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Credit management & npa of co operative bank ltd.1

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Credit management & npa of co operative bank ltd.1

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Credit management & npa of co operative bank ltd.1

  1. 1. Financial Statement Analysis of RDC Bank, Rajkot. A PROJECT ON FINANCIAL STATEMENT ANALYSIS S.K.PATEL INSTITUTE OF MANAGEMENT AND COMPUTER STUDIES
  2. 2. Financial Statement Analysis of RDC Bank, Rajkot. FINANCIAL STATEMENT ANALSIS OF RAJKOT DISTRICT CO-OPERATIVE BANK LTD. (RDC BANK) A PROJECT REPORT SUBBMITTED IN PARTIAL FULFILLMENT OF THE M.B.A. DEGREE PROJECT GUIDE Mr. PARSOTAMBHAI TALAVIYA, STATISTICS OFFICER, RDC BANK LTD. SUBMITTED BY DHAMSANIA VISHAL (ROLL NO. ) S.K.PATEL INSTITUTE OF MANAGEMENT AND COMPUTER STUDIES GANDHINAGAR, INDIA JULY 2005 S.K.PATEL INSTITUTE OF MANAGEMENT AND COMPUTER STUDIES
  3. 3. Financial Statement Analysis of RDC Bank, Rajkot. RAJKOT DISTRICT CO-OPEARTIVE BANK (H.O.) S.K.PATEL INSTITUTE OF MANAGEMENT AND COMPUTER STUDIES
  4. 4. Financial Statement Analysis of RDC Bank, Rajkot. Preface The banking activities play a crucial role in overall economic development, in case of developing country. This now progresses rapidly along with its various activities. I represent to you SHRI RAJKOT DISTRICT CO-OPERATIVE BANK a joint venture sector enterprise promoted by the Gujarat state co-operative bank. The Rajkot District Co-Operative Bank provided me the golden opportunity for me to enrich my knowledge by comparing theoretical knowledge with practical knowledge, and also helped me to understand how important it is to important aspect of any study. It helps to students to observe and analysis real life practical with the help of theoretical knowledge. Project report is a part of study in the curriculum to know the practical aspect of activities in banking. It provides opportunity to work with people and interact with them. It was a privilege for me to work in such a reputed bank like RDC bank, RAJKOT. This has given me an opportunity to work in truly professional environment where teamwork scores over individual efforts. This study was undertaken during the project work for the period of June-July 2006, as partial fulfillment of MBA programme of GUJARAT UNIVERSITY. DATE :- VISHAL DHAMSANIA S.K.PATEL INSTITUTE OF MANAGEMENT AND COMPUTER STUDIES
  5. 5. Financial Statement Analysis of RDC Bank, Rajkot. We learn in Management is “Manage + Men + T (Time, Task, etc.)”. I agree with this statement & wish to include that it would have been not possible to complete this project with out help and support of many people. I am thankful to all of them. First and foremost I am thankful to Mr. M. B. Ladani, Additional Deputy Manager and my Project Guide Mr. P. S. Talaviya, RDC Bank for giving me this valuable opportunity to have our Summer Project at the well-known Co- Operative Bank, RAJKOT DISTRICT CO-OPERATIVE BANK LTD. I thank them to take keen interest in my work, and guide me throughout the project. I would like to take this opportunity to thank my college, S. K. PATEL INSTITUTE OF MANAGEMENT AND COMPUTER STUDIES, GANDHINAGAR, for giving me this tremendous opportunity to work in the banking industry for the real-time project. It is with a deep sense of gratitude that I would like to acknowledge our Director Prof. S Chinnam Reddy and all Faulty members who have been kind enough to me in regard to completion of the project. I would like to acknowledge with thanks the resource full service and support rendered by Librarian and Lab assistant at SKPIMCS. It would be an incomplete acknowledgement if I don’t remember my Parents. This report would not have become a reality without blessing of my Parents who constantly inspired me, supported me, and contributed their precious knowledge toward my project. I sincerely extend my gratitude to them for their inspiration and prayer. Last but not the least I thank to almighty GOD who gave an opportunity to me to work on this project with the co-operation of others and I have reached this milestone successfully. I am also thankful to my seniors, my classmates and other friends who helped me in getting through this project work, smoothly. Special thanks to those who inspired me to go for this project, and also to those who think “Why This & Why Not This”! S.K.PATEL INSTITUTE OF MANAGEMENT AND COMPUTER STUDIES
  6. 6. Financial Statement Analysis of RDC Bank, Rajkot. OVERVIEW OF BANKING INDUSTRY S.K.PATEL INSTITUTE OF MANAGEMENT AND COMPUTER STUDIES
  7. 7. Financial Statement Analysis of RDC Bank, Rajkot. INDIAN BANKING INDUSTRY The Indian banking can be broadly categorized into nationalized (government owned), private banks and specialized banking institutions. The Reserve Bank of India acts as centralized body monitoring any discrepancies and shortcoming in the system. Since the nationalization of banks in 1969, the public sector banks or the nationalized banks have acquired a place of prominence and has since then seen tremendous progress. The need to become highly customer focused has forced the slow-moving public sector banks to adopt a fast track approach. The unleashing of products and services through the net has galvanized players at all levels of the banking and financial institutions market grid to look a new at their existing portfolio offering. Conservative banking practices allowed Indian banks to be insulated partially from the Asian currency crisis. Indian banks are now quoting all higher valuation when compared to banks in other Asian countries (viz. Hong Kong, Singapore, Philippines etc.) that have major problems linked to huge Non Performing Assets (NPAs) and payment defaults. Co-operative banks are nimble footed in approach and armed with efficient branch networks focus primarily on the ‘high revenue’ niche retail segments. The Indian banking has finally worked up to the competitive dynamics of the ‘new’ Indian market and is addressing the relevant issues to take on the multifarious challenges of the globalization. Banks that employ IT solutions are perceived to be ‘futuristic’ and proactive players capable of meeting the multifarious requirements of the large customer’s base, Private Banks have been fast on the uptake and are reorienting their strategies using the internet as a medium. The internet has emerged as the new and challenging frontier of S.K.PATEL INSTITUTE OF MANAGEMENT AND COMPUTER STUDIES
  8. 8. Financial Statement Analysis of RDC Bank, Rajkot. marketing with the conventional physical world tenets being just as applicable like in any other marketing medium. The Indian banking has came from a long way from being a sleepy business institution to a highly proactive and dynamic entity. This transformation has been largely brought about by the large dose of liberalization and economic reforms that allowed banks to explore new business opportunities rather than generating revenues from conventional streams (i.e. borrowing and lending). The banking in India is highly fragmented with 30 banking units, contributing to almost 50% of deposits and 60% advances. Indian nationalized banks (banks owned by the government) continue to be the major lenders in the economy due to their sheer size and penetrative networks which assures them high deposit mobilization. The Indian banking can be broadly categorized into nationalized, private banks and specialized banking institutions. The Reserve Bank of India acts as a centralized body monitoring any discrepancies and shortcoming in the system. It is the foremost monitoring body in the Indian financial sector. The nationalized banks (i.e. government-owned banks) continue to dominate the Indian banking arena. Industry estimates indicate that out of 274 commercial banks operating in India, 223 banks are in the public sector and 51 are in the private sector. The private sector bank grid also includes 24 foreign banks that have started their operation here. Under the ambit of the nationalized banks come the specialized banks institutions. These co-operatives, rural banks focus on areas of agriculture, rural development etc. INDIAN BANKING SYSTEM: S.K.PATEL INSTITUTE OF MANAGEMENT AND COMPUTER STUDIES
  9. 9. Financial Statement Analysis of RDC Bank, Rajkot. Banking segment in India function under the umbrella of Reserve Bank of India the regulatory, Central bank. This segment broadly consists of 1. Commercial Banks 2. Co-operative Banks. The banking system has three tiers. These are the scheduled commercial banks; the regional rural banks that operate in rural areas not covered by the scheduled bank & the co-operative and special purpose rural banks. 1. Commercial Banks : The commercial bank structure in India consist of A) Scheduled Commercial bank B) Nonscheduled bank.  Scheduled & Non Scheduled Bank : There are approximately 50 scheduled commercial banks. Indian & foreign almost 200 regional rural banks. More than 350 central co-operative banks. 20 land development bank and No. of primary agriculture credit societies. 1. Co-Operative Banks : There are two main categories of the co-operative banks. S.K.PATEL INSTITUTE OF MANAGEMENT AND COMPUTER STUDIES
  10. 10. Financial Statement Analysis of RDC Bank, Rajkot. A) Short term lending oriented co-operative bank -- within this category of banks, State Co-operative bank, District co-operative bank & Primary agricultural co-operative societies. B) Long Term lending oriented co-operative bank – within the second category there are land development bank at three level, state level, district level & village level. The Co-Operative banking structure in India is divided into different co-operative banks. i) Primary urban Co-operative banks. ii) Primary Agricultural co-operative societies iii) District central co-operative banks iv) State co-operative banks v) Land development banks. BANKING INSTITUTIONS : The magnitude of resource mobilization by banking institutions is related to the capacity of these institutions to reach numbers and their success and efficiency in looking after their clientele. For instance, if the banking offices were confirmed to a few centers of the country only, very naturally, the capacity of the banks to mobilize deposits from the public would remain limited to that extent. And if the network of banking offices were extended to all parts of the country and most of the population could reach one or the other bank office conveniently, the deposits would be of a larger order. Similarly, if the banking S.K.PATEL INSTITUTE OF MANAGEMENT AND COMPUTER STUDIES
  11. 11. Financial Statement Analysis of RDC Bank, Rajkot. institutions functioned efficiently and made rigorous efforts to provide satisfaction to the savers irrespective of the fact how big were the deposits of a saver-the bank could still improve their effectiveness in deposit collections. In developing economy banking institutions have a special role in making people ‘bank minded.’ For a large majority of those who can save, opening of an account in a bank would be a new experience. And therefore utmost care would need be taken in seeing to it that the experience is not so unfortunate that an average saver would decide to never visit a bank office again. If a visit to a bank office could be made a pleasant experience the banks would become still better institutions of deposit mobilization. This aspect needs to be underlined since very often it is not realized that in undeveloped economies, the savers are not as enlightened as to always bother to look into the economies of returns of their savings. Their values and decisions are dependent upon, at least equally, on considerations other than the interest rates. And one of the important factors is the security of definite and the personalized service and the consideration they would receive from the bank staff. The importance of enhancing savings may not be fully appreciated by an ordinary man. For this one can only say that if the banks can draw out financial surpluses from the community by way of the deposits to that extent the buying power in the community gets contracted. And by the magnitude there is a reduction in the aggregate consumption with a corresponding release of physical resources which can be diverted towards the creation of additional national capital. Similarly, by practicing selected credit policies the banks can influence the consumption pattern in the society. The banks are important agencies for ensuring greater savings to help economic development. The capacity and will to save on the part of the savers is not itself sufficient to ensure deposits. What is equally important is the existence of an institutional framework which makes it S.K.PATEL INSTITUTE OF MANAGEMENT AND COMPUTER STUDIES
  12. 12. Financial Statement Analysis of RDC Bank, Rajkot. convenient to save. One has no measure to assess the level of willingness but it would not be too wrong to presume that everyone, whether rich or poor, would have a desire to save. The degree of will power would, however, vary from one individual to another. In a county which recognizes private property and rights to inheritance an average man would undoubtedly like to save. But the real problem is that of impressing upon the savers that the function of saving was also a national obligation and each person must save by habit and in an organized manner. The task of making ‘saving’ conscious is only possible if there was an institutional framework which would undertake this task vigorously and continuously. And further to this the set up must ensure the necessary physical and organizational conveniences to the savers. It is in the context that one has to evaluate the capacity of the existing financial structure as instruments of enhancing and further mobilization of savings. It has been pointed out that the commercial banking in India has remained concentrated in urban centers and also in the comparatively advanced states of the country. It would not be correct to form an impression that banking offices are evenly spread over space within the urban centers or in the comparatively better off states. From this view point of savings potential, it would be appropriate to mention the general belief that the poorer sections in the Indian society have very little savings capacity is completely misplaced. In fact the savings with the lower income groups in the urban centers which will equal the middle income groups of the rural population are of a significant order. While the middle income groups enter into a race for consumption of ‘prestige goods’ and become victims of the ‘demonstration effect’ and have lesser savings willingness to save in the lower-income groups are still conservative and do effect savings. S.K.PATEL INSTITUTE OF MANAGEMENT AND COMPUTER STUDIES
  13. 13. Financial Statement Analysis of RDC Bank, Rajkot. Considering the number involved even small saving when aggregated would come to a fairly significant order. There is no doubt that dealing with very small amounts and with large numbers of comparatively lesser educated depositors would involve higher costs of administration of these bank offices. The same is true about rural areas. But the benefits of such savings are many times more than the costs of deposit collections. But this approach can only be followed by such institutions which have the proper perspective of their role and are even prepared to bear short term promotional losses in the overall and long term interests of the societies. RURAL BANKING For a long time the official view regarding the provision of banking facilities to the rural areas has been that extension of banking facilities to the rural sector should be earmarked for the cooperatives and urban banking should be largely left for the commercial banks. The Imperial Bank of India, it also argued that the private commercial banks cannot reach the villages because opening of branches in the rural areas was not a profitable proposition. It was, therefore, suggested that with the nationalization of the Imperial Bank, the State Bank of India would have special responsibility to provide banking facilities in smaller towns and villages. Thus, the official attitude seems to have been that the State Bank of India and the cooperatives would specialize in rural banking and the private commercial banks would confine their activities to the urban centers. The implication of this division of areas between the public sector banking (State Bank of India) and the cooperatives vis-à-vis the private commercial banks is that the non profitable banking should be the main responsibility of the public S.K.PATEL INSTITUTE OF MANAGEMENT AND COMPUTER STUDIES
  14. 14. Financial Statement Analysis of RDC Bank, Rajkot. sector institutions whereas the profitable ones should be earmarked for private banking institutions. It is recognized that since rural banking is not a profitable business (and that is why private banks do not attempt this) therefore, the cooperatives and the State Bank of India have to be adequately subsidized for such bank offices which run under loss and were opened with the intention of covering rural area. Such an approach would be all right if it was clearly understood that the cooperatives and the public sector banks were not to be judged on the same criteria as the other commercial banking institutions. The public sector banking institutions may, therefore, be judged on different standards than the private ones. But unfortunately it is argued that private banks do not want to go to rural areas because it was not profitable and therefore the public sector (State Bank of India) should undertake the responsibility of entering into the losing business. In the same breath it is also expected that the State Bank should show at least the same profits as other private banks. This really means that the non-profitable propositions are meant for the pubic sector and the profitable ones for the private sector. And then we turn bank to judge the efficiency on private profit criteria. No logic could strange than this. S.K.PATEL INSTITUTE OF MANAGEMENT AND COMPUTER STUDIES
  15. 15. Financial Statement Analysis of RDC Bank, Rajkot. CO-OPERATIVE BANKING Co-Operative Societies : As for the role of co-operatives in rural banking is concerned, it is high time that we understood what the cooperatives can do and what these cannot. We must understand the structural handicaps of the cooperative credit system in an economy like ours. It is only after a proper appreciation of the capacity of the cooperatives that one can decide a to how far the cooperatives can offer a solution to the problem of providing banking facilities in the rural areas. It should, however, be made clear that we do not doubt the importance and the role that cooperatives in ameliorating the economic and social conditions of the rural areas in general and the farmers in particular. Basically, the cooperatives movement is a sound one and has many a merit. For instance, agricultural, marketing, service, industrial and consumers’ cooperatives are of great significance in a developing society like ours. However, the need for opening of bank offices in rural areas is not purely the provision of credit ot agriculture. It is more than this. In this respect that we need to understand some of the structural and other inherent limitations of the cooperative credit societies. Also one has to take due note of the present defects in the cooperative movement. No doubt some of the defects in the cooperative credit movement can be set right with appropriate reforms. But, the inherent limitations of this movement for purposes of extending banking facilities to rural areas can hardly be met by such actions. At the same time we visualize that opening of branches of the organized banking institutions in rural areas would help to strengthen the cooperative credit movement in the country side. The existence of organized S.K.PATEL INSTITUTE OF MANAGEMENT AND COMPUTER STUDIES
  16. 16. Financial Statement Analysis of RDC Bank, Rajkot. banking is not a substitute or a rival development to cooperative credit societies. On the other hand, in our view organized banking is a complementary and a pre-requisite for effective functioning of the cooperative credit institutions. In principle the credit cooperative societies need not necessarily be dependent upon the governmental finance alone. The objective of establishing cooperatives in India, as also anywhere else in the world, is to bring the various economic functionaries together for mutual help. For instance, credit societies, it was expected, would receive deposts from those of their members who had surplus resources, and in turn, these resources would be lent to those who need financial assistance. In this manner, the cooperatives could eliminate the money lenders who discharged this function of receiving deposits and lending credit to the farmers. In this manner the cooperatives could provide a system of mutual help and eliminate the exploitation of the private moneylenders. The cooperatives, viewed from this angle, are an institutional reform where intermediaries are attempted to be eliminated. This is the spirit of cooperative movement. In the initial stages, the Government and other public institutions could provide financial assistance to the cooperatives if the requirements of the members of the cooperatives were more than what the cooperatives could raise from their own members. But unfortunately, in India cooperative credit movement has come to a stay as heavily dependent upon the governmental finance. It is evident from the fact that out of a total working capital of the cooperative credit institutions of Rs. 2101.44 crores in 1963-63, nearly Rs. 500 crores was the share capital and resources. The rest was provided by the Reserve Bank of India, by the Government and other public institutions. Since the credit cooperating societies have not succeeded in resource mobilization from their members or otherwise, these have remained instruments of one way flow of finance from the Government to the members of S.K.PATEL INSTITUTE OF MANAGEMENT AND COMPUTER STUDIES
  17. 17. Financial Statement Analysis of RDC Bank, Rajkot. these cooperatives. Thus the credit cooperatives are in practice only credit distributing agencies. No doubt this is an important function in itself. But this certainly is not banking for rural area. The cooperative movement has been heavily subsidized by the way of cheap and easy credit by the Reserve Bank of India. Because of this most of the cooperatives were organized by those only who wanted to avail of the governmental financial assistance. Right from the beginning the objective of organizing cooperative credit societies was to avail facilities rather than to become a forum to local farmers and other ruralities for mutual help. Secondly, the cooperative societies’ being each independent of the other has to function in isolation and therefore these societies cannot offer the normal banking facilities which an organized bank can. Due to this handicap, very naturally the depositors prefer to maintain their surplus either with the moneylenders or hoard the amounts in cash with them than handing over the same to a local cooperative credit society which cannot allow similar and easy withdrawal facilities as a private moneylender can. Of course provision of other banking facilities like transfer of funds from one place to another and safe deposit facilities are out of question. Therefore, the depositors are not encouraged to use the cooperative credit societies as institutions where they can deposit their surplus financial resources. Also, because of the advantage offered and the considerable subsidy element, the membership of the cooperatives (which is true about all types of cooperatives) is taken to be closed for others and is confined to a small section of the population of a village. A number of studies conducted by the Reserve Bank of India and other scholars on the working of the cooperative credit societies indicate that majority of the cooperatives can hardly be described as genuine cooperative societies. These are either group organization or family organizations. S.K.PATEL INSTITUTE OF MANAGEMENT AND COMPUTER STUDIES
  18. 18. Financial Statement Analysis of RDC Bank, Rajkot. A study of the Central Cooperative Banks would also indicate that the control and management of the cooperative finance is generally in the hands of a family or a group of persons and the functioning of the cooperative banks is not much at variance from any other private financial institution. Even as credit distributing agencies the cooperatives have not made the desired impact. The main reason for this has been the unwillingness on the part of the cooperatives to depart from the credit-worthiness criteria for extending financial accommodation. As a result of this cooperative credit has been availed by those only who could even otherwise raise capital of their own if they choose to do so. A study of the Cooperative credit distribution would indicate that a large share of total credit has gone to a fraction of the population comprising of big landlords and so on. This to some is unavoidable in a society whose membership comprises of a heterogeneous groups with a few dominating the decisions and functioning of the society. There cannot be any meaningful cooperation between the unequal. The situation can, however, be better dealt with by such organized agencies which are independent of local and vested interest and would function on considerations of merit, not always, and only based on the conventional criteria of credit worthiness of a borrower. Another structural defect of the cooperatives, mainly dealing with farmers is that a good part of the financial resources remain idle during the year. For instance credit needs of the farmers are the most in the sowing seasons and the pre-harvest periods. The loan recoveries are made after the harvest. Since there is time gap between the sowing and harvesting seasons, during the middle periods the finances of the cooperatives cannot be idle. However, the requirements of the agricultural trade and processing industries are the most in the post-harvest period. But because of the absence of any institutional mutual S.K.PATEL INSTITUTE OF MANAGEMENT AND COMPUTER STUDIES
  19. 19. Financial Statement Analysis of RDC Bank, Rajkot. arrangements the idle resources of the cooperatives do not become available for the latter purposes. This cannot be helped if the cooperatives remain in isolation of the organized banking structure. The net result of the division of responsibility between the private commercial banks and the Reserve Bank of India in financing of industry and the trade on the one hand and agriculture on the other respectively has been a fragmentation of India’s financial system into two water tight compartments. The private commercial banking system operates in unplanned isolation from the needs of the rural sector while the cooperative banking system finances agriculture without any coordination with the needs of the industrial and urban sectors. The inevitable economic consequence is that there is misallocation of financial resources between the two sector. This comes about because the funds earmarked for the rural sector remain idle for a major part of the year while the idle funds of the private commercial system during the lean period cannot be utilized for short term financing of the agricultural operations. Inevitably, too much finance is thus tied up merely because the financial system is fragmented into thee two broad divisions. If the private banking system were to be nationalized, it would be possible for the Government to integrate the financial system of the country into one complete whole. This would help to save idle resources of both financing sectors as well as help to coordinate and integrate their financing operations into a system of planned development. Moreover, the killed personnel of the cooperative financial sector as well as of the private commercial banks can be integrated with one another in order to provide a much large cadre of trained personnel in banking operations of the country. Such integration of two major financing sectors in the country would also help to curb the flow of financial resources into the unorganized money market which plays havoc with the economy in the present situation of acute scarcities and shortages. Once the two financing sectors, that is the private commercial banks and the cooperative sectors are integrated, they would S.K.PATEL INSTITUTE OF MANAGEMENT AND COMPUTER STUDIES
  20. 20. Financial Statement Analysis of RDC Bank, Rajkot. constitute a major source of attraction for all voluntary savings of the community in so far as they would reach out to all the areas of the country from the highest to the lowest range of society, and provide the best security for the deposits of all savers, big or small. Moreover, in the presence of such a unified financial system the unorganized money market would lose much of its attraction and concealed power to engage any financing operations which will be beyond the purview of the organized financial system. Let us not imagine that the unorganized money market in the country operates entirely outside the banking system. There are strategic points of linkage, between the unorganized money market and the banking system. These linkages would come to full view once the banking system is fully unified under the State control, and it will be easy to keep a watch and regulate the activities of the unorganized money market far more effectively than has been possible hitherto. REGULATION OF COOPERATIVE BANKS IN INDIA : A spate of functioning of these banks can be improved through a variety of ways, including by enabling depositors to enforce market discipline failures in recent years has raised concern about the working of cooperative banks. The question as to whether banks need to be regulated, and to what extent, has been at the heart of many debates in academia and among central bankers the world over. Many academics believe that regulation b central banks should be effectively combined with market discipline. Though there is no clear cut answer on how much weight should be placed on the market, there is a growing consensus that market discipline should be an integral part of any regulatory policy of monitoring banks. Apart from the question about the optimal weight to S.K.PATEL INSTITUTE OF MANAGEMENT AND COMPUTER STUDIES
  21. 21. Financial Statement Analysis of RDC Bank, Rajkot. be placed on market discipline, another question that arises pertains to the kind of regulatory policies required by the central bank and the implementation of these policies. Failure of banks is a subject that is much despised by politicians and central bankers. Generally, it is very rare that one hears of the failure of banks. Most often, there is a revival of the failed bank or merger with a healthy bank. The justification that is often provided is that the social costs of a bank failure are huge. Firms that borrow from the failed bank are unable to substitute credit and there is a loss of valuable information about borrowers, which in turn hampers economic development. These arguments hold greater validity in the case of smaller banks like cooperative banks that primarily deals with small and more opaque borrowers. This brings us to the issue of cooperative banks in India. S.K.PATEL INSTITUTE OF MANAGEMENT AND COMPUTER STUDIES
  22. 22. Financial Statement Analysis of RDC Bank, Rajkot. S.K.PATEL INSTITUTE OF MANAGEMENT AND COMPUTER STUDIES
  23. 23. Financial Statement Analysis of RDC Bank, Rajkot. S.K.PATEL INSTITUTE OF MANAGEMENT AND COMPUTER STUDIES
  24. 24. Financial Statement Analysis of RDC Bank, Rajkot. BALANCE SHEET OF RAJKOT DISTRICT CO-OPEARTIVE BANK Rs. In lacs Sr. No. CAPITAL & LIABILITIES Dt. 31/03/06 Amt. Rs. Dt. 31/03/05 Amt. Rs. Dt. 31/03/04 Amt. Rs. 1. Share Capital 2135.00 1903.44 1851.65 2. Reserve Fund & Other Reserve 8548.01 7896.05 7298.27 3. Deposits & Other Accounts 67767.62 67545.72 66149.87 4. Subsidiary State Partnership Fund A/c 5.36 6.01 7.88 5. Loans 11906.90 8279.02 12915.59 6. Bills for Collection 60.91 65.60 61.21 7. Bank Adjustment 137.45 134.37 48.66 8. Overdue Interest Reserve 1187.09 1188.09 1200.00 9. 31.24 32.84 37.15 10. 386.37 87.58 95.42 11. Payable Interest 149.98 147.19 152.99 12. Other Liabilities 979.77 587.93 732.17 13. Profit & Loss A/c 1065.00 950.00 1000.00 94360.75 88823.91 91550.92 S.K.PATEL INSTITUTE OF MANAGEMENT AND COMPUTER STUDIES
  25. 25. Financial Statement Analysis of RDC Bank, Rajkot. BALANCE SHEET OF RAJKOT DISTRICT CO-OPEARTIVE BANK Rs. In lacs Sr. No. ASSETS & RECEIVABLES Dt. 31/03/06 Amt. Rs. Dt. 31/03/05 Amt. Rs. Dt. 31/03/04 Amt. Rs. 1. Cash 2779.01 2978.45 2648.21 2. Bank Balance (in other banks) 5967.36 12121.58 23102.41 3. Investment 12923.47 13239.67 9532.67 4. Subsidiary State Partnership Fund Investment 5.36 6.01 7.88 5. Loans 67397.13 56681.31 51853.78 6. 386.37 87.58 95.42 7. Interest Receivables 2780.65 2363.43 3326.44 8. Bills for Receivables 60.91 65.60 61.21 9. Branch Adjustments -- -- -- 10. Building (less Depri.) 1217.04 1068.48 721.21 11. Furniture (less Depri.) 694.39 123.23 117.48 12. Computer (less Depri.) 30.70 11.80 13.96 13. Other Assets 118.33 76.71 70.20 94360.75 88823.91 91550.92 S.K.PATEL INSTITUTE OF MANAGEMENT AND COMPUTER STUDIES
  26. 26. Financial Statement Analysis of RDC Bank, Rajkot. PROFIT AND LOSS A/c OF RAJKOT DISTRICT CO-OPEARTIVE BANK Rs. In lacs Sr. No. DEBIT Dt. 31/03/06 Amt. Rs. Dt. 31/03/05 Amt. Rs. Dt. 31/03/04 Amt. Rs. 1. Interest on deposits and Loan’s 4827.25 4828.30 6201.15 2. Salary, allowances & Provident Fund 1761.94 1629.53 1551.15 3. Fees & allowances to Director & Local Committee 6.53 6.62 5.86 4. Rent, taxes, insurance, electricity, repairing etc. 118.11 101.59 70.11 5. Law Charges 4.37 1.23 1.86 6. Postage & telegraph 17.96 14.61 13.66 7. Audit Fees 14.67 15.57 14.66 8. Depreciation 127.96 58.46 56.56 9. Stationery Printing 1.27 10.32 9.47 10. Other Expenses 158.44 115.27 64.38 11. Other Provisions 369.60 82.01 410.29 12. Profit 1065.00 950.00 850.00 8473.15 7811.56 8905.70 S.K.PATEL INSTITUTE OF MANAGEMENT AND COMPUTER STUDIES
  27. 27. Financial Statement Analysis of RDC Bank, Rajkot. PROFIT AND LOSS A/c OF RAJKOT DISTRICT CO-OPEARTIVE BANK Rs. In lacs Sr. No. CREDIT Dt. 31/03/06 Amt. Rs. Dt. 31/03/05 Amt. Rs. Dt. 31/03/04 Amt. Rs. 1. Interest from Advances & Investment 8336.05 7647.74 9774.70 2. Commission, Discount received, Brokerage 44.13 30.05 29.25 3. Subsidy and Donation received -- -- -- 4. Income from non-banking assets and profit from sale of or dealing with such assets 13.48 -- -- 5. Other Income 79.48 133.75 79.32 8473.15 7811.56 9883.26 S.K.PATEL INSTITUTE OF MANAGEMENT AND COMPUTER STUDIES
  28. 28. Financial Statement Analysis of RDC Bank, Rajkot. ACCOUNTING POLICIES Accounting policies refers to the specific accounting principles and the methods of applying that principle adopted by the enterprise in the preparation of the financial statement. There is no single list of accounting principles, which are applicable to all the circumstances. An enterprise operates in a situation of diverse and complex economic activities. The choice of the appropriate accounting policies and the methods of applying those principle in the specific circumstances of each enterprise call for considerable judgment by the management of the enterprise/bank. The purpose of accounting policies and standard is to promote better understanding of financial statement. It also facilitates more meaningful comparison between financial statement of different enterprise/bank. S.K.PATEL INSTITUTE OF MANAGEMENT AND COMPUTER STUDIES
  29. 29. Financial Statement Analysis of RDC Bank, Rajkot. RATIO ANALYSIS Ratio analysis is widely used tool of financial anaylsis. It is defined as the systematic use of ratio to interpret the financial statement so that the strength and weakness of the firm as well as its historic performance and current financial condition can be dertermined. The term ratio refers to the numerical or quantitative relationship between two items/variables. This relationship can be expressed as  Percentage  Fraction  Proportion of number These alternative methods of expressing items, which are related to each other, are for the purpose of financial analysis refered to as ratio analysis. The rational of the ratio analysis lies in the fact that it makes related information comparable. A single figure byitself has no meaning but when expressed in term of a related figure, it yields significant interference. Since we are using the terms “RATIO” S.K.PATEL INSTITUTE OF MANAGEMENT AND COMPUTER STUDIES

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