9,121.23 / 57,947.70

(%)
14.5O
13.72
15.74

2010
63,23,847 / 3,73,46,128
2011
38,14,536 / 3,74,80,338
Fig No: 2

16.93
10.17

9,166.05 / 65,949.20
7,370.35 / 64,986.04

13.89
11.34

Analysis &Interpretation:This ratio expressed as a percentage of net profit to owners worth. The Return On Worth of
LMCB is less than the SBI, except in
the year 2010.In the year 2010, the Return on Net Worth is higher than the SBI.

RETURN ON EQUITY CAPITAL:FORMUALA- NET PROFIT/EQUITY CAPITAL*100

Table No: 3
YEAR
2007
2008
2009
2010
2011
Fig No: 3
54

FIGURES

LMCB

- 42,16,574/ 83,11,980
18,05,050 / 88,60,830
22,70,755 / 94,12,410
63,23,847 / 1,01,55,110
38,14,536 / 1,08,15,460

BANK (%)
-50.72
20.37
24.12
62.27
35.26

FIGURES (IN CRORE)

SBI BANK

4,541.31 / 526.30
6,729.12 / 631.47
9,121.23 / 634.88
9,166.05 / 634.88
7,370.35 / 635.00

(%)
862.87
1065.62
1436.68
1443.74
1160.68

Analysis &Interpretation:The Return on Equity Capital is an important profit indicator to shareholder of the
organization. From the above data, the ratio of LMCB bank is increasing by the years but it is too
less as compared to the ratio of SBI.

RETURN ON TOTAL ASSETS:FORMUALA-NET PROFIT/TOTAL ASSETS*100

Table No: 4
YEAR FIGURES

LMCB

FIGURES (IN CRORE)

BANK (%)
2007
- 42,16,574/ 30,99,13,260
2008
18,05,050 / 32,78,20,392
2009
22,70,755 / 38,59,64,560
2010
63,23,847 / 41,30,64,796
2011
38,14,536 / 42,23,71,774
Fig No: 4

55

-1.36
0.55
0.58
1.53
0.90

SBI BANK
(%)

4,541.31 / 5,66,565.24
6,729.12 / 7,21,526.32
9,121.23 / 9,64,432.08
9,166.05 / 10,53,413.74
7,370.35 / 12,23,736.20

0.80
0.93
0.94
0.87
0.60

Analysis &Interpretation:This ratio is expressed as a percentage of net profit to total assets. This ratio gives an
indication how effectively assets are being used .The ratio of Return On Total Assets of LMCB
bank is satisfactorily as compared SBI.

EARNING PER SHARE:FORMUALA- NET PROFIT/TOTAL NO OF EQUITY SHAREHOLDER

Table No: 5
YEAR

FIGURES

LMCB

FIGURES (IN CRORE)

SBI BANK

2007
2008
2009
2010
2011

- 42,16,574/ 8,31,198
18,05,050 / 8,86,083
22,70,755 / 9,41,241
63,23,847 / 10,15,511
38,14,536 / 10,81,546

BANK
-5.07
2.03
2.41
6.22
3.52

4,541.31 / 52.63
6,729.12 / 63.147
9,121.23 / 63.488
9,166.05 / 63.488
7,370.35 / 63.50

86.29
106.56
143.67
144.37
116.07

Fig No: 5

56

Analysis &Interpretation:EPS measures the earning capacity of the organization & determines the price of the equity
share in the market.EPS of LMCB bank is lower as compared to the SBI.

DIVIDEND PAYOUT RATIO:FORMUALA-DIVIDEND PER SHARE/EARNING PER SHARE*100

Table No: 6
YEAR
2007
2008
2009
2010
2011
Fig No: 6

57

FIGURES

LMCB

FIGURES (IN CRORE)

SBI BANK

BANK (%)
-

14.00 / 86.29
21.50 / 106.50
29.00 / 143.67
30.00 / 144.37
30.00 / 116.07

(%)
16.22
20.17
20.18
20.78
25.84

Analysis &Interpretation:Dividend payout ratio indicates the dividend policy adopted by the organization about
utilization of the profit. The Dividend Payout Ratio of SBI is increasing by the years. The LMCB
bank is not declared the dividend to its shareholders from last few years.

DEBT EQUITY RATIO:FORMUALA- LONG TERM DEBT/NET WORTH*100

Table No: 7
YEAR

FIGURES

LMCB

FIGURES (IN CRORE)

BANK
2007
2008
2009
2010
2011
Fig No: 7
58

22,39,78,910 / 4,35,45,645
24,44,99,340 / 4,77,02,390
29,67,44,821 / 4,85,05,054
33,02,23,404 / 3,73,46,128
35,00,13,018 / 3,74,80,338

(%)
5.14
5.12
6.11
8.84
9.33

SBI BANK
(%)

4,75,224.43 / 31,298.56
5,89,131.35 / 49,032.66
7,95,786.81 / 57,947.70
9,07,127.83 / 65,949.20
10,53,501.77/64,986.04

15.18
12.01
13.73
13.75
16.21

Analysis &Interpretation:The debt equity ratio which indicates the relative contributions of creditors and owners. From
the above data, it reveals that the debt portion is more than the equity of both the organization.
DEBT ASSET RATIO:FORMUALA-DEBT/TOTAL ASSET*100
Table No: 8
YEAR

FIGURES

LMCB

FIGURES (IN CRORE)

BANK

SBI BANK
(%)

2007

22,39,78,910 /

(%)
72.27

2008

30,99,13,260
24,44,99,340 /

74.58

5,89,131.35 / 7,21,526.32

81.65

2009

32,78,20,392
29,67,44,821 /

76.88

7,95,786.81 / 9,64,432.08

82.51

2010

38,59,64,560
33,02,23,404 /

79.94

9,07,127.83 /10,53,413.74

86.11

2011

41,30,64,796
35,00,13,018 /

82.86

10,53,501.77/12,23,736.20

86.08

42,23,71,774
59

4,75,224.43 / 5,66,565.25

83.87

Fig No: 8

Analysis &Interpretation:The debt asset ratio measures the extent to which borrowed funds support the firms assets.
Debt assets ratio indicates that the % of the total assets are financed from the debt source.
INTEREST EXPENDED/INTEREST EARNED*100
Table No: 9
YEAR

FIGURES

LMCB

FIGURES (IN CRORE)

BANK
2007
2008
2009
2010
2011

1,88,57,756 / 1,95,07,767
2,11,04,915 / 2,80,58,222
2,06,77,769 / 2,91,04,466
2,48,44,813 / 3,77,72,736
2,91,17,815 / 3,96,14,207

Fig No: 9

60

(%)
96.66
75.21
71.04
65.77
73.50

SBI BANK
(%)

23,436.82 / 39,491.03
31,929.08 / 48,950.37
42,915.29 / 63,788.43
47,322.48 / 70,993.92
48,867.96 / 81,394.36

59.35
65.23
67.28
66.66
60.04

Analysis &Interpretation:Interest expended /Interest earned ratio shows the relationship between how much interest are
paid on deposits & how much interest are earned from the loans &advances.

OTHER INCOME / TOTAL INCOME *100

Table No: 10
YEAR

FIGURES

LMCB

FIGURES (IN CRORE)

BANK
2007
2008
2009
2010
2011

13,34,631 / 2,08,42,398
17,15,380 / 2,97,73,602
09,17,904 / 3,00,22,370
08,79,437 / 3,86,52,172
10,26,162 / 4,06,40,369

Fig No: 10

61

(%)
6.40
5.76
3.05
2.27
2.52

SBI BANK
(%)

7,446.76 / 46,937.79
9,398.43 / 58,348.74
12,691.35 / 76,479.78
14,968.15 / 85,962.07
14,935.09 / 96,329.45

15.86
16.10
16.59
17.41
15.50

Analysis &Interpretation:This ratio expresses the income of the bank from the other sources rather than only interest.
The source of other income is such as commission on demand draft, rent from lockers etc. Other
income to total income ratio of LMCB bank is low that means the bank has the less other
resources of incom
COMPARATIVE PERFORMANCE ANALYSIS OF CO-OPERATIVE BANK &
NATIONALISED BANK FROM 2007 TO 2011
Particulars

Average figures

Average
(co-

Average figures (in

crores)

Average(
nationali

operativ

zed
7,385.61 /72,811.56
7,385.61 / 53,842.83
7,385.61 / 612.50

bank)
10.14%
13.71%
1205.81%

Net Profit Ratio

Return On Net Worth
Return On Equity

19,99,522 / 3,19,86,182
19,99,522 / 4,29,15,911
19,99,522 / 95,11,158

e bank)
6.25%
4.65%
21.02%

Capital
Return On Total

19,99,522 / 37,18,26,956

o.53%

7,385.61 / 9,05,934.71

o.81%

Assets
Earning Per Share

19,99,522 / 9,51,115

2.10

7,385.61 /61.25

120.58

Dividend Payout

0%

24.9 / 120.58

20.65%

Ratio
62

Debt Assets Ratio

28,90,91,898 / 37,18,26,956

77.74%

7,64,154.438 /

84.34%

Debt Equity Ratio

28,90,91,898 / 4,29,15,911

6.73

9,05,934.71
7, 64,154.438 /

14.19

63.24% /5

12.64(%

53,842.83
3.22% /5

0.64(%)

2,29,20,613 / 3,08,11,479

)
74.38(%

38,894.32 / 60,923.61

63.84(%)

11,887.956 / 72,811.56

16.32(%)

NPAs
Interest
expended/Interest
earned
Other income/Total
income

63

)
11,74,702 / 3,19,86,182

3.67(%)

CHAPTER 7
FINDING, RECOMMENDATIONS &CONCLUSIONS:-

FINDING:Findings are drawn based on data analysis.

1) The Net Profit Ratio of The Lasalgaon Merchant Co-operative Bank Ltd, Lasalgaon is low
as compared to State Bank of India, except in the year 2010.

2) The Return on Net Worth of The Lasalgaon Merchant Co-operative Bank Ltd, Lasalgaon is
low as compared to State Bank of India, except in the year 2010.

3) The Return on equity Capital is increasing by the years but it is too low as compared to SBI.

4) The Return on Total asset is more than SBI in the last two years.

64

5) The Earning Per Share of The Lasalgaon Merchant Co-operative Bank Ltd, is too lower as
compared to SBI.

6) The Lasalgaon Merchant Co-operative Bank Ltd, has not declared the dividend to its
shareholders from last few years.

7) The Debt Equity Ratio of The Lasalgaon Merchant Co-operative Bank Ltd, is low as
compare to SBI, It indicates that most of the portion of capital is raised by the equity.

8) The Debt Asset Ratio of The Lasalgaon Merchant Co-operative Bank is low as compared to
SBI.

CONCLUSIONS:-

From the data analysis, I have concluded that the performance of The Lasalgaon Merchant
Co-operative Bank Ltd, s not good as compared to SBI. The bank should give dividends to its
shareholders. It will create a loyalty of shareholders towards the bank. The bank is not using its
assets effectively due to this the profit of the bank is low as compared to SBI.

65

RECOMMENDATIONS:1) The Lasalgaon Merchant Co-operative Bank Ltd, should try to increase the net profit by
decreasing the expenses of the bank.

2) The Lasalgaon Merchant Co-operative Bank should utilize its total assets effectively.

3) The Lasalgaon Merchant Co-operative Bank should try to reduce its NPAs i.e. Non
Performing Assets.

4) The Earning Per Share of The Lasalgaon Merchant Co-operative Bank is too low, the bank
should try to increase the EPS.

66

5) The bank should declared the dividend to its shareholders.

6) The management should try to motivate its employees to increase the net profit.

7) The management should make a committee for recovery of debt.

8) The bank should give loans to its shareholders for the productive purpose.

BIBLIOGRAPHY:
FINANCIAL MANAGEMENT : ICFAI UNIVERSITY
FINANCIAL MANAGEMENT : N.M.VECHALKAR
ANNUAL REPORT OF LMCB BANK
WWW.SBI.COM
WWW.RBIBULLETIN.COM

67

THE LASALGAON MERCHANTS CO-OPERATIVE BANK LTD, LASALGAON

(DIST-NASHIK)
BALANCE SHEET
CAPITAL
&LIABILITIES
SHARE CAPITAL
PAID UP CAPITAL
RESERVE AND
OTHER FUND
DEPOSITS
BILLS PAYABLE
INTEREST PAYBLE
68

31-03-2007

31 -03-2008

31-03-2009

31-03-2010

31-03-201

1,25,00,000

1,25,00,000

1,25,00,000

1,25,00,000

1,25,00,0

83,11,980

88,60,830

94,12,410

1,01,55,110

1,08,15,4

3,52,33,665

3,88,41,560

3,90,92,644

2,71,91,018

2,66,64,8

22,39,78,910

24,44,99,340

29,67,44,821

33,02,23,404

35,00,13,0

8,69,454

6,64,608

8,56,494

3,40,380

3,90,0

1,08,10,346

48,57,840

70,01,337

78,01,536

61,92,5

OTHER
LIABILITIES
&PROVISION
RESERVE FOR
OVERDUE
INTEREST

4,04,467

11,46,352

6,81,304

7,48,503

8,91,2

3,02,12,959

2,70,80,590

2,99,04,802

3,02,80,998

2,68,89,9

BRANCH
ADJUSTMENT

91,479

64,222
18,05,050

22,70,755

63,23,847

5,14,5

32,78,20,392

38,59,64,560

41,30,64,796

42,23,71,7

PROFIT&LOSS
TOTAL

ASSETS
CASH BAL.
BANK BAL.
FIXED DEPOSITS IN
BANK
INVESTMENTS
SHARES OF C00PERATIVE
SOCIETIES
OTHER
INVESTMENT
LOANS
&ADDVANCES:
1)CASH CREDIT
2)AGAINST
PLEDGE OF GOODS
INTEREST
RECEIVABLE
SELF D.D.
COLLECTION
&DISCOUNTING
BILLS RECEIVABLE
FIXED ASSETS
69

30,99,13,260

31-03-2007
55,16,890
1,06,24,789
1,65,00,000

31 -03-2008
80,08,981
174,47,034
1,15,00,000

31-03-2009
46,09,296
3,21,52,165
4,88,03,045

31-03-2010
1,30,65,949
2,67,26,287
4,59,03,954

31-03-2011
86,25,236
1,33,96,906
6,17,95,817

5,75,80,500
4,04,500

5,74,30,500
4,04,500

5,72,80,500
4,04,500

7,70,80,000
4,04,500

8,44,94,500
4,04,500

1,05,00,000

95,59,532

44,62,060
14,47,43,965

53,64,750
15,86,53,248

53,81,938
1,76,99,184

50,75,630
19,51,01,184

45,06,898
21,34,41,980

12,20,599

14,82,564

21,41,061

29,86,426

29,56,217

9,29,385

9,71,301

65,71,134

6,48,874

89,000

8,69,455
36,49,827

6,64,608
67,58,867

8,56,494
60,52,881

3,40,380
48,11,730

3,90,053
39,38,874

INTEREST
ACCRUED
OTHER ASSETS
&INCOME
ACCUMLATED
LOSS
BRANCH
ADJUSTMENT
TOTAL

EXPENSES
INTEREST ON
LOANS &DEPOSITS
SALARY
&ALLOWANCE
GRATUITY PAID
CONTRIBUTION TO
P.F.
COMMISSION PAID
ON SMALL SAVING
RENT,TAXES
INSURANCE
&LIGHTING
COURT EXPENSES
POSTAGE
&TELEGRAM
AUDIT FEE
DEPRECIATION
PRINTING
&STATIONERY
ADVERTISEMENT
OTHER EXPENSES
70

3,02,12,959

2,70,80,590

2,99,04,802

3,02,80,998

2,68,89,974

10,76,714

8,72,601

8,08,170

9,11,287

15,49,419

2,16,21,616

216,21,616

1,98,16,566

96,23,811

1,00,823

1,03,786

92,336

38,59,64,560

413064796

42,23,71,774

PROFIT &LOSS A/C

FOR THE YEAR ENDED
31 -03-2008
31-03-2009
2,11,04,915
2,06,77,769

31-03-2010
2,48,44,813

31-03-2011
2,91,17,815

30,99,13,260

31-03-2007
1,88,57,756

32,78,20,392

30,52,286

32,67,635

33,58,383

37,36,779

39,29,618

2,15,325
3,19,989

3,59,563

2,10,030
3,58,472

1,85,220
4,05,114

4,29,259

3,12,088

3,63,786

4,44,982

6,71,030

6,35,426

4,03,103

4,30,165

4,83,388

5,86,483

6,14,782

25,000
89,402

35,884
91,873

84,448

2,570
79,511

81,202
68,578

1,30,400
6,32,024
87,452

1,40,000
9,64,946
56,183

1,45,173
9,97,256
57,396

1,55,946
8,37,314
60,100

1,99,204
5,77,076
58,227

21,136
9,13,010

36,760
11,16,840

23,500
9,10,818

11,120
7,52,326

47,600
10,77,046

NET PROFIT
TOTAL

INCOMES
INTEREST
RECEIVED
COMMISSION
OTHER INCOME
NET LOSS
TOTAL

71

2,50,58,972

18,05,050
2,97,73,602

22,70,755
3,00,22,370

63,23,847
3,86,52,173

38,14,536
4,06,40,369

31-03-2007
1,95,07,767

31 -03-2008
2,80,58,222

31-03-2009
2,91,04,466

31-03-2010
3,77,72,736

31-03-2011
3,96,14,207

1,79,343
11,55,288
42,16,574
2,50,58,972

3,13,546
14,01,834
2,97,73,602

3,32,456
5,85,448

2,73,655
6,05,782

2,06,439
8,19,723

3,00,22,370

3,86,52,173

4,06,40,369

72

Mar '07

Mar '08

Mar '09

Mar '10

Mar '11

12 mths

12 mths

12 mths

12 mths

12 mths

Cash & Balances with

RBI

29,076.43

51,534.62

55,546.17

61,290.87

94,395.50

Balance with Banks,

Money at Call

22,892.27

15,931.72

48,857.63

34,892.98

28,478.65

Advances

337,336.49 416,768.20 542,503.20

631,914.15

756,719.45

Investments

149,148.88 189,501.27 275,953.96

285,790.07

295,600.57

Assets

Gross Block

8,061.92

8,988.35

10,403.06

11,831.63

13,189.28

Accumulated
Depreciation

5,385.01

5,849.13

6,828.65

7,713.90

8,757.33

Net Block

2,676.91

3,139.22

3,574.41

4,117.73

4,431.95

141.95

234.26

263.44

295.18

332.23

25,292.31

44,417.03

37,733.27

35,112.76

43,777.85

Capital Work In Progress

Other Assets
Total Assets

566,565.24 721,526.32 964,432.08 1,053,413.74 1,223,736.20

Contingent Liabilities

259,536.57 736,087.59 614,603.47

Bills for collection

Book Value (Rs)

73

70,418.15
594.69

93,652.89 152,964.06
776.48

912.73

429,917.37

585,294.50

166,449.04

205,092.29

1,038.76

1,023.40

------------------- in Rs. Cr. -------------------

Profit & Loss account of

State Bank of India
Mar '07

Mar '08

Mar '09

Mar '10

Mar '11

12 mths

12 mths

12 mths

12 mths

12 mths

39,491.03

48,950.31

63,788.43

70,993.92

81,394.36

7,446.76

9,398.43

12,691.35

14,968.15

14,935.09

46,937.79

58,348.74

76,479.78

85,962.07

96,329.45

23,436.82

31,929.08

42,915.29

47,322.48

48,867.96

Employee Cost

7,932.58

7,785.87

9,747.31

12,754.65

14,480.17

Selling and Admin Expenses

3,251.14

4,165.94

5,122.06

7,898.23

12,141.19

602.39

679.98

763.14

932.66

990.50

7,173.55

7,058.75

8,810.75

7,888.00

12,479.30

0.00

0.00

0.00

0.00

0.00

13,251.78

14,609.55

18,123.66

24,941.01

31,430.88

5,707.88

5,080.99

6,319.60

4,532.53

8,660.28

42,396.48

51,619.62

67,358.55

76,796.02

88,959.12

Mar '07

Mar '08

Mar '09

Mar '10

Mar '11

Income
Interest Earned
Other Income
Total Income
Expenditure
Interest expended

Depreciation
Miscellaneous Expenses
Preoperative Exp Capitalised
Operating Expenses
Provisions & Contingencies
Total Expenses

74

12 mths

12 mths

12 mths

12 mths

12 mths

4,541.31

6,729.12

9,121.23

9,166.05

7,370.35

Extraordionary Items

0.00

0.00

0.00

0.00

0.00

Profit brought forward

0.34

0.34

0.34

0.34

0.34

4,541.65

6,729.46

9,121.57

9,166.39

7,370.69

0.00

0.00

0.00

0.00

0.00

Equity Dividend

736.82

1,357.66

1,841.15

1,904.65

1,905.00

Corporate Dividend Tax

125.22

165.87

248.03

236.76

246.52

86.29

106.56

143.67

144.37

116.07

Equity Dividend (%)

140.00

215.00

290.00

300.00

300.00

Book Value (Rs)

594.69

776.48

912.73

1,038.76

1,023.40

3,682.15

5,205.69

6,725.15

6,495.14

2,488.96

-2.88

-0.10

306.90

529.50

2,729.87

862.04

1,523.53

2,089.18

2,141.41

2,151.52

0.34

0.34

0.34

0.34

0.34

4,541.65

6,729.46

9,121.57

9,166.39

7,370.69

Net Profit for the Year

Total
Preference Dividend

Per share data (annualised)

Earning Per Share (Rs)

Appropriations
Transfer to Statutory
Reserves
Transfer to Other Reserves
Proposed Dividend/Transfer
to Govt
Balance c/f to Balance Sheet
Total

75