Deposite Scheme Projec T From Net Nice

1
SUMMER TRAINING REPORT ON

DEPOSITE SCHEME

Undertaken at

INDIAN BANK

Submitted in partial fulfilment of the requirements for the award of the degree
of

MASTER OF BUSINESS ADMINISTRATION
to

Guru Gobind Singh Indraprastha University, Delhi

Under the Guidance of Submitted by
Kulbir Kaur Pinky Aggarwal
Designation MBA-III
Semester
PMCC/1056/13

Session 2013 14

PERIYAR MANAGEMENT AND COMPUTER COLLEGE
Periyar Centre, FC33, Plot No. 1&2, Institutional Area, Jasola, New Delhi 110025

2

TO WHOM IT MAY CONCERN

I pinky Enrolment No.PMCC/1056/13 From MBA-III Semester of the Periyar
Management and Computer College hereby declare that the Summer Training Report
(MS-204) entitled______________________________________________________
___________________________at INDIAN BANK is an original work and the same
has not been submitted to any other Institute for the award of any other degree.

Date: Signature of the
Student

Certified that the Summer Training Report submitted in partial fulfilment of Master of
Business Administration (MBA) to be awarded by G.G.S.I.P. University, Delhi by
_________________________, Enrolment No. ________________ has been
completed under my guidance and is satisfactory.

Date: Signature of the Guide
Name of the Guide: Kulbir Kaur
Designation:

3

ACKNOWLEDGEMENT

Firstly, I would like to thank MR.PRABHAKAR KHARE (CHIEF MANAGER) and a
sincere thanks to all other staff members of . INDIAN BANK who have helped me directly or
indirectly in my difficulties.
I wish to express my deepest and most sincere thanks to my Faculty Guide, Mrs Kulbir
Kaur for their invaluable guidance & support throughout the completion of my project.
Last but not least, I am thankful to all my family for cooperating with me at every stage of the
project. They acted as a continuous source of inspiration and motivated me throughout the
duration of the project helping me a lot in completing this project.

( Pinky Aggarwal)

4

CHAPTER 1
INTRODUCTION

1.1 ABOUT THE INDUSTRY
Banking in India originated in the last decades of the 18th century. The
first banks were The General Bank of India, which started in 1786, and Bank of
Hindustan, which started in 1790; both are now defunct. The oldest bank in
existence in India is the State Bank of India, which originated in the Bank of
Calcutta in June 1806, which almost immediately became the Bank of Bengal. This
was one of the three presidency banks, the other two being the Bank of Bombay and
the Bank of Madras, all three of which were established under charters from the
British East India Company. For many years the Presidency banks acted as quasi-
central banks, as did their successors. The three banks merged in 1921 to form
the Imperial Bank of India, which, upon India's independence, became the State
Bank of India in 1955.

HISTORY OF BANKING
Indian merchants in Calcutta established the Union Bank in 1839, but it
failed in 1848 as a consequence of the economic crisis of 1848-49. The Allahabad
Bank, established in 1865 and still functioning today, is the oldest Joint Stock bank
in India.(Joint Stock Bank: A company that issues stock and requires shareholders to
be held liable for the company's debt) It was not the first though. That honour
belongs to the Bank of Upper India, which was established in 1863, and which
survived until 1913, when it failed, with some of its assets and liabilities being
transferred to the Alliance Bank of Simla.
When the American Civil War stopped the supply of cotton
to Lancashire from the Confederate States, promoters opened banks to finance
trading in Indian cotton. With large exposure to speculative ventures, most of the
banks opened in India during that period failed. The depositors lost money and lost
interest in keeping deposits with banks. Subsequently, banking in India remained the
exclusive domain of Europeans for next several decades until the beginning of the
20th century.
5

Foreign banks too started to arrive, particularly in Calcutta, in the 1860s.
The Comptoire d'Escompte de Paris opened a branch in Calcutta in 1860, and
another in Bombay in 1862; branches in Madras and Pondicherry, then a French
colony, followed. HSBC established itself in Bengal in 1869. Calcutta was the most
active trading port in India, mainly due to the trade of the British Empire, and so
became a banking centre.
The first entirely Indian joint stock bank was the Oudh Commercial
Bank, established in 1881 in Faizabad. It failed in 1958. The next was the Punjab
National Bank, established in Lahore in 1895, which has survived to the present and
is now one of the largest banks in India. Around the turn of the 20th Century, the
Indian economy was passing through a relative period of stability. Around five
decades had elapsed since the Indian Mutiny, and the social, industrial and other
infrastructure had improved. Indians had established small banks, most of which
served particular ethnic and religious communities.
The presidency banks dominated banking in India but there were also
some exchange banks and a number of Indian joint stock banks. All these banks
operated in different segments of the economy. The exchange banks, mostly owned
by Europeans, concentrated on financing foreign trade. Indian joint stock banks were
generally undercapitalized and lacked the experience and maturity to compete with
the presidency and exchange banks. This segmentation let Lord Curzon to
observe, "In respect of banking it seems we are behind the times. We are like some
old fashioned sailing ship, divided by solid wooden bulkheads into separate and
cumbersome compartments."
The period between 1906 and 1911, saw the establishment of banks
inspired by the Swadeshi movement. The Swadeshi movement inspired local
businessmen and political figures to found banks of and for the Indian community.
A number of banks established then have survived to the present such as Bank of
India, Corporation Bank, Indian Bank, Bank of Baroda, Canara Bank and Central
Bank of India. The fervour of Swadeshi movement lead to establishing of many
private banks in Dakshina Kannada and Udupi district which were unified earlier
and known by the name South Canara ( South Kanara ) district. Four nationalised
banks started in this district and also a leading private sector bank. Hence undivided
Dakshina Kannada district is known as "Cradle of Indian Banking". During the First
World War (19141918) through the end of the Second World War (19391945),
6

and two years thereafter until the independence of India were challenging for Indian
banking.

POST INDEPENDENCE
The partition of India in 1947 adversely impacted the economies
of Punjab and West Bengal, paralyzing banking activities for months.
India's independence marked the end of a regime of the Laissez-faire for the Indian
banking. The Government of India initiated measures to play an active role in the
economic life of the nation, and the Industrial Policy Resolution adopted by the
government in 1948 envisaged a mixed economy. This resulted into greater
involvement of the state in different segments of the economy including banking and
finance. The major steps to regulate banking included:

The Reserve Bank of India, India's central banking authority, was established
in April 1934, but was nationalized on January 1, 1949 under the terms of the
Reserve Bank of India (Transfer to Public Ownership) Act, 1948 (RBI,
2005b).[Reference www.rbi.org.in]
In 1949, the Banking Regulation Act was enacted which empowered the
Reserve Bank of India (RBI) "to regulate, control, and inspect the banks in
India."
The Banking Regulation Act also provided that no new bank or branch of an
existing bank could be opened without a license from the RBI, and no two
banks could have common directors.

NATIONALISATION
Despite the provisions, control and regulations of Reserve Bank of India,
banks in India except the State Bank of India or SBI, continued to be owned and
operated by private persons. By the 1960s, the Indian banking industry had become
an important tool to facilitate the development of the Indian economy. At the same
time, it had emerged as a large employer, and a debate had ensued about the
nationalization of the banking industry. Indira Gandhi, then Prime Minister of India,
expressed the intention of the Government of India in the annual conference of the
7

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

LIBERLIZATION
In the early 1990s, the then Narasimha Rao government embarked on a
policy of liberalization, licensing a small number of private banks. These came to be
known as New Generation tech-savvy banks, and included Global Trust Bank (the
first of such new generation banks to be set up), which later amalgamated with
Oriental Bank of Commerce, Axis Bank(earlier as UTI Bank), ICICI
Bank and HDFC Bank. This move, along with the rapid growth in the economy of
India, revitalized the banking sector in India, which has seen rapid growth with
strong contribution from all the three sectors of banks, namely, government banks,
private banks and foreign banks.
The new policy shook the Banking sector in India completely. Bankers, till
this time, were used to the 4-6-4 method (Borrow at 4%; Lend at 6%; Go home at 4)
of functioning. The new wave ushered in a modern outlook and tech-savvy methods
of working for traditional banks. Currently (2010), banking in India is generally
fairly mature in terms of supply, product range and reach-even though reach in rural
India still remains a challenge for the private sector and foreign banks.

ADOPTION OF BANKING TECHONOLGY
The IT revolution had a great impact in the Indian banking system. The
use of computers had led to introduction of online banking in India. The use of the
modern innovation and computerisation of the banking sector of India has increased
8

many folds after the economic liberalisation of 1991 as the country's banking sector
has been exposed to the world's market. The Indian banks were finding it difficult to
compete with the international banks in terms of the customer service without the
use of the information technology and computers.

RESERVE BANK OF INDIA

Reserve Bank of India was established on April 1, 1935 in accordance with
the provisions of the Reserve Bank of India Act, 1934. Though initially RBI was
privately owned, it was nationalized in 1949. Its central office is in Mumbai where
the Governor of RBI sits.
India has a well developed banking system. Most of the banks in India were
founded by Indian entrepreneurs and visionaries in the pre-independence era to
provide financial assistance to traders, agriculturists and budding Indian
Scheduled banks
Co-operative banks Commercial banks
Urban Co-
operatives (52)
Old (22)
Regional rural
banks (196)
Public Sector
banks (27)
State Co-
operatives (16)
Other Nationalised
banks (19)
Foreign banks (40)
Private Sector
banks (30)
New (8)
State bank of India
and Associate
banks (8)
RESERVE BANK OF INDIA
Central bank and supreme monetary authority
9

industrialists. The origin of banking in India can be traced back to the last decades of
the 18th century.
The role of central banking in India is looked by the Reserve Bank of India,
which in 1935 formally took over these responsibilities from the then Imperial Bank
of India. Reserve Bank was nationalized in 1947 and was given broader powers. In
1969, 14 largest commercial banks were nationalized followed by six next largest in
1980. But with adoption of economic liberalization in 1991, private banking was
again allowed. The commercial banking structure in India consists of: Scheduled
Commercial Banks and Unscheduled Banks. Scheduled commercial Banks
constitute those banks, which have been included in the Second Schedule of Reserve
Bank of India (RBI) Act, 1934.
Indian banks can be broadly classified into public sector banks (those banks
in which the Government of India holds a stake), private banks (government does
not have a stake in these banks; they may be publicly listed and traded on stock
exchanges) and foreign banks.
India has a strong and vibrant banking sector comprising state-owned
banks, private sector banks, foreign banks, financial institutions and regional banks
including cooperative banks, rural banks and local area banks. In addition there are
non-banking financial companies (NBFCs), housing finance companies, Nidhi
companies and chit fund companies which play the role of financial intermediaries.
India is also committed to further open the banking sector for foreign investment in
pursuance to its commitment to the World Trade Organisation (WTO).
As monetary authority of the country, the Reserve Bank of India (RBI)
regulates the banking industry and lays down guidelines for day-to-day functioning
of banks within the overall framework of the Banking Regulation Act, 1949, Foreign
Exchange Management Act, 1999 and Foreign Direct Investment (FDI) policy of the
government.

STATE-OWNED BANKS
The Indian banking sector is dominated by 28 state-owned banks which
operate through a network of about 50,000 branches and 13,000 ATMs. The State
Bank of India (SBI) in the largest bank in the country and along with its seven
associate banks has an asset base of about Rs. 7,000 billion (approximately US$150
10

billion). The other large public sector banks are Punjab National Bank, Canara Bank,
Bank of Baroda, Bank of India and IDBI Bank.
PUBLIC SECTOR BANKS
The public sector banks have overseas operations with Bank of Baroda
topping the list with 51 branches, subsidiaries, joint ventures and representative
offices outside India, followed by SBI (45 overseas branches/offices) and Bank of
India (26 overseas branches/offices). Indian banks, including private sector banks,
have 171 branches/offices abroad. SBI is present in 29 countries followed by Bank
of Baroda (20 countries) and Bank of India (14 countries).

PRIVATE SECTOR BANKS
Private sector banks India has 29 private sector banks including nine new
banks which were granted licences after the government liberalised the banking
sector. Some of the well known private sector banks are Karnataka Bank, ICICI
Bank, HDFC Bank and IndusInd Bank. Yes Bank is the latest entrant to the private
sector banking industry.
In terms of reach the private sector banks with an asset of over Rs 5,700
billion (about US$124 billion) operate through a network of 6,500 branches and over
7,500 ATMs.

FOREIGN BANKS
Foreign banks have brought latest technology and latest banking practices
in India. They have helped made Indian Banking system more competitive and
efficient. Government has come up with a road map for expansion of foreign banks
in India.
Foreign banks As many as 29 foreign banks originating from 19
countries are operating in India through a network of 258 branches and about 900
ATMs. With total assets of more than Rs 2,000 billion (about 44 billion US dollars)
they are present in 40 centres across 19 Indian states and Union Territories.
Some of the leading international banks that are doing brisk business in
India include Standard Chartered Bank, HSBC Bank, Citibank N.A. and ABN-
AMRO Bank.

11

REGIONAL BANKS
Rural areas in India are served through a network of Regional Rural Banks
(RRBs), urban cooperative banks, rural cooperative credit institutions and local area
banks. Many of these banks are not doing well financially and the government is
currently engaged in restructuring and consolidating them.
Local area banks were of recent origin and as on March 31, 2006 four
such banks were operating in the country.

NATIONALISED BANKS
Nationalised banks dominate the banking system in India. The history of
nationalised banks in India dates back to mid-20th century, when Imperial Bank of
India was nationalised (under the SBI Act of 1955) and re-christened as State Bank
of India (SBI) in July 1955.

FINANCIAL INSTITUTIONS
Financial institutions India has seven major state-owned financial
institutions which include Industrial Development Bank of India (IDBI), Industrial
and Financial Corporation of India (IFCI), Tourism Finance Corporation of India
(TFCI), Small Industries Development Bank of India (SIDBI), National Bank for
Agriculture and Rural Development (NABARD) and National Housing Bank
(NHB).
These institutions provide term loans and arrange refinance. There are also
specialised institutions like the Power Finance Corporation (PFC), Indian Railway
Finance Corporation (IRFC), and Infrastructure Development Finance Company
(IDFC) and state-level financial corporations.

1.2 OBJECTIVES OF THE STUDY
PRIMARY OBJECTIVE
To study the performance of deposit schemes in Karnataka Bank
SECONDARY OBJECTIVES
1) To evaluate the performance of cash inflow in the form of deposits
12

2) To analyze the return on investment of deposit schemes
3) To find out the performance of demand deposits, savings bank deposits and term de
posits
4) To analyze the efficiency of management
5) To find out the relationship between the deposits and loans

1.3 SCOPE OF THE STUDY
The present study attempts to obtain a general view of deposit schemes practice in
Indian bank. The study to know their increase or decrease of various schemes is also
analyzed in order to give atrue and clear picture of its performance. The present study
aims at studying deposits of the Indian bank. The study focuses only the views of the
bank. But it does include the views of the others who aredirectly or indirectly
associated with the bank. It is concerned to the administration of assets & liabilitiesto
analysis the profitability liquidity of the organization with the help of ratios

13

1.4 ABOUT THE COMPANY

1.4.1 Name of the company: Indian Bank
Address : B - 1/7, ASHOK VIHAR, PHASE - II,
NEW DELHI 110052
Phone no : 011-27411133
Email : [email protected]
Website name : Indian-bank.com

1.4.2 Indian Bank is an Indian state-owned financial services company. Head
quartered in Chennai, India. It has 19000 employees, 2100 branches and is one of
the big public sector banks of India. It has overseas branches inColombo, Jaffna, Sri
Lanka, Singapore, and 229 correspondent banks in 69 countries. Since 1969
the Government of India has owned the bank, which celebrated its centenary

Early formation and expansion
In the last quarter of 1906, Madras (now Chennai) was hit by the worst financial
crisis the city was ever to suffer.
[1]
Of the three best-known British commercial
names in 19th century Madras, one crashed; a second had to be resurrected by a
distress sale; and the third had to be bailed out by a benevolent
benefactor. Arbuthnot & Co, which failed, was considered the soundest of the three.
Parry's (now EID Parry), may have been the earliest of them and Binny & Co.'s
founders may have had the oldest associations with Madras, but it was Arbuthnot,
established in 1810, that was the city's strongest commercial organisation in the 19th
Century. A key figure in the bankruptcy case for Arbuthnot's was the Madras
lawyer, V. Krishnaswamy Iyer; he went on to organise a group of Chettiars that
founded Indian Bank. Annamalai and Ramaswami Chettiar founded Indian Bank
(IB) on 5 March 1907, and it commenced operations 15 August 1907 with its head
office in Parry's Building, Parry Corner, Madras.

In the year 2000, they signed a MoU with Infosys Technologies Ltd for
implementation of Finacle, a Core Banking Solution. In the year 2002, they made a
14

pact with Corporation Bank for sharing ATM's. Also, they made a tie-up with
MetLife India for the distribution of insurance products as a corporate agent. In the
year 2003, the Bank took up Corporate Agency for distribution of products of Bajaj
Allianz General Insurance Co Ltd.
The Bank in association with MetLife India launched K-Life a term
product designed for SB/current account holders of the bank. Also, the Bank
launched a credit product 'KBL Insta Cash' for consumption purposes, and 'KBL
Vahana Mitra' for the purchase of new vehicles. The Bank along with Western
Union Financial Services made tie-up with Bharat Overseas Bank to provide
inbound money transfer services.
In the year 2004, the Bank launched the 'Gold Card Scheme' for the
exporters. In the year 2005, the Bank launched real time gross settlement (RTGS)
system under the name of Money Quick. Also, they inked an agreement with
National Financial Switch for ATM connectivity and launched 'no frills' accounts.
In the year 2006, they made a tie up with Franklin Templeton (I) Private
Limited for distribution of their mutual funds. They launched CDSL-DP services at
select branches. In the year 2007, the Bank signed MoU with Allahabad Bank,
Indian Overseas Bank, Sompo Japan Insurance Inc. and Dabur Investment
Corporation to form a joint venture for undertaking General Insurance business.
During the year 2008-09, the Bank opend 16 branches at Moradabad, New
Delhi - Karol Bagh, Thane, Mumbai - Vile Parle, Bommasandra, Bangalore -
Chandra Layout, Bangalore - Sadashivanagar, Mysore - J P Nagar, Belgaum -
Udyambag (Extension Counter upgraded), New Delhi - East of Kailash, Bangalore -
Yelahanka New Town, Pune-Dhankawadi, Doddaballpur, Uppal Kalan, Bellandur
and Hoskote.
The Bank added 30 ATM outlets at various locations. Also, they shifted
15 branches/ offices to new premises. The Bank won the prestigious Sun and NDTV
Green IT award instituted by Sun Microsystems and NDTV, for use of eco efficient
green technologies to run business. During the year 2009-10, the Bank opened 17
branches in Patna, Kanakapura, Tambaram, Vellore, Dhanbad, Kolkata -
Bhowanipore, Naganathapura, Gundlupet, New Delhi - Ashokvihar, Ujjain,
Ghaziabad, Kancheepuram, Chennai - Annanagar (West), Brahmapur,
Serillingampally, Durg and Rajarhat - Kolkata. The Bank added 46 ATM outlets at
various locations. Also, they shifted 16 branches/offices to new premises.
15

In April 2010, the opened their 9th Regional Office at Hyderabad. The
Bank bagged 'Special Award for use of IT for Internal effectiveness' for the year
2009, instituted by Institute for Development and Research in Banking Technology
(IDRBT). As on March 31, 2010, the Bank had 464 branches, 217 ATM outlets, 8
Regional Offices, one International Division, one Data Centre, one Customer Care
Centre, 5 Service branches, 2 Currency Chests, 6 Extension Counters and two
Central processing centers, spread across 20 states and 2 Union Territories. Further,
for better ambience and improved customer service.
In September 2010, the Bank launched a new product exclusively for
women, i.e. the new saving bank account for women named KBL Vanitha to
encourage saving habit among the womenfolk and also to allay the fear of managing
their wealth. The Bank plans to increase their total number of business units to 780,
by increasing the total number of branches to 480 and own ATM network to 300 by
March 2011.

1.4.3 Indian Bank MISSION
"Our mission is to be a technology savvy, customer centric progressive bank
with a national presence, driven by the highest standards of corporate governance
and guided by sound ethical values."

1.4.4 FACILITIES AND CUSTOMER SERVICE

Indian Bank provides a broad range of customized products and services
suitable for all kinds of market, trade and perceived requirements, be it business or
personal. It deals in personalized banking, business banking, money transfer,
internet banking and insurance services. The facilities include borrowing facilities,
deposits, optimum returns on surplus funds and helping with smooth overseas
transactions. As a part of personalized banking, Karnataka Bank provides services
for high earning deposits, simple & convenient loans, life insurance, money transfer,
utility bill payments and thus, efficiently keeps a track of your finances.
.
Customer Profile
16

Branches should prepare a profile for each new customer based on risk categorization. A
format of the Customer Profile is given in Annexure 1.3. The customer profile contains
information relating to customer's social/financial status, nature of business activity,
information about his clients' business and their location, etc

Annexure 1.3
......................................................Branch
Part B - Business Profile
(to be used for accounts of business entities including Sole Proprietor concerns)

Note: i. This is in addition to Customer Profile Part A
ii. To be verified/filled in by the Authorized Officer and signed by
Customer and Officer
.
Geographical location of the business

Nature/Activity of business /occupation

Estimated income from the business Rs................................... per annum
Any other source of income (indicate the source) Rs.
Total annual income Rs.
Approximate value of movable and immovable
Assets

Details of existing bank accounts, if any

Details of Credit Facilities, if any, availed (If space
provided is found insufficient, furnish in a separate
sheet)

Details of foreign countries, if any, visited during last
three years

Date: : .
Customer Authorized officer of Bank
(With Name and SS No.)

17

BOARD OF DIRECTORS

Chairman
Shri T.M. Bhasin
Managing Director & CEO
Shri T.M. Bhasin

Director
S R Hegde
R V Shastri
U R Bhat
T S Vishwanath
Sitarama Murty M
S V Manjunath
D Harshendra Kumar
H Ramamohan
T R Chandrasekaran

Company Secretary

Y V Balachandra

MULTI BRANCH BANKING
Multi Branch Banking facility is a value added service to our customers
taking advantage of "Core Banking Solution". It is a 'technology driven-anywhere
banking' facility and 'at par' facilities for Savings Bank and Current account with
structured schedule of services and charges. Now the customer can access his
account at all branches of the Bank.
The salient features of the scheme are as under:
1. The concept of 'anywhere' banking is extended to all domestic SB and Current
Accounts except NO Frills Accounts. Even SB-General and Current-General
accounts are eligible for MBB facility with Multicity Cheques.
2. SB-General (SBGEN),SB-Money Sapphire, SB-Money Platinum, Current A/c
General (CAGEN),CA- Money Pearl, CA - Money Ruby, CA- Money Diamond,
CA-Money Platinum, are MBB accounts with structured free services
and Multicity Cheque facility with cheques payable at par at all Branches.

FACILITIES AVAILABLE UNDER MBB
PAYMENT SERVICES:
18

Any where Cash withdrawal for self cheques only
Multicity Cheques
Funds Transfer
Funds Transfer through RTGS/NEFT

COLLECTION SERVICES:
Any where Cash Deposit- By self only
Collection of out station cheques
Any where Deposit of cheques for collection

OTHER FACILITIES:
Internet Banking
Mobile Banking (SMS alerts)
Demat Account
'MoneyPlant' Visa International Debit Card

INTERNET BANKING
Karnataka bank has been introduced Internet Banking facility
MoneyClick
TM
to manage our finances in the comfort of our home or our office as
per our convenience. MoneyClick
TM
is a Self-Service Channel, which is available 24
hours a day and 365 days a year in an absolutely simple, friendly but secured
environment.
In MoneyClick
TM
, a mere touch of a button or click of a mouse makes
you accessible to a host of Banking Services, called Fingertip Banking. We can
carry out your banking transactions safely and with total confidentiality by enjoying
online banking without wasting your time or losing your peace of mind.

Money ClickTM Retail
It offers different online services to our retail/individual customers, like
balance enquiry, requests for Chequebooks, recording stop-payment instructions,
balance transfer instructions, account opening and other forms of traditional banking
19

services. This also offers utility bill payment services to our valued customers for
payment of BSNL Mobile, Electricity, Water bills etc.

MoneyclickTM Corporate
In addition to the above services, our Corporate Customers can avail
Trade Finance Facilities such as Import/ Export Credit facilities, Requests for
Forward Contracts, Inland Trade, and Bank Guarantee etc. Also
Moneyclick
TM
facilitates access control at Corporate User level wherein various
users at different hierarchy levels have varying powers to operate a corporate
account.

MoneyClickTM Cyber Kids
Children between 12-18 years who are having Account with us are
eligible for this special e-banking facility.

MOBILE BANKING
Karnataka Bank offers Mobile Banking for the convenience of paying for
utility bills, mobile recharge, movie tickets, online purchases, retail shopping and
much more at over 15,000 merchants directly from our mobile.

Karnataka Bank mobile payment service is independent of the handset
model and service providers and works on even the most basic handsets and across
all telecom operators (GSM or CDMA).

FEATURES
Mobile payment facility will be an additional facility to our customer for
making Payment through their mobile for the goods purchased by them.
On registration for Mobile Payment solution, the customer will be enabled to
make secured payments directly from their registered mobile phone,
authorized by using their ATM PIN.
Customers can use this facility round the clock.
This facility is extended to the users free of cost.
This facility saves time; avoid hassles of travelling, waiting in long queues to
make bill payment, ticket booking etc.
20

At present the facility will be extended to customers subject to a daily cap of
Rs.50, 000/- per customer for transaction involving purchase of
goods/services (as per RBI guidelines).

BENEFITS
EASY:
Works on even the simplest mobile handsets across all operators (GSM or
CDMA)
Doesn't require GPRS connectivity, SIM change or application download
SMS & Interactive Voice based transaction platform makes it very easy-to-
use

SECURE:
Confidential PIN Based Transaction
PIN entry only through an IVR call where the PIN is transmitted in a DTMF
format(Just as the PIN entry system for tele banking)
No financial details divulged during the transaction process

CONVENIENT:
Transact over-the-counter, online, on the telephone or from just about
anywhere
Save time and effort by paying bills from anywhere, anytime
Turn your mobile phone into a debit card

REGISTRATION:
Existing Debit Card holders (Classic/GOLD) who are above 18years are
eligible for mobile banking facilities. In case existing customers do not have debit
cards, they have to first apply for Debit Cards and upon receipt of the same they can
register for Mobile Payment facility. A customer would be able to register to use Pay
mate services in any one of the following:
DEMAT ACCOUNT
A Bank where its Head Office provides the facility of opening and
conduct of Accounts through its branches, a Depository institution extends various
21

services to the investors through its agents known as Depository Participant. In
India, now there are two Depositories. They are CDSL and NSDL. Participant can
be anybody who complies with the eligibility requirements. Participant (DP) can be
a Bank also. All the various functions undertaken and enabled through Demat
accounts are referred to as DP activity. Under the depository system, a demat
account holder or holder/owner of securities who is entitled to all the benefits (such
as dividend or interest/bonus or right shares etc), is known as a Beneficial
Owner (BO).

PREREQUISITES OF OPENING A DEMAT ACCOUNT:
The formalities involved in opening a bank account and a demat account
are similar. An investor desirous of holding his securities in electronic form can
open a demat account with a DP of his choice by completing necessary account
opening formalities after furnishing proof of his/her identity, photograph and proof
of address. An agreement with the DP in the prescribed format is to be executed by
paying requisite stamp duty.

DEMATERIALISATION OF SECURITIES:
After getting the demat account number from the DP, the BO can cause
credit of fresh purchases of securities to his demat account and/or transfer the
balances held in demat account held with other DP to this newly opened demat
account. He can also tender the securities held by him/her in physical form to DP for
dematerialization and credit to the demat account. After necessary verification, DP
forwards the physical securities (duly defaced) either to the company or to their duly
appointed RTA (Registrar and Transfer Agent) who, after necessary scrutiny,
destroys the certificates in physical form and authorizes the depository to give
corresponding (electronic) credit to the subject demat account.

FREE FACILITIES BY CDSL TO ITS DEMAT ACCOUNT
HOLDERS:
The evolution of the Indian capital market has seen several enhancements
during the past few years and this has been a result of innovative use of newer
technologies. In the reduced settlement cycle era, investors require updated demat
22

account information at a much faster pace than ever before. In other words, the quest
for account status information has raised manifold.
In order to facilitate a CDSL demat account holder to easily adapt to the
fast reducing settlement cycle, CDSL has introduced Internet-enabled services
called "easi" and "easiest" to empower a demat account holder in managing his
securities 'anytime-anywhere' in an efficient and convenient manner, all in a state-of-
the-art secure environment. Further to effective risk control mechanism for
monitoring of demat account, CDSL has also introduced "smart" facility.

MONEY PLANT ATM
Karnataka Bank has entered into ATM sharing arrangement with NPCI-
NFS and CashTree ATM network. The NFS network with NPCI has 66 Member
Banks and covers around 86,793 ATMs while CashTree network has 13 member
Banks and covers around 7400 ATMs. All Debit & Moneyplant
TM
International Visa
Debit Card/Moneyplant
TM
ATM card holding customers of Karnataka Bank can
avail the facility of withdrawal through Banks' MoneyPlant
TM
ATMs and shared
network ATMs.

1.5 ABOUT THE Industry
One of the important functions of the Bank is to accept deposits from the
public for the purpose of lending. In fact, depositors are the major stakeholders of
the Banking System. The depositors and their interests form the key area of the
regulatory framework for banking in India and this has been enshrined in the
Banking Regulation Act, 1949. The Reserve Bank of India is empowered to issue
directives advices on interest rates on deposits and other aspects regarding conduct
of deposit accounts from time to time. With liberalization in the financial system and
deregulation of interest rates, banks are now free to formulate deposit products
within the broad guidelines issued by RBI.
23

This policy document on deposits outlines the guiding principles in respect
of formulation of various deposit products offered by the Bank and terms and
conditions governing the conduct of the account. The document recognises the rights
of depositors and aims at dissemination of information with regard to various
aspects of acceptance of deposits from the members of the public, conduct and
operations of various deposits accounts, payment of interest on various deposit
accounts, closure of deposit accounts, method of disposal of deposits of deceased
depositors, etc., for the benefit of customers.
While adopting this policy, the bank reiterates its commitments to
individual customers outlined in 'Code of Banks' Commitment to Customers'.
The various deposit products offered by the Bank can be categorised
broadly into the following types. Definitions of major deposits schemes are as under:
"Demand deposits" means a deposit received by the Bank which is
withdrawable on demand. "Savings deposits" means a form of demand
deposit which is subject to restrictions as to the number of withdrawals as
also the amounts of withdrawals permitted by the Bank during any specified
period.
"Term deposit" means a deposit received by the Bank for a fixed period
withdrawable only after the expiry of the fixed period.
"Current Account" means a form of demand deposit wherefrom withdrawals
are allowed any number of times depending upon the balance in the account
or up to a particular agreed amount and will also include other deposit
accounts which are neither Savings Deposit nor Term Deposit.

ACCOUNT OPENING AND OPERATION OF DEPOSIT
ACCOUNTS
The Bank before opening any deposit account will carry out due diligence as
required under "Know Your Customer" (KYC) guidelines issued by RBI
Anti-Money Laundering rules and regulations and or such other norms or
procedures as per the "Know Your Customer"(KYC) policy of the bank. If
the decision to open an account of a prospective depositor requires clearance
at a higher level, reasons for any delay in opening of the account will be
24

informed to the customer and the final decision of the Bank will be conveyed
at the earliest to the customer.
The bank is committed to providing basic banking services to disadvantaged
sections of the society. Banking services will be offered to them through 'no
frill' accounts and accounts will be opened with relaxed customer acceptance
norms as per regulatory guidelines.
The account opening forms and other material would be provided to the
prospective depositor by the Bank. The same will contain details of
information to be furnished and documents to be produced for verification
and/or for record, it is expected of the Bank official opening the account, to
explain the procedural formalities and provide necessary clarifications
sought by the prospective depositor when he approaches for opening a
deposit account.
The regulatory guidelines require banks to categorize customers based on
risk perception and prepare profiles of customers for the purpose of
transaction monitoring. Inability or unwillingness of a prospective customer
to provide necessary information/details could result in the bank not opening
an account.
Inability of an existing customer to furnish details required by the bank to
fulfil statutory obligations could also result in closure of the account after
due notice(s) is provided to the customer.
For deposit products like Savings Bank Account and Current Deposit
Account, the Bank will normally stipulate certain minimum balances to be
maintained as part of terms and conditions governing operation of such
accounts. Failure to maintain minimum balance in the account will attract
levy of charges as specified by the Bank from time to time. For Saving Bank
Account, the Bank may also place restrictions on number of transactions,
cash withdrawals, etc., for a given period. Similarly, the Bank may specify
charges for issue of cheque books, additional statement of accounts,
duplicate passbook, folio charges, etc. All such details, regarding terms and
conditions for operation of the accounts and schedule of charges for various
services provided will be communicated to the prospective depositor while
opening the account.
25

Savings Bank Accounts can be opened by eligible person/ persons and
certain organizations/ agencies (as advised by Reserve Bank of India (RBI)
from time to time).
Savings Bank Account
Eligibility
Individuals, Joint accounts, Clubs, associations, trusts, Govt. Bodies,
societies (including co-operatives), educational institutions, associations
and other non-trading organizations.
Benefits
ECS/RTGS/NEFT facilities are available
Two cheque books of 2x20 leaves free in a calendar year for cheque
operated SB accounts
Collection of local cheques free
Collection of Outstation cheques with the presecibed charges
No charges for Intra / Inter city transactions
ICOOC ( Local / Outstation) facility available
ATM / Debit card One year from the date of first use FREE
From Second year onwards chargeable Rs.50/- per year + applicable
taxes. **
** Not applicable for the Senior Citizen Debit Cards and Biometric
Cards
24 hrs ATM facility with arrangements with various banks for sharing
of their ATMs
Multicity cheque facility Intra city, intercity transactions,Internet/
mobile /phone banking facilities are available at all branches
Nomination facilities are available
50 withdrawals permitted free per half year . Rs.6/- will be levied for
each transaction beyond 50 transactions per half year
No TDS on interest earned on SB deposits
Min Amt
Minimum amount- Rs.250/- for non cheque operation
Minimum balance of Rs.500/- for cheque operation
Lesser minimum balance for pensioners and bonafide students
Non Maintenance of Minimum
Balance
A 30 per month for non maintenance of average monthly balance
Interest Rates In January and July on a daily product basis @4% p.a
Applications and Documents Application
26

Specimen Signature Card
Form 60 or 61 (if customer does not have PAN card)
Photograph of depositor/s (2 copies)
Proof of address as per KYC norms
Any other related documents applicable to Students, Minor, HUF, Trusts
etc.

.Procedure for opening savings accounts

.1 KYC procedures
The prospective account holder should be properly identified as per KYC norms. For
detailed guidelines on Know Your Customer procedures, please refer Chapter 1.

.2 Application and Specimen Signature Card
The application form (Refer Annexure 4.1) and specimen signature card should be
obtained duly signed by the prospective account holders. The details to be obtained in
the application form are given in Chapter 4 and the instructions given therein should
be followed. The opening of the account should be authorised by the Manager/Asst
Manager or any officer permitted by HO for this purpose (Refer Para 12 of Chapter
1). Two copies of photographs of the depositors/persons authorised to operate the
account should be obtained
(Refer Para 10 of Chapter 1).

3.3 Initial Deposit
The initial deposit for opening an account should be in cash. Opening of an account
by cheque should be avoided.

.4 Minimum Balance
4.4.1 The following minimum balances are prescribed for SB accounts

4.4.2 In case of pensioners the minimum balance in SB accounts with
cheque facility is Rs.250 and without cheque facility there is no
need for maintenance of Minimum balance.

4.4.3 In case of Students with bonafide certificate, the minimum balance
will be Rs. 250 for accounts with cheque facility and Rs. 100 for
accounts without cheque facility .
4.4.4 Where the balance in SB accounts falls below the stipulated
minimum,a service charge as prescribed by Head Office shall be
levied on each occasion irrespective of the number of days for
which the position continues. There is no service charges
for pensioners for non-maintenance of minimum balance in
27

SB accounts without vcheque facility.
4.4.5 At the time of opening Savings Bank accounts, banks should
inform their customer about the requirement of maintaining
minimum balance and levying of charges, if such
minimum balance is not maintained

. Opening of Accounts
After the initial deposit is paid, the account is opened in the ledger in the serial
order duly indexed and entries made in the Account Opened and Closed
Register. Detaile instructions on opening of account is given in
Chapter 4 of this Manual.

Current Accounts can be opened by individuals/partnership firms/ Private
and Public Limited Companies/HUFs/ Specified Associates/Societies/
Trusts, Departments of Authority created by Government (Central or State),
Limited Liability Partnership etc.

Current Account
Eligibility

Suitable for all type of customers
Salient Features Ordinary Current Account
Min Amt Quarterly average balance Rs.5000 prescribed
Benefits
ECS/RTGS/NEFT facilities are available
Nomination facility for individuals and sole proprietor concerns,
Multicity cheque facility, Intra city, intercity transactions are
permitted in CBS branches
ATM / Debit card One year from the date of first use FREE
From Second year onwards chargeable Rs.50/- per year +
applicable taxes. **
** Not applicable for the Senior Citizen Debit Cards and Biometric
Cards
No charges for Intra / Inter city transactions
Non Maintenance of Minimum
Quarterly Average Balance not maintained Rs. 340 per quarter
for metro / urban branches and Rs.115 per quarter for semi urban
28

balance / rural branches

Term Deposits Accounts can be opened by individuals/partnership firms/
Private and Public Limited Companies/HUFs/ Specified
Associates/Societies/ Trusts, Departments of Authority created by
Government (Central or State), Limited Liability Partnership etc.
Term Deposit is a deposit received by the Bank for a fixed period which is
withdrawable only after the expiry of the said fixed period and shall also
include deposits such as recurring, reinvestment, cash certificates and so on

The due diligence process, while opening a deposit account will involve
satisfying about the identity of the person, verification of address, satisfying
about his occupation and source of income. Obtaining introduction of the
prospective depositor from a person acceptable to the Bank and obtaining
recent photograph of the person/s opening/ operating the account are part of
due diligence process.
In addition to the due diligence requirements under KYC norms, the Bank is
required by law to obtain Permanent Account Number (PAN) or General
Index Register (GIR) Number or alternatively declaration in Form No. 60 or
61 as specified under the Income Tax Act/ Rules.
Deposit accounts can be opened by an individual in his own name (status:
known as account in single name) or by more than one individual in their
own names (status: known as Joint Account). Savings Bank Account can
also be opened by a minor jointly with natural guardian or with mother as the
guardian (Status: known as Minors Account). Minors above the age of 10
will also be allowed to open and operate saving bank account independently.
However no overdrafts will be granted to these minors.
Operation of Joint Account: The Joint Account opened by more than one
individual can be operated by single individual or by more than one
individual jointly. The mandate for operating the account can be modified
with the consent of all joint account holders. The Savings Bank Account
29

opened by minor jointly with natural guardian/guardian can be operated by
natural guardian only till the minor attains majority.
The term deposit account holders at the time of placing their deposits can
give instructions with regard to closure of deposit account or renewal of
deposit for further period on the date of maturity. In the absence of such
mandate, the Bank will seek instructions from the depositor/s as to the
disposal of the deposit by sending intimation before 15 days of the maturity
date of term deposit by post or courier at the last known address of the
depositor.
Nomination facility is available on all deposit accounts opened by
individuals. Nomination is also available to a sole proprietary concern
account. Nomination can be made in favour of one individual only.
Nomination so made can be cancelled or changed by the account holder/s
any time. While making nomination, the signature of the account holder/s in
the nomination forms (DA1, DA2 & DA3) need not be attested by witnesses.
However, thumb impression of the accountholder/s is required to be attested
by two witnesses.
Nomination can be modified by the consent of account holder/s. Nomination
can be made in favour of a minor also. Nomination facility is also available
for joint deposit accounts and in such cases nomination should be made by
all depositors jointly.
Account opening form

A depositor desirous of opening an account with the Bank should complete the
relative account opening form/card (Annexure 4.1) in all respects with full name(s)
and
specimen signature(s) at appropriate places. The prospective account holder should
normally be required to fill in the account opening form in the presence of a banks
official.

NRI SERVICES
An Indian citizen or a foreign citizen of Indian origin who stays abroad for
employment/carrying on business or vocation or under circumstances indicating an
intention for an uncertain duration of stay abroad is a Non-Resident Indian (NRI).
30

(Those who stay abroad on business visit, medical treatment, study or such other
purposes which do not indicate an intention to stay there for an indefinite period will
not be considered as NRIs).
An NRI is a person resident outside India who is a citizen of India or is a
person of Indian origin. Under the Foreign Exchange Management Act (FEMA),
generally, a person is resident outside India if he is in India for less than 182 days
during the course of the preceding financial year and also includes any person who
stays abroad:
For the purposes of carrying out employment or any business or vocation;
Under circumstances indicating an intention to stay outside India for an
uncertain duration;
Any Indian citizen deputed outside India for a temporary period in
connection with employment
For education
Bank offers vide range of deposit schemes for Non Resident Indians which
includes Non Resident Rupee account (NR (E) RA), Foreign Currency Non-
Resident Account (FCNR), Non-Resident Ordinary Account (NRO), and Resident
Foreign Currency (Domestic) Account (RFCD).
Opening and maintaining of Bank Accounts of Non- Resident Indian is
guided by the Foreign Exchange Management Act-1999 (FEMA) and interest on
terms deposits are revised based on LIBOR rates from time to time.

OBJECTIVES OF THE STUDY

PRIMARY OBJECTIVE

To study the performance of deposit schemes in Karnataka Bank

SECONDARY OBJECTIVES

1) To evaluate the performance of cash inflow in the form of deposits
2) To analyze the return on investment of deposit schemes
31

3) To find out the performance of demand deposits, savings bank deposits and
term deposits
4) To analyze the efficiency of management
5) To find out the relationship between the deposits and loans

SCOPE OF THE STUDY

The present study attempts to obtain a general view of deposit schemes
practice in Karnataka bank. The study to know their increase or decrease of various
schemes is also analyzed in order to give a true and clear picture of its performance.
The present study aims at studying deposits of the Karnataka bank. The study
focuses only the views of the bank. But it does include the views of the others who
are directly or indirectly associated with the bank. It is concerned to the
administration of assets & liabilities to analysis the profitability liquidity of the
organization with the help of ratios.

IMPORTANCE OF THE STUDY

Cash flow statement shows efficiency of a firm in generating cash inflows
from its regular operations.

Return on investment can be used to measure the value of the bank or of a
specific investment that they might make.

Percentage analysis is help to evaluate and compare the deposits.

Ratio analysis is an important technique of financial statement analysis.
Accounting ratios are useful for understanding the financial position of the
company. Different users such as investors, management, bankers and
creditors use the ratio to analyze the financial situation of the company for
their decision making purpose.

32

The effect of correlation is to reduce the range of uncertainty. The prediction
based on correlation analysis is likely to be more variable and near to reality.

LIMITATIONS OF THE STUDY

The analysis is based on the secondary data. Hence there is a limitation of
doubtful accuracy.

The data collected is limited to 5 years and hence it does not give the whole
picture.

As the present business moves from the cash basis to accrual basis, the
prepaid and credit transactions might be represented an increase in working
capital and it would be misleading to equate net income to cash flow because
a number of non cash items would affect the net income.

Return of investment does not take into account the time value of money. It
does not account for the variable nature of annual net cash inflows.

The ratios are generally calculated from past financial statements and thus
are no indicator of future.

33

CHAPTER 2
REVIEW OF LITERATURE

Mr. Joseph (2005) studied the performance of Lead Bank Scheme in
Kerala, the mobilisation of bank deposits in Kerala by commercial Banks. He
observed that competition from co-operative and other institutions was the main
obstacles to achieving the deposit mobilisation target. The popularity of private
financial institutions was due to their personal relations with local people. 56.4
percent of the customers (self employed) surveyed had their first percent dealing
with banks for taking loans.

Mr. Laurent (2006) studied the perception of customers on five
competing banks in a medium size city in UK for private deposits. He observed that
these five banks differed from each other as a result of oligopolistic market
situation only on seven attributes i.e., friendliness, quality of service, community
spirit, modem facilities, convenience, range of services and ownership. These seven
attributes accounted for 91 percent of the overall differences between the five banks.
The study revealed that on the basis of perception of overall image of the five banks
relative to each other, there existed the different market segments.

K. Avadhani (2007) studied the performance of rural branches of some
commercial banks in order to identify the factors influencing deposit mobilisation in
rural areas in different states. He came out with the opinion that there existed
34

sufficient relationship between the deposits of a rural branch and its age. The growth
of deposits is at a faster rate in the first six years and tapers off subsequently. The
growth rate in deposits of commercial banks cannot be explained in terms of price
differentials as co-operatives offer high rates of interest. Therefore product
differentials would offer a better explanation of the disparate growth rates in
deposits.

Mr. Nag and Mr. Shivaswamy (2008) studied the comparative
performance of foreign and Indian banks and observed that there was a distinct
preference of bank customers to bank with foreign banks notwithstanding the fact
that foreign banks stipulate relatively high levels of minimum amounts to be
maintained as deposits and charge relatively high interest rates and service costs. In
respect of deposit supplies, their strategy had been to procure from a segmented part
of the total supplies of deposits of large size from a relatively small number of
depositors. Large accretion of non-resident deposits with foreign banks was mainly
because of the familiarity of the names of foreign banks operating in India to banks
abroad.

Raju (2009) studied the levels of savings and the manner of their
distribution among different physical and financial assets of household sector in
Kerala and identified the factors influencing their savings behaviour. He found that
major portions of the savings of households in Kerala were in the form of financial
savings and that too in the form of bank deposits.

Subramanian (2010) analyzed the empirical analysis on dis-intermediation
from the household sectors portfolio preferences point of view based on demand
model of five assets including bank deposits The study revealed that the
household sectors preferences between bank deposits and lending to private
corporate sector tended to be in favour of the latter and against the former.

Nalini (2011) studied on the impact of mutual funds on the deposit
mobilisation of commercial banks examined the awareness level and adoption level
of mutual funds among household investors in Thiruvananthapuram district. She
found that the advent of mutual funds has brought in expected changes in the growth
35

of bank deposits and their ownership pattern, but the changes were not of a
significant magnitude.

CHAPTER 3
RESEARCH METHODOLOGY

Research Methodology is a way to systematically solve the research
problem. It may be understand as a science of studying as research is done
scientifically in this we study various steps that are generally adopted by a
researcher in studying the research problem along with logic behind them.

RESEARCH DESIGN
A Research design is a system of conditions for collection and analysis
of data which aims to provide the precise information. Research is a systematic way
of exploring, analysing and conceptualizing social life in order to extend and verify
knowledge to see this research helps to construct a theory. This method is simply a
systematically planned way of doing things to achieve the desired result.
A Research design of this study is analytical in nature. It is an arrangement of
condition of collection and analysis of data in a proper that aims to combine
relevance to the research purpose with economy in procedure.

DATA DESIGN
Collection of data is the process remuneration together with the proper
record of research. Those data which are already been passed through the statistical
process. In this study is based on the secondary sources. Secondary data is the data
that have been already collected by and readily available from other sources. Such
36

data are cheaper and more quickly obtainable than the primary data and also may be
available when primary data cannot be obtained at all.
It is economical.
It saves efforts and expenses
It helps to make primary data collection more specific since with the help of
secondary data, we are able to make out what are the gaps and deficiencies
and what additional information needs to be collected
It helps to improve the understanding of the problem
It provides a basis for comparison for the data that is collected by the
researcher
The secondary data for the study is mainly collected through
Annual reports
Circulars
Internet
TOOLS USED FOR ANALYSIS

RETURN OF INVESTMENT:
A performance measure used to evaluate the efficiency of an investment
or compare the efficiency of a number of different investments. To calculate ROI,
the return on an investment is divided by the cost of the investment; the result is
expressed as a percentage or a ratio.
Return on investment is a popular metric because it is versatile and simple to use. If
an investment does not have a positive ROI or if there are alternative investment
opportunities with a higher ROI, the investment should not be undertaken.

EBIT
Return of Investment = __________________
Capital Employed

PERCENTAGE ANALYSIS
37

Percentage analysis consists of reducing a series of related amounts to a
series of percentages of a given base. Two approaches are often used. The first,
called horizontal analysis, indicates the proportionate change in financial statement
items over a period of time, such analysis is most helpful in evaluating trends.
Vertical analysis (common-size analysis) is proportional expression of each item on
the financial statements in a given period to a base amount. It analyzes the
composition of each of the financial statements from different years
(a) To detect trends not evident from the comparison of absolute amounts and
(b) To make intercompany comparisons of different sized enterprises.

100
PERCENTAGE = __________________ CURRENT
YEAR
BASE YEAR

RATIO ANALYSIS:
Ratio analysis is the process of determining and presenting the
relationship of items and group of items in the statements. According to Batty J.
Management Accounting Ratio can assist management in its basic functions of
forecasting, planning coordination, control and communication.
It is helpful to know about the liquidity, solvency, capital structure and
profitability of an organization. It is helpful tool to aid in applying judgement,
otherwise complex situations.
According to Accountants Handbook by Wixon, Kell and Bedford, a ratio is an
expression of the quantitative relationship between two numbers. 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.
38

CURRENT RATIO
This ratio explains the relationship between current assets and current
liabilities of a business.

Current Assets
Current Ratio = __________________
Current Liabilities

Current Assets:-Current assets includes those assets which can be converted into
cash with in a years time.
Current Assets = Cash in Hand + Cash at Bank + B/R + Short Term Investment +
Debtors (Debtors Provision) + Stock(Stock of Finished Goods + Stock of Raw
Material + Work in Progress) + Prepaid Expenses.

Current Liabilities: - Current liabilities include those liabilities which are repayable
in a years time.
Current Liabilities = Bank Overdraft + B/P + Creditors + Provision for Taxation +
Proposed Dividend + Unclaimed Dividends + Outstanding Expenses + Loans
Payable within a Year.

Significance:
According to accounting principles, a current ratio of 2:1 is supposed to be an
ideal ratio.
It means that current assets of a business should, at least, be twice of its
current liabilities. The higher ratio indicates the better liquidity position; the firm
will be able to pay its current liabilities more easily. If the ratio is less than 2:1, it
indicates lack of liquidity and shortage of working capital.The biggest drawback of
the current ratio is that it is susceptible to window dressing. This ratio can be
improved by an equal decrease in both current assets and current liabilities.

39

RATIO OF CURRENT LIABILITIES TO PROPRIETORS
FUND:
This ratio explains the relationship between current liabilities and
shareholders fund of a business.

Current
Liabilities
Ratio of Current Liabilities to Proprietors fund =
__________________

Shareholders fund

Significance:
This ratio should be 33% or more than that. In other words, the proportion of
shareholders funds to total funds should be 33% or more. A higher proprietary ratio
is generally treated an indicator of sound financial position from long-term point of
view, because it means that the firm is less dependent on external sources of finance.
If the ratio is low it indicates that long-term loans are less secured and they face the
risk of losing their money.

INTEREST COVERAGE RATIO
This ratio is also termed as Debt Service Ratio. This ratio is calculated as
follows:

EBIT
Interest Coverage Ratio =
______________________________________
Fixed Interest Charges

Significance:
40

This ratio indicates how many times the interest charges are covered by the
profits available to pay interest charges. This ratio measures the margin of safety for
long-term lenders. This higher the ratio, more secure the lenders is in respect of
payment of interest regularly.
If profit just equals interest, it is an unsafe position for the lender as well as for the
company also, as nothing will be left for shareholders. An interest coverage ratio of
6 or 7 times is considered appropriate.

DEBT EQUITY RATIO
This ratio expresses the relationship between outsiders fund and
shareholders fund.

Outsiders fund
Debt Equity Ratio =
________________________________________
Shareholders fund

Outsiders Funds: - These refer to long term liabilities which mature after one year.
These include Debentures, Mortgage Loan, Bank Loan, and Loan from Financial
institutions and Public Deposits etc.
Shareholders Funds: - These include Equity Share Capital, Preference Share
Capital, Share Premium, General Reserve, Capital Reserve, Other Reserve and
Credit Balance of Profit & Loss Account.

Significance:
This Ratio is calculated to assess the ability of the firm to meet its long term
liabilities. Generally, debt equity ratio of is considered safe. If the debt equity ratio is
more than that, it shows a rather risky financial position from the long-term point of
view, as it indicates that more and more funds invested in the business are provided
by long-term lenders. The lower this ratio, the better it is for long-term lenders
because they are more secure in that case. Lower than 2:1 debt equity ratio provides
sufficient protection to long-term lenders.
41

WORKING CAPITAL RATIO
This ratio shows the difference between the current assets and current
liabilities.

Working Capital Ratio = Current Assets Current
Liabilities

Significance:
This ratio is of particular importance in non-manufacturing concerns where
current assets play a major role in generating sales. It shows the number of times
working capital has been rotated in producing sales.A high working capital turnover
ratio shows efficient use of working capital and quick turnover of current assets like
stock and debtors. A low working capital turnover ratio indicates under-utilisation of
working capital.

CASH FLOW STATEMENT
The cash flow statement is a financial statement that shows how changes in
balance sheet accounts and income affect cash and cash equivalents, and breaks the
analysis down to operating, investing, and financing activities. Essentially, the cash
flow statement is concerned with the flow of cash in and cash out of the business.
The statement captures both the current operating results and the
accompanying changes in the balance sheet. As an analytical tool, the statement of
cash flows is useful in determining the short-term viability of a company,
particularly its ability to pay bills.
The cash flow statement is distinct from the income statement and balance
sheet because it does not include the amount of future incoming and outgoing cash
that has been recorded on credit. Therefore, cash is not the same as net income,
which, on the income statement and balance sheet, includes cash sales and sales
42

made on credit. The money coming into the business is called cash inflow, and
money going out from the business is called cash outflow.

CORRELATION
The correlation is one of the most common and most useful statistics. A
correlation is a single number that describes the degree of relationship between two
variables.

43

CHAPTER 4
DATA REDUCTION ,PRESENTATION& ANALYSIS

4.1 RETURN OF INVESTMENT
A performance measure used to evaluate the efficiency of an
investment or compare the efficiency of a number of different investments. Return
on investment is a popular metric because it is versatile and simple to use. If an
investment does not have a positive ROI or if there are alternative investment
opportunities with a higher ROI, the investment should not be undertaken.

EBIT
Return of Investment = __________________
Capital Employed

TABLE 4.1.1
RETURN ON INVESTMENT

(RS.IN CRORES)
YEARS EBIT CAPITAL
EMLOYED
ROI
2007 0.18 1.66 0.11
2008 0.25 1.52 0.16
2009 0.27 1.57 0.17
44

2010 0.17 2.17 0.08
2011 0.21 3.52 0.06
Source: Secondary data

INTERPRETATION:
The above table shows that the performance of return on investment
is based on deposits. The return on investment has been increased up to 2009. In
2010, the earning before in tax started to decrease, so the return on investment also
started to decrease in the year. The highest rate of return on investment is 0.17
Crores in the year 2009.

CHART 4.1.1
RETURN ON INVESTMENT

0.11
0.16
0.17
0.08
0.06
0
0.02
0.04
0.06
0.08
0.1
0.12
0.14
0.16
0.18
2007 2008 2009 2010 2011
R
s
.

I
n

C
r
o
r
e
s

Years
45

4.2 PERCENTAGE ANALYSIS
Percentage analysis consists of reducing a series of related amounts to a
series of percentages of a given base. Two approaches are often used. The first,
called horizontal analysis, indicates the proportionate change in financial statement
items over a period of time, such analysis is most helpful in evaluating trends.
Vertical analysis (common-size analysis) is proportional expression of each item on
the financial statements in a given period to a base amount. It analyzes the
composition of each of the financial statements from different years
(a) To detect trends not evident from the comparison of absolute amounts and
(b) To make intercompany comparisons of different sized enterprises.

100
PERCENTAGE = __________________ CURRENT YEAR
BASE YEAR

TABLE 4.2.1
DEMAND DEPOSITS
YEARS AMOUNTS (Rs) PERCENTAGE
2007 10,806,889 100
2008 11,192,915 103.57
2009 11,570,171 107.06
2010 17,064,834 157.91
46

2011 18,560,921 171.75


INTERPRETATION:
The percentage analysis about demand deposits will be presented in the
above table. The year 2007 was taken as the base year for find out the percentage of
deposits increased for remaining years (i.e., 2008 to 2011). The percentage of
deposits increased compare to previous years because of increasing customers year
by year.

CHART 4.2.1
DEMAND DEPOSITS

100
103.57
107.06
157.91
171.75
0
20
40
60
80
100
120
140
160
180
200
2007 2008 2009 2010 2011
P
e
r
c
e
n
t
a
g
e

Years
47

TABLE 4.2.2
SAVINGS BANK DEPOSITS
2007 21,998,110 100
2008 26,483,683 120.39
2009 28,994,262 131.80
2010 38,136,801 173.36
2011 49,465,383 224.86


48

CHAPTER 5
DATA INTERPRETATION

The above table shows the performance of savings bank deposits for the last five
years with the help of percentage analysis. The year 2007 was taken as the base year
for find out the percentage of deposits increased for remaining years (i.e., 2008 to
2011). The percentage of deposits increased compare to previous years because of
increasing customers year by year.

CHART 5.1
SAVINGS BANK DEPOSITS

TABLE 5.2
TERM DEPOSITS
100
120.39
131.8
173.36
224.86
0
50
100
150
200
250
2007 2008 2009 2010 2011
P
e
r
c
e
n
t
a
g
e

Years
49

2007 107,569,355 100
2008 132,485,325 123.16
2009 162,768,420 151.31
2010 182,104,853 169.29
2011 205,338,159 190.89

INTERPRETATION:
The above table shows the performance of term deposits for the
last five years with the help of percentage analysis. The year 2007 was taken as the
base year for find out the percentage of deposits increased for remaining years (i.e.,
2008 to 2011). The percentage of deposits increased compare to previous years
because of increasing customers year by year.

CHART 5.3
TERM DEPOSITS

100
123.16
151.31
169.29
190.89
0
50
100
150
200
250
2007 2008 2009 2010 2011
P
e
r
c
e
n
t
a
g
e

Years
50

5.3 RATIO ANALYSIS
Ratio analysis is the process of determining and presenting the
relationship of items and group of items in the statements. According to Batty J.
Management Accounting Ratio can assist management in its basic functions of
forecasting, planning coordination, control and communication.

5.3.1 CURRENT RATIO

Current Assets
Current Ratio = __________________
Current Liabilities

TABLE
5.3.1 CURRENT RATIO

(RS.IN CRORES)
Years Current Assets Current Liabilities Current Ratio
2007 10.71 4.22 2.53
2008 12.83 4.71 2.72
2009 13.27 5.01 2.65
2010 16.24 6.99 2.32
2011 19.33 8.73 2.21

51


INTERPRETATION:
The current ratio of the company this shows that the current ratio is
more than the standard level 2:1 so they should maintain this for future
CHART 5.3.1
CURRENT RATIO

5.3.2 RATIO OF CURRENT LIABILITIES TO PROPRIETORS
FUND:
This ratio explains the relationship between current liabilities and
shareholders fund of a business.

2.53
2.72
2.65
2.32
2.21
0
0.5
1
1.5
2
2.5
3
2007 2008 2009 2010 2011
R
s
.
I
n

C
r
o
r
e
s

Years
52

Current Liabilities
Ratio of Current Liabilities to Proprietors fund = __________________
Shareholders fund

TABLE 4.3.2
RATIO OF CURRENT LIABILITIES TO PROPRIETORS FUND

(RS.IN CRORES)
Years Shareholders fund Current Liabilities Ratio of Current
Liabilities to
Proprietors fund
2007 1.24 4.22 3.40
2008 1.38 4.71 3.41
2009 1.57 5.01 3.19
2010 1.83 6.99 3.82
2011 2.43 8.73 3.59


INTERPRETATION:
The above table reveals that ratio of current liabilities to
Proprietors fund does not have same level of ratio. In 2008, the ratio has been
increased when compare to the previous year. But in 2009, the ratio has decreased.
Then again the ratio has started to increase in 2010 and decrease in 2011.

CHART 5.3.2
53

RATIO OF CURRENT LIABLITIES TO PROPRIETORS FUND

5.3.3 INTEREST COVERAGE RATIO
This ratio is also termed as Debt Service Ratio. This ratio is calculated
as follows:

EBIT
Interest Coverage Ratio = ______________________________________
Fixed Interest Charges

3.4
3.41
3.19
3.82
3.59
2.8
2.9
3
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
3.9
2007 2008 2009 2010 2011
R
s
.

I
n

C
r
o
r
e
s

Years
54

TABLE 5.3.3

(RS.IN CRORES)
Years EBIT Fixed Interest
Charges
Interest Coverage
Ratio
2007 0.18 0.83 0.22
2008 0.26 1.10 0.24
2009 0.28 1.44 0.19
2010 0.17 1.71 0.10
2011 0.21 1.76 0.12


INTERPRETATION:
The above table reveals that ratio of current liabilities to
Proprietors fund does not have same level of ratio. In 2008, the ratio has been
increased when compare to the previous year. But in 2009, the ratio has decreased.
Then again the ratio has started to increase in 2010 and decrease in 2011.

CHART 5.3.3

55

5.3.4 DEBT EQUITY RATIO
This ratio expresses the relationship between outsiders fund and
shareholders fund.

Outsiders fund
Debt Equity Ratio = ________________________________________
Shareholders fund

Outsiders Funds: - These refer to long term liabilities which mature after one year.
These include Debentures, Mortgage Loan, Bank Loan, and Loan from Financial
institutions and Public Deposits etc.
Shareholders Funds: - These include Equity Share Capital, Preference Share
Capital, Share Premium, General Reserve, Capital Reserve, Other Reserve and
Credit Balance of Profit & Loss Account.

0.22
0.24
0.19
0.1
0.12
0
0.05
0.1
0.15
0.2
0.25
0.3
2007 2008 2009 2010 2011
R
s
.

I
n

C
r
o
r
e
s

Years
56

TABLE 5.3.4
DEBT EQUITY RATIO

(RS.IN CRORES)
Years Outsiders fund Shareholders
fund
Debt Equity
Ratio
2007 0.94 1.24 0.76
2008 0.94 1.38 0.68
2009 0.96 1.57 0.61
2010 1.47 1.83 0.80
2011 1.93 2.43 0.79

INTERPRETATION:
The above table reveals that interest coverage ratio during the year 2007
was 0.76 and it is gradually decreasing to 0.68 and 0.61 in the next years. But in
2010, the ratio is increasing to 0.80. And again the ratio is decreasing to 0.79.

CHART 5.3.4
DEBT EQUITY RATIO

57

5.3.5 WORKING CAPITAL RATIO
This ratio shows the difference between the current assets and current
liabilities.

Working Capital Ratio = Current Assets Current Liabilities

TABLE 5.3.5
WORKING CAPITAL

(RS.IN CRORES)
Years Current Assets Current Liabilities Working Capital
2007 10.71 4.22 6.49
0.76
0.68
0.61
0.8
0.79
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
2007 2008 2009 2010 2011
R
s
.

I
n

C
r
o
r
e
s

Years
58

2008 12.83 4.71 8.12
2009 13.27 5.01 8.26
2010 16.24 6.99 9.25
2011 19.33 8.73 10.6


INTERPRETATION:
The above table reveals that working capital has been increasing every
year. It shows this ratio have more value in the future.

CHART 5.3.5
WORKING CAPITAL

59

5.4 CASH FLOW STATEMENT

TABLE 5.4.1
CASH FLOW STATEMENT FOR THE YEAR ENDED 31
st

MARCH 2007

Particulars

Rs
March 31,
2007
Rs
6.49
8.12
8.26
9.25
10.6
0
2
4
6
8
10
12
2007 2008 2009 2010 2011
R
s
.

I
n

C
r
o
r
e
s

Years
60

A.CASH FLOW FROM OPERATING ACTIVITIES

Net profit before tax and extra ordinary items
Adjustments for :
Depreciation on Fixed Assets including
Least Adjustment charges
Provisions and Contingencies
Amortisation of premium on Held to Maturity Investments
Rights Issue Expenses
Operating profit before working capital changes Adjustment
for :

Advances & Other Assets
Investments
Deposits, Borrowings & Other Liabilities

Cash generated from operations
Direct taxes paid
Net cash flow from operating activities (A)

166,081
837,800
107,220
0

-16,552,492
4,509,462
9,484,091

2,730,376

1,111,101
3,841,477

-2,558,939
1,282,538
1,212,431
70,107

INTERPRETATION:
The above table shows the performance of cash inflow and outflow of
March 31
st
2007, the total amount of deposits was 9,484,091. It evaluates the cash
inflow and outflow is based on deposits.
TABLE 5.4.2
st

MARCH 2008

61

Particulars

Rs
March 31,
2008

Rs


Adjustments for :
for :

Investments

Direct taxes paid

174,558
577,000
103,505
0

-12,493,493
-8,994,232
27,882,669

3,435,443

855,063
4,290,506

6,394,944
10,685,450
1,662,277
9,023,173

INTERPREATION:
The above table shows the performance of cash inflow and outflow
of March 31
st
2008, the amount of deposits has been increased when compare to
March 31
st
2007.
TABLE 4.4.3
62

st

MARCH 2009

Particulars

Rs
March 31,
2009

Rs



Adjustments for :
for :

Investments

Direct taxes paid

198,281
805,000
119,484
0

-9,192,728
-26,504,345
31,663,643

4,061,484

1,122,765
5,184,249

-4,033,430
1,150,819
1,681,016
-530,197

INTERPRETATION:
63

of March31st 2009, the amount of deposits has been increased when compare to
March 31
st
2008.
TABLE 5.4.4
st

MARCH 2010

Particulars

Rs
March 31,
2010

Rs


Adjustments for :
for :

Investments

Direct taxes paid

221,451
710,830
288,649
0

-26,628,891
-10,412,005
37,932,753

1,930,483

1,220,930
3,151,413

891,857
4,043,270
1,025,830
3,017,440
64


INTERPRETATION:
of March31st 2010, the amount of deposits has been increased when compare to
March 31
st
2009.
TABLE 5.4.5
st
MARCH 2011

Particulars

Rs
March 31,
2011

Rs


Adjustments for :
for :
Investments
Direct taxes paid

229,918
1,203,520
71,445
0

-27,235,702
-15,603,686
34,360,220

2,354,458

1,504,883
3,859,341

8,479,168
-4,619,827
1,274,120
-5,893,947

65


INTERPRETATION:
of March31st 2011, the amount of deposits has been decreased when compare to
March 31
st
2010.

TABLE 5.4.6
NET CASH FLOW FROM OPERATING ACTIVITIES
(RS.IN
LAKHS)
Years Net Operating activities
2007 0.7
2008 90.23
2009 -5.3
2010 30.17
2011 -58.93

INTERPRETATION:
The above table shows the deposits are one of the main factors of net
cash flow from operating activities. The cash inflow is based on the deposits. If the
amount of deposits increased, the net cash flow also increased.

CHART 5.4.1
NET OPERATING ACTIVITIES

66

5.5 CORRELATION
The correlation is one of the most common and most useful statistics. A
correlation is a single number that describes the degree of relationship between two
variables.

x x y y
x x
y y

TABLE 5.5.1
CORRELATION:

(RS.CRORES)
Years Deposits(x) Loans(y)
2007 14 10
2008 17 11
2009 20 12
0.7
90.23
-5.3
30.17
-58.93
-80
-60
-40
-20
0
20
40
60
80
100
2007 2008 2009 2010 2011
R
s
.

I
n

L
a
k
h
s

Years
67

2010 24 14
2011 27 17


RESULT:
r = 0.98

INTERPRETATION:
The above calculation shows the positive correlation. So there is
significant relationship between two variables.

68

CHAPTER 6

SUMMRY , CONCLUSION ,FINDINGS AND SUGGESTIONS

6.1 FINDINGS

The deposits of Indian bank have been increasing every year

The highest net cash flow from operating activities is 90.23 lakhs in the year
2008 and the lowest net cash flow from operating activities -58.93 lakhs in
the year 2011

The percentage analysis helps to identify the percentage of demand deposits,
savings bank deposits and term deposits have been increasing every year

The percentage of savings bank deposits has been doubled in the year 2011

The current ratio of the bank from the year, 2007-2011 is to be above 2:1and
it is satisfactory

The highest ratio of current liabilities to proprietors fund is 3.82 crores in
the year 2010

The lowest interest coverage ratio is 0.10 crores in the year 2010

The highest debt equity ratio is 0.80 crores in the year 2010

The working capital of the bank have been increasing every year, so the bank
shall use the capital effectively

The result of correlation shows positive correlation.

69

6.2 SUGGESTIONS

The deposit schemes are showing an unconstructive sign. So the bank keeps
in control for the future period

The percentage analysis are essentially concerned with the identification of
significant accounting data relationships, which give the decision-maker
insights into the financial performance of a company

Ratio analysis has a major significance in analysing the financial
performance of a company over a period of time.

The bank shall improve their level of cash and bank balances because it is
playing a vital role for additional improvement

The result of correlation shows positive correlation. So there is a good
relationship between deposits and loans in the bank

6.3 CONCLUSION

The study is made on the topic deposit schemes by using financial tools & with five
years data at Karnataka bank Ltd. This tools used for the study helped in
determining the position of the concern consequently for the past five years. The
analysis of financial statements is a process of evaluating the relationship between
component parts of financial statements to obtain a better understanding of the
firms position and performance. The banks overall financial position is
satisfactory. The bank deposit schemes have been increasing year by year, so the
bank gets more growth in every year.

70

6.4 BIBLIOGRAPHY

Web sites

www.indianbank.com
www.wikipedia.org
www.google.com

Books referred

Basic Financial Management MY Khan & PK Jain
Financial Management Prasanna Chandra
Financial Accounting Jon Ben Hoyle & CJ Skender

Annual reports

Annual report 2006 2007

71

APPENDIX
INDIAN BANK (P) LTD

MARCH-11 MARCH-10 MARCH-09 MARCH-08 MARCH-07

CAPITAL AND
LIABILITIES
Capital
Reserves and
Surplus
Deposits
Borrowings
Other Liabilities
and Provision

1,882,004

22,408,866
273,364,463
10,863,339

8,411,403

1,339,861

16,987,632
237,306,488
3,416,403

11,301,159

1,215,847

14,454,423
203,332,853
39,728

9,535,209

1,213,533

12,582,500
170,161,923
1,421,955

8,018,267

1,213,533

11,172,744
140,374,354
4,207,383

5,257,148
TOTAL 316,930,075 316,930,075 270,351,543 228,578,060 193,398,178 162,225,1 316,930,075 270,351,543 228,578,060 193,398,178 162,225,16 270,351,543 228,578,060 193,398,178 162,225,162

ASSETS
Cash & balances
with RBI
Balances with
Banks and Money
at Call & Short
Notice
Investments
Advances
Fixed Assets
Other Assets

19,398,055

462,519
115,063,393
173,480,709
1,455,268
7,070,131

17,430,979

624,503
99,920,463
144,356,833
1,480,758
6,538,007

13,649,830

957,539
89,614,883
118,100,450
1,384,876
4,870,482

14,822,059

5,020,429
59,637,087
108,419,746
1,197,731
4,301,126

8,268,237

3,346,911
50,481,644
95,526,799
1,068,216
3,533,355
TOTAL 316,930,075 270,351,543 228,578,060 193,398,178 162,225,162
72

Contingent
Liabilities
90,358,016
9,628,992
101,192,384
10,322,427
100,427,447
9,289,287
69,590,090
7,646,757
34,279,000
6,728,849

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