Chapter-1 Banking industry: An overview

1. Banking History 2. Development of Banking in India 3. Indian Financial System 4. Types of Banks 5. Functions of Commercial Banks 6. Recent Developments in Banking Sector in India 7. Problems faced by banking industry

BANKING HISTORY
It may be said that banking in its most simple form is as old as authentic history. As early as 2000 B.C. Babylonians had developed a system of banks. In ancient Greece and Rome the practice of granting credits was widely prevalent. Traces of credit by compensation and by transfer order are found in Assyria, Phoenicia and Egypt before the system attained the full development in Greece and Rome. The books of the old Sanskrit laws giver, Manu, are full of regulation governing credit. He speaks of judicial proceeding in which credit instrument were called for interest on loans to banker, usurer and even of the renewal of commercial papers. In Rome, the bankers were called Argentarii, Mensaril or

Callybistoe. The banks were called Tabornoe Argentarii. Some of the banks carried business on their own account and others were appointed by the governments to receive the taxes. They used to transact their business on similar lines as those of modern banks. People used to settle their accounts with their creditors by giving a cheque or draft on the bank. If the creditors had also an account at the same bank the account was settled by an order to make the transfer of such money from one name to another. To pay money by a draft was known as Prescribere and Rescribere and the draft was known as Attributio. These bankers also received deposits and lent money. Loan banks were also common in Rome. From the loan banks the poor citizens received loans without paying interest. They lent money for a period of three to four years on the security of land.

Although during the early periods, private individual did banking business, many countries established public banks either for the purpose of facilitating commerce or to serve the government. The Bank of Venice, established in 1157, is supposed to be the most ancient bank. Originally, it was not a bank in the modern sense, being simply an office for the transfer of the public debt. As early as 1349 the Drapers of Barcelona carried on the business of banking. Though it was subject to official regulation, the drapers were not allowed to commence this business until they had given sufficient securities. During 1401 a public bank was established in Barcelona. It used to exchange money, receive deposits and discount bills of exchange both for the citizens and the foreigners. The Bank of Amsterdam was established in 1609 to meet the needs of the merchants of the city. It accepted all kinds of specie on deposits could be withdrawing his deposits within six months. These written orders were used in the same manner as modern cheque. In course of time, it is interesting to note that most of the European banks in existence were formed on the model of the Bank of Amsterdam. The beginning of English banking may correctly be attributed to the London Goldsmiths. They used to receive their customers valuables and funds for safe custody and issue receipts acknowledging the same. These notes, in course of time, became payable to bearer on demand and hence enjoyed considerable circulation. In fact, the goldsmith note may be considered as the precursor of the bank note. The business of the goldsmith got a rude shock by the ill treatment of the government of Charles II under the Cable ministry. However, the ruin of goldsmiths marks turning point in the history of English banking, which resulted in the growth of private banking and the establishment of the Bank of England in 1694.

Globally, the story of banking has much in common, as it evolved with the moneylenders accepting deposits and issuing receipts in their place. According to the Central Banking Enquiry Committee (1931), money lending activity in India could be traced back to the Vedic period, i.e., 2000 to 1400 BC. The existence of professional banking in India could be traced to the 500 BC. Kautilyas Arthashastra, dating back to 400 BC contained references to creditors, lenders and lending rates. Banking was fairly varied and catered to the credit needs of the trade, commerce, agriculture as well as individuals in the economy. Mr. W. E. Preston, member, Royal Commission on Indian Currency and Finance set up in 1926, observed it may be accepted that a system of banking that was eminently suited to Indias then Requirements was in force in that country many centuries before the science of banking became an accomplished fact in England. Although the business of banking is as old as authentic history, banking institution has since then changed in character and content very much. They have developed from a few simple operations involving the satisfaction of a few individuals needs to the complicated mechanism of modern banking, involving the satisfaction of the capital seeking employment and providing the very lifeblood of commerce.

DEVELOPMENT OF BANKING IN INDIA

Financial system of any country consists of specialized and nonspecialized financial institutions, of organized and unorganized financial markets, of financial instruments and services that facilitate transfer of funds. The word system in the financial system implies a set of complex and closely connected and interlinked institutions, agents, practices, markets, transactions, claims and liabilities in the economy. Banking in India has its origin as early as the Vedic period. It is believed that the transition from money lending to banking must have occurred even before Manu, the great Hindu jurist, who has devoted a section of his work to deposits and advances and laid down rules relating to rates of interest. During the Mogul period, the indigenous bankers played a pivotal role in lending money and financing foreign trade and commerce. During the days of East India Company, it was the turn of the agency houses of carry on the banking business. The General Bank of India was the first Joint Stock bank to be established in the year 1786. The others, which followed, were the Bank of Hindustan and the Bengal Bank. The Bank of Hindustan is reported to have continued till 1906 while the other two failed in the meantime. In the first half of the 19th century the East India Company established three banks; Bank of Bengal in 1809, the Bank of Bombay in 1840 and the Bank of Madras in 1843. These three banks are also known as Presidency Banks. These three banks amalgamated in 1920 and new bank, the Imperial Bank of India was established on 27th January, 1921. With the passing of the State Bank of India Act in 1955 the undertaking of the Imperial Bank of India was taken over by the newly constituted State Bank of India.

The Reserve Bank of India as the Central Bank of country was created in 1935 by passing Reserve Bank of India Act 1934. In the wake of the Swadeshi Movement, a number of banks with Indian management were established in the country namely, Punjab National Bank Ltd. the Central Bank of India Ltd on July 19, 1969, 14 major banks of the country were nationalized and on 15th April, 1980, six more commercial banks were also taken over by the government. The Indian banking broadly categorized into Nationalized Banking

government owned banks, Private banks and Specialized

Institution. The Reserve Bank of India acts as a centralized body monitoring any discrepancies and shortcoming in the system. Since the nationalization of banks in 1969, the public sector banks or the nationalized banks have acquired a place of prominence and has since then seen tremendous progress. The need to become highly customer focused has forced the slow-moving public sector banks to adopt a fast track approach. The unleashing of product and services through the net has galvanized players at all levels of the banking and financial institutions. Conservative banking practices allowed Indian banks to be insulted partially from the Asian currency crisis. Indian banks are now quoting a higher valuation when compared to banks in other Asian countries (viz. Hong Kong, Singapore, Philippines, etc.) that have major problem linked to huge Non-Performing Assets (NPA) and payment defaults. Co-operative banks are nimble footed in approach and armed with efficient branch networks focus primarily on the high revenue niche retail segments. The Indian banks have finally worked up to the competitive dynamics of the new Indian market and are addressing the relevant issues to take on the multifarious challenges of globalization. It has come a long way from being a sleepy business institution to a highly proactive and dynamic entity. Banks that employ IT solutions are perceived to be futuristic and
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proactive players capable of meeting the multifarious requirement of the large customer base. Private Banks have been fast on the uptake and are reorienting their strategies using the Internet as medium. The Internet has emerged as the new and challenging frontier of marketing with the conventional physical world tenets being just as applicable like in any other marketing medium. The transformation has been largely brought by the large dose of liberalization and economic reforms that allowed banks to explore new business opportunities rather than generating revenues from conventional streams (borrowing and lending). The banking in India is highly fragmented with 30 banking units contributing to almost 50% of deposits and 60% of revenues. Indian nationalized banks (banks owned by the government) continue to be the major lenders in the economy due to their sheer size and penetrative networks which assure them high deposits mobilization. The Indian banking can be broadly categorized into nationalized, private banks and specialized banking institutions. RBI is the foremost monitoring body in the Indian financial sector. The nationalized banks continue to dominate the Indian banking arena. Industry estimate indicate that out of 274 commercial banks operating in India, 223 banks are in the public sectors and 51 are in private sector. The private sector banks grid also include 30 foreign banks that have started their operation here.

40000 35075 35000 30000 25000 20000 15000 10000 6321 5000 245 0 State Bank of India & its Associates Nationalized Banks Foreign Banks Regional Rural Bank Other Schedualed Commercial Bank Non Scheduled Commercial Bank 25 13896 14762

Under the ambit of the nationalized banks comes the specialized banking institution. These co-operative, rural banks also focus on area of agriculture, rural development etc., unlike commercial banks these cooperative banks do not lend on the basis of a Prime Lending Rate (PLR). They also have various tax sops because of their holding pattern and lending structure and have lower overheads. This enables them to give a marginally higher percentage on saving deposits.

Many of these co-operative banks diversified into specialized areas (catering to the vast retail audience) like car finance, housing loans, truck finance etc. in order to keep pace with their public sector and private counterparts, the co-operative banks too have invested heavily in Information Technology to offer high-end computerized banking services to its clients. Completing the roles of the nationalized and private banks are the specialized financial institutions (NBFCs). With their focused portfolio of products and services, these Non Banking Financial Institution acts as an important catalyst in contributing to the overall growth of the financial services sector. NBFCs offer loans for working capital requirement; facilitate mergers and acquisitions, IPO finance, etc. apart from financial consultancy services. Trends are now changing as banks (both public and private) have now started focusing on NBFC domains like long and medium term finance, working capital requirement, IPO financing etc. to meet the multifarious needs of the business community.

India Financial System

Indian Financial System

Financial Market Financial Institutes

Financial Instruments Financial Services

Non-Banking Institutes

Banking Institutes

Scheduled Comm. Banks Private Sector Banks Public Sector Banks Foreign Banks Regional Rural Banks

Scheduled Co-op. Banks

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Economic growth and development of any country depends upon a wellknit financial system. Financial system comprises a set of sub-systems of financial institutions, financial markets, financial instruments and services which help in the formation of capital. Financial system comprises of four major components. These components are: 1. Financial Institutions: These are institutions which mobilize and transfer the savings or funds from surplus unit to deficit units. These institutions can be classified into, banking and non-banking institutions. Banking institutions include commercial banks, co-operative banks and other banks. Non-banking institutions include organized and unorganized financial institutions. 2. Financial Markets: This is a place or mechanism where funds or savings are transferred from surplus units to deficit units. These markets can be broadly classified into money markets and capital markets. Money market deals with short-term claims or financial assets less than a year whereas capital markets deal with those financial assets which have maturity period of more than a year. 3. Financial Instruments: The commodities that are traded or dealt in a financial market are financial assets or securities or financial instruments. There is a variety of securities in the financial markets as the requirements of lenders and borrowers are varied. Some of the examples of these financial instruments are equity shares, preference shares, debentures, bonds, etc. 4. Financial Services: Financial services include fund based services and fee based services. Fund based services include Leasing, Hire purchase and Factoring. Fee based services include Merchant Banking, Credit rating and Merger.
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Types of Banks
Central Bank:Central Bank is apex banking authority in any country. event of crisis. It usually controls monitory policy and is the lender of last resort in the They are often charged with controlling the money supplies, including printing paper money. Example of the central bank is the European Central Bank and Reserve Bank of India.

Commercial Bank:Commercial banks are banking institutions that accept deposits and grant short-term loans and advances to their customers. It also provides mid-term and long term loans to business enterprises. Types of Commercial Banks: Commercial banks are of three types i.e., Public sector banks, Private sector banks and Foreign banks. 1. Public Sector Banks: These are banks where majority stake is held by the Government of India or Reserve Bank of India. 2. Private Sector Banks: In case of private sector banks majority of share capital of the bank is held by private individuals.

3. Foreign Banks: These banks are registered and have their headquarters in a foreign country but operate their branches in our country. The number of foreign banks operating in our country has increased since the financial sector reforms of 1991.

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Development Banks:Business often requires medium and long-term capital for purchase of machinery and equipment, for using latest technology, or for expansion and modernization. Such financial assistance is provided by development banks. Co-operative Banks:People who come together to jointly serve their common interest often form a co-operative society under the Co-operative Societies Act. When a co-operative society engages itself in banking business it is called a cooperative bank state. Types of Co-operative Banks: 1. Primary Credit Societies: These are formed at the village or town level with borrowers and non-borrower members residing in one locality. 2. Central Co-operative Banks: These banks operate at the district level having some of the primary credit societies belonging to the same district as their members.

3. State Co-operative Banks: These are the apex (highest level) cooperative banks in all the states of the country. They mobilize funds and help in its proper channelization among various sectors.

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Specialized Banks:There are some banks, which cater to the requirements and provide overall support for setting up business in specific areas of activities, EXIM bank, SIDBI and NABARD are examples of such banks. They engage themselves in some specific area or activity and thus, are called specialized banks. 1. Export Import Bank of India (EXIM Bank): If you want to set up a business for exporting products abroad or importing products from foreign countries for sale in our country, EXIM bank can provide you the required support and assistance. 2. Small Industries Development Bank of India (SIDBI): If you want to establish a small-scale business unit or industry, loan on easy terms can be available through SIDBI.

3.

National

Bank

for

Agricultural

and

Rural

Development

(NABARD): It is a central or apex institution for financing agricultural and rural sectors. If a person is engaged in agriculture or other activities like handloom weaving, fishing, etc. NABARD can provide credit, both short-term and long-term, through regional rural banks.

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Functions of commercial banks

However the commercial role of banks is wider than banking and includes: Issue of banknotes (promissory notes issued by a banker and payable to bearer on demand). Processing of payments by way of telegraphic transfer, EFTPOS, internet banking or other means.

Issuing bank drafts and bank cheques. Accepting money on term deposit. Lending money by way of overdraft, installment loan or otherwise.

Providing documentary and standby letters of credit (trade finance), guarantees, performance bonds, securities underwriting commitments and other forms of all balance sheet exposures.

Safekeeping of documents and other items in safe deposit boxes. Currency exchange.

Sale, distribution or brokerage with or without advice of insurance, unit trusts and similar financial products as a financial supermarket.

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Recent Developments in Banking Sector in India

The Reserve Bank and government has initiated a host of measures for the creation of a competitive environment and to improve efficiency of banking sector. The first phase of reform includes nationalization of the bank to achieve social objectives. Second phase of reforms started with liberalization of the sector in early nineties. After India embarked upon the process of liberalization and regulation, reforms have been undertaken in the following areas: The control, regulation and supervision of the banking system has also been liberalized with full freedom to the banks in conducting the banking business subject to prudential norms and other regulatory requirements of the Reserve Bank of India. Controls on credit have also been relaxed except certain requirements of lending to priority sector. Interest rates are deregulated. The Banks rights have been strengthened by enactment of following laws: 1. The Recovery of Debts due to Banks and Financial Institutions Act, 1993 (DRT Act) Under DRT Act Debt Recovery Tribunal was set up for Recovery of loans of banks and financial institutions. These tribunals are functioning efficiently which can be seen from the fact that average recovery period is one year as against 5 to 7 year of civil court.

2. The best indicator of the health of the banking industry in a country is its level of NPAs. Indian banks seem to be batter placed then their Asian neighbors in this regard. The net NPA ratio of Indian scheduled commercial bank stands at 2.9% as per 2004 figures. A

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few banks have even managed to reduce their net NPAs to less than one percent (before the merger of Global Trust Bank into Oriental Bank of Commerce, OBC was a zero NPA bank.) This has largely been possible due to SARFAESI (Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest) Act, 2002. This act has empowered banks with regard to recovery of defaulted loan. 3. To enhance risk management skills, to correct mismatch between assets and liabilities RBI has issued ALM (Assets-Liability Management) and risk management guidelines. The guidelines require that banks should give importance to credit risk.

Major Reform Initiatives Some of the major reform initiatives in the last decade that have changed the face of the Indian banking and financial sector are: Interest rate deregulation. Interest rates on deposits and lending have been deregulated with banks enjoying greater freedom to determine their rates. Adoption of prudential norms in terms of capital adequacy, asset classification, income recognition, provisioning and exposure limits, investment fluctuation reserve, etc. Reduction in pre-emption lowering of reserve requirements (SLR and CRR), thus releasing more lendable resources which banks can deploy profitably. Banks now enjoy greater operational freedom in terms of opening and swapping of branches and banks with a good track record of profitability have greater flexibility in recruitment.

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New private sector banks have been set up and foreign banks permitted to expand their operations in India including through subsidiaries. Banks have also been allowed to set up Offshore Banking Units in Special Economic Zones.

New areas have been opened up for bank financing, insurance, credit cards, infrastructure financing, leasing, gold banking, besides of course investment banking, asset management, factoring, etc.

New instruments have been introduced for greater flexibility and better risk management. E.g. interest rate swaps, forward rate agreements, cross currency forward contracts, forward cover to hedge inflows under foreign direct investment, liquidity adjustment facility for meeting day-to-day liquidity mismatch.

Several new institutions have been set up including the National Securities Deposits Ltd., Central Depositories Services Ltd., Clearing Corporation of India Ltd., Credit Information Bureau India Ltd.

Limits for investment in overseas markets by banks, mutual funds and corporation have been liberalized. The overseas investment limit for corporate has been raised to 100% of net worth and the ceiling of $100 million on prepayment of external commercial borrowings has been removed.

Universal Banking has been introduced. With banks permitted to diversify into long-term finance and DFIs into working capital, guidelines have been put in place for the evolution of universal banks in an orderly fashion.

Technology infrastructure for the payments and settlement system in the country has been strengthened with electronic funds transfer, Centralized Funds Management System, Structured Financial Messaging Solution and Negotiated Dealing System and move towards Real Time Gross Settlement.

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Adoption of global standards, prudential norms for capital adequacy, asset classification, income recognition and provisioning are now close to global standard. RBI has introduced Risk Based Supervision of banks (against the traditional transaction based approach). Best international adopted. practices in Accounting systems, corporate governance, payment and settlement system, etc. are being

Credit delivery mechanism has been reinforced to increase the flow of credit to priority sectors through focus on micro credit and Self Help Groups.

RBI

guidelines

have

been

issued

for

putting

in

place

risk

management systems in banks. Risk Management Committees in banks address credit risk, market risk and operational risk. Banks have specialized committees to measure and monitor various risks and have been upgrading their risk management skills and systems. The limit for foreign direct investment in private banks has been increased from 49% to 74% and the 10% cap on voting rights has been removed. In addition, the limit for foreign institutional investment in private banks is 49%.

Wide ranging reforms have been carried out in the area of capital markets. Fresh investment in CPs, CDs are allowed only in dematerialized form. SEBI has reduced the settlement cycle from T+3 to T+2 from April 1, 2003 i.e. settlement of stock deals will be completed in two trading days after the trade is executed, taking the Indian stock trading system ahead of some of the developed equity markets. Stock exchanges will set up trade guarantee funds. Retail trading in Government securities has been introduced on NSE and BSE from January 16, 2003. A Serious Frauds Office is proposed to be set up. Fungibility of ADRs and GDRs allowed.

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Problems faced by banking industry

Efficiency: This in turn has made it necessary to look for efficiencies in the business. Banks need to access low cost funds and simultaneously improve the efficiency. The banks are facing pricing pressure, squeeze on spread and have to give thrust on retail assets. Diffused customer loyalty: This will definitely impact customer preferences, as they are bound to react to the value added offerings. Customers have become demanding and the loyalties are diffused. There are multiple choices; the wallet share is reduced per bank with demand on flexibility and customization. Given the relatively low switching costs; customer retention calls for customized service and hassle free, flawless service delivery. Misaligned mindset: These changes are creating challenges, as employees are made to adapt to changing conditions. There is resistance to change from employees and the seller market mindset is yet to be changed coupled with. Fear of uncertainly and control orientation. Acceptance of technology is slowly creeping in but the utilization is not maximized. Competency gap: Placing the right skill at the right place will determine success. The competency gap needs to be addressed simultaneously otherwise there will be missed opportunities. The focus of people will be on doing work but not providing solutions, on escalating problems rather than solving them and on disposing customers instead of using the opportunity to cross sell.

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Chapter-2 BOB Overview

1. History of BOB 2. Management team, bankers & auditors 3. General Meeting 4. Reserve Fund 5. Leave Rule

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History of BOB
Prior to independence from the British Rule, the ancient India was ruled by princely states, scattered over the width and breadth of the large Indian nation. The Maharajas of the inner States of colonial India contributed to the welfare of their respective regions as well as the Indian nation as a whole The Maharaja of Baroda, a princely state of British India, by name Sir Sayyajirao Gaekwad III, had the same vision in establishing a bank for servicing the public at large and the citizens of Baroda State, a Gujarati population in particular. On 20th July 1908, Bank of Baroda was established under the rules of Companies Act 1897, in a small building at Baroda, by the Maharaja with a paid up capital of Rs.10 lakhs. The guidelines set by the Maharaja for the bank was to serve the people of the State of Baroda as well as the neighboring regions with money lending, saving, transmission and encouraging the development of arts, science, commerce and trade for the people. The success story of the Bank of Baroda is studded with many a leaps and strides it made in the International presence, apart from establishing branches all over the Indian nation, by acquisition of already popular banking entities, as also commencing new commercial banking establishments, in the unique Gujarati style. During the years of 1908 to 2007 (and the century year being round the corner) Bank of Barodas growth owes to the excellence in rendering financial products and services to the national and international population. Countries beginning from America to Zambia, in the alphabetical order have been enjoying the services of Bank of Baroda as of today.

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Bank of Baroda is Nationalized scheduled Commercial Bank in public sector. The head office of BOB is in Baroda and corporate office in Mumbai, India. The Bank now (as on Oct 2009) has a wide network of over 3028 branches in India and 76 foreign branches, and thousand networked ATMs. Mr. M.D. Mallya is the Chairman \ Managing Director of BOB in Year 2008-2009. As on 20th July, 2008 the Bank completed its centenary year, for BOB it is a long and eventful journey over 100 years and across 25 countries.

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MANAGEMENT TEAM, BANKERS & AUDITORS

Board of Directors

M. D. Mallya Vinay A. Shah Masarrat Shahid Alok Nigam Deepak B. Phatak Ajay Mathur Satya Dev Tripathi Dharmendra Bhandari R. K. Bakshi N. S. Srinath Maulin A. Vaishnav R. Gandhi

: Chairman and Managing director : Co. Secretary & Coml. Officer : Director : Director : Director : Non Official Part Time Director : Non Official Part Time Director : Director : Executive Director : Director : Director : Director

Auditor N. C. Banerjee & Co. Brahmayya & Co. Khimji Kunverji & Co. S. K. Kapoor & Co. Ashwani & Associates Haribhakti & Co.

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GENERAL MEETING
1) The powers which have to be given to the annual general meetings, the same will be to the shareholder as well as first general meeting also. 2) The meetings, annual general meeting and special general meeting of the organization will be of two types. Annual general meeting will be in the three months from the government year 31st march which is called by the administration committee and special general meeting will be called under sub section-20. 3) The work of annual general meeting is as under: 1. To read and to permit the works of the next general meeting. 2. To take a report from the administration committee about the accounting statements and works of the previous year of the organization. 3. To appoint the local audit for checking the accounts during the year and time to time. 4. To appoint about the appointment given by govt. officer account checking list come from audit and to think about the other important communication letters which is come from the govt. officer.

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5. To concentrate the report of works of organization during the present year and to think about the next year considering the present years report. 6. Any activity doing continue or stop which is according to the objective of organization, the decisions taken about this matter. 7. To think about the other works which is presented in the meetings and also for the benefit of the organization the permission of the head is necessary.

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RESERVE FUND

1) Over and above of admission fee, forfeited share, penalty and reward, a fund amount which is taken form annual Net profit, will be transferred to reserve fund account. Personal right of any share- holder will not be claimed on such reserve fund. 2) A loss which is occurred due to working activities during the year can

be balanced from reserve fund after taking the permission of officer, but such amount will have to be credited to reserve fund from the next years profit.

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LEAVE RULE
Leave rules for employee of union will be as under. (a) Casual leave:12 casual leaves will be granted during the year. (b) Earned leave:Earned leaves will be granted for 30 days and these leaves can be accumulated for 240 days maximum. If an employee does not want to avail these leaves, union can pay cash for these leaves to concern employee as per full pay. But at the encashment for such leaves, permission should be given after the consideration of financial condition of society, circumstances and financial capability. An employee can convert their leaves to cash, ones time during the every two Years. (c) Sick leave:15 days sick leaves will be allowed during every year, with pay. Except such type leaves, special sick leaves will be permitted as a special case by the management committee as per need on the basis of doctor certificated without pay.

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Chapter-3 Research Methodology

1. Introduction 2. Title of the Research Study 3. Objectives of the study 4. Period of the study 5. Research design 6. Universe of the study 7. Sources of sample units 8. Scope of the study 9. Accounting Techniques 10. Limitations of the study

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1. Introduction:
The growth of any country depends upon the strength of its Banking sector. The economic enrichment and upliftment of social life depends upon the Banking sector of that country. The banking sector which reflects financial function of the country plays a crucial role in transforming the small savings into the large capital. Thus the banking sector boosts the economic growth of the country. In 1969 and 1980, the government nationalized the major banks in the private sector. Since that time no new bank could have been setup in India, though there was no legal bar to that effect. After the recommendation of the Narsimham Committee on financial sector reforms, the Reserve Bank of India issued guidelines for the setup of new banks in the private sector in January, 1993. The guidelines ensure that the new banks are financially viable and technologically modern from the very beginning. It means these banks will function in a professional manner, so that the banking system in India can improve image and win the confidence of the public. The project report attempts to analyze the productivity of Bank of Baroda. Thus the present project work makes an in depth study of the productivity of BOB in India during the 4 years.

2. Title of the Research Study:

In the present research work title of research study is A Ratio Analysis of Bank of Baroda.

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3. Objectives of the Study:

No work is started without any objective. The present project work has also some objectives. The present project report works has been under taken keeping in view the following objectives:
1. To understand and identify the major trends in the banking operations of Bank of Baroda.

2. To understand the various trends in productivity of capital of BOB.

3. To understand the various trends in productivity of employee of BOB.

4. To understand the various trends in productivity of branch of BOB.

4. Period of the study:

The present study has been made covering the period of last 4 years i.e. year 2006-07 to 2009-10. There is no special reason to choose this time period for the purpose of study.

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5. Research Design:
According to Claire Selltiz, Research Design is the arrangement of conditions for collection and analysis of data in a manner that aims to combine relevance to the research purpose with economy in procedure. Research Design includes conceptual structure within which the research has been conducted, it is the blue print for the collection measurement and analysis of the data. In short, research design suggests the decision regarding what, where, when, how much, by what means an inquiry on a research study is conducted.

6. Universe of the study:

Universe of the study consists of all the banks working in India. Banking industry of India consist of the following segments.
1. Scheduled to commercial banks in public sector: (a) (b) (c) First 14 Nationalized Banks. Second 6 Nationalized Banks. SBI and its subsidiaries.

(Total 20 Nationalized Banks but now only 19 Banks are there.)

2. Scheduled commercial bank in private sector: (a) (b) 21 old private banks. (Before 1994) 9 new private banks. (1994 and afterward)

3. Foreign banks: 36 Foreign Banks are working as on 31-3-2003.

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7. Sources of Sample Units:

The present study is mainly based on secondary data obtained from the issues of IBA bulletin and Annual Report of BOB. To supplement the data, different publication, bank quest, various books, periodicals, journals and different websites related with banking industry etc. have been used for better reliability.

8. Scope of the study:

In the present research study researcher has selected only Bank of Baroda from the whole banking industry. To analyse the productivity of capital, employee and branch and its ratio analysis , researcher has used various ratios like Business per unit of capital, Net Profit per Unit of Capital, Interest Income per Unit Of Capital, Non-Interest income per unit of Capital, Interest Expenditure per unit of capital, Business per Employee, Net Profit per Employee, Net total income per employee, Working fund per Employee, Business per Branch, Net Profit per Branch.

9. Accounting Techniques:
I have picked up the technique to suit the requirement and also on the basis of data availability. Ratio analysis has been used as accounting technique which is used for the analysis financial statement of the selected units. Ratio analysis means the process of computing, determining and presenting relationship of items and group of items in the financial appraisal. Ratio expresses the numerical relationship between two figures. Accounting ratios are used to describe significant relationship, which exist between figures shown on a balance sheet, in a profit and loss account, in
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a budgetary control system or in any other part of the accounting organization.

10. Limitations of the Study:

The present project work is having certain limitations which are as follows: The data which is used for this study is based on annual reports of the bank and secondary data collected from RBI & IBA Bulletins published from time to time. Therefore the quality of this project work depends on quality and reliability of data published in annual reports. There are different methods to measure the productivity of the banks. In this connection, view of experts differed from one another.

The present project work is largely based on ratio analysis, such analysis has its own limitations, which also applies to the study.

This

study

is

related

with

only

one

bank

viz.

BOB.

Any

generalization for universal application cannot be applied here.

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Chapter-4 Financial Highlights

1. Statistical Analysis 2. Financial Highlights 3. Profit & Loss A/c of Bank of Baroda 4. Balance sheet of Bank of Baroda

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Statistical Analysis
The heart of any research process lies in analysis and interpretation of data. One must collect the data, analyses and interpret according to the research plan. The term analysis refers to the computation of certain measures along with searching for patterns of relationship that exist among data group. As per the Oxford Advanced Learners Dictionary, Interpretation means the particular way in which something is understood or explained. Interpretation refers to the task of drawing inferences from the collected facts after an analytical and, or experimental study. In fact, it is a search for broader meaning of research findings. Interpretation is must for the usefulness and utility of research finding. I can come to know through interpretation why findings are, what they are and can make others understand the real significance of research findings. In the present project work, I have includes the ratio analysis of productivity of the BOB Bank.

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Financial Highlights

Sr. No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29

Particulars Capital Reserve and Surpluses Owned Funds Deposits Borrowings Other liabilities & Provisions Total Assets/ Liabilities Contingent Liabilities Cash and Balances with RBI Balances with Banks and Money at Call and Short Notice Investments Advances Fixed Assets Other Assets Interest Income Other Income Total Income Interest Expenditure Other Operating Expenses Total Expenses Provisions and Contingencies Net Profit/ Net Loss Spread Staff Branches Interest Income as % to Assets Non Interest Income as % to Assets Operating Profit as % to Assets Return on Assets In Crores " " " " " " " " " " " " " " " " " " " " " " In Nu " In % In % In % In % In Crores In Lakhs "

2006-07

2007-08

2008-09

2009-10

365.53 365.53 365.53 365.53 8284.41 10678.40 12470.01 14740.86 8649.94 11043.93 12835.54 15106.39 124915.98 152034.12 192396.95 241044.26 1171.15 3927.05 5636.09 13350.09 8683.69 12594.41 16538.15 8815.97 143146.17 179599.51 227406.72 278316.71 61375.31 82362.32 73386.09 6413.52 9369.72 10596.34 13539.97 11866.85 12929.56 13490.77 21927.09 34943.63 43870.07 52445.88 61182.38 83620.87 106701.32 143985.90 175035.29 1088.81 2427.00 2309.72 2284.76 5212.50 4301.83 4578.12 4347.22 9212.64 11813.48 15091.58 16698.34 1173.24 2051.04 2757.66 2806.36 10385.88 13864.51 17849.24 19504.70 5426.56 7901.67 9968.17 10758.86 2544.31 2934.29 3576.06 9359.41 12428.99 15622.03 16446.40 1388.54 1593.03 2077.80 1026.46 1435.52 2227.20 3058.33 3786.08 3911.81 5123.41 38086 36774 36838 38960 2772 2899 2974 3148 7.22 7.63 7.78 1.11 1.94 0.72 5.48 2.70 11.80 1.32 1.89 0.80 7.04 3.90 12.91 1.42 2.22 0.98 9.13 6.05 12.88

30 Business Per Employee 31 Net Profit Per Employee 32 Capital Adequacy Ratio

37

Profit & Loss A/c of Bank of Baroda

Rs in Cr. As on Particulars Income Interest Earned Other Income Total Income Expenditure Interest expended Employee Cost Selling and Admin Expenses Depreciation Miscellaneous Expenses Preoperative Exp Capitalised Operating Expenses Provisions & Contingencies Total Expenses Net Profit for the Year Extraordinary Items Profit brought forward Total Preference Dividend Equity Dividend Corporate Dividend Tax Per share data (annualised) Earning per Share (Rs) Equity Dividend (%) Book Value (Rs) Appropriations Transfer to Statutory Reserves Transfer to Other Reserves Proposed Dividend/ Transfer to Govt Balance c/f to Balance Sheet Total 2009-10 2008-09 2007-08 200607

16698.34 15091.58 11813.48 9212.64 2806.36 2757.66 2051.04 1381.79 19504.7 17849.2 13864.5 10594.4 10758.86 2350.88 1627.56 230.86 1478.21 0 4711.23 976.28 16446.4 3058.33 0 0 3058.33 0 639.26 0 83.96 150 414.71 1162.07 1257 639.26 0 3058.33
38

9968.17 2348.13 885.24 230.5 2189.99 0 3844.66 1809.2 15622 2227.2 0 0 2227.2 0 383.56 0 61.14 90 352.37 1136.23 707.41 383.56 0 2227.2

7901.67 1803.76 927.2 232 1564.36 0 3370.27 1157.05 12429 1435.52 0 0 1435.52 0 340.94 0 39.41 80 303.18

5426.56 1644.06 646.25 194.28 1656.81 0 2771.45 1369.95 9567.96 1026.46 0 0 1026.46 0 252.46 0 28.18 60 237.46

444.23 271.5 650.35 502.5 340.94 252.46 0 0 1435.52 1026.46

Balance Sheet of Bank of Baroda

Rs. In Cr. As On Particulars Capital and Liabilities: Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Net Worth Deposits Borrowings Total Debt Other Liabilities & Provisions Total Liabilities Assets Cash & Balances with RBI Balance with Banks, Money at Call Advances Investments Gross Block Accumulated Depreciation Net Block Capital Work In Progress Other Assets Total Assets Contingent Liabilities Bills for colleciton Book Value (Rs) 2009-10 2008-09 2007-08 2006-07

365.53 365.53 365.53 365.53 365.53 365.53 365.53 365.53 0 0 0 0 0 0 0 0 14740.86 12470.01 10678.4 8284.41 0 0 0 0 15106.39 12835.54 11043.93 8649.94 241044.26 192396.95 152034.13 124915.98 13350.09 5636.09 3927.05 1142.56 254394.35 198033.04 155961.18 126058.54 8815.97 16538.15 12594.41 8437.7 278316.71 227406.73 179599.52 143146.18

13539.97

10596.34

9369.72

6413.52

21927.09 13490.77 12929.56 11866.85 175035.29 143985.9 106701.32 83620.87 61182.38 52445.88 43870.07 34943.63 4266.6 3954.13 3787.14 2244.62 1981.84 1644.41 1360.14 1155.81 2284.76 2309.72 2427 1088.81 0 0 0 0 4347.22 4578.12 4301.83 5212.5 278316.71 227406.73 179599.50 143146.18 77997.01 64745.82 75364.33 54999.86 27949.6 22584.64 15105.51 12976.53 414.71 352.37 303.18 237.46

39

Chapter-5
CONCEPTUAL FRAME WORK OF PRODUCTIVITY IN BANKING SECTOR

1. Introduction 2. Meaning of Productivity 3. Productivity in Banks 4. Measuring of Productivity in Banks

A. Productivity of Capital
B. Productivity of Employee C. Productivity of Branch

40

INTRODUCTION:
The concept of productivity has a lot of importance because it is an index of economic welfare. Thats why the I have selected it as the main topic of this research. The link between productivity and economic growth is almost self-evident. Productivity plays a significant role in increasing the production per unit of input and thereby increasing national income. It is very closely linked with the survival of nation. So it is a fact that the productivity is a basic requirement for obtaining the economic, social, political and institutional goals and for raising the standard of living of the people and to enable the country to join the group of the developed countries. From the organizational point of view, the productivity is a crucial or vital parameter to measure long term industrial growth and competitiveness. It is the true source of competitive advantage as well as social stability. Productivity is the major goal of all organizations. It is vital for the survival of an organization. The growth of an organization depends on the productivity and this makes this concept central and crucial. It is the key to the economic health of every organization. Thats why this concept has gained importance in recent years and it has become the pre-requisite for the organizational success. The productivity of any manufacturing unit can be measured easily but it is very difficult to measure the productivity of a service unit like bank as the service cannot be quantified easily. Hence, the I have developed some comprehensive formulae to measure the productivity of the bank.

41

MEANING OF PRODUCTIVITY
The term productivity is controversial. Therefore it has got different meaning for different people. It means the relationship between output and input, for the economists. To behaviouralists, it means an attitude of mind. It is a mere cost reduction concept for the cost accountant. To engineers it is machine utilization. And it means profitability for the managers. So, productivity is a multi-dimensional concept and each person can draw its meaning to fit his situation. The dictionary meaning of productivity is output per unit of input, it means the yield obtained from any process or product by employing one more factors of production. In short, it is the ratio of output to input. It is not merely the measure of production but the ratio of efforts to result. It may be defined as a practical measurement relating to the total output of any one of the measurable factors of production, in a ratio, preferring the scarce or predominant nature of the input. As a ratio between output and input, it denotes a quantitative relationship between what is produced and what is introduced into the process. Thus, it is a measure of how well resources are utilized to achieve organizational objectives. Productivity refers to a comparison between the quantity of goods or services produced and the quantity of resources employed in turning out these goods or services. Thus, it measures the ability to produce. The productivity measures how well resources are expended in the context of accomplishing a mission or a set of objectives.

42

Productivity signifies continual striving toward the economically most efficient mode of production of goods, commodities and services needed by a society. The concept of productivity must be broad enough to denote the purpose for which it is measured. The productivity index, as a ratio, measures how well resources are expended in the context of accomplishing a mission or a set of objectives. It is the measure of how specified resources are managed to accomplish timely objectives stated in terms of quantity and quality. In a general sense, productivity represents a close integration of effectiveness and efficiency. It is a combination of effectiveness and efficiency of a system. It implies effective and efficient use of available and potential resources. Peter Drucker has distinguished between efficiency and effectiveness, stating that while the former is doing things right, the letter means doing right things. Efficiency indicates optimum utilization of resources and effectiveness being the achievement of performance results. It is achieving the highest result possible while consuming the least volume of resources. How will resources are brought together and utilized is indicated by the ratio of the volume of results called output to the volume of the resources called input. Thus, productivity denotes the relationship between the use of inputs and outputs obtained from them. It can be expressed as under. Productivity = = = Output Input Performance achievement Resources consumed Effectiveness Efficiency

43

PRODUCTIVITY IN BANKS
Banking belongs to service sector. It provides variety of services to its customers. The basic service of a bank is to accept the deposits, repay them on demand and lend credit for productive investment. So, its operations are known as financial transactions. These financial transactions are aimed at satisfying certain needs of the society. The service of banking unit is deposit oriented and credit oriented. The banking services have the following characteristics: The services of a bank are highly intangible in nature. Banking services are produced, delivered and consumed instantly. Banking services are spread over a wide range. Environments affect the type and number of services provided by the bank. Growth in bank services must be perfectly guided by the tradeoff between risk and return. They are multiplicative.

As we know the services are not easily quantifiable, it is very difficult to measure the productivity of a service unit like bank. The concept of productivity is new to the banking. The banking industry has started playing its role in the Indian society very recently. It is very difficult to measure productivity in banking industry but it is the only solution to many problems of banking system. The challenges of growth and development can only be met with through improved productivity. It is true that the productivity cannot be measured easily but it can be experienced by some comprehensive ways such as the achievement of the given targets, exploration of new markets and identification of potential locations for branch expansion etc. such measures can give the idea of productivity of a bank.
44

In the productivity analysis, we need to find the answers of the following questions first. Which resources are utilized?

How are the resources measured?

How is the value determined?

Is the timescale of measurement important?

What is achieved within how much time?

To what extent the resources are used effectively and efficiently to achieve specified target within the specified time limit?

To what extent a particular bank has achieved the socio-economic objectives?

Answering the above questions will give the idea of the productivity of a particular bank. Here, though the social objectives are necessary, they should not lead to inefficiency. Therefore, the productivity measurement must be based on both fulfillment of social objectives and financial viability.

45

The concept of productivity is easily applicable to the industrial sector but it becomes obscure in service organizations like bank. Since the banking sector provides variety of services, they are difficult to be measured. It is difficult to set parameters for bank productivity since their operations are directive and various other social compulsions also exist. Despite these complexities, there are many such areas where norms of productivity are applicable. If we think the bank productivity in broader sense, it can be said that the productivity can be judged by the extent to which the bank is responsive to the needs of the economy. Even if these indicators will not describe the complete story of the bank productivity, one can get signals so that the need of changes can be found out. It is quite clear from the discussion that mere input and output ratios cannot give us the perfect idea of the bank productivity but more comprehensive and multidimensional approaches are required. The present project work describes such approaches that are useful to measure productivity of a bank.

46

MEASURING PRODUCTIVITY IN BANK

Introduction: In the service sector the productivity of the unit depends on the human skills. The human skills are very important for achieving high productivity levels. The banking industry is the service industry. So its productivity also depends on the human skills or we can say the employees of the bank. The productivity of the service unit like bank depends also on the other factors like the trade and inters relationship in the key economic, commercial, political and social issues. The productivity can be improved if the performance of these factors can be improved. Productivity means the ratio of output to input for a specific production system. The productivity can be said to be improved if the output is increased by the same amount of input or less amount of input is used to produce the same amount of output. The productivity of any manufacturing unit can be measured easily because its output can be quantified easily. But the service unit like bank provides the variety of services which are very difficult to measure or they cannot be quantified. So it is very much necessary to develop a comprehensive and multidimensional approach. The traditional norms of measurement have to be replaced by more relevant and comprehensive norms. The above discussion clarifies that it is not easy to measure the productivity of a service unit like bank. So the comprehensive and multidimensional approaches are required to measure the productivity of a bank. The I have selected the three major areas in which the productivity of bank can be measured. They are:

47

A. Productivity of Capital Banking sector is a combination of man power as well as the capital. Here capital means total resources (Total liabilities or total assets) of a bank as on a particular date. In the modern age the use of mechanization and automation has taken the place of use of manpower to the effective use of capital. The effective use of capital can help a bank to achieve decided goals. I have used the following ratios to measure productivity of capital of the bank. 1. Business Per Unit of Capital 2. Net Profit per Unit of Capital 3. Interest Income per Unit Of Capital 4. Interest Expenditure per unit of capital B. Productivity of Employee The banking sector is a service sector where human skills are very important to achieve high productivity level. Here, the manpower forms a large portion of the operation. The measurement of productivity of employee becomes very necessary in this case. The productivity of employee in a particular industry or plant is the ratio of the output of that industry or plant to employee input in the industry or plant. But the meaning of input of employee varies. Here employee productivity means the volume of output achieved in a particular period in relation to the sum of direct and indirect efforts involved in the production of a given output. The following ratios are used to measure the employee productivity of the bank. 5. Business per Employee 6. Net Profit per Employee 7. Net total income per employee 8. Working fund per Employee

48

C. Productivity of Branch This is the age of decentralization. We can see that the

organizations are spreading their ranges of task. The same is the cases with banking sector. The banks have opened several branches to provide their services to the society. In this manner, the banks are providing place utility to the people. In this situation it is necessary to measure the productivity of the branches of a bank. The branches can prove to be profitable only if their productivity is met with the decided objectives. The following ratios are used by me to measure the branch productivity of the bank. 9. Business per Branch 10. Net Profit per Branch I have used various ratios to measure the productivity of all these three areas.

49

A. Productivity of Capital: 1) Business per Unit of Capital

To know the capital productivity of a bank, the best ratio that can be used is business per unit of capital. Here total capital employed means working fund i.e. Total assets or total liabilities. high the productivity of capital is high. productivity is low. Formula:Business Per unit of Capital = Business Working fund Where, Business = Deposits +Advances of the bank. Working fund = W.F. are total resources of a bank as on a particular date. Capital + Reserve & surplus + Deposit + Borrowings & provisions. If this ration is And if this ratio is low the

Table Particulars F.Y.2006-07 F.Y.2007-08 F.Y.2008-09 F.Y.2009-10 Deposits 124915.98 152034.13 192396.95 241044.26 Advances 83620.87 106701.32 143985.90 175035.29 =Business 208536.85 258735.45 336382.85 416079.55 Working Fund 143146.18 179599.52 227406.73 278316.71 Ratio 1.457 1.44 1.479 1.495

50

Chart BUSINESS PER UNIT OF CAPITAL

1.5 1.49 1.48 1.47 1.46 1.45 1.44 1.43 1.42 1.41 F.Y.2006-07 F.Y.2007-08 F.Y.2008-09 F.Y.2009-10

Analysis:With the help of above given formula the Business per unit of Capital is calculated for the year 2006-07 to 2009-10. In the year 200708, the ratio was 1.44. In the year Business was 258735.45 and working fund were 179599.52. We see and say that in the year 2006-07 the ratio was 1.457 so we can say that the ratio is decrease then the last year. In the year 2007-08 the ratio is1.44 and in the year 2008-09 the ratio is 1.479 so we can say that the Business per unit of capital is increase year by year. In the year 2009-10 the ratio is 1.495 thus the ratio is increase then the last year. In this way, we can see that the Business per unit of capital this assembly is fluctuating during the period of 2006-07 to 2009-10.

51

2) Net Profit per Unit of Capital Productivity of capital can be measured by the net profit per unit of capital ratio. If this is high the productivity of capital is high. If this ratio is low, the productivity of the capital is low. Formula:Net profit per unit of capital = Net Profit Working fund Net Profit: Net profit will be achieved by deducting provisions and contingencies and provision for taxation from the operating ratio. Working Fund: particular date. Working is total resources of a bank as on a x 100

Table

Particulars F.Y.2006-07 F.Y.2007-08 F.Y.2008-09 F.Y.2009-10 Net Profit 1026.46 1435.52 2227.20 3058.33 Working fund 143146.18 179599.52 227406.73 278316.71 Ratio 0.717 0.799 0.979 1.099

52

Chart

NET PROFIT PER UNIT OF CAPITAL

1.2 1 0.8 0.6 0.4 0.2 0 F.Y.2006-07 F.Y.2007-08 F.Y.2008-09 F.Y.2009-10

Analysis:With the help of above given formula the Net profit per unit of capital is calculated for the year 2006-07 to 2009-10. In the year 200607, the Net profit per unit of capital was 0.717. In the year Net profit was 1026.46 and working fund was 143146.18. We see and say that in the year 2007-08 the ratio is 0.799 so we can say that the ratio is increase then the last year. In the year 2008-09 the ratio is 0.979 and in the year 2009-10 the ratio is 1.099 so we can say that the net profit per unit of capital is increase year by year. In this way, we can see that the Net profit per unit of capital is increase during the period of 2006-07 to 2009-10.

53

3) Interest Income per Unit of Capital The productivity of capital can be measured by the interest income per unit of capital. Formula:Interest income per unit of capital= Interest Income Working fund Interest income: The total discount, interest income from loans and advances, interest income from investment. Working Fund: particular date. Working is total resources of a bank as on a x 100 If this ratio is high, the productivity of the capital is high. If this ratio is low, the productivity of the capital is low.

Table Particulars Interest Income Working fund Ratio F.Y.2006-07 F.Y.2007-08 F.Y.2008-09 F.Y.2009-10 9212.64 11813.48 15091.58 16698.34 143146.18 179599.52 227406.73 278316.71 6.436 6.578 6.636 5.999

54

Chart

INTEREST INCOME PER UNIT OF CAPITAL

6.8 6.6 6.4 6.2 6 5.8 5.6 F.Y.2006-07 F.Y.2007-08 F.Y.2008-09 F.Y.2009-10

Analysis:With the help of above given formula the Interest income per unit of capital is calculated for the year 2006-07 to 2009-10. In the year 2006-07, the Interest income per unit of capital was 6.436. In the year Interest income was 9212.64 and working fund was 143146.18. We see and say that in the year 2007-08 the ratio is 6.578 so we can say that the ratio is increase then the last year. In the year 2008-09 the ratio is 6.636 and in the year 2009-10 the ratio is 5.999 so we can say that the ratio is decrease then the last year. In this way, we can see that the Interest income per unit of capital increase during the period of 2006-07 to 2009-10 except 2009-10.

55

4) Interest Expenditure per unit of capital This ratio can also be used to measure the capital productivity of the bank. Here interest expenditure means amount paid by the bank to depositors on their short term and long term deposits. If this ratio is low, the productivity of capital is high. productivity of capital is low. Formula: Interest Expenditure per unit of capital = Interest Expenses x 100 Working fund Interest Expenses: Interest expenditure means amount paid by the bank to depositors on their short term and long term deposit. Working Fund: particular date. Working is total resources of a bank as on a And if this ratio is high, the

Table Particulars Interest Expenses Working fund Ratio F.Y.2006-07 F.Y.2007-08 F.Y.2008-09 F.Y.2009-10 5,426.56 7,901.67 9,968.17 10,758.86 143146.18 3.791 179599.52 4.399 227406.73 4.383 278316.71 3.866

56

Chart

INTEREST EXPENDITURE PER UNIT OF CAPITAL

4.5 4.4 4.3 4.2 4.1 4 3.9 3.8 3.7 3.6 3.5 3.4 F.Y.2006-07 F.Y.2007-08 F.Y.2008-09 F.Y.2009-10

Analysis:With the help of above given formula the interest

expenditure per unit of capital is calculated for the year 2006-07 to 200910. In the year 2006-07, Interest Expenditure per unit of capital was 3.791. In the year interest expenditure was as 5,426.56 and WF was 143146.18. We see and say that in the year 2007-08 the ratio is 4.399 so we can say that the ratio is increase then the last year. In the year 200809 the ratio is 4.383 and in the year 2009-10 the ratio is 3.866 so we can say that the ratio is decrease then the last year. In this way, we can see that the int. Expenditure per unit of capital decrease during the period of 2006-07 to 2009-10 except 200708.

57

B. Productivity of Employee:
5) Business per Employee To know the employees productivity, the best ratio that can be used is business per employee ratio. If this ratio is high, the productivity of employees in the bank is better. And if this ratio is law, the productivity of the employee in the bank is lower. This ratio is an indicator of degree of employees productivity of banks. Formula:

Business Per employee

Business No. of employees

Business Employee subordinates.

= Deposits +Advances of the bank. = employees in India include officers, clerks and

Table Particulars Deposits Advances =Business No. of employees Ratio F.Y.2006-07 F.Y.2007-08 F.Y.2008-09 F.Y.2009-10 124,915.98 152,034.13 192,396.95 241,044.26 83,620.87 106,701.32 143,985.90 175,035.29 208,536.85 258,735.45 336,382.85 416,079.55 38086 36774 36838 38960 5.475 7.036 9.131 10.680

58

Chart

BUSINESS PER EMPLOYEE

1.2 1 0.8 0.6 0.4 0.2 0 F.Y.2006-07 F.Y.2007-08 F.Y.2008-09 F.Y.2009-10

Analysis:With the help of above given formula the Business per employee is calculated for the year 2006-07 to 2009-10. In the year 2006-07, Business per employee was 5.475. We see and say that in the year 2007-08 the ratio is 7.036 so we can say that the ratio is increase then the last year. In the year 2008-09 the ratio is 9.131 and in the year 2009-10 the ratio is 10.680 so we can say that the ratio is increase then the last year. In this way, we can see that the Business per Employee increase during the period of 2006-07 to 2009-10.

59

6) Net Profit per Employee To measure per employee profit, profit per employee ratio is used. This is the best indicator of the productivity. This ratio shows how efficiently the employee work in the bank. If this ratio is high, it indicates better employee productivity. employee productivity. Formula: If this ratio is low, it indicates lower

Net profit per employee =

Net Profit No. of employees

x 100

Net profit

= Net profit will be achieved by deducting provisions

and contingencies and provision for taxation form the operating profit. Employee subordinates. = employees in India include officers, clerks and

Table Particulars Net profit No. of employees Ratio F.Y.2006-07 F.Y.2007-08 F.Y.2008-09 F.Y.2009-10 1026.46 1435.52 2227.20 3058.33 38086 36774 36838 38960 2.695 3.904 6.046 7.850

60

Chart

NET PROFIT PER EMPLOYEE

1.2 1 0.8 0.6 0.4 0.2 0 F.Y.2006-07 F.Y.2007-08 F.Y.2008-09 F.Y.2009-10

Analysis:With the help of above given formula the Net profit per employee is calculated for the year 2006-07 to 2009-10. In the year 2006-07, Net profit per employee was 2.695. We see and say that in the year 2007-08 the ratio is 3.904 so we can say that the ratio is increase then the last year. In the year 2008-09 the ratio is 6.046 and in the year 2009-10 the ratio is 7.850 so we can say that the ratio is increase then the last year. In this way, we can see that the Net profit per Employee increase during the period of 2006-07 to 2009-10.

61

7) Net total income per employee To measure the relationship between Net total income and employees, Net total income per employee ratio is used. Net total income is a key indicator of the productivity of a bank. Net total income includes interest plus other income of the bank. If this ratio is high, the productivity of the bank is high. If this ratio is low the productivity is low. Formula:Net total income per employee = Net total income No. of employees

Net total income of the bank. Employee subordinates.

= It includes interest income plus other income

= employees in India include officers, clerks and

Table

Particulars Net Total income No. of employees Ratio

F.Y.2006-07 F.Y.2007-08 F.Y.2008-09 F.Y.2009-10 10,594.43 13,864.52 17,849.24 19,504.70 38086 36774 36838 38960 0.278 0.377 0.485 0.501

62

Chart

NET TOTAL INCOME PER EMPLOYEE

1.2 1 0.8 0.6 0.4 0.2 0 F.Y.2006-07 F.Y.2007-08 F.Y.2008-09 F.Y.2009-10

Analysis:With the help of above given formula the Net total income per employee is calculated for the year 2006-07 to 2009-10. In the year 2006-07, net total income per employee was 0.278. In the year Net total income was 10,594.43 and No. emp. was 38086. We see and say that in the year 2007-08 the ratio is 0.377 so we can say that the ratio is increase then the last year. In the year 2008-09 the ratio is 0.485 and in the year 2009-10 the ratio is 0.501 so we can say that the ratio is increase then the last year. In this way, we can see that the Net total income per Employee increase during the period of 2006-07 to 2009-10.

63

8) Working fund per Employee This ratio is used to measure the relationship between working fund and employee of the bank. contingent liability are considered in this ratio. indicators of the productivity of the bank. The working fund and This is one of the best If this ratio is low, the

productivity is low. If this ratio is high, the productivity is high. Formula:

Working fund per employee =

Working fund + Contingent liability No. of employees

Working Fund: particular date. Employee subordinates.

Working is total resources of a bank as on a

: Employees in India include officers, clerks and

Table Particulars Working fund Contingent liability Total No. of employee Ratio F.Y.2006-07 F.Y.2007-08 F.Y.2008-09 F.Y.2009-10 143146.18 179599.52 227406.73 278316.71 54,999.86 75,364.33 64,745.82 77,997.01 198,146.04 38086 5.203 254,963.85 36774 6.933 292,152.55 36838 7.931 356,313.72 38960 9.146

64

Chart

WORKING FUND PER EMPLOYEE

1.2 1 0.8 0.6 0.4 0.2 0 F.Y.2006-07 F.Y.2007-08 F.Y.2008-09 F.Y.2009-10

Analysis:With the help of above given formula the Working fund per employee is calculated for the year 2006-07 to 2009-10. In the year 2006-07, working fund per employee was 5.203 and No. emp. was 38086. We see and say that in the year 2007-08 the ratio is 6.933 so we can say that the ratio is increase then the last year. In the year 2008-09 the ratio is 7.931 and in the year 2009-10 the ratio is 9.146 so we can say that the ratio is increase then the last year. In this way, we can see that the Working fund per Employee increase during the period of 2006-07 to 2009-10.

65

C. Productivity of Branch:
9) Business per Branch

Business per branch ratio is an indicator of the relationship between business and number of branches of the bank. This is one of the best indicators of the banks productivity. If this ratio is high, the productivity of the bank is high. If this ratio is low, the productivity of the bank is low. Formula:

Business per Branch =

Business No. of Branch

Business Branch

= Deposits +Advances of the bank. = a branch may be defined as a section of an enterprise,

geographically separated from rest of the business, controlled by head office, and generally carrying on same activities as of the enterprise.

Table Particulars Deposits Advances =Business No. of Branch Ratio F.Y.2006-07 F.Y.2007-08 F.Y.2008-09 F.Y.2009-10 124,915.98 152,034.13 192,396.95 241,044.26 83,620.87 106,701.32 143,985.90 175,035.29 208,536.85 258,735.45 336,382.85 416,079.55 2772 2899 2974 3148 75.230 89.250 113.108 132.173

66

Chart

BUSINESS PER BRANCH

140 120 100 80 60 40 20 0 F.Y.2006-07 F.Y.2007-08 F.Y.2008-09 F.Y.2009-10

Analysis:With the help of above given formula the Business per Branch is calculated for the year 2006-07 to 2009-10. In the year 200607, Business per branch was 75.230 and No. Branch was 2772. We see and say that in the year 2007-08 the ratio is 89.250 so we can say that the ratio is increase then the last year. In the year 2008-09 the ratio is 113.108 and in the year 2009-10 the ratio is 132.173 so we can say that the ratio is increase then the last year. In this way, we can see that the Business per Branch increase during the period of 2006-07 to 2009-10.

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10) Net Profit per Branch

This ratio is used to measure the profit earned per branch of the bank. This ratio measures the efficiency of the branches of the bank. If this ratio is high, the productivity of the bank is high. If this ratio is low, the productivity is low. Formula:

Net profit per Branch =

Net Profit No. of Branches

Net profit

= Net profit will be achieved by deducting provisions

and contingencies and provision for taxation form the operating profit. Branch = A branch may be defined as a section of an

enterprise, geographically separated from rest of the business, controlled by head office, and generally carrying on same activities as of the enterprise.

Table Particulars Net profit No. of Branches Ratio F.Y.2006-07 F.Y.2007-08 F.Y.2008-09 F.Y.2009-10 1026.46 1435.52 2227.20 3058.33 2772 2899 2974 3148 0.37 0.495 0.749 0.972

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Chart

NET PROFIT PER BRANCH

1.2 1 0.8 0.6 0.4 0.2 0 F.Y.2006-07 F.Y.2007-08 F.Y.2008-09 F.Y.2009-10

Analysis:With the help of above given formula the Net profit per branch is calculated for the year 2006-07 to 2009-10. In the year 200607, Net profit per Branch was 0.37. In the year Net profit was 1026.46 and No. branch was 2772. We see and say that in the year 2007-08 the ratio is 0.495 so we can say that the ratio is increase then the last year. In the year 2008-09 the ratio is 0.749 and in the year 2009-10 the ratio is 0.972 so we can say that the ratio is increase then the last year. In this way, we can see that the Net profit per Branch increase during the period of 2006-07 to 2009-10.

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Findings & Suggestions

1.1 Banking in its most simple form is as old as authentic history. As early as 2000 B.C. Babylonian had developed a system of banks.

1.2 In Rome, the bankers were called Argentarii, Mensaril or Callybistoe. The banks were called Tabornoe Argentarii. To pay money by a draft was known as Prescribere and Rescribere and the draft was known as Attributio. 1.3 The Bank of Venice, established in 1157, is supposed to be the most ancient bank. Originally, it was not a bank in the modern sense, being simply an office for the transfer of the public debt. 1.4 As early as 1349 the Drapers of Barcelona carried on the business of banking. During 1401 a public bank was established in Barcelona. The Bank of Amsterdam was established in 1609 to meet the needs of the merchants of the city. 1.5 The beginning of English banking may correctly be attributed to the London Goldsmiths. They used to receive their consumers valuables and funds for safe custody and issue receipts acknowledging the same. These notes became payable to bearer on demand and hence enjoyed considerable circulation. The business of the Goldsmith got a rude shock by the ill treatment of the government of Charles II under the cable ministry. 1.6 The ruin of goldsmith marks turning point in the history of English banking, which resulted in the growth of private banking and the establishment of the Bank of England in 1694.

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1.7 Banking in India has its origin as early as the Vedic period. The great Hindu Jurist Manu, who has devoted a section of his work to deposits and advances and laid down rules relating to rate of interest. 1.8 The General Bank of India was the first joint stock bank to be established in the year 1786. The East India Company established three banks; viz, Bank of Bengal in 1809, the Bank of Bombay in 1840 and the Bank of Madras in 1843. These three banks were amalgamated in 1920 and new bank, the Imperial Bank of India was established on 27 th January, 1921. 1.9 The Reserve Bank of India as the Central Bank of country was created in 1935 by passing Reserve Bank of India Act 1934. In the wake of the Swadeshi Movement, a number of were established in the country. 1.10 The major types of banks are central bank, commercial bank, cooperative bank, development bank, private sector and public sector banks. 2.1 The concept of productivity has considerable importance, as it is an index of economic welfare. From the point of view of an organization, it is a strategic parameter crucial to long term industrial growth and competitiveness. 2.2 The term Productivity is controversial. Therefore, it has different meanings for different people. 2.3 The simpler meaning of productivity is the ratio of output to input. 2.4 The productivity can be easily measured for the manufacturing industry, but it is very difficult for the service industry like bank. Since the

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service cannot be qualified easily, there are many complexities in measuring the productivity of a service unit. 2.5 Even if there are many complexities in measuring productivity of bank, it can be said that the productivity can be judge by the extent to which the bank is responsive to the needs of economy. 2.6 To measure the productivity of bank, the three areas viz., productivity of capital, productivity of employees and productivity of branch, have been developed by the researcher. 3.1 In 1969 and 1980, the government nationalized the major banks in India. Since that time no new bank could have been setup in India. After the recommendation of the Narsimham Committee, the Reserve Bank of India issued guidelines and eight private sector banks have been established. 3.2 Assumptions and value are included in Research Methodology. Which are useful for data interpretation and reaching to the conclusion? According to Clair Sellitz, Research design is the arrangement of condition and analysis of data in a manner that aims to combine relevance to the researcher purpose with economy in procedure. 3.3 Accounting techniques and Statistical techniques have been used. Ratio analysis has been used as accounting techniques and arithmetic mean has been used as statistical techniques. 3.4 The present research work has some limitations like reliability of the data, views of experts, limitations of tools and techniques and the research work cannot be applied to the universe as it is related to a nationalized bank.

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4.1 Business per unit of capital ratio shows up and down fluctuation trend in BOB during the study period. In this calculation, we can see that there is continuous increase except 2007-08. To improve this ratio the bank should make effective utilization of unit of capital. 4.2 Net profit per unit of capital ratio shows fluctuation trend in BOB during the study period. In this calculation, we can see that there is continuous increase trend. To improve this ratio more, the bank should increase its profit earning capacity. If this capacity is improved more profit will be earned per unit of capital. 4.3 Interest income per unit of capital ratio shows fluctuating trend in BOB. In this calculation, we can see that there is less increasing trend and very low ratio in last year. In this ratio is to be improved, the bank should give more deposits so that the interest income can be increased and interest income per unit of capital ratio can be increased. 4.4 Interest expenditure per unit ratio shows ups and downs trend in BOB. In this calculation, we can see that there is very low ratio and it shows good sign for bank. If this ratio is low, the productivity capital is high. And if this ratio is high, the productivity of capital is low. So to improve this ratio the bank should try to decrease more its interest expenditure. 4.5 Business per employee ratio shows upward trend in BOB. In this calculation, we can see that there is continuous increasing ratio. So it can be concluded that BOB is getting good business from its employees. To improve more this ratio, the bank should make effective utilization of its labour force. 4.6 Net profit per employee ratio shows continuous increasing trend in BOB. It means that the bank is earning good profit per its employees. To
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improve more this ratio, the bank should make effective utilization of its labour force, so that net profit per employee can be increased. 4.7 Net total income per employee ratio shows continuous upward trend in BOB. Net total income is the productivity of the bank. Net total income includes interest income plus other income of the bank. If the ratio is low, the productivity is low and if this ratio is high, the productivity is high. To improve more this ratio, the bank should increase in the net total income. 4.8 Working fund per employee ratio shows upward trend in BOB. It can be known that the bank has improved this ratio. To improve more this ratio, the bank should make effective utilization of its working fund. 4.9 Business per branch ratio shows upward trends in BOB. To improve more this ratio, the bank should increase the efficiency of its branches. 4.10 Net profit per branch ratio shows increasing trend in BOB. To improve more this ratio, the bank should increase the profit earning capacity of its branches. So in all most all ratios, the productivity is continuously increase year by year. So we can say that, Bank of Baroda utilize all resources effectively.

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Conclusion
Through the research work it can be concluded that the banking industry has wide scopes in the Indian economy. The banking industry has its roots nearly before 2000 B.C. Since then the banking sector has been playing its role of growth and development in the Indian economy. The banking industry has helped the country to grow very fast. It is proved that the finance sector should be very strong, if any country wants to grow very fast. To achieve this kind of growth Indian government has adopted the policy of liberalization. As a result 51 private sector banks are working in the country. Out of them 30 foreign banks have also been playing their role in the Indian economy. The Researcher has selected nationalized bank, Bank of Baroda. After the in-depth analysis of productivity of the bank it can be concluded that the productivity of the bank is different in the different areas viz., Productivity of Capital, Productivity of Employees and Productivity of Branches.

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Bibliography

1. Reference Books Financial Management Cost & Management Accounting 2. Other Materials Material Provided by BOB Annual Report 2006-2007 Annual Report 2007-2008 Annual Report 2008-2009 Annual Report 2009-2010 3. Web Site www.bankofbaroda.com www.moneycontrol.com www.financialexpress.com M. Y. Khan & P. K. Jain Ravi M. Kishore

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