Vijaya Bank Project 007 (2)

7/31/2019 Vijaya Bank Project 007 (2)

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PERFORMANCE OF VIJAYA BANK

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1. INTRODUCTION

1.1Finance:

Finance is one of the major elements, which activates the overall growth of

economy; Finance is the lifeblood of economic activity. A well-knit financial system

directly contributes to the growth of the economy. An efficient financial system calls

for the effective performance of financial institutions, financial instruments and financial

markets.

Importance of finance

Finance is regarded as the lifeblood of a business enterprise; this is because in the

modern money-oriented economy finance is one of the basic foundations of all kinds of

economy activities. It is the master key, which provides access to all the sources for

being employed in manufacturing and merchandising activities. It has rightly been said

that business needs money to make more money. However, it is also true that money

begets more money. The bank efficient management of every business enterprise is

closely linked with efficient management of its finances.

Scope of finance

The firm secures capital it needs and employs finance activities, which generate

return on invested capital. The business firm mainly engages in activities to perform the

functions of finance, thus it requires a number of real assets (plant, machines, furniture)

and financial asset (shares and bonds) to receive return on its investments and distributes

returns. These processes of raising funds are known respectively as financing,

Investment and dividend decisions.

Retained earnings are other undistributed returns on equity capital; they are,

therefore, rightfully a part of equity capital. The retention of earnings can be considered

as a form of raising new capital. If a company distributes all earnings to shareholders,

then, it can reacquire new capital from the same sources by issuing new shares.


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The finance function of raising and using money although has a significant effect on

other function, yet it needs not necessarily limit or constraint the general running of the

business. A company in a tight financial position will, of course, give more weight to

financial considerations.

Finance functions: -

There are four important finance functions:

1. Investment decision

Investment decision or capital budgeting is the oldest area of the recent thinking in

finance. Its one very significant aspect is the risk of measuring the prospective

profitability of new investments. Future benefits are difficult to measure and cannot be

predicted with certainly, Because of the uncertain future. Capital budgeting decision

involves risk. Investment proposals should therefore, be evaluated in terms of both

expected return and risk.

2. Financing decision

Financing decision is the 2nd

important function to be performed by the financial

manager. Broadly, he must decide when, where and how to acquire funds to meet the

firms investment needs. The central issue before him is to determine the proportion of

equity and debt. The mix of debt and equity is known as the firms capital structure.

3. Dividend decision

The dividend policy should be determined in terms of its impact on the shareholders

value. The optimum dividend policy is one, which maximizes the market value of the

firms shares. Thus, if shareholders are not indifferent to the firms dividend policy, the

financial manager must determine the optimum dividend payout ratio.

4. Liquidity decision

Investment in current asset affects firms profitability, liquidity and risk. A conflict

exists between profitability and liquidity while managing the current assets. It may

become illiquid. But it could lose profitability, as idle current assets would not earn


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any thing. Thus a proper trade off must be achieved between profitability and

liquidity.

Financial services: -

Many financial institutions giving services to the public these are: -

1. Bank

2. Co-operative societies

3. Financial institutions

4. Private Banks

5. Foreign Banks

6. Nationalized Bank

7. Non-Banking financial institutions.

Meaning of Financial Statements:

The term financial statement refers to the statements, which are prepared the

business concern or banks at the end of the each financial year, i.e. which start from 1st

April of current year to 31st

March of next year.

The statements are

(a) INCOME STATEMENTS or PROFIT & LOSS ACCOUNTS which is prepared

in order to know whether the concern has earned profits or sustained loss during

the specific financial period.

(b) POSITION STATEMENT or BALANCE SHEET with the respective

schedules forming a part of Balance sheet, which is prepared by the concern in

order to know their financial position. The Financial Auditors and accountants,

Board OF Directors (BOD), usually prepare these.

To these statements are added the statements of retained earnings and statements

such as Funds Flow Statements (FFS); Cash Flow Statements (CFS); Ratio analysis, in

order to know the positions regarding Profitability, Liquidity and solvency.


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Nature of Financial Statements:

Financial statements are prepared for the purpose of presenting a periodical

review or report by the management and deal with state of investment in business and

result achieved during the period under view. They reflect a combination of recorded

facts, accounting conventions and personal judgments. From this it is clear that three

things affect financial statements i.e.

1. Recorded facts.

2. Accounting conventions.

3. Personal judgments.

Only those facts, which are recorded in the business books, will be reflected in the

financial statements.The following points reflect truly the nature of financial statements of business

entities:

(i) These are reports or summarized reviews about the performance, achievements and

weaknesses of the concern.

(ii) These are prepared at the end of the accounting period so that various parties may

take decisions of their future actions in respect of the relationship with the concerns.

(iii) The reliability of financial statements depends on the reliability of the accountingdata. These statements cannot be said to be true and fair representatives of the strengths

or profitability of the concern if there are numerous frauds and defalcations in the

accounts.

(iv) The figures in the financial statements are a combination of recorded facts. There

may be certain developments and factors which may be very important for the business

are not taken into account as these are not recorded in the routine of accounting.

Moreover, fixed assets are recorded at historical value without taking into consideration

the change in their values due to price level fluctuations.

(v) These statements are prepared as per accounting concepts and conventions.

(vi) These statements are influenced by the personal judgment of the accountant though

he is expected to be more objective in his approach. These judgments may relate to

valuation of inventory, depreciation of fixed assets and while making distinction

between capital and revenue.


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Meaning of Analysis of Financial Statements:

Analysis is the process of critically examining in detail accounting information

given in the financial statements. For the purpose of analysis, individual items are

studied; their interrelationship with other related figures established, the data is

sometimes rearranged to have better understanding of the information with help of

different techniques or tools for the purpose. Analyzing financial statements is a process

of evaluating relationship between component parts of financial statements to obtain a

better understanding of firms position and performance. In the words of Myer,

Financial statements analysis is largely a study of relationship among the various

financial factors in a business as disclosed in a series of statements. The analysis of

financial statements thus refer tot the treatment of the information contained in thefinancial statements in a way so as to afford a full diagnosis of the profitability and

financial position of the firm concerned. For this purpose financial statements are

classified methodically, analyzed and compared with the figures of previous years or

other similar firms.

Objectives of Financial Analysis:Financial Analysis is helpful in assessing the financial position and profitability

of a concern. This is done through comparison by ratios for the same concern over a

period of years; or for one concern against another; or for one concern against the

industry as a whole (Inter-firm comparison); or for one concern against the

predetermined standards; or for one department of a concern against other departments

of the same concern (Intra-firm comparison). Accounting ratios calculated for a number

of years show the trend of the change of position, i.e., whether the trend I upward or

downward or static. The ascertainment of trend helps us in making estimates for the

future.

Keeping in view the importance of accounting ratios the accountant

should calculate the ratios in appropriate form, as early as possible, for presentation to

the management for managerial control.

The main objectives of analysis of financial statements are to assess:

(i) The present and future earning capacity or profitability of the concern,


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(ii) The operational efficiency of the concern as a whole and of its various parts or

departments,

(iii) The short term and long term solvency of the term for the benefit of the debenture

holders and trade creditors,

(iv) The comparative study in regard to one firm with another firm or one department

with another department,

(v) The possibility of developments in the future by making forecast and preparing

budgets,

(vi) The financial stability of a business concern,

(vii) The real meaning and significance of financial data, and

(viii)The long-term liquidity of its funds.

Types of Financial Statements analysis:

Different types of financial statements analysis can be made on the basis of:

(i) The nature of the analyst and the material used by him,

(ii) The objective of the analysis, and

(iii) The modus operandi of the analysis.

i) The nature of the analyst and the material used by him:a. External analysis: It is made by the persons who are not connected with the

enterprise. They do not have access to the enterprise. They do not have access to the

detailed record of the company and have to depend mostly on the published statements.

Such type of analysis is made by investors, credit agencies, governmental agencies and

research scholars.

b. Internal analysis: The internal analysis is made by the persons who have

access to the books of accounts. They are members of the organization. Analysis offinancial statements or other financial data for managerial purpose is the internal type of

analysis. The internal analyst can give more reliable result than the external analyst

because every type of information is at his disposal.

(ii) According to the objective of the analysis:

a. Long term analysis: This analysis is made in order to study the long term

financial stability, solvency and liquidity as well as profitability and earning capacity of


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a business concern will be able to earn a minimum amount which will be sufficient to

maintain a reasonable rate of return on the investment so as to provide the funds

required for modernization, growth and development of the business and to meet its

costs of capital. This type of analysis helps the long term financial planning which is

essential for the continued success of the business.

b. Short term analysis: This is made to determine the short-term solvency,

stability and liquidity as well as earning capacity of the business. The purpose of this

analysis is to know whether in the short run a business concern will have adequate funds

readily available to meet its short-term requirements and sufficient borrowing capacity

to meet contingencies in the near future. This analysis is made with reference to items of

current assets and current liabilities (Working capital analysis) to have fairly sufficient

knowledge about the companys current position which may be helpful for short-term

financial planning and long term planning.

(iii) According to the Modus operandi of the analysis:

a. Horizontal (or dynamic) Analysis: This analysis is made to review and

analyze financial statements of a number of years and therefore based on financial data

taken from several years. This is very useful for long term trend analysis and planning.b. Vertical (or static) analysis: This analysis is made to review and analyze the

financial statements of one particular year only. Ratio analysis of the financial year

relating to a particular accounting year is an example of this type of analysis.

Ratio:

Ratio is one of the important and most powerful tools of the financial analysis. A

ratio can be defined as The indicated quotient of two mathematical expression, and

as the relationship between two or more things. Ratio is thus, the numerical or an

arithmetical relationship between two figures. It is expressed where one figure is

divided by another.

A ratio can be used as a yardstick for evaluating the financial position and

performance of a concern, because the absolute according data cannot provide

meaning full understanding and interpretation. A ratio is the relationship between

two accounting items expressed mathematically. Ratio analysis helps the analysts to


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make quantitative judgments with regard to concerns financial position and

performance.

Ratio analysis:Ratio analysis is the technique of the calculation of a number of accounting ratios

from the data or figures found in the financial statements, the comparison of the

accounting ratios with those of the previous years or with those of other concerns

engaged in similar line of activities or with those of standard or ideal ratios, and the

interpretation of the comparison.

Following are the four steps involved in the ratio analysis:

(1) Selection of relevant data from the financial statements depending upon theobjective of the analysis.

(2) Calculations of appropriate ratios form the above data.

(3) Comparison of the calculated ratios with the ratios of the same firm in the

past, or the ratios of some other firms of the comparison with ratios of the

industry to which the firm belong.

(4) Interpretation of the ratios.

Interpretation of the Ratios:

The Interpretation of ratios is an important factor. Though calculation of ratios is

also important but it is only a clerical task whereas interpretation needs skill, intelligence

and foresightedness.

The interpretation of the ratios can be made in the following ways:

1. Single absolute ratio: -

Generally speaking one cannot draw any meaningful conclusion when a single ratio is

considered in isolation. But single ratios may be studied in relation to certain rules of

thumb which are based upon well proven conventions as for example 2:1 is considered

to be a good ratio for current assets to current liabilities.

2. Group of ratio: -


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Ratios may be interpreted by calculating a group of related ratios. A single ratio

supported by other related additional ratios becomes more understandable and

meaningful. For example, the ratio of current assets to current liabilities may be

supported by the ratio of liquid assets to liquid liabilities to draw more dependable

conclusions.

3. Historical comparison: -

One of the earliest and most popular ways of evaluating the performance of the firm

is to compare its present ratio with the past ratios called comparison overtime. When

financial ratios are compared over a period of time, it gives an indication of the direction

of change and reflects whether the firms performance and financial position has

improved, deteriorated or remained constant over a period of time.

4. Projected ratios: -

Ratios can also be calculated for future standards based upon the projected or

proforma financial statements. These future ratios may be taken as standard for

comparison and the ratios calculated on actual financial statements can be compared

with the standard ratios to find out variances.

5. Inter-firm comparison: -

Ratios of one firm can also be compared with the ratios of some other selected firms in

the same industry at the same point of time. This kind of comparison helps in evaluating

relative financial position and performance of the firm.

Guidelines or precautions for use of ratios:

1. Accuracy of financial statements

2. Objective or purpose of analysis.

3. Selection of ratio.

4. Use of standards.

5. Calibre of the analyst.

6. Ratios provide only a base.


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Classification of Ratios:

Ratios may be classified as follows keeping in view the particular purpose.

(i) Profitability Ratios: Profitability ratios are utmost importance for a

concern. These ratios are calculated to enlighten the end results of business

activities which is sole criterion of the overall efficiency of a concern.

The following are the profitability ratios:

1. Return on Capital employed (overall Profitability ratio)

2. Return on shareholders fund.

3. Return on Equity shareholders fund.

4. Return on Total Assets.

5. Earning per share.

6. Payout ratio.

7. Ratio of Net profit to total income.

8. Ratio of Net profit to Total deposits.

9. Ratio of Net to Spread.

10. Ratio of interest earned to Total income.

11. Ratio of Interest expended to Total income.

12. Ratio of total income to working capital.

(ii) Financial Ratios:

These ratios are calculated to judge the financial position of the concern

from long term as well as short term solvency point of view.

1. Liquidity Ratios: If it is decided to study position of the concerns, in order to

highlight the relative strength of the concerns in meeting their current obligations to

maintain sound liquidity and pinpoint the difficulties if any in it, then liquidity ratios are

calculated. These ratios are used to measure the firms ability to meet short term

obligations. They compare short term obligations to short term (or current) resources

available to meet these obligations. From these ratios, much insight can be obtained into

the present cash solvency of the firm and firms ability to remain solvent in the event of

adversity. The important ratios are:

1. Current Ratio (or Working capital ratio).


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2. Stability Ratios:

These ratios help in ascertaining long term solvency of a firm which depends on

firms adequate resources to meet its long term funds requirements, appropriate debt

equity mix to raise long term funds and earnings to pay interest and installment of longterm loans in time. The following ratios can be calculated for this purpose:

1. Fixed Assets Ratio.

2. Ratio of Current assets to fixed assets.

3. Debt Equity Ratio.

(iii). Solvency Ratios:

To run a bank successfully financial strength of the bank is very important. In

order to assess the financial strength, solvency ratios are determined.

a. Ratio of Cash to deposits.

b. Ratio of Credit to Deposits.

c. Ratio of Cash Management.

Uses of ratio analysis

Ratio analysis simplifies the understanding of financial statements by establishing an

inter-relationship between the various financial figures.

1. Ratio analysis is an instrument to diagnosis the financial health or condition of a

business. Ratios tell the whole story of the changes in the financial condition of

an enterprise. They evaluate the important aspects of the conduct of a business

like liquidity, profitability, solvency etc.

2. Ratio analysis is an invaluable aid to the management in the efficient discharge

of its basic functions of forecasting, planning, communication, control etc. By

an analytical study of ratios, the past performance of the business trends can be

understood and on the basis of these trends the future events can be forecasted.

3. Information as to what happened in the business during a particular year can be

easily conveyed through ratios.


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4. Ratios are a useful instrument of management control particularly in the areas of

sales and costs.

5. Ratio analysis facilitates inner-firm and intra-firm comparisons.Ratio analysis is useful not only to the management but also to the outsiders like

creditors and investor. A creditor can ascertain the extent of security that is available for

the payment of the amount due to him through the computation and interpretation of

ratios.

An investor can know that past performance of company through the calculation and the

interpretation of ratios like, return on capital employed etc.

Limitations of ratio analysis

Ratio analysis is, no doubt, useful in many respects, but its importance should not be

exaggerated. This is because; ratio analysis suffers from a lot of limitations. Some are: -

1. Ratios are calculated from the data found in the financial statements. The

financial statements may lack accuracy and suffer from many limitations so

ratios, derived from such statements are also subject to those limitations.

2. There is no consistency in the meaning of certain ratios. As such, the items used

in the calculation of ratios differ from one analyst to another. This means that

ratios are non comparable.

3. Ratios are just supplementary to and not substitute of the original absolute figures.

Thus they become meaningless. If detached from details of their derivation.

4. Financial analysis based on ratios may give misleading results if the effects of

changes in price level are not taken into account while their computation.5. Ratios alone are not adequate for judging, the financial position of a business as

they give only a fraction of information needed for the decision.

6. There is a danger of window dressing into ratio analysis. On account of

possibility of window dressing, a particular ratio cannot be taken as a definite

indicator of profitability of a concern.

7. Ratios are tools of quantitative analysis only. Qualitative factors, which also

influence the conclusions drawn, are ignored in ratios analysis.


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8. A ratio is hyper sensitive. A new entry of a transaction can change its magnitude

drastically.

9. Ratios gain significance only when they are compared with standards. But it is

very difficult to lay down fixed standards for ideal ratios. In the absence of

reliable standards for comparison, the interpretation of ratios becomes mostly

subjective.

Thus, in words of Erich A Helfert, Ratios are not ends in themselves rather, on

selective basis, they may help to answer significant questions.

Need for the study

Ratio analysis can be applied to financial statements and similar data in order to

assume the performance of a company; to determine whether it is solvent and financially

healthy to assess the risk attached to its financial structure and to analyze the return

generated for its shareholders and other interested parties. Ratio analysis then, can

provide useful information to inform the decision of the: -

(a) Investors:

To make the decisions about whether to buy or sell their securities.

(b) Company management:

To assess and compare the performance of different divisions without the company

and performance of company as a whole against its competitors and against its

competitors and against previous years.

(c) Financial Institutions:

To make decisions about whether or not to agree to the requests for debt finance from

companies and about the terms and conditions under which such finance will be made

available. Ratio are useful for measuring the performance and helpful in cost control.

Ratios are a very important communication media as they can communicate the

strength and financial standing of the firm to the internal and external parties.


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2. DESIGN OF STUDY

STATEMENT OF THE PROBLEM OF THE STUDY SELECTED

Ratio analysis gives first hand information about the financial aspect of the

business. It is used as analytical tool in all business.

But, is ratio analysis useful as an analytical tool in service industry.

To find out the extent of utility of ratio analysis in measuring the growth trend of a bank,

this study has been selected and stated as: -

As an analytical tool to measure the growth trend in Vijaya

Bank.

SCOPE OF THE STUDY :-

The study has been done to analyze the financial position of Vijaya Bank for the

year 2002-03 & 2007-2008. This study helps to understand the various components

involved in the Ratio analysis of Vijaya Bank. Analysis of financial performance by use

of ratio has a very wide scope. This could be useful in understanding the strengths and

weakness.

OBJECTIVES OF THE STUDY:

1. To measure the profitability of a concern & thus reveal the total effect of the

business transaction on the profit position & to indicate how far the enterprise

has been successful in its aim.

2. To know budgeting decisions policies of Vijaya bank

3. To know the solvency position of the bank.

4. To know dividend policy, earning per share, and capital structure of the bank.

5. To give suggestions and to conclude on the findings.


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HYPOTHESIS

As the study is made a financial aspect with regard to financial statements, there

is no hypothesis to be proved or disproved.

OPERATIONAL DEFINITIONS OF CONCEPTS: -

CAPITAL EMPLOYED = Equity share capital + Reserve & surplus + Long term

liabilities.

Equity shareholders fund = Equity share capital + capital Reserves + Revenue reserves

+ Balance of profit and loss account.

Spread = Interest earnedInterest expended.

EPS = Earning per share

Working capital = current assetscurrent liabilities.

Operating profit = Net profit after tax + provisions & contingencies.

Current assets = Cash & balance with RBI + Balance with banks & money at call +

advances + other assets.

Current liabilities = Demand deposits (from banks & from others) + savings bank

deposits + other liabilities & provisions.

RESEARCH METHODOLOGY

SECONDARY DATA: -

Secondary sources of data are those sources in which data already collected and

published are assembled. The data so collected are called the secondary data. The task of

gathering secondary data is the task of compilation of data from various published

sources.

This was collected through the,

1. Bank Broachers.

2. Bank records.

3. Annual reports.

4. Information from Internet.


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LIMITATION TO THE STUDY:

1. This study is limited to Vijaya Bank.

2. The study is limited to the techniques of calculating ratios used by the Bank.

3. Non-availability of certain data in an in-depth manna.

4. The study is limited to certain ratios only. Those are ratios applicable to Bank.

5. Restrictions on behalf of the Bank officials to divulge important information.


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3. COMPANY PROFILE

HISTORY OF BANKING

Origin of the word Bank and Banking History in India

Opinion is not uniform with regard to the origin of the word Bank.

According to some authors, the word bank is derived from the Words Bancus or

Banquet that is a bench where the transaction takes place.

Evolution of Banking:

Money lending developed as an occupation in India from 500 B.C. But the 1st

modern bank was set up in Madras in 1688. Agency houses started by the British in

India paved the way for establishing joint stock banks in IndiaBank of Hindustan was

established in 1770 in Calcutta. General BOI (Bank of India) was established in 1786.

Three presidency banks namely Bank of Calcutta, Bank of Bombay &

Bank of Madras was established. These 3 banks subsequently emerged tighter to formImperial bank of India in 27

thJanuary 1921, which was nationalized in 1955 & named as

State Bank of India.

Many other banks like The Allahabad bank, The Punjab national bank,

The Syndicate bank, The Bank of India, The Indian bank, Bank of Baroda & Central

bank of India, The Dena bank, The Union bank of India, The Bank of Maharastra, The

Indian overseas bank, The Canara Bank, The united Bank of India and The United

commercial bank came into existence. However Indian banking system has experienced

a series of crisis & as a consequence witnessed a number of bank failures. This is more

so during the post world war I period.

RBI was therefore established in 1935 to regulate and control banking in India.

Definition and meaning of Bank:


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Section 5( c ) of the Banking Regulation Act of 1949 defines a Banking company

as Any company which transacts the business of banking in India.

The term Banking is defined in Section 5 ( b ) of the same Act as

Accepting, for the purpose of lending or investing, of deposits of money from the public,

repayable on demand or otherwise, and withdraw able by cheque, draft, order or other

wise.

A Bank is an institution, which deals in money. It means that a bank receives money in

the form of Deposits from public and lends for the Purpose of Development of Trade

and commerce

Professor. Hart says that a banker is one who in the Ordinary courses of business,

receives money which he repays by Honoring the cheques of persons from whom or on

whose account he Receives it.

Professor. Kinley defines a bank as an establishment, which makes to individuals such

advances of money as, may be required and safely made and to which individuals

entrust money that they do not require it for use.

Main functions of Banking:

A Banking company can perform the following forms of business:

A. The pure banking business of accepting of deposits of money from the public and

lending of funds to the needy as specified in Section 5(b) of the banking Act, 1949.

B. Other forms of banking business enumerated in section 6 of the Banking RegulationAct, viz.:

1. The raising, taking or borrowing of money.

2. Lending or advancing of money, with or without security.

3. Drawing, making, accepting, discounting, purchasing, selling, collecting and

dealing in bills of exchange, hundis, promissory notes, drafts, coupons, bills

of lading, railway receipts, warrants, debenture certificates and other

instruments, whether negotiable or not.

4. Granting and issuing letters of credit, circular notes and


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Travelers cheque.

5. Buying, selling and dealing in bullion.

6. Buying and selling of foreign exchange.

7. Acquiring, holding, issuing on commission, underwriting and dealing in

stocks, shares, debentures, bonds, securities and investments of all kinds.

8. Purchasing and selling of bonds and other forms of securities on behalf of

customers.

9. Negotiating of loans and advances.

10. Receiving of all kinds of bonds and securities and valuables for safe custody.

11. Acting as an agent for the government, local authority

or any other person.

12. Participating in any issue of loans or securities made by the central

government, state governments, municipalities, corporations, companies or

any other association.

13. Transacting of every kind of guarantee or indemnity business.

14. Acquiring, selling and releasing any property which may come into its

possession in satisfaction of the claims.

15. Undertaking and executing trusts and administering estates as executors or

administers.

16. Acquiring, constructing or altering any building or works necessary for its own

purposes.

17. Selling, leasing or mortgaging or otherwise dealing with any of its properties and

rights.

History:

Vijaya bank was founded by late shri.A.B shetty on 23rd

Oct 1931 in mangalore.

The Bank became a scheduled Bank in 1958. It was nationalized on 15th

April 1980. In

the year 1885, Vijaya Bank sponsored its first grameena Bank in it lead district mandya.

True to it tradition. The Bank promoted Vijaya Rural development foundation whichconducts training programs in rural areas. In year 1995, a housing finance subsidiary


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was established named Vijaya Bank housing finance limited, the objective of the

founders was essentially to promote banking habits, thrift and entrepreneurship among

the farming community of Dakshina kannada District in Karnataka.

BRANCHES:-

Vijaya bank has a network of 843 branches spread over 28 states and 4 union

territories. It has 43 specialized branches which include and 1881 branches commercial

and personal banking branches, overseas branches, corporate banking branches and a

specialized branch for women, small scale industries, agricultural finance, and asset

recovery management funds transfer.

It has three tier organizational structures, Head office, Regional office and the

branches.

The head office hosts various functional departments that are instrumental in policy

formulation and monitoring of performance of the regions and branches. The banks have

17 regional offices exercise immediate supervision and control over the branches under

their jurisdiction.

SERVICES:-

Vijaya bank has comes up with various innovative services to its customers apart

from offering saving accounts, current account and fixed deposits for the customers to

deposit their money. It offers various deposits schemes such as Jeevan Nidhi deposits

and recurring deposits schemes.

The Bank provides loans like home loans, educational loans, vehicle loans etc., it also

provides advances to small scale industries, agricultural activities (under special

agricultural credit plan) as directed by the Reserve Bank of India, the bank has come out

with a charter for women and implanted various points to met credit needs of women to

make them self reliant and economically independent.

To stay ahead in the global environmental, the Vijaya Bank has diversified into

various fields it has established ATMs it also provides various credit card schemes such


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as pre-approved credit card schemes and special credit cards for staff members etc., the

bank has diversified its merchants banking activities into specialized services.

BOARD OF DIRECTORSCHAIRMAN AND MANAGING DIRECTOR:-SHRI M.S. KAPUR

EXECTIVE DIRECTOR: SHRI P.A. SETHI

Mr. Ashok Kumar

Mr. Ashok Kumar Shetty

Mr. P Shantharam Shetty

Mr. Nishank Kumar Jain

Mr. T Valliappan

Mr. S Ananthan

Mr. R VaidyanathanMr. G B Singh

Mr. Albert Tauross

Mr. Ranjan Shetty

Mr. Sridhar Cherukuri

Mr. K Venkatappa

Mr. S C Kalia

Mr. Brij Mohan Sharma

Director

Director

Director

Director

Executive Director

Nominee Director

DirectorDirector

Chairman and Managing director

Director

Non Official PartTime Director

Director

Executive Director

Director

Customer service:

The banking being essentially a service industry, efficient service is the most

important factor to attract and retain a customer. The Bank is committed to provide its

customers with a high standard of services. The Bank considers that no man is too small

for Banking and no complaint is too insignificant to attend to. Keeping this in view, an

exclusive section dealing with customer grievances is set up in Central Inspection

Department at Head Office to keep strict vigil over complaints received from the

customers. The Department is headed by a General Manager who Is the Nodal Office for

customer grievances.

Our aim is to respond to the complaint with efficiency, courtesy and fairness. The

customer can make a complaint over phone, in person or by e-mail. Every complaint is

acknowledged and efforts are made to resolve the matter within a period of 7 days.


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22

The Chairman and Managing Director also keep a close watch on the redressed of

customer complaints and grievances. A detailed review note on the status of complaint is

being placed before him every fortnight.

Marketing setup:

To meet the increasing competition from the new generation private sector,

foreign and also many of the public sector banks, the bank has set-up a marketing cell

and has recruited marketing graduates with specialization in marketing as marketing

managers who have varied experience to market the diverse products of the bank and

also increase the clientele base in different regions in the country.

The marketing cell has formulated various strategies for marketing the asset and

liability products of the bank which would assist the branches in not only improving the

business but also help in getting good publicity and mileage in the market.

Merchant Banking and Allied activities:

The bank is registered with SEBI for activities like category 1 Merchant Banker,

Debenture Trustee and Bankers to the issue. The Bank has associated itself as

collecting bankers for collecting subscriptions related to public/rights issue etc. The

bank has also acted as Debenture Trustee for about 52 assignments.

During the year, the bank has handled over 660 payment bankers assignments. The

number of instruments paid through our designated branches was about 70 lakhs. The

bank is also extending at par facility in respect of corporate customers of a number of

private/foreign sector banks who do not have the required branch network of their own.

The bank is therefore able to leverage its vast network to generate fee-based income,

float balance apart from optimum utilization of its manpower and infrastructure.

The bank is also extending collection and payment services for correspondent banks

in the public and private sector including foreign banks.

PUBLICITY AND PUBLIC RELATIONS:


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23

The has gone for massive advertisement and publicity by way of constant release of

corporate advertisements, both in print and electronic media for enhancing the corporate

image and to market its follow on public issue. Due to this, gee expenditure on

advertisement and publicity has gone up substantially. From this advertisement

campaign, the visibility of the bank has reached the nook and corner of the country and

Bank has already derived utmost advantage evidenced by overwhelming response to the

follow on Public Issue by way of subscription of over 17 times of the issue size and its

share valve having gone up substantially thereafter in the stock markets.

COMPUTERISATION:

Vijaya Bank has taken up many initiatives in the technological front today 78.6% of

the total business of the bank is begin handled by Computerized branches amounting to

356 Branches. The Bank has implemented the corporate E-mail solution using

INFINET infrastructure institute of institution for development and research in banking

technology.

MANPOWER, STAFF PRODUCTIVITY AND RECRUITMENT:

The total staff strength of the Bank stood at 11624 in March 2008 as compared to

11723 in March 2007. Of the total staff, 3615 are officers, 5462 are clerical staff, 1925

re sub-staff and 622 are part-time employees in sub-ordinate cadre. The number of

women employees as at the end of March 2008 stood at 1942 consisting of 339 officers

and 1211 award staff constituting 16.7% of total employees belonging to handicapped

category and 475 employees belonging to Ex-servicemen category.

TECHNOLOGICAL UPGRADATION:

The Bank has created a Department of information technology at the corporate

office, the primary objective of this department is to promote computer literacy among

employees, to upgrade communication and information technology and to develop

electronic Banking capabilities. At present 80 branches were fully computerized and 77

partially computerized. These branches cover 53% of total business of the Bank.


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24

Besides, the Bank has installed 12 ATMs in 9 branches located in Mumbai, Bangalore,

Delhi, Chennai and Mangalore. The Bank also introduced Any branch Banking

system by networking its 6 fully computerized branches in Mumbai using leased

telecom lines, the Mobile Banking facilities have been provides at branches and hobby

Banking facilities at 2 branches. E-mail connection has installed and made operational

in 30 centers. The Bank has taken up the task of re-engineering the computerization at

the Head office. This exercise includes setting up corporate local area network,

establishing connectivity with zonal/regional offices major branches.

INVESTMENT AND FUNDS MANAGEMENT:

The gross investments of the Bank stood at Rs.8913.88 crores as on march 31 2007

and the net investments stood at Rs.8861.61 crores (Net investments are arrived at by

reducing provisions for depreciation and Non-performing investment from gross

investments) The average yield on investment (Excluding special securities) Stands at

10.56% as on march 31 2007. The Bank continued to remain active in trading of

securities and earned a profit of Rs.225.08 crores during the year from sale of

investment.

BANKS PERFORMANCE:

The Bank improved its performance under various parameters during the year. The

major business focus of the Bank during the year has been on stepping up the growth of

Saving Bank deposits and retail credit, especially the housing loans. The recovery of

non-performing assets was yet another thrust area. The highlights of the performance

are given below:

1. The net profit increased to Rs.411.31 Crore for the year 2007-04 as against

Rs.196.56 Crore in 2002-03. The gross profit recorded 100% increase from

Rs.432.36 Crore in 2002-03 to Rs.865.64 Crore in 2007-04.


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2. The total business crossed Rs.30000 Crore mark and stood at Rs.32350.10 Crore

in March 2008 as compared to Rs.25203.80 Crore in March 2007, recording

28.35%increase.

3. The total deposits of the Bank increased from Rs.17019.81 Crore in March 2007

to Rs.21015.05 Crore in March 2008, recording 23.47% increase. Savings Bank

Deposits grew by 26.7% from Rs.3511.13 Crore in March 2007 to Rs. 4447.31

Crore in March 2008.

4. Gross credit of the Bank increased from Rs.8183.99 Crore in March 2007 to

Rs.11335.05 Crore in March 2008, recording 38.50% increase. Housing Loans

more than trebled from Rs.591.73 Crore in March 2007 to Rs.1811.75 Crore in

March 2008.

5. The net non-performing advances as percentage to net advances declined from

2.61% as on 31-3-2007 to 0.91% as on 31-3-2008. Cash recoveries under NPAs,

interests on NPAs and recovery under prudentially written off accounts amounts

to Rs.203.74 Crore in 2007-04 as compared to Rs.115.00 Crore in 2002-03.

6. The Capital Adequency Ratio stood at 14.11% at the year end, much above the

prescribed requirement of 9%.

MISSION:

Our mission is to emerge as a prime national bank backed by modern

technology meeting customer aspiration with professional banking services

growth contributing to national development.


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ORGANISATION CHART:

Designation wise staff strength

SL No. Designation Strength

1 ASSISTANT GENERAL MANAGERS 25

2 CHIFE MANAGERS 200

3 SENIOR MANAGERS 1000

4 MANAGERS 15005 ASSISTANT MANAGERS 4000

6 AWARD STAFF 8700

7 SUB STAFF 4000Total 19425

BOARD OFDIRECTORS

CHAIRMAN &MANAGING

DIRECTORS

EXECUTIVEDIRECTOR

GENERALMANAGERS

CRIDETRECOVERY

CREDITOPERATION

DEPUTY GENERALMANAGER

REGIONALMANAGER

DIT DEPT &INFO TECH

VISULANCET & PMANAGEMENT

CRIDETRECOVERY

CRIDETRECOVERY

CRIDETRECOVERY

SENIORMANAGERS

MANAGERSASSISTANTMANAGERS

ASST GENERALMANAGERS

CHIEFMANAGERS

AWARDSTAFF

SUB STAFF


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4. ANALYSIS AND INTERPRETATION

Analysis of objective:

The first objective of the study is to arrive at the short-term solvency or the liquidity

position and to portray ratios which measure the stake (risk) of creditors as against

owners and thus picture of the long-term financial position of the concern.

1. Profitability Ratios:

Return on Capital employed (overall Profitability ratio):

This ratio is an indicator of earning capacity of the capital employed in the business. The

ratio is calculated as follows:

Here, Capital Employed= Profit before Tax

Capital Employed= Equity share capital + Reserves & Surplus + Long term

Liabilities.

A project Yielding higher return is Favored.

Particulars 2006 2007 2008 2009

Operating Profit 4355633 8712007 10221737 11798271

Capital Employed 15012328 22701522 25850122 29355623

ratio 0.290 0.384 0.395 0.402

Percentage 29.01% 38.38% 39.54% 40.19%

Table no. 1.1

Calculation of Operating Profit (Profit before Tax):

Particulars 2006 2007 2008 2009

Net Profit after Tax 1984662 4149638 5286452 6165820

Add: Provisions &

Contingencies 2370971 4562368 4935285 5632451


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Profit Before Tax 4355633 8712007 10221737 11798271

Particulars 2006 2007 2008 2009

Equity share Capital 3335178 4335178 5325638 5870662Add: Reserves & Surplus 4777523 9020174 9812650 11285186

Add: Long term

Liabilities6899627 9346170

10711834 12199775

Capital Employed 15012328 22701522 25850122 29355623

Graph 1:

Showing Operating Profit to Capital Employed:

Graph 2:

Showing Operating Profit to Capital Employed in Percentage:

29.01%

38.38%39.54%40.19%

0

0.1

0.2

0.3

0.40.5

Percentage

1 2 3 4

Year

Operating Profit to Capital Employed In %

Series2

Series3

Operating Profit to Capital Employed

05000000

100000001500000020000000250000003000000035000000

1 2 3 4Years

AmountSeries1Series2


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29

Interpretation:

The Ratio of return on capital employed has increased by 38.73% in the year2007 as compared to that of 2006, which has decreased by 29.01% and Ratio of return

on capital employed has increased by 40.19% in the year 2009 as compared to that of

2008, which has decreased by 39.54%

Return on shareholders fund:When it is desired to work out the profitability of the company from the

shareholders point of view, then it is calculated by the following formula:

The ratio of net profit to shareholders funds shows the extent to which

profitability objective is being achieved. Higher the ratio, better it is.

Particulars 2006 2007 2008 2009

Operating Profit 1984662 4149638 5286452 6165820Shareholders' funds 173229852 185030798 194568920 206542350

Ratio 0.011 0.022 0.027 0.030

Percentage 1.15% 2.24% 2.19% 2.56%

Table 1.2

Calculations of Shareholder Funds:

Particular 2006 2007 2008 2009Operating profit= Net Profit

i.e.1984662 4149638 5286452 6165820

Shareholders funds=

Share capital

10000000

0

10000000

0

12000000

0 150000000

Add: reserves & surplus 73229852 85030798 91030850 96152354

Total

17322985

2

18503079

8

21103085

0 246152354


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Interpretation:

The ratio of return on shareholders fund has increased by 2.24% in the year 2007 as

compared to that of 2006 which has decreased by 1.15%. and ratio of return on

shareholders fund has increased by 2.56% in the year 2009 as compared to that of 2008

which has decreased by 2.19%.


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31

Graph 3:

Showing Operating Profit to Shareholders funds:

Graph 4:

Showing Operating Profit to Shareholders Funds in Percentage:

Return on Equity Shareholders Fund

This ratio is a measure of the percentage of net profit to equity shareholders funds. The

ratio is expressed as follows:

Return on equity shareholders fund

= Net profit after Tax X 100

Equity shareholders funds

1.15%

2.24% 2.19%2.56%

0.00%

1.00%

2.00%

3.00%

Percentage

1 2 3 4

year

Operating Profit to Shareholders Funds

operating profit to Shareholders Funds

0

50000000

100000000

150000000

200000000

250000000

2006 2007 2008 2009year

Amount

perating ProfitShareholders' funds


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Here, Equity shareholders fund= Equity share capital + Capital

Reserves + Revenue reserves +

Balance of profit and loss account.

Higher the ratio, better it is.

Particulars 2006 2007 2008 2009

Operating Profit 1984662 4149638 5286452 6165820

Equity shareholders' funds 101304840 103224423 125625865 146583250

ratio 0.019 0.04002 0.0421 0.0421

Percentage 1.95% 4.02% 3.13% 3.17%

Table 1.3

Calculations Equity Shareholders Fund:

Particulars 2006 2007 2008 2009

Operating profit= Net Profit

i.e. 1984662 4149638 5286452 6165820

Shareholders funds=

Share capital 100000000 100000000 120000000 150000000

Add: Capital reserve ------ -----

Add: Revenue reserve 1304840 3224423 3526850 3826523

Total 101304840 103224423 123526850 153826523

Interpretation:

The ratio of return on equity shareholders fund has increased by 4.02% in the

year 2008 as compared to that of 2007 which has decreased by 1.95% and ratio of return

on equity shareholders fund has increased by 3.17% in the year 2009 as compared to that

of 2008 which has decreased by 3.13%.


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Graph 5:

Showing Operating Profit to Equity Shareholders Funds:

Graph 6:

Showing Operating Profit to Equity Shareholders Funds in Percentage:

Return on Total Assets:

This ratio is calculated to measure the profit after Tax against the amount invested

in total assets to ascertain whether assets are being utilized properly or not. It is

calculated as under:

Return on Total assets= Net profit after Tax X 100

Total assets

1.96%

4.00%4.57% 4.87%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

Percentage

1 2 3 4

year

Operating Profit Shareholders Fund

Return on Equity Shareholders Fund

20000000400000006000000080000000

100000000120000000140000000

2006 2007 2008 2009

Year

Amount

Operating Profit

Equity shareholders'funds


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Particulars 2006 2007 2008 2009

Net Profit 1984662 4149638 5286452 6165820

Total Assets 190722849 240710182 252652852 261245965

Ratio 0.0104 0.017 0.0209 0.0236Percentage 1.04% 1.72% 2.09% 2.36%

Table 1.4

Interpretation:

The ratio of return on total assets has increased by 1.72% in the year 2008 as

compared to that of 2007, which has decreased by 1.04% and ratio of return on total

assets has increased by 2.36% in the year 2009 as compared to that of 2008, which has

decreased by 2.09%.

Graph 7:

Showing Net Profit to Total Assets:

Net Profit to Tatol Assets

0

50000000

100000000

150000000

200000000

250000000

300000000

2006 2007 2008 2009

year

Amount Net Profit

Total Assets


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35

Graph 8:

Showing Net Profit to Total Assets in Percentage:

Earnings per share:

This helps in determining the market price of equity shares of the company and in

estimating the companys capacity to pay dividend to its equity shareholders. It is

calculated as follows:

Earnings per share= Net profit after Tax X 100

No. Of equity share

Particulars 2006 2007 2008 2009

Net Profit 1984662 4149638 5386452 6165820

No. of Equity shares 10000000 10000000 12000000 13500000

Ratio 0.1984 0.4149 0.4405 0.4567

Percentage 19.84% 41.49% 44.05% 45.67%

Table 1.5

Calculations of No. of Equity Shares:

Particulars 2006 2007 2008 2009


No. of Equity shares= 100000000/10 100000000/10 120000000/10 135000000/10

Amount/ Face value 10000000 10000000 12000000 13500000

1.04%

1.72%2.09%2.36%

0.00%

1.00%

2.00%

3.00%

Percentage

1 2 3 4

year

Net profit to Total Assets

Series1


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36

Interpretation:

The ratio of earning per share has increased by 41.49% in the year 2007 as

compared to that of 2006, which has decreased by 19.84% and ratio of earning per share

has increased by 45.67% in the year 2009 as compared to that of 2008, which has

decreased by 44.05%.

Graph 9:

Showing Net Profit to No. of Equity Shares:

Graph 10:

Showing Earning Per Share Ratio:

19.84%

41.49%44.05%45.67%

0.00%10.00%20.00%30.00%40.00%50.00%

Percentage

1 2 3 4

Year

Earning per Share

Net Profit to No of Equity Shares

0000000000000

60000008000000

10000000120000001400000016000000

2006 2007 2008 2009

Year

AmountNet Profit

No. of Equityshares


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Payout ratio:

This ratio indicates as to proportion of earning per share has been used for paying

dividend. This ratio is very important from shareholders point of view as it tells that if a

company has used whole or substantially the whole of its earning for paying dividend

and retained nothing for the future growth and expansion purposes, then there will be

very dim chances of capital appreciation in the price of the shares. In other words, an

investor who is more interested in capital appreciation must look for a company having

low payout ratio.

This is determined as follows:

Payout ratio= Dividend per equity share

Earning per share

Here, Dividend per equity share = Dividend declared

No. Of equity share

Dividend declared= Interim dividend + Final dividend

Particulars 2006 2007 2008 2009

Dividend Per Equity share 0.9 1.5 2.0 2.4

EPS 5.89 11.07 12.05 14.1

Ratio 0.1528 0.1355 0.1660 0.1681

Percentage 15.28% 13.55% 16.60% 16.81%

Table 1.6

Calculations of Dividend Per Equity Share:

Particulars 2006 2007 2008 2009

Dividend declared=Interim

div.d+ Final Div.d.

9000000 15000000

24000000 32000000Dividend per share= 9000000/ 15000000/ 24000000/ 32000000/

Dividend declared/ No. of

equity shares 10000000 10000000 12000000 13500000

0.9 1.5 2.0 2.4


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Interpretation:

The ratio of payout ratio has decreased by 13.55% in the year 2007 as compared

to that of 2006, which has increased by 15.28% and ratio of payout ratio has decreased

by 16.81% in the year 2009 as compared to that of 2008, which has increased by

16.60%.

Graph 11:

Showing Dividend Per Equity SharetoEPS:

Graph 12:

Showing Dividend Per Equity share to EPS in Percentage:

15.28%13.55%

16.60% 16.81%

0.00%

5.00%

10.00%

15.00%20.00%

Percentage

1 2 3 4

year

Divident Per Equity Share to EPS

Divident Per Equity Share to EPS

0.9 1.52.0 2.4

5.89

11.0712.05

14.1

02468

10121416

2006 2007 2008 2009

Year

AmountDividend PerEquity share

EPS


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39

Ratio of Net profit to Total income:

The bank should ensure that a consistent and higher level of profitability is aimed at and

achieved. The bank must be vigilant to see that expenditure is controlled and profitable

employment of funds is used and increase non-funded income.

Ratio is given by= Net profit X 100

Total income


Particulars 2006 2007 2008 2009

Net Profit 1984662 4149638 5286452 6165820

Total income 20346473 24834904 25652852 27245965

Ratio 0.0976 0.167 0.206 0.226

Percentage 9.76% 16.70% 20.61% 22.63%

Table 1.7

Calculations:


Total Income 20346473 24834904 25652852 27245965

Interpretation:

The ratio of net profit to total income has increased by 16.70% in the year 2007

than, that of 2006 which has decreased by 9.76% and ratio of net profit to total income

has increased by 22.63% in the year 2009 than, that of 2008 which has decreased by

20.61%


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40

Graph 13:

Showing Net Profit to Total Income:

Graph 14:

Showing Net Profit to Total Income in Percentage:

9.76%

16.70%20.61%

22.63%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

Percentage

1 2 3 4

year

Net Profit to Total Income

Net Profit to Total Income

0

5000000

10000000

15000000

20000000

25000000

30000000

2006 2007 2008 2009

Year

Amount Net Profit

Total income


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41

Net profit to Total deposits:

The bank needs to mobilize deposits and other funds more of cost and low

of deposits. Advancing than of maintaining excess of liquidity over the

statutory requirement can employ efficient funds.

Ratio is given as= Net profit X 100

Total deposits

Lower the ratio, better it is.

Particulars 2006 2007 2008 2009

Net Profit 1984662 4149638 5286452 6165820

Total Deposits 170429571 210334695 224156890 256254235ratio 0.0116 0.0197 0.024 0.024

Percentage 1.16% 1.97% 2.36% 2.41%

Table 1.8

Calculations:


Total Deposits 170429571 210334695 224156890 256254235

Interpretation:

The ratio of net profit to total deposits has increased by1.97% In the year 2007

than the previous year 2006 which has decreased by 1.16% and ratio of net profit to total

deposits has increased by 2.41% In the year 2009 than the previous year 2008 which has

decreased by 2.36%.


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42

Graph 15:

Showing Net Profit to Total Deposits:

Graph 16:

Showing Net Profit to Total Deposits in Percentage:

1.16%

1.97%

2.36% 2.41%

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

Percentage

1 2 3 4

Year

Net Profit to Total Deposit

Net Profit to Total Deposit

0

50000000

100000000

150000000

200000000

250000000

300000000

2006200720082009

Year

Amount Net Profit

Total Deposits


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43

Ratio of Net to Spread:

This ratio indicates the relationship between interest Earned on advances and interest

Expended on deposits. More of interest earned than interest expended is a good ratio

indicator.

Ratio is given as= Net profit X 100

Spread

Here, Spread refers to Interest earned less interest expended.

Particulars 2006 2007 2008 2009

Net Profit 1984662 4149638 5286452 6165820

Spread 6479302 8428810 8525920 9806520

ratio 0.3067 0.4923 0.620 0.629

Percentage 30.67% 49.23% 62.00% 62.87%

Table 1.9

Calculations of Spread:

Particulars 2006 2007 2008 2009


Spread= Interest

earned- Interest

Expended

6479302= 8428810= 8525920= 9806520=

16883751-

10404449

19566455-

11137645

21025630-

12499710

23156250-

13349730

Interpretation:

The ratio of net to spread has increased by 49.23% in the year 2007 than, that of

2006 which has decreased by 30.67% and ratio of net to spread has increased by 62.87%

in the year 2009 than, that of 2008 which has decreased by 62%.


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44

Graph 17:

Showing Net Profit to Spread:

Graph 18:

Showing Net Profit to Spread in Percentage:

NET PROFIT TO SPREAD

01000000

2000000

3000000

4000000

5000000

6000000

7000000

8000000

9000000

10000000

1 2 3 4

Years

Amount

Series1

Series2

30.67%

49.23%

62.00%62.87%

0.00%

20.00%

40.00%

60.00%

80.00%

Percentage

1 2 3 4

Year

Net Profit to Speread


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Ratio of interest earned to Total income:

As known, interest is a major source of income for any bank. It would be advantageous

to the bank it steps are taken to enhance its income from non-interest like commission,

locker rents etc.

Ratio is given as= Interest earned X 100

Total income


Particulars 31-3-2006 31-3-2007 31-3-2008 31-3-2009

Interest earned 16883751 19566455 21025630 23156250

Total income 20346473 24834904 25652852 27245965

Ratio 0.8298 0.7878 0.8196 0.8499

Percentage 82.98% 78.78% 81.96% 84.99%

Table 1.10

Interpretation:

The ratio of Interest earned to total income has decreased by 78.78% in the year

2007 as compared to that of 2006, which has increased by 82.98% and ratio of Interest

earned to total income has decreased by 84.99% in the year 2009 as compared to that of

2008, which has increased by 81.96%.

Graph 19:

Showing Interest Earned to Total Income:

Intere st Earned to Total Income

0

5000000

10000000

15000000

20000000

25000000

30000000

2005 2006 2007 2008

Year

Amount

Interest earned

Total income


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46

Graph 20:

Showing Interest Earned to Total Income in Percentage:

Ratio of Interest expended to Total income:

Interest expended on borrowings and deposits are the main expenditure for any bank.

The ratio expended to total income indicated the extent of total drained out for the

payment on deposits and borrowings.

Ratio is given as= Interest expended X 100

Total income

Lower the ratio, better it is.

Particulars 31-3-2006 31-3-2007 31-3-2008 31-3-2009

Interest Expended 10404449 11137645 12499710 13349730

Total income 20346473 24834904 25652852 27245965

ratio 0.5113 0.4484 0.4873 0.4900

Percentage 51.13% 44.84% 48.73% 49.00%

Table 1.11

Calculations:

Interest Expended 10404449 111137645 12499710 13349730

Total income 20346473 24834904 25652852 27245965

Interpretation:

The ratio of Interest expended to total income has decreased by 44.84% in theyear 2007 as compared to that of 2006, which has increased by 51.13% and ratio of

82.98%

78.78%

81.96%

84.99%

74.00%

76.00%

78.00%

80.00%

82.00%

84.00%

86.00%

Percentage

1 2 3 4

Year

Interest Earned to Total Income


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47

Interest expended to total income has decreased by 49% in the year 2009 as compared to

that of 2008, which has increased by 48.73%.

Graph 21:

Showing Interest Expended to Total Income:

Graph 22:

Showing Interest Expended to Total Income in Percentage:

INTEREST EXPENDED TO TOTAL INCOME

0300000060000009000000

12000000150000001800000021000000240000002700000030000000

1 2 3 4

Years

A

mount

Series1

Series2

51.13%44.84%

48.73%49.00%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

Percentage

1 2 3 4

Years

INTEREST EXPENED TO TOTAL INCOME


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48

Ratio of Total income to Working capital:

By working out this ratio the income earning capacity of the bank is arrived at respect to

the working capital.

Ratio is given as= Total income X 100

Working capital

Particulars 31-3-2006 31-3-2007 31-3-2008 31-3-2009

Total income 20346473 24834904 25652852 27245965

Working Capital 78889139 93560777 94152250 91530640

ratio 0.2579 0.2654 0.2725 0.2977

Percentage 25.79% 26.54% 27.25% 29.77%

Table 1.12

Calculations Working Capital:

Particulars 2006 2007 2008 2009

Total income 20346473 2483904 25652852 27245965

Working capital= 78889139= 93560777= 94152250= 98530640=

Current assets- 100512831- 130427578- 157103980- 173135220-

current liabilities 179401970 223988355 251256230 271665860

Interpretation:

The ratio of total income to working capital has higher by 26.54% in the year

2007 as compared to that of 2006 which has decreased by 25.79% and ratio of total

income to working capital has higher by 29.77% in the year 2009 as compared to that of

2008 which has decreased by 27.25%


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49

Graph 23:

Showing Total Income to Working Capital:

Graph 24:

Showing Total Income to Working Capital in Percentage:

TOTAL INCOME TO WORKING CAPITAL

0

20000000

40000000

60000000

80000000

100000000

1 2 3 4

Years

Amount

Series1

Series2

25.79%

26.54%27.25%

29.77%

23.00%

24.00%

25.00%

26.00%

27.00%

28.00%

29.00%

30.00%

Percentage

1 2 3 4

Year

Total Income to Work ing Capital


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2. Financial Ratios:

Liquidity Ratios:

Current Ratio:

This is most widely used ratio. It is the ratio Current assets to current liabilities. It shows

a firms ability to cover its current liabilities with its current assets. It is expressed as

follows:

Current Ratio=Current Assets

Current LiabilitiesGenerally 2:1 is considered ideal for concern i.e. current assets should be twice

than Current liabilities.

Particulars 31-3-2006 31-3-2007 31-3-2008 31-3-2009

Current Assets 100512831 130427578 157103980 173135220

Current Liabilities 179401970 223988355 251256230 271665860

Ratio 0.56 0.58 0.625 0.637

Table 2.1

Graph 25:

Showing the Current Assets to Current Liabilities:

CURRENT ASSETS TO CURRENT LIABILITIES

0

50000000

100000000

150000000

200000000

250000000

300000000

1 2 3 4

Years

Amount

Series1

Series2


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51

Graph 26:

Showing the Current Ratio:

Stability Ratios:

Fixed assets ratio:

This ratio explains whether the firm has raised adequate long-term funds to meet its

fixed requirements and is calculated as under:

Fixed assets ratio= Fixed Assets

Capital employed

This ratio gives an idea as to what part of the capital employed has been used in

purchasing the fixed assets for the concern. If the ratio is less than one then it is good for

the concern. The ideal ratio is 0.67.

Particulars 31-3-2006 31-3-2007 31-3-2008 31-3-2009

Fixed Assets 1593881 1912711 2215612 2865350Capital employed 15012328 22701522 25850122 29355623

Ratio 0.106 0.084 0.0857 0.0976

Table 2.2

Calculations:

Fixed assets 1593881 1912711 2215612 2865350

Capital employed 15012328 22701522 25850122 29355623

0.56

0.58

0.630.64

0.52

0.54

0.56

0.58

0.6

0.62

0.64

Ratio

1 2 3 4

Year

Current Ratio


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Interpretation:

The fixed assets ratio has decreased by 0.084 ratio in the year 2007 than that of

2006 which has increased by 0.106 ratio and fixed assets ratio has decreased by 0.0976

ratio in the year 2009 than that of 2008 which has increased by 0.0857 ratio.

Graph 27:

Showing Fixed Assets to Capital Employed:

Graph 28:

Showing Fixed Assets Ratio:

FIXED ASSETS TO CAPITAL EMPLOYED

0

5000000

10000000

15000000

20000000

25000000

30000000

1 2 3 4

Years

Amount

Series1

Series2

0.106

0.084 0.0860.098

0

0.02

0.04

0.06

0.08

0.1

0.12

Ratio

1 2 3 4

Years

FIXED ASSETS RATIO


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53

Ratio of Current assets to fixed assets:

This ratio will differ from industry to industry, and therefore; no standard can be laid

down.

Ratio of Current assets to fixed assets= Current assets

Fixed assets

Particulars 31-3-2006 31-3-2007 31-3-2008 31-3-2009

Current Assets 100512831 130427578 157103980 173135220

Fixed Assets 1593881 1912711 2215612 2865350

Ratio 63.06 68.18 70.91 60.42

Table 2.3

Calculations:

Current Assets 100512831 130427578 157103980 173135220

Fixed Assets 1593881 1912711 2215612 2865350

Interpretation:

The ratio of current assets to fixed assets has increased by 68.18 in the year 2007

as compared to 2006, which has decreased by 63.06 and ratio of current assets to fixed

assets has decreased by 60.42 in the year 2009 as compared to 2008, which has

increased by 70.91.

Graph 29:

Showing Current Assets to Fixed Assets:

CURRENT ASSETS TO FIXED ASSETS

0

25000000

50000000

75000000

100000000

125000000

150000000

175000000

200000000

1 2 3 4

Years

amount

Series1

Series2


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54

Graph 30:

Showing Current Assets to Fixed Assets Ratio:

Debt equity Ratio:

It measures the extent of equity covering the debt. This ratio is calculated to measure the

relative proportions of outsiders funds and shareholders funds invested in the

company. This ratio is determined to ascertain the soundness of long term financial

policies of the company and is known as external-internal equity ratio. It is calculated as

follows:

Debt equity Ratio= Long term debts

Shareholders funds

Share holders funds= Equity share capital + Profit & loss a/c (Cr.bal.) + Capital

reserves + Revenue reserves + Reserves for contingencies, sinking funds for renewal of

fixed assets or redemption of debentures.

The ideal case for this is 2:1.

Particulars 31-3-2006 31-3-2007 31-3-2008 31-3-2009

Long term debts 4031843 4219641 4423850 4542256Share holders' funds 173229852 185030798 198535160 214896520

ratio 0.023 0.022 0.022 0.021

Table 2.4

Calculations:

Particulars 2006 2007 2008 2009

Long term debts

4031843 4219641 4423850 4542256i.e. Borrowings

Shareholders' funds 173229852 185030798 198535160 214896520

63.0668.18 70.91

60.42

0

20

40

60

80

Ratio

1 2 3 4

Years

CURRENT ASSETS TO FIXED ASSETS


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Interpretation:

The debt equity ratio has decreased by 0.022 in the year 2007 than, that of 2006

which has increased by 0.023 and debt equity ratio has decreased by 0.021 in the year

2009 than, that of 2008 which has increased by 0.022.

Graph 31:

Showing Long-term Debts to Equity Shareholders Funds:

Graph 32:

Showing Debt-equity Ratio:

LONG TERM DEBTS TO EQUITY

SHAREHOLDERS FUND

02500000050000000

75000000100000000125000000150000000175000000

200000000225000000

250000000

1 2 3 4

Years

Amount

Series1

Series2

0.022 0.023 0.022 0.021

0

0.005

0.01

0.015

0.02

0.025

Ratio

1 2 3 4

Years

DEBT EQUITY RATIO


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3.2 Ratio of Cash Management:

This is to be worked out with refernce to the total cost of establishment expenditure to

working capital. It reveals the cost for operating and managing the bank. The bank

should inculcate cost consiousness among its staff and management so that higher

profits can be achieved.

Ratio of Cash Management= Total Expenditure X 100

Working Capital

Solvency ratios is very important to understand whether bank is standing on a

sound path.

Particulars 31-3-2006 31-3-2007 31-3-2008 31-3-2009

Total Expenditure 3179691 5674294 6525350 7121650

Working Capital 78889139 93560777 94152250 98530640

ratio 0.0403 0.0606 0.0693 0.0723

Percentage 4.03% 6.06% 6.93% 7.23%

Table 3.1

Calculations:

Particulars 2006 2007 2008 2009

Total Expenditure 3179691 5674294 6525350 7121650

Working Capital 78889139 93560777 94152250 98530640

Interpretation:

The ratio of cash management has increased 6.06% in the year 2007 as compared

to 2006, which has decreased by 4.03% and ratio of cash management has increased

7.23% in the year 2009 as compared to 2008, which has decreased by 6.93%.


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57

Graph 33:

Showing Total Expenditure to Working Capital:

Graph 34:

Showing Total Expenditure to Working Capital in Percentage:

TOTAL EXPENDITURE TO WORKING CAPITAL

0

20000000

40000000

60000000

80000000

100000000

120000000

1 2 3 4

Years

Amount

Series1

Series2

4.03%

6.06%

6.93% 7.23%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

percentage

1 2 3 4

Years

TOTAL EXPENDITURE TO WORKING CAPITAL


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5. FINDINGS, SUGGESTIONS AND CONCLUSION

Findings

1. The ratio of return on capital employed is better when higher, according to table

1.1 there is an increase of 9.36% than the previous year

2. The ratio of return on shareholders fund is better when higher, according to

table 1.2 there is an increase of 10.97% than the previous year.

3. The ratio of return on equity share holders fund is better when higher, according

to table 1.3 there is an increased of 2.07% than the previous year.

4. The return on total assets has increased by 0.68% than, that of previous year.

5. The ratio of earning per share has increased by 0.2% than the previous year.

6. The payout ratio has decreased by 1.73% than the previous year.

7. Net profit to total income is better when higher. According to table 1.7 there is

an increased of 6.94% than the previous year.

8. Net profit to total deposits is better when lower, According to table 1.8 there is

an increase of 0.81 than the previous year.

9. The ratio of net to spread has increased by 18.56% than the previous year, which

seems to be a good indicator as because the interest earned is more than, that of

interest expended.

10. As per the table 1.10 the ratio of interest earned to total income has decreased by

4.2% than the previous year, because they did not invest their deposits in other

securities.

11. The ratio of interest expended to total income is better when lower, according to

table 1.11 there is a decrease of 6.29% .It is good indicator because the income is

more than that of expenditure.

12. As per the table 1.12 the ratio of total income to working capital increased by

0.75% than the previous year.

13. Current ratios should be 2:1 that means current assets should be twice than

current liabilities, according to table 2.2.1 the current ratios difference is 0.02

than the previous year.

14. Fixed assets ratios should less than 1 then it is good, according to table 2.2.1

there is a difference of 0.022 than the previous year.

15. As per the table 2.2.2 the ratio of current assets to fixed assets difference is 5.12than the previous year.


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59

16. The ratio of debt equity should be 2:1, according to table 2.2.3 there is a

difference of 0.001 than the previous year.

17. As per the table 3.1 the ratio of cash to deposits decreased by 2.21 than the

previous year.

18. As per the table 3.2 the ratio of cash management has increased by 2.03% than

previous year.

19. As per the table 3.3 the ratio of credit to deposit is increased by 6.25% than the

previous year.

Suggestions:

1. In order to increase the return on total assets bank should increase the turnover

by advancing relatively safer loans.

2. The bank needs to increase the return on capital employed by earning more

profits, as this depicts the profitability position.

3. The bank should put more efforts in recovering the non-performance assets

(NPA).

4. The bank should ensure the customers satisfaction by providing them

convenient facilities and offering them new products and services.

Conclusion:

Vijaya bank has shown a very good progress over the years and this has been

clearly reflected in the study made.

The growth trend of the Vijaya bank has been analyzed through ratios and as a

result, Vijaya Bank has emerged as a financially strong, progressive and ideally

profitable company which always keeps its customers and stake holders looking ahead.

Ratio analysis was considered as the main analytical tool to measure the growth

trend of Vijaya bank.

Ratio analysis has succeeded in providing a clear insight to the financial position

and performance of the Vijaya Bank and thus has been successful as an analysis tool to

measure the growth trend of Vijaya Bank.


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Cost and Management Accounting -

Jain & Narang

Banking Theory and Practice-Reddy and Appanniah

Cost and Management Accounting-M.N. Arora

Banking Theory and Practice-Dr. P.K. Srivastava

Advanced Accountancy (Bank Accounts)-

R.L. Gupta & M. RamaSwamy

Documents

Vijaya Bank Project 007 (2)