SWATI SAHAY

A Summer PROJECT REPORT ON

WORKING CAPITAL IN ICICI BANK OF INDIA In Partial Fulfillment of the Post Graduate Diploma in Management RCMA, Bhubaneswar (Batch- 2010-12)

SUBMITTED TO
FACULTY GUIDE

SUBMITTED BY SWATI

SAHAY
Mr. R.K.MISHRA REG NO:- 1001247129 LECTUER IN FINANCE RCMA (BHUBANESWAR) CORPORATE GUIDE:Mr.RAJESH SRIVASTAV (MANAGER IN FINANCE) ICICI Bank, PATNA

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Plot No. GD 2/12 & 13, Chakadola Vihar, Chandrasekharpur, Bhubaneswar 751023, Odisha-India.

PREFACE
MANAGEMENT HAS TWO FACES: ONE IS THEORETICAL AND OTHER IS PRACTICAL ASPECT.THE THEORETICAL ASPECT OF MANAGEMENT ,WE LEARN AT OUR INSTITUTE AND THE PRACTICAL ASPECT IS PROVIDED IN FORM OF SUMMER INTERNSHIP.

THE MAIN IDEA BEHIND THE INTERNSHIP IS TO BRING A MANAGEMENT STUDENT TO THE ACTUAL ENVIRONMENT OF THE BUSINESS SCENARIO, SO THAT HE IS ABLE TO JUDGE THE THEORETICAL AND PRACTICAL ASPECTS AND KNOW THE DIFFERENCE BETWEEN THE TWO. IT ALSO HELPS TO HAVE A GLIMPSE OF A CORPORATION IN WAY OF PRACTICAL TRAINING BEFORE FINALLY MOVING INTO THE CORPORATE WORLD AND PROFESSIONALISM.

THE INTERNSHIP AT ICICI BANK LIMITED WAS REALLY A GREAT OPPORTUNITY FOR ME TO LEARN ABOUT THE CORPORATE WORLD. THE STUDY OF WORKING CAPITAL MANAGEMENT IS DIRECTED TOWARDS REPORTING THE FACTS GATHERED FROM THE SECONDARY DATA. THE REMAINING PARTS DEALS WITH THE OUTCOME TO COMPLETE THE STUDY.

I HOPE MY STUDY WILL HELP THE ORGANIZATION TO TAKE PROPER MARKETING STRATEGIES TO CONTROL THE OPERATIONS.IF MY STUDY CAN HELP PEOPLE TO GO FOR FURTHER RESEARCH IN THIS FIELD THAN MY CHERISH DESIRE WILL BE FULFILLED.IN THIS STUDY, EFFORTS HAVE BEEN MADE TO PREPARE THE REPORTS AS JUDICIALLY AS

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POSSIBLE.ERRORS &OMISSION,IF ANY MAY KINDLY BE TAKEN AS UNINTENTIONAL & BE PARDONED.

ACKNOWLWLEDGEMENT
IF WORDS ARE CONSIDERED TO BE SIGNS OF GRATITUDE THEN LET THESE WORDS CONVEY THE VERY SAME MY SINCERE GRATITUDE TO ICICI BANK FOR PROVIDING ME WITH AN OPPORTUNITY TO WORK WITH BANK AND GIVING NECESSARY DIRECTIONS ON DOING THIS PROJECT TO THE BEST OF MY ABILITIES.

I AM HIGHLY INDEBTED TO MR. RAJESH SRIVASTAV, BRANCH MANAGER, WHO HAS PROVIDED ME WITH THE NECESSARY INFORMATION AND ALSO FOR THE SUPPORT EXTENDED OUT TO ME IN THE COMPLETION OF THIS REPORT AND HIS VALUABLE SUGGESTION AND COMMENTS ON BRINGING OUT THIS REPORT IN THE BEST WAY POSSIBLE.

I AM ALSO OBLIGED DR.PRABIR PAL (DIRECTOR OF

RCMA), DR.

SUJATA MANGARAJ (DEAN OF M.B.A. DEPARTMENT RCMA) & PROF. RAMAKRISHNA MISHRA WHO INSPIRED TO GO AHEAD WITH FULFILLING THE PROJECT REPORT .

I EXPRESS MY GRATITUDE TOWARDS EMPLOYEE OF ICICI BANK, THOSE WHO HAVE HELPED ME DIRECTLY OR INDIRECTLY IN COMPLETING THE TRAINING
SWATI SAHAY

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PGDM (2010-2012) ROLL NO-1001247129

CERTIFICATE
THIS IS TO CERTIFY THAT THE PROJECT ENTITLED WORKING CAPITAL MANAGEMENT OF ICICI BANK OF LIMITED HAS BEEN CARRIED OUT BY MISS. SWATI SAHAY HAVING REGISTRATION NO-1001247129 FROM 31ST MAY TO 7TH JULY 2011, UNDER MY SUPERVISION IN PARTIAL FULFILLMENT OF HER PGDM 2010-2012 AT REGIONAL COLLEGE OF MANAGEMENT (AUTUNOMOUS) ,BHUBANESWAR. I AM SATISFIED WITH HIS SINCERE PERFORMANCE AND STUDY CONDUCTED BY HER IN ICICI BANK OF LIMITED. I RECOMMEND SUBMITTING THE PROJECT REPORT. I WISH HIM ALL SUCCESS IN LIFE. THIS IS ALSO CERTIFIED THAT THE PROJECT WORK IS ORIGINAL AND HAS NOT BEEN SUBMITTED TO ANY OTHER PLACE.

DATE: R.K. MISHRA FACULTY IN FINANCE RCMA(BHUBANESWAR)

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DECLARATION

I HEREBY DECLARE THAT THE FOLLOWING DOCUMENTED PROJECT REPORT TITLED WORKING CAPITAL MANAGEMENT IN BANKING SECTOR" IS AN AUTHENTIC WORK DONE BY ME AS A PART OF MY STUDY ON FINANCE. I ALSO FURTHER STATE THAT THE PROJECT HAS BEEN PREPARED BY MY OWN WITH THE SECONDARY DATA PROVIDED IN THE REPORTS OF THE COMPANY, WHICH WERE ESSENTIAL FOR THE COMPLETION OF THE PROJECT. THE PROJECT WAS UNDERTAKEN AS A PART OF THE COURSE CURRICULUM OF PGDM PROGRAMME, RCMA,BHUBANESWAR. THIS HAS NOT BEEN SUBMITTED TO ANY OTHER EXAMINATION BODY EARLIER.

SWATI SAHAY

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INDEX
CONTENTS PAGE NO.

1. EXECUTIVE SUMMARY .. 7. 2. INTRODUCTION TO INDUSTRY 11. 3. COMPANY PROFILE31. 3.1 PRODUCTS AND SERVICES. 42 3.2 SWOT ANLYSIS 45 3.3 FINANCIAL STATEMENT. 47 4. REVIEW OF LITERATURE 4.1 WORKING CAPITAL OVERVIEW...51 4.2 CASH MANAGEMENT 56 5. RATIO ANALYSIS66 6. FINDINGS AND SUGGESSTION ...78 7. CONCLUSION.. 81 8. BIBILOGRAPHY...82

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EXECUTIVE SUMMARY

INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA BANK (ICICI) IS THE LEADING PRIVATE BANK IN INDIA. ESTABLISHED IN 1955(AS INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA).1994, ICICI ESTABLISHED BANKING CORPORATION AS A BANK SUBSIDIARY FORMERLY INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA. LATER ICICI BANKING CORPORATION RENAMED AS ICICI BANK LIMITED. ICICI BANKS EQUITY SHARE IS LISTED IN NSE AND BSE, AND ITS AMERICAN DEPOSITORY RECEIPTS ARE LISTED IN NEW YORK STOCK EXCHANGE. ICICI BANKS IS INDIA SECOND LARGEST BANK WITH TOTAL ASSETS OF RS. 4,062.34 BILLION (US$ 91 BILLION) AT MARCH 31, 2011 AND PROFIT AFTER TAX RS. 51.51 BILLION (US$ 1,155 MILLION) FOR THE YEAR ENDED MARCH 31, 2011. THE BANK HAS A NETWORK OF 2,543 BRANCHES AND ABOUT 7,037 ATMS IN INDIA, AND HAS A PRESENCE IN 19 COUNTRIES, INCLUDING INDIA. ICICI BANK IS LARGEST ISSUER OF CREDIT CARD IN INDIA. THE BANK IS EXPANDING RAPIDLY IN OVERSEAS MARKETS. IT HAS OPERATIONS IN THE UK, HONG KONG AND CANADA. IT ACQUIRED A SMALL BANK IN RUSSIA RECENTLY. IT HAS TIE-UPS WITH MAJOR BANKS IN THE US AND CHINA. THE BANK IS AGGRESSIVELY TARGETING THE NRI POPULATION FOR EXPANDING ITS BUSINESS. IT ALREADY OFFERS MONEY TRANSFER FACILITIES TO INDIA FROM MOST MAJOR COUNTRIES ACROSS THE GLOBE. ICICI ALONG WITH UTI SETS UP CREDIT RATING INFORMATION SERVICES OF INDIA

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LIMITED, (CRISIL) INDIA'S FIRST PROFESSIONAL CREDIT RATING AGENCY THE WORKING CAPITAL RATIO IS CALCULATED AS: POSITIVE WORKING CAPITAL MEANS THAT THE COMPANY IS ABLE TO PAY OFF ITS SHORT-TERM LIABILITIES. NEGATIVE WORKING CAPITAL MEANS THAT A COMPANY CURRENTLY IS UNABLE TO MEET ITS SHORTTERM LIABILITIES WITH ITS CURRENT ASSETS (CASH, ACCOUNTS RECEIVABLE AND INVENTORY).WORKING CAPITAL ALSO GIVES INVESTORS AN IDEA OF THE COMPANYS UNDERLYING OPERATIONAL EFFICIENCY. MONEY THAT IS TIED UP IN INVENTORY OR MONEY THAT CUSTOMERS STILL OWE TO THE COMPANY CANNOT BE USED TO PAY OFF ANY OF THE COMPANYS OBLIGATIONS. TO MEASURE EFFICIENCY WE HAVE USED RATIO ANALYSIS AS A TECHNIQUE AND THE MAIN RATIO WE HAVE USED ARE LIQUIDITY RATIO AND ACTIVITIES RATIO. ONE MORE TOOL WE HAVE USED IS CALCULATION OF OPERATING CYCLE WHICH SHOWS HOW EFFECTIVELY THE FIRM IS USING ITS RESOURCES OR HOW MUCH TIME ITS TAKE TO CONVERT ITS INVESTMENT BACK INTO CASH.

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OBJECTIVE OF STUDY
TO FIND OUT THE EFFICIENCY OF WORKING CPITAL

MANAGEMENT.

TO HAVE A PRACTICAL EXPERIENCE OF THE FUNCTIONING OF THE FINANCE DEPARTMENT OF A BANKING COMPANY.

TO STUDY HOW WORKING CAPITAL MANAGEMENT PRACTICES PLAYS AN IMPORTANT ROLE IN SUPPORTING OTHER ACTIVITIES OF AN BANKING INDUSTRY.

TO GAIN FAMILIARITY WITH THE VARIOUS COMPONENTS OF WORKING CAPITAL IN ICICI BANK OF INDIA.

TO FIND OUT THE DIFFERENCE BETWEEN THE THEORETICAL AND PRACTICAL ASPECT OF WORKING CAPITAL MANAGEMENT.

TO STUDY AND COME OUT WITH ANY SOLUTION FOR IMPROVEMENT OF WORKING CAPITAL MANAGEMENT AT ICICI BANK OF INDIA.

TO KNOW THE LIQUIDITY POSITION OF THE COMPANY WITH THE HELP OF CURRENT RATIO.

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METHODOLOGY
THE DATA WHICH I HAVE COLLECTEDFOR MAKING THIS PROJECT IS COMBINATION OF BOTH PRIMARY AND SECONDARY DATA. PRIMARY DATA:

This data had been collected through meetings and interviews with various managers and employees of the finance department of ICICI Bank Of India. Data are also collected through telephone conversations.

SECONDARY DATA:

Apart from the primary data certain secondary data were required for this project. Following are the sources of secondary data: Annual reports Cost & budget reports Creditors reports Debtors reports
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Inventory reports Cash reports

INTRODUCTION
INTRODUCTION TO BANKING INDUSTRY
BANKS ARE IN THE BUSINESS OF ACCEPTING DEPOSITS FOR THE PURPOSE OF LENDING. THEY ACT AS FINANCIAL INTERMEDIARIES BETWEEN DEPOSITORS WITH SURPLUS FUNDS AND BORROWERS WHO ARE IN NEED OF FUNDS. BANKS OCCUPY A PIVOTAL PLACE IN THE PAYMENT SYSTEM FOR GOVERNMENT, BUSINESS AND HOUSEHOLDS. THUS, THEY PLAY A VITAL ROLE IN THE ECONOMIC AND FINANCIAL LIFE OF COUNTRY. THE BANKING SECTOR IN THE COUNTRY HAS UNDERGONE A METAMORPHIC PERSUADE THE POLICIES OF INTEREST RATE

DEREGULATION AND FINANCIAL LIBERALIZATION IN A BID TO SUPPLEMENT THE GOVERNMENT POLICIES OF ECONOMIC

LIBERALIZATION.

THE MOST IMPORTANT CHANGE THAT HAS

OVERTAKEN THE NATIONS BANKING INDUSTRY, RELATES TO THE FACT THAT THE COMPETITIVE FORCES ARE SOUGHT TO BE

INTRODUCED CONSCIOUSLY IN THE FINANCIAL SERVICE SECTOR WIDE

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TO FACILITATE THE ENTRY OF FOREIGN BANKS AND NEW PRIVATE SECTOR BANKS. AFTER THE NATIONALIZATION OF 14 MAJOR COMMERCIAL BANKS IN THE YEAR 1969, NO NEW PRIVATE BANKS WERE LICENSED BY RBI IN THE COUNTRY THOUGH THERE WAS NO LEGAL BANK ON THE ENTRY OF PRIVATE SECTOR BANKS. THE NARASIMHAM COMMITTEE REPORT OF 1991, HAS ENVISAGED A LARGER ROLE FOR PRIVATE SECTOR BANKS.

HISTORICAL OF BANKING IN INDIA WITHOUT A SOUND AND EFFECTIVE BANKING SYSTEM, INDIA CANNOT HAVE A HEALTHY ECONOMY. THE BANKING SYSTEM OF INDIA SHOULD NOT ONLY BE HASSLE FREE BUT IT SHOULD BE ABLE TO MEET NEW CHALLENGES POSED BY THE TECHNOLOGY AND ANY OTHER EXTERNAL AND INTERNAL FACTORS. .

FOR THE PAST THREE DECADES INDIA'S BANKING SYSTEM HAS SEVERAL OUTSTANDING ACHIEVEMENTS TO ITS CREDIT. THE MOST STRIKING IS ITS EXTENSIVE REACH. IT IS NO LONGER CONFINED TO ONLY METROPOLITANS OR COSMOPOLITANS IN INDIA. IN FACT, INDIAN BANKING SYSTEM HAS REACHED EVEN TO THE REMOTE CORNERS OF THE COUNTRY. THIS IS ONE OF THE MAIN REASONS OF INDIA'S GROWTH PROCESS.
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NOT LONG AGO, AN ACCOUNT HOLDER HAD TO WAIT FOR HOURS AT THE BANK COUNTERS FOR GETTING A DRAFT OR FOR WITHDRAWING HIS OWN MONEY. TODAY, HE HAS A CHOICE. GONE ARE DAYS WHEN THE MOST EFFICIENT BANK TRANSFERRED MONEY FROM ONE BRANCH TO OTHER IN TWO DAYS. NOW IT IS SIMPLE AS INSTANT MESSAGING OR DIAL A PIZZA. MONEY HAS BECOME THE ORDER OF THE DAY.

THE

FIRST

BANK

IN

INDIA,

THOUGH

CONSERVATIVE,

WAS

ESTABLISHED IN 1786. FROM 1786 TILL TODAY, THE JOURNEY OF INDIAN BANKING SYSTEM CAN BE SEGREGATED INTO THREE DISTINCT PHASES. THEY ARE AS MENTIONED BELOW: EARLY PHASE FROM 1786 TO 1969 OF INDIAN BANKS NATIONALIZATION OF INDIAN BANKS AND UP TO 1991 PRIOR TO INDIAN BANKING SECTOR REFORMS. PHASE I: .

THE GENERAL BANK OF INDIA WAS SET UP IN THE YEAR 1786. NEXT BANK OF HINDUSTAN AND BENGAL BANK. THE EAST INDIA COMPANY ESTABLISHED BANK OF BENGAL (1809), BANK OF BOMBAY (1840) AND BANK OF MADRAS (1843) AS INDEPENDENT UNITS AND CALLED IT

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PRESIDENCY BANKS. THESE THREE BANKS WERE AMALGAMATED IN 1920 AND IMPERIAL BANK OF INDIA WAS ESTABLISHED WHICH STARTED AS PRIVATE SHAREHOLDERS BANKS.

IN 1865 ALLAHABAD BANK WAS ESTABLISHED AND FIRST TIME EXCLUSIVELY BY INDIANS, PUNJAB NATIONAL BANK LTD. WAS SET UP IN 1894 WITH HEADQUARTERS AT LAHORE. BETWEEN 1906 AND 1913, BANK OF INDIA, CENTRAL BANK OF INDIA, BANK OF BARODA, CANADA BANK, INDIAN BANK, AND BANK OF MYSORE WERE SET UP. RESERVE BANK OF INDIA CAME IN 1935.

DURING THE FIRST PHASE THE GROWTH WAS VERY SLOW AND BANKS ALSO EXPERIENCED PERIODIC FAILURES BETWEEN 1913 AND 1948. THERE WERE APPROXIMATELY 1100 BANKS, MOSTLY SMALL. PHASE II: .

GOVERNMENT TOOK MAJOR STEPS IN THIS INDIAN BANKING SECTOR REFORM AFTER INDEPENDENCE. IN 1955, IT NATIONALIZED IMPERIAL BANK OF INDIA WITH EXTENSIVE BANKING FACILITIES ON A LARGE SCALE ESPECIALLY IN RURAL AND SEMI-URBAN AREAS. IT FORMED STATE BANK OF INDIA TO ACT AS THE PRINCIPAL AGENT OF RBI AND TO HANDLE BANKING TRANSACTIONS OF THE UNION AND STATE GOVERNMENTS ALL OVER THE COUNTRY.
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SEVEN BANKS FORMING SUBSIDIARY OF STATE BANK OF INDIA WAS NATIONALIZED IN 1960 ON 19TH JULY, 1969, MAJOR PROCESS OF NATIONALIZATION WAS CARRIED OUT. IT WAS THE EFFORT OF THE THEN PRIME MINISTER OF INDIA, MRS. INDIRA GANDHI. 14 MAJOR COMMERCIAL BANKS IN THE COUNTRY WERE NATIONALIZED.

THE FOLLOWING ARE THE STEPS TAKEN BY THE GOVERNMENT OF INDIA TO REGULATE BANKING INSTITUTIONS IN THE COUNTRY: 1949: ENACTMENT OF BANKING REGULATION ACT. 1955: NATIONALIZATION OF STATE BANK OF INDIA. 1959: NATIONALIZATION OF SBI SUBSIDIARIES. 1961: INSURANCE COVER EXTENDED TO DEPOSITS. 1969: NATIONALIZATION OF 14 MAJOR BANKS. 1971: CREATION OF CREDIT GUARANTEE CORPORATION. 1975: CREATION OF REGIONAL RURAL BANKS. 1980: NATIONALIZATION OF SEVEN BANKS WITH DEPOSITS OVER 200 CRORE. PHASE III: .

THIS PHASE HAS INTRODUCED MANY MORE PRODUCTS AND FACILITIES

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IN THE BANKING SECTOR IN ITS REFORMS MEASURE. IN 1991, UNDER THE CHAIRMANSHIP OF M NARASIMHAM, A COMMITTEE WAS SET UP BY HIS NAME WHICH WORKED FOR THE LIBERALIZATION OF BANKING PRACTICES.

THE COUNTRY IS FLOODED WITH FOREIGN BANKS AND THEIR ATM STATIONS. EFFORTS ARE BEING PUT TO GIVE A SATISFACTORY SERVICE TO CUSTOMERS. PHONE BANKING AND NET BANKING IS INTRODUCED. THE ENTIRE SYSTEM BECAME MORE CONVENIENT AND SWIFT. TIME IS GIVEN MORE IMPORTANCE THAN MONEY. .

THE FINANCIAL SYSTEM OF INDIA HAS SHOWN A GREAT DEAL OF RESILIENCE. IT IS SHELTERED FROM ANY CRISIS TRIGGERED BY ANY EXTERNAL MACROECONOMICS SHOCK AS OTHER EAST ASIAN

COUNTRIES SUFFERED. THIS IS ALL DUE TO A FLEXIBLE EXCHANGE RATE REGIME, THE FOREIGN RESERVES ARE HIGH, THE CAPITAL ACCOUNT IS NOT YET FULLY CONVERTIBLE, AND BANKS AND THEIR CUSTOMERS HAVE LIMITED FOREIGN EXCHANGE EXPOSURE.

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RESERVE BANK OF INDIA

THE CENTRAL BANK OF THE COUNTRY IS THE RESERVE BANK OF INDIA (RBI). IT WAS ESTABLISHED IN APRIL 1935 WITH A SHARE CAPITAL OF RS. 5 CRORES ON THE BASIS OF THE RECOMMENDATIONS OF THE HILTON YOUNG COMMISSION. THE SHARE CAPITAL WAS DIVIDED INTO SHARES OF RS. 100 EACH FULLY PAID WHICH WAS ENTIRELY OWNED BY PRIVATE SHAREHOLDERS IN THE BEGINNING. THE GOVERNMENT HELD SHARES OF NOMINAL VALUE OF RS. 2, 20,000. .

RESERVE BANK OF INDIA WAS NATIONALIZED IN THE YEAR 1949. THE GENERAL SUPERINTENDENCE AND DIRECTION OF THE BANK IS ENTRUSTED TO CENTRAL BOARD OF DIRECTORS OF 20 MEMBERS, THE GOVERNOR AND FOUR DEPUTY GOVERNORS, ONE GOVERNMENT OFFICIAL FROM THE MINISTRY OF FINANCE, TEN NOMINATED DIRECTORS BY THE GOVERNMENT TO GIVE REPRESENTATION TO IMPORTANT ELEMENTS IN THE ECONOMIC LIFE OF THE COUNTRY, AND FOUR NOMINATED DIRECTORS BY THE CENTRAL GOVERNMENT TO REPRESENT THE FOUR LOCAL BOARDS WITH THE HEADQUARTERS AT MUMBAI, KOLKATA, CHENNAI AND NEW DELHI. LOCAL BOARDS CONSIST OF FIVE MEMBERS EACH CENTRAL GOVERNMENT APPOINTED FOR A TERM OF FOUR YEARS TO REPRESENT TERRITORIAL AND ECONOMIC INTERESTS AND THE INTERESTS OF CO-OPERATIVE AND INDIGENOUS BANKS. .

THE RESERVE BANK OF INDIA ACT, 1934 WAS COMMENCED ON APRIL 1, 1935. THE ACT, 1934 (II OF 1934) PROVIDES THE STATUTORY BASIS OF THE FUNCTIONING OF THE BANK. THE BANK WAS CONSTITUTED FOR THE NEED OF FOLLOWING: 1. TO REGULATE THE ISSUE OF BANKNOTES
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2. TO MAINTAIN RESERVES WITH A VIEW TO SECURING MONETARY STABILITY AND 3. TO OPERATE THE CREDIT AND CURRENCY SYSTEM OF THE COUNTRY TO ITS ADVANTAGE. FUNCTIONS OF RESERVE BANK OF INDIA THE RESERVE BANK OF INDIA ACT OF 1934 ENTRUST ALL THE IMPORTANT FUNCTIONS OF A CENTRAL BANK,THE RESERVE BANK OF INDIA.

BANK OF ISSUE:

UNDER SECTION 22 OF THE RESERVE BANK OF INDIA ACT, THE BANK HAS THE SOLE RIGHT TO ISSUE BANK NOTES OF ALL DENOMINATIONS. THE DISTRIBUTION OF ONE RUPEE NOTES AND COINS AND SMALL COINS ALL OVER THE COUNTRY IS UNDERTAKEN BY THE RESERVE BANK AS AGENT OF THE GOVERNMENT. THE RESERVE BANK HAS A SEPARATE ISSUE DEPARTMENT WHICH IS ENTRUSTED WITH THE ISSUE OF CURRENCY NOTES. THE ASSETS AND LIABILITIES OF THE ISSUE DEPARTMENT ARE KEPT SEPARATE FROM THOSE OF THE BANKING DEPARTMENT.

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BANKER TO GOVERNMENT:

THE SECOND IMPORTANT FUNCTION OF THE RESERVE BANK OF INDIA IS TO ACT AS GOVERNMENT BANKER, AGENT AND ADVISER. THE RESERVE BANK IS AGENT OF CENTRAL GOVERNMENT AND OF ALL STATE GOVERNMENTS IN INDIA EXCEPTING THAT OF JAMMU AND KASHMIR. THE RESERVE BANK HAS THE OBLIGATION TO TRANSACT GOVERNMENT BUSINESS, VIA. TO KEEP THE CASH BALANCES AS DEPOSITS FREE OF INTEREST, TO RECEIVE AND TO MAKE PAYMENTS ON BEHALF OF THE GOVERNMENT AND TO CARRY OUT THEIR EXCHANGE REMITTANCES AND OTHER BANKING OPERATIONS. THE RESERVE BANK OF INDIA HELPS THE GOVERNMENT - BOTH THE UNION AND THE STATES TO FLOAT NEW LOANS AND TO MANAGE PUBLIC DEBT. IT ACTS AS ADVISER TO THE GOVERNMENT ON ALL MONETARY AND BANKING MATTERS.

BANKERS'

BANK

AND

LENDER

OF

THE

LAST

RESORT

THE RESERVE BANK OF INDIA ACTS AS THE BANKERS' BANK. ACCORDING TO THE PROVISIONS OF THE BANKING COMPANIES ACT OF 1949, EVERY SCHEDULED BANK WAS REQUIRED TO MAINTAIN WITH THE RESERVE BANK A CASH BALANCE EQUIVALENT TO 5% OF ITS DEMAND LIABILITIES AND 2 PER CENT OF ITS TIME LIABILITIES IN INDIA.
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THE SCHEDULED BANKS CAN BORROW FROM THE RESERVE BANK OF INDIA ON THE BASIS OF ELIGIBLE SECURITIES OR GET FINANCIAL ACCOMMODATION IN TIMES OF NEED OR STRINGENCY BY

REDISCOUNTING BILLS OF EXCHANGE. SINCE COMMERCIAL BANKS CAN ALWAYS EXPECT THE RESERVE BANK OF INDIA TO COME TO THEIR HELP IN TIMES OF BANKING CRISIS THE RESERVE BANK BECOMES NOT ONLY THE BANKER'S BANK BUT ALSO THE LENDER OF THE CONTROLLER OF CREDIT. LAST RESORT. .

THE RESERVE BANK OF INDIA IS THE CONTROLLER OF CREDIT I.E. IT HAS THE POWER TO INFLUENCE THE VOLUME OF CREDIT CREATED BY BANKS IN INDIA. IT CAN DO SO THROUGH CHANGING THE BANK RATE OR THROUGH OPEN MARKET OPERATIONS. ACCORDING TO THE BANKING REGULATION ACT OF 1949, THE RESERVE BANK OF INDIA CAN ASK ANY PARTICULAR BANK OR THE WHOLE BANKING SYSTEM NOT TO LEND TO PARTICULAR GROUPS OR PERSONS ON THE BASIS OF CERTAIN TYPES OF SECURITIES. AS SUPREME BANKING AUTHORITY IN THE COUNTRY, THE RESERVE BANK OF INDIA, THEREFORE, HAS THE FOLLOWING POWERS:

(A) IT HOLDS THE CASH RESERVES OF ALL THE SCHEDULED BANKS.

(B) IT CONTROLS THE CREDIT OPERATIONS OF BANKS THROUGH

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QUANTITATIVE AND QUALITATIVE CONTROLS.

(C) IT CONTROLS THE BANKING SYSTEM THROUGH THE SYSTEM OF LICENSING, INSPECTION AND CALLING FOR INFORMATION. .

(D) IT ACTS AS THE LENDER OF THE LAST RESORT BY PROVIDING REDISCOUNT FACILITIES TO SCHEDULED BANKS.

CUSTODIAN OF FOREIGN RESERVES:

THE RESERVE BANK OF INDIA HAS THE RESPONSIBILITY TO MAINTAIN THE OFFICIAL RATE OF EXCHANGE. ACCORDING TO THE RESERVE BANK OF INDIA ACT OF 1934, THE BANK WAS REQUIRED TO BUY AND SELL AT FIXED RATES ANY AMOUNT OF STERLING IN LOTS OF NOT LESS THAN RS. 10,000. THE RATE OF EXCHANGE FIXED WAS RE. 1 = SH. 6D. SINCE 1935 THE BANK WAS ABLE TO MAINTAIN THE EXCHANGE RATE FIXED AT LSH.6D. THOUGH THERE WERE PERIODS OF EXTREME PRESSURE IN FAVOUR OF OR AGAINST THE RUPEE. AFTER INDIA BECAME A MEMBER OF THE INTERNATIONAL MONETARY FUND IN 1946, THE RESERVE BANK HAS THE RESPONSIBILITY OF MAINTAINING FIXED EXCHANGE RATES WITH ALL OTHER MEMBER +COUNTRIES OF THE I.M.F.BESIDES MAINTAINING THE RATE OF EXCHANGE OF THE RUPEE, THE RESERVE BANK HAS TO ACT AS THE CUSTODIAN OF INDIA'S
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RESERVE

OF

INTERNATIONAL

CURRENCIES.

SUPERVISORY FUNCTIONS:

IN ADDITION TO ITS TRADITIONAL CENTRAL BANKING FUNCTIONS, THE RESERVE BANK HAS CERTAIN NON-MONETARY FUNCTIONS OF THE NATURE OF SUPERVISION OF BANKS AND PROMOTION OF SOUND BANKING IN INDIA. THE RESERVE BANK ACT, 1934, AND THE BANKING REGULATION ACT, 1949 HAVE GIVEN THE RBI WIDE POWERS OF SUPERVISION AND CONTROL OVER COMMERCIAL AND CO-OPERATIVE BANKS, RELATING TO LICENSING AND ESTABLISHMENTS, BRANCH EXPANSION, LIQUIDITY OF THEIR ASSETS, MANAGEMENT AND METHODS OF WORKING, AMALGAMATION, RECONSTRUCTION, AND LIQUIDATION. THE RBI IS AUTHORIZED TO CARRY OUT PERIODICAL INSPECTIONS OF THE BANKS AND TO CALL FOR RETURNS AND NECESSARY INFORMATION FROM THEM. THE NATIONALIZATION OF 14 MAJOR INDIAN SCHEDULED BANKS IN JULY 1969 HAS IMPOSED NEW RESPONSIBILITIES ON THE RBI FOR DIRECTING THE GROWTH OF BANKING AND CREDIT POLICIES TOWARDS MORE RAPID DEVELOPMENT OF THE ECONOMY AND REALIZATION OF CERTAIN DESIRED SOCIAL OBJECTIVES.

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PROMOTIONAL FUNCTIONS:

THE BANK NOW PERFORMS A VARIETY OF DEVELOPMENTAL AND PROMOTIONAL FUNCTIONS, WHICH, AT ONE TIME, WERE REGARDED AS OUTSIDE THE NORMAL SCOPE OF CENTRAL BANKING. THE RESERVE BANK WAS ASKED TO PROMOTE BANKING HABIT, EXTEND BANKING FACILITIES TO RURAL AND SEMI-URBAN AREAS, AND ESTABLISH AND PROMOTE NEW SPECIALIZED FINANCING AGENCIES. IT SET UP THE DEPOSIT INSURANCE CORPORATION IN 1962, THE UNIT TRUST OF INDIA IN 1964, THE INDUSTRIAL DEVELOPMENT BANK OF INDIA ALSO IN 1964, THE AGRICULTURAL REFINANCE CORPORATION OF INDIA IN 1963 AND THE INDUSTRIAL RECONSTRUCTION CORPORATION OF INDIA IN 1972. THESE INSTITUTIONS WERE SET UP DIRECTLY OR INDIRECTLY BY THE RESERVE BANK TO PROMOTE SAVING HABIT AND TO MOBILIZE SAVINGS, AND TO PROVIDE INDUSTRIAL FINANCE AS WELL AS AGRICULTURAL FINANCE. THE RBI HAS SET UP THE AGRICULTURAL REFINANCE AND DEVELOPMENT CORPORATION TO PROVIDE LONGTERM FINANCE TO FARMERS.

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FACTS FILES OF BANK IN INDIA THE FIRST, OLDEST, LARGEST, THE BIGGEST ALL SUCH INFORMATION IN THIS SECTION: THE FIRST BANK IN INDIA TO BE GIVEN A ISO CERTIFICATION THE FIRST BANK IN NORTHERN INDIA TO GET ISO CERTIFICATION FOR THEIR SELECTED BRANCHES THE FIRST INDIAN BANK TO BE HAVE STARTED SOLELY WITH THE INDIAN CAPITAL THE FIRST AMONG PRIVATE SECTOR BANK IN KERALA TO BECOME A SCHEDULED BANK IN 1946 UNDER THE RBI ACT1946. INDIAS OLDEST, LARGEST AND MOST SUCCESSFUL COMMERCIAL BANK, OFFERING THE WIDEST POSSIBLE RANGE OF DOMESTIC, INTERNATIONAL,AND NRI PRODUCTS AND SERVICES THROUGH ITS VAST NETWORK IN INDIA AND OVERSEAS. THE OLDEST PUBLIC SECTOR BANK IN INDIA HAVING BRANCHES ALL OVER THE INDIA. AND SERVING THE CUSTOMERS FROM THE LAST 132 YRS. CANARA BANK PUNJAB AND SIND BANK PUNJAB NATIONAL BANK SOUTH INDIAN BANK STATE BANK OF INDIA.

ALLABAHAD BANK OF INDIA

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Public Sector Banks in India:

AMONG THE PUBLIC SECTOR BANKS IN INDIA, UNITED BANK OF INDIA IS ONE OF THE 14 MAJOR BANKS WHICH WERE NATIONALIZED ON JULY 19, 1969. ITS PREDECESSOR, IN THE PUBLIC SECTOR BANKS, THE UNITED BANK OF INDIA LTD., WAS FORMED IN 1950 WITH THE AMALGAMATION OF FOUR BANKS VIZ. CAMILLA BANKING CORPORATION LTD. (1914), BENGAL CENTRAL BANK LTD. (1918), COMILLA UNION BANK LTD. (1922) AND HOOGHLY BANK LTD. (1932).

THE FOLLOWING ARE THE LIST OF PUBLIC SECTOR BANKS IN INDIA ALLAHABAD BANK

ANDHRA BANK
BANK OF BARODA

BANK OF INDIA
BANK OF MAHARASTRA CANARA BANK CENTRAL BANK OF INDIA

CORPORATION BANK
DENA BANK

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LIST OF STATE BANK OF INDIA AND ITS SUBSIDIARY, A PUBLIC SECTOR BANKS

STATE BANK OF INDIA

STATE BANK OF BIKANER & JAIPUR STATE BANK OF HYDERABAD STATE BANK OF INDORE STATE BANK OF MYSORE STATE BANK OF SAURASTRA STATE BANK OF TRAVANCORE PRIVATE SECTOR BANKS IN INDIA: PRIVATE BANKING IN INDIA WAS PRACTICED SINCE THE BEGINING OF BANKING SYSTEM IN INDIA. THE FIRST PRIVATE BANK IN INDIA TO BE SET UP IN PRIVATE SECTOR BANKS IN INDIA WAS INDUSIND BANK. IT IS ONE OF THE FASTEST GROWING BANK PRIVATE SECTOR BANKS IN INDIA. IDBI RANKS THE TENTH LARGEST DEVELOPMENT BANK IN THE WORLD AS PRIVATE BANKS IN INDIA AND HAS PROMOTED WORLD CLASS INSTITUTIONS IN INDIA. LIST OF PRIVATE BANKS IN INDIA DHANALAKSHMI BANK DEVELOPMENT CREDIT BANK FEDERAL BANK HDFC BANK ICICI BANK .

IDBI BANK
INDUSIND BANK
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CO-OPERATIVE BANKS IN INDIA: THE CO OPERATIVE BANKS IN INDIA STARTED FUNCTIONING ALMOST 100 YEARS AGO. THE COOPERATIVE BANK IS AN IMPORTANT CONSTITUENT OF THE INDIAN FINANCIAL SYSTEM, JUDGING BY THE ROLE ASSIGNED TO CO OPERATIVE, THE EXPECTATIONS THE CO OPERATIVE IS SUPPOSED TO FULFILL, THEIR NUMBER, AND THE NUMBER OF OFFICES THE COOPERATIVE BANK OPERATE. THOUGH THE CO OPERATIVE MOVEMENT ORIGINATED IN THE WEST, BUT THE IMPORTANCE OF SUCH BANKS HAVE ASSUMED IN INDIA IS RARELY PARALLELED ANYWHERE ELSE IN THE WORLD. THE COOPERATIVE BANKS IN INDIA PLAY AN IMPORTANT ROLE EVEN TODAY IN RURAL FINANCING. THE BUSINESSES OF COOPERATIVE BANK IN THE URBAN AREAS ALSO HAS INCREASED PHENOMENALLY IN RECENT YEARS DUE TO THE SHARP INCREASE IN THE NUMBER OF PRIMARY CO-OPERATIVE BANKS. 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. REGIONAL RURAL BANKS IN INDIA: RURAL BANKING IN INDIA STARTED SINCE THE ESTABLISHMENT OF BANKING SECTOR IN INDIA. RURAL BANKS IN THOSE DAYS MAINLY FOCUSED UPON THE AGRO SECTOR. REGIONAL RURAL BANKS IN INDIA PENETRATED EVERY CORNER OF THE COUNTRY AND EXTENDED A HELPING HAND IN THE GROWTH PROCESS OF THE COUNTRY. SBI HAS 30 REGIONAL RURAL BANKS IN INDIA KNOWN AS RRBS. THE RURAL BANKS OF SBI ARE SPREAD IN 13 STATES EXTENDING FROM
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HDFC AXIS BANK HSBC BANK SBI BANK BANK OF INDIA CITI BANK BANK OF AMERICA DETUSCHE BANK
ABN-AMRO BANK

BANK OF INDIA DEUTCHE BANK UNION BANK OF INDIA YES BANK UCO BANK OF INDIA JAMMU AND KASHMIR BANK BANK OF MAHRASHTRA ALLAHABAD BANK

BOARDS OF MEMBERS: MS CHANDA KOCCHAR- MANAGING DIRECTOR ANDCHIEF EXECUTIVE OFFICER.

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MR. N.S. KANNAN EXEUTIVE DIRECTOR AND CFO MR.K RAMKUMAR EXEUTIVE DIRECTOR MR. RAJIV SABHARWAL EXECUTIVE DIRECTOR

AWARDS AND RECOGNISTION FOR SECOND YEAR IN A ROW, ICICI BANK WAS AWARDED THE "MOST TECH-FRIENDLY BANK", BY BUSINESSWORLD MR. N. VAGHUL, FORMER CHAIRMAN, ICICI BANK, RECEIVED THE "LIFETIME ACHIEVEMENT AWARD", BY BUSINESSWORLD MS. CHANDA KOCHHAR, MANAGING DIRECTOR & CEO WAS RANKED 10TH IN THE LIST OF "TOP 50 WOMEN IN WORLD BUSINESS 2011", BY FINANCIAL TIMES MS. CHANDA KOCHHAR, MANAGING DIRECTOR & CEO TOPS THE LIST OF "INDIA'S 50 MOST POWERFUL BUSINESSWOMEN ", BY FORTUNE INDIA ICICI BANK WAS RANKED 2ND IN THE BANKING SECTOR AND 10TH IN THE OVERALL "BT 500 INDIA'S MOST VALUABLE COMPANIES", BY BUSINESS TODAY FOR THE SECOND CONSECUTIVE YEAR, ICICI BANK WAS RANKED SECOND IN THE "INDIA'S 50 BIGGEST FINANCIAL COMPANIES" , IN THE BW REAL 500 BY BUSINESSWORLD MS.CHANDA KOCHHAR, MANAGING DIRECTOR & CEO WAS

CONFERRED WITH "WOMEN OF POWER" AWARD, BY THE ASIAN BUSINESS LEADERSHIP FORUM (ABLF)

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MS.CHANDA KOCHHAR, MANAGING DIRECTOR & CEO, WAS THE FIRST WOMAN TO BE NAMED AS THE "BUSINESS LEADER OF THE YEAR", BY THE ECONOMIC TIMES MS.CHANDA KOCHHAR, MANAGING DIRECTOR & CEO WAS RANKED 5TH IN THE INTERNATIONAL LIST OF "50 MOST POWERFUL WOMEN IN BUSINESS", BY FORTUNE. SHE WAS RANKED 10TH IN 2010. ICICI BANK TOPS THE LIST OF "MOST TRUSTED PRIVATE SECTOR BANK" AND RANKS 10TH IN THE LIST OF "INDIA'S MOST TRUSTED SERVICE BRANDS" BY BRAND EQUITY, MOST TRUSTED BRANDS 2011 MS. CHANDA KOCHHAR, MANAGING DIRECTOR & CEO, WAS NAMED AMONG THE 50 MOST INFLUENTIAL IN GLOBAL FINANCE BY BLOOMBERG MARKETS MAGAZINE MS. CHANDA KOCHHAR, MANAGING DIRECTOR & CEO, WAS RANKED 43RD IN THE FORBES LIST OF MOST POWERFUL WOMAN IN THE WORLD ICICI BANK RECEIVED THE BEST MANPOWER EFFICIENT AWARD AMONGST PRIVATE SECTOR BANKS BY FICCI IBA ICICI BANK WON THE BEST LOCAL BANK GOLD BY TRADE AND FORFAITING AWARDS, UK ICICI BANK RANKED SECOND IN THE FINANCIAL SERVICES SECTOR IN BUSINESSWORLD'S,"MOST RESPECTED COMPANY AWARDS 2011" ICICI BANK HAS WON THE "BANKING TECHNOLOGY AWARDS 2010" AT THE INDIAN BANKS ASSOCIATION IN THE FOLLOWING CATEGORIES: O "BEST FINANCIAL INCLUSION INITIATIVE" (FIRST PRIZE) O "BEST ONLINE BANK" ( RUNNER UP) O "BEST USE OF BUSINESS INTELLIGENCE" ( RUNNER UP) O "TECHNOLOGY BANK OF THE YEAR" ( RUNNER UP)
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PRODUCTS AND SERVICES

THE BANK PROVIDES A WIDE RANGE OF BANKING PRODUCTS AND FINANCIAL SERVICES TO ITS RETAIL AND CORPORATE CUSTOMERS. ICICI BANK PRODUCTS AND SERVICES INCLUDE PERSONAL BANKING, NRI BANKING, BUSINESS BANKING, AND OTHER FINANCIAL SERVICES. ICICI BANK PRODUCTS & SERVICES PERSONAL BANKING DEPOSITS:ICICI BANK PROVIDES THE FOLLOWING DEPOSITS:

SAVINGS ACCOUNT ADVANTAGE DEPOSIT FIXED DEPOSITS SECURITY DEPOSITS RECURRING DEPOSITS TAX-SAVER FIXED DEPOSIT SPECIAL SAVINGS ACCOUNT LIFE PLUS SENIOR CITIZENS SAVINGS ACCOUNT YOUNG STARS SAVINGS ACCOUNT SALARY ACCOUNT ADVANTAGE WOMAN SAVINGS ACCOUNT EEFC ACCOUNT RESIDENT FOREIGN CURRENCY (DOMESTIC) ACCOUNT CHILD EDUCATION PLAN BANK@CAMPUS PRIVILEGE BANKING FAMILY BANKING
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RURAL SAVINGS ACCOUNT PEOPLES SAVINGS ACCOUNT SELF HELP GROUP ACCOUNTS OUTWARD REMITTANCE FREEDOM SAVINGS ACCOUNT LOANS ICICI BANK OFFERS THE FOLLOWING LOAN FACILITIES:

HOME LOANS PERSONAL LOANS TWO WHEELER LOANS CAR LOANS COMMERCIAL VEHICLE LOANS PRE-APPROVED LOANS LOAN AGAINST PROPERTY LOANS AGAINST SECURITIES LOAN AGAINST GOLD ORNAMENTS CARDS ICICI BANK OFFERS VARIOUS CARDS SUCH AS:

CREDIT CARDS DEBIT CARDS CONSUMER CARDS COMMERCIAL CARDS TRAVEL CARDS CORPORATE CARDS PREPAID CARDS BUSINESS CARDS PURCHASE CARDS
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DISTRIBUTION CARDS MERCHANT SERVICES

INVESTMENTS ICICI BANK OFFERS THE FOLLOWING RANGE OF INVESTMENT PRODUCTS:

ICICI BANK TAX SAVING BONDS MUTUAL FUNDS SENIOR CITIZENS SAVINGS SCHEME GOVERNMENT OF INDIA BONDS FOREIGN EXCHANGE SERVICES INITIAL PUBLIC OFFERS (IPO) BY CORPORATES ICICI BANK PURE GOLD INSURANCE ICICI BANK OFFERS VARIOUS TYPES OF INSURANCE SUCH AS:

HOME INSURANCE HEALTH INSURANCE HEALTH ADVANTAGE PLUS FAMILY FLOATER STUDENT MEDICAL INSURANCE PERSONAL ACCIDENT TWO WHEELER INSURANCE TRAVEL INSURANCE INDIVIDUAL OVERSEAS TRAVEL INSURANCE ICICI PRU LIFESTATE RP MOTOR INSURANCE CAR INSURANCE LIFE INSURANCE
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NRI BANKING NRIS GET BENEFIT FROM THE FOLLOWING SERVICES:

MONEY TRANSFER BANK ACCOUNTS INVESTMENTS PROPERTY SOLUTIONS INSURANCE LOANS AGAINST FD BUSINESS BANKING CORPORATE NET BANKING CASH MANAGEMENT ONLINE TAXES TRADE SERVICES CUSTODIAL SERVICES FXONLINE SME SERVICES

SWOT ANALYSIS: STRENGTH O ICICI BANK HAS TODAY EMERGED AS SECOND LARGEST BANK IN INDIA AND IS AMONG THE TOP 250 BANKS IN THE WORLD WITHIN THE DECADE OF ITS OPERATION.

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O ICICI BANK OFFER WIDE RANGE OF PRODUCTS AND SERVICES FROM BANKING ACTIVITIES TO GENERAL INSURANCE.

O ICICI BANK HAS EXPANDED ITS MARKET CAPITALISATION THROUGH ENLISTMENT NOT ONLY IN BSE AND NSE, BUT ALSO IN BECOMING THE FIRST NON-JAPENSE ASIAN BANK TO GET ENLISTED IN NYSE.

WEAKNESS O IT PRIMARLY TARGETS UPPER ,MIDDLE CLASS OF THE SOCIETY, THEREBY LOSING THE BUSINESS OPPORTUNTIES CONCENTRATED AT MIDDLE AND BOTTOM SECTIONS OF THE ECONOMICAL PYRAMID. O ICICI LEVIES HIGHER SERVICESCHARGE FOR VARIOUS TRANSCATIONS MAKING IT EXPENSIVETO AFFORD BY THE MAJOR SECTIONS OF THE SOCIETY. OPPORTUNTIES O BRANCH EXPANSION FOR RAPID GROWTH O IMPROVE SHAREHOLDERS RETURN O BROADENING OF THE DEMOGRAPHIC BASE O GROWTH IN GENERAL INSURANCE INDUSTRY INCREASING THE MARKET SHARE OF ICICI BANK. THREATS O COMPETIVE PRODUCTSAND OFFERS FROM IDBI AND HDFC WILL HELP IN

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O MORE AND MORE BANKING COMING IN THE PRIVATE AND PUBLIC SECTOR WITH ONLINE BANKING SYSTEM. O GLOBAL AND DOMESTIC ECONOMIC SLOW DOWNCOULD AFFECT FINANCIAL PERFORMANCE OF ICICI.

FINANCIAL STATEMENT
Profit & Loss Account for the year ended 31st Dec, 2011 Current Year Dec 11 (In Laces) Income Sales Other Income 903.92 34.09 987.04 Expenditure Materials Consumed Personnel Expenses Mfg Other expenses Dep / Amortisation Financial Charges Excise duty Mis Expenditure W/off 621.23 104.58 172.48 34.38 30.57 120.04 20.28 738.73 87.33 166.27 30.01 26.72 130.87 18.33 1134.22 25.32 1159.54 31 Previous Year 31 Dec 10 (In Laces)

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1224.32 Loss for the year before extra ordinary items and prior period adjustments Extra ordinary items: Expenses on abandoned project W/off Assets W/off Pension liability Prior period adjustments Loss after prior pd. Exp. & extraord. Items. Loss b/f from early years Less: Amt. Adjusted against Cap. Reduction300 Loss: c/f to B/S (185.27) (368.39) (68.39) ---(116.88) -(116.88)

1198.26 (38.72)

--

-5.14 0.30 (44.16)

(324.23) ---

(368.39)

Balance Sheet as at 31 Dec 2010 Sources Of Funds 31 Dec 11 31 Dec 10.

Shareholders Fund Capital Reserves & Surplus 37 434.20 21.00 734.20 21.00

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455.20 Loan Funds Secured loans Unsecured loans Application of Funds Fixed Assets Gross Block Less: Dep. Net Block Capital work in progress inc. capital advances. 380.29 Investments Current Advances Inventories Sundry Debtors Cash & Bank Balances Other current Assets. Loans & Advances Less: Current liabilities & 146.36 114.71 5.63 21.66 44.39 assets, Loans & 0.10 530.59 153.55 377.04 3.25 360.46 --

755.20

198.09 0.04

520.94 125.09 395.85 1.58

397.43 0.10

93.87 123.22 10.64 20.14 47.06

Provisions Liabilities Provisions 38 116.07 14.11 137.02 15.73

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Net Current Assets Misc. Expenditure Profit & Loss A/c Total:

130.18 47.43 185.27 815.66

152.75 45.23 368.39 953.33

WORKING CAPITAL MANAGEMENT

REVIEW OF LITERATURE
WORKING CAPITAL MANAGEMENT IS THE MANAGEMENT OF ASSETS THAT ARE CURRENT IN NATURE. CURRENT ASSETS, BY ACCOUNTING DEFINITION ARE THE ASSETS NORMALLY CONVERTED IN TO CASH IN A PERIOD OF ONE YEAR. HENCE WORKING CAPITAL MANAGEMENT CAN BE CONSIDERED AS THE MANAGEMENT OF CASH, MARKET SECURITIES RECEIVABLE, INVENTORIES AND CURRENT LIABILITIES. IN FACT, THE MANAGEMENT OF CURRENT ASSETS IS SIMILAR TO THAT OF FIXED ASSETS IN THE SENSE THAT IS BOTH IN CASES THE FIRM ANALYSES THEIR EFFECT ON ITS PROFITABILITY AND RISK FACTORS, HENCE THEY DIFFER ON THREE MAJOR ASPECTS: 1. IN MANAGING FIXED ASSETS, TIME IS AN IMPORTANT FACTOR DISCOUNTING AND COMPOUNDING ASPECTS OF TIME PLAY AN IMPORTANT ROLE IN CAPITAL BUDGETING AND A MINOR PART IN THE MANAGEMENT OF CURRENT ASSETS. THE LARGE HOLDINGS OF CURRENT ASSETS, ESPECIALLY CASH, MAY STRENGTHEN THE FIRMS LIQUIDITY POSITION, BUT IS BOUND TO REDUCE PROFITABILITY OF THE FIRM AS IDEAL CAR YIELD NOTHING.
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3.

THE LEVEL OF FIXED ASSETS AS WELL AS CURRENT ASSETS DEPENDS UPON THE EXPECTED SALES, BUT IT IS ONLY CURRENT ASSETS THAT ADD FLUCTUATION IN THE SHORT RUN TO A BUSINESS. TO UNDERSTAND WORKING CAPITAL BETTER WE SHOULD HAVE BASIC KNOWLEDGE ABOUT THE VARIOUS ASPECTS OF WORKING CAPITAL. TO START WITH, THERE ARE TWO CONCEPTS OF WORKING CAPITAL: GROSS WORKING CAPITAL NET WORKING CAPITAL

GROSS WORKING CAPITAL: GROSS WORKING CAPITAL, WHICH IS ALSO SIMPLY KNOWN AS WORKING CAPITAL, REFERS TO THE FIRMS INVESTMENT IN CURRENT ASSETS: ANOTHER ASPECT OF GROSS WORKING CAPITAL POINTS OUT THE NEED OF ARRANGING FUNDS TO FINANCE THE CURRENT ASSETS. THE GROSS WORKING CAPITAL CONCEPT FOCUSES ATTENTION ON TWO ASPECTS OF CURRENT ASSETS MANAGEMENT, FIRSTLY OPTIMUM INVESTMENT IN CURRENT ASSETS AND SECONDLY IN FINANCING THE CURRENT ASSETS. THESE TWO ASPECTS WILL HELP IN REMAINING AWAY FROM THE TWO DANGER POINTS OF EXCESSIVE OR INADEQUATE INVESTMENT IN CURRENT ASSETS. WHENEVER A NEED OF WORKING CAPITAL FUNDS ARISES DUE TO INCREASE IN LEVEL OF BUSINESS ACTIVITY OR FOR ANY OTHER REASON THE ARRANGEMENT SHOULD BE MADE QUICKLY, AND SIMILARLY IF SOME SURPLUSES ARE AVAILABLE, THEY SHOULD NOT BE ALLOWED TO LIE IDEAL BUT SHOULD BE PUT TO SOME EFFECTIVE USE. NET WORKING CAPITAL: THE TERM NET WORKING CAPITAL REFERS TO THE DIFFERENCE BETWEEN THE CURRENT ASSETS AND CURRENT LIABILITIES. NET WORKING CAPITAL CAN BE POSITIVE AS WELL AS NEGATIVE. POSITIVE WORKING CAPITAL REFERS TO THE SITUATION WHERE CURRENT ASSETS EXCEED CURRENT LIABILITIES AND NEGATIVE WORKING CAPITAL REFERS TO THE SITUATION WHERE CURRENT LIABILITIES EXCEED CURRENT ASSETS. THE NET WORKING
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CAPITAL HELPS IN COMPARING THE LIQUIDITY OF THE SAME FIRM OVER TIME. FOR PURPOSES OF THE WORKING CAPITAL MANAGEMENT, THEREFORE WORKING CAPITAL CAN BE SAID TO MEASURE THE LIQUIDITY OF THE FIRM. IN OTHER WORDS, THE GOAL OF WORKING CAPITAL MANAGEMENT IS TO MANAGE THE CURRENT ASSETS AND LIABILITIES IN SUCH A WAY THAT A ACCEPTABLE LEVEL OF NET WORKING CAPITAL IS MAINTAINED. IMPORTANCE OF WORKING CAPITAL MANAGEMENT: MANAGEMENT OF WORKING CAPITAL IS VERY MUCH IMPORTANT FOR THE SUCCESS OF THE BUSINESS. IT HAS BEEN EMPHASIZED THAT A BUSINESS SHOULD MAINTAIN SOUND WORKING CAPITAL POSITION AND ALSO THAT THERE SHOULD NOT BE AN EXCESSIVE LEVEL OF INVESTMENT IN THE WORKING CAPITAL COMPONENTS. AS POINTED OUT BY RALPH KENNEDY AND STEWART MC MULLER, THE INADEQUACY OR MISS-MANAGEMENT OF WORKING CAPITAL IS ONE OF A FEW LEADING CAUSES OF BUSINESS FAILURE. CURRENT ASSETS, IN FACT, ACCOUNT FOR A VERY LARGE PORTION OF THE TOTAL INVESTMENT OF THE FIRM.

CURRENT ASSETS AS PERCENTAGE OF TOTAL ASSETS

YEAR 2009 2010 2011 PERCENTAGE 31% 26% 35%

40 35 30 25 20 15 10 5 0 2009 2010 2011

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IT CAN BE VISUALIZED FROM THE TABLE THAT IN THE FIRST YEAR OF OUR STUDY I.E. 2009 IT WAS 31% WHICH WAS REDUCED TO 26% IN THE NEXT YEAR AND IN 2010 IT IS 35% SHOWS FLUCTUATING TREND. DETERMINANTS OF WORKING CAPITAL: THERE IS NO SPECIFIC METHOD TO DETERMINE WORKING CAPITAL REQUIREMENT FOR A BUSINESS. THERE ARE A NUMBER OF FACTORS AFFECTING THE WORKING CAPITAL REQUIREMENT. THESE FACTORS HAVE DIFFERENT IMPORTANCE IN DIFFERENT BUSINESSES AND AT DIFFERENT TIMES. SO A THOROUGH ANALYSIS OF ALL THESE FACTORS SHOULD BE MADE BEFORE TRYING TO ESTIMATE THE AMOUNT OF WORKING CAPITAL NEEDED. SOME OF THE DIFFERENT FACTORS ARE MENTIONED HERE BELOW:NATURE OF BUSINESS: NATURE OF BUSINESS IS AN IMPORTANT FACTOR IN DETERMINING THE WORKING CAPITAL REQUIREMENTS. THERE ARE SOME BUSINESSES WHICH REQUIRE A VERY NOMINAL AMOUNT TO BE INVESTED IN FIXED ASSETS BUT A LARGE CHUNK OF THE TOTAL INVESTMENT IS IN THE FORM OF WORKING CAPITAL. THERE BUSINESSES, FOR EXAMPLE, ARE OF THE TRADING AND FINANCING TYPE. THERE ARE BUSINESSES WHICH REQUIRE LARGE INVESTMENT IN FIXED ASSETS AND NORMAL INVESTMENT IN THE FORM OF WORKING CAPITAL.

SIZE OF BUSINESS: IT IS ANOTHER IMPORTANT FACTOR IN DETERMINING THE WORKING CAPITAL REQUIREMENTS OF A BUSINESS. SIZE IS USUALLY MEASURED IN TERMS OF SCALE OF OPERATING CYCLE. THE AMOUNT OF WORKING CAPITAL NEEDED IS DIRECTLY PROPORTIONAL TO THE SCALE OF OPERATING CYCLE I.E. THE LARGER
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THE SCALE OF OPERATING CYCLE THE LARGE WILL BE THE AMOUNT WORKING CAPITAL AND VICE VERSA.

BUSINESS FLUCTUATIONS: MOST BUSINESS EXPERIENCE CYCLICAL AND SEASONAL FLUCTUATIONS IN DEMAND FOR THEIR GOODS AND SERVICES. THESE FLUCTUATIONS AFFECT THE BUSINESS WITH RESPECT TO WORKING CAPITAL BECAUSE DURING THE TIME OF BOOM, DUE TO AN INCREASE IN BUSINESS ACTIVITY THE AMOUNT OF WORKING CAPITAL REQUIREMENT INCREASES AND THE REVERSE IS TRUE IN THE CASE OF RECESSION. FINANCIAL ARRANGEMENT FOR SEASONAL WORKING CAPITAL REQUIREMENTS ARE TO BE MADE IN ADVANCE.

PRODUCTION POLICY: AS STATED ABOVE, EVERY BUSINESS HAS TO COPE WITH DIFFERENT TYPES OF FLUCTUATIONS. HENCE IT IS BUT OBVIOUS THAT PRODUCTION POLICY HAS TO BE PLANNED WELL IN ADVANCE WITH RESPECT TO FLUCTUATION. NO TWO COMPANIES CAN HAVE SIMILAR PRODUCTION POLICY IN ALL RESPECTS BECAUSE IT DEPENDS UPON THE CIRCUMSTANCES OF AN INDIVIDUAL COMPANY.

FIRMS CREDIT POLICY: THE CREDIT POLICY OF A FIRM AFFECTS WORKING CAPITAL BY INFLUENCING THE LEVEL OF BOOK DEBTS. THE CREDIT TERM IS FAIRLY CONSTANT IN AN INDUSTRY BUT INDIVIDUALS ALSO HAVE THEIR ROLE IN FRAMING THEIR CREDIT POLICY. A LIBERAL CREDIT POLICY WILL LEAD TO MORE AMOUNT BEING COMMITTED TO WORKING CAPITAL REQUIREMENTS WHEREAS A STERN CREDIT POLICY MAY DECREASE THE AMOUNT OF WORKING CAPITAL REQUIREMENT APPRECIABLY BUT THE REPERCUSSIONS OF THE TWO ARE NOT SIMPLE. HENCE A FIRM SHOULD ALWAYS FRAME A RATIONAL CREDIT POLICY BASED ON THE CREDIT WORTHINESS OF THE CUSTOMER.

AVAILABILITY OF CREDIT: THE TERMS ON WHICH A COMPANY IS ABLE TO AVAIL CREDIT FROM ITS SUPPLIERS OF GOODS AND DEVICES
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CREDIT/ALSO AFFECTS THE WORKING CAPITAL REQUIREMENT. IF A COMPANY IN A POSITION TO GET CREDIT ON LIBERAL TERMS AND IN A SHORT SPAN OF TIME THEN IT WILL BE IN A POSITION TO WORK WITH LESS AMOUNT OF WORKING CAPITAL. HENCE THE AMOUNT OF WORKING CAPITAL NEEDED WILL DEPEND UPON THE TERMS A FIRM IS GRANTED CREDIT BY ITS CREDITORS.

GROWTH AND EXPANSION ACTIVITIES: THE WORKING CAPITAL NEEDS OF A FIRM INCREASES AS IT GROWS IN TERM OF SALE OR FIXED ASSETS. THERE IS NO PRECISE WAY TO DETERMINE THE RELATION BETWEEN THE AMOUNT OF SALES AND WORKING CAPITAL REQUIREMENT BUT ONE THING IS SURE THAT AN INCREASE IN SALES NEVER PRECEDES THE INCREASE IN WORKING CAPITAL BUT IT IS ALWAYS THE OTHER WAY ROUND. SO IN CASE OF GROWTH OR EXPANSION THE ASPECT OF WORKING CAPITAL NEEDS TO BE PLANNED IN ADVANCE.

PRICE LEVEL CHANGES: GENERALLY INCREASE IN PRICE LEVEL MAKES THE COMMODITIES DEARER.HENCE WITH INCREASE IN PRICE LEVEL THE WORKING CAPITAL REQUIREMENTS ALSO INCREASES. THE COMPANIES WHICH ARE IN A POSITION TO ALTER THE PRICE OF THESE COMMODITIES IN ACCORDANCE WITH THE PRICE LEVEL CHANGES WILL FACE FEWER PROBLEMS AS COMPARED TO OTHERS. THE CHANGES IN PRICE LEVEL MAY NOT AFFECT ALL THE FIRMS IN SAME WAY. THE REACTIONS OF ALL FIRMS WITH REGARDS TO PRICE LEVEL CHANGES WILL BE DIFFERENT FROM ONE OTHER..

WORKING CAPITAL - OVERALL VIEW

CASH MANAGEMENT CASH IS THE IMPORTANT CURRENT ASSET FOR THE OPERATIONS OF THE BUSINESS. CASH IS THE BASIC INPUT NEEDED TO KEEP THE
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BUSINESS RUNNING ON A CONTINUOUS BASIS. IT IS ALSO THE ULTIMATE OUTPUT EXPECTED TO BE REALIZED BY SELLING THE SERVICE OR PRODUCT MANUFACTURED BY THE FIRM. THE FIRM SHOULD KEEP SUFFICIENT CASH, NEITHER MORE NOR LESS. CASH SHORTAGE WILL DISRUPT THE FIRMS OPERATIONS WHILE EXCESSIVE CASH WILL SIMPLY REMAIN IDLE, WITHOUT CONTRIBUTING ANYTHING TOWARDS THE FIRMS PROFITABILITY. THUS A MAJOR FUNCTION OF THE FINANCIAL MANAGER IS TO MAINTAIN A SOUND CASH POSITION. CASH IS THE MONEY WHICH A FIRM CAN DISBURSE IMMEDIATELY WITHOUT ANY RESTRICTION THE TERM CASH INCLUDES CURRENCY AND CHEQUES HELD BY THE FIRM AND BALANCES IN ITS BANK ACCOUNTS. SOMETIMES NEAR CASH ITEMS, SUCH AS MARKETABLE SECURITIES OR BANK TIME DEPOSITS ARE ALSO INCLUDED IN CASH. THE BASIC CHARACTERISTICS OF NEAR CASH ASSETS ARE THAT THEY CAN READILY BE CONVERTED INTO CASH. CASH MANAGEMENT IS CONCERNED WITH MANAGING OF: I) CASH FLOWS IN AND OUT OF THE FIRM

II) CASH FLOWS WITHIN THE FIRM III) CASH BALANCES HELD BY THE FIRM AT A POINT OF TIME BY FINANCING DEFICIT OR INVESTING SURPLUS CASH. SALES GENERATE CASH WHICH HAS TO BE DISBURSED OUT. THE SURPLUS CASH HAS TO BE INVESTED WHILE DEFICIT CASH HAS TO BE BORROWED. CASH MANAGEMENT SEEKS TO ACCOMPLISH THIS CYCLE AT A MINIMUM COST. AT THE SAME TIME IT ALSO SEEKS TO ACHIEVE LIQUIDITY AND CONTROL. THEREFORE THE AIM OF CASH MANAGEMENT IS TO MAINTAIN ADEQUATE CONTROL OVER CASH POSITION TO KEEP FIRM SUFFICIENTLY LIQUID AND TO USE EXCESS CASH IN SOME PROFITABLE WAY. THE CASH MANAGEMENT IS ALSO IMPORTANT BECAUSE IT IS DIFFICULT TO PREDICT CASH FLOWS ACCURATELY, PARTICULARLY THE INFLOWS AND THAT THERE IS NO PERFECT COINCIDENCE BETWEEN THE INFLOWS AND OUTFLOWS OF THE CASH. DURING SOME
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PERIODS CASH OUTFLOWS WILL EXCEED CASH INFLOWS BECAUSE PAYMENT FOR TAXES, DIVIDENDS OR SEASONAL INVENTORY ETC., BUILD UP. ON THE OTHER HAND CASH INFLOWS WILL BE MORE THAN CASH PAYMENT BECAUSE THERE MAY BE LARGE CASH SALES AND MORE DEBTORS REALIZATION AT ANY POINT OF TIME. CASH MANAGEMENT IS ALSO IMPORTANT BECAUSE CASH CONSTITUTES THE SMALLEST PORTION OF THE CURRENT ASSETS, YET MANAGEMENTS CONSIDERABLE TIME IS DEVOTED IN MANAGING IT. AN OBVIOUS AIM OF THE FIRM NOW-A-DAYS IS TO MANAGE ITS CASH AFFAIRS IN SUCH A WAY AS TO KEEP CASH BALANCE AT A MINIMUM LEVEL AND TO INVEST THE SURPLUS CASH FUNDS IN PROFITABLE OPPORTUNITIES. IN ORDER TO RESOLVE THE UNCERTAINTY ABOUT CASH FLOW

PREDICTION AND LACK OF SYNCHRONIZATION BETWEEN CASH RECEIPTS AND PAYMENTS, THE FIRM SHOULD DEVELOP APPROPRIATE STRATEGIES REGARDING THE FOLLOWING FOUR FACETS OF CASH MANAGEMENT. 1. CASH PLANNING: - CASH INFLOWS AND CASH OUTFLOWS SHOULD

BE PLANNED TO PROJECT CASH SURPLUS OR DEFICIT FOR EACH PERIOD OF THE PLANNING PERIOD. CASH BUDGET SHOULD PREPARED FOR THIS PURPOSE. 2. MANAGING THE CASH FLOWS: - THE FLOW OF CASH SHOULD BE

PROPERLY MANAGED. THE CASH INFLOWS SHOULD BE ACCELERATED WHILE, AS FAR AS POSSIBLE DECELERATING THE CASH OUTFLOWS.
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3.

OPTIMUM CASH LEVEL: - THE FIRM SHOULD DECIDE ABOUT THE

APPROPRIATE LEVEL OF CASH BALANCES. THE COST OF EXCESS CASH AND DANGER OF CASH DEFICIENCY SHOULD BE MATCHED TO DETERMINE THE OPTIMUM LEVEL OF CASH BALANCES. 4. INVESTING SURPLUS CASH: - THE SURPLUS CASH BALANCE

SHOULD BE PROPERLY INVESTED TO EARN PROFITS. THE FIRM SHOULD DECIDE ABOUT THE DIVISION OF SUCH CASH BALANCE BETWEEN BANK DEPOSITS, MARKETABLE SECURITIES AND INTER CORPORATE LENDING. THE IDEAL CASH MANAGEMENT SYSTEM WILL DEPEND ON THE FIRMS PRODUCTS, ORGANIZATION STRUCTURE, COMPETITION, CULTURE AND OPTIONS AVAILABLE. THE TASK IS COMPLEX AND DECISION TAKEN CAN AFFECT IMPORTANT AREAS OF THE FIRM. Functions of Cash Management: CASH MANAGEMENT FUNCTIONS ARE INTIMATELY, INTERRELATED AND INTERTWINED LINKAGE AMONG DIFFERENT CASH MANAGEMENT FUNCTIONS HAVE LED TO THE ADOPTION OF THE FOLLOWING METHODS FOR EFFICIENT CASH MANAGEMENT: USE OF TECHNIQUES OF CASH MOBILIZATION TO REDUCE OPERATING REQUIREMENT OF CASH MAJOR EFFORTS TO INCREASE THE PRECISION AND RELIABILITY OF CASH FORECASTING. MAXIMUM EFFORT TO DEFINE AND QUANTIFY THE LIQUIDITY RESERVE NEEDS OF THE FIRM. DEVELOPMENT OF EXPLICIT ALTERNATIVE SOURCES OF LIQUIDITY AGGRESSIVE SEARCH FOR RELATIVELY MORE PRODUCTIVE USES FOR
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SURPLUS MONEY ASSETS.

THE ABOVE APPROACHES INVOLVE THE FOLLOWING ACTIONS WHICH A FINANCE MANAGER HAS TO PERFORM. 1. TO FORECAST CASH INFLOWS AND OUTFLOWS 2. TO PLAN CASH REQUIREMENTS 3. TO DETERMINE THE SAFETY LEVEL FOR CASH. 4. TO MONITOR SAFETY LEVEL FOR CASH 5. TO LOCATE THE NEEDED FUNDS 6. TO REGULATE CASH INFLOWS 7. TO REGULATE CASH OUTFLOWS 8. TO DETERMINE CRITERIA FOR INVESTMENT OF EXCESS CASH 9. TO AVAIL BANKING FACILITIES AND MAINTAIN GOOD RELATIONS WITH BANKERS MOTIVES FOR HOLDING CASH: THERE ARE FOUR PRIMARY MOTIVES FOR MAINTAINING CASH BALANCES: 1. TRANSACTION MOTIVE 2 .PRECAUTIONARY MOTIVE 3. SPECULATIVE MOTIVE 4. COMPENSATING MOTIVE 1. TRANSACTION MOTIVE: - THE TRANSACTION MOTIVE REFERS TO THE HOLDING OF CASH TO MEET ANTICIPATED OBLIGATIONS WHOSE TIMING IS NOT PERFECTLY SYNCHRONISED WITH CASH RECEIPTS. IF THE RECEIPTS OF CASH AND ITS DISBURSEMENTS COULD EXACTLY COINCIDE IN THE NORMAL COURSE OF OPERATIONS, A FIRM WOULD NOT NEED CASH FOR TRANSACTION PURPOSES. ALTHOUGH A MAJOR PART OF TRANSACTION BALANCES ARE HELD IN CASH, A PART MAY ALSO BE IN SUCH MARKETABLE SECURITIES WHOSE MATURITY
48

SWATI SAHAY

CONFORMS TO THE TIMING OF THE ANTICIPATED PAYMENTS. 2. PRECAUTIONARY MOTIVE: - PRECAUTIONARY MOTIVE OF HOLDING CASH IMPLIES THE NEED TO HOLD CASH TO MEET UNPREDICTABLE OBLIGATIONS AND THE CASH BALANCE HELD IN RESERVE FOR SUCH RANDOM AND UNFORESEEN FLUCTUATIONS IN CASH FLOWS ARE CALLED AS PRECAUTIONARY BALANCES. THUS, PRECAUTIONARY CASH BALANCE SERVES TO PROVIDE A CUSHION TO MEET UNEXPECTED CONTINGENCIES. THE UNEXPECTED CASH NEEDS AT SHORT NOTICE MAY BE THE RESULT OF VARIOUS REASONS AS: UNEXPECTED SLOWDOWN IN COLLECTION OF ACCOUNTS RECEIVABLE, CANCELLATIONS OF SOME PURCHASE ORDERS, SHARP INCREASE IN COST OF RAW MATERIALS ETC. THE MORE UNPREDICTABLE THE CASH FLOWS, THE LARGER THE NEED FOR SUCH BALANCES. ANOTHER FACTOR WHICH HAS A BEARING ON THE LEVEL OF PRECAUTIONARY BALANCES IS THE AVAILABILITY OF SHORT TERM CREDIT. PRECAUTIONARY CASH BALANCES ARE USUALLY HELD IN THE FORM OF MARKETABLE SECURITIES SO THAT THEY EARN A RETURN. 3. SPECULATIVE MOTIVE: - IT REFERS TO THE DESIRE OF A FIRM TO TAKE ADVANTAGE OF OPPORTUNITIES WHICH PRESENT THEMSELVES AT UNEXPECTED MOVEMENTS AND WHICH ARE TYPICALLY OUTSIDE THE NORMAL COURSE OF BUSINESS. THE SPECULATIVE MOTIVE REPRESENTS A POSITIVE AND AGGRESSIVE APPROACH. FIRMS AIM TO EXPLOIT PROFITABLE OPPORTUNITIES AND KEEP CASH IN RESERVE TO DO SO. THE SPECULATIVE MOTIVE HELPS TO TAKE ADVANTAGE OF: OPPORTUNITY TO PURCHASE RAW MATERIALS AT A REDUCED PRICE ON PAYMENT OF IMMEDIATE CASH; CHANCE TO SPECULATE ON INTEREST RATE MOVEMENTS BY BUYING SECURITIES WHEN INTEREST RATES ARE EXPECTED TO DECLINE; DELAY PURCHASES OF RAW MATERIALS ON THE ANTICIPATION OF DECLINE IN PRICES; ETC. 4. COMPENSATION MOTIVE: - YET ANOTHER MOTIVE TO HOLD CASH BALANCES IS TO COMPENSATE BANKS FOR PROVIDING CERTAIN SERVICES AND LOANS. BANKS PROVIDE A VARIETY OF SERVICES TO BUSINESS FIRMS, SUCH AS CLEARANCES OF CHEQUES, SUPPLY OF CREDIT INFORMATION, TRANSFER OF FUNDS, ETC. WHILE FOR SOME OF
49

SWATI SAHAY

THE SERVICES BANKS CHARGE A COMMISSION OF FEE FOR OTHERS THEY SEEK INDIRECT COMPENSATION. USUALLY CLIENTS ARE REQUIRED TO MAINTAIN A MINIMUM BALANCE OF CASH AT THE BANK. SINCE THIS BALANCE CAN NOT BE UTILIZED BY THE FIRMS FOR TRANSACTION PURPOSES, THE BANK THEMSELVES CAN USE THE AMOUNT FOR SERVICES RENDERED. TO BE COMPENSATED FOR THEIR SERVICES INDIRECTLY IN THIS FORM, THEY REQUIRE THE CLIENTS TO ALWAYS KEEP A BANK BALANCE SUFFICIENT TO EARN A RETURN EQUAL TO THE COST OF SERVICES. SUCH BALANCES ARE COMPENSATING BALANCES. COMPENSATING BALANCES ARE ALSO REQUIRED BY SOME LOAN AGREEMENTS BETWEEN A BANK AND ITS CUSTOMER. CASH MANAGEMENT: OBJECTIVES THE BASIC OBJECTIVE OF CASH MANAGEMENT IS TWOFOLD: (A) TO MEET THE CASH DISBURSEMENT NEEDS (PAYMENT SCHEDULE); (B) TO MINIMIZE FUNDS COMMITTED TO CASH BALANCES. THESE ARE CONFLICTING AND MUTUALLY CONTRADICTORY AND THE TASK OF CASH MANAGEMENT IS TO RECONCILE THEM. MEETING THE PAYMENTS SCHEDULE: A BASIC OBJECTIVE OF THE CASH MANAGEMENT IS TO MEET THE PAYMENT SCHEDULE, I.E. TO HAVE SUFFICIENT CASH TO MEET THE CASH DISBURSEMENT NEEDS OF THE FIRM. THE IMPORTANCE OF SUFFICIENT CASH TO MEET THE PAYMENT SCHEDULE CAN HARDLY BE OVER EMPHASIZED. THE ADVANTAGES OF ADEQUATE CASH ARE : (I) IT PREVENTS INSOLVENCY OR BANKRUPTCY ARISING OUT OF THE INABILITY OF THE FIRM TO MEET ITS OBLIGATIONS; (II) THE RELATIONSHIP WITH THE BANK IS NOT STRAINED; (III) IT HELPS IN FOSTERING GOOD RELATIONS WITH TRADE CREDITORS AND SUPPLIERS OF RAW MATERIALS, AS PROMPT PAYMENT MAY ALSO HELP THEIR CASH MANAGEMENT; (V) IT LEADS TO A STRONG CREDIT RATING WHICH ENABLES THE FIRM TO PURCHASE GOODS ON FAVORABLE TERMS AND TO MAINTAIN ITS LINE OF CREDIT WITH BANKS AND OTHER SOURCES OF CREDIT; (VI) TO TAKE ADVANTAGE OF FAVORABLE BUSINESS OPPORTUNITIES THAT MAY BE
50

SWATI SAHAY

AVAILABLE PERIODICALLY; AND (VI) FINALLY THE FIRM CAN MEET UNANTICIPATED CASH EXPENDITURE WITH A MINIMUM OF STRAIN DURING EMERGENCIES, SUCH AS STRIKES , FIRES OR A NEW MARKETING CAMPAIGN BY COMPETITORS. MINIMIZING FUNDS COMMITTED TO CASH BALANCES: THE SECOND OBJECTIVE OF CASH MANAGEMENT IS TO MINIMIZE CASH BALANCES. IN MINIMIZING CASH BALANCES TWO CONFLICTING ASPECTS HAVE TO BE RECONCILED. A HIGH LEVEL OF CASH BALANCE WILL, ENSURE PROMPT PAYMENT TOGETHER WITH ALL THE ADVANTAGES, BUT IT ALSO IMPLIES THAT LARGE FUNDS WILL REMAIN IDLE ULTIMATELY RESULTS LESS TO THE EXPECTED. A LOW LEVEL OF CASH BALANCES, ON THE OTHER HAND, MAY MEAN FAILURE TO MEET THE PAYMENT SCHEDULE THAT AIM OF CASH MANAGEMENT SHOULD BE TO HAVE AN OPTIMAL AMOUNT OF CASH BALANCES CASH MANAGEMENT TECHNIQUES & PROCESSES THE FOLLOWING ARE THE BASIC CASH MANAGEMENT TECHNIQUES AND PROCESS WHICH ARE HELPFUL IN BETTER CASH MANAGEMENT: SPEEDY CASH COLLECTION: IN MANAGING CASH EFFICIENTLY THE CASH IN FLOW PROCESS CAN BE ACCELERATED THROUGH SYSTEMATIC PLANNING AND REFINED TECHNIQUES. THESE ARE TWO BROAD APPROACHES TO DO THIS WHICH ARE NARRATED AS UNDER: PROMPT PAYMENT BY CUSTOMER: ONE WAY TO ENSURE PROMPT PAYMENT BY CUSTOMER IS PROMPT BILLING WITH CLEARLY DEFINED CREDIT POLICY. ANOTHER AND MORE IMPORTANT TECHNIQUE TO ENCOURAGE PROMPT PAYMENT THE BY CUSTOMER IS THE PRACTICE OF OFFERING TRADE DISCOUNT/CASH DISCOUNT. EARLY CONVERSION OF PAYMENT INTO CASH : ONCE THE CUSTOMER HAS MAKES THE PAYMENT BY WRITING ITS CHEQUES IN FAVOR OF THE FIRM, THE COLLECTION CAN BE EXPEDITED BY PROMPT ENCASHMENT OF THE CHEQUE. IT WILL BE RECALLED THAT THERE IS A LACK BETWEEN THE TIME AND CHEQUE IS PREPARED AND MAILED BY THE CUSTOMER AND THE TIME FUNDS ARE INCLUDED IN THE CASH RESERVOIR OF THE FIRM.
51

SWATI SAHAY

CONCENTRATION BANKING: IN THIS SYSTEM OF DECENTRALIZED COLLECTION OF ACCOUNTS RECEIVABLE, LARGE FIRMS WHICH HAVE A LARGE NO. OF BRANCHES AT DIFFERENT PLACES, SELECT SOME OF THESE WHICH ARE STRATEGICALLY LOCATED AS COLLECTION CENTERS FOR RECEIVING PAYMENT FOR CUSTOMERS. INSTEAD OF ALL THE PAYMENTS BEING COLLECTED AT THE HEAD OFFICE OF THE FIRM, THE CHEQUES FOR A CERTAIN GEOGRAPHICAL AREAS ARE COLLECTED AT A SPECIFIED LOCAL COLLECTION CENTERS. UNDER THIS ARRANGEMENT THE CUSTOMERS ARE REQUIRED TO SEND THEIR PAYMENTS AT LOCAL COLLECTION CENTER COVERING THE AREA IN WHICH THEY LIVE AND THESE ARE DEPOSITED IN THE LOCAL ACCOUNT OF CONCERNED COLLECTION, AFTER MEETING LOCAL EXPENSES, IF ANY. FUNDS BEYOND A PREDETERMINED MINIMUM ARE TRANSFERRED DAILY TO A CENTRAL OR DISBURSING OR CONCENTRATION BANK OR ACCOUNT. A CONCENTRATION BANKING IS ONE WITH WHICH THE FIRM HAS A MAJOR ACCOUNT USUALLY A DISBURSEMENT ACCOUNT. HENCE THIS ARRANGEMENT IS REFERRED TO AS CONCENTRATION BANKING. LOCK-BOX SYSTEM: THE CONCENTRATION BANKING ARRANGEMENT IS INSTRUMENTAL IN REDUCING THE TIME INVOLVED IN MAILING AND COLLECTION. BUT WITH THIS SYSTEM OF COLLECTION OF ACCOUNTS RECEIVABLE, PROCESSING FOR PURPOSES OF INTERNAL ACCOUNTING IS INVOLVED I.E. SOMETIME IN ELAPSES BEFORE A CHEQUE IS DEPOSITED BY THE LOCAL COLLECTION CENTER IN ITS ACCOUNT. THE LOCK-BOX SYSTEM TAKES CARE OF THIS KIND OF PROBLEMS, APART FROM EFFECTING ECONOMY IN MAILING AND CLEARANCE TIMES. UNDER THIS ARRANGEMENT, FIRMS HIRE A POST OFFICE BOX AT IMPORTANT COLLECTION CENTERS. THE CUSTOMERS ARE REQUIRED TO REMIT PAYMENTS TO LOCK-BOX. SLOWING DISBURSEMENTS: A BASIC STRATEGY OF CASH MANAGEMENT IS TO DELAY PAYMENTS AS LONG AS POSSIBLE WITHOUT IMPAIRING THE CREDIT RATING/STANDING OF THE FIRM. IN FACT, SLOW DISBURSEMENT REPRESENTS A SOURCE OF FUNDS REQUIRING NO INTEREST PAYMENTS. THERE ARE SEVERAL
52

SWATI SAHAY

TECHNIQUES TO DELAY PAYMENT OF ACCOUNTS PAYABLE NAMELY (1) AVOIDANCE OF EARLY PAYMENTS; (2) CENTRALIZED DISBURSEMENTS; (3) FLOATS; (4) ACCRUALS. AVOIDANCE OF EARLY PAYMENTS: ONE WAY TO DELAY PAYMENTS IS TO AVOID EARLY PAYMENTS. ACCORDING TO THE TERMS OF CREDIT, A FIRM IS REQUIRED TO MAKE A PAYMENT WITHIN A STIPULATED PERIOD. IT ENTITLES A FIRM TO CASH DISCOUNTS. IF HOWEVER PAYMENTS ARE DELAYED BEYOND THE DUE DATE, THE CREDIT STANDING MAY BE ADVERSELY AFFECTED SO THAT THE FIRMS WOULD FIND IT DIFFICULT TO SECURE TRADE CREDIT LATER. BUT IF THE FIRM PAYS ITS ACCOUNTS PAYABLE BEFORE THE DUE DATE IT HAS NO SPECIAL ADVANTAGE. THUS A FIRM WOULD BE WELL ADVISED NOT TO MAKE PAYMENTS EARLY I.E. BEFORE THE DUE DATE. CENTRALIZED DISBURSEMENTS: ANOTHER METHOD TO SLOW DOWN DISBURSEMENTS IS TO HAVE CENTRALIZED DISBURSEMENTS. ALL THE PAYMENTS SHOULD BE MADE BY THE HEAD OFFICE FROM A CENTRALIZED DISBURSEMENT ACCOUNT. SUCH AN ARRANGEMENT WOULD ENABLE A FIRM TO DELAY PAYMENTS AND CONSERVE CASH FOR SEVERAL REASONS. FIRSTLY IT INVOLVES INCREASE IN THE TRANSIT TIME. FLOAT: A VERY IMPORTANT TECHNIQUE OF SLOW DISBURSEMENTS IS FLOAT. THE TERM FLOAT REFERS TO AMOUNT OF MONEY TIED UP IN THE CHEQUE THAT HAVE BEEN WRITTEN, BUT HAVE YET TO BE COLLECTED AND ENCASHED. ALTERNATIVELY, FLOAT REPRESENTS THE DIFFERENCE BETWEEN THE BANK BALANCE AND BOOK BALANCE OF CASH OF A FIRM. THE DIFFERENCE BETWEEN THE BALANCE AS SHOWN IN THE FIRMS RECORD AND THE ACTUAL BANK BALANCE IS DUE TO TRANSIT AND PROCESSING DELAYS. ACCRUALS: FINALLY, A POTENTIAL TOOL FOR STRETCHING ACCOUNTS PAYABLE IS ACCRUALS WHICH ARE DEFINED AS CURRENT LIABILITIES THAT REPRESENT A SERVICE OR GOODS RECEIVED BY A FIRM BUT NOT YET PAID FOR. FOR INSTANCE, PAYROLL, I.E., REMUNERATION TO EMPLOYEES, WHO RENDER SERVICES IN ADVANCE AND RECEIVE PAYMENT LATER.
53

SWATI SAHAY

CIRCULATION SYSTEM OF WORKING CAPITAL IN THE BEGINNING THE FUNDS ARE OBTAINED BY ISSUING SHARES, OFTEN SUPPLEMENTED BY LONG TERM BORROWINGS. MUCH OF THESE COLLECTED FUNDS ARE USED IN PURCHASING FIXED ASSETS AND REMAINING FUNDS ARE USED FOR DAY TO DAY OPERATION AS PAY FOR RAW MATERIAL, WAGES OVERHEAD EXPENSES. AFTER THIS FINISHED GOODS ARE READY FOR SALE AND BY SELLING THE FINISHED GOODS EITHER ACCOUNT RECEIVABLE ARE CREATED AND CASH IS RECEIVED. IN THIS PROCESS PROFIT IS EARNED. THIS ACCOUNT OF PROFIT IS USED FOR PAYING TAXES, DIVIDEND AND THE BALANCE IS PLOUGHED IN THE BUSINESS. WORKING CAPITAL IS CONSIDERED TO EFFICIENTLY CIRCULATE WHEN IT TURNS OVER QUICKLY. AS CIRCULATION INCREASES, THE INVESTMENT IN CURRENT ASSETS WILL DECREASE. CURRENT ASSETS TURNOVER RATIO SPEAKS ABOUT THE EFFICIENCY OF ICICI BANK IN THE UTILIZATION OF CURRENT ASSETS. FAST TURNOVER CURRENT ASSETS RESULTS IN A BETTER RATE ON INVESTMENT.

TABLE SHOWING CURRENT ASSETS TURNOVER RATIO

Year 2009

Ratio (in times) 1.78

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SWATI SAHAY

20010 2011

2.98 1.98

Average: 2.24

3 2.5 2 1.5 1

ICICI 0.5 BANK OF INDIA

RATIO ANALYSIS: 2009 RATIO ANALYSIS
LIQUIDITY RATIO: LIQUIDITY RATIO SHOWS THE FIRMS SHORT TERM SOLVENCY AND ITS ABILITY TO PAY OFF THE LIABILITIES. IT HAS BEEN DEVISED TO KEEP A TRACK OF THEIR FIRMS EXPOSURE THE RISK THAT IT WILL NOT BE ABLE TO MEET ITS SHORT TERM OBLIGATIONS. IT PROVIDES A QUICK MEASURE OF LIABILITY OF THE FIRM BY ESTABLISHING A RELATIONSHIP BETWEEN ITS CURRENT ASSETS AND ITS CURRENT LIABILITIES. SOME OF THE LIQUIDITY RATIO: A) CURRENT RATIO: THE CURRENT RATIO GIVES THE MARGIN BY WHICH THE VALUE OF THE CURRENT ASSETS MAY GO DOWN WITHOUT CREATING AND PAYMENTS THE FIRMS. THE TOTAL CURRENT ASSETS INCLUDE PREPAID EXPENSES AND SHORT TERM INVESTMENTS. WHEREAS THE CURRENT LIABILITY INCLUDES ALL TYPES OF LIABILITY WHICH WILL MATURE FOR PAYMENTS WITHIN A PERIOD OF ONE YEAR E.G. BANK OVERDRAFT,
55

2010

2011

SWATI SAHAY

BILLS PAYABLE, TRADE CREDITOR, OUTSTANDING ETC. THE CURRENT RATIO THROW LIGHT ON THE FIRMS ABILITY TO PAY ITS CURRENTS LIABILITIES OUT OF ITS CURRENTS ASSETS. THE CURRENT RATIO IS COMPARED WITH THE STANDARD RATIO OF TWO TIMES FOR 2: 1 B) QUICK RATIO / ACID TEST RATIO / LIQUID RATIO: THIS RATIO ESTABLISHES RELATIONSHIP BETWEEN QUICK CURRENT ASSETS AND CURRENT LIABILITIES. A CURRENT ASSETS IS CONSIDERED TO BE LIQUID IF IT I CONVERTIBLE INTO CASH WITHOUT LOSS OF TIME AND VALUE. THEREFORE LIQUID ASSETS = CURRENTS ASSETS (INVENTORY + PREPAID EXPENSES) THE INVENTORY IS SINGLED OUT OF THE TOTAL CURRENT ASSETS AS THE INVENTORY IS CONSIDERED TO BE THE POTENTIAL ILLIQUID. THE REASON FOR KEEPING INVENTORY OUT IS THAT IT MAY BECOME ABSOLUTE, UN SALEABLE OR OUT OF FASHION AND ALWAYS REQUIRES TIME FOR REALIZING INTO CASH. GENERALLY A QUICK RATIO OF 1:1 IS CONSIDERED TO BE SATISFACTORY BECAUSE THIS MEAN THAT THE QUICK ASSETS OF THE FIRM ARE JUST EQUAL TO THE QUICK LIABILITY AND THERE HAS NOT BEEN SEEN TO BE A POSSIBILITY OF DEFAULT IN PAYMENTS BY THE FIRM. C) NET WORKING CAPITAL RATIO: IT INDICATES THE FIRMS POTENTIAL RESERVOIR OF FUND. NET WORKING CAPITAL RATIO= NET WORKING CAPITAL/ NET ASSETS ACTIVITY / TURNOVER / PERFORMANCE RATIO: IT IS MEASURE OF MOVEMENT AND THUS INDICATES AS TO HOW FREQUENTLY AN ACCOUNT HAS MOVED OVER DURING A PERIOD. IT SHOWS AS TO HOW EFFICIENTLY AND EFFECTIVELY THE ASSETS OF THE FIRM ARE BEING UTILIZED. THESE RATIOS ARE USUALLY CALCULATED WITH REFERENCES TO SALES / COST OF GOODS SOLD AND ITS EXPRESSED IN TERMS OF RATE OR TIMES.

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A) WORKING CAPITAL TURNOVER RATIO: THE WCT RATIO STUDIES THE VELOCITY OR UTILIZATION OF THE WORKING CAPITAL OF THE FIRM DURING A YEAR. THE WC HERE REFERS TO THE NET WORKING CAPITAL WHICH IS EQUAL TO THE TOTAL CURRENT ASSETS LESS TOTAL CURRENT LIABILITIES. THE HIGHER THE WCT RATIO THE LOWER IS THE INVESTMENT IN THE WORKING CAPITAL AND HIGHER WOULD BE THE PROFITABILITY. A HIGH WCT RATIO REFLECTS THE BETTER UTILIZATION OF THE WC OF THE FIRM. HOWEVER, A HIGH WCT RATIO IMPLIES A LOW NET WORKING CAPITAL IN RELATION TO THE SALES VOLUME AND THEREFORE IMPLIES OVER TRADING BY THE FIRM IN RELATION TO ITS NET WC.

B) FIXED ASSETS TURNOVER RATIO: THIS RATIO SHOWS THE CONTRIBUTION OF AVERAGE FIXED ASSETS TO NET SALES. HIGHER THE RATIO BETTER WILL BE THE SALES PER UNIT OF FIXED ASSETS. FA TURNOVER RATIO = (NET SALES) / AVERAGE FIXED ASSETS C) CAPITAL TURNOVER RATIO: CAPITAL TURNOVER RATIO = (NET SALES) / AVERAGE CAPITAL EMPLOYED.

RATIOS USEFUL TO ANALYZE WORKING CAPITAL MANAGEMENT (A) EFFICIENCY RATIOS 200 9 1. WORKING CAPITAL 4.84
57

201 0 10.

201 1 5.7

IDEAL RATIO -

SWATI SAHAY

TURNOVER (TIMES) 2. CURRENT ASSETS TURNOVER (TIMES) 3. INVENTORY TURNOVER (TIMES) 9.49 1.78

23 2.9 8 9.2 0

1 1.9 7 7.8 8 -

(B) LIQUIDITY RATIO 1. CURRENT RATIO 2.12 1.8 0 2.ACIDTESTRATIO 1.15 0.9 8 3. CASH RATIO 0.57 0.0 8 2.4 1 1.0 3 0.0 5 0.5 1.0 2.0

4 3.5

CURRENT RATIO AND QUICK RATIO CURRENT RATIO 2.12 1.80 2.41 QUICK RATIO 1.51 0.97 1.03
Quick Ratio Current Ratio

YEAR 3
2.5

2009 2010
2

2011
1.5 1 0.5 0
2009

58
2010 2011

SWATI SAHAY

(C) STRUCTURAL HEALTH OF WORKING CAPITAL RATIO/YEAR 1. CA 2. CL 3. CASH TO CA 4. RECEIVABLES TO CA 5. LOANS AND ADVANCES TO CA 6. INVENTORY TO CA 7. RM TO INVENTORY 8. STOCK INVENTORY SPARES TO 2009 0.31 0.15 0.27 0.27 0.15 0.42 0.44 0.12 0.06 TO 0.38 2010 0.26 0.14 .04 0.50 0.19 0.38 0.46 0.14 0.08 0.32 2011 0.35 0.14 0.02 0.40 0.15 0.50 0.30 0.11 0.03 0.56

9. WIP TO INVENTORY
0.35 10. FINISHED INVENTORY 0.3

GOODS

0.25 0.2 0.15 0.1 0.05 0 2009 2010 2011

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INTERPRETATION (RATIO ANALYSIS) THE UTILIZATION RATE OF NET WORKING CAPITAL AS DEPICTED BY WORKING CAPITAL TURNOVER RATIO IS FLUCTUATING DURING THE PERIOD. IT SHOWS THAT WORKING CAPITAL HAS NOT BEEN EFFECTIVELY USED OVER THE PERIOD OF YEARS EXCEPT IN THE YEAR 2006. AS SHOWN BY CURRENT ASSETS TURNOVER RATIO, THE UTILIZATION OF CURRENT ASSETS IN TERMS OF SALES HAS SHOWN A DECREASING TREND WHICH SHOWS THAT CURRENT ASSETS HAS BEEN EFFECTIVELY USED TO ACHIEVE SALES. AGAIN IF WE LOOK AT THE EFFICIENCY WITH WHICH INDIVIDUAL ELEMENTS OF WORKING CAPITAL HAVE BEEN UTILIZED, THE PICTURE OF INVENTORY TURNOVER IS NOT VERY BRIGHT. RECEIVABLES TURNOVER ALSO SHOWS A DECLINING TREND. GENERALLY SUCH A SITUATION DOES NOT SUIT THE COMPANY. AS WE LOOK AT THE EXTENT OF LIQUIDITY OF WORKING CAPITAL, WE NOTICE THAT THE RATIO SHOWS AN INCREASING TREND. THIS INDICATES IMPROVEMENT ON THE LIQUIDITY FRONT. IF WE ANALYZE THE STRUCTURAL HEALTH OF WORKING CAPITAL, THE PROPORTION OF CURRENT ASSETS TO TOTAL ASSETS HAS BEEN APPROPRIATE DURING THIS PERIOD. SUCH A HIGHER PROPORTION OF CURRENT ASSET IN THE ASSETS PORTFOLIO OF ICICI BANK OF INDIA. IS QUITE ACCEPTABLE. OUR ANALYSIS ABOVE INDICATES THE AREAS OF CONCERN TO MANAGEMENT IN MAKING BEST POSSIBLE USE OF RESOURCES. DECREASING EFFICIENCY IN THE USE OF CURRENT ASSETS HINTS OF THE POSSIBILITY OF PROBLEMS IN WORKING CAPITAL MANAGEMENT.
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ON FURTHER ANALYSIS, INVENTORY CONSTITUTES A MAJOR PROPORTION OF TOTAL CURRENT ASSETS. AMONG ITS VARIOUS COMPONENTS, RAW MATERIALS, STOCKS, SPARED AND FINISHED GOODS IN PARTICULAR NEED FURTHER ANALYSIS AS HERE STAND OUT TO THE PROBLEM AREAS.

CASH FLOW STATEMENT (2010-11) SOURCES AMOUNT A ( IN LACS) PROCEEDS FROM BORROWIN GS SALE ASSETS TOTAL 190.28 OF 27.34 CHANGE IN CASH 190.28 5.01 162.37 APPLICATIO N LOSS FROM OPERATION AMOUNT B (IN LACS) 185.27

SUMMARY OF CASH FLOW ANALYSIS A) CASH FROM OPERATION TO TOTAL CASH AVAILABLE = 185.31/190.28 = 97.38% B) CASH FROM LONG TERM SOURCES TO TOTAL CASH AVAILABLE = 162.37/190.28 = 85.33% C) PROCEEDS FROM SALE OF NON-CURRENT ASSETS TO TOTAL CASH = 17 14/19028 = 0.90%
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SCHEDULE OF CHANGES IN WORKING CAPITAL PARTICULARS AMOUNT (IN LACS) DEC201 0 DEC2 011 CHANGES IN WORKING CAPITAL INCREASE (DEBIT) DECRE ASE (CREDI T) CURRENT ASSETS INVENTORIES SUNDRY DEBTORS CASH BANK BALANCES OTHER CURRENT ASSETS CURRENT LIABILITIES WORKING 110.85 172.29
62

93.87 123.22

146.36 114.71

52.48 -

8.51

AND

10.64

5.63

5.01

20.14 247.87 137.02

21.66 288.36 116.07

1.52

20.95

SWATI SAHAY

CAPITAL (CA-CL) INCREASE WORKING CAPITAL 172.29 172.29 74.96 74.96 IN 61.44 61.44

FUND FLOW STATEMENT (2010-11) SOURCES AMOUNT A (IN LACS) INCREASE LOAN SALE OF ASSET TOTAL 22.94 185.31 IN 162.37 INCREASE CAPITAL LOSS FROM OPERATION 185.31 123.87 IN APPLICATION AMOUNT B (IN LACS) WORKING 61.44

AVERAGE COLLECTION PERIOD YEAR 2009

50 45 40 35 30 25 20 15 10 5 0 2009 2010 2011

DAYS 38 40 46

2010 2011

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SWATI SAHAY

DEBTOR TURNOVER RATIO YEAR 2009 2010 2011

50 45 40 35 30 25 20 15 10 5 0 2009
Debtors Turnover Ratio

DEBTORS TURNOVER RATIO 9.49 9.20 7.88

AVERAGE COLLECTION PERIOD (IN DAYS) 38 40 46

2010

2011

Average Collection Period (in days)

SUMMARY OF FUND FLOW ANALYSIS

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SWATI SAHAY

1. 2. 3.

INCREASE IN NET WORKING CAPITAL 61.44 FUNDS FROM OPERATIONS TO FINANCE PERMANENT ADDRESS (123.87) RATIO OF FUND FLOW FROM OPERATIONS TO TOTAL FUNDS IN THE BUSINESS (-) 123.87/85.31 = (66.85)

INTERPRETATION (FUND FLOW STATEMENT) 1. NETWORKING CAPITAL HAS BEEN INCREASED OVER THE YEARS, WHICH HAS INCREASED LIQUIDITY 2. COMPANY SHOULD TAKE CORRECTIVE ACTIONS TO COVERT LOSS FROM OPERATION TO FUNDS FROM OPERATION.

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FINDINGS AND SUGGESTIONS

THE BASIC OBJECTIVE FOR WHICH THE STUDY WAS CARRIED OUT HAS BEEN FULFILLED IN THE EARLIER CHAPTER, BASED ON THE OBJECTIVE INTERVIEW SCHEDULE WAS DESIGNED. DATA COLLECTED BASED ON SCHEDULE WAS ANALYZED AND SOME FINDINGS HAVE EMERGED.

MAJOR FINDINGS OF THE STUDY THE BANK CALCULATES WORKING CAPITAL REQUIREMENTS, LOAN REQUIREMENTS,LIQUIDITY RATIO, ACTVITY RATIO,AND FINANCE POSTION RATIO BEFORE SANCTIONING THE LEAD TIMES BETWEEN THE APPLICATION AND SANCTIONING OF LOAN VARIES FROM ONE TO THREE WEEKS. THE ICICI BANK ASK FOR THREE YEARS AUDITEDBALANCE SHEET, P/L ACCOUNT,INCOME TAX ASSESMENT FOR THERE EVALUATION PURPOSES. IN CASE OF NEW UNIT OF ICICI BANK LOOKS INTO. THE TECHNICAL FEASBILITY AS WELL AS ECONOMIC VIABILITY OF THE PROJECT.

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011

THE NET PROFIT OF THE BANK OF THE IS INCREASED FROM 2010 TO

THE EXPENDITURE OF THE COMPANY IS GRADUALLY INCREASE FRONM 2010 TO 2010 WHICH IS BAD SIGN FOR THE COMPANY

ICICI BANK MUST ADOPT EFFECTIVE CREDIT MANGEMENT TECHNIQUES TO MINIMIZES DEFAULTING LOANERS.

THE INCOME OF THE COMPANY IS ALSO INCREASED FROM 2010 TO 2011.

ICICI BANK SHOULD TAKE INTITATIVE TO ACHIEVE THERE FUTURE PLANS.

THE COMPANY CURRENTS ALSO DECREASED FROM 2010 TO 2011. ICICI CURRENT LIABILTIES IN 2010 IS152..24 TO 2011 IS 152.75 WHICH IS INCREASED.

RECEVIABLE TURNOVER OF THE COMPANY IS ALSO DECREASING IN TREND WHICH IS NOT SUIT FOR THE COMPANY. THE RATIO USED FOR ANALYSIS OF LIQUIDITY POSITION IS CURRENT RATIO AND QUICK RATIO. THESE RATIOS REVEAL THAT COMPANY HAS SOUND LIQUIDITY POSITION THROUGHOUT THE PERIOD OF STUDY. BOTH THE RATIO SHOWS FLUCTUATING TREND WITHIN REASONABLE LIMIT BUT THESE RATIO ARE HIGHER THAN CONVENTIONALLY ACCEPTED NORMS I.E. 2:1 IN CASE OF CURRENT RATIO & 1:1 IN CASE OF OF QUICK RATIO, WHICH IN SHOWS INEFFECTIVENESS THE MANAGEMENT MANAGING

CURRENT/QUICK ASSETS IN RELATION TO CURRENT LIABILITIES.

SUGGESTIONS

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KEEPING IN VIEW OF DETAILED ANALYSIS OF OUR STUDY AND OUR FINDINGS MENTIONED IN ABOVE PARAGRAPHS, THE FOLLOWING SUGGESTIONS SHALL BE HELPFUL IN INCREASING THE EFFICIENCY IN WORKING CAPITAL MANAGEMENT.

COMPANY SHOULD MAKE A POLICY IN RESPECT OF INVESTMENT OF EXCESS CASH, IF ANY; IN MARKETABLE SECURITIES AND OVERALL CASH POLICY SHOULD BE INTRODUCED.

MANAGEMENT SHOULD DEVELOP A CREDIT POLICY AND PROPER SELF REALIZATION SYSTEM FROM CUSTOMERS SO THAT EFFICIENT AND EFFECTIVE MANAGEMENT OF ACCOUNTS RECEIVABLE CAN BE ENSURED. THIS WILL SIGNIFICANTLY IMPROVE THE PROFITABILITY AND LIQUIDITY OF THE COMPANY.

PURCHASE POLICY REGARDING RAW MATERIAL, CONSUMABLES, AND TOOLS AND PACKING MATERIALS ETC. SHOULD BE INTRODUCED WHICH ULTIMATELY HELPS IN PLANNING OF INVENTORY, AVAILMENT OF MAXIMUM TRADE CASH DISCOUNT AND AVAILMENT OF MAXIMUM CREDIT PERIOD FROM SUPPLIERS.

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CONCLUSION
FROM THE ABOVE STUDY THE MAJOR FINDINGS ARE OVERALL FINANCE POINT OF VIEW, BANKING IS PERFORMING WELL. THIS STUDY INDICATES THAT IN ORDER TO IMPROVE THE OVER ALL PERFORMANCE OF ICICI BANK THE MANGEMENT MUST TAKE ALLPOSSIBLE STEPS,REVIEW AND MODIFY VARIOUS POLICIES, FINANCIAL TRADING, BY USING SOUND INFORMATION MANAGEMENT SYSTEM TO ENABLE MANAGEMENT TO HAVE A CONTROL OVER THE VARIOUS OPERATIONS. THOUGH THIS STUDY MAY BE ACADEMIC IN NATURE IT MAY SERVE A STARTING POINTFOR THE MANGERIAL ACTION PLANS TOWARDS ENHANCING NOT ONLY THE OPERATIONAL EFFICENCY BUT ALSO WILL PROVE A GREAT HELP IN UNDERSTANDING AND DETERMING APPORPRIATE STRATEGIC PLANS TO BRING VARIOUS IMPORTANT FINANICIALRATIO TO THE LEVELOF BANK STANDARDS.

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BIBLIOGRAPHY

BOOKS& REFERENCES:
M.Y. khan and P.K. jain, Financial Management I.M. Pandey Financial Management Annual Reports 2010-2011

WEBSITES:
www.sail.co.in
www.google.co.in www.managementparadise.com www.icicibank.com

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