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A Project Report On “Comparative performance analysis of The Lasalgaon Merchant Co-operative bank Ltd, Lasalgaon &State Bank Of India”. IN The Lasalgaon Merchant Co-operative bank Ltd, Lasalgaon Submitted to University of Pune In Partial fulfilment Of the requirement of The Degree of “MASTER OF BUSINESS ADMINISTRATION” Under the guidance of 1

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A

Project Report

On

“Comparative performance analysis of The Lasalgaon Merchant

Co-operative bank Ltd, Lasalgaon &State Bank Of India”.

IN

The Lasalgaon Merchant Co-operative bank Ltd, Lasalgaon

Submitted to

University of Pune

In Partial fulfilment Of the requirement of

The Degree of

“MASTER OF BUSINESS ADMINISTRATION”

Under the guidance of

Prof. Ravindra Gawali

Submitted By:-

SHARAD MANIK CHANDWADE

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Declaration

I, the under signed, hereby declare that this dissertation entitled “Comparative performance

analysis of The Lasalgaon Merchant Co-operative bank Ltd, Lasalgaon &State Bank Of India”.

is a genuine and confide work prepared by me and submitted to the PUNE UNIVERSITY

through AMRUTVAHINI INSTITUTE OF MANAGEMENT & BUSINESS

ADMINISTRATION for the partial fulfilment of THE MASTERS degree in Business

Administration. The present work is of original nature and the conclusions drawn therein are

based on the Data collected by myself. To the best of my knowledge, the matter presented in this

dissertation has not been Submitted for the award of any Degree, Diploma or Membership Either

to this or any Other Institute / University.

Place: - (Sharad M.Chandwade)

Date:- (Student)

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ACKNOWLEDGMENT

I hereby take immense pleasure to express my gratitude towards The Lasalgaon Merchant

Cooperative bank Ltd, Lasalgaon for giving me an opportunity for the summer project at their

esteemed organization. I express my hearty thanks to AMRUTVAHINI INSTITUTE OF MANAGEMENT &

BUSINESS ADMINISTRATION and University of Pune for providing the platform for getting the practical

knowledge during 2010-2012 I remain indebted to my respected guide Prof .Gavali Sir and all my

teachers for helping, guiding and mentoring me to complete this work. I would like to thank the LMCB

Bank,Lasalgaon for giving me the opportunity to do my sixty days summer project training in their

esteemed organization. I am highly obliged to Mr. Rasal Sir (Chief executive officer) for granting me to

undertake my training at bank.I express my thanks to Mr.Rasal Sir (Chief executive officer ) under whose

able guidance and direction, I was able to give shape to my training.

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INDEX

Sr.No. CHPTER TITLE Page No.

1 INTRODUCTION 1

2 INDUSTRY PROFILE

2.1 HISTORICAL BACKGROUND IN INDIA

2.2 MEANING AND DEFINITION OF BANK

2.3 TYPES OF BANKS

2.4 BANK ING SECTOR IN INDIA

2.5 BANK ING SCERERIO

2.6 HISTORY OF RBI

2. 7 FUNCTIONS OF RESERVE BANK OF

INDIA

2.8 CO-OPERATIVE BANKS

2.9 NABARD

3 COMPANY PROFILE

3.1 HISTORY OF THE ORGANIZATION

3.2 FOUNDER PROMOTERS OF THE BANK

3.3 OBJECTIVES OF THE ORGANIZATION

3.4 ORGANIZATION STRUCTURE

3.5 GENERAL INFORMATION OF THE BANK

3.5 GROWTH AND DEVELOPMENT OF THE

BANK

4 THEORETICAL BACKGROUND

4.1 DEFINITION OF RATIO ANALYSES

4.2 IMPORTANCE OF RATIO ANALYSES

4.3 PROFITABILITY ANALYSES

4.4 ROLE OF PROFITABILITY ANALYSES

5 RESEARCH METHODOLOGY

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5.1 DEFITION OF RESERECH

5.2 SOURCES OF DATA

5.3 SAMPLING DESIGN

5.4 SWOT ANALYSES

5.5 OBJECTIVES OF THE STUDY

5.6 SCOPE OF THE STUDY

5.7 LIMITATION OF THE STUDY

6 DATA ANALYSES & INTERPRETATION

7 FINDINGS,CONCLUSIONS,

RECOMMENDATIONS

7.1 FINDINGS

7.2 CONCLUSIONS

7.3 RECOMMENDATIONS

8 BIBLIOGRAPHY

9 ANNEXURE

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CHAPTER 1

INTRODUCTION-

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In the 21st century banking industry plays a very important role in the development of the

Indian economy. We cant think about any economy without the banking industry. The

importance of the bank in the modern economy cannot be neglected. They occupy a very

important place in the field of commerce and industry of any country. No country can achieve

commercial and industrial progress in the absence of sound banking system.

In the banking industry co-operative bank plays a very important role. Co-operative banks are

mainly established for the purpose of providing finance for the agricultural sector. Most of the

finance to the agricultural sector are provided by the co-operative banks. But today most of the

co-operative bank faces the problem of unrecovery of debt, increase in the NPA i.e non

performing assets etc due to the [profitability of the co-operative banks are getting decreased.

The main object of the this project is to find out the profitability of co-operative banks and

nationalized banks and analyzed it & check whether the profitability of co-operative banks are

competible with the nationalized banks.

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CHAPTER 2

INDUSTRY PROFILE:

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HISTORICAL BACKGROUND IN INDIA

From the early Vedic period the giving and taking of credit in one form or the other have

existed in Indian Society.  The bankers are the pillars of the Indian society.  Early days bankers

were called as indigenous bankers.  The development of modern banking has started in India

since the days of East India Company.  These banks mostly had no capital of their own and

depended entirely on deposits in India.

         Indian banking comprises of players who include public sector banks, State bank of India

and its associates, private sector banks, both of old and new sectors, both of old and new

generations, scheduled banks, cooperative banks, regional rural banks, foreign banks etc.

The banking industry worldwide is transformed concomitant with a paradigm shift in the Indian

economy from manufacturing sector to nascent service sector. Indian banking as a whole in

undergoing a change.  Indian banks have always proved beyond doubt their adaptability to

mould themselves into agile and resilient organizations.

          The first bank in India, General Bank of India was established in 1786.  From 1786 till

today, the journey of Indian banking system can be segregated into three distinct phases.

They are as follows

Early phase from 1786 to 1969 of Indian Banks.

Nationalization of Indian banks and up to 1991 prior to Indian banking sector reforms.

New phase of Indian banking system with the advent of Indian Financial & Banking

sector Reforms after 1991.

Phase I

The General Bank of India was set up in the year 1786. Next came Bank of Hindustan and

Bengal Bank. The East India Company established Bank of Bengal (1809), Bank of Bombay

(1840) and Bank of Madras (1843) as independent units and called it Presidency Banks. These

three banks were amalgamated in 1920 and Imperial Bank of India was established which started

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as private shareholders banks, mostly Europeans shareholders.

In 1865 Allahabad Bank was established and first time exclusively by Indians, Punjab National

Bank Ltd. was set up in 1894 with headquarters at Lahore. Between 1906 and 1913, Bank of

India, Central Bank of India, Bank of Baroda, Canara Bank, Indian Bank, and Bank of Mysore

were set up. Reserve Bank of India came in 1935.

During the first phase the growth was very slow and banks also experienced periodic failures

between 1913 and 1948. There were approximately 1100 banks, mostly small. To streamline the

functioning and activities of commercial banks, the Government of India came up with The

Banking Companies Act, 1949 which was later changed to Banking Regulation Act 1949 as per

amending Act of 1965 (Act No. 23 of 1965). Reserve Bank of India was vested with extensive

powers for the supervision of banking in india as the Central Banking Authority.

During those days public has lesser confidence in the banks. As an aftermath deposit

mobilization was slow. Abreast of it the savings bank facility provided by the Postal department

was comparatively safer. Moreover, funds were largely given to traders.

Phase II

Government took major steps in this Indian Banking Sector Reform after independence. In 1955,

it nationalized Imperial Bank of India with extensive banking facilities on a large scale specially

in rural and semi-urban areas. It formed State Bank of india to act as the principal agent of RBI

and to handle banking transactions of the Union and State Governments all over the country.

Seven banks forming subsidiary of State Bank of India was nationalized in 1960 on 19th July,

1969, major process of nationalization was carried out. It was the effort of the then Prime

Minister of India, Mrs. Indira Gandhi. 14 major commercial banks in the country was

nationalized.

Second phase of nationalization Indian Banking Sector Reform was carried out in 1980 with

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seven more banks. This step brought 80% of the banking segment in India under Government

ownership.

The following are the steps taken by the Government of India to Regulate Banking Institutions in

the Country:

1949 : Enactment of Banking Regulation Act.

1955 : Nationalization of State Bank of India.

1959 : Nationalization of SBI subsidiaries.

1961 : Insurance cover extended to deposits.

1969 : Nationalization of 14 major banks.

1971 : Creation of credit guarantee corporation.

1975 : Creation of regional rural banks.

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

After the nationalization of banks, the branches of the public sector bank India rose to

approximately 800% in deposits and advances took a huge jump by 11,000%.

Banking in the sunshine of Government ownership gave the public implicit faith and immense

confidence about the sustainability of these institutions.

Phase III

This phase has introduced many more products and facilities in the banking sector in its reforms

measure. In 1991, under the chairmanship of M Narasimham, a committee was set up by his

name which worked for the liberalization of banking practices.

The country is flooded with foreign banks and their ATM stations. Efforts are being put to give a

satisfactory service to customers. Phone banking and net banking is introduced. The entire

system became more convenient and swift. Time is given more importance than money.

The financial system of India has shown a great deal of resilience. It is sheltered from any crisis

triggered by any external macroeconomics shock as other East Asian Countries suffered. This is

all due to a flexible exchange rate regime, the foreign reserves are high, the capital account is not

yet fully convertible, and banks and their customers have limited foreign exchange exposure.

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Meaning & definition of Bank:

A bank is a financial institution where an individual can deposit money. Banks provide a system

for easily transferring money from one person or business to another. Using banks and the many

services they offer saves an incredible amount of time, and ensures that the funds of micro as

well as macroeconomic agents "pass hands" in a legal and structured manner. There are also

other types of financial institutions that operate just like banks.

          According to section 5(b) of the Banking Regulation Act the term banking is defined as

accepting for the purpose of lending or investment of deposits of money from the public,

repayable on demand or otherwise and withdraw able by cheque, draft, order or otherwise.

Functions of the bank:-

Functioning of bank is among the more complicated of corporate operations. Since banking

involves dealing directly with money. Governments in most countries regulate this sector rather

stringently. In India, the regulation traditionally has been very strict and in the opinion of certain

quarters, responsible for the present condition of the banks, where NPA’s are of a very high

order. The process of financial reforms, which started in1991 has cleared the cobwebs somewhat

but lot remains to be done. The multiplicity of policy and regulation that a bank has to work

with, makes its operations even more complicated, sometimes bordering on illogical. This

section attempts to give an overview of the functions in as simple manner as possible.

Banking Regulation Act of India,1949 defines Banking as “accepting. For the purpose of

lending or investment of deposits of money from the public, repayable on demand or otherwise

and withdraw able by cheque draft, order or otherwise”, Deriving from this definition and

viewed solely from the point of view of the customers, banks essentially perform the following

functions.

1) Accepting deposits from public

2) Lending money to public

3) Transferring money from one place to another

4) Credit creation

5 Acting as trustees

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6) Keeping valuable in custody

7) Investment decision and analysis

8) Government business

9) Other types of lending and transaction

TYPES OF BANK:-

CENTRAL BANK:- A central bank, reserve bank,or monetary authority is the entity

responsible for the monetary policy of the national currency and money supply.

COMMERCIAL BANK:- A commercial bank performs all kind of banking functions such as

accepting deposits , advancing loans,credit creation &agency function.

INDUSTRIAL BANK:- Ordinarily industrial banks performs three main functions- firstly

Aceptance of long term deposite : since the industrial bank give long term loans, they cannot

accept short term deposit from the public. Secondly , meeting the credit requirements of

companies. Thirdly it does some other functions-the industrial banks tender advice to big

industrial firms regarding the sale &purchase of shares & debentures.

AGRICULTURAL BANKS:- As the commercial & the industrial banks are not in position to

meet the credit requirement of agricultural, there arises need of setting up special types of banks

to finance agriculture. Firstly farmers require short term loans to buy seeds, fertilizer,

ploughs ,and other inputs.

FOREIGN EXCHANGE BANK:- Their main function is to make international payments

through the purchase and sale of exchange bills .As is well known ,the exporters of a country

prefer to receive the payments for their exports in their own currency .Hence their arises the

problem of converting the currency of one country into the currency of another .The foreign

exchange banks try to solve this problem.

BANKING SECTOR IN INDIA:-

CENTRAL BANK:- The reserve bank of India is the central bank i.e fully owned by the

government. It is governed by a central board appointed by the central government .It issues

guidelines for the functioning of all banks operating within the country.

PUBLIC SECTOR BANKS:-

A) State bank of India and its associate banks called the state bank group

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B 20 nationalized banks

C) Regional rural banks

PRIVATE SECTOR BANKS:-

A) Old generation private banks

B ) New generations private banks

C) Foreign banks operating in indie

D) Scheduled co-operative banks

E) Non-scheduled banks

CO-OPERATIVE SECTOR:-

A) State co-operative banks

B) Central co-operative banks

C) Primary agricultural credit societies

DEVELOPMENTS BANKS:-

IFCI, IDBI, ICCCI , IIBI,

NABARD

EXPORT-IMPORT BANK OF INDIA

NATIONAL HOUSING BANK

SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA

NORTH EASTERN DEVELOPMENT FINANCE CORPORATIO

HIGHLIGHTS OF THE BANK PERFORMANCE:-

The year gone by was an exceptional year for the Bank in terms of most parameters. Net profit

surged by 60% from Rs. 701 crores to Rs. 1123 crores and the global business mix crossed the

milestone mark of Rs. 200,000 crores to touch Rs. 207,000 crores. While deposits grew by

27.6% to Rs. 119882 crores, the share of low cost deposits hovered at 40% and your bank

continues to be one of the few banks with such a large share of low cost deposits. Credit

expansion was a robust 30% touching an aggregate level of Rs.86791 crores. The growth has

been quite broad based encompassing various segments such as agriculture, industry, SME and

retail. Foreign branches accounted for a smart rise of 34% in advances.

          Priority Sector not only constitutes the Bank's social commitment, but is recognized today

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as a profitable business opportunity. With almost two third branches in rural and semi urban

areas, the bank has ably risen to the occasion. While agriculture clocked a growth of 25% and

constituted 18.5% of net bank credit, priority sector grew by almost 23% and accounted for

45.5% of net bank credit. The Bank could for the first time record net NPA below 1%. In fact on

the back of robust cash recoveries of Rs. 752 crore and upgradation of Rs. 132 core, gross NPA

slid by Rs. 379 crore to Rs. 2100 crore. Recoveries together with prudent provisioning saw Net

NPA falling sharply to Rs. 632 crore from Rs. 970 crore resulting in a healthy loan loss coverage

ratio.

 

BANKING SCENERIO:-

      The future of the banking sector appears quite promising though there are quite a few

challenges to contend with. The customer is more discerning and has a much wider access to

technology and knowledge. Hence the imperative need to roll out innovative customized

products which will be the key differentiator amongst banks. Time and distance have shrunk and

the internet has greatly facilitated global reach and therefore, evolution of delivery channels and

interactive services have been a boon to banking. The core banking solution platform is being

increasingly adopted by the banks to fully realize the opportunity thrown up by technology.

        Unlike the previous year, credit growth of the system was not as profound but quite robust

nonetheless and resources though not really scarce, were a bit expensive. RBI initiated various

measures such as increase of reverse repo rate, higher CRR prescriptions etc. which were aimed

at moderating credit growth. To certain sector specific instructions have also been issued by RBI

to rein in expansion of Bank credit to such sectors.All this ushered in a period of increasing cost,

declining yields and consequently pressure on margins. Healthy rebalancing of the credit

portfolio was the answer to this syndrome.

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HISTORY OF RBI

The central bank of the country is the Reserve Bank of India (RBI). It was established in April

1935 with a share capital of Rs. 5 crores on the basis of the recommendations of the Hilton

Young Commission. The share capital was divided into shares of Rs. 100 each fully paid which

was entirely owned by private shareholders in the begining. The Government held shares of

nominal value of Rs. 2,20,000.

Reserve Bank of India was nationalised in the year 1949. The general superintendence and

direction of the Bank is entrusted to Central Board of Directors of 20 members, the Governor

and four Deputy Governors, one Government official from the Ministry of Finance, ten

nominated Directors by the Government to give representation to important elements in the

economic life of the country, and four nominated Directors by the Central Government to

represent the four local Boards with the headquarters at Mumbai, Kolkata, Chennai and New

Delhi. Local Boards consist of five members each Central Government appointed for a term of

four years to represent territorial and economic interests and the interests of co-operative and

indigenous banks.

The Reserve Bank of India Act, 1934 was commenced on April 1, 1935. The Act, 1934 (II of

1934) provides the statutory basis of the functioning of the Bank.

The Bank was constituted for the need of following:

To regulate the issue of banknotes

To maintain reserves with a view to securing monetary stability and

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

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Functions of Reserve Bank of India

The Reserve Bank of India Act of 1934 entrust all the important functions of a central bank the

Reserve Bank of India.

Bank of Issue

Under Section 22 of the Reserve Bank of India Act, the Bank has the sole right to issue bank

notes of all denominations. The distribution of one rupee notes and coins and small coins all over

the country is undertaken by the Reserve Bank as agent of the Government. The Reserve Bank

has a separate Issue Department which is entrusted with the issue of currency notes. The assets

and liabilities of the Issue Department are kept separate from those of the Banking Department.

Originally, the assets of the Issue Department were to consist of not less than two-fifths of gold

coin, gold bullion or sterling securities provided the amount of gold was not less than Rs. 40

crores in value. The remaining three-fifths of the assets might be held in rupee coins,

Government of India rupee securities, eligible bills of exchange and promissory notes payable in

India. Due to the exigencies of the Second World War and the post-was period, these provisions

were considerably modified. Since 1957, the Reserve Bank of India is required to maintain gold

and foreign exchange reserves of Ra. 200 crores, of which at least Rs. 115 crores should be in

gold. The system as it exists today is known as the minimum reserve system.

Banker to Government

The second important function of the Reserve Bank of India is to act as Government banker,

agent and adviser. The Reserve Bank is agent of Central Government and of all State

Governments in India excepting that of Jammu and Kashmir. The Reserve Bank has the

obligation to transact Government business, via. to keep the cash balances as deposits free of

interest, to receive and to make payments on behalf of the Government and to carry out their

exchange remittances and other banking operations. The Reserve Bank of India helps the

Government - both the Union and the States to float new loans and to manage public debt. The

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Bank makes ways and means advances to the Governments for 90 days. It makes loans and

advances to the States and local authorities. It acts as adviser to the Government on all monetary

and banking matters.

Bankers' Bank and Lender of the Last Resort

The Reserve Bank of India acts as the bankers' bank. According to the provisions of the Banking

Companies Act of 1949, every scheduled bank was required to maintain with the Reserve Bank a

cash balance equivalent to 5% of its demand liabilites and 2 per cent of its time liabilities in

India. By an amendment of 1962, the distinction between demand and time liabilities was

abolished and banks have been asked to keep cash reserves equal to 3 per cent of their aggregate

deposit liabilities. The minimum cash requirements can be changed by the Reserve Bank of

India.

The scheduled banks can borrow from the Reserve Bank of India on the basis of eligible

securities or get financial accommodation in times of need or stringency by rediscounting bills of

exchange. Since commercial banks can always expect the Reserve Bank of India to come to their

help in times of banking crisis the Reserve Bank becomes not only the banker's bank but also the

lender of the last resort.

Controller of Credit

The Reserve Bank of India is the controller of credit i.e. it has the power to influence the volume

of credit created by banks in India. It can do so through changing the Bank rate or through open

market operations. According to the Banking Regulation Act of 1949, the Reserve Bank of India

can ask any particular bank or the whole banking system not to lend to particular groups or

persons on the basis of certain types of securities. Since 1956, selective controls of credit are

increasingly being used by the Reserve Bank.

The Reserve Bank of India is armed with many more powers to control the Indian money

market. Every bank has to get a licence from the Reserve Bank of India to do banking business

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within India, the licence can be cancelled by the Reserve Bank of certain stipulated conditions

are not fulfilled. Every bank will have to get the permission of the Reserve Bank before it can

open a new branch. Each scheduled bank must send a weekly return to the Reserve Bank

showing, in detail, its assets and liabilities. This power of the Bank to call for information is also

intended to give it effective control of the credit system. The Reserve Bank has also the power to

inspect the accounts of any commercial bank.

As supereme banking authority in the country, the Reserve Bank of India, therefore, has the

following powers:

(a) It holds the cash reserves of all the scheduled banks.

(b) It controls the credit operations of banks through quantitative and qualitative controls.

(c) It controls the banking system through the system of licensing, inspection and calling for

information.

(d) It acts as the lender of the last resort by providing rediscount facilities to scheduled banks.

Custodian of Foreign Reserves

The Reserve Bank of India has the responsibility to maintain the official rate of exchange.

According to the Reserve Bank of India Act of 1934, the Bank was required to buy and sell at

fixed rates any amount of sterling in lots of not less than Rs. 10,000. The rate of exchange fixed

was Re. 1 = sh. 6d. Since 1935 the Bank was able to maintain the exchange rate fixed at lsh.6d.

though there were periods of extreme pressure in favour of or against

the rupee. After India became a member of the International Monetary Fund in 1946, the Reserve

Bank has the responsibility of maintaining fixed exchange rates with all other member countries

of the I.M.F.

Besides maintaining the rate of exchange of the rupee, the Reserve Bank has to act as the

custodian of India's reserve of international currencies. The vast sterling balances were acquired

and managed by the Bank. Further, the RBI has the responsibility of administering the exchange

controls of the count.

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Co-operative Banks

INTRODUCTION

Co-operative banks are an important constituent of the Indian financial system, judging by the

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

number of offices they operate. The co-operative movement originated in the West, but the

importance that such banks have assumed in India is rarely paralleled anywhere else in the

world. Their role in rural financing continues to be important even today, and their business in

the urban areas also has increased in recent years mainly due to the sharp increase in the number

of primary co-operative banks.

ORIGIN AND GROWTH OF CO-OPERATIVE BANKS

Co-operative banks are a part of the vast and powerful superstructure of co-operative

institutions which are engaged in the tasks of production, processing, marketing, distribution,

servicing, and banking in India. The beginning of co-operative banking in this country dates back

to about 1904 when official efforts were initiated to create a new type of institution based on the

principles of co-operative organization and management, which were considered to be suitable

for solving the problems peculiar to Indian conditions. In rural areas, as far as agricultural and

related activities were concerned, the supply of credit, particularly institutional credit, was

woefully inadequate, and unorganized money market agencies, such as money lenders, were

providing credit often at exploitatively high rates of interest. The co-operative banks were

conceived in order to substitute such agencies, provide adequate short-term and long-term

institutional credit at reasonable rates of interest, and to bring about integration of the

unorganized and organized segments of the Indian money market.

When the national economic planning began in India, co-operative banks were made an integral

part of the institutional framework of community development and extension services, which

was assigned the important role of delivering the fruits of economic planning at the grassroots

levels. In other words, they became a part of the arrangements for decentralized plan formulation

and implantation for the purpose of rural development in general, and agricultural development

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in particular. Today co-operative banks continue to be a part of a set of institutions which are

engaged in financing rural and agricultural development. This set-up comprises the RBI,

NABARD, commercial banks, regional rural banks, and co-operative banks. The relative

importance of co-operative banks in financing agricultural and rural development has undergone

some changes over the years. Till 1969, they increasingly substituted the informal sector lenders.

After the nationalization of banks and the creation of RRBs and NABARD, however, their

relative share has somewhat declined. All the institutional sources contributed about 4 per cent of

the total rural credit till 1954. The contribution increased to 62 per cent by 1990. The share of

co-operative banks in this institutional lending has declined from 80 per cent in 1969 to about 42

per cent at present. The percentage of rural population covered by the agricultural credit co-

operatives was 7.8 in 1951, 36 in 1961, and about 65 per cent at present.

Cooperative banks in India finance rural areas under:

· Farming

· Cattle

· Milk

· Hatchery

· Personal finance

Cooperative banks in India finance urban areas under:

· Self-employment

· Industries

· Small scale units

· Home finance

· Consumer finance

· Personal finance

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FEATURES OF CO-OPERATIVE BANKS

Some distinguishing characteristics of the nature of co-operative banks are as follows:

(i) They are organized and managed on the principles of co-operation, self-help, and mutual help.

They function with the rule of "one member, one vote".

(ii) They function on "no profit, no loss" basis. For commercial banks also, profitability is no

longer the main objective, but in their case this change has been brought about as a result of

social or public policy, while co-operative banks, by their very nature, do not pursue the goal of

profit maximization.

(iii) Co-operative banks perform all the main banking functions of deposit mobilization, supply

of credit and provision of remittance facilities. However, it is said that the rang~, of services

offered is narrower and the degree of product differentiation in each main type of service is much

less in the case co-operative banks, compared to commercial banks. In other words, co-operative

banks are characterized by functional specialization. It should be added that this is true with

much less force now, because many changes have taken place in the co-operative banking system

since the Banking Commission arrived at the above-mentioned conclusion. For example,\co-

operative banks now provide housing loans also. The UCBs provide working capital loans \and

term loans as well. The State Co-operative Banks (SCBs), Central Co-operative Banks (C0)3s)

and Urban Co-operative Banks (UCBs) can normally extend housing loans up to Rs one 1akh to

an individual. The scheduled UCBs, however, can lend up to Rs three lakh for housing purpose.

The UCBs can provide advances against shares and debentures also.

(iv) As said earlier, co-operative banks do banking business mainly in the agricultural and rural

sector. However, certain types of banks viz., UCBs, SCBs and CCBs operate in semi-urban,

urban, and metropolitan areas also. The urban and non-agricultural business of these banks has

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

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commercial banks, from urban to rural.

PROBLEMS AND POLICY

As in the case of commercial banks, the quantitative growth of co-operative banks has not been

accompanied by a qualitative growth. There have always been a number of weak..'1esses in their

performance. Many of these weaknesses were identified by the All India Rural Credit Survey

Committee (AIRCSC) in the early 1950s. By that time, co-operative banks had been in the

business for 45 years and the AIRCSC had concluded that co-operatives had failed, but that they

must succeed. As a result, special measures were introduced by the government and the RBI to

revive and strengthen co- operative banks. Even after a span of 35 years, an assessment of the

cooperative banks shows that" ... many of the weaknesses of the co-operative credit system

identified by the Rural Credit Survey Committee continue to persist even today.

In the same vein, the Khusro Committee asserts: "No credit system has been subjected to as

much experimentation at the dictates of those outside the system as the co-operative credit

system has been The history of co-operative credit system has been the history of alternating

periods of growth, stagnation and reorganisation and yet quantitatively the achievements of the

co-operative systems have by no means been insignificant. Thus looking to the stake of the

movement even in the limited sphere of credit, the classic assertion of the Rural Credit Survey

made 35 years ago still seems valid that Co-operation has failed but Co-operation must succeed.”

Main weakness of Co-operative Banks

The main weaknesses of co-operative banks are as follows:

(a) The vital link in the co-operative credit system namely, the PACSs, themselves remain very

weak. They are too small in size to be economical and viable; besides too many of them are

dormant, existing only on paper.

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(b) With the expanding credit needs of the rural sector, the commercial banks have come in

actively to meet the credit requirements of this sector, and this has aggravated the difficulties of

co-operative banks. The theory that co-operative banks would be buoyed up by the competition

from other financial institutions does not appear to have worked.

(c) Co-operative banks are not doing well in all the states; only a few account for a major part of

their business. For example, 75 per cent of total deposits mobilised by SCBs was from only

seven states in 1987-Andhra Pradesh, Gujarat, Karnataka, Madhya Pradesh, Maharashtra, Tamil

Nadu, and Uttar Pradesh.

(d) These banks still rely very heavily on refinancing facilities from the government, the RBI,

and NABARD. They have yet not been able to become self-reliant in respect of resources

through deposit mobilization.

(e) They suffer from dangerously low or weak quality of loan assets, and from highly

unsatisfactory recovery of loans.

(f) They suffer from infrastructural weaknesses and structural flaws. They do not look like banks

and do not inspire confidence in the potential members, depositors and borrowers.

(g) They suffer from too much officialisation and politicization. Undue governmental

interventions have prevented them from developing steadily as a self-reliant and resilient credit

system. Most of them are headed by politicians.

(h) They unduly depend on government capital rather than member capital. (i) There is no active

participation of their members in their working, which can come about if they work with

members' money rather than government largesse.

(j) They have been resorting to unethical practices. There are many regulators for them, but still

there are many lacunae in their regulation. In fact, the existence of multiple regulatory authorities

has come in the way of effective regulation, control, and monitoring of COBs.

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GOVERNMENT INITIATIVES TO STRENGTHEN THE DEVELOPMENT OF CO-

OPERATIVE BANKS

Even before the submission of the Khusro Committee Report, the government and the RBI had

initiated certain measures to strengthen the development of co-operative banks. Some of these

policy initiatives were as follows:

(i) The NABARD had formulated a scheme for the reorganization of PACSs and the

implementation of this scheme had started in those states which have accepted it.

(ii) The programme for development of selected P ACSs into truly multi-purpose co-operative

societies has been implemented in many states and Union Territories.

(iii) In addition to such programmes, certain state governments like Andhra Pradesh, Madhya

Pradesh West Bengal had also initiated development programmes to strengthen the working of

the co-operative credit institutions at the base level.

(iv) On the basis of their financial position as on 30 June 1987, 175 CCBs and 7 SCBs in the

country were identified as 'weak' banks and brought under the programme of rehabilitation

which, however, did not really work quite well.

(v) With a view to enabling weak banks which were either ineligible or were on the verge of

becoming ineligible for refinance SUPP011, a 12-Point Action Programme had been formulated

and circulated by NABARD to all the state governments.

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National Bank for Agriculture and Rural Development

History

NABARD was established on the recommendations of Shivaraman Committee, by an act of

Parliament on 12 July 1982 to implement the National Bank for Agriculture and Rural

Development Act 1981. It replaced the Agricultural Credit Department (ACD) and Rural

Planning and Credit Cell (RPCC) of Reserve Bank of India, and Agricultural Refinance and

Development Corporation (ARDC). It is one of the premiere agencies to provide credit in rural

areas.

Role

NABARD:

1. serves as an apex financing agency for the institutions providing investment and

production credit for promoting the various developmental activities in rural areas

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2. takes measures towards institution building for improving absorptive capacity of the

credit delivery system, including monitoring, formulation of rehabilitation schemes,

restructuring of credit institutions, training of personnel, etc.

3. co-ordinates the rural financing activities of all institutions engaged in developmental

work at the field level and maintains liaison with Government of India, State

Governments, Reserve Bank of India (RBI) and other national level institutions

concerned with policy formulation

4. undertakes monitoring and evaluation of projects refinanced by it.

NABARD's refinance is available to State Co-operative Agriculture and Rural Development

Banks (SCARDBs), State Co-operative Banks (SCBs), Regional Rural Banks (RRBs),

Commercial Banks (CBs) and other financial institutions approved by RBI. While the ultimate

beneficiaries of investment credit can be individuals, partnership concerns, companies, State-

owned corporations or co-operative societies, production credit is generally given to individuals.

NABARD has its head office at Mumbai, India

NABARD operates throughout the country through its 28 Regional Offices and one Sub-office,

located in the capitals of all the states/union territories.Each Regional Office[RO] has a Chief

General Manager [CGMs] as its head, and the Head office has several Top executives like the

Executive Directors[ED], Managing Directors[MD], and the Chairperson. It has 336 District

Offices across the country, one Sub-office at Port Blair and one special cell at Srinagar. It also

has 6 training establishments.

NABARD is also known for its 'SHG Bank Linkage Programme' which encourages India's banks

to lend to self-help groups (SHGs). Because SHGs are composed mainly of poor women, this has

evolved into an important Indian tool for microfinance. As of March 2006 2.2 million SHGs

representing 33 million members had to been linked to credit through this programme.[4]

NABARD also has a portfolio of Natural Resource Management Programmes involving diverse

fields like Watershed Development, Tribal Development and Farm Innovation through dedicated

funds set up for the purpose.

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Rural Innovation

NABARD's role in rural development in India is phenomenal.[5] National Bank For Agriculture

& Rural Development (NABARD) is set up as an apex Development Bank by the Government

of India with a mandate for facilitating credit flow for promotion and development of agriculture,

cottage and village industries. The credit flow to agriculture activities sanctioned by NABARD

reached Rs 1,574,800 million in 2005-2006. The overall GDP is estimated to grow at 8.4 per

cent. The Indian economy as a whole is poised for higher growth in the coming years. Role of

NABARD in overall development of India in general and rural & agricultural in specific is

highly pivotal.

Through assistance of Swiss Agency for Development and Cooperation, NABARD set up the

Rural Infrastructure Development Fund. Under the RIDF scheme Rs. 512830 million have been

sanctioned for 2,44,651 projects covering irrigation, rural roads and bridges, health and

education, soil conservation, water schemes etc. Rural Innovation Fund is a fund designed to

support innovative, risk friendly, unconventional experiments in these sectors that would have

the potential to promote livelihood opportunities and employment in rural areas.[6] The assistance

is extended to Individuals, NGOs, Cooperatives, Self Help Group, and Panchayati Raj

Institutions who have the expertise and willingness to implement innovative ideas for improving

the quality of life in rural areas. Through member base of 250 million, 600000 cooperatives are

working in India at grass root level in almost every sector of economy. There are linkages

between SHG and other type institutes with that of cooperatives.

The purpose of RIDF is to promote innovation in rural & agricultural sector through viable

means. Effectiveness of the program depends upon many factors, but the type of organization to

which the assistance is extended is crucial one in generating, executing ideas in optimum

commercial way. Cooperative is member driven formal organization for socio-economic

purpose, while SHG is informal one. NGO have more of social color while that of PRI is

political one. Does the legal status of an institute influences effectiveness of the program? How

& to what an extent? Cooperative type of organization is better (Financial efficiency &

effectiveness) in functioning (agriculture & rural sector) compared to NGO, SHG & PRIs.[7]

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Recently in 2007-08, NABARD has started a new direct lending facility under 'Umbrella

Programme for Natural Resource Management' (UPNRM). Under this facility financial support

for natural resource management activities can be provided as a loan at reasonable rate of

interest. Already 35 projects have been sanctioned involving loan amount of about Rs 1000

million. The sanctioned projects include honey collection by tribal in Maharashtra, tussar value

chain by a women producer company ('MASUTA'), eco-tourism in Karna

National Bank for Agriculture and Rural Development

Logo of NABARD Headquarters in Mumbai

Headquarters Mumbai, Maharashtra, India

Established 12 July 1982 [1]

Managing Director Dr K G Karmakar [2]

Currency

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

Website www.nabard.org

NABARD is the apex development bank in India

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CHAPTER 3

COMPANY PROFILE

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History of the organization:

There was need to meet financial requirement of middle class &small businessman. In 1944

Mr. Ramkisan Daga & other member got together & registered “The Lasalgaon Merchant Co-

operative Bank LTD , Lasalgaon.

Location

The Bank is situated in the lasalgaon.

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

Post box no-16

TAL- Niphad , Dist –Nashik

Founder promoters of the bank:

Ramkisan Motilal Daga

Jayraj Brahmechal

Shriram Shankar Palod

Bansilal Chunilal Daga

Bandulal Balaram Kasat

Radhakisan Mayaram Daga

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Ramkisan Rambakal Kambali

Motilal Harlal Kathi

Jagganath Jathmal Daga

Objectives of the organization:

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

To inspire the shareholder for the saving.

To provide the loans to the shareholders who need it.

To make available other banking facilities other than financing.

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Organization Structure:

SHAREHOLDERS

BOARD OF DIRECTOR

CKIEF EXECUTIVE OFFICER

SENIOR OFFICER

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JUNIOR OFFICER

CLERK

General information of the bank

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

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

Post box no-16

TAL-Niphad ,Dist –Nashik

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

Reserve Bank

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

Bank Code Number -0550

Total Office Staff - 28

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GROWTH AND DEVELOPMENT OF THE BANK:-

PAID UP CAPITAL:-

(Figures in lakhs)

35

YEAR PAID UP CAPITAL

2005-06 80.14

2006-07 83.12

2007-08 88.61

2008-09 94.12

2009-10 101.55

2010-11 108.15

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RESERVE FUND:-

(Figures in lakhs)

36

YEAR RESERVE FUND

2005-06 355.37

2006-07 352.34

2007-08 388.42

2008-09 390.93

2009-10 271.91

2010-11 266.64

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DEPOSITS:-

(Figures in lakhs)

37

YEAR DEPOSITS

2005-06 2034.97

2006-07 2239.79

2007-08 2444.99

2008-09 2967.45

2009-10 3301.23

2010-11 3500.13

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LOANS:-

(Figures in lakhs)

38

YEAR LOANS

2005-06 1501.70

2006-07 1492.06

2007-08 1640.18

2008-09 1823.77

2009-10 2001.77

2010-11 2179.48

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INVESTMENTS:-

(Figures in lakhs)

39

YEAR INVESTMENTS

2005-06 836.76

2006-07 845.81

2007-08 784.90

2008-09 1060.84

2009-10 1229.84

2010-11 1462.90

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PROFIT/LOSS:-

(Figures in lakhs)

40

YEAR PROFIT/LOSS

2005-06 5.13

2006-07 -42.17

2007-08 18.05

2008-09 22.71

2009-10 63.24

2010-11 38.14

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CHAPTER 4

THEORITICAL BACKGROUND

Definition of ratio analysis:

A tool used by individuals to conduct a quantitative analysis of information in a company's

financial statements. Ratios are calculated from current year numbers and are then compared to

previous years, other companies, the industry, or even the economy to judge the performance of

the company. Ratio analysis is predominately used by proponents of fundamental analysis.

Ratio can be defined as “numerical or an arithmetical relationship between two figures. It is

expressed when one figure derived by other.”

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IMPORTANCE OF RATIO ANALYSIS:

1) Accounting ratios reveal the financial position of the business firm. This helps

banks ,insurance companies as well as other financial institutions . The ratios also helpful to

investors for finding the profitability of the firm.

2) The ratios are very useful in intra firm comparisons are necessary to find out the exact

position of the firm as compared to other firm in the same industry. Compare the performance of

a firm current year with that of previous years.

3) If accounting ratios are calculated for a number of years, a trend can be established. This

help in setting future plans and forecasting.

4) Accounting ratios are of great assistance in locating the weak spots in the business. This

weakness may exist in spite of satisfactory performance otherwise.

Profitability analysis:

These ratios given an idea abut the profitability of a business firm Profit and profitability differ

from each other as profit is the difference between income and expenditure while profitability is

measured by comparing the profit with some other parameter like sales, capital employed, total

assets. The ratios reviling are the ratios under this category are usually expressed in percentage.

A class of financial metrics that are used to assess a business's ability to generate earnings as

compared to its expenses and other relevant costs incurred during a specific period of time. For

most of these ratios, having a higher value relative to a competitor's ratio or the same ratio from a

previous period is indicative that the company is doing well.

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Role of profitability analysis:

The financial manager has to take rational decisions from time to time keeping in view the

objectives of the company. Always the decision must be based on the analytical tool.

Profitability analysis is the most useful technique in this regard .A profitability analysis relies

on the comparison or relationship of the data which enhances the utility or the practical value of

the accounting information Profitability analysis today is performed by various users of financial

statements. Investors and management perform the analysis to understand how profitably or

productively the assets of the company are used. Lenders and Suppliers of goods look for the

ability of the firm to repay the dues on time. For instance, as a deposit holder of a bank, you

would be interested in liquidity of the bank and would expect the bank to pay you the amount

when you need.

Profitability analysis, which provides historical linkage between various financial

components ,is useful. Suppose the top management fixes a goal to increase the net income by

another 20%for the coming year .Using profit to sales linkage, we can estimate additional

turnover required to achieve the goals.

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CHAPTER 5

RESEARCH METHODOLOGY

DEFINITION OF RESEARCH:-

Research can be defined as “A process that is followed by a person to answer either his/her own

queries or somebody else queries about a particular object, person, subject etc.”

The person that does the research is known as researcher and the thing about which he/she is

doing research is known as area of research.

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Research is, thus, an original contributions to the existing stock of knowledge making for its

advancement .It is the pursuit of truth with the help of study. observations, comparisons and

experiment.

Procedures used in making systematic observations or otherwise obtaining data, evidence, or

information as part of a research project or study .

SOURCES OF DATA:-

PRIMARY DATA SOURCE:- This data is gathered for the first time problem solution.

Primary data are collected from the employee of the bank through the

Interaction and by asking some questions.

SECONDARY DATA SOURCE:- Secondary data consists of information that already exists

to serve the purpose. Secondary data are available in lower cost & another benefit of secondary

data is quicker availability. Here the relevant secondary data was collected through the available

literature from organization in the from of annual reports & other information is collected

through the internet.

SAMPLING DESIGN:-

The design for this study is judgment sampling.

SAMPLE SIZE : Two banks

DATA TYPE : Secondary data

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DATA COLLECTION METHOD:

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

SWOT ANALYSIS:-

The overall evaluation of a business’s strengths, weaknesses, opportunities, and threats is called

SWOT analysis. SWOT analysis consists of an analysis of the external and internal

environments.

STRENGTH:-

The bank is spread into limited area due to its limited area it is easy to monitor minor

requirements of the customers which may else ignored by other banks.

The bank has the branches in the nearby villages where the branches of other banks are

not yet opened which gives the benefits to the bank.

As the bank is co-operative bank, bank gets the advantages of getting the priority by

different co-operative societies for transaction & loans.

Due to the co-operative in nature people has faith in the bank.

Adherence to co-operative values & principles.

The main priority of the bank of the Lasalgaon Merchant Co-operative Bank is

member service rather than profit.

WEAKNESSESS:-

Due to the limited area, the bank has less resources as compared to other banks.

The LMCB banks staff lacks the professionalism.

Political interference in the management of the bank due to this proper decisions are not

taken.

The LMCB bank is not having the facilities like internet banking and mobile banking.

The LMCB bank is not having the facilities of ATM.

Lack of knowledge about the many aspects of the banking regulation to the employees.

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OPPORUNITIES:-

Providing ATM facilities to the member bank can increase its business.

The LMCB bank is having the opportunities to open new branches in the nearby villages

where branches of the other banks are not yet opened.

The LMCB bank can make available the facilities like internet banking & mobile

banking.

Being co-operative bank this bank gets priority over the other banks from the co-

operative societies.

As a co-operative bank, bank can give 1% more interest on deposits to attract the deposits

from the public.

THREATS:-

The main threat to the LMCB bank is increasing the numbers of branches of nationalized

bank &commercial banks.

Easy policies of the other banks.

Instant services are provided by some other banks.

Online banking, mobile banking &ATM facilities of the nationalized bank.

Facilities like Zero Balance Account by the State Bank Of India.

OBJECTIVES OF THE STUDY:

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

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

determination of financial soundness.

3) To compare the performance of co-operative bank (i.e. The Lasalgaon Merchant Co-operative

Bank Ltd.) with the nationalized bank (i.e. State Bank of India)

4) To find out the whether there is a growth in the co-operative bank’s performance.

5) To find out the factors which are affecting the financial performance of the co-operative &

nationalized bank.

SCOPE OF THE STUDY:-

1) The project will be helpful to the bank to know its performance.

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

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

policy.

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

help to remove these drawbacks.

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

banks.

LIMITATION OF THE STUDY:-

1) To get the financial data from the organization is not an easy task.

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

3) Maximum secondary data is used for the study.

4) The study was conducted for the limited period. The profitability of the bank was studied only

for the 5 years. Due to this we may not get the proper results.

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

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

different.

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CHAPTER6

DATA ANALYSIS & INTERPRETATION:-

NET PROFIT RATIO:-

FORMUALA – NET PROFIT /TOTAL RECEIPT*100

Table No: 1

YEAR FIGURES LMCB

BANK

(%)

FIGURES (IN CRORE) SBI

BANK

(%)

2007 - 42,16,574/ 2,08,42,398 -20.23 4,541.31 / 46,937.79 9.68

2008 18,05,050 / 2,97,73,602 6.06 6,729.12 / 58,348.74 11.53

2009 22,70,755 / 3,00,22,370 7.56 9,121.23 / 76,479.78 11.92

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2010 63,23,847 / 3,86,52,173 16.36 9,166.05 / 85,962.07 10.66

2011 38,14,536 / 4,06,40,369 9.38 7,370.35 / 96,329.45 7.65

Fig No: 1

Analysis &Interpretation:-

Net profit Ratio reveals overall firms efficiency in the operating the business & the net return

available to the owners. The net profit ratio of LMCB bank in the year 2010&11 is more than

SBI. In the year 2007 the LMCB bank suffered from the loss. In the year 2008&09,the net profit

ratio of LMCB bank is less than the SBI

RETURN ON NET WORTH:-

FORMNUALA:-NET PROFIT/OWNERS CAPITAL*100

Table No: 2

YEAR FIGURES LMCB

BANK (%)

FIGURES (IN CRORE) SBI BANK

(%)

2007 - 42,16,574/ 4,35,45,645 -9.68 4,541.31 / 31,298.56 14.5O

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2008 18,05,050 / 4,77,02,390 3.78 6,729.12 / 49,032.66 13.72

2009 22,70,755 / 4,85,05,054 4.68 9,121.23 / 57,947.70 15.74

2010 63,23,847 / 3,73,46,128 16.93 9,166.05 / 65,949.20 13.89

2011 38,14,536 / 3,74,80,338 10.17 7,370.35 / 64,986.04 11.34

Fig No: 2

Analysis &Interpretation:-

This ratio expressed as a percentage of net profit to owners worth. The Return On Worth of

LMCB is less than the SBI, except in

the year 2010.In the year 2010, the Return on Net Worth is higher than the SBI.

RETURN ON EQUITY CAPITAL:-

FORMUALA- NET PROFIT/EQUITY CAPITAL*100

Table No: 3

YEAR FIGURES LMCB

BANK (%)

FIGURES (IN CRORE) SBI BANK

(%)

2007 - 42,16,574/ 83,11,980 -50.72 4,541.31 / 526.30 862.87

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2008 18,05,050 / 88,60,830 20.37 6,729.12 / 631.47 1065.62

2009 22,70,755 / 94,12,410 24.12 9,121.23 / 634.88 1436.68

2010 63,23,847 / 1,01,55,110 62.27 9,166.05 / 634.88 1443.74

2011 38,14,536 / 1,08,15,460 35.26 7,370.35 / 635.00 1160.68

Fig No: 3

Analysis &Interpretation:-

The Return on Equity Capital is an important profit indicator to shareholder of the

organization. From the above data, the ratio of LMCB bank is increasing by the years but it is too

less as compared to the ratio of SBI.

RETURN ON TOTAL ASSETS:-

FORMUALA-NET PROFIT/TOTAL ASSETS*100

Table No: 4

YEAR FIGURES LMCB

BANK (%)

FIGURES (IN CRORE) SBI BANK

(%)

2007 - 42,16,574/ 30,99,13,260 -1.36 4,541.31 / 5,66,565.24 0.80

2008 18,05,050 / 32,78,20,392 0.55 6,729.12 / 7,21,526.32 0.93

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2009 22,70,755 / 38,59,64,560 0.58 9,121.23 / 9,64,432.08 0.94

2010 63,23,847 / 41,30,64,796 1.53 9,166.05 / 10,53,413.74 0.87

2011 38,14,536 / 42,23,71,774 0.90 7,370.35 / 12,23,736.20 0.60

Fig No: 4

Analysis &Interpretation:-

This ratio is expressed as a percentage of net profit to total assets. This ratio gives an

indication how effectively assets are being used .The ratio of Return On Total Assets of LMCB

bank is satisfactorily as compared SBI.

EARNING PER SHARE:-

FORMUALA- NET PROFIT/TOTAL NO OF EQUITY SHAREHOLDER

Table No: 5

YEAR FIGURES LMCB

BANK

FIGURES (IN CRORE) SBI BANK

2007 - 42,16,574/ 8,31,198 -5.07 4,541.31 / 52.63 86.29

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2008 18,05,050 / 8,86,083 2.03 6,729.12 / 63.147 106.56

2009 22,70,755 / 9,41,241 2.41 9,121.23 / 63.488 143.67

2010 63,23,847 / 10,15,511 6.22 9,166.05 / 63.488 144.37

2011 38,14,536 / 10,81,546 3.52 7,370.35 / 63.50 116.07

Fig No: 5

Analysis &Interpretation:-

EPS measures the earning capacity of the organization & determines the price of the equity

share in the market.EPS of LMCB bank is lower as compared to the SBI.

DIVIDEND PAYOUT RATIO:-

FORMUALA-DIVIDEND PER SHARE/EARNING PER SHARE*100

Table No: 6

YEAR FIGURES LMCB

BANK (%)

FIGURES (IN CRORE) SBI BANK

(%)

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2007 - 14.00 / 86.29 16.22

2008 - 21.50 / 106.50 20.17

2009 - 29.00 / 143.67 20.18

2010 - 30.00 / 144.37 20.78

2011 - 30.00 / 116.07 25.84

Fig No: 6

Analysis &Interpretation:-

Dividend payout ratio indicates the dividend policy adopted by the organization about

utilization of the profit. The Dividend Payout Ratio of SBI is increasing by the years. The LMCB

bank is not declared the dividend to its shareholders from last few years.

DEBT EQUITY RATIO:-

FORMUALA- LONG TERM DEBT/NET WORTH*100

Table No: 7

YEAR FIGURES LMCB

BANK

FIGURES (IN CRORE) SBI

BANK

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(%) (%)

2007 22,39,78,910 / 4,35,45,645 5.14 4,75,224.43 / 31,298.56 15.18

2008 24,44,99,340 / 4,77,02,390 5.12 5,89,131.35 / 49,032.66 12.01

2009 29,67,44,821 / 4,85,05,054 6.11 7,95,786.81 / 57,947.70 13.73

2010 33,02,23,404 / 3,73,46,128 8.84 9,07,127.83 / 65,949.20 13.75

2011 35,00,13,018 / 3,74,80,338 9.33 10,53,501.77/64,986.04 16.21

Fig No: 7

Analysis &Interpretation:-

The debt equity ratio which indicates the relative contributions of creditors and owners. From

the above data, it reveals that the debt portion is more than the equity of both the organization.

DEBT ASSET RATIO:-

FORMUALA-DEBT/TOTAL ASSET*100

Table No: 8

YEAR FIGURES LMCB

BANK

(%)

FIGURES (IN CRORE) SBI BANK

(%)

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2007 22,39,78,910 /

30,99,13,260

72.27 4,75,224.43 / 5,66,565.25 83.87

2008 24,44,99,340 /

32,78,20,392

74.58 5,89,131.35 / 7,21,526.32 81.65

2009 29,67,44,821 /

38,59,64,560

76.88 7,95,786.81 / 9,64,432.08 82.51

2010 33,02,23,404 /

41,30,64,796

79.94 9,07,127.83 /10,53,413.74 86.11

2011 35,00,13,018 /

42,23,71,774

82.86 10,53,501.77/12,23,736.20 86.08

Fig No: 8

Analysis &Interpretation:-

The debt asset ratio measures the extent to which borrowed funds support the firms assets.

Debt assets ratio indicates that the % of the total assets are financed from the debt source.

INTEREST EXPENDED/INTEREST EARNED*100

Table No: 9

YEAR FIGURES LMCB

BANK

(%)

FIGURES (IN CRORE) SBI BANK

(%)

2007 1,88,57,756 / 1,95,07,767 96.66 23,436.82 / 39,491.03 59.35

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2008 2,11,04,915 / 2,80,58,222 75.21 31,929.08 / 48,950.37 65.23

2009 2,06,77,769 / 2,91,04,466 71.04 42,915.29 / 63,788.43 67.28

2010 2,48,44,813 / 3,77,72,736 65.77 47,322.48 / 70,993.92 66.66

2011 2,91,17,815 / 3,96,14,207 73.50 48,867.96 / 81,394.36 60.04

Fig No: 9

Analysis &Interpretation:-

Interest expended /Interest earned ratio shows the relationship between how much interest are

paid on deposits & how much interest are earned from the loans &advances.

OTHER INCOME / TOTAL INCOME *100

Table No: 10

YEAR FIGURES LMCB

BANK

(%)

FIGURES (IN CRORE) SBI BANK

(%)

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2007 13,34,631 / 2,08,42,398 6.40 7,446.76 / 46,937.79 15.86

2008 17,15,380 / 2,97,73,602 5.76 9,398.43 / 58,348.74 16.10

2009 09,17,904 / 3,00,22,370 3.05 12,691.35 / 76,479.78 16.59

2010 08,79,437 / 3,86,52,172 2.27 14,968.15 / 85,962.07 17.41

2011 10,26,162 / 4,06,40,369 2.52 14,935.09 / 96,329.45 15.50

Fig No: 10

Analysis &Interpretation:-

This ratio expresses the income of the bank from the other sources rather than only interest.

The source of other income is such as commission on demand draft, rent from lockers etc. Other

income to total income ratio of LMCB bank is low that means the bank has the less other

resources of incom

COMPARATIVE PERFORMANCE ANALYSIS OF CO-OPERATIVE BANK &

NATIONALISED BANK FROM 2007 TO 2011

Particulars Average figures Average

(co-

operativ

e bank)

Average figures (in crores)

Average(

nationali

zed

bank)

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Net Profit Ratio 19,99,522 / 3,19,86,182 6.25% 7,385.61 /72,811.56 10.14%

Return On Net Worth 19,99,522 / 4,29,15,911 4.65% 7,385.61 / 53,842.83 13.71%

Return On Equity

Capital

19,99,522 / 95,11,158 21.02% 7,385.61 / 612.50 1205.81

%

Return On Total

Assets

19,99,522 / 37,18,26,956 o.53% 7,385.61 / 9,05,934.71 o.81%

Earning Per Share 19,99,522 / 9,51,115 2.10 7,385.61 /61.25 120.58

Dividend Payout

Ratio

- 0% 24.9 / 120.58 20.65%

Debt Assets Ratio 28,90,91,898 / 37,18,26,956 77.74% 7,64,154.438 /

9,05,934.71

84.34%

Debt Equity Ratio 28,90,91,898 / 4,29,15,911 6.73 7, 64,154.438 /

53,842.83

14.19

NPA’s 63.24% /5 12.64(%

)

3.22% /5 0.64(%)

Interest

expended/Interest

earned

2,29,20,613 / 3,08,11,479 74.38(%

)

38,894.32 / 60,923.61 63.84(%)

Other income/Total

income

11,74,702 / 3,19,86,182 3.67(%) 11,887.956 / 72,811.56 16.32(%)

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CHAPTER 7

FINDING, RECOMMENDATIONS &CONCLUSIONS:-

FINDING:-

Findings are drawn based on data analysis.

1) The Net Profit Ratio of “The Lasalgaon Merchant Co-operative Bank Ltd, Lasalgaon” is low

as compared to “State Bank of India”, except in the year 2010.

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2) The Return on Net Worth of “The Lasalgaon Merchant Co-operative Bank Ltd, Lasalgaon” is

low as compared to “State Bank of India”, except in the year 2010.

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

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

5) The Earning Per Share of “The Lasalgaon Merchant Co-operative Bank Ltd,” is too lower as

compared to SBI.

6) “The Lasalgaon Merchant Co-operative Bank Ltd, has not declared the dividend to its

shareholders from last few years.

7) The Debt Equity Ratio of “The Lasalgaon Merchant Co-operative Bank Ltd, is low as

compare to SBI, It indicates that most of the portion of capital is raised by the equity.

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

SBI.

CONCLUSIONS:-

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From the data analysis, I have concluded that the performance of “The Lasalgaon Merchant

Co-operative Bank Ltd”, s not good as compared to SBI. The bank should give dividends to its

shareholders. It will create a loyalty of shareholders towards the bank. The bank is not using its

assets effectively due to this the profit of the bank is low as compared to SBI.

RECOMMENDATIONS:-

1) “The Lasalgaon Merchant Co-operative Bank Ltd,” should try to increase the net profit by

decreasing the expenses of the bank.

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

3) “The Lasalgaon Merchant Co-operative Bank should try to reduce its NPA’s i.e. Non

Performing Assets.

4) The Earning Per Share of “The Lasalgaon Merchant Co-operative Bank is too low, the bank

should try to increase the EPS.

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

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

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

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

BIBLIOGRAPHY:

FINANCIAL MANAGEMENT : ICFAI UNIVERSITY

FINANCIAL MANAGEMENT : N.M.VECHALKAR

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ANNUAL REPORT OF LMCB BANK

WWW.SBI.COM

WWW.RBIBULLETIN.COM

THE LASALGAON MERCHANTS CO-OPERATIVE BANK LTD, LASALGAON (DIST-NASHIK)

BALANCE SHEET

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 CAPITAL &LIABILITIES 31-03-2007 31 -03-2008 31-03-2009   31-03-2010   31-03-2011

SHARE CAPITAL 1,25,00,000 1,25,00,000 1,25,00,000 1,25,00,000  1,25,00,000

PAID UP CAPITAL 83,11,980 88,60,830 94,12,410 1,01,55,110  1,08,15,460

RESERVE AND OTHER FUND 3,52,33,665 3,88,41,560 3,90,92,644 2,71,91,018  2,66,64,878

DEPOSITS 22,39,78,910 24,44,99,340 29,67,44,821 33,02,23,404  35,00,13,018

BILLS PAYABLE 8,69,454 6,64,608 8,56,494 3,40,380  3,90,053

INTEREST PAYBLE 1,08,10,346 48,57,840 70,01,337 78,01,536  61,92,547OTHER LIABILITIES &PROVISION 4,04,467 11,46,352 6,81,304 7,48,503  8,91,270RESERVE FOR OVERDUE INTEREST 3,02,12,959 2,70,80,590 2,99,04,802 3,02,80,998  2,68,89,976

BRANCH ADJUSTMENT 91,479 64,222      

PROFIT&LOSS   18,05,050 22,70,755 63,23,847  5,14,572

TOTAL 30,99,13,260  32,78,20,392  38,59,64,560  41,30,64,796  42,23,71,774 

ASSETS 31-03-2007 31 -03-2008 31-03-2009   31-03-2010   31-03-2011CASH BAL. 55,16,890 80,08,981 46,09,296 1,30,65,949 86,25,236BANK BAL. 1,06,24,789 174,47,034 3,21,52,165 2,67,26,287 1,33,96,906FIXED DEPOSITS IN BANK

1,65,00,000 1,15,00,000 4,88,03,045 4,59,03,954 6,17,95,817

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INVESTMENTS 5,75,80,500 5,74,30,500 5,72,80,500 7,70,80,000 8,44,94,500SHARES OF C0-0PERATIVE SOCIETIES

4,04,500 4,04,500 4,04,500 4,04,500 4,04,500

OTHER INVESTMENT

1,05,00,000 95,59,532

LOANS &ADDVANCES:1)CASH CREDIT 44,62,060 53,64,750 53,81,938 50,75,630 45,06,8982)AGAINST PLEDGE OF GOODS

14,47,43,965 15,86,53,248 1,76,99,184 19,51,01,184 21,34,41,980

INTEREST RECEIVABLE

12,20,599 14,82,564 21,41,061 29,86,426 29,56,217

SELF D.D. COLLECTION &DISCOUNTING

9,29,385 9,71,301 65,71,134 6,48,874 89,000

BILLS RECEIVABLE

8,69,455 6,64,608 8,56,494 3,40,380 3,90,053

FIXED ASSETS 36,49,827 67,58,867 60,52,881 48,11,730 39,38,874INTEREST ACCRUED

3,02,12,959 2,70,80,590 2,99,04,802 3,02,80,998 2,68,89,974

OTHER ASSETS &INCOME

10,76,714 8,72,601 8,08,170 9,11,287 15,49,419

ACCUMLATED LOSS

2,16,21,616 216,21,616 1,98,16,566 96,23,811

BRANCH ADJUSTMENT

1,00,823 1,03,786 92,336

TOTAL 30,99,13,260 32,78,20,392 38,59,64,560 413064796 42,23,71,774

PROFIT &LOSS A/C FOR THE YEAR ENDED

EXPENSES 31-03-2007 31 -03-2008 31-03-2009 31-03-2010   31-03-2011INTEREST ON LOANS &DEPOSITS

1,88,57,756 2,11,04,915 2,06,77,769 2,48,44,813 2,91,17,815

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SALARY &ALLOWANCE

30,52,286 32,67,635 33,58,383 37,36,779 39,29,618

GRATUITY PAID 2,15,325 2,10,030 1,85,220 -CONTRIBUTION TO P.F.

3,19,989 3,59,563 3,58,472 4,05,114 4,29,259

COMMISSION PAID ON SMALL SAVING

3,12,088 3,63,786 4,44,982 6,71,030 6,35,426

RENT,TAXES INSURANCE &LIGHTING

4,03,103 4,30,165 4,83,388 5,86,483 6,14,782

COURT EXPENSES 25,000 35,884 - 2,570 81,202POSTAGE &TELEGRAM

89,402 91,873 84,448 79,511 68,578

AUDIT FEE 1,30,400 1,40,000 1,45,173 1,55,946 1,99,204DEPRECIATION 6,32,024 9,64,946 9,97,256 8,37,314 5,77,076PRINTING &STATIONERY

87,452 56,183 57,396 60,100 58,227

ADVERTISEMENT 21,136 36,760 23,500 11,120 47,600OTHER EXPENSES 9,13,010 11,16,840 9,10,818 7,52,326 10,77,046NET PROFIT 18,05,050 22,70,755 63,23,847 38,14,536TOTAL 2,50,58,972 2,97,73,602 3,00,22,370 3,86,52,173 4,06,40,369

INCOMES 31-03-2007 31 -03-2008 31-03-2009 31-03-2010   31-03-2011INTEREST RECEIVED

1,95,07,767 2,80,58,222 2,91,04,466 3,77,72,736 3,96,14,207

COMMISSION 1,79,343 3,13,546 3,32,456 2,73,655 2,06,439OTHER INCOME 11,55,288 14,01,834 5,85,448 6,05,782 8,19,723NET LOSS 42,16,574 -TOTAL 2,50,58,972 2,97,73,602 3,00,22,370 3,86,52,173 4,06,40,369

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Balance Sheet of State Bank of India

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

Mar '07 Mar '08 Mar '09 Mar '10 Mar '11

12 mths 12 mths 12 mths 12 mths 12 mths

Capital and Liabilities:

Total Share Capital 526.30 631.47 634.88 634.88 635.00

Equity Share Capital 526.30 631.47 634.88 634.88 635.00

Share Application Money 0.00 0.00 0.00 0.00 0.00

Preference Share Capital 0.00 0.00 0.00 0.00 0.00

Reserves 30,772.26 48,401.19 57,312.82 65,314.32 64,351.04

Revaluation Reserves 0.00 0.00 0.00 0.00 0.00

Net Worth 31,298.56 49,032.66 57,947.70 65,949.20 64,986.04

Deposits 435,521.09 537,403.94 742,073.13 804,116.23 933,932.81

Borrowings 39,703.34 51,727.41 53,713.68 103,011.60 119,568.96

Total Debt 475,224.43 589,131.35 795,786.81 907,127.83 1,053,501.77

Other Liabilities & Provisions

60,042.26 83,362.30 110,697.57 80,336.70 105,248.39

Total Liabilities 566,565.25 721,526.31 964,432.08 1,053,413.73 1,223,736.20

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Mar '07 Mar '08 Mar '09 Mar '10 Mar '11

12 mths 12 mths 12 mths 12 mths 12 mths

Assets

Cash & Balances with RBI

29,076.43 51,534.62 55,546.17 61,290.87 94,395.50

Balance with Banks, Money at Call

22,892.27 15,931.72 48,857.63 34,892.98 28,478.65

Advances 337,336.49 416,768.20 542,503.20 631,914.15 756,719.45

Investments 149,148.88 189,501.27 275,953.96 285,790.07 295,600.57

Gross Block 8,061.92 8,988.35 10,403.06 11,831.63 13,189.28

Accumulated Depreciation

5,385.01 5,849.13 6,828.65 7,713.90 8,757.33

Net Block 2,676.91 3,139.22 3,574.41 4,117.73 4,431.95

Capital Work In Progress 141.95 234.26 263.44 295.18 332.23

Other Assets 25,292.31 44,417.03 37,733.27 35,112.76 43,777.85

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

Contingent Liabilities 259,536.57 736,087.59 614,603.47 429,917.37 585,294.50

Bills for collection 70,418.15 93,652.89 152,964.06 166,449.04 205,092.29

Book Value (Rs) 594.69 776.48 912.73 1,038.76 1,023.40

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Profit & Loss account of State Bank of India

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

Mar '07 Mar '08 Mar '09 Mar '10 Mar '11

12 mths 12 mths 12 mths 12 mths 12 mths

Income

Interest Earned 39,491.03 48,950.31 63,788.43 70,993.92 81,394.36

Other Income 7,446.76 9,398.43 12,691.35 14,968.15 14,935.09

Total Income 46,937.79 58,348.74 76,479.78 85,962.07 96,329.45

Expenditure

Interest expended 23,436.82 31,929.08 42,915.29 47,322.48 48,867.96

Employee Cost 7,932.58 7,785.87 9,747.31 12,754.65 14,480.17

Selling and Admin Expenses 3,251.14 4,165.94 5,122.06 7,898.23 12,141.19

Depreciation 602.39 679.98 763.14 932.66 990.50

Miscellaneous Expenses 7,173.55 7,058.75 8,810.75 7,888.00 12,479.30

Preoperative Exp Capitalised 0.00 0.00 0.00 0.00 0.00

Operating Expenses 13,251.78 14,609.55 18,123.66 24,941.01 31,430.88

Provisions & Contingencies 5,707.88 5,080.99 6,319.60 4,532.53 8,660.28

Total Expenses 42,396.48 51,619.62 67,358.55 76,796.02 88,959.12

Mar '07 Mar '08 Mar '09 Mar '10 Mar '11

74