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ORGANIZATIONAL STUDY AT
BANK OF INDIA
Submitted in partial fulfillment of the
requirements of
The M.B.A Degree Course of Bangalore University
Submitted By
RAKESH KUMAR
(REGD.NO:05XQCM6071)
Under the Guidance and Supervision of
PROF. S. RAMGOPAL
(Internal guide)
Mr. L.N.JHA
(External guide)
(Senior Manager, Bank of India)
PLACE: Bangalore
DATE: RAKESH KUMAR
PLACE: Bangalore
DATE:
PROF. S. RAMGOPAL
RAKESH KUMAR
1 Introduction 08
3 Financial Performance 28
5 SWOT Analysis 48
INTRODUCTION
METHODOLOGY:
This report is prepared with the help of both primary data and secondary data. The
primary data is collected by interviewing the concerned persons of the bank. The
data was collected from these persons by having discussions with them and asking
them questions related to the bank and its functioning. Information was collected
from them regarding their policies, problems and techniques adopted. The
secondary data is collected in the form of Annual Report of the bank and other
records, documents and journals of the bank.
Beginning with one office in Mumbai, with a paid-up capital of Rs.50 lakhs and
50 employees, the Bank has made a rapid growth over the years and blossomed
into a mighty institution with a strong national presence and sizable
international operations. In business volume, the Bank occupies a premier
position among the nationalized banks.
The Bank has 2628 branches in India spread over all states/ union territories
including 93 specialized branches. These branches are controlled through 48
Zonal Offices. There are 24 branches/ offices (including three representative
offices) abroad.
The Bank came out with its maiden public issue in 1997. Total number of
shareholders as on 31/03/2006 is 2, 38,708.
While firmly adhering to a policy of prudence and caution, the Bank has been in
the forefront of introducing various innovative services and systems. Business
has been conducted with the successful blend of traditional values and ethics and
the most modern infrastructure. The Bank has been the first among the
nationalized banks to establish a fully computerized branch and ATM facility at
the Mahalaxmi Branch at Mumbai way back in 1989. The Bank is also a Founder
Member of SWIFT in India. It pioneered the introduction of the Health Code
System in 1982, for evaluating/ rating its credit portfolio.
The Bank has a strong position in financing foreign trade. Over 270 branches
provide export credit. The expertise in this area has enabled the Bank to achieve
a leading position in providing export credit in certain areas like diamond
export.
The Bank has identified specialized target groups to develop core advantage for
future growth. The Bank, as on March 2003, had 93 specialized branches
comprising Corporate Banking Branches to undertake very large credit business,
Overseas Branches specializing in Foreign Exchange Business, NRI Branches
which specially cater to the requirements of Non-Resident Indians, Capital
Market Branches which undertake all activities relating to capital market such as
collection of applications, processing of refund orders, Merchant Banking etc.
Commercial & Personal Banking Branches cater to the requirements of high net
worth customers. Apart from this, the Bank also has specialized Branches for
Asset Recovery, Small Scale Industries, Hi-tech Agriculture Finance, Lease
Finance and Treasury.
The Bank's corporate personality and philosophy are fully reflected in the
emblem, which is a five-pronged Star -- a harmonious blend of traditional and
the functional. The elongated prong pointing upwards conveys the Bank's drive
to achieve ascending goals. The Star is a beacon and guide to those in need of
direction.
Shri Amitabh Verma Shri A. K. Khound Shri Deepak P.Patil Shri V.Eswaran
Shri Madhavan Nair Gopinath Dr. Pamidi Kotaiah Shri. Tarun Sheth
The BOI emblem epitomizes the corporate personality & basic possibility of the
bank. In conception & design, it is harmonious blend of the traditional & the
functional.
Within the central circle lies the banks seal- a symbolic & stylized representation
of MOTHER INDIA signifying BOI’s continuing consciousness of the legacy of
the national past.
The 5 prongs of the star represent the Banks pragmatic aspect- banking service
extending over 5 continents. The single elongated point, yearning upwards,
conveys BOI’s unceasing endeavor to achieve ever-ascending goals.
The star has yet another aspect. It is a beacon & guide to those in need of direction. It
symbolizes the Bank’s perpetual readiness to assist anyone, common man & business
man alike, in steering a course through the contemporary maze of monetary affairs.
Last of all, the star has astrological significance: it is a determinant of times to come.
BOI sees this as a commitment to ensuring that the corporate emblem shines as a
harbinger of a bright future for all.
BOI VISION:
To become the Bank of choice for corporate, medium business & upmarket retail
customers.
To provide cost effective developmental banking for small business, mass market
& rural market.
BOI MISSION:
To provide superior, proactive banking service to niche market globally, while
providing cost-effective responsive service to others in our role as a development
Bank & in so doing meet the requirements of our stakeholders.
a) To establish and carry on the business of the bank where of the head office
or place of business shall be with such branches or agencies as may from time
to time be determined upon.
c) To take or acquire the whole or any part of any business similar to that of this
bank or any business which this bank is authorized to carry on and such other
business which is capable of being conducted to the benefit directly or
indirectly of this bank.
h) To take or concur in the taking up of all such steps and proceedings as may see
best calculated to uphold and support the credit of the bank.
k) To, sell, manage develop exchange lease mortgage, dispose off, turn to
account, or otherwise deal with all or any part of the property and rights of the
bank.
o) To open establish maintain and operate currency chests and small coins depots
on such terms and conditions as may be required by the reserve bank of India
established under the reserve bank of India act, 1934 and enter into all
administrative or other arrangements for undertakings with the RBI
Executive Director
General Manager
Senior Manager
Manager
Officer
HEAD OFFICE:
Highest controlling authority (Policy decisions implementation & control is done here).
ADVERTISEMENT:
Road side banners to welcome the people entering into the city
Hoardings of different schemes
Through City Cable & different Print Media
By greeting people on each Festival via media
DETAILS→
PROFIT:
Net Profit for the year ended March ’06 Rs.701.44 cr increases by Rs.361.39
cr or 106.28%.
Operating Profit for the year ended March ’06 Rs.1701.22 cr increases by
Rs.240.86 cr or 16.49%.
Interest Income improved by Rs.997.17 cr or 16.53%
Interest Expenses improved by Rs.602.08 cr or 15.87%.
Net Interest Income improved by Rs.395.09 cr or 17.66%.
NPA:
Gross NPA reduced by Rs.677 cr or 21.44%.
Net NPA declined by Rs.584 cr or 37.62%.
Gross NPA ratio declined to 3.72% from 5.53%.
Net NPA ratio declined to 1.49% from 2.80%.
Net NPA to Networth ratio declined to 21.18% from 38.45%.
Provision coverage ratio improved to 60.89% from 50.76%.
PROFITABILITY RATIOS:
Yield on Advances increased to 7.58% from 7.14%.
Cost of deposit declined to 4.05% from 4.17%.
Operating expenses to Average Assets declined to 2.04% from 2.15%.
Staff Cost to Average Assets declined to 1.28% from 1.41%.
Return on assets (annualized) stood at 0.68% improved from 0.38%.
SHAREHOLDER VALUE:
Book Value per Share improved to Rs.93.77 from Rs.82.93.
Earnings per Share (EPS) improved to Rs.14.39 from Rs.6.98.
ADVANCES:
Global Advances (Gross) increased by Rs.9545 cr (16.71%).
Domestic Advances grew by Rs.10197 cr (23.27%).
Foreign Advances declined marginally by Rs.652 cr (-4.91%).
RETAIL CREDIT:
Healthy growth of Rs. 3915 cr (36.71%).
Share of Retail credit in Non-food Credit increased by 2.49%
Share of incremental Retail credit in incremental Non-food Credit
stood at 38.12%.
S.M.E. CREDIT:
Increased from Rs.13606 cr to Rs.15553 cr (14.31%).
MICROSCOPIC
STUDY
OF
NPA
Till the mid eighties the banking system did not have the uniformity or objectivity in
assessing the credit risk and even in those banks where it existed, transparency was
lacking. The prudential norms have not only brought in objectivity, but also placed the
actual credit risk position in a proper perspective so that the banks can take proper steps
from time to time to keep the credit portfolio healthy and remunerative. It will be
observed from above that percentage of gross NPA to gross advances have come down
from 13.91% in 1999-2000 to 9.72% in 2003- 2004 for nationalized bank. The decline is
also evident in case of individual banks; similarly if we consider the overall picture of
Public Sector Banks, the above percentage has declined from 13.98% in 1999-2000 to
9.36% in 2003 – 2004. The similar trend could be observed in the ratio of Net NPA to
Net Advances which has come down 4.77% for nationalized banks and 4.54 % in case of
total public sector banks, and during this period pace of reforms in financial sector
reforms gathered increased momentum and the Indian economy tended to integrate with
the world economy.
LOSS ASSETS:
A Loss Asset is one where the loss has been identified by the Bank or Internal
/External Auditors or the RBI inspection, but the amount has not been written off
wholly or partly. In other words, such an asset is considered un collectable with
little salvage or recovery value. Account should be classified as Loss asset, if the
value of security assessed is less than 10% of the outstanding in the account.
CAUSES OF NPA:
1. Recurrent drought & flood.
2. Lack of organized market.
3. Under & over financing in some cases.
4. Poor follow-up by the Bank.
5. Rescheduling of advances not being done in desiring cases.
6. Willful default.
CONCLUSION:
Though it must be admitted that awards passed by the Lok Adalats depend on
compromise between the parties, in bank cases where the chances of dispute on
factual aspects are less, and the bank is open for a compromise settlement, the
chances of borrowers agreeing for an award are high. Hence banks must take
advantage o f this low cost and time saving machinery to get speedy awards. As
the awards are passed as a result of the agreement between parties, chances of fast
recovery are also higher.
Arbitration is the reference of disputes or differences between not less than 2 parties
to a third party other than a court for determination. Such reference is made with the
consent of all the parties to the disputes. It is an alternative to litigation through
courts. Arbitration act was passed in 1940, which was a codified Law for the whole
country. The Supreme Court in ONGC vs. Collector of Central Excise has directed
that the Government should encourage arbitration in the event of disputes between
public sector banks and institutions and government departments. This will speed up
the process of justice. Considerable time is saved in litigation. Parties to the dispute
can choose their own arbitrators. No court fee or the infrastructure of a court is
involved. This leads to reduction in expenses also. The venue and time of arbitration
can be fixed as per the parties’ requirement. More importantly a time frame of 6
months has been fixed for settlement of the dispute through arbitration. As per the
arbitration and reconciliation act 1996, there are very limited grounds for filling
appeal against the award of the arbitrator. Hence in recovery cases, if bank opts for
arbitration, then the bank may have no choice but to accept the amount awarded by
the arbitrator.
In the context of the recovery of NPAs DRTs are assuming great importance since
efforts are on to set up 7 more DRTs during this year and also to strengthen them.
Though the recovery through DRTs is at present less than 2% of the claim amount,
banks and FIs have to depend heavily on them. Efforts are on to assign more powers
to DRTs. More importantly, the borrowers’ tendency to challenge the verdict of the
appellate tribunals in the high court to seek natural justice needs to be checked.
Otherwise, early recovery efforts through DRTs would be futile. Secondly, training of
presiding officers of tribunals about the intricacies of banking practices is very
essential. Further, the number of recovery officers has to be enhanced in every DRTs
for effective recovery. Finally banks and FIs have to come forward to provide liberal
help to DRTs to equip them in terms of infrastructure, manpower etc.
There are 9 DRT cases since 2000 in this Muz. Zone but Bank has
got decree in only 2 cases.
A need was felt to create a special agency to facilitate debt restructuring because there
has been some hesitancy on the parts of the banks and financial institutions to
implement RBI guidelines on debt restructuring. Recently a three tier body, viz. CDR
has been set up to coordinate corporate debt restructuring program. CDR consists of
forum, group and cell. While the forum evolves broad policy guidelines, the group
takes decision on the proposals recommended by the cell. Initially the borrower
approaches this lead bank/FI with a request to restructure debt, which in turn puts up
the proposal to the cell. The CDR covers only multiple banking accounts enjoying
credit facility exceeding 20 crores. Cases of DRT, BIFR and willful defaults, doubtful
and loss accounts and stifled cases are outside the preview of the CDR shelter.
Decisions of the group are based on the super majority principle. If 75% of the
secured creditors agree to the rehabilitation plan, it is binding on the other banks / FIs.
It is proposed to set up ARCs in the private sector to take over NPAs of the public
sector banks. The RBI will be the regulator of these ARCs. The ARC will buy the
NPAs of the banks and the financial institution at the pre-determined discounted
value and issue NPA Redemption Bonds that carry a fixed return. ARCs are expected
to be managed by professionals to effect maximum recovery of NPAs, which will
help to redemption of bonds after some time. The financial ministry has finalized the
draft bill to set up ARCs. Though the proposed scheme seems to be attractive, the
success will depend upon the efficiency of DRTs and courts.
WRITE OFF:
Banks have to resort to write off where there are absolutely no chances of recovery
either by persuasion or compromise or legal means. No valid purpose would be
served by keeping such assets in particular loss assets, where full provisions have
been made. In the absence of any other alternative, write off must be done in suitable
cases for cleansing the balance sheets.
WEAKNESSES:
Sometimes redresal of grievances of customers consume more than the
stipulated time
ATMs of Bank of India or their associates are not set up at all places,
which make it difficult for people in remote areas to access ATMs.
Since it is a government bank so they cannot take decisions on their own.
THREATS:
Bank of India faces a threat from foreign banks which have traditionally
served trade finance, fee-based services and other short–term financing
products in retail liabilities.
Bank of India faces strong competition from private banks and mutual
funds since Indian commercial banks attract the majority of retail bank
deposits, historically the preferred retail savings product in India.
BIBLIOGRAPHY
&
ANNEXURE
ANNAUAL REPORTS
BANKS RECORD
JOURNAL ANALYST
WEBSITE:
www.bankofindia.com
www.google.com
II. Assets
Cash & Balance with RBI 6 55884159 39047232
Balance with Banks 7 58575686 36215273
Investments 8 317817542 286863210
Advances 9 651737444 555288868
Fixed Assets 10 8099659 8141756
Other Assets 11 30628254 24225496
Total 1122742744 949781835
Contingent Liabilities 12 828104962 797725188
Bills of collection 61540547 52723267
II. EXPENDITURE
15 4396.72 3794.64
Interest expended
16 2115.14 1932.32
Operating expenses
785.56 999.34
Provisions and contingencies
214.22 120.97
Provision for Taxes
7511.64 6847.27
TOTAL:
III. NET PROFIT FOR THE YEAR 701.44 340.05