DATA INTERPRETATION

5.1) Capital Adequacy

Borrowings Debt Equity Ratio = Share Capital + Reserves

(Rs. In Thousands)

Year
2005 2006

Borrowings 1853 49924 40000 1205534

Share Capital 320573 320573 320573 641156 641156

Reserves 1023390 1153170 1401757 3603626 3759615

PERCENTAGE 0.137 % 3.387 % 2.322 % 0% 27.39 %

2006 2007 2007 2008 2008 2009 2009 2010

Table No. 1 Interpretation:

The Debt to Equity Ratio measures how much money a bank should safely be able to borrow over long periods of time. Generally, any bank that has a debt to equity ratio of over 40% to 50% should be looked at more carefully to make sure there are no liquidity problems.

Debt Equity Ratio

30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% 2006 2007 2008 2009 2010 Percentage

Graph No. 1

Here the ratio is very less than the expected ratio from 2009 to 2010. In 2010, bank is showing 27.39 %. Its because if the increase of borrowings and a continuous increment in reserves and surplus.

Total Advances to Total Asset Ratio

Total Advances Total Assets

Total Advances to Total Asset Ratio =

(Rs. In Thousands)

Year 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010

Total Advances 15943442 18394961 21020332 31960564 50062686

Total Assets 28487395 34479452 40329836 56428241 80868910

Percentage 55.96 53.35 52.12 56.63 61.90

Table No. 2

Interpretation:

Total Advance to Total Asset Ratio shows that how much amount the bank holds against its assets.

Total Advance to Total Assets

62 60 58 56 54 52 50 48 46 2006 2007 2008 2009 2010 Percentage

Graph No. 2

Here the Total Asset Ratio is continuously increasing from 61.13% to 63.98%, from 2010 2011, which shows the sound condition of the bank. As the bank is growing the advances and the assets are increased in same proportion. Because of that the ratio keeps in same rate.

Government Securities to Total Investment

Govt. Securities Government Securities to Total Investment = Total Investment

(Rs. In Thousands)

Year 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010

Govt. Securities 6656560 7412629 9229910 13875787 16794051

Total Investment 7096035 8651934 10750557 15673623 20277927

Percentage 93.80 85.67 85.85 88.52 82.81

Table No. 3

Interpretation:

This ratio shows the percent of investment in government securities. It is believed that the more investment in government security is safer. As per norms stipulated by the RBI, the banks have to maintain SLR at the rate of 25%.

Government Securities to Total Investment

94 92 90 88 86 84 82 80 78 76 2006 2007 2008 2009 2010 Percentage

Graph No. 3

Here the ratio was averagely 86.5% but in the last year it was decreased to 82.81% in the year 2010. The ratio was decreased in the year 2010 because of decrease in investment in government securities as compared to last two preceding years. Moreover as against statutory requirement to invest 15% out of 25% of SLR in central government securities the bank has invested 100% of SLR requirement in Govt. of India Securities. So, Dhanlaxmi Bank has adequate liquidity as per RBI norms, but it reduces their profitability.

5.2) Asset Quality

Gross NPA Ratio

Gross NPA Gross NPA Ratio = Total Loan

(Rs. In Thousands)

Year 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010

Gross NPA 1113800 962900 632100 644300 775000

Total Loan 15943442 18394961 21021332 31960564 50062586

Percentage 6.98 % 5.23 % 3.00 % 2.01 % 1.54 %

Table No. 4

Interpretation:

This ratio is used to check whether the bank's gross NPAs are increasing quarter on quarter or year on year. If it is, indicating that the bank is adding a fresh stock of bad loans. It would mean the bank is either not exercising enough caution when offering loans or is too lax in terms of following up with borrowers on timely repayments.

Gross NPA Ratio

7.00% 6.00% 5.00% 4.00% Percentage 3.00% 2.00% 1.00% 0.00% 2006 2007 2008 2009 2010

Graph No. 4

Here the ratio is decreased from approx 6.49% to 1.98% which shows the Bank takes care of their money. Thats why their Gross NPA decreases year by year. And this is because of the concentrated efforts taken during the year to reduce the level of existing Non-Performing Assets (NPAs), as well as preventing fresh accretion of NPAs.

Net NPA Ratio

Net NPA Net NPA Ratio = Total Loan

(Rs. In Thousands)

Year 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010

Net NPA 459900 322400 185600 282400 419400

Total Loan 15943442 18394961 21021332 31960564 50062586

Percentage 2.88 % 1.75 % 0.88 % 0.88 % 0.83 %

Table No. 5

Interpretation:
Net NPAs reflects the performance of banks. A high level of NPAs suggests high probability of a large number of credit defaults that affect the profitability and networth of banks and also wear down the value of the asset. Loans and advances usually represent the largest asset of most of the banks. It monitors the quality of the banks loan portfolio. The higher the ratio, the higher the credits risk.

Net NPA Ratio

3 2.5 2 1.5 1 0.5 0 2006 2007 2008 2009 2010 Percentage

Graph No. 5

Above ratios show the fluctuation of NPA of Dhanlaxmi Bank during the last 5 years. The bank has lowest net NPA is 0.83% in 2009-10. Net NPA is continuously decreased from 2006 to 2010. So it is good for the bank to decrease in NPA. Because of decrease in NPA the risk of bad loans are also decreased.

5.3) Management Quality

Total Advances to Total Deposit Ratio

Total Advances Total Advances to Total Deposit Ratio = Total Deposit

(Rs. In Thousands)

Year 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010

Total Advances 15943442 18394961 21020332 31960564 50062586

Total Deposit 25326708 30879580 36084202 49688113 70984840

Percentage 62.95 % 59.56 % 58.25 % 64.32 % 70.52 %

Table No. 6

Interpretation:

This ratio shows the investment of the bank through approving the loans against accepting the loan.

Total Advances to Total Deposit Ratio

80 70 60 50 40 30 20 10 0 2006 2007 2008 2009 2010 Percentage

Graph No. 6

Here the ratio is continuously increasing year by year from 62.95% to 70.52% in year 2006 to 2010. This shows good sign of the bank, if it will be increased more, than it may be risky for the bank. The number of borrowal accounts surpassed the two-lakhsmark and stood at 2,08,962 as on March 31, 2010.

Business per Employees

Total Income Business per Employees = No. of Employees

(Rs. In Thousands)

Year 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010

Total Income 2369369 2761719 3545174 4877744 6255582

No. off Employees 486 1300 2700 3700 4200

Ratio 4875.24 2124.39 1313.02 1318.30 1489.42

Table No. 7

Interpretation:

Revenue per employee is a measure of how efficiently a particular bank is utilizing its employees. Ideally, a bank wants the highest business per employee possible, as it denotes higher productivity. In general, rising revenue per employee is a positive sign that suggests the bank is finding ways to squeeze more sales/revenues out of each of its employee.

Business per Employees

5000 4500 4000 3500 3000 2500 2000 1500 1000 500 0 2006 2007 2008 2009 2020 Ratio

Graph No. 7

The Bank is maintaining an average ratio for last three years. And the revenue per employees has decreased because of recruitment of employees by the bank.

Profit per Employees

Net Profit Profit per Employees = No. of Employees

(Rs. In Thousands)

Year 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010

Net Profit 95158 161401 284636 574514 233037

No. off Employees 486 1300 2700 3700 4200

Ratio 195.80 124.15 105.42 155.27 55.48

Table No. 8

Interpretation:

Profit per employee is a measure of how efficiently a particular bank is utilizing its employees. Ideally, a bank wants the highest profit per employee.

Profit per Employees

200 180 160 140 120 100 80 60 40 20 0 2006 2007 2008 2009 2010 Ratio

Graph No. 8

The ratio says that, profit per employee was 1.9 lakhs in 2006 and it has decreased to .55 lakhs in 2010 which is because of the decrease in profit by 50 % as compared to 2009.

5.4) Earnings Quality

Dividend Payout Ratio

Dividend Dividend Payout Ratio = Net Profit

(Rs. In Thousands)

Year 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010

Dividend 22440 32058 64116 64116 64116

Net Profit 95158 161401 284636 574514 233037

Percentage 23.58 % 19.86 % 22.52 % 11.16 % 27.51 %

Table No. 9

Interpretation:

Dividend payout ratio shows the percentage of profit shared with the shareholders. The more the ratio will increase the goodwill of the bank in the share market

Dividend Payout Ratio

30 25 20 15 10 5 0 2006 2007 2008 2009 2010 Percentage

Graph No. 9

Here the average ratio during the five years is approx 22%. The ratio is much fluctuated. In 2010, it was highest at 27.51% and minimum in the year 2009 which was 11.16% only.

Return on Assets

Net Profit Return on Assets = Total Assets

(Rs. In Thousands)

Year 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010

Net Profit 95158 161401 284636 574514 233037

Total Assets 28487395 34479452 40329836 56428241 80868910

Percentage 0.33 % 0.46 % 0.70 % 1.02 % 0.28 %

Table No. 10

Interpretation:
Return on Asset Ratio shows that how much return bank can get from their total asset. Higher the ratio is good for the bank. Because if ratio is higher than we can say that the return of bank is high.

Return on Assets
1.2 1 0.8 0.6 0.4 0.2 0 2006 2007 2008 2009 2010 Percentage

Graph No. 10

Here we can see that in 2006 this ratio is 0.33% and it has increased to1.02% in 2009, and in 2010 it has dropped to 0.28%. The main reason for this change in the ratio is the drop in Net profit and change in Assets.

Operating Profit to Average Working Fund

Operating Profit Operating Profit to Average Working Fund = Avg. Working Fund

(Rs. In Thousands)

Year 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010

Operating Profit 95158 161401 284636 574514 233037

Avg. Working Fund 26136171 31857765 37335743 53470834 74590610

Percentage 0.36 % 0.50 % 0.76 % 1.07 % 0.31 %

Table No. 11

Interpretation:

Earning reflect the growth capacity and the financial health of the bank. High earnings signify high growth prospects.

Operating Profit to Average Working Fund

1.20% 1.00% 0.80% 0.60% 0.40% 0.20% 0.00% 2006 2007 2008 2009 2010 Percentage

Graph No. 11

Here it was increased from 0.36% in the year 2006 to 1.07% in the year 2009 which is good for the bank. Because of decrease in the net profit, the ratio was dropped in the year 2010 to 0.31%.

Net Profit to Average Assets

Net Profit Net Profit to Average Assets = Average Assets

(Rs. In Thousands)

Year 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010

Net Profit 95158 161401 284636 574514 233037

Average Assets 27466012.5 31483423.5 37404644 48379038.5 68648575.5

Percentage 0.34 % 0.51 % 0.76 % 1.18 % 0.33 %

Table No. 12

Interpretation:
Net profit to average asset indicates the efficiency of the banks in utilizing their assets in generating profits. A higher ratio indicates the better income generating capacity of the assets and better efficiency of management.

Net Profit to Average Assets

1.20% 1.00% 0.80% 0.60% 0.40% 0.20% 0.00% 2006 2007 2008 2009 2010 Percentage

Graph No. 12

In this, the ratio has continuously increased year by year from 0.34% in 2006 to 1.18% in the year 2009. This is a good time for Bank to be 'giving back', for it has just completed a very successful year. And in 2010 it has dropped to 0.33%. The main reason for this change in the ratio is the drop in Net profit.

Interest Income to Total Income

Interest Income Interest Income to Total Income = Total Income

(Rs. In Thousands)

Year 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010

Interest Income 2098865 2465375 3182851 4084150 5345706

Total Income 2369369 2761719 3545174 4877744 6255582

Percentage 88.58 89.26 89.77 83.73 85.45

Table No. 13

Interpretation:

Interest income to total income ratio shows that how much interest income earn from total income.

Interest Income to Total Income

90 89 88 87 86 85 84 83 82 81 80 2006 2007 2008 2009 2010 Percentage

Graph No. 13

The bank was maintained on an average same percentage from 2006 to 2009 of 89.20%. In 2008 it was decreased to 83.73% and in 2010 it has increased to 85.45.

Other Income to Total Income

Other than Interest Income Other Income to Total Income = Total Income

(Rs. In Thousands)

Year 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010

Other Than Interest Income 270504 296344 362323 793594 909876

Total Income 2369369 2761719 3545174 4877744 6255582

Percentage 11.41 % 10.73 % 10.22 % 16.26 % 14.54 %

Table No. 14

Interpretation:

Fee based income account for a major portion of the banks other income. The bank generates higher fee income through innovative products and adapting the technology for sustained service levels. The higher ratio indicates increasing proportion of feebased income. The ratio is also influenced by gains on government securities, which fluctuates depending on interest rate movement in the economy.

Other Income to Total Income

18.00% 16.00% 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% 2006 2007 2008 2009 2010 Percentage

Graph No. 14

The Bank has averagely 11% part of income is from other way of income which is good for the bank from 2006 to 2007.And in last two years it shows 16.26 % and 14.54 %, which shows that, Bank earning from government security and through providing innovative products.

4.5) Liquidity

Liquidity Asset to Total Asset

Liquidity Asset Liquidity Asset to Total Asset = Total Assets

(Rs. In Thousands)

Year 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010

Liquidity Asset 3087784 6050654 6924336 6860655 7503283

Total Assets 28487395 34479452 40329836 56428241 80868910

Percentage 10.83 % 17.54 % 17.15 % 12.15 % 9.27 %

Table No. 15

Interpretation:

Liquidity for a bank means the ability to meet its financial obligations as they come due. Bank lending finances investments in relatively illiquid assets, but it fund its loans with mostly short term liabilities. Thus one of the main challenges to a bank is ensuring its own liquidity under all reasonable conditions.

Liquidity Asset to Total Asset

18.00% 16.00% 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% 2006 2007 2008 2009 2010 Percentage

Graph No. 15

Here the ratio is continuously decreasing from 2008 to 2010, which was very high at 17.54 in 2007 and very low at 9.27 in 2010. The ratio was decreased because of increment in total assets.

Government Securities to Total Assets

Govt. Securities Government Securities to Total Assets = Total Assets

(Rs. In Thousands)

Year 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010

Govt. Securities 6656560 7412629 9229910 13875787 16794051

Total Assets 28487395 34479452 40329836 56428241 80868910

Percentage 23.36 % 21.49 % 22.88 % 24.59 % 20.76 %

Table No. 16

Interpretation:

Government securities to total asset ratio shows that, what percentage of government securities bank has against total assets. Higher the ratio is good for the bank because if this ratio is higher than we can say that bank is more investing in government securities.

Government Securities to Total Assets

25.00% 24.00% 23.00% 22.00% Percentage 21.00% 20.00% 19.00% 18.00% 2006 2007 2008 2009 2010

Graph No. 16

This ratio was fluctuating during the five years. At last in the year 2010 the ratio was 20.763%. In the year 2009, the G-sec investment was decreased as compared to last years preceding year and the total assets were increased also increased.

Approves Securities to Total Assets

Approved Securities Approved Securities to Total Assets = Total Assets

(Rs. In Thousands)

Year

Approved Securities

Total Assets

Percentage

2005 2006 2006 2007 2007 2008 2008 2009 2009 2010

25631 5849 8117 3654 1749894

28487395 34479452 40329836 56428241 80868910

0.09 % 0.01 % 0.02 % 0.006 % 2.16 %

Table No. 17

Interpretation:
Approved securities include securities other than government securities. This ratio measures the Approved Securities as a proportion of Total Assets. Banks invest in approved securities primarily after meeting their SLR requirements, which are around 25% of net demand and time liabilities. This ratio measures the risk involved in the assets hand by a bank.

Approved Securities to Total Assets

2.50%

2.00%

1.50% Percentage 1.00%

0.50%

0.00% 2006 2007 2008 2009 2010

Graph No. 17

The ratio was continuously decreased from 0.01% in the year 2006 to 0.006% in the year 2009. The ratio is continuously decreased because of decrement in Approved securities. In the last year 2010 the ratio was increased to 2.16, because of the increment in investment in approved securities.

Liquidity Asset to Total Deposit

Liquidity Asset Liquidity Asset to Total Deposit = Total Deposit

(Rs. In Thousands)

Year 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010

Liquidity Asset 3087784 6050654 6924336 6860655 7503283

Total Deposit 25326708 30879580 36084202 49688113 70984840

Percentage 12.19 % 19.59 % 19.18 % 13.80 % 10.57 %

Table No. 18

Interpretation:

The ratio shows how much part of the deposits invested into the liquidity asset, which can be easily convert in to monetary value in the time of need.

Liquidity Asset to Total Deposit

20.00% 18.00% 16.00% 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% 2006 2007 2008 2009 2010 Percentage

Graph No. 18

Here the ratio was 19.59 % in 2006 and after fluctuation it was 10.57 % in 2010. The ratio was decreased because of increment in deposits and approx 10 % increment in assets in the year 2010.

6.2) ANALYSIS

COMPONENT RATINGS TO THE BANK

Now, after analyzing the ratio next, task to do is to give weightage to all the parameters according to the importance of the ratios. Each component will be given weightage according to the importance of itself and ratios covered in that particular point. The total weightage allocated to the all parameters would be out of 100. The weightage given to different parameters is as follows:

TABLE - 19 Component Weightage Parameters Capital Adequacy Asset Quality Management Earnings Liquidity Total Weightage 27 % 16 % 15 % 18 % 24 % 100 %

Ratio Wise Weightage:

After giving the importance to the each parameter, now its turn to give the weightage according to the importance of the ratio we will allocate the weightage to the each particular ratio. The weightage given to the each ratio is as follows.

RATIO Capital Adequacy Debt Equity Ratio Total Advances to Total Assets Ratio Government Securities to Total Investment Asset Quality Gross NPA to Total Loan Net NPA to Total Loan Management Total Advances to Total Deposit Business per Employees Profit per Employees Earnings Dividend Payout Ratio Return on Assets Operating Profit to Average Working Fund Net Profit to Average Assets Interest Income to Total Income Other Income to Total Income Liquidity Liquidity Asset to Total Assets G-Sec to Total Assets Approved Securities to Total Security Liquidity Asset to Total Deposit Total Table No. 20

WEIGHTAGE Out of 27 % 9% 9% 9% Out of 16 % 8% 8% Out of 15 % 5% 5% 5% Out of 18 % 3% 3% 3% 3% 3% 3% Out of 24 % 6% 6% 6% 6% 100 %

After allocating the weightage, we have made frequency classes according to the results found from the ratios for each ratio of each parameter. He frequency classes for each ratio are as follows:

Capital Adequacy
Table No. 21 Ratios
Debt-Equity Ratio Total Advances to Total Assets G-Sec to Total Invest.

1
Below 0.15 Below 50 Below 82

2
0.15 - 1 50 - 53 82 - 84

4
1-3 53 - 55 84 - 86

Marks 5
3- 9 55 - 57 86 - 88

6
9 - 18 57 - 59 86 - 88

8
18 - 27 59 - 61 88 - 90

9
Above 27 Above 61 Above 90

Asset Quality
Total No. 22 Marks 5
4-6 1 1.5

Ratios
Gross NPA to Total Loan Net NPA to Total Loan

1
Above 10 Above 3.5

2
8 - 10 2.5 3.5

3
6-8 1.5 2.5

6
2-4 0.75 - 1

7
1-2 0.50 0.75

8
Below 1 Below 0.50

Management Quality
Table No. 23 Marks 3
55 - 65 1500 2000 100 - 150

Ratios
Total Advance to Total Deposit Business per Employee Profit per Employee

1
Below 50 Below 1000 Below 50

2
50 - 55 1000 1500 50 - 100

4
65 70 2000 3000 150 - 200

5
Above 70 Above 3000 Above 200

Earnings Quality
Table No. 23 Marks 1.5 2.0
12 - 18 0.50 0.75 0.50 0.75 0.50 0.75 82 - 84 12 - 14 18 - 25 0.75 - 1 0.75 - 1 0.75 - 1 84 - 86 14 -16

Ratios
Dividend Payout Ratio Return on Assets Operating Profit to Avg. Working Fund Net Profit to Avg. Assets Interest Income to Total Income Other Income to Total Income

0.5
Below 10 Below 0.25 Below 0.25 Below 0.25 Below 80 Below 10

1.0
10 12 0.25 0.50 0.25 0.50 0.25 0.50 80 - 82 10 - 12

2.5
25 - 30 1 1.25 1 1.25 1 1.25 86 - 88 16 - 18

3.0
Above 30 Above 1.25 Above 1.25 Above 1.25 Above 88 Above 18

Liquidity
Table No. 25 Marks 3.5
12 - 14 21 - 23 0.5 - 1 12 - 15

Ratios
Liquidity Asset to Total Asset G-Sec To Total Assets Approved Sec to Total Assets Liquidity Asset to Total Deposit

1
Below 10 Below 20 Below 0.05 Below 10

2
10 - 12 20 - 21 0.05 0.5 10 - 12

5
14 - 16 23 - 24 1-2 15 - 18

6
Above 16 Above 24 Above 2 Above 18

After allocating classes for the each ratio and for the five years, now we will give marks, on the basis of average of their average of performance during the last five years i.e. 2006 to 2010.
RATIO Capital Adequacy Debt Equity Ratio Total Advances to Total Assets Ratio Government Securities to Total Assets Asset Quality Gross NPA to Total Loan Net NPA to Total Loan Management Total Advances to Total Deposit Business per Employees Profit per Employees Earnings Dividend Payout Ratio Return on Assets Operating Profit to Average Working Fund Marks Out of 9 Marks 5 5 5 Out of 8 Marks 6 5 Out of 5 Marks 3 4 3 Out of 3 Marks 2 1.5 1.5

Net Profit to Average Assets Interest Income to Total Income Other Income to Total Income Liquidity Liquidity Asset to Total Assets G-Sec to Total Assets Approved Securities to Total Security Liquidity Asset to Total Deposit Table No. 26

1.5 2.5 1.5 Out of 6 Marks 3.5 3.5 2 5

Overall Rating of the Bank

Parameters Capital Adequacy Asset Quality Management Quality Earning Quality Liquidity TOTAL Table No. 27

Marks 15 11 10 10.5 14 60.5

After going through the whole process, I found that, bank has scored 60.5 Marks