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Primax International Journal of

Finance (PIJF)

Primax International Journal of Commerce and Management ResearchNo.25/A, Nagadevanahalli, Boothappa Temple Road, 80 Feet Ring Road, Jnanabharathi Post,

Bangalore -56, Karnataka, India. Ph: 08971725451Email: [email protected], [email protected]

www.primaxijcmr.com

• Research Papers • Articles • Case studies

Print ISSN: 2348-0475Primax International Journal of Finance (PIJF)

Page IIConference Paper - July 2016Special Issue

Managing Editor:

Prof. T. Rajeswari., M.Sc.,M.A(Eng).,M.B.A.,M.A.(Soc).,(Ph.D)

Coordinator:

Dr. K. V. Ramanathan

Professor of Finance,

Padmashree Institute of Management Studies. Bangalore.

Dr. V. Selvaraj

Head & Associate Professor,

Nehru Memorial College (Autonomous),Tiruchirappalli.

Dr. M. Muthu Gopalakrishnan

Associate Professor,

Acharya Bangalore B School, Bangalore.

Publisher:

Primax Commerce and Management Research Academy, Bangalore-56

(Karnataka Reg.: 48/159/CE/0103/2013)

Issue:

Special Issue - Conference Paper – July, 2016.

COPYRIGHT:

1. All rights reserved. And Copyright © 2013, Primax Commerce and Management Research

Academy.

2. Reproduction of any part of this Journal in the whole or in part without written permission from the

publisher is prohibited .

3. All rights reserved ISSN: 2348-0475

Contact:

T. Rajeswari., M.B.A.,M.A(Eng.).,M.Sc.,M.A(Soc).,(Ph.D)

Founder and Managing Editor,

No.25/A, Nagadevanahalli, Boothappa Temple Road80 Feet Ring Road, Jnanabharathi Post,Bangalore -56, Karnataka, India. Ph: +91 8971725451Email: [email protected], [email protected]

Primax International Journal of Finance (PIJF) Print ISSN: 2348-0475

Page IIIConference Paper - July 2016Special Issue

Editor Desk

It gives me a great pleasure to launch this new journal for Two day International Conference special

Issue July 2016 “Primax International Journal of Finance”. There are a lot of challenges which the

growing economies face in the realms of basic necessities in life. Technology can play a very distinct

role in bringing about this change. It is very important that different stakeholders unite and collaborate

on issues which confront the society. One of the key objectives of research should be its usability and

application. This journal attempts to document and spark a debate on the research focused on

business & Management in context of emerging world. The sectors could range from education,

finance, HR, Marketing, transport, shelter, manufacturing and service areas. The key focus would

however be the emerging sectors and research which discusses application and usability in societal

or consumer context whether individual or industrial.

The application of technology is a key theme in every paper which is published in this journal. The

intent of this journal is to showcase technologies which could bring about a fundamental change in

achieving societal and consumer impact. These technologies could be very sophisticated to very

elementary but in terms of impact they would be capable of being commercialized, scaled up and

focus on real life challenges.

The first issue has been very carefully put together covering a range of technologies in the domain of

Finance, Marketing, HR, IT, Operation Management & Economics. The contributions have come in

not only from India from industry and academics but also from very renowned institutions and global

industry groups as well.

I would like to thank our team member, coordinator all the editorial team members, reviewers and

initial team which has helped in making this journal a possibility. We hope that the research featured

here sets up many new milestones. We have had an overwhelming response from some very eminent

Editors and researchers globally to support as Editorial Team. I look forward to make this endeavour

very meaningful. A very warm thanks to participants from different universities of India to provide an

opportunity to make this journal a reality.

Prof. T. Rajeswari,

Managing Editor

Primax Journal.

“The secret of life is not enjoyment, but education through experience”. And Experience is

the only source of knowledge.

-: Swami Vivekananda


Page IVConference Paper - July 2016Special Issue

Contents

Sl.No.

1

2

3

4

5

6

7

8

9

10

11

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14

15

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Title of the Articles Page No.

1 - 8

9 - 18

19 - 22

23 - 27

28 - 30

31 - 33

34 - 42

43 - 46

47 - 51

52 - 57

58 - 65

66 - 70

71 - 79

80 - 89

90 - 97

98 - 100

101 - 103

104 - 113

Indian Mutual Fund Market: Retail Investor’s Investment Insight - Anita Anil & Dr. R. Kamaraj

Testing for the Long-Run Sustainability of Economic Growth of SelectedCountries using Genuine Savings Rate Approach

- Dhananjaya K & Dr. Krishna Raj

A Study with Reference to Technology Based Services Rendered by IndianOverseas Bank - Dr. A. Irin Sutha & J. Solomon Thangadurai

Achieving Excellence in Banking Sector through Good Corporate Governance- Dr. A. Uttama Durga Devi

E-Banking - An Overview - Dr. E. Mubarak Ali & K. Riyaz Ahamed

Financial Performance Analysis - Dr. K. Kumar & S. V. Sheeba Mary

Financial Performance of MFIS In India and Bangladesh – A Comparison - Dr. R. Rupa

Crowdfunding: A Booster for Budding Entrepreneurs - Dr. G. Parimalarani

The Role of Debtors in the Working Capital Management Practice - AComparative Study of Automobile Industry - Dr. Loluru Nagarjuna

A Study on the Effect of Intellectual Capital on the Profitability Ratios withSpecial Reference to Public Sector Banks Listed In BSE

- Dr. M. Abdul Hakkeem & K. Ashraf Ali

Working Capital Management in Tamil Nadu Cements Corporation Ltd, Ariyalur - Dr. M. Chandrasekaran & A. Vanithamani

A Study on Feasibility of buying and Selling of Shares in Stock Market withReference to Five Selected It Companies - Dr. P. Kanagaraju & L. Jayaseelan

A Study on Women Empowerment through Financial Inclusion in India.- Dr. T. Aswatha Narayana & Srikanth. R

Comparative Analysis of Mutual Fund Schemes Available at LIC NomuraMutual Fund and UTI Mutual Fund - G. Ravi Kumar & Dr. V. Murali Krishna

Indicators of Financial Inclusion in India - An Analytical Study - K. Santosh, Dr. S. E. V. Subrahmanyam & Dr. T. Narayana Reddy

Study on Banking Services offered to Women Entreprenuers and the FinancialProblems Faced by them with Special Reference to the Borrowers of StateBank of India, Kerala - K. Sudha

Budget 2016: Impact on Entrepreneurial Growth - Ketan Vira & Dr. R. K. Singh

An Empirical Study on The Performance of Top Ten Banks During 2014-2016 - L. Raga Jyothi


Page VConference Paper - July 2016Special Issue

Sl.No. Title of the Articles Page No.

19

20

21

22

23

24

25

26

27

28

Investors’ Perception Towards Mutual Fund - M. Venkataramana, Dr. M. Vijaya Bhaskar Reddy & Dr. T. Narayana Reddy

A Study on Financial Perforance of Tamilnadu Sugar Corporation Limited(TASCO) - P. Besmi

Performance Evaluation of Selected Mutual Fund Schemes of HDFC AssetManagement Company, Tirunelveli - R. Sangeetha & C. Maria Rex Sugirtha

A Study on Financial Performance of with Reference to the District Co-Operative Central Bank Ltd., Eluru - R. Sireesha

Customer Utility of Mobile Financial Services - T. Velmurugan & Dr. M. Ramesh

Economics of Transition- Analysis of Differences in the Path Taken by Chinaand Successor Countries of USSR and Its Impact on their RespectiveEconomies

- T. Raja Reddy, Dr. K. Visweswara Reddy & Dr. E. Lokanadha Reddy

Service Quality of Public Sector Banks in Tamilnadu: An Empirical Study - V. Prabakaran & Dr. P. Krishnaveni

Comparative Study on the Financial Literacy among the Youth in Bangaloreand Cochin - Vinnarasi. B

A Study on Financial Performance of New Generation Private SectorsCommercial Banks - T. Shahin Banu

MUDRA – A Boon to Women MSME Sector: An Analysis of New FinancialInitiative by the Union Government - Jyothi

114 - 119

120 - 123

124 - 128

129 - 135

136 - 140

141 - 144

145 - 149

150 - 158

159 - 164

165 - 171

Conference Paper - July 2016Special Issue


INDIAN MUTUAL FUND MARKET: RETAIL INVESTOR’S INVESTMENT

INSIGHT

1. Assistant Professor, Dept of Management Studies, K.Ramakrishnan College of Engineering, Trichy.2. Head and Professor, Dept of Management Studies, K.Ramakrishnan college of Engineering, Trichy.

Abstract

In case of mutual funds, people are not interested in the day-to-day management of the funds but are interested in the

final outcome of the investment. Hence, they pool their money together, hire an investment manager who manages

funds for them and expect to earn a return on them.Indian mutual fund has gained a lot of popularity from the past few

years. Earlier only UTI enjoyed the monopoly in this industry, but with the passage of time, many new players entered

the market. As the time has passed, this industry has become a buzzword in the Indian financial system. Mutual

Funds, which have come out as strong financial intermediaries, are playing a vital part in the process. They have not

only endowed stability to the financial system, but have also lent assistance to rationalize the process of resource

allocation. On matching up with other contemporary financial instruments, mutual funds put forward a dependable,

uncomplicated and a better fitting in approach of investment. Therefore, it is very important to know the investors’

interest, or, lack of it, in this industry as Indian investors finds it difficult to familiarize them with this investment avenue

still. The foremost rationale for this lack of appeal in mutual funds is the low customer awareness level. This paper

discusses the introduction, evolution of mutual fund market along with the range of different expenses, various parties

involved in this market segment.

Keywords: Mutual Fund, Investors ‘Awareness, Investors Behavior, Risk Factors.

Anita Anil1 Dr. R. Kamaraj2

Introduction

Mutual funds really captured the public’s attention inthe 1980s and ’90s when mutual fund investment hitrecord highs and investors saw incredible returns.However, the idea of pooling assets for investmentpurposes has been around for a long time.

A mutual fund is a pool of money, collected from investors,and is invested according to certain investmentobjectives. A mutual fund is created when investors puttheir money together. It is therefore a pool of theinvestor’s funds. The most important characteristic of amutual fund is that the contributors and the beneficiariesof the fund are the same class of people. The term mutualmeans that investors contribute to the pool, and alsobenefit from the pool. There are no other claimants tothe funds. The pool of funds held mutually by investorsis the mutual fund.

A mutual fund’s business is to invest the funds thuscollected, according to the wishes of the investors whocreated the pool. In many markets these wishes arearticulated as “investment mandates”. Usually, theinvestors appoint professional investment managers, tomanage their funds. The same objective is achieved whenprofessional investment managers create a “product”,and offer it for investment to the investor.

Origin and Growth of mutual funds in India

The mutual fund industry in India started in 1963 withthe formation of Unit Trust of.

Origination

Some historians cite that closed-ended investmentcompanies launched in the Netherlands in 1822 by KingWilliam I as the first mutual funds, while others point toa Dutch merchant named Adrian van Ketwich whoseinvestment trust created in 1774 may have given theking the idea. Ketwich probably theorized thatdiversification would increase the appeal of investmentsto smaller investors with minimal capital. (Saini S, 2011)Mentioned that next wave of near-mutual funds includedan investment trust launched in Switzerland in 1849,followed by similar vehicles created in Scotland in the1880s.

The idea of pooling resources and spreading risk usingclosed-ended investments soon took root in Great Britainand France, making its way to the United States in the1890s. The Boston Personal Property Trust, formed in1893, was the first closed-ended fund in the U.S. Thecreation of the Alexander Fund in Philadelphia in 1907was an important step in the evolution toward what weknow as the modern mutual fund. The Alexander Fundfeatured semi-annual issues and allowed investors tomake withdrawals on demand.



The mutual fund industry in India started in 1963 withthe formation of Unit Trust of India, at the initiative of theGovernment of India and Reserve Bank. Until 1987, UTIenjoyed a monopoly in the Indian mutual fund market.Then a host of other government-controlled Indianfinancial companies came up with their own funds. Theseincluded State Bank of India, Canara Bank, and PunjabNational Bank. This market was made open to privateplayers in 1993, brought many private players fromdomestic and foreign countries. Hence, the history andgrowth of mutual funds in India can be broadly dividedinto five distinct phases.

i) Phase – I (1963-1987): The Unit Trust of India wasthe sole player in the industry. Created by an act ofparliament in 1963, UTI launched its first product,the Unit Scheme 1964, which is even today the singlelargest mutual fund scheme. UTI created a numberof products such as monthly income plans,children’s plans, equity-oriented schemes and Offshore funds during this period. UTI managed assetsof Rs 6,700 crore at the end of this phase.

ii) Phase – II (1987-1993): In 1987 public sector banksand financial institutions entered the mutual fundindustry. SBI mutual fund was the first non- UTI fundto be set up in 1987. Significant shift of investorsfrom deposits to mutual fund industry happenedduring this period. Most funds were growth-orientedclosed-ended funds. By the end of this period, assetsunder UTI s management grew to Rs. 38,247 crore.

iii) Phase – III (1993-1996): In 1993, the mutual fundindustry was open to private sector players, bothIndia and foreign. SEBI s first set of regulations forthe industry were formulated in 1993, andsubstantially revised in 1996. Significant innovationsin servicing, product design and informationdisclosure happened in this phase, mostly initiatedby private sector players.

iv) Phase – IV (1996-1999): The implementation of thenew SEBI regulations and the restructuring of themutual fund industry led to rapid asset growth. Bankmutual funds sere re-cast according to the SEBIrecommended structure, and UTI came undervoluntary SEBI supervision.

v) Phase – V (1999-2004): This phase was marked byvery rapid growth in the industry, and significantincrease in market shares of private sector players.Assets crossed rS1, 00,000 crore. The tax breakoffered to mutual funds in 1999 created arbitrageopportunities for a number of institutional players.Bond funds and liquid funds registered the highestgrowth in this period, accounting for nearly 60% ofthe assets. UTI s share of the industry dropped tonearly 50%.

Contribution of Mutual Funds to the Economy

Mutual Funds play an important role in the developmentof the financial system. First, they pool the resources ofsmall investors together, increasing their participationin financial markets, which helps both inclusion and theefficient functioning of markets themselves, as a resultof larger volumes. Second, Mutual Funds, beinginstitutional investors, can invest in market analysisgenerally not available or accessible to individualinvestors, thereby providing services based on informeddecisions to small investors. Decisions made on thebasis of deeper understanding of risks and returnscontribute to financial stability, besides helping to mitigatemarket risk for this group of investors. Third, transparencyin investment strategies and outcomes, though typicallymandated by regulators, is relatively easy to deliver on,so that investors can find out exactly where they standwith regard to their investments at any point of time. dto their investments at any point of time.

Advantages of mutual funds to the Investors

a. Portfolio diversification

b. Professional management

c. Reduction in risk

d. Reduced transaction costs

e. Liquidity

f. Convenience and flexibility

a. Portfolio diversification: By offering readymadediversified portfolios, mutual funds enable investorsto hold diversified portfolios. Though investors cancreate their own diversified portfolios, the costs ofcreating and monitoring such portfolios can be high,apart from the fact that investors may lack theprofessional expertise to manage such a portfolio.

b. Professional management: Mutual funds aremanaged by investment managers (Assetmanagement companies or AMCs) who are appointedby trustees and bound by the investmentmanagement agreement, on the hows and whys oftheir investment management functions. Investmentmanagers and funds are also bound by the AMFIcode of ethics, which foster professional standardsin the industry.

c. Reduction of risk: Mutual funds invest in a portfolioof securities. This means that all funds are notinvested in the same investment avenue. It is wellknown that risk and returns of various investmentoptions do not move uniformly or in sympathy withone another. If the equity market is moving down, thedebt markets may be moving up. Therefore, holdinga portfolio that is diversified across investmentavenues is a wise way to manage risk. When such aportfolio is liquid and marked to market, it enables



investors to continuously evaluate the portfolio andmanage their risks more efficiently.

d. Reduced transaction costs: Mutual funds providethe investor the benefit of economies of scale, byvirtue of their size. Though the individual investor’scontribution may be small, the mutual fund itself islarge enough to be able to reduce costs in itstransactions. These benefits are passed on to theinvestors.

e. Liquidity: Most of the funds being sold today areopen-ended. That is, investors can sell their existingunits, or buy new units, at any point of time, at pricesthat are related to the to the NAV of the fund on thedate of the transaction. This enables investors toenjoy a high level of liquidity on their investments.

TYPES OF MUTUAL FUNDS

Mutual funds can offer further generic choices to theinvestors in terms of:

a. Nature of participation: Open or closed end funds

b. Nature of income distribution: Dividend; growth; re-investment of dividends. Investors can also chosefrom varying periodicity for distribution of dividends-daily, weekly, monthly, quarterly or annual.

Open-ended funds: There are two ways in whichinvestor participation in a mutual fund can be structured.In an open- ended fund, investors can buy and sell unitsof the fund, at NAV related prices, at any time, directlyfrom the fund. This is called an open- ended fund.

Closed end funds: A closed end fund is open for saleto investors for a specific period, after which further salesare closed. The following are the types offered by mutualfunds:

1. Equity funds

2. Debt funds

3. Balanced funds

1. Equity Funds: Equity funds are those that investpre- dominantly in equity shares of companies. Thereare a variety of ways in which an equity portfolio canbe created for investors. There are thus the followingchoices in equity funds:

a. Simple Equity Funds

b. Primary market funds

c. Sectoral funds

d. Index funds

e. Other equity funds

a. Simple equity funds: These funds invest a pre-dominant portion of the funds mobilized in equity andequity related products. In most cases about 80-90%of their investments are in equity shares. These fundshave freedom to invest both in primary and secondarymarkets for equity.

b. Primary market funds The primary market fundsinvest in equity shares, but do so only when a primarymarket offering available. The focus is on capturingthe opportunity to buy those companies, which issuetheir primary markets, either through a public offer orthrough private placements.

c. Sectoral funds: Sectoral funds choose to invest inone or more chosen sectors of the equity markets.These sectors could vary depending on the investorpreference and the return-risk attributes of the sector.

d. Index funds: In a simple equity fund, the fundmanager has the mandate to create an investmentportfolio of equity shares, returns in the equitymarkets. The portfolio in this case, can be composedfrom the universe of equity shares available to themanager.

e. Other variations in equity funds: Equity funds canalso be created to invest in equity shares ofcompanies with specific attributes. PSU funds whichspecialize in investing only in PSU stocks; there is atop 200 funds, which invests in companies within theuniverse of the top 200 equity stocks; there is a selectequity fund, which invests from the universe of stockscomprising the A group companies of the Bombaystock exchange; and there is a 30- stock fund thatlimits the number of stocks in its portfolio to 30stocks. All these products try to define a subset ofthe equity market, in terms of size and otherattributes, and tend to focus on that segment.

2. Debt Funds: Debt funds are those that pre-dominantly invest in debt securities. Since most debtsecurities pay periodic interest to investors, thesefunds are also known as income funds. However, itmust be remembered that funds investing in debtproducts can also offer a growth option to theirinvestors.

a. Liquid funds and Money market funds: Thesedebt funds invest only in instruments withmaturities less than a year. The investmentportfolio is very liquid, and enables investors tohold their investments for very short horizons of aday or more. The fund pre- dominantly invests inmoney market instruments and provides investorsthe returns that are available on these instruments.In some cases, the funds also provide investorswith cheque writing facility (only self-cheques),as an additional facility for liquidity.

b. Gilt funds: A gilt fund invests only in securitiesthat are issued by the government, and thereforedoes not carry any credit risk. These funds investin short and long-term securities issued by thegovernment. These funds are preferred byinstitutional investors who have to invest only in



government paper. These funds also enable retailinvestors to participate in the market forgovernment securities, which is otherwise a large-ticket wholesale market.

c. Simple debt funds: These funds invest in aportfolio of debt securities chosen from theuniverse of debt securities indicated above. Thefund manager has the freedom to choose fromthe universe of debt securities; government andothers, as well as long and short term.

d. Sect oral debt funds: These funds invest in apre-specified subset of the debt markets. Forexample, there are debt funds that would investonly in AAA rated debt securities issued by thecorporate sector.

e. Serial plans or fixed term plans: This isvariation to the simple debt fund, where theobjective is to match the holding period horizonof the investor, with the maturity of the investment.A variety of serial plans that enable investors tochoose from 14 days to 5 years are available.The investment portfolio can be made up eitherpurely of government debt that matures on a datethat matches the horizon of the plan, ofcombination debt securities.

3. BALANCED FUNDS: Funds that invest both in debtand equity markets are called balanced funds. Atypical balanced fund would be almost equallyinvested in both the markets. The variations are fundsthat invest pre-dominantly in equity (about 70% ) andkeep a smaller part of their portfolios in debtsecurities. These funds seek to enhance the incomepotential of their equity component, by bringing indebt. Similarly there are pre-dominantly debt funds(over 70% in debt securities), which invest in equity,to provide some growth potential to their funds. Abalanced fund also tends to provide investors exposureto both equity and debt markets in a one product.Therefore the benefits of diversification get furtherenhanced, as equity and debt markets have differentrisk and return profiles.

Tax Saving Schemes: These schemes offer tax rebatesto the investors under specific provisions of the IncomeTax Act, 1961 as the Government offers tax incentivesfor investment in specified avenues. e.g. Equity LinkedSavings Schemes (ELSS). Pension schemes launchedby the mutual funds also offer tax benefits. Theseschemes are growth oriented and invest pre-dominantlyin equities. Their growth opportunities and risksassociated are like any equity-oriented scheme.

Principal Parties Involved in Mutual Funds

For anybody to become well aware about mutual funds,it is imperative for him/her to know the structure of a

mutual fund. Most importantly, who are the primaryparties involved, what are their roles, etc. Table showsdifferent parties along with their respective roles, dutiesin context of mutual funds.

Table - 1 : Parties involved in mutual fundtransaction process:

Relevance of Study

According to RBI, Financial education can be broadlydefined as, “providing familiarity with and understandingof financial market products, especially rewards andrisks, in order of making informed choices”(Bihari et.al,2012). Financial education goes ahead of theprerequisites like financial information and

SEBI It is the governing authority of stockmarket. Mutual funds legal frameworkis regulated by SEBIs guidelines.

Investor He is neither a speculator (who takeson high risks for high rewards) nor agambler (who takes on the risk of totalloss for out of proportion rewards) butone whose primary objectives are tosafeguard the principle investment, asteady income and capitalappreciation.

Trustees The mutual fund has been formed asa public trust and trustees managethe trust. They are primarilyaccountable for protecting the interestof mutual fund investors.

Asset A company that invests’ its clientsManagement pooled funds into securities thatCompany match its declared financial

objectives. It manages the investmentportfolios of the schemes and handlesvarious other routine activitiesincidental to the mutual fund business.Its’ income comes from themanagement fees it charges for theschemes it manages.

Distributors They earn commission for bringing ininvestors into the schemes of amutual fund. This commission is anexpense for the scheme.

Registrars An investor holding in mutual fundschemes is typically followed by theschemes’ RTA (Registrar andTransfer Agent). Some AMCs’ preferto handle it in-house.

Custodian/ As the name suggests, a custodianDepository of the securities preserves the custody

of the securities in which the schemeinvests. Therefore, for an investmenttransaction of mutual fund, custodianreceives or gives delivery.



revealed that number of intermediaries and AUM hasincreased many folds since 1990. Major areas of concernwere systematic risk & excess volatility and as a solutionto this, SEBI was established in 1992 to regulate varioussecurities market in India. Another matter, which drewauthor’s attention, was the suitability of Mutual Fundsand composite securities for retail investors and for this,AMFI was incorporated in 1995 as this considers investorconcern as sovereign. One more growing topic of concernis the inadequacy of clarity & liquidity of securities andfor this SEBI came for assistance.

As the mutual fund industry has grown enormously, anumber of participants have entered the market andaccordingly related expenses have risen. Richard (1989)worked on the viability of various expenses related tomutual funds and their outcome on their performance.While testing this notion for 20 years, he found that risk-adjusted returns without taking into account fees andother overheads, are commensurate with index fundsreturns & fund performance is not influenced by portfolioturnover and management fees in any manner. With theinclusion of various costs, trading process becamecomplicated, expensive, and necessitated somechanges. In this context, Bajaj (2013) worked in detailon the outlook of the Indian mutual fund industry & hasdiscussed about the changes in various costs anddirectives in this trade since pre 2006. Since 2006, initialissue expenses have been completely stopped byJanuary 2008.

2009, entry loads were also removed completely fromall types of mutual funds. Along with this, exit loadswere also determined at subject to a maximum of 1% inAugust 2009. With the passage of time, SEBI hasrelaxed several rules & regulations of mutual fundindustry, which has played a pivotal role in extending itsspheres in the form of its various products and itsabundant clientage. (Saini 2011). This growing marketcoverage by mutual funds required analysis of itscomparative returns to ensure its steadiness in the longrun. Sharma (2013) has worked to assess the returnearned by the sample mutual fund schemes & weightedagainst the standard market returns & found that largenumbers of Mutual Funds have surpassed the marketbenchmark indexes in Sharpe & Treynor Ratios andcorrelation between them is significantly higher. Theyalso found that a fund & its market return have a highcorrelation.

Manasa (2012) have segregated mutual funds into Public& the private sector as an Investment option and studiedwhether the selection of either of them is influenced bydemographic variables in any manner. Researcher foundthat variables like Gender, Age, Marital Status &Occupation of Investors affect his decision in a noteworthy

recommendation. The primary emphasis of anydiscourse in the context of financial education is on theindividual, who juggles with the proximity of both,resources as well as skills, to deal with widespreadcomplexities of financial markets. The financial educationconcept has implicitly attained a very vital standing inthe recent years, as financial markets have becomeprogressively more complex and as there is informationlopsidedness amongst markets and individual investors,as a result of which, the latter finds it grueling to craftinformed choices. To support the above statement,Tamimi et.al, (2009) found that the literacy level ofinvestors of people of UAE is way below the neededlevel. This study is very important in order to judge theinvestors’ awareness in a market like India, where thecompetition increases day by day due to the entry of alarge number of players with different financial strengthsand strategies.

Review of Literature

Mutual Fund Investments on one hand lessen the taxburden of the investor, and on the other, it gives asubstantial yield without bearing large amount of risk.Because of its multifarious benefits as an investmentbroad way, it creates interest in researchers andacademicians to do research on it, but it is also notuntouched by its own up-and-coming challenges, and inall, investor awareness about mutual fund investment,has been most widely observed to be a crucial aspect,in diverse backgrounds and geographical locales. Thisliterature review, discusses the studies done in India &abroad and it has been bifurcated into two sections viz:

1) Introduction, expansion, expenses related to themutual fund market.

2) Comprehensive discussion about Indian investorawareness levels of mutual fund investment.

Introduction, expansion, expenses related to themutual fund market.

This study discloses that a greater number of investorssave their money to acquire various kinds of resourcesand for this bank deposits are the most popular savinginstrument. While talking about the standpoint ofindependent stockholders, researchers found that itmight be affected by his investment objective, timehorizon, investment or performance facet of the assetclass (Saha, 2011). Most of the investor’s have a positiveapproach towards mutual funds, but the primary challengebefore the mutual fund industry is to win over the potentialinvestors before they switch to some other alternativeand for which launch of some innovative schemes wouldbe beneficial.(Sharma 2012).

Santhi (2013) looked into the magnification of marketsize & entanglement of mutual funds. Data collected



manner, while it is not much affected by variables likeeducational qualification & level of income.

Indian investor awareness levels of mutual fundinvestment

Consumer behavior is a critical matter for researchstudies. To evaluate the projections of any class ofproduct irrespective of its nature, one should be awareof the behavior of the consumer and manners of conductof any investor are certainly influenced by his intensityof familiarity, awareness, knowledge etc. about theproduct (mutual fund) as well as product market(derivative market). As few studies have been able toconstruct sophisticated measures of financial literacyand definitively establish causal links between financialeducation, literacy and behavior in the US population.Researchers to date found that various segments of USpopulation lack several types of financial skills. (BihariS, 2012). This section of literature review attempts togauge the level of awareness of mutual fund investors inIndian market context and the related behavior patterns.

Singh and Jha (2009) conducted a study on awareness& acceptability of mutual funds and found that consumersbasically prefer mutual fund due to return potential,liquidity and safety and they were not totally aware aboutthe systematic investment plan. The invertors’ will alsoconsider various factors before investing in mutual fund.

Design et al (2006) conducted a study on womeninvestors’ ’ perception towards investment and found thatwomen investors’ ’ basically are indecisive in investingin mutual funds due to various reasons like lack ofknowledge about the investment protection and theirvarious investment procedures, market fluctuations,various risks associated with investment, assessmentof investment and redressal of grievances regarding theirvarious investment related problems. Savings is a habitspecially embodied into women. Even in the past, whenwomen mainly depended on their spouses’ income, theyused to save to meet emergencies as well as for futureactivities. In those days, women did not have anyawareness about various investment outlets. But as timepassed, the scenario has totally changed. Ramamurthyand Reddy (2005) conducted a study to analyze recenttrends in the mutual fund industry and draw a conclusionthat the main benefits for small investors’ due to efficientmanagement, diversification of investment, easyadministration, nice return potential, l iquidity,transparency, flexibility, affordability, wide range ofchoices and a proper regulation governed by SEBI. Thestudy also analyzed about recent trends in mutual fundindustry like various exit and entry policies of mutualfund companies, various schemes related to real estate,commodity, bullion and precious metals, entering ofbanking sector in mutual fund, buying and selling of

mutual funds through online. Anand and Murugaiah (2004)had studied various strategic issues related to themarketing of financial services. They found that recentlythis type of industry requires new strategies to surviveand for operation. For surviving they have to adopt newmarketing strategies and tactics that enable them tocapture maximum opportunities with the lowest risks inorder to enable them to survive and meet the competitionfrom various market players globally.

Dunna (October 2012) worked on the complications &options in the Mutual Fund Industry. Among variousissues related to the Mutual Fund Industry, fundamentalcomplication is the lack of awareness about the productsin general public. Awareness is a matter of knowledgeof a situation or a fact (Oxford dictionary) and it becomescrucial to know whether awareness is gender specific.Gnana et.al (2006) conducted a research on womeninvestors’ perception regarding investment and the studyrevealed that women investor’s are overall wavering aboutinvesting in mutual funds, due lack of awareness aboutinvestment shield, range of investment procedures,market volatility, and diverse risks, evaluation ofinvestments and Redressal of investor complaints linkedwith mutual fund investments.

Working on the same framework, Parihar et.al (2009)found that there is noteworthy interdependence betweenage, gender, income, & attitude of investors towardsMutual Funds, whereas education & occupation doesnot play any effective role in shaping the attitude ofinvestors towards Mutual Funds.

Singh (2012) also worked on various demographic factorsto evaluate their impact on the investor’s investingoutlook. He found that only age and occupation doesnot have any effect on investor’s attitude yet a numberof other variables like gender, income, and educationalqualification, undoubtedly affect it. Along with this, helooked into the factors accounting for selection of MutualFunds. In this, he found that predominately returnpotential, liquidity, & flexibility play a vital role in relationto an investor’s selection criterion. Furthermore,transparency & affordability of the fund also work as adecisive factor. Investor awareness can be reviewed fromdifferent outlooks, as Design (2006) along with othersdid it on the basis, demographic variables and Saha(2011) did it on the geographical basis.

Saha (2011) worked on the awareness level of individualinvestor about Mutual Fund and it has been found thatin Tier 1 city like Kolkata, people are quite knowledgeablebut the real challenge lies in Tier 2 & Tier 3 cities.Complimenting the results of this study, Saini (2011)analyzed the awareness level of investors regardinginvesting in Mutual Fund & they found that investors arenot fully aware of Mutual Funds in Tier-II city likeChandigarh.



Likewise, Pandey (2011) conducted a survey to look intothe perception of non-investors in investing in MutualFunds and determine the obstacles faced in investing inthis industry. For this, he analyzed the pattern ofinvestor’s behavior with reference to periodic & non-periodic investments and found that although people havehigh probability to invest, but they do not go for periodicinvestments due to lack of knowledge, low expertise,high uncertainty, highly volatile market, etc.working ontheir perceptions, they found that investors mostimportantly fund securities for tax shelter & the mainpush to invest is the minimum guaranteed returns andnon-volatility of the investment. Additionally, researchersworked to know the shortcomings of this industry froman investor’s point of view and found that the majority ofrespondents believed that lack of lucidity, awareness;lofty expenses are some of the problem areas.

Along with geographical dispersion, mutual fundfunctioning is also a complicated process and a majorrationale for a big lot of investor dis-interest in it. Sharma(2013) analyzed investor’s perspective towards investingin mutual funds & found that primary investors are notwell informed about several functions of Mutual Funds.In addition to this, it was also discovered that safety offunds invested, favorable credit rating of the fund byreputed credit rating agencies, capital inflation are someof the desirable features of mutual fund Schemes andthey affect the selection of mutual funds directly orindirectly. The results of this research revealed that tosecure the funding of Indian investor AMC should ensurefull disclosure & regular updates of relevant informationalong with safety of funds & monetary benefits.

Likewise, Pandey (2011) conducted a survey to look intothe perception of non-investors in investing in MutualFunds and determine the obstacles faced in investing inthis industry. For this, he analyzed the pattern ofinvestor’s behavior with reference to periodic & non-periodic investments and found that although people havehigh probability to invest, but they do not go for periodicinvestments due to lack of knowledge, low expertise,high uncertainty, highly volatile market, etc.

Objectives

1. To study and analyze the impact of variousdemographic factors on investors’ ’ attitude towardsmutual fund.

2. To study about the factors (on the basis of rank)responsible for the selection of mutual funds as aninvestment option.

Research Methodology

The study is basically an analytical study based onprimary research as well as also related to the analysisof the attitude of investors’ ’ towards mutual funds. For

measuring various phenomena and analyzing thecollected data effectively and efficiently to draw soundconclusions, a number of statistical techniques basicallyChi-square test for testing of hypothesis has been usedand for analyzing the various factors responsible forinvestment in mutual funds, ranking was done on thebasis of weighted scores and scoring was done on thebasis of scale. Chi- Square test of goodness of fit hasbeen used. It is a powerful test for testing the significanceof the discrepancy between theory and experiment asgiven by Karl Pearson. It enables us to find if the deviationof the experiment from theory is just by chance or it isreally due to the inadequacy of the theory to fit theobserved data.

Hypotheses

The hypothesis of the present study includes:

Ho : There is no significant difference in the grossmobilization of fund between the companies andyears.

Ho : There is no significant difference in the redemptionof mutual funds between the companies and years.

Ho : There is no significant difference in the net flowsin mutual funds between the companies and years

Source of Data

The study is mainly based on secondary data. The dataanalyzed and interpreted in this study related to allcompanies are collected from the website of SecurityExchange Board of India.

Tools Used

The statistical tools play a vital role in analyzing thedata and drawing inferences there from. In order to derivethe results from the information collected throughsecondary data, various statistical tools such as mean,standard deviation, Co – efficient of variation, CompoundAnnual Growth Rate, regression and F test have beenaccomplished through EXCEL and SPSS software.

Analysis and Discussion and conclusion

Nowadays, large numbers of investment prospects areavailable to the investors in financial markets. Investorscan invest in corporate bonds, post office schemes,debentures, bank deposits, etc. Although, these days,investors opted for portfolio managers to invest their fundson their behalf, due to proximity of time and lack ofawareness, expertise. These portfolio managers areproficient in stock market functions and invest funds insuch a way that the investors would get minimumassured returns. Thus, in order to help the investors,mutual funds provide a protective shed in the small andbig investors to promote this market. Following are someroot causes of investor awareness, and as an elucidation,few propositions are also given.



• Even though, SEBI has reduced several costsassociated with mutual fund products and hasrelaxed various regulations in this connection, butthe need of the hour is to have newer, leaner operatingstructures to make the mutual fund system moreunderstandable, even by a new entrant.

• To keep investors aware and interested in theorganization schemes, organizations should provideinformation in simple, concise form and regularly toinvestors through various sources of information easilyaccessible by investors. To support the abovediscussed fact, extra attention should be given tothe ways of educating investors about mutual fundsas the majority of investors get information fromnewspapers, which in turn, restricts the access ofless educated potential investors who are unable toreceive newspapers as in rural areas and informationis also gained by investors through their responsegroups also, which makes feedback prejudiced dueto individual experiences

This study reveals that still there is a big part ofinvestors who are still confused about the mutualfunds and have not formed any attitude towards thisparticular form of investment as they lack awarenessabout various functions of mutual funds.

• Moreover, as far as the demographic factors areconcerned, gender, income, age, and level ofeducation have significantly influenced the investor’sattitude towards mutual funds. On the other hand,factor like occupation has not been found to influencethe attitude of investors’ towards mutual funds.

• Present study outlined that majority investors have apositive approach towards investing in mutual funds,but due lack of conceptual knowledge, expertise theystay away from this investment avenue.

Today, the main task before the mutual fund industryis to convert potential investors into reality investorsas people in metro cities have considerably high levelsof awareness but the challenge lies in small cities.

• According to KPMG report, product innovation isexpected to be restricted. So, to avoid the allied harm,new and more innovative schemes should be launchedfrom time to time to maintain the investor confidence.All this will lead to the overall growth and developmentof the mutual fund industry.

• Financial advisors play a pivotal role in this investmentprocess, but their importance has been limited byinvestors due to broker’s preference to their ownmotives and their proximity of knowledge aboutvarious schemes. This makes the need for educating

financial advisors even prior to investors throughsuitable educational programs.

To sum it up, as numerous authors have put abundantinformation in black and white regarding mutual funds,whether in context of its introduction, origination,regulatory concerns, assortment of risks, incentive,& expenses attached, demography, investorperception… and lot more, still some troubleshootersare required for few long persistent problems like lackof awareness, in this industry. Apart from the above-mentioned issues, in India there is a lot of scope forthe growth of mutual fund companies if funds satisfyeverybody’s needs and sharp improvements in servicestandards and disclosure are desirable.

References

1. Bajaj, U (2013, September).Mutual Funds in India-Acomprehensive growth analysis. Indian Journal ofApplied Research. III (9).

2. Business India. (2013, September) page no.76.Bihari,S (2012, June).Financial Literacy:MutualFunds.SCMS Journal of Indian Management

3. Climent, F. S. (2011, October). Green and Good?The Investment performance of US EnvironmentMutual Funds. Journal of Business Ethics, 103(2).

4. Dunna, M (October 2012). Mutual Funds in India-Issues, Opportunities & Challenges. Asia PacificJournal of Marketing & Management Review., I(2).

5. Financial Literacy and Investment decisions of UAEinvestors http://www.emeraldinsight.com/journals.htm?articleid=1821868

6. Gnana D, S.K, L.A (2006, April).Women investor’sperception towards investment: An empirical study.Indian Journal of Marketing Investment CompanyInstitute Report(ICI),2013

7. Indian Mutual Fund Industry,KPMG Report, 2012

8. Manasa,V, Ashwin M. (2012, April). Perceptions ofInvestors on Mutual Funds-A Comparative study onPublic & Private sector Mutual Funds. Tecnia Journalof Management Studies., VII(1).

9. Pandey, A. (2011, January). Investor’s Behavior:Mutual Funds.CMS Journal of Indian Management.

10. Parihar B, S. R. (2009). Analyzing Investors’ attitudetowards Mutual Funds as an Investment option.ICFAI University press, VIII(7).

11. Richard, I. (1989, February). Efficiency with costlyinformation: A study of Mutual Funds performance.Quarterly journal of Economics, IV(1)



TESTING FOR THE LONG-RUN SUSTAINABILITY OF ECONOMIC

GROWTH OF SELECTED COUNTRIES USING GENUINE SAVINGS RATE

APPROACH

1. Research Scholar, Centre for Economic Studies and Policy, Institute for Social and Economic Change (ISEC), Bangalore.2. Associate Professor, Centre for Economic Studies and Policy, Institute for Social and Economic Change (ISEC), Bangalore

Abstract

Off late the world has realized that the growth models that believed in growth- environment tradeoff are not sustainable.

In the pursuit of increasing their GDP, countries have ignored the negative externalities of growth which would seriously

threaten the survival of the future generation. Two kinds of damage are caused by unsustainable growth. Firstly,

productive base, particularly natural capital like forest, minerals, energy is depleting. Secondly, environment pollution

and climate change caused by excessive CO2 emissions are threatening human lives in terms of deteriorating health

conditions and increasing temperature level. In the light of these concerns, sustainable development has become an

important goal of nations. This study attempts to assess the sustainability of economic growth of selected countries

using Genuine Saving Rate approach.

Keywords: Sustainable development, negative externalities, and genuine saving rate.

Dr. Krishna Raj2Dhananjaya. K1

Introduction

For long economies, in the pursuit of increasing theirGDP, have ignored the negative externalities of growthwhich would seriously threaten the survival of the futuregeneration. However, of late the world has realized thatthe growth models that believed in growth- environmenttradeoff are not sustainable. Economists andenvironmentalists have questioned the growth modelsthat overlook the serious negative externalities whichmay diminish the ability of future generations to meettheir own needs. In general, economic growth results intwo types of negative externalities. Firstly, productivebase, particularly natural capital like forest, minerals,and energy get depleted. Secondly, environment pollutionand climate change caused by excessive CO

2 emissions

threaten human lives in terms of deteriorating healthconditions and increasing temperature level. In the lightof these concerns, sustainable development has becomean important goal of nations which became more explicitever since United Nations Conference on Environmentand Development in 1992 which urged the participantnations to rethink economic development and find waysto halt the destruction of irreplaceable natural resourcesand pollution of the planet. In order to conceptualize andmeasure the goal of sustainable development, decisionmakers need indicators that assist them to understandthe current state of the growth and the progress madetowards achieving sustainable development. However,traditional national accounts which do not take intoaccount the negative externalities of growth like pollutionand resource depletion are found to be both inadequate

and misleading. Gross Domestic Product (GDP), thepopular measure of economic growth, for example,considers the depreciation in physical capital, whereasit is silent with regard to the depreciation of naturalcapital and the cost of environment pollution. Therefore,we need better measures of growth that would captureall types of nation’s wealth, i.e., physical, human andnatural capital and reflect the genuine progress achievedby a nation. Genuine Saving Rate (GSR) is one suchalternate national accounting measure which attemptsto show the actual saving of a nation after accountingfor depreciation in physical and natural capital andinvestment in human capital. Using this framework, thispaper attempts to assess the sustainability of economicgrowth of selected countries.

Genuine Savings Rate

In order to overcome the deficiency of traditionalmeasures of growth, Genuine Saving Rate (GSR) wasintroduced originally by Pearce & Atkinson (1993whichwas popularized by World Bank as one of the indicatorsof sustainable development. GSR is a simple yet a usefulmeasure to assess the level of an economy’ssustainability. It basically broadens the definition ofwealth to include natural and human capital along withphysical capital. Therefore, GSR is also called adjustedsaving rate as it accommodates and modifies thetraditional saving rate by including all types of wealth ofa nation. Particularly, it corrects for the depletion in naturalresources, environmental degradation and investment inhuman capital which are ignored by the traditional



indicators of growth. It makes series of adjustments to gross national saving rate by subtracting depreciation in

natural resources such as fossil fuels, minerals, and timber, costs of environmental pollution like CO2 damage and

Particulate Matter (PM-10) damage and adding investment in human capital proxied by the spending on

education.(Ferreira and Vincent, 2005). With these corrections, GSR can serve as a leading indicator of sustainable

economic growth.

Calculation of GSR

As discussed above, GSR is an adjustment to standard national accounting measure of Gross National Savings

(GNS). GSR makes four types of adjustments to gross national saving. First, estimates of capital consumption of

produced assets are deducted to obtain Net National Savings (NNS). Secondly, current expenditures on education

are used as proxy to represent investment in human capital and added to net national saving. Thirdly, the depletion

of energy, mineral, and forest resources are estimated and deducted to reflect the decline in natural capital as a

result of economic growth. Finally, pollution damages are deducted. Many pollution damages are local in their

effects, and therefore difficult to estimate without location-specific data. Here we estimate health damages due to

urban air pollution. As for global pollution damages, the estimates include damages from carbon dioxide emissions

(World Bank, 2013).Table 1 summarizes the definition and method of calculation of various components of GSR.

Fig. 1 : Derivation of GSR

Source: World Bank

Figure 1 explains the concept of GSR. As shown in the figure, four adjustments are made to arrive at GSR. GSR is

a better measure of a nation’s wealth as it takes into consideration the depletion/creation of all forms of wealth.

Depreciation is deducted to account for the depletion in physical capital used in the production. Depletion in

natural resources and pollution damages are deducted to account for the depletion in natural capital and environmental

pollution. Finally, investment in education is added to GNS in order to account for the human capital. A positive

GSR value may indicate the long run economic sustainability of a nation. On the other hand, a negative GSR

shows that the extent of depletion in natural capital and cost of environmental pollution is more than saving rate

generated by an economy indicating that economy is on the path of unsustainable growth. An economy with

persistently negative GSR must lead to declining wellbeing and signals the policy interventions to restore the

depletion in natural capital (Hamilton and Clemens, 1999).



Table - 1 : Summary of the Calculation of Genuine Saving Rate

Gross national saving(GNS)

Depreciation

Net national saving NS)

Education expenditure(EE)

Energy depletion (ED)

Mineral depletion (MD)

Net forest depletion(NFD)

CO2 damages (CO2D)

PM damages (PMD)

Adjusted net saving(ANS)

DefinitionItem

Difference between GNI and public andprivate consumption plus net currenttransfers.

Replacement value of capital used upin the process of production.

Difference between gross national savingand the consumption of fixed capital

Public current operating expenditures ineducation, including wages and salariesand excluding capital investments inbuildings and equipment

Ratio of present value (PV) of rents,discounted at 4%, to exhaustion time ofthe resource. Rent is calculated as theproduct of unit resource rents and thephysical quantities of energy resourcesextracted. It covers coal, crude oil, andnatural gas

Ratio of present value of rents,discounted at 4%, to exhaustion time ofthe resource. Rent is calculated as theproduct of unit resource rents and thephysical quantities of mineral extracted.It covers tin, gold, lead, zinc, iron, copper,nickel, silver, bauxite, and phosphate.

Product of unit resource rents and theexcess of round wood harvest overnatural growth

A conservative figure of $20 marginalglobal damages per ton of carbonemitted was taken.

Willingness to pay (WTP) to avoidmortality and morbidity attributable toparticulate emissions

Net national saving plus educationexpenditure and minus energydepletion, mineral depletion, net forestdepletion, carbon dioxide damage, andparticulate emissions damage.

Base Value

-

+

-

-

-

-

-

GNS = GNI - private consumption- public consumption + net currenttransfers

NNS = GNS - Depreciation

(data taken directly from sourceor estimated)

ED = PV(rent, 4% discount rate,exhaustion time)/exhaustion timerent = production volume x unitresource rent unit rent = unit price- unit cost exhaustion time = min(25 years, reserves/production)

MD = PV(rent, 4% discount rate,exhaustion time)/exhaustion timerent = production volume x unitresource rent unit rent = unit price- unit cost exhaustion time = min(25 years, reserves/production)

NFD = (round wood production -increment) x average price x rentalrate

CO2D = emissions (tons) x $20

PMD = disability adjusted lifeyears (DALYs) lost due to PMemissions x WTP

ANS = NNS + EE - ED - MD - NFD- CO2D - PMD

Adjustment(Plus or Minus)

Formula

Source: Author’s Construction based on World Bank

Empirical Analysis of GSR and its Components

In this section we discuss the genuine rate saving and extent of negative externalities measured in terms of energydepletion, mineral depletion and cost of pollution. We chose ten developed and developing countries based on thesize of the economy in terms of GDP. Data on GSR and the components of it has been collected from World Bank.Data on GSR is available till 2014 and the data on the various components of GSR is available only till 2008.

Table 2 and Chart 2 shows the trend in GSR in developed and developing Economies. As evident from the table andfigure GSR in developed countries are gradually declining from 13.40 percent during 1995-99 to 8.13 per cent to 8.13per cent in 2010-14. On the other hand, growth of developing economies has been relatively more sustainable as theGSR increased from 12.50 in 1995-99 to 14.24 per cent in 2010-14.



Table - 2 : Genuine Saving Rate(per cent)

Source: Author’s Calculations

1995-99 13.40 12.50

2000-04 12.07 10.69

2005-09 10.69 11.73

2010-14 8.13 14.24

Developed Countries Developing CountriesYear

Fig. 2 : GSR in developed in developing countries

Table 3 depicts country wise average GSR. As evident from the table, except for Sweden in all the developedcountries GSR has been declining which shows that their saving rate is becoming increasingly insufficient tocompensate the declining natural capital and the pollution damages. Among developed countries, Korea and Swedenhave reasonably higher GSR. On other hand, most of the developing economies are on sustainable growth path.Fastest developing economies such as China and India are relatively more sustainable with higher GSR. On otherhand, GSR in developing economies such as Mexico, Turkey, South Africa, Iran and Thailand is declining whichindicates that they are on an unsustainable growth path.

Table - 3 : Genuine Saving Rate

United Kingdom 9.64 8.81 5.91 3.91 China 29.05 27.64 37.09 33.60

United States 9.33 6.35 3.74 4.78 India 13.56 16.84 23.11 20.04

Japan 13.03 8.79 9.32 3.74 Brazil 5.56 5.54 6.57 8.39

Italy 11.22 9.45 7.54 3.09 Russia 0.78 2.29 2.58 13.19

Canada 10.60 11.12 8.20 6.27 Mexico 11.56 11.90 10.00 7.69

Korea, Rep. 24.35 21.29 20.27 19.03 Indonesia 14.31 5.08 4.44 25.43

France 13.12 12.45 10.07 6.95 Turkey 16.31 11.90 7.60 9.90

Australia 12.76 12.21 12.65 8.73 South Africa 6.49 3.91 1.42 3.08

Spain 12.86 12.27 9.74 6.25 Iran -1.20 -3.11 3.77 4.55

Sweden 17.06 17.95 19.44 18.54 Thailand 21.86 16.25 17.96 12.68

Developed Countries Developing Countries

Country 1995- 99 2000-04 2005 - 09 2010-14 Country 1995- 99 2000-04 2005 - 09 2010-14

Source : Author’s Construction



Fig. 4 : GSR in developing countriesFig. 3 : GSR in developed countries

Source: Author’s construction

Growth and Negative Externalities

As mentioned earlier economic growth also causes negative externalities in the form of environmental pollution andthe resulting health hazards and depletion of natural capital like energy, minerals, forest etc. GSR is obtained afterdeducting these negative externalities from the net national saving. In this section we discuss the extent of thesenegative externalities in developed and developing countries.

Energy Depletion

Table 4 explains the extent of energy depletion in developed and developing countries.It covers coal, crude oil, andnatural gas. It is clear from the table that energy depletion has been very high in developing countries which is alsoincreasing over the period of time. This may be due to the fact that these countries are growing at higher phase andhence exploit more energy resources. This may also be due to relatively lower efficiency in energy usage indeveloping countries as compared to developed countries. Among developing countries, Iran and Russia haveexperienced higher level of energy depletion as shown in the table 5. For instance, average energy depletion during2004-08 was 28.76 per cent and 21 per cent of GNI in Iran and Russia

Table - 4 : Energy Depletion (% of GNI)


Table - 5 : Energy Depletion (per cent GNI)

1990-94 0.40 4.11

1995-99 0.37 3.84

2000-04 0.66 6.43

2004-08 1.08 8.59




Japan 0.00 0.00 0.01 0.02 Brazil 0.54 0.38 1.52 2.43

Italy 0.09 0.10 0.14 0.20 Russia 10.49 12.32 22.34 21.47

Canada 1.25 1.40 2.68 4.54 Mexico 3.27 3.02 3.89 7.23


France 0.03 0.02 0.02 0.02 Turkey 0.23 0.13 0.15 0.22

Australia 0.94 0.70 1.64 2.86 Iran 13.27 12.98 20.53 28.76

Spain 0.02 0.01 0.02 0.03 South Africa 0.94 0.85 1.85 3.46

Sweden 0.00 0.00 0.00 0.00 Thailand 0.52 0.70 2.06 4.23


Country 1990-94 1995-99 2000-04 2004-08 Country 1990-94 1995-99 2000-04 2004-08




Respectively which indicates that these countries are on an unsustainable path as far as the energy consumptionis concerned? Indonesia has also experienced higher energy depletion with energy depletion of 9.97 per cent ofGNI. On other hand, Turkey maintained higher energy efficiency (0.22 per cent) which is comparable to that developedcountries. Among developed countries Canada and Australia have experienced higher energy depletion with 4.54per cent and 2.86 per cent respectively during 2004-08.

Fig. 5 : Energy depletion in developed countries Fig. 6 : Energy depletion in developing countries

Mineral Depletion

GSR takes into account the depletion of minerals such as tin, gold, lead, zinc, iron, copper, nickel, silver, bauxite,and phosphate in the process of economic growth. Table 6 explains the extent of depletion in minerals which ismeasured in terms of per cent of GNI. As shown in the table, both developed and developing economies haveexperienced higher mineral depletion from 1995-99. However, the extent of mineral depletion was slightly higher indeveloping economies than developed countries. Among developing countries, China, Brazil, Indonesia, and SouthAfrica have witnessed higher level of mineral depletion. Among developed countries, Australia has been experiencinggreater mineral depletion with 3.06 per cent during 2004-08. Table also shows that most of the developed countriesare sustainable in terms of mineral depletion which may indicate that at higher level of development there exists anegative correlation between development and depletion.

Table - 6 : Mineral Depletion (% of GNI)


Table - 7 : Mineral Depletion (per cent GNI)

1990-94 0.11 0.25

1995-99 0.09 0.20

2000-04 0.12 0.30

2004-08 0.40 0.88




Japan 0.00 0.00 0.00 0.00 Brazil 0.39 0.29 0.64 1.61

Italy 0.00 0.00 0.00 0.00 Russia 0.08 0.15 0.29 0.94

Canada 0.26 0.17 0.14 0.60 Mexico 0.14 0.09 0.04 0.26


France 0.00 0.00 0.00 0.00 Turkey 0.04 0.02 0.02 0.05


Country 1990-94 1995-99 2000-04 2004-08 Country 1990-94 1995-99 2000-04 2004-08



Australia 0.81 0.70 0.99 3.06 Iran 0.08 0.09 0.11 0.47


Sweden 0.03 0.02 0.01 0.28 Thailand 0.04 0.00 0.00 0.02


Fig. 7 : Mineral Depletion in developed countries Fig. 8 : Mineral Depletion in developing countries


CO2 Emission

Environmental pollution is another negative externality caused by economic growth. Pollution cots of CO2 emission

is deducted from Net National saving to get the GSR. Table 8 shows the extent of CO2 emissions in developed and

developing countries. It is clear from the table that

Table - 8 : CO2 (% of GNI)

1990-94 0.29 1.27

1995-99 0.29 1.25

2000-04 0.29 1.26

2004-08 0.23 0.85



Table - 9 : CO2 Damage (per cent GNI)



Japan 0.16 0.16 0.18 0.20 Brazil 0.26 0.23 0.37 0.22

Italy 0.20 0.21 0.22 0.17 Russia 2.25 2.80 2.56 1.09

Canada 0.42 0.44 0.43 0.32 Mexico 0.59 0.61 0.38 0.33


France 0.15 0.15 0.15 0.11 Turkey 0.53 0.54 0.51 0.32

Australia 0.50 0.49 0.49 0.35 Iran 1.64 1.65 1.88 1.42


Sweden 0.12 0.12 0.12 0.09 Thailand 0.59 0.80 1.12 0.94


Country 1990-94 1995-99 2000-04 2004-08 Country 1990-94 1995-99 2000-04 2004-08




Fig. 9 : CO2 damage in developed countries Fig. 10: CO2 damage in developing countries


CO2emission as per cent of GNI was higher in developing countries. However, during 2004-08 CO

2 emission has

come down to 0.85 per cent in developing countries. On other hand, developed countries have stabilized CO2 costs

at 0.29 per cent till 2000-04 which slightly came down to 0.23 per cent during 2004-08. Among the developingcountries, China, Iran, South Africa, and Russia are found to have higher CO

2emission in terms of percentage of

GNI. On the other hand, all the developed countries have CO2 emission below 1 per cent as shown in the table 9.

PM 10 Damages

PM 10 damages are another important negative externality caused by economic growth which has to be compensatedand hence deducted from NNS. Table depicts the extent of PM damages which is measured in terms of percentageof GNI. As shown in the table, magnitude of PM damage has been declining in both developed and developingcountries. However, developing countries are found to have higher PM damages as compared to developed countries.Table also shows that all the countries have PM damages below 1 per cent, though

Table - 10 : PM Damage (% of GDP)

1990-94 0.31 0.75

1995-99 0.28 0.66

2000-04 0.20 0.57

2005-08 0.11 0.37



Table - 11 : PM Damage (per cent GDP)



Japan 0.56 0.52 0.39 0.26 Brazil 0.46 0.36 0.33 0.17

Italy 0.25 0.23 0.17 0.08 Russia 1.41 0.80 0.59 0.14

Canada 0.26 0.24 0.16 0.08 Mexico 0.57 0.50 0.35 0.27


France 0.02 0.02 0.01 0.01 Turkey 1.23 1.09 0.95 0.58

Australia 0.18 0.13 0.07 0.02 Iran 1.05 0.95 0.74 0.43


Sweden 0.01 0.01 0.00 0.00 Thailand 0.32 0.35 0.31 0.24


Country 1990-94 1995-99 2000-04 2004-08 Country 1990-94 1995-99 2000-04 2004-08




Fig. 11 : PM 10 Damages in developed countries Fig. 12 : PM 10 damages in developing countries

Table - 12 : Countries like China, India, Indonesia, and Turkey are found to have higher percentage ofPM damages


It is clear from the above discussion that developing countries are found to have higher level of negative externalitiesin terms of energy depletion, mineral depletion, Co2 emission and PM 10 damages which shows that their growthis less sustainable than developed countries. On other hand developed countries are found to have lesser negativeexternality. However, in terms GSR, developing countries are found to have higher level of GSR as compared todeveloped countries. This inconsistency is due to the fact that developing countries have higher level of GrossNational Saving and lower depreciation allowance. This indicates that, though developing countries are causingmore negative externalities, they generate sufficiently higher level of Gross national saving to compensate. Hence,in terms the extent of negative externalities, developed countries are found to be more sustainable as they causeless of them in terms of the percentage of GNI. However, in terms GSR developing countries are found to be moresustainable as they create more saving to compensate these negative externalities.

Conclusion

The concept of GSR provides an alternate measure of an economy’s growth which takes into accounts all forms ofwealth. This measure will help signal early indicators of unsustainability in the growth path of an economy. Usingthis measure, the study attempted to understand the long term sustainability of major developed and developingcountries and found that developed countries are more sustainable in terms of the extent of negative externalitiescaused by them. On other hand developing countries are found to be more sustainable in terms of GSR as theygenerate higher saving rate to compensate the negative externalities. Studies like this help policy makers tounderstand the current growth path and take appropriate policy interventions to achieve sustainable economicgrowth.

References

1. Ferreira, Susana and Vincent, Jeffrey R. (2005), Genuine Savings: Leading Indicator of SustainableDevelopment?, Economic Development and Cultural Change, Vol. 53, No. 3 (April 2005), pp. 737-754.

1990-94 21.88 27.79 13.55 10.99 5.09 3.56

1995-99 23.14 26.03 13.75 11.22 5.04 3.88

2000-04 22.68 26.50 14.18 10.85 4.83 4.11

2004-08 22.88 28.04 14.13 11.11 4.68 4.12

Gross National Saving (% of GDP) Depreciation (% of GDP)

Year

Education (% of GDP)

DevelopedCountries

DevelopingCountries

DevelopedCountries

DevelopingCountries

DevelopedCountries

DevelopingCountries



2. Hamilton, Kirk and Clemens, Michael (1999), Genuine Savings Rates in Developing Countries, The WorldBank Economic Review, Vol. 13, NO. 2,pp.333–56.

3. Pearce, David W., and Giles Atkinson (1993), Capital Theory and the Measurement of Sustainable Development,EcologicalEconomics,8, pp. 103–8.

4. World Bank, Adjusted net savings, including particulate emission damage (% of GNI), available in http://data.worldbank.org/indicator/NY.ADJ.SVNG.GN.ZS.

5. World Bank (2013), A More Accurate Pulse on Sustainability, available in http://www.worldbank.org/en/news/feature/2013/06/05/accurate-pulse-sustainability.

6. World Bank, Calculating Adjusted Net Saving, available in http://siteresources.worldbank.org/ENVIRONMENT/Resources/Calculating_Adjusted_Net_Saving.pdf.



A STUDY WITH REFERENCE TO TECHNOLOGY BASED SERVICES

RENDERED BY INDIAN OVERSEAS BANK

1. Assistant Professor, Department of Commerce, SRM University, Chennai.2. Research Scholar, Department of Commerce, Madras Christian College, Chennai

Abstract

Online banking services suppliers need to look out for indicators of innovative ways that in making awareness

regarding the services through participation in exhibition also as adoption of latest technologies in on-line banking.

Indian Overseas bank customers are been facing continuous drawback in victimization the technology primarily

based services; bank got to take necessary steps to endure these disadvantages. Fifty one of Respondents won’t

counsel Indian Overseas bank services to their friends, relatives; this provides clear image of Indian Overseas Bank

facing problem in providing technology primarily based services to its customers. Bank should strengthen their

technology banking services. Finally, all the banks are been implementing Technology primarily based banking to

strengthen their banking in quickest mode of dealings and to draw in the purchasers. Indian Overseas Bank should

update their websites, all modes of technology primarily based transactions quicker compared to personal banks.

Keywords: indicators, exhibition, adoption, victimization, technology

J. Solomon Thangadurai 2Dr. A. Irin Sutha1

Introduction

Internet banking includes the system that permitsfinancial organization customers, people or businesses,access accounts, interact business, or get data onmonetary merchandise and services on public or non-public network together with net - Khan (2007). Netbanking is that the act of conducting monetary mediationon the web - Kim (2006). It’s that method whereby theclient is in a position to access, management and usehis/her account over the web. Since the mid-1990s, therehas been a elementary shift in banking delivery channelstoward victimization self-service channels like electronicbanking, principally the employment of automatic tellermachines (ATMs) and net banking. Qureshi et al. (2008),shoppers shifted from ancient banking to on-line industry.The core reason of this transfer is perceived utility,perceived easy use, security and privacy provided byon-line banking. Despite the actual fact that the webhas AN ever-growing importance within the bankingsector as a result of the benefits it brings to each theentities and their customers, not all the monetary entitiesthat have adopted e-banking are triple-crown, actuallybecause of AN inadequate web site style and alternativefactors moreover – Ortega (2007).

Indian Overseas Bank (IOB) may be a major bankprimarily based in metropolis (Madras), with quite 3700domestic branches, three extension counters and eightbranches overseas as of thirty.09.2014. Indian OverseasBank has Associate in Nursing ISO certified in-houseinfo Technology department, that has developed thesoftware package that its branches use to supply on-

line banking to customers; the bank has achieved 100%networking standing still as 100% CBS standing for itsbranches. IOB conjointly incorporates a network ofregarding 3300 ATMs everywhere India. IOB offers netBanking & Mobile Banking and is one amongst the banksthat the government of India has approved for on-linepayment of taxes. The bank’s business quite doubledwithin the last four years.

Literature Review

Internet banking is wherever client will access his or herchecking account via the web victimization computer ormovable and web-browser; Raman et al. (2008) samethat service as associate degree intangible smart charmotherwise to every client and bound extent of serviceought to be achieved so as to satisfy the client whichthe ensuing commitment, loyalty and retention area unitimportant indicators of client satisfaction. clientcommitment; Power and Associates (2009) note thaton the average, extremely committed customers useadditional product or services, offer additional referralsand area unit abundant less possible to change to adifferent bank, compared with customers UN agencyhave lower commitment levels. Indeed, this read issupported by Casaló et al. (2008) UN agency contendsthat higher levels of web site usability would possiblycause higher levels of consumer’s affection commitmentto the web site also a right away, positive and vitalrelationship between satisfaction in previous interactionsand therefore the consumer’s commitment to a moneyservices web site. Client loyalty; Power and Associates(2009) defines client loyalty as a deeply command



commitment to oft re obtain or repatronize an equivalent product or service, and although multidimensional innature, it includes re obtain, repurchasing and resistance towards increase


Research methodology has many dimensions. It includes not only the research methods but also considers thelogic behind the methods used in the context of the study and explains why only a particular method or techniquehas been used. It also helps to understand the assumptions underlying various techniques and by which they candecide that certain techniques will be applicable to certain problems and other will not. Therefore in order to solve aresearch problem, it is necessary to design a research methodology for the problem as the some may differ fromproblem to problem.

Objectives of the study:

To know the customer’s awareness about the technology based transaction and the level of service provide by theIndian Overseas bank.

To know the customer’s interest towards the technology based transactions.

To study the experience of the existing customer in Indian Overseas bank Technology based services.

To study the satisfaction level of customers in the technology based transactions and their level of usage.

To study the problems faced by the customers in using the technology based transactions.

Scope of the Study

This study is limited to the customers with in Chennai city. The study will be able to reveal the preferences, needs,satisfaction and awareness of the Indian Overseas bank (MCC Campus) customers Technology based services. Italso help banks to know whether the existing technology based services they are offering are really satisfying thecustomer’s needs.

Analysis and Interpretation

Table - 1 : Showing one way ANOVA test of Income and Payment done with Debit/ Credit card

ANOVA Annual Income

Between Groups 4.296 5 .859 .844 .522

Within Groups 91.663 90 1.018

Total 95.958 95

Sig.Sum of Squares df Mean Square F

Interpretation:

Ho - There is no significant difference between the Annual income and Payment done with Debit/ Credit card.

H1 - There is a significant difference between the Annual income and Payment done with Debit/ Credit card.

The one way ANOVA table value shows p value as .522 which is greater than .05. Hence, Null hypothesis isaccepted, There is no significant difference between the Payment done with Debit/ Credit card and Annual income.

Table - 2 : Showing Chi square test of Age and Technology based services accessed in internetbanking:

Chi-Square Tests

Pearson Chi-Square 22.481a 27 .713

Likelihood Ratio 27.406 27 .442

Linear-by-Linear Association 2.285 1 .131

N of Valid Cases 95

Value df Asymp. Sig. (2-sided)

Interpretation:

Ho - There is no association between the Age and Technology based services accessed in Internet banking.

H1 - There is association between the Age and Technology based services accessed in Internet banking



The Chi Square table value shows p value as .713 which is greater than .05. Hence, Null hypothesis is accepted,There is no association between the Technology based services accessed in Internet banking and Age. In otherwords Age and Technology based services accessed in Internet banking are independent.

Table - 3 : Showing one way ANOVA test of Occupation and Payment done with the help of IndianOverseas Internet banking facility

ANOVA Occupation

Between Groups .436 5 .087 .068 .997

Within Groups 112.209 87 1.290

Total 112.645 92

Sig.Sum of Squares df Mean Square F

Interpretation:

Ho - There is no significant difference between the Occupation and Payment done with the help of Indian OverseasBank.

H1 - There is a significant difference between the Occupation and Payment done with the help of Indian OverseasBank.

The one way ANOVA table value shows p value as .997 which is greater than .05. Hence, Null hypothesis isaccepted, There is no significant difference between the Payment done with the help of Indian Overseas Bank andOccupation.

Table - 4 : showing Chi square test of Occupation and Indian Overseas bank services compare to otherbank satisfaction level

Chi-Square Tests




N of Valid Cases 100


Interpretation:

Ho - There is no association between the Occupation and Indian Overseas bank services compare to other banksatisfaction level.

H1 - There is association between the Occupation and Indian Overseas bank services compare to other banksatisfaction level.

The Chi Square table value shows p value as .061 which is greater than .05. Hence, Null hypothesis is accepted,There is no association between the Indian Overseas bank services compare to other bank satisfaction level andOccupation. In other words Occupation and Indian Overseas bank services compare to other bank satisfaction levelare independent.

Table - 5 : Showing Chi Square test of Educational Qualification and Problems faced in Technologybased services:

Chi-Square Tests




N of Valid Cases 100




Interpretation:

Ho - There is no association between the EducationalQualification and Problem faced in technologybased transaction.

H1 - There is association between the EducationalQualification and Problem faced in technologybased transaction.

The Chi Square table value shows p value as .174 whichis greater than .05. Hence, Null hypothesis is accepted,There is no association between the Problem faced intechnology based transaction and EducationalQualification. In other words Educational Qualificationand Problems faced in Technology based services areindependent.

Bar chart showing the suggesting Indian OverseasBank to your friends/ relatives for its technologybased services

Fig. 1 : Suggesting Indian overseas bank to others

Interpretation:

The frequency table shows 51% of respondents are notagreed to suggest Indian Overseas bank to others, 48%are agreed to suggest Indian Overseas bank and 1%respondents specified other.

Conclusions and Recommendations

Although the findings of this analysis unconcealedpositive responses that were higher than the typical, thebank have to be compelled to listen in providing data toits customers and conjointly they need to supply simpleand versatile technology based mostly services.

Online banking services suppliers got to look out forindicators of innovative ways in which in makingawareness regarding the services through participationin exhibition in addition as adoption of recenttechnologies in on-line banking.

Indian Overseas bank customers area unit been facingcontinuous downside in mistreatment the technologybased mostly services, bank have to be compelled totake necessary steps to live through thesedisadvantages.

51% of Respondents won’t recommend Indian Overseasbank services to their friends, relatives; this clearlyprovides plan Indian Overseas Bank facing issue inproviding technology based mostly services to itscustomers. Bank should strengthen their technologybanking services.

Finally, All the banks area unit been implementingTechnology based mostly banking to strengthen theirbanking in quickest mode of dealings and to draw in theshoppers. Indian Overseas Bank should update theirwebsites, all modes of technology based mostlytransactions quicker compared to personal banks.

Reference:

1. Khan SK (2007). Adoption Issues of Internet Banking in Pakistani’s Firms, Lulea University ofTechnology, Sweden. epubl.ltu.se/1653-0187/2007/009/LTU-PB-EX-07009-SE.pdf

2. Kim BM, W iddows R, Yilmazer T (2006). TheDeterminants of Consumers’ Adoption of InternetBanking: Factors Determining Consumer Adoptionof Internet Banking. Retrieved on July, 2010 fromWorld Wide Web: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1021484.

3. Qureshi TM, Zafar MK, Khan MB (2008). CustomerAcceptance of Online Banking in DevelopingEconomies. Retrieved on [January, 2010] from WorldWide Web: http://www.arraydev.com/commerce/jibc/2008-04/Tahir%20Masood.pdf.

4. Ortega BH, Martinez JJ, De Hoyos MJM (2007). AnAnalysis of Web Navigability in Spanish InternetBanking. Retrievedon [September, 2010] from WorldWide Web:http://www.arraydev.com/commerce/jibc/2007-12/Blanca_Final.pdf

5. Casaló L, Flavián C, Guinalíu M (2008). The role ofusability and satisfaction in the consumer’scommitment to a financial services website. Int. J.Electronic Financ., 2(1): 2008-2031.

6. Raman SR, Alam N, Mphil MK (2008). InformationTechnology in Malaysia: E-service quality and Uptakeof Internet banking. Retrieved on [January, 2010] fromWorld Wide web: http://www.arraydev.com/c o m m e r c e / J I B C / 2 0 0 8 - 0 8 / J I B C A r t i c l e _MuraliRaman.pdf.



ACHIEVING EXCELLENCE IN BANKING SECTOR THROUGH GOOD

CORPORATE GOVERNANCE

1 . Associate Professor, Department of Commerce,Ch.S.D.St. Theresa’s College for Women, AP.

Abstract

Corporate Governance includes the processes through which corporations’ objectives are set and pursued in the

context of the social, regulatory and market environment. The framework of rules and practices by which a board of

directors ensures accountability, fairness, and transparency in a company’s relationship with its all stakeholders

(financiers, customers, management, employees, government, and the community).

Governance is an age old concept which provides for a set of transparent relationships between an institutions

management, its board, shareholders and other stakeholders. Corporate governance is gaining centre stage in the

recent times due to failure of corporate and wide dissatisfaction among the people with the way corporate works and

hence became a widely discussed topic worldwide. Good corporate governance in any corporation world over is

interplay of legal requirements, the ethics, effectiveness, board legal requirements, the ethics, effectiveness, board

relationships and group dynamics. The objective of this paper is to study corporate governance in banks and how to

achieve the excellence in banks through good corporate governance. Good Corporate Governance in Banks can only

be sustained by a knowledgeable, skilful, and well informed board of directors with a proper blend of expertise,

professionalism, independence and involvement.

Dr. A. Uttama Durga Devi1

History of Corporate Governance

The Origin of modern corporate governance can probablybe traced to a series of scandals and collapses in theUK in the late 1980s and early 1990s, which were widelyattributed to poorly managed business practices(Leeladhar 2004). Although corporate governancedeficiencies may not have been causal in the strict senseof the term, there can be no doubt that they facilitated,or at the very least, did not prevent, practices that resultedin poor performance.

In May 1991, the London Stock Exchange set up aCommittee under the chairmanship of Sir Arian Cadburyto help raise the standards of corporate governance andthe level of confidence in financial reporting and auditing.The Cadbury committee report has since become thebasic document for corporate governance all over theworld. Corporate governance is a dynamic concept, interms of scope, thrust and relevance and should beviewed as an ongoing process subject to changes basedon experiences and developments.

In April 1997, CII set up a committee to examinecorporate governance issues, and recommend avoluntary code of best practices. The committee wasdriven by the conviction that good corporate governancewas essential for Indian companies to access domesticas well as global capital at competitive rates.

Desirable Disclosure: Listed companies should givedata on high and low monthly averages of share prices

in a major stock exchange where the company is listed;greater detail on business segments, up to 10% ofturnover, giving share in sales revenue, review ofoperations, analysis of markets and future prospects.

Kumar Mangalam Birla Committee report andClause 49: While the CII code was well-received andsome progressive companies adopted it, it was felt thatunder Indian conditions a statutory rather than a voluntarycode would be more purposeful, and meaningful.

Naresh Chandra Committee Report: The NareshChandra Committee was appointed in August 2002 bythe Department of Company Affairs (DCA) under theMinistry of Finance and Company Affairs to examinevarious corporate governance issues. The Committeesubmitted its report in December 2002.

Narayana Murthy Committee report on CorporateGovernance: The fourth initiative on corporategovernance in India is in the form of the recommendationsof the Narayana Murthy committee. The committee wasset up by SEBI, under the chairmanship of Mr. N.R.Narayana Murthy, to review Clause 49 and suggestmeasures to improve corporate governance standards.

Corporate Governance voluntary guidelines 2009:

More recently, in December 2009, the Ministry ofCorporate Affairs (MCA) published a new set of –Corporate Governance Voluntary Guidelines 2009,designed to encourage companies to adopt better



practices in the running of boards and board committees,the appointment and rotation of external auditors, andcreating a whistle blowing mechanism.

The guidelines are divided into the following six parts:

• Board of Directors,

• Audit Committee of the Board

• Auditors

• Secretarial Audit

• Institution of mechanism for Whistle Blowing

Need for Corporate Governance in Banking System:

Banks play a vital role in the economy and the continuedstrength and stability of the banking system is a matterof general public interest and concern, both in regard toits linkages with the real sector and for providing apayment and settlement system. Banks are highlyleveraged organizations. Banks can continue to fund theiroperations only so long as they enjoy the confidence ofthe financial markets. Depositors’ protection and publicpolicy considerations of banks lead to a comprehensiveregulatory and supervisory framework. It has beenrecognized that banks lead to a comprehensive regulatoryand supervisory framework. It has been recognized thatthere is a need to attach importance to qualitativestandards such as internal controls and risk managementcomposition and role of the board and disclosure standards.

Good corporate governance is an important factor in acompetitive environment. Investors, customers,employees and vendor have all become more discerningand are demanding greater transparency and fairness inall dealings. To attract and retain the commitment ofinvestors, customers, employees, Banks should ensurethat they match the global benchmark in CorporateGovernance Practices.

Adequate disclosure and transparency are two key pillarsof a corporate governance framework in a bank.

Unlike companies, there is an external dimension tocorporate governance in banks. In addition to interest ofshareholders’ interest of depositors is also involved.

Banks are custodians of public wealth, and there mustbe a system of internal checks and balances to ensurethat this interest is safeguard.

Hallmarks of good governance in Banks:

Enhancing the value for all stakeholders, includingdepositors.

A well understood corporate vision/mission statementcodifying its values, methods and culture.

A broad-based board, comprising of specialist directors,with independent dispositions.

Establishment of relevant committees of the board, withtheir roles clearly defined, to oversee functions of thebank in critical areas.

Setting standards for good banking practices to:

Ensure a transparent and fair relationship between thecustomers and the bank.

Institute a comprehensive risk management system.

Proactively eliminate customer complaints and evolve ascheme for redressals of the grievances (of customers,particularly retail depositors and borrowers), and

Institute systems and processes to ensure compliancewith the statues and laws concerning banking.

A clearly enunciated code of conduct for dealing with allthe stakeholders.

Effective systems of internal control, monitoring andvigilance mechanism.

Global best practices – Some thoughts:

Appraisal of board performance

There is nothing wrong in having a board level appraisalwhen we do the same for employees, vendors, agentsetc. it’s not an easy proposition and as complicated as‘who would rate the rater’. If done properly, appraisalscan help boards become effective by clarifying individualand collective contribution as well as responsibilities. Itcan also ensure healthy balance of power.

No one can evaluate board but the board itself. It couldbe done on the parameters of knowledge, experience,power, information, time, motivation, crises managementetc.

Lead director

Today is the age of empowered board of directors. Bankboards in India should have majority of independentdirectors and such directors should select one as leadindependent director who should also meet with themanagement on a regular basis. It is imperative thatindependent directors should take responsibility for boardprocedures and lead director should serve as a facilitatorof the governance process and board activities.

Management Vs Governance

Many people often mistakenly understand the two termsas synonyms. Even well managed corporation could bebadly governed and lead to corporate failure. Whilegovernance has to come from the top most layer, theboard, the management is a function of one layer beneaththe board, the executive or top management. The wellgoverned model will come from more new ideas, moreadaptable decision making and better accountability.

Board oversight – Strategic audit

The strategic audit can provide an orderly way for boardsto review strategy without invading management territory.This could be triggered by events such as CEO’sretirement, abnormal decline in profitability or hike inNPA level etc.



Board empowerment

Effective board empowerment is missing on Indian Bankboards. This emanates from the composition itself whichin most public sector banks controlled.

Moving towards global best practices, Indian banks areexpected to move in the direction of board empowermentso that boards can be effective.

There have been several instances where independentdirectors participate more effectively in the boardmeetings and CEOs in such entities do not find theirpowers diminished. The practice of empowering theboards is followed in companies like Dayton HudsonCorporation, Monsanto, and General Motors etc.

Governance through committees of the board

Board Committees cannot and do not shift theresponsibility of the board. They should not be seen inthat context. But yeas, board committees, as specialisedcommittees focusing on specific areas such as audit,nomination, do enhance quality of discussions andstrategies. Such committees can contribute to corporateperformance by periodic review of internal and externalbusiness environment.

On the other hand board acts as a policy framing bodyto give advice or consent. In India, two-tier governanceis not in vogue but in many other countries, this issuccessfully practiced. The authority of executivecommittee should be well defined to avoid clash oroverlapping with the board itself.

Good corporate governance in banks can only besustained by a knowledgeable, skilful and well informedboard of directors with a proper blend of expertise,professionalism, independence and involvement.

The bank boards also require representation in the areassuch as finance, information technology, humanresources development, economics and person with goodtrack record of integrity and experience in managingindustrial enterprises.

As a step towards effective corporate governance, thefollowing sub-committees of the Board should functionin a bank, (as per RBI/SEBI requirements).

Executive committee/management committee/supervisory committee (EC/MC)

Executive Committee/Management Committee/Supervisory Committee is a committee of directors todeal with matter which need quick decisions and timelymonitoring of the activities of the Bank. It shall exercisethe powers vested in the Board in respect of sanctionand review of credit proposals, investments compromise/write-off proposals, approval of capital/revenueexpenditure, fil l ing of suits/appeals and otheradministrative issues for macro nature.

• Audit Committee of Board (ACB)

Audit Committee of Board (CB) normally comprisesof RBI nominee and independent directors with oneor more professional directors, if one is on the board.ACB provides directions and also oversees the totalaudit function in the Bank.

• Share transfer committee

The Share Transfer Committee approves and monitorstransfers, transmission, splitting and consolidationof shares issued by the Bank. The committee alsomonitors redressing of complaints from shareholdersrelating to transfer of shares, non-receipt of balancesheet, dividends and other matters pertaining toinvestor’s servicing. Compliance officer alsoparticipates in the meeting.

• Risk management committee (RMCB)

The Risk Management Committee monitors theBank’s credit and market risk policies andprocedures, approves and reviews dealing authorities.The committee also ensures that the Bank’s creditexposure, to any one group or industry, does notexceed the internally set limits and that the risk isprudently diversified. RMCB oversees the policy andstrategy for integrated risk management relative tovarious risk exposures of the Bank. Thus, RMCBperforms following essential functions-

♦ Identify monitor and measure the risk profile ofthe Bank.

♦ Develop policies and procedures, verify the modelsthat are used for pricing complex produces andalso identify new risks.

♦ Develop policies that clearly spell out thequantitative prudential limits on various segmentsof Bank’s operations.

♦ Effectively communicate the risk strategy andpolicies throughout the organization.

Banks may also have following committees at theoption of management/Board on need basis:

• Credit approval committee

The Credit Approval Committee approves creditexposures, which are beyond the powers delegatedto the executives of the Bank. This facilitates quickresponse to the needs of the customers and speedydisbursement of loans.

• Nomination/remuneration committee

The Nomination Committee of the bank is primarilyconcerned with performance evaluation, makingrecommendations to the Board regarding top-levelsuccession and appointments, viz, the membershipof the Board, the corporate management committeeand the senior most level of executive management,one level below the Board.



• Asset-Liability management committee (ALMC)

This committee primarily deals with management andmarching of assets and liabilities of the bank on along term and short term horizon.

• Director’s Committee

This committee is required to review the vigilancematters and review the disposal of vigilance and otherdisciplinary action cases.

• Customer service committee

This committee is constituted in terms of RBIguidelines to review and oversee the customer servicelevel in the banks. The committee monitors the qualityof services rendered to the customers and alsoensures implementation of directives received fromRBI in this regard.

• Special committee to monitor large value frauds

In terms of RBI guidelines, a special committee ofdirector is required to be constituted for monitoringand follow-up of cases of frauds involving amounts ofINR 1 crore and above.

• Information technology committee

This committee is constituted with a view to monitorthe progress of effective assimilation and speedyimplementation of information technology in the bank.

Role of the Reserve Bank of India:

The Reserve Bank of India needs to place more emphasison securing sound corporate governance of banks ratherthan to focus only on regulatory compliance. As the roleof the board is crucial in developing sound corporategovernance of banks, the RBI should asses theperformance of the entire board.

This could be done by reviewing minutes of boardmeetings, by checking the board members’ accessibilityto necessary information and resources, observing boardmeetings of banks when it thinks it is appropriate, issuingwarnings when necessary, and even asking the bank toreorganize its board framework and operationalprocedures in the interests of sound corporategovernance. Since public sector banks are governed bythe respective legislations under which they were setup, some of the governance aspects of these banks areexempt from applicability of the relevant provisions ofthe Banking Regulation Act, although they have a bearingon prudential aspects. In regard to these matters, theReserve Bank prescribes its policy framework for theprivate sector banks and suggests that the Governmentadopt the same for public sector banks. Corporategovernance of banks cuts across the areas of bankingsupervision and securities regulation.

It would be in the interests of all concerned, that the RBIshould, in conjunction with Securities and Exchange

Board of India, develop and publicize a code of corporategovernance of banks, based on which banks coulddevelop their own codes. Furthermore, the RBI couldprovide incentives for banks to improve their corporategovernance. For instance, taking into consideration thesuggested code mentioned above, the RBI could developa rating mechanism for the corporate governance ofbanks. Such a rating be designed either as a ratingspecifically focused on corporate governance, or as apart of a broader rating mechanism within which factorsregarding corporate governance play one of the majorroles in determining overall ratings. Another example ofincentives is the possible differentiated deposit insurancepremium reflecting the ratings.

The methodology of the ratings of corporate governanceof banks should be articulated as clearly as possibleand should be announced well in advance in order toprovide time for banks to reorganize their framework.SEBI could contribute to developing the criteria byproviding its accumulated knowledge and experienceabout corporate governance.

Suggestions

Based on the overall experience, it is strongly felt thatapart from all the committees of the board as mentionedabove, there is a gap to be filled in and in order to ensuretotal compliance and observe prudent corporategovernance, it would be desirable for the Bank boardsto have two more board level committees, viz,Compliance Committee and Corporate GovernanceCommittee.

Compliance Committee:

Bank boards must have a compliance committee of theboard to oversee the level of compliance and ensure thatbanks comply not only with the banking laws but withall the laws to which a banking company is exposed.

Corporate Governance Committee:

Much is said and written about corporate governancebut we fail to realise that the ultimate objective is toensure corporate governance and follow and implementpolicies which lead to best disclosures and transparentpractices watching and safeguarding the interest of allstakeholders. At the board level, the issue of corporategovernance is somehow missed out and review offunctioning of these committees are limited to notingthe minutes of there committee meetings which is justa ritual in most of the cases. There is a need to reviewthe functioning and performance of these committeesso as to ensure that governance does exist andapplicable corporate governance norms are followed. Thiscommittee should periodically review the bank’s and it’scommittee’s performance from the angle of qualitativeaspects of corporate governance being practiced.



Conclusion

In the years to come, the Indian financial system willgrow not only in size but also in complexity as the forcesof competition gain further momentum and financialmarkets acquire greater depth. Corporate governance inIndian banking industry is by and large satisfactoryirrespective of size, profitability or non performing assets(NPA) level in the banks.

This study concluded that the corporate governancepractices in the banking and financial sector in Indiashould improve for best investment policies, appropriateinternal control systems, better credit risk management,better customer service and adequate automation inorder to achieve excellence, transparency andmaximization of stakeholder’ value and wealth. There isa lot of improvement required in choosing right personsfor the position of directors in the banks, particularly incases where the Government nominates these andGovernment nominates these and those elected byshareholders. Banks in India need to look at larger andmacro level issues in order to match global practiceswhich are considered best the world.

References

1. Journal of Business Law and Ethics June 2014, Vol.2, No. 1, pp. 91-101. Published by American ResearchInstitute for Policy Development.

2. Kohli S.S., “Corporate Governance in Banks: TowardsBest Practices”, IBA Bulletin, pp.29-31, 2003; alsoas seen in Mridushi Swarup, Corporate Governancein Banking Sector, IJMBS, pg 76-81, vol. 1, issue 2,June 2011.

3. Divya Purohit., “Altius Shodh Journal of Managementand Commerce – Corporate Governance in India: withreference to its History and legal framework in India,Indore.

4. J. Madan Mohan, Corporate Governance practicesin Banking Sector, Good Governance and RuralDevelopment in India, ISBN-13: 978-1-5032-8325-1(ISBN-10: 1503283259), pg no. 338-349, Sir C RReddy Autonomous College, Eluru, Andhra Pradesh

5. Sanjiv Agarwal, Achieving Excellence via GoodGovernance, The Indian Banker, pg no. 52-57, March2012.

6. Reddy, Y. V. (2006): Corporate Governance in Banksin India, Speech at the Seminar on CorporateGovernance for Bank Directors organised by theIndian Institute of Management, Bangalore,International Institute of Finance, Washington andthe Indian Banks’ Association on December 16, 2005,RBI Bulletin, January.

7. RBI (2002): Report of the Consultative Group ofDirectors of Banks/Financial Institutions, ChairmanDr. A. S. Ganguly, Mumbai: RBI.



E-BANKING - AN OVERVIEW

1. Associate Professor in Commerce, Jamal Mohamed College, Trichy.2. Research Scholar in Commerce, Jamal Mohamed College, Trichy

Abstract

The phase of the entire banking industry is rapidly changing in the 21st century. A focus-shift from traditional banking

to new service delivery channels is paramount among many banks to provide customers with 24x7 (around-the-

clock) accesses to banking services for improved customer service delivery. Herein, we investigate into the impact of

electronic banking (e-banking) service delivery on customer satisfaction. ATMs are at your doorstep. There are more

plastic cards in your wallet than currency notes. A huge part of this change is due to advent of Information Technology.

Banks today operate in a highly globalized, liberalized, privatized and a competitive environment. In order to survive

in this environment banks have to use IT. Indian banking industry has witnessed a tremendous developments due to

sweeping changes that are taking place in the information technology. Electronic banking has emerged from such an

innovative development.

Keywords: Electronic Banking, Customer Satisfaction, Information Technology.

Dr. E. Mubarak Ali1

Introduction

Information Technology has become a necessary tool intoday’s organizations. Banks today operate in a highlyglobalized, liberalized, privatized and a competitiveenvironment. In order to survive in this environment bankshave to use IT. IT has introduced new business paradigm.It is increasingly playing a significant role in improvingthe services in the banking industry. Indian bankingindustry has witnessed a tremendous developments dueto sweeping changes that are taking place in theinformation technology. Electronic banking has emergedfrom such an innovative development. Modern technologyis seen as a panacea for most of the ills that the bankingsector faces today. Even at present, India is a relativeunbanked country as the credit-to-GDP ratio is one ofthe lowest in the developing economies. So banks arefacing the dual challenge of increasing penetration andhigh growth trajectory. The banking industry can kill twobirds with one stone that is with help of technology.Tremendous progress took place in the field of technologywhich has reduced the world to a global village and ithas brought remarkable changes in the banking industry.Branch banking in the brick and mortar mode has beentransformed into click and order channel mode.

E-Banking

Delivery of banking services to customers at their officeor home with the help of electronic technology is termedas e-banking. Daniel defines electronic banking as thedelivery of bank’s information and services by banks tocustomers via different delivery platforms that can beused with different terminal devices such as a personalcomputer and a mobile phone with browser or desktop

software, telephone or digital television. E-banking is abrew of services that embody Internet banking, Mobilebanking, ATM kiosks, Fund Transfer System, Real TimeGross Settlement (payment & allotment system), Credit/Debit/Smart/Kisan Cards, Cash government services,as well as Data warehousing, Operational interpretationfor MIS as well as Customer Relationship Management.E-based banking is also known as Cyber banking, homebanking, and virtual banking and includes various bankingactivities that can be conducted from anywhere. Aperusal of the concept of e-banking as described in theliterature reveals that the term e-banking, is an upperconstruct that encompasses an array of banking servicesdelivered through electronic media, be it through phone,PC, TV or internet. Thus the term E-banking includesRTGS, NEFT, ECS, Credit cards and debit cards, Chequetruncation, ATM, Tele banking, Internet banking andMobile banking.

E-Banking In India

In India e-banking is of fairly recent origin. The traditionalmodel for banking has been through branch banking.Only in the early 1990s there has been start of non-branch banking services. The good old manual systemson which Indian Banking depended upon for centuriesseem to have no place today. The credit of launchinginternet banking in India goes to ICICI Bank. Citibankand HDFC Bank followed with internet banking servicesin 1999. Several initiatives have been taken by theGovernment of India as well as the Reserve Bank tofacilitate the development of e- banking in India. TheGovernment of India enacted the IT Act, 2000 with effectfrom October 17, 2000 which provided legal recognitionto electronic transactions and other means of electronic

K. Riyaz Ahamed2



commerce. The Reserve Bank is monitoring andreviewing the legal and other requirements of e-bankingon a continuous basis to ensure that e-banking woulddevelop on sound lines and e-banking related challengeswould not pose a threat to financial stability.

A high level Committee under chairmanship of Dr. K.C.Chakrabarty and members from IIT, IIM, IDRBT, Banksand the Reserve Bank prepared the IT Vision Document-2011-17, for the Reserve Bank and banks which providesan indicative road map for enhanced usage of IT in thebanking sector. To cope with the pressure of growingcompetition, Indian commercial banks have adoptedseveral initiatives and e-banking is one of them. Thecompetition has been especially tough for the publicsector banks, as the newly established private sectorand foreign banks are leaders in the adoption of e-banking.Indian banks offer to their customers followinge-banking products and services:

a) Automated Teller Machines (ATMs)

b) Internet Banking

c) Mobile Banking

d) Phone Banking

e) Telebanking

f) Electronic Clearing Services

g) Electronic Clearing Cards

h) Smart Cards

i) Door Step Banking

j) Electronic Fund Transfer

The Three broad facilities that e-banking offers are:

i) Convenience: Complete your banking at yourconvenience in the comfort of your home.

ii) No more Qs: there are any queues at an online bank.

iii) 24x7 services: Bank online services are provided 24hours a day, 7 days a week and 52 weeks a year.

Functions Of E-Banking

At present, the personal e-bank system provides thefollowing services: -

Inquiry about the Information of Account

The client inquires about the details of his own accountinformation such as the card’s / account’s balance andthe detailed historical records of the account anddownloads the report list.

Card Accounts’ Transfer

The client can achieve the fund to another person’s CreditCard in the same city.

Bank-Securities Accounts Transfer

The client can achieve the fund transfer between his ownbank savings accounts of his own Credit Card accountand his own capital account in the securities company.

Moreover, the client can inquire about the present balanceat real time.

The Transaction of Foreign Exchange

The client can trade the foreign exchange, cancel ordersand inquire about the information of the transaction offoreign exchange according to the exchange rate givenby our bank on net.

The B2C Disbursement on Net

The client can do the real-time transfer and get thefeedback information about payment from our bank whenthe client does shopping in the appointed web-site.

Client Service

The client can modify the login password, information ofthe Credit Card and the client information in e-bank on net.

Account Management

The client can modify his own limits of right and state ofthe registered account in the personal e-bank, such asmodifying his own login password, freezing or deletingsome cards and so on.

Reporting the Loss if the Account

The client can report the loss in the local area (notnationwide) when the clients Credit Card or passbook ismissing or stolen.

Advantages of E-Banking

i. Account Information: Real time balance informationand summary of day’s transaction.

ii. Fund Transfer:Manage your Supply-Chain network,effectively by using our online hand transfermechanism. We can effect fund transfer on a realtime basis across the bank locations.

iii. Request: Make a banking request online.

iv. Downloading of account statements as an excel fileor text file.

v. Customers can also submit the following requestsonline: Registration for account statements by e-maildaily / weekly / fortnightly / monthly basis.

• Stop payment or cheques

• Cheque book replenishment

• Demand Draft / Pay-order

• Opening of Letter of credit

vi. Customers can Integrate the System with his ownERP

vii. Bill Payment through Electronic Banking

viii.The Electronic Shopping Mall

ix. Effecting Personal Investments through ElectronicBanking

x. Investing in Mutual funds



Challenges in Adoption of E-Banking

E-banking is facing following challenges in Indian bankingindustry:

i. The most serious threat faced by e-banking is that itis not safe and secure all the time. There may beloss of data due to technical defaults.

ii. E-banks are facing business challenges. For thetransactions made through internet, the servicecharges are very low. Unless a large number oftransactions are routed over the Web the e-bankscannot think of profit.

iii. There is lack of preparedness both on part of banksand customers in the adoption of new technologicalchanges.

iv. There is lack of proper infrastructure for the installationof e-delivery channels.

Conclusion

The banking industry has been a leader in the e-businessworld in recent years. The e-banking revolution hasfundamentally changed the business of banking byscaling borders and bringing about new opportunities.In India, E-banking is in a nascent stage. No doubt Indianbanks are making sincere efforts for the adoption of

advanced technology and installation of e-deliverychannels but still masses are wary of the concept.Banks are making sincere efforts to popularise the e-banking services and products. Younger generation isbeginning to see the convenience and benefits if e-banking. In years to come, e-banking will not only beacceptable mode of banking but will be preferred modeof banking.

References

1. Gurusamy S, “Banking in the New Millennium: Issues,

Challenges & Strategies”, Kanishka Publishers &

Distributors, New Delhi, 2001, pp. 1-62.

2. Uppal R K, “E-Delivery Channels in Banks- A Fresh

Outlook”, Researchers World- Journal of Arts

Science & Commerce, Vol. II, No. 1, January 2011,

pp. 180-191.

3. Bhasin Niti, “Banking Development in India 1947 to

2007: Growth, Reforms & Outlook”, New Century

Publications, New Delhi, 2006, pp. 185-189.

4. Reserve Bank of India, Report on Trend and

Progress of Banking in India, RBI Mumbai, Various

Issues.

5. Economic Times, ET Banking Survey 2009, 21

December 2009, p.11.



FINANCIAL PERFORMANCE ANALYSIS

1. Associate professor, Department of Commerce, National College, Trichy.2. Research Scholar, Bharathidasan University, Trichy

Abstract

Financial performance analysis is the process of identifying the financial strengths and weaknesses of the firm by

properly establishing the relationship between the items of balance sheet and profit and loss account. It also helps in

short-term and long term forecasting and growth can be identified with the help of financial performance analysis. The

dictionary meaning of ‘analysis’ is to resolve or separate a thing in to its element or components parts for tracing their

relation to the things as whole and to each other. The analysis of financial statement is a process of evaluating the

relationship between the component parts of financial statement to obtain a better understanding of the firm’s position

and performance

S. V. Sheeba Mary2Dr. K. Kumar1

Introduction

Financial analysis (also referred to as financialstatement analysis or accounting analysis or Analysis of finance) refers to an assessment of theviability, stability and profitability of a business, sub-business or project. Financial performance analysis isthe process of identifying the financial strengths andweaknesses of the firm by properly establishing therelationship between the items of balance sheet and profitand loss account. It also helps in short-term and longterm forecasting and growth can be identified with thehelp of financial performance analysis.

The dictionary meaning of ‘analysis’ is to resolve orseparate a thing in to its element or components partsfor tracing their relation to the things as whole and toeach other. The analysis of financial statement is aprocess of evaluating the relationship between thecomponent parts of financial statement to obtain a betterunderstanding of the firm’s position and performance.This analysis can be undertaken by management of thefirm or by parties outside the namely, owners, creditors,investors.

It is performed by professionals who prepare reportsusing ratios that make use of information takenfrom financial statements and other reports. Thesereports are usually presented to top management asone of their bases in making business decisions.Financial analysis may determine if a business will:

• Continue or discontinue its main operation or part ofits business;

• Make or purchase certain materials in themanufacture of its product;

• Acquire or rent/lease certain machineries andequipment in the production of its goods;

• Issue stocks or negotiate for a bank loan to increaseits working capital;

• Make decisions regarding investing or lending capital;

• Make other decisions that allow management tomake an informed selection on various alternativesin the conduct of its business.

Financial analysts often assess the followingelements of a firm

1. Profitability - its ability to earn income and sustaingrowth in both the short- and long-term. A company’sdegree of profitability is usually based on the incomestatement, which reports on the company’s resultsof operations;

2. Solvency - its ability to pay its obligation to creditorsand other third parties in the long-term;

3. Liquidity - its ability to maintain positive cash flow,while satisfying immediate obligations;

Both 2 and 3 are based on the company’s balancesheet, which indicates the financial condition of abusiness as of a given point in time.

4. Stability - the firm’s ability to remain in business inthe long run, without having to sustain significantlosses in the conduct of its business. Assessing acompany’s stability requires the use of both theincome statement and the balance sheet, as well asother financial and non-financial indicators. etc.

Financial analysts often compare financialratios (of solvency, profitability, growth, etc.)

• Past Performance - Across historical time periodsfor the same firm (the last 5 years for example),

• Future Performance - Using historical figures andcertain mathematical and statistical techniques,including present and future values, This extrapolation



method is the main source of errors in financialanalysis as past statistics can be poor predictors offuture prospects.

• Comparative Performance - Comparison betweensimilar firms.

These ratios are calculated by dividing a (group of)account balance(s), taken from the balance sheet and/ or the income statement, by another, for example:

Net income / equity = return on equity (ROE)

Net income / total assets = return on assets (ROA)

Areas of Financial Performance Analysis

Financial analysts often assess the firm’s productionand productivity performance (total businessperformance), profitability performance, liquidityperformance, working capital performance, fixed assetsperformance, fund flow performance and socialperformance. Various financial ratios analysis includes

1. Working capital Analysis

2. Financial structure Analysis

3. Activity Analysis

4. Profitability Analysis

Significance of Financial PerformanceMeasurement:

The interest of various related groups is affected by thefinancial performance of a firm. The type of analysis variesaccording to the specific interest of the party Involved:

• Trade creditors: interested in the liquidity of the firm(appraisal of firm’s liquidity)

• Bond holders: interested in the cash-flow ability ofthe firm (appraisal of firm’s capital structure, the majorsources and uses of funds, profitability over time,and projection of future profitability)

• Investors: interested in present and expected futureearnings as well as stability of these earnings(appraisal of firm’s profitability and financial condition)

• Management: interested in internal control, betterfinancial condition and better performance (appraisalof firm’s present financial condition, evaluation ofopportunities in relation to this current position, returnon investment provided by various assets of thecompany etc.)

Limitations of Financial Statement Analysis

Financial statement analysis is a very important devicebut it has Certain limitation which are to be kept in mind.Following are the limitations of financial statement analysis.

1. Based on past data:

The nature of financial statements is historical. Pastcannot be the index of future estimation, forecasting,budgeting and planning.

2. Financial statement analysis cannot be asubstitute for judgment :

Analysis is a tools which can be utilized usefully byan expert may lead to erroneous conclusion byunskilled analysis. Thus the result analysis cannotbe considered as judgment or conclusion.

3. Reliability of figures:

The accuracy and reliability of analysis depends onreliability of figures derived from financial statement.

4. Different interpretation:

Result of the analysis may be interpreted differentlyby different user

5. Change in accounting methods:

Analysis will be effective if the figures taken fromfinancial statements comparable. If there are frequentchange in accounting policies and method, figuresof different periods will be different and comparable.

6. Price level change:

The ever rising inflation erodes the value of money inthe present day economic situation, which reducesthe validity of analysis.

7. Limitations of the tools of analysis:

Different techniques of analysis are used by ananalyst. These tools are suitable for different type ofanalysis. Application of a particular tool or techniquedepends on the skill and expertise of the analyst. Ifan unsuitable technique is used, it give misleadingresult. It may lead to wrong conclusions and prove

harmful to the business concern.

Methods of Analysis and Interpretation

The analysis and interpretation of financial statement isused to determine the financial position and result ofoperation as well. The following are the tools that areused for analyzing the financial position of the company:

• Ratio Analysis

• Comparative balance sheet

• Common size balance sheet

• Trend analysis

Ratio Analysis

Ratio analysis is an important and age-old technique. Itis a powerful tool of financial Analysis. It is defined as“The indicated quotient of two mathematical expressions”and as “the relationship between two or more things”.Systematic use of ratio is to interpret the financialstatement so that the strength and weakness of a firmas well as its historical performance and current financialcondition can be determined.

A ratio is only comparison of the numerator with thedenominator.The term ratio refers to the numerical or



quantitative relationship between two figures. Thus, ratiois the relationship between two figures and obtained bydividing a former by the latter. Ratios are designed showhow one number is related to another.

The data given in the financial statements are in absoluteform and are dumb and are unable to communicateanything. Ratios are relative form of financial data andare very useful technique to check upon the efficiencyof a firm. Some ratios indicate the trend or progress ordownfall of the firm.

In the view of the requirements of the various users ofratio, it is divided in to the following important categories.

1. Liquidity ratios

2. Activity ratios

3. Profitability ratios

4. Earnings ratios

Liquidity Ratios

Liquidity ratios measure the ability of the firm to meetit’s a current obligation. In fact, analysis of liquidity needsthe preparation of cash budgets and cash and fund flowstatements; but liquidity ratios, by establishing arelationship between cash and other current asset tocurrent obligations provide a quick measure of liquidity.

A firm should ensure that it does not suffer From lack orliquidity, and it does not have excess liquidity .the failureof the company to meet its obligations due to its lack ofliquidity, will result in a poor creditworthiness, loss ofcreditor’s confidence, or even in legal tangles resultingin the closure of the company a very high degree ofliquidity is also bad idle assets earn nothing. The firmsfund will be unnecessarily tied up in current assets.Therefore it is necessary to strike a proper balancebetween high liquidity and lack of liquidity.

Activity Ratio or Turnover Ratio

Activity Ratio highlights the activity and the operationalefficiency of the business concern. The bettermanagements of asserts the larger the amount of sales.Activity ratio measures the relationship between the salesand the assets. Turnover ratios are employed to evaluatethe efficiency with which the firm manages and utilize sits assets. Their ratio indicates the speed with whichassets are brought converted as turn over into sales.

Profitability Ratios

Profitability reflects the final result of the businessoperations. Profit earning is considered essential for thesurvival of the business. There are two types of profitabilityratios profit margin ratio and the rate of return ratios. Profitmargin ratio shows the relationship between profit and sales.

Popular profit margin ratios are gross profit margin andnet profit margin ratio. Rate of return ratio reflectsbetween profit and investment. The important rates of

return measures are rate of return on total assets andrate in equity.

Earnings Ratios

Earnings are income to the shareholders of the shareinvested by them. Hence the earnings ratio will be usefulto the investors to the value of the shares that is beenholding by them

Comparative Balance Sheet

The comparative balance sheet is helpful in analyzingand evaluating the financial position of the firm over aperiod of years. The comparative balance sheet analyseis the study of the trend of the same items, group ofitems, and computed items in two or more balance sheetof the same business enterprise on different dates.

The changes in periodic balance sheet items reflect theconduct of a business. The changes can be observedby comparison of the balance sheet at the beginningand at the end of the period and these changes can helpin forming an opinion about the progress of an enterprise

Common Size Balance Sheet

Financial statements when read in absolute figure arenot easily understandable. They are even miss leading.Each items of asset is converted in to percentage tototal asset and each item of capital and liabilities isexpressed to total liability and capital fund. Thus thewhole balance sheet is converted in to percentage formi.e., every individual item stated as a percentage of total100.such converted balance sheet is known as commonsize balance sheet. The percentage so calculated canbe easily compared with the corresponding percentagesin some other period.

Trend Analysis

The ‘trend’ signifies a tendency and as such the reviewand appraisal of tendency in accounting variables arenothing but the trend analysis. Trend analysis is carriedout by calculating trend ratio. Trend analysis is significantfor forecasting and budgeting. Trend analysis disclosesthe change in financial and the operating data betweenspecific periods.

Conclusion

Financial analysis determines a company’s health andstability, providing an understanding of how the companyconducts its business. But it is important to know thatfinancial statement analysis has its limitations as well.Different accounting methods adopted by different firms’changes the visible health and profit levels for either betteror worse. Different analysts may get different results fromthe same information. Hence, we must conclude thatfinancial statement analysis is only one of the tools (althougha major one) while taking an investment decision.



FINANCIAL PERFORMANCE OF MFIs IN INDIA AND BANGLADESH – A

COMPARISON

1 . Associate Professor, School of Commerce (PG),C M S College of Science and Commerce, Coimbatore.

Abstract

Microfinance Institutions (MFIs) are those institutions which are providing microfinance services such as savings,

credit, insurance and remittance services to poor. The study aims at analyzing and comparing the performance of

mature MFIs in India and Bangladesh by applying mannwhitney u test. The data have been collected from Microfinance

Information Exchange (MIX) from the fiscal year 2007 to 2011. On comparison of the financial performance of mature

MFIs during the study period it is evident that the Indian MFIs stand better than the MFIs of Bangladesh in many

aspects, though Bangladesh is the place of origin for the concept of microfinance and Microfinance Institutions.

Key words: Financial Performance, Microfinance Institutions.

Dr. R. Rupa1

Introduction

Finance is an extra ordinary effective tool in spreadingeconomic opportunity and fighting against poverty.Access to finance allows the poor to use their rich talentsor open avenues for greater opportunities. Providingsustained credit services is one of the means to increaseincome and productivity of poor. Though the bankingsystem in India witnessed unprecedented growth andachieved phenomenal outreach, notwithstanding this,empirical studies in the 1980s have revealed that a verylarge number of poorest of the poor continue to remainoutside the reach of formal banking system. It is realizedthat existing banking policies, procedures and systemnot have been well suited to meet the credit needs ofpoor. And, it is in this situation microfinance has comeas a solution. Starting with the Grameen bank foundedby Mohammed Yunus in 1970s microfinancerepresented a method of lending that is to be tailoredspecifically to the world’s poorest population.Microfinance initially has been a form of voluntary helpto most deprived population. Microfinance has emergedas a viable alternative to reach the hitherto unreachedfor their social and economic empowerment throughsocial and financial intermediation.

The institutions that are providing microfinance servicessuch as savings, credit, insurance and remittanceservices to poor are called Microfinance Institutions(MFIs). MFIs have come up as a bridge between banksand poor, whose only source of credit has so far beenthe money lender. MFIs are commonly known as “Bankfor the poor”. MFIs play a significant role in financialsector development, and thereby, overall development.

Statement of the Problem

India and Bangladesh are two developing economies inthe world and poverty is a common problem in these

two countries. Microfinance is an option to resolve thisproblem of poor people. A decade ago, the expectationfor microfinance as decisive tool in combating povertywas high. Bangladesh has been the birth place ofmicrofinance and also pioneer in the world for applyingmicrofinance. In India, microfinance traces its roots tomid-1970s when some prominent Indian NGOs startedusing self-help group model. Yet a question remainswhether Indian MFIs are sustainable? To providemicrofinance and other support services MFIs shouldbe able to sustain for long period.

In order to sustain operations, MFIs must generateenough revenues from financial services to cover theirfinancial and operating cost and in many cases, buildinstitutional capital through profit. Financial performancebecomes a watchword in the governance of MFIs. Anumber of studies have been conducted by variousresearchers discretely on the topic financial performanceof MFIs. There are barely few studies, which have madea comparison on the financial performance of MFIs inIndia and Bangladesh, which is considered to be theoriginator of Microfinance. The financial performance ofMFIs may be compared either from previous years’performance or from other countries which are pioneerin Microfinance. Bangladesh, being the pioneer in themicrofinance and having similar demographics is theobvious choice for comparison. The MFIs have beendivided into three categories, namely, ‘New’, ‘Young’ and‘Mature’ based on the maturity of their microfinanceoperations. The MFIs are classified on the basis of theirage as: (i) Age less than 10 years – New MFI, (ii) Agebetween 10 to 15 years – Young MFI and (iii) Age morethan 15 years – Mature MFIs. The MFIs are classifiedinto three categories (new, young, and mature) basedon the maturity of their microfinance operations. Hence



an attempt has been made to assess the financialperformance of mature Microfinance Institutionsoperating in India and Bangladesh and to make acomparison thereof compare the performance of matureMFIs in India and that of Bangladesh.

Objectives of the study

The study focuses on the following objectives:

1. To analyse the financial performance of matureMicrofinance Institutions in India

2. To analyse the financial performance of matureMicrofinance Institutions in Bangladesh.

3. To compare the performance of Mature MicrofinanceInstitutions in India and Bangladesh.

Scope of the Study

The study is pertaining to mature microfinanceinstitutions in India and Bangladesh.

The comprehensive financial performance indicatorsmodel used by Microfinance Information Exchange (MIX)has been chosen for the study. The variables, such asinstitutional characteristics, financing structure, outreachindicators, overall financial

performance indicators, revenue and expenses, efficiencyand risk and liquidity have been considered to analysethe financial performance.


Source of data

The study is primarily based on secondary data. Thedata have been collected from Microfinance InformationExchange (MIX) i.e., www.mixmarket.org.

Period of study

The period undertaken for the study is from fiscal year2007 to 2011 (2007-08 to 2011-2012).

Sample and sampling design

The MFIs which have fulfilled the disclosure guidelineslaid down by Consultative Group to Assist the Poor(CGAP),providing details on all indicators of financialreporting are considered in this study. There are 122MFIs in India and 37 MFIs in Bangladesh which havereported their financial information to CGAP through MIXin the fiscal year 2011. The MFIs for which the financialdetails have been reported at least for 5 yearscontinuously have been identified. It is noted that only26 MFIs are mature in India and 25 MFIs fromBangladesh are mature and all these MFIs have beentaken for the study. The list of MFIs selected for thestudy is appended (Appendix – A1).

Tools for analysis

The following statistical tools have been used foranalyzing the data:

Descriptive Statistics

Descriptive statistics, namely, Mean and Standarddeviation has been used in this study to understand the

distribution and characteristics of the variables studied.Mean is referred to as the measure of central tendencyas it gives an idea of what is a typical or common valuefor a given variable. The Standard Deviation is called themeasure of dispersion which is used to study how farthe variable of interest is ‘spread out’ in the study.

Mann-Whitney U test

The Wilcoxon rank sum test (also known as the Mann-Whitney U test or the Wilcoxon-Mann-Whitney test) isused to test whether two samples are drawn from thesame population. It is most appropriate when the likelyalternative is that the two populations are shifted withrespect to each other. The test is performed by rankingthe combined data set, dividing the ranks into two setsaccording to the group membership of the originalobservations, and calculating a two sample z statistic.

Limitations of the study

The study is subject to the following limitations:

• The limitations inherent in statistical tools apply tothis study also.

• Non availability of continuous data from MIX for morethan five years has restricted the period and numberof MFIs in this study.

Comparison of the Performance of Mature MFIs inIndia and Bangladesh - Mann Whitney U test

Null hypothesis has been framed and tested to ascertainthe difference, if any, in the mean ranks of selected parameters.

1. Assets

H0

: “The mean rank of assets of Mature MFIs does

not differ significantly between the two countries”.

Table - 1 : Mann Whitney U test - Assets of MatureMFIs in India and Bangladesh – A Comparison

Source: Computed Ns-Not significant

India Mean (US $) 100682320.7

S.D 185890685.2

N 152

Mean rank 143.4

Sum of ranks 21797

Bangladesh Mean (US $) 126653072.8

S.D 310207211.2

N 125

Mean rank 133.65

Sum of ranks 16706

Test statistics Mann- Whitney U 8831

Wilcoxon W 16706

Z -1.008

Sig. Ns

Country Statistics Assets



On comparison with India, the Mature MFIs of Bangladesh show an extensive asset base. The mean rank shows areverse trend. The U test value when converted into Z score value of -1.008 reveals that there is no significantdifference in assets between two countries. Hence, the hypothesis is accepted.

2. Financing Structure

H0

: “The mean rank of financing structure indicators of Mature MFIs does not differ significantly between the two

countries”.

Table - 2 : Mann Whitney U test - Financing Structure of Mature MFIs in India and Bangladesh - AComparison

India Mean 18.65 9.68 82.55

S.D 14.61 20.88 16.81

N 152 152 152

Mean Rank 141.17 139.09 149.86

Sum of Ranks 21459 21142 22778

Bangladesh Mean 17.7 6.21 79.13

S.D 13.13 11.62 10.9

N 125 125 125

Mean Rank 136.36 138.89 125.8

Sum of Ranks 17045 17361 15725

Test statistics Mann-Whitney U 9169.5 9486 7850

Wilcoxon W 17044.5 17361 15725

Z -0.498 -0.021 -2.487

Sig. Ns Ns *

Country Statistics GLP to total assetsCapital/Asset ratio Debt to equity ratio

Source: Computed Ns-Not significant * significant at 5 per cent

The mean value of capital/asset ratio of mature MFIs has been higher in India with 18.65 per cent when comparedto that of Bangladesh with 17.70 per cent. The mean rank also show a similar trend. The U test value whenconverted to Z score has been -0.498, which indicates that there is no significant difference in the capital/assetratio of mature MFIs between the two countries. Hence, the null hypothesis is accepted for this variable.

The mean value of debt to equity ratio of mature MFIs has been higher in India with 9.68 per cent when compared tothat of Bangladesh with 6.21 per cent. The mean rank has also revealed the same trend. The U test value whenconverted to Z score 0.021 has shown that there is no significant difference in the debt equity ratio of mature MFIsthe two countries. Hence, the null hypothesis is accepted for this variable.

The gross loan portfolio to total assets has shown higher mean value for Mature MFIs in India than that of Bangladesh.The mean rank has also revealed a similar trend. The U test value when converted to Z score -2.487 has shown thatthere is a significant difference in the gross loan portfolio to total assets of mature MFIs at 5 per cent level. Hence,the hypothesis is rejected for this variable.

It is concluded that the capital/assets ratio and debt to equity ratio of mature MFIs does not have a significantdifference between the two countries, whereas, gross loan portfolio to total assets of mature MFIs have shown amentionable difference between the two countries. It is observed that irrespective of the countries the mature MFIsshow a similar performance in capital/asset ratio and debt to equity ratio, while the gross loan portfolio to totalassets of mature MFIs of India show better performance.

3. Outreach indicators

H0

: “The mean rank of outreach indicator of Mature MFIs does not differ significantly between the two countries”.



Table - 3 : Mann Whitney U test - Outreach Indicators of Mature MFIs in India and Bangladesh – AComparison

India Mean 565883 159.14 13.12 226.47

S.D 1085073.79 74.29 6.91 959.18

N 152 152 152 152

Mean Rank 136.6 167.51 96.95 165.05

Sum of Ranks 20763 25462 14737 25088

Bangladesh Mean 835964 115.06 19.26 110.36

S.D 1833299.18 37.31 5.37 34.25

N 125 125 125 125

Mean Rank 141.92 104.33 190.13 107.32

Sum of Ranks 17740 13041 23767 13415

Test statistics Mann-Whitney U 9135 5166 3108.5 5540

Wilcox on W 20763 13041 14736.5 13415

Z -0.55 -6.533 -9.634 -5.969

Sig. Ns ** ** **

Country Statistics ALBPB/GNI per capitaNAB ALBPB AOB

Source: Computed Ns-Not significant ** significant at 1 per cent

The mean value of number of active borrowers of mature MFIs has been higher in Bangladesh with 835964 whencompared to that of India with 565883. The mean rank has also recorded the same trend. The U test value whenconverted to Z score -0.550 has shown that there is no significant difference in the number of active borrowers ofMature MFIs between the two countries. Hence, the hypothesis is accepted for this variable.

The average loan balance per borrower has shown a higher mean value for mature MFIs in India with US $ 159.14than that of Bangladesh with US $ 115.06. The mean rank has shown a similar trend. The U test value whenconverted to Z score of -6.533 has shown that there is a significant difference at 1 per cent level in the average loanbalance per borrower of mature MFIs between the two countries. Hence, the hypothesis is rejected for this variable.

The mean value of average loan balance per borrower/GNI per capita of mature MFIs has been higher in Bangladeshwith 19.26 per cent than that of India with 13.12 per cent. The mean rank also shows a similar trend. The U testvalue when converted to Z score -9.634 has shown that there is a significant difference at 1 per cent level in theaverage loan balance per borrower/GNI per capita of mature MFIs between the two countries. Hence, the hypothesisis rejected for this variable.

The mean value of average outstanding balance of mature MFIs has been higher in India with US $ 226.47 than thatof Bangladesh with US $ 110.36. The mean rank also shows a similar trend. The U test value when converted to Zscore of -5.969 has shown that there is a significant difference in the average outstanding balance of mature MFIsat 1 per cent level between the two countries. Hence, the hypothesis is rejected for this variable.

It is found that the number of active borrowers of mature MFIs do not show a significant difference between the twocountries, whereas, average loan balance per borrower, average loan balance per borrower/GNI per capita andaverage outstanding balance have shown a significant difference between the two countries. It is observed that themature MFIs of Bangladesh have better outreach in terms of number of active borrowers and average outstandingbalance than that of India, whereas, Mature MFI of India have better outreach in terms of average loan balance perborrower and average loan balance per borrower/GNI per capita.

4. Overall Financial Performance Indicators

H0

: “The mean rank of overall financial performance indicators of Mature MFIs does not differ significantly between

the two countries”.



Table - 4 : Mann Whitney U test - Overall Financial Performance Indicators of Mature MFIs in India andBangladesh – A Comparison

India Mean 0.74 13.51 113.41

S.D 8.8 46.63 36.41

N 152 152 152

Mean Rank 138.08 145.24 141.63

Sum of Ranks 20988 22077 21528

Bangladesh Mean 1.6 -14.04 116.8

S.D 4.92 138.2 56.85

N 125 125 125

Mean Rank 140.12 131.41 135.8

Sum of Ranks 17516 16426 16976

Test statistics Mann- Whitney U 9359.5 8551 9100.5

Wilcoxon W 20987.5 16426 16975.5

Z -0.212 -1.43 -0.602

Sig. Ns Ns Ns

Country Statistics OSSROA ROE

Source: Computed Ns-Not significant

The ROA of mature MFIs have higher mean value with 1.6 per cent in Bangladesh than that of India with 0.74 per

cent. The mean rank also show the same trend. The U test value in terms of Z score with -0.212 has revealed that

there is no significant difference in ROA of mature MFIs between the two countries. Hence, the hypothesis is

accepted for this variable.

The ROE of mature MFIs has shown a higher mean value in India with 13.51 per cent when compared to that of

Bangladesh with -14.04 per cent. The mean rank also shows a similar trend. The U test value when in terms of Z

score -1.43 has shown that there does not exist difference in the ROE of mature MFIs between the two countries.

Hence, the hypothesis is accepted for this variable.

The OSS of mature MFIs has shown a higher mean value in Bangladesh with 116.8 per cent than that of India with

113.41 per cent. But the mean rank has shown a reverse trend with India having higher mean rank. The U test value

when converted to Z score -0.602 has shown that there is no significant difference in the OSS of mature MFIs

between two countries. Hence, the hypothesis is accepted for this variable.

To conclude, the overall financial performance indicators of mature MFIs do not differ significantly between the two

countries. It is observed that mature MFIs of Bangladesh have been able to generate higher return on assets and

their operational self-sufficiency is high when compared to that of India, whereas, mature MFIs of India have been

able to generate high return on equity.

5. Revenue and Expenses

H0

: “The mean rank of revenue and expenses of Mature MFIs does not differ significantly between the two

countries”.



Table - 5 : Mann Whitney U test - Revenue and Expenses of Mature MFIs in India and Bangladesh – AComparison

India Mean 20.88 0.03 23.65 19.43 8.84 0.99 9.28

S.D 7.97 150.2 9.36 8.76 2.52 1.65 5.57

N 152 152 152 152 152 152 152

Mean Rank 149 143.2 144.17 146.17 192.39 113.43 109.08

Sum of Ranks 22648 21767 21915 22218 29244 17242 16581

Bangladesh Mean 19.5 5.65 23.27 17.95 4.3 1.62 12.37

S.D 5.38 29.1 6.44 6.11 2.38 1.54 5.49

N 125 125 125 125 125 125 125

Mean Rank 126.84 133.89 132.71 130.28 74.08 170.09 175.38

Sum of Ranks 15855 16736 16589 16286 9259.5 21261 21923

Test statistics Mann- Whitney U 7980 8861 8713.5 8410.5 1384.5 5614 4952.5

Wilcoxon W 15855 16736 16588.5 16285.5 9259.5 17242 16580.5

Z -2.291 -0.963 -1.185 -1.642 -12.232 -5.857 -6.854

Sig. * Ns Ns Ns ** ** **

Country Statistics FR/A PM YGP(N) TE/A FE/A PLI/A OE/A

Source: Computed * significant at 5 per cent Ns-Not significant ** significant at 1 per cent

The mean value of financial revenue/assets of mature MFIs has been higher in India with 20.88 per cent than that ofBangladesh with 19.5 per cent. A similar trend is noted in the mean rank. The U test value in terms to Z score -2.291has shown a significant difference between the two countries at 5 per cent level in the financial revenue/assets.Hence, the hypothesis is rejected for this variable.

The mean value of profit margin of mature MFIs has been higher in Bangladesh with 5.65 per cent when comparedto that of India with 0.03 per cent. The mean rank has shown a reverse trend. The U test value when converted to Zscore -0.963 has shown that there is no significant difference in the profit margin of mature MFIs of two countries.Hence, the hypothesis is accepted for this variable.

The yield on gross portfolio (nominal) of mature MFIs has shown a higher mean value in India with 23.65 per centwhen compared to that of Bangladesh with 23.27 per cent. A similar trend is noted in the mean rank. The U testvalue when converted to Z score -1.185 has shown that there is no significant difference in the yield on grossportfolio (nominal) of mature MFIs between the two countries. Hence, the hypothesis is accepted for this variable.

The total expense/assets of mature MFIs have shown a higher mean value in India with 19.43 per cent whencompared to that of Bangladesh with 17.95 per cent. A similar trend is noted in the mean rank. The U test valuewhen converted to Z score -1.642 has shown that there is no significant difference in the total expense/asset ofmature MFIs between the two countries. Hence, the hypothesis is accepted for this variable.

The financial expense/assets of mature MFIs have shown a higher mean value in India with 8.84 per cent whencompared to that of Bangladesh with 4.3 per cent.

The mean rank has also shown a similar trend. The U test value when converted to Z score -12.232 has shown that thereis a significant difference in the financial expense/assets of mature MFIs. Hence, the hypothesis is rejected for this variable.

The provision for loan impairment of mature MFIs has shown a higher mean value in Bangladesh with 1.62 per centthan that of India with 0.99 per cent. The mean rank has also shown identical trend. The U test value when convertedto Z score -5.857 has shown that there is a significant difference in the provision for loan impairment/assets ofmature MFIs between the two countries at 1 per cent level. Hence, the hypothesis is rejected for this variable.

The mean value of operating expense/assets of mature MFIs has been higher for MFIs in Bangladesh with 12.36 percent than that of India with 9.28 per cent. The mean rank has also shown the same trend. The U test value whenconverted to Z score -6.854has revealed that there is a significant difference in the operating expense/assets ofmature MFIs at 1 per cent level between the two countries. Hence, the hypothesis is rejected for this variable.



To conclude, the revenue and expense indicators, namely, profit margin, yield on gross portfolio (nominal) and totalexpense/assets do not differ significantly between the mature MFIs of two countries, whereas, financial revenue/assets, financial expense/assets, provision for loan impairment/assets and operating expense/assets differsignificantly between the mature MFIs of two countries. It is observed that mature MFIs of India have higher financialrevenue/assets, as well as, their total expense/assets and financial expense/assets are also on higher side thanthat of Bangladesh. It is also evident that both mature MFIs of India and Bangladesh have been charging higherinterest rate. The mature MFIs of Bangladesh have higher profit margin and their provision for loan impairment/assets and operating expenses/assets have been high when compared to that of India.

6. Efficiency

H0

: “The mean rank of efficiency indicators of mature MFIs does not differ significantly between India and Bangladesh”

Table - 6 : Mann Whitney U test - Efficiency of Mature MFIs in India and Bangladesh – A Comparison

India Mean 12.43 1.83 18.86 313 57.24

S.D 9.97 0.94 15.31 222.28 23.58

N 152 152 152 152 152

Mean Rank 108.42 104.16 135.35 178.93 153.24

Sum of Ranks 16481 15832 20573 27198 23293

Bangladesh Mean 17.2 2.82 16.67 150 53.87

S.D 18.24 1.04 7.73 48.67 19.87

N 125 125 125 125 125

Mean Rank 176.18 181.37 143.44 90.44 121.68

Sum of Ranks 22023 22671 17931 11305 15211

Test statistics Mann- Whitney U 4852.5 4204 8944.5 3430 7335.5

Wilcoxon W 16480.5 15832 20572.5 11305 15210.5

Z -7.005 -7.983 -0.838 -9.149 -3.263

Sig. ** ** Ns ** **

Country Statistics OE/LP AS/GNI per capita CPB LPSM PeAR


The mean value of operating expense/loan portfolio of mature MFIs has been higher in Bangladesh with 17.2 percent when compared to India with 12.43 per cent.

The mean rank has alsoshown the same trend. The U test value when converted to Z score -7.005 has revealed thatthere is a significant difference in the operating expense/loan portfolio of mature MFIs between the two countries at1 per cent level. Hence, the hypothesis is rejected for this variable.

The mean value of average salary/GNI per capita of mature MFIs has been higher in Bangladesh with 2.82 per centwhen compared to India with 1.83 per cent.

The mean rank has also shown an identical trend. The U test value when converted to Z score -7,983 has shown thatthere is a significant difference in the average salary/GNI per capita of mature MFIs between the two countries at 1per cent level. Hence, the hypothesis is rejected for this variable.

The mean value of cost per borrower of mature MFIs has been higher in India with 18.86per cent than that ofBangladesh with 16.67 per cent. The mean rank has shown a reverse trend. The U test value when converted to Zscore -0.838 has shown that there is no significant difference in the cost per borrower of mature MFIs between twocountries. Hence, the hypothesis is accepted for this variable.

The mean value of loans per staff member of mature MFIs has been higher in India with 313.43 than that ofBangladesh with 150.57. The mean rank has also shown a similar trend. The U test value when converted to Z score-9.149 has revealed that there is a significant difference at 1 per cent level. Hence, the hypothesis is rejected for thisvariable.



The mean value of personnel allocation ratio of mature MFIs has been higher in India with 57.24 per cent than thatof Bangladesh with 53.87 per cent. The mean rank has shown a similar trend. The U test value when converted toZ score -3.263 has shown that there is a significant difference between the two countries at 1 per cent level. Hence,the hypothesis is rejected for this variable.

To conclude, the efficiency indicator, cost per borrower has not differed significantly between the countries, whereas,operating expense/loan portfolio, average salary/GNI per capita, loan per staff member, personnel allocation ratiodiffer significantly between the two countries. It is found that Mature MFIs of India exhibits higher efficiency than thatof Bangladesh, whereas, mature MFIs of Bangladesh have been more efficient in reducing the cost per borrowerwhen compared with India.

7. Risk and Liquidity

H0

: “The mean rank of risk and liquidity indicators does not differ significantly between India and Bangladesh”

Table - 7 : Mann Whitney U test - Risk and Liquidity of Mature MFIs in India and Bangladesh – AComparison

India Mean 13.31 2722.51 17.59

S.D 53.72 20272 13.3

N 152 152 152

Mean Rank 114.9 132.55 141.94

Sum of Ranks 17465 20148 21576

Bangladesh Mean 5.8 95.01 15.32

S.D 9.08 96.75 10.05

N 125 125 125

Mean Rank 168.31 146.84 135.42

Sum of Ranks 21039 18356 16928

Test statistics Mann- Whitney U 5836.5 8519.5 9052.5

Wilcoxon W 17464.5 20147.5 16927.5

Z -5.536 -1.481 -0.675

Sig. ** Ns Ns

Country Statistics NELA as a per cent of total assetsPAR > 90 days Risk coverage


The mean value of PAR >90 days of mature MFIs have been higher in India with 13.31 per cent than that ofBangladesh with 5.80 per cent. The mean rank has shown a reverse trend. The U test value when converted to Zscore -5.536 has shown that there is a significant difference in the PAR > 90 days of mature MFIs between the twocountries at 1 per cent level. Hence, the hypothesis is rejected for this variable.

The mean value of risk coverage of mature MFIs has been higher in India when compared to that of Bangladesh, butthe mean rank has shown a reverse trend. The U test when converted to Z score-1.481 has shown that there is nosignificant difference in the risk coverage of mature MFIs between the two countries. Hence, the hypothesis isaccepted for this variable.

The mean value of NELA as a per cent of total assets of mature MFIs has been higher in India with 17.59 per centthan that of Bangladesh with 15.32 per cent. The same is reflected in the mean rank. The U test value whenconverted to Z score -0.675 has shown that there is no significant difference in the NELA as a per cent of total assetof mature MFIs between the two countries. Hence, the hypothesis is accepted for this variable.

To conclude, Risk and Liquidity indicators of mature MFIs, namely, risk coverage and NELA as a per cent of totalassets do not differ significantly between the two countries and PAR > 90 days have shown a significant differencebetween the two countries. It is found that the risk coverage of mature MFIs is high for India than that of Bangladesh,whereas, Mature MFIs of Bangladesh have shown better performance in terms of PAR and liquidity.



Findings

The mature MFIs of India have revealed a betterperformance in variables, namely, debt to equity ratio,gross loan portfolio to total assets, average loan balanceper borrower, average loan balance per borrower/GNI percapita, return on equity, financial revenue to assets, yieldon gross portfolio (nominal), provision for loan impairmentto assets, operating expense by assets, operatingexpense by loan portfolio, average salary by GNI percapita, loans per staff member, personnel allocation ratioand risk coverage.

The mature MFIs of Bangladesh have exhibited a betterperformance in variables, namely, assets, capital toassets ratio, number of active borrowers, averageoutstanding balance, return on assets, operational self-sufficiency, profit margin, total expense to assets,financial expense to assets, cost per borrower, portfolioat risk greater than 90 days and non-earning liquid assetsas a per cent of total assets.

Suggestions

India

1. Government can take measures to give financialInstitutional status (status of Bank) based on theconsistent performance of MFIs (to those who qualitythe conditions)

2. Microfinance Institutions in India should focus moreon the cost management, to improve their performance.

3. MFIs in India can become sustainable throughefficient asset management, cost management andleverage management resulting in robust growth inReturn on assets, Return on equity and operationalself-sufficiency; Increasing gross loan portfolio to totalassets, lesser rate of financial expense to asset andoperating expenses to assets; greater rate of financialexpense to assets. Leverage management can beeffective with well-maintained capital asset ratio anddebt equity ratio within the limit fixed by the apex bodies.

Bangladesh

1. The predominant focus of Bangladeshi MFIs shouldbe on the earnings management of MicrofinanceInstitutions to improve the performance.

2. MFIs in Bangladesh can concentrate on assetmanagement, cost management and leveragemanagement to attain sustainability.

Conclusion

Although the microfinance sector has reported animpressive growth, sufficient regulatory and governancewould help achieve the goal of poverty alleviation andfinancial inclusion and this could be achieved withcombined cooperation of banks, donors’ government,NGO and other players in the country. Thus, continuousefforts are required to diversify the sources of funding

available for the MFIs in order to attract foreignInvestment for well-established MFIs in order to servethe rural low income population, alleviate poverty andalso, make them profitable.

On comparison of the financial performance of matureMFIs during the study period it is evident that the IndianMFIs stand better than the MFIs of Bangladesh in manyaspects, though Bangladesh is the place of origin forthe concept of microfinance and Microfinance Institutions.

Scope for Further Research

Further research can be undertaken in the following areas:-

• Social performance of mature MFIs – A comparisonbetween India and Bangladesh.

References

1. Abdul Qayyum and Ahmad M, “Efficiency andsustainability of microfinance institution in SouthAsian”, Pakistan Institute of DevelopmentEconomics, 2006.

2. Anand Kumar Rai, “A comparative analysis of thefinancial performance of microfinance institutions ofIndia and Bangladesh”, Thesis, Jaypee BusinessSchool, July 2012.

3. Ben SoltaneBassem, “Social and financialperformance of MFIs: Is there a trade off?” Journal ofEconomics and International Finance, Vol.4 (4),February 2012, pp. 92-100.

4. Frances Sinha, “State of microfinance in India 2009”,Prepared for Institute of Microfinance, as a part of projecton state of microfinance in SAARC countries, 2009.

5. Jivan Kumar Chowdhury, “Microfinance revolution andmicrofinance services in Indian perspective”, BankingFinance, Vol. XXI, No.6, June 2008, pp. 5-8.

6. K.MuralidharaRao, “MFIs in India: An overview”,NABARD, 2011, pp.57-66.

7. K.S.Thakur, Peyush Kant Sharma and Ravi Jain, “Acomprehensive study of microfinance in India withspecial reference to Gwalior”, Journal of Accountingand Finance, Vol.25, No. 2, April – September 2011.

8. LetenahEjigu, “Performance analysis of samplemicrofinance institutions of Ethiopia”, InternationalNGO Journal, Vol. 4(5), May 2009, pp. 287-298.

9. Microfinance industry in India, Lok Capital, March 2010.

10. Pankaj.K.Agarwal and Prbal.K.Sen, “Disclosure andfinancial performance: A cross sectional study ofmicrofinance institutions of India”, Business Vision,Vol.5, No.2, 2009, pp. 194-212.

11. Pushparaj Sharma, “A comparative study ofMicrofinance in Nepal and Bangladesh” ManagementResearch Committee, Pokhara, JMC, 2004.

12. ZeynupUgur, “Commercial banks and microfinance”,University of Pennsylvania, 2006.



CROWDFUNDING: A BOOSTER FOR BUDDING ENTREPRENEURS

1. Associate Professor, Department of bank Management, Alagappa University, Karaikudi.

Abstract

The concept of crowd funding is a popular concept started in The United States and The United Kingdom. After the

2008 financial crisis, small businesses find very difficult to raise funds in the market. As a result crowd funding has

taken a new magnitude in helping the budding entrepreneurs in realising their dreams. Crowd Funding generally

refers to a method of funding a project or venture through small amounts of money raised from a large number of

people, typically through a portal acting as an intermediary. The United States relaxed regulations on investment-

based crowd funding in 2012 (via the JOBS Act), rewards- based sites like Kick-starter and Indiegogo have been

around since the late 2000s..The USA has 344 crowd funding investing platform, leading the world in the number of

active platforms. The UK with 87 and France is 3rd with 53.It is clear that the private market is getting closer to being

ready to facilitate deal throughout.

In India Securities Exchange Board of India has come out with a proposal to explore the possibilities of having a

security-based crowd funding framework in India within the existing legal framework. This proposal does not touch up

on reward based crowd funding that is common on platforms like Kick starter and would apply for to services like Lets

Venture. According to these proposals only accredited investors registered with a crowd funding platform can invest in

equity-based crowd funding campaigns. Also, only Indian start-ups or SMEs can raise funds through these platforms.

By taking this as the background the study made an attempt to have an insight on crowd funding at international level.

Dr. G. Parimalarani1

Introduction

The concept of crowd funding is a popular concept startedin The United States and The United Kingdom. After the2008 financial crisis, small businesses find very difficultto raise funds in the market. As a result crowd fundinghas taken a new magnitude in helping the buddingentrepreneurs in realizing their dreams. Crowd Fundinggenerally refers to a method of funding a project or venturethrough small amounts of money raised from a largenumber of people, typically through a portal acting asan intermediary (Consultation paper on peer to peerlending, RBI, April 2016).Crowd funding is the processof one party financing a project by requesting andreceiving small contribution from many parties inexchange for values to those parties. If we want to raisefund we have to create an online profile and explain ourprojects and fund raising goals and share the same withpublic at a large including our peers, relatives, and friendsof friends and so forth.

The crowd funding market is in its infancy, especially indeveloping countries, but the potential market issignificant. It is swelling the ranks of early-stageentrepreneurs and bolstering the pipeline of enterprisesthat diversify economies and create the majority of jobs(World Bank report 2016, crowd finding’s potential forthe developing world).

It is estimated that there are 344 million households inthe developing world able to make small crowd finance

investments in community businesses. Thesehouseholds have an income of at least Us $10,000 ayear, and at least three months of savings or threemonths savings in equity holdings. Together they havethe ability to deploy up to US$ 96 billion a year by 2025in crowd funding investment. The greatest potential liesin China, which accounts for up to Us $ 50billion of thatfigure, followed by the rest of East Africa, Central Europe,Latin America/The Carribbean and the MENA region.

Today more than 80% of the world’s on line populationinteracts with social networks on a regular basis, despitethe fact that 65% of world’s population 4.6 billion stilllack internet access (McKinsey Global Institute 2012).But still Crowd funding has gained traction in a numberof developed economies, including Australia, The UK,The Netherlands, Italy and The US. The existingphenomenon is spreading across the developed worldand of now attracting considerable interest in thedeveloping world as well.

Types of Crowd funding

Crowd funding can be divided into four categories andthey are :-

Donation Crowd funding: Denotes solicitation thefunds for social ,artistic, philanthropic or other purposeand not in exchange for anything of tangible value. Example,In the Us, Kick starter, Indiegogo etc are some of theplatforms that support donation based crowd funding.



Reward Crowd funding: It refers to solicitation of funds,wherein investors receive some existing or future tangiblereward (Membership reward scheme) as consideration.Example : Websites which supports are Kick starter,Rock hub etc.,

Peer–to-Peer Lending: An online platform matcheslenders/investors with borrowers/issuers in order toprovide unsecured loans and the interest rate is set bythe platform. Some peer-to –peer platform arrange loansbetween individuals, while other platforms pool fundswhich are then lend to small and medium sizedbusinesses. Example: In Us – Lending club, Prosperetand In Uk –Zopa , Funding circle. Open Data Institute(July 2016) founded that between October 2010 and May2013 some 49,000 investors in the Uk funded Peer-To–Peer loans worth more than dollar 378 million. In peer-topeer lending, there is no investor protection by way of aconversation scheme to cover default. In somejurisdiction like Germany and Italy Peer-To –Peerplatform are classified as banks and are thereforeregulated as banks.

Equity Based Crowd funding: In consideration of fundssolicited from investors equity share of the company areissued. It refers to fund raising by a business, particularlyearly-stage funding, through offering equity interest inbusiness to investors online.

Benefits of Crowd funding:

• Provide finance for start-ups and Small and Marginalsector and thereby help in increasing the flows ofcredit to SMEs.

• Due to the financial crisis (2008) the banks becomeincreasing constrained in their ability to lend moneyto the ventures or start-ups which may have high riskelement.

• Without undergoing rigorous procedures the SMEsare able to raise funds at lower cost of capital.

• It provides new investment avenue and provide a newproduct for portfolio diversification of investors.

• In increase competition in a space traditionallydominated by a few providers.

Current Scenario of Crowd funding in InternationalArena:

The concept of crowd funding is a popular concept startedin The United States and The United Kingdom. The UnitedStates relaxed regulations on investment-based crowdfunding in 2012 (via the JOBS Act), rewards- based siteslike Kick-starter and Indiegogo have been around sincethe late 2000s. Table 1 deals with the number ofcrowd funding investing platform in selectedcountries. The USA has 344 crowds funding investingplatform, leading the world in the number of active

platforms. The UK with 87 and France is 3rd with 53.It isclear that the private market is getting closer to beingready to facilitate deal throughput.

Table - 1 : Number Of Crowd funding InvestingPlatforms In Selected Countries

USA 344

France 53

Italy 15

Uk 87

Spain 27

Netherland 34

Germany 26

Brazil 17

Canada 34

Australia 12

South Africa 4

India 10

Russian federation 4

Belgium 1

HongKong SAR, China 1

China 1

UAE 1

Estonia 1

CountryCrowdfunding Investment

Platform

Source: Date connect as of June 2, 2016,

The US Securities and Exchange Commission (SEC)have come up with a proposal for crowd funding, thehighlights of which are as follows:

• A company could raise up to $1 million for equitythrough crowd funding each year.

• A company raising more than $500,000 must filemore detailed information to the SEC.

• A company must provide educational information toinvestors, ensuring investors know what they arebuying and understand their risks.

• Investors with a net annual income of less than$100,000 would be permitted to invest up to only$2,000 or 5 percent of their annual income or networth every year.

• Investors with net income or annual income of morethan $100,000 would be able to invest 10 percent ofthat every year.

• Securities would need to be purchased through onlinecrowd funding portals - a new class created by the SEC.



Date realized by P2PFA, the cumulative lending throughP2P platform globally , at the end of Q4 of 2014 hasreached 4.4 billion GBP.It has grown dramatically from2.2 million GBP(2012) to 4.4 billion GBP (2015).Table 2highlights the peer-to peer lending globally.

Table - 2 : Peer- To–Peer Lending Globally

2010 1 million

2011 2 million

2012 4 million

2013 9.5 million

2014 2.2 billion

2015 4.4 billion

YEAR AMOUNT (Pound)

Source: www.iosw.org

India scenario

In the next six months or so, many crowd funding platforms are expected to be in India. Worldwide, nearlya thousand such platforms will be launched. Recently,platforms such as Wish berry and Ignite Intent have beenlaunched in the country. Most of them are in the rewardsand donation space, as there aren’t too many regulatoryissues around this model. There have been attempts atcrowd funding for events like the Goa Project andcampaigns like Teach for India. Crowd funding is slowlybecoming an alternative funding channel for the filmindustry. Film Director Pawan Kumar from Karnatakarecently raised Rs 51 lakh using Face book and otherplatforms. Many online P2P lending platforms some aretargeting at microfinance activities with a goal ofconcentrating on social impact and providing easy creditto small entrepreneurs. Here the rates are lower thanthe moneylenders. Presently around 30 startups P2Pcompanies are operating in India.

Securities Exchange Board of India(SEBI) has come outwith a proposal to explore the possibilities of having asecurity-based crowd funding framework in India withinthe existing legal framework. This proposal does nottouch up on reward based crowd funding that is commonon platforms like Kick starter and would apply for toservices like Lets Venture. According to these proposalsonly accredited investors registered with a crowd fundingplatform can invest in equity-based crowd fundingcampaigns. Also, only Indian start-ups or SMEs canraise funds through these platforms.

It has also proposed that such campaigns can only berun by SEBI recognized crowd funding platforms. Apartfrom the basic due diligence, these platform will have toset up a ‘Screening Committee’ to select companiesthat can use these platforms. According to the proposal,

crowd funding platforms may charge a nominal fee fromthe company seeking funds through the platform andfrom the accredited investors on the platform.

Challenges in India

1. The idea of crowd funding is not new in India. Placesof worship, for example, are built overnight using alarge number of donations. However, the concept ofonline crowd funding is new to the country.

2. The industry is also not very investor-friendly. It seemspeople are still not ready for this concept.

3. Low trust levels of doing the things online are also achallenge. India’s ecommerce space needs to reallymature before anything substantial can happen inthis space. People need to be spending more andmore online for them to even start thinkingabout backing online projects online.

4. As long as the crowd funding platforms are notmaking any financial promises to the contributors,they should be theoretically safe to operate. Howeverto build a credible case for the industry to grow inIndia, it would do help if these platforms proactivelyapproach the regulators and work with them toprocesses so as to build long-term credibility andtransparency.

5. Ecommerce in India only got a boost when theyinitiated the concept of cash on delivery. Similarly,crowd funding will have to look at building an offlinebase to finally induce mass awareness andencouraging larger participation.

Crowd funding in Asia and Pacific

In Asia and the Pacific, crowd funding is increasinglygarnering interest from technology companies, financialinvestors, and government regulators. As a bellwetherof this, in August 2014, a conference was held inSingapore called the Crowd funding Asia 2014 Summit.This conference brought together academia, banks,securities firms, industries, government, entrepreneurs,commercial enterprises, and social enterprises, to shareand exchange crowd funding knowledge. There wereapproximately 200 attendees, primarily from SoutheastAsia, but the conference also attracted crowd fundingindustry participants from the PRC; Taipei, China; Japan;and the Republic of Korea.

In Sri Lanka, a platform called Crowd fund Sri Lanka(registered in the United States) is funding entrepreneursvia the ‘reward’ model, but states that it also may fundbusiness projects itself. The majority of projects fundedare at the micro enterprise level. While Singapore; HongKong, China; and the PRC are the most developed crowdfunding markets in Asia, other countries in the regionare preparing the foundations and regulations to introducecrowd funding to their markets.



In the Republic of Korea, the Financial ServicesCommission (FSC) reported in September 2013 that thecountry planned to launch a crowdfunding system in2014, to help venture companies attract seed moneyfrom a wide pool of small investors with fewer restrictions.Under the planned system, the minimum equity capitalrequirements for online funding brokers would be W500million ($459,136),equivalent to other general securitiesbrokerage.

In Malaysia, in August 2014, the Securities Commissionof Malaysia launched a public consultation on proposedregulations for ‘crowd investing’. These proposedregulations address: the creation of a secondary marketfor securities bought via crowd funding portals; the typesof applicants that can raise finance through crowd fundingportals; and the maximum amount that a company canraise through the portals.

While crowd funding has very real potential as a significantmechanism for SMEs (especially start-ups) to accessdebt and/or equity investments for growth, there aresignificant constraints to the evolution of crowd fundingas a strong competitor to commercial loans from banksand NBFIs, or to significantly address Asia’s reported$200-billion SME financing gap, estimated in 2011.

These constraints include:

• lack of legal and regulatory foundations for crowdfunding (start-ups are unable to offer securities,shares, or any other form of direct equity interest tothe general public in Singapore, for example);

• cultural issues (such as trust and giving up businessequity);

• security of investments and scams;

• small market sizes in Asia and the Pacific, whichlimit national development (in Oceania, no countriesother than Australia, New Zealand, and Papua NewGuinea have more than 1 million people, while manyAsian countries have populations of less than 10million);

• low income/asset levels of the domestic populations,which work against making investments in unknownentities or persons; and

• Lack of desktop or laptop computers and internetconnections in low-income households to accesscrowdfunding websites.

Conclusion:

Sustainable economic growth , poverty reduction andsocial equalities with their balanced promotion are keythe factors to achieve inclusive growth at the nationallevel acros.Finance is the crucial element for newstartups, so it is quiet necessary to develop innovativefinancing model like crowd funding which go beyondthe traditional bank lending. National economiesadvances, the number of growth oriented projects aresteadily increasing with a growing requirement for accessto long –term growth capital. It is high time for thedeveloping nations to implement regulatory norms sothat it will not affect the investors in the long run.

References

1. Arjya B. Majumdar, Regulating equity crowd fundingin India-A response to SEBI’S consultation paper,international symposium on corporate governance andcapital markets.

2. Crowd based equity funding-Discussion paper-corporations and markets Advisory Committee,Australia, September 2013.

3. Consultation paper on peer to peer lending RBI, April2016, www.rbi.org , accessed on 12.7.2016

4. Crowd funding in emerging markets: lessons fromeast Africa Startups, World Bank group, 2014

5. Crowdfundings’ potential for the developing world,2013, infoDev, Finance and private sectordevelopment department, Washington , D.C , worldBank

6. Eleanorkirby and Shaneworner, “Crowd-Funding : Aninfant industry growing fast staff working paperNo(SWPs/2014) IOSCO Reserach Department ,2014.

7. Ibrahim.Darian M.Equity crowdfunding:A market forlemons: (March 17, 2015) Minnesota Law Review,Forthcoming : William & Mary Law school reserachpaper No.09-292, Available at SSRN:http://ssrn.com,abstract =2539786



THE ROLE OF DEBTORS IN THE WORKING CAPITAL MANAGEMENT

PRACTICE -A COMPARATIVE STUDY OF AUTOMOBILE INDUSTRY

1 . PDF Scholar, S.K.Institute of Management, S.K.University, Anantapuram

Abstract

The present study strictly abides by conceptual frame work of research process to the debtors management to the

working capital management practice. The Companies which shine in the management of working capital will have a

real competitive advantage. Debtors play a vital role in a business and no business can run successfully without

enough capital to cover short needs. The debtors management is essential to the Working capital management

practice of short term funds in the business to make the short term payments. The debtors as a source of working

capital are measure of company efficiency and operational solvency. The debtors management is usually measure

by the form the short term assets. It is important indicator of the firm ability to continue its normal operations without

additional debt obligations to the solvency. The sample size of the study is financial statements (Balance sheet &

Profit and Loss account) of Tata Motors, Maruti Suzuki, Mahindra and Mahindra of Automobile Industry. The duration

of study is from 2009-2013.

Key words: Debtors, Working capital, Solvency, Turnover, Collection period

Dr. Loluru Nagarjuna1

Introduction

The Companies which shine in the management ofworking capital will have a real competitive advantage.Current uncertainties in the global economy and financialmarkets are putting unparalleled pressures oncompanies and their supply chains. Debtors play a vitalrole in a business and no business can run successfullywithout enough capital to cover short needs. Maintainingsufficient levels of short-term capital is a constantlyongoing challenge of business concern as well asefficient management of debtors. In today’s turbulentfinancial markets, uncertain business environment andshort term financing has become both harder and morecostly to obtain. Therefore companies are increasinglyshifting away from traditional sources of external financingand turning their eyes towards their own organizationsfor ways of improving liquidity. A positive working capitalposition is required for the continuous running of acompany’s operations to pay short term debt obligationsand to cover operational expenses. A company with anegative working capital balance is unable to cover itsshort-term liabilities with its current assets especiallywith debtors. Working capital management coversinvestment of current assets by using short-termliabilities. The current liabilities are those which are shortterm maturing obligations to be met normally within ayear, consist of trade creditors, short term borrowings,bank overdraft, tax payments due, dividends payable andoutstanding expenses. Trade credit acts as a bridge forthe movement of goods through production and

distribution stages to customers. It is considered as anessential marketing tool. A firm grants trade credit toprotect its sales from the competitors and to attract thepotential customers to buy its production at favorableterms. When the firm sells goods or services on credit,receivables or debtors are created. The debtors areelements of risk which should be carefully analyzed. Itis based on economic value. To the buyer, the economicvalue in goods or services passes immediately at thetime of sale, while the seller expects an equivalent valueto be received on. It implies futurity. The cash paymentfor goods or services received by the buyer will be madeby him in future period. The term receivables are definedas “debt owned to the firm by the customers arisingfrom sale of goods or services in the ordinary course ofbusiness.

Scope of the study

The debtors as a source of working capital are measureof company efficiency and operating liquidity. The workingcapital is usually calculated by subtracting currentliabilities from current Assets. It is important indicator ofthe firm ability to continue its payments to current debtwithout additional debt obligations. Debtors can be highor low, depending on how much of current debt thecompany is carrying on its balance sheet. In generalterms, companies that have a lot of working capital willexperience more growth in the near future since theycan expand and improve their operations using existingresources. On the other hand, companies with small ornegative working capital may lack the funds necessary



for growth or future operation. Working Capital also showsif the company has sufficient liquid resources to satisfyshort-term liabilities and operational expenses.Appropriate determination of the scope for a research ofpresent nature certainly enhance the effectiveness ofthe research, identifying the scope for any study is likehitting bulls’ eye. Any study that deviates in terms ofscope will certainly head towards stumbling blocks,since; the scope is always limited and should alwaysbe limited by the efforts of the researcher so as to enhancethe effectiveness in accomplishment of objectives.Against the present study handpicks the sole factor of‘debtors’ management’ practice is in an effort to establishthe influence on ‘Working capital management’ as againstthe convention of choosing multiple factors towards profits.

Significance of the study

It is quite essential that for any firm to carry on itsobjectives, it requires both debtors and working capital.While the investment in debtors leads to generation ofsales, the investment in working capital helps in properutilization of that capacity. Liquidity and profitability whichare conflicting but are the desired goals of financialmanagement are directly affected by the performance ofdebtors management as source of working capitalmanagement. To achieve the trade-off between liquidityand profitability, it is necessary that debtors should bemanaged in a manner that it’s availability in right quantity,at right time and from right sources is ensured.Investment in current assets represents a very significantportion of the total investment in assets. Investment indebtors is also very important to consider while investingin current assets. For example, in the case of the largeand medium public limited companies in India, currentassets constitute about 60 percent of total assets ortotal capital employed and debtors should be one thirdin total current assets for sound working capitalmanagement. This indicates that every firm should payspecial attention to the management of debtors as wellas current assets on a continuing basis. Working capitalor investment in debtors is a must for generation of sales,and for meeting the day-to-day payments with conversion.The fate of large scale investment in fixed capital is oftendetermined by a relatively small amount of currentassets. Working capital is just like a heart of industry ifit is weak; the business cannot prosper and survive,although there is a large body (investment) of fixedassets. Moreover, not only the existence of workingcapital is a must for the industry, but it must be adequatealso. Adequacy of the working capital is the lifebloodand controlling nerve center of a business. Inadequateas well as redundant working capital is dangerous forthe health of industry. It is said, ‘Inadequate workingcapital is disastrous; whereas redundant working capitalis a criminal waste’. Both situations are not warrantedin a sound organization.

Need for the Study

The basic aim of any business firm is profit maximization.The debtors management is essential to the Workingcapital management practice of short term funds in thebusiness. Working capital is very essential to maintainsmooth running of a business. No business can runsuccessfully without an adequate level of debtors to theworking capital. The profit maximization in automobileindustry, growth of automobile markets in terms ofdebtors collectively offers a possibility to the salesvolume. A contemporary platform for the present studyattempting to identify the level of debtors as result ofefficient working capital management practice sponsoredthe profit maximization practices. The need of the studydebtors management for working capital to run the day-to-day business is essential. The firms earn sufficientreturn from its operations to achieve this aim. To earn asteady amount of profit requires successful sales activity.The firm has to invest enough funds in debtors as anopportunity for the success of sales. Current assets areneeded because sales do not convert into cashimmediately. There is an operating cycle involved in theconversion of sales into cash. In other words, investmentin current assets is turned over many times in a year.Investment in current assets such as inventories andsundry debtors is calculated during the firm’s operatingcycle which is usually less than a year. Operating cycleis the time duration required to convert sales, after theconversion of resources into inventories, into cash.


The objective of financial management profitmaximization is need to be effectively accomplished andrecent management practices are also eyeing on debtorsmanagement as a tool of effective working capitalmanagement practice. The profit maximization andwealth maximization is on the top of the minds of allfinancial managers and an evaluation of the same isrelevant, current assets and current liabilities invited inthe present state of cut throat competition for profitabilityof the firm. Innumerable factors are involved in the practiceof debtors to working capital management for profits asan ultimate objective of business concern, many pastresearches explored almost all the factors including thepresent research factor ‘debtors’, however the presentstudy is distinctive in its address which is “debtorsmanagement to the working capital management practice”.

Methodology

The present researches strictly focused on theconceptual frame work of research process to the conceptof working capital management practice. Requiredelements in various stages of research process areexplained hereafter. The data collected for the presentstudy comprises of only secondary data at where the



primary data is not required. In order to fulfill the objectives of the study, the secondary data; balance sheets and profitand loss accounts were drawn from the official websites. Sample of the study has been based on convenientsampling technique and a sample size of study is three i.e. Tata Motors, Maruti Suzuki, Mahindra and Mahindrafrom Automobile Industry. The duration of study is from 2009-2013. For this study some required conceptual toolswere applied and calculated. The detailed information from publications, internal records, books, magazines, journals,web services.

Objectives of the study:

1. To compare the debtors turnover in selected companies

2. To compare the collection period in selected companies

3. To compare the sundry debtors to total current assets in selected companies

Limitations

All limitations for a study of this nature are listed under volume, time, human and monetary bound, and researchstudy of this nature could not be carried out without any of the above limitations. Hence this research study islimited to principally the population, target and sample. Second factor is the time factor which exerts magnificentinfluence on the sample collection and processing. Third factor is secondary data that creeps into all activities ofresearch process like data collection, data processing, interpretation and report generation and presentation. Fourthone and the most important is the monetary aspect which encompasses all the activities of not only the researchbut the whole of this world. Despite the above limitations, the researcher put in all his best efforts in overcoming thelimitations and in completing the study.

Table - 1.0 : Average sundry debtors of TATA Motors, MARUTI Suzuki, and Mahindra and Mahindra

in millions Rs.,

Sundry Debtors 18180.4 27083.2 26028.8 23919.2 12055.2 14237 9376 8245 8099 9378 22083.5 19285.3 12603.1 12580.8 10436.5

Avg. Sundry Debtors 21453.36 9867 15397.84

Variation -8902.8 1054.4 2109.6 11864 4861 1131 146 -1279 2798.2 6682.2 22.3 2144.3

Variation rate -32.87% 4.05% 8.81% 98.41% 51.84% 13.71% 1.80% -13.63% 14.50% 53.02% 0.17% 20.54%

FY 2013

TATA MOTORSParticulars

FY 2012 FY 2011 FY 2010 FY 2009 FY 2013 FY 2012 FY 2011 FY 2010 FY 2009 FY 2013 FY 2012 FY 2011 FY 2010 FY 2009

MARUTI SUZUKI MAHINDRA AND MAHINDRA

Source: From Financial reports of Selected Firms for the period of 2009-2013, website: moneycontrol.com

Table 1.0 presents the average sundry debtors of selected companies and its variation rate in the years. In the year2009 the established by research the level of sundry debtors, Tata recorded Rs.12055.2/- millions, Maruti Suzukirecorded Rs. 9378/- millions and Mahindra and Mahindra recorded Rs. 10436.5/- millions. The research establisheda rise in the FY 2010; Tata with 98.41%, Mahindra and Mahindra with and a decline in Maruti Suzuki with 13.63%.For the FY 2011 the research found a rise in three selected firms, Tata recorded with the rate of 8.81%, MarutiSuzuki with the rate of 1.80% and Mahindra and Mahindra with the rate of 0.17%. All the selected firms recorded arise in the FY 2012, Tata recording 4.05%, and Maruti Suzuki recording 13.71% and Mahindra and Mahindrarecording 53.02%. A rise in the FY 2013, Maruti Suzuki recorded with the rate of 51.84% and Mahindra andMahindra recorded with the rate of 14.50% however a decline in Tata recorded with the rate of 32.87%.

Table - 1.1 : Debtors turnover of TATA Motors, MARUTI Suzuki, and Mahindra and Mahindra

Debtors Turnover

A) Net Sales 447657 543066 470884 355931 256297 435879 355871 366184 290989 204537 404412 318472 234603 186021 130937

B) Avg.Sundry Debtors 21453.36 9867 15397.84

C) Debtors turnover(A/B) 20.86 25.31 21.94 16.59 11.94 44.17 36.06 37.11 29.49 20.72 26.26 20.68 15.23 12.08 8.5

Average Debtors Turnover 19.32 33.51 16.55

Scale 23.12

FY 2013







Table 1.1. Analyse the research data of debtors turnover and its variation rate of the sample organisations for thepreceding five financial years. In the year 2009 research established debtors turnover of selected firms, Tata recorded11.94, Maruti Suzuki recorded 20.72 and Mahindra and Mahindra recorded 8.5.The research establishes a rise inthe FY 2010 for all the selected firms; Tata with 16.59 Maruti Suzuki with 29.49 and Mahindra and Mahindra with12.08. A rise in the FY 2011 of all three firms, Tata registered with 21.94 Maruti Suzuki registered 37.11 andMahindra and Mahindra registered 15.23. The firms once again register a rise in the FY 2012, Tata with 25.31,Mahindra and Mahindra with the 20.68 and a decline in Maruti Suzuki registered 36.06. A rise in the FY 2013, MarutiSuzuki confirmed 44.17, Mahindra and Mahindra with the rate of 26.26 and a fall in the Tata motors with 20.86followed by previous year. But Maruti Suzuki registered highest 33.51, Moderate recorded in Tata Motors with 19.32and Mahindra and Mahindra Recorded 16.55 followed by average debtors turnover 23.12 as scale to the study.

Table - 1.2 : Average collection period of TATA Motors, MARUTI Suzuki, and Mahindra and Mahindra

In Days

A) Days in a Year 360 360 360 360 360 360 360 360 360 360 360 360 360 360 360

B)Debtors turnover 20.86 25.31 21.94 16.59 11.94 44.17 36.06 37.11 29.49 20.72 26.26 20.68 15.23 12.08 8.5

C) Collection period(A/B) 17.25 14.23 16.4 21.69 30.15 8.15 9.98 9.7 12.2 17.37 13.7 17.4 23.63 29.8 42.35

Average Collection Period 19.94 11.48 25.37

Scale 18.93

FY 2013





Table 1.2. Explain the research data of average collection period of debtors and its variation rate of the sample

organisations for the preceding five financial years. In the FY 2009 the average collection period in Tata recorded30.15days, Marut Suzuki recorded 17.37 days and Mahindra and Mahindra recorded 42.35 days. In the FY 2010 theresearch establishes a decrease in the average collection of all three selected firms, Tata registered with 21.69,Maruti Suzuki registered 12.2 and Mahindra and Mahindra registered 29.8. A fall established by research in the FY2011, Tata declined to 16.4, Maruti Suzuki to 9.7 and Mahindra and Mahindra fall down to 23.63. The selected firmsrepeats down fall in the FY 2012, Tata registering 14.23, Mahindra and Mahindra with 13.7 and Maruti Suzukiregistering with 13.7. A decline establishes by research FY 2013, Maruti Suzuki with 8.15, Mahindra and Mahindrawith 13.7 however a rise in the Tata motors registered to 17.25 when compared with the previous FYs.AverageCollection Period recorded in high in Mahindra and Mahindra 25.37, moderate in Tata Motors 19.94 low in MarutiSuzuki 11.48 followed by 18.93 as scale to the study.

Table - 1.3 : Sundry debtors to Total current assets of TATA Motors, MARUTI Suzuki, and Mahindra andMahindra

In Days

Source: From Financial reports of Selected Firms for the period of 2009-2013, website: moneycontrol.com *T.C.A.-Total Current Assets

Sundry Debtors 18180.4 27083.2 26028.8 23919.2 12055.2 14237 9376 8245 8099 9378 22083.5 19285.3 12603.1 12580.8 10436.5

*T.C.A 101350 137129.2 109717 121998 99297.2 180036 174520 157419 141435 107583 89434.3 79083 54426.8 70834.2 59323.6

Sundry debtors (as 1/3rd 33783.2 45709.73 36572.2 40666.1 33099.1 60012 58173.3 52473 47145 35861 29811.3 26361 18142.26 23611.4 19774.5

of T.C.A)

Sundry debtors to 1/3rd 0.53:1 0.59:1 0.71:1 0.58:1 0.36:1 0.23:1 0.16:1 0.15:1 0.17:1 0.26:1 0.74:1 0.73:1 0.69:1 0.53:1 0.52:1

of *T.C.A

Variation -0.06 -0.12 0.13 0.22 0.07 0.01 -0.02 -0.09 0.01 0.04 0.16 0.01

Variation rate -10.16% -16.90% 22.41% 61.11% 43.75% 6.66% -11.76% -34.61% 1.36% 5.79% 30.18% 1.92%

FY 2013




Table 1.3. Compare debtors to one third of Total current assets. In the year 2009 the research presents the debtorsagainst total current asset of selected firms, Tata recorded 0.36:1, Maruti Suzuki recorded 0.26:1 and Mahindra andMahindra recorded 0.52:1. Research establishes the ratio in the FY 2010, a rise in Tata with 61.11%, Mahindra andMahindra with 1.92% and a decline in the Maruti Suzuki with the rate of 34.61%. In the FY 2011; Tata recorded with



22.41%, Mahindra and Mahindra recorded with 30.18%,however decline in Maruti Suzuki recorded with 11.76%.In the FY 2012 the research established a rise in theratio, Maruti Suzuki increasing with 6.66%, Mahindraand Mahindra increasing with 5.79% and a decline inTata decreasing with the rate of 16.90.The firms registera rise in the FY 2013, Maruti Suzuki recorded with therate 43.75%, Mahindra and Mahindra recorded with therate of 1.36% and a decline in the firm Tata motorsregistered with the 10.16%.

Conclusion

The study concluded that Maruti Suzuki and Tata motorsare managing sundry debtors efficiently and effectivelywhen compared to Mahindra and Mahindra with lowperformance.

• Increases in average sundry debtors of selectedcompanies by the study confirm adequate debtorsto working capital management practice.

• Increase in the debtors turnover of Maruti Suzuki andTata Motors study confirm optimal debtorsmanagement to working capital managementpractices compared to Mahindra and Mahindra.

• Decrease in average collection period of MarutiSuzuki and Tata Motors confirm efficientmanagement of sundry debtors to the working capitalmanagement practice compared to Mahindra andMahindra.

• Increased proportion of sundry debtors to total currentassets in Maruti Suzuki and Tata Motors studyconfirms optimal working capital managementpractices compared to Mahindra and Mahindra.

References

1. John Sagan, “Towards a Theory of Working CapitalManagement”, The Journal of Finance, May 1955,pp. 121-129.

2. Ernest W. Walker, “Towards A Theory of WorkingCapital”, The Engineering Economist, Winter 1967,pp. 21-35.

3. J. F. Weston and E.F. Brigham, Managerial Finance,

Holt, Rinehart and Winston, 4th edition, 1972.

4. James C. Vanhorne, “A Risk-Return Analysis of afirm’s Working Capital Position”, The Engineering

Economist, Winter 1969, pp. 50-58.

5. Paul Welter, “How to Calculate Savings PossibleThrough Reduction of Working Capital”, Financial

Economist, October 1970, pp. 50-58.

6. R. J. Lambrix and S.S. Singhvi, “Managing theWorking Capital Cycle”, Financial Executive, June1979, pp.32-41.



A STUDY ON THE EFFECT OF INTELLECTUAL CAPITAL ON THE

PROFITABILITY RATIOS WITH SPECIAL REFERENCE TO PUBLIC

SECTOR BANKS LISTED IN BSE

1. Assistant Professor, Department of Commerce, Jamal Mohamed College, Trichy.2. Research Scholar, Department of Commerce, Jamal Mohamed College, Trichy.

Abstract

As the world economy is moving from being an industrial economy to knowledge based one, identification, valuation

and management of intellectual capital has become an important issue for many companies. The present paper

studies the relationship between intellectual capital and its components (structural, physical and human) and the

bank profitability ratios (return on assets, return on shareholders’ equity, profit margin and net profit growth rate) in the

Iranian banking industry by using two control variables, i.e., bank size and financial leverage. The results indicate

that intellectual capital has a strong impact on banks’ performance.

Keywords: Public Sector Banks, Profitability Ratios, BSE

Dr. M. Abdul Hakkeem1

Introduction

In today’s global economy, knowledge has become themost important capital alternative to physical andfinancial capital (Chenetal., 2004). The businessenvironment based on knowledge requires an approachwhich includes the new organizational intangible assetslike knowledge and human resource’ competencies,relationships with the customer, organizational culture,organizational structure, systems, etc. Meanwhile, theintellectual capital theory has attracted the increasingattention of academic researches and the organizationsthemselves (Bontis, 1999)

As early as the 1950s, shortage of Physical and financialcapital was considered to be the main factor forunderdevelopment in the developing countries. Butnowadays. It is quite obvious that countries which havestrong organizations, efficient administrative institutions,and human capital expertise can attract physical andfinancial capital too which can be used in acceleratingthe process of growth and development. In fact, theintellectual capital is responsible for the organization’sinvestment management, and a commercial unit canincrease its competitive advantage in the market by usingit, which includes knowledge, information, the rights overintellectual properties and experience (Stewart, 1997).In the globalized world, the country’s banking systemfaces new challenges such as entry of foreign banks.Therefore, to survive and compete In this dynamicenvironment, banks need to pay more attention to theirhuman resources. This requires quantifying thecontribution of the intellectual capital in the organization(Bagheri, 2007 and Fetros and Beigi, 2010)

In the modern economics, creation of wealth andeconomic growth mainly originates from intangible(intellectual) assets. The new economic progress is anemphasis on the fact that creating value dependsmore on intangible assets rather than tangible asset(physical and financial). The most important issue Inthe field of intangible assets is how to conceptualize,understand, evaluate, and measure the size of thisassets. This valuable business – based capital as avaluable subject worthy of academic study and full ofpractical concepts, has found remarkable acceptance.Although the importance of intellectual capital iscontinuously growing many organizations are facingproblem with regard to its management. The increasinggap between the market value and the book value ofmany companies draws attention to the study of themissing value in the financial statements. Intellectualcapital has a hidden value which cannot be observed inthe financial statements, and it is a subject that leadsthe organizations toward obtaining competitive advantage(Maditions et al., 2011) Knowledge management toolsand methodologies help the organizations in identifyingand analyzing their capabilities and competencies tomaintain and realize their constant competitive advantageand ultimately achieve the status of a knowledge – basedeconomy. Such evaluations can facilities adaptingoperations in an appropriate way and also the growth ofthe national knowledge systems for comprehensivedevelopment.

On the other hand, profit plays a crucial role in economicdecision making. Financial analysts and managers havealways used profit as a guide for dividend payment, as a

K. Ashraf Ali2



tool for measuring management effectiveness, and as ameans for making decision (Saghafi and Abhaei, 199) Acompany’s financial performance can be evaluated basedon its financial ratios.

Of course, none of the ratios alone gives enoughinformation about the finical status of the company orits performance. The most important financial ratios arethe profitability ratios, which represent a company’soperational efficiency. These rations are effectiveeconomic factors and guide investors and managementwhile making policies and devising strategies.

However, to become a knowledge – based economy, itis necessary to pay attention to the banking systemand financial institutions because they have vastresources of intellectual capital If proper action is nottaken to create a framework for accounting and reportingthe intellectual capital, banks will be exposed to loss oftheir intangible resources. According to Roos and Roos(1997), intellectual capital is one of the vital resourcesin increasing productivity and performance of banks.

Considering the importance of intellectual capital in thepresent era and also management incentives, thequestion that arises is whether the intellectual capitalhas any effect on profitability rations?

The present paper studies the relationship betweenintellectual capital and its components (structural,physical and human) and the bank profitability rations(return on assets, return on shareholder’s equity, profitmargin and net profit growth rate) in the Iranian bankingindustry.

Research Problem

The present study is titled as a project report on madewith” A Study On the Effect Of Intellectual CapitalOn The Profitability Ratios With Special ReferencePublic Sector Banks Listed In BSE” Reference ToTop 2 Old Public Sector Bank State Bank Of India,Bank Of Baroda

Research Objective

• To study the profile of selected public sector bank inIndia.

• To determine the financial performance of selectedpublic bank in India

• To find out the relationship between intellectual capitaland financial leverage with other variables.

• To provide necessary finding, suggestion and conclusion

Hypothesis

Ho

: There is no significant relationship between Intellectualcapital and determinants of financial leverage.

Ha

: There is significant relationship between Intellectualcapital and financial leverage determinants of IC.


The term intellectual capital was first coined by JohnKenneth Galbraith (1969, cited in Feiwel, 1975). Hebelieved that intellectual capital is an ideological processand includes the flow of thought. But Stewart (2001)claims that the issue was first raised in 1958. In general,intellectual capital has more meaning than intelligence,and it is associated with a degree of intellectual operation(Bontis, 1998). According to Bose (2004), organizationsmeasure intellectual capital for improving internalmanagement, for improving reporting outside theorganization, for exchanging intellectual capital, and forlegal reasons to improve accounting. Intellectual capitalconsists of non-physical resource which is related tothe employees’ abilities, organizational resources,operational methods and communication with therelevant stakeholders (Lonnqvist, 2004), and specifiesthe value of each company in the market environment.From the accounting point of view, intellectual capital isthe equivalent of the market and book value differentialof a company’s assets, which, in spite of not being inthe balance sheet due to its hidden nature, has thepotential to turn into profit and benefit (Andriessen andTissen, 2000). The market value means the exchangeprice in the competitive environment and it is the pricewhich is expected for the company’s activities andproducts. Experts present different definitions andclassifications for intellectual capital, but the abstractand dynamic nature of intellectual capital has made thedefinition of this variable difficult. Intellectual capital isan intangible asset with the potential to create value forthe company and the society (Mavridis, 2005). Brooking(1996) defines intellectual capital as a combination ofmarket intangible asset, intellectual asset, human assetand sub-structural asset, which empowers theorganization in performing its activities. IntellectualCapital and Firm Performance Kamath (2008), in a studyon 25 companies of pharmaceutical companies,considered the relationship between intellectual capitalcomponents with traditional financial performancecriteria, including profitability, productivity and marketvalue. He used Pulic’s model to measure the intellectualcapital and found that there was no meaningfulrelationship between intellectual capital components andfinancial performance criteria, but among its intellectualcapital components, human capital has the highestimpact on performance. Abbasi and Amangeldi (2010)identifed the role of the intellectual capital components(relationship capital, human capital and structural capital)on banking efficiency, and found The Effect of IntellectualCapital on the Profitability Ratios in the Banking Industry:Evidence from Iran 41 that the companies with higherintellectual capital have better financial performance;moreover, the average had different meaningful intellectualcapital coefficient. Bataineh and Al Zoabi (2011) studied



the relationship between financial reporting andintellectual capital performance in the Indian informationtechnology industry. The results indicated that there isa meaningful relationship between profitability andintellectual capital performance. Falikhatun et al. (2011)provided experimental evidence of the corporategovernance impact on the intellectual capital disclosurein the annual reports published by the Indonesian bankingsector. This research was conducted by using 36 annualreports of the companies listed on the Indonesian StockExchange (BEI) from 2004 to 2008. It was found that onan average, the information related to intellectual capitalwhich was disclosed by the companies in Indonesia isonly 35.70%. The size of the board of directors,independent directors, the ownership structure and theintellectual capital disclosure do not affect, while theexistence of the management ownership is an importantvariable, which has a negative impact on the disclosureof the internal structure of the capital. Moreover, thefindings showed that intellectual capital disclosure canbe used as one of the company’s sustainabilityassessment approaches. Fethi et al. (2011) studied theintellectual capital in the development and investmentof banks of Turkey. In today’s competitive banking sector,there is a need for banks to increase their valueaddedservices. The intellectual capital has a high impact onthe quality of the banking services. Ghorbani et al. (2011)studied the impact of intellectual capital on the financialperformance of pharmaceutical companies in Iran. Theresults showed that optimal and effective use of thecompanies’ material and intellectual resources has aneffect on their profitability indexes. Also, the humanresource efficiency has a negative impact on theproductivity and the structural capital efficiency has apositive impact on equity. The study believed that theIranian drug market still shows sensitivity to the materialcapital more than the intellectual capital. Maditinos etal. (2011), in a study on 96 Greek companies, foundthat there is a meaningful relationship between humancapital and one of the financial performance criteria, i.e.,return on shareholders’ equity (ROE), and there is nomeaningful relationship between other components offinancial performance criteria [return on assets (ROA)and the rate of revenue growth (GR)] and intellectualcapital. Pirasteh et al. (2011) studied the relationshipbetween intellectual capital and the performanceevaluation indexes of the listed companies on the TehranStock Exchange. The results showed that there is arelationship between the intellectual capital as anindependent variable and profit before tax, operationalcash flow and added value as dependent variables.Abbaszadeh et al. (2012) studied the impact ofintellectual capital on the financial performance of thecompanies in Tehran Stock Exchange by using thefinancial performance criteria, i.e., return on assets,

return on equity shareholders, ratio of market value tobook value and the economic value added. The resultsshowed that there is a meaningful relationship betweenintellectual capital and all the five criteria. 42 The IUPJournal of Bank Management, Vol. XIII, No. 1, 2014Abdullah and Sofian (2012) studied the relationshipbetween the characteristics of the board of directors andthe intellectual capital performance of 147 banks in themember countries of the Gulf Cooperation Council. Theresults indicated that there is a meaningful relationbetween the characteristics of the board of directors andthe intellectual capital performance. Ahmadian et al.(2012) studied the impact of intellectual capital on theprofitability of the listed companies on the Tehran StockExchange and found that there is a positive relationshipbetween intellectual capital and profitability. Darabi etal. (2012) studied the relationship between intellectualcapital and earnings quality. The results suggest thatthere is a meaningful relationship between intellectualcapital and its components (physical capital, humancapital and structural capital) and the earnings quality.Shams et al. (2012) examined the impact of intellectualcapital and its components on each of the financialperformance indexes by using a linear regression model.The results indicated that the intellectual capital has adirect relationship with the indexes of return on equity,employees’ productivity and the ratio of market to bookvalue of each share and profit per share.


This study includes top 2 Public Sector Bank on thebasis of the intellectual capital. 2 The name of 2 publicsectors Bank is given in the Table below:

STATE BANK OF INDIA SBI

BANK OF BARODA BOB

BANKS INDEX

Research Design

Among various Researches Design in this study theresearches applied only quantitative research which isbased on current or past financial statement.

Nature of Data

The Researcher had applied only secondary data for datacollection of financial statement.

Universe

In India the Public Sector Bank consist of 10 Bank

Selection of the Banks

On the base Intellectual Capital the researcher hasselected top 2Public Sector Bank in India namelySTATE BANK OF INDIA and BANK OF BARODA



Period of Data Collection:

The entire research work is depends on the secondary data, that is the Financial Statement of the public SectorBank under published in the website www.moneycontrol.com for the period of 10 year that is from 1st April –31st Dec 2008 to 1st April – 31st Dec 2016.

Method of Data Collection

The researcher had used only secondary data.

Tools of Analysis:

The statistical tools which are used for analysis:

Returnon asset Return on equity Profit before tax Market value to book value

Economic value added Operating cash flow Rate of growth rate

SCOPE:

The present project report examines the return, volume and Intellectual Capital relationship of selected banking.

The scope of the research comprises of information derived from secondary data from various website

Data Analysis and Interpretation

Table - 1 : State bank of India

Regression result Determination coefficient .010 0.010 6.266 11.854 0.585 0.358

Durbin- waston test 2.260 1.915 2.238 1.224 2.145 2.345

Sig .280 0.407 .040 .699 0.516 0.996

Beta -1.187 -0.342 .729 .163 -.271 0.002

t-statistics -.436 0.891 2.611 .405 -0.691 0..5

Return on asset Return on equity Return on Growth

Intectualcapital

Financialleverage

Intectualcapital

Financialleverage

Intectualcapital

Financialleverage

Table - 2

Regression result Determination coefficient 446.988 -4176.306 -129075.586 75824.275 -129075.586 75824.275


Sig 0.637 0.499 .001 0.332 .001 0.332

Beta .199 .282 .924 0.383 .924 0.383

t-statistics .497 .719 9.095 1.040 5.934 1.015

Operating cash flow Profit Before Tax Economic Value Added

Intectual

capital

Financial

leverage

Intectual

capital

Financial

leverage

Intectual

capital

Financial

leverage

Table - 3 : Market Value to Book Value

Regression result Determination coefficient 0.234 0.332

Durbin- waston test 1.814 1.592

Sig 0.512 0.251

Beta -0.274 -0.461

t-statistics -0.697 -1.271

Intectual capital Financial leverage



Table - 4 : BANK OF BARODA

Regression result Determination coefficient 0.011 0.017 4.132 6.564 0.513 0.989


Sig 0.241 0.004 0.061 o.769 0.407 0.041

Beta -0.436 -0.844 0.645 0.115 -0.316 -0.686

t-statistics -1.280 -4.170 2.231 0.305 -0.883 -2.496

Return on asset Return on equity Return on Growth

Intectualcapital

Financialleverage

Intectualcapital

Financialleverage

Intectualcapital

Financialleverage

Table - 5

Regression result Determination coefficient -5033.551 -17855.908 1978.617 2731.378 -1476.543 -6895.592


Sig 0.006 0.068 0.012 0.527 0.001 0.183

Beta 0.827 0.632 0.784 0.244 0.894 0.488

t-statistics 3.893 2.156 3.341 0.665 5.282 1.789

Operating cash flow Profit Before Tax Economic Value Added

Intectual

capital

Financial

leverage

Intectual

capital

Financial

leverage

Intectual

capital

Financial

leverage

Table - 6 : Market Value to Book Value

Regression result Determination coefficient 0.194 0.123

Durbin- waston test 0.875 0.785

Sig 0.897 0.178

Beta -0.051 0.492

t-statistics -0.135 1.495

Intectual capital Financial leverage

Findings

State Bank of India

There is a meaningful relationship between return on asset and all the variables, i.e., intellectual capital, financialleverage as is evident from the values 0.280, 0.407, respectively.

There is a meaningful relationship between return on equity and all the variables, i.e., intellectual capital, financialleverage as is evident from the values 0.040, 0.699 respectively.

There is a meaningful relationship between profit before tax and all the variables, i.e., intellectual capital, financialleverage as is evident from the values 0.000, 0.388 respectively.

There is a meaningful relationship between book value to market value and all the variables, i.e., intellectual capital,financial leverage as is evident from the values 0.353, 0.999respectively.

There is a meaningful relationship between economic value added and all the variables, i.e., intellectual capital,financial leverage as is evident from the values 0.001, 0.332 respectively.

There is a meaningful relationship between return on rate of growth and all the variables, i.e., intellectual capital,financial leverage as is evident from the values 0.516, 0.996 respectively

There is a meaningful relationship between return on asset and all the variables, i.e., intellectual capital, financialleverage as is evident from the values 0.241, 0.004 respectively.



Bank of Baroda

There is a meaningful relationship between return onequity and all the variables, i.e., intellectual capital,financial leverage as is evident from the values 0.641,0.769 respectively.

There is a meaningful relationship between profit beforetax and all the variables, i.e., intellectual capital, financialleverage as is evident from the values 0.012, 0.527respectively.

There is a meaningful relationship between book valueto market value and all the variables, i.e., intellectualcapital, financial leverage as is evident from the values0.897,0.178 respectively

There is a meaningful relationship between economicvalue added and all the variables, i.e., intellectual capital,financial leverage as is evident from the values 0.001,0.183 respectively.

There is a meaningful relationship between return on rateof growth and all the variables, i.e., intellectual capital,financial leverage as is evident from the values 0.407,0.041 respectively.

There is a meaningful relationship between return onasset and all the variables, i.e., intellectual capital,financial leverage as is evident from the values 0.051,0.001 respectively.

There is a meaningful relationship between return onequity and all the variables, i.e., intellectual capital,financial leverage as is evident from the values 0.961respectively.

Suggestions

The results indicate that intellectual capital has a strongeffect on companies’ performance, and the studyconcludes that intellectual capital drives companies toprofit and it impacts all the profitable aspects ofcompanies like ROE, ROA, profit and other financialratios. The summary of the results is presented inappendix.

Conclusion

A study on the relationship between the intellectualcapital and profitability ratios can also be made inpharmaceutical ,banking and petroleum industries basedon the valuable role the play in contributing to theeconomy of the country ; and (ii) it is suggested andthe companies report regarding identifying and measuringtheir capital in their annual reports in accordance withthe IRAN accounting standards.

Further Study

The following studies can be done by the other researcherthere further study

A study on the effect of intellectual capital on theprofitability ratios with special reference to public sectorbanks listed in NSE

A study on the effect of intellectual capital on theprofitability ratios with special reference to private sectorbanks listed in BSE.



WORKING CAPITAL MANAGEMENT IN TAMIL NADU CEMENTS

CORPORATION LTD, ARIYALUR

1 . Head and Associate Professor, Department of Business Administration,Dhanalakshmi Srinivasan College of Arts &Science (w),Perambalur.

2. Assistant Professor in Commerce, Dhanalakshmi Srinivasan College of Arts & Science (w) Perambalur.

Abstract

Management accounting provides necessary information to assist the management in the creation of policy and in the

day-to-day operations or working capital. It enables the management to discharge all its functions i.e., planning,

organization, staffing, direction and control efficiently with the help of accounting information.Working capital is the

amount of funds which a company must have to finance its day to day operation. It can also be regarded as that

proportion of the company’s total capital which is employed in short term operation in other word, it is the amount

available at all times in the form of near-cash and assets and assets, which can be converted into cash within a short

period.

Dr. M. Chandrasekaran1

Introduction

Management is basically concerned with the performanceof planning organizing, directing, coordinating andcontrolling which in fact are its main functions.Management is also regarded as the act of getting thingsdone through the others. The work is always shared withothers. The term management accounting refers toaccounting for the management. Managementaccounting provides necessary information to assist themanagement in the creation of policy and in the day-to-day operations or working capital. It enables themanagement to discharge all its functions i.e., planning,organization, staffing, direction and control efficiently withthe help of accounting information.

Working capital is the amount of funds which a companymust have to finance its day to day operation. It canalso be regarded as that proportion of the company’stotal capital which is employed in short term operationin other word, it is the amount available at all times inthe form of near-cash and assets and assets, whichcan be converted into cash within a short period.

Working capital is the amount of funds which a companymust have to finance its day-to-day operations. In thewords it is the capital that makes a company work. Thetotal capital employed consists of fixed assets andworking capital. Fixed assets form a support to thecompany long term operation which working capital isregarded as that portion of the company’s total capitalwhich is employed in short term operation. Workingcapital is also known by other terms, viz. circulatingcapital fluctuating capital, revolving capital and its partof the firm’s capital etc.

Need for Working Capital

Working capital is needed for the following purpose.

• For the purpose of raw materials, spares and otherstores for conversion into finished goods.

• To pay wages and salaries to workers and managerialstaff.

• To pay expenses on account of running maintenanceand serving of plant and machinery.

• To pay rates and taxes such as import and custom duties.

• To pay general administration expenses such assalaries to office staff, rent, interest, electricity andtelephone bills.

• To pay expanses on sales such as expenses onpacking, advertisements and publicity, salaries andcommissions to salesman, discount and commissionto dealers, railway freight loading charges and so on.

Sources of Working Capital

There is several of working capital. The sources maydiffer from one concern to other, depending on theorganizations requirements. Each whether trading ormanufacturing concern may procure funds from varioussources to meet its working capital requirements fromtime to time.

A . Vanithamani2

1. Issue of Shares

2. Issue of depentures

3. Retained earnings

4. Loans from financial

institution

5. Public deposits

1. Trade credit

2. Bank credit

3. Cedit papers

4. Customers credit

5. Govt. assistance

1. Depreciation

funds

2. Provision for

taxation

3. Outstanding

Long Term Short Term

Sources of working capital

Internal External



Scope of the Study

Working capital management policies have a great effecton firm’s profitability, liquid and its structural health. Afinancial manager therefore chalks out appropriateworking capital management policies in respect of eachof the component working capital, so as to ensure higherprofitability, proper liquidity and sound structural healthof the organization. The research helps the managementto ensure maximum wealth of the firm, maximumutilization of available resources, increase the rate ofreturn on investment and also helps the factory tomanage the working capital in an efficient manner.


The company movement is necessary to protect theinterest of weaker section of the factory. The primaryobjective of this movement is how to safeguardeconomically the weaker sections of the company fromthe opposition strong segment of the company. In allforms of organization, it a sole trade partnership or joinstock company, the primary motive is to increase profits.The philosophy behind co-operative movement is “all foreach and each for all”. Hence, the researcher would liketo carry out the research in Tamilnadu CementsCorporation Limited (TANCEM)in order to know how farthis company is more helpful in fulfilling the needs of theweaker section of the company.


A structured and scientific way to solve the problemsunder study is main purpose of research methodology.It includes all the tools irrefutable. The research explainsthe means of collecting data, the area under study, thedetermination of the sample size and various statisticaltools used to analyze the data in order to follow astructured path of conducting the study

Research methodology is a way to systematically solvethe research problems. According to Clifford woody,“Research comprises defining and redefining problems,formulating hypothesis or suggested solutions,collecting organizing and evaluating data, makingdeductions and reaching conclusions; and at lastcarefully testing the conclusions; to determine whetherthey fit the formulating hypothesis.

Research Design

A research design is the overall plan or programmers ofresearch. According to this project, the descriptive anddiagnostic research was used because this in rigid andmust focus attention of the total working aspects of theorganization.

Objectives of the Study

The objectives framed for the study are as follows:-

• To analyze the working capital position of a companyfor the past five years.

• To assess the liquidity of the firm.

• To find out whether the company maintains asatisfactory level of working capital.

Limitations of the Study

The study is subject to the following limitations,

• The study is only pertaining to TANCEM Ariyalur.

• The period of study is of 5 years and the performanceevaluation is also limited.

• The study is purely based on the data available inthe form of annual reports and appraisal reports.


A review of literature helps the researcher to have afirsthand knowledge about the existing work done byothers. A review of literature would be of immense helpin gaining and inside into the studies which can be madeareas related to the subject of the study. There arenumber of studies and the working capital in public andprivate limited companies from times to times available.

Concept of Working Capital

There are two concept of working capital

Gross concept

According to this concept the working capital refers tothe firm’s total investments in current assets. It is alsocalled the circulation capital. It is equal to the total sum ofcurrent assets only and it may represent both owned capitalas well as loan capital used for financing the current assets.

Net capital

This concept refers to the differences between the networking capital and help the management that forpermanent sources for its financing since working capitalunder this approach does not increase with increasesin short-term borrowings.

Process of Working Capital

Borrow Money Purchase of Raw Material

Payment to Creditors

Cash and Credit Sales

Sales Finished Goods

Credit purchase

period is allowed

Labor and Electricity

Charges

Work –In -Progress

Review of Related Literature

Many researchers have studied working capital fromdifferent views and in different environments. The followingones were very interesting and useful for our research:



Chakraborty (1976) made a study to examine the relationship between working capital turnover and profitability inIndian cement, fertilizer and sugar industries. As finding of the study, he reported positive association betweenprofitability and working capital turnover.

Nunn (1981) As for the determinants of working capital practices, we find even less prior research on which to draw.Nunn (1981) uses the PIMS database to examine why some product lines have low working capital requirements,while other product lines have high working capital requirements. In addition, Nunn is interested in “permanent”rather than temporary working capital investment as he uses data averaged over four years. Using factor analysis,he identifies factors associated with the production, sales, competitive position, and industry.

Eljelly (2004) made an attempt to examine the association between liquidity and profitability by using current ratioand conversion cycle on a sample of joint stock companies in Saudi Arabia. As findings, the study showed that thecash conversion cycle was more important that the current ratio as a more of liquidity indicators. Such study alsorepotted a significant variation among industries with respect to the relevant measure of liquidity.

Raheman and Nasr (2007) made a study on working capital management and profitability on a sample of 94selected Pakistani firms listed on Karachi Stock Exchange for the period of six years (1999-2004). They actuallyexamined the average collection period, average payment period, inventory turnover, cash conversion cycle andcurrent ratio on the net operation profitability of Pakistani firms. They have also found a significant negative relationshipbetween liquidity and profitability.

Eljelly, 2010 elucidated that efficient liquidity management involves planning and controlling current assets andcurrent liabilities in such a manner that eliminates the risk of inability to meet due short-term obligations and avoidsexcessive investment in these assets. The relation between profitability and liquidity was examined, as measuredby current ratio and cash gap (cash conversion cycle) on a sample of joint stock companies in Saudi Arabia usingcorrelation and regression analysis. The study found that the cash conversion cycle was of more importance as ameasure of liquidity than the current ratio that affects profitability. The size variable was found to have significanteffect on profitability at the industry level. First, it was clear that there was a negative relationship between profitabilityand liquidity indicators such as current ratio and cash gap in the Saudi sample examined. Second, the study alsorevealed that there was great variation among industries with respect to the significant measure of liquidity.

Enschede, February 2012 Even though I have written this thesis individually, I would like to thank the people whohave lend their continuous support, encouragements and guidance throughout the period of making this thesis.First of off all I am very grateful to my supervisors at the University of Twente, Prof. Dr. RezaulKabir and Dr. XiaohongHuang for their support and valuable advices given to me in the making of this thesis. I am also very thankful to myparents for their continuous support and for all the given opportunities and encouragements, which enabled me toreach the goals in my live. I would also like to thank my family and friends for all the support given throughout mystudy. Now it is time for me to test how well my knowledge can be applied in practice.

Current Ratio

Current ratio is the relationship between current assets and current liabilities. It is calculated by dividing the totalcurrent assets by total current liabilities.

Current Ratio = Current Assets/Current Liabilites

Table - 1 : Current Ratio

2007-2008 635419796 262075978 2.42

2008-2009 517712239 388740731 1.33

2009-2010 668157031 420804654 1.60

2010-2011 728460002 379846771 1.91

2011-2012 742036000 394326000 1.88

Current Asset (Rs) RatioYears Current Liabilities (Rs)

Source: Secondary data

The above table indicates the current ratio of the Factory for the past five years. The current ratio of a Factorymeasures its short-term solvency, that is, its abilities to meet short-term obligation. As measures of short-term /current financial liquidity it indicates the rupees of current assets available for each rupee of current liability /obligation payable. As majority the current ratio had showed an increasing and decreasing trend over the years.



Quick Ratio

This ratio is also termed as ‘acid test ratio’ or ‘liquid ratio’. This ratio is ascertained by comparing the liquid assets

to current liabilities. The prepaid expenses and stock are not taken as liquid assets.

Quick Ratio = Liquid Assets/ Liquid Liabilities

Table - 2 : Quick Ratio

2007-2008 502429414 262075978 1.91

2008-2009 401082338 388740731 1.03

2009-2010 541784091 420804654 1.28

2010-2011 523259470 379846771 1.38

2011-2012 513900000 394326000 1.30

Quick Asset(Rs) RatioYears Current Liabilities(Rs)


The above table explains the quick ratio of the Factory for the past five years. The quick ratio is a rigorous measure

of a Factory to reduce short-term liabilities. The usefulness of the ratio lies in the fact that it is widely accepted as

the best available test of the liquidity position of a Factory. From the year 2007-2008 to 2011-2012, the quick ratio

was higher than the standard ratio i.e., 1:1. As majority, the liquid ratio had showed an increasing and decreasing

trend over the years.

Current Assets Turnover Ratio

The firm may wish to know its efficiency of utilizing current assets such as, cast debtor’s stock, inventories.

Current Asset Turnover Ratio =Net Sales/Current Asset

Table - 3 : Current Assets Turnover Ratio

2007-2008 1430300346 635419796 2.25

2008-2009 1159839221 517712239 2.24

2009-2010 1636778149 668157031 2.44

2010-2011 1512206105 728460002 2.08

2011-2012 1298884000 742036000 1.75

Net sales(Rs) RatioYears Current Asset(Rs)


The above table indicates the cash to current asset ratio of the Factory for the past five years. During the year 2009-

2010, the cash to current asset ratio was high i.e., 2.44. During the year 2011-2012, the cash to current asset ratio

was low i.e., 0.10. As majority, the cash to current asset ratio had showed a decreasing and increasing trend over

the years. The ratio is also known as the investment turnover ratio. It is based on the relationship between the

cost of goods sold and assets/investment of a Factory.

Cash Turnover Ratio

Case turnover ratio is the most liquid asset a financial analysis examines net sales and its equivalent to cash bank.

Trade investment or marketable securities are equivalent of net sales. The may be included in the computations of

the cash turnover ratio.



Cash Turnover Ratio= Net Sales/Cash &Bank

Table - 4 : Cash Turnover Ratio

2007-2008 1430300346 212162217 6.74

2008-2009 1159839221 85689873 13.54

2009-2010 1636778149 29204813 56.04

2010-2011 1512206105 49891316 30.31

2011-2012 1298884000 37515000 34.62

Net sales(Rs) RatioYears Cash bank(Rs)


The above table indicates the cash turnover ratio of the Factory is first three year increasing trend and last two yeardecreasing trend. The ratio measure liquidity of a firm by comparing actual cash turnover ratio. To conclude thedecision of liquidity ratio. The short-term solvency of a firm can be judged not merely in to term of the traditionalliquidity ratio.

Hypothesis Testing

The Association Table between Current Ratio and Quick Ratio

Null Hypothesis (Ho)

There is a significant relationship between Current ratio and Quick ratio.

Alternative hypothesis (Ha)

There is no significant relationship between Current ratio and Quick ratio.

Table - 5 : Two Ways Table

1 2.42 1.91 4.33

2 1.33 1.03 2.36

3 1.6 1.28 2.88

4 1.91 1.38 3.29

5 1.88 1.30 3.18

9.14 6.9 16.04

Current Ratio TotalS.No Quick Ratio

X2 =

Oi = Observed Frequency

Ei = Expected Frequency

Ei =

=

(RT) (CT)[Row Total × Column Total]

GT Grand total

Σ

Ei

GT

Chi –square Test

(Oi –Ei)2

2.42 2.47 -0.05 0.0025 0.001012146

1.91 1.86 0.05 0.0025 0.001344086

1.33 1.34 -0.01 0.0001 0.000007462

1.03 1.02 0.01 0.0001 0.000009804

EI (Oi- Ei)2OI Oi - Ei (Oi-Ei)2 /Ei



1.6 1.64 -0.04 0.0016 0.00097561

1.28 1.24 0.04 0.0016 0.001290323

1.91 1.87 0.04 0.0016 0.000855615

1.38 1.42 -0.04 0.0016 0.001126761

1.88 1.81 0.07 0.0049 0.002707182

1.30 1.37 -0.07 0.0049 0.003576642

0.01306103

Degree of Freedom

= (r-1) (C-1) = (2-1) (5- 1)= 1 × 4

= 4

Table value 5% significant level.

= 9.488

Calculated value = 0.01306103

= 0.01306103 <9.488

Result (Ho)

There is significant relationship between Current ratio and Quick ratio of the respondents in the study.

The Association Table between Current Assets Turn Over Ratio and Cash Turnover Ratio

Null Hypothesis (Ho)

There is a significant relationship between Current assets turnover ratio and Cash turnover ratio.

Alternative hypothesis (Ha)

There is no significant relationship between Current assets turnover ratio and Cash turnover ratio.

Table - 6 : Two Ways Table

1 2.25 6.74 8.99

2 2.24 13.54 15.78

3 2.44 56.04 58.48

4 2.08 30.31 32.39

5 1.75 34.62 36.37

10.76 141.25 152.01

Current Assets Turnover Ratio TotalS.No Cash Turnover Ratio

X2 =

Oi = Observed Frequency

Ei = Expected Frequency

Ei =

=

(RT) (CT)[Row Total × Column Total]

GT Grand total

Σ

Ei

GT

Chi –square Test

(Oi –Ei)2



2.25 0.64 1.61 2.5921 4.05015625

6.74 8.38 -1.64 2.6896 0.32095465

2.24 1.12 1.12 1.2544 1.12

13.54 14.66 -1.12 1.2544 0.08556617

2.44 4.14 -1.7 2.89 0.69806763

56.04 54.34 1.7 2.89 0.05318366

2.08 2.29 -0.21 0.0441 0.01925764

30.31 30.10 0.21 0.0441 0.00146512

1.75 2.57 -0.82 0.6724 0.26163424

34.62 33.80 0.82 0.6724 0.01989349

6.63017885

EI (Oi- Ei)2OI Oi - Ei (Oi-Ei)2 /Ei

Degree of Freedom

= (r-1) (C-1) = (2-1) (5- 1) = 1 × 4

= 4

Table value 5% significant level.

= 9.488

Calculated value = 6.63017885

= 6.63017885<9.488

Result (Ho)

There is significant relationship between Current assets turnover ratio and Cash turnover ratio of the respondents inthe study.

Finding, Suggestions and Conclusion

Finding

• The Current ratio had showed a decreasing trend over the past five years from 2.42 to 1.88.

• The Quick ratio was decreased from 1.91in the year 2007-08to 1.30 in the year2011-12.

• The Stock turnover ratio decreased from 17.82 in the 2007-08 to 10.35 in the year 2011-12.

• The Cash ratio was decreased from 0.80in the 2007-08 to 0.10 in the year 2011-12.

• The Current assets turnover ratio is increased from 2.25in the year 2007-08to 2.44 in the year 2009-10. It wasfurther decreased to 1.75in the year 2011-12.

• The Cash turnover ratio showed an increased trend from 6.75 to 56.04 over the past three years from 2007-08 to2009-2010.

Suggestions

The following suggestions were offered for improving the performance of Tamilnadu Cements Corporation Limited(TANCEM), Ariyalur:

• Current assets are more than current liabilities. In order to improve it is solvency position more, the TANCEMshould take measured to reduce current liabilities i.e. creditors, Long-term debt, accrued expenses etc., andincrease current assets i.e. debtors, inventories etc.

• Cash is the most liquid assets. So the preparation of cash and bank balance in the total current assets as to beincreased to improve the liquidity position of TANCEM.

• The factory has to increase the working capital over the years in order to meet the day to day expenses.



Conclusion

The TANCEM limited financial position is very good. It isexport in allover international contract and the employeesof the company fully enjoying there were doing a job.The ratios are very good in year. It also provides variouspromotional activities exclusively for the benefits of theemployees. The working capital management ofTamilnadu Cements Corporation Limited(TANCEM)Ariyalur was found satisfactory over the periodof the study. It was analyzed that the factory waseffectively running its operations, as its liquid ratio wasmore than the standard ratio.

Hence, it was evident that the Tamilnadu CementsCorporation Limited (TANCEM) Ariyalur was wellmanaged and formed exclusively to promote and developthe weaker section of the factory.

Bibliography

1. C. R. Kothari, 2002 “Research MethodologyMethod And Techniques” Wishwa Prakasham,New Delhi.

2. R.S.N. Pillai And Bagavathi.”ManagementAccounting”

3. S. Chandand Company Ltd Publication, New Delhi,Third Edition (2006)

4. I. M. Pandey “Financial Management”, NewDelhi, Vikas Publication, Ninth Edition (2007)

5. T.S Reddy, Y.Hari Prasad Reddy”ManagementAccounting” Chennai, Margham Publication, ThirdEdition (2007)

6. Dr. R. Ramachandaran & Dr. R. Srinivasan“Financial Management”, Sriram Publication(2010)

Website

www.google.com

www.tancem.com



A STUDY ON FEASIBILITY OF BUYING AND SELLING OF SHARES IN

STOCK MARKET WITH REFERENCE TO FIVE SELECTED IT

COMPANIES

1. Assistant Professor and Research Advisor, Department Of Commerce, Thanthai Hans Rover College, Perambalur.2. Research Scholar, PG and Research Department Of Commerce, Thanthai Hans Rover College, Perambalur.

Abstract

Economic growth of a nation based on the stock market of the country, the study entitled “A study on feasibility of

buying and selling of shares in stock it market with reference to five selected IT companies” is focus on function of

stock market. The outcome of the study is to provide a view to investors when to buy and sell the shares. For this study

research forecasting technique Trend analysis are used for data analysis and interpretation. Secondary data are used

for the research which data collected from websites through the way of company’s stock closing price. This study

reveals that the primary responsibility of investors to know about the forecasting technique, price movement, portfolio

construction and risk and return in order to ensure their investment worthwhile keywords: Risk and Return, Portfolio

management, stock, option and price movement.

Keywords: Portfolio management, stock option, shares, risk and return and Investment management.

Dr. P. Kanagaraju1

Introduction

In financial market, a share is a unit of account for variousinvestments. It often means the stock of a corporation,but is also used for collective investments such as mutualfunds, limited partnerships, and real estate investmenttrusts.

Corporations issue shares which are offered for sale toraise share capital. The owner of shares in the corporationis a shareholder (or stockholder) of the corporation..Ashare is an indivisible unit of capital, expressing theownership relationship between the company and theshareholder. The denominated value of a share is itsface value, and the total of the face value of issued sharesrepresent the capital of a company, which may not reflectthe market value of those shares.

Stock Market in India

Indian stock market started functioning from 1875. Thename of the first share trading association in India wasNative Share and Stock Broker’s Association which latercame to be known as Bombay Stock Exchange (BSE).This association kicked of with 318 members. Indianshare market mainly consists of two stock exchanges:

1. Bombay Stock Exchange (BSE)2. National Stock Exchange (NSE)


Gupta (1981) in an extensive study titled ‘Return onNew Equity Issues’ states that the investmentperformance of new issues of equity shares, especiallythose of new companies, deserves separate analysis.

The factor significantly influencing the rate of return onnew issues to the original buyers is the ‘fixed price’ atwhich they are issued. The return on equities includesdividends and capital appreciation. This study presentssound estimates of rates of return on equities, andexamines the variability of such returns over time.

Jawaharlal (1992) presents a profile of Indian investorsand evaluates their investment decisions. He made aneffort to study their familiarity with, and comprehensionof financial information, and the extent to which this isput to use. The information that the companies providegenerally fails to meet the needs of a variety of individualinvestors and there is general impression that thecompany’s Annual Report and other statements are notwell received by them.

Research Design

A research design is simply the framework or plan for astudy that is used as a guide in collecting and analyzingthe data. It is a blueprint that is followed in completing a study.

According to Kerlinger, “Research design is the plan,structure, & strategy of investigation conceived so as toobtain answers to research questions and to control variance”.

Analytical Research Design

The characteristics of this method is that the researcherhas no control over the variables, he can only reportwhat has happen or what is happen, the researcher hasto use the facts or information already available andanalyze these to make a critical evaluation of thematerial. Here, generally comparative and correlation

L. Jayaseelan2



19922.0520726.75

18774.818160.8

1960218475.45 18154.84 17834.23 17513.62 17193.01 16872.4

0

5000

10000

15000

20000

25000

2015

AUG

2015

SEP

2015

OCT

2015

NOV

2015

DEC

2016

JAN

2016

FEB

2016

MAR

2016

APR

2016

MAY

2016

JUN

HCL TREND ANALYSIS

2015 AUG 19922.1

2015 SEP 20726.8

2015 OCT 18774.8

2015 NOV 18160.8

2015 DEC 19602

2016 JAN 18475.5

2016 FEB 18154.8

2016 MAR 17834.2

2016 APR 17513.6

2016 MAY 17193

2016 JUN 16872.4

methods trend projections and forecasting, identifying the key control areas and managing them is done in this typeof research based on the recent past data.


• To study about the basic functions of stock market• To identify the criteria and feasibility for when to buy and when to sell the share• To provide the suggestion to the investors about buying and selling the shares.

Scope of the Study

Investment made for the purpose of full filly their needs and wants in future and also to avoid uncertainty happenings.Thus, this study focus on analyzing feasibility of when to buy and when to sell using moving average method, trendanalysis and also relative strength index. This study provides a suggestion to the investors about buying and holding.


Investment in stock market is a risky one, because it is not possible for prediction about return on investment instock market. Thus, it is necessary to analyze the investment made through fundamental analysis and technicalanalysis and make the investment to be worth.

Data Collection

Data used for this research is collected by secondary data method. Secondary data collected for the study by theway of company’s stock prices through the websites.


A trend analysis is an aspect of technical analysis that tries to predict the future movement of a stock based onpast data. Trend analysis is based on the idea that what was happened in the past gives traders an idea of what willhappen in the future. There are three main types of trends: short, intermediate, and long term.

Trend analysis tries to predict a trend like a bull market run and ride that trend until data suggests a trend reversal(e.g. bull to bear market). Trend analysis is helpful because moving with trends, and not against them, will lead toprofit for an investor.

Limitation of the Study

• It is collected from secondary data• Past one year data only can prejudge the stock price.• IT company data’s are not apply on other company

Duration of the Study

The study period was January 2016 to march 2016 and the data used for the project are January 2015 to December 2015.


HCL Trend Analysis



Interpretation

From the above trend analysis with the closing stock price of the company, it is found that September (2015) monthhave a highest value and June (2015) month facing the lowest value.

Infosys Trend Analysis

23349

24244.7

25027.2

22826.2

24780.5

24478.8724623.32 24767.77

24912.2225056.67 25201.12

21500

22000

22500

23000

23500

24000

24500

25000

25500

2015

AUG

2015

SEP

2015

OCT

2015

NOV

2015

DEC

2016

JAN

2016

FEB

2016

MAR

2016

APR

2016

MAY

2016

JUN

INFOSYS TREND ANALYSIS2015 AUG 23349

2015 SEP 24244.7

2015 OCT 25 027.2

2015 NOV 22826.2

2015 DEC 24780.5

2016 JAN 24478.9

2016 FEB 24623.3

2016 MAR 24767.8

2016 APR 24912.2

2016 MAY 25056.7

2016 JUN 25201.1

Interpretation

From the above trend analysis with the closing stock price of the company, it is found that June (2015) month havea highest value and November (2015) month facing the lowest value.

TCS Trend Analysis

54835.2

56293.5 56436.7

50894.3

55131.9

53276.5852796

52315.42

51834.8451354.26

50873.68

48000

49000

50000

51000

52000

53000

54000

55000

56000

57000

2015

AUG

2015

SEP

2015

OCT

2015

NOV

2015

DEC

2016

JAN

2016

FEB

2016

MAR

2016

APR

2016

MAY

2016

JUN

TCS TREND ANALYSIS2015 AUG 54835.2

2015 SEP 56293.5

2015 OCT 56436.7

2015 NOV 50894.3

2015 DEC 55131.9

2016 JAN 53276.6

2016 FEB 52796

2016 MAR 52315.4

2016 APR 51834.8

2016 MAY 51354.3

2016 JUN 50873.7

Interpretation

From the above trend analysis with the closing stock price of the company, it is found that October (2015) monthhave a highest value and November (2015) month facing the lowest value.



11327.2

12019.812141.9

11188.3

12157.6

12015.7512098.68

12181.6112264.54

12347.47 12430.4

10400

10600

10800

11000

11200

11400

11600

11800

12000

12200

12400

12600

TECHMAHINDRA TREND ANALYSIS

2015 AUG 11327.2

2015 SEP 12019.8

2015 OCT 12141.9

2015 NOV 11188.3

2015 DEC 12157.6

2016 JAN 12015.8

2016 FEB 12098.7

2016 MAR 12181.6

2016 APR 12264.5

2016 MAY 12347.5

2016 JUN 12430.4

Interpretation


WIPRO Trend Analysis

TechMahindra Trend Analysis

11907.9

12686.212819.2

11844.7

12957.312820.25

12945.98 13071.7113197.44

13323.1713448.9

11000

11500

12000

12500

13000

13500

14000

2015

AUG

2015

SEP

2015

OCT

2015

NOV

2015

DEC

2016

JAN

2016

FEB

2016

MAR

2016

APR

2016

MAY

2016

JUN

WIPRO TREND ANALYSIS2015 AUG 11907.9

2015 SEP 12686.2

2015 OCT 12819.2

2015 NOV 11844.7

2015 DEC 12957.3

2016 JAN 12820.3

2016 FEB 12946

2016 MAR 13071.7

2016 APR 13197.4

2016 MAY 13323.2

2016 JUN 13448.9

Interpretation


Findings

• In trend analysis, September (2015) month have a highest value and June (2015) month is facing the lowestvalue of stock market in HCL Company.

• In trend analysis, June (2015) month have a highest value and November (2015) month is facing the lowest valueof stock market in INFOSYS Company.

• In trend analysis, October (2015) month have a highest value and November (2015) month is facing the lowestvalue of stock market in TCS Company.

• In trend analysis, June (2016) month have a highest value and November (2015) month is facing the lowest valueof stock market in TECHMAHINDRA Company.



• In trend analysis, June (2016) month have a highestvalue and November (2015) month is facing the lowestvalue of stock market in WIPRO Company.

• From the above MACD, it is found that based on thestock closing price the stock price which are all fallabove the middle is feasible to buy and below themiddle lines are feasible to sell with reference to HCL.

• From the above MACD, it is found that based on thestock closing price the stock price which are all fallabove the middle is feasible to buy and below themiddle lines are feasible to sell with reference toINFOSYS.

• From the above MACD, it is found that based on thestock closing price the stock price which are all fallabove the middle is feasible to buy and below themiddle lines are feasible to sell with reference to TCS.

• From the above MACD, it is found that based on thestock closing price the stock price which are all fallabove the middle is feasible to buy and below themiddle lines are feasible to sell with reference toTECHMAHINDDRA.

• From the above MACD, it is found that based on thestock closing price the stock price which are all fallabove the middle is feasible to buy and below themiddle lines are feasible to sell with reference toWIPRO.

• From the above RSI table, it is found that 98.30 isthe highest value which fall on 6th March 2015 ad1.52 is the lowest value which fall on 29th January2015

• From the above RSI table, it is found that 98.03 isthe highest value which fall on 4th June 2015 ad 3.08is the lowest value which fall on 3rd February 2015

• From the above RSI table, it is found that 97.86 isthe highest value which fall on 14th April 2015 and2.22 is the lowest value which fall on 12th February2015

• From the above RSI table, it is found that 98.21 isthe highest value which fall on 11th March 2015 and3.61 is the lowest value which fall on 7th January 2015

• From the above RSI table, it is found that 91.37 isthe highest value which fall on 16th April 2015 and10.34 is the lowest value which fall on 16th January201

Suggestions

• Company has to identify the investment portfolio withseveral forecasting technique in order to ensureoptimum fund allocation.

• Investments in the stock in risky facts but companyhave to reduce the risk by the way of forward trend.

• Investors fund have to utilize properly in order todevelop the market share of the company.

• Trend analysis shows UPS and down for all thecompanies. It is a made based o closing price. So,all the companies have to cautions on theirperformance which will improve the stock price ofthe company.

CONCLUSION

The study entitled A study on stock price volatility withreference to selected IT companies is focus on analyzingthe stock price variations among the companies andtheir impacts. From the study, it is observed that stockprice shows a significant variation from time to time. Itreveals that the stock market is evidence of uncertainty.From the study, it is concluded that it is the primaryresponsibility of investors to analyze the stock trendsbefore investing in it. Also, investors should aware aboutidentifying the criteria on when to buy the shares andwhen to sell it in order to retain the optimum level ofprofit.

References

1. Grewal and Navjot Grewal, Portfolio Investment inshares, Vision books Pvt.Ltd.36 Connaught place,New Delhi 1984.

2. Analysis of stock market investment strategies-Worcester.

3. L.C.Gupta. Stock trading in India, Society for capitalmarket research and development, Delhi, 1992.

4. Juhi Ahuja-2012-Indian capital market An over viewwith its Growth VSRD International journal ofBusiness and Management research.

5. Bhalla V.K. Iirz-estiirerrt Mnilngeiirei-t SecurityAnalysis and portfolio Mnr-ngeiiierlf,S.Chand &Co.Ltd. New Delhi.1982.

www.moneycontrol.com

http//stockcharts.com/school/doku.php

htpp://m.moneycontrol.com/stockmarketsindia

hrrp://markets.wsi.com

htpp://markets.ft.com/markets

www.stockmarket.com



A STUDY ON WOMEN EMPOWERMENT THROUGH FINANCIAL

INCLUSION IN INDIA.

1. Professor & Research Guide, Dept of commerce & Management, Government First Grade College, Bangalore.2. Research Scholar, Department of Commerce, Bangalore University, Bangalore.

Abstract

Financial freedom is not measured by how much money one earns while working, or accumulating riches and buying

means of comfort. Rather, it is more about having a wide set of options to choose from. Till about 20 years ago, one

could count on the finger tips the number of successful business start-ups.With low-risk appetite, financial management

was a placid activity. The reason: there was very little freedom in the choice of financial instruments.

While the rising number of business start-ups mirrors the freedom to choose when to work and freedom to do what one

likes, there is also the larger question of freedom to 'borrow' one's way out of abject poverty. India is replete with stories

of young girls dropping out of school and married off soon after by poor parents. Financial inclusion has a direct

correlation with overall economic growth - a useful guide in times of crippling slowdown.In its conventional definition,

financial inclusion means making available banking services at an affordable cost to low-income and disadvantaged

groups of people. Any such blueprint, besides covering the rural poor, should also seek to bring within its ambit the

large number of poor women in towns and cities who remain outside any formal banking network. Access to banking

services is critical for the economic empowerment of women in a country such as India. According to the World Bank's

Global Financial Inclusion Index (Global Findex) database more than 1.3 billion women worldwide remain largely

outside the formal financial system. Only 26% of women in India admit to having a bank account. Per capita credit in

the case of women is 80% lower than in the case of men. Access to banking services also has another major

significance: prevention of financial frauds. Seen in this light, the setting up of the Bharatiya Mahila Bank is more than

a welcome step. More such initiatives are needed as the hard-earned money of too many innocent and financially

uninitiated people is at stake.

Keywords: Financial freedom, empowerment of women, poverty.

Srikanth. R2Dr. T. Aswatha Narayana1

Introduction

Financial inclusion benefits individuals and households,and well-functioning financial systems benefit wholecountries. However, access to financial services is highlyunequal, with poor people – and particularly poor women– frequently the least served by existing institutions andsystems. There is ample evidence of how financialinclusion projects of different types can, if properlydesigned and implemented, enhance women’s economicempowerment. Financial inclusion projects can thereforehelp to achieve both gender equity objectives and povertyreduction objectives.

As such, in order to promote poverty reduction andgender equity, there is a clear rationale for usingdevelopment resources to enhance financial inclusionfor women. This toolkit offers a practical guide todeveloping and monitoring financial services to enhancewomen’s financial inclusion as one tool for the economicempowerment of women.

A financial inclusion programme may not be targetedspecifically at women. For example, it may have broadpoverty reduction goals that benefit men as well as

women. To make sure women benefit as much aspossible from the programme, it is important tounderstand why financial exclusion for women is differentfrom financial exclusion for men.


1. Understanding Women’s specific financial needs inrelation to men’s

2. Why financial inclusion for growth and poverty.

3. Understanding financial inclusion and women’sempowerment – the evidence.

4. Understanding about Gender related barriers toaccessing financial services.

5. To suggest right mode of operandi for development ofbetter incorporate

Women’s economic empowerment through financialinclusion.

Understanding Women’s specific financial needsin relation to men’s

A financial inclusion programme may be targeted at thegeneral population, i.e. not specifically at women. For



example, it may have broad poverty reduction goalsaimed at bringing poor people into the market system.These types of programme still offer significant benefitsfor women’s financial inclusion and women’s economicempowerment. However, to make sure women benefitas much as possible from the programme, it is importantthat we build up a proper understanding of why it issometimes more difficult for women to access financialservices or to achieve maximum benefit from them. Wedo this not by focusing exclusively on women’s financialneeds, but by actively comparing women’s financialneeds and behavior with men’s. As one practitioner hassuggested, we need:

To ensure a successful outcome, a financial inclusionprogramme that is also designed to achieve

Women’s economic empowerment should promotewomen’s access to and use of different financial servicesand institutions in ways that enhance their own livesand those of their households.

There is no universally accepted definition of women’sfinancial inclusion and neither is there a

Universally accepted definition of women’s economicempowerment. However, work has recently been carriedout 3 to examine how market systems development canbe made more responsive to the gender-specificsystemic constraints faced by poor women and men. Itproposes that women’s economic empowerment shouldcomprise:

• Economic advancement through increased incomeand return on labor;

• Access to opportunities and life chances, such asskills development or job openings;

• Access to assets, services and the support requiredto advance economically;

• Decision-making authority in different spheresincluding household finances.

The full range of issues that would be needed to addresswomen’s economic empowerment in its totality. Thefocus is on where financial inclusion, which embraces amuch broader range of activities than traditionalmicrofinance, overlaps with a wider gender equity andeconomic empowerment agenda, as in the diagrambelow.

Gender equality

Women’s economic empowerment

Finanical inclusion

Microinsurance SME finance

Cash transfers Branchless banking

Microfinance Banking policy reform

Why financial inclusion for growth and poverty

Managing money is a key part of everyone’s lives. Poorpeople everywhere are borrowing and saving in differentways for different purposes, sending and receiving moneyand trying to protect themselves against financial shocks.Financial institutions can play a vital role in this. Aninclusive financial system is one in which rules andfinancial institutions are responsive to the needs of thepoor, helping them to use money more productively andto develop financial security. Access to responsiblydeliver financial services means that people can:

• Save money safely, with less risk of loss throughfire, theft, fraud, etc.

• Send and receive money securely;

• Borrow for consumption or investment purposes basedon an understanding of pricing, terms And conditions;

• Insure against risk.

Access to financial services can also limit some of therisks poor people face. Holding money in a bank orsavings scheme can reduce the risk of loss through fireor theft. It can help people smooth consumption whentheir income fluctuates and prevent them from slippingback into poverty as a result of shocks such as illness,unemployment or death.

Understanding financial inclusion and women’sempowerment – the evidence.

Poor people in general tend to be financially excluded,but women in many countries are frequently morefinancially excluded than men at similar levels of income:

Many studies have demonstrated the impacts of financialinclusion schemes on different types of women and theevidence suggests that financial inclusion schemes ofdifferent types can have significant effects on women’seconomic empowerment, However, there are otherconstraints that will not be overcome throughprogrammes that focus on financial inclusion alone.

Micro finance schemes

Microfinance programmes are the most common andmost studied of financial inclusion programmes. Anumber of studies have shown that they can have apositive impact on women’s empowerment

Micro credit schemes have little impact on women’seconomic empowerment. In some cases because theprevailing discrimination against women’s economicactivities was too pervasive.

The scheme itself, most commonly due to: loans beingtoo small to transform women’s opportunities; short loanrepayment terms that do not allow for long-term wealth-creating investment; or because interest rates are toohigh. Far from empowering women, such factors canSource: Jones (2012). Discussion Paper for an M4P Women’s

Economic Empowerment Framework.



push them into over indebtedness and may increasetheir vulnerability in other ways. As is also the case withmen, women may also simply lack the entrepreneurialskills to create value from a micro loan, and the ultra-poor may not be able to access microcredit due to theirinability to make even minimal loan repayments.

Financial literacy programmes

Increasing women’s financial inclusion is not just a matterof providing products and services that more closelymeet the needs of women. It is also a matter of improvingwomen’s financial literacy or capabilities. Enhancingfinancial knowledge and economic skills can thus beconsidered as one of the key instruments required topromote economic empowerment. Financial literacy isoften offered as part of microfinance or other programmesand should take into account underlying social andcultural factors in its design.

Transactions. The term ‘transactions’ covers bankaccounts and money transfers, which, in turn, can bebroken down into remittances, mobile money and cashtransfers. For most programmes that aim to achievesystemic improvements in financial inclusion, bankaccount usage is probably the leading indicator.Promoting the use of mainstream bank accounts canimprove women’s financial inclusion and reducevulnerability by making it easier and safer for them tomanage their money, including building up savings.Donors are now strongly encouraging branchlessbanking, which uses correspondents or agents (suchas post offices, small shops and petrol stations) as analternative and much cheaper distribution channel to afull bank branch network. Since expensive branchinfrastructure is not required, financial service institutionsand mobile phone operators can deliver services at alower cost, bringing formal financial services within reachof those previously excluded.

Mobile money

Where money is sent using a mobile phone, is anotherform of branchless banking, although it is increasinglymobile phone companies and not banks that arepromoting the service. Mobile money is hugely promising,however challenges remain, not least in how toappropriately regulate the industry and ensurecompliance with Know Your Customer (KYC)requirements. This is especially pertinent for women, aswomen are less likely than men to be able to fulfil KYCrequirements given they often lack formal documentation.

Typically, barriers to financial inclusion (FI) arecategorized as ‘supply’ or ‘demand’ side. These mayaffect women more than men, or affect them differentlyfrom men, but in some measure they will affect bothmen and women, and especially poor men and women.

Research has indicated that many more people citedemand-side barriers, rather than supply-side barriers,as the reason why they do not engage with formalfinancial services. But both matter and it is therelationship between the two that largely determines theextent and quality of access. Income poverty (the primarydemand-side constraint) is the reality in which financialinclusion operates and, depending on the particular issue,tackling financial exclusion from the supply side maybe the best (or only) way for the programme to makeheadway.

The importance of demand side research on women’sfinancial inclusion cannot be underestimated. The waywomen manage their money has been a much moreprivate (and often domestic) undertaking in comparisonto the way men manage their money. Intra-householddynamics have sometimes obliged women to managetheir income and savings with great secrecy. As regardsenterprise finance, all SMEs, regardless of the genderof their owner, can face many major barriers to accessingcredit, although some barriers have a disproportionatelynegative impact on women entrepreneurs. These include:record keeping issues; limited financial awareness andliteracy levels; lack of ownership of acceptable collateral(e.g. where banks have a high preference for land andbuildings, cash and some types of equipment); the costof credit; negative perceptions of banks; risk aversion;gender discrimination; and cultural constraints on womenentrepreneurs. Furthermore, because womenentrepreneurs tend to run smaller businesses than men,this puts them at a disadvantage when accessing bankfinance because banks tend to prefer larger loan sizes.

Understanding about Gender related barriers toaccessing financial services

Some of the constraints that particularly affectwomen are set out

Supply –side constraints

1. Collateral requirements exclude women who oftenlack land/property rights

2. Limited physical outreach and typical bank openinghours affect women more than men because theyare less mobile than men

3. Documentation requirements: women often lack proofof identity

4. Product features: may not meet women’srequirements (e.g. eligibility, loan term etc.)

5. Marketing messages not targeted at poor women

6. Service delivery can be patronizing towards women

7. The physical infrastructure can intimidate women andis not suited to their needs

8. Few women in senior management positions: womenare not prioritised as a business segment.



Demand –side constraints

1. Women have lower incomes than men, often becauseof the kind of work they do

2. Low levels of education: women are often less welleducated and literate than men, affecting theirfinancial capability

3. Constraints on mobility

4. Lack of access to a mobile phone

5. Lack of decision-making power and self-esteem

6. Poor access to information, poor social networks andrisk aversion

7. Loyalty to informal products due to their socialdimension, which may stop women from exploringformal-sector alternatives

8. Statutory formal laws, which may explicitly inhibitwomen´s access to commercial credit

9. Customary laws that undermine incentives to invest

Source: World Bank Enterprise surveys

Supply side data

Supply side data will provide a picture of who is currentlyserved by financial institutions, to what degree and underwhat conditions. There is usually plentiful supply side

data from central banks, banking or microfinance industryassociations. Data may include information on productsand services available, reach of services, number ofclients, average loan size, etc.

However, supply-side data alone are inadequate for thepurposes of establishing a baseline of financial inclusion.For a start, many people have multiple accounts and sobank account penetration may be overstated if basedsolely on central bank data. Further, the data refers topeople who are, by definition, included and so tells usnothing about the people who do not have access tofinancial services. These are, after all, the primary targetof a financial inclusion programme.

Demand-side data

The baseline also needs to include demand-side data

which tends to be much less readily available. Demand-side data give a picture of what services might be ofvalue to different groups and what constraints they mightexperience in accessing it.

Typically, demand-side data include information onpeople who are both included and excluded, which allowsus to trace an access (or usage) frontier. This then helpsus to determine what the actual barriers are from theindividual’s perspective. Because women are surveyedas well as men, it is possible to build a picture of thefactors that constrain women’s access in particular.

Methodologies for collecting demand-side data caninclude:

• Financial diaries are are surveys of poor householdstaken at regular intervals over time, which providevaluable insights into financial management andfinancial flows. For example, MicrofinanceOpportunities (MFO) has a diaries methodology thattracks inflows and outflows of cash and non-cashhousehold and business resources on a weeklybasis. A team of local fieldworkers, trained by MFO,visits a group of participants each week and asksthem to recount all the resources that came into thehousehold/business and all resources that left thehousehold business over the past week: every bar ofsoap bought, every basket of tomatoes sold, everycash gift received from a visiting in-law. A diariesexercise was carried out in South Africa in 2005 (seewww.financialdiaries.com) and the study’s findingswere subsequently incorporated

Into the influential book, ‘Portfolios of the Poor.

• Community based and participative assessmentsare particularly useful if the programme aims toempower women and the communities they live in toparticipate in programme design and implementation.In this way, data collection is not extractive, rather itis owned by the community.

• Household and population based surveys, suchas Fin Scope, are useful for gaining national and large-scale information but are fairly expensive and taketime to implement.

• Focus groups are a qualitative methodology providinga depth of understanding about issues, such as attitudestowards particular financial products or financialinstitutions, or why people make certain financialchoices. They can be a useful tool to market test newproducts and services, and to study the multiple levelsof exclusion women may face in their daily lives.

• Financial services-based surveys include, exitinterviews.

Market system data

Financial inclusion involves ensuring that a potentiallywide range of financial institutions – banks as well as‘pro poor’ institutions such as microfinance institutions(MFIs) – responds to the needs of the poor. A picture ofthe whole system is therefore needed. This datacomprises information on what institutions exist and thelegal and regulatory environment they operate under. Itshould include information on: how they are regulated;who the different types of service provider are and howthey address the market; what kind of market informationis available (e.g. from credit bureaucracy) and who hasaccess to it. Civil society organizations can be valuablepartners for a programme designed to achieve specificgender outcomes.



The range of stakeholders should include:

• The financial sector – both formal (e.g. banks, insurancecompanies, microfinance institutions, and their industryassociations) and semi-formal (e.g. cooperatives);

• Other relevant industries (e.g. mobile phone companies);

• Government – policy makers and regulators;

• Academics and the research community;

• women’s groups;

• Other civil society organizations with a perspectiveon gender equality and women’s empowerment (e.g.land or consumer rights organizations);

• The legal profession and other service providers (e.g.credit bureaucracy).

Gender equlity and women’s empowerment

Health and re-lated

social services,

gender training,

care support,

infra-structure

Networks,

support groups

and information

services

Employment

education and

training

Legal and

regulatory

environment

Appropriate

financial

products and

services

Linked business

development

services

and financial

literacy

Women’s financial inclusion

Women’s economic empowerment

Findings

There have been increased incidences of firms operatingbetween the regulatory boundaries at their will, defraudinginvestors in the name of farming, plantations, and pyramidformations and experts say that all such schemes fallunder India’s rapidly growing unregulated “shadowbanking” area.

The major reasons for failure of Financial Inclusion inthe past in spite of initiatives were:

a) Absence of technology,

b) Absence of reach and coverage,

c) Inefficient delivery mechanism,

d) Absence of business model, and

e) Lack of compassion for poor among rich.

But, today, there is an increase in focus on inclusivegrowth. Banking technology has progressed fast enoughand more importantly the realization that the poor isbankable has arrived. Various immediate measures whichgovernment of India should implement or which are underimplementations but should be executed in a moreeffective manner are

• Strengthen agency banking (micro financeinstitutions, business facilitators and businesscorrespondents). Our very old post offices will be anideal channel to pursue the future long term goals ofagency banking especially in rural India. A Post OfficeCard Account may be created for those who are notable or unwilling to access a basic bank account.

• Achieve synergies between the technology providersand banking channels to expand reach.

Application developers will be required to synergizecore banking with micro financial applications.

• Increase coverage under mobile banking and satellitebanking and develop new platforms.

Recent developments from private players like Nokia,which has introduced Nokia Life Tools, should betargeted as potential partners in achieving such goals.

• Have interest rate ceilings specified for NGO/MFI forthey tend to charge higher rates of interest in a sugarcoated form. These legalities can be introduced oncean NGO/MFI enters into partnership with a bank.

• Corporate social responsibility: The CSR cells ofMNC’s and other firms can contribute by means of acommon platform or even individually. Contributioncan be cash grants to registered

NGO/MFI’s, which will be responsible fordisbursement, or the CSR cell can act as potentialcustomers for goods produced by the cottageindustries. This model has been highly successful inthe United Kingdom and even in eastern rural regions.

Long Term Measures

• Legal requirement that each and every citizen orresident should have access to transaction bankingand payment services with an independent supervisorybody to enforce and control the implementation.

• Financing infrastructure development: The ruraleconomy has a big need to upgrade necessaryinfrastructure and, thereby, contribute to enhanceddevelopment capacity, poverty reduction, and improvedliving standards. To this it was agreed to work towardsadopting sustainable and viable financing policies andsupporting technical assistance, capacity-building,and knowledge-sharing initiatives to makeinfrastructure markets operate more effectively.

• National registers of information of payment defaults,as well as bankruptcies and court judgments, toaddress credit use difficulties by protection of vulnerableconsumers from exploitative lending and ensuring theprovision of appropriate credit on the market.

Suggest right mode of operandi for developmentof better incorporate women’s economicempowerment through financial inclusion

1. Endorse the following set of suggestions forpolicymakers in the developing world to establish asupportive, enabling environment that will facilitatewomen entrepreneurs’ access to financial servicesin their respective countries.

2. Develop country-specific diagnostics and strategiesto include a gender dimension in financial inclusionprogrammes.



3. Develop a supportive legal and regulatory framework.

4. Increase women’s legal access to property to improve access to collateral and control over assets, and strengthenwomen’s incentives and ability to grow their businesses.

4. Encourage formalization.

5. Expand financial infrastructure, such as credit bureaux and collateral registries, that can increase access andreduce the cost of borrowing.

6. Strengthen SME access to small claims courts and alternative dispute resolution mechanisms.

7. Build the capacity of financial institutions to better serve women entrepreneurs.

8. Expand research to combine access to finance and business training.

9. Design effective government support mechanisms.

10. Appoint a national leader/champion for women-owned SMEs.

11. Build more inclusive public-private dialogue processes by empowering women’s networks to actively participatein policy dialogue.

12. Strengthen women entrepreneurs’ human capital by developing appropriate entrepreneurial education and trainingopportunities.

13. Consider providing incentives and specific goals for increased procurement by government of goods and servicesfrom women-owned enterprises (specifically women-owned SMEs) within their countries.

14. Lead efforts to identify, evaluate, and support the replication of successful models for expanding financial servicesto women entrepreneurs.

Source :See Porteous (2004).DFID/SDC (2008), ibid.

Conclusion

Financial inclusion has been a catch phrase for the past few years. Delivering financial services to all sections of thepopulation will remain a challenge that central banks around the world will face over the next few years. Increasing



educational levels means more financial inclusion;therefore, a literate population must be created in orderto create a meaningful financially included population.Innovation and out-of-the-box thinking are what has madethe world what it is today. We can never be complacentwith what we have or what we have achieved; the humanlife is an endeavor for progress and a better life. Thisshould be the case with financial inclusion; we cannotbecome complacent and become victims of our ownsuccess. Not only should people have access to basicfinancial services but should also actively use them. Amodern and a globalized economy cannot be successfulunless it is inclusive. With enthusiasm and foresight,this challenge would be overcome rather simply. Weshould not lose the enthusiasm with which we startedand that mediocrity or partial success cannot consideredas same as success.

Developing and under-developed economies all over theglobe are looking for new modes and means to containpoverty and include their citizens in the financial system.It is becoming increasingly apparent that addressingfinancial exclusion will require a holistic approach onthe part of the banks in creating awareness about financialproducts, education, and advice on money management,debt counseling, savings and affordable credit. The bankswould have to evolve specific strategies to expand theoutreach of their services in order to promote financialinclusion.

The main focus of the banks in the country has beentowards using business correspondents for reaching outto the unbanked population. However, with the increasingpenetration of telecommunications in the country andgreater reach, mobile based business models (alsoreferred to as M-Banking) will prove to be instrumentalin realizing branchless banking and taking it to highergrounds by enabling low cost and real time transactionsover secure networks.

Criticisms

1. K. R. Srivatsaditi Nigam March 2015, Mahila Bankadd 55 branches

2. Usha Ananthasubramanian, CMD, BharatiyaMahila Bank

The financial inclusion initiatives are to extricate poorwomen from outfits that charge high interest, and thecoverage of these initiatives need to widen and deepento touch their lives. -For Usha Ananthasubramanian, whohas spent over 30 years in the banking and insurancesector, a fresh challenge is at hand. As Chairman andManaging Director of Bharatiya Mahila Bank, India’s firstall-woman bank, she has the task of ensuring financialinclusion of women, who form close to 50 per cent ofIndia’s population but own only one per cent of totalassets. Excerpts from an email interview:

What is your vision for the bank?

The bank comes with a very powerful vision “EmpoweringWomen Economically”. The focus is on both words —economic and empowerment. While empowermentencompasses issues such as education, health, rightsetc., the fundamental reason for setting up the bank isto promote economic empowerment by enabling equalaccess to financial services. Women from all sectionsof society should stand to benefit from the bank. Whilethe focus will be to cater to the needs of women, thebank would not exclude any segment from its purview.

What kind of branch expansion is on the cards?

We started with seven branches on Day One (November19) . With two more branches — one each at Delhi andIndore — today, we have nine operational branches. Wewill be opening another 16 branches by March 2014 invarious State capitals. . By March 2015, the bank willadd another 55 branches.

How do you propose to tackle the problem ofcollateral, as most women neither own propertynor land in their names?

The general need of women toward economic activitiesis a very nominal amount, say, Rs. 10,000 or Rs.25,000,which can be collateral-free loans. These are more oftenin the nature of micro activities and are often executedfrom their homes or nearby areas. Further, when we lookat women entrepreneurs, the start-up supportrequirement is a few lakhs, say, Rs. 10-15 lakh andupwards of over Rs. 50-75 lakh. These can be coveredunder the credit guarantee for small and mediumenterprises scheme where loans are collateral-free. Asthe enterprise grows, the entrepreneur is able to createsome collateral, which can be offered for higher orderloans.

What new products will Mahila bank introduce for,say, working women?

The bank is focused on encouraging entrepreneurship.Any activity — micro, small or medium — and the bankwill come forward to partner the entrepreneur throughstructured or tailor-made products. Working women arealso a potential target group and products are beingdesigned to cater to them either directly or indirectly.When I say indirectly, the bank’s product, say, day-carecentre, will enable working women to continue with theirjobs with quality day care centres run by women.

What steps will the bank take to reach out to ruralwomen, many of whom have no option but toborrow from microfinance groups, even at highinterest rates?

The financial inclusion initiatives are to extricate poorwomen from outfits that charge high interest, and thecoverage of these initiatives need to widen and deepen



to touch their lives. What is more important is financialliteracy, and the importance of formal channels and timelysupport by way of loans. The bank will reach out to thesewomen through tie-ups with established NGOs who areinto skilling/training of women and other foundationsacross the country.

You announced higher interest on savings depositsby women. What about concessions on lendingrates?

Let me make a correction here — the higher interest onsavings is for all depositors, not only for women. Thereare certain concessions on loans to women, such aseducational loans, loans for homes owned by women,cars owned by women, and as we roll out other products,you may watch out for some more concessions. As partof the inaugural offer, the bank is not charging anyprocessing fee till January 31.

Will the bank take up wholesale banking in a bigway or will it be retail-focused?

The bank comes with products and services for allsegments of the society. While it would largely be aretail & MSME-focused bank, it would also look for goodopportunities in the wholesale segment. Ultimately, thebank should become a commercially viable, profit-makingentity.

Bharatiya Mahila Bank, the first all-woman bank, plansto open 16 more branches in the next four Months Thebranches would be coming up in state capitals and Unionterritories.

“We plan to add another 16 branches to our network inthe next four months,” Mahila Bank Chairperson said.

Bharatiya Mahila Bank, with staff strength of 100 atthe moment, has drawn on a majority of cadre fromstate-run lenders. Besides, it has recruited 110 freshersin officer cadre.

In another first, the bank has all-women, eight-memberboard.

The board consists of business graduate sarpanch fromRajasthan Chhavi Rajawat, Dalit entrepreneur KalpanaSaroj, retired public banker Nupur Mitra, academicPakiza Samad, private equity professional RenukaRamnath, Godrej Group executive Director Tania Dubashand government nominee Priya Kumar.

It is one of the major steps in women’s empowerment.in our society where male domination is visible in manyspheres of l ife, it will really help in womensempowerment. we are living in an era of marketdiscourse. the economic status of a person carries agreat importance in this era. It will definitely boost theirconfidence and make them more independent in choicemaking. it will also lift their self-esteem and dignity.it

will also help in gender equality. they will be able to betterserve the society and thus society as a whole will benefit.

“It has been decided that the bank will be called theBhartiya Mahila Bank as it will have connect with ruralIndia, which was the main idea behind setting up awomen’s bank,” said the official, who did not want to benamed.

In his budget speech this year, Finance Minister PChidambaram had announced that the governmentwould establish a women’s bank and provided for 1,000crore as initial capital.”We are in discussion with thePlanning Commission. They will soon approve a provisionof 1,000 crore under the Plan during 2013-14,” the officialsaid.

The Bhartiya Mahila Bank will not offer any concessionalrates to women, though. “It is a commercial bank, whichwill follow the guidelines stipulated by the Reserve Bankof India,” the official said. The bank will primarily drawits human resource from existing employees in publicsector banks.

“The idea is to empower women in the country and bringbanking services at their doorstep. The bank will takeinitiatives to open accounts of women not only throughbranches but by organising camps all across thecountry,” he said.

The women’s bank will support and coordinate with self-help groups and other organisations to promote lendingto women. It will also tie up with existing state-runfinancial institutions to provide other services suchas insurance and pension products.

According to the finance ministry’s estimates, the bankwill expand its presence up to 500 branches by its fourthyear of operations.

Chidambaram had earlier said that initially there wouldbe one branch in each major region of the country - North,South, East, West and the North-East. He had arguedin his budget speech that women got a raw deal frommany institutions, including public sector banks.

“A number of people have told me clearly there is a biasto lend to men rather to women,” Chidambaram had said,adding that a public sector bank for women would be agood institution that would address issues usuallyignored by banks.

The government had set up a five-member panel, headedby former Canara Bank chairman MBN Rao, to preparea blueprint for the all-women bank.

Mumbai: India on Tuesday got its first all-woman bank,which will be universal in nature, with Prime MinisterManmohan Singh launching the Bharatiya Mahila Bankas a small step towards empowerment of women.



The bank, a pioneering initiative announced in the UnionBudget, was launched with a corpus of Rs 1,000 croreand will have seven branches in major cities to startwith.Coinciding with the 6th birthday of late Indira Gandhi,Prime Minister Manmohan Singh inaugurated the firstbranch at a function here in the presence of UPAChairperson Sonia Gandhi, coalition leaders SharadPawar and Farooq Abdullah, besides Finance MinisterP Chidambaram.

Singh said women lag behind men in areas such asentrepreneurial skills, employment, literacy and health.

1. ”The setting up of the Bharatiya Mahila Bank is asmall step towards economic empowerment of ourwomen,” he said.

2. ”The sad reality is that women in India facediscrimination and hardship at home, school, at theirplaces of work and in public places. Women’s social,economic and political empowerment

3. ”We have gathered here to witness the beginning ofa unique institution,” Singh said, adding, “The bankwill provide financial services predominantly to womenand women self-help groups.”

4. Chidambaram said the BMB will be a universal bankwhich will have unique products designed for womenand devote special attention to the funding needs ofover 60 lakh self-help groups.

5. The idea of an exclusive lender for women was mootedat the Jaipur Congress plenary last year. Pointingout that women account for a paltry 7.3 percent oftotal credit in the financial system, CongressPresident Sonia Gandhi hoped the new bank wouldemerge as a catalyst for gender.justice,and.equality.

Anantha subramanian said the bank will offer women-centric products that other lenders don’t offer, such asfunding for a catering business, day care centres andkitchen upgrades.

1. Manmohan Singh inaugurates India’s first all womenBharatiya Mahila Bank

2. Bharatiya Mahila Bank for economic empowermentof women: PM

3. RBI directs PSU banks to give loans to women groupsat 7%

References

1. Arunachalam, R.S. (2008): Scoping paper onfinancial inclusion, considerations andrecommendations for UNDP, pp.52,

2. Das, S.K and Nanda, B.P. (2008): Microfinance andSustainable Rural Development, in Microfinance andRural Development in India, Eds. Das,S.K, Nanda,B. P and Rath J, New Century Publications, NewDelhi, India

3. Agrawal. (2008): The need for Financial Inclusion withan Indian Perspective,IDBI, GILTS

4. Rangappa, K. B, Renuka Bhai and Sandesh A.L.(2008): SHG-Bank Linkage Programme andFinancial Inclusion; Rural Household Study inDavangere District in Karnataka, pp 1-13.

5. Chakrabarthy K.C (2009), “Financial Inclusion,RBIInitiatives” at National seminar on launching aNational initiative for financial inclusion, DFS GoI.

6. rbi.org.in



COMPARATIVE ANALYSIS OF MUTUAL FUND SCHEMES AVAILABLE AT

LIC NOMURA MUTUAL FUND AND UTI MUTUAL FUND

1. Research Scholar, Bharathiar University, Coimbatore, Tamilnadu.2. Assistant Professor, Dept. of Management, SITAMS, Chittoor, Andhra Pradesh

Abstract

Generally, when an investor decides to study the investment options available in today’s confusing, complex and

risky environment, he thoroughly evaluates all the investment options. While evaluating such multiple options,

prima facie, he naturally considers several factors like Past performance of the option under study, Risk adjusted

returns from the invested plan, Share in the portfolio policy, Fund house, Back Returns i.e. percentage of Interest /

Dividend and Consistent rate of return on investment. In the words of Warren Buffett, “Risk comes from not knowing

what you are doing”. If, at all, an investor decides to follow all these options for his investment, quite strictly, preferably

he would come to a rational conclusion of an option of Mutual Funds. However, when an investor decides to opt for

Mutual Funds, he proceeds with the assumptions that the performance of mutual funds is relatively good, the return on

mutual fund is better as compared to the returns on fixed deposits with banks or posts. The performance of mutual

funds is good because of proper portfolio and risk management and it is linked and dependent on the stock market.

As Robert Arnott has commented, “In investing, what is comfortable is rarely profitable”.

Keywords: Mutual Fund, Share Market, Performance, Portfolio, Returns, Risk.

G. Ravi Kumar1

Introduction

Stock market plays a very vital role in developingeconomy like India and also attracting the rural peoplein recent years. Investors usually observe that all capitalmarket investment avenues are risky. Moreover, in casean investor decides to invest in shares in order to obtainhigher returns in short time with least investment, heshould necessarily possess adequate technicalknowledge related to share market. Also, he is neededto devote disproportionate time to get proper technicalknowledge to be expert investor in the share market. Asa result, it is observed that there is an increasing andinclining trend towards investment in mutual funds. Asper Dave Ramsey, “Financial peace isn’t the

acquisition of stuff. It’s learning to live on less than

you make, so you can give money back and have

money to invest. You can’t win until you do this”.

After several social interactions with eminent financialpersonalities, experts and analysts, the researcherrealized that mutual fund is indeed one of the upcominginvestment options. The performance of the Indian MutualFund Industry accounted for an impressive growth infunds mobilized after Globalization in India. Assets underManagement have increased from Rs 47000 crores inMarch, 1993 to Rs 1356006.61 crores in March, 2016.It had shown an outstanding and amazing growth.Thereafter, the researcher tried to search the literaturerelated to performance of mutual funds. However, it wasfound that a lot of literature is not available on the said

topic because it appears that substantial research workin this area is still to be done. Researcher also observedthat investors always get confused where to makeinvestment. Therefore, it was decided to conductthe research on Mutual Funds performance as oneof the investment options because as Robert Kiyosaki

directed, “It’s not how much money you make, but

how much money you keep, how hard it works for

you, and how many generations you keep it for”.

This study is an attempt to understand the performanceof share market and to analyze the correlation ofperformance of mutual funds between two reputedcompanies. As a part of this study, data is collectedregarding performance of mutual funds and for thefinancial years 2011–12 to 2015-16. Two Equity MutualFunds, Two Balanced Fund Two Tax Saving Funds andTwo Index Funds are taken as sampling.

Review of Literature:

Gupta Ramesh (1989) evaluated the fundperformance in India comparing the returns earnedby schemes of similar risk and similar constraints.

Vidhyashankar S. (1990), Bansal L. K. (1991), Batraand Bhatia (1992), Saha Asish and Rama Murthy Y. Sree.(1993-94), Shome (1994), Kale and Uma (1995), Jaydev(1996), Gupta and Sehgal (1998), Irissappane Aravazhi(2000) also identified that there was trend in shift frombank or company deposits to mutual funds due to itssuperiority and return, liquidity, safety and capital

Dr. V. Murali Krishna1



appreciation played a predominant role in the preference of the schemes by investors. Narasimhan M. S. andVijayalakshmi S. (2001), RoshniJayam (2002), Singh, Jaspal and SubhashChander (2003), Satish D. (2004), SondhiH. J. and Jain P. K. (2005), Muthappan P. K. and Damodharan E. (2006), Sanjay Kant Khare (2007), Dr. VikasKumar (2011) also studied the performance of various mutual funds schemes and found that mutual funds providedbetter returns to the investors.

Venugopalan S. (1992), Ansari (1993), Venkateshwarlu M. (2004) conducted the survey of investors and suggestedsome guidelines to the investors on returns, benchmark comparison, diversification, selectivity and markettiming skills. Vaid, Seema (1994), Tripathy, NaliniPrava (1996), Kumar V. K. (1999), Gupta Amitabh (2000),Abhishek Kumar (2012) conducted the study on mutual fund industry and studies revealed that the industry showeda continuous growth.

Concept of Mutual Fund

A Mutual Fund is a trust that pools the savings of number of investors who share a common financial goal. Themoney collected from investors is invested in capital market instruments such as shares, debentures and othersecurities. Mutual fund issues units to the investors in accordance with quantum of money invested by the investors.Investors of mutual funds are known as unit holders. The income earned through these investments and the capitalappreciation realized is shared by its unit holders in proportion to the number of units owned by them. Thus aMutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in adiversified, professionally managed basket of securities at a relatively lower cost.

In India, there are many companies, both public and private that are engaged in the trading of mutual funds. Widevarieties of Mutual Fund Schemes are available in the market. Investors can invest their money in different types ofmutual funds depending upon their individual investment objectives.

Like different investment avenues, mutual funds also offer advantages and disadvantages, which are important forany investor to consider and understand before they decide to invest in mutual fund.

Advantages of Mutual Funds:

Fig. 1

Disadvantages of Mutual Funds

• Costs Control Not in the Hands of an Investor

• No Customized Portfolios



• Difficulty in Selecting a Suitable Fund Scheme

• Misleading Advertisement

• Operating Costs

Need for the Study

The main purpose of this study is to know about mutual fund and its functioning. This helps to know in details aboutmutual fund industry right from its inception stage, growth and future prospects. It also helps in understandingdifferent schemes of mutual funds, since the study depends upon different schemes like Equity, Balanced, Taxsavings and Index as well as the returns associated with those schemes. The study was done to analyze thereturns associated with the different mutual funds. Ultimately this would help in understanding the benefits ofmutual funds to investors.

Scope of Study

The main focus of the study was to track the performance of the different mutual fund schemes. Since differentcompanies come out with similar themes in the same season, it becomes difficult for the company to constantlyperform well so as to survive the competition and provide maximum capital appreciation or return as the casemay be. Other than the market, the performance of the fund depends on the kind of stock selected by the fundmanagers of the company.

The analysis is done on the performance of funds with the same theme or sector and reason out why a fundperforms better than the others in the lot. It is limited to investors and their investment preferences. Study objectiveis to investigate the return on investment in share market and to understand the fund sponsor qualities influencingthe selection of Mutual Funds/Schemes. Also to find out that how far the mutual fund schemes are able to win theconfidence of the investors.


1. To study the various schemes available at LIC Nomura Mutual Fund and SBI Mutual Fund.

2. To analyze and compare the performance of different mutual fund schemes offered by LIC Nomura Mutual Fundand SBI Mutual Fund.

3. To know the factors that effects on the performance of mutual fund schemes.

4. To find out the best scheme available for investors by comparing their performance.

5. To compare the similar schemes of LIC Nomura Mutual Fund with SBI Mutual Fund and find out the reasonsbehind the difference in their performances.

ResearchMethodology:

1 Typeof Data Secondary Data.

2 Population Mutual Funds in India.

3 SamplingArea PublicSector.

4 Natureof Sourceof Data Quantitative.

5 Sampling Methodology Convenience Sampling.

6 Sample Size 08 Mutual Fund Schemes Each TWO from Equity, Balanced, Tax and Index.

7 Periodof Study 5 years 2011-12 to 2015-16

8 Methodof Data Collection Funds Fact sheet published by LIC Nomura Mutual Fund & SBI Mutual Fund,Other published material of Mutual Funds and Research based online portals.

9 StatisticalTools Portfolio Return & Co-efficient of correlation

Particulars DetailsSl. No

Limitations of the Study:

1. Research is based on the secondary data.

2. The study is restricted to only two Mutual Fund Companies.

3. The data is limited to performance of the mutual funds only for the period of last five years.

4. The data is limited to 08 schemes only.




Table No - 1. 1 : LIC Nomura MF Equity Fund- Growth Vs UTI Equity Fund – Growth

Table No - 1.2

2015-16 42.0207 35.9729 -14.39 104.1106 95.994 -7.80

2014-15 30.4361 41.0132 34.75 71.913 102.942 43.15

2013-14 25.974 30.4216 17.12 59.235 71.839 21.28

2012-13 24.342 25.8447 6.17 54.88 59.004 7.51

2011-12 27.2442 24.2266 -11.08 55.56 54.6 -1.73

Scheme LIC Nomura Equity Fund UTI Equity Fund

Opening (NAV) Closing (NAV) Return (per cent) Opening (NAV) Closing (NAV) Return (per cent)Year

Table No: 1.3

2015-16 -14.39 -7.80

2014-15 34.75 43.15

2013-14 17.12 21.28

2012-13 6.17 7.51

2011-12 -11.08 -1.73

Co-efficient of Correlation 0.9872

LIC Nomura Equity Fund UTI Equity FundYear

Type of Scheme Open-Ended Open-Ended

Nature of Scheme Equity Equity

Inception Date January 1993 August 2005

Face Value(Rs ./Unit) 10.00 10.00

Fund Size ( Rs. In crores) Rs 295.349 as on 31-03-2016 4467.56 as on March 31, 2016

Scheme Benchmark S & P BSE Sensex S&P BSE 100

Minimum Investment Rs. 5000 Rs. 5000

Purchase Redemptions Daily Daily

NAV Calculations Daily Daily

NAV( /Unit) as on 31/03/16 Rs 35.9729 95.994

Entry Load 0.00 0.00

Exit Load Exit load of 1 per cent if redeemed Exit load of 1 per cent if redeemed withinwithin 365 days.CDSC- 1 per cent 365 days. CDSC- 1 per cent

LIC Nomura MF Equity Fund UTI Equity FundInvestment Information



Graph - 1.1

-14.39

34.75

17.12

6.17

-11.08-7.80

43.15

21.28

7.51

-1.73

-20.00

-10.00

0.00

10.00

20.00

30.00

40.00

50.00

2011 -12

LIC Nomura Equity Fund

UTI Equity Fund

2012-132013-142014-152015-16

Interpretation

LIC Nomura Equity Fund and UTI Equity Fund, both scheme focused on large sector, so there is long term growthwith minimum fluctuation. Graph No.1.1 revealed that both schemes have given good returns in last five yearsexcept in the year 2015-16 and 2011-12 because of down trend in the market. If compare the data available in thecurrent year, UTI Equity Fund has given more returns than LIC Nomura Equity Fund.

The coefficient of correlation between the LIC Nomura Equity Fund Return and UTI Equity Fund Return is 0.9872.It shows that there is perfect positive correlation between these two schemes during the study.

Table No - 2.1 : LIC Nomura MF Balanced Fund- Growth Vs UTI Balanced Fund- Growth


Nature of Scheme Hybrid Hybrid

Inception Date January 1991 January 1995

Face Value(Rs ./Unit) 10.00 10.00

Fund Size ( Rs. In crores) Rs. 31.16 as on March 31, 2016 Rs. 1246.29 as on March 31, 2016

Scheme Benchmark Crisil balanced Fund Crisil Balanced Fund




NAV( /Unit) as on 31 March, 2016 Rs. 77.0068 Rs. 122.2096


Exit Load Exit load of 1 per cent if redeemed Exit load of 1 per cent if redeemed within 365within 365 days. CDSC- 1 per cent days. CDSC- 1 per cent

LIC Nomura MF Balanced Fund UTI Balanced FundInvestment Information

Table No: 2.2

2015-16 89.4378 77.0068 -13.90 128.2694 122.2096 -4.72

2014-15 66.5455 87.598 31.64 98.175 127.254 29.62

2013-14 58.5416 66.2871 13.23 84.513 97.981 15.94

2012-13 54.4814 58.4192 7.23 77.93 84.253 8.11

2011-12 55.566 54.0817 -2.67 80.97 77.64 -4.11

Scheme LIC Nomura Balanced Fund UTI Balanced Fund




Table No - 2.3

Graph - 2.1

-13.90

31.64

13.23

7.23

-2.67-4.72

29.62

15.94

8.11

-4.11

-20.00

-10.00

0.00

10.00

20.00

30.00

40.00

2015-16 2014-15 2013-14 2012-13 2011-12

LIC Nomura Balanced Fund

UTI Balanced Fund

Interpretation

From the above graph it was indicated that both schemes are representing same results during the study. There isalmost equal priority given for both Equity and Debt in the Hybrid (Balanced) schemes. While compare to LICNomura Balanced Fund the UTI Balanced Fund showing little bit of better performance during the study period.

The coefficient of correlation between the LIC Nomura Balanced Fund Return and UTI Balanced Fund Return is0.9738. It shows that there is perfect positive correlation between these two schemes during the study.

Table No: 3.1 : LIC Nomura MF Tax Plan- Growth Vs UTI Equity Tax Saving Plan- Growth

2015-16 -13.90 -4.72

2014-15 31.64 29.62

2013-14 13.23 15.94

2012-13 7.23 8.11

2011-12 -2.67 -4.11


LIC Nomura Balanced Fund UTI Balanced FundYear



Inception Date January 1997 August 2005

Face Value( Rs. /Unit) 10.00 10.00

Fund Size ( Rs. In crores) Rs. 50.72 as on March 31, 2016 Rs. 576.99 as on March 31, 2016

Scheme Benchmark S & P BSE Sensex S & P BSE 100

Scheme Previous Name Dhan Tax Saver '97 ---




NAV(Rs. /Unit) as on 31 March, 2016 Rs. 44.4588 Rs. 61.9942


Exit Load N. A; CDSC- 0.00 N. A; CDSC- 0.00

LIC Nomura MF Tax Plan UTI Equity Tax Saving PlanInvestment Information



2015-16 51.813 44.4588 -14.19 67.1702 61.9942 -7.71

2014-15 33.734 50.5987 49.99 47.428 66.4809 40.17

2013-14 28.567 33.6635 17.84 40.3396 47.4727 17.68

2012-13 27.163 28.3966 4.54 37.72 40.1612 6.47

2011-12 30.1598 27.0113 -10.44 40.37 37.58 -6.91

Scheme LIC Nomura Tax Saving Fund UTI Tax Saving Fund


Table No - 3.2

2015-16 -14.19 -7.71

2014-15 49.99 40.17

2013-14 17.84 17.68

2012-13 4.54 6.47

2011-12 -10.44 -6.91


LIC Nomura Tax Saving Fund UTI Tax Saving FundYear

Table No - 3.3

Graph - 3.1

-14.19

49.99

17.84

4.54

-10.44-7.71

40.17

17.68

6.47

-6.91

-20.00

-10.00

0.00

10.00

20.00

30.00

40.00

50.00

60.00

2015-16 2014-15 2013-14 2012-13 2011-12

LIC Nomura Tax Saving Fund

UTI Tax Saving Fund

Interpretation:

LIC Nomura Tax Saving Fund and UTI Tax Saving Fund are the schemes invested its money for 3 year lock in periodfor the purpose of tax saving. The schemes aim is not to achieve high return but save the Tax. Graph No.3.1 revealedthat both the schemes are showing equal results during the study.

The coefficient of correlation between the LIC Nomura Tax Saving Fund and UTI Tax Saving Fund Return is 0.9983.It shows that there is perfect positive correlation between these two schemes during the study.



Table No - 4.1 : LIC Nomura MF Index: Nifty Plan- Growth Vs UTI Nifty Index Fund- Growth



Inception Date November 2002 February 2000

Face Value( /Unit) 10.00 10.00

Fund Size ( In crores) Rs. 15.52 as on March 31, 2016 Rs. 306.71 as on March 31, 2016

Scheme Benchmark Nifty 50 Index Nifty 50 Index




NAV( /Unit) as on 31 March, 2016 Rs. 42.9394 Rs. 48.943


Exit Load Exit load of 1 per cent if redeemed Exit load of 1 per cent if redeemed withinwithin 1 Month. CDSC- 1 per cent 15 days. CDSC- 1 per cent

LIC Nomura MF Index: Nifty Plan UTI Nifty Index FundInvestment Information

Table No - 4.2

2015-16 47.9588 42.9394 -10.47 53.872 48.943 -9.15

2014-15 37.3384 47.6383 27.59 41.886 53.272 27.18

2013-14 31.7085 37.197 17.31 35.59 41.784 17.40

2012-13 29.5312 31.6088 7.04 32.942 35.367 7.36

2011-12 32.1717 29.4119 -8.58 36.161 32.808 -9.27

Scheme LIC Nomura Index Fund UTI Index Fund


Table No - 4.3

2015-16 -10.47 -9.15

2014-15 27.59 27.18

2013-14 17.31 17.40

2012-13 7.04 7.36

2011-12 -8.58 -9.27


LIC Nomura Index Fund UTI Index FundYear



Graph - 4.1

-10.47

27.59

17.31

7.04

-8.58-9.15

27.18

17.40

7.36

-9.27

-15.00

-10.00

-5.00

0.00

5.00

10.00

15.00

20.00

25.00

30.00

2015-16 2014-15 2013-14 2012-13 2011-12

LIC Nomura Index Fund

UTI Index Fund

Interpretation:

The calculation of Return is shown in the Table 4.1, both schemes namely LIC Nomura Index Fund and UTI IndexFund are showing good returns in the last five years, except in 2015-16 and 2011-12 due to the volatile conditions inmarket. Hence both schemes are showing same results.

The coefficient of correlation between the LIC Nomura Index Fund and UTI Index Fund Return is 0.9990. It showsthat there is perfect positive correlation between these two schemes during the study.

Findings:

1. LIC Nomura Equity Fund and UTI Equity Fund, Both schemes have given similar returns in the last 5 years.

2. UTI Equity Fund is well managed compare toLIC Nomura Equity Fund and also given higher returns.

3. LIC Tax Saving Fund scheme was more aggressive than UTI Tax Saving Fund and given higher positive as wellas negative returns.

4. UTI Balanced Fund was well managed than LIC Nomura Balanced Fund and given higher returns in the studyperiod.

5. LIC Nomura Index Fund and UTI Index Fund, both schemes are very good and given similar average returns inlast 5 years.

6. The Co-efficient of correlation of these two companies is showing perfect positive correlation during the studyperiod.

Suggestions:

1. LIC Nomura Equity Fund, UTI Balanced Fund, Fund and HDFC Sensex Plan, LIC Nomura Index Fund and UTIIndex Fund, LIC Nomura Index Fund and UTI Index Fund are the schemes which have given similar returnsduring last five years, so investors should select these schemes according to their convenience and interest.

2. Mutual Fund Liquid schemes are always beat inflation rate and give positive performance but lowreturns, so those investors want constant returns they should invest their money in this schemes.

3. Those investors who are ready to take high risk they should select LIC Tax Saving Fund.

4. Investors should select Equity schemes for high returns in long period where as they can select balancedschemes for returns and growth with minimum risk for short period.

5. Investors should select UTI Balanced Fund instead of LIC Nomura Balanced Fund because it is well managedand given higher returns.

Conclusion:

After the study of “Comparative Analysis of Mutual Fund Schemes Available at LIC Nomura Mutual Fund &UTIMutual Fund”, it can be concluded that –

Both the companies are offering similar types of schemes for different sectors and taking similar amount of risk, sothey provided close returns with minimum fluctuation.The Indian Mutual Funds Industry has changed totally for good



since last one decade and has shown substantial growthand potential. Though the Asset under Management andnumber of schemes has increased significantly, it is yetto be a household product, and needs to cover the retailsegment effectively.

REFERENCES:

1. Bansal L K, “Challenges For Mutual Funds In India”,

Chartered Secretary, Vol. 21(10), (October 1991), pp.

825-26.

2. Batra and Bhatia, “Indian Mutual Funds: A study of

Public sector”, paper presented, UTI Institute of

Capital Market, Mumbai, (1992).

3. Gupta O. P. and Sehgal Sanjay, “Investment

Performance of Mutual Funds: The

IndianExperience”, paper presented in Second UTI-

ICM Capital Markets Conference, December23-24,

(1998), Vasi, Bombay.

4. Jayadev, ‘Investment Policy & Performance of Mutual

Funds’, Kanishka Publishers & Distributors, New

Delhi, (1998).

5. Kale and Uma, “A Study on the Evaluation of the

Performance of Mutual Funds in India”, National

Insurance Academy, Pune, India (1995).

6. Rao, Mohana P, ‘Working of Mutual Fund

Organizations In India’, Kanishka Publishers,New

Delhi, (1998).

7. Sanjay Kant Khare 2007, “Mutual Funds: A

Refuge for Small Investors”, SouthernEconomist,

(January 15, 2007), pp.21-24.

8. Sahadevan S. and Thiripalraju M, ‘Mutual Funds:

Data, Interpretation and Analysis’, Prentice Hall of

India Private Limited, New Delhi, (1997).

9. Venugopalan S, “Mutual Funds”, Chartered

Secretary, Vol. XXII (8), (August 1992), pp.691-

694.



INDICATORS OF FINANCIAL INCLUSION IN INDIA - AN ANALYTICAL

STUDY

1. Research Scholar, JNTUA, Ananthapuramu.2. Professor & Director, Dept. of Management Studies, SITAMS, Chittoor.3. Assistant Professor & Head, Dept. of Humanities, JNTUA College of Engineering, Ananthapuramu.

Abstract

The process of economic growth, especially when it is on high growth trajectory, must strive to encompass participation

from all sections of society. Lack of access to finance for small/marginal farmers and weaker sections of the society

has been recognized as a serious threat to economic progress especially in developing countries. In this purpose

financial inclusion plays a vital role for the development of economy. It means to provide basic banking services at an

affordable cost to the low income and marginalized groups. The present study depends on secondary data. The study

is undertaken to study the share of ATMs of Public Sector and Scheduled Commercial Banks, Volume of transactions

through ATMs and relationship between population group-wise number of branches of Scheduled Commercial Banks

and Bank Group and population group-wise number of functioning Branches. The mentioned suggestions are useful

to improve the financial inclusion in India. So it is necessary to improve the financial inclusion by adopting new

models and the banks can establish their new branches in rural areas to deliver their services to the weaker sections

of the society.

Key Words: Financial Inclusion, ATM Network, Branch Network, RBI, PMJDY

K. Santosh1

Introduction

The Indian economy switched gears in the early part ofthis century and has been growing at a healthy pacesince then. As India forges ahead with the vision tobecome an economic behemoth in the next few years,the average level of prosperity attained by its populaceand the degree of equitable distribution of wealth will, inno small measure, be determined by the scale ofinclusive growth that would have achieved.

The efforts to include the financially excluded segmentsof the society in the formal financial system in India arenot new. The concept was first introduced by the RBI in2005 and branchless banking through banking agentscalled Bank Mitra (Business Correspondent) was startedin the year 2006. In the year 2011, the Government ofIndia gave a serious push to the program by undertakingthe “Swabhimaan” campaign to cover over 74,000 villages,with a population more than 2,000 (as per 2001 census),with banking facilities

Definition of Financial Inclusion

Although the target groups may be different from countyto country or region to region, financial inclusion refers,in its broadest sense, to the delivery of financial servicesat affordable costs to all sections, particularly weakersection.

A Committee on financial inclusion (2008) headed byDr. C. Rangarajan defined financial inclusion as, “Theprocess of ensuring access to financial services and

timely and adequate credit where needed by vulnerablegroups such as weaker sections and low income groupsat an affordable cost”.

Prof. Raghuram Rajan’s committee on financial sectorreforms (2009) defined financial inclusion as, “Expandingaccess to financial services, such as payment services,savings products, insurance products, and inflation-protected products”.

CRISIL defines financial inclusion (2013) as, “The extentof access by all sections of society to formal financialservices, such as credit, deposit, insurance and pensionservices”.

Indicators of Financial Inclusion in India

As per the Department of Financial Services, Ministryof Finance, Government of India, the Financial Indicatorsare: ATM Network and Branch Network.

ATM Network

ATM Network is tool for financial inclusion, because ithas its own features.

ATM Introduced in India

In 1987, first time Hongkong and Shanghai BankingCorporation (HSBC) introduced the ATM concept in India.But now almost every bank provides ATM facilities to itscustomers. The State Bank of India has the first largestnetwork of ATMs (49724) amongst the Public SectorBanks; the ICICI Bank Limited has the first largestnetwork of ATMs (13766) and AXIS Bank has the second

Dr. S. E. V. Subrahmanyam2 Dr. T. Narayana Reddy3



largest network of ATMs (12743) amongst the PrivateSector Banks; and CITI Bank has the first largestnetwork of ATMs (569) amongst the Foreign Banks inIndia as on 31st March 2016.

Services Offer by Banks through ATM

The following are the services offer by banks throughATM in India.

• Cash Withdrawal and Balance Enquiry

• Mini Statement

• Cash/Cheque Deposit

• Bill Payments

• Request for Cheque book

• Money Transfer

• Mobile Recharge

• Tax Payments

• Payment of tuition fees / application forms

• Railway tickets / Air tickets

• Make donations

• Open an Fixed Deposit

• Loan account inquiries

• Getting the currencies you want

• Free SMS alert registration

• Credit Card Payments

• Payment of Insurance Premiums

Branch Network Services

Branch network services are playing a vital role for thefinancial inclusion. The following are the branch networkservices offer by various banks in India.

• Saving Accounts

• Current Accounts

• Fixed Deposits

• Smart Salary Accounts

• Internet Banking facility

• Loans

• Debit and Credit Cards

• Money Transfer

• Mobile Banking

• Agricultural Banking

• NRI’s Accounts, etc.

Literature Review

Diganta KR. Mudoi, in his article (2012) entitled “Astudy and analysis of financial inclusion in India”,mentioned that the Public-Private partnerships cancontribute to financial inclusion with government offeringthe appropriate regulatory framework and incentives toservice providers, and private operators increasing theirinstitutional outreach and range of services. Models ofbanking sector can use to expand financial accessinclude retail banking, wholesale banking in partnershipwith MFIs, and Franchise (or) agent banking.

Atul Raman, in his article (2012) entitled “FinancialInclusion and Growth of Indian Banking System”recommended that setting up financial literacy centresand credit counseling at pilot basis launching a financialliteracy campaign etc., leads to increase the economicgrowth, raising living standard of people, equality etc.

Raihanath. MP & Dr. K.B. Pavithran (2014) in hisarticle entitled “Role of Commercial Banks in theFinancial Inclusion Programme”, highlighted thatimportant areas of financial inclusion performed bycommercial banks are: Financial literacy, Creditcounseling, Business Correspondents/BusinessFacilitators model, Know Your Customer norms, KisanCredit Cards/General Credit Cards, No-frill accounts,Branch expansion, Mobile Banking and other measuressuch as micro insurance, microcredit etc.

Dr. Rao S.K, (2010) in his article entitled “Nationalizationof banks – An anchor for financial inclusion”,recommended that despite nationalization and massivebranch expansion, the challenges of financial inclusioncould not be fully met by the banking sector alone andthere is need for identifying new channels to achieve fullinclusive growth in the country.


Financial inclusion is not a recent phenomenon. In Indiait can be traced back to 1904 in India, when the co-operative movement began in the country. A focal eventin its evolution was the bank nationalization program in1969, when 14 major commercial banks werenationalized, and the lead bank scheme was,subsequently, introduced. As a consequence, brancheswere opened in large numbers across the nation. Buteven in areas that were until then unreached by banks itmeans financial exclusion.

So it is necessary to study the indicators of financialinclusion in India and the present study is undertakento find out the share of both off-site and on-site ATMs ofPublic Sector and Scheduled Commercial Banks andtheir relationship; the volume of transactions throughATMs (Debit and Credit cards); and population group-wise and bank group and population group wise numberof branches of Scheduled Commercial Banks andNumber of functioning branches.


The following are the objectives of the present study.

• To study the position of ATMs deployed by PublicSector and Scheduled Commercial Banks during2010-11 to 2015-16.

• To analyze the Volume of transactions through ATMs(Debit and Credit cards).



• To study the relationship of a population group-wise number of branches of Scheduled Commercial Banks during2010-11 to 2014-15.

• To analyze the Bank Group and population group-wise Number of Functioning Branches as on 31st March, 2015.


The present study depends on secondary data. The secondary data was collected from the website of www.rbi.organd Department of Financial Services.

ATM Network

Number of ATMs of Public Sector Banks (PSBs)

The following table presents the number of ATMs of Public Sector Banks in India during 2010-11 to 2015-16.

Table No - 1 : Number of ATMs of Public Sector Banks (PSBs) during 2010-11 to 2015-16

31.03.2011 20032 30201 50233 39.88 60.12 100

31.03.2012 24181 34012 58193 41.55 58.45 100

31.03.2013 29411 40241 69652 42.23 57.77 100

31.03.2014 44504 65920 110424 40.30 59.70 100

31.03.2015 58763 69902 128665 45.67 54.33 100

31.03.2016 62060 80399 142459 43.56 56.44 100

ATMs %

Off-site On-site Total Off-site On-site TotalAs on

Source: www.rbi.org.

From the above table it is observed that the number of ATMs of Public Sector Banks at off-site gradually increasedfrom 20032 as on 31st March, 2011 to 62060 as on 31st March, 2016. On the other hand, the number of ATMs ofPublic Sector Banks at on-site gradually increased from 30201 as on 31st March, 2011 to 80399 as on 31st March,2016. Furthermore the percentage of ATMs of Public Sector Banks at off-site is 39.88 as on 31st March, 2011 and itis gradually increased to 43.56 per cent as on 31st March, 2016. But the percentage of ATMs of Public Sector Banksat on-site is 60.12 as on 31st March, 2011 and it is gradually decreased to 56.44 per cent as on 31st March, 2016.

Number of ATMs of Scheduled Commercial Banks (SCBs)

The following table presents the number of ATMs of Scheduled Commercial Banks in India during 2010-11 to 2015-16.

Table No - 2 : Number of ATMs of Scheduled Commercial Banks (SCBs) during 2010-11 to 2015-16

31.03.2011 34377 41268 75645 45.45 54.55 100

31.03.2012 48141 47545 95686 50.31 49.69 100

31.03.2013 58254 55760 114014 51.09 48.91 100

31.03.2014 76676 83379 160055 47.91 52.09 100

31.03.2015 92191 89061 181252 50.86 49.14 100

31.03.2016 97150 101950 199100 48.79 51.21 100

ATMs %

Off-site On-site Total Off-site On-site TotalAs on


From the above table it is observed that the number of ATMs of Scheduled Commercial Banks at off-site tremendouslyincreased from 34377 as on 31st March, 2011 to 97150 as on 31st March, 2016. On the other hand, the number ofATMs of Scheduled Commercial Banks at on-site gradually increased from 41268 as on 31st March, 2011 to 101950as on 31st March, 2016. Furthermore the percentage of ATMs of Scheduled Commercial Banks at off-site is 45.45



as on 31st March, 2011 and it is gradually increased to 48.79 per cent as on 31st March, 2016. But the percentageof ATMs of Scheduled Commercial Banks at on-site is 54.55 as on 31st March, 2011 and it is gradually decreasedto 51.21 per cent as on 31st March, 2016.

Volume of Transactions through ATMs (Debit Cards)

The following table presents the volume of transactions thorough ATMs (Debit Cards) during 2010-11 to 2015-16.

Table No - 3 : Volume of Transactions through ATMs (Debit Cards) during 2010-11 to 2015-16

31.03.2011 399553342 22461539 422014881 1061653.47 37055.43 1098708.9

31.03.2012 471031623 30668922 501700545 1317167.70 46534.07 1363701.77

31.03.2013 482004645 45376619 527381264 1556405.61 66873.05 1623278.66

31.03.2014 571497661 56981333 628478994 1796098.93 85770.65 1881869.58

31.03.2015 624205135 76105726 700310861 1987479.84 108283.2 2095763.04

31-03-2016 731722405 112868336 844590741 2245821.75 134631.91 2380453.65

No. of Transactions (Actual) Amount of Transactions(Rs. Millions)

ATM POS Total ATM POS TotalAs on


From the above table it can be observed that the volume of transactions through Debit Cards at ATMs is graduallyincreased from 399553342 as on 31st March, 2011 to 731722405 as on 31st March, 2016 and at POS also graduallyincreased from 22461539 as on 31st March, 2011 to 112868336 as on 31st March, 2016.On the other hand theamount of transactions through Debit Cards at ATMs is gradually increased from ¹ 1061653.47 (Millions) as on 31st

March, 2011 to ¹ 2245821.75 (Millions) as 31st March, 2016 and at POS also gradually increased from ¹ 37055.43(Millions) as on 31st March, 2011 to ¹ 134631.91 (Millions) as on 31st March, 2016.

Percentage of Volume of Transactions through ATMs (Debit Cards)

The following table presents the percentage of volume of transactions thorough ATMs (Debit Cards) during 2010-11to 2015-16.

Table No - 4 : Percentage of Volume of Transactions through ATMs (Debit Cards) during 2010-11 to 2015-16

31.03.2011 94.68 5.32 100.00 96.63 3.37 100.00

31.03.2012 93.89 6.11 100.00 96.59 3.41 100.00

31.03.2013 91.40 8.60 100.00 95.88 4.12 100.00

31.03.2014 90.93 9.07 100.00 95.44 4.56 100.00

31.03.2015 89.13 10.87 100.00 94.83 5.17 100.00

31.03.2016 86.64 13.36 100.00 94.34 5.66 100.00

Transactions (%) Total (%)

ATM POS Transactions ATM POS AmountAs on

Total (%) Amount (%)


From the above table it can be observed that the percentage of volume of transactions through Debit Cards at ATMsis gradually decreased from 94.68 per cent as on 31st March, 2011 to 86.64 per cent as on 31st March, 2016 and atPOS is gradually increased from 5.32 per cent as on 31st March, 2011 to 13.36 per cent. On the other hand, thepercentage of amount transactions through Debit Cards at ATMs is gradually decreased from 96.63 per cent as on31st March, 2011 to 94.34 per cent as on 31st March, 2016 and at POS is gradually increased from 3.37 per cent ason 31st March, 2011 to 5.66 per cent as on 31st March, 2016.

Volume of Transactions through ATMs (Credit Cards)

The following table presents the volume of transactions thorough ATMs (Credit Cards) during 2010-11 to 2015-16.



Table No - 5 : Volume of Transactions through ATMs (Credit Cards) during 2010-11 to 2015-16

31.03.2011 171978 23227778 23399756 963.72 70553.98 71517.701

31.03.2012 202106 28744710 28946816 1208.71 88373.72 89582.435

31.03.2013 225770 35616482 35842252 1492.85 111217.42 112710.27

31.03.2014 296548 46105415 46401963 1661.70 145487.31 147149.01

31.03.2015 437278 56906942 57344220 2343.98 178987.96 181331.94

31.03.2016 612531 72220394 72832925 2803.17 226942.99 229746.15

No. of Transactions (Actual) Amount of Transactions (Rs. Millions)

ATM POS Total ATM POS TotalAs on


From the above table it can be observed that the volume of transactions through Credit Cards at ATMs is graduallyincreased from 171978 as on 31st March, 2011 to 612531 as on 31st March, 2016 and at POS also graduallyincreased from 23227778 as on 31st March, 2011 to 72220394 as on 31st March, 2016.On the other hand the amountof transactions through Credit Cards at ATMs is gradually increased from ¹ 963.721 (Millions) as on 31st March, 2011to ¹ 2803.17 (Millions) as 31st March, 2016 and at POS also gradually increased from ¹ 70553.98 (Millions) as on 31st

March, 2011 to ¹ 226942.99 (Millions) as on 31st March, 2016.

Percentage of Volume of Transactions through ATMs (Credit Cards)

The following table presents the percentage of volume of transactions thorough ATMs (Credit Cards) during 2010-11to 2015-16.

Table No - 6 : Percentages of Volume of Transactions through ATMs (Credit Cards) during 2010-11 to2015-16

31.03.2011 0.73 99.27 100.00 1.35 98.65 100.00

31.03.2012 0.70 99.30 100.00 1.35 98.65 100.00

31.03.2013 0.63 99.37 100.00 1.32 98.68 100.00

31.03.2014 0.64 99.36 100.00 1.13 98.87 100.00

31.03.2015 0.76 99.24 100.00 1.29 98.71 100.00

31.03.2016 0.84 99.16 100.00 1.22 98.78 100.00

Transactions (%) Total (%)

ATM POS Transactions ATM POS AmountAs on

Total (%) Amount (%)


From the above table it can be observed that there is no significant change in volume of transactions through CreditCards at ATMs and POS during 2010-11 to 2015-16. Thus Credit Cards at POS plays a major role in transactionsand amount.

Branch Network of Scheduled Commercial Banks

Population Group-wise number of Branches of Scheduled Commercial Banks (SCBs)

The following table presents the population group wise number of branches of Scheduled Commercial Banks (SCBs)as on 31st March, 2011 to 31st March, 2015.



Table No - 7 : Population Group wise number of branches of Scheduled Commercial Banks (SCBs) ason 31st March, 2015

2011 33297 23079 17606 16238 90220

2012 36540 25816 18855 17246 98457

2013 39794 25811 19900 18062 103567

2014 45152 31433 21428 19187 117200

2015 48557 33766 23036 20498 125857

Rax = 0.997

Rbx = 0.987

Rcx = 0.996

Rdx = 0.994

Rural (a) Semi-Urban (b) Urban (c) Metropolitan (d) Total (x)March 31st


The above table represents the population group wise number of branches of Scheduled Commercial banks. It canbe observed that population group wise the number of branches in rural area is gradually increased from 33297 ason 31st March, 2011 to 48557 as on 31st March, 2015 and in Semi-Urban area, the number of branches are alsogradually increased from 23079 as on 31st March, 2011 to 33766 as on 31st March, 2015 and in Urban area, thenumber of branches are increasing from 17606 as on 31st March, 2011 to 23036 as on 31st March, 2015 and in theMetropolitan area, the number of branches are increasing from 16238 as on 31st March, 2011 to 20498 as on 31st

March, 2015. Furthermore it can be observed that there is high positive relationship between number of branches ofRural and Total (0.997), Semi-Urban and Total (0.987), Urban and Total (0.996), Metropolitan and Total (0.994) ofScheduled Commercial Banks during 2010-11 to 2014-15.

Percentage of Branch Network of SCBs

The following table presents the percentage of population group wise number of branches of Scheduled CommercialBanks (SCBs) during 2010-11 to 2014-15.

Table No - 8 : Percentage of Branch Network of SCBs as on 31st March, 2015

2011 36.91 25.58 19.51 18.00 100

2012 37.11 26.22 19.15 17.52 100

2013 38.42 24.92 19.21 17.44 100

2014 38.53 26.82 18.28 16.37 100

2015 38.58 26.83 18.30 16.29 100

Rural(%) Semi-Urban (%) Urban (%) Metropolitan (%) TotalAs on March 31st


The above table represents the percentage of branches of Scheduled Commercial Banks in India. It can be observedthat the percentages of branches in Rural area is gradually increasing from 36.91 per cent as on 31st March, 2011to 38.58 per cent as on 31st March, 2015 and in the Semi-Urban area, it is also increasing from 25.58 per cent as on31st March, 2011 to 26.83 per cent as on 31st March, 2015 and in the Urban area, it is gradually decreasing from19.51 per cent as on 31st March, 2011 to 18.30 per cent as on 31st March, 2015 and in Metropolitan area also it isgradually decreasing from 18.00 per cent as on 31st March, 2011 to 16.29 per cent as on 31st March, 2015.

Bank Group and Population Group wise Number of Functioning Branches

The following table presents the Bank Group and population group wise number of functioning branches as on 31st

March, 2015.



Table No - 9 : Bank Group and Population Group-wise No. of Functioning Branches as on Mar 31st, 2015

SBI & Its Associates 8029 6593 4304 3622 22548

Nationalized Banks 21228 16428 12604 11325 61585

Other Public Sector Banks 377 528 479 378 1762

Private Sector Banks 4302 6457 4521 4698 19978

Foreign Banks 8 12 57 247 324

Regional Rural Banks 14613 3748 1071 228 19660

Grand Total 48557 33766 23036 20498 125857

Rural Semi-Urban Urban Metropolitan TotalBank Group


From the above table it can be observed that the Nationalized Banks have majority branches in Rural, Semi-Urban,Urban and Metropolitan areas, RRBs have majority branches in rural areas. SBI and its Associates have majoritybranches in Rural followed by Semi-Urban, Urban and Metropolitan areas. Private Sector Banks plays a major rolein Urban and Metropolitan areas.

Percentage of Bank Group and Population Group-Wise Number of Functioning Branches

The following table presents the percentage of Bank Group and population group wise number of functioning branchesas on 31st March, 2015.

Table No - 10 : Percentage of Bank group with Population Group-Wise Number of FunctioningBranches as on 31st March, 2015

SBI & Its Associates 16.54 19.53 18.68 17.67

Nationalized Banks 43.72 48.65 54.71 55.25

Other Public Sector Banks 0.78 1.56 2.08 1.84

Private Sector Banks 8.86 19.12 19.63 22.62

Foreign Banks 0.02 0.04 0.25 1.20

Regional Rural Banks 30.09 11.10 4.65 1.11

Grand Total 100 100 100 100

Rural Semi-Urban Urban MetropolitanBank Group


From the above table it is observed the Nationalized Banks have majority branches (round above 50 per cent) inRural, Semi-Urban, Urban and Metropolitan areas; Regional Rural Banks have majority branches in rural areas andSBI and its associates have 18 per cent in all areas. The Private Sectors banks do not give much importance forrural areas.

Findings

From the above analysis the following findings are made.

• The number of ATMs of both Public Sector and Scheduled Commercial Banks are increasing at off-site and on-site but the percentage of ATMs at off-site is increasing and at on-site is decreasing during 2010-11 to 2015-16.

• The number and amount of transactions through ATMs (Debit Cards) are gradually increasing at ATMs and POSbut the percentage of number and amount of transactions at ATMs are decreasing year by year and at POS it isincreasing year by year during 2010-11 to 2015-16.

• More than 90 per cent of transactions are doing through ATMs (Debit Cards) during 2010-11 to 2015-16.

• The number and amount of transactions through ATMs (Credit Cards) are gradually increasing at ATMs and POSbut the percentage of number and amount of transactions are slightly fluctuating at ATMs and POS during 2010-11 to 2015-16.



• More than 99.31 per cent of transactions are doingthrough Credit Cards at POS during 2010-11 to 2014-15.

• The population group-wise number of branches ofScheduled Commercial Banks is gradually increasingin Rural, Semi-Urban, Urban and Metropolitan areas.

• The Branch Network of Scheduled Commercial Banksis increasing in Rural and Semi-Urban areas since31st March, 2011.

• The Scheduled Commercial Banks are maintaining65.43 per cent Branch Network in Rural and Semi-Urban areas as on 31st March, 2015.

• The Nationalized banks have majority branches inRural, Semi-Urban, Urban and Metropolitan areas;RRBs have majority branches in Rural area. SBI andits Associates have majority branches in Ruralfollowed by Semi-Urban, Urban and Metropolitanareas. Private Sector Banks plays a major role inUrban and Metropolitan areas.

• The Nationalized Banks have majority branches(round above 50 per cent) in Rural, Semi-Urban, Urbanand Metropolitan areas; Regional Rural Banks havemajority branches in rural areas and SBI and itsassociates have 18 per cent in all areas. The PrivateSectors banks do not give much importance for ruralareas.

Suggestions

• The Public Sector and Scheduled Commercial Banksshould try to increase the number and volume oftransactions at off-site to reduce the expenses andrisk. It is also most benefit for the public to do thetransactions where and when they want.

• The Public Sector and Scheduled Commercial Banksshould conduct awareness campaigns about theproducts and services offer by them to increase thefinancial inclusion.

• Most of the Rural and Semi-Urban people areilliterates. So the banks should conduct awarenesscampaigns about the operation of ATMs.

• As per the 2011 Census the Rural population is 68.84per cent but the Branch Network of ScheduledCommercial Banks has 65.43 per cent as on 31st

December, 2014. The banks should consider themigration from Rural to Urban. As per the 2011 Censusthe level of urbanization increased by 4.35 per cent.So the banks should consider the migration of ruralpeople at the time of expansion of branch network inrural areas.

• The Private Sector Banks also establish theirbranches in rural areas to serve the weaker sectionssuch as low income groups and marginalized groups.This leads to improve the financial inclusion in India.

Conclusion

Financial Inclusion is an important priority of theGovernment. The objective of financial inclusion is toextend financial services to the large hitherto un-servedpopulation of the country to unlock its growth potential.In addition, it strives towards a more inclusive growth bymaking financing available to the poor in particular. Thetwo key indicators of financial inclusion are Branchesand ATMs is important steps towards financial inclusionin India. For achieving of financial inclusion it is necessaryto overcome the supply and demand factors and alsobanks can adopt new technology/models to deliverbanking services to the poor at an affordable cost. It isthe main aim of financial inclusion which strives forinclusive growth of Indian economy.

References

Articles in Journals

1. Diganta KR. Mudoi (2012), “A study and Analysis ofFinancial Inclusion in India”, ‘www.ijrcm.org.in’,Volume No. 3, Issue No. 9, September, pp. 91-94.

2. Atul Raman (2012), “Financial Inclusion and Growthof Indian Banking System”, ‘www.iosrjournals.org’,Volume No. 1, Issue No. 3, May-June, pp. 25-29.

3. Raihanath. MP & Dr. K.B. Pavithran (2014), “RoleCommercial Banks in the Financial InclusionProgramme”, ‘www.borjournals.com’, Volume No. 3,Issue No. 5, May, pp. 75-81.

4. Dr. Rao S,K, (2010), “Nationalization of Banks – ananchor for financial inclusion”, ‘Bank Quest’, VolumeNo. 8, Issue No. 3, July-September.

5. Occasional Paper - 48 (2009), “Financial Inclusion –An Overview”, NABARD, pp.1-2.

Books

1. CRSIL Inclusix, An index to measure India’s progresson Financial Inclusion, june-2013, pp. 17-19.

2. Pradhan Mantri Jan-Dhan Yojana, A National Missionon Financial Inclusion, pp. 5.

3. “A HUNDRED SMALL STEPS”, Report of theCommittee on Financial Sector Reforms, 2009, pp.49-50.

Websites

www.financialservices.gov.in

www.rbi.org

http://www.atminventor.com/

http://bank-information.a1feeds.com/Banking_Services/ATM.aspx

http://money.howstuffworks.com/personal-finance/banking/10-things-you-can-do-at-atm.html

Census of India 2011.



STUDY ON BANKING SERVICES OFFERED TO WOMEN

ENTREPRENUERS AND THE FINANCIAL PROBLEMS FACED BY THEM

WITH SPECIAL REFERENCE TO THE BORROWERS OF STATE BANK

OF INDIA, KERALA

1 . Research scholar,CMS College of Science and Commerce, Coimbatore.

Abstract

Today’s women are taking more and more professional and technical degrees to cope up with market need and are

flourishing as de signers, interior decorators, exporters, publishers, garment manufacturers and still exploring new

avenues of economic participation. It is perhaps for these reasons that Government Bodies, NGO’s, Social Scientists,

Researchers ‘and International Agencies have started showing interest in the issues related to entrepreneurship

among women in India. Women entrepreneur’s explore the prospects of starting a new enterprise; undertake risks,

introduction of new innovations, coordinate administration & control of business & providing effective

leadership in all aspects of business and have proved their footage in the male dominated business arena. The study

focuses on the concept of women entrepreneurs in India; their traits in business, the problems faced by them when

they set up and make some suggestions for future prospects for development of Women Entrepreneurs

K. Sudha1

Introduction

Women Entrepreneurs may be defined as the women ora group of women who initiate, organize and operate abusiness enterprise. Government of India has definedwomen entrepreneurs as an enterprise owned andcontrolled by a women having a minimum financial interestof 51% of the capital and giving at least 51% of employmentgenerated in the enterprise to women. Like a maleentrepreneurs a women entrepreneur has many functions.

They should explore the prospects of starting newenterprise; undertake risks, introduction of newinnovations, coordination administration and control ofbusiness and providing effective leadership in all aspectsof business. The study focuses on the concept of womenentrepreneurs in India; their traits in business, theproblems faced by them when they set up and makesome suggestions for future prospects for developmentof Women Entrepreneurs

Women Entrepreneurs and Banks

Women entrepreneurs now a day’s mainly depend onbanks for financial assistance to start up their businessventure. Banks provide lot of facilities to womenentrepreneurs like working capital fund, businessdevelopment fund etc. These financial assistance areprovided for low interest rate. In India, the Micro, Small& Medium Enterprises (MSME) developmentorganizations, various State Small IndustriesDevelopment Corporations, the nationalized banks and

even NGOs are conducting various programmersincluding Entrepreneurship Development Programmers(EDPs) to cater to the needs of potential womenentrepreneurs, who may not have adequate educationalbackground and skills. The Office of DC (MSME) hasalso opened a Women Cell to provide coordination andassistance to women entrepreneurs facing specificproblems. The present study titled “Banking servicesoffered to women entrepreneurs in India with referenceto STATE BANK OF INDIA, Kerala” aims to probe thebanking facilities available to women entrepreneurs andtheir satisfaction level towards services rendered by thebank to them and the problems faced by them.

Objectives of the Present Study:

1. To analyze the problems and social status of womenentrepreneurs

2. To analyze the purpose of borrowing and variousschemes available to women entrepreneurs.

3. To known the amount of disbursement by the bankto women entrepreneurs and to analyze the opinionof women entrepreneurs about various quantitativeand qualitative services of the bank.

4. To study the repayment schedule of the womenentrepreneurs

5. To analyze the satisfaction level of services renderedby the bank to the women entrepreneurs.

6. To offer suggestion to improve the services of bankto women entrepreneurs.




Now a day’s many women entrepreneurs depend onbanks for their financial assistance and their services.Women entrepreneurs face some problems while availingthis financial assistance from the bank. We here studythe problems faced by women entrepreneurs whileavailing loan from the bank and the banks servicestowards women entrepreneurs. Whether womenentrepreneurs repay the loan regularly. What womenentrepreneurs say and what bank say about womenentrepreneurs are studied. Whether womenentrepreneurs are satisfied with banking servicesavailable to them.

The present study titled “Banking services offered towomen entrepreneurs in India with reference toSTATE BANK OF INDIA, Kerala” aims to probe thebanking facilities available to women entrepreneurs andtheir satisfaction level towards services rendered by thebank to them and the problems faced by them.

Research Methodology Used:

i) Study area: The study refers to the womenentrepreneur customers of SBI branches in Kerala,a thriving business centre was chosen for the studymainly due to easy Accessibility of the informationand the co-operation extended by the bank

ii) Data source : The study has used only primary & secondary data which were collected fromwomen entrepreneurs of Kerala using questionnairemethod. The questionnaire has been prepared insuch a way that the respondents were able toexpress their opinions freely and frankly. A pilot studywas conducted in order to validate the questionnaire.

iii) Sampling procedure and size : For the purposeof collection of data, 200 respondents were selectedusing Convenient random sampling method.

Limitations of the Study:

1. The process of collection of data has consumed lotof time and remained a challenging task as it involvescollection of personal details of respondents. Howeveradequate care has been Exercised to collect theunbiased data. The study is limited to particularbranch because of time constraint.

2. As the sample size of the study was confirmed to200, the present study was unable to take Universalapplication; hence it’s been done for relevant databased on the study.

3. Since the study was done to a branch of the selectedbank, an exhaustive view on the Commercial bankingto women entrepreneurs in Kerala was not possiblehence it been restricted with a single branchcustomers.


This empirical study aims at the investigation of theopinion of the women entrepreneurs on the servicesrendered by the State Bank of India , Kerala. The previousstudies made in this area of research are limited innumber and they are not directly related to this study. Areview of some of the studies made previously has beengiven in the following

P. Babu (1978)

1 “The study was an attempt to find out the sociologicalfactors that contribute to the development of smallentrepreneurs(women)” .The study showed thatcommunity and family background contributed to thesuccess of prospective entrepreneurs, formal educationhas not been a positive factor in entrepreneurshipdevelopment, providing infrastructure facilities alone willnot promote entrepreneurship development and theAssociation of Small Scale Industries has to play animportant role in identification and development ofentrepreneurs, a strong policy to support theentrepreneurs is called upon ,as the economy demandsthe growth of women entrepreneurs., the education andother factors like the background for entrepreneurshipis no criteria for entrepreneurial growth ,risking bearingattitude and innovation prove to be more encouragingtowards growth.

Margaret Meaning and Anne Jardim (1979)

2 conducted the study of women at managerial positionby analyzing the life and career history of twenty-fivewomen at the top management position in business andindustry. The study reveals that women can buildextremely successful management careers even withoutlegal pressures to aid them. The study further revealsthe price they paid -their personal lives were mortgagedto pay for their careers. Maintain work life balance isone of the most important traits for women entrepreneursas they also have a family to run, kids to be lookedafter. The concept of entrepreneurs is a part ofentrepreneurship as they go hand in hand. Entrepreneuris the people who do not own the business but run thebusiness for someone with same zest and sincerity.

Mayers (1981)

3 conducted a research study to analyze the effect ofeconomic pressure on employment of married women.The study reveals those married women withcomparatively low economic background and having morefinancial burdens arc coming for wage employment andundertaking other economic activities. Women whocannot be employed ,due to other responsibilities canbe encouraged to use their skills by availing the policiesof the government .The policies are run through a network of schemes that help them to financially supportthemselves as well as add up to the economy



1. P. Babu “The study was an attempt to find out thesociological factors that contribute to thedevelopment of small entrepreneurs (women)”- 1978

2. Margaret Meaning and Anne Jardim “conducted thestudy of women at managerial position by analyzingthe life and career history of twenty-five women atthe top management position in business andindustry” – 1979

3. Mayers “conducted a research study to analyze theeffect of economic pressure on employment ofmarried women” -1981

4. Lehrer Sara “studied the effects of a women'sconference on participants attitude towardswomen's role in society” -198I

5. Aruna Shree P Rao “made a study on the level oforganizational involvement of women in developmentprojects” -1981

6. Alman Aisha Mohammed “the study was undertakento explore the level of economic development attainedby Saudi Arabia from its oil resources and its impacton the socioeconomic status of women” – 1981

7. Bowen & Hisrich “compared & evaluatedvarious research studies done on entrepreneurshipincluding women entrepreneurship” -1986

8. Bhanu Shali “conducted a study on entrepreneurshipdevelopment in Kolhapu district in Maharashtra” -1987

9. Wim Vizverberg “from a case study undertaken therural areas of Cote d' Ivoire among self employedsmall scale enterprises”- 1988

10. Nafziger “the study investigated the motivating factorsin the context of entrepreneurship development andthe impact of education on entrepreneurshipdevelopment in a society” -1988

STATE BANK OF INDIA:

Name of the loan: Stree Shakti Package This is a specialoffer of loans to women entrepreneurs. It givesconcessions in promoter’s margin and rate of interest.The aim of the scheme is to inspire women to start newventures. No security is needed for loans up to 5 lakhsfor industrial units.

State Bank of India Services to Women

Stree Shakthi Package For Women Entrepreneurs

Women Entrepreneurs comprise those Small Scale Unitsmanaged by one or more women entrepreneurs who havestake not less than 51% of the equity. The importantfeatures of the package are: The entrepreneurs who haveundergone EDP conducted by State level Agencies orprogrammes co-sponsored/sponsored by Bank areeligible for financial assistance Branch Manager and thefield Staff will provide necessary inputs and assistanceto those women who do not plan to set up full-fledgedindustrial ventures but would like to do something at home.

Suggestion

• In various public financial institution and banks,special cells should be opened for Providing easyfinance to women entrepreneurs.

• Special schemes exclusively for womenentrepreneurs should be made.

• Association of women entrepreneurs should ensureresponsibility of creating greater Awareness amongyoung women.

• Serious efforts should be made for maximumutilization of all viable information and technologiesfor promoting the course of women entrepreneurs.

• Rural women entrepreneurs should be provided withspecial training facilties for the talents and skills.

• Government should provide separate financial fundsfor women entrepreneurs.

• We should provide her with special infrastructurefacilities whatever she needs.

• Government should arrange special training

• Programmes for the women entrepreneurship.

• Government should facilitate top ranker womenEntrepreneurs.

• Women entrepreneurs should be more competitiveand efficient in the local and international market

• We should invite successful women entrepreneursfrom foreign nations so as Indian counter parts canshare their experience

Conclusion

Entrepreneurship among women, no doubt improves thewealth of the nation in general and of the family inparticular. Women today are more willing to take upactivities that were once considered the preserve of men,and have proved that they are second to no one withrespect to contribution to the growth of the economy.Women entrepreneurship must be moulded properly withentrepreneurial traits and skills to meet the changes intrends, challenges global markets and also becompetent enough to sustain and strive for excellencein the entrepreneurial arena. Women can contributemuch to the economic prosperity of a country throughtheir active Participation in industrialization throughentrepreneurship – viz women entrepreneurship. Anybank success depends on getting back funds loaned bythem. State bank of India has successful track record.Many women entrepreneurs are repaying the loanregularly. This encourages the bank to give furtherfinancial assistance to development of women India’sbeen debating the issue of gender discrimination likenever before. With many new schemes for womenentrepreneur’s state bank of India contributes a largeportion in developing women entrepreneurs.



BUDGET 2016: IMPACT ON ENTREPRENEURIAL GROWTH

Ketan Vira1 Dr. R.K.Singh2

Abstract

India is on a growth trajectory due to the measures taken by the present government, estimating economy to grow by

more than 7.5%. In the midst of global markets being depressed, India stands a better chance to grow and hence

being labeled as a ‘bright spot’. One of the factors through which the estimated growth can be achieved is entrepreneurial

development. The Budget 2016 has made provisions and amendments to boost entrepreneurial growth. As per the

new budget the incentives offered to new start ups will encourage people to take up entrepreneurship on a larger

scale. This paper tries to focus on the amendments and provisions for new start-ups incorporated in the budget and

how these will lead to young aspiring entrepreneurs to take up new ventures. The objective is to study the extent to

which the Budget 2016 will lead to entrepreneurial development. The data collected is through interviews and the

budget document along with KPMG and ICAI analysis done post budget. This study connects the three aspects of

entrepreneurial growth – government policy, incentives and funding.

Keywords: Start-up, Income Tax provisions, Budget 2016

1. Research Scholar, JJT University, Rajasthan.2. Director, GNVS Institute of Management, GTB Nagar, Sion, Mumbai.

Introduction

In the midst of a recessionary situation on the globalfront the Government has tried to address a widerspectrum of themes in the Budget while adhering to thefiscal consolidation roadmap. Designed around ninepillars, the agenda of the budget was ‘Transforming India’and is in line with the initiatives and vision of the Modigovernment.

The Hon’ble Finance Minister has formulated the visionand theme of “Skilled India, Successful India”. Launchingthe Start-up India Action plan, The Hon’ble Prime Ministermentioned that the Government wants to play thesupporting role, that of an enabler. The intention islaudable and the Budget looks to provide some veryimportant steps around the ease of doing business,taxation, and access to capital for MSMEs and skilldevelopment.

The Government has realized that the only wayemployment can be generated, at the pace at which itis needed, is by empowering entrepreneurship and easingentry barriers for youth having ideas that can build abusiness, nurture it well so as to add to the nationsGDP and generating a path to the unemployed yettalented lot to work upon.

The Union Budget 2016 has been looked up by the entirestart-up community as the most interesting one, whichfor the first time has been prepared with a vision of self-propelling the entrepreneurial population.

Key announcements for Start-ups in budget are:

• Start-ups which will be set up during April,2016 toMarch, 2019 will receive 100% deduction of profitsfor 3 out of 5 years (MAT will apply in such cases)

• The government has set up a fund with corpus of INR10,000 crore to provide support to Start-ups.

• Women Entrepreneurs would be entitled to a loanfrom INR 10 lakhs to INR 1 crore to start a business.

• Creating online portal for easy registration so as todo away with regulatory processes.

• Amendments will be made to the Companies Act,2013 for empowering environment conducive for start-ups

• Two projects per bank branch to be facilitated whichwill benefit at least 2.5 lakhs entrepreneurs.

The Union Budget 2016 aims to accelerate the investors’interest and make Start-ups more competitive, byinducing initiatives like creating a fast track system forexamining of patents in a cost effective manner,exemption of income tax for the first three years as wellas tax exemptions on high investments. There will beno Capital Gains Tax, which will reduce administrativeand legal costs.

Literature Review

Onwuka and Ile Chika (2006) argue that entrepreneursmust possess high entrepreneurial capacity, with highability to grab business opportunities existing in thatenvironment and pursue them with suitable innovations.

Burney Shaheer (2014) created a model of businessstartup decisions by utility maximizing individuals todetermine the impact of county fiscal environments onentrepreneurship. Their study concludes that whileoccupational license taxes do not significantly influenceentrepreneurial decisions, there are many other facetswhich counties can use as policy tools. Counties that



foster a robust and rewarding environment for entrepreneurs have a strategic advantage relative to other counties.Some ways to achieve this may include relaxing the regulatory framework for startups and rallying communitysupport to spur innovation.

Objectives

To identify the factors highlighted in a budget which will lead to entrepreneurial growth

To study the impact of start-up provisions on entrepreneurial growth


In this study, research method adopted were mainly from the secondary sources derived from; journal publications,books, e-library, report of KPMG, report of Dun and Brad street, report of ICAI, Analysis done by different economistswere also used to find the gaps in the study.

Analysis:

Identified factors highlighted in the Budget 2016 which will lead to entrepreneurial growth include:

1. Ease of doing business:

Fig. 1



In India the establishment of debt recovery tribunalsreduced nonperforming loans by 28% and loweredinterest rates on larger loans, suggesting that fasterprocessing of debt recovery cases cut the cost of credit.A badly designed tax system can be a big deterrent forbusinesses. After a tax reform in Brazil, businesslicensing among retail firms rose by 13%.

India is the South Asian economy recording the biggestincrease in the distance to frontier score since 2004.One of the areas of greatest improvement has beenstarting a business. In 2004 India cut time from theprocess for obtaining a permanent account number (anidentification number for firms), and in 2006 it speededup the process for obtaining a tax registration number.In 2010 India established an online system for valueadded tax registration and replaced the physical stamppreviously required with an online version. And in thepast year India eliminated the paid-in minimum capitalrequirement and streamlined the process for starting abusiness. More reforms are ongoing-in starting abusiness and other areas measured by Doing Business-though the full effects have yet to be felt.

1. In 2014 the government of India launched anambitious program of regulatory reform aimed atmaking it easier to do business. Spanning a range ofareas measured by Doing Business, the programrepresents a great deal of effort to create a morebusiness friendly environment, particularly in Delhiand Mumbai

2. Taxation : Start-ups which will be set up during April,2016 to March, 2019 will receive 100% deduction ofprofits for 3 out of 5 years (MAT will apply in suchcases) .This will encourage many entrepreneurs toenter into the business and achieve their break-evenpoint at the earliest possible due to lesser tax liabilityand ploughing back their profits in business. Resultantthe business will grow faster motivating entrepreneursto take up initiatives and expand their businessestoo.

3. Access to Capital for MSMEs: Apart from the MUDRAloans budget also had made a provision for easyaccess to capital by government setting up a fund

with corpus of INR 10,000 crore to provide support toStart-ups. To promote entrepreneurship among womenprovision is made where women entrepreneurs willbe entitled to a loan from INR 10 lakhs to INR 1 croreto start a business. Further two projects per bankbranch to be facilitated which will benefit at least 2.5lakhs entrepreneurs.

4. Skill Development: Entrepreneurship Education andTraining through Open Online Courses to be providedin 2,200 colleges, 300 schools, 500 government ITIs,and 50 Vocational Training Centres. This will lead topromoting entrepreneurship education and skilldevelopment for prosterity to venture intoentrepreneurship.

The abovementioned factors have created a path forentrepreneurial development as it is incentive in termsof taxation and regulatory support which are the pillarsfor entrepreneurship.

Conclusion

Budget 2016 focuses on pro-market initiatives will havea cascading effect with youngsters from becoming job-creators rather than job seekers. Necessary amendmentswill be introduced in Companies Act facilitatingregistration of companies in one day and also addressingother challenges in doing business in India, includingfor start-ups. This will lead to a cumulative effect inentrepreneurial development.

References

1. PWC Report on Budget 2016

2. Union Budget 2016-17: Impact Analysis, Dun andBrad Street

3. Union Budget 2016: An Analytical Overview, WIRC,ICAI

4. A World Bank Group Flagship Report (13th Edition)Doing Business 2016: Measuring Regulatory andQuality Efficiency. Retrieved from

5. http://www.doingbusiness.org/~/media/GIAWB/Doing%20Business/Documents/Annual-Reports/English/DB16-Full-Report.pdf

www.kpmg.com/IN/budget2016



AN EMPIRICAL STUDY ON THE PERFORMANCE OF

TOP TEN BANKS DURING 2014-2016

L.Raga Jyothi1

Abstract

Banking sector plays an important role in economic development of a country. The banking system of India is featured

by a large network of bank branches and financial services. Today, banking sector is a leading player in Indian

economy. Among banking sector private sector banking is always a competitor for public sector banks. This study will

throw light on performance of top ten banks, nifty and nifty bank. The research will be analyzed the data for the period

of two years from Apr 2014 to Mar 2016. A comparative study was carried out between the top ten banks, nifty and nifty

bank by using correlation coefficient. This research is based on secondary data and the results prove that there is a

relation between top ten banks, nifty and nifty bank. Investors are suggested to trade on nifty bank which is directly

related to the performance of these banks.

Key words : nifty, nifty bank, correlation coefficient, private sector, public sector etc.

1. Research Scholar, Management studies S.C.S.V.M.V.University, Kanchipuram.

Introduction

Banking sector plays an important role in economicdevelopment of our country. Besides, public sector bankshave a strong hold on the banking sector in India. Publicsector banks are those banks in which a major part ofstake is owned by the Government. The process ofbanking can be given as accepting deposits of moneyfrom public for the purpose of lending or investing,repayable on demand through cheque/draft.

Besides, the private sector banks are banks wheregreater parts of stake or equity are held by privateshareholders and not by government. Banking sector isa leading player in Indian economy. Private Banks havegained good share in Indian banking industry over fewyears because of usage of technology. The share ofprivate banking is 18.2 percent of Indian banking industry.

Need of banks:

Before introduction of banks, money lender used tohandle all the financial activities. At that time interestrates are high and uniformity in lending loans and interestrates are lagging. Besides, there is no security to thedeposits. To overcome those problems governmentcame with organized banking sector which are organizedby government. These organized banks provide loans,accepts deposits and provides other services to thecustomers. The functions of banks are :

• To provide security to the deposits of the customers.

• To provide equal norms and conditions in case ofrate of interest, period of lending to all type ofcustomers.

• To control the supply of money and credit.

• To increase public confidence by utilizing depositsto increase their savings.

History of Indian financial system :

The first bank in India, called The General Bank of Indiawas established in the year 1786. The East IndiaCompany established The Bank of Bengal/Calcutta(1809), Bank of Bombay (1840) and Bank of Madras(1843). The next bank was Bank of Hindustan whichwas established in 1870. These three individual units(Bank of Calcutta, Bank of Bombay, and Bank of Madras)were called as Presidency Banks. In 1921, three majorbanks i.e. Banks of Bengal, Bank of Bombay, and Bankof Madras, merged to form Imperial Bank of India. In1935, the Reserve Bank of India (RBI) was establishedand it took over the central banking responsibilities fromthe Imperial Bank of India, transferring commercialbanking functions completely to IBI. In 1955, after thedeclaration of first-five year plan, Imperial Bank of Indiawas subsequently transformed into State Bank of India(SBI). . In 1955, after the declaration of first-five yearplan, Imperial Bank of India was subsequentlytransformed into State Bank of India (SBI). Followingthis, occurred the nationalization of major banks in Indiaon 19 July 1969. The Government of India issued anordinance and nationalized the 14 largest commercialbanks of India, including Punjab National Bank (PNB),Allahabad Bank, Canara Bank, Central Bank of India,etc. Thus, public sector banks revived to take up leadingrole in the banking structure. In 1994, the Reserve Bankof India issued a policy of liberalization to license limitednumber of private banks, which came to be known asNew Generation tech-savvy banks. Global Trust Bankwas, thus, the first private bank after liberalization; it



was later amalgamated with Oriental Bank of Commerce (OBC). Then Housing Development Finance CorporationLimited (HDFC) became the first (still existing) to receive an 'in principle' approval from the Reserve Bank of India(RBI) to set up a bank in the private sector. Undoubtedly, being tech-savvy and full of expertise, private banks haveplayed a major role in the development of Indian banking industry. They have made banking more efficient andcustomer friendly.

The banks selected in this study are top ten banks in nifty bank. The banks in the nifty bank are selected based ontheir weight age. Stocks weight age in bank nifty is determined based on their free float market cap outstanding.The weight ages of stock in bank nifty are based on 2015 review.

Table - 1

S.No. BANK NAME DETAILS

1 HDFC BANK Housing Development Finance Corporation Ltd., was popularly known as HDFC BankLtd., It was established in the year 1994. It was one of the first banks to receive an ‘inprinciple’ approval from RBI, for setting up a bank in private sector. The weight age ofHDFC bank is 27.02

2 ICICI BANK Industrial Credit and Investment Corporation of India, was popularly known as ICICIbank Ltd., It was established in the year 1994. it was the second largest bank in India interms of assets and third in term of market capitalization. Its weightage is 24.09

3 AXIS BANK Axis bank, former called as UTI bank. In 1994, Axis bank was sponsored together by theadministration of Unit Trust of India(UTI), Life Insurance Corporation of India(LIC) andGeneral Insurance Corporation Ltd., Its weightage is 13.10

4 STATE BANK SBI are an Indian Multinational Public sector and financial services company. In 1956,OF INDIA Imperial bank of India was changed to State Bank of India. Their head quarter was in

Mumbai. SBI is the king among all public sector banks in India. Its weightage is 11.41

5 KOTAK This bank was established in 1985, is an Indian financial service conglomerate.In 2003,MAHINDRA BANK RBI gave license to carry on banking business. With this KMFL(kotak Mahindra finance

Ltd.) became the first non-banking finance company in India to be converted into a bank-Kotak Mahindra Bank Ltd.,(KMBL). Its weightage is 9.36.

6 INDUS IND BANK Indusind bank, is a Mumbai based bank and was established in 1994. It is the firstamong the new generation private banks in India. The name Indus ind is derived fromthe rich and vivid Indus valley civilization. Its weightage is 4.97.

7 YES BANK Yes bank is one of the top most private Indian banks. It was established in 2004. Yesbank is the only Green field bank license awarded by the RBI in the last two decades. Itis the world’s single AAA rated private bank. Its weightage is 3.76

8 BANK OF Bank of Baroda was established in 1908, Head quartered in Gujarat (vadodara). Bank ofBARODA Baroda was the winner of Excellence in Banking Award. Based on 2014 data, it is ranked

801 on Forbes Global 2000 list. It is second largest bank in India, next to State Bank ofIndia. Its weightage is 2.0

9 FEDERAL BANK In 1931, Travancore Federal bank began operations in kerala. After 10 years, the day today operations has stopped. In 1947, the bank’s name was shortened from TravancoreFederal bank to Federal bank. In 1970, Federal bank became a scheduled commercialbank and came out Initial public offering in 1994. Its weightage is 1.60.

10 PUNJAB Punjab National bank was established in the year 1894, head quartered in New Delhi.NATIONAL BANK Punjab National Bank was the winner of Golden Peacock award. PNB perform corporate

social responsibility by organizing blood donation camps, medical camps and treeplantation. PNB has the distinction of being the first Indian bank to have been startedsolely with Indian capital that has survived to the present. Its weightage is 1.50.

Review of literature :

Sarkar and Das (1997) conducted “A study on comparison of the performance of the three bank sectors - public,private and foreign” - for the year 1995-1996. These banks are compared in terms of profitability, productivity andfinancial management. They find that the public sector banks are very poor in performance than the other twosectors due to lack of technology and innovative ideas.



Garima Choudhary (2014) Conducted a study on “Performance comparison of private sector banks with publicsector banks in India”. He concluded that the major area of concern for any bank is the customer service andcustomer satisfaction, thus just like the private sector banks, it is high time that the public sector banks also startconcentrating more on the customers and the services provided to them. Top most rank held by a private bank is aclear indicator of the better performance of the private banks due to their higher concern towards customer feedback,their efficient management and thus yielding to higher productivity and networks throughout India. To strive the cutthroat competition given to the public sector banks by the private sector banks, the public sector will have to pull uptheir shoes to be at the better half part of the race else the time is very near which can make these public sectorbanks just a memory or a history for everyone.

Ravi. K. Dhar and Silky Vigg Kushwah conducted a study on “service quality expectations and perceptions ofpublic and private sector banks in India: A comparative study”. The study has been carried out at both aggregate anddisaggregates levels in order to explore and map the differences. It also traces the factors affecting customerexpectations and perceptions in regard to the service quality of banks. The study concludes that banks should giveimportance to service quality. This implies that public sector banks have to focus on customer expectations andperceptions about service quality. Besides, public sector banks have to continually assess their services to retaintheir existing customers and getting new customers.

Gaganjot Singh (1998) in his study “New innovations in banking industry – a study of new private sector banks”views that the new private sector banks in India are using better technology and are offering better services to thecustomers. As the public sector banks have already established a huge customer base, they become complacentand are slow to become customer friendly. They are also less innovative in the use of technology-assisted customerservice. He concluded that public sector banks are success full because of their customer’s trust only and privatesector banks are more successful because of their creative ideas.

N. S. Varghese and P Verma (2000) conducted study on” Analyzing the impact of information technology on newgeneration banks”. He concluded that new generation banks are far ahead of traditional public sector banks. Heobserves that the business per employee of major public sector banks in India is a mere fraction of the business peremployee of new generation banks. So the public sector banks have to improve their productivity and efficiency tocompete with the new generation banks which are fully computerized.

Table - 2

APRIL '14 1.46 -0.71 3.19 7.81 2.71 -4.89 5.34 11.84 -5.54 4.59 0.38 -0.49

MAY '14 -2.34 13.4 20.36 21.34 8.11 11.1 28.1 2.64 27.32 19.63 14.49 7.75

JUNE '14 13.4 0.48 4.71 5.38 2 7.44 -5.56 3.35 13.4 4.66 3.08 4.78

JULY '14 7.85 3.57 1.56 -9.62 7.68 -2.55 -0.48 -1.13 -10.92 -3.91 -0.14 1.21

AUG '14 1.46 6.46 2.38 1.88 9.43 5.29 6.78 0.93 2.32 0.43 3.98 3.81

SEP '14 -2.66 -7.98 -5.33 -1.26 -2.83 5.97 -2.71 3.08 3.49 -6.79 -2.52 -0.32

OCT '14 5.32 12.73 16.98 10.54 10.87 15.86 21.8 3.66 13.41 4.91 10.8 4.54

NOV '14 4.73 7.89 8.86 18.77 7.44 3.52 3.58 16.9 4.73 12.05 8.35 2.87

DEC '14 -2.17 -0.02 3.71 -3.39 4.88 6.71 8.69 -0.65 0.13 1.44 0.81 -3.75

JAN '15 11.7 2.27 16.9 -1.12 4.62 8.31 12.15 -10.58 -6.37 -13.1 5.95 6.48

FEB '15 5.75 -3.93 4.53 -2.54 5.83 5.95 0.35 -3.54 0.56 -12.87 -0.44 1.13

MAR '15 -1.96 -10.07 -11.07 -12.7 -6.46 -4.22 -6.77 -12.44 -8.94 -13.89 -8.75 -5.17

APR '15 -11.3 5.13 1.81 1.16 0.75 -6.82 3.35 3.84 -0.68 10.94 0.73 -3.56

MAY '15 4.75 -4.66 2.45 1.51 7.11 5.55 4.17 -4.35 8.34 -4.54 1.65 2.47

MonthHDFC

Bank

ICICI

Bank

Axis

Bank

SBI

Bank

Kotak

Bank

Indus

Ind

Yes

Bank

Baroda

Bank

Federal

Bank

PNB

BankNifty

Nifty

Bank



JUNE '15 4.88 -2.84 -4.76 -5.7 -1.01 0.31 -4.64 -11.53 2.99 -9.75 -2.27 -0.58

JULY '15 3.42 -2.04 2.63 2.64 0.81 11.73 -1.77 22.7 -8.81 8.75 2.48 1.87

AUG '15 -10.89 -8.72 -11.84 -8.38 -6.22 -12.26 -17.43 3.27 -9.7 -4.07 -8.71 -6.34

SEP '15 3.21 -1.69 -0.87 -3.14 0.2 10.49 7.32 1.07 4.83 -6.82 1.37 0.52

OCT '15 1.95 1.29 -4.92 -1.72 6.44 -4.01 2.66 -13.52 -15.8 -4.82 -0.05 0.92

NOV '15 -3.25 -0.81 -1.81 5.13 0.63 2.56 1.72 11.74 7.51 12.6 0.45 -1.48

DEC '15 3.67 -4.98 -4.64 -10.52 3.83 3.08 -5.74 -12.92 -4.92 -20.48 -3.06 -0.15

JAN '16 -6.42 -11.92 -9.19 -20.04 -5.05 -4.05 2.63 -20.22 -17.9 -21.29 -8.33 -4.72

FEB '16 -10.32 -16.27 -8.35 -12.75 -7.72 -10.63 -8.67 5.31 -0.96 -22.66 -10.3 -7.94

MAR '16 3.13 21.2 16.85 21.02 9.78 15.6 24.15 9.42 -0.64 17.64 14.72 9.95

Scope and Necessity for the Study

There are many banks in India. Based on stock weight age in nifty bank top ten banks are selected for my study.

The time period is selected from April 2014 to March 2016. This study since compares the top ten banks in NIFTY,

it will help in extrapolating the areas that need to be concentrated by each bank in balance with NIFTY. While done,

the banks will suitably make more profits at the same time providing financial benefits to the customers who are in

absolute need of those kinds of services.


To study the performance of nifty bank and nifty from 2014-2016.

a. To study the performance of top ten banks in nifty bank from 2014-2016.

b. To compare the performance of top ten banks with nifty bank.

c. To compare the performance of top ten banks with nifty.

Research Methodology:

Sample size is ten banks in nifty bank, nifty bank and nifty.

Data collection is secondary data collected from NSEindia.com. Respective company prospectus is used to get

details regarding bonus issues, stock split etc.

The research is designed by using the analysis tools like Simple percentage to calculate stock and market

returns and correlation coefficient to compare the stock and market returns

Analysis and Interpretation:

The returns of stock and market has been calculated as the difference between the closing

Price and opening price and divided by the offer price. The result figure was multiple by 100 to set the figure in

percentage.

P1-P0

Stock or market return = -------------------------

P0

Where, P1 = closing price of stock or market

P0 = opening price of stock or market



Correlation Coefficient

Correlation coefficient formulas are used to find how strong a relationship is between data. The formulas return avalue between -1 and 1, where :

• A correlation coefficient of 1 means that for every positive increase of 1 in one variable, there is a positiveincrease of 1 in the other.

• A correlation coefficient of -1 means that for every positive increase of 1 in one variable, there is a negativedecrease of 1 in the other.

• Zero means that for every increase, there isn’t a positive or negative increase. The two just aren’t related.

The absolute value of the correlation coefficient gives us the relationship strength. If the number is larger, the relationbetween the variables will be stronger and vice versa.

Correlation Formula

In this study Pearson’s correlation coefficient formula is used:

r = n (Σxy) - (Σx) (Σy)

n [nΣx2 - (Σx)2 ] [nΣy2 - (Σx)2]

Comparison of Public Sector Banks, Nifty And Nifty bank Through Graphs:

HDFC Bank:

GRAPH : 1 Comparison of HDFC bank performance with nifty and nifty bank

Correlation NIFTY NIFTY BANK

Hdfc bank 0.4692 0.6381

Icici bank 0.9082 0.8295

Axis bank 0.9387 0.8304

State bank of india 0.8751 0.7491

Kotak mahindra bank 0.848 0.7704

Indus ind bank 0.7751 0.7615

Yes bank 0.8414 0.7192

Bank of baroda 0.4619 0.2827

Federal bank 0.6877 0.5472

Punjab national bank 0.7512 0.485

Table - 3

Fig. 2

-40

-30

-20

-10

0

10

20

30

40

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

NIFTYBANK

NIFTY

HDFC BANK



Inference

The graph implies that the movement of HDFC stock price was good but when compared with nifty and nifty bankthe correlation was 0.6381 and 0.9082 respectively. This implies that the relationship between the stock and niftywas strong when compared with nifty bank.

ICICI Bank

Graph - 2 : Comparison of ICICI bank performances with nifty and nifty bank

Fig. 3

-40

-30

-20

-10

0

10

20

30

40

50

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

NIFTYBANK

NIFTY

ICICI BANK

Inference :

The stock prices of ICICI has reached top so experts decided to split the face value of its shares from 10 Rs to 2 Rsthat is 1:5. The performance of ICICI shares are fluctuating. When we compare with correlation the values of niftyand nifty bank are 0.9082 and 0.8295. This implies that the relationship between ICICI shares, nifty and nifty bankare positive and strong.

AXIS Bank

Graph - 3 : Comparison of Axis bank performances with nifty and nifty bank

Inference :

Axis bank has undergone stock split, the face value of the share was split from 10 Rs to 2 Rs that is 1:5.Theperformance of the Axis bank was moderate. When we compare with correlation the values of nifty and nifty bankare 0.8304 and 0.9387 respectively. The relationship between the stocks, nifty and nifty bank was positive and arevery strong.

STATE BANK OF INDIA :

GRAPH - 4 : Comparison of SBI bank performances with nifty and nifty bank

Fig. 4

-25

-20

-15

-10

-5

0

5

10

15

20

25

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

SBI

NIFTY

NIFTY BANK



Inference :

The stock prices of SBI has reached top so experts decided to split the face value of its shares from 10 Rs to 1 Rsthat is 1:10. The performance of SBI was fluctuating. When we compare the performance of SBI with nifty and niftybank, the correlation coefficient was 0.8751 and 0.7491 respectively. This implies that the relationship between SBIbank, nifty and nifty bank are positive and very strong.

KOTAK MAHINDRA BANK :

Graph - 6 : Comparison of Kotak Mahindra bank performances with nifty and nifty bank

Fig. 5

-30

-20

-10

0

10

20

30

40

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

NIFTYBANK

NIFTY

KOTAK MAHINDRA

Inference :

In July, 2015 Kodak Mahindra bank has announced bonus share in 1:1 ratio. Before and after the bonus issue theperformance of the bank is high. Overall the performance of the bank in two years is moderate. The correlationcoefficient values of nifty and nifty bank are 0.7704 and 0.848 respectively. The relation between the nifty bank andshare is strong when compared with nifty.

INDUSIND Bank

Graph - 7 : Comparison of Indus Ind bank performances with nifty and nifty bank

Fig. 6

-40

-20

0

20

40

60

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

NIFTYBANK

NIFTY

INDUSIND

Inference :

The performance of Indus Ind bank is fluctuating. The correlation coefficient values of nifty and nifty bank are 0.7615and 0.7751 respectively. The relation between stock, nifty and nifty bank are positive



YES BANK :

Graph - 7 : Comparison of Yes bank performances with nifty and nifty bank

Fig. 7

-40

-30

-20

-10

0

10

20

30

40

50

60

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

NIFTYBANK

NIFTY

YES BANK

Inference :

The performance of Yes bank was fluctuating. The correlation coefficient values of nifty and nifty bank are 0.7192and 0.8414 respectively. The relationships between the variables are positive and relation between stock and niftybank is strong when compared with nifty.

BANK OF BARODA :

Graph - 8 : Comparison of Bank of Baroda performance with nifty and nifty bank

Fig. 8

-25

-20

-15

-10

-5

0

5

10

15

20

25

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

BANK OF BARODA

NIFTY

NIFTY BANK

Inference :

The stock prices of Bank of Baroda has reached top so experts decided to split the face value of its shares from 10Rs to 2 Rs that is 1:5. The performance of Bank of Baroda was fluctuating. When we compared with correlation thevalues of nifty and nifty bank are 0.4619 and 0.2827 respectively. This implies that the relationship between theBank of Baroda, nifty and nifty bank was positive but weak when compared with other banks.



FEDERAL BANK :

Graph - 9 : Comparison of Federal bank performances with nifty and nifty bank

Fig. 9

-40

-20

0

20

40

60

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

NIFTYBANK

NIFTY

FEDERAL

Inference :

In July, 2015 federal bank has issued bonus shares in 1:1 ratio. The performance of federal bank is fluctuating inpast two years. The correlation coefficients of nifty and nifty bank are 0.5472 and 0.6877 respectively. The relationshipbetween stock and nifty bank is strong when compared with nifty.

Punjab National Bank

Graph - 10 : Comparison of Punjab national bank performance with nifty and nifty bank

Fig. 10

-30

-20

-10

0

10

20

30

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

PUNJAB NATIONAL BANK

NIFTY

NIFTY BANK

Inference :

The stock prices of Punjab National Bank has reachedtop so experts decided to split the face value of its sharesfrom 10 Rs to 2 Rs that is 1:5. The performance of PunjabNational Bank was fluctuating. When compared withcorrelation the values are 0.7512 and 0.485. This impliesthat the relationship between Punjab National Bank, niftyand nifty bank was positive but it was strong in case ofbank and nifty bank and weak in case of nifty.

Findings and Suggestions

• The performances of all the banks are fluctuating. Inthe month of May 2014, the entire banks growth ratehas increased except HDFC bank and bank ofBaroda.

• Similarly, the performance of all the banks was highin the month of Mar 2016 except Federal bank andHDFC.

• The performance of nifty bank is dependent on theperformance of top private sector bank.

• In last two years it is clear that nifty bank showsnegative growth rate whenever top private sector banksare down in its growth rate.

• The performance of nifty bank is fluctuating and theirperformance was maximum in the months of May2014 and mars 2016 same as private sector banks.

• The relation between ICICI, Axis and Yes bank withnifty and nifty bank are relatively very strong whencompared with other banks.



• The performance of entire public sector banks is lowfrom Apr 2014 to Mar 2015 except in May, Oct, andMar.

• In the month of Mar 2016 the growth rate of all thepublic sector banks was high when compared withother months, besides; nifty and nifty bank was alsohigh on the same month.

• The relation between banks, nifty and nifty bank wasstrong and positive except Bank of Baroda which isless than 0.5.

• The values of correlation coefficient were highest innifty bank, nifty with private sector banks and low inthe case of public sector banks.

In my study the relation between bank performanceswith nifty and nifty bank was taken by taking correlationcoefficient. The relation can also be explained by meansof Return on Equity or profitability by using ratio analysisand other techniques. All these comparisons will helpthe investors to take decision on their investments.

Conclusion

In my study the top ten banks are selected based onweight age of the stock. The weight age is calculatedbased on free float market cap outstanding. Bank Niftyindex stocks are selected from banking stocks whichare traded on National Stock Exchange of India, whichare highly liquid and large capitalized. These bankswhich number in 12 consist of both public sector banksand private sector banks. Bank Nifty Index providesinvestors a bench mark of banking stocks performancein Indian capital markets. Among them only top tenbanks are selected. It can be seen that out of total 12stocks in the bank nifty index, Just 4 stocks have aweight age of around 75%. Just 3 private sector bankshave a weight age of around 65% in bank nifty. That isthe reason now a day’s bank nifty moves as per themovement of just these stocks. Public Sector banksalmost have no impact in moving the index. Thecorrelation coefficient indicates that the percentageincrease in growth rate of nifty is totally dependent onthe growth rate of private sector banks. The relationbetween the private sector banks and nifty bank arepositive and are very strong which indicate that theincrease in growth rate of private sector banks willdefinitely increases the growth rate of nifty bank. Therelation between the private sector banks and nifty ispositive and is moderately strong because the nifty indexis composed of many companies also with banks whichalso affect the performance of nifty.

References

1. Avneet kaur(2012), “An empirical study on theperformance evaluation of public sector banks inIndia”, International Journal of marketing, financialservices and management research. Vol 1, Issue-11

2. M. Karthikeyan and P. Sivakami(2014), “Performanceof public sector banks in India(a study using cramelmodel)”, paripex-Indian journal of research”, Vol. 3,Issue-4

3. Kajal Chaudhary and Monika Sharma(2011),“Performance of Indian Public sector Banks andPrivate sector Banks- A Comparative studies”,International Journal of Innovation, Management andtechnology, Vol. 2,no.-3, June 2011

4. Khan and Jain (2010), Financial Management, 3rdedition, Tata Mc Graw-Hill Publishing

5. Kothari, C.R., (2004) Research methodology-Methods and Techniques, New Age InternationalPublishers, New Delhi.

6. Nishit. V. Davda and Dr. Ashvin.H. Solanki,(2014), “Areview article on New Private sector banks in India:Challenges and Opportunities”, Indian Journal ofResearch, Vo.-3, Issue-3, 2014

7. Nutan N.Thoke, Parikshit. K. Pachorkar,(2012),“Correlation study of Financial Performance Indicatorsin Indian Public Sector Banks and Private SectorBanks”, IBMRFD’s Journal of Management andResearch, Vol.-1, Issue-1, 2012

8. Prasanna Chandra, (2006), Financial ManagementTheory and Practice, 6th edition, Tata Mc Graw Hill.

9. Ruchi Sharma, Ashutosh Goswami, PadeepKumar(2014), “Private sector Banks in India: Anassessment of Financial performance”, Midas TouchIndian Journal of Multidisciplinary Research, Vol.-2,no.-3,2014 Ms. Shikha Gupta (2004), “An Empiricalstudy of Financial performance of ICICI Bank-Acomparative analysis”, IITM Journal of Businessstudies (JBS) Vol. 1, Issue-1, 2014.

10.Sarkar.P.C and Das.A (1997). “Development ofcomposite Index of Banking Efficiency, the Indiancase. Occasional papers 18, RBI central officeMumbai.

11.Varghese,N.S. (2000 mar 15). New Private SectorBanks: New Kids on the Block. Business line.Kochi

Website :

a. http//www.investopedia.com

b. http//www.wikipedia.com

c. http//www.nseindia.com



INVESTORS’ PERCEPTION TOWARDS MUTUAL FUND

M. Venkataramana1 Dr. M. Vijaya Bhaskar Reddy2 Dr.T.Narayana Reddy3

Abstract

The individual characters of investor across the humankind and especially of Indian investors have not been entirely

researched so far. The main intention of doing this research is to know about investor’s perception towards Mutual

Fund, with consideration of Socio economic variables. To achieve objectives the primary data has been collected

through structured questionnaires. Secondary data has been collected from reports, books, journals, magazines and

other published data’s. For collecting the primary information judgment sampling technique is used. The sample size

restricted to 100 respondents of all category investors. The socio economic factors like age, gender, education,

income and savings of investors’ perception towards mutual fund is not encouraging but the age of investors’ and

saving habit of respondents is correlated

Keywords : Investor, Perception, Mutual Fund, Socio Economic Factors.

1. Research Scholar, Department of Management, JNTU, Anantapur.2. Assistant Professor, Department of H&S, SITAMS, Chittoor.3. Assistant Professor & Head, Dept.of H&S, JNTU Anantapur.

Introduction

The mutual fund is a type of professionally-managed

collective investment scheme which pools money from

many investors. The profit gained from funds is shared

to unit holders in proportion to the number of units owned

by them. Thus, a Mutual Fund is the most appropriate

investment for the common man as it offers an

opportunity to invest in a diversified, professionally

managed basket of securities at a relatively low cost.

The main purpose of doing this research study is done

to determine the investor’s perception towards mutual

fund with special consideration of Socio economic

variables. To achieve these objectives the primary data

has been collected through structured questionnaires

from the investor’s. Secondary data has been collected

from reports, books, journals, magazines and other

published data’s. For measuring perception of investors’

nine point scaling is used and various phenomena and

analyzing the collected data effectively and efficiently to

draw sound conclusion, a number of statistical tests

would be conducted like chi square for testing of

hypothesis.

Review Literature

Sikidar and Singh (1996) carried out a survey with an

objective to understand the behavioral aspects of the

investors of the North Eastern Region towards equity

and MF’s investment portfolio. The survey revealed that

the salaried and self employed formed the major

investors in MF primarily due to tax concessions.

Cohn R.A.et.al (1975) made an attempt to explain the

attributes and attitudes of individual investors and also

conducted a study to examine the individual investor’s

risk aversion and portfolio composition.

Warren (1990) used life style characteristics to

differentiate investors by the size and the nature of their

investment holdings. They found that the failure to use

lifestyle characteristics as segmentation variables omits

an opportunity for further segmentation and blurs some

real differences between individual investors and their

financial service needs. However investor’s life style and

investment characteristics have been studied by

Rajarajan 2009. On the basis of life style variable he

divided investors into three groups viz. active investors,

individualists and passive investors.

Ramamurthy and Reddy (2005) carried out a study to

analyze recent trends in the mutual fund industry and

concluded that the major benefits delivered to the small

investors by mutual funds are professional management,

diversification of investment, convenient administration,

return potential, liquidity, transparency, flexibility,

affordability, wide choice and proper regulation. They also

analyzed certain recent trends in the mutual fund industry

such as, entry and exit of mutual fund companies,

compulsory certification of mutual fund sales/ marketing

personnel, mutual fund schemes related to real estate,

commodity, bullion and precious metals, etc., shift from

income funds to money market funds, shift from banks

to mutual funds and buying and selling of mutual fund

online.



Julie R Agnew (2006) examined the individual

characteristics on behavioral biases 401 (K) plan

allocation decisions and found that higher salaried

employees tend to make significantly better choices in

investment in company stock. As a result, he suggested

that a sample of higher-income market participants is

more likely to meet the diversification conditions.

Yash Pal Davar and Suveera Gill (2007) in their paper on

investment decision making revealed that the class of

investors(undoubtedly) with growing age develop maturity

and experience for making decisions about the usage of

their surplus and available funds in the light of overall

economic needs of the family.

Szyszka Adam (2008) in his article on efficient market

hypothesis to behavioral finance analyzed how investors’

psychology changes the vision of financial markets. He

found that investors not always are able to correctly value

the utility of decision alternatives, cannot estimate and

update probability and events and do not diversify properly.


• To study the investor’s perception towards mutual

fund with consideration of socio economic variables.

Research Design

This research study is an analytical and descriptive

research. It is related to the analysis of perception of

investors towards mutual funds. In order to conduct this

study, 100 mutual fund investors of have been considered.

Sources of Data

All the data required for this research work is obtained

from primary and secondary sources. Mainly

questionnaire has been used as a primary instrument.

1. Sampling Plan :

• Targeted population: Mutual fund investors’

• Sampling unit: Individual Mutual fund investors’

• Sampling method: Judgment sampling

• Sample size: 100

Hypothesis

• H0: Respondents perception is independent towards

mutual fund on the basis of Socio economic variables.

• H1: Respondents perception is dependent towards

mutual fund on the basis of Socio economic variables.

Scope of the Study

The research study undertaken does not probe too much

about whether the respondents have a very well insight

into mutual funds. The research involves only a general

study related to the investment perception of investors

towards mutual funds. The research would reveal results

regarding the investment perception of various investors

about mutual funds and thus in turn, helps the

organization to identify the perception of various investors

and to improve the marketing of mutual funds.

• The study has helped the researcher to gain real time

experience by interacting with the investors and has

helped to analyze “The perception of the investors

towards Mutual Funds”.

• The study will help for Mutual fund companies for

further marketing planning.

• The study will help for mutual fund companies for

introduce new type of plan.

• The study has been done with a motive to change

the perception of the investors and help them gain

more knowledge on their investment.


Based on Gender the perception levels are:

(Table - 1)

Table - 1 : Gender vs. Perception towards mutual funds

Gender Positive Neutral Negative Respondents

Male 25 23 10 58

Female 18 13 11 42

Total 43 36 21 100



Fig. 1

0

10

20

30

40

50

60

70

Male Female

RE

SP

ON

DE

NT

S

GENDER

GENDER PROFILE

Positive

Neutral

Negative

Respondents

Interpretation :

From the above analysis it was clear that majority of the respondents i.e., 43 per cent have shown positive responsetowards mutual fund performance wise.

Based on Age the perception levels are :

Table - 2 : Age vs. Perception towards mutual funds

Fig. 2

0

10

20

30

40

50

60

45<

NO

. O

F R

ES

PO

ND

EN

TS

Positive

Neutral

Negative

Respondents< 35 35 -45

AGE

DEMOGRAPHIC PROFILE

Age (YEAR) Positive Neutral Negative Respondents

< 35 22 20 10 52

35-45 8 7 6 21

45< 13 9 5 27



Interpretation :

Majority of the respondents age is less than 35 years i. e., 22 per cent shows positive openion towards mutual funds.

Table - 3 : Based on Education the perception levels are

Fig. 3

0

5

10

15

UP TO SSC INTER GRADUATION POST

GRADUATION

RE

SP

ON

DE

NT

S

EDUCATION

EDUCATION DETAILS OF THE RESPONDENTS

Positive

Neutral

Negative

Interpritation :

Based on their qualification, 43 respondents shows positive openion.

Table - 4 : Based on Income the perception levels are

Fig. 4

0

10

20

30

40

upto 1000 10000 -20000 <20000

Axis

Tit

le

Axis Title

Chart Title

Positive

Neutral

Negative

Respondent?

Income Positive Neutral Negative Respondent

Up to 1000 20 12 5 31

? 10000-20000 10 8 9 34

<20000 13 16 7 35

Total 43 36 21 100

Education Positive Neutral Negative Respondent

UP TO SSC 14 8 5 27

INTER 10 10 6 26

GRADUATION 9 10 5 24

POST GRADUATION 10 8 5 23

TOTAL 43 36 21 100



Interpritation :

Based on their income, 43 respondents shows positive openion towards mutual funds.

Table - 5 : Based on Savings the perception levels are

0

20

40

60

UptoRs5000

Fig. 5

<15000RE

SP

ON

DE

NT

S

Positive

Neutral

Negative

RespondentRs. 5000-15000

SAVINGS IN

RESPONDENTS SAVINGS

Interpritation :

Based on their savings, 43 respondents shows positive openion.

Table - 6 : Based on Age, Income and Savings the perception levels are

Fig. 16

0

5

10

15

20

25

1 2 3

Chart Title

Positive perception respondent

age group

Positive perceptionrespondents

incomelevel

Positive perceptionrespondents

Savings level

Positive perceptionrespondent age group

Positive perception respondentsincome level

22 14 20

8 17 10

13 12 13

Positive perceptionrespondents Savings level

Savings Positive Neutral Negative Respondent

Up to Rs5000 20 14 10 44

Rs5000-15000 10 10 6 26

<15000 13 12 5 30

Total 43 36 21 100



The above table shows the co-relation between positiveperception respondents’ age a group and positiveperception of respondent’s income level.

The age and income of the respondents relation level is-0.4574, it means age and income has the negativerelation and the above table identify the positiveperception respondents age a group and positiveperception of respondents saving level. The age andsavings of the respondents relation is 0.9980. It meansage and saving has the positive relation.

Findings of the Study

• The perception of investors’ is not depending on thesocio economic factors.

• The perception towards income is independent, maybe the income habit is created on the basis of theircapacity and willingness but the saving habit createddue to the age factor.

Conclusion

After completion of the study I conclude that, it isnecessary to provide awareness among the investorsregarding to mutual funds and their benefits in the future.It is necessary to attract more and more investor forstrengthen mutual fund industry. In this study only 43per cent of the respondents are having positive opiniontowards mutual funds. So it shows the importance ofawareness programs towards mutual funds.

References :

1. Sikidar, Sujit, Singh, Amrit Pal,“Financial Services:Investment in Equity and Mutual Funds – ABehavioural Study”, in Bhatia B.S., and BatraG.S.(ed.) Management of Financial Services, Deepand Deep Publications, New Delhi, pp. 136-145. 1996.

2. Cohn.R.A, W.G.Lewellen, R.C.Lease, G.G.Schlarbaum, “individual investors risk aversion andinvestment portfolio composition”, journal of finance,XXX(2), pp. pp. 605-620, 1975.

3. Warren William E, Steven Robert, Mc Conkey CWilliam “Using Demographic and lifestyle analysisto segment Individual investors”, Financial analystJournal, pp. 74-75, 1990

4. Ramamurthy B M, Reddy Sudarshana,"RecentTrends in Mutual Fund Industry”, SCMS Journal ofIndian Management, July-September

5. Julie R Agnew,“Do behavioural biases vary acrossindividuals? Evidence from individual level 410(k)data”, journal of finance and quantitative analysis,Vol. 41, No. 4, Dec 2006, pp. 939-961, 2006.

6. Yash Pal Davar, Suveera Gill,“investment decisionmaking: an empirical study of perceptual view ofinvestors”, Metamorphosis, A journal of ManagementResearch, IIM, Luckow, Vol. 6, No. 2, July-Dec 2007.

7. Szyazka Adam,"From the efficient markethypothesis to behavioral finance”, ICFAI journal ofbehavioural finance, pp 68-76, 2008. 8. Subramanya.P R, Renukamurthy “investors attitude towardsmutual fund” IJMBS, Vol3, Issue 1, Jan-Mar-2013 pp:57-59.



A STUDY ON FINANCIAL PERFORANCE OF TAMILNADU SUGAR

CORPORATION LIMITED (TASCO)

P. Besmi1

Abstract

The effective administration of working capital helps in understanding the survival and growth of sugar industry. Apart

from this, many a times, problem arises as to how effectively the working capital be managed to obtain the results in

terms of higher return on investment. Very often paucity of working capital is considered as the potent factor for the

failure of the unit. About 50 million farmers, their dependants and a large number of agricultural laborers are involved

in sugarcane cultivation, harvesting and ancillary activities, and constituting 7.5 per cent of the rural population.

Besides, the industry provides employment to about 2 million skilled and semi skilled workers and others employed

in ancillary activities are mostly from rural areas

1. Research Scholar, PG and Research Department of Commerce,Thanthai Hans Roever College ,Perambalur.

Introduction

Sugar industry in recent times has acquired greatsignificance in India. It has been developing by leapsand bounds. The sugar industry is the second largestagro-based industry in India located in rural areas. Theeffective administration of working capital helps inunderstanding the survival and growth of sugar industry.Apart from this, many a times, problem arises as tohow effectively the working capital be managed to obtainthe results in terms of higher return on investment. Veryoften paucity of working capital is considered as thepotent factor for the failure of the unit. About 50 millionfarmers, their dependants and a large number ofagricultural laborers’ are involved in sugarcane cultivation,harvesting and ancillary activities, and constituting 7.5per cent of the rural population. Besides, the industryprovides employment to about 2 million skilled and semiskilled workers and others employed in ancillary activitiesare mostly from rural areas. India with around 4.25 millionhectares of land on sugar cane produces around, 280million tonnes of sugarcane.The production of sugar haswitnessed a dramatic increase to around 27.00 milliontonnes during 2006-2007 against 1.10 million tonnesduring 1950-51. When we feel proud of the improvementin the production of sugar over the years, we are painedto note that this sector has not been nourished on soundlines.


India ranks first in sugar consumption and second insugar production in world but its share in global sugartrade is below 3%. Indian sugar industry has been facingraw material and resources as well as infrastructuralproblems. Globalization has brought a number ofopportunities but at the same time posed certainchallenges before sugar industry. Most of the sugar units

utilize production capacity below 50%. Low capacitiesutilization and inadequacy of raw material led to closerof 100 sugar mills in India. Mounting losses anddecreasing net worth of sugar mills have been responsiblefor sickness of sugar industry. Sickness in sugar industryhas reached to an alarming proportion. Indian sugarindustry has been cash striven for decades. Low cashinflow due to pilling stocks leads to serious financialcrisis and finally to closing sugar mills. Sugar priceshave been a political issue and rather than economicalissue many a time it worsens economy of sugar mills.

Tamil Nadu is one of the major producers of sugar inIndia next to Uttarpradesh and Maharashtra. Thoughthe present scenario in Indian and global sugar industryis looks very good, returns gained by India Sugar Millsare very low compared with international level. The profitsearned by sugar mill in Brazil, Thailand are very highdue to the operating environment. But most of the sugarmills in India particularly in Tamil Nadu are incurringlosses due to many reasons. Some of the reasons areincrease in cost involved during production and recoveryof sugar per tonne sugar cane crushed also not up tothe international level.


The present study is designed to examine the receivablemanagement of Sugar Corporation Limited in Tamil NaduState. Following are the specific objectives of the study.

To analyse receivable management in sugar corporationlimited in Tamil Nadu.

To examine the accounts receivables turnover ratio, inSugar Corporation Limited in Tamil Nadu state.

Period of the study

To be more precise in analysis it was necessary to definethe period of study. The study period is taken as ten



years from 1997-98 to 2006-2007. These are the financial years, commencing 1st April and ending 31st March everyyear. The period of ten years is quite enough to determine the trend of working capital and to examine the problemof management working of capital.

Sample Design

The present study pertains to only public sector sugar mills in Tamil Nadu state. Three public sector mills areselected for study are Arignar Anna Sugar Mill, Kurungulam, Thanjavur District, Madura Sugar Mill, Pandiarajapuram,Madurai District and Jawaharlal Nehru Sugar Mill, Eraiyur, Perambalur District, All public sector sugar mills arecontinuously in operation during the study period but, Madura Sugar Mill did not operate from 2002-2003 for reducingcane registration and some administration problems. Arignar Anna sugar Mill have crushing capacity 2500 TCD perday, Madura sugar Mill have crushing capacity 1250 TCD per day and Perambalur Sugar Mill have crushing capacity3000 TCD per day.

Result Analysis of Receivable Management

Receivable is an important component of working capital. It occupies the second important place after inventoriesand constitutes a substantial portion of current assets. Receivable arises through credit sales and credit sales isconsidered to be an important marketing tool, acting as a bridge for the movement of goods from production anddistribution stages to customers finally. Credit sales are made to maintain and to increase sales. Selling on creditis easy but recoveries from receivables are difficult which may ultimately lead to cash crunch. Thus receivablemanagement occupies important place in working capital management.

Account receivables have a significant part in the working capital of the business next to inventories. They arerelated to trade credit, which has become an essential marketing tool in modern business. When firms sell goodsfor cash, payment are received immediately and therefore no receivables are created. Usually credit sales aremade can open account, which mean that no formal acknowledgement of debt obligation is taken from buyers. Theonly document of evidence is a purchase order (or) invoice. Selling on credit is an easy job, but recovery fromcustomers is a delicate job. While recovering the amount from the customers promptly. A prompt recovery fromcostumers without hurting their relations is a central idea of receivable management. The firm should keep in mindits long term relationship with the customer.

Growth of Receivables

The growing tendency of receivables in public sector sugar mills studied is shown in Table .1 the growth is shown forthe period of ten years from 1997-98 to 2006-07 year wise. It is shown with the help of growth index for which 1997-98 has been taken as base year.

Table - 1 : Growth indices of Receivables Management in TASCO

Years Arignar Anna Sugar Mill Madura Sugar Mill Perambalur Sugar Mill

1997-98 100 100 100

1998-99 258 103 88

1999-00 103 86 92

2000-01 98 102 164

2001-02 112 78 142

2002-03 97 90 103

2003-04 103 92 43

2004-05 245 165 249

2005-06 98 89 126

2006-07 115 98 41

Average 133 101 115

Source : Annual Reports from TASCO



In Arignar Anna sugar mill growth index of receivables registered fluctuating trend during the study period. Thelowest growth index observed was 97percent in 2002-03, due to little amount of receivables and highest index258percent in 1998-99, due to high amount of receivables. This reveals that loan and advances were under controlin the year 2002-03. It showed poor control over receivables in 1998-99. The size of receivables varied from Rs.495.13 lakhs to 1301.20 lakhs.

The average growth trend of receivable in Madura Sugar Mill was observed 101percent, which is less than ArignarAnna Sugar Mill. It showed fluctuating trend during the study period. The growth index ranges from 86percent in1999-2000 to 103percent in 1998-00. It showed higher index of receivables. The highest index observed was103percent in 1998-1999. It reveals the poor control over receivables management. It indicates that the mill hasfailed in controlling receivables.

Perambalur Sugar Mill, the average growth index observed was 115percent, which is less than index Arignar Annasugar mill. The lowest growth appeared was 43percent in 2003-04, expressing little amount of receivables. Itindicates good control over receivables. The highest growth index registered was 249 percent in 2004-2005, whichexperts the which express the unsatisfactory position of receivables and, it indicates inefficient collection policyand poor receivable management.

The review of all amount of receivables in Sugar mills studied, shows that the size of receivables is higher in 2500TCD mill than 3000 TCD mill. It is observed from the sugar mills studied that the size of receivables is determinedby the amount of advances given to harvesting and transportation contractors and farmers.

The table .1 shows that the index of receivables in three public sector sugar mills has been growing year by yearthroughout the study period. All mills showed various size of receivables, which is unexpected because of sametype of schemes and pattern for granting loans and advances to farmers and contractors implemented in almost allmills studied. The size of receivables may vary in proportion to production, but it was not observed so. This showsinefficient control over receivable exercised by sugar mills.

Accounts Receivables turnover Ratio

The efficiency of receivables management can be examined by finding receivables turnover ratio. Higher the ratio,higher the performing receivables management and lower the ratio, lower will be the performance. In fact, receivablesturnover ratio may not be much useful in examining the efficiency of the receivables management as in sugar mills,receivables do not contain debtors against credit sales. However, the receivables may be related with sales foranalysis purposes as they contribute significant role in production and ultimately in sales. The account receivablesturnover ratio of the sugar mills studied for the period from 1997-98 to 2006-07 shown in table 6.2.

Accounts receivables turnover ratio =Net Sales on Credit

Average Receivable

Table - 2 : Receivable Turnover Ratio in TASCO

Years Arignar Anna Sugar Mill Madura Sugar Mill Perambalur Sugar Mill Average

1997-98 4.60 3.08 6.42 4.7

1998-99 7.58 2.18 5.39 5.0

1999-00 3.08 4.19 4.43 3.09

2000-01 4.75 5.23 6.54 5.5

2001-02 8.80 4.10 10.20 7.7

2002-03 10.20 No Operation 12.54 11.37

2003-04 11.40 No Operation 8.95 10.17

2004-05 6.50 No Operation 9.47 7.98

2005-06 7.36 No Operation 8.62 7.99

2006-07 8.67 No Operation 10.39 9.53

Average 7.29 3.75 8.29

Source : Annual Reports from TASCO



Mill-Wise Receivables Turnover Ratio

Arignar Anna Sugar Mill, the average receivables turnoverratio observed was 7 times of sales, it indicates goodperformance of receivables. The lowest ratio appearedwas 3.08 times, reflecting decrease in sales. It showsthat the mill has failed in controlling the receivables.Hence, its short term financial position seems to beunsatisfactory. The ratio shows much fluctuation duringthe study period from 1997-98 and 2006-07. The highestratio recorded was 11.40 times in 2003-04 expressingsatisfactory performance of receivables. It shows theratio above 7 times in six years of the study period.

In Madura Sugar Mill, the average receivable turnoverratio 3 times, which is lower than average of Arignar AnnaSugar Mill. The Mill was not operating from 2002-03,because of reducing cane registration and for someadministration problem. The lowest ratio appeared was2.18 times, reflecting decrease in sales. It shows thatthe mill has failed in controlling the receivables. Hence,its short term financial position seems to beunsatisfactory. The highest ratio, recorded was 5.23times in 2000-01 expressing satisfactory performanceof receivables.

In Perambalur sugar mill, the average receivablesturnover ratio was 8 times, which is higher than theaverage of Arignar Anna Sugar Mill, denoting efficientcontrol over receivables. The lowest ratio appeared was4 times in 1999-2000 reflecting increase in receivables.It shows unsatisfactory performance or receivables. Thisreveals that inefficient administration results in lowerturnover receivables. For profitability, a high turnover ofreceivable is necessary. The highest ratio shown was12.54 times in 2002-03, due to lower amount ofreceivables. It means the receivables were under controlin the year. The receivable turnover ratio observed was

more than 8 times in 6 years of the study period. Itindicates efficient collection policy. It can be seen fromtable 6.2 that there were ups and downs in the ratio overthe years throughout the study period. The lowest ratioobserved was 2 times in Madura Sugar Mill during thestudy period. The highest ratio observed was 12 timesin Perambalur Sugar Mill. It indicates good control overreceivables and better performance in receivablemanagement.

Conclusion

To most of the sugar mills, the better position ofreceivable management is seen in the said table .2,because the receivable in sugar mills is not that muchrisky as credit sales in open account. Receivable inpublic sector sugar mill comprises loans and advanceswhich are given only after verification of security of itsrecovery.

References

1. S.c. Baradia, Working Capital Management, PointerPublishers, Jaipur, 1988, p.113.

2. Weston and Brigham, Essentials of Managerialfinance, The Dryden Press Japan, 1985, p.213.

3. Cooly and Roden, Business Financial Management,The Dryden Press, New York, 1988, p.494.

4. Ramesh, K.S. Rao, Financial Management,Macmillan Publishing Company, New York, 1987,p.558.

Journals and Magazines

1. Facts For You

2. Kissan World

3. The Hindu Survey of Indian Industry

4. Indian Journal of Marketing

5. The Hindu Survey of Indian Agriculture.



PERFORMANCE EVALUATION OF SELECTED MUTUAL FUND

SCHEMES OF HDFC ASSET MANAGEMENT COMPANY,

TIRUNELVELI

R.Sangeetha 1 C.Maria Rex Sugirtha2

Abstract

In Indian financial market, so many investment avenues are there for investors. Among them, Mutual Funds play a

significant role in mobilizing savings from the savers and allowing them to invest in the capital market securities of

corporate with relatively lower degree of risk. In India, Asset Management Companies (AMC) provide investors a

variety of diversification and investment options since they have a larger pool of fund. AMCs aim to pool the assets

together to provide the investors get proportional return by investing their smaller investment in a large set of securities.

In this study the open-ended mutual funds schemes’ performance of HDFC-AMC are evaluated in the context of

mutual funds in India. The popular methods of Sharpe, Treynor and Jenson measures are used in this study to

analyze the performance of selected mutual funds schemes. These measures are used to analyze and rank the Fund

Managers’ return with respect to standard deviation (σ), market risk (β) and the predictive ability of the Fund Manager.

Keywords : Asset Management Company (AMC), Open-ended Mutual Fund, Diversification, Market Risk.

1. Assistant Professors, Xavier Institute of Business Administration (XIBA),St. Xavier’s College ,Tirunelveli2. Assistant Professors, Xavier Institute of Business Administration (XIBA),St. Xavier’s College, Tirunelveli

Introduction

The Equity Market in India has offered investors with theright environment to create long term wealth. Investorsare looking to identify the best opportunities that bringgrowth to their portfolio.

Mutual Funds provide investors an opportunity of investingin a basket of well-researched stocks instead of investingin an individual stock. The investment can be startedwith a small amount and can be kept added later at theconvenience of the investors. In open-ended funds,investors can invest/redeem anytime online/off line orthrough the distributor. Equity Mutual Funds offerSystematic Investment Plan (SIP) / Systematic TransferPlan (STP) to suit the investors’ needs and budget. Thisencourages the habit of regular savings and investment.Besides, the long term capital gains (after holding for 12months) are tax-free. Dividends are also tax free.

Open-ended Mutual Funds are like the leaky bucketmeans that the investors can sell back their units atany time to the Asset Management Company (AMC).The investors get a new experience in Mutual Fundswhich significantly differ from that of shares, PPF,insurance or anything else.

HDFC offers more mutual fund schemes for considerationthat aim to discover the right opportunities for theinvestors. HDFC AMC with a track record of over 15years, provide open-ended growth schemes thatconstantly seek to generate capital appreciation overthe long term by investing in high potential stocks.

Review of Previous Studies

Mr. D.N Rao has done a research on the topic InvestmentStyles and performance of equity Mutual Funds in India.The study classified the 419 open-ended schemes in tosix distinct investment styles, analyzed the financialperformance of select open ended equity mutual fundschemes for the 1-st April 2005- 31-st March 2006. Thevariables chosen for analyzing financial performance are;monthly compounded mean return, risk per unit returnand Sharpe ratio. A comparison of the financialperformance of the 21 Open-ended Equity growth plansand 21 Open-ended equity dividend plans was made interms of the chosen variables. Out of the 21 Growthplans, 4 Growth plans had higher Coefficient of Variation(Risk per unit Return) than the corresponding dividendplans had higher Coefficient of Variation (Risk per unitReturn) than the corresponding Growth plans offered bythe AMC. Three Growth plans and three Dividend plansand the corresponding Growth plans offered by the AMC.Three Growth plans and three Dividend plans had almostequal Risk per unit return. A comparison of the Sharperatios of Growth plans and the corresponding Dividendplans indicated that 18 Growth plans out of 21(approximately 90%) had better risk adjusted excessreturns highlighting the fact that Growth plans are likelyto reward the investor more for the extra risk they areassuming.

Anand and Murugaiah (2008) examined the componentsand sources of investment performance in order toattribute it to specific activities of Indian fund managers.They also attempted to identify a part of observed return



which is due to the ability to pick up the best securitiesat given level of risk. For this purpose, Fama’smethodology is adopted here. The study covers theperiod between April 1999 and March 2003 and evaluatesthe performance of mutual stocks of 25 fund houses.The empirical results reported reveal the fact that themutual funds were not able to compensate the investorsfor the additional risk that they have taken by investingin the mutual funds. The study concludes that theinfluence of market factor was more severe duringnegative performance of the funds while the impactselectivity skills of fund managers was more than theother factors on the fund performance in times ofgenerating positive return by the funds. It can also beobserved from the study that selectivity, expected marketrisk and market return factors have shown closercorrelation with the fund return.

Dr. M. Jeyadev says “In his paper an attempt is made toevaluate the performance of two growth oriented mutualfunds (Master gain and Magnum Express) on the basisof monthly returns compared to benchmark returns. Forthis purpose risk adjusted performance measuresuggested by Jenson, Treynor and Sharpe are employed.It is found that master gain had performed betteraccording to Jenson and Treynor’s measure and on thebasis of Sharpe ratio its performance in not up tobenchmark index. The performance of Magnum expressis poor on the basis of all these three measures. HoweverMagnum express is well diversified and has reduced itsunique risk where master gain did not. These two fundsfound to be poor in earning better returns either adoptingmarketing or selecting underpriced securities. It can beconcluded that, the two Growths oriented funds havenot performed better in terms of total risk and the fundsare not offering advantages of diversification andprofessionalism to the investors. ”

Dr. S. Narayana Rao says “In his paper the performanceevaluation of Indian Mutual Funds in a bear market iscarried out through relative performance index, risk returnanalysis, Treynor’s ratio, Sharpe measure, Jensonmeasure and Fama measure. The study started with asample of 269 open ended schemes for computingrelative performance index. Then after excluding the fundswhose returns are less than the risk free returns, 58schemes were used for further analysis. The results ofperformance measures suggest that most of the mutualfund schemes in the sample of 58 were able to satisfyinvestor’s expectations by giving excess returns overexpected returns based on both premium for systematicrisk and total risk. The results of performance measuressuggest that most of the mutual fund schemes in thesample of 58 were able to satisfy investor’s expectationsby giving excess returns over expected returns based oboth premium for systematic risk and total risk.”


• To understand the overall Mutual Fund market in India.

• To understand and analyze the performance ofselected equity schemes of HDFC mutual fund.

• To analyze the rate of returns of the selected HDFCequity schemes.

• To analyze the risk of selected equity schemes ofHDFC mutual fund by using statistical tools.

Data

Mutual Funds Market in India

• The asset management industry in India is amongthe fastest growing in the world

• Total Assets under Management (AUM) of the mutualfund industry clocked a CAGR of 12.8 per cent overFY07–16 to reach US$ 215.4 billion

• As of FY16 (Till September’15), 43 asset managementcompanies were operating in the country, with totalAUM US$ 215.4 billion

Fig. 1

• SEBI has announced various measures aimed atincreasing penetration and strengthening distributionnetwork of MFs

Table - 1 :

Leading AMCs in India (As of September 2015)

HDFC Asset Management Co.Ltd.,

ICICI Prudential AssetManagement Co. Ltd.,

Reliance Capital AssetManagement Ltd.,

Biria Sun Life Asset ManagementCo. Ltd.,

UTI Asset Management CompanyLtd.,

Top 5 AMCs in India AUM (USD billion)

27.9

26.9

25.04

21.8

17.0



Selection of Benchmark Index

In order to evaluate the performance of selected

schemes, they must be compared with the selected

benchmark portfolio. CNX 500 and S&P 500 Index were

selected as benchmark portfolio under which the selected

schemes are listed. The market returns of benchmark

portfolio were compared to returns of selected schemes

and analyzed with Sharpe, Jenson, and Treynor Indices.

Finally the results were interpreted.

Selection of Risk Free Rate

In this study the 5 years risk free interest rates from

2010 - 2014 were considered to evaluate the ex-post

returns of the selected schemes.

Study Period

For the purpose of evaluating the performance of selected

open-ended mutual funds, a period of 5 calendar years

( 1st January 2010 - December 2014) is taken into

consideration to understand a variety of ups and downs

in the stock market which impacted on the returns of

selected fund managers.

Methodology

This study used quantitative data for analysing different

open-ended mutual fund schemes to have a better

understanding of mutual fund performance.

Types of Data & Their Sources

The prime objective of the study is to examine the

performance of mutual fund schemes in relation to end

result variables in the form of ex-post returns. In this

context, it is necessary to evaluate mutual fund

performance with regard to their adequacy and

effectiveness in terms of ex-post returns. In other words,

the study intends to accumulate required familiarity to

make new insights into mutual fund performance based

on ex-post return and risk. Accordingly, an attempt is

made to analyze investment performance of sampled

schemes and commented on the adequacy of this

performance by attributing it to different activities of the

mutual fund managers. The study is mainly based on

secondary data. The secondary data are used to examine

and evaluate the ex-post performance of selected mutual

funds. The study uses closing yearly net asset value of

selected mutual fund schemes. Totally, 5 mutual fund

schemes are chosen. The information of NAV is obtained

from secondary sources like, websites of hdfcfund.com,

yahoo finance, marketwatch.com, mutualfundindia.com

etc.These sources are cross-checked with other sources

that to ensure validity of the data and observed same.

Risk Measurement

Risk refers to the possibility that the actual outcome ofan investment will differ from its expected outcome. Therisk of an investment refers to the variability of it rate ofreturn. More specifically, most investors are concernedabout the actual outcome being less than the expectedoutcome. It can very well be substantiated that the widerthe range of possible outcomes, the greater the risk.Commonly used measures of risk are as follows.

A. Variance

Variance is the mean of the squares of deviations ofindividual returns around their average value.

B. Standard Deviation

The standard deviation of returns, a measure ofdispersion, is the square root of the mean of thesquare of deviations around the arithmetic average.

C. Beta

A measure of risk commonly advocated is beta. Thebeta of a portfolio is computed the way the beta of anindividual security is computed. To calculate the betaof a portfolio, the rate of return of a market index isregressed. The slope of the regression line is theportfolio beta. Beta reflects the systematic risk ofthe portfolio.

Performance Measurement

For evaluating the performance of a portfolio it isnecessary to consider both risk and return. The threepopularly employed portfolio performance measures areTreynor measure, the Sharpe measure, and the Jensenmeasure.

A. Sharpe Measure

The Sharpe measure is similar to the Treynor measurewhere it employs standard deviation, not beta, asthe measure of risk. Hence, the Sharpe measurereflects the excess return earned on a portfolio perunit of its total risk (Standard Deviation).

B. Jensen Measure

Jensen Measure reflects the difference between thereturn actually earned on a portfolio and the returnthe portfolio was supposed to earn. Fund evaluationservices often place heavy reliance on Alpha becauseit is a risk-adjusted measure.

C. Treynor Measure

Treynor’s risk premium of the portfolio is thedifference between the average return and the risk-free rate of return. The risk premium depends on thesystematic risk assumed in a portfolio.



Data Analysis

The Table - 1 : Shows the Risk-Free Interest rate for the 5 years from 2010 to 2014.

The Table - 2 : Shows the Variance, Beta and Standard Deviation of 5 selectedMutual Funds Schemes of HDFC AMC, Tirunelveli.

Years Rf (%)

2010 8.1

2011 8.6

2012 8.15

2013 9

2014 8

Average 8.37

Funds Top 200 CSF EF PMC CBF

Covariance 705.102 727.71 787.058 671.856 702.165

Variance 658.377 658.377 667.628 667.628 667.628

Beta 1.07097 1.10531 1.17889 1.00633 1.05173

SD 25.6589 25.6589 25.8385 25.8385 25.8385

Table - 3 : Sharpe Measure

FUNDS SHARPE MEASURE (Rp) RANK

TOP 200 0.31 III

CORE & SATELLTE 0.23 V

EQUITY 0.38 II

PREMIER MULTI CAP 0.23 IV

CAPITAL BUILDER 0.4 I

According to Sharpe Measure, the Capital Builder Fund (0.4) has performed well compared to other funds.

Table - 4 : Treynor Measure

FUNDS TREYNOR MEASURE (Rp) RANK

TOP 200 7.35 III

CORE&SATELLTE 5.31 V

EQUITY 8.38 II

PREMIER MULTI CAP 5.83 IV

CAPITAL BUILDER 9.9 I

As per Treynor Measure, Capital Builder Fund (9.9) yields better returns compared with other selected funds.



Table - 5 : Jenson Measure

FUNDS ALPHA BETA JENSEN INDEX RANK

TOP 200 12.58 1.07097 11.7483 III

CORE&SATELLTE 10.48 1.10531 9.49032 V

EQUITY 14.35 1.17889 12.1789 II

PREMIER MULTI CAP 10.92 1.00633 10.8611 IV

CAPITAL BUILDER 15.28 1.05173 14.5285 I

Jenson Index compares realized return of the fund with the predicted return.

σp indicates the predictive ability of the ‘Fund Manager’. To properly adjust the Jenson Measure for ranking

purpose, each fund’s alpha is to be divided by its Beta.

As per Jenson Measure, among the Risk-adjusted performance of 5 selected schemes, Capital Builder Fund

(14.53) is the best one.

Conclusion

The present study has examined the Mutual Fund Performance of the selective Open-ended Mutual Fund Schemes

of HDFC – AMC, Tirunelveli, over a period from January 2010 –December 2014. From the above analysis, it is clear

that the Portfolio is a well-diversified one where the Unsystematic Risk is 0 and both Sharpe and Treynor Measures

give the same results.

References

1. D.N.Rao (2006) Investment Styles and Performance of Equity Mutual Funds in India Kings University August 6,

2006.

2. Anand S. and Murugaiah V., "Analysis of Components of Investment Performance- An Empirical Performance of

Mutual Funds in India", http://papers.ssrn.com/sol3/papers.cfm?abstract_id=961999, 2007, accessed on June,

2016.

3. S. Narayan Rao , M. Ravindran ,”Performance Evaluation of Indian Mutual Funds”, Working paper , http://

papers.ssrn.com/sol3/papers.cfm?abstract_id=433100.

4. Jayadev, M (1996). Mutual Fund Performance: An Analysis of Monthly Returns. Finance India, 10 (1), 73-84.

5. Rajeshwari T. R. and Moorthy V. E. R., "Performance Evaluation of selected Mutual Funds and Investor Behaviour",

PhD Thesis, Sri Sathya Sai Institute of Higher Learning, Prasanthinilayam, 2002.

6. Ramamurthy B. M. and Reddy S., “Recent Trends in Mutual Fund Industry”, SCMS Journal of Indian Management,

July 2005.

7. Sapar N. R. and Madava R., "Performance Evaluation of Indian Mutual Funds", available at http://papers.ssrn.com/

so13/papers.cfm?abstract_id=433100, 2003, accessed on June, 2012.

http://www.ibef.org/industry/financial-services-india.aspx



A STUDY ON FINANCIAL PERFORMANCE OF WITH REFERENCE

TO THE DISTRICT CO-OPERATIVE CENTRAL BANK Ltd., ELURU

R. Sireesha1

Abstract

Co-operative banks in India are established for the purpose of providing agriculture loans and protecting the farmers

from private moneylenders. These banks are started with the motive of service in nature whereas commercial banks

are profit oriented. The profits will be equally distributed by way of dividend to the shareholders and some amount will

be kept for public infrastructure in the rural areas in the form of common good fund. The structure is controlled and

organized in the democratically manner. NABARD is providing funds to the co-operative structure. Co-operative

banks are organized in the three tier structure PACS in the base level, DCCB in the District level and State Co-

operative Banks at state level. The District Co-operative Central Bank ltd, Eluru has received best performance award

by NABARD continuous three years and the bank as earned profits since its inception.

Keywords : Private moneylenders, PACS, APCOB, NABARD

1. Lecturer in commerce, CH.S.D.Theresa’s college, Eluru.

Introduction

Agriculture plays a vital role in the Indian economy. Itcontributes approximately more than half of the nationalincome. More than 70 percent of our Indian peopledepends on Agriculture and 80 percent live withinvillages, but the economic position of these people isstill not satisfactory and they are unable to meet theirfinancial requirements for farming operations thereforethey depend upon private money lenders immensely tomeet their financial requirements.

Rural people seek the help of money lenders .But theydemand high rate of interest and impose such conditionswhich are detrimental to the interests of the borrowers.Thus, the rural people exposed exploitation by the villagemoney lenders. Banks also did not come forward tofinance the rural people due to the risk involved.

Co- operative Banks

These banks are operated on the Co-operative lines inIndia Cooperative credit institutions are organized underthe Cooperative societies Act. They deal with financialneeds in the rural areas. The co-operative movementwas started in India in 1904 to relieve the farmers fromthe clutches of the money lenders. The co-operativeinstitutions have three-tire credit structure.

Primary Co operative Credit Societies

It is organized for a village or a group of villages the areaof operations is limited to the village. People of thosevillages can become its members it can be organizedby 10 or more members. These members contribute tothe share capital of the society these societies canmobilize deposits from its members and non-members.They get loans from the District Co-operative CentralBank.

District Co operative Central Banks

For every District there will be a District Co-operative

Central Bank. All the primary co-operative societies will

be members of the District co-operative Central Bank,

individuals also can be it’s associate members, it also

accepts deposits from the public, it gives loans to the

Primary co-operative societies and associate members.

The resources of this bank consists of share capital,

deposits, loans and advances from the state co-operative

Bank. Not only giving loans but it also supervise, inspect

and co-ordinate the activities of the primary co-operative

societies.

State Co-operative Banks

For every state there will be a State Co-operative Bank,

it is the Apex co-operative bank. All the District Co-

operative Central Banks in the State will be its members.

National Bank for Agriculture and Rural Development

(NABARD) gives loans and advances to the state co-

operative banks. A part from its share capital, deposits

and reserves, the state co-operative bank depends mostly

on the loans and advances from the NABARD. Nearly

fifty to ninety percent of the working funds of the state

co-operative banks consist of borrowing from NABARD.

About the Bank :

The District Cooperative Central Bank Ltd., Eluru was

registered on 18-11-1918 and commenced its business

from 30-11-1918. Single window credit delivery system

was introduced in 1987 and 8 PADBs were merged with

the DCCB and now it is working with 34 branches in the

district, 258 PACS are affiliated to the bank with an

average of 3 villages per PACS (state average is 12).

About 4.68 lakhs people in the district are availing the



services of bank and PACS (12.3% of the districtpopulation). There are 670 other Coop. societies affiliatedto the bank.

Mission : “To cater to the Agricultural and non-agriculturalcredit needs of the farmers of the district for sustainabledevelopment of rural economy and also to render bankingservices to the rural as well as urban community.”

Need for the Study

It is a known fact that the success of the firm entirelydepends upon its financial discipline. The need for thestudy is to know the performance of the bank in termsof generation of deposits and lending of advances. Tocarry out the study, all most all the Balance sheet itemsof the bank have been examined.

Objectives of Study

Primary Objective

The Primary Objective of the study is to examine theFinancial Performance of the District Co-operative CentralBank Ltd., Eluru, W.G. Dist.

Secondary Objectives

• To study the quantity and types of deposits raisedand types of advances granted by the Bank.

• To examine the growth of deposits and advances andthe level of recovery of advances.

• To find out the various problems encountered by theBank

• To know the various measures under taken by theBank to raise the own funds as well as to raise therecovery of advances.

Methodology of the Study

Methodology is a systematic procedure of collectinginformation in order to analyze and verify a phenomenon.The collection of information is done in two principlesources. They are as follows.

Primary data

It is the information collected directly without anyreferences. In this study it is gathered throughinteractions with concerned officers and staff, eitherindividual or collectively, sum of the information has beenverified or supplemented with personal observationconducting personal interviews with the concernedofficers of Audit department of DCCB, Eluru.

Secondary data

The secondary data was collected from already publishedsources such as pamphlets of annual reports, returnssubmitted to various higher financial institutions andinternal records, reference from text books and journalsrelating to financial management. The data collection

includes Collection of required data from Statutory Auditreports of DCCB, Eluru.

The tables which contain the data were calculated inthe following manner.

For calculation of Trend :

Trend = Current Year outstanding /Base Yearoutstanding*100

For calculation of Growth Rate:

Growth rate = Current Year Trend – Base Year Trend

Deposits and Advances

Deposits in Banking

Deposits plays vital role in raising Banks working fund.In India Banks have two types of Deposits:

• Demand Deposits.

• Term Deposits

Savings Bank Deposits

Individuals are eligible to open this kind of Account. Ithas the facility to be operated singly or jointly. Theminimum balance is to be maintained shall be subjectto change and have different minimum balancerequirements based on the mode of operation of theaccount such as cheque or with drawl form.

Current Deposits

This type of Account can be operated by individuals,proprietorships, Partnerships, Clubs / Associations,Companies, Co-operative societies. This has a specialOver Draft facility available on pre-arrangement. Theminimum balance has to be maintained shall be subjectto change.

Term Deposits

This type of Account can be operated by individuals,proprietorships, partnerships, Clubs/Associations,companies, Co-operative societies. This deposit helpsto plan future expenditure and to meet savings need withgrowth. The minimum period of this deposit is 15 daysand the maximum period is 120 months with theminimum amount of Rs.1000/-. Advance against depositis permitted. In Re Investment Plan Interest is payablequarterly with cumulative and automatic renewal facilityis also available.

Recurring Deposit Scheme

This type of Account can be operated by individuals,proprietorships, partnerships, partnerships, and clubs/Associations, companies, and Co-operative societies.The purpose is to build up savings through regularmonthly deposits of fixed sums over a selected periodof time. The period of depots is from 6 months to 120months in multiples of 3 months.



Advances in Banking

Of all the functions of a modern Bank, lending is most

important. A study of the balance sheet of other

nationalized Banks reveal that about 90 % of their revenue

come form interest and discounts that is to say, income

derived from advances including bills discounted and bills

purchased and interest on investments. Hence the

strength of a Bank is primarily judged by the soundness

of its advances. A wise and prudent regard to its lending

is considered as an important factor inspiring confidence

in the minds of customers and prospective depositors

of a Bank.

Bank’s advances not only play an important part in the

earnings of a Bank but also promote the economic

development of the country. All types of business activity

including trade industry and agriculture have to depend

upon Bank finance in one form or the other. By

channeling the accumulated savings of the nation, Banks

help both the depositors and borrowers. They also create

more avenues of employment problem and raise standard

of living of the people. During the last decade Banking

advances have undergone drastic and marked changes.

The class Banking has changed into mass banking. This

change is being further accelerated and lays emphasis

on diversification on the advance portfolio in favor of priority

sectors such as exports, small -scale industries and

agriculture. Since they are relatively new fields when

compared to the old type of traditional Banking they

require not only proficiency in advance operations but

also a sense of social awareness and imagination on

the part of Bankers. Even the security aspect with which

the Bankers have been familiar for a long time, have

changed beyond to repay more than the security offered

for advances.

Principles of Lending

There are a few general principles of good lending, which

every Banker follows when appraising advances

proposal. They are safety, liquidity, purpose profitability,

security and spread.

An Ideal Advance

To sum up an ideal advances is one which is granted to

a reliable customer for an approved purpose in which

the customer has adequate experience and knowledge

that the money will be used for advantage and repayment

will be made within a reasonable period from trading

receipt or known maturities due on or about given dates.

Forms of Advances :

• Over Draft

• Demand Loan

• Cash Credit

• Term Loans

• Bills Purchase and Discounting

• Advance Against Term Deposit

• Advance Against Gold Ornaments

These are generally on short-term basis since Banks

cannot afford to lock up their funds for long periods.

Therefore a considerable percentage of their advances

repayable on demand. Advances are generally granted

against tangible security and only in special deserving

cases on unsecured basis.

Priority Sector Advances

After the nationalization of major Banks, the Banking

industry in India has accepted social Banking as its

objective. The Government of India has assigned to the

Banks the important role of fulfilling the aspirations of

the people especially the weaker sections and creates

opportunities for them for gainful employment and also

to help them lead a better life.

The Reserve Bank of India has fixed a certain portion of

total Banks advances to be given to the priority sector

such as agriculturists, SSI units, small borrowers, self -

employed persons etc.

The following is a list of segments forming the priority

sector :

• Agriculture & Allied activities

• Small Scale Industries undertakings

• Retail Trade

• Small road and water transport operator

• Professional and Self-employed persons

• Small business

• Housing loans to weaker sections

• Consumption credit

• Education

• State Sponsored welfare schemes for different

communities.

Short-term Loans

Short-term loans are given essentially to meet the

working capital gap of a part of which of course the

borrower has to meet from lot of long-term sources. The

working capital gap can be determined only in relation

to the business plan prepared by the consultant. The

success of the business plan and the safety of Bank

finances are closely interrelated. Therefore the Banks

should ensure that the business plan submitted by the

customer is capable to be achieved.




Table - 1.1 : Trends and Annual Growth (%) Of Current Deposits

Trend and Annual Growth (%) of Current Deposits Table 4.1

Year Current Deposits (RS. In Lakhs) Trend Annual Growth (%) rate

2007-08 1353.93 100 0

2008-09 1890.07 139.60 39.60

2009-10 2280.76 168.45 28.86

2010-11 2911.87 215.07 46.61

2011-12 2900.55 214.23 -0.39

2012-13 2130.48 157.35 -56.88

2013-14 2313.00 170.84 13.49

2014-15 2849.75 210.47 39.63

Source: Bank Annual Reports

Interpretation :

Table 1.1 shows the Trend and growth of current deposits, except in 2011-12. The current Deposits have continuouslyincreased from 2007-08 to 2014-15 and there is decrease in the Year 2011-12 and 2012-13.

Chart - 1.1 : Annual Growth Rate(%) of Current Deposits

Fig. 1

-100

-50

0

50

100

Annual Growth (%) rate


Trend and Annual Growth (%) of Savings Deposits

Year Savings Deposits Trend Annual Growth (%) rate

(Rs. In Lakhs)

2007-08 3360.95 100 0

2008-09 4019.58 119.60 19.60

2009-10 4495.59 133.76 14.16

2010-11 4496.11 133.77 0.02

2011-12 4940.56 147.00 13.22

2012-13 5528.47 164.49 22.49

2013-14 7693.09 228.89 64.40

2014-15 8140.08 242.19 13.30


Table - 1.2 : Trend and Annual Growth (%) Of Savings Deposits



Interpretation :

Table 1.3 shows the trend and Growth of Fixed Deposits. There is continuous growth in Fixed Deposits

Chart - 1.3 : Annual Growth Rate (%) of Fixed Deposits

Table -1.3 : Trend and Annual Growth (%) Of Fixed Deposits

Trend and Annual Growth (%) of Fixed Deposits

Year Fixed Deposits Trend Annual Growth (%) rate

2007-08 24861.68 100 0

2008-09 31041.01 124.85 24.85

2009-10 39056.21 157.09 32.24

2010-11 40540.38 163.06 5.97

2011-12 46950.73 188.85 25.78

2012-13 51924.23 208.85 20.00

2013-14 58661.08 235.94 27.09

2014-15 64710.87 260.28 24.34


Interpretation:

Table 1.2 shows the trend and Growth of Savings Deposits. There is continuous growth in Savings Deposits and theGrowth is high in the year 2013-14.

Chart - 1. 2 : Annual Growth Rate (%) of Savings Deposits

Fig. 2

0

10

20

30

40

50

60

70



Fig. 3

0

5

10

15

20

25

30

35





Table - 1.4 : Trends and Annual Growth (%) of Advances for Agricultural Purpose

Year Advances for Agricultural Purpose Trend Annual Growth (%) rate

2007-08 23384.91 100 0

2008-09 48468.22 207.26 107.26

2009-10 43219.41 184.82 -22.45

2010-11 65786.37 281.32 96.50

2011-12 69030.09 295.19 13.87

2012-13 88285.59 377.53 82.34

2013-14 142715.04 610.28 232.75

2014-15 139607.93 597.00 -13.28


Interpretation :

Table 1.4 shows the trend and Growth of Advances for Agricultural Purpose. There is continuous growth in Advancesfor Agricultural Purpose and the Growth is high in the year 2013-14 and there is short fall in 2014-15 due to StateGovernment Debt waiver scheme.

Chart - 1.4 : Annual Growth Rate (%) of Advances for Agricultural Purpose

Fig. 4

-50

0

50

100

150

200

250

2007 -08 2008 -09 2009 -10 2010 -11 2011 -12 2012 -13 2013 -14 2014 -15



Findings

1. The low Cost deposits i.e Current Deposits and Savings Deposits are low in Quantum out of Total deposits of theBank.

2. Internal Control system like Internal Audit and periodical Inspections were badly neglected by the Bank.

3. The Bank is having less quantum of out standings in other than Agricultural Loans.

4. The bank has given major amounts as loans to the agriculture. But due to Agriculture Debt Waiver and ReliefScheme 2008& 2013 the Out standings under Agriculture purpose has decreased in the year 2009-2010 and2014-15.

5. The Trend and growth rate of Paid up Share Capital has increased gradually for the past several years.

6. The Trend and growth rate of Reserve fund and other reserves have been decreased gradually during the last 5years. The Bank is maintaining huge amounts in other banks as well as cash on hand.



Suggestions

1. The bank has to concentrate to mobilize Low Costdeposits by giving targets to Employees and by widepublicity.

2. Effective accounting system should be implemented.

3. Internal control system has to be sensitized for bettertransparency of accounts and surprise checking ofsenior officers of the Bank will help for better controlon Branches.

4. Periodical Inspections of the Branches as well asHead office must be done in regular intervals whichenable the authorities to find out the irregularitiesimmediately if any.

5. The Bank has to concentrate other diversifiedbusiness other than the Agricultural loans which isvery much helpful to lend on higher rate of interest.

6. The Bank has to minimize the maintenance of Cashon hand and other Bank balances. It should be up toCRR and SLR.

7. The Bank Authorities have to take appropriatemechanism to recollect the bad debts.

Conclusion

Co – operative banks are started with service motto andworks on “no profit, no loss’ basis and they perform allthe main banking function. They have a federal structureof three – tier linkages and vertical integration. Some co– operative banks are scheduled banks, but most of themare non – scheduled banks. There is much scope forfurther improving deposit mobilization and this is a keyto the self – reliance of these banks. Co – operativebanks have played a great role in developing short termand long term rural credit structure and micro creditdispensation system. Co operative banks have played asignificant role for micro finance and providing financefor self – help linkage program. The NPAs of co – operativebanks are higher than those of commercial banks interms of NPAs to assets ratio


1. Financial Institutions and Markets- L. M. Bhole &Jitendra Mahakud

2. Banking Theory & Practice- Dr. P. K. Srivastava

3. Banking and financial system- R.N.Maheswariand &R.R.paul

4. Indian banking- S.Natarajan&R.Parameswaran

5. Audit Reports from Eluru District Co-operative CentralBank for the period of 2007-08 to 2014-15.



CUSTOMER UTILITY OF MOBILE FINANCIAL SERVICES

T. Velmurugan1 Dr. M. Ramesh2

Abstract

Mobile banking is an application of mobile computing which provides customers with the support needed to be able

to bank anywhere, anytime using a mobile handheld device and a mobile service such as SMS. Mobile banking

facility removes the space and time limitations from banking activities such as checking account balances or transferring

money from one account to another and time saving when one goes to bank and does some banking activities. Banks

have changed from paper based banking solutions provider to the latest technologies like online-banking, mobile-

banking etc. This paper aims at enriching the knowledge and understanding of customers’ usefulness on mobile

banking services. Customers who are having bank account and operate through their mobile phone are included as

respondents. Factor analysis applied in order to analyze the factors which involve in adoption of financial services

through mobile phone that is customer utility of mobile financial services.

Keywords : Mobile banking, mobile financial services, usefulness and utility expectancy,

1. Assistant Professor, Department of Business Administration, Govt. Arts College, Kulithalai2. Professor, Department of Business Administration, Annamalai University

Introduction

Mobile banking is used in many parts of the world withlittle or no infrastructure, especially remote and ruralareas. This aspect of mobile commerce is also popularin countries where most of their population is unbanked.In most of these places, banks can only be found in bigcities, and customers have to travel hundreds of milesto the nearest bank. Some part of India’s population isunbanked. In rural India, the banking coverage amongthe adult population is 39 percent, in contrast to 60percent in urban India. However, this does notnecessarily mean that 60 out of every 100 Indian adultsin cities have bank accounts, as it is common for oneperson to have multiple accounts. In 2010, only 5.2percent of the country’s 6,50,000 villages had bankbranches despite the fact that 39.7 percent of the overall31,727 bank branches were in rural India.The largestbank in India, State Bank of India posted 529,318 mobiletransactions with a transaction volume of Rs.32.63 Crore(approximately $7.3 million) in February 2011 alone. In2010, SBI posted YTD growth of 1,865 percent intransaction values, ICICI Bank posted a growth of 532percent and HDFC Bank posted 512 percent growth.This demonstrates that the areas of India which arecovered by financial services are of immense economicpotential. RBI developed the operative guidelines toencourage financial institutions to extend their serviceinto mobile banking. A forecast study by the BostonConsulting Group in July 2011 claims that mobile bankingin India is set to generate approximately $4.5 billion infee based revenue by 2015. This revenue would begenerated from $350 billion of mobile transaction volumespredicted to occur by 2015, in contrast to $235 billiontoday.

The biggest limitation of internet banking is therequirement of a personal computer with an Internetconnection, but definitely a big barrier if consider mostof the developing countries of Asia like India. Mobilebanking addresses this fundamental limitation of internetbanking, as it reduces the customer requirement to justa mobile phone. Mobile usage has seen an explosivegrowth in most of the counties especially India. The mainpurpose of mobile banking scores over Internet Bankingis that it enables “Anywhere Anytime Banking isAvailable”. Customers don't need access to a computerterminal to access their bank accounts. Financialservices are generally complex and need a lot of trustfor the consumer to use technology.

Banks have changed from paper-based banking solutionsprovider to the latest of the technologies like online-banking, mobile-banking, etc. Customers across theworld, even technologically optimists, have refrained fromusing technology aided solutions. There are manyreasons why technology has not been able to ride theacceptance wave and cross the hurdle and become anacceptable feature in banking. As today‘s banking hasredefined itself as customer centric, it becomes moreimportant that the customer is happy with the servicesbeing provided. Unfortunately, the acceptance andadoption rates are very low even in the case of educatedcustomers.

Literature Review

Sevcik (2004) stated that not all innovations are adoptedeven if they are good, it may take a long time for aninnovation to be adopted. He further stated that resistanceto change may be a hindrance to diffusion of innovationalthough it might not stop the innovation; it will slow itdown.



Suh et al. (2009) verified the effect of trust on behavioural intentions in mobile banking, using the trust from thebanks’ perspective. This indicates that trust helps reduce fraud and potential risks caused by opportunistic behaviourand provides users the ultimate benefit of getting more reliable banking services from honest banks (Gu et al.,2009). To better understand the role of the customer trust on the adoption of mobile banking, the concept of brandloyalty and customer loyalty is also introduced in this study.

Yasodha et al. (2012) revealed that education, gender and income play an important role in shaping customers’perceptions about mobile banking services offered by Indian Overseas Bank. The current study provided a basis forfurther refinement of models through integrating constructs of technology acceptance model (TAM) and theory ofplanned behavior (TPB) to predict mobile banking adoption in UAE. Next, the information communication technologyin UAE is explored.

According to Sabharwal (2015) the lines between devices are getting blurred. "Earlier internet banking was meantfor desktops and mobile banking was for cell phones. Now we have laptops and tablets which are mobile. After wereworked our website so that it can be accessed from any device we are seeing a large number of customers log into our website using mobile devices. Incrementally the number of customers registering for mobile banking isalready 50% more than those registering for internet banking.


The present study falls under the category of descriptive studies as the nature of problem is to determine therelationship among the different variables.

Qualitative data were collected from customers of the select banks in Chidambaram.


This paper aims at enriching the knowledge and understanding of customers’ usefulness and utility expectancy onmobile banking services

Sample Size

Customers of select who operated their financial activities through mobile phones were targeted as the keyrespondents. There was a need to sample the population because not all the population elements use mobilebanking. MBS proforma has been used in order to identify how many customers are using MBS offered by theirbank through their mobile phone. Majority of respondents are not aware of mobile banking services offered byvarious banks. 36.2 per cent are using mobile banking services and 63.8 per cent are not using mobile bankingservices. Total sample size was 257.


Table - 1 : Descriptive Statistics for Usefulness / Utility Expectancy Mobile Banking

Usefulness / Utility Expectancy Mobile Banking Mean Std. Deviation

I conduct my banking transactions through mobile applications 1.90 .991

I have greater control over my transaction through mobile banking 2.01 .870

I find Mobile banking convenient to manage my banking transactions 1.89 .868

I find Mobile banking more user-friendly than other existing 2.12 .888

I save time by using mobile banking 1.65 .834

I find mobile banking very reliable and easy to use 1.78 .858

I like using mobile banking because it provides me accurate and timely

information on my account. 1.91 .801

I could complete my banking more quickly using mobile banking 1.98 .897

I could perform banking 24 hours/day using mobile banking 2.04 .985

I find increase in my efficiency and effectiveness 2.08 1.010



Table - 2 : KMO and Bartlett's Test - Usefulness/Utility Expectancy Mobile Banking

KMO and Bartlett's Test

Kaiser-Meyer-Olkin Measure of Sampling Adequacy .912

Bartlett's Test of Sphericity Approx. Chi-Square 1168.936

df 45

Sig. .000

The above table shows that the KMO value is 0.912, which indicates that the factor analysis is useful with the data.The chi-square value for Bartlett’s test of Sphericity is 939.531 and the significant value is 0.000, which is significantat more than 99 per cent level of confidence. For the purpose of extraction, Principal Component Analysis is usedand for the rotation, Varimax rotation is used which is the standard rotation method (Kaiser, 1958). For factoranalysis, Principal component analysis method is applied on ten influence variables Usefulness / Utility Expectancymobile banking.

Table - 3 : Communalities and Rotated Component Matrix for Usefulness /Utility Expectancy Mobile Banking

Component Total % of variance Cumulative % Total % of variance Cumulative %

1 5.203 52.034 52.034 2.522 25.223 25.223

2 .931 9.312 61.345 2.467 24.666 49.889

3 .773 7.731 69.077 1.919 19.188 69.077

Extraction Method: Principal Component Analysis

Table - 4 : Communalities and Rotated Component Matrix for Usefulness / Utility Expectancy Mobile Banking

Initial Extraction Component Component Component

1 2 3

1.000 .780

1.000 .746 .785

1.000 .689 .762

1.000 .693 .421

1.000 .567 .746

1.000 .676 .795

1.000 .581

1.000 .614

Ease of Use/Effort Expectancy mobile banking

I conduct my banking transactions through

mobile applications

I have greater control over my transaction

through mobile banking

I find Mobile banking convenient to manage my

banking transactions

I find Mobile banking more user-friendly than

other existing channels, including Bank

Branches, ATMs, and Phone Banking

I save time by using mobile banking

I find mobile banking very reliable and easy to

use

I like using mobile banking because it provides

me accurate and timely information on my

account.

I could complete my banking more quickly

using mobile banking applications

Component Communalities Rotated Component Matrix

Extraction Sums of Squared Loadings Rotation Sums of Squared Loadings



1.000 .773 .514

1.000 .788 .603

I could perform banking 24 hours/day using

mobile banking

I find increase in my efficiency and effectiveness

in utilizing banking service

The tables interpret factor loading for Usefulness / Utility Expectancy mobile banking is positively perceived. I savetime by using mobile banking and I like using mobile banking because it provides me accurate and timely arecomparatively low to the tune of 56 per cent and 58 per cent respectively of the total variance. However, theremaining three variables have high factor loadings above 80 per cent. The high factor loading variances like I findincrease in my efficiency and effectiveness, I conduct my banking transactions through mobile applications and Icould perform banking 24 hours/day using mobile banking are scoring 78.8 per cent, 78 per cent and 77 per centrespectively. Factor 1 has four significant loadings, factor 2 has two significant loadings, and Factor 3 has onesignificant loading respectively. The first extracted factor Usefulness / Utility Expectancy mobile banking like I findmobile banking very reliable and easy to use, I have greater control over my transaction through mobile banking, Ifind Mobile banking convenient to manage my banking transactions and I save time by using mobile bankingaccounted for 52 per cent of the variance. The second factor of Usefulness / Utility Expectancy mobile banking is Icould perform banking 24 hours/day using mobile banking and I find increase in my efficiency and effectiveness inutilizing banking service accounted for 9 per cent of the variance. The third factor of Usefulness / Utility Expectancymobile banking is I find Mobile banking more user-friendly than other existing channels, including Bank Branches,ATMs, and Phone Banking accounted for 7 per cent of the variance.

Table - 5 : Variance Explained by Factors of Usefulness / Utility Expectancy Mobile Banking

S. No Factors Eigen Value % Variance Cumulative %

Explained

1 I find mobile banking very

reliable and easy to use 5.203 52.034 52.034

2 I find increase in my efficiency and

effectiveness in utilizing banking service 0.931 9.312 61.345

3 I find Mobile banking more user-friendly

than other existing channels, including

Bank Branches, ATMs, and Phone Banking 0.773 7.731 69.077

This table explains the reduced three factors 69.07 per cent of total variance, which is fairly significant. Among thethree groups of Usefulness /Utility Expectancy mobile banking, the first one customer felt that mobile banking veryreliable and easy to use has 52.03 per cent of total variance. Further more Customers feel that to find increase inmy efficiency and effectiveness in utilizing banking service has 9.3 per cent of total variance and Customers feelthat to find Mobile banking more user-friendly than other existing channels, including Bank Branches, ATMs, andPhone Banking has 7.7 per cent of total variance. This indicates the primary variable of Usefulness / Utility Expectancymobile banking.

Conclusion

The variables of the Usefulness / Utility Expectancy of Mobile Banking are highly significant. Customer felt thatmobile banking very reliable and easy to use. More Customers feel that to find increase in my efficiency andeffectiveness in utilizing banking service and the feel that Mobile banking more user-friendly than other existingchannels. Greater level of technical infrastructure of the banks, intention to check fraud related issues, reduce costof banking services, customer education, reduce crowd at the bank branches, reduce number of employees in thebranch level, develop customer’s trust, etc. are the major adopting factors of M-Banking by the bankers.

References

1. Aldas-Manzano, J., Lassala-Navarre, C., Ruiz-Mafe, C. and Sanz-Blas, S. (2009). The Role of ConsumerInnovativeness and Perceived Risk in Online Banking Usage, International Journal of Bank Marketing, Vol. 27,No. 1, pp. 53-75.



2. Gu, J.C., Lee, S.C., & Suh, Y.H. (2009). Determinants of Behavioral Intention to Mobile Banking. Expert Systemswith Applications, 36(9), 11605-11616.

3. Mahajan, V., & R. A. Peterson. (1985). Models for Innovation Diffusion. Bewerly Hills, California: Sage Publications.

4. Palani, A., & Yasodha, P. (2012). A Study on Customer Perception Towards Mobile Banking in Indian OverseasBank, Chennai, International Journal of Marketing and Technology, 2(4), 262-276.

5. Sabharwal, R., & Shetty, M. (July 3, 2015). Mobile Banking Comes of Age. Times of India. Retrieved from http://timesofindia.indiatimes.com/tech/tech-news/ Mobile-banking-comes-of-age/articleshow/47918016.cms.

6. Sevcik P. (2004). Innovation Diffusion. Business Communication Review, 34(9), 8-11.

7. Suoranta, M., & Mattila, M. (2004). Mobile Banking and Consumer Behaviour: New Insights into the DiffusionPattern, Journal of Financial Services Marketing, 8(4), 354-366.



ECONOMICS OF TRANSITION - ANALYSIS OF DIFFERENCES IN

THE PATH TAKEN BY CHINA AND SUCCESSOR COUNTRIES OF USSR

AND ITS IMPACT ON THEIR RESPECTIVE ECONOMIES

T. Raja Reddy1 Dr.K.Visweswara Reddy2 Dr. E.Lokanadha Reddy3

Abstract

In this article we compare the performance of China and successor countries of USSR during the post 1989 period.

This article initially discuses the level of economic development in Soviet Union in the late eighties. It is noticed that

compared to China the Soviet Union had a good starting advantage with reference to the stage of development. But

the transition strategies in the erstwhile Soviet Union nations were not similar. The most discussed growth strategy

among these nation states is the neo-liberal transition strategy (NLTS). While in China, it was known as State Directed

Transition Strategy (SDTS). The relative political stability in China helped to step up the pace of development in the

later years. China’s impressive economic achievements during the last three decades are largely the result of radical

reforms of economic system. While the CIS countries have reached and stayed at different trajectories of economic

reforms and economic mechanisms formation. A difference in models and scenarios has eventually resulted in

uneven rates of reform, scope of economic liberalization and mechanisms for economic regulation in the nation

states. At the end it noted that both the countries being observed in the study are facing different challenges in the

recent times. Thus, a one size fits all transition strategy will not work for the nations.

Keywords : Transition, CIS, China, NLTS, SDTS.

1. Associate Professor, Dept of MBA, SVCET, Chittoor, Andhra Pradesh.2. Professor, Dept of MBA, SVCET, Chittoor, Andhra Pradesh.3. Professor, Dept of MBA, SVCET, Chittoor, Andhra Pradesh.

Introduction

China and Successor countries of USSR’s economicgrowth and opening up, followed by continuing integrationto the global economy , is indispensably linked totransition from centrally planned economy to marketbased economy, albeit in their own path. Thepolicymakers in these countries formulated transitionstrategies that focused on macroeconomic stabilizationand microeconomic restructuring, along with institutionalreforms. The implementation of these strategies variedacross these countries in speed and specifics. Let usstart the discussion by examining the differencesbetween the conditions of at the initial period of transitionbetween China &Soviet Union from three differentdimensions.

Level of economic development & industrialization

At the beginning of transition, meaning 1989-1991, theGDP per capita in Soviet Union was 20 to 50 times higherthan in China in 1980, the starting period of transition. In1980 the gross national income per capita was only $250in China. However, at the beginning of the transition periodin Soviet Union i.e., 1989 the GNP per capita was $9000.This was a huge difference in terms of economicsstandards prevailing in these countries.

With respect to structural characteristics of theeconomy, China was under industrialized and oppositeto this was former Soviet Union, which was overindustrialized with high share in military expenditure.

The military expenditure was 17.5% of GDP in the earlytransition period compared to 2.7% of GDP in case ofChina. China was predominantly an agrarian economy.Soviet Union on the other hand had established industrialpresence. In Soviet Union, agriculture was throughcollectives& state owned and not effective. Agriculturein China was already in private hands and was runningefficiently. There was a huge labor surplus in China butSoviet Union was experiencing labor shortages. TheChinese agriculture was in private hands and veryproductive. Further, economy of former Soviet Union washighly energy intensive. This was unlike in China, whereit was not energy intensive.

Social Policy & Social Service

There were also huge differences in terms of policyconcerning social services. For example in China, onlyemployees of public sector were entitled to a publiclyfinanced pension system and other social policyinstruments. All the others were required to finance theirretirement and also health services. In former SovietUnion, there was excessive burden of social programsin communist regime. The communist regimes wereusing social policy as a tool / instrument forlegitimization of their actions. This resulted intremendous burden on the Soviet economy.

Political Environment

At the late stage of communism, the governments inSoviet Union were unable to use coercive power on



massive scale. The communist party in China hadabsolute power and could control most elements of thecommand. It gradually abandoned most of controls. InSoviet Union CPE collapsed spontaneously at the endof 1980, which is in contrast to what happened in China,where it was step-by-step dismantled.

To summarize, the falling productivity, extensive use offactors of production, falling international prices for oil,prohibitive costs on economy resulting from arms race,gradual political weakening of communist regime, costof social net and failure of partial reform process, haveresulted in leading USSR into macroeconomicdisequilibrium, permanent food shortage, monetaryoverhang and fiscal deficit. It was a point of no returnrequiring urgent action. This resulted in the movementfrom centrally planned economy to market basedeconomy in Soviet Union.

In China, partially because of power struggles withinthe CCP after Mao’s death domestically and partiallybecause of the improvement of Sino-US relations andinspiring economic performance of neighboring countriessuch as Japan, “four little dragons” and other countries,that the “reform and open door” policy under DengXiaoping leadership was carried out in 1978. From thenon, China has entered a new era known as the transitionperiod (The World Bank, 1996), namely the transitionsfrom the command economy to a market-oriented one;from a rural, agricultural society to an urban, industrialone; and from a non-WTO nation to a WTO one.

The pace of reforms and their sequencing; theireconomic and political determinants

In December 1991 the Soviet Union disintegrated, thuscreating the Commonwealth of Independent States. Thepolitical leadership of newly independent states embarkedon an effort to replace its state socialist system, basedon state ownership of enterprises and central planning,by a capitalist market system, based on private propertyand a market system of coordination. The economicstrategy that these countries had relied on to implementthis transition goes by several names, the mostdescriptive of which is the neoliberal transition strategy(NLTS). This strategy, designed by Westernneoclassical economists, calls for limited governmentinvolvement in the transition process, relying primarilyon individual self-interested initiatives to transform theeconomy.

The NLTS, sometimes known as a shock therapy, callsfor making the transition from state socialism tocapitalism very rapidly, within a few years. This strategyrelied on the following main policies: macroeconomicstabilization, domestic and external liberalization ofeconomy, privatization and economic restructuring,

institutional and legal reforms, social safety net andpolitical reforms. During the initial period of transition,the Soviet economy was experiencing the high inflation.This required some urgent measures for macroeconomicstabilization. These measures included reducingsubsidies, rationalizing government expenditure,introducing normal tax based systems, creatingadditional fiscal room for providing safety net, stoppingquasi fiscal activities of the central bank, activelymanaging supply of money and inflation, among others.The next important step involved liberalization of theeconomy. This included price de-regulation, unificationof exchange rate, introduction current account andcapital account convertibility among others. Theprivatization of the public sector companies was aimedat not only opening the doors for the new privateenterprise but also restructure the state owned enterpriseaccording the market needs. The institutional reformswere aimed at building various market supportinstitutions and adopting market oriented legislation. Themechanism for the enforcement of these legislations wasalso strengthened. There was a demand fordemocratization from the citizens of Soviet Union, thusresulting in launching political reforms aimed atinstitutionalizing democracy.

The other giant state socialist country, China, began itsown transition to a capitalist market system earlier, in1978. China's transition strategy, which might be calleda state-directed transition strategy (SDTS), differssignificantly from the NLTS. China’s SDTS involves, asthe name suggests, a very active role for the state inmanaging the transition. Rather than seeking to directlyconvert the state-owned, planned economy into a private,market-based one, China sought to use its state-owned,planned economy as a base for launching a new non-state, market based sector. Though many economistsargue that the Chinese transition has been gradual, it isindeed found to be rapid. The collectivization of theagricultural land, the first move towards transition, wasindeed rapid and radical. But, the resistance to radicalreform process by the conservative communists, createdan impression that the reform process was gradual.

State still exercised some controls with respect toagriculture, but nevertheless de-collectivization ofagriculture helped in realizing the huge economicpotential of agriculture. It was followed by the introductionof dual price system in the urban industry, which allowedthe enterprises to become more flexible and adjustproduction to market demand. This time also includedthe setting up of SEZs (Special Economic Zones) tofoster industrialization and attract FDI. These can besummed up as first stage reforms. In the second stageof reforms, there was decentralization of central planningand economic control. This resulted in new institutional



townships and village enterprises. During this period,they opened Shanghai Stock Exchange for strengtheningtheir financial markets and attracting foreign institutionalinvestment. In the second half of 1990s and first half of2000, under Jiang Zemin, China unified the exchangerate and introduced current account convertibility. It alsoundertook unilateral trade liberalization measure andjoined WTO. During this period, it also undertook largescale privatization of state industry and large scalefinancial sector reforms. Since 2005, though the reformsare said to continue, the pace has slowed down.

Results of the reform process

The growth performance since 1989 can be interpretedas poor to disastrous in CIS countries. All most all thecountries experienced large decline in output; as muchas 45 % or more in Russia and even more in the otherCIS countries, like a drop of 65 % in Ukraine. (WilliamDavidson Institute). Many CIS countries experienced highinflation or hyperinflation as the communist systemdisintegrated. Russia, Ukraine and Kazakhstanexperienced at least one year when the inflation wasabove 2000%. Post transition in CIS countries, the privatesector contributes between 60% and 80% of GDP(EBRD, 2010). Few exceptions to this are Turkmenistan(25%), Belarus (30%) and Uzbekistan (45%). Theincome inequalities among the people in CIS countrieshave increased. Pre-transition the Gini Coefficient forCIS countries was 0.28. Ten years into transition theGini Coefficient has increased to 0.46. (EBRD TransitionReport,2002). Post-transition these has not beensubstantial improvement in the standard of living of thepeople of CIS countries, as reflected in the HDI index(HDR, UNDP, 2003). Ten years into transition, there wasa drop in the life expectancy in 3.5 years in Russia, 3years Ukraine and 4 years in Kazakhstan. The declineis attributed to early deaths of middle aged male, whoare presumably more exposed to stress and resort toheavy drinking.

The undertaking of market based reforms has resultedin rich dividends to China. From the early stage ofintroduction of market reforms, the Chinese economyhas been growing at an average rate of 10 %, a significantachievement by any international standards. As a result,China became the second largest economy in the worldin terms of nominal and real GDP, after United States.China today is an industrialized manufacturing hub withmore than 70% of its GDP contributed by private andquasi private sector. The huge budget surplus andgrowing international reserves have made China, thelargest creditor in the world. The transition process didnot result in substantial improvement in the income levelsof people in China. China still remains lower middleincome country with per capita GDP at 18% of the percapita GDP of United States. The income inequality

among the people tends to very high, with a Ginicoefficient of 0.45. The aging population is also creatingtremendous burden on the Chinese economy. TheHuman Development Indicators, including lifeexpectancy, literacy, infant mortality, per capita income,and the incidence of poverty, all show dramaticimprovement, in line with the rapid economic growth.

Comparison of the current economic systemsoutcomes in China and in the successor countriesof the former USSR

China’s impressive economic achievements during thelast three decades are largely the result of radical reformsof economic system. Change in the ownership patternhas shifted into private hands. Decision making regardingconsumption and production has been largelydecentralized to individual households and firms,respectively; economic incentives, markets, competition,and internationalization have to considerable extentreplaced command, administrative processes, monopolyand autarky. Since the 1980s, China's Communist Partyhas been using "socialist market economy" to describetheir nation's economic system. China's economy issubject to market forces, and capitalists are involved,but the Party does not believe that capitalists run theireconomy. In recent years, China has renewed its supportfor state-owned enterprises in sectors consideredimportant to "economic security," explicitly looking tofoster globally competitive industries.

All the CIS countries, from the beginning of theirsovereign existence, faced the necessity to find theirown way. Major aspects of structural economy are similarin all the countries. Macroeconomic conditions, theirsocial adaptation level, resources and manageability aredifferent. Countries like Armenia, Kyrgyzstan, Republicof Moldova and Russian Federation have undertakenradical reform process and we can see active stateparticipation in institutional reforms and marketinfrastructure. Countries like Belarus, Kazakhstan andUkraine opted for gradual reform process. In countrieslike Azerbaijan, Georgia and Tajikistan, exacerbation ofinternal political struggle did not allow the start or forcedto suspend reform process. Following the recovery fromRussian financial crisis in 2008, the countries of CISenjoyed robust economic growth. From 2000 to 2008,economies of CIS countries grew by an average rate of6%. This was result of the transition process leading tomacro-economic stability, drastic cuts in the publicexpenditure combined with improvement in fiscaldiscipline and tax reforms, Energy Exports ( in case ofRussia, Kazakhstan and Azerbaijan), improved economicfreedom, relatively free labor markets and implementationof structural reforms (Ander Aslund and NazgulJenign).Also, CIS countries are less integrated to world economicsystem than desired.



Differences between successor countries of theformer USSR in their reform strategies andoutcomes

Initially all major CIS countries adopted Russian Modelof ‘Shock Therepy’, which was either voluntarily adoptedby them or involuntarily forced on them. Governments ofBelarus, Kazakhstan, Turkmenistan, Ukraine andUzbekistan concentrated their efforts on theestablishment of national state institutes and politicaland economic management structures, development ofeconomic reforms base, reforming the manufacturingindustries structure and preparing for conditions of crisisrecovery. These countries basically rejected the standardprograms of IMF. Kyrgyzstan and Moldova, havingselected a principally different way, were guided by theIMF regulation from the very beginning. The initial financialdestabilization and hyperinflation has escalated the crisisin the real sector of the national economies of CIScountries resulting in reduction or significant retardingof market reforms in CIS countries. As a result, reductionof state controls in the economy & privatization wasbasically stopped in Belarus, Moldova and Ukraine. InArmenia, Azerbaijan and Georgia, partial privatizationtook place. “Voucher” privatization was fully rejected inUzbekistan and was not completed in Kazakhstan andKyrgyzstan. As a result, CIS countries have reachedand stayed at different trajectories of economic reformsand economic mechanisms formation. Differences inmodels and scenarios have eventually resulted in unevenrates of reform, scope of economic liberalization andmechanisms for economic regulation.

Economic Challenges - China and SuccessorCountries of USSR

The important challenges for the Chinese economyinclude forth coming demographic crisis; limits of‘extensive growth’ and export led growth; overcoming

ecological, social and urbanization barriers; reducing itshigh domestic savings rate and correspondingly lowdomestic consumption; facilitating higher-wage jobopportunities for the aspiring middle class, including ruralmigrants and increasing numbers of college graduates;reducing corruption and other economic crimes; andcontaining environmental damage and social strife relatedto the economy's rapid transformation.

On the other hand, the important economic challengesahead for the successor countries of USSR include,overcoming slow and fragile economic growth; reducingthe external debt burden; stabilizing the volatilecommodity markets; handling inflationary pressure;improving business climate and governance; avoidingmarginalization in global economy and getting rid ofunsustainable welfare state model.

References :

1. The World Bank. (1996). World Development Report1998: From Plan to Market, Oxford University Press.

2. Wang Zengyi, Understanding Transition in China:Democratic Tensions, Institutional Adjustment andInternational forces. Princeton University Press.

3. Kotz, David. Lessons from the Economic Transitionin Russia & China.(2000). Political Economy andContemporary Capitalism: Radical Perspectives onEconomic Theory and Policy. Sharpe, 2000.

4. Willam Davidson Institute Report, based on OECDEconomic Outlook, July 2001.

5. EBRD Transition Report 2001, 2002 & 2010.

6. Human Development Report. UNDP. 2013.

7. Ander Aslund and NazgulJenign, “ The EurasianGrowth Paradox”, Institute for InternationalEconomics, Working Paper No 06-5.



SERVICE QUALITY OF PUBLIC SECTOR BANKS IN TAMILNADU:

AN EMPIRICAL STUDY

V.Prabakaran1 Dr.P.Krishnaveni2

Abstract

Service quality is the key term to be successful in this competitive environment. The service quality influences the

customer value and satisfaction which leads to customer loyalty. The perception of service quality various person to

person and it is having a high potential to make decisions and deliver values to the customers. The purpose of this

study is to check the service quality of the public sector banks located in Tamilnadu and also to check the influencing

factors for using internet banking provided by the public sector banks. 300 samples from all over Tamilnadu covering

major cities like, Coimbatore, Chennai, Madurai, Salem and Trichy were collected and analyzed by using exploratory

factor analysis. Servequal model suggested by Parasuraman was adopted in this study to check the service gap

between customers’ expectation and perception. The five dimensions of service quality were analyzed individually

and the improving factors were discussed in this study.

Keywords : Service Quality, Servequal, Public Sector Banks, Internet Banking

1. Assistant Professor, Department of Management Studies, Saravanampatti, Coimbatore.2. Assistant Professor, Department of Management Studies, Saravanampatti, Coimbatore.

Introduction

The Indian banking system initiated its operation during18th century with the establishment of General Bank ofIndia in 1786. During post liberalization, the bankingterminologies and its operations have changedtremendously towards their customer satisfaction. Today,bank is playing an important role on every individual’slife. They cater the needs of retail investors, agriculturist,industrialist and other sections of the society. As of now,27 public sector banks, 31 private sector banks and 38foreign banks are available in India. Though plentynumber of banks available in India, the public sectorbanks always dominates. This is due to the low lendingrate as they have back up of government authorities.Besides getting the loan at cheaper interest rate, thereis an element of security and trust that has made thepublic sector banks a hit among the people. Even afterso many private players in the market, the public bankshave posted huge profits and are also looking forexpansions in the country and in abroad as well.

Statement of the problem

In the ear of dynamic business environment, a healthyas well as balanced environment is must to have aconsistent economic growth and prosperity in the fieldof finance. In this competitive environment, banksgenerate revue through the products and servicesrendered to their customers. At today’s scenario, thelife of any banks depends upon their customersatisfaction and its ability to compete their competitor.Since the customers taste and preferences keepchanging, the banking sector needs to concentrate onthe service quality in order to retain their existing

customers. By considering this scenario, the study

aimed to analyse the service quality of public sector

banks located in Tamilnadu.


Service quality can be defined as the difference between

the expectation of the customers and their perception.

If expectations overtook, it leads to customer

dissatisfaction, Parasuraman et al., (1985). Delivering

high quality services lead to customer satisfaction and

customer loyalty, Gronroos (2000). Private bank

customers in Erode district having the higher perception

of tangible factors and low in product variety,

Dharmalingam.S, Kanna.K.V (2011). Hasra, S.G. and

Srivastava, B.L. (2009) suggested that, the bank should

pay attention to the dimension of service quality and

pay more attention to dimension of assurance-empathy

to increase loyalty to a company. Poor service quality

is existed in public sector banks, because of the

deficiency in tangibility factors, lack of responsiveness

and empathy, as said by Sudesh (2007). The

performance of the new generation banks is better in

terms of service quality than the old generation banks,

Joshua, A.J. et al.(2005).


After reviewing the above literature, this study is aimed

to check the service quality of public sector banks located

in Tamilnadu, by identifying the customers’ expectations

and perception of banks they associated with. Also this

study intended to check the influencing factors for using

internet banking service provided by public sector banks.




Tamilnadu is one of the Banking hubs in this country. As of March 2014, 8841 commercial banks are available inTamilnadu which is the research area for this study. The researcher have taken 300 samples from all over the statecovering major cities like, Coimbatore, Chennai, Madurai, Salem & Trichy. The convenient method of sample collectionand its data were analyzed by using exploratory factor analysis.

Numerous models have been proposed by many researchers in this concept. One such model is “servequal model”proposed by Parasuraman, is the famous and most acceptable model to test the service quality of a serviceindustry. It has five dimensions, as listed below.

Tangibles: Physical facilities, equipment and appearance of employees.

Reliability: Ability to perform the promised service dependably and accurately.

Responsiveness: Willingness to help customers and provide prompt service.

Assurance: Knowledge and courtesy of employees and their ability to inspire, trust and confidence.

Empathy: Caring and individualized attention that the firm provides to its customers.

Analysis

Respondents’ Profile

A sample of 300 respondents was selected for this study. Their demographic profiles were analyzed and listed below.

Table - 01 : Demographic Profile of the Respondents

Variable Category No. of respondents Percentage

Age < 20 yrs 0 0

21 to 25 yrs 66 22.0

26 to 30 yrs 126 42.0

> 30 yrs 108 36.0

Occupation Government Employee 46 15.3

Private Employee 66 22.0

Business Man/Women 91 30.3

Others 97 32.3

Education SSLC 0 0.0

HSC 18 6.0

UG Degree 90 30.0

PG Degree 144 48.0

Others 48 16.0

Type of account Savings Bank 300 100.0

Current Account 0 0.0

Frequency of visiting the bank Daily 0 0.0

Weekly 0 0.0

Monthly 96 32.0

Occasionally 204 68.0

Frequency of using Internet banking Daily 0 0.0

Weekly 42 14.0

Monthly 150 50.0

Occasionally 108 36.0



Income per month < Rs.5000 0 0.0

5000 to 10000 0 0.0

10000 to 15000 78 26.0

> 15000 222 74.0

Holding Period of account < 1 yr 0 0.0

1 to 3 yrs 180 60.0

> 3 yrs 120 40.0

The above table shows the demographic profile of the respondents selected for this study. Most of the respondentsare in the age group between 20yrs to 30yrs and also employed in private companies or doing their own business.All the respondents were having saving account with the public sector banks and with available of latest technology,the frequency of customers visiting the bank starts coming down; instead, they use internet banking and mobilebanking.

Factor influencing the usage of Internet Banking

The study has used 11 factors to check its influencing level in using internet banking. All the 11 factors weregrouped with the use of factor analysis and the different dimensions were tabulated below.

Table - 02 : Influencing factors for I Banking

S.No Customer Preference Quantity Percentage

1 View transaction details & pay bill 222 74.0

2 Fund Transfer 174 58.0

3 Safety 114 38.0

4 Reduce paper work 108 36.0

5 Email/SMS alert from Bank 102 34.0

6 Convenient 138 46.0

7 Transaction speed 126 42.0

8 Efficiency 108 36.0

9 Effectiveness 96 32.0

10 Ubiquity 120 40.0

11 24X7 operating time 192 64.0

Table - 02 : Influencing factors for I Banking

Factor 1 2.023 18.395 18.395 View transaction details, pay bill, Email/SMS

alert from Bank & Convenient

Factor 2 1.593 14.479 32.874 Safety

Factor 3 1.515 13.771 46.645 Transaction speed

Factor 4 1.379 12.534 59.178 Efficiency, Effectiveness & 24X7 operating time

Factor 5 1.057 9.609 68.787 Reduce paper work & Ubiquity

Factor 6 1.032 9.380 78.167 Fund Transfer

Dimension /

Factor

Eigen

Values

Percentage of

Variance

Cumulative

PercentageVariables



From table 2 it is inferred that, most of the customers preferred internet banking for their online transaction and topay their bills. They feel comfortable in internet baking as it is available on 24x7 and also they feel it’s secure andconvenient than visiting a bank. All the 11 variables were grouped by using the factor analysis and narrow down tofive factors where their eigen values are greater than 1.

Service Gap Analysis

By using servequal model, 16 variables were selected for this study and the customers’ expectation and perceptionwere collected and analyzed by using simple average and standard deviation tools. The mean value can be interpretedas, higher the mean value higher the expectation or experience level of the respondents.

Table - 04 : Service Gap Analyses

1 Ambience 3.1 3.2 -0.1

2 Neat appearance of staff 4.2 4.0 0.1

3 Communication materials 4.1 3.2 0.9

4 Service delivery 3.6 3.2 0.4

5 Empathy 3.4 3.1 0.2

6 Error free service 3.0 2.9 0.2

7 Exact time of delivery info 4.2 3.4 0.8

8 Genuine service 4.0 3.5 0.5

9 Help customer in usage 4.5 3.4 1.1

10 Never be busy to respond 4.2 3.1 1.1

11 Consistent courteously 4.2 3.2 1.0

12 Safe service 4.7 3.9 0.7

13 Service knowledge 4.4 3.8 0.6

14 Individual attention 4.0 3.1 0.8

15 Convenient operating time 3.3 3.0 0.3

16 Specific needs to be understood 3.9 3.4 0.4

S.No VariableExpectation Experience Difference in

MeansMean Mean

From the above table it is understood that, service gap is prevailing in helping customers, responsiveness and beingconsistency in courteous. The customers’ expectations are high in those factors but the public sector banks arelagging to fulfill the customers’ requirement. Customers are almost happy with the ambience, error free service andbanks operation timing.

Customer Satisfaction Level

The below table shows the satisfaction level of respondents which was found by calculating the difference betweenthe expected and experience level of 300 respondents individually. If the cumulative value of expectation levelexceeds experience level, then the respondent is classified as non satisfied customer and vice versa.

Table - 05 : Customer Satisfaction Level

S.No Particulars Quantity Percentage

1 Satisfied Customer 69 23.0

2 Unsatisfied Customer 231 77.0



From the above table, it is inferred that, only 23% of therespondents were happy with the service provided bythe public sector banks. The requirements of remaining231 respondents are not fulfilled by the banks.

Conclusion

This paper made an attempt to check the service qualityof Indian public sector banks located in Tamilnadu.Samples of 300 respondents were collected andanalyzed by using exploratory factor analysis and thecustomer satisfaction levels were tested. As saying goes,technologies rule the market. Nowadays, the banks areequipped with modern equipments for their operations,displaying modern materials to their customers.According to this study, the dimensions of service qualitylike tangibles, reliability and empathy are almost meetingthe customers’ expectations. The other two dimensionslike responsiveness and assurance were not meetingthe customers’ expectations. More specifically, thecustomers were not happy with the helping tendency ofthe bank employee, responsiveness and consistency inbehavior. This study suggested the public sector banksto concentrate on employees’ attitude building andwillingness to help in order to increase the service qualitylevel. Promptness in delivery and guiding the customersare the key factors which increase the service quality ofa bank.

References

1. Dharmalingam, S. & Kannan, K.V. (2011), “Customerperception of service quality of private sector banksn Tamilnadu-An empirical study”, Journal of BankingFinancial Services & Insurance Research, 1 (5), 39-49.

2. Gronroos, C. (1984), ̀ `A service quality model andits market implications”, European Journal ofMarketing, 18(4), 36-44.

3. Joshua, A.J., Moli, V. & Koshi, P. (2005),“Expectation and perception of service quality in oldand new generation banks”, Indian Journal ofMarketing, 37(3), 18-25.

4. Mubarak Ali, E., David Sam Jaykumar, G.S. &Senthil, P.L. (2011), “Service Quality of Indian Bankin Thanjavur District: Evidence from Survey Data”,10 (2), 77 – 95.

5. Parasuraman, A., Zeithaml, V.A & Berry, L.L. (1985),“A Conceptual Model of Service Quality and ItsImplications for Future Research”, Journal ofMarketing, 49(4), 41-50.

6. Parasuraman, A., Zeithaml, V.A. & Berry, L.L. (1988),“SERVQUAL: A Multiple Item Scale for MeasuringCustomer Perceptions of Service Quality”, Journalof Retailing, 64(1), 12-40.

7. Parasuraman, A., Zeithaml, V.A. & Berry, L.L.(1991a), “Understanding Customer Expectations ofServices”, Sloan Management Review (Spring),32(3), 39-48.

8. Parasuraman, A., Zeithaml, V.A. & Berry, L.L.(1991b), “Refinement and Reassessment of theSERVQUAL Scale”, Journal of Retailing, 67(4), 42-50.

9. Parasuraman, A., Zeithaml, V.A. & Berry, L.L. (1994),“Alternative Scales for Measuring Service Quality: AComparative Assessment Based on Psychometricand Diagnostic Criteria”, Journal of Retailing, 70(3),210-230.

10. Sandip Ghosh Hazra & Kailash B.L. Srivastava.(2009), “Impact of service quality on customer loyalty,commitment and trust in the Indian banking sector”The IUP Journal of Marketing Management, 3(3&4),75-95.

11. Sudesh. (2007), “Service quality in banks-A studyin Haryana and Chandigarh”, NICE Journal ofBusiness, 2(1), 55-65.

12. Wisniewski, M. & Donnelly. (1996), “MeasuringService Quality in Public Sector: The Potential forSERVQUAL”, Total Quality Management, 7(4), 357-365.

13. State Level Bankers Committee, Tamilnadu,accessed on 13.05.15 <http://www.slbctn.com/Banking_Details.aspx>



COMPARATIVE STUDY ON THE FINANCIAL LITERACY AMONG

THE YOUTH IN BANGALORE AND COCHIN

Vinnarasi B1

Abstract

The lack of financial knowledge and skills was the core reasons that lead to the economic and financial crisis in 2008.

The financial crisis has highlighted the need for strengthened financial knowledge. Over the recent years, financial

landscape has changed considerably in our country. Financial landscape has become complex over the past few

years with the introduction of many new financial products. In order to understand risk and return associated with these

products, a minimum level of financial literacy is a must. Financially literate individuals can make effective use of

financial products and services. They can sail through tough financial times because of the fact that they might have

accumulated savings, purchased insurance and diversified their investments. Financial literacy aids in improving the

quality of financial services and contribute to economic growth and development of a country. So, this research

focuses on measuring the financial literacy among youth in Bangalore and Cochin.

Keywords : Finance, Financial Literacy.

1. Department of commerce, Christ University, Bangalore.

Introduction

Finance can also be defined as the science of money

management. A key point in finance is the time value of

money, which states that purchasing power of one unit

of currency, can vary over time. Finance aims to price

assets based on their risk level and their expected rate

of return. The Organization for Economic Co-operation

and Development (OECD) has defined financial literacy

as “a combination of awareness, knowledge, skill,

attitude and behavior necessary to make sound financial

decisions and ultimately achieve individual well-being”.

It is the ability to make informed judgment and to take

effective decisions regarding the use and management

of money. It includes the ability to discern financial

choices, discuss money and financial issues without

discomfort, plan for the future and respond competently

to life events that affect every day financial decisions,

including events in the general economy. A person is

known as financial literate if he/she is able to manage

his/her personal finance in life and changing society in

order to which he/she must achieve necessary

perception, develop his/her skills in this area and be

able to understand the impact of individual's financial

decisions on his/her own, others and the environment.

Gaining an in-depth understanding of financial concepts

will help students to develop an insight through which

financial problems can be evaluated and gives focus on

those critical aspects that have not been discerned

previously. As a result, students will be able to see

financial problems and situations in a new light and learn

how to make sound financial decisions. From a regulatory

perspective, financial literacy empowers the common

person and thus reduces the burden of protecting the

common person from the elements of market failure and

information asymmetries. There are three primary

benefits to being financially literate. Financial literacy

plays a key role in preventing individuals from becoming

involved with fraudulent financial transactions or engaging

in financially destructive behaviour.

Financial?literacy?is?advantageous?for?wealth

preservation.?People who are financially literate tend to

better financial planners even for their future retirement

planning, accumulating wealth and avoiding debt. People

who have financial literacy tend to be wealthier than those

who do not. They are able to understand macroeconomic

problems and make informed decisions related to fiscal

and monetary policies than an electorate who has not

undergone financial education.

In India the levels of financial literacy is very low. A big

improvement in financial knowledge of individuals is

necessary. This is possible with appropriate financial

education programs targeted at right people at right time.

For financial education to be effective we must know the

level of financial knowledge, attitudes and behavior.

The average age of an Indian in 2020 is expected to be

29 years. This would be the major working class which

will generate income, save and create demand for

products and services. As the youth population in Indian

economy is high, it is necessary to create awareness

among them about the significance of financial literacy.

Bangalore and Cochin having high young demographic

dividend and socio economic diversity in south India

should undergo researches in this topic.



Financial Literacy

The Organization for Economic Co-operation andDevelopment (OECD) has defined financial literacy as“a combination of awareness, knowledge, skill, attitudeand behavior necessary to make sound financialdecisions and ultimately achieve individual well-being”.It is the ability to make informed judgment and to takeeffective decisions regarding the use and managementof money. More specifically, it is the ability to read,analyze, manage, and communicate about the personalfinancial conditions that affect material well-being. Itincludes the ability to discern financial choices, discussmoney and financial issues without discomfort, plan forthe future and respond competently to life events thataffect every day financial decisions, including events inthe general economy.

Financial literacy can broadly be defined as the capacityto have familiarity with and understandings of financialmarket product especially rewards and risk in order tomake informed choices. Viewed from this standpoint,financial literacy primarily relates to personal financialliteracy to enable individuals to take affective actions toimprove overall well-being and avoid distress in mattersthat are financial. Financial literacy helps individuals toimprove their level of understanding of financial matterswhich enables them to process financial information andmake informed decisions about personal finance.Financial literacy is directly related to the well-being ofindividuals. Previous research suggests that those withlow levels of financial literacy, faces problems with issuesrelating to personal finance such as savings, borrowings,investments, retirement planning etc.

Need for Financial Literacy

The need for financial literacy is felt in the developedand the developing countries alike. In the developedcountries, the increasing number and complexity offinancial products, the continuing shift in responsibilityfor providing social security from governments andfinancial institutions to individuals, and the growingimportance of individual retirement planning make itimperative that financial literacy be provided to all.

In the developing countries also, the increasingparticipation of a growing number of consumers in newlydeveloping financial markets will necessitate the provisionof financial literacy – if these markets are to expand andoperate efficiently. In addition, the substantial growth ofinternational transactions during the last decade,resulting from new technologies and the growinginternational mobility of individuals, makes theimprovement in financial literacy, increasingly, aninternational concern. So, financial literacy is the processby which investors improve their understanding offinancial markets, products, concepts and risks.

Over the recent years, financial landscape has changedconsiderably in India. Financial landscape has becomecomplex over the past few years with the introduction ofmany new financial products. In order to understand riskand return associated with these products, a minimumlevel of financial literacy is a must. Financially literateindividuals can make effective use of financial productsand services; will not get cheated by people sellingfinancial products not suited for them. Financial literacyaids in improving the quality of financial services andcontribute to economic growth and development of acountry.

Financial literacy is important for several reasons.Financially literate consumers are able to sail throughtough financial times because of the fact that they mighthave accumulated savings, purchased insurance anddiversified their investments. Financial literacy is alsodirectly correlated with positive financial behaviour suchas timely payment of bills and loan installments, savingbefore spending and using credit card judiciously.


Dahlia Ibrahim, (2009). It was studied that majority ofstudents do not practice proper money managementskills. Interest in exploring the issues of personal finance,particularly money management, has tremendouslyincreased in recent years due to the society’s awarenesson its importance. This research stresses on theimportance of financial literacy among students, bylooking into the student’s background, financial attitude,financial knowledge and family.

Mohamed E., (2013), this paper examined financialliteracy and its relation to different forms of personaldebt. Questionnaires were distributed to a convenientsample of 412 individuals working for serviceorganizations and residing across the UAE and weresubjected to descriptive statistics, reliability analysis,and t-tests. A person’s ability to manage his personalfinance has become an important issue in today’s world.They no longer look at only short-term financial affairs(such as money savings and borrowings) but also long-term prospects. The results indicate that the averagelevel of financial literacy in UAE is below the averagelevel and that individuals with strong financial attitudetend to borrow less from credit cards.

Trent W. Maurer, (2011), this project compares thelearning gains from teaching financial literacy skills toundergraduate students through two methods: traditionalclassroom instruction and peer financial counseling.Students at a south eastern university were giveninstruction through either a semester-long course onfamily economics (N = 78) or a one-hour peer led session(N = 149). Pre-test and Post-test were done to makethe analysis. Comparisons of post-test learning revealed



similar gains between the two methods on plannedfinancial behaviors. Results suggest additionalinvestigation to explore peer financial counseling forteaching financial literacy skills may be warranted.

Bryce L. (2010), this research tries to examine thefinancial literacy of the youth and the role of the parentsin influencing the young adults’ financial knowledge,attitudes and behaviors. The college student financialliteracy survey, consisting of 44 questions each wastaken from 420 college students from Tennesse, Nevada,Oklahoma, South Dakota, Idaho and Virginia. This testshowed that parental influence was significant in thefinancial attitude but did not have any effect over thefinancial knowledge and at the same time had an indirectinfluence on the financial attitude.

Mohamad. (2010), this study aims to find the relationshipof savings behavior and financial problems to the financialliteracy, among college students in Malaysia. Resultsdemonstrated that students who had higher financialknowledge test scores were more likely to report savingsbehaviour and also reported fewer financial problems.The influence of childhood consumer experience andfinancial socialization agents on savings and financialproblems was more mixed, indicating that financialexperience before college may create bad habits or poorattitudes toward financial management that could bemitigated through financial education during college.

Bart, (2014), this paper examines the impact of financialexperience on financial literacy. Exploiting a uniquefeature of New Zealand, whereby domestic students canobtain interest-free student loans and can fully participatein the national retirement scheme while internationalstudents cannot, authors employ an instrumentalvariables approach to identify the causal effect of financialexperience on financial literacy. A survey was conductedon a sample of 338 business students and it was foundthat there is a positive and causal effect of financialexperience on financial literacy. The results haveimportant implications for financial educationprogrammes and may explain why many of theseprogrammes to date have had limited success.


1. To know the level of financial literacy in Cochincompared to that in Bangalore amongst collegestudents.

2. To know the level of financial confidence in Cochincompared to that in Bangalore amongst collegestudents.

Methodology

The data has been sourced from both primary andsecondary sources. Primary data was collected in theform of questionnaires to the undergraduate students.

The questionnaire was a structured questionnaire basedon the “Survey of Personal Financial Literacy amongCollege Students in JumpStart” (Mandell, 2008) and thethree questions developed by Lusardi and Mitchell (2006).They encompass a number of concepts, includingfinancial awareness and knowledge, financial skills andfinancial capability. Secondary data was sources fromvarious journals, articles, conference proceedings,surveys and from the internet.

Sample size : The sample size was 200. Of which 100students each from Cochin and Bangalore. From the100 students, 50 students each from two colleges wereselected. The other 100 samples were also selected inthe similar lines.

Sampling technique : The colleges were selected onthe basis of stratified random sampling, thus two collegesfrom each city was selected. Further random samplingwas used to select 50 students from each of the fourcolleges selected.

Tool for analysis : Mean and Standard deviation wasused along with independent samples t-test toinvestigate the mean difference between students whoanswered correctly on financial literacy questions in theBangalore and that in Cochin.

Data Analysis

First, results of three questions developed by Lusardiand Mitchell (2006). The precise wording of the threebasic financial literacy questions used in this study isas follows:

Compound Interest Rate

Suppose you had Rs.100 in a savings account and theinterest rate was 2% per year. After five years, how muchdo you think you would have in the account if you leftthe money to grow?

a. More than Rs.102 (correct answer)b. Exactly Rs.102 c. Less than Rs.102

Inflation

Imagine that the interest rate on your savings accountwas 1% per year and inflation was 2% per year. Afterone year, how much would you be able to buy with themoney in this account?

a. more thanb. exactly the same asc. less than (correct answer)

Risk Diversification

Do you think that the following statement is true or false?“Buying a single company stock usually provides a saferreturn than a stock mutual fund.”

a. Trueb. False (correct answer)



Responses for each question were re coded into a dichotomous variable where, value of 0 was assigned for incorrectresponse and 1 for correct response. This study found significant differences between the Bangalore and Cochinstudents (Table 1): The proportion of the Bangalore students who correctly answered the Compound interest ratequestion was 82 percent (SD =.335) compared to 76 percent of Cochin students (SD = .477), with t-value = 6.453where p value was statistically significant (<.01);

The proportion of Bangalore students correctly answered the Inflation question was 60 percent (SD = .437) comparedto 44 percent of Cochin students (SD = .500), with t-value = 6.750 where p value was statistically significant (<.01).

The proportion of the Bangalore students who answered correctly for the Risk diversification question was 74percent (SD = .332) compared to 62 percent of Cochin students (SD =.495), with t-value = 8.547 where p value wasstatistically significant (<.01). Although both the Bangalore and Cochin students were expected to show higherperformance on these three basic questions, the Bangalore students achieved better results in contrast with theCochin counterparts.

Table - 1 : Showing the financial literacy score between Bangalore and Cochin

Group Place N Answered Mean SD t-Value

Variables Correctly

Compound Bangalore 50 41 .872 .335 6.453**

Interest Cochin 50 38 .652 .477

Bangalore 50 30 .744 .437 6.453**

Inflation Cochin 50 22 .474 .500

Risk Bangalore 50 37 .875 .332 8.547**

Diversification Cochin 50 31 .578 .495

Next, differences of means for the seven Jump$tart questions between the Bangalore and Cochin were analyzed(Tables 2A to 2F) through the independent samples t-test. Responses for each of seven questions were coded intore-coded into a dichotomous variable, where value of 0 was assigned for incorrect response and 1 for correctresponse, the Bangalore college students who participated in this study demonstrated a significantly betterachievement in answering questions correctly in Jump$tart compared to the Cochin students.

For the Family Budget question (Table 2A), the Bangalore students outscored Cochin counterparts. Approximately56 percent of the Bangalore students answered correctly, compared to 50 percent by Cochin students. There wasstatistically significant difference between the Bangalore and Cochin (Bangalore: mean = .773, SD = .419; Cochin:mean = .647, SD = .479; t-value 3.318 where p-value statistically significantly at .05 level).

Q. Suresh just found a job with a take-home pay of Rs.2000 per month. He must pay his monthly expenses up toRs.1850. how long will it take him to accumulate savings of Rs.600?

Table - 2A : Comparison of financial literacy (Jump$tart): family budget

Alternatives Bangalore Cochin t- value

N(Mean) %(SD) N (Mean) %(SD)

1. One months 2 .8 7 2.8

2. Two months 5 7.8 12 13.0

3. Three month 15 13.9 6 18.6

4. Four months 28 76.7 25 65.6

(Correct Answer)

Answer in alternatives (.773) (.419) (.647) (.479) 3.318*

coded as 0 if wrong,

1 if correct

Note : * indicate that the difference is significant at 5-percent



For the Savings and Retirement question, the gap between the Bangalore and Cochin was statistically significant (t= 2.283 where p-value was statistically significant at .05 level). Approximately 60 percent of the Bangalore studentsanswered correctly, compared to 50 percent by Cochin students (Table 2B).

Q. Robin and Liza are the same age. At age 25, Liza began saving Rs.2000 a year while Robin saved nothing. Atage 50, Robin realized that he needed money for retirement and started saving Rs.4000 per year while Liza keptsaving her Rs.2000. Now they are both 75 years old. Who has the most money in his or her retirement account?

Table -2B : Showing the Comparison of financial literacy (Jump$tart): savings for retirement

Money Management: The independent samples t-test shows that there was a statistically significant differencebetween the Bangalore (mean = .724, SD = .448) and Cochin with (mean = .184, SD = .388) in their response to theMoney Management question, with t =14.783 where p-value was statistically significant at .01 level (See Table 2D).Approximately a half of cochin respondents answered that invested stock was the least beneficial when they needmoney right away when the correct response was down payment on house, which could be because of lack ofclarity with regard to down payment of the houses.

Q. Many people put aside money to take care of unexpected expenses. If Hari and Meera have money put aside foremergencies, in which of the following forms would it be of LEAST benefit to them if they needed it right away?

Table - 2C : Comparison of financial literacy (Jump$tart): money management

1. Invested in a down payment 30 60 10 20on the house (Correct Answer)

2. Stocks 14 28 25 50

3. Savings account 4 8 10 20

4. Insurance 2 4 8 16

Answer in alternatives coded (0.724) (.448) (.184) (.388) 14.783*as 0 if wrong , 1 if correct

Note : *, ** indicate that the difference is significant at 5-percent and 1-percent levels, respectively.

AlternativesBangalore Cochin t- value

Protecting Family Savings : It was observed a significant difference between the Bangalore and Cochin in terms ofhow they answered the Protecting Family Savings question (Table 2B; Bangalore: mean = .403, SD = .491; Cochin:mean = .150, SD = .357; t =6.567 where p-value was statistically significant at .01 level). It was interesting to notethat over 50 percent of college students in Cochin believed a certificate of deposit at bank would protect the

1. They would each have the 15 30 10 20same amount because theyput away exactly the same

2. Robin, because he saved 2 4 8 16more each year

3. Liza, because she has 3 6 7 14put away each year

4. Liza, because her money 30 60 25 50has grown for a longertime at compound interest(Correct Answer)

Answer in alternatives (.595) (.492) (.498) (.501) 2.283*coded as 0 if wrong , 1 if correct



N(Mean) %(SD)N(Mean) %(SD)




purchasing power of a family’s savings better than a house financed with a fixed-rate mortgage. Forty percent of theBangalore students answered this question correctly.

Q. Which of the following types of investment would best protect the purchasing power of a family’s savings in theevent of a sudden increase in inflation?

Table - 2D : Comparison of financial literacy (Jump$tart): protecting family savings

Regarding the safest place to save money, the difference between the Bangalore and Cochin was statisticallysignificant (Bangalore: mean = .928, SD = .260; Cochin: mean = .795, SD = .404; t-value = 4.770 where p-value wasstatistically significant at .01 level). Though 80 percent of Cochin students correctly answered the question, 5percent, or roughly one of 20 Cochin students believed that saving with herself as the safest place to save money.

Q. Malini has saved Rs.12,000 for her college expenses by working part-time. Her plan is to go for higher studiesnext year and she needs all of the money she saved. Which of the following is the safest place for her collegemoney?

Table - 2E : Comparison of financial literacy (Jump$tart): safest place to save money

1. A 10-year bond issued by a 8 16 10 20corporation/ post office

2. A house financed with fixed 20 40 8 16interest rate (Correct Answer)

3. A certificate of deposit at 15 30 25 50Bank

4. Bullion 7 14 6 12

Answer in alternatives coded as (.403) (.491) (.150) (.357) 6.567**0 if wrong , 1 if correct



The independent samples t-test shows that there was a statistically significant difference between the Bangalore(mean = .370, SD = .483) and Cochin (mean = .132, SD = .339) in their response to the question about Savings forChildren, with t = 6.295 where p-value was statistically significant at .01 level.

Q. Mukesh and Jyoti had a baby. They received money as baby gifts and want to put it away for the baby’seducation. Which tends to have the highest growth over periods of time as long as 18 years?

1. Save it with herself 1 2 4 8

2. Stocks 1 2 1 2

3. Corporate bonds 4 8 5 10

4. A bank savings account 44 88 40 80(Correct Answer)








Table - 2F : Comparison of financial literacy (Jump$tart): savings for children

1. Stocks (Correct Answer) 19 38 8 16

2. A government savings bond 23 46 9 18

3. A savings account 8 16 33 66





The first research question explores whether the level of financial literacy in Cochin was low compared to that in theBangalore amongst college students. As presented in Table 1 and Tables 2A to 2F, we observed relatively low levelsof financial literacy in Cochin compared to that in Bangalore amongst selected college students.

Confidence

While 82.8 percent of the Bangalore students believed they were well prepared to make their own financial decisions,only 61.5 percent of Cochin students felt confidence in making their own financial decisions (See Table 3A).

It was observed a significant difference between the Bangalore and Cochin in terms of their confidence to make ownfinancial decisions, with t-value 5.793 where p-value was statistically significant at .01 level.

Table - 3A : Table showing confidence in making financial decisions: Bangalore vs. Cochin

I am well Bangalore 9 18 41 82 1.828 .378 5.793**

prepared to

Make financialChina 19 38 31 62 1.618 .487decision on

my own.

Note. *, ** indicate that the difference is significant at 5-percent and 1-percent levels, respectively.

Group

Variables

Strongly

disagree Or disagree

N %

Agree Or Strongly

Agree

N %

Mean SD t- value

“Strongly disagree” and “Disagree” were coded as 1. “Agree” and “Strongly agree” were coded as 2.

Further analysis revealed that there was no statistically significant difference between those who were confidentand those were less confident in making financial decisions in answering correctly financial literacy questions (ninequestions, maximum points = 9) in the Bangalore sample (mean of confident = 6.394; mean of less confident =6.017; t = 1.535) and in cochin sample (mean of confident = 4.119; mean of less confident = 4.148; t = -.118). SeeTable 3B. The Bangalore students in this study, regardless of their confidence level, scored significantly higher onthe financial literacy test compared to Cochin students.

Table - 3B : Showing scores of students confident in making financial decisions andscores of students less confident in making financial decisions

Place Level of confidence N Mean SD t-value

Bangalore Confident 42 6.394 1.745 1.535

Less Confident 8 6.017 1.603

Cochin Confident 32 4.119 1.547 -.118

Less Confident 18 4.148 1.430

Note : *, ** indicate that the difference is significant at 5-percent and 1-percent levels, respectively. Scores are calculated by

adding the number of correct response for the ten financial literacy questions. Thus, maximum score is 10.



From the above table it is inferred that Bangalore students who were confident in making financial decisions comparedto Cochin.

Table - 3C : Showing financial literacy at different confidence levels in making financial decisions:scores of Bangalore students vs. scores of Cochin students in making financial decisions

Bangalore Cochin t-value

N Mean SD N Mean SD

Confident 42 6.395 1.745 32 4.119 1.547 12.630**

Less 8 6.017 1.603 18 4.145 1.430 7.156**

Confident

Note : *, ** indicate that the difference is significant at 5-percent and 1-percent levels, respectively. Scores are calculated by

adding the number of correct response for the ten financial literacy questions. Thus, maximum score is 10.

Findings

• 82 percent of the Bangalore students correctlyanswered the Compound interest rate questioncompared to 76 percent of Cochin students. So theawareness about compound interest is average forboth the places, although compound interest beinga common terminology has comparatively lowawareness in Cochin.

• The proportion of Bangalore students correctlyanswered the Inflation question was 60 percentcompared to 44 percent of Cochin students, that isan average level of awareness for students inBangalore but comparatively low level for Cochinstudents.

• The proportion of the Bangalore students whoanswered correctly for the Risk diversification questionwas 74 percent compared to 62 percent of Cochinstudents.

• Although both the Bangalore and Cochin studentswere expected to show good performance on thesethree basic questions, the Bangalore studentsachieved better results in contrast with the Cochincounterparts.

• Family Budgeting question was correctly answeredby 56 percent of the Bangalore students comparedto 50 percent of Cochin students. This questionincluded mathematical calculations and the conceptof financial planning in it.

• The Savings and Retirement awareness in Bangalorewas 60% and in Cochin was 50% among Cochinstudents. This was a numerical question that teststhe retirement savings planning under thecompounded interest concept.

• Money management skill can be found by the waythe various investment schemes are understood.Accordingly, 60% of the Bangalore students havebetter awareness compared to the 20% of the Cochinstudents.

• Protecting Family Savings under inflation situationsshowed that financial literacy with respect to thisconcept was just 40% in Bangalore and even lowerrate for Cochin students.

• The level of understanding relating to the safest placeto save money, 88% have a clear option that it issavings account and even Cochin students have 80%awareness.

• When the savings for children in the long run wasstudied, the stocks were least preferred by the Cochinstudents, however 38% of the Bangalore studentsconsidered the correct option as stocks.

• Out of the nine questions studied, the financial literacybetween Bangalore and Cochin showed thatBangalore students are having the higher financialliteracy when compared to the Cochin students.

• When the level of financial decision makingconfidence was studied,82% of the Bangalorestudents are confident compared to the 60% of theconfident students in Cochin.

Suggestions

Kerala being the most literate state in India, has relativelylow level of financial literacy in its commercial capitalcity Cochin compared to that of Bangalore. In order toincrease and maintain the level of financial literacy it isneeded to create a widespread awareness relating tothe same. For this the developed countries have certainorganizational bodies that carries out such awarenessprograms to ensure that their citizens don’t make a wrongfinancial decision due to lack of knowledge. Suchinitiatives have been taken by RBI in India, but it needsto be more widespread taking into consideration the vastpopulation. The campaigns for spreading awarenessabout financial inclusion and financial literacy need tobe intensified. This can be done through innovativedissemination channels including films, documentaries,pamphlets and road shows etc.



Conclusion

The lack of financial knowledge and skills was the corereasons that lead to the economic and financial crisis in2008. There is a growing body of literature documentingthe positive role financial education can play in improvingknowledge, retirement planning, spending, and savingsbehaviour, budgeting and use of credit card. Nearly halfof Cochin students in this study did not feel that theywere ready to make their own financial decisions. Theirlack of confidence in making financial decision wasreflected on their poor performance in the financial literacytest. What was even more alarming was that the Cochinstudents who were confident enough to make theirfinancial decisions demonstrated their poorunderstanding of financial knowledge, even lower thanthe Bangalore students with less confidence. Theirconfidence with no clear reasons may lead them tobecome victims of financial traps in the deregulatedfinancial markets where access to credit or money isjust a few clicks away. While it is generallyacknowledged that education holds the key to increasingfinancial independence and confidence in makingfinancial decisions.

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A STUDY ON FINANCIAL PERFORMANCE OF NEW GENERATION

PRIVATE SECTORS COMMERCIAL BANKS

1. Research Scholar, KKC College, P. Vellore, Namakkal.

Abstract

A bank is a financial institution that provides banking and other financial services to their customers.A bank is

generally understood as an institution which provides fundamental banking services such as accepting deposits and

providing loans. There are also non- banking institutions which provide certain banking services without meeting the

legal definition of a banks are a subset of the financial services industry. A banking system is also referred to as a

system provided by the bank which offers cash management, services for customers, reporting the transactions of

their accounts and portfolios throughout the day. Indian banking system for the past three decades has several

outstanding achievement to its credit. The most striking is its extensive reach. It is no longer confined to only

metropolitans or cosmopolitans in India.

T. Shahin Banu1

Introduction

The banking sector offers several facilities andopportunities to their customers. All the bankssafeguards the money and valuables and provide loans,credit and payment service, such as checking accounts,money orders and cashier’s cheques. The banks alsooffer investment and insurance products. In the early1990’s the then Narsimha Rao Government embarkedon a policy of liberalization and licensing a small numberof private banks. On the suggestions of Narsimhancommittee, the banking Regulation Act was amendedin 1993 and thus the gates from the new private sectorsbanks were opened. This came to be known as the newgeneration tech-savvy banks, and included Global TrustBank ( the first of such new generation banks to be setup), which later amalgamated with oriental bank ofcommerce, Axis Bank (earlier as UTI Bank), ICICI Bank,Development Credit Bank, IndusInd Bank, KotakMahindra Bank, Yes Bank and HDFC Bank. The privatesectors played a strategic role in the growth of joint stockbanks in India. The country is flooded with foreign banksand their ATM stations. Efforts are being put to give asatisfactory service to customers. Phone banking, Netbanking and machine deposit is introduced.

The private sector banks are always trying to innovatenew products avenues new schemes, services and makethe industries to achieve expertise in their respectivefields by offering quality service and guidance. Theyintroduce new technology in the banking service. Thus,they lead the other banks in various new fields forexample introduction of computerized operations creditcard business, ATM services. The banks that were underthe control of the private sector before the Second World

War have enormous experience and expertise under theirbelt. Also there were many foreign banks which werefunctioning under complete private ownership since the1950s. The prominent private sector banks had manyunique characteristics However, after the greatdepression, the government gave permission for privateentrepreneurs to set up private sector banks on a massivescale. These private sector banks can be broadlyclassified into two categories. They are follows;

Old Private sectors banks New Private sector banks

Old Private Sector Banks The old private sector bankswere those banks which were working in the privatesector before the great depression. The old private sectorbanks have been operating since a long time and maybe referred to those banks, which are in operation frombefore 1991.

These banks are more than 50 years old. The banks,which were not nationalized at the time of banknationalization that took place during 1969 and 1980,are known to be the old private sector banks. New PrivateSector Banks The new private sector banks are thosethat have come into operation very recently. The banks,which came in operation after1991, with the introductionof economic reforms and financial sector reforms arecalled as new private sector banks. Banking regulationact was then amended in 1993, which permitted the entryof new private sector banks in the Indian banking sector.However there were certain criteria set for theestablishment of the new private sector banks. The bankshould have a minimum net worth of 100 crores. Thepromoters holding should be a minimum of 25% of thepaid up capital. Within 3 years of the starting of theoperations, the bank should offer shares to public.



The new private sector banks that were established in the private sector after the Second World War actuallyescaped from the conditions of nationalization. There are seven new generation private sector banks in India. Theyare Axis Bank, Development Credit Bank, HDFC Bank, ICICI Bank, Indusind Bank, Kotak Mahindra Bank and YesBank.


The present structure of commercial banks in India is characterized by a mix of public sector banks and privatesector banks. The share of public sector banks was around 2% in 1960. It increased to over 80%in 1987. A reversetrend is observed in respect of private sector banking. The share of private sector banks has declined from 98% in1960 to less than 20% in 1987. The trend implies a reduction in the private sector banks concentration of economicpower in the hands of a few private individuals. It is no longer adequate for private sector banks to provide onlytraditional banking services. The developing countries like India, still has a huge number of people who do not haveare availing banking services and their expectations are raising as the level of services are increasing due to theemergence of information technology and competition. How private sector banks are moving growth and achievementsto what extent the deposits and advances of the private sector banks grow during the period of this study. What arethe factors affecting the profitability of the private sector banks?

Scope of the Study

This study is undertaken to measure the financial performance of New Generation private sector commercial banksin India. The study will provide details about the growth of deposits and advances, profitability analysis of theselected banks. It is hoped that the result of this study will propose policy measures for the betterment of the newgeneration private sector banks to achieve the good financial performance.


The main objectives framed for the present studies are as follows: To study the growth of New Generation privatesector commercial banks. To examine the growth of deposit and advances of selected banks. To ascertain theprofitability of chosen banks.

Hypotheses keeping the above objectives and the data collected for this study, the following hypotheses wereframed and tested. There is no significant difference between the mean values of AGR in deposits among theselected banks. There is no significant different between the mean value of AGR in advances among the selectedbanks.

There is no significant different between the mean value of Profitability Ratios among the selected banks.

Methodology

The present study is designed to analyse the financial performance of New Generation private sector commercialbanks.

Sampling Design

Sampling Design in India banks are being segregated into three groups such as public sector banks, private sectorbanks and forging banks in order to find the solution to the problems faced by the private sector banks this studyfocus only on new generation private sector banks. There are seven new generation private sector banks, registeredin India as on 31.3.2011.

Table - 1

1 Axis Bank Ltd 1995 Andhrapradesh

2 Development credit Bank Ltd 1995 Maharashtra

3 HDFC Bank Ltd 1994 Maharashtra

4 ICICI Bank Ltd 1996 Maharashtra

5 Induslnd Bank Ltd 1994 Maharashtra

6 Kotak Mahindra Bank Ltd 1985 Maharashtra

7 Yes Bank Ltd 2005 Maharashtra

Name of the Bank Year of Establishment Origin (state)S. No.



The above table shows that one Banks are based onAndhra pradesh, six Banks are based Maharashtra. TheDC Bank was merged cooperative banks, KotakMahindra Bank was converted in to non banking financialcompany, and Yes Bank was started in 2005 notcompleted in ten years. In this study were selected inabove set banks.

Data Collection

The study comprises the secondary data only. Thesecondary data pertaining to the study were collectedfrom the head offices of selected banks websites,journals, magazines, IFMR libraries of Tamilnaduuniversities.

Statistical Tools Used

The collected data were codified, classified and thenTabulated with the help of computer statistical tools suchas mean, standard Deviation (SD), coefficient of Variation(CV), Compound Annual Growth Rate (CAGR), AverageAnnual Growth Rate (AAGR), ANOVA, ‘t’ test andfinancial tools like selected ratio analysis and trendanalysis were used.

Area of Study

The area of study for the present study is whole of India.Because all the selected banks have branches all overIndia. 6.5 Period of Study the secondary data werecollected for the period of ten years from 2003-04 to2012-13

Limitations of the Study

The study suffers from the following limitations. Theanalysis is made only by using secondary data whichhas its own limitation. The study is confined to NewGeneration Private sectors banks only which is expectedto represent the industry. In other words industrycomparisons are not conducted. The present study isbased upon selected four new generation private sectorsbanks. As the size of the sample selected is very small,the limitations of a small sample are applicable. In spiteof all these limitations this study throws light on theimportant challenging problems of the new generationprivate sector banks.

Deposits the Money deposits with the bank is assuredas for as its safety is concerned. Further the depositoris allowed to withdraw it whenever required. Banks allowinterest on deposits. Such interest helps in growth offunds deposited with the bank.

Advances the advances may be regarded as ‘credit’granted where the money is disbursed and its recoveryis made on a later date. It is a debt for the borrower.Loan is given for a definite

The above Table 1 show the value of AAGR in depositswere the highest at 553.51% and the value of CAGR in

deposits was the highest at 31.87% for AXIS Bank andit denotes that AXIS Bank had a highest growth in itsdeposits than all other selected banks. The deposit ofAXIS Bank goes up to the maximum of 12.06 times ofits base year value during the year 2012-13. The valueof AAGR in deposits was the lowest at 293.95% and thevalue of CAGR purpose and for a predetermined period.Interest is charged on the loan at agreed rate and intervalsof payment.

6.9 Trend Analysis Trend analyses refer to the study ofmovement of figures over a period. The trend may beregular or irregular. If it is regular it may show anincreasing tendency or decreasing tendency. Forfinancial statement analysis, trend percentages can becalculated when data relating to several years are to beanalysed. Generally the earliest year is taken as thebase year. The figures for the base year are taken as100 and the figures for the other years are expressed asa percentage to the base year and the trend isdetermined Formula for CAGR is [(End value ÷ Startingvalue) (1/ (Number of years-1))] -1. Deposits a depositaccount may be of current account, savings account orother type of deposit account. These transactions arerecorded on the bank’s books and the resulting balanceis recorded as a liability for the bank, and representsthe amount owned by the bank to the customer. Toevaluate the tendency in deposits of the selected banksfor a period of ten years from 2003-04 to 2012-13, thedata are analysed and exhibited in

Table 1in deposits were the lowest at 17.58% for ICICIBank and it denotes that ICICI Bank had a lesser growthin its deposits than all other selected banks. The depositof ICICI Bank goes up to the maximum of 4.30 times ofits base year value during the year 2012-13. The lowestco-efficient of variation of AGR in deposits of ICICI Bankat 35.01 shows its stable growth in deposits during theperiod of this study.

The above Table 2 show the value of AAGR in advanceswere the highest at 895.92% and the value of CAGR inadvances was the highest at 40.28% for AXIS Bank andit denotes that AXIS Bank had a highest growth in itsadvances than all other selected banks. The advancesAXIS Bank go up to the maximum of 21.04 times of itsbase year value during the year 2012-13. The value ofAAGR in advances were the lowest at 302.92% and thevalue of CAGR in advances was the lowest at 18.69%for ICICI Bank and it denotes that ICICI Bank had a lessergrowth in its advances than all other selected banks.

The advance of ICICI Bank goes up to the maximum of4.67 times of its base year value during the year 2012-13. The lowest coefficient of variation of AGR in advancesof ICICI Bank at 37.57 shows its stable growth inadvances during the period of this study. Analysis of



Variance (ANOVA) The analysis of variances technique, developed by R.A. Fisher in 1920’s is capable of fruitfulapplication to a diversity of practical problems. Basically, it consists of classifying and cross-classifying statisticalresults and testing whether the mean of a specified classification differ significantly. The variance is the square ofthe standard deviation of a series and gives an idea about the variability of the values of various items from the meanof the series. In the analysis of variance an attempt is made to find out whether the means given by a number ofsamples are significantly differ from one another. With the help of analysis of variance it is possible to study thesignificance of the difference of mean values of a large number of samples at the same time. In order to find out thesignificant difference of mean values of Annual Growth Rate in deposits and loans of selected banks single factoranalysis of variance has been used. Suitable hypothesis are framed for the each items and the results are shows inthe ANOVA tables. Deposits Ho: There is significant difference between the mean values of AGR in deposits amongselected banks.

With a view to test the significance of variance of the AGR in deposits among the selected banks under the study,the ‘F’ test has been applied. The analysis of Table 2 shows that the calculated value of ‘F’ ratio came to 7.19between the selected banks. The Table value of ‘F’ at 5 percent level of significance for V1= 3 and V2 = 32 is 2.901.The calculated value of ‘F’ is greater than the Table value. Therefore hypothesis is rejected. This shows that there issignificant difference between the mean values of AGR in deposits among the selected banks. Advances Ho: Thereis no significant different between the mean value of AGR in advances among the selected banks.

Table - 2 : Anova for AGR in Advances

Between 189898.89 3 63299.63 11.52

Within 175823.64 32 5494.49

Total 365721.40 35

Sum of squares df Mean squareSource of variation F Sig

Source: Compiled and calculated by published RBI reports

To ascertain the significance of variance of the AGR in Advances among the selected banks under the study, the ‘F’test has been applied. It is revealed from the Table 3 shows that the calculated value of ‘F’ ratio came to 11.52between the selected banks. The Table value of ‘F’ at 5 percent level of significance for V1= 3 and V2 = 32 is 2.901.The calculated value of ‘F’ is greater than the Table value. Therefore hypothesis is rejected. This shows that there is

Significant difference between the mean values of AGR in advances among the selected banks. Test of Significance(‘t’ Test) the‘t’ test has been applied to identify whether there is significant difference between two variables. In thisanalysis significant difference between AGR in deposits and

Table - 3 : "t" Test values of AGR in deposits and AGR in Advances

AXIS 122.84 57.69 222.63 109.48 -2.42 2.10 Accepted

HDFC Bank 97.13 48.60 139.00 76.06 -1.39 2.10 Accepted

INDUSIND Bank 42.57 32.01 56.34 44.61 -0.75 2.10 Accepted

ICICI Bank 36.63 46.18 40.82 47.04 -0.19 2.10 Accepted

AGR in deposits Agr in Advances"t" valueBank Table value Ho

Mean SD Mean SD

Source : Compiled and calculated by using published RBI reports

Shows that AXIS Bank lead with the highest mean values in AGR in deposits and AGR in advances. The smallerstandard deviation of INDUSIND Bank in AGR in deposits and AGR in advances depicts that it has maintainedstability in its growth of deposits and advances. The‘t’ test has been applied to test the significant differencebetween the AGR in deposits and AGR in advances. It shows that the calculated value of‘t’ came for AXIS Bank at-2.42, HDFC Bank at -1.39, INDUSIND Bank at -0.75 and ICICI Bank at -0.19. The table value of‘t’ at 5 percent levelof significance for DF at 18 is 2.10. The calculated value of‘t’ for all the selected banks were less than table value at5 percent significant level. Therefore hypothesis is accepted. This shows that there is no significant differencebetween the mean values of AGR in deposits and AGR in advances. Profitability Analysis of Selected Banks theOperational efficiency of banks is a corner stone of the economy. It can also be said that the growth and financialstability of the country depend on the financial soundness of its banking sector. Enhanced profitability and operational



efficiency have become vital for banks in India for survival and growth in the ongoing era of globalization. Theprofitability is an important criterion to measure the performance of banks in addition to productivity. Financial andoperational efficiency management of banking operations aimed at ensuring growth in profit and efficiency requiresup to date knowledge of all those factors on which the banks profits depends. Financial sectors reforms initiated inIndia in the early 1990s have brought about fierce competition in the banking industry. Ratio Analysis the ratioanalysis is one of the most powerful tools of financial analysis interpretation of financial statement can be madeeasier by establishing quantitative relationships between various items of financial statement. These ratios showhow profitable the bank is compared to previous years and to similar banks. In order to analyses the profitability ofthe selected banks incomes and expenses are compared in relation to utilization of resources. To examine theprofitability of the selected banks the following accounting ratios are employed

Advances, term deposits and term loans, deposits and interest on deposits, advances and interest on advances areanalysed. AGR in Deposits and AGR in Advances Ho: There is no significant difference in the mean values of AGRin deposits and AGR in advances.

Ratios Relating to Financial Strength In order to run and manage a bank funds are needed. If the funds are inadequateor not properly manage, the entire organization suffers. It is therefore, necessary that correct estimate of thefinancial ratios shall help the organization to run its work smoothly and without any stress. The following are theratios which show the financial strength of the selected banks. a) Debt Equity Ratio, b) Proprietary Ratio, a) DebtEquity Ratio Debt Equity (DE) ratio helps to measure the relative claims of outsiders and the shareholders againstthe firm’s assets. This ratio indicates the relationship between the outsider’s funds and the shareholder’s funds.Table 6.22 shows the analysis of DE ratio in selected banks.

Table - 4 : Debt Equity Ratio of Selected Banks

2003-04 11.87 5.97 15.32 9.95

2004-05 8.86 4.22 14.86 8.46

2005-06 9.27 5.23 15.72 7.36

2006-07 11.92 4.93 14.77 9.39

2007-08 6.07 4.39 12.70 5.26

2008-09 7.53 5.61 11.84 4.47

2009-10 5.76 4.33 10.56 4.11

2010-11 7.25 4.46 7.55 4.24

2011-12 7.14 5.05 8.33 4.71

2012-13 5.57 5.21 6.25 4.73

Total 81.23 49.40 117.89 62.68

Mean 8.12 4.94 11.79 6.27

S D 2.33 0.59 3.48 2.29

CV 28.63 11.87 29.54 36.51

Debt Equity Ratio(Times)

HDFC BankYear Indusind Bank ICICI BankAXIS BANK

Source: Compiled and calculated by using published RBI reports

It could be seen from Table 4 that the DE ratio of INDUSIND bank was the highest for ten years during 2003- 04 to2012 – 13 at 15.32%, 14.86%, 15.72%, 14.77%, 12.70%, 11.84%, 10.56%, 7.55%, 8.33% and 6.25% respectively.The DE ratio of HDFC bank was the lowest for five years during 2003-04 to 20 07-08 at 5.97%, 4.22%, 5.23% 4.93%and 4.39% respectively. The DE ratio of ICICI bank was the lowest for the next five years during 2008-09 to 2012 -13 at 4.47%, 4.11%, 4.24%, 4.71% and 4.73% respectively. The average DE ratio of INDUSIND bank was thehighest at 11.79% and HDFC bank was the lowest at 4.94% among the selected banks during the study period. Thelowest value of co-efficient of variation of HDFC bank at 11.87 shows its stability in maintaining outsider’s fund onshareholder’s fund. b) Proprietary Ratio Proprietary Ratio (PR) is an important ratio for determining long tern solvencyof a firm. This ratio establishes the relationship between shareholder’s funds to total assets. Table 6.23 shows thatPR of selected banks.



Table - 5 : Proprietary Ratio of selected banks

2003-04 4.71 6.37 5.31 6.68

2004-05 6.42 8.79 5.31 7.69

2005-06 5.80 7.21 4.91 8.97

2006-07 4.64 7.05 5.05 7.16

2007-08 8.00 8.63 5.80 11.71

2008-09 6.91 7.99 6.03 13.15

2009-10 8.88 9.67 6.78 14.20

2010-11 7.83 9.15 8.88 13.56

2011-12 7.99 8.86 8.23 12.35

2012-13 9.72 9.05 10.41 12.43

Total 70.91 82.77 66.70 107.90

Mean 7.09 8.28 6.67 10.79

SD 1.70 1.08 1.88 2.87

CV 24.01 12.99 28.22 26.56

Proprietary Ratio (%)

HDFC BankYear Indusind Bank ICICI BankAXIS BANK

Source: Compiled and calculated by using published RBI reports

Table 5 shows that the PR of ICICI bank was the highest for the first year 2003-04 at 6.68%. For the second year2004-05 the PR of HDFC bank was the highest at 8.79%. for the next eight year from 2005-06 to 2012-13 the PR ofICICI bank was the highest at 8.97%, 7.16%, 11.71%, 13.15%, 14.20, 13.56%, 12.35% and 12.43%.respectively.The PR ratio of AXIS bank was the lowest for the first year 2003-04 at 4.71%. The PR ratio of INDUSIND bank wasthe lowest for the next two years 2004-05 and 2005-06 at 5.31% and 4.91% respectively. The PR ratio of AXIS bankwas the lowest for the years during 2006-07 at 4.64%. The PR ratio of INDUSLND bank was the lowest for the nextthree years during 2007-08 to 2009- 10 at 5.80%, 6.03% and 6.78% respectively. The PR ratio of AXIS bank was thelowest for the next two years during 2010-11 and 2011-12 at 7.83% and 7.99% respectively. The PR ratio of HDFCbank was the lowest for the lost year during 2012-13 at 9.05% The mean value of PR of ICICI bank was the highestat 10.79% and INDUSIND bank was the lowest at 6.67% among the selected banks. It indicates that the ICICI bankhad the more percentage of shareholder’s fund and INDUSIND bank had the lesser percentage of shareholder’sfund. The co-efficient of variation of INDUSIND bank was the highest at 28.22 and HDFC bank was the lowest at12.99 among the selected banks during the period of this study.

It depicts that the INDUSIND bank had instability and HDFC bank had stability in maintaining shareholder’s fund ontotal assets. Thus it can inferred that the PR of ICICI bank is satisfactory when considering its higher mean valueand HDFC bank is satisfactory when considering its stability in maintaining shareholder’s fund on total assets. 8.Conclusion This research was aimed at studying the financial performance of new generation private sector commercialbanks. Private sector banks an important role in the development of Indian economy. After introduction of newgeneration private sector banks, the banking industry underwent major changes. The Indian banking industry wasdominated by public sector banks. But now the situation has changed private sector banks with use of technologyand professional management has gained a reasonable position in the banking industry. Banking constitutes animportant link in several socio-economic activities. Therefore, the banking industry must be on a sound footing,while in India, there is stress on the social responsibility of banks, the significance of liquity and profitability is notto be neglected. The financial viability of the banking system is certainly essential; not only to instill public confidencebut also to make banks capable of discharging their social responsibilities.

Reference

1. Panneerselvam R, Research Methodology, PHI Learning Pvt Ltd, New Delhi, 2011.

2. Pillai RSN and Bagavathi, Management Accounting, S.Chand and Company Ltd, New Delhi, 2010

3. Santhanam B, Banking and Financial System, Margham Publications, Chennai, 2009.

4. Gordon Natarajan, Banking Theory, Law and Practice, Himalaya Publishing House.



MUDRA – A BOON TO WOMEN MSME SECTOR: AN ANALYSIS OF NEW

FINANCIAL INITIATIVE BY THE UNION GOVERNMENT

1. Assistant Professor, Department of Secretarial Practice, Crossland College, Brahmavar Udupi, Karnataka.

Abstract

Micro, Small and Medium Enterprises (MSMEs) play a significant role in the growth of economy of a country. Finance

is the key driver for all business ventures. Success of any business depends on the availability of fund. Most of the

women in MSME sector either do not get easy loans for their enterprise or they are not aware of most of the schemes

specifically designed for them. If at all there is availability of loan, the financial institutions demand collateral securities

which are a great hurdle to these small entrepreneurs. There are a number of facilities provided for the corporate

sectors in India, but according to the government, there is a need to focus on the 5.75 crore units who use funds of Rs

11 lakh crore, with an average per unit debt of Rs 17,000 to employ 12 crore Indians. These facts, actually led to the

vision for MUDRA Yojana. The introduction of MUDRA Yojana (Micro Units Development and Refinance Agency)

emerged as the boon to these women. Today MSMEs, particularly women in India, have dared to start own business

and also emerged as prominent borrowers of the new scheme “Pradhan Mantri MUDRA Yojana” launched by the NDA

government. This scheme is aimed at “funding the unfunded” and save them (5.75 crore small entrepreneurs both

men and women) from exploitation at the hands of money lenders. It would be responsible for developing and

refinancing through a Pradhan Mantri MUDRA Yojana, all Micro-finance Institutions (MFIs) which are in the business

of lending to MSME business entities engaged in manufacturing, trading and service activities. The purpose of this

paper is to analyze the MUDRA scheme initiative introduced by the Prime Minister for facilitating easy funding for

MSMEs particularly women. This is a conceptual paper; the data is analyzed through secondary sources collected

through news papers, magazines and through web sources. The paper also focuses on the significance of the

scheme, its objectives, modalities of issues as well as its requirements and how it is a boon to these women MSMEs.

KEYWORDS: PMMY, MUDRA, MSMEs, MFIs

Jyothi1

Introduction

The background

Women entrepreneurship is an important untappedsource of growth in India, creating new employmentopportunities and avenues for women’s economicindependence. Women entrepreneurship developmentis important for the achievement of broader developmentobjectives such as growth with equity. Women are theintegral part of a nation. They have been regarded asthe real builders of the country’s destiny. The status ofwomen in any society is an index of its progress. Theactual condition of women does not match up to thisstatement. Though they enjoy more freedom and powerthan ever before, they are still disadvantaged whencompared to men in reality in all aspects of life. Womenare deprived of equal access to education, health care,money matters, access to financial resources, anddecision making powers in the political, social, householdand business sectors. The real tragedy is that womenare often better economic stewards of capital than men.In spite of the many difficulties faced, if proper exposureand knowledge are imparted to them for self-employment,it gives them the strength to overcome many of these

problems. Involving women in economic activities is oneof the key factors of empowering women. However, lackof access to financial resources hinders their self-confidence in taking up risk in starting own business.

As per data, about 13 per cent of enterprises in theregistered micro, small and medium enterprises sectorare being managed by women.1 Micro, Small andMedium Enterprises (MSMEs) play a significant role inthe growth of economy of a country. Finance is the keydriver for all business ventures which acts a lubricant forrunning a business smoothly. Success of any businessdepends on the availability of fund. People in the ruraland remote parts of our country still have not coveredunder financial inclusion. Access to credit, loans, andinsurance would be just a dream to these sections ofthe people. Majority of them rely on money lenders fortheir immediate financial necessities at a very high rateof interest. When business fail, these borrowers fall intothe debt-trap of money lenders unable to repay this hugeamount in addition to the different kinds of humiliation.Most of the individuals, particularly women in MSMEsector either do not get easy loans for their enterpriseor they are not aware of most of the schemes specifically



designed for them. If at all there is availability of loan,the financial institutions demand collateral securitieswhich are a great hurdle to these small entrepreneurs.There are a number of facilities provided for the corporatesectors in India, but according to the government, thereis a need to focus on the 5.75 crore units who use fundsof Rs 11 lakh crore,2 with an average per unit debt of Rs17,000 to employ 12 crore Indians3. These facts, actuallyled to the vision for MUDRA Bank. The introduction ofMUDRA Yojana (Micro Units Development and RefinanceAgency) emerged as the boon to these women. TodayMSMEs, particularly women in India, have dared to startown business and also emerged as prominent borrowersof the new scheme “Pradhan Mantri MUDRA Yojana”launched on 8 April, 2015 by PM Narendra Modi. Thisscheme is aimed at “funding the unfunded” and savethem (5.75 crore small entrepreneurs) from exploitationat the hands of money lenders. It would be responsiblefor developing and refinancing all Micro-finance Institutions(MFIs) which are in the business of lending to MSMEbusiness entities engaged in manufacturing, trading andservice activities. “Supporting these entrepreneurs wouldbe the biggest way to help the Indian economy growand prosper.” 4.

Importance of MSMES

Micro, Small and Medium Enterprises (MSME) sectorhas emerged as a highly vibrant and dynamic sector ofthe Indian economy over the last five decades. MSMEsnot only play crucial role in providing large employmentopportunities at comparatively lower capital cost thanlarge industries but also help in industrialization of rural& backward areas, thereby, reducing regionalimbalances, assuring more equitable distribution ofnational income and wealth. MSMEs are complementaryto large industries as ancillary units and this sectorcontributes enormously to the socio-economicdevelopment of the country5. The sector has a high growthpotential and performs a critical role in the manufacturingand value chains. MSME sector is characterized by lowinvestment requirement, operational flexibility andlocation wise mobility.

Women in MSME Sector and Issues ConfrontingThem

Today India ranks 70 out of 77 in countries covered inthe 2015-Female Entrepreneurship Index. The mainreasons that the study identifies is access to first-tierfinance. The MSME sector contributes to about 45percent of the total manufactured output and nearly 40percent to India’s exports. There are about 36 millionMSMEs in the country, providing employment to morethan 60 million persons, but out of total 15.64 lakhregistered enterprises 2.15 lakh (13.72 percent) arewomen entrepreneurs, as per the available statistics.

Table - 1: Status of MSMEs in India

26 million 1.5 million 24.5 million 60 million

(7% owned by women)

Estimated

MSMEs

Unregistered

Segments

Estimated

employment

Registered MSMEs

Segments

(Source: Fourth All-India Census of MSMEs)

The Fourth All India Census of MSME reported that thereare total of 26.61 lakh women MSMEs functioning in ourcountry as of now out of which only 2.15 lakh areregistered units in organized sector. The remaining 18.06lakhs are still in the unorganized sector.

Table - 2: No. of Women Enterprises in MSMEsector

2.15 lakh 18.06 lakh 6.40 lakhs 26.61 lakhs

Registered

Sectors

Economic

Census 2005Total

Unregistered

sector

(Source: Fourth All India Census of MSME)

Success for India lies in success of these small businessunits. Providing the flesh and blood to the economy, smallbusinesses functioning either in the form of partnershipor in own account enterprises, adds nearly 50% of theGDP in the form of Manufacturing, Service and Trading.Alongside it is employment generation tool, with morethan 12 crore people associated. No wonder the supportto this sector is support to government’s ambitious targetof realizing the asset of India’s demography. The biggestbottleneck to the growth of entrepreneurship in the Non-Corporate Small Business Sector (NCSBS) is lack offinancial support. Majority of this sector does not haveaccess to formal sources of finance. It is difficult tomobilize funds for their business from any financialinstitutions as all these funding agencies demandcollateral securities for extending credit.

Although the issues of women owned MSMEs are notmuch different from issues of corporate enterprises, thereare certain issues need to be addressed. Some of themajor issues before them are funding, lack of knowledge,gender discrimination, marketing, and branding.1 In theinitial business stages, most women are forced to relyon personal funding, including for meeting working capitalrequirements. A report released by International FinanceCorporation in 2014 said that there was a finance gap ofRs 6.37 lakh crore when it came to meet therequirements of women entrepreneurs in the MSMEssector. Lack of collateral and a misogynist mindset arethe main hurdle women face in accessing loans accordingthe reports of Times of India. Another obstacles facedby any entrepreneur is the lack of knowledge whether itis legal aspect of business or about the knowledge ofgovernment run schemes for the welfare of women



entrepreneurs. Increasing incidents of violence andatrocities against women in the work place is anothermajor challenge which needs to be addressed seriouslyby the government. Empowering women entrepreneursis essential for achieving the goals of sustainabledevelopment and the bottlenecks hindering their growthmust be eradicated to entitle full participation in thebusiness.

Government Initiatives for Helping Women In MSME

Government extends number of schemes to cater to theneeds of women entrepreneurs. In addition to commonschemes to MSMEs, there are some special schemesinvariably meant for women MSMEs some of whichinclude:

• Trade Related Entrepreneurship Assistance andDevelopment Scheme (TREAD) for Women

• Rural Employment Generation Programme (REGP)

• Prime Minister’s RozgarYojana (PMRY)

• Mahila Coir Yojana

• Special awards to Women and SC/ST Entrepreneursetc.

The Micro, Small & Medium Enterprises DevelopmentOrganization (MSME-DO), the various State SmallIndustries Development Corporations (SSIDCs), thenationalized banks and even NGOs are conductingvarious programmes including EntrepreneurshipDevelopment Programmes (EDPs) for the womenentrepreneurs. The Small Industries Development Bankof India (SIDBI) has been implementing two specialschemes for women namely:

• Mahila Udyam Nidhi: This is an exclusive schemefor providing equity to women entrepreneurs.

• Mahila Vikas Nidhi: This scheme offersdevelopmental assistance for pursuit of incomegenerating activities to women.

In addition to these two schemes, the SIDBI has alsotaken initiative to set up an informal channel for creditneeds on soft terms giving special emphasis to women.Over and above this, SIDBI also provides training for creditutilization and also credit delivery skills for the executivesof voluntary organisations working for women. Some ofthe most recent initiatives of the Government of India tofacilitate the MSME sector are:

• Prime Minister’s Employment Generation Programme(PMEGP): Ministry of MSME has been implementinga credit-linked subsidy programme since 2008-09 withKhadi and Village Industries Commission (KVIC) asnodal agency at the national level for generating self-employment opportunities through establishment ofmicro-enterprises in the non-farm sector by helpingtraditional artisans and unemployed youth. Under this

scheme, beneficiaries belonging to specialcategories such as scheduled castes, scheduledtribes, OBCs, minorities, women, ex-servicemen,physically handicapped, beneficiaries belonging toNorth Eastern Region, hill and border areas, etc.,the margin money subsidy is 35% in rural areas and25% in urban area.

• Pradhana Manthri Jan-Dhan Yojana (PMJDY) and

• Pradhan Manthri Mudra Yojana (PMMY).

Pradhan Manthri Mudra Yojana (PMMY) - MUDRA

MUDRA stands for ‘Micro Units Development andRefinance Agency’. After the Jan-Dhan Yojana, PMMYis projected to be a major step in ensuring financialinclusion. Prime Minister Narendra Modi launched theMUDRA Scheme on April 8, 2015. It is a financialinitiative by Prime Minister, created in order to facilitatethe micro units and provide them sufficient funds in orderto develop. Small businesses are often unable to availloans from banks because of lack of collateral andinsufficient funds to pay off the interest. According tothe PM, helping these businesses grow would in turnlead to the development of the Indian economy. Hence,this scheme was launched. MUDRA is still not a fullyfledged bank and is in its initial stages.

Objectives Of Mudra Yojana

The main objective of MUDRA Bank is to encourageentrepreneurs and small business units to expand theircapabilities and operations, to reduce over indebtednessand to provide formal system of credit. Agriculture & Self-employment will be the focus areas of Mudra Bank. Theforemost objective of the scheme is to refinance collateral-free loans (“Funding the Unfunded”) of up to Rs 10 lakhgiven by lending institutions to non-corporate smallborrowers, for income-generating activities in the non-farm segment. Besides these, MUDRA Yojana islaunched keeping in mind various objectives to be fulfilledthroughout the implementation of this scheme.

Following are the focused objectives of MUDRAYojana:

• Providing financial assistance for the development ofMSMEs who run micro units and also are deniedloans from other financial sources.

• Providing skill development, entrepreneurshipdevelopment training (EDP), marketing training andfinancial literacy.

• To lay down policy guidelines to finance micro/smallenterprises

• To get all Micro Finance Institutions and entitiesregistered and regulate the same.

• To help small businesses grow and develop theirenterprise further.



• To assist lower income groups in setting up and developing their business.

• To help set up responsible financial practices in order to prevent over borrowing for lower income entrepreneurs.

• To help create easy access to finance for the unbanked and also help lower the cost of finance.

• To give SC/ST preference in lending.

• To regulate all Micro Finance Institutions dealing with manufacturing, service and trading.

Thus, MUDRA will help all small businesses gain easy access to finance and regulate the policy guidelines forthe same.

Features and Benefits

MUDRA scheme owns the following features and benefits.

• Security/collateral free loan

• Credit can be availed in a hassle free manner

• Interest rate would be applicable as per RBI guidelines and will vary for each lending institution.

• Borrowers won’t be charged any processing fee which is ideally in the range of 1%-2%.

• Subsidy is not given to the borrower for the loan availed

• Problems faced in setting up infrastructure will be resolved

• Individuals seeking loan should be an Indian citizen.

• Loan requirement should be less than Rs. 10 Lakh.

• Loans can be availed by small enterprises from rural and urban areas in various areas such small retailers,women entrepreneurs, manufacturing and trading enterprises and others.

Allocation of Funds

Under PMMY, the financial institutions extends finance to non-farm sector of micro enterprises which are in thebusiness of manufacturing, trading and service sector in rural, urban and metro for income generation purpose.Depending upon the category of business, this scheme provides loan in 3 categories to these micro institutions.The Figure 1 below illustrates the three different categories of loan disbursement of MUDRA scheme.

Fig. 1 : Categories of MUDRA scheme

Source: IJCISS Vol.2 Issue-10, (October, 2015) ISSN: 2394-5702 International Journal in Commerce, IT & Social Sciences1

• Shishu: Under the Shishu stage, MUDRA will provide a loan up to RS.50, 000 to small businesses.

• Kishor: Next is the Kishor stage. Under this stage, MUDRA will provide loans of an amount ranging from RS.50,000 up to Rs.5 lakh.



• Tarun: Last stage of intervention is the Tarun stage. Under this stage, loans of amounts ranging from Rs.5 lakhto Rs.10 lakh will be provided.

As per the figure 1 mentioned above, it would be ensured that at least 60% of the credit flows to Shishu CategoryUnits and the balance to Kishor and Tarun categories. This shows the significance of micro units functioning inour country.

MUDRA Offerings

Within the framework and overall objective of development and growth of Shishu, Kishor and Tarun Units, theproducts being offered by MUDRA at the rollout stage have been designed to meet requirements of different sectors/ business activities as well as business segments. Figure 2 illustrates the details of offerings.

Fig. 2 : MUDRA Offerings

Source: IJCISS Vol.2 Issue-10, (October, 2015) ISSN: 2394-5702 International Journal in Commerce, IT & Social Sciences

Access to Financial Resources Through Mudra

To get loan under this yojana, various public and private sector banks have been given the responsibility to provideloans under this scheme. One can approach the following institutions or banks to apply for a loan after havingprepared a proper business plan:

• 27 Scheduled Commercial Banks in public and private sector.

• 31 Regional Rural Banks (RRBs)

• 17 Private Sector Banks

• 4 Co-operative Banks

• 36 Micro Finance Institutions (MFIs)

• 25 small business finance companies and Non Banking Financial Companies (NBFCs)

• Scheduled urban and state co-operative banks

These institutions have to pass the eligibility criteria laid down by MUDRA yojana and are then eligible to provideloans to suitable candidates as per the common parameters, under the PM MUDRA Yojana. When the loan ispassed, one will get a MUDRA card, similar to a credit card with limit up to 10% of loan amount to purchase workingcapital.



The application form has to be submitted along with thefollowing documents for the approval of the loan,

• Proof of Identity (Self attested Voter ID/DrivingLicense/PAN Card/Aadhaar Card/Passport/any otherPhoto ID issued by Government)

• Proof of Residence (Recent Telephone Bill/Electricity Bill/Property Tax Receipt (not older than2 months)/Voter ID Card/Aadhaar Card/Passport/Domicile Certificate/Certificate Issued by a localauthority)

• Applicant’s recent photograph (not older than 6months)

• Quotation of Machinery/other items to bepurchases

• Name of the Supplier/Details of Machinery/Priceof Machinery

• Proof of Identity/Address of the BusinessEnterprise (relevant licenses & certificates)

• Proof of Category (SC/ST/OBC/Minority etc)

Apart from the above mentioned documents, individualbanks could ask for other documents as needed.The Banks are not supposed to take any processingfee and are not supposed to ask for any collateral.The repayment period is also extended to 5 years.But it is also made clear that the applicant shouldnot be a defaulter to any Bank or financial institution.

Mudra Initiatives to MSMEs

MUDRA bank intend to bridge the demand-supply gapof credit flow to the MSME sector. The ‘Make in India’initiative, focused on manufacturing in India, cannot beseen as separate from MUDRA as financing is thebackbone of the MSME sector, a major contributor tomanufacturing. The different approaches of MUDRA bankto MSME sectors are:

• MUDRA would be responsible for developing andrefinancing through a Pradhan Mantri MUDRA Yojana,all Micro-finance Institutions (MFIs) which are in thebusiness of lending to micro/small business entitiesengaged in manufacturing, trading and serviceactivities.

• Would also partner with State/Regional levelcoordinators to provide finance to Last Mile Financiersof small/micro business enterprises.

• Further, the approach goes beyond credit onlyapproach and offers a credit – plus solution for theseenterprises spread across the country.

• Will lay down policy guidelines for micro enterprisefinancing business

• Will register MFI entities

• Will provide accreditation /rating of MFI entities

• Will lay down responsible financing practices to wardoff over indebtedness and ensure proper clientprotection principles and methods of recovery.

• Will formulate and run a Credit Guarantee schemefor providing guarantees to the loans/portfolios whichare being extended to micro enterprises

Mudra Benefits To Women MSMEs

MUDRA offers different types of loans as per the needsof the aspirants. Mahila Uddyami Scheme is one amongthem. This scheme is invariably meant for womenentrepreneurs. It offers timely and adequate financialsupport to the Micro Finance Institutions (MFIs), forlending to women, group of women and SHGs for creationof qualifying assets as per RBI guidelines towards settingup and running micro enterprises as per MSMED Act.

Observations

As the paper is conceptual one, the data is collectedthrough secondary sources like journal, newspapers andinternet resources. However, the author has noted thefollowing observations during the preparation of this paper.

• It is hassle free process of availing loan. No muchformality needs to be followed.

• According to the announcements of scheme, nocollateral securities necessary; but in reality, thelending institutions demand it as their safety measurewhere specific prevention measures needs to beadopted to do away this practice

• Priorities are given to vulnerable sections of thesociety like women, physically and financiallyhandicapped, SC/ST people etc.

• Though the scheduled banks are asked to collect8% to 9% interest, the rate charged is very high whichneeds to be taken care by the government.

• Easy repayment options with flexible rate of interestwhich is institution specific.

• Once the loan has been sanctioned, the beneficiariesare allotted MUDRA Card where they can use it forbuying business raw materials.

• Great impact on boosting the country’s economy.

• Holistic way of Women Empowerment.

• Increased amount of employment generation therebyeradicating the unemployment to a great extent.

• Increased share in GDP

The objectives and aspirations of the government arelaudable; but more stringent policies to be taken atthe implementation level to ratify the problems oflending if it has to really reach the beneficiaries.



Conclusion

MUDRA Yojana has widely hailed as a robust measureto achieve inclusive growth resulted in terms of a boonfor MSME sector. The lending priority is given tovulnerable and unprivileged sections of the society whichinclude women, SC/ST enterprises, physically andfinancially weaker sections of the society both at ruraland urban sectors as well. By allotting Rs. 20,000 Croresfrom the shortfalls of Priority Sector Lending, MUDRAbank has initiated a brave step by funding the unfundedby refinancing all MFI who lend to MSMEs engaged insmall manufacturing, trade or services. It will partner allstate/regional level coordinators to provide easy financeto even the remote investors including women. If MUDRAcan continue to retain focus on the underprivileged andextend its reach to the remote parts of the country, itcan well emerge as a bigger success story than whatGrameen Bank of Bangladesh ever was or will be. MicroFinance is a potent tool for development of economy,enhancing opportunity for income generation in India.This also promotes a rewarding entrepreneurialecosystem for those with ideas but restricted due totheir credit standing and accessibility. Such microenterprises are indispensible for Indian economy, as theypossess multiplier effect in terms of job, wealth andcapital generation. This is correct step towards asustainable economy. There is an old saying that goeslike this: “Give a man a fish, you feed him for aday; teach him how to fish, and he will never gohungry.” MUDRA Bank is a confident step forward bythe Union Government that can be a game changer ingiving birth to a new set of entrepreneurs. ‘Funding theUnfunded’ is far better than giving subsidy for it mayseem welcoming at first but does little to help anindividual strive for a better life.

References

1. The Times of India, October 5, 2015

2. The Financial Express, April 11, 2015

3. financialexpress.com

4. http://www.financialexpress.com/article/industry/banking-finance/pradhan-mantri-mudra-yojana-all-you-wanted-to-know-in-10-points/144786/

5. http://www.mudra.org.in/#

6. msme.gov.in

7. http://indianresearchjournals.com/pdf/IJMFSMR/2012/October/5.pdf

8. http://www.governancenow.com/news/regular-story/mudra-banks-big-help-for-small-business

9. http://www.smetimes.in/smetimes/news/top-stories/2015 /Sep /14 /cha l l enges - fac ing -women-entrepreneurs-in-india1632598.html

i. “Creating An Enabling Environment For Women’sEntrepreneurshipIn India”; Hina Shah; May 2013

ii. NSSO Survey of 2013 (National Sample Surveyorganization now known as National Sample SurveyOffice, is an organization under the Ministry ofStatistics, Government of India.)

iii. http://www.financialexpress.com/article/industry/banking-finance/pradhan-mantri-mudra-yojana-all-you-wanted-to-know-in-10-points/144786/

iv. Prime Misnister Narendra Modi on launchingMUDRA Yojana on April 2015. MSME Annual Report2014-15

v. President of FICCI Ladies Organization (FLO),Archana Garodia Gupta, www.smetimes.in

vi. MUDRA: Micro Units Development & RefinanceAgency Seema Assistant Professor, Department ofCommerce, Indira Gandhi University, Meerpur, Rewari(HR), IJCISS Vol.2 Issue-10, (October, 2015) ISSN:2394-5702 International Journal in Commerce, IT &Social Sciences

viii. MUDRA: Micro Units Development & RefinanceAgency Seema Assistant Professor, Department ofCommerce, Indira Gandhi University, Meerpur, Rewari(HR), IJCISS Vol.2 Issue-10, (October, 2015) ISSN:2394-5702 International Journal in Commerce, IT &Social Sciences



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