FINANCIAL PERFORMANCE OF LAKSHMI VILAS BANK

By
S.NATARAJAN
2010201044
A PROJECT REPORT
Submitted to the
FACULTY OF MANAGEMENT SCIENCES
In partial fulfillment of the requirements
for the award of the degree
of
MASTER OF BUSSINESS ADMINISTRATION

DEPARTMENT OF MANAGEMENT STUDIES

COLLEGE OF ENGINEERING CAMPUS, GUINDY
ANNA UNIVERSITY
CHENNAI 600025
JUNE 2011

ACKNOWLEDGEMENT
I take this opportunity to thank Mr. Ravindrakumar Director, Lakshmi vilas bank for providing
this project and giving me a chance to equip myself in this prestigious organization. I extend my
gratitude to him for acting as an external guide to me in shaping out this project.
I would also like to thank our esteemed Prof. Dr.L.Suganthi, Head of the Department,
Department of Management Studies, Anna University, Guindy for her encouragement and for
helping me in successful completion of this project. I thank all the faculty members of the
department for their support in knowledge acquisition.
I am thankful to the respondents for sparing their valuable time in filling up the questionnaire.
I also extend my thanks to my friends for being supportive throughout this project.

ABSTRACT

Financial performance of Lakshmi Vilas Bank This will

undertake to examine and understand how financial management plays a
crucial role in the growth of banking. It is concerned with examining the
profitability position of the banks for a period of five years (2006-2010).
The main objective of this study is to analyze the financial performance
of the bank by analyzing the financial statements with CAMEL ratio.
Financial performance is analysed for capital adequacy, assets quality,
management, earning quality and liquidity. Charts and tables are used
for better understanding of the bank performance. Lakshmi vilas bank as
maintaining their capital above the minimum requirement of RBI. The
study deals with findings and suggestions for the improvement of the
bank.

CONTENTS

CHAPTER
1
1.1
1.2
1.3
1.4
1.5
1.6
1.7
2
3
4
5
5.1
5.2
5.3

S.NO
4.1.1

TITLE
INTRODUCTION
INTRODUCTION TO THE TOPIC
INDUSTRY PROFILE
COMPANY PROFILE
STATEMENT OF THE PROBLEM
OBJECTIVE OF THE STUDY
SCOPE OF THE STUDY
LIMITATIONS OF THE STUDY
REVIEW OF LITERATURE
RESEARCH DESIGN AND METHODOLOGY
DATA ANALYSIS AND INTERPRETATION
FINDINGS, SUGGESTION AND CONCLUSIONS
FINDINGS
SUGGESTIONS
CONCLUSION
BIBILIOGRAPHY

LIST OF TABLES
PARTICULARS
Table showing the calculation of CAR Ratio

PAGE NO
1
4
6
8
8
8
9
10
16
28
59
60
61
62

PAGE NO
28

4.2.1

Table showing the calculation of Debt-Equity Ratio

29

4.3.1

Table showing the calculation of Advance of Assets

30

4.4.1

Table showing the calculation of G Secs to Total Investments

31

4.5.1

Table showing the calculation of Gross NPAs to Net Advances

32

4.6.1

Table showing the calculation of Gross NPAs to Total Assets

33

4.7.1

Table showing the calculation of Total Investments to Total Assets

34

4.8.1

Table showing the calculation of Percentage Change in Gross NPAs

35

4.9.1

Table showing the calculation of Net NPAs Ratio

36

4.10.1

Table showing the calculation of Shareholders Risk Ratio

37

4.11.1

Table showing the calculation of provision ratio

38

4.12.1

Table showing the calculation of Sub Standard Assets Ratio

39

4.13.1

Table showing the calculation of Doubtful Assets Ratio

40

4.14.1

Table showing the calculation of loss assets ratio

41

4.15.1

Table showing the calculation of Total advances to Total Deposits

42

4.16.1

Table showing the calculation of Net Profit per Employee

43

4.17.1

Table showing the calculation of Business per Employee

44

4.18.1

Table showing the calculation of RONW

45

4.19.1

Table showing the calculation of Operating Profit by Average Working

46

4.20.1

Funds
Table showing the calculation of Net Interest Margin

47

4.21.1

Table showing the calculation of Net Profit to Average Assets

48

4.22.1

Table showing the calculation of Percentage Growth in Net Profit

49

4.23.1

Table showing the calculation of Non Interest Income / Total Income

50

4.24.1

Table showing the calculation of Interest Income / Total Income

51

4.25.1

Table showing the calculation of Liquid Assets / Demand Deposits

52

4.26.1

Table showing the calculation of Liquid Assets / Total Deposits

53

4.27.1

Table showing the calculation of Liquid Assets / Total Assets

54

4.28.1

Table showing the calculation of G Secs / Total Assets

55

4.29.1

Table showing the calculation of Approved Securities / Total Assets

56

4.30.1

Table showing the calculation of Cash Reserve Ratio

57

4.31.1

Table showing the calculation of Statutory Liquidity Ratio

58

LIST OF CHARTS
S.NO

PARTICULARS

PAGE NO

4.1.2

Chart showing the CAR ratio

28

4.2.2

Chart showing the debt equity ratio

29

4.3.2

Chart showing the advance of assets

30

4.4.2

Chart showing the G Secs to Total Investments

31

4.5.2

Chart showing the Gross NPAs to Net Advances

32

4.6.2

Chart showing the Gross NPAs to Total Assets

33

4.7.2

Chart showing the Total Investments to Total Assets

34

4.8.2

Chart showing the Percentage Change in Gross NPAs

35

4.9.2

Chart showing the Net NPAs Ratio

36

4.10.2

Chart showing the Shareholders Risk Ratio

37

4.11.2

38

4.12.2

Chart showing the provision ratio

Chart showing the Sub Standard Assets Ratio

39

4.13.2

Chart showing the Doubtful Assets Ratio

40

4.14.2

Chart showing the loss assets ratio

41

4.15.2

Chart showing the Total advances to Total Deposits

42

4.16.2

Chart showing the Net Profit per Employee

43

4.17.2

Chart Showing the Business per Employee

44

4.18.2

Chart showing the RONW

45

4.19.2

Chart showing the Operating Profit by Average Working Funds

46

4.20.2

Chart showing the Net Interest Margin

47

4.21.2

Chart showing the Net Profit to Average Assets

48

4.22.2

Chart showing the Percentage Growth in Net Profit

49

4.23.2

Chart showing the Non Interest Income / Total Income

50

4.24.2

Chart showing the Interest Income / Total Income

51

4.25.2

Chart showing the Liquid Assets / Demand Deposits

52

4.26.2

Chart showing the Liquid Assets / Total Deposits

53

4.27.2

Chart showing the Liquid Assets / Total Assets

54

4.28.2

Chart showing the G Secs / Total Assets

55

4.29.2

Chart showing the Approved Securities / Total Assets

56

4.30.2

Chart showing the Cash Reserve Ratio

57

4.31.2

Chart showing the Statutory Liquidity Ratio

58

CHAPTER 01
INTRODUCTION
1.1. INTRODUCTION TO THE TOPIC

Financial Management is that managerial activity which is concerned with the planning and
controlling of the firms financial resources. Though it was a branch of economics till 1890 as a
separate or discipline it is of recent origin.
Financial Management is concerned with the duties of the finance manager in a business firm.
He performs such varied tasks as budgeting, financial forecasting, cash management, credit
administration, investment analysis and funds procurement. The recent trend towards
globalization of business activity has created new demands and opportunities in managerial
finance.
Financial statements are prepared and presented for the external users of accounting
information. As these statements are used by investors and financial analysts to examine the
firms performance in order to make investment decisions, they should be prepared very
carefully and contain as much information as possible. Preparation of the financial statement is
the responsibility of top management. The financial statements are generally prepared from the
accounting records maintained by the firm.
Financial performance is an important aspect which influences the long term stability,
profitability and liquidity of an organization. Usually, financial ratios are said to be the
parameters of the financial performance. The Evaluation of financial performance had been taken
up for the study and was conducted at Lakshmi Vilas Bank. Analysis of Financial performances
is of greater assistance in locating the weak spots at the financial position of Lakshmi Vilas
Bank. This further helps in
Financial forecasting and Planning
Communicate the strength and financial standing of Lakshmi Vilas Bank For effective
control of business
FINANCIAL STATEMENTS ANALYSIS:

Financial performance analysis is defined as the process of identifying financial strengths

and weaknesses of the firm by properly establishing relationship between the items of the
balance sheet and the profit and loss account.
The financial statements provide some extremely useful information to the extent that the
balance sheet mirrors the financial position on a particular date in terms of the structure of assets,
liabilities and owners equity, and so on and the profit and loss account shows the results of
operations during a certain period of time in terms of the revenues obtained and the cost incurred
during the year. Thus, the financial statements provide a summarized view of the financial
position and operations of a firm.
The focus of financial analysis is on key figures in the financial statements and the
significant relationship that exists between them. The analysis of financial statements is a process
of evaluating the relationship between component parts of financial statements to obtain a better
understanding of the firms position and performance. The first task of the financial analyst is to
select the information relevant to the decision under consideration from the total information
contained in the financial statements. The second step is to arrange the information in a way to
highlight significant relationships. The final step is interpretation and drawing of inferences and
conclusion. In brief, the financial analysis is the process of selection, relation and evaluation.
NEED FOR FINANCIAL PERFORMANCE ANALYSIS:
Financial statements are prepared to meet external reporting obligations and also for
decision making purposes. But the information provided in the financial statements is not an end
in itself as no meaningful conclusions can be drawn from these statements alone. However, the
information provided in the financial statements is of immense use in making decisions through
analysis and interpretation of financial statements. This analysis also helps the firm to evaluate
its standings in terms of the financial position.

1.2. INDUSTRY PROFILE

10

If there is one industry that has the stigma of being old and boring, it would have to be banking;
however, a global trend of deregulation has opened up many new businesses to the banks.
Coupling that with technological developments like Internet banking and atms, the banking
industry is obviously trying its hardest to shed its lacklustre image.
There is no question that bank stocks are among the hardest to analyze. Many hold several assets
and have several subsidiaries in different industries. A perfect example of what makes analyzing
a bank stock so difficult is the length of their financials. While it would take us an entire
textbook to explain all the ins and outs of the banking industry, this point will hopefully shed
some light on the more important areas to look at when analyzing a bank as an investment.
There are two major types of banks:
1. Regional Banks - These are the smaller financial institutions that primarily focus on one
geographical area within a country. Providing depository and lending services are
regional banks primary line of business.
2. Major (Mega) Banks - While these banks might maintain local branches, their main scope
is in financial centres, where they get involved with international transactions, and
underwriting, etc.
Could you imagine a world without banks? At first this might sound like a great thought!
Banks (and financial institutions) have, however, for several reasons, become cornerstones of
our economic growth and steer the wheels of the economy towards its goal of Self reliance
in all fields. They transfer risk, provide liquidity, facilitate both major and minor
transactions, and provide financial information for both individuals and businesses.
Perhaps the banking industry's largest distinction is the government's heavy involvement in
it. Besides setting restrictions on borrowing limits and the amount of deposits that the bank
must hold in their vault, the government has a huge influence on banks profitability.
In present age in India there are many banks including foreign banks, public sector, private
sectors, commercial banks and co-operative banks. The structure of INDIAN BANKING
SYSTEM is as under:

11

BRIEF PROFILE OF PRIVATE BANKS

Private Banks are banks that are not incorporated. A private bank is owned by either an
individual or a general partner(s) with limited partner(s). In any such case, the creditors can look
to both the "entirety of the bank's assets" as well as the entirety of the sole-proprietor's/generalpartners' assets.
These banks have a long tradition in Switzerland, dating back to at least the revocation of the
edict of Nantes (1685). However most have now become incorporated companies, so the term is
rarely true anymore. There are a few private banks remaining in the US. One is brown brothers
Harriman & co., a general partnership with about 30 members. Private banking also has a long
tradition in the UK where Coutts & Co has been in business since 1692.
"Private Banks" and "private banking" can also refer to non-government owned banks in general,
in contrast to government-owned (or nationalized) banks, which were prevalent in communist,
socialist and some social democratic states in the 20th century. Private Banks as a form of
organization should also not be confused with "private banks" that offer financial services to high
net worth individuals and others.
12

1.3. COMPANY PROFILE

LAKSHMI VILAS BANK
Vision
"To be a sound and dynamic banking entity providing financial services of excellence with Pan
India presence."
Mission
To develop a range of quality financial services and products to create value for customers,
shareholders and the society; to motivate people to achieve excellence in performance leading to
sustained profitable growth and build a vibrant organization.
Brief History and background
The Lakshmi Vilas Bank Limited (LVB) was founded eight decades ago ( in 1926) by seven
people of Karur under the leadership of Shri V.S.N. Ramalinga Chettiar, mainly to cater to the
financial needs of varied customer segments. The bank was incorporated on November 03, 1926
under the Indian Companies Act, 1913 and obtained the certificate to commence business on
November 10, 1926, The Bank obtained its license from RBI in June 1958 and in August 1958 it
became a Scheduled Commercial Bank.
During 1961-65 LVB took over nine Banks and raised its branch network considerably. To meet
the emerging challenges in the competitive business world, the bank started expanding its
boundaries beyond Tamil Nadu from 1974 by opening branches in the neighboring states of
Andhra Pradesh, Karnataka, Kerala, Maharashtra, Madhya Pradesh, Gujarat, West Bengal, Uttar
Pradesh, Delhi and Pondicherry. Mechanization was introduced in the Head office of the Bank as
early as 1977. At present, with a network of 273 branches,1 satellite branch and 8 extension
counters, spread over 16 states and the union territory of Pondicherry, the Bank's focus is on
customer delight, by maintaining high standards of customer service and amidst all these new
challenges, the bank is progressing admirably. LVB has a strong and wide base in the state of
Tamil Nadu, one of the progressive states in the country, which is politically stable and has a
vibrant industrial environment. LVB has been focusing on retail banking, corporate banking and
banc assurance.
The Bank's business crossed Rs.15561.01 Crores as on March 31, 2010. The Bank earned a Net
profit of Rs. 30.66 Crores. The Net owned Funds of the Bank reaches Rs. 739.00 Crores. With a
13

fairly good quality of loan assets the Net NPA of the bank was pegged at 4.11 % as on March 31,
2010.
New Identity
The new logo unit depicts the following,
Red is for the values, Pure and Strong. Red is for Truth that can do no wrong.
Gold is the land of prosperity where we all belong, the abode of wealth where happiness
hails from.
A glimmer of lights from ochre gold, the circle of kumkum where all good things hold.
Come walk the path of Lakshmi and celebrate her blessings, wisdom, growth and
contentme ana life full of rich meaning
Board of Directors
The Company's Board is broad based comprising 10 Directors:

Shri. P.R. Somasundaram Managing Director & CEO

Shri. K. Balaji Director
Shri. N. Saiprasad Director
Shri. K. Ravindrakumar Director
Shri. Kusuma R Muniraju Director
Shri. D.L.N.Rao Director
Shri. B.K. Manjunath Director
Shri. K.R. Pradeep Director
Shri. S.G. Prabhakaran Director
Shri. S. Dattathreyan Director

1.4. STATEMENT OF THE PROBLEM

At regular period public sector banks must prepare documents called financial statements.
Financial statements show the financial performance of a bank. They are used for both internal
14

and external purposes. When they are used internally, the management and sometimes the
employees use it for their own information. Managers use it to plan ahead and set goals for
upcoming periods. When they use the financial statements that were published, the management
can compare them with their internally used financial statements. They can also use their own
and other enterprises financial statements for comparison with macro economical datas and
forecasts, as well as to the market and industry in which they operate in. The four main types are
balance sheets, profit and loss accounts, cash flow statements, and income statements.
Financial statements for banks present a different analytical problem than manufacturing and
service companies. As a result, analysis of a bank's financial statements requires a distinct
approach that recognizes a bank's somewhat unique risks. Banks take deposits from savers,
paying interest on some of these accounts. They pass these funds on to borrowers, receiving
interest on the loans. Their profits are derived from the spread between the rate they pay for
funds and the rate they receive from borrowers. This ability to pool deposits from many sources
that can be lent to many different borrowers creates the flow of funds inherent in the banking
system. By managing this flow of funds, banks generate profits, acting as the intermediary of
interest paid and interest received and taking on the risks of offering credit. So, the study is
conducted to analyse the financial performance of Lakshmi Vilas Bank on the basis of CAMEL
model.

1.5. OBJECTIVE OF THE STUDY

PRIMARY OBJECTIVE

To analyze the financial performance of LAKSHMI VILAS BANK.

SECONDARY OBJECTIVES

To do an in-depth analysis of the bank by using CAMEL as a tool of measuring

performance.

To compare the performance of Lakshmi Vilas bank and Indusind bank.

15

1.6. SCOPE OF THE STUDY

This study will be useful for the bank to find out its financial position.

It also analyzes its competitors performance to ensure effective competition through

improved competence.

It also brings out the fact that whether the financial performance of the bank is
progressive or regressive.

1.7. LIMITATONS OF THE STUDY

The data have been tabulated using last five years annual report and such data are
secondary in nature.

Lakshmi Vilas bank performance compared with Indusind bank though there are so many
private sector banks.

It has not been possible to get a personal interview with the top management employees
of Lakshmi Vilas Bank.

Time was a limiting factor in conducting the study.

The study was completely done on the basis of ratios calculated from the balance sheets.

CHAPTER 2

16

REVIEW OF LITERATURE
Financial Performance of Banks in India
The present study was undertaken to examine and understand how financial management plays a
crucial role in the growth of banking. It is concerned with examining the profitability position of
the selected sixteen banks (BANKEX-based) for a period of five years (2000-01 to 2006-2007).
The study reveals that the profitability position was reasonable during the period of study when
compared with the previous years. Return on Investment proved that the overall profitability and
the position of selected banks were sustained at a moderate rate. With respect to debt equity
position, it was evident that the companies were maintaining 1:1 ratio, though at one point of
time it was very high. Interest coverage ratio was continuously increasing, which indicated the
company's ability to meet the interest obligations. Capital adequacy ratio was constant over a
period of time. During the study period, it was observed that the return on net worth had a
negative correlation with the debt equity ratio. Interest income to working funds also had a
negative association with interest coverage ratio and the Non-Performing Assets (NPA) to net
advances was negatively correlated with interest coverage ratio.1
CAMELs and Banks Performance Evaluation
Despite the continuous use of financial ratios analysis on banks performance evaluation by
banks' regulators, opposition to it skill thrive with opponents coming up with new tools capable
of flagging the over-all performance (efficiency) of a bank. This research paper was carried out;
to find the adequacy of CAMEL in capturing the overall performance of a bank; to find the
relative weights of importance in all the factors in CAMEL; and lastly to inform on the best
ratios to always adopt by banks regulators in evaluating banks' efficiency. The data for the
research work is secondary and was collected from the annual reports of eleven commercial
banks in Nigeria over a period of nine years (1997 - 2005). The purposive sampling technique
was used. The findings revealed the inability of each factor in CAMEL to capture the holistic
performance of a bank. Also revealed, was the relative weight of importance of the factors in
CAMEL which resulted to a call for a change in the acronym of CAMEL to CLEAM. In
addition, the best ratios in each of the factors in CAMEL were identified. The paper concluded
1

17

that no one factor in CAMEL suffices to depict the overall performance of a bank. Among other
recommendations, banks' regulators are called upon to revert to the best identified ratios in
CAMEL when evaluating banks performance.2
Rating the Performance of the Bank through CAMELS Model
In todays scenario, the banking sector is one of the fastest growing sectors and a lot of funds are
invested in Banks. Also todays banking system is becoming more complex. So, we thought of
evaluating the performance of the banks. There are so many models of evaluating the
performance of the banks, but we have chosen the CAMELS Model to evaluate the performance
of the banks. We have read a lot of books and found it the best model because it measures the
performance of the banks from each parameter i.e. Capital, Assets, Management, Earnings and
Liquidity After deciding the model, we have chosen three banks from the three different sectors,
i.e. AXIS Bank from Private Sector, Gandhidham Co-operative Bank from co-operative banks
and Bank of India from the public sector. Then we have collected annual reports of the
consecutive five years i.e. 2004-05 to 2008-09 of all the banks. And we have calculated ratios for
all the banks and interpreted them. After that we have given weightage to each parameter of the
CAMELS Model. According to their importance and our understandings, we have allocated
weightage to the each ratios of the each parameter. From the weighted results of each ratio, we
have given marks on the bases of the performance of the bank. And after addition of all the
marks, we have given the rank 1, 2 and 3 to the banks. As per the whole evaluation, we gave 1st
rank to AXIS Bank, 2nd rank to Bank of India and 3rd rank to Gandhidham Co-operative Bank.3

CHAPTER 3
3. METHODOLOGY
2
3

18

Research connotes a systematic and objective investigation of a subject or problem in

order to discover relevant information or principles. The success of a research depends mostly on
the method on which it is carried out. The applied method will improve the validity of finding.
This chapter discusses the method of data collection.
RESEARCH
It is defined as A systematic gathering, recording and analyzing of datas about problems
relating to marketing of goods and services. It enables the companies to understand the needs
and wants of the customers and also helps them in making decisions.
RESEARCH DESIGN
The kind of research design used in this study is Exploratory Research. Exploratory
research is conducted to clarify ambiguous problems. Management may have discovered general
problems, but research is needed to gain better understanding of the dimensions of the problems.
Exploratory studies provide information to use in analyzing a situation, but uncovering
conclusive evidence to determine a particular course of action is not the purpose of exploratory
research. Usually, exploratory research is conducted with the expectation that subsequent
research will be required to provide conclusive evidence.
DATA COLLECTION
The data were collected from secondary sources.
Secondary data
The secondary data used for this study are collected from the annual reports published by
the bank.
TOOL USED FOR ANALYSIS
The data collected from the annual reports of the bank were subjected to analysis using tool
relevantly. The tool used in this study is

Ratio Analysis

PERIOD OF STUDY

The study was conducted for a period of five years from the year financial year
19

2005-2006 to 2009-2010.
Ratio Analysis
It's all very well being armed with a list of ratios and people who might want to use them,
but we need to know where to get all the figures to put into those ratios, don't we?
Here are all the figures which are taken from profit and loss account and balance sheet of
Lakshmi Vilas Bank.
Purely for analytical convenience, the Financial Ratio of bank is generally categorised
differently from that of commercial businesses. The working Group to ``Review the system of
on-site supervision over Bank headed by Shri S. Padmanabhan, constituted in February 1995
recommended far reaching changes in bank inspections by the Reserve Bank of India and
introduce a rating methodology for the banks i.e. CAMEL model. It is elaborated as under:
1.
2.
3.
4.
5.

C
A
M
E
L

Capital Adequacy
Asset Quality
Management
Earnings Quality
Liquidity

TYPES OF RATIOS
C CAPITAL ADEQUACY
Capital adequacy is stipulated by Bank for International Settlements (BIS) at Basle to
ensure that the banks have enough capital to absorb losses from assets which turn bad. The
norms are fixed as a percentage of risk weighted assets i.e. assets are, weighted on the basis of
the risk involved in their realisation. For example, cash is given a risk weightage of 0% and
higher weightage for assets secured by goods, mortgage etc. In India Narasimham Committee
recommendations have stipulated that Indian Banks particularly those with International
Presence must have a capital adequacy of 8%. Capital adequacy reflects the overall financial
condition of the banks and also the ability of the management to meet the need for additional
capital. It includes the following
A. Capital Adequacy Ratio
20

Capital adequacy ratios ("CAR") are a measure of the amount of a bank's core capital expressed
as a percentage of its assets weighted credit exposures.
Capital adequacy ratio is defined as

TIER 1 CAPITAL -A) Equity Capital, B) Disclosed Reserves

TIER 2 CAPITAL -A) Undisclosed Reserves, B) General Loss reserves, C) Subordinate Term
Debts
Where Risk can either be weighted assets ( ) or the respective national regulator's minimum
total capital requirement. If using risk weighted assets,

10%
The percent threshold varies from bank to bank (10% in this case, a common requirement for
regulators conforming to the Basel Accords) is set by the national banking regulator of different
countries.
Two types of capital are measured: tier one capital (T1 above), which can absorb losses without a
bank being required to cease trading, and tier two capital (T2 above), which can absorb losses in
the event of a winding-up and so provides a lesser degree of protection to depositors.
Since different types of assets have different risk profiles, CAR primarily adjusts for assets that
are less risky by allowing banks to "discount" lower-risk assets. The specifics of CAR
calculation vary from country to country, but general approaches tend to be similar for countries
that apply the Basel Accords. In the most basic application, government debt is allowed a 0%
"risk weighting" - that is, they are subtracted from total assets for purposes of calculating the
CAR.

21

B. Debt Equity Ratio

The debt-to-equity ratio (D/E) is a financial ratio indicating the relative proportion of
shareholders' equity and debt used to finance a company's assets. Closely related to leveraging,
the ratio is also known as Risk, Gearing or Leverage. The two components are often taken from
the firm's balance sheet or statement of financial position (so-called book value), but the ratio
may also be calculated using market values for both, if the company's debt and equity are
publicly traded, or using a combination of book value for debt and market value for equity
financially.
Debt Equity ratio = Debt (liabilities)
Equity

C. Advances to Assets
Total Advances also includes receivables. The value Total Assets is excluding revaluation of all
the assets.
Advances to Assets = Total Advances / Total assets
D. G-Secs to Total Investment
Government securities (G-secs) are sovereign securities which are issued by the Reserve Bank of
India on behalf of Government of India, in lieu of the Central Government's market borrowing
programme.
G Secs to Total Investments = G-Secs / Total Investments X 100
Investment is putting money into something with the expectation of profit. More specifically,
investment is the commitment of money or capital to the purchase of financial instruments or
other assets so as to gain profitable returns in the form of interest, dividends, or appreciation of
the value of the instrument (capital gains). It is related to saving or deferring consumption.
Investment is involved in many areas of the economy, such as business management and finance
whether for households, firms, or governments. An investment involves the choice by an
individual or an organization, such as a pension fund, after some analysis or thought, to place or
22

lend money in a vehicle, instrument or asset, such as property, commodity, stock, bond, financial
derivatives (e.g. futures or options), or the foreign asset denominated in foreign currency, that
has certain level of risk and provides the possibility of generating returns over a period of time.
A ASSET QUALITY
The prime motto behind measuring the asset quality is to ascertain the quality of assets and
majority of ratios in this segment are related to nonperforming assets i.e. NPA. A credit facility is
treated as past due when it remains outstanding for 30 days beyond the due date. An NPA is
defined generally as a credit facility in respect of which interest or instalment of principal is in
arrears for two quarter or more. This segment contain following ratio
A. Gross NPAs to Total Assets
Gross NPAs are gross provisions on NPAs and Total Assets considered are net of revaluation
reserves.
Gross NPAs to Total Assets = Gross NPAs / Total Assets X 100
B. Gross NPAs to Net Advances
Net Advances are net of bills rediscounted and specific loan loss provision. Any extension of
credit. Bankers talk of advances when the rest of us say loans. An advance from a banker in this
context could be in the form of a drawing under an overdraft facility, a fully drawn advance or
term loan, a line of credit with a bill option, a bill facility or a personal loan.
Gross NPAs to Net Advances = Gross NPAs / Net Advances X 100
C. Total Investment to Total Assets
Total Investments to Total Assets = Total Investments / Total Assets
An investment bank is a financial institution that assists individuals, corporations and
governments in raising capital by underwriting and/or acting as the client's agent in the issuance
of securities. An investment bank may also assist companies involved in mergers and
acquisitions, and provide ancillary services such as market making, trading of derivatives, fixed

23

income instruments, foreign exchange, commodities, and equity securities. This ratio is used as a
tool to measures the percentage of total assets locked up in investments.
D. Percentage Change in Gross NPAs
This measure gives the movement in Gross NPAs on year-on-year basis.
Percentage Change in Gross NPAs = Change in Gross NPAs / Gross NPAs at beginning X 100
E. Net NPAs Ratio
This ratio measures the Net NPAs on year-on-year with the help of Net Advances.
Net NPAs Ratio = Net NPAs / Net Advances X 100
F. Shareholders Risk Ratio
This ratio measures the shareholders risk between the Net npas and total Capital and Reserves.
Shareholders Risk Ratio = Net NPAs / Total Capital and Reserves X 100
G. Provision Ratio
This ratio measures the total provision of gross NPAs to know the provision ratio.
Provision Ratio = Total Provision / Gross NPAs X 100
H. Sub Standard Assets Ratio
This ratio measures the total sub standard assets of Gross NPAs with the help of Gross NPAs
Sub Standard Assets Ratio = Total Sub Standard Assets / Gross NPAs X 100
I. Doubtful Assets Ratio
This ratio measures the total doubtful assets of Gross NPAs with the help of Gross NPAs
Doubtful Assets Ratio = Total Doubtful Assets / Gross NPAs X 100
24

J. Loss Assets Ratio

This ratio measures the total loss assets of Gross NPAs with the help of Gross NPAs
Loss Assets Ratio = Total Loss Assets / Gross NPAs X 100

M MANAGEMENT
Management is the most important ingredient that ensures sound functioning of banks. With
increased competition in the Indian banking sector, efficiency and effectiveness have become the
rule as banks constantly strive to improve the productivity of their employees. The major
improvements in the style of management and productivity have come about in the all sectors of
banks.The ratios of this segment are:
A. Total advances to Total Deposits
This ratio measures the efficiency of the management in converting deposits into advances. Total
deposits include demand deposits, saving deposits, term deposits and deposits of other banks.
Total advances also include the receivables.
Total advances to Total Deposits = Total advances / Total Deposits X 100
B. Net Profit per Employee
It is arrived at by dividing the PAT earned by the bank by total number of employees. Higher the
ratio, higher the efficiency of management.
Net Profit per Employee = Net Profit / No. of Employee
C. Business per Employee
It is arrived at by dividing total business by total number of employees. Business includes the
sum total advances and deposits in a particular year.
Business per Employee = Total Business / No. of Employee

25

D. Return on Net Worth (RONW)

It is a measure of the profitability of a company. PAT is expressed as a percentage of Average Net
Worth.
RONW = Net Profit / Net Worth X 100

E EARNINGS QUALITY
Investing additional funds forms an important part of the banking function along with lending. In
the recent past, banks have been criticized for making most of their money from treasury
operation and other investment rather than from core lending operation. Even as fee-based
operations still account for a minority of the banks revenues, the share of non-interest income is
higher. The ratio of this section, assesses the quality of income in terms of income generated by
core activities i.e., income from lending operations. This segment contains the following;
A. Operating Profit by Average Working Funds
This ratio gives return on total assets employed on a daily basis. Working funds is the daily
average of the total assets during the year.
Operating Profit by Average Working Funds = Operating Profit / Average Working Funds X 100
B. Net Interest Margin (NIM)
It is arrived at by dividing Spread by Total Earning Assets. Spread is the difference between the
interest income and interest expended as a percentage of Total Assets. Interest income includes
dividend income. Interest expanded includes interest paid on deposits, loans from RBI, and other
short-term and long-term loans.
NIM = Spread / Total Earning Assets X 100
C. Net Profit to Average Assets

26

This ratio measures return on assets employed or the efficiency in utilization of the assets. It is
arrived at by dividing the Net Profit by Average Assets, which is the average of total assets in the
current year and previous year.
Net Profit to Average Assets = Net Profit / Average Assets
D. Percentage Growth in Net Profit
It is percentage change in net profit from last year. It arrived by dividing changes in net profit by
net profit at beginning.
Percentage Growth in Net Profit = Changes in Net Profit / Net Profit at Beginning X 100
E. Non Interest Income / Total Income
This measures the income from operations, other than lending as a percentage of total income.
Non-interest income is the interest income earned by the banks excluding income on advances
and deposits with RBI.
Non Interest Income / Total Income = Non Interest Income / Total Income X 100
F. Interest Income / Total Income
This ratio measures the income from lending operations as a percentage of total income
generated by the banks in a year. Interest income includes income on advances, interest on
deposits with RBI.
Interest Income / Total Income = Interest Income / Total Income X 100
L LIQUIDITY
The business of banking is all about borrowing and lending money. Timely repayment of
deposits is of crucial importance to avoid a run on a bank. With co-operative banks going under
frequently and with the recent collapse of GTB (Global Trust Bank) investors have become
extremely sensitive. They are alert; they rush to the bank to withdraw money at the slightest hint
27

of trouble. In such a scenario, even false rumours could wreck havoc with a bank. Hence, banks
have to ensure that they always maintain enough liquidity. Through mandatory Statutory
Liquidity Ratio (SLR) and Cash Reserve Ratio (CRR), RBI ensures that banks maintain ample
liquidity. In fact, over the last few years banks have been awash with liquidity. It contains the
following;
A. Liquid Assets / Demand Deposits
This ratio measures the ability of a bank to meet demand from demand deposits in a particular
year. Liquid assets include cash in hand, balance with RBI, balance with other banks (both in
India and abroad), and money at call and short notice.
Liquid Assets / Demand Deposits = Liquid Assets / Demand Deposits
B. Liquid Assets / Total Deposits
Liquid assets are measured as a percentage of Total Deposits. Liquid Assets include cash in hand,
balance with RBI, balance with other banks (both in India and abroad), and money at call and
short notice. Total Deposits include demand deposits, saving deposits, term deposits and deposits
of other financial institutions.
Liquid Assets / Total Deposits = Liquid Assets / Total Deposits X 100
C. Liquid Assets / Total Assets
Liquid Assets as measured as percentage of Total Assets.
Liquid Assets / Total Assets = Liquid Assets / Total Assets X 100
D. G Secs / Total Assets
This ratio measures the proportion of risk free liquid assets invested in G-Secs as a percentage of
the assets held by a bank and is arrived at by dividing investment in government securities by
total assets.

28

G Secs / Total Assets = G Secs / Total Assets X 100

E. Approved Securities / Total Assets
Approved securities are investments made in state-associated bodies like electricity boards,
housing boards, corporation bonds and shares of regional rural banks.
Approved Securities / Total Assets = Approved Securities / Total Assets X 100
F. Cash Reserve Ratio
RBI uses CRR either to drain excess liquidity or to release funds needed for the economy from
time to time. Increase in CRR means that banks have less funds available and money is sucked
out of circulation. Thus we can say that this serves duel purposes i.e. it not only ensures that a
portion of bank deposits is totally risk-free, but also enables RBI to control liquidity in the
system, and thereby, inflation by tying the hands of the banks in lending money.
Cash Reserve Ratio = Total Cash / Total Deposits X 100
G. Statutory Liquidity Ratio
Statutory Liquidity Ratio is the amount of liquid assets, such as cash, precious metals or other
approved securities, that a financial institution must maintain as reserves other than the Cash
with the Central Bank. The statutory liquidity ratio is a term most commonly used in India.
Statutory Liquidity Ratio = Total Demand/Time Liabilities X 100

CHAPTER 4
4. DATA ANALYSIS AND INTERPRETATION
29

4.1 Capital Adequacy Ratio (CAR) or Capital to Risk Assets Ratio (CRAR):
As per the latest RBI norms, banks in India should have a CAR of 9%. It is arrived at by dividing
the Tier I and Tier II capital by risk weighted assets. Tier I capital includes equity capital and free
reserves. Tier II capital comprises sub-ordinated debt of 5-7 year tenure.
CAR = Capital Funds / Risk Weighted Assets X 100
4.1.1 Table showing the calculation of CAR ratio
YEAR
LVB
2006
10.79
2007
12.43
2008
12.73
2009
10.09
2010
14.82
4.1.2 Chart showing the CAR ratio

INDUSIND
10.54
12.54
11.97
12.55
15.3

Inference: From the above table both the banks are maintain their CAR amount above 9% both
the banks are averagely increase their capital adequacy.
4.2 Debt Equity Ratio
Debt-Equity ratio is arrived at by dividing Total borrowings and Deposits by Net Worth. Net
Worth includes equity capital, preference capital, reserves and surplus less revaluation reserves
and miscellaneous expenses not written off.
30

Debt-Equity Ratio = Debt / Equity

4.2.1 Table showing the calculation of debt-equity ratio
YEAR
LVB
2006
91.23
2007
90.6
2008
91.75
2009
89.86
2010
83.9
4.2.2 Chart showing the debt equity ratio

INDUSIND
84.71
82.3
81.99
77.86
81.92

Inference:
From the above table the two banks are maintaining their debt equity. In 2007 & 2008 the LVB
as decrease their debt. But the INDUSIND bank as maintain their debt amount year by year.
4.3 Advances to Assets
Total Advances also includes receivables. The value Total Assets is excluding revaluation of all
the assets.
Advances to Assets = Total Advances / Total assets
4.3.1 Table showing the calculation of advance of assets
YEAR

LVB

INDUSIND
31

2006
0.6
2007
0.62
2008
0.59
2009
0.63
2010
0.59
4.3.2 Chart showing the advance of assets

0.52
0.55
0.55
0.57
0.58

Inference:
From the above table the advances to asset of lakshmi vilas bank as increase year by year.
Indusind bank as decrease the advances to asset to year by year.

4.4 G Secs to Total Investments

The ratio is calculated by dividing the amount invested in government securities by total
investments.
G Secs to Total Investments = G-Secs / Total Investments X 100
4.4.1 Table showing the calculation of G Secs to Total Investments
YEAR
2006
2007
2008

LVB
91.23
90.6
91.75

INDUSIND
84.71
82.3
81.99
32

2009
89.86
2010
83.9
4.4.2 Chart showing the G Secs to Total Investments

77.86
81.92

Inference:
From the above table government securities of lakshmi vilas bank are more than the indusind
banks government securities.

4.5 Gross NPAs to Net Advances

Net Advances are net of bills rediscounted and specific loan loss provision.
Gross NPAs to Net Advances = Gross NPAs / Net Advances X 100
4.5.1 Table showing the calculation of Gross NPAs to Net Advances
YEAR
LVB
2006
4.22
2007
3.63
2008
3.57
2009
2.74
2010
5.17
4.5.2 Chart showing the Gross NPAs to Net Advances

33

INDUSIND
2.88
3.09
3.07
1.61
1.24

Inference:
From the above table refers to the gross NPAs to net advances, in that table lakshmi vilas bank as
increase their gross npa to net advances is year by year. But the indusind bank as maintain their
gross npa to net advances is decrease by last two years.

4.6 Gross NPAs to Total Assets

Gross NPAs are gross provisions on NPAs and Total Assets considered are net of revaluation
reserves.
Gross NPAs to Total Assets = Gross NPAs / Total Assets X 100
4.6.1 Table showing the calculation of Gross NPAs to Total Assets
YEAR
LVB
2006
2.53
2007
2.25
2008
2.11
2009
1.73
2010
3.1
4.6.2 Chart showing the Gross NPAs to Total Assets

34

INDUSIND
1.52
1.63
1.68
0.92
0.72

Inference:
From the above table describes Gross npa to total asset. In this comparison lakshmi vilas bank is
higher than the indusind bank. But the Indusind bank is maintaining their gross npa to total asset.

4.7 Total Investments to Total Assets

This ratio is used as a tool to measures the percentage of total assets locked up in investments.
Total Investments to Total Assets = Total Investments / Total Assets
4.7.1 Table showing the calculation of Total Investments to Total Assets
YEAR
LVB
2006
0.26
2007
0.22
2008
0.25
2009
0.22
2010
0.28
4.7.2 Chart showing the Total Investments to Total Assets

35

INDUSIND
0.3
0.28
0.28
0.29
0.29

Inference:
From the above table represents the investment details of the banks. In that table Indusind bank
is higher than the lakshmi vilas bank. Lakshmi vilas bank is slightly increasing their investment
year by year.

4.8 Percentage Change in Gross NPAs

This measure gives the movement in Gross NPAs on year-on-year basis.
Percentage Change in Gross NPAs = Change in Gross NPAs / Gross NPAs at beginning X 100
4.8.1 Table showing the calculation of Percentage Change in Gross NPAs
YEAR
LVB
2006
33.43
2007
5.13
2008
5.18
2009
4.3
2010
125.7
4.8.2 Chart showing the Percentage Change in Gross NPAs

36

INDUSIND
16.12
27.48
14.46
34.99
0.17

Inference:
From the above table clearly explains the percentage change in gross npa, here lakshmi vilas
bank is increasing their gross npa in last financial year (2009-10). But the indusind is
maintaining their gross npa year by year.

4.9 Net NPAs Ratio

This ratio measures the Net NPAs on year-on-year with the help of Net Advances.
Net NPAs Ratio = Net NPAs / Net Advances X 100
4.9.1 Table showing the calculation of Net NPAs Ratio

YEAR

LVB

INDUSIND

2006

1.89

2.09

2007

1.57

2.46
37

2008

1.54

2.27

2009

1.24

1.13

2010

4.11

0.49

4.9.2 Chart showing the Net NPAs Ratio

Inference: From the above table represents the net npa of two banks. Here the lakshmi vilas
bank as maintaining their net npa for the last four years (2006-2009) suddenly the net npa as
increase higher than the indusind bank.
4.10 Shareholders Risk Ratio
This ratio measures the shareholders risk between the Net NPAs and total Capital and Reserves.
Shareholders Risk Ratio = Net NPAs / Total Capital and Reserves X 100
4.10.1 Table showing the calculation of Shareholders Risk Ratio

YEAR

LVB

INDUSIND
38

2006

19.22

22.5

2007

14.3

25.9

2008

14.2

21.56

2009

14.29

10.76

2010

34.88

4.25

4.10.2 Chart showing the Shareholders Risk Ratio

Inference: From the table represents the shareholders risk ratio of the banks. In that table shows
the lakshmi vilas bank as maintaining their risk below the indusind bank for 2006-08. After that
the lakshmi vilas bank as increased their shareholders risk higher than the indusind bank.
4.11 Provision Ratio
This ratio measures the total provision of gross NPAs to know the provision ratio.
Provision Ratio = Total Provision / Gross NPAs X 100
4.11.1 Table showing the calculation of provision ratio
39

YEAR

LVB

INDUSIND

2006

48.83

27.47

2007

50.4

20.12

2008

52.3

25.8

2009

51.33

29.75

2010

18.6

60.14

4.11.2 Chart showing the provision ratio

Inference: From the above table represents lakshmi vilas bank as totally decrease their
provisions in the last year. At this stage indusind bank as increased their provision above the
lakshmi vilas bank.
4.12 Sub Standard Assets Ratio
This ratio measures the total sub standard assets of Gross NPAs with the help of Gross NPAs

40

Sub Standard Assets Ratio = Total Sub Standard Assets / Gross NPAs X 100
4.12.1 Table showing the calculation of Sub Standard Assets Ratio

YEAR

LVB

INDUSIND

2009

21.9

53.7

2010

51.6

49.8

4.12.2 Chart showing the Sub Standard Assets Ratio

Inference:
From the above table clearly explains the substandard assets of both banks are maintaining same
level of the last year.

4.13 Doubtful Assets Ratio

41

This ratio measures the total doubtful assets of Gross NPAs with the help of Gross NPAs
Doubtful Assets Ratio = Total Doubtful Assets / Gross NPAs X 100
4.13.1 Table showing the calculation of Doubtful Assets Ratio

YEAR

LVB

INDUSIND

2009

72.09

43.54

2010

46.8

49.1

4.13.2 Chart showing the Doubtful Assets Ratio

Inference:
From the above table represents the doubtful assets of the two banks are the lakshmi vilas bank
as decreased their doubtful assets in last year. But the indusind bank as slightly increased then
the lakshmi vilas bank.
4.14 Loss Assets Ratio
42

This ratio measures the total loss assets of Gross NPAs with the help of Gross NPAs
Loss Assets Ratio = Total Loss Assets / Gross NPAs X 100
4.14.1 Table showing the calculation of loss assets ratio

YEAR

LVB

INDUSIND

2009

5.94

0.08

2010

1.5

0.8

4.14.2 Chart showing the loss assets ratio

Inference:
From the above table represents the loss asset ratio of banks. In 2009 the lakshmi vilas bank as
very high as the indusind bank. But in 2010 the lakshmi vilas bank as decrease their loss asset
compare then the previous year. Indusind bank as increased their loss assets in last year.
4.15 Total advances to Total Deposits
43

This ratio measures the efficiency of the management in converting deposits into advances. Total
deposits include demand deposits, saving deposits, term deposits and deposits of other banks.
Total advances also include the receivables.
Total advances to Total Deposits = Total advances / Total Deposits X 100
4.15.1 Table showing the calculation of Total advances to Total Deposits
YEAR
LVB
2006
68.09
2007
71.96
2008
68.68
2009
71.26
2010
69.17
4.15.2 Chart showing the Total advances to Total Deposits

INDUSIND
62.04
62.81
67.21
71.3
76.9

Inference:
From the above table represents the total advances to total deposits. In that ratio both the banks
are maintaining their advances to deposits equally.
4.16 Net Profit per Employee
It is arrived at by dividing the PAT earned by the bank by total number of employees. Higher the
ratio, higher the efficiency of management.
44

Net Profit per Employee = Net Profit / No. of Employee

4.16.1 Table showing the calculation of Net Profit per Employee
YEAR
LVB
2006
119967
2007
91277
2008
121607
2009
206740
2010
115517
4.16.2 Chart showing the Net Profit per Employee

INDUSIND
251846
261079
261589
348953
650770

Inference:
From the above table represents net profit per employee. In that ratio lakshmi vilas bank is
decrease than the indusind bank.

4.17 Business per Employee

It is arrived at by dividing total business by total number of employees. Business includes the
sum total advances and deposits in a particular year.
Business per Employee = Total Business / No. of Employee
4.17.1 Table showing the calculation of Business per Employee
45

YEAR
LVB
2006
38917243
2007
4478584
2008
45607
2009
51815
2010
57826
4.17.2 Chart Showing the Business per Employee

INDUSIND
166325332
109946439
110954096
89110535
87796313

Inference:
From the above table Indusind bank business is higher than the lakshmi vilas bank. so the
lakshmi vilas bank as to improve their business per employee.

4.18 Return on Net worth (RONW)

It is a measure of the profitability of a company. PAT is expressed as a percentage of Average Net
Worth.
RONW = Net Profit / Net Worth X 100
4.18.1 Table showing the calculation of RONW
YEAR
2006
2007

LVB
7.72
4.43

INDUSIND
4.25
6.45
46

2008
6.05
2009
11.08
2010
4.15
4.18.2 Chart showing the RONW

5.56
8.91
14.62

Inference:
From the above table represents the return on net worth between the two banks. Here both the
banks net worth are changing every year. In the year 2010 indusind bank is higher than the
lakshmi vilas bank.
4.19 Operating Profit by Average Working Funds
This ratio gives return on total assets employed on a daily basis. Working funds is the daily
average of the total assets during the year.
Operating Profit by Average Working Funds = Operating Profit / Average Working Funds X 100
4.19.1 Table showing the calculation of Operating Profit by Average Working Funds
YEAR
2006
2007
2008
2009
2010

LVB
1.62
1.36
1.46
1.46
0.31

INDUSIND
2.95
1.96
2.03
2.98
4.23
47

4.19.2 Chart showing the Operating Profit by Average Working Funds

Inference:
From the above table represents the operating profit by average working funds. In that ratio
shows the lakshmi vilas bank is lower than the indusind bank. In 2010 lakshmi vilas bank is
lower than the 2009.
4.20 Net Interest Margin (NIM)
It is arrived at by dividing Spread by Total Earning Assets. Spread is the difference between the
interest income and interest expended as a percentage of Total Assets. Interest income includes
dividend income. Interest expanded includes interest paid on deposits, loans from RBI, and other
short-term and long-term loans.
NIM = Spread / Total Earning Assets X 100
4.20.1 Table showing the calculation of Net Interest Margin
YEAR
2006
2007
2008
2009
2010

LVB
2.75
6.12
1.82
2.93
6.38

INDUSIND
0.26
8.79
6.08
0.13
9.3
48

4.20.2 Chart showing the Net Interest Margin

Inference:
From the above table shows the Indusind bank as not maintaining their net interest margin. But
the lakshmi vilas bank as slowly increased the net interest margin every year.
4.21 Net Profit to Average Assets
This ratio measures return on assets employed or the efficiency in utilization of the assets. It is
arrived at by dividing the Net Profit by Average Assets, which is the average of total assets in the
current year and previous year.
Net Profit to Average Assets = Net Profit / Average Assets
4.21.1 Table showing the calculation of Net Profit to Average Assets
YEAR
LVB
2006
0.50
2007
0.32
2008
0.41
2009
0.67
2010
0.32
4.21.2 Chart showing the Net Profit to Average Assets

49

INDUSIND
0.22
0.35
0.33
0.58
0.11

Inferences:
From the above table shows the difference of two banks in net profit to average assets. In this
ratio lakshmi vilas bank is higher than the indusind bank. The bank will maintain correctly at
every year.
4.22 Percentage Growth in Net Profit
It is percentage change in net profit from last year. It arrived by dividing changes in net profit by
net profit at beginning.
Percentage Growth in Net Profit = Changes in Net Profit / Net Profit at Beginning X 100
4.22.1 Table showing the calculation of Percentage Growth in Net Profit
YEAR
LVB
2006
572.75
2007
21.76
2008
43.74
2009
99.05
2010
39.03
4.22.2 Chart showing the Percentage Growth in Net Profit

50

INDUSIND
82.57
85.27
10.01
97.6
136.15

Inferences:
From the above table indicates the percentage growth in net profit of the two banks. In that both
the bank as maintaining their net profit averagely. But they want to increase their net profit.

4.23 Non Interest Income / Total Income

This measures the income from operations, other than lending as a percentage of total income.
Non-interest income is the interest income earned by the banks excluding income on advances
and deposits with RBI.
Non Interest Income / Total Income = Non Interest Income / Total Income X 100
4.23.1 Table showing the calculation of Non Interest Income / Total Income
YEAR
LVB
INDUSIND
2006
25.07
22.53
2007
21.24
24.35
2008
22.41
21.71
2009
17.41
18.09
2010
18.21
17.88
4.23.2 Chart showing the Non Interest Income / Total Income

51

Inferences:
From the above table indicates the non interest income / total income of the two different banks.
In that both the banks as maintain the same level of non interest income.
4.24 Interest Income / Total Income
This ratio measures the income from lending operations as a percentage of total income
generated by the banks in a year. Interest income includes income on advances, interest on
deposits with RBI.
Interest Income / Total Income = Interest Income / Total Income X 100
4.24.1 Table showing the calculation of Interest Income / Total Income
YEAR
LVB
2006
61.58
2007
69.11
2008
66.71
2009
68.85
2010
71.56
4.24.2 Chart showing the Interest Income / Total Income

52

INDUSIND
61.47
61.65
66.44
65.04
65.10

Inferences:
From the above table represents the interest income / total income of two banks. In that interest
income of lakshmi vilas bank is higher than the indusind bank for every year of interest.
4.25 Liquid Assets / Demand Deposits
This ratio measures the ability of a bank to meet demand from demand deposits in a particular
year. Liquid assets include cash in hand, balance with RBI, balance with other banks (both in
India and abroad), and money at call and short notice.
Liquid Assets / Demand Deposits = Liquid Assets / Demand Deposits
4.25.1 Table showing the calculation of Liquid Assets / Demand Deposits
YEAR
LVB
2006
1.02
2007
1.26
2008
1.09
2009
1.79
2010
1.32
4.25.2 Chart showing the Liquid Assets / Demand Deposits

53

INDUSIND
1.23
1.51
1.20
0.65
0.59

Inferences:
From the above table represents the liquid assets / demand deposits of two banks. In that lakshmi
vilas bank as much higher than the indusind bank of every year.
4.26 Liquid Assets / Total Deposits
Liquid assets are measured as a percentage of Total Deposits. Liquid Assets include cash in hand,
balance with RBI, balance with other banks (both in India and abroad), and money at call and
short notice. Total Deposits include demand deposits, saving deposits, term deposits and deposits
of other financial institutions.
Liquid Assets / Total Deposits = Liquid Assets / Total Deposits X 100
4.26.1 Table showing the calculation of Liquid Assets / Total Deposits
YEAR
LVB
2006
10.68
2007
12.77
2008
10.9
2009
11.97
2010
9.18
4.26.2 Chart showing the Liquid Assets / Total Deposits

54

INDUSIND
9.86
14.7
11.4
8.7
9.74

Inferences:
From the above table describes the liquid assets / total deposits of two banks. In that measures
both the banks are maintaining their total deposits equally for every year. In 2010 indusind bank
as increased slightly.
4.27 Liquid Assets / Total Assets
Liquid Assets as measured as percentage of Total Assets.
Liquid Assets / Total Assets = Liquid Assets / Total Assets
4.27.1 Table showing the calculation of Liquid Assets / Total Assets
YEAR
LVB
2006
0.09
2007
11.0
2008
9.43
2009
0.10
2010
0.07
4.27.2 Chart showing the Liquid Assets / Total Assets

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INDUSIND
8.40
12.4
9.36
6.96
7.35

Inference:
From the above table represents lakshmi vilas bank is not maintaining their liquid assets / total
assets comparing the indusind bank liquid assets. In 2006, 2009, 2010 the lakshmi vilas bank is
very low than the Indusind banking.

4.28 G Secs / Total Assets

This ratio measures the proportion of risk free liquid assets invested in G-Secs as a percentage of
the assets held by a bank and is arrived at by dividing investment in government securities by
total assets.
G Secs / Total Assets = G Secs / Total assets
4.28.1 Table showing the calculation of G Secs / Total Assets
YEAR
2006
2007
2008
2009
2010

LVB
23.7
20.37
23.83
20.12
24.6

INDUSIND
26
23.17
23.36
22.74
24.09

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4.28.2 Chart showing the G Secs / Total Assets

Inferences:
From the above table represents the government securities comparison of two banks. lakshmi
vilas bank and Indusind bank as maintaining their securities as equally every year.
4.29 Approved Securities / Total Assets
Approved securities are investments made in state-associated bodies like electricity boards,
housing boards, corporation bonds and shares of regional rural banks.
Approved Securities / Total Assets = Approved Securities / Total Assets X 100
4.29.1 Table showing the calculation of Approved Securities / Total Assets
YEAR
2006
2007
2008
2009
2010

LVB
0.34
0.27
0.20
0.11
0.07

INDUSIND
0.014
0.007
0.016
0.013
0.01

4.29.2 Chart showing the Approved Securities / Total Assets

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Inferences:
From the above table represents the approved securities of two banks. In that ratio lakshmi vilas
bank is higher than the indusind bank. But every year lakshmi vilas bank approved securities are
decreasing every year.
4.30 Cash Reserve Ratio
Cash Reserve Ratio = Total Cash / Total Deposits X 100
4.30.1 Table showing the calculation of Cash Reserve Ratio

YEAR

LVB

INDUSIND

2006

4.6

4.02

2007

5.7

5.78

2008

6.8

8.01

2009

8.04

5.38

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2010

8.27

7.85

4.30.2 Chart showing the Cash Reserve Ratio

Inferences:
From the above table represents the cash reserve ratio of two banks. In that lakshmi vilas
bank is higher than the indusind bank for every year.
4.31 Statutory Liquidity Ratio
Statutory Liquidity Ratio = Total Demand/Time Liabilities X 100
4.31.1 Table showing the calculation of Statutory Liquidity Ratio

YEAR

LVB

INDUSIND

2006

13.5

9.18

2007

12.9

11.39
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2008

12.7

11.22

2009

8.03

16.5

2010

8.46

21.61

4.31.2 Chart showing the Statutory Liquidity Ratio

Inferences:
From the above table represents the statutory liquidity ratio of lakshmi vilas bank is lower than
the Indusind bank for the last two year. So they want to maintain their statutory liquidity ratio.
CHAPTER 5
5.1 FINDINGS
Capital adequacy:

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Capital adequacy of Lakshmi vilas bank is the same level of Indusind bank. In 2010 Lakshmi
vilas bank having the capital amount is 14.82%. The capital adequacy ratio of Lakshmi Vilas
Bank is above the minimum requirements and above the RBI average.
Assets:
Compare to the Indusind bank, Lakshmi Vilas Bank has highest Gross NPA ratio which is not
good for the bank.
Management:
Professional approach that has been adopted by the bank in the recent past is in right direction &
also it is the right decision.
Earnings:
Operating profit of Lakshmi vilas bank is to lower than the Indusind bank. In 2010 they earn
only 0.31%. Lakshmi Vilas banks net interest income is equal to the Indusind bank net interest
income.
Liquidity:
Compare to the Indusind bank, Lakshmi Vilas banks liquidity position is very low in the liquid
assets to total assets.

5.2 SUGGESTIONS

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 The bank should try to maintain a 0% NPA by always lending and investing or creating
quality assets which earn returns by way of interest and profits. They should give loans to
the customers, whose credit worthiness is good.
Lakshmi vilas bank has highest government security to total investment ratio which leads
to reduce their income and ultimately their profitability so they have to invest in other
government investment option rather than only in government securities.
Lakshmi vilas bank has to give more advances in order to earn more interest. But they
should have to also keep in mind the credit worthiness of the customers.
Have good appraisal skills, system, and proper follow up to ensure that bank is above the
risk.

5.3 CONCLUSION
The study titled Financial performance of lakshmi vilas bank reveals the financial position of
the bank currently. The study reveals that the bank has performed well during the period of study
from 2006-2010. The bank has succeeded in maintaining CRAR at a higher level than the
prescribed level, 9%. Gross NPA ratio has registered declining trend for during the last five
years. In management quality, we have found that Business per Employee Ratio is increased
during the last five years. The improvement shows the growth of the bank as well as efficiency
of the employees. There is a huge possibility for the bank to improve in certain aspects like to
introduce the new type of loans and fixed deposits. The return on capital employed could also to
be improved. As a whole the financial performance of the bank is very much satisfactory.

BIBLOGRAPHY
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Books referred:
M Y Khan and P K Jain, Financial Management Fourth Edition 2006,
Tata McGraw-Hill Publishing Company Limited, New Delhi.
Robert C Higgins, Analysis for Financial Management Eighth Edition 2009
Tata McGraw-Hill Publishing Company Limited, New Delhi.
Prasanna Chandra Financial Management Sixth Edition 2004,
Tata McGraw-Hill Publishing Company Limited, New Delhi.
Websites visited:
www.lvbank.com
www.indusind.com
www.allbankingsolutions.com

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