roll of commercial bank in mobilixing deposits-55

Role of Commercial Bank in Mobilizing Deposits

1S.C.S (A) College, Puri

CHAPTER-11.1-INTRODUCTION

A commercial bank is a type of financial intermediary and a type of bank.

Commercial banking is also known as business banking. It is a bank that provides

checking accounts, savings accounts, and money market accounts and that accepts

time deposits. After the Great Depression, the U.S. Congress required that banks

engage only in banking activities, whereas investment banks were limited to

capital market activities. As the two no longer have to be under separate ownership

under U.S. law, some use the term "commercial bank" to refer to a bank or a

division of a bank primarily dealing with deposits and loans from corporations or

large businesses. In some other jurisdictions, the strict separation of investment and

commercial banking never applied. Commercial banking may also be seen as

distinct from retail banking, which involves the provision of financial services

direct to consumers. Many banks offer both commercial and retail banking

services.

1.2-Objectives The main objective of a commercial bank is to generate profitability for its

ownership by providing quality based products and services to the residents

of the communities and regions that they represent. Aside from offering

traditional banking products, commercial banks must be highly competitive

and provide specialized products.

Commercial banks are to profess higher profitability by maintaining circular

and efficient flow of amount of money deposited by the customers and the

lenders. Commercial bank contributes to the economic cycle by keeping the

money circulation among households, government and corporate businesses.



The commercial banks lend money to the financial agents through their

various products and services by earning interest income on the borrowed

money. Commercial banks design their short permanent status and long term

loans and other products to cater to the need of customers while enhancing

their own returns. Their objective is to attract more customers and build

profitable relationships next to the new and existing customers.

1.3-Scope of Study

On the preparation of the project, I mainly studied about the capital formation and

GDP of the nation. So far as this purpose, I have taken the GDP and GDS of different

years. All the data relating to this has been collected from secondary source.

1.4-Significance

This project significance an overall analysis of Commercial Bank. In which

the total investment including savings of the country are projected. Here the actual

investment of the business also calculated and shown in details as commercial

banks are showing there present progress report including their rate of

development in the country. At lost, the commercial bank not only increase the

saving of the people but also increases the economic rate of growth in the country.

1.5-Methodology

The study was exploratory in nature with primary data being collected

though questionnaire and balance sheets administered to a sample of 50

respondents. A personal interview was conducted with respondents. Some of the

questionnaires were filled up after a small conversation relevant to the subject of

the study. The questionnaire was structured with both open and close-ended



questions. The balance sheet also served the purpose of calculating the various

ratios. Analysis, tabulation and interpretation of the data were done accordingly

and conclusions were drawn. Thus the questionnaire and interview method along

with the balance sheets were adopted for the purpose of research.

1.6-Limitation

It last I try my level, best to collect adequate data for completing the project

in time, Though the project commercial bank is arranged in a collective manner,

but it takes more time for completing manner, but it takes more time for competing

the project, Besides that I have faced same problem which are as follows.

Shortage of time

Improper co-ordination form Zonal office

1.7-Chapter PlanChapter -1 : Introduction

Chapter-2 : Company Profile

Chapter-3 : Analysis & Interpretation

Chapter-4 : Financial Analysis Of Commercial Bank In India

Chapter-5 : Conclusion



CHAPTER -2COMPANY PROFILE

2.1-INTRODUCTION Banking occupies one of the most important positions in the modern economic

world. It is necessary for trade and industry. Hence it is one of the great agencies

of commerce. Although banking in one form or another has been in existence from

very early times, modern banking is of recent origin. It is one of the results of the

Industrial Revolution and the child of economic necessity. Its presence is very

helpful to the economic activity and industrial progress of a country. This Chapter

briefly traces the historical and contemporary imperatives to provide financial

services to the rural poor in India and the institutional responses to the same.

2.2-MeaningA commercial bank is a profit-seeking business firm, dealing in money and credit.

It is a financial institution dealing in money in the sense that it accepts deposits of

money from the public to keep them in its custody for safety. So also, it deals in

credit, i.e., it creates credit by making advances out of the funds received as

deposits to needy people. It thus, functions as a mobiliser of saving in the

economy. A bank is, therefore like a reservoir into which flow the savings, the idle

surplus money of households and from which loans are given on interest to

businessmen and others who need them for investment or productive uses.

Definition of a Bank

The term ‘Bank’ has been defined in different ways by different economists. A few

definitions are:

According to Walter Leaf “A bank is a person or corporation which holds itself

out to receive from the public, deposits payable on demand by cheque.” Horace



White has defined a bank, “as a manufacture of credit and a machine for

facilitating exchange.”

According to Prof. Kinley, “A bank is an establishment which makes to individuals

such advances of money as may be required and safely made, and to which

individuals entrust money when not required by them for use.”

The Banking Companies Act of India defines Bank as “A Bank is a financial

institution which accepts money from the public for the purpose of lending or

investment repayable on demand or otherwise withdrawable by cheques, drafts or

order or otherwise.”

Thus, we can say that a bank is a financial institution which deals in debts and

credits. It accepts deposits, lends money and also creates money. It bridges the gap

between the savers and borrowers. Banks are not merely traders in money but also

in important sense manufacturers of money.

FUNCTIONS OF COMMERCIAL BANKSCommercial banks have to perform a variety of functions which are common to

both developed and developing countries. These are known as ‘General Banking’

functions of the commercial banks. The modern banks perform a variety of

functions. These can be broadly divided into two categories: (a) Primary functions

and (b) Secondary functions.



Evolution of the Financial LandscapeIn post-independence India, in order to facilitate improvements in agricultural

production and attain food self-sufficiency, the stance of policy was to ensure

sufficient and timely credit at “reasonable” rates of interest to as large a segment of

the rural population as possible (Rangarajan 1996). The strategy to achieve this

was threefold: expansion of the institutional base, directed lending to

disadvantaged borrowers, and credit provision at concessional rates of interest. The

latter was justified in terms of the perceived mismatch between the longer term

returns of farm investment in relation to cultivator households’ short term

consumption needs and requirements to service the loans. 4.02 Fisher and Sriram

(2006) identify three post-independence phases in rural credit provision. First, the

1950’s up to the mid-1960’s when cooperatives were the institutional vehicles of

choice; second, the 1970’s and 1980s when attention shifted to commercial banks

and RRBs and third, the reform period in the early 1990’s which saw the re-

structuring of the banking system, the emergence of SHGs and a growing number

of MFIs.

In terms of scale, spread, costs, risks, and the inter-temporal nature of credit

markets, financial institutions and agents in India face formidable challenges in

meeting the diverse financial service needs of the country’s rural population.

The present rural financial infrastructure comprises a wide variety of formal, semi-

formal and informal financial service providers, with distinctive cultures and

characteristics. The number of organizations and agents is very substantial : 33,553

rural and semi-urban branches of commercial banks, 13,932 rural and semi-urban

branches of Regional Rural Banks, 1.09 lakh primary cooperatives, 1,000 NGO-

MFIs and around 20 MFIs registered as companies (Section 25) and nearly three

million SHGs. Even more numerous are the myriad of informal agents constituting

a great range of financial service providers across the country.



Different segments of the financial infrastructure have not developed

uniformly or simultaneously, and their relative standing in terms of government

policy and intervention has changed over time. Moreover, financial institutions

have themselves influenced government policy ( Jones 2006). In the following

paragraphs, an attempt is made to trace the forces and compulsions that have led to

the development of particular rural financial institutions in the country, to outline

the changing fortunes and shares of these different systems, to show the present

gap between rural financial needs and provisions, and to assess policy options to

reduce this gap through institutional development, linkages and reform.

Evolution of Commercial BanksThe foundation for building a broad base of agricultural credit structure was laid by

the Report of the All-India Rural Credit Survey (AIRCS) of 1954. The provision of

cultivator credit in 1951-52 was less than 1% for commercial banks. In the report it

was observed that agricultural credit fell short of the right quantity, was not of the

right type, did not fit the right purpose and often failed to go to the right people.

With a view to give an impetus to commercial banks, particularly, in the sphere of

investment credit, the nationalization of the Imperial Bank of India and its

redesignation as the State Bank of India (SBI) was recommended.

2.3-The role of commercial banksCommercial banks engaged in the following activities:

Processing of payments by way of telegraphic transfer, EFTPOS, internet

banking, or other means

Issuing bank drafts and bank cheques.

Accepting money on term deposit

Lending money by overdraft, installment loan, or other means



Providing documentary and standby letter of credit, guarantees, performance

bonds, securities underwriting commitments and other forms of off balance

sheet exposures

Safekeeping of documents and other items in safe deposit boxes

Currency exchange sale, distribution or brokerage, with or without advice, of

insurance, unit trusts and similar financial products as a “financial

supermarket”

2.4-TYPES OF DEPOSIT The basic function of a commercial bank are receipt of deposits from the public

and advancing of money to the businessmen. The deposits received by the banks

can be classified into two categories.

Primary deposits

Derivate/Creative deposits.

Primary Deposits

When a customer deposits cash with bank, he bank is said to have a primary cash

or simple deposit. In other words, the primary deposit arises when the people

deposit cash with the book. The initiative for making primary deposits. Comes

form the people primary deposits also arise an account of charge bull on any other

instrument deposited by a customer with his band for the purpose of collection. In

such cases, the primary deposit will arise only when the payment is collected by

the band and credited to the account of the customs. The deposits which are

received, by the bank are used to made loans and advances to the business

institution.

Derivate/ Creative Deposits

Bank deposit also arises when a bank advances money to the business man out of

the primary deposits received by it. Such deposits are called derivate or secondary



deposits since they are derived from the primary deposit. Derivate deposits also

unite when a bank discomfort a bill of exchange of its customer or purchase

government security from its customer. In frits case, the bank will credit the

account of the customer with the amount of the bill less the interest and other

changes and in second case, it will credit the account of the customer with the

agreed price of the security.

Thus, in both cases, more deposits are credited even though n o cash has been

deposited with the bank.

Similarly, bank deposits arises when a bank purchases Govt. Securities from a

customer as it will credit the account of the customers with amount. It will

followed by an increase in the supper if money. In short, when a bank credits the

account of a customer without receiving cash, there will be an increase in supply of

bank money and when a bank credit the account of a customer after receiving

cash, there is no increase in supply of money.

2.2 UTILISATION OF DEPOSITS

The deposits which are received by a bank are utilized in different way which are

given bellow.

a) Cash in hand and with RBI

A bank has to sufficient cash reserve to made the requirement of the customers.

Every commercial bank in the country must keep at least3% of its deposits with the

RBI to satisfy the requirement of cash sufficient to meet the demand of the

customers.

b) Balance with other banks.

Banks usually keep cash reserve with other banks to settle inter bank indebted ness

.This helps in making remittances by draft and setting the accounts. Some banks

keep their found with bigger banks for purpose of safety.



c) Money at call and shot notices

Sometimes, loans granted by the bank are repayable and demand an on short

notice. These loan are also highly liquid as they can be converted into cash very

shortly. In India, money at call and short notice represent the money lent to other

banks. But in England, it represents the money advance to the discount hourses.

d)Investment

Bank also purchases securities issued by central and state government and big?

Industrial Rouse. These securities can be hold in the market in time kef need and

there security loans may be obtained from the Reserve Bank of India. May banks

in India Investment about 25% of their found in government securities.

e) Loans and Advances

The bank may advance credit facilities to customers by way of either loans of cash

credit of overdrafts it is a important part of the activity of banks to advance loans

to need persons. Banks lend only for short period on t him security of marketable

good maintaining sufficient margins.

f) Bills of receivable being bills for collection

Bank discount the bills of exchange and keep with them the bills till they fall due.

They are liquid assets as the also on the liabilities sides as they are meant for

collection.

g. Constituents liabilities for acceptance endorsements and other obligation.

These items also appear on both the side of the balance sheet. These item represent

the total dues of te bank customers in respect obligation it has accepted on their he

half like accepting a bill and issue of letter of credit.

h. Premises and furniture’s

Bank have their own premises and feature to perform the Banking operation. These

are also to be shown in the balance sheet. Bank must provided depreciation on

these assets annually these assets are not liquid and cannot be realized without any



loss value. Bank also holds other assets like development express. Preliminary

express etc.

i. Non- Banking Assets

Thee assets are acquired by a bank in the settlement of claim the ordinary course of

business under the banking regulation Act. Such assets are not be retained

permanently. The are to be disposed of with in a period of seven years from the

date of their acquisition.

2.5-CURRENT ACCOUNTCurrent Account is also know as demand deposit account. A businessman an

organization can open a current with a bank by making on initial deposits of 3000/-

in rural area and Rs. 500/- in urban area here is no upper limit to the amount which

can be with drawn by drawing cheques n this account. There is no restriction

regarding the amount that is why it is know as running and active amount. A

customer may be permitted to with draw more than that what he has deposited on

this account if he has entered in the agreement with bank in this regard. Some

benefits are as follows.

Businessmen have to receive and make a large number of payments very day

it is difficult to handle cash. The cheque & facilities removes the difficulty

There is no restriction of the number of cheques or on the amount to be

drawn at a time by one cheque.

Overdraft facilities are allowed by bank on the current account holders

2.6-SAVING BANK ACCOUNTSSaving deposit account is meant for small businessmen and individuals who wish

to save a little out of there current income to safeguard their future and also to earn

some interest on their saving. A savings account can be opened with as small and

sum Rs.5/ similarly. Small amounts can be withdrawn. A minimum balance of



Rs5/ is to be maintained in the account of cheque book facilities is not been issued

minimum balance of Rs 100/- is necessary. There are restrictions on the maximum

amount that can be deposited in this account and also on the withdrawals form this

account. The bank may not provide week and may be down a limit on the amount

that allowed to deposit cheque, drafts, dividend, warrants etc. which stand in their

name only. For this facility, it is necessary that account holder must be or saving

account in the same bank. However, the banks do not accept do not accept cheques

or instruments payable to third party or deposit in the saving bank account. Saving

bank account is very popular among the general public because of following

reasons.

A saving account can be opened with as little Rs5/- only. It help people of

small mean to save for their further.

The money lying with the bank is quite safe. There is no fear of theft

The money can be withdrawn conveniently from the saving account.

2.7-FIXED DEPOSIT ACCOUNTThe term deposit repayable only after the expiry of specific period, which

ordinarily varies from fifteen days to five years. Since, it is to be repayable only

after a fixed period of time, which is to be determined at the to me of opening of

the account, it is also known as time deposit. People who can afford to keep their

money with bank for a certain period without withdrawing it mean while go in for

fixed deposits. Fixed deposits are the most suitable forms of rasing resources for a

commercial bank.

The rate of interest in case of fixed deposits is high because of its length of the

time of the deposit. The longer the period the higher is the rate of interest. People

having surplus funds prefer to deposit money in fixed deposit because of the

following advantages.



The rate interest on fixed deposits is higher than that allowed on savings

account deposits. The longer the period of deposit, the higher is the rate of

interest allowed by the bank.

The idle and surplus of the people lying in fixed deposits get them good

return in the form of interest

The customer can get loan from the bank 90% of amount of the fixed deposit

receipt.

2.8-RECURRING DEPOSIT ACCOUNTThe recurring deposit account has gained wide popularity these days. Under this,

the depositor is required to deposit fixed amount of money every month for a

specific period of time. Each installment may very from Rs 5/- to Rs. 500/- or more

per month and the total period of account varies from 12 months to 10 years. After

the get bank all his deposit longer with commutative interest accrued on them.

Recurring deposit account offers the following benefits to the public. It provides a good way to save in all amount for use in the further, like

education of children marriage of children etc.

People having low income may open a recurring deposit account with a

commitment to deposit as low Rs 5/- every month.

The recurring deposit account can be opened for any period ranging from 12

months to 120 months.

Loans can taken up to 90% of the deposits of the depositor need money.

Highest position with the saving deposit of the public. So everything is carried on

in a systematic manner by which ultimate goal can be achieved. The commercial

banks in India are playing an important role both in collecting and providing loan

to general public. The back also provided other subsidiary functions and services to

the public. Depending upon the nature of business, the functioning of banks are

also made accordingly.



2.9- DRI SCHEMEThe different rate of interest scheme was launched in 1972 on the recommendation

of Dr. R.K Hazari committee under DRI scheme, each public sector commercial

banking is required to lend at least 1% of its total advances to the economic

background people at a low rate of 4% per annum. At least 2%rd of the loan

under this scheme is given to the people belonging to scheduled castes and tribes.

Families with annual income of Rs 72000/- in urban areas eligible to get

concessional loan under this scheme. The DRI scheme is applicable through the

country. It has following features.

The eligible borrowers can borrow a composite loans upto Rs. 6500/- under this

scheme. To start with, limit was Rs 500/- for working capital loan and Rs 2500/-

for turn loans.

At least one third of the advances under DRI scheme are give in rural and semi-

urban areas.

At least two third of of the advances under DRI scheme are given to persons

belonging to scheduled castes and scheduled tribes.

CHAPTER-33.1-ANALYSIS & INTERPRETATION



Under the project report I have collected various information relating to Different

period starting from 2007 up to 20011. The basic concept of this project is

Concerned with groupies of long term investment even the investment

in rural sector depending upon the period development and other related issues, the

bank has to provide various finances particularly in the field of small scale scales

business as well business as well as other areas.

The investment of commercial bank particularly the investment

Of long-term budget and long-term loan is only possible after a

systematic analysis and interpretation of business object. Whenever

there is a planning’s comes for implementing the basic development or

rural sector, the measurable effect is also considered accordingly so the

relative progress, improvement and basic development is only possible

after a long- term analysis of sartorial progress.

Progress AfterState/Zone 2009 2010 2011 2012 20131. N 11 16 16 11 162. E 13 14 14 12.5 253. W 12 13 13.5 13.6 234. S 11 16 14.5 14.1 245. C 10 12.5 22.5 11.5 21

ACHIVEMENT OF SUCCESS AFTER 2009

As the commercial bank are acting as the measuring rod of economic development

of a country even, most of the annual progress and development can be studied

after investigating the practical happening of an area. Staring from SBI group up to

al other commercial bank, every where there is a need if financial assistance for all

types of business unit.



During 2009 the progress of success comes to east India in 13% in 2007, the

relative progress also made in a different ways. Both in north and the percentage is

being equal and which 16%. In 2011 it comes to maximum 22.5% in central India.

By the end of 2013 the actual progress is studies in East India is 25%.

% Increase In Deposits of Commercial Bank In Different Achievement

State/Zone 2010 2011 2012 20131. N 6.5 7.2 2.2 6.12. E 7.2 7.5 2.5 7.253. W 3.5 7.1 3.1 7.14. S 6.8 6.1 5.1 6.115. C 4.9 5.9 4.1 7.12

Percentage Increase in Deposits of Commercial Bank in Difference Zone

In India , most of the development work has been assigned to commercial bank

even the plan are implemented which are completely guided by the Act of Reserve

Bank of India whenever more funds are required by commercial bank, a systematic

and interpretation also made with their views.

The total progress of commercial bank in North India goes to 6.5% and

which is completely analysis by the expert group of RBI. The highest percentage

of investment was taken place in eastern zone as 7.2% during 2011 the progress

also rating as 7.5 by the end of 20011 and by the end of 2013 the rating 5.4 which

belongs to south India. In 2013 maximum investment belong to east India and it is

7.25%.

DEPOSITS RECEIVED BY PUBLIC SECTOR BANK AFTER 2007State/Zone 2009 % 2010 % 2011 % 2012 % 2013 %

1. N 15780 25.17 16570 25.27 17220 24.68 17290 25.69 17680 24.78

2. E 12380 19.76 13280 20.25 14200 20.36 14340 21.32 15290 21.44



3. W 11640 18.57 12320 18.78 12200 17.49 12500 18.58 12600 17.67

4. S 11290 18.01 12200 18.60 14540 20.85 11520 17.13 11540 16.19

5. C 11590 18.49 11220 17.10 11591 16.62 11630 17.28 14210 19.92

62680 100 65,590 100 69,761 100 67,280 100 71,320 100

Deposit Received By Public Sector Bank after 2009

In India, public sector are taking important role by which more investment of funds

can be assured easily. In North India investment is maximum due to more political

interference and other related effects even the investment growing rapidly by the

change of infra-structural facilities and programs of various banking institutions.

In 2009 the total amount of loans provided by commercial bank in northern

zone but the total investment goes to 62680 crores. In 2008 the total investment of

commercial bank goes to 65590 like in 2007,08 and 09 the total collected fund was

6975, Rs. 67280 and Rs 71320 crores respectively

PROFIT SICE State/Zone 2010 % 2011 % 2012 % 2013 %

1. N 262.1 18.84 361.8 14.84 440.6 20.88 541.5 16.23

2. E 341.4 20.64 642.6 26.36 421.6 19.97 580.2 17.38

3. W 245.2 14.82 344.8 14.14 381.4 18.07 740.8 22.19

4. S 344.8 20.82 548.2 22.48 241.6 11.44 745.9 22.36

5. C 548.2 27.88 540.8 22.18 625.4 29.64 728.8 21.84

Total 1654.8 100 2438.2 100 2110.6 100 3337.2 100

PROFIT

Most of the commercial bank are expecting a profit out of their investment in the

marked. Through, the investment in East and centra India is more. Even, the



investment by the end of 2010 it comes to 7459 crores in Western India and which

comes to Rs 3357.2 crores by total of the amount. All particulars are clearly

mentioned in the project.

Starting from 2011 up to 2013 in evry stage the expected profit is rate 15-20% but

practically it is more than the expected amount. In a systematic analysis it is found

that the total profit earn during 2012 was Rs. 2438.2 crore. At last the profitability

of the banking sector also increases with an expevted value

DEPOSITS ON RURAL SECTORS AFTER 2006State/Zone 2009 % 2010 % 2011 % 2012 % 2013 %

1. N 6440 20.55 3340 12.11 5410 16.43 3660 12.73 215 13.70

2. E 3480 11.11 3289 11.58 5420 16.46 3420 11.88 4410 14.35

3. W 7650 24.40 7100 24.99 7400 22.46 7145 24.82 7245 24.92

4. S 7220 23.04 7210 25.38 7450 22.62 7550 26.24 7660 24.47

5. C 6550 20.90 7370 25.94 7258 22.04 6990 24.31 7220 23.47

Total 31.340 100 28,409 100 32,938 100 28,765 100 30,750 100

Deposits on Rural Sectors After 2009

The investment are collection of funds even the loan are fully arranged in a basis

way by which more and more funds can be created whenever the country wants to

develop its economic condition, at the same time it requires full co-operation of

commercial bank as commercial banks are providing a banks are providing a basic

infra structure to the rural sector even ton to rural industries.

In report, it was mentioned that the commercial bank providing loan to rral

sector with a full of institutional progress. By the end of 2009, the total investment

goes to Rs. 31340 million like such the loan provided by the end of 2010 goes to

Rs. 28409 million like such the loan provided by the end of 2008 goes to

Rs. 28409 million also also the amount of investment is related with 30750 million

by the end of 2013 this is what the increase of 7.5% of loan from 2009

3.2-FINANCIAL STRUCTURE OF commercial bank



The Indian financial system comprises the following institutions:

1. Commercial Bank

a. Public sector

b. Private sector

c. Foreign bank

d. Cooperative institutions.

i. urban cooperative bank

ii. State cooperative bank

iii. Central cooperative bank

2. Financial Initiations

a. All- India financial institution (AIFIs)

b. State financial corporation (SFCs)

c. State industrial development corporation(SIDCs)

3. Nonbanking financial companies (NBFCs)

4. Capital market intermediaries

About 92 percentage of the country’s banking is under state control while the

balance comprises private sector and foreign bank. The public sector commercial

bank are divided into three categories.

Nationalized Banks (19 banks) in In 1969, the Government arranged the

nationalization of 14 scheduled commercial bank in order to expand the branch

network, followed by six more in 1980. A merger reduced the number from 20 to

19. Nationalized bank are wholly owned by the Government, although some of

them have made public issues. In contrast to the state bank group, nationalized

bank are centrally governed i.e., by their respective head offices. Thus, there is

only booed for each nationalized bank and meeting are less frequent ( generally,

one a month)



The state bank group and nationalized bank are together referred to as the public

sector banks (PSBs.)

Table 1 and 2 provide details of details of public issues and post issue

shareholdings of these PSB.s

Issue of Subordinated Debt Instruments for Inclusion in Tier-2 Capital

During the Rear Ended March 1998( Rs billion)Nam of Bank Amount Permitted Amount Raised

Punjab & Sind Bank 1.0 1.0

Bank of India 7.0 Nill

Syndicate Bank 0.8 0.6

Dena Bank 2.0 1.5

Regional Rural banks

RRBs. In 1975, the state bank group and nationalized bank were required to

sponsor and set up RRBs in partnership with individual state to provide low-cost

financing and credit terms of total assets . the table clearly shown the importance

of PSBs.

Structure of the Banking Industry in Terms of Total Assets, March1997Bank Number Total Assets (Rs. Billion)State Bank of India and Associates 8 2,043.56Nationalized bank 19 3,519.05Old private sector bank 25 444.54New Private sector bank 9 161.13Foreign bank 39 559.11Regional rural bank 169 190.51aMore than 40,000 NBFCs exist exist, 10,000 of which hand deposits Rs 1,539

billion as March 1996 After public frauds and failure of some NBFCs, RBIs

supervisory power over these high-growth and high –risk companies was vastly



strengthened in January 1997. RBI has imposed compulsory registration and

maintenance of a specified percentage of liquid reserves on all NBFCs.

Magnitude and Complexity of the Bank Sector

The magnitude and complexity of the India banking sector can be understood

better by looking at some basic banking date. Table 4 shows classification on

banks based on working funds.

Classification of Banks Based on Working Funds, as of 31st March 1997Classification Working Funds (Rs billion)

Small UP To 50

Medium 50-100

Large 100-250

Very Large 250-500

Exceptionally Large Above 500

Interms of growth the number of commercial bank branches rose eightfold from

8,262 in june 1969 at the time of nationalization of 14 bank to 64,239 in june 1998.

The average population per bank branch dropped from 64,000 in june 1969 to

15,000 in June 1997, although in many of the rural centers ( such as in hill districs

of the North ), this ratio was only 6000 people per branch, This was achieved

through the establishmentment of 46,675 branches in rural and semi –urban area,

accounting for 73.5 percent of the network of branches As of March 1998, deposits

of the banking sytem sstood at Rs6,013.48 billion and net bank credit at

Rs,3,218.13 billion.

PUBLIC SECTOR BANKS ‘BAD DEBTS:Parliamentary review

Government ownership in banks attracts parliamentary review . the Estimates

Committee of Parliament takes a serious view of adverse comments made against



to managements of PSB and NPAs on account of transgression of powers. The

committee called for a total revamp- of the training system for bank officers. The

committee also noted that public sector undertaking (PSU) banks have to be able to

contain NPAs at a par with international standards where the tolerable levels of

NPAs are “around 3 to 4 percent.”

NONPERFORMING ASSETS OF ALL INDIA FINANCIAL INSTITUTIONS

The net NPAs-total loans ratio at IDBI stood at 10.1 percent, ICICI at 7.7 percent,

and IFCI at 13.6 percent as of 31 March 1998.However, loans from other AIFIs

such as LIC, GIC, UTI, and their subsidiaries, risk Capital and Technology

Corporation (RCTC), Technology Development and Information Company of

India (TDICI), and Tourism Finance Corporation of India (TFCI), to the industrial

sector have been substantial , but the date on their NPAs are not readily available.

For state – level institutions such as SFCs and SIDCs, which lend to medium-size

industry and SSI sectors, the NPA data are also not readily available State-level

institutions benefit from a special recovery procedure allowed under their separate

enactment. With the exception of IDBI, ICICI and IFCI, the other AIFIs are not

under RBI’s regulatory discipline. There is a need to study feature of their loan

operations, credit control, and NPAs.

FUNCTION OF BANK CAPITALCAPITAL ADEQUACY

Capital adequacy is a self-regulatory discipline and cannot save banks that are

distressed. As such, the time required for meeting bank capital adequacy must be



shortened to a minimum. The CAMEL rating system clearly recognizes the

strength of bank capital as just one requirement and also an end product of other

processes, mostly management driven . It is essential to amplify the quality of

earnings as it is the first thing that catches shareholder’s attention. History shows

that banking problems germinate during years of economic boom. When the

earnings component becomes volatile and susceptible to sharp growth that is no

sustainable, the quality of loan/risk assets can become suspect.

PSB are owned by the Government, therefore, they have implicit guarantees from

the Government, resulting in the lack of capital adequacy ratio (car)norm. Given

the recommendation of the Narasimham committee (I) in 1991 on the BIS standard

of capital adequacy, a CAR of 8 percent was to be achieved by march1996.

Twenty –six out of 27 PSBs had complied with this requirement as of March

1998. Narasimham Committee (II) recommended CAR targets of 9 percent by

2000 and 10 percent by2002. As many PSBs have already high CARs (some

indicated an average CAR of about 9.6 percent as of March 1998), such targets

could be attained. Moreover ,. As 35 percent of deposits are allocated to CRR and

SLR, coupled with investment in Government guarantees bonds risk assets are are

not preferred.

However , RBI has introduced a calculation method that 60 percent of approved

securities should be market –market, and the ratio will be raised to 100 percent in

a few years . Deposit the higher mark-to- market ratio, many bank s increased

investments in approved securities to comply with CAR.

The banks will have difficulties raising more capital in the near future, with capital

markets sluggish, investor confidence low, and bank issues unpopular with

investors. The need for general provisioning on standard assets increases the



pressure on profitability of banks as Government – guaranteed securities are prone

to default.

RBI has decided to implement certain recommendations of Narasimham Committee(II).

Banks are to achieve a minimum of 9 percent CAR by 31 March 2000.

Decisions on further enhancement will be made thereafter.

An asset will be treated as doubtful if it has remained substandard for 18

months instead of 24 months. Banks may make provisions in two phases.On 31

March 2001 provisioning will be art not less than 50 percent on the assets that

have become doubtful on account of the new norms.

On 31 March 2002 a balance of 50percent of the provisions should be made in

addition to the provisions needed by 31March 2001. A proposal to introduce a

norm of 12 months will be announced later.

Government – guaranteed advances that have turned sticky are to be classified

as NPAs as per the existing prudential norms effective 1 April 2000. Provisions

on these advances should be made over a period of four years such that

existing/ old Government – guaranteed advances that would become NPAs on

account of new asset classification norms should be fully provided for during

the next four years from the year ending March 1999 to March 2002 with a

minimum of 25 percent each year. To start with, banks should make a general

provision of a minimum of 0.25 percent for the year ending 31 March 2000.

The decision to raise further the provisioning requirement on standard assets

shall be announced in the process.

Banks and financial institutions should adhere to the prudential norms on asset

classification, provisioning , etc. , and avoid the practice of evergreening .



Banks are advised to take effective steps for reduction of NPAs and also put in

place risk management systems and practices to prevent reemergence of fresh

NPAs.

PSBs shall be encouraged to raise their tier-2 capital , but Government

guarantee to hond issues for such purpose is deemed inappropriate.

Banks are advised to establish a formal ALM system beginning 1 April 19999 .

Instructions on further disclosures such as maturity pattern of assets and

liabilities , foreign currency assets and liabilities , movements in provision

account , and NPAs , will be issued in due course.

Arrangements should be put in place for regular updating of instruction manuals. Compliance has to be reported to RBI by 30 April 19999.

Bank are to ensure a loan review mechanism for large advances soon after their sanction and measures in time

A 2.5 percent risk weight is to be assigned to Government /approved securities by March 2000

Risk weights to be assigned for Government guaranteed advances sanctioned

effective 1 April 19999 are as followe:

Central Government 0 percent :

State government : O percent,

Governments that remained defaulter as 31 March 2000:20 percentage.

The last figures as ( of 1997/98) for bank’s and selected financial institution capital

adequacy are shown in Table 19 and 20. Table 19 indicates that most PSBs have

comfortable CARs but ones the accounts are recast in conformity with the

forthcoming provisioning norms, bank will have to start planning for capital

issues. The size of bank issues, sequencing, and readiness of the capital market to

absorb all public offering will pose tremendous challenge challenges to bank

management.



TIER-2 CAPITAL FOR BANKSTo meet CAR requirements seven bank – Canara Bank, Punjab National Bank, Central Bank of India, India Overseas Bank, United Bank of India, Federal bank ( Private sector), and Vijay Bank- are finalizing plans to raise about Rs. About Rs20 billion worth of subordinated debt, which qualifies as tier-2 capital?

Capital Adequacy of public sector Bank, 1995/96/1997/98(percent)

Name of Bank 1995//96 1996/97 1997/98State Bank of India 11.60 12.17 14.58State Bank of Bikaner & Jaipur 9.33 8.82 10.65State Bank of Hyderabad 9.90 10.84 10.82State bank of Indore 8.80 9.31 9.83State Bank Mysore 8.81 10.80 9.83State Bank of Patiala 9.51 11.25 11.61State Bank of Saurashtra 12.38 12.14 13.24State Bank of Travancore 9.40 8.17 18.14Allahabad Bank 9.68 11.00 11.48Andhra Bank 5.07 12.05 12.37Bank of Baroda 11.19 11.80 12.05Bank of India 8.49 10.26 9.11Bank of Moharashtra 10.38 9.07 10.90Canrara Bank 2.63 10.17 9.54Central bank of India 11.30 9.41 10.40Corporation bank 8.27 11.30 16.90Dena Bank Neg. 10.81 11.88Indian Bank 5.95 Neg 1.41Indian Bank 16.99 10.07 9.34Indian Overseas bank 3.31 17.53 15.28Oriental bank of Commerce 8.23 9.23 11.39Punjab National bank 8.42 9.15 8.81Syndicate Bank 7.42 8.80 10.50United Commercial bank 7.93 3.16 9.07Union Bank of India 9.50 10.53 10.50United Bank of India 3.50 6.23 8.41Vijay bank Neg 11.53 10.30

CREDIT DELIVERY SYSTEMDistribution of Outstanding credit scheduled commercial Bank According to type of Account March 1996 Percent

Type of Account No of Account Credit Limit Amount Outstanding



Cash Credit 16.1 35.7 35.7Overdraft Loans 608 7.7 7.4Medium-term loans 7.2 7.9 8.0Long-term loans 24.8 9.4 10.3Packing Credit 42.9 18.9 19.8Export trade bills purchased 0.5 7.3 7.0Export trade bill discounted 0.3 3.2 2.6Export trade bill advanced 0.1 2.1 1.8Advance against export cash Incentive and duty drawback claim

0.1 1.1 0.9

Indian Trade bill purchased 0.0 0.1 0.1Indian Trade bill discounted 0.4 1.3 1.2Indian Other bill discounted 0.3 2.4 2.0.92Advance against important bill 0.2 0.9 0.7Forign currency check/TCs/DDs/ TTs/ MTs purchased

0.101

0.80.8

0.80.4

Total 100.0 100 100.0Amount Rs.billion 4,767,771.0 2,684,4 2184.4

Table show the Indian bank’ blow coverage of bills and receivable financing, and low level of export of bank clientele to the forein trade segment.

Partly these should be ascribed to a lack of banking services or expertise of centers where demand for the service exists but is met by distantly placed branches. Inadequate bills and direct receivables financing results in underutilization of network branches through which collection can take place.

3.3-HUMAN RESOURCES ISSUES IN BANKING

LABOUR UNION AND HUMAN RESOURCES:-

The number of bank management staff and employees in India is vast (223,000

in SBI; 81,252in SBI Associates; 581,000 in nationalized banks; 57,241 in old

private sector banks; 1,620 in new private sector banks, and 13,510 in foreign

banks operating in the country). The total is 957,623 with the number of staff

employed in co-operative and rural banks equally large. Potentially, the gap

between availability of required skills and actual requirements is increasing as



more complex product mixes are introduced and traditional banking products are

replaced. Another reason is the skewed age profile of employees, some of whom

were taken on 30-35 years back when the branch expansion programs started.

Indian banks are highly unionized and productivity benchmarks are not clearly

established. To create a more constructive work attitude, the disinvestment or

privatization programs of PSBs should include share offerings to staff, an idea

successfully carried out by SBI, Bank of Baroda and Bank of India among others.

The spread of computerization (so far inhibited by staff union pressures on quotas

and wage hikes) must be evaluated in terms of return on information technology

assets of the banks and revised productivity benchmarks.

Another issue requiring attention is regular recruitment in various grades every

year, since experienced employees in banking are built up over several years

An embargo on recruitment since 1985 has skewed the age profile of the work

force in PSBs. Such imbalances are difficult to rectify. There are those who argue

for productivity-linked wages, which is a dangerous recipe in the context of a

unionized work force.

What is needed is fair competition, merit based career progression policies, strong

management of staff, and transparent performance evaluation systems (experienced

of international banks paying proprietary rewards and package for specialist

traders, etc. have not exactly been happy since such staff have landed some banks

with losses).

The merger of banks as recommended by Narasimham Committee (II) to create

strong banks that can compete internationally can result only in the creation of

formidable union power and amplify inefficiencies.



Policies are also needed to prevent significant turnover of banking staff in cities,

urban as well as semi urban and rural branches. Incentives must be given to staff in

rural and semi-urban branches to increase motivation and minimize fast personnel

turnover.

WAGE HIKES

For the first time, the government, RBI and IBA have ruled out a uniform wage

increase formula that is not linked to banks’ productivity and performance.

Across-the-board pay hikes blur the distinction between good and bad performers

while operating costs continue to mount. About 80 percent of the operating

expenses of PSBs are accounted for by wages and salaries.RBI data on bank

intermediation cost (BIC) ratios show that PSBs in the period 1991-1998 recorded

an average rise in the BIC ratio, in contrast with Indian private sector banks, which

managed to hold the ratio down.

The only way forward now is for banks to be left free to genuinely compete. The

Chief Vigilance Commission in 1999 has clarified that bank should be 100%

computerized by the year 2000 and that bank unions will have no say in this

matter. This is to ensure that frauds, which have reached serious proportions under

the manual processing system, are kept in check. The area of computer fraud,

however, is not addressed. Foreign banks have started reducing staff under the

Voluntary Retirement Scheme. Such packages for staff of week PSBs remain

under discussion.

Table shows the number of staff deployed in scheduled commercial banks (SCBs),

and the number of deposit accounts and borrowing accounts handled. As can be

seen from the table, improvements must be made in branch service operations,

staffing, and expansion in rural and semi-urban SCBs considering the high volume



of banking transactions and relatively smaller number of staff per branch compared

with urban/metropolitan SCBs.

CHAPTER-4Financial analysis of Commercial bank in India

4.1-P&L Account of Commercial bank In India ------------------- in Rs. Cr. -------------------

Particular 2013 2012 2011 2010 2009 12 mths 12 mths 12 mths 12 mths 12 mthsIncomeInterest Earned 21,751.72 17,877.99 16,347.36 12,355.22 9,180.33Other Income 2,641.77 2,616.64 3,051.86 2,116.93 1,562.95Total Income 24,393.49 20,494.63 19,399.22 14,472.15 10,743.28ExpenditureInterest expended 13,941.03 12,122.04 10,848.45 8,125.95 5,739.86



Employee Cost 3,475.44 2,296.07 1,937.41 1,657.01 1,614.00Selling and Admin Expenses

1,720.85 2,334.80 1,120.62 1,122.39 957.63

Depreciation 140.56 101.29 69.37 73.13 96.73Miscellaneous Expenses 2,626.91 1,899.36 2,416.02 1,484.26 1,211.89Preoperative Exp Capitalised

0.00 0.00 0.00 0.00 0.00

Operating Expenses 6,122.54 5,422.07 3,716.65 3,342.23 3,165.32Provisions & Contingencies

1,841.22 1,209.45 1,826.77 994.56 714.93

Total Expenses 21,904.79 18,753.56 16,391.87 12,462.74 9,620.11 Mar '13 Mar '12 Mar '11 Mar '10 Mar '09 12 mths 12 mths 12 mths 12 mths 12 mthsNet Profit for the Year 2,488.71 1,741.07 3,007.35 2,009.40 1,123.17Extraordionary Items 0.00 0.00 0.00 0.00 0.00Profit brought forward 0.00 0.00 0.00 541.76 541.76Total 2,488.71 1,741.07 3,007.35 2,551.16 1,664.93Preference Dividend 0.00 0.00 0.00 0.00 0.00Equity Dividend 444.30 428.65 491.54 245.77 196.69Corporate Dividend Tax 0.00 0.00 0.00 0.00 0.00Per share data (annualised)Earning Per Share (Rs) 45.54 33.15 57.26 38.26 23.04Equity Dividend (%) 70.00 70.00 80.00 40.00 35.00Book Value (Rs) 292.26 243.75 224.39 168.06 117.89AppropriationsTransfer to Statutory Reserves

828.54 686.86 1,518.33 795.78 405.60

Transfer to Other Reserves

1,215.87 625.56 997.48 1,509.61 520.88

Proposed Dividend/Transfer to Govt

444.30 428.65 491.54 245.77 196.69

Balance c/f to Balance Sheet

0.00 0.00 0.00 0.00 541.76

Total 2,488.71 1,741.07 3,007.35 2,551.16 1,664.93

4.2-BALANCE SHEET OF THE BANKThe balance sheet of a commercial bank is a statement of its assets and liabilities.

Assets are what others owe the bank, and what the bank owes others constitutes its

liabilities. The business of a bank is reflected in its balance sheet and hence its

financial position as well. The balance sheet is issued usually at the end of every

financial year of the bank.



The balance sheet of the bank comprises of two sides; the assets side and the liabilities side. It is customary to record liabilities on the left side and assets on the right side. The following is the proforma of a balance sheet of the bank.

4.3-Balance Sheet of Commercial bank In India

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

Particular 2013 2012 2011 2010 200912 mths 12 mths 12 mths 12 mths 12 mths

Capital and Liabilities:Total Share Capital 547.22 525.91 525.91 525.91 488.14Equity Share Capital 547.22 525.91 525.91 525.91 488.14Share Application Money 0.00 0.00 0.00 0.00 0.00Preference Share Capital 0.00 0.00 0.00 0.00 0.00Reserves 15,423.99 12,275.46 11,258.72 8,300.38 5,257.75Revaluation Reserves 1,319.47 1,428.62 1,710.29 1,763.10 149.48Net Worth 17,290.68 14,229.99 13,494.92 10,589.39 5,895.37Deposits 298,885.81 229,761.94 189,708.48 150,011.98 119,881.74



Borrowings 22,021.38 22,399.90 9,486.98 7,172.45 6,620.83Total Debt 320,907.19 252,161.84 199,195.46 157,184.43 126,502.57Other Liabilities & Provisions 12,974.69 8,574.63 12,811.39 11,056.16 9,239.05Total Liabilities 351,172.56 274,966.46 225,501.77 178,829.98 141,636.99

2013 2012 2011 2010 200912 mths 12 mths 12 mths 12 mths 12 mths

AssetsCash & Balances with RBI 21,782.43 15,602.62 8,915.28 11,741.85 7,196.89Balance with Banks, Money at Call

15,527.56 15,627.51 12,845.97 5,975.54 10,208.65

Advances 213,096.18 168,490.71 142,909.37 113,476.33 84,935.89Investments 85,872.42 67,080.18 52,607.18 41,802.88 35,492.76Gross Block 4,020.12 3,790.81 3,578.23 3,448.44 1,733.50Accumulated Depreciation 1,654.19 1,504.07 1,156.75 1,049.28 955.61Net Block 2,365.93 2,286.74 2,421.48 2,399.16 777.89Capital Work In Progress 114.81 65.07 110.45 26.92 11.41Other Assets 12,413.22 5,813.63 5,692.02 3,407.32 3,013.50Total Assets 351,172.55 274,966.46 225,501.75 178,830.00 141,636.99Contingent Liabilities 143,699.22 118,535.87 107,155.08 100,486.14 54,811.58Bills for collection 32,505.88 28,372.75 11,490.74 20,181.00 17,116.16Book Value (Rs) 292.26 243.75 224.39 168.06 117.89

4.4-Cash Flow Statement of Commercial Bank of India

Particular 2013 2012 2011 2010 2009 12 mths 12 mths 12 mths 12 mths 12 mthsNet Profit Before Tax 3495.38 2493.83 4164.43 2684.72 1532.86Net Cash From Operating Activities

5946.80 8439.81 4018.39 -565.02 5111.96

Net Cash (used in)/fromInvesting Activities

-556.64 -224.72 -360.43 -183.33 -67.53

Net Cash (used in)/from Financing Activities

689.70 1253.78 385.91 1060.20 915.12

Net (decrease)/increase In Cash and Cash Equivalents

6079.86 9468.87 4043.87 311.85 5959.56

Opening Cash & Cash Equivalents

31230.13 21761.26

17717.39

17405.54

11445.98

Closing Cash & Cash Equivalents

37309.99 31230.13

21761.26

17717.39

17405.54



CHAPTER-55.1-FINDINGS

This project report provide detail information about the investment of

commercial after 2000 A.D in some case it discloses the total progress of

commercial bank with different ration and this progress are shown in zone wise

so, the project will show the detail about the bank as a whole.

5.2-SUGGESTION After completing the project report I want to suggest the bank to invest more

amounts to suggest the bank to invest more amounts for developing the economic

of poor people. Even more and more amount has been invested for minimizing the

poverty in the country. At last I would like to suggest the bank authority for

maintaining a regular finance system to poor people of India.

5.3-CONCLUSION



Although both branch banking system and unit banking system have their

relative merits and demerit, but the merit of the former auto high those of the later.

There has grown a general tendency in favor of the branch banking system mainly

because of large finance resources, economics of large operation and effective

control by the Central Bank Experience has shown that unit- banking system is

hampered by limited resources and doesn’t work under economic depression.

Today, the branch banking system is especially for the underdeveloped countries.

The entire banking system in India has developed on the lines of branch banking

system.

So far, bands, in underdeveloped countries have been paying more attention

to trade and commerce and have almost neglected agriculture and industry. Thus

necessary structural and function reforms in the banking system of the

underdeveloped countries should be made in order to encourage the banks to play

developmental role in these economic the blanks must diversify their activities not

only provide medium-turm and long term loans to industry and agriculture.

At last the role of “COMMERCIAL BANK” in present day growing rapidly by the

change of present economic policy and its system afterward the function and

services of commercial bank is very much essential in present day as if all type of

information about the information about the investment, progress and development

rural sector in India since 2003. Thus, it is a vital report for the research holder ,

bank employee and commercial bank.

5.4-BIBLIOGRAPHYBanking Law and Practice –By T.N. Chabra

Banking Law and Practice – By A.C. Nayak

Banking Monthly Bulletin

Annual financial Report – Government of India

Websites of Banks



THANKS

roll of commercial bank in mobilixing deposits-55

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