1.

1 INTRODUCTION
Fundamental analysis involves examining the economic, financial and other qualitative and quantitative factors related to a security in order to determine its intrinsic value. It attempts to study everything that can affect the securitys value, including macroeconomic factors (like the overall economy and industry conditions) and individually specific factors (like the financial condition and management of companies). Fundamental analysis, which is also known as quantitative analysis, involves delving into a companys financial statements (such as profit and loss account and balance sheet) in order to study various financial indicators (such as revenues, earnings, liabilities, expenses and assets). Such analysis is usually carried out by analysts, brokers and savvy investors. Many analysts and investors focus on a single number net income (or earnings) to evaluate performance. When investors attempt to forecast the market value of the firm, they frequently rely on earnings. Many institutional investors, analysts and regulators believe earnings are not as relevant as they once were. Due to non recurring events, disparities in measuring risk and managements ability to disguise fundamental earnings problems, other measures beyond net income can assist in predicting future firm earnings.

Two Approaches of Fundamental Analysis While carrying out fundamental analysis, investors can use either of the following approaches. 1. Top down approach : In this approach, an analyst investigates both international and national economic indicators, such as GDP growth rates, energy prices, inflation and interest rates. The search for the best security then trickles down to the analysis of total sales, price levels and foreign competition in a sector in order to identify the best business in the sector.

2. Bottom up approach : In this approach, an analyst starts the search with specific business, irrespective of their industry/region. How does fundamental analysis works? Fundamental analysis is carried out with the aim of predicting the future performance of the company. It is based on the theory that the market price of a security tends to move towards its real value or intrinsic value. Thus, the intrinsic value of the security being higher than the securitys market value represents a time to buy. If the value of the security is lower than its market price, investors should sell it. The steps involved in fundamental analysis are 1.Macroeconomic analysis, which involves considering currencies, commodities and indices. 2.Industry sector analysis, which involves the analysis of companies that are a part of the sector. 3.Situational analysis of the company. 4.Financial analysis of the company. 5.Valuation The valuation of any security is done through the discounted cash flow(DCF) model, which takes into consideration. 1.Dividends received by investors. 2.Earnings or cash flows of the company 3.Debt, which is calculated by using the debt to equity ratio and the current ratio (Current assets / Current liabilities) Benefits of fundamental analysis Fundamental analysis helps in 1.Identifying the intrinsic value of a security. 2.Identifying long-term investment opportunities since it involves real-time data. Drawbacks of fundamental analysis The drawbacks of fundamental analysis are 1.Too many economic indicators and extensive macro economic can confuse novice investors.

2.The same set of information on macro economic indicators can have varied effects on the same currencies at different times.It is beneficial only for long-term investments. Fundamental analysis tools These are the most popular tools of fundamental analysis 1.Earnings per share EPS 2.Price to Earnings ratio P/E 3.Projected Earnings Growth PEG 4.Price to Sales P/S 5.Price to Book P/B 6.Dividend Payout Ratio 7.Dividend Yield 8.Book Value 9.Return on Equity

Ratio Analysis Financial ratios are tools for interpreting financial statements to provide a basis for valuing securities and appraising financial and management performance.

A good financial analyst will build financial ratio calculations extensively in a financial modeling exercise to enable robust analysis. Financial ratios allow a financial analyst to 1.Standardise information from financial statements across multiple financial years to allow comparison of a firms performance over time in a financial model. 2.Standardise information from financial statements from different companies to allow an apples to apples comparison between firms of differing size in a financial model. 3.Measure key relationships by relating inputs (costs) with outputs (benefits) and facilitates comparison of these relationships over time and across firms in a a financial model. In general, there are four kinds of financial ratios that a financial analyst will use most frequently, these are :

y y y y

Performance ratios Working Capital ratios Liquidity ratios Solvency ratios

These four financial ratios alow a good financial analyst to quickly and efficiently address the following questions or concerns : Performance ratios: y y What returns is the company making on its capital investment? What are its profit margins?

Working Capital Ratios y y How quickly are the debts paid? How many times is the inventory turned?

Liquidity ratios y Can the company continue to pay its liabilities and debts?

Solvency Ratios(Longer Term) y y What is the level of debt in relation to other assets and to equity? Is the level of interest payable out of profits?

Financial analysis is the process of identifying the financial strengths and weakness of the firm by properly establishes relationship between the items of the balance sheet and the profit and loss account. Financial analysis can be undertaken by management of the firm or by parities outside the firm, owners, creditors inventors and others. The nature of analysis will differ depending on the purpose of the analysis. Technical analysis is the practice of anticipating price changes of financial instrument by analyzing prior price changes and looking for patterns and relationships in price history. Since all the investors in the stock market want to make the maximum profits possible, they just cannot afford to ignore either fundamental or technical analysis.

The price of the security represents a consensus. It is the price at which one person agrees to buy and another agrees to sell. The price at which an investor is willing to buy or sell depends primarily on his expectations. If he expects the securities price to rise, he will buy it; if the investor expects the price to fall, he will sell it. These simple statements are the cause of the major challenge in forecasting security prices, because they refer to human expectations. As we all know firsthand, humans expectations are neither easily quantifiable nor predictable. If prices are based on investor expectations, then knowing what a security should sell for (i.e fundamental analysis) becomes less important than knowing what other investors expect it to sell for. Thats not to say that knowing what a security should sell for isnt important it is. But there is usually a fairly strong consensus of a stocks future earnings that the average investor cannot disprove.

OBJECTIVE OF STUDY
y y y y y y To study the concepts and techniques of fundamental analysis. To study the Growth trend in Banking sector and in particularly of Lakshmi Vilas Bank. To evaluate the performance of Lakshmi vilas bank with respect to its financial performance. To find out the profitability and liquidity positions of the Lakshmi vilas bank. To analyze the working capital management of the Lakshmi vilas bank. To provide some recommendations based on the findings of the study.

1.3 SCOPE:
The study is undertaken to analyze the financial information to indicate the operating and financial efficiency and growth of the Lakshmi vilas bank. Ratios are used to determine the financial status of the Lakshmi vilas bank. The current study has covered Economic analysis, Industry analysis, comparative and common size analysis and trend analysis.

1.4 NEED FOR THE STUDY

Financial performance is a prerequisite for anticipating the future to get better insight about financial strength and weakness of the Lakshmi vilas bank. The financial data are used to analyze the Lakshmi vilas bank past performance. The current study attempts to study the financial performance of past five years. It will help to improve the growth and development of Lakshmi vilas bank.

1.5 LIMITATIONS:
1. As the ratios are generally calculated from past financial statement, they are not considered as indicators of future 2. The difference in the definitions of items in the Balance sheet and the P& L statement make the interpretation of ratios difficult.

1.6 REVIEW OF LITERATURE:

1.7 RESEARCH MEDHODOLOGY

RESEARCH DEFINITION

Research is an organized, systematic, database, critical, objective, scientific enquiry or investigation into a specific problem undertaken the purpose of finding answers or solutions to it. In essence, research provides the needed information that guides managers to make informed decisions to successfully deal with problems RESEARCH METHODOLOGY Research methodology generally refers to the systematic procedures carried out in any project (or) research study. Methodology gives a clear picture of suitable

classification and service of the different of the study as to arrive at a poor manifestation of the objective, scope, limitations of the study. Research simply means search for facts, answers to questions and solutions to problems.

RESEARCH DESIGN
The research design used for this project work is analytical in nature. financial data collected from the company are used for analysis. The

SOURCES OF DATA

The Lakshmi vilas bank provided necessary records and reports which constituted the source of data (secondary data). The discussions made with the staff of the Lakshmi vilas bank also provided sufficient information relating to the management, working and day-to-day affairs of the company.

PERIOD OF THE STUDY

This study has covered a period of five years from 2006 - 2010.

1.1 COMPANY HISTORY

The Lakshmi Vilas Bank Limited (LVB) was founded eight decades ago ( in 1926) by seven people of Karur under the leadership of Shri V.S.N. Ramalinga Chettiar, mainly to cater to the financial needs of varied customer segments. The bank was incorporated on November 03, 1926 under the Indian Companies Act, 1913 and obtained the certificate to commence business on November 10, 1926, The Bank obtained its license from RBI in June 1958 and in August 1958 it became a Scheduled Commercial Bank. During 1961-65 LVB took over nine Banks and raised its branch network considerably. To meet the emerging challenges in the competitive business world, the bank started expanding its boundaries beyond Tamil Nadu from 1974 by opening branches in the neighboring states of Andhra Pradesh, Karnataka, Kerala, Maharashtra, Madhya Pradesh, Gujarat, West Bengal, Uttar Pradesh, Delhi and Pondicherry. Mechanization was introduced in the Head office of the Bank as early as 1977. At present, with a network of 270 branches,1 satellite branch and 7 extension counters, spread over 15 states and the union territory of Pondicherry, the Bank's focus is on customer delight, by maintaining high standards of customer service and amidst all these new challenges, the bank is progressing admirably. LVB has a strong and wide base in the state of Tamil Nadu, one of the progressive states in the country, which is politically stable and has a vibrant industrial environment. LVB has been focusing on retail banking, corporate banking and banc assurance. The Bank's business crossed Rs. 12,606 Crores as on March 31, 2009. The Bank earned a Net profit of Rs. 50.30 Crores. The Net owned Funds of the Bank reaches Rs. 453.70 Crores. With a fairly good quality of loan assets the Net NPA of the bank was pegged at 1.24 % as on March 31, 2009.

Lakshmi Vilas Bank YEAR EVENTS

1926 - The Company was Incorporated at Karur, South India. The main object of the company is The Bank transacts banking business of every description. 1931 - 2,900 Rights shares issued at par. 1947 - 10,000 Right shares issued (prem. Rs.5 per share; prop. 1:1). 1953 - 5,000 Rights shares issued (prem. Rs.5 per share; prop. 1:4). 1957 - 12,500 Bonus shares issued in prop. 1:2. 1958 - The Bank was licensed under the Banking Companies Act and it became a scheduled Bank The Same Year 1960 - 12,500 rights shares issued (prem. Rs.10 per share; prop. 1:3) 1961 - In October, the Karur Mercantile Bank, Ltd. Karur, was amalgamated with the Bank, as ordered by the Central Government. The Bank took over particular assets and liabilities of Kannivad " Bank Pvt. Ltd., in November, for the Trichinopoly Vysya Bank, Ltd., Tiruchirapalli, in August 1963 and of Tirirukkattupally Bank, Ltd., Tanjore in December. 1963 - 25,000 rights shares issued (prem. Rs.10 per share; prop. 1:2). 1962 - 1,191 shares issued to members of Karur Mercantile Bank, Ltd. on its merger. 1964 - In 1964, Salem Gugai Sree Krishna Bank, Ltd., Salem, was amalgamated with the Bank. Negotiations were being carried on with some other banking concerns for amalgamation, 24 shares issued. 1965 - The Bank took over the particular assets and liabilities of the Shri Nadiambal Bank (P) Ltd., in January of the Kattuputtur Bank(P) Ltd., in March of the Salem National Bank in August and of the Salem Sree Ramaswamy Bank, Ltd., in September. 1971 - 37 shares issued. 1974 - 1,52,504 shares issued (prem. Re.1 per share). 1982 - 1,14,388 right equity shares issued in prop. 1:2 1986 - 3,43,164 rights equity shares issued at par in prop. 1:1. 1988 - 6,00,000 No. of equity shares issued at par to public in December. 1989 - 6,43,164 right equity shares issued in prop. 1:2. 1993 - The Company issued 9,64,746 No. of equity shares of Rs.10 each 1997 -Mr K. Raghunath Shenoy has become the chief executive officer and Chairman of Lakshmi Vilas Bank. He was executive director of the

bank till recently. 1998 -Developed a credit product Gem Credit specifically for the artificial gem processing industry. 1999 - launched a money-back deposit scheme to suit the needs of not mind a longer maturity period but want a larger pay-out. 2000 - introduced a basket of products namely Lakshmi Agribike, Lakshmi Consumer Credit and Lakshmi Rental Loan 2001 -Reduced its prime lending rate (PLR) by one per cent to 13 per cent per annum from 14 per cent effective April 1, 2001 -Board Announces that it has allocated an amount of Rs 25 crore towards financing rice mills in Andhra Pradesh for the current fiscal year. -Board Announces a distribution tie-up called Bancassurance with Lakshmi Vilas Bank to develop a nationwide network which also has a strong regional focus. -Signed a letter of intent with CGU Life Insurance to offer agency services to the latter -Board announces the launch of its education loan scheme - Vidya Lakshmi Loan -Lakshmi Vilas Bank slashes deposit rates -Forges an alliance with ICRA for putting in place a credit risk assessment system 2002 -Mr.M P Shyam and Mr. V N Krishnamurthy have been appointed as Additional Directors. And Mr. Athi R. Venkatraman and Mr. T Srinivasulu have resigned as Directors of the company. -Board entered into an MOU with Dabur CGU Life Insurance Company (P) Ltd on May 28, 2002 to sell insurance products under the Brand name 'AVIVA'. 2003 -LVB slashed interest rate for deposits by 0.25 % for periods above 271 and 364 days maturity slab. -LVB forges alliance with ICICI Infotech for core banking solution -Lakshmi Vilas Bank mobilises Rs 50 cr through tier-II bonds issue investors who do

-Entered into Corporate Agency Arrangement with M/s Royal Sundaram Alliance Insurance Co. Ltd. for distributing their General Insurance Products. -Unveils Aviva Life Insurance products at Visakahapatnam in Andhra Pradesh -Board Decided to set up three strategic business units (SBUs) to cash in on the increasing opportunities in the large and mid-corporates, and retail and personal segments. -Lakshmi Vilas Bank Ltd has acquired 807,000 shares amounting to 12.32% of the total paid up capital of Blue Coast Hotels and Resorts Ltd. (Formerly Morepen Hotels Ltd). -Mr Abhishek Dalmia of the New Delhi-based Renaissance Group has picked up a 2-per cent stake each in Lakshmi Vilas Bank This will translate into around 2.3 lakh shares of Lakshmi Vilas Bank. 2004 -The Lakshmi Vilas Bank has entered into a tie up with the Wall Street Exchange Centre LLC, Dubai belonging to the House of Patels for remittences of NRIs through rupee drawing arrangement (RDA) 2007 - Lakshmi Vilas Bank Ltd has appointed Shri.R.Mohan as Additional Director. 2009 - Lakshmi Vilas Bank has entered into an alliance with PayMate for mobile payment solution, which is being made available to its customers across 250 branches. 2010 - Lakshmi Vilas Bank Ltd has informed that the Board of Directors of the Bank at the meeting held on January 23,2010 has Co-opted Shri.K.S.R.Anjaneyulu as an additional Director and also appointed him, as Managing Director & CEO of the Bank. - Lakshmi Vilas Bank Limited has co-opted Shri. P.R. Somasundaram as an additional Director and also appointed him, as Managing Director & CEO of the Bank for a period of three years.

2.2 INDUSTRY PROFILE:

LAKSHMI VILAS BANK,one of the banks in South India has implemented an EnterpriseStorage Solution, a centralised system that the bank is using to consolidate all its businessdatabases into one single platform for managing and protecting vital customer data. The need with the increase in the business of the bank, it was found that the existing infrastructure was not sufficient to take care of the complexities that were emerging, such as business continuity requirements, data size, application tiering, instant copies of the data base for testing new products and MIS. Therefore, it was necessary for Lakshmi Vilas Bank to go for enterprise storage and also upgrade the present P Series servers of IBM.Managing the data was a major issue with the increase in business and consequent increase in data size. It required a lot of capacity planning discussions to estimate the future data size of the bank. The database of various applications running in the bank was lying in a distributed manner and was difficult to manage and operate. The same has now beenconsolidated and centralised using new enterprise storage solutions in the data centre,says B.Murali Nair, Chief Technology Officer at Lakshmi Vilas Bank According to him, the biggest challenges were technical. The configuration of the system was extremely critical in this enterprise storage project. Centralised storage To solve the problem, the bank opted for Hitachi storage virtualisation with Hitachi dynamic provisioning. The end-to-end implementation started in October 2009 and was completed by April 31st 2010. To ensure seamless implementation, the project was divided into phases. The first step involved

revamping of data cabling at the data centre followed by upgrading the core switch and then the server and storage implementation. Each of these was as eparate project and the project management was handled by different project managers.

Virtualisation enabled the management of all assets in one single, virtualised pool, whilethin provisioning and business continuity services helped improving storage utilisation. The banks prior IBM DS4800 storage solution is still been used for their non critical application like intranet, leave management etc.To further reduce banking transaction time and improve the accessibility of data between branches and different channels like Net banking and ATM, the bank has also upgraded their Core transaction Server from IBM P5 series to IBM P6 series. It has also been seamlessly integrated with the new storage solution. Increased turnaround time The new solution has made database management much easier and ensures timely availability of database to various departments in the bank. The administrators can now easily create instances of the database and make them available to users in the departments like offsite surveillance, antmoney laundering and product development team. This was not possible earlier as the same database instance was used by all departments and they had to wait for their turn. The result was huge time losses and delays. Thus operational efficiencies increased, turnaround time and redundancies improved and it made it easier for virtualisation to be implemented. Thus we could observe a lot of improvement in the overall operational efficiencies and operational costs, said Nair.

Facilitate future IT projects This solution is an important cog in the wheel, leading up to the implementation of a CRM solution. It will start by facilitating efficient critical data management and help the bank to embark on projects like data warehousing, data mining, business intelligence and channe lintegration (SOA).

ECONOMIC ANALYSIS

The global economy has begun to recover from the deep recession set off by the financial crisis. This recovery is underpinned by output expansion in emerging market economies (EMEs), particularly those in Asia. The pace and shape of recovery, however, remain uncertain. 2. In fact, the global economic outlook presents a mixed picture. On the positive side, world output, as per the International Monetary Fund (IMF) estimates, has expanded by 3 per cent in the second quarter (quarter-onquarter, annualised), manufacturing activity has picked up, trade is recovering, financial market conditions are improving, and risk appetite is returning. A sharp recovery in equity markets has enabled banks to raise capital to repair their balance sheets. In the US, home prices appear to be stabilising. Capital flows to EMEs have resumed. Most importantly, the anxiety and nervousness that pervaded the financial markets during the height of the crisis are being replaced by a sense of calm. 3. On the negative side, there are concerns that the recovery is fragile. The second quarter improvement is essentially the outcome of policy-induced stimulus. Going forward, the impact of the stimulus will fade away and inventory rebuilding may lose momentum. In advanced economies, private

consumption remains constrained by continuing job losses, sluggish income growth and dented confidence. Even as output is recovering, unemployment is expected to increase to over 10 per cent in the US and the Euro area. Investment is also expected to remain weak due to ruptured balances sheets, excess capacity and financing constraints. Bank collapses are continuing. World trade remains below its year ago level, notwithstanding recent quarter-on-quarter improvement. 4. Reflecting this mixed trend which has a small bias towards the positive, the IMF projected, in its October 2009 World Economic Outlook (WEO), that the rate of contraction of the world economy in 2009 will be 1.1 per cent, an upward revision from its projection of a contraction of 1.4 per cent made in its July 2009 WEO. However, the IMF expects the ensuing global recovery to be slow. In its latest Economic Outlook (September 2009), the Organisation for Economic Co-operation and Development (OECD) projects the pace of activity to remain weak well into 2010 on account of numerous headwinds. On balance, while global economic prospects have improved since the First Quarter Review in July 2010, uncertainties remain about the pace and sustainability of economic recovery. 5. The Indian economy, which slowed down significantly during the second half of 2009-10, largely due to the knock-on effect of the global financial crisis, has begun to stabilise. This is despite the continuing contraction in exports and the worst drought since 1972. Performance of the industrial sector has improved markedly in recent months. Both domestic and external financing conditions are on the upturn. Capital inflows have revived. Activity in the primary capital market has picked up and funding from nonbank

domestic sources has eased. Liquidity conditions have remained easy and interestrates have softened in the money and credit markets. 6. At the same time, there are several negative indications. Private consumption demand is yet to pick up. Agricultural production is expected to decline due to lower Kharif foodgrain production. Services sector growth remains below trend. Bank credit growth continues to be sluggish. There are also clear signs of rising inflation stemming largely from the supply side, particularly from food prices. 7. This Second Quarter Review of Monetary Policy for 2010-11 is thus set against the backdrop of incipient signs of recovery in the global economy and improving prospects for the domestic economy. The Review is organised in two parts. Part A covers Monetary Policy and is divided into three sections: Section I provides an assessment of the Macroeconomic and Monetary Developments; Section II defines the Stance of Monetary Policy; and Section III sets out Monetary Measures. Part B covers the Developmental and Regulatory Policies and is organised into seven sections: Financial Stability (Section I), Interest Rate Policy (Section II), Financial Markets (Section III), Credit Delivery Mechanism and other Banking Services (Section IV), Financial Inclusion (Section V), Regulatory Measures for Commercial Banks (Section VI) and Institutional Developments (Section VII). Part A of this Statement should be read and understood together with the detailed review in Macroeconomic and Monetary Developments released yesterday.
Competition LAST PRICE ICICI Bank HDFC Bank 1,051.55 2,393.10 MARKET CAP(RS.CR) 121,114.62 111,333.16 NET INTREST 25,974.05 19,928.21 NET PROFIT 5,151.38 3,926.39 TOTAL ASSETS 363,399.71 277,352.61

Axis Bank Kotak Mahindra IndusInd Bank YES BANK Federal Bank Karur Vysya ING Vysya Bank JK Bank Lakshmi Vilas

1,253.70 443.25 259.20 294.10 455.00 410.20 344.75 840.85 120.50

51,515.73 32,661.83 12,077.94 10,209.60 7,778.89 4,796.88 4,171.02 4,076.26 1,175.59

15,154.81 4,303.56 3,589.36 4,041.74 4,052.03 2,217.69 2,694.06 3,713.13 1,064.84

3,388.49 818.18 577.32 727.13 587.08 415.59 318.65 615.20 101.14

242,713.37 37,436.31 35,369.52 59,007.00 43,675.61 21,993.49 33,880.24 42,546.80 10,486.28

Key Financial Ratios of Lakshmi Vilas Bank ------------------- in Rs. Cr. ------------------Investment Valuation Ratios

Face Value Dividend Per Share Operating 5.93 Profit Per Share (Rs) Net Operating 180.62 Profit Per Share (Rs) Free Reserves Per 29.45 Share (Rs) Bonus in 14.78 Equity Capital

Mar '06 10.00 2.50

Mar '07 10.00 0.70 2.65

Mar '08 10.00 1.50 10.96

Mar 09 10.00 2.50 17.85

Mar '10 10.00 0.60 16.09

93.11

115.13

150.06

101.14

23.40

25.62

25.82

35.98

26.44

25.65

25.87

13.04

Dividend Per Share

Series 1
4.5 4 3.5 3 2.5 Series 1 2 1.5 1 0.5 0 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10

Profitability Ratios Mar '06 3.23 7.73 Mar '07 3.73 5.27 Mar '08 45.76 4.91 Mar 09 4.21 8.00 Mar '10 5.36 4.72

Interest Spread Adjusted Cash Margin(%) Net Profit Margin Return on Long Term Fund(%) Return on Net Worth(%) Adjusted Return on Net Worth(%) Return on Assets Excluding Revaluations Return on Assets Including

6.02 80.74

3.76 78.49

4.37 102.84

6.66 128.48

3.02 93.47

8.63

5.12

6.04

11.08

4.14

7.74

4.33

4.73

10.50

4.13

0.46

81.18

85.64

93.02

75.79

0.46

81.18

85.64

93.02

75.79

Revaluations Management Efficiency Ratios Mar '06 7.86 Mar '07 8.45 Mar '08 9.10 Mar 09 9.87 Mar '10 10.49

Interest Income / Total Funds Net Interest Income / Total Funds Non Interest Income / Total Funds Interest Expended / Total Funds Operating Expense / Total Funds Profit Before Provisions / Total Funds Net Profit / Total Funds Loans Turnover Total Income / Capital Employed(%) Interest Expended / Capital Employed(%) Total Assets Turnover Ratios Other Income / Total Income Operating Expense / Total Income Selling Distribution Cost

3.04

2.89

2.91

3.07

3.47

0.45

0.24

0.25

0.30

0.28

4.83

5.57

6.19

6.79

7.02

2.78

2.65

2.04

1.90

1.80

0.57

0.34

0.98

1.30

1.77

0.50 0.13 8.32

0.33 0.14 8.70

0.41 0.15 9.35

0.68 0.16 10.17

0.33 0.17 10.77

4.83

5.57

6.19

6.79

7.02

0.08

0.08

0.09

0.10

0.10

5.46

2.77

2.69

2.96

2.62

33.41

30.43

21.86

18.67

16.70

0.20

0.27

0.20

0.23

0.18

Composition

Profit And Loss Account Ratios Mar '06 67.24 Mar '07 69.71 Mar '08 75.47 Mar 09 76.65 Mar '10 72.60

Interest Expended / Interest Earned Other Income / Total Income Operating Expense / Total Income Selling Distribution Cost Composition

5.46

2.77

2.69

2.96

2.62

33.41

30.43

21.86

18.67

16.70

0.20

0.27

0.20

0.23

0.18

Balance Sheet Ratios Mar '06 10.79 Mar '07 12.43 Mar '08 12.73 Mar 09 10.29 Mar '10 14.82

Capital Adequacy Ratio Advances / Loans Funds(%)

74.69

76.53

71.65

80.30

74.72

Debt Coverage Ratios Mar '06 67.29 Mar '07 70.17 Mar '08 70.23 Mar 09 70.15 Mar '10 70.11

Credit Deposit Ratio Investment Deposit Ratio Cash Deposit Ratio Total Debt

31.42

27.67

28.23

27.40

29.49

5.86

5.20

6.31

7.53

8.17

14.90

12.67

13.45

16.22

12.28

to Owners Fund Financial Charges Coverage Ratio Financial Charges Coverage Ratio Post Tax

1.15

1.09

1.18

1.22

1.28

1.13

1.08

1.09

1.13

1.07

Leverage Ratios Mar '06 0.04 11.67 Mar '07 0.04 12.47 Mar '08 0.05 10.56 Mar 09 0.03 13.00 Mar '10 0.03 21.76

Current Ratio Quick Ratio

Current ratio
0.06 0.05 0.04 0.03 Current ratio 0.02 0.01 0 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010

Cash Flow Indicator Ratios Mar '06 Mar '07 Mar '08 Mar 09 Mar '10

Dividend Payout Ratio Net Profit Dividend Payout Ratio Cash Profit Earning Retention Ratio Cash Earning Retention Ratio AdjustedCash Flow Times

24.78

22.72

33.87

28.36

22.24

19.32

15.95

25.28

22.64

14.22

75.30

76.74

56.76

70.08

77.70

80.72

83.78

69.84

76.38

85.76

150.18

203.82

198.04

121.89

189.52

Mar '06

Mar '07 Mar '06 11.50 148.99

Mar '08 Mar '07 3.60 81.18

Mar '09 Mar '08 5.18 85.64

Mar '10 Mar 09 10.31 93.02 Mar '10 3.15 75.79

Earnings Per Share Book Value

Policy Stance

On the basis of the above overall assessment, the stance of monetary policy for the remaining period of 2009-10 will be as follows: Keep a vigil on the trends in inflation and be prepared to respond swiftly and effectively through policy adjustments to stabilise inflation expectations. Monitor the liquidity situation closely and manage it actively to ensure that credit demands of productive sectors are adequately met while also securing price stability and financial stability. Maintain a monetary and interest rate regime consistent with price stability and financial stability, and supportive of the growth process. 92. In conclusion, it bears emphasis that the Reserve Bank is mindful of its fundamental commitment to price stability. It will continue to monitor the price situation in its entirety and will take measures as warranted by the evolving macroeconomic conditions swiftly and effectively. Monetary Measures and Bank Rate The Bank Rate has been retained unchanged at 6.0 per cent.

Repo Rate The repo rate under the Liquidity Adjustment Facility (LAF) has been retained unchanged at 4.75 Reverse Repo Rate The reverse repo rate under the LAF has been retained unchanged at 3.25 per cent. The Reserve Bank has the flexibility to conduct repo/reverse repo auctions at a fixed rate or at variable rates as circumstances warrant. 97. The Reserve Bank retains the option to conduct overnight or longer term repo/ reverse repo under the LAF depending on market conditions and other relevant factors. The Reserve Bank will continue to use this flexibly including the right to accept or reject tender(s) under the LAF, wholly or partially, so as to make efficient use of the LAF in daily liquidity management. Cash Reserve Ratio 98. The cash reserve ratio (CRR) of scheduled banks has been retained unchanged at 5.0 per cent of their net demand and time liabilities (NDTL). 99. The collateralised borrowing and lending obligation (CBLO) liabilities of scheduled banks were exempted from CRR prescription in order to develop CBLO as a money market instrument. Volumes in the CBLO segment have increased over the years, especially after the phasing out of the non-banks from the inter-bank market. The daily average volume in the CBLO segment, which was only Rs.6 crore in January 2003, is now over Rs.60,000 crore. Since the objective of developing CBLO as a money market instrument has been broadly achieved, it is proposed that: liabilities of scheduled banks arising from transactions in CBLO with Clearing Corporation of India Ltd. (CCIL) will be subject to maintenance of CRR with effect from the fortnight beginning November 21, 2009. Statutory Liquidity Ratio 100. In view of difficult macroeconomic situation and liquidity conditions in the global and domestic financial markets after the collapse of Lehman Brothers, the statutory liquidity ratio (SLR) of scheduled commercial banks (SCBs) was reduced from 25 per cent to 24 per cent of their NDTL with effect from November 8, 2008. The liquidity situation has remained comfortable since mid-November 2008 as reflected in the surplus funds being placed by banks daily in the LAF window of the Reserve Bank. Accordingly, it has been decided to: restore the SLR for scheduled commercial banks to 25 per cent of their NDTL with effect from the fortnight beginning November 7, 2009. 101. SCBs are currently maintaining SLR investments at 27.6 per cent of their NDTL, net of LAF collateral securities, and 30.4 per cent of NDTL, inclusive of LAF collateral securities. As such, the increase in the SLR will not impact the liquidity position of the banking system and credit to the private sector. Distribution of branches of Indian banks operating abroad

Out of total 129* branches/offices of Indian banks operating abroad in 29 countries as at end March 2008, banks furnished data for 121 Indian overseas branches operating in 27 countries on International Trade in banking services. Similarly out of 280** foreign bank branches operating in India as at end March 2008, the survey covered 273 branches of foreign banks. Bank of Baroda had the largest overseas presence with 42 branches in 12 countries, followed by State Bank of India (33 branches in 18 countries) and Bank of India (22 branches in 8 countries). The United Kingdom was having the highest number of Indian banks branches (23), followed by Hong Kong (12), Singapore (9), Fiji (9), United Arab Emirates (9), Mauritius (8), and Sri Lanka (7). Employment

The details of number of branches and number of employees of Indian banks operating abroad and foreign banks operating in India are given in Table 1. The foreign banks operating in India employed 99.6 per cent of their employees locally while the Indian banks operating abroad employed 74.5 per cent of employees from local sources, 22.0 per cent from India and remaining 3.5 per cent from other countries

Indian Bank operating Forgein Number of Branches 121 Number of Employees 4647 of which; Local 3461 Indians 1023 Others 163

Forgein Banks operating in ndia 273 30159 30062 NA 97

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