A

Project Repot

On

Financial Performance of

AJMS Bank Ltd.

At

Amreli

Under the Guidance of (Bank)

Mr.B.S.Kothiya

Under the Guidance of (College)

Dr.Vishal Patidar

Institution

Submitted to

Gujarat Technological University - Ahmedabad

Prepared By:

Dhone Paresh Y

Desai Kartik A

M.B.A. Sem. II, Seat No B-013991

Seat No B-013941

Company Certificate

K. K. Parekh Institute of Management Student – Amreli

Dr. Jivraj Mehta Vidhya Vihar Campus Lathi road – Amreli

Ph: (02792) 223509 fax: (02792) 223509

E-mail: kkpimsa@yahoo.com

Web: kkpimsamreli.com

DIRECTOR’S RECOMMENDATION

TO,

The Registrar

Gujarat Technological University

Ahmedabad

Subject: MBA Summer Training Project Report

Respected Sir,

I am recommending the Summer Training Project entitled-Financial Performance

prepared by Desai Kartik A & Dhone Paresh Y at Amreli Jilla Madhyastha

Sahakari Bank Ltd as the partial fulfillment of the University requirement for the

award of MBA degree of Gujarat Technology University –Ahmedabad.

Date: - Thanking You,

Place: - Amreli Yours Faithfully

Director

S T U D E N T D E C L A R A T I O N

We the undersigned student Desai Kartik A & Dhone Paresh Y of K. K. Parekh

Institute of Management Studies – Amreli M.B.A. II Semester, hereby declare

that, the project on Financial Performance of Amreli Jilla Madhyastha Sahakari

Bank Ltd is our own work.

In the partial fulfillment of Master Degree of Business Administration, we had

undergone project work at Amreli Jilla Madhyastha Sahakari Bank Ltd under the

guidance of Dr.Vishal Patidar K. K. Parekh Institute of Management Studies –

Amreli and submitted to Gujarat Technological University, Ahmedabad.

This project work is our original work and has not been submitted to any where

earlier.

PREFACE

We know the training is for the development of the knowledge in particular field. It

can never be possible to make a mark in today‘s competitive era only with

theoretical knowledge is not enough. When all sectors are developing of global

level, practical knowledge of administration & management of business is very

important.

Banks are the blood of the nation‘s economy without them one can‘t imagine

economy moving. Therefore banks should be operated very efficient co-operative

banks is a small part of whole banking system in India, but bank are very important

not only economical point of view but also from social point of view as it is more

concerned about common people‘s development.

It must require a practice. Practice makes man perfect, theory makes him

thoughtful. So, theoretical knowledge is only a half way in study network, with a

view to expand the boundaries of thinking. We have undergone 2nd

semester

training at Amreli District Co-Operative Bank Ltd. We have made a deliberate to

collect the requires information and fulfill training objective.

We hope that institution will appreciate this project.

ACKNOWLEDGEMENT

To acknowledgement is very great way to show your gratitude the person who has

contributed in your success in one or other way.

We are great full of Mr..B.S.Kothiya (general manager), for providing us an

opportunity to carry out our training of Amreli district co-operative bank ltd.

At the very outset of the training we deem it is our duty to express our sincere

thanks to all who give continuous guidance and support during the training period.

We would also like to thank to Mr. A.B.Gondaliya, Mr. P.K.Khunt, and Mr.

D.H.Ladola who have spared sometime and helped us to carry on our project work

successfully at the best level.

We also grateful to Dr. Vishal Patidar director of K.K.P.I.M.S, amreli to show us

the right path towards the project work.

Last but not least our parents, which is always behind us in our work for support

any time.

Executive Summary

We have seen that ―how banking activities runs?‖ and working of employees, we

also seen that every employees work in chain. They follow communication system

in bank as up-down and down-up. We have known from this training manager

behavior is politely towards their employees & also to customer. Staff of the bank

is co-operative, provide information and help to trainee who is eager getting the

training and give awareness to customer about their services.

We are learn from the bank‘s staff, How to handle the customer and their

problems? Staff‘s behaviors with the customer are co-operative. We analyze

internal departments have mutual understanding & helpful. In the bank internal

audit system which obey RBI guidelines.

INDEX

TABLE OF CONTENTS

NO.

PARTICULARS

PAGE NO.

1.

INDUSTRY PROFILE

1

1.1 Banking Sector in India 2

1.2 Introduction 3

1.3 Definition of co-operative bank 4

1.4 Characteristic of co-operative bank 5

1.5 Types of co-operative bank 7

1.6 Importance of co-operative 8

2. COMPANY PROFILE 9

2.1 Introduction 10

2.2 Brief History 11

2.3 Mission & Goal 12

2.4 Activities of the Bank - Banking activities

- Social Activities

13

2.5 Speciality of Bank 21

2.6 Special Achievement 22

2.7 Existing Board of Director 23

3. STUDY OF VARIOUS

DEPARTMENTS

24

3.1 Human Resource Department 25

3.2 Financial Department 28

3.3 Service Department 32

4. RESEARCH METHODOLOGY

35

4.1 Introduction 36

4.2 Define the Problem 37

4.3 Objectives of The Study 37

4.4 Rational of The Study 38

4.5 Limitation of The Study 38

4.6 Variable & Hypothesis Formulation 39

4.7 Data Collection 40

4.8 Data Analysis & Interpretation 41

Ratio Analysis

Trend Analysis

Chi-Square Test

4.9 Findings 59

4.10 Suggestions 60

4.11 Conclusion 61

4.12 Bibliography 62

1

1.1 BANKING SECTOR IN INDIA

Without a sound and effective banking system in India it cannot have a healthy

economy. The banking system of India should not only be hassle free but it should

be able to meet new challenges posed by the technology and any other external and

internal factors.

For the past three decades India‘s banking system has several outstanding

achievements to its credit. The most striking is its extensive reach. It is no longer

confined to only metropolitans or cosmopolitans in India. In fact, Indian banking

system has reached even to the remote corners of the country. This is one of the

main reason of India‘s growth process.

The government‘s regular policy for Indian bank since 1969 has paid rich

dividends with the nationalization of 14 major private banks of India.

Not long ago, an account holder had to wait for hours at the bank counters for

getting a draft or for withdrawing his own money. Today, customer has a choice.

Gone are days when the most efficient bank transferred money from one branch to

other in two days. Now it is simple as instant messaging or dial a pizza. Money has

become the order of the day.

The first bank in India, though conservative, was established in 1786. From 1786

till today, the journey of Indian Banking System can be segregated into three

distinct phases. They are as mentioned below:

Early phase from 1786 to 1969 of Indian Banks

Nationalization of Indian Banks and up to 1991 prior to Indian banking sector

Reforms.

New phase of Indian Banking System with the advent of Indian Financial &

Banking Sector Reforms after 1991.

2

1.2 INTRODUCTION

The Co-operative banks have a history of almost 100 years. The Co-operative

banks are an important constituent of the Indian Financial System, judging by the

role assigned to them, the expectations they are supposed to fulfill, their number,

and the number of offices they operate. The co-operative movement originated in

the West, but the importance that such banks have assumed in India is rarely

paralleled anywhere else in the world. Their role in rural financing continues to be

important even today, and their business in the urban areas also has increased

phenomenally in recent years mainly due to the sharp increase in the number of

primary co-operative banks.

While the co-operative banks in rural areas mainly finance agricultural based

activities including farming, cattle, milk, hatchery, personal finance etc. along with

some small scale industries and self-employment driven activities, the co-operative

banks in urban areas mainly finance various categories of people for self-

employment, industries, small scale units, home finance, consumer finance,

personal finance, etc.

Some of the co-operative banks are quite forward looking and have developed

sufficient core competencies to challenge state and private sector banks.

According to NAFCUB the total deposits & lending‘s of Co-operative Banks is

much more than Old Private Sector Banks & also the New Private Sector Banks.

This exponential growth of Co-operative Banks is attributed mainly to their much

better local reach, personal interaction with customers, and their ability to catch the

nerve of the local clientele.

3

Though registered under the Co-operative Societies Act of the Respective States

(where formed originally) the banking related activities of the co-operative banks

are also regulated by the Reserve Bank of India. They are governed by the Banking

Regulations Act 1949 and Banking Laws (Co-operative Societies) Act, 1965

1.3 DEFINITION OF CO-OPERETIVE BANK

A co-operative bank is a financial entity which belongs to its members, who are at

the same time the owners and the customers of their bank. Co-operative banks are

often created by persons belonging to the same local or professional community or

sharing a common interest. Co-operative banks generally provide their members

with a wide range of banking and financial services (loans, deposits, banking

accounts…). Co-operative banks differ from stockholder banks by their

organization, their goals, their values and their governance.

-ICBA, International Cooperative Banks Association

A cooperative is a legal entity owned and democratically controlled by its

members. Members often have a close association with the enterprise as producers

or consumers of its products or services, or as its employees.

-Robert Owen (1771-1858)

Member-owned organization, similar to a mutual savings and loan association that

makes loans and pays interest on pooled deposits

-Business Definition

4

1.4 CHARACTERISTICS OF CO-OPERATIVE BANKS

1. Membership

Members of co-operative banks are not simply shareholders. Membership aim sat

establishing a long term relationship with the co-operative bank and generates

rights, particularly voting rights.

In co-operatives, ―ownership‖ rights (e.g. the right to vote and to speak in the

General Assembly, the election of directors etc.) emanate only from the acquisition

of membership. It means that the rights are vested in the membership of the

individual, not in the share. Furthermore, the members of cooperatives do not only

formulate different objectives, but also have a strong involvement in their

cooperative.

Indeed, members are generally more involved in the activities of their cooperative

and therefore, they are likely to have a higher degree of understanding of the

cooperative‘s business than would be the case for a shareholder of a public limited

company. The Members, as investors, do not expect high profits, but they want that

the co-operative business conduct is sound and it works efficient and profitable.

2. Character of investment

For a wide majority of co-operative banks, the shares of members can be redeemed

by the co-operative only at nominal value. Members usually receive limited

compensation on capital subscribed as a condition of membership Co-operatives

may pay a dividend to their members, depending on the performance on the entity.

But the distribution as dividend is constrained by the fact that at least a certain part

of the profits is used to set up reserves to ensure the operations and the financial

situation of the co-operative bank in order to pursue their objective targets.

5

3. Democratic member participation: The “one man- one vote”

principle

This ―one man- one vote‖ principle offers optimal protection for the democratic

participation of all members of a co-operative. It ensures a fair representation of

the interests of all individuals, who are members in a cooperative. The ―one man-

one vote‖ principle provides equal rights to all members regardless of the amount

of shares they hold, and guarantees each member the same influence on decisions

and thereby the supply of the members‘ demands to the greatest extent.

4. Ownership structure

The ―one man- one vote‖ principle is complemented by special restrictions

concerning the ownership structure of cooperatives. For members of a co-operative

bank, there are limitations regarding the numbers of shares purchasable. They are

not free to acquire an uncapped number of shares. Consequently, usually members

of co-operatives contribute equitably to the capital of their cooperative bank. This

set-up helps avoiding an ―unbalanced‖ ownership structure where a single

shareholder could hold vast numbers of shares. Such restrictions ensure the proper

functioning of a cooperative and prevent to undermine the notion of democratic

participation of all members.

6

1.5 TYPES OF CO-OPERATIVE BANKS

There are three types of co-operative banks operating in our country. They are

primary credit societies, central co-operative banks and state co-operative banks.

These banks are organized at three levels, village or town level, district level and

state level.

(i) Primary Credit Societies:

These are formed at the village or town level with borrower and non-borrower

members residing in one locality. The operations of each society are restricted to a

small area so that the members know each other and are able to watch over the

activities of all members to prevent frauds.

(ii) Central Co-operative Banks:

These banks operate at the district level having some of the primary credit societies

belonging to the same district as their members. These banks provide loans to their

members (i.e., primary credit societies) and function as a link between the primary

credit societies and state co-operative banks.

(iii) State Co-operative Banks:

These are the apex (highest level) co-operative banks in all the states of the

country. They mobilize funds and help in its proper channelization among various

sectors. The money reaches the individual borrowers from the state co-operative

banks through the central co-operative banks and the primary credit societies

7

1.6 IMPORTANCE OF CO-OPERATIVE BANK

It is a superior institutional arrangement for financing operations. Co-

operative banks after loans to farmer borrowers. So that the farmers might

utilize the amount for increasing agricultural production and rising their

standard of living.

Generally speaking people are conservative when they can‘t translate their

plans into action due to their inability regarding financial handicaps. Co-

operative banks make persons dynamic by offering them the necessary

financial assistance.

A strong and stable co-operative bank in a rural area faces a large number of

borrowers from the clutches of money lender and constrains the latter to

reduce their rate of interest if they want to continue in business consequently

the prohibit margin of money lenders has been greatly reduced.

Co-operative banks not only stimulate several economic activities bit also

help on bringing about rural reorientation by changing the thinking and

behavior of the people for their own advantage and for the benefit of the

nation.

8

9

2.1 INTRODUCTION

The co-operative bank of Amreli Jilla Madhyastha Sahakari Bank Ltd is

established on 23-08-1950 under the strong and effective leadership of one of the

National Co-Operative Honor Shri Dwarkadasbhai Patel with the intention of

survive of common man.

According to banking regulation act, 1949, there must be a specific name of the

bank. Because of, they can easily deal with the co-operative society.

BANK OVERVIEW

Name of the bank: Amreli Jilla Madhyastha Sahakari Bank Ltd

Date of Established: 23-08-1950

Head office : Amreli Jilla Madhyastha Sahakari Bank Ltd,

Bhojalrams Bhavan,

Raj Mahel road,

Amreli-365601

Saurashtra (Gujarat)

Nature of business : Banking Service

Phone number : 02792-222601, 221938

10

2.2 BRIEF HISTORY

Co-operative sector has a special importance in the development of Gujarat state.

The Co-operative activities had played a role of guide for whole country and the

Amreli District Central Co-Operative Bank Ltd has also played vital role as a part

of it.

This bank was formed in 1909 under the old Vadodara State with the name ―The

Amreli Khetiwadi Pedhi Ltd.‖ The bank gets its registration under co-operative

law of the Bombay Act 1950, Registration No.19170/2; dated 23-08-1950. The

bank started its activities with the name of ―Amreli District Central Co-Operative

Bank Ltd.‖

Then after the formation of separate Gujarat State in 1960, bank commenced their

activities as a District Bank under 1961 Co-Operative Law.

Since 1950, the audits class of the bank in last 59 years remains ―A‖ which indeed

a golden script achievement. The bank remained operational and active from long

period of time and has made some profound changes in the co-operative sectors.

Ex-president of the bank Shri Dwarkadasbhai Patel reared it like a plant and

respected president Shri Dilipbhai Shanghani has developed this plant in a giant

tree of development.

11

2.3 MISSION & GOAL OF BANK

Mission

- To provide a banking services at rural level

- To provide a loan at cheaper rate to district‘s farmers.

- To provide insurance Rs.200000 against accident expiry along with

the loans.

Goal

An effort for social and economical development of Amreli Districts

farmer‘s and as well as to give their contribution for the growth of

India‘s agriculture development rate.

12

2.4 ACTIVITIES OF THE BANK

Deposit

- Current Deposit

- Fixed Deposit

- Saving Deposit

- Recurring Deposit

1. Current Deposit

Current account refers to regularity of transecting in account with in banking hours

on all working day. The banker‘s liability in this regard is to honor all the demand of

the customer to the extent to which his account shows a credit balance. It is because

of this obligation current account deposit is known as bankers demand liability &

in order to fulfill this liability they keeps sufficient cash ready every moment.

A current account is an account which is generally opened by businessmen,

companies, institutes, corporate, industrialists etc

No of accounts Amount Rs (in lacks)

2995 1121.25

13

2. Fixed Deposit

This account attracts those customers who have money invest for a longer period but do

not want to take much of risk. Such person prefers to deposit with commercial banks

for a specified period at a specified rate of interest. The interest rate varies from one

period to another. A deposit of 15 days attracts a smaller rate of interest and deposits l

or 5 or more years. The highest rate of interest. The period for which deposits are to

be made depends upon the depositor himself, However, once a decision is taken by the

depositor any money deposit usually he is not allowed to withdrawal the same before

the interest earned till that date or accepts a forever rate of interest than stipulated at the

time of deposits.

No of A/C Amount Rs. (lacks)

12597 14957.79

3. Saving deposits

Saving deposit account is an ideal account or those who 2have money to save but

who can not advantageously invest them any where else as their saving are not of

much significance to the capital market because their saving are too small. This

amount is therefore meant of smaller saver. The account is therefore encourages

small saving and tries to forge a saving habit in the general public. The attitude to

save is important which this account tries to create and thus mobilize such small

savings for greater social good saving deposits account is for that section of society

and put to fruitful utilization.

14

Characteristics of the saving deposit

Restriction on with drawl of amount.

Restriction on deposit of amount.

Payment of interest quarterly

No of A/C Amounts Rs. (In lacks)

110663 8747.9

4. Recurring deposits

To encourage regular saving habits in the depositing public the hank in the country

provide an opportunity to them to save regularly. According to their capacity and

need and earn more than what saving deposit accounts offers to them . The

following are the main features of the recurring deposits.

The account can be transfer from one bank to another in the country on request by

customer.

This account can be opened by every one competent to enter in to contract including the

minor one.

A passbook is supplied to the customer and entry is made mere every month after

every deposit.

The account attract higher rate of interest.

Easy and simple account opening procedure.

Speedy and timely services.

15

LOANS

(A) Term Loans

1. Business loan

Any kind of traders, businessmen or a person, who is going to start a new business,

can get business loan. Bank grants business loan for the purpose of fulfillment or

short term working capital need in the business.

Bank grants this type of loan Rs.2 lacks to maximum 25 lacks.

A person who is gating business loan he has to mortgage land, building or any other

fixed assets.

Document of properties have to be given to the bank by a person

bank takes all these documents as a security.

A person has to give reference of two people, who are depositor in the AJMS Bank

as guarantors,

RELEVENT DOCUMENTS

Application form, other documents specified in the application form.

Three years financial statements.

No Due certificate of bank.

Proof of guarantor‘s income.

16

2. Vehicle loan

Only farmer can get this type of loan,

Bank grants this type of loan Rs. 15,000 to maximum 10. 00,000 or

85% of the quotation price of the product.

Bank charges rate of interest on this loan is 15%.

A person has to give reference of two people who are depositor in bank.

Loan repayment period is 5 years.

Quotation of vehicle, proof of guarantor‘s income (one time only), RTO

certificate & other documents are required with the application form

3. Loan against NSC/KVP/LIC

Any person who should have NSC/KVP/LIC certificate on his own name and any

policy holder. Bank grants loan for any purpose. Bank charges rate of interest on

this loan is 13%.

Application form, other documents specified in the application form and if an

applicant has to give Share certificate or policy than need to sign in favor of the

bank.

17

4. Education loan

Student of any Govt. approve universities, medical, engineering,

management or any professional courses as well as any post graduation

courses can be got.

Loan is included all the amount related with the study like course fee,

hostel fee, cost of books etc.

Rate of interest is 15%.

Interest should be paid regularly from the date of passing loan.

The completion of course, after 3 months, student must be paid the loan in

60 equal installments.

18

(B) Cash Credit

Cash credit is the main method of lending in India and accounts for about 70% of

total bank credit. Under this system, the banker specifies a limit, called the cash

credit. Limit for the each customer, up to which the customer is permitted to

borrow against the security of tangible assets or guarantees. The customers

withdraws from his cash credit account as and when he needs the funds and

deposits any amount of money, which he funds surplus with him on any day. The

cash credit account is thus an active and running account to which deposits and

withdrawals may be affected frequently. The customer is required to provide

tangible assets as security to cover the amount borrowed from the banker. The

borrower is charged interest on the actual amount utilized by borrower and for the

period actually utilized only.

There is no any limit.

Books of account for last three years.

Stock list at the date of application.

Income tax return and assessment order of last three years.

Audited report from C.A.

Municipal shop act license.

Receipt of rent.

Partnership deed.

Register of firms.

S.S.I. incense in case of small scale industry.

In case of company memorandum of association and article of

association.

Project report and C.M.A. report

The rates of interest are 13% to 15% and also give rebate if rating of

customers is AAA and AA

19

(C) Gold Loan

Purpose Personal use

Limit Rs. 100000

Period 12 months

Rate of interest for Farmer: 12%

Other: 13%

Security : Gold silver ornaments or items on Re-pledge

Documents : Loan application form, other things.

For the purpose of this kind of loan the bank shall appoint one or more goldsmiths,

who will make valuation of the ornaments or items of gold-silver and the loanee

has to accept his decision arrived at on the basis of the kind/weight etc. of gold-

silver ornaments or items.

20

2.5 SPECIALITY OF BANK

1. In this district with the framing to get development of cattle breeding business

as well as rural and urban level creation of self-employment and increase

income of district peoples, noting this matter co-existence from the bank

established a Amreli District Milk Productive Co-Operative Association Ltd.

(Amar Dairy)

2. Bank has 70% Public deposit of total deposit

3. Bank giving a crop-loan to all farmers through K.C.C.

4. This bank is first bank which starting a plan of housing loan for farmers.

5. Bank does not charging charge like that dormant charge, loan processing

charge, loan supervision fee or other charges which is imposed by other

banks.

6. Bank does not taking an inspection fee from the associations.

7. This is only one bank in Gujarat, who kept a crop loan of personal loan

account of association‘s member farmer

8. This bank opening a saving a/c of farmer at zero balance

21

9. Bank has done tie-up with Ing Vyas life insurance co. ltd and Iffco Tokiyo

General insurance co. from this tie-up districts peoples can get a advantages

of insurance and bank gets income in the form of commission

10. Bank gives loan to ―Sakhi Mandal‖ and ―Self Help Groups‖ at a rate of

10.5% as well as women credit societies at a rate of 9%

11. Bank posses 51 branches in Amreli Districts

12. 297 employees are working in a bank

13. All branch are computerized and to meet the future requirement they are ready

to provide E-Banking

2.6 SPECIAL ACHIEVEMENT

1. In 1999-2000 gets a ―Best Performance Award‖ by NABARD

2. In year 2009-2010 bank gets license from RBI, its show bank‘s prosperity.

3. Many time banks get a prize of good recovery by Gujarat State Co-Operative

bank.

4. In year 2006-2007 under plan of SGSY gets a ―Best Banker Award‖ by

DRDA

5. Constant 95% or more debt collection.

6. From beginning Amreli Bank has been awarding as audit calls ‗A‘ by district

register

22

2.7 EXISTING BOARD OF DIRECTORS

Dilipbhai N. Shanghani (Chairman)

Arunbhai M. Patel (Vice Chairman)

Chandubhai N. Shanghani (M.D.)

Dadbhai A. Varu

Naliniben D. Patel

Smitaben J. Masrani

B.S. Kothiya (C.E.O)

23

24

3.1 HUMAN RESOURCES DEPARTMENT

INTRODUCTION

The personnel department in and organization plays a very vital role as it deals

totally with the human resources of an organizations, their needs wants and even

their problems. A personnel manager must have all the qualities of a leader in order

to manage the human resources in the best possible manner and thereby make

effective utilization of its resources.

The human resources of an organization are of utmost importance compared to any

other resources the organizations may possess. It is therefore said to be the heart of

an organization without whose functioning the organization would stop

functioning.

The reason behind these resources being so very important is that human beings

are social animals who without a satisfactory work environment wouldn‘t work

efficiently and effectively.

The task of a personnel manager in an organization is a very challenging task as

the whole of an organization and its various departments consists of human beings

whose behavior is quite irrational. It is very difficult to judge the behavior of an

individual at as it may differ from person to person.

25

EMPLOYEES SERVICES & WELFARE ACTIVITIES & AMENITIES To motivate the employees and to increase their morals it becomes very necessary

for every company to perform the activities which can be helpful in the

achievement of this motive and there by the efficiency and satisfaction of the

employee can be raised accordingly.

Recreational and Entertainment Facility:

The bank conducts different types of programs and games on different type of

occasions especially for its staff members. It also provides many type of sports

facility to its employees and their family members. There are lawn tennis courts,

table tennis, cricket grounds, etc.

Independence and Republic Day Celebration:

The bank celebrates the Independent & Republic Day every year. On this day the

program of the national flag hosting is followed by sweet distribution to all the

employees of the company.

26

Provident Fund Scheme

Provident Fund Scheme of AJMSB for the employees is as per the rules and

regulations of the Govt. The provident fund refers to compulsory saving of the

employees from their own salary. According to this scheme, employees will get the

amount, which he has saved at the time of his retirement in terms of PR.

The bank is generally regular and depositing with the appropriate authorities‘

undisputed statutory dues including PF. Out of this PF fund, the employee can get

the loan or can withdraw the required amount form it whenever he is in need.

Round about 10% of the amount from the employees‘ salary is reserved as PF.

Encashment of Leave

AJMSB provides encashment of leave facility which means employees can take

leave of 24 days in a year and their salary is not cut off as per rules

Motivation

For motivation they are providing allowance according to performance base. Give

opportunity to attain management programmed.

27

3.2 FINANCE DEPARTMENT

INTRODUCTION

―Financial management means procurement of funds at minimum costs and

effective utilization in order to maximize the wealth of shareholders.‖

The term of financial management refers to its relationship with the closely-related

fields of economics and accounting, its functions, scope and objectives. Financial

management, as an academic discipline, has undergone fundamental changes in its

scope and coverage. In the early years of its evolution it was treated synonymously

with the raising of funds. In the current literature pertaining to financial

management, a broader scope so as to include, in addition to procurement of funds,

efficient use of resources is universally recognized.

Financial management, as an integral part of overall management, is not a totally,

independent area. It draws heavily on related disciplines and fields of study, such

as economics, accounting, marketing, production and quantitative methods. A part

from economics and accounting, finance also draws for its key day to day

decisions on supportive disciplines such as marketing, production and quantitative

methods, for instance, financial managers should consider the impact of new

product development and promotion plans made in the marketing area since their

plans will require capital outlays and have an impact on the projected cash flows.

28

Finally, the tools of analysis developed in the quantitative methods area are helpful

in analyzing complex financial management problem. Organization makes their

planning for the financial sources which are very helpful in the future course of

action.

Taking a commercial business as the most common organizational structure, the

key objectives of financial management would be to:

Create wealth for the business

Generate cash, and

Provide and adequate return on investment bearing in mind the risks that the

business is taking and the resources invested.

1. Financial Planning

Management needs to ensure that enough funding is available at the right

time to meet the needs of the business. In the short term, funding may be

needed to invest in equipment, pay employees and fund sales made on

credit.

In the medium and long term, funding may be required for significant

additions to the productive capacity of the business or to make acquisitions.

2. Financial Control

Financial control is a critically important activity to help the business ensure

that the business is meeting its objectives.

3. Financial Decision-Making

A key financing decision is whether profits earned by the business should be

retained rather than distributed to shareholders via dividends. If dividends

are too high, the business may be starved of funding to reinvest in growing

revenues and profits further.

29

FINANCIAL DECISIONS

Financial management consists of four major decisions or functions which

are as discussed as below.

1. Investment decision

Investment decision is the long term, strategic policies of an organization.

Investment decisions have a long term effect on the working of an

organization. Thus an enterprise should invest in proposals which maximize

share value.

2. Financing decision

There are various sources of capital like equity, preference shares, borrowed

funds, and retained profits. The finance manager has to select a proper mix

of owned at the minimum cost. A financing decision adds to the value to the

value of shareholders.

3. Dividend decision

Profits can either be distributed or reinvested into the business. The

proportion of profits that needs to be distributed and that needs to be retained

is a crucial decision. It is the job of finance manager to satisfy the

shareholders as well as claw back into the business. This division of profit

when done in an optimum manner maximizes shareholder value.

4. Liquidity decision

An enterprise needs finance for the day today activities for the smooth

functioning. The brand of FM that deals with investments in current assets &

liabilities, in other words investment is the net working capital comprises of

the liquidity decisions.

30

ACCOUNTING CONVENTION

The accounts are prepared under the historical cost convention and confirm the

statutory provision and prevailing practices, except as otherwise stated.

Investments

Classification of investments is made as per the guidelines of Reserve Bank of

India. The entire investment portfolio of the bank is classified under two categories

viz. ―Held Till Maturity‖ and ―Available for sale ―. For the purpose of balance

sheet the investments have been classified in the following four categories viz.

Government securities

Other approved securities

Share

Bonds of PSUs

Investments under ―Held Till Maturity‖ category are carried at acquisition cost and

the premium paid has been amortized remaining period of maturity

31

“Product or service is the real thing by which one can satisfy

its customers.”

3.3 SERVICE DEPARTMENT

INTRODUCTION

The general management of any industry can be divided in to four types of

organization that is production, marketing, finance and personal. From which

production is the basic and core activities for all industry.

But, AJMSB is purely a service sector. So, here, we can say that, there is no any

production department but only ―service department‖. The work of a service

department is to produce better services to the customers, which satisfy the human

desire in a best manner.

In banking service department is concern with that process which converts the

inputs in to outputs.

32

OTHER SERVICES

Locker facility

Locker facilities are provided in 13 branches

To Provide Security for the valuables bank offers.

Locker Facility at very economical charges

Types of locker Yearly Rate

A 400 + service tax

B 450 + service tax

C 550 + service tax

D 600 + service tax

E 700 + service tax

F 1200 + service tax

G 1300 + service tax

H 1400 + service tax

I 1600 + service tax

J 2000 + service tax

Demand draft

Loans against Gold

Purpose : Personal use

Limit : Rs. 100000

Period : 12 months

Rate of interest for Farmer : 12%

Other : 13%

Security : Gold silver ornaments or items on Re-pledge

Documents : Loan application form,

For the purpose of this kind of loan the bank shall appoint one or more goldsmiths,

who will make valuation of the ornaments or items of gold-silver and the loanee

has to accept his decision arrived at on the basis of the kind of weight etc. of gold-

silver ornaments or items.

33

Out station cheque collection facility

SOCIAL ACTIVITIES

In a time of famine and inundate rain to distribute a food packet.

In a period of national misery give a co-existence through bank.

In a time of famine bank give a ―House Hold Loan‖ for farmers to buying

house holding things.

34

35

4.1 INTRODUCTION

Research is part of any systematic knowledge. It has occupied the realm of human

understanding in some form or the other from times immemorial. The thirst for

new areas of knowledge and the human urge for solution to the problems have

developed a faculty for search and research and re-research in him/her. Research

has now become an integral part of all the areas of human activity.

Research methodology gives the study of the necessary training on gathering

materials and arranging them, participated in the field of work the requirement and

also training in the techniques for objectives effectively and efficiency with in time

framework without deviating from the original target.

MEANING OF RESEARCH

“RESEARCH IS A SCIENTIFIC AND SYSTEMATIC SEARCH FOR PERTINENT

INFORMATION ON A SPECIFIC TOPIC”.

C.R.KOTHARI

“MANIPULATION OF THINGS, CONCEPTS OR SYMBOLS FOR THE PURPOSE OF

GENERALIZING AND TO EXTEND, CORRECT OR VERIFY KNOWLEDGE, WHETHER

THAT KNOWLEDGE AIDS IN THE CONSTRUCTION OF A THEORY OR IN THE PRACTICE

OF AN ART”.

D.SLESINGER AND M. STEPHENSON

36

4.2 DEFINE PROBLEM

A research problem, in general, refers to some difficulty which a researcher

experience in the context of either a theoretical or practical situation or wants to

obtain a solution for the same. Our research problem is the financial performance

of the ―AJMS Bank‖ over the years.

4.3 OBJECTIVES OF STUDY

The main objective of the study is to evaluate existing credit appraisal process and

to compare with different models to find out if any discrepancy is their in the

existing model of the bank. The objective of research is to discover answers to

questions through the application of scientific procedures. The main aim of

research is to find out the truth which is hidden and which has not been discovered

as yet.

Other objectives are as follows

To find out financial performance of AMRELI JILLA MADHAYASTHA

SAHAKARI BANK LIMITED

To evaluate the existing credit appraisal process of AMRELI JILLA

MADHAYASTHA SAHAKARI BANK LIMITED.

To Analyses and relate different models with the existing model of the bank.

To study the financial performance of co-operative bank & its effect on national

growth.

To study the importance of co-operative bank in the development of rural areas.

37

4.4 RATIONAL THE STUDY

Identifying and defining opportunities and problems.

Improving our understanding of the various fields of management.

Research helps the management to discharge its managerial function of

planning, forecasting, co-coordinating, motivating, controlling and

evaluation effectively.

Research helps developing new products or modifying existing products,

new market etc., is continuous process in business.

4.5 LIMITATIONS OF THE STUDY

In spite of all sincere efforts in preparing this report, there desire certain

Limitations, which can not be ignored.

Our whole study has only on secondary data so it may affect the result of

the analysis.

Our sample for analysis includes only some year's annual data so it may affect

the results of the analysis,

The unit under study is co-operative sector and it possesses limitation of

Co-operative sector.

The measurement profitability confronts many practical difficulties.

38

4.6 HYPOTHESIS

Hypothesis is usually considered as the principal instrument in research. Its main

function is to suggest new experiments and observations. In fact, many

experiments arc carried out with the deliberate object of testing hypothesis.

Ordinarily, when one talks about hypothesis, one simply means a mere assumption

or some supposition to be proved or disproved. But for a researcher hypothesis is a

formal question that he intends to resolve.

HO: NULL HYPOTHESIS

HA: ALTERNATIVE HYPOTHESES

HO: There would be no significance difference in the financial performance

―Amreli Jilla Madhayastha Sahakari Bank Limited" over the years.

HA: There would be significance difference in the financial performance of

―Amreli Jilla Madhayastha Sahakari Bank Limited" over the years.

39

4.7 DATA COLLECTION

Introduction

The collection of data is an important part in the process of research work. The

quality and credibility of the results derived from the application of research

methodology depends upon the relevant, accurate and adequate data. In simple

language we can say that the information collected from various sources, which

can be expressed in quantitative form, for a specific purpose, which is called data.

PRIMARY DATA:

Primary data are sought for their proximity to the truth and control over error.

Primary data the researcher collects to address the specific problem at hand.

Primary data have been collected through discussions with executives and staff in

the bank.

SECONDARY DATA:

Secondary data have at least one level of interpretation inserted between the events

and its recording.

Secondary data results of studies done by others and for different purposes than the

one for which the data are being reviewed.

Secondary data are taken from annual balance sheets, profit & loss account and

internal circulated matters from ajmsb.

40

4.8 DATA ANALYSIS & INTERPRETATION

(A) RATIO ANALYSIS

A ratio can be expressed in various ways, including as a percentage, a fraction, a

―times‖ figure, a number of days, a rate or as a simple number. The various ratios

that are generally used have been summarized below. Liquidity Analysis Ratios: A

firm needs liquid assets to meet day-to-day payments. Therefore, liquidity ratios

highlight the ability of the firms to convert its assets into cash. If the ratios are low

then it means that money is tied up in stocks and debtors. Thus, money is not

available to make payments. This may cause considerable problems for firms in the

short run. It is often viewed that a value less than 1.5 implies that the company

may run out of money as its cash is tied up in unproductive assets.

(1) Fixed Assets Turnover Ratio:-

It ascertain the efficiency and profitability of the branch. Fixed assets ate compared

to sales. The more the total income in relation to the amount invested in fixed

assets, the more efficient is the use of fixed assets. The computation is as under.

The formula:-

Fixed assets turnover ratio = Sales

Average fixed assets

2009-10 = 321.06

27.26

= 11.78 %

2008-09 = 258.44

24.36

= 10.61 %

Comment:-

The bank holds fixed assets turnover ratio in 2009 is 10.61% & 2010 is 11.78 %, the

higher the turnover ratio, the bank is in a better than last year.

41

(2) Net Profit Ratio:-

This ratio is also known as profit margin, this ratio is valuable for the purpose of

ascertaining the overall profitability of the business. Net profit ratio indicates what

profit if sales is left to the proprietors after meeting all expenses. In short, this ratio

measures the relationship between net profit and sales of firm, A low profit margin

has the opposite implication,

Thus, the increase in this ratio year after year is a define indication of improving

condition of the business. The formula.,

Net profit ratio -= Net profit *100

Sales

2009-10 = 161.66*100

321.6

= 50.27 %

2008-09 = 100.22*100

258.44

= 38.78 %

Comment:-

AJMSBANK HOLD net profit ratio in 2009 is 38.78 % & in 2010 is 50.27 %.

Therefore the net profit ratio is increase. The bank is a good profit margin. The bank

should more & more profit for the future.

42

(3) Expenses Ratio:-

The expenses ratio is very important for analysis the profitability of a firm. This

ratio is computed by dividing expenses by sales. The term expenses, refers to the

operating expenses of a firm exclusives of financial expenses like interest takes

and dividends, for the purpose of ascertaining relationship between operating

expenses and sales, expenses ratio are computed. The formula.

Expenses Ratio = Expenses *100

Sales

2009-10 = 267.19*100

321.6

= 83.08 %

2008-09 = 223.81*100

258.44

= 86.60 %

Comment:-

The bank holds the expenses ratio in 2009 is 86.60 % & in 2010 is 83.08 %. The

expenses ratio is decreases. So the bank should try to control the expenses.

43

(4) Operating Ratio:-

This is a ratio, which shows relationship between operating expenses to net sales.

In case the net profit ratio is 20%. It means that the operating ratio is 80%.

Operating expenses includes the cost of direct material, direct labors and other

overheads. But financial charges like interest provision for taxation etc. are

excluded from operating costs.

Incase, the comparison shows that there is increase in this ratio. The reason for

such increase should be found out and management by advised to check the

increase.

The formula,

Operating Ratio = cost of sales *100

Net sales

2009-10 = 197.98*100

321.6

= 61.56 %

2008-09 = 160.12*100

258.44

= 61.96 %

Comment:

The above calculation shows that for every sales of 100 the bank holds operating

expenses in 2009 is 61.96 % & in 2010 61.56 %. There is not difference in two

years.

44

(5) Administrative Exp. To Total Exp. Ratio:-

The following is the ratio that indicates the portion of administration expenses in

total expenses. The ratio shows part of administrative expenses is higher the ratio

can be calculated following.

The formula.

Administrative exp. To total exp. Ratio = Administrative Exp,* 100

Total expenses

2009-10 = 74.65*100

267.19

= 27.94 %

2008-09 = 61.44*100

223.81

= 27.45 %

Comment:

In this ratio the administration expenses is higher. This ratio in 2009 is 27.45 % &

2010 27.94 %. This ratio is increases.

45

(6) Return On Investment:-

This ratio indicates the profitability of business and is very much in use among

financial analysis. However, there is different meaning of the term investment. The

investment has means of all assets except fictitious assets.

The formula.

Investment turnover ratio = Net profit after interest and tax

Share holders fund

2009-10 = 161.66

103.77

= 1.55

2008-09 = 100.21

103.56

= 0.97

Comment:-

Investment turnover ratio is in 2009 is 0.97 & in 2010 is 1.55 it means the ratio is

increases. So the bank should try to more turnover of the future.

46

(7) Gross Profit Ratio:-

Gross profit is the relationship between prices, sales volume and costs. Gross profit

ratio is helpful to measure profitability of a branch.

However, the gross profit should be adequate to cover operating expenses,

A high ratio of gross profit lo sale is a sign of good management because of impels

that the cost of production of the firm is relatively low. This factor may be high

cost of production low selling price etc.

The formula

Gross profit = gross profit *100

Net sales

2009-10 = 233.95*100

321.6

= 72.75 %

2008-09 = 153.23*100

258.44

= 59.29 %

Comment-

The bank hold gross profit Ratio in 2009 is 59.29 % & in 2010 is 72.75%. Therefore

the gross profit ratio is increase- The bank is a good profit margin. The bank should

more & more profit for the future.

47

(B) TREND ANALYSIS:

The earlier sections had exposed you to analyzing statements using horizontal and

vertical form as well as using the common size financial statements in the

comparative form. The horizontal analysis performed there, comparing the

performance of the AJMS Bank over the five year period indicates the time series

analysis or rather trend analysis. This is called as trend analysis because we trying

to see if there is a pattern in the performance of the bank over the year which could

help us forecast the performance of the bank for the future.

48

TREND ANALYSIS

Share capital

Comment:

This chart shows that share capital is increasing over the years. We

can see that in the year 2006-07 there is minimum share capital of

982.67 and highest in 2009-10 i.e.1037.68.

.

49

800

850

900

950

1000

1050

2005-06 2006-07 2007-08 2008-09 2009-10

share capital

Funds

Comment: This chart shows that funds are increasing in every year. We can see

that in the year from 2005-06 to 2009-10. It shows bank prosperity.

50

0

200

400

600

800

1000

1200

1400

1600

1800

2000

2005-06 2006-07 2007-08 2008-09 2009-10

funds

Deposits

Comment: From the chart we can shows that deposits are increasing in every year.

We can see that in the year from 2005-06 to 2009-10. it shows bank

provide better services and interest rate to customer.

51

0

5000

10000

15000

20000

25000

2005-06 2006-07 2007-08 2008-09 2009-10

Deposits

Working capital

Comment:

Chart shows that working capital is increasing year by year. So, bank

has to decide some limited criteria of working capital. And within that

they have to perform.

52

0

5000

10000

15000

20000

25000

30000

35000

40000

2005-06 2006-07 2007-08 2008-09 2009-10

W.C

Investment

Comment:

There is less fluctuation in investment. From the chart we can see that

in year 2005-06 is 532.67 and 2009-10 is 487.67. There is decrease in

investment.

53

460

470

480

490

500

510

520

530

540

2005-

06

2006-

07

2007-

08

2008-

09

2009-

10

Investment

Total income

Comment: Total income is year by year increasing. So we can say that bank has

good reputation.

54

0

500

1000

1500

2000

2500

3000

3500

2005-06 2006-07 2007-08 2008-09 2009-10

income

No of members

Comment:

Chart shows that no. of Members are fluctuation every years. From

the above data we can say that performance of the bank is trustworthy.

55

850

860

870

880

890

900

910

2005-06 2006-07 2007-08 2008-09 2009-10

Members

Net profit

Comment:

Chart shows that Net profits are more fluctuation every year. From the

chart we can see that in year 2005-06 is 237 and 2007-08 is 285.57.

This two years bank gets higher profit as compare to other years. From

the above data we can say that performance of the bank is not stable.

56

0

50

100

150

200

250

300

2005-06 2006-07 2007-08 2008-09 2009-10

Net profit

CHI- SQUARE TEST

OF THE FINANCIAL PERFORMANCE OVER

THE YEAR

HO: there would be no significance difference in the financial performance

of ―Amreli Jilla Madhayastha Sahakari Bank Limited‖ over the year.

HA: There would be significance difference in the financial performance of

―Amreli Jilla Madhayastha Sahakari Bank Limited‖ over the year.

Year

Observed

Frequency

Oi

Expected

Frequency

Ei

(Qi-Ei)

(Oi-Ei)2

(Oi-Ei)2/Ei

2002-03

232

192.63

39.37

1550

1550/192.63

2003-04

240

192.63

47.37

2244

2244/192.63

2004-05

180

192.63

-12.63 160

160/192.63

2005-06

237

192.63

44.37

1969

1969/192.63

2006-07

104

192.63

-88.63

7855

7855/192.63

2007-08

286

192.63

93.37 8718

8718/192.63

2008-09

100

192.63

-92.63 8580

8580/192.63

2009-10

162

192.63

-30.63

938

938/192.63

Total

1541

————

0

32014/192.63

Expected Frequency: = 1541

8

= 192.63

57

Significance level:

Significance level is apply 0.05 level

Calculated value:

X2 = ( Oi-Ei)

2

Ei

= 32014

192.63

= 166.19

Critical Value:

Degree of freedom = n-1

= 8-1

= 7

So, as critical value is 14.07

Interpretation:

As calculated value (166.19) grater than to critical value (14.07), so

we reject null hypothesis and we conclude that there would be

significance difference in the financial performance of ―Amreli Jilla

Madhayastha Sahakari Bank Limited‖ over the year.

58

4.9 FINDINGS

The financial performance is an important aspect of evaluation which

indicates the ability to perform various tasks in the most effective way.

Bank has created good reputation in the economic sector. Because of the

entire farmer have trust to the co-operative bank.

The co-operative credit sector in India is single largest institutional

infrastructure for flow of farm finance. Total income is year by year

increasing.

The strong points of the "AJMS Bank‖ are its financial strength, amount of

depositors & good services.

The primary aim of the co-operative bank is to encourage thrift, savings &

self-help & mutual aid in order to be self-reliant,

59

4.10 SUGGESTIONS

As improvement is a constant requirement for every one and if we try to learn

from a little things also. Than every minute we will improve ourselves. And for

constant improvement in organization management should keep their eye on

every concern, during our visit at bank we have tried to cover everything and

according to our knowledge we are trying to give suggestion to the Ajms bank and

we are sure that it surely will be helpful in progress of the bank.

First and foremost suggestion for Ajms bank is that, yet they are not using

such marketing tools in the area of cutthroat competition in banking sector.

Each bank should try for better and different marketing. Ajms bank should

make one group of executive, who can help to the management and can

provide different services like collection from home only and they should

use such slogan for innovative products. Using strategic marketing tool bank

can improve a lot in the market.

Bank should provide other services like as Net banking, Credit Card, phone

banking, and ATM, other services like payment of income tax, insurance

premium, for increase customer, customer satisfaction and fund based income.

Change in customer profile with medium value customer and the increased play

of customer in rural and semi urban provide a new market.

60

4.11 CONCLUSION

Each and every beginning has an end in the same ways. Each and every

introduction has a conclusion. We are thankful and express our gratitude to

all those who has directly or indirectly co-operated us in preparation of our

project report and suggested some new ideas.

“Amreli Jilla Madhayastha Sahakari Bank Limited is well and truly set on

the path of becoming a farmer bank. The bank has undertaken older

initiatives that would help it, achieve its wide aspirations. In co-operative

sector, the opportunities are enormous and to capitalize on these

opportunities. It is important to have a wide network, strong structure, strong

knowledge, excellent official skills, and sound regulatory policy with its

passion for innovations, commitment for the new services and corporate

philosophy to build healthy communication. The bank plans to guide its

efforts in creating every people‘s Bank.

Finally, we can say that under the guidance of efficient management and

extremely dedicated human resources. We wish and predict all great success

in its endeavors to “Amreli Jilla Madhayastha Sahakari Bank Limited”.

61

4.12 BIBLIOGRAPHY

Books:

Donald R. Cooper, Pamela S. Schindler, Business Research Methods,

Tata McGraw Hill, 9th

Edition

I.M.Pandey, Financial Management, Vikas Publishing House Pvt.

Ltd., 9th

Edition

General information: Annual report Balance sheet

Profit & loss account

Internal circulated matters from AJMS Bank

Website: http://en.wikipedia.org/wiki/Cooperative_banking http://www.allbusiness.com/glossaries/cooperative-bank/4950059-1.html http://www.google.co.in/search?hl=en&defl=en&q=define:The+Co-operative+Bank&sa=X&ei=UbstTJGyDIuGrQfmsf3zBQ&ved=0CAYQkAE

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