Role of Commercial Bank in Mobilizing Deposits

CHAPTER-1
1.1-INTRODUCTION
A commercial bank is a type of financial intermediary and a type of bank. Commercial banking is also known as business banking. It is a bank that provides checking accounts, savings accounts, and money market accounts and that accepts time deposits. After the Great Depression, the U.S. Congress required that banks engage only in banking activities, whereas investment banks were limited to capital market activities. As the two no longer have to be under separate ownership under U.S. law, some use the term "commercial bank" to refer to a bank or a division of a bank primarily dealing with deposits and loans from corporations or large businesses. In some other jurisdictions, the strict separation of investment and commercial banking never applied. Commercial banking may also be seen as distinct from retail banking, which involves the provision of financial services direct to consumers. Many banks offer both commercial and retail banking services.

1.2-Objectives
The main objective of a commercial bank is to generate profitability for its ownership by providing quality based products and services to the residents of the communities and regions that they represent. Aside from offering traditional banking products, commercial banks must be highly competitive and provide specialized products. Commercial banks are to profess higher profitability by maintaining circular and efficient flow of amount of money deposited by the customers and the lenders. Commercial bank contributes to the economic cycle by keeping the money circulation among households, government and corporate businesses.
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Role of Commercial Bank in Mobilizing Deposits

The commercial banks lend money to the financial agents through their various products and services by earning interest income on the borrowed money. Commercial banks design their short permanent status and long term loans and other products to cater to the need of customers while enhancing their own returns. Their objective is to attract more customers and build profitable relationships next to the new and existing customers.

1.3-Scope of Study
On the preparation of the project, I mainly studied about the capital formation and GDP of the nation. So far as this purpose, I have taken the GDP and GDS of different years. All the data relating to this has been collected from secondary source.

1.4-Significance
This project significance an overall analysis of Commercial Bank. In which the total investment including savings of the country are projected. Here the actual investment of the business also calculated and shown in details as commercial banks are showing there present progress report including their rate of development in the country. At lost, the commercial bank not only increase the saving of the people but also increases the economic rate of growth in the country.

1.5-Methodology
The study was exploratory in nature with primary data being collected though questionnaire and balance sheets administered to a sample of 50 respondents. A personal interview was conducted with respondents. Some of the questionnaires were filled up after a small conversation relevant to the subject of the study. The questionnaire was structured with both open and close-ended
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questions. The balance sheet also served the purpose of calculating the various ratios. Analysis, tabulation and interpretation of the data were done accordingly and conclusions were drawn. Thus the questionnaire and interview method along with the balance sheets were adopted for the purpose of research.

1.6-Limitation
It last I try my level, best to collect adequate data for completing the project in time, Though the project commercial bank is arranged in a collective manner, but it takes more time for completing manner, but it takes more time for competing the project, Besides that I have faced same problem which are as follows. Shortage of time Improper co-ordination form Zonal office

1.7-Chapter Plan
Chapter -1 Chapter-2 Chapter-3 Chapter-4 Chapter-5 : Introduction : Company Profile : Analysis & Interpretation : Financial Analysis Of Commercial Bank In India : Conclusion

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CHAPTER -2
COMPANY PROFILE 2.1-INTRODUCTION
Banking occupies one of the most important positions in the modern economic world. It is necessary for trade and industry. Hence it is one of the great agencies of commerce. Although banking in one form or another has been in existence from very early times, modern banking is of recent origin. It is one of the results of the Industrial Revolution and the child of economic necessity. Its presence is very helpful to the economic activity and industrial progress of a country. This Chapter briefly traces the historical and contemporary imperatives to provide financial services to the rural poor in India and the institutional responses to the same.

2.2-Meaning
A commercial bank is a profit-seeking business firm, dealing in money and credit. It is a financial institution dealing in money in the sense that it accepts deposits of money from the public to keep them in its custody for safety. So also, it deals in credit, i.e., it creates credit by making advances out of the funds received as deposits to needy people. It thus, functions as a mobiliser of saving in the economy. A bank is, therefore like a reservoir into which flow the savings, the idle surplus money of households and from which loans are given on interest to businessmen and others who need them for investment or productive uses. Definition of a Bank The term Bank has been defined in different ways by dif ferent economists. A few definitions are: According to Walter Leaf A bank is a person or corporation which holds itself out to receive from the public, deposits payable on demand by cheque. Horace 4
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Role of Commercial Bank in Mobilizing Deposits

White has defined a bank, as a manufacture of credit and a machine for facilitating exchange. According to Prof. Kinley, A bank is an establishment which makes to individuals such advances of money as may be required and safely made, and to which individuals entrust money when not required by them for use. The Banking Companies Act of India defines Bank as A Bank is a financial institution which accepts money from the public for the purpose of lending or investment repayable on demand or otherwise withdrawable by cheques, drafts or order or otherwise. Thus, we can say that a bank is a financial institution which deals in debts and credits. It accepts deposits, lends money and also creates money. It bridges the gap between the savers and borrowers. Banks are not merely traders in money but also in important sense manufacturers of money.

FUNCTIONS OF COMMERCIAL BANKS

Commercial banks have to perform a variety of functions which are common to both developed and developing countries. These are known as General Banking functions of the commercial banks. The modern banks perform a variety of functions. These can be broadly divided into two categories: (a) Primary functions and (b) Secondary functions.

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Evolution of the Financial Landscape

In post-independence India, in order to facilitate improvements in agricultural production and attain food self-sufficiency, the stance of policy was to ensure sufficient and timely credit at reasonable rates of interest to as large a segment of the rural population as possible (Rangarajan 1996). The strategy to achieve this was threefold: expansion of the institutional base, directed lending to disadvantaged borrowers, and credit provision at concessional rates of interest. The latter was justified in terms of the perceived mismatch between the longer term returns of farm investment in relation to cultivator households short term consumption needs and requirements to service the loans. 4.02 Fisher and Sriram (2006) identify three post-independence phases in rural credit provision. First, the 1950s up to the mid-1960s when cooperatives were the institutional vehicles of choice; second, the 1970s and 1980s when attention shifted to commercial banks and RRBs and third, the reform period in the early 1990s which saw the re structuring of the banking system, the emergence of SHGs and a growing number of MFIs. In terms of scale, spread, costs, risks, and the inter-temporal nature of credit markets, financial institutions and agents in India face formidable challenges in meeting the diverse financial service needs of the countrys rural population. The present rural financial infrastructure comprises a wide variety of formal, semiformal and informal financial service providers, with distinctive cultures and characteristics. The number of organizations and agents is very substantial : 33,553 rural and semi-urban branches of commercial banks, 13,932 rural and semi-urban branches of Regional Rural Banks, 1.09 lakh primary cooperatives, 1,000 NGOMFIs and around 20 MFIs registered as companies (Section 25) and nearly three million SHGs. Even more numerous are the myriad of informal agents constituting a great range of financial service providers across the country.
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Different segments of the financial infrastructure have not developed uniformly or simultaneously, and their relative standing in terms of government policy and intervention has changed over time. Moreover, financial institutions have themselves influenced government policy ( Jones 2006). In the following paragraphs, an attempt is made to trace the forces and compulsions that have led to the development of particular rural financial institutions in the country, to outline the changing fortunes and shares of these different systems, to show the present gap between rural financial needs and provisions, and to assess policy options to reduce this gap through institutional development, linkages and reform.

Evolution of Commercial Banks

The foundation for building a broad base of agricultural credit structure was laid by the Report of the All-India Rural Credit Survey (AIRCS) of 1954. The provision of cultivator credit in 1951-52 was less than 1% for commercial banks. In the report it was observed that agricultural credit fell short of the right quantity, was not of the right type, did not fit the right purpose and often failed to go to the right people. With a view to give an impetus to commercial banks, particularly, in the sphere of investment credit, the nationalization of the Imperial Bank of India and its redesignation as the State Bank of India (SBI) was recommended.

2.3-The role of commercial banks

Commercial banks engaged in the following activities: Processing of payments by way of telegraphic transfer, EFTPOS, internet banking, or other means Issuing bank drafts and bank cheques. Accepting money on term deposit Lending money by overdraft, installment loan, or other means 7
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Providing documentary and standby letter of credit, guarantees, performance bonds, securities underwriting commitments and other forms of off balance sheet exposures Safekeeping of documents and other items in safe deposit boxes Currency exchange sale, distribution or brokerage, with or without advice, of insurance, unit trusts and similar financial products as a financial supermarket

2.4-TYPES OF DEPOSIT
The basic function of a commercial bank are receipt of deposits from the public and advancing of money to the businessmen. The deposits received by the banks can be classified into two categories. Primary deposits Derivate/Creative deposits. Primary Deposits When a customer deposits cash with bank, he bank is said to have a primary cash or simple deposit. In other words, the primary deposit arises when the people deposit cash with the book. The initiative for making primary deposits. Comes form the people primary deposits also arise an account of charge bull on any other instrument deposited by a customer with his band for the purpose of collection. In such cases, the primary deposit will arise only when the payment is collected by the band and credited to the account of the customs. The deposits which are received, by the bank are used to made loans and advances to the business institution. Derivate/ Creative Deposits Bank deposit also arises when a bank advances money to the business man out of the primary deposits received by it. Such deposits are called derivate or secondary 8
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deposits since they are derived from the primary deposit. Derivate deposits also unite when a bank discomfort a bill of exchange of its customer or purchase government security from its customer. In frits case, the bank will credit the account of the customer with the amount of the bill less the interest and other changes and in second case, it will credit the account of the customer with the agreed price of the security. Thus, in both cases, more deposits are credited even though n o cash has been deposited with the bank. Similarly, bank deposits arises when a bank purchases Govt. Securities from a customer as it will credit the account of the customers with amount. It will followed by an increase in the supper if money. In short, when a bank credits the account of a customer without receiving cash, there will be an increase in supply of bank money and when a bank credit the account of a customer after receiving cash, there is no increase in supply of money. 2.2 UTILISATION OF DEPOSITS The deposits which are received by a bank are utilized in different way which are given bellow. a) Cash in hand and with RBI A bank has to sufficient cash reserve to made the requirement of the customers. Every commercial bank in the country must keep at least3% of its deposits with the RBI to satisfy the requirement of cash sufficient to meet the demand of the customers. b) Balance with other banks. Banks usually keep cash reserve with other banks to settle inter bank indebted ness .This helps in making remittances by draft and setting the accounts. Some banks keep their found with bigger banks for purpose of safety. 9
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c) Money at call and shot notices Sometimes, loans granted by the bank are repayable and demand an on short notice. These loan are also highly liquid as they can be converted into cash very shortly. In India, money at call and short notice represent the money lent to other banks. But in England, it represents the money advance to the discount hourses. d)Investment Bank also purchases securities issued by central and state government and big? Industrial Rouse. These securities can be hold in the market in time kef need and there security loans may be obtained from the Reserve Bank of India. May banks in India Investment about 25% of their found in government securities. e) Loans and Advances The bank may advance credit facilities to customers by way of either loans of cash credit of overdrafts it is a important part of the activity of banks to advance loans to need persons. Banks lend only for short period on t him security of marketable good maintaining sufficient margins. f) Bills of receivable being bills for collection Bank discount the bills of exchange and keep with them the bills till they fall due. They are liquid assets as the also on the liabilities sides as they are meant for collection. g. Constituents liabilities for acceptance endorsements and other obligation. These items also appear on both the side of the balance sheet. These item represent the total dues of te bank customers in respect obligation it has accepted on their he half like accepting a bill and issue of letter of credit. h. Premises and furnitures Bank have their own premises and feature to perform the Banking operation. These are also to be shown in the balance sheet. Bank must provided depreciation on these assets annually these assets are not liquid and cannot be realized without any
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loss value. Bank also holds other assets like development express. Preliminary express etc. i. Non- Banking Assets Thee assets are acquired by a bank in the settlement of claim the ordinary course of business under the banking regulation Act. Such assets are not be retained permanently. The are to be disposed of with in a period of seven years from the date of their acquisition.

2.5-CURRENT ACCOUNT
Current Account is also know as demand deposit account. A businessman an organization can open a current with a bank by making on initial deposits of 3000/in rural area and Rs. 500/- in urban area here is no upper limit to the amount which can be with drawn by drawing cheques n this account. There is no restriction regarding the amount that is why it is know as running and active amount. A customer may be permitted to with draw more than that what he has deposited on this account if he has entered in the agreement with bank in this regard. Some benefits are as follows. Businessmen have to receive and make a large number of payments very day it is difficult to handle cash. The cheque & facilities removes the difficulty There is no restriction of the number of cheques or on the amount to be drawn at a time by one cheque. Overdraft facilities are allowed by bank on the current account holders 2.6-SAVING BANK ACCOUNTS Saving deposit account is meant for small businessmen and individuals who wish to save a little out of there current income to safeguard their future and also to earn some interest on their saving. A savings account can be opened with as small and sum Rs.5/ similarly. Small amounts can be withdrawn. A minimum balance of 11
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Rs5/ is to be maintained in the account of cheque book facilities is not been issued minimum balance of Rs 100/- is necessary. There are restrictions on the maximum amount that can be deposited in this account and also on the withdrawals form this account. The bank may not provide week and may be down a limit on the amount that allowed to deposit cheque, drafts, dividend, warrants etc. which stand in their name only. For this facility, it is necessary that account holder must be or saving account in the same bank. However, the banks do not accept do not accept cheques or instruments payable to third party or deposit in the saving bank account. Saving bank account is very popular among the general public because of following reasons. A saving account can be opened with as little Rs5/- only. It help people of small mean to save for their further. The money lying with the bank is quite safe. There is no fear of theft The money can be withdrawn conveniently from the saving account.

2.7-FIXED DEPOSIT ACCOUNT

The term deposit repayable only after the expiry of specific period, which ordinarily varies from fifteen days to five years. Since, it is to be repayable only after a fixed period of time, which is to be determined at the to me of opening of the account, it is also known as time deposit. People who can afford to keep their money with bank for a certain period without withdrawing it mean while go in for fixed deposits. Fixed deposits are the most suitable forms of rasing resources for a commercial bank. The rate of interest in case of fixed deposits is high because of its length of the time of the deposit. The longer the period the higher is the rate of interest. People having surplus funds prefer to deposit money in fixed deposit because of the following advantages. 12
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The rate interest on fixed deposits is higher than that allowed on savings account deposits. The longer the period of deposit, the higher is the rate of interest allowed by the bank. The idle and surplus of the people lying in fixed deposits get them good return in the form of interest The customer can get loan from the bank 90% of amount of the fixed deposit receipt.

2.8-RECURRING DEPOSIT ACCOUNT

The recurring deposit account has gained wide popularity these days. Under this, the depositor is required to deposit fixed amount of money every month for a specific period of time. Each installment may very from Rs 5/- to Rs. 500/- or more per month and the total period of account varies from 12 months to 10 years. After the get bank all his deposit longer with commutative interest accrued on them. Recurring deposit account offers the following benefits to the public. It provides a good way to save in all amount for use in the further, like education of children marriage of children etc. People having low income may open a recurring deposit account with a commitment to deposit as low Rs 5/- every month. The recurring deposit account can be opened for any period ranging from 12 months to 120 months. Loans can taken up to 90% of the deposits of the depositor need money. Highest position with the saving deposit of the public. So everything is carried on in a systematic manner by which ultimate goal can be achieved. The commercial banks in India are playing an important role both in collecting and providing loan to general public. The back also provided other subsidiary functions and services to the public. Depending upon the nature of business, the functioning of banks are also made accordingly.
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2.9- DRI SCHEME The different rate of interest scheme was launched in 1972 on the recommendation of Dr. R.K Hazari committee under DRI scheme, each public sector commercial banking is required to lend at least 1% of its total advances to the economic background people at a low rate of 4% per annum. At least 2%rd of the loan under this scheme is given to the people belonging to scheduled castes and tribes. Families with annual income of Rs 72000/- in urban areas eligible to get concessional loan under this scheme. The DRI scheme is applicable through the country. It has following features. The eligible borrowers can borrow a composite loans upto Rs. 6500/- under this scheme. To start with, limit was Rs 500/- for working capital loan and Rs 2500/for turn loans. At least one third of the advances under DRI scheme are give in rural and semiurban areas. At least two third of of the advances under DRI scheme are given to persons belonging to scheduled castes and scheduled tribes.

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CHAPTER-3
3.1-ANALYSIS & INTERPRETATION
Under the project report I have collected various information relating to Different period starting from 2007 up to 20011. The basic concept of this project is Concerned with groupies of long term investment even the investment in rural sector depending upon the period development and other related issues, the bank has to provide various finances particularly in the field of small scale scales business as well business as well as other areas.

The investment of commercial bank particularly the investment Of long-term budget and long-term loan is only possible after a systematic analysis and interpretation of business object. Whenever there is a plannings comes for implementing the basic development or rural sector, the measurable effect is also considered accordingly so the relative progress, improvement and basic development is only possible after a long- term analysis of sartorial progress. State/Zone 1. N 2. E 3. W 4. S 5. C 2009 11 13 12 11 10 Progress After 2010 2011 16 16 14 14 13 13.5 16 14.5 12.5 22.5 2012 11 12.5 13.6 14.1 11.5 2013 16 25 23 24 21

ACHIVEMENT OF SUCCESS AFTER 2009 As the commercial bank are acting as the measuring rod of economic development of a country even, most of the annual progress and development can be studied
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after investigating the practical happening of an area. Staring from SBI group up to al other commercial bank, every where there is a need if financial assistance for all types of business unit. During 2009 the progress of success comes to east India in 13% in 2007, the relative progress also made in a different ways. Both in north and the percentage is being equal and which 16%. In 2011 it comes to maximum 22.5% in central India. By the end of 2013 the actual progress is studies in East India is 25%. % Increase In Deposits of Commercial Bank In Different Achievement

State/Zone 1. N 2. E 3. W 4. S 5. C

2010 6.5 7.2 3.5 6.8 4.9

2011 7.2 7.5 7.1 6.1 5.9

2012 2.2 2.5 3.1 5.1 4.1

2013 6.1 7.25 7.1 6.11 7.12

Percentage Increase in Deposits of Commercial Bank in Difference Zone In India , most of the development work has been assigned to commercial bank even the plan are implemented which are completely guided by the Act of Reserve Bank of India whenever more funds are required by commercial bank, a systematic and interpretation also made with their views. The total progress of commercial bank in North India goes to 6.5% and which is completely analysis by the expert group of RBI. The highest percentage of investment was taken place in eastern zone as 7.2% during 2011 the progress also rating as 7.5 by the end of 20011 and by the end of 2013 the rating 5.4 which belongs to south India. In 2013 maximum investment belong to east India and it is 7.25%.
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DEPOSITS RECEIVED BY PUBLIC SECTOR BANK AFTER 2007

State/Zone 2009 1. 2. 3. 4. 5. N E W S C 15780 12380 11640 11290 11590 62680 % 25.17 19.76 18.57 18.01 18.49 100 2010 16570 13280 12320 12200 11220 % 25.27 20.25 18.78 18.60 17.10 2011 17220 14200 12200 14540 11591 69,761 % 24.68 20.36 17.49 20.85 16.62 100 2012 17290 14340 12500 11520 11630 67,280 % 25.69 21.32 18.58 17.13 17.28 100 2013 17680 15290 12600 11540 14210 % 24.78 21.44 17.67 16.19 19.92

65,590 100

71,320 100

Deposit Received By Public Sector Bank after 2009 In India, public sector are taking important role by which more investment of funds can be assured easily. In North India investment is maximum due to more political interference and other related effects even the investment growing rapidly by the change of infra-structural facilities and programs of various banking institutions. In 2009 the total amount of loans provided by commercial bank in northern zone but the total investment goes to 62680 crores. In 2008 the total investment of commercial bank goes to 65590 like in 2007,08 and 09 the total collected fund was 6975, Rs. 67280 and Rs 71320 crores respectively PROFIT SICE
State/Zone 1. 2. 3. 4. 5. Total N E W S C 2010 262.1 341.4 245.2 344.8 548.2 1654.8 % 18.84 20.64 14.82 20.82 27.88 100 2011 361.8 642.6 344.8 548.2 540.8 2438.2 % 14.84 26.36 14.14 22.48 22.18 100 2012 440.6 421.6 381.4 241.6 625.4 2110.6 % 20.88 19.97 18.07 11.44 29.64 100 2013 541.5 580.2 740.8 745.9 728.8 3337.2 % 16.23 17.38 22.19 22.36 21.84 100

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PROFIT Most of the commercial bank are expecting a profit out of their investment in the marked. Through, the investment in East and centra India is more. Even, the investment by the end of 2010 it comes to 7459 crores in Western India and which comes to Rs 3357.2 crores by total of the amount. All particulars are clearly mentioned in the project. Starting from 2011 up to 2013 in evry stage the expected profit is rate 15-20% but practically it is more than the expected amount. In a systematic analysis it is found that the total profit earn during 2012 was Rs. 2438.2 crore. At last the profitability of the banking sector also increases with an expevted value DEPOSITS ON RURAL SECTORS AFTER 2006
State/Zone 2009 1. 2. 3. 4. 5. Total N E W S C 6440 3480 7650 7220 6550 31.340 % 20.55 11.11 24.40 23.04 20.90 100 2010 3340 3289 7100 7210 7370 % 12.11 11.58 24.99 25.38 25.94 2011 5410 5420 7400 7450 7258 32,938 % 16.43 16.46 22.46 22.62 22.04 100 2012 3660 3420 7145 7550 6990 28,765 % 12.73 11.88 24.82 26.24 24.31 100 2013 215 4410 7245 7660 7220 % 13.70 14.35 24.92 24.47 23.47

28,409 100

30,750 100

Deposits on Rural Sectors After 2009 The investment are collection of funds even the loan are fully arranged in a basis way by which more and more funds can be created whenever the country wants to develop its economic condition, at the same time it requires full co-operation of commercial bank as commercial banks are providing a banks are providing a basic infra structure to the rural sector even ton to rural industries. In report, it was mentioned that the commercial bank providing loan to rral sector with a full of institutional progress. By the end of 2009, the total investment goes to Rs. 31340 million like such the loan provided by the end of 2010 goes to Rs. 28409 million like such the loan provided by the end of 2008 goes to
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Rs. 28409 million also also the amount of investment is related with 30750 million by the end of 2013 this is what the increase of 7.5% of loan from 2009

3.2-FINANCIAL STRUCTURE OF commercial bank

The Indian financial system comprises the following institutions: 1. Commercial Bank a. Public sector b. Private sector c. Foreign bank d. Cooperative institutions. i. urban cooperative bank ii. State cooperative bank iii. Central cooperative bank 2. Financial Initiations a. All- India financial institution (AIFIs) b. State financial corporation (SFCs) c. State industrial development corporation(SIDCs) 3. Nonbanking financial companies (NBFCs) 4. Capital market intermediaries About 92 percentage of the countrys banking is und er state control while the balance comprises private sector and foreign bank. The public sector commercial bank are divided into three categories. Nationalized Banks (19 banks) in In 1969, the Government arranged the nationalization of 14 scheduled commercial bank in order to expand the branch network, followed by six more in 1980. A merger reduced the number from 20 to 19. Nationalized bank are wholly owned by the Government, although some of them have made public issues. In contrast to the state bank group, nationalized 19
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bank are centrally governed i.e., by their respective head offices. Thus, there is only booed for each nationalized bank and meeting are less frequent ( generally, one a month) The state bank group and nationalized bank are together referred to as the public sector banks (PSBs.) Table 1 and 2 provide details of details of public issues and post issue shareholdings of these PSB.s Issue of Subordinated Debt Instruments for Inclusion in Tier-2 Capital During the Rear Ended March 1998( Rs billion) Nam of Bank Punjab & Sind Bank Bank of India Syndicate Bank Dena Bank Regional Rural banks RRBs. In 1975, the state bank group and nationalized bank were required to sponsor and set up RRBs in partnership with individual state to provide low-cost financing and credit terms of total assets . the table clearly shown the importance of PSBs. Structure of the Banking Industry in Terms of Total Assets, March1997
Bank State Bank of India and Associates Nationalized bank Old private sector bank New Private sector bank Foreign bank Regional rural bank Number 8 19 25 9 39 169 Total Assets (Rs. Billion) 2,043.56 3,519.05 444.54 161.13 559.11 190.51a

Amount Permitted 1.0 7.0 0.8 2.0

Amount Raised 1.0 Nill 0.6 1.5

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More than 40,000 NBFCs exist exist, 10,000 of which hand deposits Rs 1,539 billion as March 1996 After public frauds and failure of some NBFCs, RBIs supervisory power over these high-growth and high risk companies was vastly strengthened in January 1997. RBI has imposed compulsory registration and

maintenance of a specified percentage of liquid reserves on all NBFCs. Magnitude and Complexity of the Bank Sector The magnitude and complexity of the India banking sector can be understood better by looking at some basic banking date. Table 4 shows classification on banks based on working funds. Classification of Banks Based on Working Funds, as of 31st March 1997 Classification Small Medium Large Very Large Exceptionally Large Working Funds (Rs billion) UP To 50 50-100 100-250 250-500 Above 500

Interms of growth the number of commercial bank branches rose eightfold from 8,262 in june 1969 at the time of nationalization of 14 bank to 64,239 in june 1998. The average population per bank branch dropped from 64,000 in june 1969 to 15,000 in June 1997, although in many of the rural centers ( such as in hill districs of the North ), this ratio was only 6000 people per branch, This was achieved through the establishmentment of 46,675 branches in rural and semi urban area, accounting for 73.5 percent of the network of branches As of March 1998, deposits of the banking sytem sstood at Rs6,013.48 billion and net bank credit at Rs,3,218.13 billion. 21
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PUBLIC SECTOR BANKS BAD DEBTS: Parliamentary review Government ownership in banks attracts parliamentary review . the Estimates Committee of Parliament takes a serious view of adverse comments made against to managements of PSB and NPAs on account of transgression of powers. The committee called for a total revamp- of the training system for bank officers. The committee also noted that public sector undertaking (PSU) banks have to be able to contain NPAs at a par with international standards where the tolerable levels of NPAs are around 3 to 4 percent. NONPERFORMING ASSETS OF ALL INDIA FINANCIAL INSTITUTIONS The net NPAs-total loans ratio at IDBI stood at 10.1 percent, ICICI at 7.7 percent, and IFCI at 13.6 percent as of 31 March 1998.However, loans from other AIFIs such as LIC, GIC, UTI, and their subsidiaries, risk Capital and Technology Corporation (RCTC), Technology Development and Information Company of India (TDICI), and Tourism Finance Corporation of India (TFCI), to the industrial sector have been substantial , but the date on their NPAs are not readily available. For state level institutions such as SFCs and SIDCs, which lend to medium-size industry and SSI sectors, the NPA data are also not readily available State-level institutions benefit from a special recovery procedure allowed under their separate enactment. With the exception of IDBI, ICICI and IFCI, the other AIFIs are not under RBIs regulatory discipline. There is a need to study feature of their loan operations, credit control, and NPAs.

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FUNCTION OF BANK CAPITAL CAPITAL ADEQUACY Capital adequacy is a self-regulatory discipline and cannot save banks that are distressed. As such, the time required for meeting bank capital adequacy must be shortened to a minimum. The CAMEL rating system clearly recognizes the strength of bank capital as just one requirement and also an end product of other processes, mostly management driven . It is essential to amplify the quality of earnings as it is the first thing that catches shareholders attention. History shows that banking problems germinate during years of economic boom. When the earnings component becomes volatile and susceptible to sharp growth that is no sustainable, the quality of loan/risk assets can become suspect. PSB are owned by the Government, therefore, they have implicit guarantees from the Government, resulting in the lack of capital adequacy ratio (car)norm. Given the recommendation of the Narasimham committee (I) in 1991 on the BIS standard of capital adequacy, a CAR of 8 percent was to be achieved by march1996. Twenty six out of 27 PSBs had complied with this requirement as of March 1998. Narasimham Committee (II) recommended CAR targets of 9 percent by 2000 and 10 percent by2002. As many PSBs have already high CARs (some indicated an average CAR of about 9.6 percent as of March 1998), such targets could be attained. Moreover ,. As 35 percent of deposits are allocated to CRR and SLR, coupled with investment in Government guarantees bonds risk assets are are not preferred. However , RBI has introduced a calculation method that 60 percent of approved securities should be market market, and the ratio will be raised to 100 percent in 23
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a few years . Deposit the higher mark-to- market ratio, many bank s increased investments in approved securities to comply with CAR. The banks will have difficulties raising more capital in the near future, with capital markets sluggish, investor confidence low, and bank issues unpopular with investors. The need for general provisioning on standard assets increases the pressure on profitability of banks as Government guaranteed securities are prone to default. RBI has decided to implement certain recommendations of Narasimham Committee(II). Banks are to achieve a minimum of 9 percent CAR by 31 March 2000. Decisions on further enhancement will be made thereafter. An asset will be treated as doubtful if it has remained substandard for 18 months instead of 24 months. Banks may make provisions in two phases.On 31 March 2001 provisioning will be art not less than 50 percent on the assets that have become doubtful on account of the new norms. On 31 March 2002 a balance of 50percent of the provisions should be made in addition to the provisions needed by 31March 2001. A proposal to introduce a norm of 12 months will be announced later. Government guaranteed advances that have turned sticky are to be classified as NPAs as per the existing prudential norms effective 1 April 2000. Provisions on these advances should be made over a period of four years such that existing/ old Government guaranteed advances that would become NPAs on account of new asset classification norms should be fully provided for during the next four years from the year ending March 1999 to March 2002 with a minimum of 25 percent each year. To start with, banks should make a general provision of a minimum of 0.25 percent for the year ending 31 March 2000.
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The decision to raise further the provisioning requirement on standard assets shall be announced in the process. Banks and financial institutions should adhere to the prudential norms on asset classification, provisioning , etc. , and avoid the practice of evergreening . Banks are advised to take effective steps for reduction of NPAs and also put in place risk management systems and practices to prevent reemergence of fresh NPAs. PSBs shall be encouraged to raise their tier-2 capital , but Government guarantee to hond issues for such purpose is deemed inappropriate. Banks are advised to establish a formal ALM system beginning 1 April 19999 . Instructions on further disclosures such as maturity pattern of assets and liabilities , foreign currency assets and liabilities , movements in provision account , and NPAs , will be issued in due course. Arrangements should be put in place for regular updating of instruction manuals. Compliance has to be reported to RBI by 30 April 19999. Bank are to ensure a loan review mechanism for large advances soon after their sanction and measures in time A 2.5 percent risk weight is to be assigned to Government /approved securities by March 2000 Risk weights to be assigned for Government guaranteed advances sanctioned effective 1 April 19999 are as followe: Central Government 0 percent : State government : O percent, Governments that remained defaulter as 31 March 2000:20 percentage. The last figures as ( of 1997/98) for banks and selected financial institution capital adequacy are shown in Table 19 and 20. Table 19 indicates that most PSBs have comfortable CARs but ones the accounts are recast in conformity with the

forthcoming provisioning norms, bank will have to start planning for capital 25
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issues. The size of bank issues, sequencing, and readiness of the capital market to absorb all public offering will pose tremendous challenge challenges to bank management. TIER-2 CAPITAL FOR BANKS To meet CAR requirements seven bank Canara Bank, Punjab National Bank, Central Bank of India, India Overseas Bank, United Bank of India, Federal bank ( Private sector), and Vijay Bank- are finalizing plans to raise about Rs. About Rs20 billion worth of subordinated debt, which qualifies as tier-2 capital? Capital Adequacy of public sector Bank, 1995/96/1997/98(percent) Name of Bank
State Bank of India State Bank of Bikaner & Jaipur State Bank of Hyderabad State bank of Indore State Bank Mysore State Bank of Patiala State Bank of Saurashtra State Bank of Travancore Allahabad Bank Andhra Bank Bank of Baroda Bank of India Bank of Moharashtra Canrara Bank Central bank of India Corporation bank Dena Bank Indian Bank Indian Bank Indian Overseas bank Oriental bank of Commerce Punjab National bank Syndicate Bank United Commercial bank Union Bank of India United Bank of India Vijay bank

1995//96
11.60 9.33 9.90 8.80 8.81 9.51 12.38 9.40 9.68 5.07 11.19 8.49 10.38 2.63 11.30 8.27 Neg. 5.95 16.99 3.31 8.23 8.42 7.42 7.93 9.50 3.50 Neg

1996/97
12.17 8.82 10.84 9.31 10.80 11.25 12.14 8.17 11.00 12.05 11.80 10.26 9.07 10.17 9.41 11.30 10.81 Neg 10.07 17.53 9.23 9.15 8.80 3.16 10.53 6.23 11.53

1997/98
14.58 10.65 10.82 9.83 9.83 11.61 13.24 18.14 11.48 12.37 12.05 9.11 10.90 9.54 10.40 16.90 11.88 1.41 9.34 15.28 11.39 8.81 10.50 9.07 10.50 8.41 10.30

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CREDIT DELIVERY SYSTEM

Distribution of Outstanding credit scheduled commercial Bank According to type of Account March 1996 Percent Type of Account Cash Credit Overdraft Loans Medium-term loans Long-term loans Packing Credit Export trade bills purchased Export trade bill discounted Export trade bill advanced Advance against export cash Incentive and duty drawback claim Indian Trade bill purchased Indian Trade bill discounted Indian Other bill discounted Advance against important bill Forign currency check/TCs/DDs/ TTs/ MTs purchased Total Amount Rs.billion No of Account 16.1 608 7.2 24.8 42.9 0.5 0.3 0.1 0.1 0.0 0.4 0.3 0.2 0.1 01 100.0 4,767,771.0 Credit Limit 35.7 7.7 7.9 9.4 18.9 7.3 3.2 2.1 1.1 0.1 1.3 2.4 0.9 0.8 0.8 100 2,684,4 35.7 7.4 8.0 10.3 19.8 7.0 2.6 1.8 0.9 0.1 1.2 2.0.92 0.7 0.8 0.4 100.0 2184.4 Amount Outstanding

Table show the Indian bank blow coverage of bills and receivable financing, and low level of export of bank clientele to the forein trade segment. Partly these should be ascribed to a lack of banking services or expertise of centers where demand for the service exists but is met by distantly placed branches. Inadequate bills and direct receivables financing results in underutilization of network branches through which collection can take place. 3.3-HUMAN RESOURCES ISSUES IN BANKING LABOUR UNION AND HUMAN RESOURCES:The number of bank management staff and employees in India is vast (223,000 in SBI; 81,252in SBI Associates; 581,000 in nationalized banks; 57,241 in old 27
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private sector banks; 1,620 in new private sector banks, and 13,510 in foreign banks operating in the country). The total is 957,623 with the number of staff employed in co-operative and rural banks equally large. Potentially, the gap between availability of required skills and actual requirements is increasing as more complex product mixes are introduced and traditional banking products are replaced. Another reason is the skewed age profile of employees, some of whom were taken on 30-35 years back when the branch expansion programs started. Indian banks are highly unionized and productivity benchmarks are not clearly established. To create a more constructive work attitude, the disinvestment or privatization programs of PSBs should include share offerings to staff, an idea successfully carried out by SBI, Bank of Baroda and Bank of India among others. The spread of computerization (so far inhibited by staff union pressures on quotas and wage hikes) must be evaluated in terms of return on information technology assets of the banks and revised productivity benchmarks. Another issue requiring attention is regular recruitment in various grades every year, since experienced employees in banking are built up over several years An embargo on recruitment since 1985 has skewed the age profile of the work force in PSBs. Such imbalances are difficult to rectify. There are those who argue for productivity-linked wages, which is a dangerous recipe in the context of a unionized work force. What is needed is fair competition, merit based career progression policies, strong management of staff, and transparent performance evaluation systems (experienced of international banks paying proprietary rewards and package for specialist traders, etc. have not exactly been happy since such staff have landed some banks with losses). 28
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The merger of banks as recommended by Narasimham Committee (II) to create strong banks that can compete internationally can result only in the creation of formidable union power and amplify inefficiencies. Policies are also needed to prevent significant turnover of banking staff in cities, urban as well as semi urban and rural branches. Incentives must be given to staff in rural and semi-urban branches to increase motivation and minimize fast personnel turnover. WAGE HIKES For the first time, the government, RBI and IBA have ruled out a uniform wage increase formula that is not linked to banks productivity and performance. Across-the-board pay hikes blur the distinction between good and bad performers while operating costs continue to mount. About 80 percent of the operating expenses of PSBs are accounted for by wages and salaries.RBI data on bank intermediation cost (BIC) ratios show that PSBs in the period 1991-1998 recorded an average rise in the BIC ratio, in contrast with Indian private sector banks, which managed to hold the ratio down. The only way forward now is for banks to be left free to genuinely compete. The Chief Vigilance Commission in 1999 has clarified that bank should be 100% computerized by the year 2000 and that bank unions will have no say in this matter. This is to ensure that frauds, which have reached serious proportions under the manual processing system, are kept in check. The area of computer fraud, however, is not addressed. Foreign banks have started reducing staff under the Voluntary Retirement Scheme. Such packages for staff of week PSBs remain under discussion. 29
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Table shows the number of staff deployed in scheduled commercial banks (SCBs), and the number of deposit accounts and borrowing accounts handled. As can be seen from the table, improvements must be made in branch service operations, staffing, and expansion in rural and semi-urban SCBs considering the high volume of banking transactions and relatively smaller number of staff per branch compared with urban/metropolitan SCBs.

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CHAPTER-4
Financial analysis of Commercial bank in India
4.1-P&L Account of Commercial bank In India
------------------- in Rs. Cr. ------------------Particular Income Interest Earned Other Income Total Income Expenditure Interest expended Employee Cost Selling and Admin Expenses Depreciation Miscellaneous Expenses Preoperative Exp Capitalised Operating Expenses Provisions & Contingencies Total Expenses 2013 12 mths 21,751.72 2,641.77 24,393.49 13,941.03 3,475.44 1,720.85 140.56 2,626.91 0.00 6,122.54 1,841.22 21,904.79 Mar '13 12 mths 2,488.71 0.00 0.00 2,488.71 0.00 444.30 0.00 45.54 70.00 292.26 828.54 1,215.87 444.30 0.00 2,488.71 2012 12 mths 17,877.99 2,616.64 20,494.63 12,122.04 2,296.07 2,334.80 101.29 1,899.36 0.00 5,422.07 1,209.45 18,753.56 Mar '12 12 mths 1,741.07 0.00 0.00 1,741.07 0.00 428.65 0.00 33.15 70.00 243.75 686.86 625.56 428.65 0.00 1,741.07 2011 12 mths 16,347.36 3,051.86 19,399.22 10,848.45 1,937.41 1,120.62 69.37 2,416.02 0.00 3,716.65 1,826.77 16,391.87 Mar '11 12 mths 3,007.35 0.00 0.00 3,007.35 0.00 491.54 0.00 57.26 80.00 224.39 1,518.33 997.48 491.54 0.00 3,007.35 2010 12 mths 12,355.22 2,116.93 14,472.15 8,125.95 1,657.01 1,122.39 73.13 1,484.26 0.00 3,342.23 994.56 12,462.74 Mar '10 12 mths 2,009.40 0.00 541.76 2,551.16 0.00 245.77 0.00 38.26 40.00 168.06 795.78 1,509.61 245.77 0.00 2,551.16 2009 12 mths 9,180.33 1,562.95 10,743.28 5,739.86 1,614.00 957.63 96.73 1,211.89 0.00 3,165.32 714.93 9,620.11 Mar '09 12 mths 1,123.17 0.00 541.76 1,664.93 0.00 196.69 0.00 23.04 35.00 117.89 405.60 520.88 196.69 541.76 1,664.93

Net Profit for the Year Extraordionary Items Profit brought forward Total Preference Dividend Equity Dividend Corporate Dividend Tax Per share data (annualised) Earning Per Share (Rs) Equity Dividend (%) Book Value (Rs) Appropriations Transfer to Statutory Reserves Transfer to Other Reserves Proposed Dividend/Transfer to Govt Balance c/f to Balance Sheet Total

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4.2-BALANCE SHEET OF THE BANK

The balance sheet of a commercial bank is a statement of its assets and liabilities. Assets are what others owe the bank, and what the bank owes others constitutes its liabilities. The business of a bank is reflected in its balance sheet and hence its financial position as well. The balance sheet is issued usually at the end of every financial year of the bank. The balance sheet of the bank comprises of two sides; the assets side and the liabilities side. It is customary to record liabilities on the left side and assets on the right side. The following is the proforma of a balance sheet of the bank.

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4.3-Balance Sheet of Commercial bank In India

------------------- in Rs. Cr. -------------------

Particular Capital and Liabilities: Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Net Worth Deposits Borrowings Total Debt Other Liabilities & Provisions Total Liabilities

2013 12 mths 547.22 547.22 0.00 0.00 15,423.99 1,319.47 17,290.68 298,885.81 22,021.38 320,907.19 12,974.69 351,172.56 2013 12 mths 21,782.43 15,527.56 213,096.18 85,872.42 4,020.12 1,654.19 2,365.93 114.81 12,413.22 351,172.55 143,699.22 32,505.88 292.26

2012 12 mths 525.91 525.91 0.00 0.00 12,275.46 1,428.62 14,229.99 229,761.94 22,399.90 252,161.84 8,574.63 274,966.46 2012 12 mths 15,602.62 15,627.51 168,490.71 67,080.18 3,790.81 1,504.07 2,286.74 65.07 5,813.63 274,966.46 118,535.87 28,372.75 243.75

2011 12 mths 525.91 525.91 0.00 0.00 11,258.72 1,710.29 13,494.92 189,708.48 9,486.98 199,195.46 12,811.39 225,501.77 2011 12 mths 8,915.28 12,845.97 142,909.37 52,607.18 3,578.23 1,156.75 2,421.48 110.45 5,692.02 225,501.75 107,155.08 11,490.74 224.39

2010 12 mths 525.91 525.91 0.00 0.00 8,300.38 1,763.10 10,589.39 150,011.98 7,172.45 157,184.43 11,056.16 178,829.98 2010 12 mths 11,741.85 5,975.54 113,476.33 41,802.88 3,448.44 1,049.28 2,399.16 26.92 3,407.32 178,830.00 100,486.14 20,181.00 168.06

2009 12 mths 488.14 488.14 0.00 0.00 5,257.75 149.48 5,895.37 119,881.74 6,620.83 126,502.57 9,239.05 141,636.99 2009 12 mths 7,196.89 10,208.65 84,935.89 35,492.76 1,733.50 955.61 777.89 11.41 3,013.50 141,636.99 54,811.58 17,116.16 117.89

Assets Cash & Balances with RBI Balance with Banks, Money at Call Advances Investments Gross Block Accumulated Depreciation Net Block Capital Work In Progress Other Assets Total Assets Contingent Liabilities Bills for collection Book Value (Rs)

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4.4-Cash Flow Statement of Commercial Bank of India

Particular Net Profit Before Tax Net Cash From Operating Activities Net Cash (used in)/from Investing Activities Net Cash (used in)/from Financing Activities Net (decrease)/increase In Cash and Cash Equivalents Opening Cash & Cash Equivalents Closing Cash & Cash Equivalents 2013 12 mths 3495.38 5946.80 -556.64 689.70 6079.86 2012 12 mths 2493.83 8439.81 -224.72 1253.78 9468.87 2011 12 mths 4164.43 4018.39 -360.43 385.91 4043.87 2010 12 mths 2684.72 -565.02 -183.33 1060.20 311.85 2009 12 mths 1532.86 5111.96 -67.53 915.12 5959.56

31230.13 21761.26 17717.39 17405.54 11445.98 37309.99 31230.13 21761.26 17717.39 17405.54

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CHAPTER-5
5.1-FINDINGS
This project report provide detail information about the investment of commercial after 2000 A.D in some case it discloses the total progress of commercial bank with different ration and this progress are shown in zone wise so, the project will show the detail about the bank as a whole.

5.2-SUGGESTION
After completing the project report I want to suggest the bank to invest more amounts to suggest the bank to invest more amounts for developing the economic of poor people. Even more and more amount has been invested for minimizing the poverty in the country. At last I would like to suggest the bank authority for maintaining a regular finance system to poor people of India. 5.3-CONCLUSION Although both branch banking system and unit banking system have their relative merits and demerit, but the merit of the former auto high those of the later. There has grown a general tendency in favor of the branch banking system mainly because of large finance resources, economics of large operation and effective control by the Central Bank Experience has shown that unit- banking system is hampered by limited resources and doesnt work under economic depression. Today, the branch banking system is especially for the underdeveloped countries. The entire banking system in India has developed on the lines of branch banking system. So far, bands, in underdeveloped countries have been paying more attention to trade and commerce and have almost neglected agriculture and industry. Thus necessary structural and function reforms in the banking system of the
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underdeveloped countries should be made in order to encourage the banks to play developmental role in these economic the blanks must diversify their activities not only provide medium-turm and long term loans to industry and agriculture. At last the role of COMMERCIAL BANK in present day growing rapidly by the change of present economic policy and its system afterward the function and services of commercial bank is very much essential in present day as if all type of information about the information about the investment, progress and development rural sector in India since 2003. Thus, it is a vital report for the research holder , bank employee and commercial bank.

5.4-BIBLIOGRAPHY
Banking Law and Practice By T.N. Chabra Banking Law and Practice By A.C. Nayak Banking Monthly Bulletin Annual financial Report Government of India Websites of Banks

THANKS

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