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Project On Bank
Project On Bank
WHAT IS A BANK?
A bank is a financial institution and a financial intermediary
that accepts deposits and channels those deposits into
lending activities, either directly by loaning or indirectly
through capital markets.
A bank may be defined as an institution that accepts
deposits, makes loans, pays checks, and provides financial
services. A bank is a financial intermediary for the
safeguarding, transferring, exchanging, or lending of money.
A primary role of banks is connecting those with funds, such
as investors and depositors, to those seeking funds, such as
individuals or businesses needing loans. A bank is the
connection between customers that have capital deficits and
customers with capital surpluses.
Banks distribute the medium of exchange. Banking is a
business. Banks sell their services to earn money, and they
must market and manage those services in a competitive
field.
Banks are financial intermediaries that safeguard, transfer,
exchange, and lend money and like other businesses that
must earn a profit to survive. Understanding this
fundamental idea helps you to understand how banking
systems work, and helps you understand many modern
trends in banking and finance.
DEFINITION
Banking means "Accepting Deposits for the purpose of
lending or Investing of deposits of money from the public,
repayable on demand or otherwise and withdraw by cheque,
draft or otherwise."
-Banking Companies(Regulation) Act, 1949
ORIGIN OF BANKING
Its origin in the simplest form can be traced to the origin of
authentic history. After recognizing the benefit of money as a
medium of exchange, the importance of banking was
developed as it provides the safer place to store the money.
This safe place ultimately evolved in to financial institutions
that accepts deposits and make loans i.e., modern
commercial banks.
PHASE II
Government took major steps in this Indian Banking Sector
Reform after independence. In1955, it nationalized Imperial
Bank of India with extensive banking facilities on a large scale
especially in rural and semi-urban areas. It formed State Bank
of India to act as the principal agent of RBI and to handle
banking transactions of the Union and State Governments all
over the country.
Seven banks forming subsidiary of State Bank of India was
nationalized in 1960 on 19th
July,1969, major process of nationalization was carried out. It
was the effort of the then Prime Minister of India, Mrs. Indira
Gandhi. 14 major commercial banks in the country was
nationalized.
Second phase of nationalization Indian Banking Sector
Reform was carried out in 1980 with seven more banks. This
step brought 80% of the banking segment in India under
Government ownership.
The following are the steps taken by the Government of India
to Regulate Banking Institutions in the country:-
1949: Enactment of Banking Regulation Act.
1955: Nationalisation of State Bank of India.
1959: Nationalisation of SBI subsidiaries.
1961: Insurance cover extended to deposits.
1969: Nationalisation of 14 major banks.
1971: Creation of credit guarantee corporation.
1975: Creation of regional rural banks.
1980: Nationalisation of 6 banks with deposits over 200
crore.
After the nationalisation the branches of the public
sector banks in India rose to approximately 800% and
deposits and advances took a huge jump by
11,000%.Banking in the sunshine of Government
ownership gave the public implicit faith and immense
confidence about the sustainability of these institutions.
PHASE III
This phase has introduced many more products and
facilities in the banking sector in its reforms measure. In
1991, under the chairmanship of M Narasimham, a
committee was set up by his name which worked for the
liberalization of banking practices.
TYPES OF BANKS
Banks are classified into four categories:-
Commercial Banks
Small Finance Banks
Payments Bank
Co-operative banks
CLASSIFICATION
OF BANKING
URBAN CO-
PUBLIC SECTOR
OPERATIVE
BANKS
BANKS
STATE CO-
PRIVATE
OPERATIVE
SECTOR BANKS
BANKS
FOREIGN BANKS
RRB
HDFC BANK
ICICI BANK
AXIS BANK
YES BANK
INDUSIND BANK
KOTAK MAHINDRA BANK
DCB BANK
BANDHAN BANK
IDFC BANK
CITY UNION BANK
TAMILNAD MERCANTILE BANK
NAINITAL BANK
CATHOLIC SYRIAN BANK
FEDERAL BANK
JAMMU AND KASHMIR BANK
KARNATAKA BANK
DHANALAXMI BANK
SOUTH INDIAN BANK
LAKSHMI VILAS BANK
RBL BANK
3. FOREIGN BANKS
A foreign bank is one that has its headquarters in a foreign
country but operates in India as a private entity. These banks
are under the obligation to follow the regulations of its home
country as well as the country in which they are operating.
Given below is the list of foreign banks operating in India –
Citi Bank
Standard Chartered Bank
HSBC Bank
Deutsche Bank
Bank of Scotland
Development Band of Singapore Bank(DBS)
Barclays Bank
The Bank of America
The Bank of Bahrain and Kuwait
Doha Bank
1. NABARD
National Bank for Agriculture and Rural Development
(NABARD) is a development bank in the sector of
Regional Rural Banks in India. It provides and regulates
credit and gives service for the promotion and
development of rural sectors mainly agriculture, small
scale industries, cottage and village industries,
handicrafts. It also finance rural crafts and other allied
rural economic activities to promote integrated rural
development. It helps in securing rural prosperity and its
connected matters.
2. SYNDICATE BANK
Syndicate Bank was firmly rooted in rural India as rural
banking and have a clear vision of future India by
understanding the grassroot realities. Its progress has
been abreast of the phase of progressive banking in
India especially in rural banks.
3. UNITED BANK
United Bank of India (UBI) also plays an important role
in regional rural banks. It has expanded its branch
network in a big way to actively participate in the
developmental of the rural and semi-urban areas in
conformity with the objectives of nationalisation.
Advancing of Loans.
Overdraft.
Discounting of Bills of Exchange.
Check/Cheque Payment
Collection and Payment Of Credit Instruments
Foreign Currency Exchange
Consultancy.
Bank Guarantee
Remittance of Funds
Credit cards
ATMs Services
Debit cards
Home banking
Online banking
Mobile Banking
Accepting Deposit
Priority banking
Private banking
1. ADVANCING OF LOANS
Banks are profit-oriented business organizations.
So they have to advance a loan to the public and generate
interest from them as profit.
After keeping certain cash reserves, banks provide short-
term, medium-term and long-term loans to needy borrowers.
Banks advance loans not only on the basis of the deposits of
the public rather they also advance loans on the basis of
depositing the money in the accounts of borrowers. In other
words, they create loans out of deposits and deposits out of
loans. This is called as credit creation by commercial banks.
Modern banks give mostly secured loans for productive
purposes. In other words, at the time of advancing loans,
they demand proper security or collateral. Generally, the
value of security or collateral is equal to the amount of loan.
This is done mainly with a view to recover the loan money by
selling the security in the event of non-refund of the loan.
At limes, banks give loan on the basis of personal security
also. Therefore, such loans are called as unsecured loan.
Banks generally give following types of loans and advances:
(i) Cash Credit: In this type of credit scheme, banks advance
loans to its customers on the basis of bonds, inventories and
other approved securities. Under this scheme, banks enter
into an agreement with its customers to which money can be
withdrawn many times during a year. Under this set up banks
open accounts of their customers and deposit the loan
money. With this type of loan, credit is created.
(ii) Demand loans: These are such loans that can be recalled
on demand by the banks. The entire loan amount is paid in
lump sum by crediting it to the loan account of the borrower,
and thus entire loan becomes chargeable to interest with
immediate effect.
(iii) Short-term loan: These loans may be given as personal
loans, loans to finance working capital or as priority sector
advances. These are made against some security and entire
loan amount is transferred to the loan account of the
borrower.
2. OVERDRAFT
Sometimes, the bank provides overdraft facilities to its
customers through which they are allowed to withdraw more
than their deposits. Interest is charged from the customers
on the overdrawn amount.
An overdraft occurs when money is withdrawn from a bank
account and the available balance goes below zero. In this
situation the account is said to be "overdrawn". If there is a
prior agreement with the account provider for an overdraft,
and the amount overdrawn is within the authorized overdraft
limit, then interest is normally charged at the agreed rate. If
the negative balance exceeds the agreed terms, then
additional fees may be charged and higher interest rates may
apply.
4. CHEQUE PAYMENT
Banks provide cheque pads to the account holders. Account
holders can draw cheque upon the bank to pay money.Banks
pay for cheques of customers after formal verification and
official procedures.
A cheque, or check (American English; see spelling
differences), is a document that orders a bank to pay a
specific amount of money from a person's account to the
person in whose name the cheque has been issued. The
person writing the cheque, known as the drawer, has a
transaction banking account (often called a current, cheque,
chequing or checking account) where their money is held.
The drawer writes the various details including the monetary
amount, date, and a payee on the cheque, and signs it,
ordering their bank, known as the drawee, to pay that person
or company the amount of money stated.
PROMISSORY NOTE
Rs. 5000 JUNE.1.1985
Two months after date, I promise to pay M/s Singh and Company
on order, the sum of Five Thousand Rupees only for value received
with interest at the rate of 5 percent.
STAMP
Shyam lal
M/s Singh & Co
7. CONSULTANCY
Modern commercial banks are large organizations.
They can expand their function to a consultancy business. In
this function, banks hire financial, legal and market experts
who provide advice to customers regarding investment,
industry, trade, income, tax etc.
8. BANK GUARANTEE
Customers are provided the facility of bank guarantee by
modern commercial banks.
When customers have to deposit certain fund in
governmental offices or courts for a specific purpose, a bank
can present itself as the guarantee for the customer, instead
of depositing fund by customers.
A bank guarantee is a type of guarantee from a lending
institution. The bank guarantee means a lending institution
ensures that the liabilities of a debtor will be met. In other
words, if the debtor fails to settle a debt, the bank will cover
it. A bank guarantee enables the customer, or debtor, to
acquire goods, buy equipment or draw down a loan.
A bank guarantee is when a lending institution promises to
cover a loss if a borrower defaults on a loan. The guarantee
lets a company buy what it otherwise could not, helping
business growth and promoting entrepreneurial activity.
There are different kinds of bank guarantees, including direct
and indirect guarantees. Banks typically use direct
guarantees in foreign or domestic business, issued directly to
the beneficiary. Direct guarantees apply when the bank’s
security does not rely on the existence, validity, and
enforceability of the main obligation.
9. REMITTANCE OF FUNDS
Banks help their customers in transferring funds from one
place to another through cheques, drafts, etc.
A remittance refers to money that is sent or transferred to
another party. The term is derived from the word remit,
which means to send back. Remittances can be sent via a
wire transfer, electronic payment system, mail, draft, or
check.
Remittances can be used for any type of payment including
invoices or other obligations. But the term is typically used to
refer to money sent to family members back in a person's
home country.
Payment remittances are money transfers made by people to
another party. They can be made to satisfy an obligation such
as a bill payment or an invoice when someone shops online.
But they are most commonly made by a person in one
country to someone in another. Most remittances are made
by foreign workers to family in their home countries. They
may also be payments that are made to a business. The most
common way of making a remittance is by using an electronic
payment system through a bank or money transfer service.
24-hour availability
Elimination of labour cost
Convenience of location
2.5 2.38
2.16
2 1.83
1.5 1.36
0.5
0
2018 2019
SBI ICICI
25 20.44
18.06 18.66
20
13.83
15
10
0
2018 SBI ICICI 2019
𝐷𝑒𝑏𝑡
Debt-Equity=𝐸𝑞𝑢𝑖𝑡𝑦
18 16.89
15.79
16
14
12
10
7.77
7.28
8
0
2018 2019
SBI ICICI
WHAT IS OPERATING MARGIN?
The operating margin ratio, also known as the operating
profit margin, is a profitability ratio that measures what
percentage of total revenues is made up by operating
income. In other words, the operating margin ratio
demonstrates how much revenues are left over after all the
variable or operating costs have been paid. Conversely, this
ratio shows what proportion of revenues is available to cover
non-operating costs like interest expense. It is expressed as
follows:
𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑖𝑛𝑐𝑜𝑚𝑒
Operating margin (%) = 𝑁𝑒𝑡 𝑠𝑎𝑙𝑒𝑠
15.3
14.74
16
14
12
9
10 8.08
0
2018 2019
SBI ICICI
16 14.07
13.32
14
12
10 7.68
6.76
8
0
2018 2019
SBI ICICI
14 12.33
12
10
8
5.3
6
2 0.35
0
2018 2019
-2
-2.96
-4
SBI ICICI
12 10.44
10
8
5.31
6
4
1.45
2
0
2018 2019
-1.36
-2
SBI ICICI
𝑁𝑒𝑡 𝑖𝑛𝑐𝑜𝑚𝑒
RONW= 𝑆ℎ𝑎𝑟𝑒ℎ𝑜𝑙𝑑𝑒𝑟𝑠 𝑒𝑞𝑢𝑖𝑡𝑦
6.63
7
6
5
3.19
4
3
2
0.43
1
0
-1 2018 2019
-2
-3
-3.37
-4
SBI ICICI
WHAT IS RETURN ON LONG TERM FUNDS RATIO?
The net worth ratio states the return that shareholders could
receive on their investment in a company, if all of the profit
earned were to be passed through directly to them. Thus, the
ratio is developed from the perspective of the shareholder,
not the company, and is used to analyse investor returns. The
ratio is useful as a measure of how well a company is utilizing
the shareholder investment to create returns for them, and
can be used for comparison purposes with competitors in the
same industry. It is expressed as follows:
𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑝𝑟𝑜𝑓𝑖𝑡
ROLTF (%) = 𝐿𝑜𝑛𝑔 𝑡𝑒𝑟𝑚 𝑓𝑢𝑛𝑑𝑠
79.55
80
66.37
70
60
50 38.54 38.13
40
30
20
10
0
2018 2019
SBI ICICI
WHAT IS RETURN ON ASSETS RATIO?
The return on assets ratio, often called the return on total
assets, is a profitability ratio that measures the net income
produced by total assets during a period by comparing net
income to the average total assets. In short, this ratio
measures how profitable a company’s assets are. It can be
expressed as follows:
𝑁𝑒𝑡 𝑖𝑛𝑐𝑜𝑚𝑒
ROA = 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑡𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠
1 0.82 0.81
0.8
0.6
0.4
0.2 0.02
0
2018 2019
-0.2 -0.21
-0.4
SBI ICICI
8 6.81
5.63
6
2 0.44
0
2018 2019
-2
-4 -3.73
SBI ICICI
5.96
6
4.51
5
4
2.75
3
0
2018 2019
-1 -1.03
-2
SBI ICICI
15.4
16 13.88
14
12
10
6.69 6.31
8
0
2018 2019
SBI ICICI
100 100
100
90 78.5
71.31
80
70
60
50
40
30
20
10
0
2018 2019
SBI ICICI
0.07
0.068
0.066
0.064
0.062 0.06
0.06
0.058
0.056
0.054
2018 2019
SBI ICICI
6.65
6.65
6.6
6.55
6.5 6.45
6.43
6.45
6.36
6.4
6.35
6.3
6.25
6.2
2018 2019
SBI ICICI
18.42
20 16.89
18
16 12.6 12.72
14
12
10
8
6
4
2
0
2018 2019
SBI ICICI
6.2 6.17
6.1
5.9 5.86
5.85
5.83
5.8
5.7
5.6
2018 2019
SBI ICICI
WHAT IS FIXED CHARGE COVERAGE RATIO?
The fixed charge coverage ratio is a financial ratio that
measures a firm’s ability to pay all of its fixed charges or
expenses with its income before interest and income taxes.
The fixed charge coverage ratio is basically an expanded
version of the times interest earned ratio or the times
interest coverage ratio. It can be expressed as follows:
1.8
1.67
1.8
1.6 1.43 1.38
1.4
1.2
1
0.8
0.6
0.4
0.2
0
2018 2019
SBI ICICI
90
73.39 73.35
80
70
60
50
40
30
20
10
0
2018 2019
SBI ICICI
23.77
24
23.5
23
22.22
22.5
22 21.51
21.5
20.62
21
20.5
20
19.5
19
2018 2019
SBI ICICI
68 66.05
66
63.62
64
62
60 58.11
57.39
58
56
54
52
2018 2019
SBI ICICI
3.72
4
3.5
2.88
3 2.62
2.35
2.5
1.5
0.5
0
2018 2019
SBI ICICI
24.07
25
18.63
20 16.82
13.15
15
10
0
2018 2019
SBI ICICI
11.76
12
10
6.42
8
4.59
6
4
2
0
-2 2018 2019
-4 -4.07
-6
SBI ICICI
1.6 1.5
1.4
1.2
1
0.8
0.6
0.4
0.2
0 0
0
2018 2019
SBI ICICI
WHAT IS DIVIDEND PAYOUT RATIO?
The dividend payout ratio measures the percentage of net
income that is distributed to shareholders in the form of
dividends during the year. In other words, this ratio shows
the portion of profits the company decides to keep to fund
operations and the portion of profits that is given to its
shareholders. Investors are particularly interested in the
dividend payout ratio because they want to know if
companies are paying out a reasonable portion of net income
to investors. It can be expressed as follows:
𝐷𝑃𝑆
DPR = 𝐸𝑃𝑆
19.28
20
18
16
14
12
10
8
4.4
6
4
2 0 0
0
2018 2019
SBI ICICI
3423771.88
3500000 3141292.12
3000000
2500000
2000000
1500000
1037532.15
889716.2
1000000
500000
0
2018 2019
SBI ICICI
WHAT IS PRICE TO BOOK RATIO?
The price to book ratio, also called the P/B or market to book
ratio, is a financial valuation tool used to evaluate whether
the stock a company is over or undervalued by comparing
the price of all outstanding shares with the net assets of the
company. In other words, it’s a calculation that measures the
difference between the book value and the total share price
of the company. It can be expressed as follows:
𝑀𝑎𝑟𝑘𝑒𝑡 𝑝𝑟𝑖𝑐𝑒 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒
P/B Ratio = 𝐵𝑜𝑜𝑘 𝑣𝑎𝑙𝑢𝑒 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒
Chart Title
5
4
3
2
1
0
2018 2019
SBI ICICI
4.4
4.5
4
3.26
3.5
3
2.5
2
1.18
1.5 1.01
1
0.5
0
2018 2019
SBI ICICI