A Study on

(Conducted on behalf of The Varachha CO-operative Bank Ltd., Surat) (From 1st June,2011 to10thJuly, 2011)

A Project Report submitted in partial fulfillment of the requirements For the award of the degree of

Submitted By:
Daya Kakadiya MBA(Sem-2

UNDER THE GUIDANCE OF

Miss.Priyanka Parekh

Submitted To:-

I Daya Kakadiya here by, declare that this winter training report is the result based on my own research & hard work or Published matter used a reference has been duly acknowledged. Daya Kakadiya student of Sigma Institute of Management, Vadhodiya.

Training Period from 1ST January, 2011 to 28th February, 2011 and prepared report for the same assures that information in this report is true and reliable.

Signature Place: Date:

I have undergone the project work at THE VARACHHA CO-OP BANK LTD.. I have collected the information, which is included in this report. I take the opportunity to express the feeling of grateful towards Gujarat Technological University for the project work of M.B.A(Sem 2). I also thank to Director Sir J.G and MR. RAJESH DESAI, the co-coordinator of AMBABA COMMERCE COLLEGE & MANIBA INSTITUTE OF BUSINESS MANAGEMENT for giving me an opportunity for project work at THE VARACHHA CO-OP BANK LTD., and I also express my guide MR. PARESH KELAWALA for his valuable guidance and help throughout my project. I really and most thankful to chairman and managing director of Varachha Cooperative Bank and mostly to A.D. Bhalani (General Manager) for allowing me to undergo the project work at Varachha bank next and most feeling a gratitude towards MR. PARESH KELAWALA (Punagam branch manager) and Dineshbhai, Janakbhai, Vipulbhai, Sureshbhai, Falgunbhai, Ghanshyambhai and all the staff of bank who really encourage me and give all information and training as not student, but as a friend. So I again heartily thankful to all.

Yours faithfully, Daya Kakadiya. M.B.A. (sem2)

TABLE Chapter

OF

CONTENTS:Page
3

No
1

Name of The Chapter

Preface Acknowledgement Declaration Executive Summery History of Banking Industry Introduction of bank Definition of bank and banking Types of banks

No.

Structure of banking Industry

Introduction of co-operative banks

Structure of banking Co-operative banks

Introduction of the Varachha Co-op.limited

History of the bank

Vital factors of the bank Organization structure of the bank

Introduction of the board of directors

 Different branches of the bank Day to day operations of the bank Different services provides by the bank Various types of deposit account of the bank Bankers to the bank Types of Loans in bank Objectives of the bank Contribution of bank to its shareholders Contribution of bank its customers Contribution of bank to its employees Interest rates of various deposits Interest rates of various loans

Loan recovery management Research Methodology

Research problem Objectives Period of coverage

5

 Sources of the Data Scope of the study Selection of sample Important of study Limitations of the study Review of literature Introduction of Financial Statement analysis Need for and meaning of financial analysis 4 Objectives of financial statement

Nature of financial statement

Limitation of financial statement Financial statement of Varachha bank 5 Tools of Financial statement analysis Comparative financial statement Common size financial statement Trend analysis

 Fund flow statement Cash flow statement Ratio analysis Findings and suggestions Facts and Findings 6 SWOT analysis of the bank Suggestions 7 8 9 Conclusion Bibliography Annexure

1.1 INTRODUCTION OF BANK

banks in India were founded by Indian entrepreneurs and visionaries in the pre-independence era to provide financial assistance to traders, agriculturists and budding Indian industrialists. The origin of banking in India can be traced back to the last decades of the 18th century. The General Bank of India and the Bank of Hindustan, which started in 1786 were the first banks in India. Both the banks are now defunct. The oldest bank in existence in India at the moment is the State Bank of India. The State Bank of India came into existence in 1806. At that time it was known as the Bank of Calcutta. SBI is presently the largest commercial bank in the country. The role of central banking in India is looked by the Reserve Bank of India, which in 1935 formally took over these responsibilities from the then Imperial Bank of India. Reserve Bank was nationalized in 1947 and was given broader powers. In 1969, 14 largest commercial banks were nationalized followed by six next largest in 1980. But with adoption of economic liberalization in 1991, private banking was age in allowed. The commercial banking structure in India consists of: Scheduled Commercial Banks and Unscheduled Banks. Scheduled commercial Banks constitute those banks, which have been included in the Second Schedule of Reserve Bank of India (RBI) Act, 1934. RBI includes only those banks in this schedule, which satisfy the criteria laid down vide section 42 (6) (a) of the Act.

1949 : Enactment of Banking Regulation Act. 1955 : Nationalization of State Bank of India. 1959 : Nationalization of SBI subsidiaries. 1961 : Insurance cover extended to deposits. 1969 : Nationalization of 14 major banks. 1971 : Creation of credit guarantee corporation. 1975 : Creation of regional rural banks. 1980 : Nationalization of seven banks with deposits over 200 crore.

Banking during British period before independence.

Ancient Hindu scriptures provided enough evidence of the existence of money lending business in India. Mahajans, Shroffs, Shakers, etc. were enjoyed in banking business. In the beginning of the 18th century, the East India Company set up a few commercial banks on modern lines. In 1970, first India bank knows as the Bank of Hindustan was started and was closed down twenty years later. Later on bank of Hindustan and Bengal Bank also came into existence in 1809. Bank of Hindustan carried on the business till 1900. The first joint stock bank, namely the General Bank of India was established in 1786. Later, the East India Company started three presidency banks with government participation. These were:

1). Bank of Calcutta (1806) 2). The Bank of Bombay (1840) 3). The Bank of Madras (1843)

These banks had the financial participation by the government also. During the 18th century, these entire banks were also opened by Agency house in Madras and Calcutta. These entire banks failed, the need of banking regulation in India was seriously felt. As a result companies Act, 1833 was brought into force. The impact of the agency house got slowly reduced. Allahbad Bank came into existence in 1865 and Alliance Bank of Simla in 1875. The first purely Indian joint stock bank known as the Oudh Commericial Bank was set up in 1906 encouraged the Indian entrepreneurs to start many new banks. There were as many 648 commercial banks in India by the end of 1947. As many as 161 banks failed in quick succession during 1913-1914 and peoples faith in the banks system was shaken. Thus there was a great need of an institution to control and regulate banking in the country. As a result, the reserve bank if India was established as the central bank of country in 1935 under an act called Reserve Bank of India Act. Later on with the passage of the banking regulation Act passed in 1949. RBI was brought under government control. Under this act, RBL was conferred with supervision and control of the banks and licensing powers and the authority to conduct inspections was also given to it.

10

The three presiding banks were amalgamated in 1920 and new bank called Imperial Bank of India, this bank played an important role in the economy of the country. After independence, it was nationalized in 1955 and renamed as the State Bank of India. The SBI opened a large number of branches in rural and semi-urban areas. The RBI acts as a centralized body monitoring any discrepancies and shortcoming in the system. It is the foremost monitoring body in the Indian financial sector. The nationalized banks (i.e. government owned banks) continue to dominate the India banking arena. Industry estimates indicated that out of 274 commercial banks operating in India, 223 banks are in the public sector and 51 are in the private sector. The private sector bank grid also includes 24 foreign banks that have started their operations here.

11

1.2 Definition of Bank and Banking

Bank

Banking

12

1.3Types of Banks

3)Specialized Banks:
needs These are with ,thus

There are specialized forms of banks catering to some special unique ,foreign nature exchange bank, of individual activities. banks

13

14

1.4 STRUCTURE OF RESERVE BANK OF INDIA:

Reserve bank of India

Commercial Bank

Development bank

Exim bank

Foreign bank

Indian bank

State cooperative bank

RRBS Public sector Private sector

NABARD Nationalized bank

State Bank

15

Indian banking system comprises of both organized and unorganized banks. Unorganized banking includes indigenous bankers and village moneylenders. Organized banking includes the followed, Reserve bank of India (central bank) Commercial banks Development banks Exim banks Co-operative banks Regional rural banks Land development banks National Bank for agriculture and rural development (NABARD)

16

1.5 Introduction of co-operative bank

MEANING OF CO-OPERATIVE BANK:

Co-operative bank are based on the value of self-responsibility,Democracy,equit and solidarity.In the world co-operative bank activities was stated in December1844 in Britician social development is the role aim of the Co-operative activities.

A. DEFINITION:

Co-operation is an effective self-reliance done by organism. -Sir Horas Planket. Co-operation is the step taken for equal profit or loss under mutual management.Management by mutually using their own resources and factors willingly. -Herick M. T.

17

B.

ORIGIN OF CO-OPERATIVE BANK:

The word of co-operative was (being) recognized in 1904 (when the co-operative societies Act 1904 was enacted) When the co-operative credit society was passed. The activities of co-operative was started with the main purpose of providing the advance to the member with a low interest rates, and providing advance to farmer and lower class and to make the people interested in savings.

1.6 Role of banks in Economics development

18

19

20

21

1.7

STRUCTURE OF CO-OPERATIVE BANK:

1) State co-operative bank: The state co-operative bank is a federation of central co-operative banks and acts as a watchdog of the co-operative banking structure in the state. Its funds are obtained from share capital from Reserve Bank of India.The state co-operative banks lend money to central co-operative banks and primary societies and not directly to farmers The principle one being the institution of provincial co-operative banks to serve as apex banks in the hierarch of co-operative pyramid.

2) central co-operative bank: There are the federations of primary credit societies in a district and are of two types those having a membership of primary societies only and those having a membership of societies as well as individuals. The funds of the bank consist of share capital, deposits and overdrafts from state co-operative banks and joint stocks. These banks finance member
22

societies within the limits of the borrowing capacity of societies. They also conduct all the business of a ointstock bank. 3) primary co-operative bank:

Primary co-operative bank is also known as credit society. The primary co-operative credit society is an association of borrows and number derived from the share capital and deposits of and members and loans from central co-operative banks. The borrowing power of the members well as of the society is fixed. The loans are given to members for the purpose of cattle, folder fertilizer, pesticides, implements, etc

There are three types of co-operative banks and the urban co-operative bank is one type of co-operative bank, the varachha bank is urban co-operative bank.

FUNCTION OF CO-OPERATIVE BANK:

Co-operative Banks are formed on the principle of Co-operative to Extend Credit facilities to farmers and small scale industrial concerns and promotes in general the habit of thrift and self help among the low and middle income groups of the society. Co-operative has been putting more weight on their lending activities than on deposit mobilization. The main function of Co-operative credit society was to provide cheap credit to the members who are small people with small means and small needs and finance. The Co-operative Banks have a three tier set up. The state co-operative bank, while central district co-operative banks function at the district level and primary credit societies work of the village level. Co-operative banks proceed on the principle of co-operation. CO-operative Banks maintain the cash reserve and liquid assets in relation to deposit only. To arrange the programs regarding the Economic welfare of its members.

23

 This bank supervises the functioning of primary credit society and gives training, guidance and advice to the employee of credit society only.

24

2.1 History of varachha co-operative Bank Ltd.

THE VARACHHA CO-OP. BANK LTD.

The people in Saurashtra, located in western part of Gujarat, are always depending upon the rain-fed cultivation. As a search for income generation in an alternate way for their survival, they have chosen Surat city, where there is a good scope for trade in Diamond and Textile sector. Well off people have entered into the trading sector and the others on labour front. In a phased manner, the population of the people, involved in diamond trade, belonging to Saurashtra increased to a sizeable extent in Surat and in particular in the area of Varachha. It was become obvious for a necessity of a Bank for
25

their own people; the efforts were taken by a well known philanthropist, story writer and columnist in local dailies, Mr. P. B. Dhakecha, founder chairman of our Bank. As such, The Varachha Cooperative Bank Ltd., came into existence on 16th October 1995 and Inauguration ceremony was done by on the hand of Shree Swami Sacchidanand. Some of our directors are belonging to diamond trade, who are official site holders of getting rough block diamonds from foreign countries. At the end of the first financial year the number of shareholders was 4484, Share Capital 57.44 lacs, Deposits Rs.2.70 crores, Advance Rs.2.07 crores and profit stood at 4.77 lacs. Our Bank has gradually developed the Banking activities and at the end of 5th year, with a network of 5 branches, the share capital and reserves raised to more than 8 crores and the deposits have crossed 100 crore mark, which is a rare phenomenon in Cooperative Banking Sector in all over India and the number of depositors have increased 58222. The Bank has been awarded with First Prize for the best performance among all Cooperative banks in Surat District during the FY.2000 - 01. At present the share capital and reserves raised to nearly 40 crores. The deposit is Rs.160.70 crores Advances 78.21 crores. Total 7 branches and 130 staff members. In spite of run in a cooperative sector in the year 2001, due to Madhavpura episode, the Bank has not only survived but also developed the base without any difficulty due to confidence reposed upon by the public with our Bank. We have introduced the system of quick delivery of vehicle loans, with minimum papers and documents, without any hidden charges. Other advances of our Bank have been spread over on the following categories:

Vehicle Loan Loan against gold ornaments Loan on personal guarantees (Surety Loan) Retail trade business Professional and Self employed Loan against Banks own deposits/NSC Cash credit hypothecation on stocks on trade Technology Upgradation Finance (TUF) loan with subsidy

26

Besides the banking activity, the Bank has entered into the insurance business arrangement with IFFCO-TOKIO. We are also having tie-up arrangements with insurance companies on referral basis, as per RBI guidelines. We have covered with accident insurance cover for the shareholders, depositors and borrowers of the Bank and we have received settlement to the tune of Rs.1 crore from the insurance companies. The data

pertaining to our Bank is being sent to Reserve Bank of India, banking regulator of the country, through e-Mail under offsite surveillance system (OSS) for the past 3 years.

Our Bank has been fully computerized banking system, right from inception and present programme, front end Visual Basic and the back end (database) Oracle 10G Platform. We are having the staff members, most of them belonging to younger generation, with energetic and enthusiastic approach in Customer Service. The staff attendance is being controlled under Biometric device system. CCTV system is being installed to monitor the alertness of the entire banking activity, fitted with cameras at the vital points. Our Bank has introduced Mobile Banking and Any Branch Banking (ABB) in the year 2007. Our future plan is the introduction of on and off site ATMs and Core Banking System. Other vital factors of our Bank are as follows: One of the leading cooperative Banks in South Gujarat Audit grade, continuously at A, from the beginning Any Branch Banking (ABB) CCTV system is being installed to monitor the alertness of the entire banking activity, fitted with cameras at the vital points. Bank has started E-payment facility for the customers of the Bank for the purpose of payment of Income-Tax. Personalized Cheque Book are being issued to all the customers of the Bank. RTGS/NEFT facility is also available. Mobile Banking system to customers for getting various details about their accounts like Current Balance, Cheque Return Status, FD Rates, Loan Rates, Various Loan Schemes etc. by way of SMS.
27

 Display/provision of VAT machine in Banking hall, for customers approach Strong working capital, Deposit base and our investment assets are profit oriented Net NPA continuously at zero percent No default in CRR/SLR Concurrent audit system Implementation of Know Your Customer (KYC) policy Teller system for payment upto Rs.20000 in CA and Rs.10000 in SB Franking of adhesive stamp duty arranged by Revenue Dept. of Gujarat State. Besides banking, the Bank has done a little for some noble social cause, by conducting blood donation camps. The bright wards of the shareholders are being given with educational scholarship for their future study.
2.2 Structure

of Varachha co-operative Bank BOARD OF DIRECTOR CHAIRMAN xs vcfbvbcfv

VICE CHAIRMAN

MANAGING DIRECTOR

GENERAL MANAGER

28

Kamarej Branch Kapodr a branch branch

Katarga m branch

Ring
oad Branch

Head Office

Kadodra branch

Punaga m branch

Sachine branch

2.3Introduction of Board of directors

NO. 1 2 3 4 5 6 7 8 9 10 11 12 13

NAME Shree P.B.Dhankecha Shree Kanjibhai R.Bhalala Shree Prabhudas T.Patel Shree Bhavanbhai B.Navapara Shree Lavajibhai M.Nakarani Shree Vallbhabhai P.Savani Shree Kanjibhai R.Vadariya Shree Babubhai V. Mangukiya Shree G.R.Asodariya Shree Jivarajbhai K.Patel Shree Vimalaben R.Vaghani Shree A.D.Bhalani(Head office) Shree Viththalbhai B.Dhanani

POSITION Est.Chairmen Chairmen Vice Chairmen Managing Director Director Director Director Director Director Director Director General Manager Assi.General Manager

29

2.4 Different branches of the Varachha Co-operative Bank

The development of The Varachha Co- Operative Bank was continuously increasing after two and half year from establishing of Head Office. We can know more above bank from given a table of Branch establishment. The Varachha Cooperative Bank was not needed take loan from government sector and other. For Developing and Vested it's branch so progress table as under.

Head office:
Branch manager: Mr. sureshbhai d. kakadiya Establish date: 16/10/1995 Address: affil tower: L.H.Road,surat. Kamrej branch: Branch manager: Mr. arvindbhai v. patel Establish date: 7/6/1998 Address: Bhavani Complex, Kamrej Char Rasta, Surat. Ring road branch: Branch manager: Mr nitinbhai m.lad Establish date: 4/7/1999
30

Address: first floor vankarsandh buildind opp.juss market.

Kadodra branch: Branch manager: Mr dilipbhai s. bhuva Establish date: 2/7/2000 Address: Thakorji Complex, Kadodara Char Rasta, Surat.

Kapodra branch: Branch manager: Mr bholabhai c. sorthiya Establish date: 28/1/2001 Katargam branch: Varachha road,surat. Branch manager: Mr. mukeshbhai p. malviya Establish date:26/2/2001 Address: Sardar Complex, Nr. Anath Asram, Katargam Main road ,surat. Punagam branch: Branch manager: Mr. pareshbhai d. kelavala Establish date:16/10/2008, . Address: resma resident,V.I.P.Road, Nr. Kenal, surat. Address: "Visvas Bhavan" Nr. Shiddh Kutir temple,kapodra,

Sachine branch:
31

Branch manager:Mr. shileshbhai m. bhut Establish date:8/5/2011 Address:c-g,12-15,c-complex laxmivila township G.I.D.C.

2.5

Services of Varachha co-operations of the bank

1) Net Banking Service Bank Started Net Banking Service for their respective customer since 02-Oct-2009. With help of Net Banking customer can view his/her account related information like statement, inward clearing, outward clearing etc. from anywhere.

2) Any Branch Banking (ABB) Customer can transact his/her account from any branches of the bank like cash receipt, payment, transfer, balance inquiry,statement/passbook printing, deposit outward clearing etc.

3) CCTV Monitoring Banks all branches has CCTV Camera and all this connected and monitored at Head Office. With the help of CCTV Bank is able to search any fraud with customer or employee of the bank.

4) E-Payment Facility Bank has started E-payment facility for the customers of the Bank for the purpose of payment of Income-Tax.
32

5) Personalized Cheque Book Personalized Cheque Book is being issued to all the customers of the Bank.

6) RTGS/NEFT Facility Real Time Gross Settlement/ National Electronic Fund Transfer Facility available to the customer of the bank. By this facility customer can transfer his balance throughout India of any Banks, which is member of RTGS/NEFT. 7) Mobile Banking System Now you can get the information such as Balances, Transaction Details, Cheque Status, Deposit rates and much more sitting at your home or office.Bank has a centralized mobile banking facility. Through this facility customer can know his/ her balance via SMS for getting various details about their accounts like Current Balance, Cheque Return Status, FD Rates, Loan Rates etc. Bank also send regularly SMS to the registered customer like cheque Inward/ Outward return details, FD rates, any event etc. Facility (See Example given below) Message Type Group Balance Inquiry Inward Return Outward Return Group Balance Back dated Mini Statement Deposit Rate Advance Rate 1 2 3 4 5 6 7
33

Cheque Status Help

8 9

For Example if you want to know your Group Account Balance you should go message menu in to send message option in your mobile and simply type 1 and send it to Mobile No. 98258 00042 and within short period you can get your balance by SMS from the V.C.Bank. Same way you can follow 2, 3, 4 etc. for various inquiry by SMS.

8) VAT Machine VAT machine is available to the all branches of the bank in the bankcustomer passage. With the help of VAT machine customer can view various details of his/her A/c. like Balance, Statement etc. For avail this facility customer should have registered his account with bank and get 4 digit password from the banks Officials.

9) Locker Facility Locker Facility is also available at Banks Kamrej, Kapodra and Katargam Branches with nominal rental. There is various types of locker followed by its size.

10)franking machine franking Machine under license from Government for stamping of NonJudicial Stamp arranged by Revenue Dept. of Gujarat State.

34

2.6 DAY TO DAY OPERATION

New account department: New Account is opened as well as old accounts are closed in this department. Accounts are of three types: i. ii. iii. Current Account. Saving Account. Cash Credit Overdraft Account. Daily nearly on an average about 10 to 12 current accounts and 15 to 20 saving account are opened and 1 or 2 are closed every day the procedure for opening new accounts in the bank starts with fill up the form given by bank. The bank has requirements for opening a current account is two photographs of the account holder and if the account is opened for company or firm then the photograph of the directors or proprietors or administrator, the sign and account number of the person who wants to open a new account in the bank and license of the firm. To open saving account only one photograph of account holder, signature of account holder in the same bank as well as papers or documents which give true and pair residential address such as driving license, rationing card, light or phone bill, school living certificate etc. The minimum balance for current account is Rs.5000 and the minimum balance for saving account is Rs.1100. Any account holder, current or saving, cant close his account before completion of six months in the bank. Closing of new account is somewhat difficult task as each and every aspect of the account is to be noted. The charges Rs.210 are cut and remaining amount is given back to customer through the issue of cheque book of the same amount. The cheque book of the close account is taken back by bank is stored with the account close form. The bank provides service of cash credit and overdraft against for the current account holders. Issue of cheque book and pass book:

35

This is important department of the bank. In this department new passbook and cheque book are issued. The new account department gives details of new customers and according to that new cheque book and passbook are issued. This department consists of only one employee who gives cheque book and passbook to the customers. Customers who are in need of a new cheque book have to apply a day before with a counter given in the old cheque book. For each account holder it is compulsory to allow at least five cheques to be cleared or presented to bank for issuing a new cheque book. Daily 70 to 75 new cheque books are issued to the customers. As the bank is fully computerized if changes are made by customer in cheque book, the computer will reject the cheque number because the while issuing cheque book the number of cheque are recorded in the computer. Draft Department: Draft is another department of the bank. As this bank is in no co-operative sector it has limited branches in surat. It does not have any branch in any other part of the country. So in order to provide draft service of different cities to its customers it has associated with certain banks. If a customer wants a draft for Bombay, a bank must have its branch which can discount the draft and if the bank do not have a branch than it has to joint with other bank.

Clearing Department: The most important department of the bank is clearing department. This department has maximum number of employees. Nearly about seven or eight person are continuously working in this department. Clearing per day is nearly about three or four crores. Clearing house of all banks in surat is situated at Sate Bank of India, Nanpura, Surat. Clearing which is collected from the clearing house is known as outward clearing. Token Department:-

36

The next department of the bank is the Token department. It is small but department with only one employee. The working hours of this department is from 10:00 am to 3:00 pm. Token is issued after various strict verification of cheque such as signature amount in figure as well as in words etc. This department is small but full of responsibility. Bank has a special service for its customers that is up to Rs.10,000 for saving account holders and no limit for current account holders can be withdrawn directly from the cash counts without the procedure of Toker. Transfer Department: The next department is transfer. There is only one employee in this department. In this department the cheque of the same bank is transferred from one account to other account of customers. The entry of other department such as IBC (Inter Bill Collection) etc. is done from this department.

2.7 VARIOUS TYPES OF DEPOSIT ACCOUNTS IN VARACHHA

BANK:Bank Account: The bank accepted deposits from the public and offers facilitates to the public according to their requirements and economic status. Though bank accepts deposits as a fundraising device. Its primary aim is to serve the society as financial institution and lend its might to strengthen the capital market. Keeping all these in video a bank usually offers three types of accounts in which it accepts deposits. 1) Fixed Time Deposit Account 2) Saving Deposit Account 3) Current Account

37

Attractive Deposit Rate

With Effective From : 01.12.2010

Duration

Upto & including Rs.15 Lakhs

For Deposits above Rs.15 Lakhs but less than Rs.1.Crore 5.50 5.50 6.00 7.00 7.50 8.00 8.50

30 Days Auto renewal 30 Days To 90 Days 91 Days To 180 Days 181 Days To 1 Year 1 Year To 2 Year Below 2 Year To 3 Year Below 3 Year To to above

5.50 5.50 6.00 7.00 7.50 8.00 8.50

MANAGEMENT TOWARDS PROVISION FOR PROFIT DISTRIBUTION

Net Profit

Deducted Provision Reserve Fund Share Dividend Dividend Equalization Fund Education Fund 25 % 12 % 15 % 38

I.F.R. Reserve Total

Rest Profit Deduction as per sub-rule: Arban Bank Credit equalization Accident annual fund Other activity fund Donation fund Rebate Interest Fund Jubilee Festival Fund Staff Benefit Fund Member welfare Fund Co-operative Propaganda Fund 15% 5% 20 % 10 % 20 % 10 % 10 % 20 % 05 %

2.8 BANKERS:
The Varachha Co-operative bank has some banker as follow: Bank Name The Gujarat State Co-op. Bank Ltd. HO. The Surat District Co-op. Bank HO. State Bank of India State Bank of Travankor State Bank of Sourastra State Bank of Mysore Indus Ind Bank HDFC Bank HO. ICICI Bank City Ahmedabad Surat Surat Surat Surat Surat Surat Surat Surat.

2.9 OBJECTIVES OF BANK

39

 To give possible help and necessary guidance to members of the bank in the conduct of business. To do every kind of trust and agency business and particularly do the work investment of funds, sale of properties and of recovery or acceptance of money. To accept money document, security calculate article and goods every description for keeping them in safe custody or for sending them from one place to other. To act as a balancing center for surplus funds of co-operative societies.To organize and develop co-operative societies within the district. To redeem old debts. To lend money on security to its members

2.10 BANK PROVIDES VARIOUS TYPES OF LOANS:

1) Mortgage Loan 2) Security Loan on Banks Share Certificate 3) Vehicle Loan 4) Cash Credit Loan 5) Machinery Loan 6) Term Loan 7) Self-employee Loan 8) Loan on National Saving Certificate 9) TUF Loan (Textile Upgradation Fund ) In which gold loan is short term secure loan, vehicle loan is medium term Secure loan while machinery loan, housing loan, TUF loan, is long term secure loan and surety loan is long term unsecure loan.

40

Loan Type

Limitation

Upto Rs. More 1 Lakhs Rs.1 Upto Lakhs

than Above Rs.2 Above Rs. 5 Lakhs Lakhs Rs.2 Upto Lakhs Rs.5 Lakhs

Housing Loan

Up to 5 years

12.00

12.00

12.00

12.00

Housing Loan

More than 5 12.00 Yrs & up to 10 Yrs

12.00

12.00

12.00

Consumer Durable Loan Surety Loan for Members Two Wheeler For New Cars Cash Credit Machinery Term Loan Loan Against

14.00

NA

NA

NA

14.00

14.00

NA

NA

13.00 12.00 13.00 13.00

NA 12.00 13.00 13.00

NA 12.00 13.00 13.00

NA 12.00 12.00 13.00

11.00

NA

NA

NA

Gold Ornaments Self Loan Machinery TUF Loan 13.00 13.00 13.00 13.00 Employed 11.00 11.00 11.00 11.00

GOLD LOAN: The bank gives gold loan to customers or people on pledge of ornament of gold. First guessing the value of ornament by the goldsmith of bank. bank give gold loan for one
41

year and the amount of interest paid in within month and bank give loan maximum Rs.100000/-there is no interest rebate facility not available Document which is require in gold loan: - photo - Driving licenses/election card/passport (any one) - Electricity bill/gas bill/telephone bill - municipal tax bill

If person want to take loan more than Rs.50000/-then They purchase share of the bank at Rs.1050/- and bank provide many facilities to shareholders like give gift to those shareholders which children study, and also provide dividend in every month, and give insurance premium to the shareholders.

VEHICLE LOAN: Bank provide vehicle loan to the customer. If customer want to purchase two wheeler or car and they have no capacity to purchase car at time then they take loan from the bank. it may be two wheeler or car. bank give Rs.50000/-limit for two wheeler and minimum Rs.100000/- for car.

Document which is require in vehicle loan (four wheeler) - recommendation of board of directors - photo - quotation of vehicle - driving license
42

- pan card - electricity bill/municipal tax bill - statement of other bank in which our account - last three year income tax return with balance sheet - Minimum two sureties are compulsory with their background

Document which is require in vehicle loan (two wheeler) -photo - electricity bill/pan card/pass port - driving license - municipal tax bill - quotation of vehicle - Reference of person which account available in bank - Minimum two sureties are compulsory with their background

SURETY LOAN: Surety loan is given to those person who are shareholder of the bank and there account is available from last six month. And the rate of interest is 14.00% and it is given for 5 years if customer want to take loan for 1 year then bank also provide.

Document which is require in surety loan

43

- reference of director of varachha bank - photo(2) - electricity bill/pan card/pass port - driving license - municipal tax bill - share certificate - last three year income tax return with balance sheet - Minimum two sureties are compulsory with their background

HOUSING LOAN : This loan provide for construction, additions, alteration, repair of the house etc. in the form of long-term period. Bank charge @ 12%.Bank give 1.00% rebate to those customers who pay timely interest and Installment of the loan. Document which is require in housing loan; - recommendation of board of directors - photo (2) - driving license - pan card - electricity bill/municipal tax bill - statement of other bank in which our account - Minimum two sureties are compulsory with their background (out of their family member) -last three year income tax return with balance sheet etc
44

CASH CREDIT LOAN:Bank provide cash credit facility to their customer.bank charge 13.00% interest up to Rs.500000/-and if customer want to take more than Rs.500000/- then bank charge 12.00% interest From borrower. The customer as per his fungible or security can take a loan up to that specified limit. The customer can withdraw money from his account, which is called cash credit account.

MACHINERY LOAN(TUF): TUF means Technology Upgradation Fund Under this project government has distributed subsidy of Rs.250 million. This type of the loan is given for purchase new or secondary textile machinery, bank grant loan up to 70% face value of bill of textile machinery. In this scheme borrows get subsidy decided by the government. On such loan bank may charge at the rate of 13% interests. Loan limit Up to 25.00 lac 25.00 lac to 50.00 lac Above 50.00 lac Rate of interest 13 13 13 rebate 1 1.5 2

This limit for TUF loan as well as machinery loan.

2.11SOCIAL CONTRIBUTION

Arrange blood donation camps at regular interval time to time On 2nd October 2008 Bank has arranged Mega Blood Donation Camp and collected 2222 bottles of blood. Bank gives Rs.50000/- accident insurance cover to all the blood donors.Again on 2nd October 2009 Bank has arranged Mega Blood Donation Camp and collected 3456 bottles of blood. Bank gives Rs.50000/- accident insurance cover to all the blooddonors.
45

Accident Insurance Bank has taken Group Insurance Policy every year for its valued Share Holders and Customers for Rs.50000/- to Rs.300000/- [Depending upon various accounts]. Under this service, insurance company paid approximately Rs.1.25 Crore to its Share Holders and Customers through Active Role in Samuh Lagna [Mass Marriage System] Bank employees had actively participated and helpful in Mass Marriage System organized by Saurashtra Patel Seva Samaj from time to time in various ways. bank.

2.12 AWARDs

Surat Jilla Sahkari Sangh:Award received by Shri P. B.dhakecha

Photograph : Shield

Rashtriya Vikas Ratan Gold Award:-Rashtriya

Vikas Ratan Gold Award from International Integration & Growth. 46

Rashtriya

Vikas

Ratan

Gold

Award:-

Photograph : Rashtriya Vikas Ratan Gold Award Received.

The South Guj. Co-op. Bank's Association Ltd., Surat:- Award received from The SouthGuj.
Co-op.bank's association Ltd.

Best Co-op. Bank in Surat Dist. for the year 2007-2008:- Best Co-op. Bank in Surat Dist. for the year
2007-2008.

Best Co-op. Bank in Surat Dist. for the year 2007-2008:received. 47 Photograph: Shield Award 2007-08

Highest Blood Donation Collection

for Highest.

Award-

2008:- Award received from Lok Samrpan Blood Bank, Surat

48

2.13FINANCIAL STRENGTH S

SRNO 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

YEAR 31MAR-96 31MAR-97 31MAR-98 31MAR-99 31MAR-00 31MAR-01 31MAR-02 31MAR-03 31MAR-04 31MAR-05 31MAR-06 31MAR-07 31MAR-08 31MAR-09 31MAR-10

SHARE HOLDERS 4484 5275 5566 5955 6429 6887 7342 8148 8348 9170 9569 10717 11569 12669 13566

CAPITAL 0.57 0.77 0.95 1.31 1.82 2.51 3.11 3.44 3.64 3.95 4.04 4.31 4.63 5.24 5.91

DEPOSITS 2.70 10.72 17.02 37.54 62.45 101.03 123.04 129.79 139.19 136.27 158.24 162.97 168.27 171.57 224.16

ADVANCES Total Loan 2.07 6.69 10.39 22.53 39.94 55.21 67.32 67.25 61.64 64.55 59.67 73.26 80.23 92.03 94.89

NET PROFIT 0.05 0.51 1.11 1.34 2.09 3.67 4.70 4.73 5.67 3.24 2.38 1.51 2.81 3.02 3.15

WORKING CAPITAL 3.57 13.02 23.33 44.60 72.43 115.83 146.41 159.35 175.50 175.07 197.49 208.38 221.15 226.96 279.11

No. of A/Cs. 3318 8638 15912 26398 44229 63320 71836 80490 90940 95512 98501 102317 108906 105674 123260

AUDIT CLASS A A A A A A A A A A A A A A A

DIV.RATE 15.00% 15.00% 15.00% 15.00% 15.00% 15.00% 15.00% 15.00% 12.00% 12.00% 12.00% 12.00% 12.00% 12.00%

51

3.1 Research problem:

51

3.2Objective of financial department: To analyses the present financial system of The Varachha Co-Operative Bank Ltd. To study financial strength and weakness of The Varachha Co-Operative Bank Ltd. To get basis for financial planning, analysis and decision making through financial information. 3.3 Period of coverage: I have chooses the period of coverage for the financial years i.e. 2006-2007 to 2010-2011

3.4 Source of Data: Primary data: primary data will collect through discussion with executive & staff of the bank. Secondary data: annual report, magazine, and data from the bank borrow itself.

3.5 Scope of the Study:

51

3.6 Research Design There are three main types of research design 1. Exploratory design In exploratory design the emphasis is on discovery of new ideas. The main objective of this design is to generate new idea. The two ways of doing exploratory design is the focus group interview & the case studies. 2. Descriptive studies When a researcher is interested in knowing the characteristics of certain group such as age, gender, education level, occupation, income, descriptive may be necessary. Descriptive studies are factual and are very simple. 3. Causal design As the name implies a causal design investigates the cause and effect relationship between two or more variables. The two types of the causal designs are: a) Natural experiments b) Controlled experiments The study report Analysis of a financial Statement is consider the descriptive research design.

3.7 Important of study:

51

3.8 Limitation of study:

51

3.9 Review of literature

51

51

51

4.1Introduction of Financial Statement analysis:

51

4.2 Objectives of Financial Statement:

51

4.3 Limitation of Financial Statement :

51

4.4 Financial Statement of VarachchavBank:

1] Profit & Loss Account:

51

51

Profit & Loss Account

Particulars
Expences Interest on deposit and Borrowing Salaries allowance & Provident Fund Direct fees Rent ,Tax ,Insurance, Electricity Law Fees Postage ,Telegram ,Telephone Expences Audit Fee Depreciation Fund Stationary ,Printing other Expense Income Tax Profit Total Income Interest & Discount Commission Exchange Donation Other Income Total 19,97,72,678 34,28,143.35 ----------------93,91,392 21,66,49,615.25 25,68,04,312.37 42,51,304.65 -----------------1,27,73,425.52 27,38,29,042.46 9,44,99,998.76 2,57,25,152 ----------------35,29,646.49 1,83,161 11,85,577.24 4,80,090 91,37,412.80 36,91,981.73 2,80,33,592 1,87,02,860 3,14,80,142.42 21,66,49,615.25 12,06,75,486.13 2,73,86,632 ----------------49,93,714.50 2,43,011.84 13,75,327.87 3,95,517 1,22,72,036 21,81,375.83 4,32,28,357.91 2,05,00,000 4,05,77,583.46 27,38,29,042.46

2009-2010

2010-2011

51

The Varachha co-operative Bank Ltd. of balance sheet for year 2009-2010 & 2010-2011.

Balance Sheet

51

INRTODUCTION OF FINANCIAL DEPARTMENT:Meaning:According to Himpton John A financial statement is an organized collection of data according to logical and consistent accounting procedures. Its purpose is to convey an understanding of some financial aspects of a business firm. It may show a position at a moment of time as in the case of a balance sheet, or may reveal a series of activities over a given period of time as in the case on income statement.

TOOLS OF FINANCIAL STATEMENTS

51

As Kennedy and McMuller have,said,The analysis and interpretation of financial statements are an attempt to determine the significance and meaning of the financial statement data so that a forecast may be made of the prospects for further earnings, ability to pay interest and debt maturities both current and long term and probability of a sound dividend policy . The analysis consists of the study of inter relationship between various items comprised in financial statements to determine whether the earnings and the financial position of the company are satisfactory. A number of devices are used in the analysis of financial statements, some of which are as follows: (i) Comparative Statements (ii) Common size statements (iii) Trend Percentages

(iv)Cash flow Analysis (v) Fund flow Analysis (vi)Ratio Analysis

Comparative financial statement:

When financial statements of a few years are presented in columnar form, it indicates the trend of changes taking place in business. The method of presenting both financial statements in columnar form and of judging the trend of profitability and financial condition of business is known as Comparative Statement Analysis. Generally form, though theoretically any other statement can be do presented If useful data is to be gathered from the analysis of financial statement, one must go beyond a single years balance sheet and profit and loss account, as they suffer from following limitations. (1) The balance sheet or profit and loss account of a single year does not show the nature and trend of changes taking place in business. (2) It does not give any idea about the position of incomes and expenses of current year in comparison to those of previous year.

51

(3) Balance sheet of a single period fails to disclose whether the financial position of a company is improving or deteriorating. (4) If the reader of financial statements is interested in knowing financial and operating trends over a period of years, it is necessary that the figures for different years, must be Presented together. The comparative statements may also be presented in a manner that will show the percentages of various figures with some significant item e.g. the percentage of gross profit to sales of the previous year may be presented along with such percentage for the current year. (a)Comparative Profit and Loss Accounts: The various items of profit and loss accounts may be presented side by side which will show the trend of increasing or decreasing expenses or incomes. Such changes may be shown in absolute figures of in percentage forms. While examining the comparative examined. (b) Comparative balance sheet: the change taking place in assets and liabilities over a period of years are revealed by comparative balance sheets. Such comparative balance sheets may show absolute figures or even percentage of various figures may be shown. Such percentages are generally based on value of total assets.

Fund flow statement:

In a statement which shown the inflow and outflow of funds during the year, the meaning of the word fund is working capital. The objective of preparing such a statement is to show to the management and other interested parties, what funds have come into the business and how they have been applied. A balance sheet is a static statement showing the conditions of assets and liabilities on a particular date only. While the flow statement is dynamic statement showing changes that have taken place during the year. E.g. if funds have been raised during the year by issuing further shares, the amount is shown as source of funds in the statement. If any fixed asset is bought during the year, it is shown as use or application of funds. The fund statement is therefore necessary to supplement the two basis financial statement This statement consist of two parts i) ii) Sources of Funds Application of Funds

51

Uses of fund flow statement 1. The fund flow statement acts as supplementary statement to the traditional financial statement viz., balance sheet and profit and loss account 2. The funds flow statement furnishes the information about the sources from which the company has mobilized the resources or fund during the year; 3. It also presents the detail which spell out clearly the manner in which the mobilized fund has been utilized or employed during the year; 4. It also sheds light on the efficiency of management in the working capital management.

Cash flow statement:

The fund flow statement indicates changes in working capital which have taken place during the year. But the management is more interested in the changes in cash inflow and outflow in the short run. It is a historical statement which indicates the cash inflows and outflows during the last year and would guide the management in framing policy regarding cash management. The cash budget shows the projected inflows and outflows of cash for the future budget period, which the cash flow statement is prepared on the basis of the basis of historical financial statements. Use of cash flow statement 1. Cash flow statement facilitates to prepare sound financial policies. It also helps to evaluate the current cash position. 2. A projected cash flow statement can be prepared in order to know the future cash position of a concern so as to enable a firm to plan and coordinate its financial operations properly. 3. it helps the management in taking short-term financial decisions. 4. The statement explains the causes for poor cash position in spite of substantial profits in firms by throwing light on various applications of cash made by the firm.

Common size Statements:Financial statements when read with absolute figures are not easily understandable. They are even misleading the figures shown in profit & loss account and balance sheet are converted to percentage so as to establish each element to the total figure of the statement and there statement are called
51

commonsize statements. When balance sheet and profit & loss account of the same concern for several years or when balance sheet and profit & loss account of two or more than two concerns for the same year are converted in to percentage form and presented as such, they are known as comparative commonsize statement. Interpretation:Profit & loss account figure is assumed to be equal to 100 and all other figure or expressed as percentage to sales. Similarly, in balance sheet the total of assets and liability is taken as 100 and all the figures are expressed as percentage of the total. The statement prepared is called Commonsize Statement.

Trend Analysis:The comparative and Commonsize statements suffer from a major limitation that is absence of basic standard to indicate whether the proportion of an item is normal or abnormal. Trend analysis overcomes this limitation. This technique is also an important and useful of financial statement analysis. The calculation of trend ratio involves the ascertainment of arithmetical relationship which each item of several years to the same of base year. This trend ratio is calculated only for some important item which can be logically converted with other.

Common size statement analysis of Profit and loss account for year 2010 & 2011 in The Varachha co-operative Bank Ltd.

Profit and loss account

Particular
Expense Interest on deposit and borrowing

2009-2010
43.62

2010-2011
44.07

51

Salaries allowance & Provident Fund Director Fees Rent, Tax, Insurance, Electricity Law Fees Postage, Telegram, Telephone Exp.s Audit Fee Depreciation Fund Stationary, Printing Other Expense Income Tax Profit Total Income Interest & Discount Commission Exchange Donation Non Banking Income Other Income Total

11.87 ----1.62 0.085 0.55 0.22 4.22 1.70 12.94 8.63 14.53 100.00

10.00 1.82 0.09 0.05 0.14 4.48 0.80 15.80 7.50 14.82 100.00

92.21 1.58 --------6.21 100.00

93.78 1.55 ----------4.67 100.00

Common size statement analysis of balance sheet for year 2010 & 2011 in The Varachha cooperative Bank Ltd.

Balance Sheet
Particular
Liability Share capital Reserve fund Subsidiary Fund Deposit: - Fixed Deposit - Saving Deposit - Current Deposit Call and short term loans Borrowing Bills Payable Interest Overdue Interest payable Other liability Profit and Loss A/c Total

2009-2010
2.05 7.81 ----37.55 36.10 26.36 --------0.15 2.01 4.73 2.74 1.09 100.00

2010-2011
2.12 7.57 -----27.27 27.14 20.82 ----------0.11 0.97 4.35 2.85 1.18 100.00
51

Assets Cash Bank Call & Short time Investment Investment Subsidiary Fund Invest Loans and Advances Interest receivable Bills Receivable Branch adjustment Building premises Furniture & Fixture Other Asset Total

3.00 16.94 ----40.91 ----32.91 3.20 0.15 ----0.85 0.40 1.64 100.00

2.56 10.27 -----48.55 -----33.57 2.15 0.11 -----1.08 0.52 1.07 100.00

51

Comparative statement analysis of profit and loss account for year 2010 & 2011 in The Varachha co-operative Bank Ltd.

Profit and loss account

Particular
Expense Interest on deposit and borrowing Salaries allowance & Provident Fund Director Fees Rent, Tax, Insurance, Electricity Law Fees Postage, Telegram, Telephone Exp. Audit Fee Depreciation Fund Stationary, Printing Other Expense Income Tax Profit Total Income Interest & Discount Commission Exchange Donation Non Banking Income Other Income Total

2009-2010

2010-2011

Absolute
2010-2011

%
2010-2011 27.70 6.46 41.48 32.68 16.01 (17.62) 34.30 (40.92) 54.20 9.61 28.90 126.39

9,44,99,998 2,57,25,152 35,29,643, 1,83,161 11,85,577 4,80,090 91,37,412 36,91,981 2,80,33,592 1,87,02,592 3,14,80,142 21,66,49,615

12,06,75,486 2,73,86,632 49,93,714 2,43,012 13,75,328 3,95,517 1,22,72,036 21,81,376

2,61,75,488 16,61,480 14,64,071 59,851 1,89,751 (84,573) 31,34,624 (15,10,605)

4,32,28,358 1,51,94,766 2,05,00,000 17,97,408 4,05,77,583 90,97,441 27,38,29,042 5,71,79,427

19,97,72,678 34,28,143 --------1,34,48,792 21,66,49,615

25,68,04,312 42,51,305

5,70,31,634 8,23,162 --------(6,75,366) 5,71,79,427

28.55 24.01

1,27,73,426 27,38,29,042

(5.02) 126.39

51

Comparative statement analysis of balance sheet for year 2010 & 2011 in The Varachha cooperative Bank Ltd.

Balance Sheet
Particular
Liability Share capital Reserve fund Subsidiary Fund Deposit: - Fixed Deposit - Saving Deposit - Current Deposit Call & Short Time Deposit Borrowing Bills Payable Interest Overdue Interest payable Other liability Profit and Loss A/c Total Assets Cash Bank Call & Short time Investment Investment Subsidiary Fund Invest Loans and Advances - Short term - Moderate term - Long term Interest receivable Bills Receivable Branch adjustment Building premises Furniture & Fixture Other Asset Total

2009-2010
5,91,32,500 22,53,32,015 -----

2010-2011

Absolute
2010

%
2010

7,28,65,400 1,37,32,900 23.22 26,07,59,206 3,54,27,191 15.72 ----14,80,61,114 17,42,83,402 16,18,48,523 --------(5,96,776) (2,44,90,637) 1,37,24,727 1,93,45,372 90,97,441 55,88,24,550 18.73 22.92 29.16 (13.49) (42.19) 10.09 24.53 28.90 119.40

79,05,92,313 93,86,53,427 76,00,70,549 93,43,53,951 55,49,46,207 71,67,94,730 --------44,24,274 38,27,498 5,80,51,785 3,35,61,148 13,60,00,222 14,97,24,949 7,88,68,009 9,82,13,381 3,14,80,142 4,05,77,583 2,88,35,47,600 3,44,23,72,150 8,65,50,365 48,83,88,452 ----117,95,03,022 ----31,56,02,553 30,46,65,311 32,85,98,967 9,22,37,735 44,24,274 ----2,45,05,702 1,16,70,414 4,74,00,800 2,88,35,47,600

8,82,44,532 16,94,167 1.96 35,34,85,910 (13,49,02,542) (0.27) ----1,67,11,43,767 49,16,40,745 41.70 ----31,43,99,482 (12,03,071) (O.38) 38,75,76,985 8,29,11,674 27.21 45,68,21,246 12,82,22,279 39.02 7,41,53,274 (1,80,84,461) (19.61) 38,27,498 (5,96,776) (13.49) ----3,71,90,032 1,26,84,330 51.76 1,78,92,951 62,22,537 53.31 3,68,36,472 (1,05,64,328) (22.29) 3,44,23,72,150 55,88,24,550 119.40

51

51

RATIO ANALYSIS:
A Ratio is only a comparison of the numerator with the denominator. The term ratio refers to the numerical or quantitative relationship between two figures, and obtained by dividing the former by the latter. Ratios are designed to show how one number is related to another. It is worked out by dividing one number by another. Ratio analysis is an important and age old technique of financial analysis. Ratios are relative form of financial data and very useful technique to cheque upon the efficiency of firm. Some ratios indicate trend or progress or downfall of the firm. MEANING OF RATIO:51

A ratio is only a comparison of the numerator with the denominator. The tern ratio reefers to the numerical or quantitative relationship between two figures and obtained by dividing the former by the latter. Ratio analysis is an important and age old technique of financial analysis. The data given in financial statements ratio are relative form of financial data and very useful techniques to cheek upon the efficiency of a firm. Some ratio indicates the trend or progress or downfall of the firm.

Classification of Ratios:Ratio can be classified into different categories depending upon the basic of classification as under: Profit & Loss Account Ratio:In this ratio accumulated on the basis of all items of the profit & loss account only Ex. Net profit ratio, operating profit ratio, expenses ratio. Balance sheet Ratio:In this ratios calculated on the basis of the figures of balance sheet only.Ex. Current ratio, liquid ratio, debt-equity ratio, proprietary ratio. Composite Ratio or inter statement ratio: In this ratio is the based on figures of profit & loss account as well as balance sheet.Ex. Fixed assets turnover ratio.

IMPORTANCE OF RATIO ANALYSIS:

Aid to measure general Efficiency: ratios enable the mass of accounting data to be summarized and simplified. They act as an index of the efficiency of the enterprise. As such they serve as an instrument of management control. Aid to measure financial solvency: ratios are useful tools in the hands of management and other concerned to evaluate the firms performance over a period of time by comparing the present ratio with the past ones. They point out firms liquidity position to meet its short term obligations and long term solvency.

51

Facilitate decision-making: it throws light on the degree of efficiency of the management and utilization of the assets and that is why it is called surveyor of efficiency. They help management in decision-making. Aid in intra firm comparison: intra firm comparisons are facilitated. It is an instrument for diagnosis of financial health of an enterprise. It facilitates the management to know whether the firms financial position is improving or deteriorating by setting a trend with the help of ratios. Evaluation of efficiency: ratio analysis is an effective instrument which, when properly used, is useful to assess important characteristics of business liquidity, solvency, profitability etc. a study of these aspects may enable conclusions to be drawn relating to capabilities of business. effective tool: ratio analysis helps in making effective control of the business measuring performance, control of cost etc, effective control is the keynote of better management. Ratio ensures secrecy.

LIMITATION OF RATIO ANALYSIS:

Ratio analysis a widely used tool of financial analysis, it is because ratios are simple and easy to understand. But they must be used very carefully. They suffer from various limitations: Differences in Definitions: Comparisons are made difficult due to differences in definitions of various financial terms. Lack of standard formula for working out ratios makes it difficult to compare them. They are worked out on the basis of different items in different industries. Limitation of accounting records: ratio analysis is based on financial statements which are themselves subject to limitations. Thus, ratios calculated on the figures given in the financial; statements, also suffers from similar limitations. Qualitative factors are ignored: ratios are tools of quantitative analysis only and normally qualitative factors which may generally influence the conclusions derived are ignored while computing ratios.

51

Limited use of single ratio: a single ratio would not be able to convey anything. Ratios can be useful only when they are computed in a sufficient large number. If too many ratios are calculated, they are likely to confuse instead of revealing meaningful conclusions. Background is overlooked: when inter-firm comparison is made, they differ substantially in age, size, nature of product etc. when an inter-firm comparison is made, these factors are not considered. Therefore, ratio analysis cannot give satisfactory results. Arithmetical Window dressing: window-dressing means manipulation of account in a way so as to conceal vital facts and present the statements in a way to show better position than what it actually is. By doing so, it is possible to cover up bad financial position. Therefore, ratios based on such figures are not reliable. Lack of proper standards: it is very difficult to ascertain the standard ratio in order to make proper comparison. Because, it differs from firm to firm, industry to industry. Apart from this, it may have happened that in one firm, a current of 2:1 is found to be quite satisfactory, whereas in another firm 2.5:1 may be unsatisfactory. Again, a high current ratio may not necessarily mean liquid position when current assets large inventory or inventory consisting of obsolete items.

CURRENT RATIO:

Meaning: Current ratio is the most common ratio for measuring liquidity. Being related to working capital analysis it is also called the working capital ratio. Current ratio expresses relationship between current assets and current liabilities Purpose: The current ratio of a firm measures in short term solvency. i.e. its ability to meet short term obligation. As a measure of short term current financial liquidity. It is calculated by dividing current asset by current liabilities Current Ratio = Current assets Current Liabilities
51

Particulars
Current Asset Cash Bank Advance Other Asset Bills Receivable Interest Total Current Liability Bills Payable Interest Payable Saving Deposit Current Deposit Interest Overdue Other Liability Total

2009-10 8,65,50,366 48,83,88,452 ----4,74,00,800 44,24,274 9,22,37,736

2010-2011 8,82,44,531 35,34,85,910 3,68,36,472 38,27,498 1,67,11,43,767

Current Ratio := 71,90,01,628

71,90,01,628
44,24,274 13,60,00,222 76,00,70,549 55,49,46,207 5,80,51,785 7,88,68,009

2,14,97,10,680
38,27,498 14,97,24,949 93,43,53,950 71,67,94,730 335,61,148 9,82,13,380

1,59,23,61,046

1,93,64,75,655

2,14,97,10,680
1,59,23,61,046 = 0.45 1,93,64,75,655 =1.11

1 .2 1 0 .8 0 .6 0 .4 0 .2 0 2009 21 00 2100 21 01 E st a West North

Interpretation:
51

here, it shows that the bank has been decrease in 2010 current ratio is 0.45:1 to in 2011 current ratio is 1.11 which is not satisfactory so, can be Improved by better turnover and profit.

CASH POSITION RATIO: Meaning: It is a variation of quick ratio. When liquidity is highly restricted in terms of cash and cash equivalent, this ratio should be relationship between cash and near cash items on the one hand. Purpose: The purpose of computing the ratio to measure e more rigorous of a firms liquidity position. Particulars Cash Marketable Securities Total Current Liabilities 2009-2010 8,65,50,365 117,95,03,022 1,26,60,53,387 1,59,23,61,046 2010-2011 8,82,44,532 1,67,11,43,767 1759388300

1,93,64,75,655

Cash Position Ratio =

Cash + Marketable Securities Current Liabilities

1,26,60,53,388 1,59,23,61,046

1,75,93,88,300

1,93,64,75,655
= 0.91

0.80

51

0 2 .9 0 .9 0 8 .8 0 6 .8 0 4 .8 0 2 .8 0 .8 0 8 .7 0 6 .7 0 4 .7 2009 21 00 21 0 021 01

East west No rth

PROPRIETARY RATIO:

Meaning: This relates the shareholders fund to total assets. It is a variant of the debt equity ratio. This ratio shows the long term or future solvency of the business. It is calculated by dividing shareholders funds by the total asset. Purpose: The purpose of proprietary ratio is indicate available to creditors and general financial strength of the firm. Proprietary Ratio= Shareholders Fund Total Asset Particulars Shareholders Fund Capital Reserve 5 Subsidiary Fund P&L Account Total Total Asset ----3,14,80,142 53,20,74,401 2,88,35,47,600 -------4,05,77,583 2009-2010 5,91,3,2500 9,65,59,37 2010-2011 7,28,65,400 10,49,50,670

51

Proprietary Ratio

32,64,98,777 2,26,90,56,555

53,20,74,401 2,88,35,47,600 0.18:1

0.14:1

Interpretation: The proprietary ratio is increase by 0.13:1 to 0.17:1 in the 2010 which is shown by the general strength of the bank or company. It is very important to creditors as it helps them to find out the proportion of shareholders funds in the total assets used in the business. In this ratio is always down from the good position and low ratio indicate greater risk to creditors. A ratio below 50% may be alarming for the creditors and heavily lose for company and its account is liquidation.

DEBT EQUITY RATIO:

Meaning: The financing of total asset of a business concern is done by owners equity as well as outside debts. This ratio indicates the relative proportions of debt and equity in financing the asset of a firm.
51

It is also known as external internal equity ratio. Debt equity ratio is determined to ascertain soundness of the long term financial policies of a company.

Debt Equity Ratio

Long Term Debt Shareholders Fund

Particulars Long Term Debt Fixed Deposit Other Borrowing Total Shareholders Fund

2009-2010 79,05,92,313 ----79,05,92,313 46,91,14,117

2010-2011

Debt Equity Ratio: =

57, 90, 47,751 43,10,13,335 = 1.34

79,05,92,313 46,91,14,117 = 1.69

51

Interpretation: Debt equity ratio has been increase in year 2009 to 2010 that is 11.05 and 13.37 respectively. It indicates the margin of safety to long term creditors. A high ratio shows the claim of creditors is greater than those of owners.

SOLVENCY RATIO:
Meaning: It is also known as debt ratio. It is difference of 100 and proprietary ratio. This

ratio is found out between total asset and external liabilities of the company. Purpose: This generally refers to the capacity or ability of the business to meet its short term and long term obligations. If a company in a position to pay its long term liabilities easily it is said to possess long term solvency. Solvency Ratio = Outside Liabilities Total Asset = Total Liability Shareholder Fund Total Assets

Particulars Outside Liability Total Liabilities Shareholders Fund Total Total Asset

2009-2010 2,88,35,47,600 9,06,12,642 2,79,29,34,958 2,88,35,47,600

2010-2011

Solvency Ratio:

2,18,64,17,069 2,26,90,56,555 = 0.96:1

2,79,29,34,958 2,88,35,47,600

0.97:1
51

Interpretation: In this ratio total assets are for more than external liabilities the company is treated solvent. In solvency ratio in 2009, 0.976% decrease in 2010 0.979:1 it means that outside liability is always less than total assets.

NET PROFIT RATIO:

Meaning: It is also called net profit to sales ratio (= profit margin). The profit margin is indicative of managements ability to operate the business with sufficient success not only to recover from revenue of the period, the expense of operating the business and the cost of borrowed fund. Purpose: this ratio is used to measure the overall profitability and hence it is very useful to proprietors. It is an index of efficiency and profitability when used with gross profit ratio and operational efficiency of the concern.

51

Net Profit Ratio

Net Sales Net Profit

100

Particulars Net Sales Interest Receivable Commission Total Net Profit Net Profit Ratio: =

2009-2010 9,22,37,735 34,28,143 9,56,65,878 3,14,80,142

2010-2011

3,02,24,486 7,55,32,888 = 40.02

3,14,80,142 9,56,65,878 = 32.91

Interpretation: In this ratio, in 2009, 40.02% and 2010 decrease in 2010, 32.91%. It is more useful for the further condition of the firm.

Expenses Ratio:

51

This ratio indicates the efficiency or otherwise in the incurrence of administrative expense. It is expressed as a percentage. The purpose of this ratio is that income is rise than expenditure it is also raised.

Particular Total expenses Staff, salaries, allowance Director fees Legal fees Rent, tax, insurance Postage, telegram Audit fees Stationary, printing Other expenses Total Total income

2009-2010 2,57,25,152 1,83,161 35,29,646 11,85,577 4,80,090 36,91,981 2,80,33,593 6,28,29,199 21,66,49,615

2010-2011

Expenses ratio =

Total expenses Total incomes

X 100

= 6,68,56,334 X 100 19,92,78,464 = 33.55%

= 6,28,29,200 X 100 21,66,49,615 = 29.00%

51

RETURN ON EQUITY HOLDER FUND:

Meaning: The term net profits as used here, means net income after payment of interest and tax including net non-operating income (i.e. non-operating income minus non-operating expenses). It is the final income that is available for distribution as dividends to shareholders. Shareholders funds include both preference and equity share capital and all reserves and surplus belonging to shareholders. Return of Share Holder equity = Net Profit X Shareholders Fund 100

Particulars Net Profit Shareholders Fund Return equity: = 3,02,24,486 43,10,13,335 of Share Holder

2009-2010 3,14,80,142 46,91,14,117

2010-2011

3,14,80,142 46,91,14,117

=7.01%

=6.71%

51

Interpretation: In this ratio, in 2009, 57.66% and 2010 decrease in 2010, 53.24%. The term net profit as used here means net income after payment of interest and tax including net non operating income. It is the final income that is available for distribution as dividend to shareholders.

CAPITAL TURNOVER RATIO

Sometimes the efficiency and effectiveness of the operations are judged by comparing the cost of sales or sales with amount of capital invested in the business and not with assets held in the business, though in both cases the same result is expected. Capital invested in the business may be classified as long term and short term capital or as fixed capital and working capital or owned capital and loaned capital. All capital turnovers are calculated to study the uses of various types of capital. Ratio = Net Profit Capital Employed Particular Net Sales Capital Employed Equity Reserves Total Return on Asset = 7,55,32,888 26,60,49,805 = 9,56,65,878 46,91,14,117 2009-2010 9,56,65,878 5,91,32,500 40,99,81,617 46,91,14,117 2010-2011

= 28.39%

= 20.39%

51

Interpretation: In this ratio, decrease the percentage in 2009, 28.39% to in 2010, 20.39%. Lower ratio shows lower profit and higher ratio shows higher profit.

CREDITORS TURNOVER RATIO:

This is also known as accounts payable or creditors velocity. Creditors turnovers indicates the number of times the payable rotate in a year. It signifies the credit period enjoyed by the firm paying creditors. Accounts payable include sundry creditors and bills payable. Ratio = Creditors + Interest payable + bills payable

Particular Creditors Fixed Deposit Saving Deposit Current Deposit Bills payable Interest Payable Total Interest on deposit and borrowing

2009-2010 79,05,92,313 76,00,70,549 55,49,46,207 44,24,274 13,60,00,222 2,10,56,09,070 13,60,00,222

2010-2011

51

Interest on deposit and borrowing

Creditor turnover ratio:

1,72,06,78,495 10,68,37,058 = 16.11

2,10,56,09,070 13,60,00,222

= 15.48

Interpretation: In this ratio creditors are decrease in all year. In year 2009, 20.51 times and increase in year 2010 is 22.08 times. It will be good for the bank. A higher ratio shows that the creditors are not paid in time.

51

FINDINGS
The Varachha Co-operative bank have good image in the co-operatice society because the Varachha Co-operative Bank provides speedy, effective and good interest rate on deposit.

51

 Bank has continuously got the audit class A in every year. The varchha co-operative Bank get award in district co-operative society for providing good service to their customer in 2000 2001 and Rashtriya Viskas Rattan gold award from International Integration and growth, and highest blood donation collection award in 2008 once more best co-op bank in surat dist. For the year 2007-2008. The profit of the bank is at increasing rate. By honoring the social welfare concept the bank is providing to the society welfare at a large scale. The bank has good market potential so that it can enhance or expand its business in future. Net profit of bank is in 2009, 3.02 crores and in increasing manner in 2010 i.e. 3.15 crores Share capital is in 2009, 5.24 crores and in 2010 5.91 crores. Working capital in 2009, 226.96 crores and in 2010 279.11 crores.

SUGGESTIONS

The Varachha Co-operative Bank is required to increase its network. The Varachha Co-operative Bank is required to open his branches out of city. Bank is needed to provide ATM facility for his account holder, so the account holder can easily receive money from his account. In the bank there should be a proper man power planning.

51

51

SWOT ANALYSIS:STRNGTH: The staff member of the concern is well-experienced and trained enough. The bank is providing training to new employees. The accounts of share holders as well as customers are fully secured by insurance. The bank has good brand image. The turnover of men power in the bank is very less and staff members are well satisfied with the facilities given to them. The profit of the bank is at increasing rate. Customers are serviced in the best manner. By honoring the social welfare concept the bank is providing to the society welfare at a large scale.

51

WEAKNESS: There is lack of linking performance.

In recent competitive era, varachha bank not provide some modern facilities like ATM service, debit card, credit card and even not website on intent for show the growth of bank. Rules for deposits and loans are very strict opening deposit is high and they require perfect documents, it can be limitation for slow inflow of deposits. OPPORTUNITY: The bank has good market potential so that it can enhance or expand its business in future. The bank has to start its branches in the areas like City Light, Adajan, and Sachin and out of city or state should pick up the opportunity to discover the market. THREAT: If there will be any union, it will cause problem for the bank. If there will be any opening of new bank with more facilities than other banks, it will hinder the progress of the bank. If there will any political pressure on the banking sector it will lead to decrease in productivity and efficiency. The Bank should provide rent to peons who go daily from branch to head office. So that the efficiency of peons of working will increase and they will be satisfied.

51

51

The Varachha co-operative Bank Ltd. Of Profit and loss account for year 2010& 2011
51

Profit & Loss Account

Particulars
Expences Interest on deposit and Borrowing Salaries allowance & Provident Fund Direct fees Rent ,Tax ,Insurance, Electricity Law Fees Postage ,Telegram ,Telephone Expences Audit Fee Depreciation Fund Stationary ,Printing other Expense Income Tax Profit Total Income Interest & Discount Commission Exchange Donation Other Income Total 19,97,72,678 34,28,143.35 ----------------93,91,392 21,66,49,615.25 25,68,04,312.37 42,51,304.65 -----------------1,27,73,425.52 27,38,29,042.46 9,44,99,998.76 2,57,25,152 ----------------35,29,646.49 1,83,161 11,85,577.24 4,80,090 91,37,412.80 36,91,981.73 2,80,33,592 1,87,02,860 3,14,80,142.42 21,66,49,615.25 12,06,75,486.13 2,73,86,632 ----------------49,93,714.50 2,43,011.84 13,75,327.87 3,95,517 1,22,72,036 21,81,375.83 4,32,28,357.91 2,05,00,000 4,05,77,583.46 27,38,29,042.46

2009-2010

2010-2011

The Varachha co-operative Bank Ltd. of balance sheet for year 2009-2010 & 2010-2011.

Balance Sheet

51

Web Site / Books name

www.google.com www.varachhabank.com www.rbi.com Management Accounting
Management Accounting

Author name
Website Website Website By R. S. N. Pillai Bagavathi
By Ravi M. Kishore

51