Professional Documents
Culture Documents
Executive Summary
INTRODUCTION
Working capital management has its own significance in the day to day
operations of the business working capital in the industry indicates the
effective utilization of working capital is the format requirement of any
industry.
RESEARCH METHDOLOGY
Sources of data
1) Primary Data:
2) Secondary Data;
The secondary data has been collected from the annual reports of
the bank, last three years balance sheet and profit loss account.
The scope of the study is to identify the areas of the control to have
better over various components of working capital management are
operating in nature and not our time decision.
BANK PROFILE
BANK PROFILE
HEAD OFFICE
GULBARGA
Krishna Grameena Bank was established in the year 1978. The bank has
completed 29 years of its meaningful service to the people of Gulbarga
and Bidar districts. Since inception the bank is striving hard to achive its
set objectives in its area of operation. The bank has now extended its
coverage to all the urban and semi urban centers in both the districts.
The head office building has been well equipped with centralized air
conditioning, computerized, functioning, solar lighting, modern gadgets
and a sprawling well maintained garden. The head office premises is
regarded as one of the BEST CORPORATE OFFICE not only in
Gulbarga city but also in the entire Hyderabad Karnataka Area. The bank
enjoys the popularity as the PEOPLE’S BANK in the area.
The Krishna Grameena Bank is based on the traditional Indian value of services to
the community, bank is reputed as one of the well run banks in the community of
public sector banks in the country.
The bank has been richly endowed with a relatively young, dynamic and efficient
manpower, which is the key factor of the bank success. Excellence in performance
and uniqueness in customer service form the central core of the banks
organizational culture. The growing confidence of its clientele is well reflected in
the banks performance in all critical areas of its operations all through the years.
The bank has bagged third prize from NABARD for best performances in
SHG Bank linkage programme in Karnataka State during 2005- 2006.
The Bank is one of the two RRBs in India selected by NABARD for
implementation of smart credit pilot project were in processor card are used by
SHG member to know balance in their SB A/c and to draw the money without
bothering to Branch Manager /Rural Development Officer.
1. Directors Report:
The board of directors have pleasure in presently the annual report together
with balance sheet and profit and loss account of the bank for the five years
The bank has put in place a well articulated frame work of 3 P’s (people,
process, products) to identify and execute new initiatives to accelerate business
growth on sound and sustainable lines. This frame work is also designed to
improve customer engagement at all customer touch points.
2. Branch Network:
As at the end of the financial year, the bank is having a well spread out
network of 109 branches, 76 in Gulbarga districts and remaining 33 in Bidar
district.
During the financial year 2007-2008, the bank has opened 4 new branches
two in Gulbarga district and two in Bidar districts. There are 4 area officer of
which 3 are in Gulbarga districts situated at Gulbarga, Sedam, and Shahapur and
one in Bidar.
3. Share Capital:
The bank has an authorized share capital of Rs.50000/- and an issued and
paid up capital of Rs.10000 thousands contributed by the three share holders viz,
During the year 1997-1998 the bank was taken up for restructing and a sum
of Rs.251800 thousands was sanctioned to cleanse the ‘Balance Sheet’. According
an aggregate sum of Rs.187577 thousands has been received from all the three
share holders proportionately in two branches. The balance amount, in spite of our
best efforts was not released till date. As on 31/03/2008 the position of share
capital deposit was as under:
5.
The bank has achieved a growth of Rs.1686786 thousands during the year.
The break up of existing level of deposits is as under:
1. The growth in deposits during the year was a nefty 28.85% when compared
to the p.y. This is higher than all scheduled commercial banks growth rate of
23.10% during the year 2007-2008.
2. The percentage of demand deposits has came down during the year on
account of some of the state government departments preferring banks with core
bank facility and shifted their accounts from Krishna Grameena Bank.
6. Borrowings:
Borrowings from NABARD and sponsor bank are the major sources of
funds for our bank besides deposits. The detailed of limit sanctioned and refinance
outstanding as on 31/03/2009 are as under The bank continued to make prompt
repayments to NABARD and the sponsor bank.
Investment:
Kisan credit cards under KGB brand name Krishna Krishi card, the bank has
disbursed an amount of Rs.3611500 thousands to formers. During the year the
bank has issued new KKC card to 6514 formers with this the total number of KKC
issued by the bank has shot up to 142500.
All eligible borrowers have been issued with the credit cards and personal
accident insurance cover has been provided to all eligible card holders (i.e. below
the stipulated age of 70 years) under personal accident insurance scheme (PAIS).
The share of premia borne by the bank is Rs.1361 thousands as against Rs.681
thousands contributed by borrowers.
The bank has sanctioned 432 SCC during the year 2007-2008 taking the
cumulative number of cards issued to 9858 as against 9426 as on 31/03/2007.
Amount outstanding also increased to Rs.2329.83 lakhs as on 31/03/2009 from
2150.55 lakhs as on March 2008.
Spread Analysis:
with bank having core banking facility for keeping their deposits. However, it is
gratifying to note management substantially from 2.85% as on 31/03/2007 to
2.41% as on 31/03/2008 variation in all other ratio are marginal.
The bank has adopted a fair transfer price mechanism on funds lent to and
borrowed from internally as under;
1. Interest rate on funds that lent to head office on total monthly average
deposits at 9.50% p.a.
2. Interest rate on funds borrowed from head office on total monthly average
advances at 3.00% p.a.
OFFICE
SL. Name of The Taluk & PIN
Telephone
NO. BRANCH. District CODE
Numbers
1. NehruGunj GULBARGA 958472- 585104
268263
2. Harsoor. Taluka & 958478- 585102
District- 222754
Gulbarga
3. Dongargaon. Taluka & 958478- 585313
District- 224059
Gulbarga
4. Sonth. Taluka & 958478- 585324
District- 225808
Gulbarga
5. Hagargundgi. Taluka & 958472- 585308
District- 213259
Gulbarga
6. Aland. Taluk- Aland, 958477- 585302
Dist- Gulbarga 202530
7. SalgeraVK Taluk- Aland, 958477- 585316
Dist- Gulbarga 222182
8. Bhusnoor. Taluk- Aland, 958440- 585268
Dist- Gulbarga 210140
9. Khajuri Taluk- Aland, 958477- 585314
Dist- Gulbarga 227449
10. Madiyal. Taluk- Aland, 958440- 585336
Gulbarga 200207
15. Naganoor. Tq Shorapur. Dist 958443- 585215
Gulbarga 271073
16. Malagatti. Tq Shorapur. Dist 958443- 585216
Gulbarga 329784
17. Hunsagi. Tq Shorapur. Dist 958444- 585215
Gulbarga 200087
18. Yergol. Tq Yadgir. Dist 958473- 585218
Gulbarga 215566
19. Gajarkot. Tq Yadgir. Dist 958473- 585214
Gulbarga 225605
20. Putpak. Tq Yadgir. Dist 958473- 585214
Gulbarga 225429
21. Kadechur. Tq Yadgir. Dist 958473- 585374
Gulbarga 281055
22. Konkal. Tq Yadgir. Dist 958473- 585321
Gulbarga 213737
23 Gurmitkal. Tq Yadgir. Dist 958441- 585214
Gulbarga 225363
SHRI V. M. HAGARAGI
CHAIRMAN
DIRECTORS
1.SHRI P. THOMAS
ASSISTANT GENERAL MANAGER
Rural Planning and Credit Department
Reserve Bank of India
BANGALORE
2.SHRI P. G. SHET
District Development Manager
National Bank for Agriculture and
Rural Development (NABARAD)
GULBARGA
8. SHRI.U.N.Narayana Maiya
Assistant General Manager
State Bank of India
Regional Business Office
GULBARGA
No due certificate
7 Rs.150/-
(Other than Agriculture)
Rs.250/- per lac
8 Solvency certificate Min: Rs.1000/-
Max: Rs.15000/-
Minimum balance Service charges
-Nil-
Rs.150/- per quarter
9 SB Acs. (ordinary)
Rs.600/- per quarter
SB Acs. (Ch.Book)
Rs.1200/- per quarter
C.A. (Individual)
C.A. (Others)
Account closing before 12 months
10 Rs.200/-
The bank has bagged third prize from NABARD for best performances in
SHG Bank linkage programme in Karnataka State during 2005- 2006.
The Bank is one of the two RRBs in India selected by NABARD for
implementation of smart credit pilot project were in processor card are used by
SHG member to know balance in their SB A/c and to draw the money without
bothering to Branch Manager /Rural Development Officer.
Our Values:
Integrity
Commitment
Passion
Seamlessness
Speed
Achievement in 2008-2009:
Business turnover crossed Rs.1566 crores surpassing the MoU signed with
state bank of India. Growth over the previous year was to the extant of 24.68%
PROFIT: Net profit earned was Rs.19.54 crores as against the target of
Rs18.00 crores.
100% computerization of the bank has been completed. All the branches
completed annual closing work successfully using computer.
Organization Structure:
The Bank’s head officer is located at Kusnoor Road Gulbarga in It’s own
Building with centralized air conditioning the Bank is headed by chairman a TEG
Scale V officer on deputation from state Bank of India & is of the rank of asst
general manager. The manager (Audit & vigilance) has responsibility of Audit &
vigilance of all Branches / area officers and various Department Head office
Manager are as under Head office.
Personal Department
The main reason to open this branch in Gulbarga was as this region was not
represented by the banks and the town was very much potential for the banking
service. Hence the branch was opened so as to improve this area with new things
by providing services to the customers easily. Initially at the starting stage when
this bank was opened lit has started with the numbers of 100 customers. The main
aim or the main motive is that for opening a branch in Gulbarga is to provide a
value based banking service to the customers and the development of bank from
strength to strength.
The bank’s Head Office is located at Kusnoor road Gulbarga in the own building
with centralized air-conditioning. The bank is headed by a chairman.TEG Scale-V
officer on deputation from state bank of India the General Manager is an also on
deputation from SBI and is of the rank of asset General Manager (audit and
vigilance) has responsibility of audit vigilance of all branches /areas officers and
various department at head office.
INSTITUTE OF BUSINESS MANAGEMENT &RESEARCH HUBLI Page 32
KRISHNA GRAMEENA BANK
Chairman/board of directors
General Manager
Department
Area manager
heads
Clerical staff
Branch manger
SWOT ANALYSIS
S Strength
W Weakness
O Opportunit
STRENGTH:
All the branches of the bank have been brought under computerized
environment.
WEAKNESS:
OPPORTUNITIES:
Increased branch and ATM network will enable the bank to improve the
client base.
Sharing the ATM network with other banks will facilitate optimum use
of the banks infrastructure and resources.
THREATS:
The interest rates have continued to decline over the past few years. In
conditions of excess liquidity, interest earnings of banks may be affected.
Bank like any other industry are exposed to credit, market and operational
risks in the day to day operation.
THEORETICAL BACKGROUND
Introduction:
Gross working capital refers to the firm’s investment in current assets which can be
concerned into and within an accounting year (or operating cycle) and include
cash, short term securities, debtors (accounts receivable or book debts) bills
receivable and stock (inventory).
Gross working capital points to the arranging of funds to finance current assets.
Net working capital refers to the difference between current assets and current
liabilities current liabilities are those claims of outsiders, which are expected to
mature for payment within accounting year and include creditors (account
payable), bills payable and outstanding expenses Networking capital can be
positive or negative. A positive networking capital will rise when current asset
liabilities are in excess of current asset.
The firm should plan its operations in such a way that it should have neither
too much nor too little working capital. The total working capital requirement is
determined by a wide variety of factors. These factors however effect differently.
They also vary from time to time. The following factors are involved in the proper
assessment of the working capital.
Nature of business
Production cycle
Business cycle
The business fluctuation influence the size of working capital mainly during
the upward phase when boom conditions prevail, the need for working capital is
likely to grow to cover the bag between increased sales and receipt of cash as well
as invest in plant and machinery to meet the increased demand.
Credit policy
The credit policy concern to the sales and purchase also the working capital.
The credit policy influences the requirements of working capital in two ways,
Operating Efficiency
Marketing Cycle
The need for working capital to run day to day business activities cannot be
overemphasized. We will hardly find, a business firm, which doesn’t required any
amount of working capital.Indeed,firm differ in their requirements of the working
capital.
The firm has to invest enough funds in current assets for cash instantaneously. This
is always an operating cycle involved in the conversion of sales into cash.
The need of working capital is increased by raising prices of products and relative
inputs. On the other hand, the government and monitoring authorities pray their
own role to runs the malice in period of inflation. The control measures often take
the firm of deal money policy and restrictions credit.
play the most significant role in providing working capital finance. The sources of
finance that may be two type of financing.
Loan from financing institution the option is normally rules out, because
financial institutions do not provide finance for working capital requirements.
1. FLOATING OF DEBENTURES:
The issue of tapping public deposits is directly related to the image of the
company seeking to invite private deposits.
3. ISSUES OF SHARES:
Raising funds from operational profit poses problems for any banks. sufficient
requirements to finance additional working assets, still a largely feasible solution
has increase profitability through cost control and cost reduction measures
managing the cash operating cycle, rationalizing investor stock and so on.
The permanent working capital is the minimum level of current assets. Depending
upon the changes in production and sales, the need for working capital, over and
above permanent working capital, will Fluctuate.
The over and above the permanent working capital, the firm may also require
additional working capital in order to meet the requirements arising fluctuation in
sales volume. This extra working capital needed to support the increased volume of
sales.
In view of the freedom given by RBI, banks make their own assessment of credit
requirement of borrowers based on a comprehensive study of borrowers business
options i.e. taking into account the production/processing cycle of the industry as
well as the financial and other relevant parameters of the borrowers. Accordingly,
banks can decide the levels of holdings of each item of inventory as also of
RATIO ANALYSIS
RATIO ANALYSIS
Definition of ratio
3) Ratio facilitates inter firm and intra firm comparison, their by bringing out the
strength weakness and efficiency of the firm
While ratios are compared on a historical basis, though the time periods may be of
equivalent duration, the price level changes between the periods which may distort
the result if no allowances is made for this factor.
Since analysis is made on the basis of financial statement, this will have all the
limitations such as window dressing, improper valuation of assets, inclusion of
value of fiction assets etc
Nevertheless, ratio analysis is a useful too and could be used along with other
quantitative techniques in financial management to assess the financial health of an
organization.
The third step in analysis and interpretation of balance sheet is to calculate various
ratios. The various ratios can broadly classify into four categories namely:
1) Profitability Ratio
2) Liquidity Ratio
3) Leverage Ratio
4) Activity Ratio
A) Profitability Ratio
These ratios indicate whether the business has utilized the resources profitability.
Gross profit
Gross collection
Net profit
Gross collection
Operating cost
Gross collection
Operating profit
Gross collection
Capital employed
Net Worth
Gross collection
B) Liquidity ratio
Liquidity refers to the company’s ability to meet its current obligations. The
liquidity ratios, therefore, have to do with the size and relationship of current
liabilities which represent the obligations due and current assets, which presumably
provide the source from which these obligations will be met. A company is not
sounds financially unless it has adequate liquidity. The liquidity ratios gibe us the
liquidity position of the concern.
1) Current Ratio
Current ratio:
The current ratio of a concern is the ratio of its current assets and its current
liabilities such as creditors for materials and supplies, rates and taxes etc. it
indicates the ability to meet maturing current liabilities from amount realized out
of current assets.
It is calculated as follows
Current assets
CURRENT RATIO =
Current liabilities
This ratio is not only a measure of the company’s liquidity but also shows
the margin the company has for its current assets to shrink before it gets into
difficulty in meeting current obligations.
Though the rule of thumbs is that the current ratio should be around 2:1
banks leading policy norms stimulate the bench mark current ratio of 1.25:1.00
while considering all new proposals, with satisfactory credit ratings, for working
capital limits. However, its applicability depends on such things as the type
industry and outlook for the industry. If the company has a rapid turnover of
inventory and can easily collect its dues, the ratio can be somewhat lower. If the
ratio drops to 1:1 caution should exercised when the current liabilities exceed the
current asset the concern is in an unstable situation. Caution should also be
exercised if the current ratio has been dropping over a period of several years.
Current liabilities
The rule of thumb is that the quick ratio should not be below 1:1 if the quick ratio
is low but the current ratio is high. It may bean that the company is carrying a very
high level of inventory and is not able to sell its finished products.
In interpreting this liquidity ratio the composition of the current assets is very
important. It is necessary that proportion of different current asset to the total as
well as their condition should be taken into account before concluding that the ratio
is favorable or unfavorable. It indicates the ability to meet maturing current
liabilities from readily reliable current asset.
C) Leverage Ratios
owners in the business in relation to long term liabilities are secured by fixed assets
and whether the company’s earning are sufficient to pay the loan installments and
the interest on the due dates.
The debt equity ratio is the relationship between the owner’s contribution
(capital, undistributed reserves and surpluses, etc) and the long term liabilities of
an enterprise, this ratio can be calculated asunder:
The ratio should be such that there is a higher capital or equity base. In these
situations when the concern is wound up, the creditors have a bigger protection
buffer. Also banks lending policy stipulates promoters contribution for term loan
@ 25% while giving indication that the ratio of total outside liability to tangible net
worth shall not normally go beyond 3:1.
Term loans are usually secured by fixed assets. This ratio’s shows the
coverage of long term uses by long term sources. It is computed as follows:
Net fixed assets (i.e. after depreciation) + other non current assets
Long term liabilities + tangible net worth
The reason is that, when a concern is in liquidation, its fixed assets should be
able to realize the amount to pay its long term debts. If this ratio is too low, it
implies that the assets of the concern are worth very little.
Activity Ratio
This ratio indicates how effectively the funds have been utilized in the
business. If the business keeps large funds idle, there is no written on these funds.
If all the funds available are invested than there will not be cash balances to meet
various contingencies in future as and when they occur.
Average Inventory
This ratio indicates the number of times the average stock of finished goods
is turned over or sold during a year. It also indicates the extent of overstocking or
under stocking of finished goods and the presence of non moving stock.
This ratio indicates the rate at which amounts are collected from debtors. It
indicated even the liquidity of the concern. The average realization period of the
business unit is being expressed in terms of number of sales (credit)
Uses:
This ratio indicates the rate of which creditors are being paid by the unit i.e.
average payment period is expressed in terms of number of day’s purchases
(credit).
Net Sales
DATA ANALYSIS
AND
INTERPRETATION
A. PROFITABILITY RATIO
Gross Profit
Net Sales
Note:
In bank their will be no gross profit and as well as net sales, when their will
be purchase and sell it than the gross profit will be calculated. So, it is considered
as non trading activities.
Net Profit
Gross Collection
Net profit
250000
216750
195405
200000
165017
140660
150000
115034
100000
50000
0
2004-05 2005-06 2006-07 2007-08 2008-09
Net profit
Operating cost
Gross collection
1200000
1000000
800000
600000
Operating Cost
Gross Collection
400000 Ratio
200000
0
2005-06
2006-07
2007-08
2008-09
2009-10
Operating Profit
Gross Collection
Gross Collection
250000
200000
150000
216750
100000 195405
165017
140660
115034
50000
0
2004-05 2005-06 2006-07 2007-08 2008-09
Operating profit
Capital Employed
Operating
Year Profit Interest Capital Employed Ratio
& Tax
2005-06 441170 657920 67.05
2006-07 527204 667864 78.93
2007-08 165017 828692 19.91
2008-09 195405 1011800 19.31
2009-10 1083320 1198354 90.40
= 341829 + 165017
= 506346
Year 2009-2009
= 659837
= 6462770
= 8767886
= 11683276
= 14592307
= 18724565
1200000
1083320
1000000
800000
600000 527204
441170
400000
195405
165017
200000
0
2004-05 2005-06 2006-07 2007-08 2008-09
Interpretation:
The above table shows that the profit before interest and tax increased in
year 2008-09 and as well as capital employed also. Ratio is highest in the year
2008-09. It shows that in year 2008-09 bank earned more profit.
Net Worth
Year 2005-06
= 6462770
Year 2006-07
= 1854886
Year 2007-08
= 11683276
Year 2008-09
= 14592307
Year 2009-2010
= 18724565
1200000
1083320
1000000
800000
600000 527204
441170
400000
195405
165017
200000
0
2004-05 2005-06 2006-07 2007-08 2008-09
Net profit
available to No. of equity
Year Ratio
equity share shares
holders
2005-06 216750 10000
2006-07 140660 10000
2007-08 165017 10000 16.50
2008-09 195405 10000 19.54
2009-10 115034 10000
250000
216750
195405
200000
165017
150000 140660
100000
50000
0
2004-05 2005-06 2006-07 2007-08
B. LIQUIDITY RATIO
Current Assets
1. Current Ratio =
Current Liabilities
Note : This ratio is also non-trading activities. So, it is not applicable to banks.
Current Liabilities
Note : In bank inventory will be not calculated, this is non trading activities.
C. LEVERAGE RATIO
Years 2007-08
= 1365924 + 6601190
= 7967114
Years 2008-09
= 9799661
Years 2009-10
= 5014099
Years 2006-07
= 6413663
Years 2008-09
= 11830372
5014099
11830372
5249273
7967114
9799661
D. ACTIVITY RATIO
Note: In bank cost of goods sold and average inventory will be non trading
activities. In bank their will be no cost of goods sold, so it is not calculated.
Net Sales
Fixed Assets
Note: Current assets turnover ratio considered as ideal 2 times but there will be no
nil sales and fixed assets, how could be possible in bank, so it is considerable as
non-trading activities.
PROFIT AND LOSS STATEMENT FOR THE YEAR ENDING 2004 -05
4 1066877 800175
Other Liabilities and 419633 374057
5
Provisions
TOTAL 5817693 4651839
ASSETS
Cash and Balance with 243546 260539
6
reserve Bank of India
Balance with Banks and 401531 360275
Money at Call and Short 7
Notice
Investments 8 1084775 1146431
Advances 9 3929324 2668868
Other Assets 10 22406 18045
Fixed Assets 11 136111 197681
TOTAL 5817693 4651839
INSTITUTE OF BUSINESS MANAGEMENT &RESEARCH HUBLI Page 86
Contingent Liabilities 12 36487 40889
Bills for Collection ----- -----
KRISHNA GRAMEENA BANK
Total Rs. ..
Contingent Liabilities
FINDINGS:
It is found that the bank is efficient in achieving the budgeted target. The
bank is efficient in mobilizing the funds from customers.
From the last five years data analyzed, it is found that the net movements
of Non performing of assets are in cyclic order. In the year 2002-2003 it was
high and it decreased in the year 2004-05, from 2005-06 it is again increasing
This shows that bank was efficient in recovery in the year 2004-05. This
could be due to recovery camps, recovery awareness camps etc adopted during
that year.
It is noticed found that the bank related reasons that contribute to increase
in non performing assets are improper identification of borrower of activity,
inadequate appraisal, delay in loan sanctioning, under and over financing,
insufficient gestation or repayment period, lack of post-disbursement follow-up
,etc
Some of the other bank related problems are lack of borrower contact,
inadequate understanding of clientele, lack of recovery efforts, inefficient
internal control systems, low motivation and commitment of staff,
perception of bank as charity institution, poor industrial relations climate, lack
of information to borrower on due dates, amount etc.
SUGGESTIONS:
During the study it was convincingly proved that NPA’s have viable impact
on the loan portfolio of any financial institutions and banks affecting their balance
sheet, which ultimately affects their profits.
But it is also seen that banks and financial institutions are trying their best of
reduce the percentage of NPA’s in their banks. While the ratio of NPA’s to loan
assets can be brought down through the various measures, the biggest contribution
must be through recovery, up gradation and selective write off.
When ever any borrowing units face problems may be the beyond the
control of management, the bank should immediately find out the possibility where
the unit can be brought back to normal health by giving some concessions like
cutoff in interest appropriate rehabilitation package be released in time otherwise
early action for recovery of entire loan be taken in order to minimize the expected
losses in future.
They should create their own data bank of various type of information
and do unbiased appraisals, which should cover technical, commercial,
financial, economic and management aspects.
Try to deal softly with NPA customers and motivate them to repay the
loan.
CONCLUSION:
Non-performing asset is one which does not generate income for the bank.
In other words, an advance account which ceases to yield income is a non-
performing asset.
NPA is not just a problem for banks, but also bad for the economy of the
country. The money which is locked in NPA is not available for productive
activities. It adversely affects the, profit of bank and results in higher rate of
interest to their diligent credit customers. Steps should be taken appropriately on
time to avoid NPAs. Qualitative appraisal, supervision and follow ups should be
taken for the present advances to avoid further NPAs .It is essential to restructure
the strategies for recovery process, this will improve banks general capabilities and
meets the prudential requirements.
BIBLIOGRAPHY
INSTITUTE OF BUSINESS MANAGEMENT &RESEARCH HUBLI Page 99
KRISHNA GRAMEENA BANK
BIBLIOGRAPHY
Books:
Books Referred
Websites