CHAPTER 1 : INTRODUCTION

1.1 PROBLEM IN HAND

Working capital is critical for daily management of cash flows to settle bills, wages and
other variable cost. The working capital cycle is the period of time which elapses
between the point at which cash begins to be expended on the production of a product
and the collection of cash from sale of the product to its customers. Working capital
requirements can be financed from both internally generated resources (selling current
assets) and externally acquired alternatives (borrowing and securing current assets). In
the Indian context of banking, a major part of the working capital requirements are met
by bank credit.

How can banks help facilitate customers cash flow:

Easy access to their cash

Providing convenience for customers business transactions with the abnks
award winning online banking platform (Straight2Bank), 24-hour phone banking
services and branch access.

Cash and trade solutions

Giving solutions for to make business transactions in an easy and timely manner.

Customers main transactional bank

Offering the customers preferential pricing whenever they do more transactions
with banks.
Understanding working capital cycle
By managing working capital efficiently, one can ensure an adequate cash flow to
meet their short-term expenses and obligations. Working capital is determined by
three main factors:
1) Collections
2) Credit Terms
3) Inventory Management
Facilitating smooth cash flow
Banks recognise that collections and payments are more than financial
transactions. They are fundamental to the customers business and its financial
health.
Banks have market-leading solutions to facilitate smooth cash flow to maximise
its working capital efficiency. Their Payments, Collections and Trade Finance

solutions provide certainty, control and convenience in managing the cash flow
so the customer can focus on what really matters - growing your business.

1.2 IMPORTANCE OF THE PROBLEM

A study of liquidity is of major importance to both the internal and the
external analysts because of its close relationship with day-to-day
operations of a banking business. Dilemma in liquidity management is to
achieve desired tradeoff between liquidity and profitability.
WCM in the banking sector consist of current asset and a current liability, Current assets consists of
cash, marketable securities, accounts receivables and short term investments. These assets can be
converted into cash within an accounting year. Current liabilities represent the total amount of short
term debt which must be settled within one year. They represent creditors, bills payable, bank
overdraft, outstanding expenses and short term loans. Liquidity level is enhanced by the
transformation of physical and productive assets to financial assets that creates asset money
Liquidity in banking sector frequently consists of power money created by central banks, broad
money created through traditional bank lending system, securitized debts created by capital markets,
and derivatives. The central bank uses power money to formulate policies to expand or contract
money supply in the economy after detailed analysis and estimation of the demand for money in the
economy. It uses various instruments like Reserve Requirement where commercial banks are
required by law to deposit 6% of their deposits with the CBK. This is used to influence the amount of
loans banks can advance the public and thus affects the supply of money.
An increase in this proportion reduces the amount of money available for commercial banks to lend
while a reduction has the opposite effect. The second instrument is the use of Open Market
Operations (OMO) where Central Bank buys and sells Government securities in the money market in
order to achieve a desired level of money in circulation. When the Central Bank sells securities, it
reduces the supply of money and when it buys securities it increases the supply of money in the
market. Thirdly it uses lending where the Central Bank from time to time lends to commercial banks
overnight when they fall short of funds thus affecting the amount of money in circulation and the
amount deposited by banks at the CBK. Fourthly it uses moral suasion where the Central Bank
persuades commercial banks to make decisions or follow certain paths to achieve a desired result like
changes in the level of credit

sectors of the economy. Broad money includes money held in deposit balances in banks and other
forms created in the financial system
Basic economics also teaches that the money supply shrinks when loans are repaid however, the
money supply will not necessarily decrease depending on the creation of new loans and other effects.
Finance securitizes the increase in money that its loan business promises, it documents that promise
as a binding pledge in the form of a security and trades with it. The buyer of such a paper acquires it
in order to learn something from it. Ownership of it entitles him to receive the yields the seller
commits to pay. What the seller sells is the legally binding promise to put the sum of money the
buyer has used to purchase the security to work as capital for the buyer. The seller uses the proceeds
to cover his need for capital. So a security is a debt obligation that has become a commodity by
virtue of having been turned into tradable money-capital that serves its purchaser as an investment
Bank Deposits generally have a much shorter contractual maturity than loans and liquidity
management needs to provide a cushion to cover anticipated deposit withdrawals. Liquidity is the
ability to efficiently accommodate deposit as also reduction in liabilities and to fund the loan growth
and possible funding of the off-balance sheet claims.

1.3 HISTORICAL PERSPECTIVE

Bank of Hindustan, set up in 1870, was the earliest Indian Bank.
Banking
in India on modern lines started with the establishment of three
Presidency
Banks under Presidency Banks Act 1876 i.e. Bank of Calcutta, Bank of
Bombay
and Bank of Madras. In 1921, all presidency banks were amalgamated
to form
the Imperial Bank of India. Imperial bank carried out limited central
banking
functions also prior to establishment of RBI. It engaged in all types of
commercial banking business except dealing with the foreign
exchange.
Reserve Bank of India Act was passed in 1934 & Reserve Bank of India
(RBI) was constituted as an apex bank without major government
ownership.
Banking Regulations Act was passed in 1949. This regulation brought
Reserve
Bank of India under government control. Under the Act, RBI got wide
ranging powers for supervision & control of banks. The Act also vested
licensing
powers & the authority to conduct inspections in RBI.
In 1955, RBI acquired control of the Imperial Bank of India, which was

renamed as State Bank of India. In 1959, SBI took over control of eight
private
banks floated in the erstwhile princely states, making them as its 100%
subsidiaries.
RBI was empowered in 1960, to force compulsory merger of weak
banks
with the strong ones. The total number of banks was thus reduced from
566 in
1951 to 85 in 1969. In July 1969, government nationalized 14 banks
having
deposits of Rs. 50 crores & above.
In 1980, government acquired 6 more banks with deposits of more
than Rs.
200 crores. Nationalization of banks was to make them pay the role of
catalytic
agents for economic growth. The Narsimham Committee report
suggested
wide ranging reforms for banking sector in 1992 to introduce
internationally
accepted banking practices.
The amendment of Banking Regulation Act in 1993 saw the entry of
new
private sector banks. Banking segment in India functions under the
umbrella of
Reserve Bank of India the regulatory, central bank. This segment
broadly
consists of:
1. Commercial Banks
2. Co-operative Banks
The evolution of State Bank of India can be traced back to the first
decade of the 19th century. It began with the establishment of the
Bank of
Calcutta in Calcutta, on 2 June 1806. The bank was redesigned as the
Bank of
Bengal, three years later, on 2 January 1809. It was the first ever jointstock
bank of the British India, established under the sponsorship of the
Government
of Bengal. Subsequently, the Bank of Bombay (established on 15 April
1840)
and the Bank of Madras (established on 1 July 1843) followed the Bank
of

Bengal. These three banks dominated the modern banking scenario in

India,
until when they were amalgamated to form the Imperial Bank of India,
on 27
January 1921.
An important turning point in the history of State Bank of India is the
launch of the first Five Year Plan of independent India, in 1951. The
Plan aimed
at serving the Indian economy in general and the rural sector of the
country, in
particular. Until the Plan, the commercial banks of the country,
including the
Imperial Bank of India, confined their services to the urban sector.
Moreover,
they were not equipped to respond to the growing needs of the
economic
revival taking shape in the rural areas of the country. Therefore, in
order to
serve the economy as a whole and rural sector in particular, the All
India Rural
Credit Survey Committee recommended the formation of a statepartnered
and state-sponsored bank.
The All India Rural Credit Survey Committee proposed the takeover of
the Imperial Bank of India, and integrating with it, the former stateowned or
state-associate banks. Subsequently, an Act was passed in the
Parliament of
India in May 1955. As a result, the State Bank of India (SBI) was
established on
1 July 1955. This resulted in making the State Bank of India more
powerful,
because as much as a quarter of the resources of the Indian banking
system
were controlled directly by the State. Later on, the State Bank of India
(Subsidiary Banks) Act was passed in 1959. The Act enabled the State
Bank of
India to make the eight former State-associated banks as its
subsidiaries.
The State Bank of India emerged as a pacesetter, with its operations

carried out by the 480 offices comprising branches, sub offices and
three Local
Head Offices, inherited from the Imperial Bank. Instead of serving as
mere
repositories of the community's savings and lending to creditworthy
parties,
the State Bank of India catered to the needs of the customers, by
banking
purposefully. The bank served the heterogeneous financial needs of the
planned economic development.

MISSION STATEMENT:
To retain the Banks position as premiere Indian Financial Service
Group, with
world class standards and significant global committed to excellence in
customer, shareholder and employee satisfaction and to play a leading
role in
expanding and diversifying financial service sectors while containing
emphasis
on its development banking rule.

VISION STATEMENT:
Premier Indian Financial Service Group with prospective worldclass
Standards of efficiency and professionalism and institutional values.
Retain its position in the country as pioneers in Development banking.
Maximize the shareholders value through high-sustained earnings per
Share.
An institution with cultural mutual care and commitment, satisfying
and
Good work environment and continues learning opportunities.

1.4 CAUSE AND EFFECT RELATIONSHIP OF VARIABLES IN

STUDY
1.5 SCOPE OF THE PROJECT
1.6 DETAILS OF THE ORGANISATION
1.7 PRODUCTS
Products and Services
Personal Banking
SBI Term Deposits SBI Loan For Pensioners
SBI Recurring Deposits Loan Against Mortgage Of Property
SBI Housing Loan Against Shares & Debentures
SBI Car Loan Rent Plus Scheme

SBI Educational Loan Medi-Plus Scheme

Other Services
Agriculture/Rural Banking
NRI Services
ATM Services
Demat Services
Corporate Banking
Internet Banking
Mobile Banking
International Banking
Safe Deposit Locker
RBIEFT
E-Pay
E-Rail
SBI Vishwa Yatra Foreign Travel Card
Broking Services
Gift Cheques

1.8 PROCESSES
1.9 FACILITIES
1.10ORGANISATION STRUCTURE
1.11ORGANISATION BUSINESS PROFILE
1.12OTHER RELEVANT INFORMATION
CHAPTER 2 : LITERATURE REVIEW
2.1 PRESENTATION OF MATERIAL COLLECTED THROUGH
REVIEW OF
RELEVANT LITERATURE QUOTING THE
SOURCES OF EACH MATERIAL
2.2 IDENTIFICATION OF THE GAP OR SOME AREAS
WHERE NO SUBSTANCIAL WORK HAS BEEN DONE
CHAPTER 3 : RESEARCH
METHODOLOGY
3.1 METHOD OF DATA COLLECTION
RESEARCH METHODOLOGY:

The Research and Methodology adopted for the present study has been
systematic and was done in accordance to the objectives set which has
been detailed as below.

Research Definition:-

Research is a process in which the researcher wishes to find out the end
result for a given problem and thus the solution helps in future course of
action.
According to Redman & Mory, research is defined as a Systemized effort
to gain new knowledge.

3.2 SAMPLE SIZE

Sampling:-

Sampling is that part of statistical practice concerned with the selection of

individual observations intended to yield some knowledge about a
population of concern, especially for the purposes of statistical inference.
In my survey, I have taken convenience sampling.

My sampling is probability sampling as probability sampling that has

been selected using simple random selection each unit in the population
has a known chance of being selected.

Moreover, my sampling technique is simple random technique as in

simple Random sampling; each unit of the population has an equal
probability of inclusion in the sample. In my survey, each respondent have
equal opportunity to be selected and the data, which I collected, was from
customers of SBI who had taken loan.

3.3 DATA ANALYSIS TECHNIQUES

Determining sources of Data:

There are two main sources of data

1. Primary data
2. Secondary data

Primary Data:
It consists of original informations collected for specific Purpose.
Primary data for this research, data are collected through a direct source
like survey to obtain the first hand information is others resources are
written below.

Survey.
Face to face interaction.

Secondary Data:

It consists of information that already exists somewhere and has been

collected for some specific purpose in the study. The secondary data for
this study is collected from various sources like,
Books.
Website.
Newspaper.
Financial Magazine. ( weekly , business world etc)

Questionnaire Development:

Questionnaire is the most common instrument in collecting primary data.

In order to gather primary data from viewers. The present questionnaire
consists closed ended type of questions.

3.3.1 CHOICE OF TECHNIQUE

Nature of Research:
Research is basically of two types.
1. Descriptive research
2. Explorative research

1. Descriptive Research:
.
My research design is descriptive as descriptive research

Describe the characteristics of certain groups/ samples / populations.

Estimate proportions in specified populations.
Make specific predictions.

3.3.2 BRIEF DESCRIPTION OF CHOICE OF

TECHNIQUES UTILIZED AND THE JUSTIFICATION FOR
THEIR USE
CHAPTER 4 : DATA COLLECTION ,
ANALYSIS & INTERPRETATION
4.1
4.2
4.3
4.4

THE TYPE OF DATA NEED

THE SOURCES FOR THE COLLECTION OF DATA
THE DETAILS OF THE DATA COLLECTED
PROCESSING OF THE DATA FOR ANALYSIS

4.5 ANALYSIS OF DATA

4.6 CONSOLIDATED RESULTS
4.7 CONSOLIDATED REPRESENTATION OF RESULT OF THE
ANALYSIS
4.8 DISCUSSION OF RESULTS AND INTERPRETATION OF
THE RESULTS
CHAPTER 5 : RECOMMENDATIONS &
CONCLUSION
5.1 BRIEF DESCRIPTION OF RECOMMENDATIONS
5.2 DETAILS OF EACH RECOMMENDATION, DISCUSSION
OF ITS TECHNICAL SUITABILITY, ECONOMIC JUSTIFICATION
AND FEASIBILITY OF IMPLEMENTATION
5.3 SUGGESTED SCHEME OF IMPLEMENTATION,
PRECAUTIONS AND MONITORING SYSTEMS
5.4 OVERALL BENEFITS OF THE PROJECT
5.5 LEARNINF FROM THE PROJECT
5.6 LIMITATIONS
5.7 SCOPE FOR FUTURE STUDY
REFERENCES
APPENDIX