Functional Analysis of a Bank

Aakanksha Malik
SYA
15060222002

NAME : Allahabad bank

DATE OF ESTABLISHMENT : April 24, 1865
OBJECTIVE : To put the Bank on a higher growth path by building a Strong Customer-base
through Talent Management, induction of State-of-the-art Technology and through Structural Re
organisation.
MISSION: To ensure anywhere and any time banking for the customer with latest state-of-the-art
technology and by developing effective customer centric relationship and to emerge as a world-
class service provider through efficient utilisation of Human Resources and product innovation.
AREA OF OPERATION :
Finance and insurance
Consumer banking
Corporate banking

ANALYSIS OF BANKS FINANCIAL PARAMETERS (in Rs crores)

Particulars 2013-14 2014-2015 2015-16

Deposits (resource mobilization) 190834.9 193424 200644
Advances 140905 153095 157707
Business mix 331748 346519 358352
Working funds NA NA NA
Operating profit 4020 4460 4134

Net profit 1172.02 620.90 -743.31

Owned funds NA NA NA
Borrowings (consolidated) 12138.98 14328.50 14814.35
Investment 63960.53 56478.74 55657.92
Gross NPA (asset quality) 8068.04 8357.96 15384.57
Net NPA (asset quality) 5721.81 5978.89 10292.51

1. DEPOSITS

Deposits are liability to banks, which need money to lend. It is the amount that any citizen (resident
or no-resident) keep with the bank subject to some regulatory compliance. In turn, banks pay interest
on deposits. It is considered the safest form of investment. Deposits are of two types current and

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Total deposits of the Bank increased to Rs 200,624 crore for FY 2015 from Rs 193,376 crore for FY
2014, thereby registering a growth of 3.7% which is more than compared to growth of 1.3% to Rs
193,376 crore for FY2014 from Rs 190,834 crore for FY2013.
This increasing trend in the deposits is due to CASA deposits mobilisation, since Current Accounts
and Savings Accounts (CASA) contributed 36.28 % to the total deposits for FY 2015 alone. Also
the bank had been actively participated in the Pradhan Mantri Jan Dhan Yojana (PMJDY) where a
total of 44.24 lacs accounts has been opened up so far. Another proof of banks strong sense of
credibility is associated with significant rise in total demand deposits, Saving-bank deposits and
term term deposits from other banks and organisations.

250000

200000

150000

100000

50000

0
2013-14 2014-15 2015-16

DEPOSITS ADVANCES

CD ratio shows the difference between credit and deposits. In the above figure we can see a lower
CD ratio as the deposit growth is higher than credit growth. It can also be said that banks may be
hiring more from deposit than debt market.

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2. ADVANCES
Advance is the amount that banks lends to individuals and companies.Total advances of the bank
increased 1.7% to Rs 152,372 crore for FY2015 from Rs 149,877 crore for FY2014. which is less
than compared to increased 8.6% to Rs 149,877 crore for FY2014 from Rs 138,007 crore for FY
2013.

Advances 2013-14 2014-15 2015-16

Priority sector 46,66,39,200 53,90,96,600 626,950,000

Public sector 13,60,54,604 13,05,26,556 10,19,48,017

The bank has been giving more weightage towards priority sector so as to promote MSME and
enhance rural development through financial inclusion.
In addition to above the bank has adopted Marginal Cost of Funds Based Lending Rate, which
will be the internal benchmark to calculate interest on advances as per RBI guidelines.

3. BUSINESS Mix

It is the sum total of deposits and advances.Total business of the Bank increased to Rs,358,352
crore for FY2015 from Rs,346,519 crore in FY2014, registering a growth of 3.4% which is less
than compared to growth of 4.5% to Rs346,516 crore for FY2014 from Rs331,748 crore for
FY2013 showing a rise in trend of the business. This rising trend is because of the following
reasons : deposit mobilisation , credit deployment , retail lending(retail credit), increase in priority
sector credit, RuPay Kisan Card providing ATM facility for KCC account holders, increase in
MSME sector financing and overseas branch in Hong Kong making profits.

4. OPERATING PROFIT

It denotes the profit earned by the banks through ongoing operations, deducting all minor expenses
such as tax, depreciation, production cost, amortisation and earning interest from investment
activities. Also it is an indirect measure of efficiency, so higher the operating profit more profitable
is the companys core business. Primary concern is that as it focuses on companys core business it
is the best indicator in deciding companys future.
Operating profit decreased 7.3% to Rs 4134 crore for FY2015 from Rs 4460 crore for FY2014 as
compared to increased 10.9% to Rs 4460 for FY2014 from Rs 4020 crore for FY 2013. This decline
in operating profit of the bank was result of lower net interest income.

5. NET PROFIT
Net profit decreased by 219.7% due to negative profit of Rs 743.3 crore for FY 2015 from Rs
620.90 crore for FY 2014 , which has decreased significantly as compared to 47% to Rs 620.9 crore
in FY 2014 from Rs 1,172 crore for FY 2013 .This shows a falling trend in the profits of the Bank.
This was due to significant rise in provisioning for bad loans(NPAs). Provisioning for bad loans
(NPA) had been doubled in the view of RBIs asset quality review (AQR) directive.

7. OWNED FUNDS

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Owned funds decreased 8% to Rs 22,000 crore for FY2015 from Rs 23,920.55 crore for FY 2014 ,
which is more as compared to decreased 6.5% to Rs 23,920.55 crore for FY 2014 from Rs
25,576.74 crore for FY 2013. This shows a falling trend in the owned funds by the bank.

8. BORROWINGS

BORROWINGS
16,000.00
To t a l B o r r o w i n g s
increased 3.4% to
14,000.00
14,814.35 crore for FY
12,000.00 2015 from Rs 14,328.5
10,000.00 crore for FY2014 , which
8,000.00 is less than compared to
6,000.00
increased 18% to Rs
14,328.5 crore for
4,000.00
FY2014 from Rs
2,000.00 12,138.98 crore for
0.00 FY2013.
2013-14 2014-15 2015-16

9. INVESTMENTS
Investments decreased 1.5% to RS 55,658 crore for FY2015 from Rs 56,479 crore for FY2014 ,
which is less than compared to decreased 11.7% to Rs 56,479 crore for FY2014 from Rs 63, 960
crore for FY 2013. This shows a falling trend in the investments over 3 years (from 2013 to 2016).
This is a result of fall in the net profits triggered by increase in the non performing assets (NPAs).

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10. NET AND GROSS NPA

The RBI defines net NPA as

Net NPA= Gross NPA (Balance in Interest Suspense account + DICGC/ECGC claims
received and held pending adjustment + Part payment received and kept in suspense
account + Total provisions held).

Gross NPA increased 84% to Rs 15,384.5 crore for FY 2015 from Rs 8,358 crore for FY 2014 ,
which is far more compared to increased 3.6% to Rs 8,358 crore for FY 2014 form Rs 8,068 crore
for FY 2013 . This shows that non-performing assets has increased significantly prior 2014 hence
theres a rising trend in Gross NPA. Similarly , Net NPA increased by 72% in FY 2015 from
FY2014, which is far more as compared to increased 4.5% in FY2014 from FY 2013.

ANALYSIS OF BANKs OPERATIONAL PARAMETERS

Particulars 2015-16 2014-15 2013-14

Capital to risk asset ratio Tier I- 8.41% Tier I- 7.78% Tier I- 7.51%
Tier II- 2.61% Tier II- 2.74% Tier II- 2.45%
Total= 11.02% Total= 10.45% Total= 9.96%
Credit deposit ratio ( resource 79.43% 79.6% 74.26%
development)

Overdue ratio NA NA NA
Net NPA to total advance ratio 6.76% 4% 4%

1. Capital to Risk Asset Ratio (CRAR)

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0
2013-14 2014-15 2015-16

TEIR I TEIR II
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 Capital Adequacy Ratio (CAR) is the measure of a bank's capital and expressed in
percentage term. In simple terms, this capital is set aside by banks to protect depositors. A
lower CAR means a bank is prone to the risk of going burst in case of any crisis. However, a
very high CAR means, the bank is not doing enough business.

From the above graph we can observe that theres a rising trend in the CRAR of the bank.The Bank
carries out regular assessment of its Capital necessities to keep up an agreeable Capital to Risk
Weighted Assets Ratio (CRAR) and to pad against the risks of misfortunes against any unexpected
occasions in order to secure the enthusiasm of all stakeholders. Likewise, the Bank has an all
around characterised Internal Capital Adequacy Assessment Process (ICAAP) to extensively
evaluate all dangers and maintain necessary additional capital. The Bank has embraced
Standardised Approach for Credit Risk, Basic Indicator Approach for Operational Risk and
Standardised Duration Approach for Market Risk for registering CRAR, according to the rules of
RBI.Currently Allahabad bank is using the ratings assigned by the following international credit
rating agencies: Fitch Ratings ,Moodys
Standard & Poors .

2. Credit Deposit Ratio

This is obtained by dividing the banks total loans by its deposit. It indicates how much the banks
core funds are being used for lending. A higher CD ratio means more reliance on deposits and vice
versa. CD ratio has more or less remained constant over the years as per the given table.

3. Net NPA to Total Advances Ratio

This ratio describes what proportion of the banks total loaned advances comprises of its net NPAs.
There is a significant increase in the ratio from 4% in FY2014 to 6.76% in FY2015. Hence theres
an increasing trend as a result of rising trends in net NPAs.

ANALYSIS OF BANKS PRODUCTIVITY

Particulars 2015-16 2014-15 2013-14

Business per employee 14,62,55,313.13 14,16,78,383.06 13,38,47,279.50

Net profit per employee -3,07,953.89 2,,56,243.82 4,77,032.81

Business per branch 1099739717.45 1104571718.15 1157512780.71

Net profit per branch 2315602.18 1997761.9 4125385.08

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1. BUSINESS PER EMPLOYEE
This is a measure of how proficiently a specific bank is utilising is workers. High business per
worker is a positive sign which recommends that the organisation is discovering approaches to press
more business out of its employees.

As per the graph theres

BUSINESS PER EMPLOYEE positive rise in business
14,80,00,000.00 per employee even
14,60,00,000.00 though the growth for
14,40,00,000.00 FY 2015 was 3% which
14,20,00,000.00 is less than compared to
14,00,00,000.00 growth of 6% for the
13,80,00,000.00 previous year(2014).
13,60,00,000.00
13,40,00,000.00
Since it also means
13,20,00,000.00
average deposits plus
13,00,00,000.00
average advances
12,80,00,000.00
12,60,00,000.00
divided by number of
2013-14 2014-15 2015-16 employees.We can also
say that is the employee
who attracts more
customers adds more to deposits and advances , hence does the job for the bank more efficiently.

2. NET PROFIT PER EMPLOYEE

This is equal to the net profit(after tax) divided by number of employees. Greater the value better it
is.Theres a constant decline in the net profit generated by employees over the years. This can be the
result of lack of efficiency by the employees. Also looking at the net profit of the bank we observe a
similar trend where FY 2015 showcased a negative profits. Thus this falling trend is a result of
increasing NPAs.

ANALYSIS OF BANKS SOCIAL RESPONSIBILITY

Particulars 2015-16 2014-15 2013-14

Priority sector advances ratio 7.26% 5.97%

Weaker section advances ratio NA NA NA

Membership profile 221194 205276 216693

1. Priority sector
Priority sector registered a growth of 16.30% as priority sector advances increased from Rs
53,91crore to Rs 62,695 crore as on March 2016. Agriculture Credit increased from Rs 24,680 crore
as on Mar' 15 to Rs 26,827 crore as on Mar16, registering growth of 8.70%. Also the bank has
achieved 18.27% of ANBC as on Mar'16.
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Firstly, during FY2015, bank spent a sum of Rs 1099.10 lacs under CSR activity that included an
amount of Rs 210 lacs towards Swachch Bharat Kosh for providing toilets for girls .
Secondly, bank started a scholarship scheme for the welfare of the girl child and for providing
electric fans in govt. schools in lead districts. Also a donation of Rs 817 lacs was made to All Bank
Rural Development Trust for organising skill development programmes for unemployed rural
youths & imparting finance literacy to the rural masses. Lastly, the bank Contributed to Udayan
Care for helping orphaned & abandoned girls nurtured at Udayan Ghar, Jaipur.
The Bank spent Rs`4053 crore under Priority Sector Credit against a target of Rs 4161 crore under
District Credit Plan 2015-16 achieving 97.40% of the target.

2. Membership Profile

Number of shareholders for FY 2015 has increased by 8% as compared to previous year (2014)
which reported decrease of 5%. Also shareholding of the Govt. of India (GOI) increased to 61.38%
as on 31 Mar16 from 60.38% previous year.

Additional parameters
1) Share capital
Share capital means funds raised by an institution in exchange shares of either common or
preferred shares of stock. Basically, it means raising capital by issuing shares. Equity share capital
expanded from 3,475,678 in FY2014 to Rs 3,767,491 crore in FY2015.
2) Technology
Firstly, Allahabad bank opened up an e-KYC facility that provides customer verification
without any paper documents.
Secondly, banks Internet Banking Application has been enhanced with all new facilities and
features. Mobile Banking system has been enhanced with new features like IMPS for instant funds
transfer and instant recharge of DTH & Mobile.

Thirdly, theres been introduction of facilities such as on-line generation of Transaction Password &
ATM PIN, Card Hot listing, scheduling of Funds Transfer, IMPS, e-filing of Income tax returns,
SBI e-pay integration, mobile banking registration etc.

Fourthly, New variants of of RuPay cards viz RuPay Platinum, MUDRA and PUNGRAIN has been
launched. All RuPay cards are enabled for POS & e-Commerce transactions. In addition an EMV
Chip based card has been introduced for RuPay and VISA cards.

Lastly, Bank has introduced Insta PIN facility to provide ATM PIN instantly to customers in case of
emergency. EMV Chip based card has been introduced for RuPay and VISA cards.

3) Awards
- It has been awarded Second Prize by Ministry of Rural Development, Govt. of India, for
overall performance of RSETIs. RSETI Sitapur has also been given Second Prize in
individual category.

- It has also been conferred runner up award for Best MSME Bank & Best Eco-Tech Savvy
Bank in Mid-sized Bank category for the year 2015 by CIMSME.

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- The Bank has been ranked above average by BCSBI. Allahabad bank has been ranked 7th
within 26 Public Sector Banks (PSBs).

4) Corporate governance

Allahabad Bank's corporate approach conceives sound standards of Corporate Governance went for
ensuring the premiums of every one of its partners, giving utmost importance to shareholders'
esteem while obliging the requirements of the economy, national needs and corporate growth. The
Bank believes in highest standard of ethical values, transparency and disciplined approach to
achieve sustainable excellence in its functioning. It is resolved to agree to the best global practices
combined continued openness and fairness and in this manner getting a charge out of "A Tradition
of Trust" from its clients, shareholders and every single other partner.

The Bank looks to announce corporate magnificence by-

- Upholding and upgrading the shareholders' an incentive inside the standards of morals and
legitimate system of the nation.

- Extending best of administrations to its clients. Broadcasting a free and reasonable condition for
its clients, workers, financial specialists and different areas of the general public on the loose.

- Guaranteeing a proactive administration free from predisposition,

- guaranteeing reasonable and fair equity to all areas of the general public.

RECOMMENDATIONS:

1.Increment in investments from outside india. Since Allahabad Bank has only 1 overseas branch
which is in Hong Kong , due to this scope of investment from outside has been hindered. Thus by
opening more no. of branches overseas, bank can increase the total investments.

2. Decrease the NPAs through careful consideration for lending out money to the borrowers
especially the weaker section(who has more chances of not paying back).

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