Anda di halaman 1dari 46


Report on Summer Training [Title]

Ratio Analysis to know the Financial Position of The Nawanshahar Central Co-operative Bank Limited

Submitted to Lovely Professional University

In partial fulfillment of the Requirements for the award of Degree of Bachelor of Business Administration (BBA)

Submitted by: Name of the student- Mandeep Kaur Dhamrait University Roll No.- R1813A26


I would like to convey my feelings of gratitude to all who have in any manner helped me in successfully completing this project and moreover, on time. Firstly, I would like to thanks Shri Ram Lubhaya, District Manager, S. Nirmaljit Singh, Assistant Manager of The Nawanshahar Central Co-operative Bank who gave me a golden opportunity to do summer training in the bank and undertake a meaningful project. I Am also thankful to Shri Sukhdev kumar, Mr. Manminder Singh, Mrs. Neelam Kumari, and every staff member in the bank who provided me his/her valuable advice at appropriate time to make this project successful. Last but not the least I am thankful to Mr. Lokesh Jasrai, training coordinator of LSB(Lovely School of Business) and my faculty guide who provided me time to time support in topic selection, rectification of mistakes etc. \

Page no. 1. Abstract / Executive summary .4 2. Introduction .5 3. Purpose of the project...13 4. Review of Literature.14 5. Research Methodology/Research Design.....18 6. Presentation of Data..19 7. Comparative Balance Sheet..23 8. Ratio Analysis...24 9. Ratios Used by The Nawanshahar Central Co operative Bank...35 10. Ratios as per Book.40 11. Data Analysis and Data Interpretation..43 12. Findings and Recommendations....45 13. References..46

This project report is on a co-operative bank. A co-operative bank is an institution established on cooperative basis and doing ordinary banking business. These banks are funded by collecting funds through shares, deposits etc. They are concerned with rural credit and provide financial Assistance to agriculture and rural activities This project report is on the topic of Ratio Analysis to know the Financial Position of the Nawanshahar Central Co-operative Bank Limited. Under this topic the ratios of two years i.e. 2008 and 2009 have been calculated. Moreover, comparative balance sheet of two years has been prepared to know the changes made in these two years in the figures of balance sheet of the bank. The significance of the project is that by watching these ratios one can understand the position of the bank. These ratios make comparison easy. However, there are limitations of these ratios too which are kept in mind while calculating them. Instead of a single ratio a group of ratios have been calculated to get more accurate estimate of the position of the bank. There are limitations of the study which the readers must know before reading the project report these are as follows: The study is limited to The Nawanshahar Central Co-operative Bank. No comparative study has been made with other bank. Ratios are compared for two years only i.e. 2008 and 2009. The interpretation and suggestions have been made as per our own understanding. As per calculations made in this project report, we can see that the financial position of the bank is strong. It is getting good returns on its investments. It has enough liquid assets to pay off its current liabilities. It has good amount of reserve and surpluses, undistributed profits, deposits etc. Moreover, this bank has never incurred any loss. This bank is the winner of NABARDs best performance awards. The strong position of the bank necessitates that is should be modernized like private sector banks as it is performing its functions in a classical way. It needs computerization to reduce the paper work. Otherwise, this bank is far better than other co- operative banks due to its good performance in the district Nawanshahar.

NABARD: Nationalized Bank for Agricultural and Rural Development The bank was established in 1982 by merging the Agricultural Credit Development and Rural Planning and Credit cell of the Reserve Bank Corporation. It is an apex development Bank for Supporting and promoting agriculture and rural development. It provides refinance to the institutions involved in providing Credit for agriculture and rural development. NABARD



RRBS: The Regional Rural Banks was passed in 1976. The purpose was to provide credit in the rural economy. It is the joint venture between central Government and State Government and commercial banks. The share of central bank is 50%, the share of the state Government is 15% and the share of commercial banks is 35%. The total number of RRBS is 196.

MEANING OF COOPERATIVE BANK Co-operative bank is an institution established on cooperative basis and doing ordinary banking business. These banks are funded by collecting funds through shares, deposits etc. They are concerned with rural credit and provide financial assistance to agriculture and rural activities. In INDIA, we have a huge co-operative institutions operating. In our country, cooperative institutions are started to look after the needs of the agriculturist. In 1904, provision is made to start primary co-operative societies at village level to grant short term loans. In 1912, land development banks are initiated. They grant long term loans to enable the farmers to buy farm equipments like tractors, to make permanent improvements and to repay past debts. In 1912 provision is also made to establish District Co-operative Central Banks at the state level. CO-OPERATIVE BANKS: These are the banks set up as co-operative societies under the Societies Act. In most of the states a three tier structure is being followed. At the top is the apex body i.e. State Co-operative Bank, at the middle level there is District Co-operative Bank, and at the grass route level are credit Co-operative Societies. These banks are taking care of the rural needs. These banks provide credit facilities to the rural sections. The co-operative banks have a great power to take legal action against the farmers who deny from paying the loan back.

Co-operative Banks are divided into two parts: 1. State Agricultural Development Banks 2. State Co-operative Banks

State Agricultural Development Banks (SADBs): The SADBs provide loans for long term that is more than one year. State Co-operative Banks: The State Co-operative Banks provide loans for short term that is less than one year. The total number of State Co-operative Banks in India is 28. Under the State Co-operative Banks are the District Co-operative Banks. Under District Co-operative Banks are the PACSS (Primary Agricultural Co-operative Service Societies). CO-OPERATIVE BANKS IN PUNJAB At the top level are the Punjab State Co-operative Banks, at the middle level are the District Central Co-operative Banks and at the lower level are the PACSS. All these banks are independent banks and have different shareholders and Board of Directors.

Primary Agricultural Co-operative Service Societies (PACSS): The PACSS are not basically banks but the societies. They are the associations of poor people. These are established to provide cheap, timely and adequate credit to needy people of rural sections. For the last 100 years the main function of PACSS was to provide fertilizers and credit to rural people but diversification has been made in the operations of PACSS. Now it accepts deposits and also helps in the marketing and providing consumer goods. The number of these societies in Punjab is 3500. ABOUT THE NAWANSHAHAR CENTRAL COOPERATIVE BANK HISTORY OF THE BANK WINNER OF NABARDS BEST PERFORMANCE AWARD In January 1934 devoted cooperatives of The Nawanshahar Sub- Division took a very wise and farsighted step by organizing this bank having a separate entity in jallandhar district by amalgamation of two cooperative unions namely dhahan and jandiali with working capital of Rs.2.25 Lac in a small rented room in local Gurdwara Sahib. On formation of Nawanshahar as District, Balachaur Sub Division was amalgamated in this bank w.e.f 01.10.1996.This bank is serving small, marginal, other farmers and weaker sections of the society in rural as well as urban areas in Nawanshahar District with 47 branches. All the banks are successful. Per branch business is Rs. 18 crore. This bank has won four out of six NABARD BEST PERFORMANCE AWARDS for the year 1995-96, 1996-97,1998-99, 1999-2000 being declared as best amongst the central cooperative banks of Punjab state and second prize for the year 2000-01.


1. 2. 3. 4. 5.

Commitment to quick service. Achievement of customer service. Qualitative services. Cordial relationships with public. Services with smile.

FACE LIFTING: The bank is playing special attention to have a good look under face lifting campaign launched by the Punjab State Co-operative Bank. Counters, cabins, good furniture, and seating arrangement for customers have been provided. 23 Branch Offices are air conditioned. The main branch has been covered under core banking whereas other 13 have also computerized working. Moreover, Branch Offices are likely to be covered under computerization. The loanees and other customers have not to go more than 5 to 6 kilometer to avail our banking facility in the district.

OWNED FUNDS : This bank tops all the central co-operative banks in respect of owned funds in the Punjab State. This bank is on very sound footings, which is evident from the fact that owned funds have touched a new height of Rs. 118.21 cr. Due to recurring profits in the successive years. Owned funds are share capital comprising of Rs. 100 each in paid up to Rs. 241.80 lac. As the fact that own funds have touched a new delight of Rs. 94.43 crore on 31st March, 2004.


YEAR 1934 1940 1950 1960 1967 1970 1975 1978 1979 1989 1999 7

Rs. IN LACS 0.04 0.04 0.09 0.39 1.81 4.76 17.96 34.08 30.90 124.93 588.41

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

815.90 960.89 984.07 1153.51 1322.82 1046.46 796.75 741.75 658.58 1203.74

DEPOSIT MOBILISATION: The bank enjoys remarkable trust of the people. Fully realizing that deposits are its back bone it has mobilized Rs. 502 crore as deposits over the year providing better customer service. PACSS in their area also having a good deposit base which shows the trust of the people in the co-operative movement at base level as well. This bank is also authorized to mobilize deposits from the persons living abroad. The bank has introduced Sehkari Bima Yojna Scheme to mobilize low cost deposit as well as to provide insurance insured under Deposit Insurance Credit Guarantee Corporation of India. They are serving 154903 deposit account holders. (FIG. IN LACS) 1934 194019501969197019751979199920002001200220032004200520062007200820091.86 3.31 32.62 163.80 233.69 607.83 1200.17 22707.43 2689.5 30264.12 33196.68 36913.68 39109.92 41451.20 44176.51 50206.34 55285.56 63599.82

WORKING CAPITAL: The working capital as on 31st March, 2008 is Rs. 78200.50 and 31 st March, 2009 is Rs. 90184.20 (Fig. in Lac.) ADVANCEMENT (1). FARM SECTOR: The banks loan outstanding is Rs. 21 crore. They serve 52000 loanees through Societies and 19000 loanees through direct loans. Their Credit Deposit Ratio is 20.3% of the District. Their share in District Credit Plan is 48.1%. In the year 1978, the Punjab Government introduced a simplified procedure of crop loan through cheque book and pass book system. This system is now quite successful in the bank and their advancement under the new system has considerably increased. Now the bank has fully introduced the Kissan Credit Scheme. 27500 Kissan Cards have been issued to farmers. Fertilizers to the members were issued by the PACSS and cash portion is paid at the bank counter. Loans to non agricultural members comprising mostly landless laborers, rural artisans etc for consumption needs were also advanced by the bank at the counter. This bank is having sufficient funds to meet the cash loans projected the good image of the bank as well as PACSS in addition to mass contract with the borrowers. The bank is sanctioning cash credit limit to the local sugar mills from 1969 and payment of the cane supplied to the mill is made by the bank. This system while ensuring prompt payment to cane growers offers opportunity to farmers to inculcate the saving habit. This system also helps the bank to increase mass contract. (2). NON- FARM SECTOR:Up till 1994 cooperative bank could only advance loans in cooperative sector and thereafter permission was guaranteed to diversify the loan port folio on Non Farm Sector activities such as cash credit to traders, cash credit to farmers for consumption needs, loans for purchase of consumer durable goods, loans to students for higher education, loans for purchase of motor buses, truck , tempo and taxi etc. The bank has also been allowed for housing finance in urban and rural areas and personal loans to employees. (3). RECOVERY: Member Level Recovery position is regularly reviewed in the branch managers meetings held with secretaries of PACSS. Recovery as at member level has improved significantly. In this way over dues at PACSS and bank level has been brought down. The recovery of dues at bank level is 96% and at the PACSS level is 82.6%. (4). PUBLICITY OF BANK SCHEMES: Boards showing loaning/deposit schemes has been displayed at each branch. Table calendars have been distributed amongst the public. A booklet showing the achievement of the bank is also circulated on annual bases. Displaying of boards on the roads/highways publicize their operation in the area. Handouts showing the bank schemes are also distributed. (5). MANAGEMENT: The management of the bank always remained in the hands of devoted, missionary and true corporations. Due to their clean public life, they have helped in the image building of the bank. Effective steps for streamlining of systems and procedures in the bank with a view to increase efficiency and providing better customer service have been taken. The officers of cooperative department have also guided the bank from time to time to improve in the working.

(6). SOCIAL BANKING: The bank has never lagged behind in social activities and has contributed out of common Good Fund to Blood Donor Complex Nawanshahar, Charitable Hospital at Dhahan Kaleran and Punjab Mata Vidya Wati Bhawan Nawanshahar and to government schools for construction/renovation of their buildings. The bank has also given financial aid to engineering students of engineering college Fatehgarh Sahib through Apex Bank. Electric water cooler for drinking water facility to farmers visiting PACS have been provided to all PACS in the district at the cost of Rs. 30.24 lac. out of PACS Development Fund of the bank. There is a proposal to provide financial assistance for purchase of generator set to societies out of PACS Development Fund. (7). NABARD INSPECTIONS: Suggestions/deficiencies pointed out by NABARD in their inspection notes helped a great to improve the working of the bank. Banking license was granted due to satisfactory working of the bank. The bank always implemented the directives issued by RBI/ NABARD and has made the best use of de-regulation of interest rate. (8). FUTURE BUSINESS INSPECTION: The bank have programme to top deposit with growth rate of at least 15% per annum and 15% to 28% increase in loaning. Reduction in NPAs is being taken up. Staff is fully sensitized to increase productivity of the bank. C.B.S provision of A.T.M and infrastructure development is our programme B.O.D of the bank has resolved to build new multi-storey modern building on the 80 Marla Plot/ building at Kariam Road near Railway Station Nawanshahar recently got vacated from the police. Bank has a building fund of Rs. 8.83 crore. Case will be moved to co-operative department for seeking approval after observing all formalities. (9). STAFF TRAINING: Branch Managers have been imparted training to work out the yield, cost and margin. Special emphasis has been given in training for reducing the cost of deposits by mobilizing low cost deposits. To develop HRD, staff is deputed for training from time to time at Banker Institute of Rural Development Luck now/Punjab Institute of co-operative training Chandigarh /Institute of co-operative management Chandigarh and Agriculture co-operative staff Training Institute Jallandhar. The employees lead to good financial position. (10). DIVIDEND: The bank has declared highest permissible dividend every year since 1962 and 1963 @ 10% and 20% respectively. Owing to dividend out go societies has returned highest return on the capital. (11).INVESTMENT: The bank has surplus lendable resources which are judiciously invested fetching high rate of interest in Government Securities, term deposits with Apex Bank. Term Deposits with Nationalized Banks and other banks and shares with Apex Bank/Sugar Mills etc. comprising their investments to Rs. 467 crore as on 31 March 2007.



1. Voluntary and Open Membership: co-operatives are voluntary organizations, open to all persons. 2. Democratic Member Control: co-operatives are democratic organizations, controlled by their members, who actively participate in setting their policies make decisions. 3. Member Economic Participation: Members contribute equality to & democratically control the capital of their co-operatives. At least part of the capital is usually the common property of the co-operative 4. Autonomy & Independence: Co-operatives are autonomous, self help organizations controlled by their members. 5. Education Training & Information: Co-operatives provide education and training for their members, elected representatives, managers and employees so that they can contribute effectively to the development of their co-operatives









FUNDS The authorized share-capital of the bank is Rs. 5 crore consisting of shares of the value of Rs. 100 each. This bank raises funds by issuing of shares. Raise loans from State Co-operative Bank and Government and with the previous approval of the Registrar, from the Reserve Bank of India, State Bank of India, commercial Banks. It accepts deposits from its members and non members.

MAXIMUM BORROWING LIMIT Unless specifically reduced by the Registrar, the maximum borrowing limit of the bank is 30 times its owned capital. DISTRIBUTION OF PROFITS 1. 25% of net profit is carried to the Reserve Fund. 2. The remained is applied as follows: (a). to the payment of dividend not exceeding 20% . (b). to the creation of bad and doubtful fund. (c). not more than 10% is contributed towards the welfare of the general public. (d). to the payment of bonus to the employees of the bank subject to a maximum of one months salary. 3. Any surplus is carried over to the next year or credited to Reserve Fund.



The purpose of this project is to calculate various ratios like productivity, liquidity, efficiency etc. to know the financial position of The Nawanshahar Central Co-operative Bank Limited. This report will be of great utility to the bank as well as to the readers who want to know how this bank is working and where it stands today. The calculations which are made in this project are purely based on the facts and figures and no hypothetical data has been used. So broadly the objectives of my study are: 1. To calculate various ratios to know the financial position of the bank. 2. To make comparison of two years profit and loss account and balance sheet 3. To make suggestions for further improvement.



Is Your Business Sick? Give Your Business a Health Checkup with These Three Ratios By: Susan Ward
In this article, the author emphasizes on three important ratios i.e. current ratio, total debt ratio and profit margin. Ratio analysis is a useful tool for lenders as well as owners. How healthy is your business. These ratios will tell the story. The current ratio is an excellent diagnostic tool as it measures whether or not your business has enough resources to pay its bills over the next 12 months. The total debt ratio shows how much your business is in debt, making it an excellent way to check your businesss long term solvency. How much net profit are your businesss sales producing? Calculating the profit margin will give you an answer.

Article 2 Analyze Investments Quickly With Ratios

By: Jonas Elmerraji
In this article, the author says that ratios can be an invaluable tool for making an investment decision once you know how to use them. Financial ratios can be broken up into four main categories- profitability ratio, liquidity ratios, solvency ratios, valuation ratios. Profitability is a key piece of information that should be analyzed when you are considering investment in a company. Profitability ratios are used to give us an idea of how likely it is that a company will turn a profit, as well as how that profit relates to other important information about the company. In general, the higher a companys profit margin the better but, as with most ratios, it is not enough to look at it in isolation. It is important to compare it to the company's past levels, to the market average and to its competitors. Liquidity is a measure of how quickly a company's assets can be converted to cash. Liquidity ratios can give investors an idea of how capable a company will be at raising cash to purchase additional assets or to repay creditors quickly, either in an emergency situation, or in the course of normal business. Solvency ratios are used by investors to get a picture of how well a company can deal with its long-term financial obligations and develop future assets. Valuation ratios are used to analyze the attractiveness of an investment in a company. The idea is that by using these ratios investors can gain an understanding of how cheap or expensive a company company's current stock price is compared to several different measures. In general, the less expensive a company is, the more attractive an investment in that company becomes.


Article 3
Financial Ratio Analysis for Performance Check
Financial Statement Analysis with Ratios can reveal Problem areas By: Gopinathan Thachappilly, April 12, 2009

In this article, the author says that used externally, financial ratio analysis can spot better investment options for investors, and internally, business managers can spot business areas requiring attention. There are ratios to measure the company's:

Financial health Operating performance Cash flows and liquidity

Outside investors looking for long-term investment use financial statement ratio analysis to analyze the "fundamentals" of a company. Fundamentals are indicators that point to the potential for long-term success (or otherwise) of a company. Fundamental analysis is different from "technical" analysis that focuses on short-term price movements of a company's shares in the stock market. Business managers inside the organization can do ratio analysis to quickly spot problem areas. The analysis might, for example, indicate cash flow problems. It can further reveal that the cash flow problems arise mainly because of slow collection of dues from customers. Insider managers have access to much more information than what is available in financial statements. In the case of profitability ratios, for example, they have access to the detailed composition of the cost of goods sold. They can thus check which cost element is leading to high costs. They can also analyze the performance of individual business units, and do it on a monthly basis or more frequently.

Article 4 A short History of Financial Ratio Analysis

By: James O. Horrigan In this article, the historical development of one particular usage, financial ratio analysis, is followed from its early origins to the present time. Virtually everything that has been started in ratio analysis is still going on today somewhere. The primary cause of the evolution of ratio analysis in general was Euclids rigorous analysis of the properties of ratios in book 5th of his Elements in about 300. B.C. However the adoption of ratios as a tool of financial statement analysis is a relative recent development. As the management of enterprises of various industrial sectors transferred from the enterprising capitalists to the professional managers and as financial sector became a more predominant force in the economy, the need for financial statements increased accordingly. 15

Article 5
The application of envelopment analysis in conjunction with financial ratios for bank performance evaluation
Abstract While financial ratios are currently the method most often used to evaluate a bank's performance, there is no clear-cut rationale which would allow one to acquire a composite score on the overall financial soundness of a bank. This paper demonstrates the application of DEA (Data Envelopment Analysis) in conjunction with financial ratios to help bank regulators in Taiwan not only to distinguish the efficient banks from the inefficient ones but also to gain insight into various financial dimensions that somehow link to the bank's financial operational decisions.

Article 6 An Empirical Test of Financial Ratio Analysis for Small Business Failure Prediction
This study develops and empirically tests a number of methods of analyzing financial ratios to predict small business failure. Although not all of the methods and ratios are predictors of failure, many ratio variables are found which do predict failure of Small Business Administration borrowers and guarantee recipients. Using step-wise multiple discriminate analysis with a restriction on the simple correlation of the entering variable with the included variables, a function of independent ratio variables, which is highly accurate in classifying borrowers in the test sample, is developed. Methods of analysis found useful are (1) classification of a borrower's ratio into quartiles relative to other borrowers in the sample, (2) observation of an up- or downtrend for a three-year period, (3) combinatorial analysis of a ratio's trend and recent level, (A) calculation of the three-year average, and (5) division of a ratio by its respective RMA industry average ratio. The discriminate function demonstrates ability as great as those functions recently estimated for much larger firms. However, the small business function fails to discriminate when only one statement is available; whereas Altman [1] and Beaver [4, 5] show that one financial statement is sufficient for a highly discriminate function for large businesses. This leads the author to qualify his conclusion above with the provision that at least three consecutive financial statements be available for analysis of a small business.


Article 7 An example of the use of financial ratio analysis: the case of Motorola
Abstract In this paper, we demonstrate the use of actual financial data for financial ratio analysis. We construct a financial and industry analysis for Motorola Corporation. The objective is to show students exactly how to compute ratios for an actual company. This paper demonstrates the difficulties in applying the principles of financial ratio analysis when the data are not homogeneous as is the case in textbook examples. We use Motorola as an example because the firm has several segments, two of which account for the majority of sales and represent two industries (semi-conductor and communications) that have different characteristics. The case illustrates the complexity of financial analysis.

Article 8 An expert system for financial ratio analysis


Financial analysis interprets a company's past and present financial health and predicts its future condition. Although company financial statements contain a wealth of information to support this analysis, their interpretation may be complicated. Experts in this field are limited. This research focuses on automating the current practice of financial ratio analysis to identify the various features that need to be incorporated into the system. This involves calculating the ratios, establishing the relationships between the ratios, determining the technique for accurately forecasting the financial statements and/or ratios, developing heuristics for analysing the ratios and providing a system for recommendations. A prototype expert system was then developed. The system is capable of performing five types of analysis: liquidity, leverage, turnover, profitability, and past performance. The output of the system is a list of conclusions and recommendations based on these analyses



TYPE OF RESEARCH: Every type of project requires different type of research design. Research design can be exploratory, descriptive and causal. Exploratory research design is used to generate new ideas about the problem in hand. Descriptive research design is used to describe the data with analysis and interpretation. Causal research design is used to seek the cause and effect relationship among the variables. So in this project report descriptive research design will be used because ratios are calculated on the basis of data provided in the financial statements. TYPE OF DATA: Data collection is central to every project. Data is of two types primary data and secondary data. Primary data is the data collected in its original form for the problem in hand. It is directly collected and used by the researcher. On the other hand, secondary data is a data collected by someone else and not for the problem in hand. So in this project secondary data will be used as my topic of project is to calculate various ratios. These ratios are based on the financial statements already made by the bank. PLAN FOR DATA ANALYSIS: The data collected in the form of Profit & Loss Account and Balance Sheet from the bank will be in the form of calculated ratios. These ratios will be interpreted to form meaningful conclusion. PREPERATION AND PRESENTATION OF REPORT: In this step we prepare the project report and present it to higher authorities. At last we will make the final project report which will be presented to the District Manager of the bank and one copy of it will be given to Lovely Professional University. The project report will include everything including findings and recommendations which will be useful for the bank in decision making.


PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDING 31ST MARCH 2007-2008 EXPENDITURE Interest on deposits, borrowings etc. Salary & allowances and provident fund Directors & local committee members fee & allowances AMOUNT 305129491.50 INCOME Interest & discount Commission, exchange & brokerage Other receipt 22208.00 AMOUNT 606169906.29 1783437.03



Rent, taxes, insurance & lighting 9134889.24 Law charges Postage, telegram & telephone charges Auditors fee Depreciation & repairs to property Stationery, printing, advertisement Other expenses Provision for income tax 20072008 Provision for rural advances Provision against standard assets Balance of profit 161933.00 894375.31

600000.00 5641158.95


5165231.59 30105000.00

60624000.00 4071000.00





PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDING 31ST MARCH 2008-2009 EXPENDITURE AMOUNT INCOME AMOUNT Interest on deposits, borrowings etc. Salary & allowances and provident fund Directors & local committee members fee & allowances Rent, taxes, insurance & lighting Law charges 416777566.74 Interest & discount Commission, exchange & brokerage Other receipt 49274.00 778528624.19 1944672.98





Postage, telegram & telephone 839734.79 charges Auditors fee Depreciation & repairs to property Stationery, printing, advertisement Other expenses 400000.00 4090439.73



Provision for income tax 2008- 40500000.00 2009 Provision for rural advances Provision against pending amount of frauds Provision for special reserve Balance of profit 55000000.00 260364.00

3000000.00 120374231.31 782475083.7 782475083.7



Share capital Owned funds Deposits Borrowings Bills for collection Overdue interest reserve Interest payable Other liabilities Profit and loss


Cash and bank balance

221470060.61 4522992249.05 2793148646.33 1417972.69 5006138.46 204792674.54 13826757.72 68489088.70

1141843120.60 Investment 5528555829.14 Loan & advances 723198500.00 1417972.69 9675884.36 Bills for collection Premises Interest receivables Furniture and fixtures 6758043.00 Other assets 310105496.89 65858291.42

7831143588.1 7831143588.1

7831143588.1 7831143588.1



LIABILITIES Share capital Owned funds Deposits Borrowings Bills for collection Overdue interest reserve Interest payable Other liabilities Profit and loss

AMOUNT 50792750 1205579763.14 6359982310.10 948862600.00 1347774.00 10200693.01 20386126.03 402443223.96 120374231.51

ASSETS Cash and bank balance Investment Loan & advances Bills for collection Premises Interest receivables Furniture and fixtures Other assets

AMOUNT 272826007.48 5678158412.42 2667058782.36 1347774.00 4886770.46 369569920.67 14997177.06 111124627.30





COMPARATIVE BALANCE SHEET 31 ST March 31st March Increase/Decrease Percentage 2008(Rs.) 2009(Rs) Absolute(Rs.) (%) 43730450.00 50792750.00 7062300 63736642.5 16 6 15 31 -5 5 202 30 90 16 113 26 -4 -5 -2 80 8 62 16

Share capital Owned funds Deposits Borrowings Bills for collection Overdue interest reserve Interest payable Other liabilities Profit and loss Total liabilities and capital

1141843120.60 125579963.14

5528555829.14 6359982310.10 831426480.96 723198500.00 1417972.69 9675884.36 7658043.00 310105496.89 65858291.42 7831143588.1 221470060.61 948862600.00 1347774.00 10200693.01 20386126.03 402443223.96 120374231.51 225664100 -70198.69 524808.65 13628083.03 92337727.07 59515940.09

9119969471.75 1288825883.65 272826007.48 250685946.87

Cash and bank balances Investment Loan and advances Bills for collection Premises Interest receivable Furniture and fixtures Other assets Total assets

4522992249.05 5678158412.42 1155166163.37 2793148646.33 2667058782.36 -126089863.97 1417972.69 5006138.46 204792674.54 13826757.72 68489088.70 7831143588.1 1347774.00 4886770.46 369569920.67 14997177.06 111124627.30 -70198.69 -119368 164777246.13 1170419.34 426355386

9119969471.75 1288825883.65


A ratio is a simple arithmetical expression of the relationship of one number to another. Ratio analysis is a technique of analysis and interpretation of financial statements. It is the process of establishing and interpreting various ratios for helping in making certain decisions. There are a number of ratios which can be calculated from the information given in the financial statements. In financial analysis, a ratio is used as an index or yardstick for evaluating the financial performance of a firm. The accounting figures contained in the financial statements may not be very meaningful. According to Accountants Handbook by Wixon, Kell and Bedford, a ratio is an expression of the quantitative relationship between two numbers. In simple language ratio is one number expressed in the terms of another and can be worked out by dividing one number into the other. For example:- if the current assets of a firm on a given date are 500000 and the current liabilities are 250000 then the ratio of current assets to current liabilities will be worked out to be 500000/250000 or 2:1 Such type of ratios is called simple or pure ratios. The following are the four steps involved in ratio analysis:1. Selection of relevant data from the financial statements depending upon the objective of the analysis. 2. Calculation of appropriate ratios from the given data. 3. Comparison of the calculated ratios with the ratios of the same firm in the past, or the ratios developed from projected financial statements or the ratios of some other firms or the comparison with ratios of the industry to which the firm belongs. 4. Interpretation of ratios.

INTERPRETATION OF THE RATIOS The interpretation of ratios is an important factor. Though calculation of ratios is also important but it is only a clerical task whereas interpretation needs skill, intelligence and foresightedness. The inherent limitations of ratio analysis should be kept in mind while interpreting them. The impact of factors such as price level changes, change in accounting policies, window dressing etc. should be kept in mind when attempting to interpret ratios. The interpretation of ratios can be done in the following ways:1. Single Absolute Ratio:- Generally speaking one cannot draw any meaningful conclusion when a single ratio is considered in isolation. But single ratios may be studied in relation to certain RULE OF THUMB which is based upon well proven conventions as for example:-2:1 is considered to be a good ratio for current assets to current liabilities. 2. Group of Ratios:- Ratios may be interpreted by calculating a group of related ratios. A single ratio supported by other related additional ratios becomes more understandable and meaningful. For example:- the ratio of current assets to current liabilities may be


supported by the ratio of liquid assets to liquid liabilities to draw more dependable conclusions. 3. Historical Comparison:- One of the easiest and most popular ways of evaluating the performance of the firm is to compare its present ratios with the past ratios called comparison overtime. When financial ratios are compared over a period of time, it gives an indication of the direction of change and reflects whether the firms performance and financial position has Improved, deteriorated or remained constant over a period of time. But while interpreting ratios from comparison over time, one has to be careful about the changes, if any in the firms policies and accounting procedures. 4. Projected Ratios:- Ratios can also be calculated for future standards based upon the projected or Performa financial statements. These future ratios may be taken as standard for comparison and the ratios calculated on actual financial statements can be compared with the standard ratios to find out variances, if any. Such variances help in interpreting and taking corrective action for improvement in future. 5. Inter-Firm Comparison:- Ratios of one firm can also be compared with the ratios of other same selected firms in the same industry at the same point of time. This kind of comparison helps in evaluating relative financial position and performance of the firm. But while making use of such comparison one has to be very careful regarding the different accounting methods, policies and procedures adopted by different firms.



Liquid Ratio

Turnover Ratio

Solvency Ratio

Profitability Ratio

1. Liquid Ratio : a) Current Ratio b) Quick Ratio/Acid Test Ratio/Liquid Ratio c) Absolute Liquid Ratio 2. Turnover/Activity Ratio: a) Inventory/Stock Turnover Ratio b) Debtors/Receivables Turnover Ratio 25

c) d) e) f)

Creditors/Payable Turnover Ratio Working Capital Turnover Ratio Assets Turnover Ratio Fixed Assets Turnover Ratio

3. Solvency Ratio: a) b) c) d) e) f) Debt Equity Ratio Funded Debts to Total Capitalization Ratio Solvency Ratio Proprietary Ratio Fixed Assets Ratio Interest Coverage Ratio

4. Profitability Ratio: 1) In Relation to Sale: a) b) c) d) e) Gross Profit Ratio Operating Ratio Operating Profit Ratio Net Profit Ratio Expenses Ratio

2) In Relation to Investment: a) Return on Shareholder Fund b) Return on Equity Capital c) Return on Capital Employed d) Capital Turnover Ratio 3) In Relation to Market a) b) c) d) e) f) Dividend Yield Ratio Earning Yield Ratio Payout Ratio Price Earning Ratio Equity Dividend Ratio Preference Dividend Ratio

LIQUID RATIO: Liquid ratios are calculated to know the short term solvency of the firm. These ratios disclose whether the firm is able to pay its short term liabilities or not. These ratios include the following: 26

a) Current Ratio : This ratio shows whether the firm has sufficient current assets to pay off its current liabilities. This ratio is calculated as follows: Current Ratio = current assets/current liabilities The ratio of 2:1 is assumed to be a good ratio. b) Quick Ratio: This ratio also known as liquid ratio or acid test ratio. This ratio shows the relationship between quick assets and current liabilities. Quick assets include all current assets except stock of all types and prepaid expenses, because these two items cannot be converted into cash easily in short period. Quick /Liquid Ratio = quick assets/current liabilities The ratio of 1:1 is treated as good ratio. Or Quick Assets = current assets-stock of all types prepaid expenses

c) Absolute Liquid Ratio: This ratio shows the relationship between absolute liquid assets and current liabilities. Absolute Liquid Ratio = absolute liquid assets/current liabilities Absolute liquid Assets = cash in hand + cash at bank+ short term investment The ratio of 0.5:1 is treated as a good ratio ACTIVITY/TURNOVER RATIO: Activity Ratios measure the efficiency or effectiveness with which a firm manages its resources or assets. These are also known as turnover ratios because they indicate the speed with which the assets are converted or turned into sale. These ratios include the following: A). Inventory/Stock Turnover Ratio: This ratio indicates the speed with which the stock is converted into sale. This ratio is calculated as follows:Stock Turnover Ratio = cost of goods sold/average stock Cost of goods sold = opening stock+ purchases+ direct expenses-closing stock Or Sale-gross profit Note: - i) If both stocks are not given in the problem closing stock can be taken. ii) If cost of goods sold is not given then sale can be taken.

Inventory Conversion Period: It is the average time taken for cleaning the stock. 27

Inventory Conversion Period = 365/12/inventory turnover ratio Or ICP = 365/12/cost of goods sold *average stock Higher turnover ratio is better and lower conversion period is better.

B). Debtors/ Receivable Turnover Ratio: This ratio indicates the speed with which debtors are converted into cash or debtors are collected. Debtors Turnover Ratio = net credit sale/average trade debtors Net Credit Sale = credit sale- return inwards Average Trade Debtors = opening trade debtors+ closing trade debtors/2 Trade Debtors = sundry debtors+ bills receivables Higher turnover ratio is better. Note : i) if both trade debtors are not given then closing debtors can be taken. ii) Debtors are always taken gross. In other words, provision for bad debts or reserve for bad debts or provision for discount on debtors is ignored. Average Collection Period: It is the average time taken to collect cash from debtors. Average Collection Period = 365/12/debtors turnover ratio Or 365/12/net credit sale *average trade debtors Lower the period is better. C). Creditor/Payable Turnover Ratio: This ratio indicates the speed with which creditors are paid up. Creditors Turnover Ratio = net credit purchases/ average trade creditors Net Credit Purchases = credit purchases returns outwards Trade Creditors = creditors bills + payable Lower the ratio is better. Note: i) if both trade creditors are not given, then closing trade creditors can be taken. ii) Trade creditors always taken as gross figure. In other words, provision for discount on creditors or reserve for discount on creditors is ignored.


Average Payment Period: It is the average time taken for the payment to creditors. Average payment period = number of days/creditors turnover ratio Or number of days/net credit purchases* average trade creditors Higher the period is better. D) Working Capital Turnover Ratio: It indicates the speed of utilization of net working capital. Working Capital Turnover Ratio = cost of goods sold/average working capital Working Capital = current assets- current liabilities Higher the ratio is better. E) Asset Turnover Ratio: This ratio shows the relationship between cost of goods sold and assets. Assets= fixed assets + current assets + investments F) Fixed Assets Turnover Ratio: Fixed Assets Turnover Ratio= cost of goods sold/ net fixed assets Net fixed assets= fixed assets- depreciation

SOLVENCY RATIO: Solvency ratios are calculated to know the long term solvency of the firm. These ratios include the following: A) Debt Equity Ratio: This ratio indicates the relationship between debt, outsiders fund and shareholders fund. The ratio of 1:1 is good ratio. Debt Equity Ratio= outsiders fund/net worth or shareholder fund Outsiders Fund/Debt= long term loans + debentures + mortgage loans + bank loans+ bonds+ current liabilities. Shareholders Fund = equity share capital + preference share capital+ reserve & surpluses+ general reserve+ P/L account + security premium A/C + capital reserve + any other reserve fictious assets- misc. expenses.


B) Funded Debt to Total Capitalization Ratio: This ratio show the relationship between the long term loans taken from outsiders and the total long term fund invested in the business. Funded Debt to Total Capitalization Ratio= funded debt/total capitalization Funded debt = total long term loans or debenture + bonds+ mortgage loan + bank loan + other long term loans. Total Capitalization= total long term loan + shareholder fund The ratio of 0.5:1 is satisfactory ratio. C) Proprietary Ratio/ Equity Ratio: This ratio indicates the relationship between the shareholder fund and total assets. The ratio is represented in the percentage which indicates the percentage of owner equity invested in total assets of the firm. Equity Ratio= shareholders fund/total assets D) Solvency Ratio: This ratio indicates the relationship between the total liabilities to outsiders and total assets. Solvency Ratio= total liabilities to outsiders/ total assets Lower the ratio is better. E) Fixed Assets to Net worth Ratio: This ratio indicates the relationship between fixed assets (after depreciation) and shareholders fund. Fixed Assets to Net worth Ratio= fixed assets (after depreciation)/shareholders fund F) Fixed Assets Ratio: This ratio indicate the relationship between fixed assets (after depreciation) and long term funds. Fixed Assets Ratio= fixed assets (after depreciation)/total long term funds Long-term funds= shareholders funds + debt-equity+ long term borrowings G) Current Assets to Proprietor Fund Ratio: This ratio indicates the relationship between current assets and proprietor fund. Current Assets to Proprietor Fund Ratio= current assets/proprietors fund H) Debt Survive Ratio/ Interest Coverage Ratio: This ratio indicates the relationship between net profit (before interest and taxes) and fixed interest charges.


Ratio=net profit (before interest and taxes)/fixed interest charges PROFITABILITY RATIO: Profitability ratios are calculated to know the operating results of the business. This ratio is including the following: A) In Relation to Sale: 1) Gross Profit Ratio: This ratio is calculated to know the gross trading result of the business. Gross Profit Ratio= gross profit/net sale*100 Gross Profit = sale-cost of goods sold 2) Operating Ratio: This ratio shows the relationship between operating cost and net sale. Operating Ratio= operating cost/ net sale*100 Operating cost= cost of goods sold+ operating expenses Or cost of goods sold+ administrative expenses + selling & distribution expenses Lower the ratio is better. 3) Operating Profit Ratio: Operating profit ratio shows the relationship between operating profit and net sale. Operating Profit = operating profit/net sale*100 Operating profit= sale-operating cost Or cost of goods sold administrative expenses selling and distribution expenses Or net profit + non operating expenses non operating income. Non operating Income: includes interest on investment, dividend received, and profit on sale of fixed assets. Non operating expenses: include loss on goods sold, fictious and intangible assets written off, interest on debentures and long term loans. Higher the ratio is better. 4) Net Profit Ratio: This ratio shows the relationship between net profit and net sale. Net Profit Ratio= net profit/net sale*100 31

Higher the ratio is better. 5) Expenses Ratio: This ratio shows the relationship between the particular expenses and net sale. Expenses Ratio= particular expenses/net sale *100 B) In Relation to Investment or Overall Profitability Ratio: These ratios measure the overall profitability of the concern in relation to investment. Higher the profitability ratios are better. These ratios include the following: 1) Return on Shareholders Fund/ Investment: This ratio shows the relationship between net profit after tax and the shareholders fund. Return on Shareholders Fund= net profit after tax/shareholders fund*100 2) Return on Equity Capital: This ratio shows the relationship between the profit available for equity shareholders and the paid up equity share capital. Return on Equity Capital = net profit after tax preference dividend /paid up equity capital*100 3) Return on Capital Employed: Return on capital employed shows the relationship between profits and capital employed. It is the main ratio which is used to measure the overall profitability and efficiency of the business. The capital employed may be of three types: a) Gross Capital Employed: Fixed assets + investment+ current assets. b) Net Capital Employed: Fixed assets + investment+ current assets current liabilities. c) Shareholders Fund: Equity share capital + reserve & surpluses fictious assets.

While calculating the capital employed of any type the following point are to be considered: All fixed assets used in business/ land and building, furniture, plant and machinery etc. should be taken after providing depreciation. If the replacement cost of any fixed asset is available then that value should be taken. Only those investments are taken which are inside the business. All current assets are taken. Stock, always at market price or cost price whichever is less. Intangible assets like; goodwill, patent, trade-mark should not be taken but if these assets have any sale value or if these are purchased from market, can be included. Fictious assets like; preliminary expenses, discount on issue of debentures or share, administrative expenses a/c should be excluded. Average Capital Employed= opening capital employed+ closing capital employed/2


Or opening capital employed -1/2 current year profit. Or closing capital employed current year profit Calculation of Return: The calculation of return is totally dependent upon the type of capital employed taken. a) Net profit should be taken before interest and tax. If gross capital employed is taken then all interest whether short-term or long term should be added back. b) If net capital employed is taken then interest on long term loan should be added back. c) If investments are excluded while calculating the capital employed, then income from such investment are not taken. d) All the abnormal, non- recurring, non-operating gain or losses should be excluded.

Return on Gross Capital Employed= adjusted net profit / gross capital employed *100 Return on net capital Employed= adjusted net profit/ net capital employed*100 4) Capital Turnover Ratio: This ratio shows the relationship between cost of goods sold or sales and net capital employed. Capital Turnover Ratio= cost of goods sold/ net capital employed C) In Relation to Market: a) Dividend Yield Ratio: This ratio shows the relationship between dividend per share and the market value of share. Dividend Yield Ratio= dividend per share/ market price per share*100 Dividend per Share= dividend paid to shareholder/ number of shares b) Earning Yield Ratio: This ratio shows the relationship between earning per share and market price per share. Earning Yield Ratio= earnings per share / market price per share *100 Earnings per Share= profit available for equity shareholder/ number of shares c) Cover for Preference Dividend: This ratio shows the relationship between profit available for preference dividend and preference dividend. Preference Dividend Cover= profit available for preference dividend (profit after tax)/preference dividend.


d) Equity Dividend Cover: This ratio shows the relationship between profit available for equity dividend and equity dividend. Equity Dividend Cover= profit available for equity dividend (profit after tax) - preference dividend/equity dividend. e) Price Earnings Ratio: This ratio shows the relationship between market price per share and earning per share.

Price Earning Ratio= market price per share/earnings per share



CALCULATION OF RATIOS (YEAR 2008 &2009) 1. Credit Deposit ratio = credit (loans)/deposits *100

Year Credit Deposits Ratio

2008 2793148646.33 5528555829.14 50.5%

2009 2667058782.36 6359982310.10 41.9%

2. Owned funds to working capital ratio = owned funds/working capital Working capital = total assets contra items (i.e. bills for collection & overdue interest charges) = 7831143588.1-1417972.69-9675884.36 = 7820049731.05 Owned funds = share capital + reserves+ undistributed profits = 43730450.00+ 1141843120.60+ 65858291.42 = 1251431862.02 Year Owned funds Working capital Ratio 2008 1251431862.02 7820049731.05 16% 2009 1376746744.61 9108421004.74 15%

3. Deposit to working capital ratio= deposit/working capital

Year Deposits Working capital Ratio

2008 5528555829.14 7820049731.05 71%

2009 6359982310.10 9108421004.74 70%


4. Borrowings to working capital ratio= borrowings/working capital

Year Borrowings Working capital Ratio

2008 723198500.00 7820049731.05 9.25%

2009 948862600.00 9108421004.74 10.42%

5. Total expenditure to gross income ratio= total expenditure/gross income

Year Total expenditure Gross income Ratio

2008 545018945.41 610877236.83 89%

2009 662100852.19 782475083.7 85%

6. Salaries and allowances to total expenditure ratio= salaries& allowances/total expenditure Year Salaries & allowances Total expenditure Ratio 2008 122327643.35 545018945.41 22% 2009 124881400.44 662100852.19 19%

7. Salaries and allowances to interest earned= salaries and allowances/interest earned

Year Salaries & allowances Interest earned Ratio

2008 122327643.35 606169906.29 20%

2009 124881400.44 778528624.19 16%


PROFITABILITY AND PRODUCTIVITY RATIOS 1. Net profit to owned funds ratio= net profit/owned funds

Year Net profit Owned funds Ratio

2008 65858291.42 1251431862.02 5%

2009 120374231.31 1376746744.61 8%

2. Interest income to average working funds ratio = interest income/average working funds

Year Interest income Average working fund Ratio

2008 60616.99 70896.31 8.55%

2009 77852.86 85428.83 9.11%

3. Interest income to total investment(including loans and advances and investment) ratio = interest income/total investment

Year Interest income Total investment Ratio

2008 606169906.29 7316140895.38 8.29%

2009 778528624.19 8345217194.78 9.33%

4. Establishment expenses to total income ratio = establishment expenses/total income

Year Establishment expenses Total income Ratio

2008 122327643.35 610877236.83 20% 37

2009 124881400.44 782475083.7 16%

5. Establishment expenses to total expenditure ratio = establishment expenses/total expenditure

Year Establishment expenses Total expenditure Ratio

2008 122327643.35 545018945.41 22.44%

2009 124881400.44 662100852.19 18.86%

6. Cost of management to total expenditure ratio = cost of management/total expenditure Cost of management = salaries& allowances + directors & local committee members fee+ rent, taxes, insurance & lighting+ law charges+ postage, telegram & telephone charges+ auditors fee+ depreciation & repairs to property + stationery, printing, advertisement+ other expenses (2009) =124881400.44+49274+9428645+206900+839734.79+400000+4090439.73+1168734.72+5497 792.77 = 146562921.45 (2008) =122327643.35+22208+9134889.34+161933+894375.31+600000+5641158.95+1142014.47+51 65231.59 = 145089454.01

Year Cost of management Total expenditure Ratio

2008 145089454.01 545018945.41 26.62%

2009 146562921.45 662100852.19 22.14%


7. Interest expenses to total income ratio = interest expenses /total income

Year Interest expenses Total income Ratio

2008 305129491.50 610877236.83 49.95%

2009 416777566.74 782475083.7 53.26%

8. Total expenditure to total income ratio = total expenditure/total income

Year Total expenditure Total income Ratio

2008 545018945.41 610877236.83 89.22%

2009 662100852.19 782475083.7 84.62%

9. Cost of management to total income ratio = cost of management/total income

Year Cost of management Total income Ratio

2008 145089454.01 610877236.83 23.75%

2009 146562921.45 782475083.7 18.73%

10. Cost of management to average working fund ratio = cost of management/average working fund

Year Cost of management Average working fund Ratio

2008 14508.94 70896.31 2.04%

2009 14656.29 85428.83 1.72%


SOLVENCY RATIO NPA (Non Performing Assets) to total advances ratio = NPA/total advances

Year NPA Total advances Ratio 5% above is bad

2008 803.54 279.31 2.88%

2009 851.70 266.70 3.2%


Note: - Only those bookish ratios have been calculated on which data is available in the bank.

Current Ratio = current assets/current liabilities

Year Current assets Current liabilities Ratio

2008 7743821603.23 5536731844.83 1.40:1

2009 8988960896.93 6381716210.13 1.41:1

Quick Ratio = quick assets/current liabilities Year Quick Assets Current Liabilities Ratio 2008 4950672956.9 5536731844.83 0.89:1 2009 6321902114.57 6381716210.13 0.99:1

Fixed Assets to Net Worth Ratio = fixed assets/net worth Year Fixed Assets Net Worth Ratio 2008 18832.89 12514.31 1.5:1 2009 19883.95 13767.47 1.44:1


Fixed assets= premises + furniture &fixtures 2008 = 5006138.46+13826757.72 = 18832896.18 2009 = 4886770.46+14997177.06= 19883947.52

Fixed Assets Ratio = fixed assets after depreciation/total long term funds Year Fixed assets Long term funds Ratio 2008 18832896.18 766928950 2.5:1 2009 19883947.52 999655350 1.98:1

Long term funds = shareholders funds+ long term borrowings 2008 = 43730450+723198500 = 766928950 2009 = 50792750+948862600= 999655350

Interest Coverage Ratio= EBIT/fixed interest charges Year EBIT Fixed interest charges Ratio 2008 401092782.92 305129491.50 1.31:1 2009 577651798.05 416777566.74 1.39:1

Proprietary Ratio = shareholders fund/total assets Year Shareholders fund Total assets Ratio 2008 43730450.00 7831143588.1 0.558:1 2009 50792750 9119969471.75 0.557:1

Debt Equity Ratio= long term debts/shareholders funds Year Long term debts Shareholders fund Ratio 2008 1320.10 437.30 3:1 2009 1593.68 507.93 3.2:1


Debt to Total Funds Ratio= Debt/total funds Year Debt Total funds Ratio 2008 1320.10 8164.96 0.16:1 2009 1593.68 13767.46 0.12:1

Return on Investment = net profit before tax/net worth Year Net profit before tax Net worth Ratio 2008 95963.29 12514.31 7.7% 2009 16087.42 13767.47 11.6%



Analysis of comparative Balance Sheet

The share capital of the bank has increased by 16% which means that the bank is issuing more shares as compared to the previous year. The owned funds and other reserves of the bank have increased by 6% which is a good indicator of the performance of the bank over the previous year. The deposits have also increased 15% which means people are investing more money in the bank. The borrowings have increased by 31% which means the bank increased debt component in its capital structure. Bills for collection have decreased by 5%. Interest payable has increased much more in 2009 as compared to 2008. Net profit has also increased by 90% in 2009 as compared to 2008 which is good indicator of financial health of the bank. Cash and bank balances of the bank have increased over the previous year. This shows the bank has enough liquid assets to pay off its current liabilities. The bank has increased its investments in 2009. The cash it generates from the general public in the form of deposits is invested in government securities and commercial banks at higher rates of interest. The loan and advances of the bank has decreased by 4% which shows that the bank has reduced the amount given to loanees and increased its investments. Interest receivable has increased by 80% because the interest is due from the investments made by the bank. Furniture and fixtures which are fixed assets of the bank has increased by 8% which shows that the increased amount is also spent on purchase of fixed assets.

Analysis of Ratios
Credit deposit ratio has decreased by 8.6% in 2009 as compared to 2008.

According to NABARD its better to give on credit all deposits so this ratio is best at 100%. Owned fund to working capital ratio has decreased by 1% in 2009. Deposit to working capital ratio has also decreased by 1% in 2009. Borrowing to working capital ratio has increased by 1.17% in 2009. Total expenditure to gross income ratio has decreased by 4% in 2009. Salaries and allowances to total expenditure ratio has decreased by 3% in 2009. Salaries and allowances to interest earned ratio has decreased by 4% in 2009 as compared to 2008. 43

Net profit to owned funds ratio has increased by 3% as net profit in 2009 is more than 2008. Interest income to average working funds ratio has increased by 0.56% in 2009. Interest income to total investment ratio has increased by 1.04% in 2009. This is because of increased investments. Establishment expenses to total income ratio has decreased by 4% in 2009. Establishment expenses to total expenditure ratio has decreased by 3.58% in 2009. Cost of management to total expenditure ratio has decreased by 4.48% in 2009. Interest expenses to total income ratio has increased by 3.31% because the long term debt component of the bank has increased. Total expenditure to total income ratio has decreased by 4.6% in 2009 which shows total expenditure is decreasing and total income is increasing. Cost of management to total income ratio has decreased by 5.02%. Cost of management to average working fund has decreased by 0.32%. Non-performing assets to total advances ratio has increased by 0.32%. This ratio shows that Non Performing Assets are under control because if this ratio is above 5% then is is bad for the bank. Quick ratio of the bank shows its short-term solvency. Its quick ratio in 2009 is 0.99:1 as against ideal ratio 1:1 which is a very good indicator of its liquidity. The bank is getting good returns on its investments as its return on investment ratio in 2009 is 11.6% which is higher than 7.7% in the previous year.


The financial position of the bank is very strong. It has never incurred any loss. Its financial position is getting stronger year by year. The current ratio and quick ratio of the bank shows that this bank has enough short term assets to meet its short term liabilities. Moreover, it has a good short-term solvency. The bank is getting good returns on its investments. The overall expenditure of the bank in 2009 as compared to 2008 has decreased thereby increasing its income. This bank gets increased amount of net profits year by year which maximize the wealth of its shareholders.

This bank should be made fully computerized so as to reduce the paper work. There are heaps of files and registers in the bank which consume lots of space. This space can be used for some other purpose with the use of computers. The recruitment of people is in the hands of Government and not in the bank. If the government gives the chance to recruit people then young people can be recruited as mostly old age people are working in the bank. The young people can bring new ideas in the bank. There should be a combination of young as well as old people. This bank should be free from political interference. It should be made an independent bank. In this way it can work more efficiently than it is working today. This bank is performing its functions in a classical way. This bank should be modernized like private sector banks. In this bank, there should be an open door policy. Anyone having new idea or want to make any suggestion can make it to the management without any hesitation. Top management should consider the ideas of their employees or customers and implement the feasible ones.


1. Book bye-laws of the Central Co- Operative Bank Ltd, Nawanshahar. (Taken on 22 June, 2010). 2.

4. 5. 6. 7. 8. 48

Services Management 2006 - Vol. 1, No.2/3 pp. 141 - 154

9. Gary P. Moynihan , Vineet Jain, Robert W. McLeod, Daniel J. Fonseca International Journal of Financial (All these articles viewed on 13 July, 2010) 10. Arora M.N, (2009), Cost and Management Accounting, Third Edition, Delhi, Himalaya Publishing House, pp-14.1-14.24. 11. Gupta Shashi, Sharma R.K., (2004), Accounting for Managerial Decisions, Second Edition, New Delhi, Kalyani Publishers, pp- 10.1-10.153.