performance analysis of the nationalised banks selected

7/30/2019 Performance Analysis of the nationalised banks selected

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INTRODUCTION

Finance is one of the major elements, which activates the overall growth of economy.

Finance is lifeblood of economic activity. A well-knit financial system directly contributes to

the growth of the economy. An efficient financial system calls for the effective performance

of financial institutions, financial instruments, and financial markets.

MEANING OF FINANCE:

Finance is concerned with resource allocation as well as resource management,

acquisition and investment. Simply, finance deals with matters related to money and the

markets.

Finance can be defined as the art and science of managing money. All the individuals

and organization earn or raise money and spend or invest money

Finance is concerned with the process, institutions, markets and instruments

involved in the transfer of money among and between individuals, businesses and

government.

FUNCTIONS OF FINANCE:

Financing Decision. Investment Decision. Dividend Decision. Financial Analysis and Planning.

Financial decisions are related with raising of funds from different sources like equityshare holders, preference share holders and debt sources

Investment decisions are concerned with investment of financial resources into longterm assets

Dividends decisions of a company are crucial financial decisions dividend Policy of acompany significantly affect the value of the stock of the company.


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FINANCIAL MANAGEMENT:

Financial management is a universal phenomenon. Management is the process which

involves planning, directing, organizing, staffing and controlling human efforts to achieve

stated objectives in organization.

Everyone should know the fundamental principles or proactive of Management with

a special emphasis to business enterprise

Management is an art of getting things down through or with the people in

formally organized groups. It is a task of planning, coordinating, controlling and motivating

the efforts for other towards a specific objective.

Finance is a blood of business. Financial management helps in achieving group

goals. IT reduces the cost and optimum utilization of funds and maximum results with the

minimum efforts.

DEFINITION:

Financial management is concerned with the efficient use of an important economic

resource, namely, capital funds.

Solomon

Financial management is the operational activity of a business that is responsible for

obtaining and effectively utilizing the funds necessary for efficient operation.

- J . L. Massie

Financial management is an area of financial decision making harmonizing individual

motives & enterprise goals.

Weston &Brigham

Financial management is the application of the planning & control functions of the finance

function.

Howard & Upton


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Financial management is the area of business management devoted to the judicious use of

capital & careful selection of sources of capital in order to enable a spending unit to move in

the direction of reaching its goals.

J . F. Bradley

PROCESS:

FINANCIAL MANAGEMENT

Anticipating financial needs

Acquiring financial resource

Allocating funds in business

Administrating the allocation of funds

Analyzing the performance of finance

Accounting and reporting management


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OBJECTIVES OF FINANCIAL MANAGEMENT:

Profit Maximization Wealth Maximization Implications of Wealth maximization Balanced asset structure Liquidity Judicious planning of funds Efficiency

1] PROFIT MAXIMIZATION:-

Earning profits by a corporate or a company is a social obligation. Profit is the only

means through which the efficiency of an organization can be measured. As the business

units are exploiting the resources of the country namely, land labour, capital and other

resources. It has an obligation to make use of these resources to achieve profit. Profit

maximization increases the confidence of management in expansion and diversification

programs of the company.

2] WEALTH MAXIMISATION:-

Concept of wealth maximization refers to the gradual growth of the value of the

assets of the firm in terms of benefits it can produce. Any financial action can judged in terms

of the benefits it produces less cost of action. The wealth maximization attained by a

company is reflected in the market value of shares. In other words, it is nothing but the

process of creating wealth of an organization. This maximizes the wealth of shareholders

wealth maximizations is the net present value of a financial decision. Net present value willbe equal to the gross present value of the benefits of that action minus the amount invested to

receive such benefits (NPV=GPV of benefits investments). The concept of wealth

maximization is universally accepted because it takes care of interest of financial institutions,

owners, employees and society at large.

In India the co-operative has started officially in the year 1904 when the government of India

passed the first co-operative act. The co-operative movement was introduced in India with the

main objective of making a breakthrough in the provision of credit to the poor classes.


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FINANCIAL SERVICES

Financial services can be defined as the products and services offered by

institutions like banks of various kinds for the facilitation of various financial transactions

and other related activities in the world of finance like loans, insurance, credit cards,

investment opportunities and money management as well as providing information on the

stock market and other issues like market trends.

Financial services refer to services provided by the finance industry. The

finance industry encompasses a broad range of organizations that deal with the management

of money. Among these organizations are banks, credit card companies, insurance companys

consumer finance companies, stock brokerages, investment funds and some governmentsponsored enterprises.

.

FUNCTIONS OF FINANCIAL SERVICES:

1. Facilitating transactions (exchange of goods and services) in the economy.2. Mobilizing savings (for which the outlets would otherwise be much more limited)3. Allocating capital funds (notably to finance productive investment).4. Monitoring managers (so that the funds allocated will be spent as envisaged).5. Transforming risk (reducing it through aggregation and enabling it to be carried by

those more willing to bear it).

FINANCIAL SYSTEM:

Financial System can be defined at the global, regional or firm specific level. The

Firms financial system is the set of implemented procedures that track the financial

activities of the company. On a regional scale, the financial system that enables lenders and

borrowers to exchange funds. The global financial system is basically a broader regional

system that encompasses all financial institutions, borrowers and lenders within the global

economy


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FINANCIAL SYSTEM

Financial

Institutions

Commercial

Banks

Development

Banks

Non Banking financial

Company

Financial

Instruments

Long term

Instruments

Short term

Instruments

Financial

Market

Capital

Market

Money

Market

Financial

Services

An Overview of Financial Statements:

BANKING:

A bank is a profit seeking business firm which deals with money and credit. It accepts

deposits from the public and makes these funds available to those who need them. It helps in

the remittance of money from one place to another.

A banking company is defined as a company which transacts the business of banking in

India. A banking company in India has been defined in the banking companies act 1949 asone which transacts the business of banking which means the purpose of lending or

investment, of deposits of money from the public. Repayable on demand and withdraw able

by cheque , draft, order or otherwise.


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CO-OPERATIVE BANKS:

Co-operative banks are an important constituent of the Indian financial system,

judging by role assigned to them. The co- operative movement originated in the west, but the

importance which such have assumed in India is rarely paralleled anywhere else in the world.

A credit co-operative is voluntary association of members for self-help, catering to the

financial on a mutual basis. In India, the co-operative credit movement started with chief

object of catering to the banking and credit requirements if urban middle class e.g., the small

trader or businessman, the artisans, or factory worker, the salaries people with limited fixed

income in urban or semiurban areas.

Besides protecting the middle classes and men of modest means from the clutches ofthe moneylenders. The movement is also expected to indicate the habit of thrift and savings

amongst the people.

In India the co-operative has started officially in the year 1904 when the

government of India passed the first co-operative act. The co-operative movement was

introduced in India with the main objective of making a breakthrough in the provision of

credit to the poor classes.

Especially for the vast majority of agriculturists who were suffering under the heavyweight of indebtedness. With the over whelming importance assigned to food production in

our successive five-year plans, the planners and pioneers of our conviction that co-operation

is the most effective instrument for the economic growth and prosperity of our nation.

IMPORTANCE OF URBAN CO-OPERATIVE BANKS:

The co-operative movement has become a powerful instrument for rapid economic

growth. It has resulted in several benefits. The expansion of co-operative banks has resulted

in several benefits.

a) They have provided cheap credit to farmers. They discourage un productive borrowing.b) They have reduced the importance of money lenders. More than 60% of credit needs for

agriculturists are now met by co-operative banks. Thus co-operative banks have protected

the rural population from the clutches of money lenders.

c) Small and marginal formers are being assisted to increase the income.


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d) They have promoted saving and banking habits, among the people, especially the ruralpeople. Instead of hoarding money, the rural people lend deposit there saving in the co-

operative or commercial banks.

e) They are undertaken several welfare activities. They have also taken steps to improve themorals, polity and education.

Values:Co-operatives are based on the values of self help, self-responsibility, democracy, equality

and solidarity. In the tradition of their founders, co-operative members believe in the ethical

value of honesty, openness, social responsibility and earning for others.

Functions:a) The following are the functions of central co-operative banks

b) They finance the primary credit societies.c) They accept deposits from the public.d) They provide remittance facilities.e) They grant credit to their customers on the security of first class securities, gold etcf) They act as balancing centers by shifting the excess funds of a surplus primary society

to the defect society.

g) They supervise, inspect and co-ordinate the activities of the primary co-operativesocieties.

There are now 360 district central co-operative banks in India. They lend about rupees 14000

crores annually. The most distressing feature of the functioning of central co-operative banks

is heavy and increasing over due loans.


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NEED FOR THE STUDY:

For any firm it is important to achieve its business objectives and goals, in order to expand

and to diversify the financial resources. Success of a firm depends on the availability of

financial resources and also on how a firm is utilizing its financial resources.

The management uses these tools to evaluate their own efficiency and performance

during a particular year.

In present scenario to judge the exact performance of the management in increasing

their wealth A Study on Performance Analysis at KUCB is very much useful to evaluate

the strength of bank.

Keeping this in the view this study is undertaken to analyze the Performance

Analysis in the Karimnagar Co-operative Urban Bank (KUCB), Karimnagar.

The study is also beneficial to employees and offers motivation by sharing how they

are contributing for the bank growth.

The study on performance analysis of a bank is very essential for taking financial

management decisions like how to manage the finances to achieve the strategic goals and

how to increase the profitability.

This study is also beneficial to top management of the bank by providing relevant

information regarding important aspects like liquidity, annual growth rate, activity and

profitability.

SCOPE OF THE STUDY:

The scope of the study is to collecting financial data published in annual reports and

to analyze the various figures of balances sheets of different years and to compare the

percentage change within those figures and finding the annual growth rate and compounded

annual growth rate.

The study is confined to evaluation of the last 5 years financial annual reports the first

being a part report as the bank was established in the middle of the financial year.


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OBJECTIVES OF THE STUDY:

1) To provide reliable information about changes in growth rates of a Bank that resultfrom the activities.

2) To know the concept of performance analysis.3) To analyze the financial performance of KCUB Ltd. using performance analysis.4) To understand the concept performance analysis of the bank over 5 year period.

5) To draw conclusions and to suggest suitable measures to overcome problems, if any to

improve its performance

RESEARCH METHODOLOGY:

Data is mainly two types they are-

Primary data Secondary data

PRIMARY DATA:

Primary data has been collected by interacting with the accounting department and other

concerned executives of the KCUB Ltd.

SECONDARY DATA:

For the study the data is collected from secondary sources, the major part of data is

contributed by 5 years annual reports of the company and other journals, magazines and

manuals published by Co-Operative Bank. Some of the information related to topic was

gathered from urban bank and regulatory body of Co-Operative bank.

Secondary data is collected by the personal interaction with the employees of the

bank and also the managers. It is published data and already available for use and it saves

time. The secondary data for the project is collected from the profit and loss and balance

sheets of the KCUB (Karimnagar Co-operative Urban Bank), it is collected from the internal

sources of the organization and the study is dependent on secondary data to an extent.


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PERIOD OF STUDY:

To study the ratio analysis of the Karimnagar Co-operative Urban Bank, the

research had chosen five years period from 2006-07 to 2010-11 as period of study. In

the report the financial conduction of the company in all five years of the study period,

was analyzed and presented in the form of statements and tables, accompanies by

respective interpretations.

DATA METHODOLOGY OF STUDY:

The Karimangar Co-operative Urban Bank Limited [KCUB] has been collected

mainly from primary and secondary sources like.

1. The administrative officer of the KCUB

2. The annual report and other reports

3. Discussion with CEO/Manager

LIMITATIONS OF THE STUDY:

1 The study is mainly based on the secondary and primary data was used.2 While computing ratios, averages and percentages the figures are appropriated two

decimal places. Therefore sometimes the total may not exactly tally.

3 The performance shown in the project is limited to the data provided by the bank.Hence, it is limited to information provided by them.

4 Only comparative, performance analysis has been taken for the study as a tool offinancial and no other techniques is used.

5 The study is restricted to financial position of the bank.6 The study is restricted to only five years i.e.,2006-2007 to 2010-2011


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SCHEME OF CHAPTERISATION:

Chapter I

It deals with the introduction of finance, definitions of financial management,

financial services, financial system, about banking and importance of co-operative

banks, need of the study, objectives of the study, scope of the study, research

methodology and limitations of the study.

Chapter II

It includes conceptual frame work and banking system in India, reserve bank

of India, regional rural banks, and types of banks and the concept of performance analysis.

Chapter III

It deals with the introduction of the co-operative banks, profile of Karimnagar

Co-operative Urban Bank and the organization history structure.

Chapter IV

Includes the data analysis and interpretation.

Chapter V

Includes the conclusions and suggestions and bibliography


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BANKING SYSTEM IN INDIA:

Banking system occupies an important place in nations economy. A banking

institution is on dispensable in a modern bank. It plays a pivotal role in the economic

development of a country and forms the core of the money markets in an advanced country.

In India, through the money market is still characterized by the existence of both

organized and unorganized segments, institutions in the organized money.

Market has grown significantly and playing an increasingly important role. Theunorganized sector, comparing to the money lenders and indigenous bankers, caters the needs

of large number of persons especially in the country side. Among the institutions in organized

sector of the money market, commercial banks and co-operative banks have been existence

for the past few decades.

Banks and another financial institutions are a unique set of business firms whose

assets and liabilities, regulatory restrictions, economic functions and operating make them an

important subject of research, particularly in the conditions of the emerging financial sectors

in the EU accession countries from Central and Eastern Europe (CEE). Banks' performance

monitoring, analysis and control needs special analysis in respect to their operation and in

respect to their operation and performance results from the viewpoint of different audiences,

like investors/owners, regulators, customers/clients, and management themselves. Some

historical notes on the development of the Estonian banking system and the capital structure

of banks are presented in this article. Different versions of financial ratio analysis are used for

the bank performance analysis using financial statement items as initial data sources. The

usage of a modified version of DuPont financial ratio analyzes and a novel matrix approach is

discussed in the article. Empirical results of the Estonian commercial banking system

performance analysis are also presented in the article


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NATIONALISATION:

Banks Nationalization in India: Newspaper Clipping, Times of India, July, 20, 1969

Despite the provisions, control and regulations ofReserve Bank of India, banks in

India except the State Bank of India or SBI, continued to be owned and operated by private

persons. By the 1960s, the Indian banking industry had become an important tool to facilitate

the development of the Indian economy. At the same time, it had emerged as a large

employer, and a debate had ensued about the nationalization of the banking industry. Indira

Gandhi, then Prime Minister of India, expressed the intention of the Government of India in

the annual conference of the All India Congress Meeting in a paper entitled "Stray thoughtson Bank Nationalization." The meeting received the paper with enthusiasm.

Thereafter, her move was swift and sudden. The Government of India issued an

ordinance and nationalised the 14 largest commercial banks with effect from the midnight of

July 19, 1969. Jayaprakash Narayan, a national leader of India, described the step as a

"masterstroke of political sagacity." Within two weeks of the issue of the ordinance, the

Parliament passed the Banking Companies (Acquisition and Transfer of Undertaking) Bill,

and it received the presidential approval on 9 August 1969.

A second dose of nationalization of 6 more commercial banks followed in 1980. The

stated reason for the nationalization was to give the government more control of credit

delivery. With the second dose of nationalization, the Government of India controlled around

91% of the banking business of India. Later on, in the year 1993, the government merged

New Bank of India with Punjab National Bank. It was the only merger between nationalized

banks and resulted in the reduction of the number of nationalised banks from 20 to 19. After
http://en.wikipedia.org/wiki/Reserve_Bank_of_Indiahttp://en.wikipedia.org/wiki/State_Bank_of_Indiahttp://en.wikipedia.org/wiki/Indian_economyhttp://en.wikipedia.org/wiki/Indira_Gandhihttp://en.wikipedia.org/wiki/Indira_Gandhihttp://en.wikipedia.org/wiki/Prime_Minister_of_Indiahttp://en.wikipedia.org/wiki/Government_of_Indiahttp://en.wikipedia.org/wiki/Nationalisationhttp://en.wikipedia.org/wiki/Jayaprakash_Narayanhttp://en.wikipedia.org/wiki/Parliament_of_Indiahttp://en.wikipedia.org/wiki/President_of_Indiahttp://en.wikipedia.org/w/index.php?title=New_Bank_of_India&action=edit&redlink=1http://en.wikipedia.org/wiki/Punjab_National_Bankhttp://en.wikipedia.org/wiki/File:Bank_Nationalisation_-_India.JPGhttp://en.wikipedia.org/wiki/Punjab_National_Bankhttp://en.wikipedia.org/w/index.php?title=New_Bank_of_India&action=edit&redlink=1http://en.wikipedia.org/wiki/President_of_Indiahttp://en.wikipedia.org/wiki/Parliament_of_Indiahttp://en.wikipedia.org/wiki/Jayaprakash_Narayanhttp://en.wikipedia.org/wiki/Nationalisationhttp://en.wikipedia.org/wiki/Government_of_Indiahttp://en.wikipedia.org/wiki/Prime_Minister_of_Indiahttp://en.wikipedia.org/wiki/Indira_Gandhihttp://en.wikipedia.org/wiki/Indira_Gandhihttp://en.wikipedia.org/wiki/Indian_economyhttp://en.wikipedia.org/wiki/State_Bank_of_Indiahttp://en.wikipedia.org/wiki/Reserve_Bank_of_India


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this, until the 1990s, the nationalised banks grew at a pace of around 4%, closer to the

average growth rate of the Indian economy.

LIBERALISATION:

In the early 1990s, the then Narasimha Rao government embarked on a policy of

liberalization, licensing a small number of private banks. These came to be known as New

Generation tech-savvy banks, and included Global Trust Bank (the first of such new

generation banks to be set up), which later amalgamated with Oriental Bank of Commerce,

Axis Bank(earlier as UTI Bank), ICICI Bank and HDFC Bank. This move, along with the

rapid growth in the economy of India, revitalized the banking sector in India, which has seen

rapid growth with strong contribution from all the three sectors of banks, namely,

government banks, private banks and foreign banks.

The next stage for the Indian banking has been set up with the proposed relaxation in

the norms for Foreign Direct Investment, where all Foreign Investors in banks may be given

voting rights which could exceed the present cap of 10%,at present it has gone up to 74%

with some restrictions.

The new policy shook the Banking sector in India completely. Bankers, till this time,

were used to the 4-6-4 method (Borrow at 4%; Lend at 6%; Go home at 4) of functioning.

The new wave ushered in a modern outlook and tech-savvy methods of working for

traditional banks.All this led to the retail boom in India. People not just demanded more from

their banks but also received more.

Currently (2010), banking in India is generally fairly mature in terms of supply,

product range and reach-even though reach in rural India still remains a challenge for the

private sector and foreign banks. In terms of quality of assets and capital adequacy, Indian

banks are considered to have clean, strong and transparent balance sheets relative to other

banks in comparable economies in its region. The Reserve Bank of India is an autonomous

body, with minimal pressure from the government. The stated policy of the Bank on the

Indian Rupee is to manage volatility but without any fixed exchange rate-and this has mostly

been true.
http://en.wikipedia.org/wiki/Narasimha_Raohttp://en.wikipedia.org/wiki/Liberalizationhttp://en.wikipedia.org/wiki/Axis_Bankhttp://en.wikipedia.org/wiki/UTI_Bankhttp://en.wikipedia.org/wiki/ICICI_Bankhttp://en.wikipedia.org/wiki/HDFC_Bankhttp://en.wikipedia.org/wiki/Economy_of_Indiahttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Economy_of_Indiahttp://en.wikipedia.org/wiki/HDFC_Bankhttp://en.wikipedia.org/wiki/ICICI_Bankhttp://en.wikipedia.org/wiki/UTI_Bankhttp://en.wikipedia.org/wiki/Axis_Bankhttp://en.wikipedia.org/wiki/Liberalizationhttp://en.wikipedia.org/wiki/Narasimha_Rao


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With the growth in the Indian economy expected to be strong for quite some time-

especially in its services sector-the demand for banking services, especially retail banking,

mortgages and investment services are expected to be strong. One may also expect M&A s,

takeovers, and asset sales.

In March 2006, the Reserve Bank of India allowed Warburg Pincus to increase its

stake in Kotak Mahindra Bank (a private sector bank) to 10%. This is the first time an

investor has been allowed to hold more than 5% in a private sector bank since the RBI

announced norms in 2005 that any stake exceeding 5% in the private sector banks would

need to be vetted by them.

In recent years critics have charged that the non-government owned banks are tooaggressive in their loan recovery efforts in connection with housing, vehicle and personal

loans. There are press reports that the banks' loan recovery efforts have driven defaulting

borrowers to suicide.

ADOPTION OF BANKING TECHNOLOGY:

The IT revolution had a great impact in the Indian banking system. The use of

computers had led to introduction of online banking in India. The use of the modern

innovation and computerization of the banking sector of India has increased many folds after

the economic liberalization of 1991 as the country's banking sector has been exposed to the

world's market. The Indian banks were finding it difficult to compete with the international

banks in terms of the customer service without the use of the information technology and

computers.

Number of branches of scheduled banks of India as of March 2005
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The RBI in 1984 formed Committee on Mechanization in the Banking Industry

(1984) whose chairman was Dr C Rangarajan, Deputy Governor, Reserve Bank of India. The

major recommendations of this committee was introducing MICR Technology in the all the

banks in the metropolis in India. This provided use of standardized cheque forms and

encoders.

In 1988, the RBI set up Committee on Computerization in Banks (1988) headed by

Dr. C.R. Rangarajan which emphasized that settlement operation must be computerized in the

clearing houses of RBI in Bhubaneshwar, Guwahati, Jaipur, Patna and

Thiruvananthapuram.It further stated that there should be National Clearing of inter-city

cheques at Kolkata,Mumbai,Delhi,Chennai and MICR should be made Operational.It also

focused on computerisation of branches and increasing connectivity among branches through

computers.It also suggested modalities for implementing on-line banking.The committee

submitted its reports in 1989 and computerisation began form 1993 with the settlement

between IBA and bank employees' association. IN 1994, Committee on Technology Issues

relating to Payments System, Cheque Clearing and Securities Settlement in the Banking

Industry (1994) was set up with chairman Shri WS Saraf, Executive Director, Reserve Bank

of India. It emphasized on Electronic Funds Transfer (EFT) system, with the BANKNET

communications network as its carrier. It also said that MICR clearing should be set up in all

branches of all banks with more than 100 branches.

Committee for proposing Legislation on Electronic Funds Transfer and other

Electronic Payments (1995) emphasized on EFT system. Electronic banking refers to DOING

BANKING by using technologies like computers, internet and networking, MICR, EFT so as

to increase efficiency, quick service,productivity and transparency in the transaction.

Number of ATMs of different Scheduled Commercial Banks of India as on end March 2005
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The banks in India generate their funds from two types of sources:

Long-Term Sources:

1. Tier one and Tier two Capitals in the form of equity/subordinatedebts/debentures/preference shares.

2. Internal accrual generated out of profits.3. Long-term fixed deposits generated from public and corporate clients, financial

institutions, and mutual funds, etc.

4. Long-term borrowings from financial institutions like NABARD/SIDBI.Short-Term Sources:

1.Call money market, i.e., funds generated among interbanking transactions where there isonline trading of money between bankers.

2.Fixed deposits generated from public and corporate clients, FIs, and MFs, etc.3.Market-linked borrowings from RBI.4.

Sale of liquid certificate deposits in the open market.

5.Borrowing from RBI under Repo (Repurchase option).6.Short and medium-term fixed deposits generated from public and corporate clients,

mutual funds, and financial institutions, etc.

7.Floating in current and saving accounts.8.Short-term borrowings from FIs by way of rated papers placed, etc.

RESERVE BANK OF INDIA:

The central bank plays a key role in the modern banking system. The reserve bank of

India acts as a central bank in our country. It helps in formulating and implementing the

financial policies and acts as an effective string puller of the commercial banks in licensing,

controlling, directing, assisting them. The RBI was established on 1st April 1935 under the


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reserve bank of India act 1934 and it has been acting as central bank of our country. The RBI

was nationalized in 1948.

About reserve bank of India:

On this occasion we have a need to know something about reserve bank of India. As

the central bank of the country the reserve bank of India performs both the traditional

functions of a central bank and a verity of development and promotional functions. The

reserve bank of India act 1934 confers upon it the power to act as note issuing authority,

bankers bank and bankers to the government.

Note issue authority:

The currency of our country consists of one rupee notes and coins issued by the

government of India and bank notes issued by the reserve bank. As required by section 38 of

the reserve.

Bank of India act, government puts into circulation one rupee and notes through

reserve bank only. The reserve bank has the sole right to issue bank notes in India. The notes

issued by the reserve bank and the one rupee notes and coins issued by the government are

unlimited legal tender. Reserve bank also bears the responsibility of exchange notes and coins

to those of other denominations required by the public

.

Banker to government:

The reserve bank of India acts as banker to the central and state governments.

According to section 20, it is obligatory for the bank transact government business including

the management of the public debt of the union section 21 requires the central government on

entrust the bank all its money remittance, exchange and banking transaction in India and in

particular deposit free of interest all is cash balance with the bank. In terms of section 21(A)

the reserve bank performs similar function on behalf of the state governments the bank

entered into agreements with central and state governments fore carrying on the functions. To

conduct ordinary banking business of the central government, the bank is not entitled to an

remuneration, it holds cash balances of the government free of interest. For the management


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of the public debt, the bank is entitled to change a commission. The bank is also required to

maintain currency chests of its issued department at places prescribed by the government and

to maintain sufficient notes and coins therein. The reserve bank is also authorized to make to

the central and state government, ways and means advances which are repayable within 3

months for the date of making the advance. The bank also acts as advised to the government

RBI plays a role of regulator apart from money provider in specific cases:

Right now this seems to be a short-term crisis unless the production figures of the

next month also shows negative trend like it has shown in the month of August @ 1.30%

(very low compared to the previous figures of between a band of 5 to 9%).

If IIP figure goes down continuously for the next 2 to 3 months, we have to assume,

there is a recession in the country. As the service industry may not grow at the volumes

shown previously. The industrial growth is a big hope for the future sustenance of the growth

in India.

Now let us analyze the situation of all these sources in the present scenario for the banks:

A) This is not the right time to generate the funds from long-term sources due to the bad

market scenario, so let us focus on the short-term sources.

B) Call money market is very tight. RBI borrowings and placing short term papers is not

the best way to generate funds as the mutual funds and FIs are facing acute pressure due to

withdrawals from the foreign investors including NRIs.

Hence pressure is on retail deposits and now every bank wants to concentrate on

these as a source. The rates are increasing. This is a very good time to keep money in a 2- to3-year lock deposit with nationalized banks. You may be offered 10.50 to 10.75%. It would

be 0.25-0.50% higher in case of the private/foreign and co-operative banks.

I would like to give all credit to the regulatory system in India, which has withstood to

the acute pressure on banking sector. You would remember the co-operative bank fiasco 3

years back and now foreign and private banks are under scanner. Thanks to the mature

regulatory system, we are relatively safe as far as banking in India is concerned.


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TYPES OF BANKS:

Commercial banks:

Commercial banks perform all kinds of banking business. Its primary function is to

accept deposits from the public and makes the funds available to those who need them. These

banks usually give short term loans and advances. They also render services such as

collection of cheques, safe custody of valuables, remittance facilities etc.

Industrial banks:

Industrial banks are also investmentbanks. They are primarily meant to cater to the

financial needs of industrial undertakings. They provide medium-term and long term credit

to the industries for the purchase of fixed assets.

Central bank: -

A central bank is the apex financial institution in the banking and financial system of a

country. It is regarded as the highest monetary authority in the country. It acts as the leader in

the money market. It supervises controls and regulates the activities of the commercial banks.

Savings bank:

Savings bank collects the small savings of the people. They pool together the scattered

savings of these banks is to encourage the habit of thrift among the people. Hence these

banks impose many restrictions on the withdrawals.

Exchange banks:

Exchange banks mainly deal in foreign exchange. They purchase and sell foreign

currencies and discount foreign bills. They finance foreign trade.

Co-operative banks:

These are a group of financial institutions organized under the provisions of the co-

operative societys act of the states. The main object of these banks is to provide cheap credit

to their members.


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Private Banks:

In every country there are large numbers of private banks. Individuals and firms do

banking business such private banks are also known as indigenous banks in India. Private

Banks also carry trading a part from the banking business.

Regional rural banks:

Regional rural banks were established under regional rural banks act 1975. Rural banks

may be defined as primary banking institutions. It was established to perform the banking

functions with the objective of developing the village areas.

Lead bank:

This bank adopts a district and integrates its schemes with district plans for an

effective distribution of credit along with the expanded banking facilities as per the local

needs. RBI introduced the lead bank scheme in December 1969.

The lead bank co-ordinates the activities of all the credit institutions, co-operative

banks, commercial banks and other in its allotted districts.

REGIONAL RURAL BANKS:

Regional rural banks were established under the regional rural banks act 1975.

Regional rural banks may be defined as primary banking institution. It established to serve a

compact group of villages by performing banking functions with the object of developing

village areas.

Regional rural banks operate in a limited area specified by a notification. Each RRB is

sponsored by a public sector bank. It also helps in recruitment and training of personnel in the

initial phase of the functioning of regional rural bank.

Presently a number of rural banks have gone up to 196 covering 350 districts of 23

states in India.


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Objectives of RRB: -

To meet the needs of the medium and small farmers, agriculture laborers for theoverall development of the villagers.

To liberalize the rural people the clutches of money lenders. To work for the people who are economically and socially backward in their status. To work for the development of agriculture as well as promotion of trade, commerce

and industry.

Functions of RRB:

According to the banking commission the rural banks should perform the following

functions.

Accepting deposits from the customers. Granting loans and advances to the needy rural people. Providing ancillary banking services on par with the commercial banks. Supplying the equipment and inputs to farmers. Helping for the overall development of villages in its area of operation. Providing assistance in the marketing of their products. To provide employment opportunities and encouraging the setting up rural industries.

The regional rural banks came into existence since the middle of seventies. Thus, with

the phenomenal geographical expansion banks and the setting up of the regional rural banks

during the recent past, the organized sector of money market has penetrated into rural areas as

well as to facilitate the banking business and to foster the growth of banking habit, two other

institutions have been set up.

The deposit insurance and credit guarantee corporation of India undertakes the twin

functions of extending the insurance cover to the depositors in bank and projects the interest

of banks by providing guarantee in respect of advances granted by them to the small scale

industries.

Development banking has its genesis in post independence period in India and has

contributed significantly to the industrial growth of the country during the period.

In the field of industrial finance, the Industrial Development Bank of India (IDBI),

setup in 1964 is the apex bank, which undertakes besides direct financing of big industrial


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project, refinancing of term long granted by other financial institutions including the

commercial bank. There are two prominent all-infuse institutions in the field, namely. The

Industrial Finance Corporation of India (IFCI), and the Industrial Credit and Investment

Corporation of India (ICICI). Besides the State Financial Corporations (SFC) and state

industrial development corporations (SID) have been setup to meet the requirements of small

and medium scale industries in the respect state industrial reconstruction bank of India (IRBI)

has been setup to bring back normalcy the industrial units which fall sick. All these

institutions, engaged as they are in the task of development are now designated as

development banks which are distinct from the traditional commercial banks.

Development banking has its genesis in post independence period in India has

contributed significantly to the industrial growth of the country during the period.

For financing agriculture and allied activities in the rural areas, through co-operative

credit societies and central co-operative banks have been participating since long, commercial

banks began their active participation after the nationalization of major banks in 1989. Long a

medium term credit to the agriculturists in being provided by another specialized institution,

namely the land development banks at the district level and state land development banks at

the state level.

National Bank for Agriculture and Rural Development (NABARD) is the full-fledged

apex institution in the field of agriculture and rural development.

With the establishment of export import bank of India (EXIM) on January 1, 1982, a

new APEX BANKhas come into existence in the field of financing the foreign trade of the

country.

Beside, the institutions which are mainly engaged in meeting the credit needs of

various segments of the economy, there are few other institutions, which are essentially

engaged in the business of investing in the corporate and government and semi-corporation of

India (LIC) general insurance corporation of India (GIC) and the unit trust of India channels

them into desirable securities. Hence they are called the investing institutions or institutional

investors.

To facilitate the banking business and to foster the growth of banking habit, two other

institutions have been setup. The deposit insurance and credit guarantee corporation (ECGC)

provide protection to the banks in respect of risks inherent in financing the export trade. With

the financial system may be claimed to have finest setup comparable to any advanced

country.


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payment or a reduction in earnings. The result will be a higher level of problem loans. An

increase in interest rates exposes a bank with a significant concentration in adjustable rate

loans to credit risk. For a bank that is predominately funded with short-term liabilities, a rise

in rates may decrease net interest income at the same time credit quality problems are on the

increase.

DEFINITION OF 'COMPOUND ANNUAL GROWTH RATE - CAGR'

The year-over-year growth rate of an investment over a specified period of time.

The compound annual growth rate is calculated by taking the nth root of the total

percentage growth rate, where n is the number of years in the period being considered.

This can be written as follows:

Credit Risk:

Credit risk is most simply defined as the potential that a bank borrower or

counterparty will fail to meet its obligations in accordance with agreed terms. When this

happens, the bank will experience a loss of some or all of the credit it provided to its

customer. To absorb these losses, banks maintain an allowance for loan and lease losses.

In essence, this allowance can be viewed as a pool of capital specifically set aside to

absorb estimated loan losses. This allowance should be maintained at a level that is adequate

to absorb the estimated amount of probable losses in the institution's loan portfolio.
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CONCLUSION:

A careful review of a bank's financial statements can highlight the key factors that

should be considered before making a trading or investing decision. Investors need to have a

good understanding of the business cycle and the yield curve - both have a major impact on

the economic performance of banks. Interest rate risk and credit risk are the primary factors

to consider as a bank's financial performance follows the yield curve. When it flattens or

becomes inverted a bank's net interest revenue is put under greater pressure. When the yield

curve returns to a more traditional shape, a bank's net interest revenue usually improves.

Credit risk can be the largest contributor to the negative performance of a bank, even causing

it to lose money.
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INTRODUCTION TO URBAN CO-OPERATIVE BANKS:

The urban co-operative banking movement in the country has witnessed a fillip rate of

growth soon after the implementation of the provisions of banking regulation act 1949 to

cooperative I the year 1996.

From over 400 banks from 1st March, 1990. The deposit of these banks have marked

to Rs.50,00,00,000.00 cores, Bangalore city co-operative bank limited is considered to be the

first urban co-operative banks in India.

Urban co-operative Banks have their own specialized clients I the Indian banking

systems. The evaluation of this sector could not be done on the basis of resources mobilized

and advances made but it should be properly judged from the angle has to how many

customers and clients which have been brought in the main banking.

ROLE OF URBAN CO-OPERATIVE BANK:

The term Urban Co-operative Banks (UCBs), though not formally defined, refers to

primary cooperative banks located in urban and semi-urban areas. These banks, till 1996,

were allowed to lend money only for non-agricultural purposes. This distinction does not

hold today. These banks were traditionally cantered around communities, localities work

place groups. They essentially lent to small borrowers and businesses. Today, their scope of

operations has widened considerably.

The origins of the urban cooperative banking movement in India can be traced to the

close of nineteenth century when, inspired by the success of the experiments related to the

cooperative movement in Britain and the cooperative credit movement in Germany such

societies were set up in India. Cooperative societies are based on the principles of

cooperation, - mutual help, democratic decision making and open membership. Cooperatives

represented a new and alternative approach to organization as against proprietary firms,

partnership firms and joint stock companies which represent the dominant form of

commercial organization.


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The Beginnings:

The first known mutual aid society in India was probably the Anyonya Sahakari

Mandali organized in the erstwhile princely State of Baroda in 1889 under the guidance of

Vital Laxman also known as Bhausaheb Kavthekar. Urban co-operative credit societies, in

their formative phase came to be organised on a community basis to meet the consumption

oriented credit needs of their members. Salary earners societies inculcating habits of thrift

and self help played a significant role in popularising the movement, especially amongst the

middle class as well as organized labour. From its origins then to today, the thrust of UCBs,

historically, has been to mobilize savings from the middle and low income urban groups and

purvey credit to their members - many of which belonged to weaker sections.

The enactment of Cooperative Credit Societies Act, 1904, however, gave the real

impetus to the movement. The first urban cooperative credit society was registered in

Canjeevaram (Kanjivaram) in the erstwhile Madras province in October, 1904. Amongst the

prominent credit societies were the Pioneer Urban in Bombay (November 11, 1905), the No.1

Military Accounts Mutual Help Co-operative Credit Society in Poona (January 9, 1906).

Cosmos in Poona (January 18, 1906), Gokak Urban (February 15, 1906) and Belgaum

Pioneer (February 23, 1906) in the Belgaum district, the Kanakavli-Math Co-operative Credit

Society and the Varavade Weavers Urban Credit Society (March 13, 1906) in the South

Ratnagiri (now Sindhudurg) district. The most prominent amongst the early credit societies

was the Bombay Urban Co-operative Credit Society, sponsored by Vithaldas Thackersey and

Lallubhai Samaldas established on January 23, 1906.

The Cooperative Credit Societies Act, 1904 was amended in 1912, with a view to

broad basing it to enable organization of non-credit societies. The Mac lagan Committee of

1915 was appointed to review their performance and suggest measures for strengthening

them. The committee observed that such institutions were eminently suited to cater to the

needs of the lower and middle income strata of society and would inculcate the principles of

banking amongst the middle classes. The committee also felt that the urban cooperative credit

movement was more viable than agricultural credit societies. The recommendations of the

Committee went a long way in establishing the urban cooperative credit movement in its own

right.


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In the present day context, it is of interest to recall that during the banking crisis of

1913-14, when no fewer than 57 joint stock banks collapsed, there was a there was a flight of

deposits from joint stock banks to cooperative urban banks. Mac lagan Committee chronicled

this event thus:

As a matter of fact, the crisis had a contrary effect, and in most provinces, there wa s

a movement to withdraw deposits from non-cooperatives and place them in cooperative

institutions, the distinction between two classes of security being well appreciated and a

preference being given to the latter owing partly to the local character and publicity of

cooperative institutions but mainly, we think, to the connection of Government with

Cooperative movement.

Under State Purview:

The constitutional reforms which led to the passing of the Government of India Act in

1919 transferred the subject of Cooperation from Government of India to the Provincial

Governments. The Government of Bombay passed the first State Cooperative Societies Act

in 1925 which not only gave the movement its size and shape but was a pace setter of

cooperative activities and stressed the basic concept of thrift, self help and mutual aid. Other

States followed. This marked the beginning of the second phase in the history of Cooperative

Credit Institutions.

There was the general realization that urban banks have an important role to play in

economic construction. This was asserted by a host of committees. The Indian Central

Banking Enquiry Committee (1931) felt that urban banks have a duty to help the small

business and middle class people. The Mehta-Bhansali Committee (1939), recommended that

those societies which had fulfilled the criteria of banking should be allowed to work as banksand recommended an Association for these banks. The Co-operative Planning Committee

(1946) went on record to say that urban banks have been the best agencies for small people in

whom Joint stock banks are not generally interested. The Rural Banking Enquiry Committee

(1950), impressed by the low cost of establishment and operations recommended the

establishment of such banks even in places smaller than taluka towns.

The first study of Urban Co-operative Banks was taken up by RBI in the year 1958-

59. The Report published in 1961 acknowledged the widespread and financially sound


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framework of urban co-operative banks; emphasized the need to establish primary urban

cooperative banks in new centers and suggested that State Governments lend active support

to their development. In 1963, Varde Committee recommended that such banks should be

organized at all Urban Centers with a population of 1 lakh or more and not by any single

community or caste. The committee introduced the concept of minimum capital requirement

and the criteria of population for defining the urban centre where UCBs were incorporated.

Duality of Control:

However, concerns regarding the professionalism of urban cooperative banks gave

rise to the view that they should be better regulated. Large cooperative banks with paid-up

share capital and reserves of Rs.1 lakh were brought under the preview of the BankingRegulation Act 1949 with effect from 1st March, 1966 and within the ambit of the Reserve

Banks supervision. This marked the beginning of an era of duality of control over these

banks. Banking related functions (viz. licensing, area of operations, interest rates etc.) were to

be governed by RBI and registration, management, audit and liquidation, etc. governed by

State Governments as per the provisions of respective State Acts. In 1968, UCBS were

extended the benefits of Deposit Insurance.

Towards the late 1960s there was much debate regarding the promotion of the small

scale industries. UCBs came to be seen as important players in this context. The Working

Group on Industrial Financing through Co-operative Banks, (1968 known as Damry Group)

attempted to broaden the scope of activities of urban co-operative banks by recommending

that these banks should finance the small and cottage industries. This was reiterated by the

Banking Commission (1969).

The Madhavdas Committee (1979) evaluated the role played by urban co-operativebanks in greater details and drew a roadmap for their future role recommending support from

RBI and Government in the establishment of such banks in backward areas and prescribing

viability standards.

The Hate Working Group (1981) desired better utilization of banks' surplus funds and

that the percentage of the Cash Reserve Ratio (CRR) & the Statutory Liquidity Ratio (SLR)

of these banks should be brought at par with commercial banks, in a phased manner. While

the Marathe Committee (1992) redefined the viability norms and ushered in the era of


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liberalization, the Madhava Rao Committee (1999) focused on consolidation, control of

sickness, better professional standards in urban co-operative banks and sought to align the

urban banking movement with commercial banks.

A feature of the urban banking movement has been its heterogeneous character and its

uneven geographical spread with most banks concentrated in the states of Gujarat, Karnataka,

Maharashtra, and Tamil Nadu. While most banks are unit banks without any branch network,

some of the large banks have established their presence in many states when at their behest

multi-state banking was allowed in 1985. Some of these banks are also Authorized Dealers in

Foreign Exchange

Recent Developments:

Over the years, primary (urban) cooperative banks have registered a significant

growth in number, size and volume of business handled. As on 31st March, 2003 there were

2,104 UCBs of which 56 were scheduled banks. About 79 percent of these are located in five

states, - Andhra Pradesh, Gujarat, Karnataka, Maharashtra and Tamil Nadu. Recently the

problems faced by a few large UCBs have highlighted some of the difficulties these banks

face and policy Endeavours are geared to consolidating and strengthening this sector and

improving governance.

Co operative Banks in India are registered under the Co-operative Societies Act. The

cooperative bank is also regulated by the RBI. They are governed by the Banking

Regulations Act 1949 and Banking Laws (Co-operative Societies) Act, 1965.

SERVICES OF URBAN CO-OPERATIVE BANKS:

The Urban co-operative banks rendering the following services.

Acceptance of deposits. Sophisticated lending for the promotion of industrial growth worth. Particular references to small-scale industries, trade and professions. Discounting and collecting of cheques and hundies. Provision of safe deposit locket facilities and bank guarantees etc. A few of urban banks have been licensed to deal in foreign exchange.
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OBJECTIVES OF URBAN CO-OPERATIVE THE BANK:

The objectives of the Co-operative urban bank are as follows.

To extend financial help to weaker sections in the society. To encourage small-scale industries. To encourage Self-employment schemes. To encourage small trading people in urban areas. To help the management of the bank for effective management and flow of

co-operative credit in the district.

To help the management of the bank to augment its internal resource. Mobilization of deposits and internal resources for development and diversification of

its business activities into various sectors.

To help the bank to take necessary steps for solving various types of problemsassociated with utilization of loans.

Analysis for taking corrective measure in time. To help the bank to evolve and implement system of receiving the work. To guarantee the loans and advances made to the member societies. To buy, sell or deal with securities, debentures or bonds or scripts. To maintain a library of co-operative and banking literature. To open regional offices, branches or sub- offices with the prior permission of the

registrar both for banking purposes and also the issue and recovery of short term,

medium term and long term loans.

ADVANTAGES OF COOPERATIVES:

Advocates of producer cooperatives claim numerous comparative advantages over

what is generally referred to as a classical firm (CF). The proposed advantages extend to a

host of theoretical issues. Many overlap the separate disciplines of labor economics,

industrial management and organization theory, investment and finance, and property rights

theory.

Academicians have devoted significant amounts of research and analysis to such

issues as:

(1) The absence of"shirking" by workers in producer cooperatives;


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(2) Superior productivity rates that result from the extension of democratic principles into the

cooperative workplace;

(3) The lack of unnecessary supervision due to the "horizontal monitoring" performed by

cooperative members;

(4) The pursuit of cooperative employment and output strategies that is less sensitive to

business cycle fluctuations.

Still other cooperative advocates simply emphasize the overall psychological and

social influence exerted by the set of worker-control parameters. These are thought to have a

transformational quality that converts adversarial relationships common to most CFs into an

atmosphere of cooperation. The logic of cooperative theory unfolds thusly: once worker

members begin to identify their individual and collective efforts with their firm's enhanced

performance, an atmosphere of cooperative problem solving takes root. As a result of this

more communicative workplace, improvements in production methods result from an upward

or horizontal flow of information originating from the shop floor. With heightened

satisfaction spreading throughout its membership, lower worker turnover and absenteeism

result and members build task-specific expertise.

DISADVANTAGES OF COOPERATIVES:

Compared to CFs, producer cooperatives suffer from two interrelated investment

disadvantages. Both are readily acknowledged by most cooperative proponents. The first

concerns the problem of intra-firm finance or underinvestment. This tendency arises when the

disparity between a worker member's expected profit share of income and what they could

earn by investing outside the firm (say, at a bank rate of interest) becomes problematic.

A second, and related, underinvestment point concerns the apprehension of

nonmember financiers to lend to cooperatives. Since they must risk their funds within an

organizational form where they have little control, outside financiers are reluctant to lend

except on terms unfavorable to cooperatives. At the same time cooperative members are

reluctant to borrow on terms exceeding the going interest rate and wary of relinquishing

management control to outside parties who might not share a similar commitment to

cooperative forms of organization.
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COOPERATIVE BANKS IN INDIA FINANCE RURAL AREAS UNDER:

Farming Cattle Milk Hatchery Personal finance

COOPERATIVE BANKS IN INDIA FINANCE URBAN AREAS UNDER:

Self-employment

Industries Small scale units Home finance Consumer finance Personal finance

Private Banks:

In every country there are large numbers of private banks. Individuals and firms dobanking business such private banks are also known as indigenous banks in India. Private

Banks also carry trading a part from the banking business.

Regional rural banks:

Regional rural banks were established under regional rural banks act 1975. Rural

banks may be defined as primary banking institutions. It was established to perform the

banking functions with the objective of developing the village areas.

Lead bank:

This bank adopts a district and integrates its schemes with district plans for an

effective distribution of credit along with the expanded banking facilities as per the local

needs. RBI introduced the lead bank scheme in December 1969. The lead bank co-ordinates

the activities of all the credit institutions, co-operative banks, commercial banks and other in

its allotted districts.
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THE KARIMNAGAR CO-OPERATIVE URBAN BANK LTD.

HISTORY OF ORGANIZATION:

Location:

General location can be defined as a firm located at a place where the inhabitants

are interested in its success of the product can be sold profitably and the operation costs

are minimum. Roper and well-planned location of a firm is an important managerial

decision. The performance of an enterprise is considerably affected by its location.

Unscientific and unplanned location is harmful to the organization .location of the store at a

convenient lace really achieves the customer satisfaction .thus location of a firm is animportant factor for any organization as it has its effect on sales and profitability of particular

firm the KCUB is situated in Karimnagar and is established in the year 1980.

REGISTRATION AND SHARE CAPITAL:

The Karimnagar co-operative urban bank ltd. was registered in 1980 at Karimnagar.

The area of operation of this co-operative is spread over Karimnagar district.

It was registered as primary credit society under Hyderabad co-operative societal Act

XVI of 1952. It was started with a paid up capital of Rs 478295 and authorized share capital.

According to data given by KUUB it is having 10287 members up to 31st march 1995 and

also it has share capital of Rs2654110 up to 31 st march 1995 and in the current year i.e. 31st

March, 2011 it is having 19357 members and also it has share capital of Rs.12887749

The bank is functioning in its own building from 27-12-1981. KCUB is situated in

Karimnagar district itself and its area of operation is revenue district of Karimnagar. KCUB

is located at behind Municipal Corporation near venkateshwara temple Karimnagar.

The Karimnagar co-operative urban bank limited was organized and registered during

the tenure of Sri K.S. Sharma (M.A., M.Sc., I.A.S.,) District Collector, Karimnagar, who was

its founder president. The bank was registered with Regd. No.1123/TD/ on 16-12-1980,

with a membership of 1950 at the time of registration and with a paid up share capital of

Rs.4,74,070/-. The bank has started functioning from 7th May, 1981. Ever since its inception


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of the bank, its membership has increased to 11,102 and with the mere deposits of Rs.5.00

lakhs, and the present deposits position has been increased to Rs.990.00 lakhs.

The bank has constructed its own building at a total cost of Rs.11.79 lakhs in the land

of municipality which was provided by the Govt. The bank is functioning in its own building

from 4-9-1991.

The bank has opened a branch at Jagtial, in the year 6-11-1986 and proposals for opening

another three branches at Godhavarikhani, Metpally and Mankammathota of Karimnagar

town were also submitted to the Reserve Bank of India, during the VII plan period and the

permission is awaited.

It believes in the concept ofONE FOR ALL AND ALL FOR ONE and its logo

(symbol) as HANDSHAKE and it symbolize this.

A HANDSHAKE SYMBOLIZES PROGRESS:

A handshake is all it takes to bring home in the lives of the enthusiastic and ambitious

entrepreneur to bring that ray of hope from behind dark clouds. A handshake that promises a

careful and secure future KCUB ltd. works towards making that handshake possible.

The KCUB ltd. is like mother to a new entrepreneur who encourages the child to take

the first step firmly that is what it does to the new business entrepreneur. Few institutions can

claim the success KCUB ltd. has achieved through is scheme the works on the principle of

brotherhood and humanity; it contributes in realizing he dreams of its members for a quality

life. It shares the problem of shareholders and assists to solve it, be it or marriage in the

family. Every aspect of life is taken care of by the KCUB ltd

.


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SHARE CAPITAL:

The bank has sources for its funds viz.,s own funds and borrowed funds. Own funds

consists of paid up share capital and accumulated profit or retained profit, various forms of

resources created of appropriation of profits. Borrowed funds consist of different types of

deposits accepted from members and non-members.

Normally face value of shares issued by the Bank is Rs.10/- and Rs.5/- for A class

share and B class shares respectively. So that, poor people also can become members of

the bank with rights to attend participates, vote in general body meetings and special body

meetings and to contest for elections.

STATEMENT SHOWING THE MEMBERSHIP FOR LAST FIVE YEARS:

SL.

NOPERIOD MEMBERS SHARECAPITAL

1

2

3

4

5

2006-2007

2007-2008

2008-2009

2009-2010

2010-2011

16019

16327

16801

17050

19357

9599803

11180670

12389558

13131622

12887749

Deposits:The Bank had different types of deposits accepted from the members and non-

members. The deposits are as follows.

Current deposits Saving deposits Fixed deposits Pavani deposits Recurring deposits Maruthi Cash certificates.

The bank has started with mere deposits of Rs.5.00 Lakhs and the percentage of present

position has been increased to Rs.990 Lakhs.


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Investments:

The Karimnagar co-operative urban bank ltd., had invested an amount of Rs.188.10

lakhs in Karimnagar District co-operative Central Bank and Commercial banks in Andhra

Pradesh State Co-operative Bank, Hyderabad is Rs.28.37 lakhs and in their co-operative

Bank Rs.28.37 and in other co-operative Banks Rs.2.65 lakhs. The bank has total deposits in

various banks in Rs.219.12 Lashes.

Loans and advances:

Loans and advantages in the form of cash in current account may be granted to

members on security or without security as prescribed by the board and RBI from time to

time.

The bank has made advances under various types of loans such as

Personal Loans Under Govt. Sponsored schemes House mortgage loans Gold Loans Normal loans (against the deposits) Staff Loans Cash credit to D.D.C. Store.

Values of KCUB:

1. Self help.

2. Self-responsibility.

3. Democracy.

4. Equality. Solidity

KCUB believes in ethical values -

Honesty Openness Social Responsibility Care for its members


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Functions of KCUB:

They finance the primary credit societies. They accept the deposits from the public. They provide remittance facilities. They grant credit to their customers on the security of first securities, gold etc. They act as balancing centers by shifting the excess funds of a surplus primary society

to the defect society.

They supervise, inspect and coordinate the activities of primary co-operative societies.

There are now 360 District Co-operative banks in India. They lend about 64000

Crores annually. The most distressing feature of the functioning of the Co-operative Bank is

heavy and increasing over due loans.

FINANCE:

The bank derives its working capital from the following sources-

1. Share capital

2. Deposits

3. Government loans and subsidies

4. Borrowing from the bank

The major part of the working capital is affected by the bank. Till 1969-70 the

Karimnagar dist co-operative central bank was the financier at which time the reserve bank of

India decided to enlist the finance of commercial banks for the co-operative sector. Since,

then the state bank of Hyderabad has been the financial to the bankThe bank has issuing demand drafts all over India with tie up arrangements with the

axis bank and increased income under non-fund business. Presently the bank is advancing

loans by pledging gold ornaments for commercial as well as agriculture purpose through 10

branches in the district.


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Rate of Interest for Deposits:

Types and period of Deposits Rate of Interest period

Saving Deposits 3.5%

Current Deposits 0.5%

36-46 days below 4.0%

46 days less than 90 days 5.25%

91 days to 179 days 6.00%

180days and above but less than 1 years 7.5%

1 years and above but less than 2 years 8.0%

2 years and above but less than 3 years 8.5%

3 years and above 8.8.0%

F.D. Senior 0.50%(more)

Rate of interest for loans:

Types Loans Rate of interest

All types of Loan 18.00%

Gold jewelry Loan 14.00%

The above table comprises the information of rates of interest being offered customs

on various depositing in urban cooperative Bank, Karimnagar. The data presented in the able

shows that the rate of interest would be highs as the period of deposing are longer the date in

the table also reveal that the bank is offering high rate of interest i.e. 14% compares to public

sector banks i.e. 12.5%. The increased rates provide by the Karimnagar Cooperative Urban

Bank ltd. is to increasing the deposits of Urban Bank.

Investments in others:

The Karimnagar Co-operative Urban Bank Limited thus invested an amount of

Rs.316.22 lakhs in Government of India and securities.

The bank has invested an amount of Rs.5.10 lakhs in Government of India Securities

up to 2018 at rate of interest @ 6.25%.


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BANK MEMBERS:

1) Sri Karra rajashekar garu President2) Sri MD. Samiyoddin garu Vice president3) Sri E. Laxman garu Director4) Smt Varala Jyothi garu Director5) Sri Dhesha vedadri garu Director6) Sri Anarasu kumar Director7) Sri K. Ravi garu Director8) Sri Sarilla. Prasad garu Director9) Sri Vazeer. Ahmad garu Director10)Sri Tatikonda. Baskar garu Director11)Sri Basetti. Kishan garu Director12)Sri C. rajireddy garu Co-option member13)Sri K. venkateswar garu Co-option member14)Sri GT. Venkatreddy garu CEO

Senior Advocate Sri CH. Mutyam rao garu (BA,LLB) Charted Accountant Sri E. Rajeswar rao garu (CA) Valuation Engineer Sri Kola Annareddy garu (BE) Valuation Engineer Sri S. Baravi sharma garu (BE. civil) Gold Checker Sri T. KanakachariAnd accountant 01, assistant accountants 02, cashiers 03, counter clerks 11, typists 01,

attainders 04, watchmens 02, security guards 01, callboy 01.


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Table 4.1

PAID-UP SHARE CAPITAL

INTERPRETATION:

The annual growth rate of the paid-up share capital for five year period i.e., from 2006-07to 2010-11 of KCUB continuously decreasing.

During the period 2010-2011 the annual growth as became negative i.e., -1.86% From the study it is observed that in the year 2007-08 the annual growth rate is high i.e.,

16.47%.

The absolute value of the paid up share capital is decreased in the year 2010-2011 It isobserved that the compounded annual growth rate is of paid-up share capital of KCUB is

6.07%.

0.002000000.00

4000000.00

6000000.00

8000000.00

10000000.00

12000000.00

14000000.00

2006-07 2007-08 2008-09 2009-10 2010-11

Paid

up-sharecapital

(inRs.)

Years

PAID- UP SHARE CAPITAL

YEAR PAID UP SHARE CAPITAL(in Rs.)

ANNUAL GROWTH RATE(in %)

2006-07 9599803.00

2007-08 11180670.00 16.47

2008-09 12389557.00 10.81

2009-10 13131622.00 5.99

2010-11 12887749.00 -1.86

COMPOUNDED ANNUAL GROWTH RATE (in %)6.07


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Table 4.3

SAVINGS DEPOSITS

YEARSAVINGS DEPOSITS

(in Rs.)

ANNUAL GROWTH RATE

(In %)

2006-07 31055700.78

2007-08 39662259.33 27.71

2008-09 42211992.29 6.43

2009-10 49480182.17 17.22

2010-11 56025257.04 13.23


INTREPRETATION:

In evaluating the performance of the savings deposits in KCUB of last five years(2006-07 to 2010-11) the annual growth rate is in fluctuating trend.

In the year 2008-09 the growth rate is very less when compared to other years i.e.,6.43% and in the year 2007-08 the growth rate is 27.71%.

The absolute value of the savings deposits is continuously increasing shown in thegraph clearly.

The compounded annual growth rate of savings deposits for five year period is12.52%

0

10000000

20000000

30000000

40000000

50000000

60000000

2006-07 2007-08 2008-09 2009-10 2010-11

SavingsDeposits

(inRs.)

Years

SAVINGS DEPOSITS


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Table 4.4

RECURRING DEPOSITS

YEARRECURRING DEPOSITS

(in Rs.)

ANNUAL GROWTH RATE

(In %)2006-07 2129173.60

2007-08 2383157.60 11.93

2008-09 2300460.60 -3.47

2009-10 2870689.61 24.79

2010-11 3192806.00 11.22


INTERPRETATION:

In analyzing the performance of recurring deposits the annual growth rate for the fiveyear period (2006-2007 to 2010-2011) the rate is in fluctuating trend i.e., in increasing

and decreasing trend.

During the period 2008-09 the growth rate of recurring deposits are in negative modei.e., -3.47% and in the year 2009-10 the growth rate is high i.e., 24.79%.

The absolute value of recurring deposits in the current year (2010-11) is increasedwhen compared to the previous year.

The compounded annual growth rate of recurring deposits of KCUB is -8.44%

0.00

500000.00

1000000.00

1500000.00

2000000.00

2500000.00

3000000.00

3500000.00

2006-07 2007-08 2008-09 2009-10 2010-11

Recurringdeposits

(inRs.)

Years

RECURRING DEPOSITS


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Table 4.6

SUNDRY CREDITORS

YEARSUNDRY CREDITORS

(in Rs.)

ANNUAL GROWTH RATE

(in %)2006-07 3752559.95

2007-08 3207588.45 -14.52

2008-09 3670993.95 14.45

2009-10 3885342.25 5.84

2010-11 3501255.75 -9.89

COMPOUNDED ANNUAL GROWTH RATE (in %)-1.38

INTERPRETATION:

In analyzing the performance of sundry creditors of KCUB the annual growth rate forfive year period i.e., from2006-2007 to 2010-2011 the rate is in increasing and

decreasing trend.

During the period 2008-2009 the growth rate is increased to an extent i.e., 14.45% andin the period 2010-2011 it has become negative i.e.,-9.89% which is a quite

satisfactory performance.

The absolute value of the sundry creditors is decreased when compared to previousyear.

The compounded annual growth rate of sundry creditors for a five year period is -1.38%.

0.00

1000000.00

2000000.00

3000000.00

4000000.00

5000000.00

2006-07 2007-08 2008-09 2009-10 2010-11

SundryCreditors

(inRs.)

Years

SUNDRY CREDITORS


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Table 4.7

DEPRECIATION

YEAR

DEPRECIATION

(in Rs.)

ANNUAL GROWTH RATE

(in %)

2006-07 1408313.24

2007-08 1531704.14 8.76

2008-09 1667685.14 8.88

2009-10 2039078.13 22.27

2010-11 2424674.33 18.91


INTERPRETATION:

It is observed that the annual growth rate of depreciation for a five year period i.e.,from2006-2007 to 2010-2011 is increased to an extent and decreased later.

The amount of the depreciation of KCUB for a five year period is increasingcontinuously which is shown in the graph clearly.

The annual growth rate of depreciation is high in the year 2009-10 i.e.,22.27% andless in the year 2008-09 is 8.88%

The compounded growth rate of depreciation for a five year period is 11.48%

0.00

500000.00

1000000.00

1500000.00

2000000.00

2500000.00

3000000.00

2006-07 2007-08 2008-09 2009-10 2010-11

Depreciation

(inRs.)

Years

DEPRECIATION


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Table 4.8

RESERVE FUND

YEARRESERVES FUND

(in Rs.)

ANNUAL GROWTH RATE

(in %)

2006-07 2949417.76

2007-08 2976497.61 0.92

2008-09 2976497.61 0.00

2009-10 2976497.61 0.00

2010-11 6390860.28 114.71


INTERPRETATION:

It is observed that the annual growth rate of the reserve fund for a five year period i.e.,from2006-2007 to 2010-2011 of KCUB is increased to a great extent i.e.,114.71%

even there is zero growth rate in the previous year.

By observing the graph which is shown above, the value of the reserve fund of KCUBis increased to a great level.

The compounded annual growth rate of reserve fund for a five year period of KCUB is16.67%.

0.00

2000000.00

4000000.00

6000000.00

8000000.00

2006-07 2007-08 2008-09 2009-10 2010-11

ReserveFund

(inRs.)

Years

RESERVES FUND


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Table 4.11

CASH ON HAND

YEARCASH ON HAND

(in Rs.)

ANNUAL GROWTH RATE

(in %)2006-07 2874623.94

2007-08 2846093.69 -0.99

2008-09 7784943.52 173.53

2009-10 4631508.11 -40.51

2010-11 5253268.00 13.42


INTERPRETATION:

The annual growth rate of the cash on hand for five years i.e., from 2006-2007 to2010-2011 of KCUB is fluctuating trend.

In the year 2008-2009 the absolute value and the growth rate is increased to a greatextent respectively.

The compounded annual growth rate of cash on hand for five years is 12.82%. In the current financial year the value of cash on hand is decreased shown in the

graph.

0.00

2000000.00

4000000.00

6000000.00

8000000.00

10000000.00

2006-07 2007-08 2008-09 2009-10 2010-11

Cashonhand

(inRs.)

Years

CASH ON HAND


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Table 4.12

INVESTMENTS

YEARINVESTMENTS

(in Rs.)

ANNUAL GROWTH RATE

(in %)2006-07 48624476.61

2007-08 66218329.61 36.18

2008-09 81698353.61 23.38

2009-10 146359766.61 79.15

2010-11 208736589.39 42.62


INTERPRETATION:

The performance of investments of KCUB for five year period is from 2006-07 to2010-11 is healthy; the annual growth rate is in fluctuating trend i.e., increasing anddecreasing trend.

The absolute value of the investments is continuously increasing and in the currentfinancial year i.e., 2010-2011it is registered as highest which is clearly shown in the

graph above.

From the study it is observed that that the growth rate of investments in the year 2009-10 is registered as very high i.e., 79.15%

The compounded annual growth rate of investments of KCUB for five year period(2006-07 to 2010-11) is 33.83%.

0.00

50000000.00

performance analysis of the nationalised banks selected

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