SUBMITTED TO:

MISS. HARJEET KAUR SUBMITTED BY:

MUKESH VERMA
BBA-MBA (INT.)
SEC. A
R346A29
 Success is an amalgam of dedication.
Hard work and able guidance of people around us”

I am indebted to my teachers and gurus who molded at this junction of my career from where I
can take off better in the competitive scenario of today’s world . Working on this project has been
a great pleasure & a stimulating experience.
Firstly I would like to express our deep gratitude to God all mighty for his blessings, which
provided me strength & patience to complete my term paper. I would also like to convey my
thanks to Mr. Bill Gates who have developed the Ms Office without his contribution we would
not able to make this type of attractive & in a printed way. I would also like to thanks my friends
who helped me in all possible ways.
I am also thankful to MISS. HARJEET KAUR Who provided me needed information about
their department and guided my term in the right direction.

MUKESH VERMA

(SIGNATURE)
INTRODUCTION TO BANKING INDUSTRY
History
In the history of banking, there is no unanimous opinion regarding the beginning of banks. Some
trace its origin to French word BANGUI and some to Italian word BANCA. According to one
viewpoint, in gold old days, Italian money lenders were known as “Banechi” or “Banacheri”
because people kept a special type of table to transact their business called “Banchi”. The
practice of safekeeping and saving was found in the temple of Babylon. Chankya in his
Arthashastra has also mentioned about existence of powerful guilds of merchant bankers who
received deposits, advanced loans and issued hundis.

First Bank: Casa De San Giorgio was the first bank to be established in 1148. In 1157, first
public bank ‘Bank of Venice’ was established in Italy.
First Bank in India: The first bank in India was started in 1770 as ‘Bank of Hindustan’.
First Bank in modern sense: ‘Bank of Bengal’ was the first bank in modern sense in 1806.

Bank may be defined as a financial institution which is engaged in the business of keeping
money for savings and checking accounts or for exchange or for issuing loans and credit etc. A
set of services intended for private customers and characterized by a higher quality than the
services offered to retail customers. Based on the notion of tailor-made services, it aims to offer
advice on investment, inheritance plans and provide active support for general transactions and
the resolution of asset-related problems. The essential function of a bank is to provide services
related to the storing of deposits and the extending of credit. Basic function may include Credit
collection, Issuer of banking notes, Depositor of money and lending loans.

Growth

Origin: In 1786, the England Agency Houses had established the Bank of Bengal at Calcutta.
This heralded the beginning of modern banking in India, subsequently three presidency banks
were set up, one each at Calcutta (1806), Bombay (1840), and madras (1846), till 1862, these
presidency banks were allowed to issue currency notes. The banks in existence during the period
opened branches in various cities and towns like Agra, Mumbai, Banaras, Simla, and Delhi.

From 1860 to 1900: In 1860, the concept of limited liability was introduced in banking. As a
result several joint stock banks were floated. Some of the prominent joint sector banks thus
established during the period was 1) The Allahabad Bank 2) The Alliance Bank of Simla 3) The
Oundh Bank and 4) The Punjab National Bank.

From1900 to 1950: The Swadeshi movement, which started in the early 1900s, gave stimulus to
the growth of indigenous joint stock bank. Some of the banks established during the period were:
1) The people’s Bank of India 2) The Bank of India 3) The Bank of Baroda 4) The Central Bank
of India. In 1921 the three presidency Banks were merged to form the Imperial Bank of India. On
the eve of independence in 1947, there were 648 commercial banks comprising 97 scheduled and
551 non-scheduled banks. The number of offices of Banks stood at 2,987 total deposits at
Rs.1080 crore and advances at Rs.475 crore.

On the basis of major recommendations of the Central Banking Enquiry Committee the RBI Act
was passed in 1934 and the RBI came into existence in 1934 as the central banking authority of
the country. In 1949, the banking Regulation Act (BR Act) was passed which provided the
framework for the RBI’s regulation and supervision of banks. It gave wide powers to RBI to
regulate, supervise and develop the banking systems. Such powers encompassed the
establishment of new banks. During the period following 1949, RBI attempted to institutionalize
the saving of the public and to adopt a credit system suitable to the emerging needs of the
economy.
From 1950 to 1969: During this period, two important developments took place. First, the all
India Rural Credit survey Committee, which examined the issue of credit availability at the rural
areas, recommended the creation of the state partnered/sponsored bank entrusted with the task of
opening branches in the rural areas. Accepting this recommendation, the State Bank of India Act
1955 was passed under which the RBI took control of the Imperial Bank of India, which was
renamed State Bank of India (SBI). Later in 1959, the State Bank of India (Subsidiary bank) Act
was passed enabling SBI to take over eight princely-state-association banks as the subsidies. The
conversion of Imperial Bank of India into the State Bank of India and the constitution of the
association banks accelerated the pace of extending banking facilities all over the country.

Secondly, the need about wider diffusion of banking facilities and to change the uneven
distributive pattern of bank lending was realized. Hence, to ensure an equitable and purposive
distribution of credit within the available resources and keeping in view the relative priorities of
developmental needs, the scheme of social control over banks was announced in the Parliament
in December 1967. The measures designed under the social control aimed at achieving a social
orientation of banking within the framework of the existing ownership. The National Credit
Control Council was set up in 1968 to assess the demand for Bank Credit from various sectors of
the economy and to determine their respective priorities in allocation. The period witnessed
further consolidation in banking. At the launch of the first five years plan in1951, there were 566
commercial banks consisting of 92 scheduled, 474 non scheduled banks. In 1969 total number of
banks declined to 89 out of which 73 were scheduled and 16 were non-scheduled

From 1969 to 1990: (Era of nationalization): The Indian banking scene underwent significant
changes during this period. Several structural and functional changes took place. In July 1969,
the government of India nationalized 14 major scheduled commercial banks, each having a
minimum aggregate deposit of Rs. 50 crore. According to the Bank nationalization act, 1969, the
objective and reason for the nationalization was:
“An institution such as the banking systems, which touches and should touch lives of millions
has to be inspired by a larger social purposes and has to sub-serve national
The acquisition of ownership of banks was thus to enable banks to play more efficient the role of
a catalytic agent for the economic growth by extending banking facilities to the most deserving
classes. Again, in 1980, the government of India had nationalized another six banks, each having
deposits of Rs. 200 crore or above. Another important structural development was the formation
of the Regional Rural Banks (RRBs). In 1973 the government of India had set up a working
group to study the credit availability at the rural areas. The working group identified various
weaknesses of the cooperative credit agencies and commercial banks and came to the conclusion
that they may not be able to fill the regional and functional needs of the credit systems.
Therefore, the study group recommended a new type of institution, which combined the rural
touch, and experience of co-operative with the modernized outlook and capacity to mobilize
deposit possessed by commercial banks. Such institution was to carry on banking business within
the local limits specified by the government through notification. The government of India
accepted this recommendation and permitted the establishment of RRBs. The RRBs are state
sponsored, region based, rural-oriented commercial banks. Such institution was to carry on
banking business within the local limits specified by the government through notification. The
Government of India accepted this recommendation and permitted the establishment of RRBs are
state sponsored, region based, rural-based rural oriented commercial banks set up under the
Regional Banks Act 1976. Their ownership vests with the sponsoring commercial bank, the
Central Government, and the Government of the state in which they are geographically located.
Under this approach, 196 RRBs were set up.

1990 Onwards: Era of Reforms: In 1991, the Government of India had launched an extensive
economic reform programme. As part of the general programme, reforms were introduced in the
banking sector. The main objective of the reform is to promote efficiency of the banking system
through intensified competitive forces. The strategy adopted is to improve operational efficiency
of the banking system and to impact functional autonomy through reduced state direct
intervention in the working of the institution.

Landmarks

Banking is one of the most heavily regulated businesses in the world and it is no
exception in case of India, especially after economic reforms started in 1991-92. No one can
start a bank without some government’s permission to do so, and no one can close a bank
without the government’s approval. Yet, the extensive rules that constrain bankers’ services,
behaviour, and performance are changing as well. Regulators looking over the industry are
paying more attention to its risk and to signals from the private marketplace. Increasingly it is
recognized today that government rules and regulations can only do so much, and that private
decision-makers-businesses and consumers-can do as much or more to determine which banks
are most accommodating and efficient and which should be allowed to fail (or, perhaps, be
absorbed by other, better managed institutions). This paper has been divided into four parts.
Part I deals with overall Indian Banking scenario. Part II deals with Basle norms. Part III deals
with Indian Central Bank’s response to implement Basle norms. Part IV deals with Basle II
norms and India’s preparedness to implement it. Part V conclusion.

Part I
Indian Banking Scenario: In India banking industry is divided into sub categories of Scheduled
Commercial Bank and scheduled cooperative bank. Commercial Bank again is subcategorized
as: (a) public sector bank; (b) private sector bank; (c) foreign banks; (d) Regional Rural Bank.

Part II
Basel – I: The last two decades saw unprecedented changes in the banking and financial systems
all over the world. While England, the historical seat of banking, witnessed a process of
deregulation of the financial system at the beginning of the 1970s (which was soon to cross the
Atlantic to the United States), India moved in the opposite direction, tightening controls over the
financial system by nationalizing the major commercial banks of the country. It was done at a
time when the Indian banking system, having established itself domestically in strength and
stability, was about to move towards global integration. For that, it had to wait for a quarter of a
century. In India, the decade beginning 1990 saw the commutation of the crisis of the regulated
regime with the worsening of the external balance of payments, a low foreign exchange reserve,
raging inflation and dwindling GNP. It was felt that a major restructuring of the Indian economy
was needed. On the external front, the signing of the General Agreement on Tariffs and Trade,
(GATT) followed by membership of the World Trade Organization (WTO), paved the way for
global integration.

Part III
Indian Central Bank took prompt initiative to respond to the framework of Basle in terms
of implementation of the 1988 Accord. In an effort to implement, monitor prudential
norms in the area of credit, advances and control the functioning of the banks, the Central
Bank of the country came out with comprehensive guidelines in the following areas:

: Pre conditions of effective Banking and Supervision;

: Licensing and Structure
: Prudential Regulations and Requirements: Liquidity Risk Management
 : Methods of Ongoing Banking Supervision

Part IV
Basel – II: With increasing financial sector liberalization and emergence of financial
conglomerates, financial sector stability has emerged as a key objective of the Central Bank in
India. The recent emphasis in the regulatory framework in India is on ensuring good
governance through “fit and proper” owners, directors and senior managers of the banks infuses
a qualitative dimension to the conventional discharge of financial regulation through prescribing
prudential norms and encouraging market discipline. In totality, however, these measures
interact to produce a positive impact on the overall efficiency and stability of the banking system
in India. There has been a marked improvement in capital adequacy, asset quality and the
profitability of the banking system. Commercial banks in India will start implementing Basel II
with effect from March 31, 2007. They will adopt the Standardized Approach for credit risk and
the Basic Indicator Approach for operational risk, initially. After adequate skills are developed,
both at the banks and also at supervisory levels, some banks may be allowed to migrate to the
Internal Rating Based
Approach. Banks have also been advised to formulate and operationalized the Capital
Adequacy Assessment Process as required under Pillar II of the New Framework.
Implementation of Basel II will initially require more capital for banks in India in view of the
fact that operational risk is not captured under Basel I, and the capital charge for market risk was
not prescribed until recently. Consequently, banks are exploring all avenues for meeting the
capital requirements under Basel II.

Part V
To day Indian banking industry is in change. Rather than being something in particular, it is
continually booming something new - offering new services, merging and consolidating into
much larger and more complex businesses adopting new technologies that seem to change faster
than most of us can comprehend and facing a new and changing set of rules. Despite all of these
changes sweeping through this vital industry, there are still something in banking that never seem
to change. It is an probably will always remain to be service industry providing an intangible
product that is hard to differentials from the products offered by competitors.
Besides India has got in succession Central Bankers and professional team who has left their
mark in managing the banking system despite turbulence in neighbouring countries especially
the financial turmoil which struck Asia in mid 1997.

Major players and their market share

Figure: 2.1.4.1
The banking Industry structure has changed rapidly. It has evolved from doing traditional
activities of borrowing and lending to providing specialized financial products and services like
advisory services, structured products etc. Several banks are pursuing global strategies as Indian
companies are expanding global. At the same time, the industry witnessed increased competition
with many global banks showing increasing interest in the Indian Banking sector. The banking
sector not only diversified into non-traditional
activities, but there has been a shift in the ownership and management of the banking sector from
a predominantly public sector to private sector. The private sector banks are now invading the
market share of the public sector banks rapidly. Their share in the total profits as well the total
assets have been increasing rapidly over the past few years.
Figure: 2.1.4.2

Private Banks added value to their client by providing newer products and services. The
distinguishing features of the private sector banks are product innovation and diversification,
optimum use of information technology and focus on the customer. Private Banks ventured into
products like structured finance, investment banking etc. Though such business had an element
of risk attached, it was for this risk that the private banks were rewarded. Private Banks were
more opportunistic as they concentrated on high margin business. Concepts such as any where
banking, 12-hour banking and transactions through ATMs (Automatic Teller Machines), which
were introduced by them, have revolutionized the banking practices in India. Further private
banks have adopted an outsourcing model, which helps them in reducing their cost considerably.
This in turn resulted in more profitability, and therefore they got a higher premium.
INTRODUCTION TO INDUSLAND BANK

IndusInd Bank came into existence in 1994 and is an outcome of the vision of Mr. Srichand P.
Hinduja, the head of the Hinduja Group. The Bank derives its name and inspiration from the
Indus Valley Civilisation.

IndusInd Bank has carved a niche for itself in technology-supported, cost-efficient, and
customer-friendly banking. Starting with Corporate and Wholesale Banking the Bank has now
forayed aggressively into Retail Banking as well.

IndusInd Bank launched Internet Banking in 1996 and Mobile Banking in 1997, well in advance
of other Indian banks. In 2002-03, the Bank became one of the first banks to implement the RBI
- Electronic Funds Transfer scheme. In 2003-04, the Bank became the first Indian Commercial
Bank to achieve certification for its "Entire Network of Branches" under the ISO 9001:2000
Quality Management System.

Presently (2004-05), the Bank has a business turnover of over Rs. 22000 crores and a network of
115 branches, 9 extension counters and 195 ATMs, spread over 95 geographical locations.

PROFILE OF THE COMPANY

Company Profile: Indusind Bank Ltd

Ticker: IBK

Exchanges: BOM

2008 Sales: 22,185,000,000

Major Industry: Financial

Sub Industry: Commercial Banks

Country: INDIA
Employees: 2869
Business Description

Indusind Bank Ltd. The Company's principal activity is to provide banking services. It operates
under four segments: Treasury, Corporate/wholesale banking, Retail Banking and Other
Banking. It involves in accepting deposits, providing loans, financing and other related services
in treasury to consumers and industries. The Company operates through 170 branches spread
across 141geographical locations and 99 Offsite ATMs with the opening 30 new branches.
 ANALYSIS
EXPENSES 2008 2007

Stationery and stamps 23712 22403

Commission exchange & 519047 49333

brokerage
Rent,taxes & lighting 319991 306946

Printing and stationery 61033 59633

Advertisement and 3443 3423

publicity
Postage,telegrams and 59721 53561
phones
Repairs & maintainence 84012 77109

Other expenses 417901 352421

The company cannot have a full fledge cost sheet as it provides services to the bank.it cannot
have direct expenses, but it has some office and administration and selling expense and income.
Profit loss account
Particulars Mar 08 Mar 07 (

Operating income 2,010.57 1,564.18

Material consumed - -
Manufacturing expenses - -
Personnel expenses 121.90 96.29
Selling expenses 2.11 3.33
Adminstrative expenses 298.93 266.17
Expenses capitalized - -
Cost of sales 422.93 365.78
Operating profit 7.78 -30.45
Other recurring income 164.71 205.55
Adjusted PBDIT 172.49 175.10
Financial expenses 1,579.86 1,228.85
Depreciation 40.16 34.09
Other write offs - -
Adjusted PBT 132.33 141.00
Tax charges 39.23 39.16
Adjusted PAT 75.72 95.87
Nonrecurring items -0.67 -27.65
Other non cash adjustments - -0.99
Reported net profit 75.05 67.22
Earnings before appropriation 75.05 67.22
Equity dividend 19.19 19.19
Preference dividend - -
Dividend tax 3.26 3.26
Retained earnings 52.60 44.77
COMPARATIVE BALANCE SHEET

PARTICULARS 2007 2008 ABSOLUT %AGE

E CHANGE CHANGE
Equity share capital 320 320 0 0
Share application
money 0.51 0 0.51 100
Preference share
capital 0 0 0 0
Reserves & surplus 789.39 736.79 52.6 6.663373
Loan funds 0 0 0 0
Secured loans 0 0 0 0
Unsecured loans 19,037.42 17,644.80 1392.62 7.315172
Total 20,147.32 18,701.59 1445.73 7.175793
Uses of funds 0 0 0 0
Fixed assets 0 0 0 0
Gross block 969.93 675.07 294.86 30.40013
Less : revaluation
reserve 239.81 0 239.81 100
Less : accumulated
depreciation 354.41 314.29 40.12 11.32022
Net block 375.71 360.78 14.93 3.97381
Capital work-in-
progress 9.63 8.79 0.84 8.722741
Investments 6,629.70 5,891.66 738.04 11.13233
COMPARATIVE INCOME STATEMENT
Amount is given in Rs. millions
PARTICULARS 2007 2008 ABSOLUT %AGE
E CHANGE CHANGE
Interest income 15,003 11,883 3,120 20.79584
Other income 2,441 1,888 553 22.65465
Interest expense 12,288 8,732 3,556 28.9388
Net interest income 2,715 3,151 -436 -16.0589
Operating expense 3,440 3,166 274 7.965116
Gross profit -725 -15 -710 97.93103
Gross profit margin -4.8 -0.1 -5 97.91667
Provisions/contingencies 642 1,654 -1,012 -157.632
Profit before tax 1,074 592 482 44.87896
Extraordinary Inc (Exp) 0 0 0 0
Minority Interest 0 0 0 0
Prior Period Items -10 0 -10 100
Tax 392 224 168 42.85714
Profit after tax 672 368 304 45.2381
Net profit margin 4.5 3.1 1 31.11111
COMMON-SIZE BALANCE SHEET
2008 % 2007 %
Sources of funds
Owner's fund
Equity share capital 320 1.588301 320 1.711084
Share application money 0.51 0.002531 -
Preference share capital - -
Reserves & surplus 789.39 3.918089 736.79 3.939718
Loan funds
Secured loans - -
Unsecured loans 19,037.42 94.49108 17,644.80 94.3492
Total 20,147.32 100 18,701.59 100
Uses of funds
Fixed assets
Gross block 969.93 15.47081 675.07 12.02369
Less : revaluation reserve 239.81 3.825075 -
Less : accumulated depreciation 354.41 5.652995 314.29 5.597827
Net block 375.71 5.992739 360.78 6.425862
Capital work-in-progress 9.63 0.153603 8.79 0.156559
Investments 6,629.70 105.7466 5,891.66 104.9365
Net current assets
Current assets, loans &
advances 1,033.70 16.48797 986.32 17.56737
Less : current liabilities &
provisions 1,779.31 28.38078 1,633.04 29.08612
Total net current assets -745.61 -11.8928 -646.72 -11.5187
Miscellaneous expenses not
written - -
Total 6,269.42 100 5,614.50 100

COMMON-SIZE PROFIT STATEMENT

Paticulars 2008 % 2007 %

Operating
income 2,010.57 100 1,564.18 100
Equity share
capital 320 1.588300578 320 1.711084
Share application
money 0.51 0.002531354 0 0
Preference share
capital 0 #REF! 0 0
Reserves &
surplus 789.39 3.918089354 736.79 3.939718
Loan funds 0 0 0 0
Secured loans 0 0 0 0
Unsecured loans 19,037.42 94.49107871 17,644.80 94.3492
Total 20,147.32 100 18,701.59 100
Profit before tax 75.05 67.22s

FUND FLOW STATEMENT

SOURCES AMOUNT APPLICATIONS AMOUNT
Funds from operations 2,010.57
Deposits 3,936.15 Investments 6,629.70
Borrowings 1,779.31
Decrease in working Capital 146.27
6,629.70 6,629.70

SCHEDULE OF CHANGE IN WORKING CAPITAL

PARTICULARS 2008 2007 INCREASE DECREASE
Current assets, loans 47.38
1,033.70 986.32
& advances
Less : current 146.27
1,779.31 1,633.04
liabilities & provisions
98.89
Decrease in working
capital
Total 146.27 146.27

ADJUSTED PROFIT & LOSS ACCOUNT

PARTICULARS AMOUNT PARTICULARS AMOUNT
By funds from
To transfer to 2,010.57
operations
reserve 2,010.57
 2,010.57 2,010.57

CASH FLOW STATEMENT

Particular 2008 2008

Profit before tax 75.05 67.22

Net cashflow-operating activity -327.11 826.72

Net cash used in investing activity -41.23 -64.68

Netcash used in fin. activity -49.03 352.86

Net inc/dec in cash and equivlnt -417.37 1,114.90

Cash and equivalnt begin of year 2,595.40 1,480.50
Cash and equivalnt end of year 2,178.03 2,595.40

RATIOS
Profitability ratios

MAR 2008 MAR 2007

Operating margin (%) 0.38 -1.94
Gross profit margin (%) -1.61 -4.12
Net profit margin (%) 3.45 3.79
Adjusted cash margin (%) 5.32 7.34
Adjusted return on net worth (%) 6.82 9.07
Reported return on net worth (%) 6.76 6.36
Return on long term funds (%) 152.76 129.05

Leverage ratios

Total debt/equity 17.16 16.70

Owners fund as % of total source 5.50 5.65
Fixed assets turnover ratio 2.07 2.32
Liquidity ratios

Current ratio 0.58 0.60

Current ratio (inc. st loans) 0.04 0.05
Quick ratio 8.63 8.02

Payout ratios

Dividend payout ratio (net profit) 29.91 33.39

Dividend payout ratio (cash
19.48 22.15
profit)
Earning retention ratio 70.36 76.59
Cash earnings retention ratio 80.63 82.73

Coverage ratios

Adjusted cash flow time total debt 164.28 135.77

Financial charges coverage ratio 1.11 1.14
Fin. charges cov.ratio (post tax) 1.07 1.08

Component ratios

Selling cost Component 0.10 0.21

Long term assets / total Assets 0.87 0.86
 BIBILIOGRAPHY

http://en.wikipedia.org/wiki/Bank

http://finance.indiamart.com/investment_in_india/banks.html

http://www.rbi.org.in/Scripts/bs_viewcontent.aspx?Id=159

http://www.ibisworld.com/industry/retail.aspx?indid=1288&chid=1

http://www.businessweek.com/magazine/content/06_05/b3969412.htm

http://www.internationalbusinessstrategies.com/market-research-
reports/banking.html

BOOKS:

Management accounting by: Shashi K Gupta and R.K Sharma

Cost accounting by: S.P. Jain and K.L. Narang