A PROJECT REPORT

ON

Analysis of Mutual Funds in India

Submitted in partial fulfilment for

POST GRADUATE DIPLOMA & MANAGEMENT

Program of
INSTITUTE FOR TECHNOLOGY & MANAGEMENT
NAVI MUMBAI

Submitted by : Under Guidance:

Azim khan Prof. Sammie AhmedSyed
Roll No- PGDM-2934
 ACKNOWLEDGEMENT:

Before we get into thick of things, I would like to add a few words of appreciation for the people who have
been a part of this project right from its inception. The writing of this project has been one of the significant
academic challenges I have faced and without the support, patience, and guidance of the people involved, this
task would not have been completed. It is to them I owe my deepest gratitude.

It gives me immense pleasure in presenting this project report on "ANALYSIS OF MUTUAL FUNDS IN
INDIA". It has been my privilege to have a team of project guide who have assisted me from the
commencement of this project. The success of this project is a result of sheer hard work, and determination
put in by me with the help of my project guide. I hereby take this opportunity to add a special note of thanks
forProf. Sammie Ahmed Syed, who undertook to act as my mentor despite her many other academic and
professional commitments. Her wisdom, knowledge, and commitment to the highest standards inspired and
motivated me. Without her insight, support, and energy, this project wouldn't have kick-started and neither
would have reached fruitfulness.

I also feel heartiest sense of obligation to my library staff members & seniors, who helped me in collection of
data & resource material & also in its processing as well as in drafting manuscript. The project is dedicated to
all those people, who helped me while doing this project.
 INTRODUCTION

CREDIT APPRISAL PROCESS:

Credit appraisal is a holistic exercise which starts from the time a prospective borrower walks
into the branch and culminates in credit delivery and monitoring with the objective of ensuring
and maintaining the quality of lending and managing credit risk within acceptable limits.
There are two types of proposals that are received by the Bank for funds. The first types of
proposals are for starting a new project or for setting up a new company, also known as project
financing and the other proposals are for additional funds requirements (working capital).
Financial requirements for Project Finance and Working Capital purposes are taken care of at the
Credit Department. Companies that intend to seek credit facilities approach the bank. Primarily,
credit is required for following purposes:-
1. Working capital finance
2. Term loan for mega projects
3. non fund based Limits Like Letter of Guarantee, Letter of Credit
Prior to nationalization the Bank had a security centric approach for sanctioning the proposals i.e.
the Bank sanctioned the proposal for credit facility to the company when it had security against
the amount given. There are two types of securities, primary and collateral. The primary security
is the asset created out of the Bank’s finance. Collateral security refers to other assets owned by
the company or its directors. Previously there were no regulatory issues or capital adequacy
issues. But it was observed that during boom period many people who did not even had the
knowledge about a particular industry jumped in and were interested for finance. Eventually such
companies resulted to be failures. RBI norms for Non- Performing Assets (NPA) are very strict.
Thus to avoid many of the accounts becoming NPAs the Bank changed its security centric
approach.

The process of credit appraisal would begin with the selection of the proponent. It would involve
appraising the background of the proponent/management, commercial, technical and financial
appraisal. Appraisal of credit facilities would comprise two distinct segments:

a) Appraising the acceptability of the customer

b) Assessment of the customer’s credit needs.

The appraisal would be different in respect of :

a) Personal loans for consumer durables, houses etc;
b) Loans to tiny business enterprises;
c) Loans to agriculturalists
 OBJECTIVE:
The main objectives of the project are:
 To study the credit policy of the bank and the credit appraisal process as a whole.
 To study the credit rating methods followed by the Bank for different credit ranges.
 To study the method used by bank to calculate the interest rates to be charged.
 To study and analyze the credit proposals of plywood industry.
 To study a credit appraisal report of a firm engaged in manufacturing of pre-laminated
plywood boards.

LITERATURE REVIEW:
A number of studies have observed that the profitability of commercial banks through
had started declining from the mid sixties, but the decline was more pronounce in the
post nationalization period, several exogenous ( also called policy induced) and
endogenous factors have been found responsible for this trend. An attempt has been
made to briefly review some of the studies which investigated the profitability behavior
of commercial banks in India. Many studies have not taken in the home loan of Indian
banking with their financial performance. So in this situation the present study
reviewed the research work in two dimensions. The first being findings and
recommendations by various committee and commissions The second dimension
highlighted the empirical studies conducted by bankers or academicians,.

Goyal and Joshi (2011) have concluded in their study on Social and Ethical
Aspects of Banking Industry that banks can project themselves as a social and ethical
oriented organization by simply disbursing loans to those social, ethical and
environmental concern organizations.

Kumar & Gulati (2010) examines the significance of the ownership on the Indian
domestic banks effectiveness. Data Envelopment Analyis (DEA), which is a non-parametric,
deterministic and linear programming based technique, was used to compute public and private
sector banks efficiency score. The operational cross-sectional data of the public and private
sector banks during the financial years 2005-06 and 2006-07 was used and it was found that (1)
De nova private sector banks dominate the formation of efficient frontier of Indian domestic
banking industry; (2) Primarily, the whole technical inefficiency halts from managerial
incompetence instead of scale inefficiency; and (3) Though the public and private sector banks’
efficiency differences have been noted, in most of the cases these differences are statistically
irrelevant. By and large, it is concluded that industry ownership is ineffective in the Indian
domestic banking industry.

Subbaiah & Jeyakumar (2009), customer service is a series of activities planned

to increase customer’s satisfaction level that a product or service has met the
customer outlook. The bank strongly believes the customers service will be the most
important factor in maintaining and improving the leadership in India‘s Banking
Industry. ATMs are important in the customer service so as to enhance market share
and business growth.
 Koutsomanol (2009), analyzed Central and Eastern Europe’s banking sector
efficiency and productivity growth during the period 1998-2003.

Naveen K.Shetty and Dr.Veerashekharappa (2009) studies the importance

of microfinance in bringing about financial inclusion. The paper studies impact of the
increasing gap in demand and supply of financial services in India which has led to the
increasing population of the country to be excluded from the formal financial credit
system on housing loan.

Reddy. (2007) the banks must try to increase productivity through development of
men, material and resources. In order to improve profitability it is advisable for every
bank, to diversify its operations and focus on innovative products such as, merchant
banking, leasing factoring, insurance credit cards, etc. Further, it is suggested that
public sector banks should reduce the percentage of their non-performing assets to
improve profitability. Assets liability management, risk management, manpower
planning, diversification, adoption of information technology are the key areas which
should be concentrate to improve productivity and profitability in public sectors.

RESEARCH METHODOLOGY:
The procedure adopted for conducting the research requires a lot of attention as it has directbearing on
accuracy, reliability and adequacy of result obtained. It is due to reason that researchmethodology,
which researcher used at the time of conducting the research, needs to be elaborate upon. Itmay be
understood as a science of studying how research is done scientifically. So, the researchmethodology
not only talks about the research methods but also consider the logic behind the method usedin the
context of the research study. Research methodology is a way to systematically study and solve
theresearch problems. If a researcher wants to claim his study as a good study, he must clearly state
themethodology adapted in conducting the research the research so that it may be judged by the reader
whetherthe methodology of work done is sound or not.

RESEARCH DESIGN USED IN THE STUDY:

Descriptive research design is used in this study because it will ensure the minimization of biasand
maximization of reliability of data collected. Descriptive study is based on some
previousunderstanding of the topic; research has got a very specific objective and clear cut data
requirements. Theresearcher had to use fact and information already available through financial
statements of earlier yearsand analyze these to make critical evaluation of the available material.
Hence by making the type of theresearch conducted to be both descriptive and analytical in nature.
From the study, the type of data to becollected and the procedure to be used for this purpose were
decided.

 DATA COLLECTION METHOD:

The process of data collection begins after a research problem has been defined and
researchdesign has been chalked out. There are two types of data:
 1PRIMARY DATA:
It is first hand data, which is collected by researcher itself. Primary data is collected by
variousapproaches so as to get a precise, accurate, realistic and relevant data. The main tool is
gathering primarydata was investigation and observation. It was achieved by a direct
approach and observation from theofficials of the company.
 2 SECONDARY DATA:
It is the data which is already collected by someone else. Researcher has to analyze
the data andinterprets the results. It has always been important for the completion of
any report. It provides reliable,suitable, adequate and specific knowledge. Researcher
collected the secondary data by using banks annualreports and authorized websites of
banks.

Secondary data are those, which have already been collected by some one else.

Secondary Data Sources those helpful in research were:−

1. Balance sheet of the company

2. Credit policy book of the bank
3. Office note prepared by bank
4. Bank website
5. Various articles on banking