DCCB Financial Performance 1

CHAPTER I

CONCEPTUAL AND THEORITICAL FRAME WORK

1.1 Introduction and design of the study

Finance holds the key to all human activity. It is guide for regulating investment

decisions and expenditure and endeavors to squeeze the most out of every available

rupee. The government too, treats it as a signpost, a beckon to responsibility that covers

men, money, material, methods and management. Out of these finance is a resource and it

has to be managed efficiently for the successful functioning of an bank. Financial

management is that managerial activity which is concerned with the planning and

controlling of the bank’s financial resources. The financial statement provides the basic

data for financial performance analysis.

Basic limitation of the traditional financial statement comprising the balance sheet

and the profit and loss account is that they do not give all the information regarding the

financial operations of a bank. Nevertheless, they provide some useful information to the

extent the balance sheet mirrors the financial position on a particular date in terms of the

structure of assets, liabilities and owners equity, and so on. The profit and loss account

shows the results of operations during a certain period of time in terms of the revenues

obtained and the incurred during the year. Thus, the financial statements provide a

summarized view of the financial position and operations of a bank. Therefore, much can

be learnt about a firm from a careful examination of its financial statements as invaluable

documents / performance reports. The analysis of financial statements is, thus, an

important aid to financial analysis.

The focus of financial analysis is on key figures in the financial statements and the

significant relationship that exists between them. The analysis of financial

Statements is a process of evaluating relationship between component parts of

financial statements to obtain a better understanding of the bank’s position and

performance. The first task of financial analyst is to select the information relevant to

the decision under consideration from the total information contained in the financial

statement. The second step involved in financial analysis is to arrange the information

in a way to highlight significant relationships. The final step is interpretation and

drawing of inferences and conclusions. In brief, financial analysis is the process of

selection, relation, and evaluation.

1.2 Industry Profile

Banking in India originated in the last decades of the 18th century. The first

banks were The General Bank of India, which started in 1786, and Bank of Hindustan,

which started in 1790; both are now defunct. The oldest bank in existence in India is the

State Bank of India, which originated in the Bank of Calcutta in June 1806, which almost

immediately became the Bank of Bengal. This was one of the three presidency banks, the

other two being the Bank of Bombay and the Bank of Madras, all three of which were

established under charters from the British East India Company. For many years the

Presidency banks acted as quasi-central banks, as did their successors. The three banks

merged in 1921 to form the Imperial Bank of India, which, upon India's independence,

became the State Bank of India in 1955.

The origins of the cooperative banking movement in India can be traced to the

close of nineteenth century when, inspired by the success of the experiments related to

the cooperative movement in Britain and the cooperative credit movement in Germany,

such societies were set up in India.

Now, Co-operative movement is quite well established in India. The first

legislation on co-operation was passed in 1904. In 1914 the Maclagen committee

envisaged a three tier structure for co-operative banking viz. Primary Agricultural Credit

Societies (PACs) at the grass root level, Central Co-operative Banks at the district level

and State Co-operative Banks at state level or Apex Level.

In the beginning of 20th century, availability of credit in India, more particularly

in rural areas, was almost absent. Agricultural and related activities were starved of

Organized, institutional credit. The rural folk had to depend entirely on the money

lenders, who lent often at usurious rates of interest.

The co-operative banks arrived in India in the beginning of 20th Century as an

official effort to create a new type of institution based on the principles of co- operative

organization and management, suitable for problems peculiar to Indian conditions. These

banks were conceived as substitutes for money lenders, to provide timely and adequate

short-term and long-term institutional credit at reasonable rates of interest.

The Anyonya Co-operative Bank in India is considered to have been the first co-

operative bank in Asia which was formed nearly 100 years back in Baroda. It was

established in 1889 with the name Anyonya Sahayakari Mandali Co-operative Bank

Limited, with a primary objective of providing an alternative to exploitation by

moneylenders for Baroda's residents.

In the formative stage Co-operative Banks were Urban Co-operative Societies run

on community basis and their lending activities were restricted to meeting the credit

requirements of their members. The concept of Urban Co-operative Bank was first spelt

out by Mehta Bhansali Committee in 1939 which defined on Urban Co-operative Bank.

Provisions of Section 5 (CCV) of Banking Regulation Act, 1949 (as applicable to Co-

operative Societies) defined an Urban Co-operative Bank as a Primary Co-operative

Bank other than a Primary Co-operative Society was made applicable in 1966.

With gradual growth and also given Philip with the economic boom, urban banking

sector received tremendous boost and started diversifying its credit portfolio. Besides

giving traditional lending activity meeting the credit requirements of their customers they

started catering to various sorts of customers viz.self-employed, small businessmen /

industries, house finance, consumer finance, personal finance etc

The nationalization of 14 major banks with deposits of Rs. 50 crores or more in

July 1969 was a “historic” and momentous event in the history of India. Small industrial

and business units are continuously and consistently ignored and starved of funds, even

though the Government policy was to encourage small, tiny and cottage and village

industries. Agricultural credit was never seriously considered by banks. Public funds

were used to support anti –social and illegal activities against the interest of the general

public. It was for these reasons that the Government took over 14 top commercial banks

in July 1969. In 1980 again the Government took over another 6 commercial banks –

altogether there are 20 nationalized banks.

1.3 Company Profile

After Bifurcation from Madurai District Central Cooperative Bank, Dindigul Central

Co-operative Bank was formed and started its functions from 01-06-1991. Its area of

operation consist of 7 Taluk and 14 Blocks. The central co-operative banks are located at

the district headquarters or some prominent town of the district. These banks have a few

private individuals also who provide both finance and management. The central co-

operative banks have three sources of funds,

Their own share capital and reserves

Deposits from the public and

Loans from the state co-operative banks

Main function of the banks are:

To meet the credit requirements of member-societies

To perform banking business

To act as balancing centre for the PACS by diverting the surplus funds of some

societies to those which face shortage of funds

To undertake non-credit activities

To maintain close and continuous contact with PACS and provide leadership and

guidance to them

To supervise and inspect the PACS and

To provide a safe place for the investment of the resources of PACs

There are 23 District Central Cooperative Banks in the State with 717 branches mostly in

rural areas to serve the Primary Agricultural Cooperative Banks and the rural public. In

addition, they meet the credit needs of dairy, handlooms, sugar and such other affiliated

cooperatives. They also lend directly to the public for non-agricultural purposes within

the area of operation of their branches.

1.3.1 Corporate Vision

“To evolve into a strong, sound and globally competitive financial system,

providing integrated services to customers from all segments, leveraging on technology

and human resources, adopting the best accounting and ethical practices and fulfilling

corporate and social responsibilities towards all stake holders.”

1.3.2 Corporate Mission

To become a provider of World-Class financial services

To meet the customer expectations through innovative and technological

initiatives

To emerge as a role model with distinct identity, ethical values and good

corporate governance

To enhance the shareholder’s wealth by sustained, profitable and

financially sound with prudent risk management system

To fulfill the national and social obligations as responsible corporate citizen

To create environment, intellectually satisfying and professionally

rewarding to the employees

1.3.3 Theoretical Framework

Co-operative bank performs all the main banking functions of deposit

mobilization, supply of credit and provision of remittance facilities. Co-operative

Banks belong to the money market as well as to the capital market. Co-operative

Banks provide limited banking products and are functionally specialists in agriculture

related products. However, cooperative banks now provide housing loans also. UCBs

provide working capital loans and term loan as well.

1.3.4 Deposit Schemes of Cooperative Bank

The Corporation Bank will provide the different services with CARE approach to

the customer’s. The service profile of the Corporation Bank is as follows:

Demat Account: A Bank where it’s Head Office provides the facility of

opening and conduct of Accounts through its branches, a Depository

institution extends various services to the investors through its agents known

as Depository Participant. In India, now there are two Depositories. They are

CDSL and NSDL. Participant can be anybody who complies with the

eligibility requirements. Participant (DP) can be a Bank also. All the various

functions undertaken and enabled through Demat accounts are referred to as

DP activity. Under the depository system, a demat account holder or

holder/owner of securities who is entitled to all the benefits (such as dividend

or interest/bonus or right shares etc), is known as a Beneficial Owner (BO)

Corp Pragathi Account: The account can be opened with an initial deposit of

Rs 10/- and will provide the account holder the basic banking facilities. No

penalty will be levied even if the balance in the account drops below Rs 10.

Centenary Year Gold Coin: It is 8gm Centenary Year Gold coin of 999.9

purity, 24 carat. This gold coin is available at Corp Bank branches in select

cities across India to individuals or retailers at a competitive price.

Savings Bank: Corp Bank SB account holder will get the facilities like any

Branch banking.Corp power cheque, Corp convenience card, Corp junior

account, Corp senior account

Kshemanidhi Cash Certificates: KCC is a money multiplier deposit. It is a

reinvestment Term Deposit scheme that can be opened for a period ranging

from 6 months to 10 years. The rate of interest depends on the period of

deposit.

Money Flex: The flexible term deposit- it allows the customer to withdraw

money whenever he/she wants. The deposit can be made for a period ranging

from 6 to 120 months. The minimum deposit is Rs 5000.

Fixed Deposit: The deposit can be made for period ranging from 15 days to

10 years. The rate interest depends on the period of deposit.

Corp classic: It is an innovative technology-based account that combines the

hi-liquidity of a savings bank account and the high-returns of a Terms deposit.

The account works simply by fixing by fixing your savings from a savings

bank account to a term deposit and vice versa.

Recurring Deposit: Best suite to the salaried class, the customer can save a

fixed sum every month for a period ranging from 12 months to 120 months.

Janatha Deposit: This deposit is for a period from 1 to 5. Our collection agent

will call at customers place to collect your savings at regular intervals even

daily.

Current Account: "Current Account" means a form of demand deposit

wherefrom withdrawals are allowed any number of times depending upon the

balance in the account or up to a particular agreed amount and will also include

other deposit accounts which are neither Savings Deposit nor Term Deposit.

1.3.5 Importance of Co-operative Banks

Co-operative bank forms an integral part of banking system in India. This bank

operates mainly for the benefit of rural area, particularly the agricultural sector. Co-

operative bank mobilize deposits and supply agricultural and rural credit with the wider

outreach. They are the main source for the institutional credit to farmers. They are chiefly

responsible for breaking the monopoly of moneylenders in providing credit to

agriculturists. Co-operative bank has also been an important instrument for various

development schemes, particularly subsidy-based programmes for the poor. Co-operative

banks operate for non-agricultural sector also but their role is small.

Though much smaller as compared to scheduled commercial banks, co-operative

banks constitute an important segment of the Indian banking system. They have extensive

branch network and reach out to people in remote areas. They have traditionally played

an important role in creating banking habits among the lower and middle income groups

and in strengthening the rural credit delivery system.

1.3.6 Features of Co-operative Banks for Customer Benefits

Customer's owned entities: In a co-operative bank, the needs of the customers

meet the needs of the owners, as co-operative bank members are both. As a

consequence, the first aim of a co-operative bank is not to maximize profit but to

provide the best possible products and services to its members. Some co-operative

banks only operate with their members but most of them also admit non-member

clients to benefit from their banking and financial services.

Democratic Member Control: Co-operative banks are owned and controlled by

their members, who democratically elect the board of directors. Members usually

have equal voting rights, according to the co-operative principle of "on person, one

vote".

Profit Allocation: In a co-operative bank, a significant part of the yearly profit,

benefits or surplus is usually allocated to constitute reserves. A part of this profit

can also be distributed to the co-operative members, with legal or statutory

limitations in most cases. Profit is usually allocated to members either through a

patronage dividend, which is related to the use of the co-operative's products and

services by each member, or through an interest or a dividend, which is related to

the number of shares subscribed by each member.

1.4 Need of the Study

The study aim at assessing profitability and solvency position of the company.

The liquidity and activity positions of the firm are analyzed using liquidity and

turnover ratios involving current liabilities.

The solvency position of the company is also analyzed using ratios.

1.5 Scope of the study

The scope of this study Is to provide an insight in to the concept of over all

financial performance analyse from 2009 -2013.

This study reveals the present financial position of the bank.

The ratio analysis will help to revalue the assets.

It contains summarized information of firms financial affairs, organized

systematically.

1.6 Objectives of the Study

1.6.1 Primary Objective:

The Primary objective is to study the financial performance of Dindigul central

co-operative bank Ltd, Dindigul.

1.6.2 Secondary Objective:

To make an analysis on the financial performance of Dindigul central co-

operative bank for 5 financial Years extending from 2007- 2008 to 2011- 2012

To calculate profitability turnover & financial ratio to assess the financial position

of the bank.

To study the efficiency and liquidity position using ratios.

To suggest them to utilize the sources completely.

To study the trend of financial performance of the bank.

To asses individual financial segments and put forth the strength and weakness of

the financial elements of balance sheet through trend analysis.

1.7 Limitations of the Study

The reliability of the report depends upon the secondary data alone.

The study is only for the period of five years ranging from 2008-2009 to 2012-

2013.

The results are derived from balance sheet figure.

1.8 Chapter Scheme

Chapter I describes Introduction and Theoretical Framework

Chapter II covers Review of Literature

Chapter III Concentrates on Research Methodology

Chapter IV titled towards Data Analysis and Interpretation

Chapter V Explores Findings, Suggestions and Conclusion

CHAPTER-II

REVIEW OF LITERATURE

2.1 INTRODUCTION

Many researchers have given various suggestions regarding the financial

performance of co operative banks. Some of those suggestions are given below from the

year of 2000 to 2011, collected over 30 reviews from the journals and books :

PrashantaAthma (2000), in his Ph D research submitted at Usmania University

Hyderabad, “Performance of Public Sector Banks – A Case Study of State Bank of

Hyderabad, made an attempt to evaluate the performance of Public Sector Commercial

Banks with special emphasis on State Bank of Hyderabad. The period of the study for

evaluation of performance is from 1980 to 1993-94, a little more than a decade. In this

study, Athma outlined the Growth and Progress of Commercial Banking in India and.

analyzed the trends in deposits, various components of profits of SBH, examined the

trends in Asset structure, evaluated the level of customer satisfaction and compared the

performance of SBH with other PSBs, Associate Banks of SBI and SBI. Statistical

techniques like Ratios, Percentages, and Compound Annual rate of growth and averages

are computed for the purpose of meaningful comparison and analysis. The major findings

of this study are that since nationalization, the progress of banking in India has been very

impressive. All three types of Deposits have continuously grown during the study period,

though the rate of growth was highest in fixed deposits. A comparison of SBH

performance in respect of resource mobilization with other banks showed that the average

growth of deposits of SBH is higher than any other bank group. Profits of SBH showed

an increasing trend indicating a more than proportionate increase in spread than in

burden. Finally, majority of the customers have given a very positive opinion about the

various statements relating to counter service offered by SBH.

Zacharias Thomas (2000) PhD Thesis, ‘Performance effectiveness of

Nationalized Bank- A Case Study of Syndicate Bank’, submitted to Kochin University

(1997), Thesis studied the performance effectiveness of Nationalized Bank by taking

Syndicate Bank as case study in his Ph.D thesis. Thomas has examined various aspects

like growth and development of banking industry, achievements of Syndicate Bank in

relation to capital adequacy, quality of assets, Profitability, Social Banking, Growth,

Productivity, Customer Service and also made a comparative analysis of 'the performance

34 effectiveness of Syndicate Bank in relation to Nationalized bank. A period of ten years

from 1984 to 1993-94 is taken for the study. This study is undertaken to review and

analyze the performance effectiveness of Syndicate Bank and other Nationalized banks in

India using an Economic Managerial- Efficiency Evaluation Model (EMEE Model)

developed by researcher. Thomas in this study found that Syndicate Bank got 5th

Position in Capital adequacy and quality of assets, 15th in Profitability, 14th Position in

Social Banking, 8th in Growth, 7th in Productivity and 15th position in Customer Service

among the nationalized banks. Further, he found that five nationalized banks showed low

health performance, seven low priority performance and eleven low efficiency

performance in comparison with Syndicate Bank.

Singla HK (2001), in his paper,’ financial performance of banks in India, ’in

ICFAI Journal of Bank Management No 7, has examined that how financial management

plays a crucial role in the growth of banking. It is concerned with examining the

profitability position of the selected sixteen banks of banker index for a period of six

years (2001-06). The study reveals that the profitability position was reasonable during

the period of study when compared with the previous years. Strong capital position and

balance sheet place, Banks in better position to deal with and absorb the economic

constant over a period of time.

Das and Udaykumar Lal (2002),in his book Banking Reforms in Lead Bank

Scheme, (Deep and Deep Publication, New Delhi) was the critical evaluation of the lead

bank scheme in35 the light of banking sector reforms. Das in this book observed that high

level of NPAs, large number of un-remunerative branches, low productivity, overstaff

and archaic methods of operations have affected the profitability of public sector banks.

Das sincerely felt that the whole banking sector in India is to be revolutionized to cope

with the changing dimensions of the satellite one world. Further, he felt that the backward

areas should be given more funds for investment in priority sectors and more and more

people should be brought under its coverage and the procedures of extending credit

should be simplified and there should be least hassle cost.

Subramanian and Swami (2003) in their paper, Comparative performance of

public sector banks in India” Prjanan, Vol. XXII, have analyzed and compared the

efficiency in six public sector banks, four private sector and three foreign banks for the

year 1996-97. Operational efficiency is calculated in terms of total business and salary

expenditure per employee. The analysis revealed that higher per employee salary level

need not result in poor efficiency and business per employee efficiency co-efficient was

also calculated. Among the PSBs, Bank of Baroda registered the high efficiency and

operating profit per employee. Among the private sector banks Indus Bank followed by

Citibank Registered highest and second highest operating profit per employee

respectively. However, among the Nationalized Banks there existed wide variations in

efficiency? Frequent changes are order of the day for the topics of this nature. Therefore,

one should rely on latest information. Some organizations like, RBI, IBA, SBI and ICRA

have carried out several research studies on various issues relating to banking and

exclusive banking journals/periodicals like Bank Quest, The Bankers, RBI occasional

papers, RBI bulletins and general magazines like Business Today, Business India,

Finance India, have been publishing papers on various aspects like NPAs, capital

adequacy, branch expansion, credit dispensation, deposit mobilization, service quality,

technology, performance evaluation, etc. Same studies and papers suitable to this study

are being reviewed here.

SBI Research Department in (2004), through its paper “Performance analysis of

27 Public sector banks” published in SBI monthly review performance, Vol XXXIX, was

prepared by Economic Research Department of State Bank of India, is to analyze the

Performance of the 27 Public Sector Banks for the year 1999-2000 vis-a-vis the

preceding year. Selecting four different categories of indicators-Business Performance,

Efficiency, Vulnerability and labor productivity indicators, carried out the analysis.

Altogether, 39 indicators were selected for this purpose. For the purpose of analysis, 27

PSBs disaggregated into four groups, namely, the SBI, ABs (7), the SBGs (8), and the

NBs (19). During 1999-2000, the PSBs exhibited better show in terms of several

parameters studied above. Nevertheless, the problems of NPAs and capital adequacy

remain to be taken care of. Researchers in this paper opinioned that greater operational

flexibility and functionnal autonomy should be given to PSBs especially to strengthen

their capital base. Further, they felt that since net interest margin will continue to remain

compressed in a deregulated interest rate regime, a lot of effect would have to be made to

mitigate this t far as NPAs are concerned, they believe' that, the outdated laws and

regulations that pose hindrance to banks in getting back their dues need to be suitably

amended.

In a paper published in the Financial Express in (2005), titled “India’s Best

Banks” has been doing for several years through its annual exercise to evaluate and rate

Indian banks. They claim that this survey is a comprehensive one, which evaluates the

performance of private, public, Indian and foreign Banks operating in India. With the

objective of making the comparison more meaningful, Banks were categorized into

Public Sector Banks, New Private Sector Banks and Foreign Banks. Financial

information for the year ending March 31st, 2002 and March 31, 2003 relating to each of

the banks falling into the aforesaid categories was collected from the data available from

RBI. Five major criteria were identified against which the banks were ranked. 'These

criteria are (1) Strength and soundness (ii) Growth, (iii) Profitability, iv)

Efficiency/Productivity, and (v) Credit quality. Considering the current banking,

industrial and over-all economic scenario, pertinent weights were assigned to each of the

major criteria. In the first category of "State-Run" 37 or Public Sector Banks, State Bank

of Patiala and Andhra Bank is the top two. In the category of best old private sector

banks, the magazine ranks the Jammu and Kashmir Bank and KarurVysya Bank as the

first best and second best. In the category of 'New' Private Banks, HDFC as number one

and ICICI Bank at number two. Finally, in the category of Foreign Banks, the magazine

ranks Standard Chartered Bank and City Bank at the top two slots.

Outlook Money (2005), titled “The best in the business cover story”, (March

2005), has announcing annual awards for the best performers in the personal finance

universe. In the best bank award category, the magazine selected Corporation Bank

among public sector banks and HDFC Bank among private sector banks and presented

outlook money award 2004 to these two banks. A rigorous selection process was devised

in consultation with Earnest and Young. The short listed contenders were mailed

questionnaires seeking information on operational aspects like Number of Branches,

Number of ATMs, Deposits, NPAs, CAR, and Return on Assets. They have taken two

categories of Banks Public and Private Sector. All Public Sector Banks (except SB!,

nominated for Hall of Fame Award), and Private Banks with deposit base of more than

Rs. 2,000 Cr as on 31 March 2003 were selected. The jury-A.K. Purwar, Anu, Aga,

Shitin Desai, Uma Shashikanth and Sandipan Debo-assigned weights to various

parameters and choose the winner for 2005.

Ram Mohan TT (2006), in his paper ‘Long run performance of public and private

sector bank stocks” Vol 37, has made an attempt to compare the three categories of

banks-Public, Private and Foreign-using Physical quantities of inputs and outputs, and

comparing the revenue maximization efficiency of banks during 1992-2000. The findings

show that PSBs performed significantly better than private sector banks but not

differently from foreign banks. The conclusion points to a convergence in performance

between public and private sector banks in the post-reform era, using financial measures

of performance.

D'souza in his study evaluated the performance of Public sector(2007), private

sector and foreign banks during the period 1991 to 1999-2000. The efficiency of the

banking system was measured in terms of spread/working funds ratio and turnover /

employees ratio. With reference to38the spread working funds ratio, the efficiency of the

commercial banks as a whole has declined in the post-reform period. The Public Sector

Banks’ have been responsible for this decline in efficiency, as the efficiency of the

private and foreign banks has improved over the course of 1990s. Through the

turnover/employee ratio has risen in the public sector banks, the turnover per employee in

the private and foreign banks doubled relative to the ratio for public sector banks during

this decade. However, the analysis revealed that the profitability of the public sector

banks in late nineties improved relatively to that of private and foreign banks.

Kusum W. Ketkar (2008),examined the efficiency and productivity growth in the

Indian Banking Sector from 1990 to 1995 using the Data Envelopment Analysis

methodology. Due to data availability problems at the individual bank level, the study

includes only 39 banks. Several Conclusions stand out. First, for the sample, the overall

technical inefficiency is about 31per cent and has remained stable over the examined

period. Second, foreign banks showed the highest level of efficiency. Third, between

1990 and 1995, state and private banks experienced a reduction in pure technical

efficiency, while for the nationalized and the foreign banks, it remained the same.

Further, the size has found to be positively related to pure technical efficiency and to the

number of branches negatively. Fifth, fewer branches and metropolitan location of

foreign banks, perhaps partially explains their efficiency over domestic banks.

This paper finally concludes that Indian domestic banks need to greatly improve their efficiency through introduction of computer technology, improved management skills and through consolidation and merger of banks.

Alamelu and Chidambaram emphasized (2008),the profiti1bility aspect in

commercial banks. In this paper, the scholar analyzed and compared the performance of

public and private sector bank on profitability angle. It was found that all the private

sector banks have been registered both high profits and high rate of growth. Better

customer service, technology, innovative products, good marketing strategies, proper

monitoring of advances, regional orientation are some of factors responsible for the

success of private sector banks in India.

Ramachandra Reddy(2009) focused their attention on the seriousness of 39NPAs

in public sector banks. They argued that with the introduction of international norms of

Income Recognition, Asset Classification and Provisioning in the banking Sector,

managing NP As has emerged as one of the major challenges facing the Public Sector

Banks. They felt that total elimination of NPAs is not possible in the banking business

owing to externalities but their incidence can be minimized. To reduce the seriousness of

the problem, they suggest that the banks should adopt proper policy for appraisal,

supervision and follow-up of advances; special recovery cells may be set-up at regional!

zonal levels; Recovery Officers should be appointed at making necessary provisions and

contingencies). Seven banks were operating in 'B' category (those banks, which after

operating profits have not sufficient funds to provide for the provisions, thereby incurring

net losses. And the remaining was placed in the 'e' category (those banks, which were

unable to earn significant income to enjoy sufficient operating profits). Apart from

studying the profitability of above-mentioned groups of banks, capital adequacy position

and other balance sheet trends were also discussed. Moreover, same short-term and long-

term strategies for enhancing the profitability level were suggested.

Ramasastri, A.S., Achamma Samuel and Gangadaram(2010), made an attempt

to compare the behavior of interest and non interest income of scheduled commercial

banks in India for the period from 1997-2003. This paper further tries to examine whether

non-interest income has helped in stabilizing the total income of schedule commercial

banks in the country. The major findings of the study are:

(a) The average net interest income of SCBs. declined during the period 2003-2010,

(b) The non-interest income of all SCBs exhibited an increase over a period of 7 years. It

was also observed that interest income was more stable than that of non-interest income,

and (c) In regard to the question about whether non-interest income has helped in

stabilizing the total income of banks, it was seen that with respect to the State Bank

Group, foreign banks and old private sector banks, non-interest income helped to stabilize

total operating income. However, in the case of nationalized bank and new private 40

sector banks, it was seen that non-interest income has not helped in stabilizing their

income appreciably.

Nagarajan(2010), focused his attention on 'Other income of the banks' and

analyzed the trend from 1999-2006 onwards in a wider perspective. He emphasized in

this article that other income of the banks has been receiving focused attention mainly for

two reasons. First, Banks are being urged to increase this source of income. Second, there

was a spurt in other income of banks during 2007-2008. Main conclusions of this study

are:

(i) Since 1999-2000, banks other income has been increasing at a faster pace compared

with interest earnings,

(ii) Component-wise, income from commission, exchange and brokerage is most

important,

(iii) Income from exchange transactions is also relatively steady,

(iv) Private sector banks have logged rapid rate of growth, which may be attributed to the

entry of new banks,

(v) Foreign banks have retained their share,

(vi) e cost of the public sector 'banks, and

(vii) There is unusual increasing in 2001-02 in other income of banks.

Business India (2011), in its paper has been conducting the exercise of identifying

Best Bank among the Scheduled Commercial Banks operating in India, for over 5 years

now. Business India adopted the internationally renowned CRAMEL Model (with minor

modifications) for evaluating banks. Basing on CRAMEL, Business India group

constituted a panel of experts. After a thorough discussion, the panel came to a

conclusion that ICICI was the best bank for the year 2003-04. ICICI Bank drew all round

appreciation for its aggressive market and customer acquisition strategy.

Singh R (2011), in his paper Profitability management in banks under deregulate

environment, IBA bulletin, No25, has analyzed profitability management of banks under

the deregulated environment with some financial parameters of the major four bank

groups i.e. public sector banks, old private sector banks, new private sector banks and

foreign banks, profitability has declined in the deregulated environment. He emphasized

to make the banking Sector competitive in the deregulated environment. They should

prefer noninterest income sources.

CHAPTER-III

RESEARCH METHODOLOGY

3.1 INTRODUCTION

Research Methodology is a way to systematically solve the research problem. It

may be understand as a science of studying as research is done scientifically in this we

study various steps that are generally adopted by a researcher in studying the research

problem along with logic behind them.

3.2 RESEARCH DESIGN

The collected data were presented in tables and these tables were analyzed

systematically. Ratio analysis, the vital financial tool was used to study the financial

performance of DINDIGUL CENTRAL CO-OPERATIVE BANK, DINDIGUL . A

chart and various diagrams are used to explain the analysis clearly. It is an undisputed

truth that graphs and diagrams render any complicated discussion and any intricate

subject, very simple to any casual reader of the thesis.

Common size financial statement is a tool to assess, in which figures

reported are converted into percentages to some common base. Trend percentages are

also taken as a tool which is immensely helpful in making a comparative study of the

financial statement for several years. The method of calculating trend percentages

involves the calculation of percentage relationship that each item bears to the same

item in the base year.

3.3 DATA COLLECTION

The study is based on secondary source of data. Secondary data have been mainly

obtained from annual reports, records and books of DINDIGUL CENTRAL CO-

OPERATIVE BANK, DINDIGUL.

The secondary data were also collected from audited financial statements

periodicals and other records maintained by DINDIGUL CENTRAL CO-OPERATIVE

BANK, DINDIGUL.

Collection of data is the process remuneration together with the proper record of

research. Those data which are already been passed through the statistical process. In this

study is based on the secondary sources. Secondary data is the data that have been

already collected by and readily available from other sources. Such data are cheaper and

more quickly obtainable than the primary data and also may be available when primary

data cannot be obtained at all.

It is economical

It saves efforts and expenses

It helps to make primary data collection more specific since with the help of

secondary data, we are able to make out what are the gaps and deficiencies and

what additional information needs to be collected

It helps to improve the understanding of the problem

It provides a basis for comparison for the data that is collected by the researcher

The secondary data for the study is mainly collected through:

Annual Reports

Audited financial statements

Bank Records

3.3.1 PERIOD OF STUDY

Data of 5 financial years are used for the purpose of study. The 5 years of study

ranges from 2008- 2009 to 2012 – 2013.

3.4 RESEARCH FRAMEWORK

The data which was collected is analyzed using the following tools which are as

follows:

Ratio Analysis

Common size balance sheet

3.4.1 RATIO ANALYSIS:

Ratio analysis is the process of determining and presenting the relationship of

items and group of items in the statements. It is helpful to know about the liquidity,

solvency, capital structure and profitability of an organization. It is helpful tool to aid in

applying judgment, otherwise complex situations.

Ratios are calculated from current year numbers and are then compared to

previous years, other companies, the industry, or even the economy to judge the

performance of the company. Ratio analysis is predominately used by proponents of

fundamental analysis.

3.4.2 CURRENT RATIO

Current ratios one of the oldest of all financial ratios. It was first used in 1891.

Even today; it is most common ratio for analyzing liquidity or short term financial

position. Current ratio is defined as the ratio of current assets to current liabilities. It

shows the relationship between total current assets and total current liabilities. Current

ratio is also called working capital ratio or banker’s ratio. It is calculated as follows.

Current ratio =Current Assets

Current Liabilities

3.4.3 LIQUID OR QUICK RATIO

Liquid ratio is the ratio of liquid assets to current liabilities. It stabilities the

relationship between quick assets and current liabilities. It is the measure of the instant

debt paying ability of the business enterprises. It is also called acid test ratio. It is

computed as follows:

Liquid ratio =Quick assets

Current liabilities

Objective of quick ratio

The objective of computing this ratio is to ability of the firm to meet its short term

liabilities as and when due without depending upon the realization of stock.

3.4.4 ABSOLUTE PROPERIETARY RATIO

Cash can be together with current ratio and acid test ratio so as to exclude even

receivables from the current assets to find out the absolute liquid assets. This ratio

considers only the absolute liquidity available with the firm.

Absolute proprietary Ratio =Total shareholder fund

Total tangible asset

3.4.5 DEBT EQUITY RATIO

This ratio is also Known as external- internal equity ratio and is calculated to

measure the relative claims of outsiders fund and the owners against the firm’s assets.

This ratio is the basic and most common measure of studying the indebtedness of the

firm. A ratio of 1:1 may be usually considered to be a satisfactory ratio although there

cannot be any rule of thumb or slandered norm for all type of business.

Debt Equity Ratio =Debt

Equity

or

Debt Equity Ratio =Outsiders Fund

Shareholders Fund

3.4.6 Equity Ratio

It is also known as proprietary ratio or shareholders to total equities or net worth to

total asset ratio. This ratio establishes the relationship between shareholders fund to total

assets of the firm. This ratio of proprietors fund to total fund is an important ratio for

determining long term solvency of the firm. The components of the ratio are

shareholders fund and total assets. The shareholders funds are equity share capital,

reference capital, undistributed profits, reserve fund and surpluses. Out o this amount,

accumulated losses, should be deducted. Total asset on the other hand denote total

resources of the concern.

Equity Ratio =Shareholders Fund

Total assets

3.4.7 NETWORKING CAPITAL RATIO:

Net working capital represents the excess of current assets over current liabilities.

Net working capital measures the firm’s potential reservoir of funds. Net working capital

is a measures liquidity.

Net Working capital ratio =Net working capital

Capital employed

3.4.8 FIXED ASSETS TURNOVER RATIO

It is also known as ratio of fixed assets to proprietors’ fund. This ratio establishes

the relationship between fixed assets and shareholders funds. It indicates that the extent

to which shareholders funds. It indicates that the extent to which shareholders funds are

sunk in to fixed assets. There is no rule of thumb to interpret this ratio but 60 to 65% is

considered as satisfactory.

Fixed Assets to net worth ratio =Fixed assets

Shareholders Fund

3.4.9 INVENTORY TURNOVER RATIO

It is also known as stock turnover ratio. It measures how fast the inventory move

through and out of a company and the effectiveness with which firm uses its resources.

The computation is similar to the accounts receivables computation.

Inventory turnover ratio =Cost of goods Sold

Average Inventory

3.4.10 INVENTORY HOLDING PERIOD

The average time taken for clearing the stock can be known by calculating

inventory Conversion period. The inventory holding period for manufacturing company

normally 30-40days.

Inventory Holding period =No. of Days

Inventory Turnover Ratio

3.4.11 DEBTORS COLLECTION PERIOD

The average collection period represents the average number of days for which a

firm has to wait before its receivables are converted in to cash. Average collection period

for a manufacturing company is normally 30 days.

Debtors collection period =No. of Days

Debtor’s turnover ratio

3.4.12 GROSS PROFIT RATIO

This is the ratio of gross profit to sales expressed as percentages. It is also known

as gross margin. It is calculated as follows:

Gross profit ratio =Gross Profit

x 100Net sales

3.4.13 NET PROFIT RATIO

Another measure of profitability is net profit margin. This ratio gives a measure of

net income by each unit of sales and often measured as percentages of sales.

Net Profit Ratio =Net profit

x 100Sales

3.4.14 NET WORKING CAPITAL TURNOVER RATIO

Working capital turnover ratio indicates the velocity of utilization of net working

capital. This ratio indicates the numbers of times the working capital is turned over in the

course of a year. This ratio measures the efficiency with which the working capital is

being used by a firm.

Net working capital turnover ratio = Sales

Net working capital employed

3.4.15 RETURN ON TOTAL ASSETS

The ROTA may also be called “profit to asst Ratio”. There are various approaches

possible to define net profits and assets, according to the purpose and intent of the

calculation of the ratio.

The ROTA based on this ratio would be an under estimate as the interest paid to

the creditors is excluded from the net profits.

ROTA =Net profit after Tax

x 100Total assets

3.4.16 RETURN ON INVESTMENT:

The Conventional approach of calculating return on investment is to divide PAT

by investment. Investment represent pool of funds supplied by shareholders ad lenders,

while PAT represent reside income of shareholders therefore it is conceptually unsound

to use PAT in the calculation of ROI.

ROI =Operating profit

x 100Capital employed

3.4.17 RETURN ON EQUITY:

In real sense, equity shareholders are the real owners of the company. They

assume the highest risk in the company. Equity shareholders are getting residual claim

after paying interest and performance dividend. Return on equity capital, which is the

relationship between profits of a company an its equity capital, can be calculated as:

Return on Equity =Net profit after tax

Net worth

3.4.18 DEBORS TURNOVER RATIO

It indicates the velocity of debt collection of a firm. I simple words it indicates the

number of times average debtors (receivable) are turned over during a year.

Debtors Turnover Ratio =Credit sales

Debtors

3.4.19 WORKIG CAPITAL TURNOVER RATIO

The working capital turnover ratio is used to analyze the relationship between the

money used to fund operations and the sales generated from these operations. In a

general sense, the higher the working capital turnover, the better because it means that the

company is generating a lot of sales compared to the money it uses to fund the sales.

This ratio represents the numbers of times the working capital is turned over in the course

of year and is calculated as follows:

Working capital turnover ratio =Sales

Net working capital

3.4.20 EARNING YIELD RATIO:

The earning yield may be defined as the ratio of earnings per share to the market

value per ordinary share. The earning yield ratio is also called the earning price ratio.

Earning yield =

Earning per share x 100

Market price per share

3.4.21 PRICE EARNIGS RATIO

This ratio indicates the number of times the earning per share is covered by its

market price. Price earnings ratio helps the investor in deciding whether to buy or not

buy the shares of a company at a particular market price.

Price earnings ratio =Market price per share

Earning per share

3.4.22 EARNING PER SHARE

Earning Per Share highlights the overall success of the concern from owners point

of view and it is helpful in determining market price of equity share,

Earning per share =Net profit after tax

Number of Equity Shares

3.4.23 WORKING CAPITAL MANAGEMENT

Working Capital is the life blood and nerve centre of a business. Just as circulation

of blood is essential in the human body for maintaining life, working capital is very

essential to maintain the smooth running of a business. No business can run successfully

without an adequate amount of working capital.

Working capital refers to that part of firm's capital which is required for financing

short term or current assets such as cash, marketable securities, debtors, and inventories.

In other words working capital is the amount of funds necessary to cover the cost of

operating the enterprise.

Meaning:

Working capital means the funds (i.e.; capital) available and used for day to day

operations (i.e.; working) of an enterprise. It consists broadly of that portion of assets of a

business which are used in or related to its current operations. It refers to funds which are

during an accounting period to generate a current income of a type which is consistent

with major purpose of a firm existence.

Working capital= Current assets - Current liabilities

Current assets include cash, stock, debtors etc. Current liabilities include creditors,

loan payable, dividend payable etc. Decisions relating to working capital and short term

financing referred to as working capital management. These involve managing the

relationship a firm's short-term assets and its short-term liabilities.

Meaning of Working capital management

The goal of working capital management is to ensure that the firm is able to

continue its operations and that it has sufficient cash [low to satisfy both

maturing short-term debt and upcoming operational expenses.

The fundamental principles of working capital management art reducing the

capital employed and improving efficiency in the areas of receivables,

inventories, and payable.

Concepts of Working capital

Gross Working Capital

Net working Capita

Gross Working Capital

Total Current assets

Where Current assets are the assets that can be converted into cash within

an accounting year & include cash, debtors etc.,

Referred as “Economies Concept” since assets are employed to derive a

rate of return.

CHAPTER IV

DATA ANALYSIS AND INTERPRETATION

4.1 CURRENT RATIO:

Current ratio =Current assets

Current liabilities

Table 4.1.1. Shows Current Ratio from the year 2009-2013

Year Current Assets Current Liabilities Ratio

2009 24086 22175 1.08

2010 35467 22250 1.59

2011 49933 31963 1.56

2012 64078 44973 1.42

2013 85400 41282 2.06

(Source: Dindigul Central Co-operative Bank, Dindigul 2009-2013)

Interpretation

From the above table, it reveals with the current ratio from the year 2009-2013.

Internationally accepted current ratio is 2:1 i.e., current assets shall be 2 time of current

liabilities. The ability of the concern also depends on current asset position.

4.2 QUICK RATIO:

Quick ratio =Quick assets

Quick liabilities

Table 4.2.1 Shows Quick Ratio from the year 2009-2013

Year Quick Assets Quick Liabilities Ratio

2009 4578.12 6538.15 0.70

2010 4347.22 8815.97 0.49

2011 6226.40 9656.73 0.64

2012 10224.73 11400.46 0.89

2013 9703.93 14703.38 0.65

(Source: Dindigul Central Co-operative Bank, Annual Report year 2009-2013)

Interpretation

From the above table shows in 2009-2013 the ratio is less than the ideal ratio 1.

Here, quick liabilities are twice when compared with quick assets. Hence, this position is

not healthy for the soundness of the bank.

4.3 CASH RATIO:

Cash ratio =Cash

Current liabilities

Table 4.3.1 Shows Cash Ratio from the year 2009-2013

Year Cash Current Liabilities Ratio

2009 10596.34 22175 0.47

2010 13539.17 22250 0.60

2011 19868.18 31963 0.62

2012 21651.46 44973 0.48

2013 13452.08 41282 0.32

(Source: Dindigul Central Co-operative Bank,Annual Report 2009-2013)

Interpretation

From the above table conclude an ideal cash ratio is 0.75:1. This ratio is more

rigorous measure of a firms liquidity position. The table indicates from the year 2009 to

2013. For the 5years the company’s cash position is not sufficient to meet its obligations.

Because the five years it position is lower than ideal ratio.

4.4 DEBT-EQUITY RATIO:

Debt-equity ratio =Long-term debt

Shareholders’ funds

Table 4.4.1 Shows Debt equity Ratio from the year 2009-2013

YearLong-Term

DebtShareholders Fund Ratio

2009 5636.09 365.53 15.41

2010 13350.09 365.53 36.52

2011 22307.85 392.81 56.79

2012 23573.05 412.38 57.16

2013 26579.28 422.52 62.90


Interpretation

From the above he table dealt with debt equity ratio from the year 2009 to 2013.

The standard norm is 1:1. The company has borrowed more long-term debt for its

operation. It is not healthy for the soundness of the firm. A high debt-equity ratio

indicates that the claim of outsiders are greater than those of owners. Hence, this position

affect the financial position of the concern.

4.5 PROPRIETARY RATIO:

Proprietary ratio =Total Shareholders Fund

Total Tangible Assets

Table 4.5.1 Shows Proprietary Ratio from the year 2009-2013

YearTotal Shareholders

Fund

Total Tangible

AssetsRatio

2009 365.53 4578.12 0.007

2010 365.53 4347.22 0.008

2011 392.81 6226.40 0.006

2012 412.38 10224.73 0.004

2013 422.52 9703.93 0.004

(Source: Dindigul Central Co-operative Bank, Dindigul Annual Report 2009-2013)

Interpretation

From the above table shows the proprietary ratio for the year 2010 is 0.008% and

subsequently it decreased to (0.004 in 2012). The company fails to improve or retain its

shareholder funds. Higher the ratio or the share of shareholders in the total capital of the

bank, poor is the long term solvency position of the company.

4.6

FIXED ASSETS TURNOVER RATIO

Fixed asset turnover

ratio=

Cost of goods sold

Fixed asset

Table 4.6.1 Shows Fixed asset turnover Ratio from the year 2009-2013

YearCost of goods

soldFixed Asset Ratio

2009 12470.01 22584.64 0.55

2010 14740.86 27949.60 0.52

2011 20600.30 33735.67 0.61

2012 27064.47 40717.28 0.66

2013 31546.92 44948.18 0.70


Interpretation

From the above table reveals with fixed assets turnover ratio. Higher the ratio,

more is the efficiency in probability of a business concern. A lower ratio is the indication

of under utilization of fixed assets in the year 2009-2012 is lower, is indicates lower

utilization of fixed assets.

4.7 INVENTORY TURNOVER RATIO:

Stock turnover ratio =Cost of goods sold

Average inventory

Inventory Holding period =12 months (or) 365 days

Inventory Turnover ratio

Table 4.7.1. Shows Inventory Turnover Ratio from the year 2009-2013

YearCost of Goods

SoldAverage Inventory

Stock Turnover

Ratio

Inventory holding

period in pays

2009 12470.01 4183 2.98 66

2010 14740.86 4385 3.36 42

2011 20600.30 6852 3.00 100

2012 27064.47 9856 2.74 127

2013 31546.92 15256 2.06 129


Interpretation

From the above table deals with inventory turnover ratio of the company.

Inventory turnover ratio for the year 2009 -2012 were satisfactory. But very poor in

2013. A high inventory turnover indicates efficient management of inventory, because

more frequently the stocks are sold.

4.8 INVENTORY HOLDING PERIOD:

Stock turnover ratio =Cost of goods sold

Average inventory

Inventory Holding period =12 months (or) 365 days

Inventory Turnover ratio

Table 4.8.1. Shows Inventory holding period from the year 2009-2013

YearCost of Goods

SoldAverage Inventory

Stock Turnover

Ratio

Inventory holding

period in pays

2009 12470.01 4183 2.98 66

2010 14740.86 4385 3.36 42

2011 20600.30 6852 3.00 100

2012 27064.47 9856 2.74 127

2013 31546.92 15256 2.06 129


Interpretation

From the above table shows with inventory turnover ratio of the company.

Inventory turnover ratio for the year 2009-2012 were satisfactory. But it was very poor in

2013. A high inventory turnover indicates efficient management of inventory, because

more frequently the stocks are sold.

4.9 DEBTORS TURNOVER RATIO:

Debtors Turnover Ratio =Net credit sales

Closing debtors

Table 4.9.1. Shows Debtors Turnover Ratio from the year 2009-2013

YearNet Credit

SalesClosing Debtors

Debt Turnover

Ratio2009 3412 4341.68 0.78

2010 6455 5099.62 1.26

2011 3755 5671.28 0.66

2012 5286 7393.50 0.71

2013 6070 9409.31 0.64


Interpretation

From the above table conclude Debtors velocity indicates the number of times the

debtors are turned over during a year. Generally higher the value of debtors turnover

more efficiency the management of debtors. Similarly, lower debtor turnover implies

inefficient management of debtor.

4.10

WORKING CAPITAL TURNOVER RATIO:

Working capital Turnover Ratio =Net sales

Net working capital

Table 4.10.1. Shows capital Turnover Ratio from the year 2009-2013

Year Net Sales Net working Capital

Working capital

turnover ratio

2009 3412 6776 0.50

2010 6455 12055 0.53

2011 3755 7086 0.52

2012 5286 9955 0.53

2013 6070 10525 0.57


Interpretation

From the above table deals with working capital turnover ratio. Current liabilities

of the concern, exceeds the current assets, then net working capital was positive. A

higher ratio indicates efficient utilization of working capital and a low ratio indicates

otherwise. Comparatively, in the year 2009 the net sales were decreased more than that of

earlier years.

4.11 GROSS PROFIT RATIO:

Gross Turnover Ratio =Gross profit

Net sales

Table 4.11.1. Shows Gross Profit Ratio from the year 2009-2013

Year Gross Profit Net Sales

Working capital

turnover ratio

2009 2757.66 3412 0.80

2010 2806.36 6455 0.43

2011 2809.19 3755 0.74

2012 3422.33 5286 0.64

2013 3630.62 6070 0.59

(Source: Dindigul Central Co-operative Bank, Annual Report 2009-2013)

Interpretation

From the above table highlight in the year 2009, the Gross Profit Ratio was 0.80%

but then it decreased to 0.43%, which shows a not profit earning capacity of the business

with reference to its sales. But in the year 2011, it increased to 0.74% which may be due

to increase in cost of production or due to sales at lesser price. In the year 2012, the gross

profit ratio was 0.64% decreased, and in the year 2013, the gross profit ratio 0.59%

decreased as respectively.

4.12 NET PROFIT RATIO:

Net profit Ratio =Net profit after tax

x100Net sales

Table 4.12.1. Shows Net profit Ratio from the year 2009-2013

YearNet profit after tax

Net salesNet profit ratio %

2009 2227.20 3412 65.26

2010 3058.33 6455 47.37

2011 4241.68 3755 112.94

2012 5006.96 5286 94.70

2013 4480.72 6070 73.80


Interpretation

From the above table indicates in the year 2011 the Net Profit is 112.94%, but in

the year 2013 the net profit was decreased to 73.80%, but in the year 2009-2010 the net

profit was decreased 65.26-47.37%, and in the year 2011 the net profit was increased,

Therefore the performance of the management should be appreciated. Thus an increase in

the ratio over the previous periods indicates improvement in the operational efficiency of

the business.

4.13 OPERATING RATIO:

Operating Ratio =Operating costs

x100Net sales

(Operating cost= Cost of sales + Operating Expenses)

Table 4.13.1. Shows Operating ratio from the year 2009-2013

YearOperating

CostsNet sales

Operating ratio %

2009 3844.66 3412 112.66

2010 4711.23 6455 72.98

2011 5669.88 3755 150.97

2012 6727.59 5286 127.26

2013 5946.74 6070 97.96


Interpretation

From the above table shows that in the year 2009 the operating Profit is 112.66%,

but in the year 2010 the operating profit was decreased to 72.98%, but in the year 2011

the operating Profit was increased 150.97%, and in the year 2012 the operating profit was

decreased 127.26%, and in the year 2013 the operating profit was decreased 97.96% as

respectively.

4.14 EARNING PER SHARE:

Earning per share =Net profit after tax

Number of Equity Share

Table 4.14.1. Shows Earning per share ratio from the year 2009-2013


No. of equity sharesEarning per

share2009 2227.20 365.53 6.10

2010 3058.33 365.53 8.37

2011 4241.68 392.81 10.8

2012 5006.96 412.38 12.15

2013 4480.72 422.52 10.61


Interpretation

From the above table reflects the capacity of the concern to pay dividend to its

equity shareholders. Comparatively it has heavy loss in the year 2012. Hence it degrade

the reputation of the firm as well as interest of the share holders of the bank.

4.15 PRICE EARNING RATIO:

Price earning ratio =Market price per share

Earnings per share

Table 4.15.1. Shows Price Earnings ratio from the year 2009-2013

YearMarket price

per shareEarning per share

(Rs.)

Price Earnings

Ratio2009 352.37 61.14 5.76

2010 414.71 83.96 4.99

2011 536.16 108.33 4.94

2012 668.34 121.79 5.52

2013 758.91 106.37 7.13


Interpretation

From the above table shows Usually higher the Price earnings ratio, better it is.

The Management should look into the causes that have resulted into the fall this ratio.

Hence Price Earnings Ratio positive, it decreases in the year 2010 &2011 but it decreases

in the year 2012 & 2013 .

4.16 EARNING YIELD RATIO:

Earning yield =Earning per share

x100Market price per share

Table 4.16.1. Shows Earning yield ratio from the year 2009-2013

YearEarning per

shareMarket Price per

shareEarning

yield2009 61.14 352.37 17.35

2010 83.96 414.71 20.24

2011 108.33 536.16 20.20

2012 121.79 668.34 18.22

2013 106.37 758.91 14.01


Interpretation

From the above table shows Earnings yield shows positive value. It is also

decreased trend. It reveals that good performance of the bank.

4.17 RETURN ON EQUITY:

Return on Equity =Net profit after tax

Net worth

Table 4.17.1. Shows Return on equity from the year 2009-2013


Net worthROE %

2009 2227.20 352.37 6.32

2010 3058.33 414.71 7.38

2011 4241.68 536.16 7.91

2012 5006.96 668.34 7.49

2013 4480.72 758.91 5.91


Interpretation

From the above table conclude Here, the bank has earned profit, hence, the net

profit of the shareholders net worth year after year. The return on equity ratio also

showed decreased trends positive. The bank profitability position was good.

4.18 RETURN ON INVESTMENT:

ROI =Operating profit

Capital employed

Table 4.18.1. Shows Return on investment from the year 2009-2013

YearOperating

ProfitCapital Employed

ROI %

2009 2757.66 2348.13 1.17

2010 2806.36 2350.88 1.19

2011 2809.19 2916.78 0.96

2012 3422.33 2985.58 1.14

2013 3630.62 3449.65 1.05


Interpretation

From the above table shows that in the year 2010 the bank has incurred

operational loss, and the 2010 the bank return on investment has incurred operational

profit, in the year 2011 the bank has incurred operational loss, in the year 2012 the bank

has incurred operational profit, and in the 2013 the bank has incurred operational loss as

respectively.

4.19 RETURN ON TOTAL ASSET:

ROTA =Net profit after Tax

x 100Total assets

Table 4.19.1. Shows Return on total asset from the year 2009-2013


Total AssetsReturn on

Total Assets %

2009 2227.20 4578.12 48.64

2010 3058.33 4347.22 70.37

2011 4241.68 6226.40 68.11

2012 5006.96 10224.73 48.96

2013 4480.72 9703.93 46.17


Interpretation

From the above table deals,In the year 2009-2013 the company incurred net profit.

The return on total assets showed positive (Profit) balance in all the 5years.

4.20 DEBT

RATIO:

Debt ratio =Total debt

Net asset

Table 4.20.1. Shows Debt ratio from the year 2009-2013

Year Total debt Net Asset Debt ratio%2009 4341.68 4919.38 0.88

2010 5099.62 5826.77 0.87

2011 5671.28 6520.62 0.86

2012 7393.50 8317.27 0.89

2013 9409.31 10486.28 0.90


Interpretation

From the above table concludes debt ratio for the year 2009 is 0.88 and it is has

increased subsequently to 0.90 in the year 2013. This position was not good to conduct

business in future. Hence, the company has to take necessary step to avoid borrowing

loan from bank or others. Huge debts carries huge amount of interest, it affects the

profitability of the concern.

4.21 NET WORKING CAPITAL RATIO

Net working capital ratio =Net working capital

Capital employed

Net working capital = Current assets – Current liabilities

Table 4.21.1. Shows Debt ratio from the year 2009-2013

YearNet working capital (in

Rs.)

Net Assets (or) Capital employed

(in Rs.)

Ratio

2009 6776 4578.12 1.48

2010 7277 4347.22 1.67

2011 6445 6226.40 1.03

2012 6678 6352.53 1.05

2013 7024 6975.12 1.01


Interpretation

From the above table revealed the networking capital ratio from the year 2009 to

2013. The bank borrowed loan for its working capital requirements, because current

liabilities were lower than that of current assets, in every year. Hence liquidity position is

good.

CHAPTER V

SUMMARY OF FINDINGS,SIGGESTIONS AND CONCLUSIONS

5.1 FINDINGS

1. It is inferred that from the table 4.1.1,clear that current ratio of the bank from the

year 2009 to 2013 is 2:1 ie current assets shall be 2 times of current liabilities.

2. It is showed that from the table 4.2.1,clar that quick ratio of the bank from the year

2009 to 2013 quick liabilities are twice when compared with quick assets.

3. It is inferred that from the table 4.3.1,clar that cash ratio of the bank from the year

2009 to 2013 cash position is not sufficient to meet its obligations. Because cash ratio is

lower than ideal ratio.

4. It is concluded that from the table 4.4.1, clear that debt equity ratio of the bank from

the year 2009 to 2013 the company has borrowed more long term debt for its operation.

A high debt equity ratio indicates that the claims of outsiders are greater than those of

owners.

5. It is showed that from the table 4.5.1,clar that proprietary ratio of the bank from

the year 2009 to 2013 the bank fails to improve or retain its share holders funds.

6. It is concluded that from the table 4.6.1,clar that fixed asset turnover ratio of the

bank from the year 2009 to 2013 a lower ratio is the indication of under utilization of

fixed assets in the year 2009&2011 and 2012&2013.

7. It is inferred that from the table 4.7.1,clar that inventory turnover ratio of the bank

from the year 2009 to 2013 inventory turnover ratio for the year 2008 to 2011 was

satisfactory, but it was very poor in 2013

8. It is showed that from the table 4.9.1,clar that turnover ratio of the bank from the

year 2009 to 2013 higher value of the debtors turnover indicates the more efficient and

lower debtor turnover implies inefficient management of debtors .

9. It is concluded that from the table 4.10.1,clar that working capital turnover ratio of

the bank from the year 2009 to 2013 A higher ratio indicates efficient utilization of

working capital and low ratio indicates inefficient utilization, comparatively in the year

2012 & 2013 net sales were decreased .

10. It is inferred that from the table 4.11.1,clear that the gross profit ratio of the bank

from the year 2009 to 2013 subsequently increase and decrease every year.

11. It is showed that from the table 4.12.1,clear that the net profit ratio of the bank


12. It is concluded that from the table 4.13.1,clear that the operating ratio of the bank


13. It is inferred that from the table 4.14.1,clear that the earning per share of the bank

from the year 2009 to 2013 in the year 2009 has heavy loss of the bank to pay dividend to

its equity share holders.

14. It is showed that from the table 4.15.1,clear that the price earnings ratio of the

bank from the year 2009 to 2013,negative earning ratio affects the market price of the

shares.

15. It is concluded that from the table 4.17.1,clear that the return on investment of the

bank from the year 2009 to 2013 subsequently increase and decrease every year.

16. It is inferred that from the table 4.19.1,clear that the return on total assets of the

bank from the year 2009 to 2013, subsequently increase and decrease every year.

5.2 SUGGESTIONS

1. The liquidity position of the company can be utilized in a better or other effective

purpose.

2. The bank can be use the credit facilities provided by the creditors.

3. Efforts should be taken to increase the overall efficiency in return out of capital

employed by making used of the available resource effectively.

4. The bank can increase its sources of funds to make effective financial analyze

system for more profits to be earn in upcoming years.

5. Quick liabilities could be reducing to avoid un certainty of fund flow of the bank

to manage financial position in effective manner.

6. Utilization of fixed assets is very low its affects the ineffective utilization of

resources so the bank can take necessary action to use effective utilization of

resources.

7. Borrowing more long term debt by the bank it affects the claims of owners more

than outsiders.

8. Improve cash position of the bank because bank fails to meet cash obligation

because cash ratio is less than ideal ratio.

5.3 CONCLUSION

The study is made on the topic financial performance using ratio analyze with five

years data in dindigul central co operative bank. Finance is said to be an important factor

of business it is the life blood of any bank for the growth and development of an bank, it

financial system should be strong and perfect. The study will reveals the financial

performance of the company from the past 5 years starting from 2009 to 2013.various

ratio analysis are helpful in evaluating the efficiency of performance in dindigul central

co operative bank, dindigul. The financial performance of the bank for the five years is

analyses and it is proved that the bank is financially sound

Date post:	23-Oct-2015
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DCCB Financial Performance 1

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