CHAPTER -1ST

INTRODUCTION

o WHAT IS WORKING CAPITAL?

Meaning & Definition of Working Capital

o WHAT IS WORKING CAPITAL MANAGEMENT?

Meaning & Definition of Working Capital
Management

CHAPTER 1ST
[1]
 INTRODUCTION

WHAT IS WORKING CAPITAL?

o Meaning of Working Capital :
The capital of a business which is used in its day-to-day trading
operations, calculated as the current assets minus the current liabilities.
Working capital or WC is calculated as:

WORKING CAPITAL = CURRENT ASSETS CURRENT LIABILITIES

Working Capital refers to that part of the firms capital, which is required
for financing short-term or current assets such as marketable securities,
debtors and inventories.

Funds thus, invested in currents assets keep revolving fast and are
constantly converted into cash and this cash flow out again in exchange
for other current assets. Working Capital is also known as revolving or
circulating capital or short-term capital.

o Definition of Working Capital :

Working capital is a common measure of a companys overall health.

Working capital is a measure of both a company's efficiency and its short-

term financial health.

Working Capital is also known as circulating capital or current capital.

The use of the term circulating capital instead of working capital
indicates that its flow is circular in nature.

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Working capital is the life-blood and nerve centre of a business firm. The
importance of working capital in any industry needs no special emphasis.
No business can run effectively without a sufficient quantity of working
capital. It is crucial to retain right level of working capital. Working capital
management is one of the most important functions of corporate
management. A business enterprise with ample working capital is always
in a position to avail advantages of any favorable opportunity either to

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buy raw materials or to implement a special order or to wait for enhanced
market status. Working capital can be utilized for the payment of lease,
employee's payroll, and pretty much any other operating costs that are
involved in the everyday life of business. Even very successful business
owners may need working capital funds when the unexpected
circumstances arise. The overall success of the company depends upon its
working capital position. So, it should be handled properly because it
shows the efficiency and financial strength of company.

Figure: WORKING CAPITAL CYCLE

STRUCTURE OF WORKING CAPITAL

The different elements or components of current assets and current

liabilities constitute the structure of working capital which can be
illustrated in the shape of a chart as follows:

CURRENT LIABILITIES CURRENT ASSETS

Bank Overdraft Cash and Bank Balance
Creditors Inventories: Raw-Material
Work-in-progress
Finished Goods
Outstanding Expenses Spare Parts
Bills Payable Accounts Receivables
Short-term Loans Bills Receivables
Proposed Dividends Accrued Income
Provision for Taxation, etc. Prepaid Expenses
Short-term Investments

o CLASSIFICATION OF WORKING CAPITAL

The quantitative concept of Working Capital is known as gross working

capital while that under qualitative concept is known as net working

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 capital. Working capital can be classified in various ways. The important
classifications are as given below:

OT Y n t h e
bP aE s i s o f
CS O N C E P
TO U F A L
CW L A S S I F
IO C R A T I O N
K I
N
G
CC AA
P I
TT AA
L
1. ON THE BASIS OF CONCEPTUAL CLASSIFICATION

There are two concept of working capital viz., quantitative and

qualitative. The quantitative concept takes into account as the current
assets while the qualitative concept takes into account the excess of
current assets over current liabilities. Deficit of working capital exists
where the amount of current liabilities exceeds the amount of current
assets. The above can be summarised as follows:

GROSS WORKING CAPITAL

The gross working capital is the capital invested in the total current
assets of the enterprises current assets are those Assets which can
convert in to cash within a short period normally one accounting year.

Gross Working Capital = Total Current Assets

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 NET WORKING CAPITAL

Net Working Capital = Excess of Current Assets over Current Liabilities

Net working capital can be positive or negative. When the current assets
exceeds the current liabilities are more than the current assets. Current
liabilities are those liabilities, which are intended to be paid in the ordinary
course of business within a short period of normally one accounting year
out of the current assts or the income business.

NET WORKING CAPITAL = CURRENT ASSETS CURRENT

LIABILITIES.

CONSTITUENTS OF CURRENT ASSETS

1) Cash in hand and cash at bank

2) Bills receivables

3) Sundry debtors

4) Short term loans and advances.

5) Inventories of stock as:

a. Raw material

b. Work in process

c. Stores and spares

d. Finished goods

6. Temporary investment of surplus funds.

7. Prepaid expenses

8. Accrued incomes.

9. Marketable securities

CONSTITUENTS OF CURRENT LIABILITIES

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1. Accrued or outstanding expenses.

2. Short term loans, advances and deposits.

3. Dividends payable.

4. Bank overdraft.

WORKING CAPITAL DEFICIT

Working Capital Deficit = Excess of Current Liabilities over Current Assets

2. ON THE BASIS OF VARIABILITY/ TIME

Gross Working Capital can be divided in two categories viz., (i) permanent
or fixed working capital, and (ii) Temporary, Seasonal or variable working
capital. Such type of classification is very important for hedging decisions.

PERMANENT OR FIXED WORKING CAPITAL

Permanent or fixed working capital is minimum amount which is

required to ensure effective utilization of fixed facilities and for
maintaining the circulation of current assets. Every firm has to maintain a
minimum level of raw material, work- in-process, finished goods and cash
balance. This minimum level of current assets is called permanent or fixed
working capital as this part of working is permanently blocked in current
assets.
As the business grow the requirements of working capital also increases
due to increase in current assets.
Reserve Working Capital is a type of fixed working capital, which is
in reserve form, like Reserves and Surplus.
Regular Working Capital is the fixed amount of working capital
which is used in regular day to day operations.

TEMPORARY OR VARIABLE WORKING CAPITAL

Temporary or variable working capital is the amount of working capital

which is required to meet the seasonal demands and some special
exigencies. Variable working capital can further be classified as seasonal
working capital and special working capital. The capital required to meet
the seasonal need of the enterprise is called seasonal working capital.
Special working capital is that part of working capital which is required to
meet special exigencies such as launching of extensive marketing for
conducting research, etc.

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Temporary working capital differs from permanent working capital in the
sense that is required for short periods and cannot be permanently
employed gainfully in the business.
Temporary Working Capital = Total Current Assets Permanent
Current Assets

3. ON THE BASIS OF FINANCIAL REPORTS

The information of working capital can be collected from Balance Sheet or

Profit and Loss Account; as such the working capital may be classified as
follows:

CASH WORKING CAPITAL

This is calculated from the information contained in profit and loss

account. This concept of working capital has assumed a great significance
in recent years as it shows the adequacy of cash flow in business. It is
based on Operating Cycle Concepts which is explained later in this
chapter.

BALANCE SHEET WORKING CAPITAL

The data for Balance Sheet Working Capital is collected from the balance
sheet. On this basis the Working Capital can also be divided in three more
types, viz., gross Working Capital, net Working Capital and Working Capital
deficit.

________?

IMPORTANCE OR ADVANTAGE OF ADEQUATE WORKING

CAPITAL:-

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 SOLVENCY OF THE BUSINESS: Adequate working capital helps in
maintaining the solvency of the business by providing uninterrupted of
production.

Goodwill: Sufficient amount of working capital enables a firm to make

prompt payments and makes and maintain the goodwill.

Easy loans: Adequate working capital leads to high solvency and

credit standing can arrange loans from banks and other on easy and
favourable terms.

Cash Discounts: Adequate working capital also enables a concern to

avail cash discounts on the purchases and hence reduces cost.

Regular Supply of Raw Material: Sufficient working capital ensures

regular supply of raw material and continuous production.

Regular Payment Of Salaries, Wages And Other Day TO Day

Commitments: It leads to the satisfaction of the employees and raises
the morale of its employees, increases their efficiency, reduces
wastage and costs and enhances production and profits.

Exploitation of Favourable Market Conditions: If a firm is having

adequate working capital then it can exploit the favourable market
conditions such as purchasing its requirements in bulk when the prices
are lower and holdings its inventories for higher prices.

Ability to Face Crises: A concern can face the situation during the
depression.

Quick And Regular Return On Investments: Sufficient working

capital enables a concern to pay quick and regular of dividends to its
investors and gains confidence of the investors and can raise more
funds in future.

High Morale: Adequate working capital brings an environment of

securities, confidence, high morale which results in overall efficiency in
a business.

EXCESS OR INADEQUATE WORKING CAPITAL:-

Every business concern should have adequate amount of working

capital to run its business operations. It should have neither redundant

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 or excess working capital nor inadequate nor shortages of working
capital. Both excess as well as short working capital positions are bad
for any business. However, it is the inadequate working capital which is
more dangerous from the point of view of the firm.

DISADVANTAGES OF REDUNDANT OR EXCESSIVE WORKING

CAPITAL:-

1. Excessive working capital means ideal funds which earn no profit for
the firm and business cannot earn the required rate of return on its
investments.

2. Redundant working capital leads to unnecessary purchasing and

Accumulation of inventories.

3. Excessive working capital implies excessive debtors and defective

credit policy which causes higher incidence of bad debts.

4. It may reduce the overall efficiency of the business.

5. If a firm is having excessive working capital then the relations with

banks and other financial institution may not be maintained.

6. Due to lower rate of return n investments, the values of shares may

also fall.

7. The redundant working capital gives rise to speculative transactions

DISADVANTAGES OF INADEQUATE WORKING CAPITAL:-

Every business needs some amounts of working capital. The need for
working capital arises due to the time gap between production and
realization of cash from sales. There is an operating cycle involved in sales
and realization of cash. There are time gaps in purchase of raw material
and production; production and sales; and realization of cash.

Thus working capital is needed for the following purposes:

For the purpose of raw material, components and spares.

To pay wages and salaries

To incur day-to-day expenses and overload costs such as office

expenses.

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 To meet the selling costs as packing, advertising, etc.

To provide credit facilities to the customer.

To maintain the inventories of the raw material, work-in-progress,

stores and spares and finished stock.

For studying the need of working capital in a business, one has to study
the business under varying circumstances such as a new concern requires
a lot of funds to meet its initial requirements such as promotion and
formation etc. These expenses are called preliminary expenses and are
capitalized. The amount needed for working capital depends upon the size
of the company and ambitions of its promoters. Greater the size of the
business unit, generally larger will be the requirements of the working
capital.

The requirement of the working capital goes on increasing with the

growth and expensing of the business till it gains maturity. At maturity the
amount of working capital required is called normal working capital.

There are others factors also influence the need of working capital in a
business.

FACTORS DETERMINING THE WORKING CAPITAL

REQUIREMENTS:-

1. NATURE OF BUSINESS: The requirements of working is very limited in

public utility undertakings such as electricity, water supply and railways
because they offer cash sale only and supply services not products, and
no funds are tied up in inventories and receivables. On the other hand the
trading and financial firms requires less investment in fixed assets but
have to invest large amt. of working capital along with fixed investments.

2. SIZE OF THE BUSINESS: Greater the size of the business, greater is

the requirement of working capital.

3. PRODUCTION POLICY: If the policy is to keep production steady by

accumulating inventories it will require higher working capital.

4. LENTH OF PRDUCTION CYCLE: The longer the manufacturing time

the raw material and other supplies have to be carried for a longer in the
process with progressive increment of labour and service costs before the
final product is obtained. So working capital is directly proportional to the
length of the manufacturing process.

5. SEASONALS VARIATIONS: Generally, during the busy season, a firm

requires larger working capital than in slack season.

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6. WORKING CAPITAL CYCLE: The speed with which the working cycle
completes one cycle determines the requirements of working capital.
Longer the cycle larger is the requirement of working capital.

7. RATE OF STOCK TURNOVER: There is an inverse co-relationship

between the question of working capital and the velocity or speed with
which the sales are affected. A firm having a high rate of stock turnover
will needs lower amt. of working capital as compared to a firm having a
low rate of turnover.

8. CREDIT POLICY: A concern that purchases its requirements on credit

and sales its product / services on cash requires lesser amt. of working
capital and vice-versa.

9. BUSINESS CYCLE: In period of boom, when the business is prosperous,

there is need for larger amt. of working capital due to rise in sales, rise in
prices, optimistic expansion of business, etc. On the contrary in time of
depression, the business contracts, sales decline, difficulties are faced in
collection from debtor and the firm may have a large amt. of working
capital.

10. RATE OF GROWTH OF BUSINESS: In faster growing concern, we

shall require large amt. of working capital.

11. EARNING CAPACITY AND DIVIDEND POLICY: Some firms have

more earning capacity than other due to quality of their products,
monopoly conditions, etc. Such firms may generate cash profits from
operations and contribute to their working capital. The dividend policy
also affects the requirement of working capital. A firm maintaining a
steady high rate of cash dividend irrespective of its profits needs working
capital than the firm that retains larger part of its profits and does not pay
so high rate of cash dividend.

12. PRICE LEVEL CHANGES: Changes in the price level also affect the
working capital requirements. Generally rise in prices leads to increase in
working capital.

Others factors: These are:

Operating efficiency.

Management ability.

Irregularities of supply.

Import policy.

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 Asset structure.

Importance of labour.

Banking facilities, etc.

MANAGEMENT OF WORKING CAPITAL:-

Management of working capital is concerned with the problem that

arises in attempting to manage the current assets, current liabilities. The
basic goal of working capital management is to manage the current assets
and current liabilities of a firm in such a way that a satisfactory level of
working capital is maintained, i.e. it is neither adequate nor excessive as
both the situations are bad for any firm. There should be no shortage of
funds and also no working capital should be ideal. WORKING
CAPITALMANAGEMENT POLICES of a firm has a great on its probability,
liquidity and structural health of the organization. So working capital
management is three dimensional in nature as

1. It concerned with the formulation of policies with regard to profitability,

liquidity and risk.

2. It is concerned with the decision about the composition and level of

current assets.

4. It is concerned with the decision about the composition and level of

current liabilities.
5.

WHAT IS WORKING CAPITAL MANAGEMENT?

o Meaning of Working Capital Management :

Working Capital Management is derived with three different words, with

different meanings.

WORKING means work-in-progress or doing work.

CAPITAL is the amount of cash investments involved in the business for

its operations.

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MANAGEMENT is an art of getting work done through others, by proper
planning, organizing, staffing, directing, communicating, co-coordinating
and with systematic control.

Thus, working capital management or WCM is simply means the

management of working capital of an organization.

The goal of working capital management is to ensure that a firm is

able to continue its operations and that it has sufficient ability to satisfy
both maturing short-term debt and upcoming operational expenses. The
management of working capital involves managing inventories, accounts
receivable and payable and cash.

Working capital management refers to a company's managerial

accounting strategy designed to monitor and utilize the two components of
working capital, current assets and current liabilities, to ensure the most
financially efficient operation of the company. The primary purpose of
working capital management is to make sure the company always maintains
sufficient cash flow to meet its short-term operating costs and short-
term..debt..Obligation.

The main objective of working capital management are

as follows;

The basic objective of working capital management is to minimize cost to

the firm whether managing cash, receivables (Sunday debtors) or
inventory or miscellaneous current assets, minimize risk to the company
on receivables, ensure just level of inventory to operate full level of
capacity with minimum inventory.

It also implies that as far as possible miscellaneous current assets should

be utilized for companys operations. In other words the working capital
management should aim to optimize production and sales with minimum
risk and cost. However, this had not been achieved by cement industry
because scientific techniques have not been utilized and decisions have been

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taken on ad hoc basics. It seems from the analysis of data of selected sample companies that
in cement industry by and large there is no proper working capital management. Every
decision has been left out to market forces without working out cost benefit analysis or
applying various formulas suggested by experts. This is very much evident from wide
variations in various ratios from company to company and in different years for the same
company.

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 CHAPTER 2ND
INTRODUCTION TO BANKING

o INTRODUCTION TO BANKING INDUSTRY

History of Indian Banking

o INTRODUCTION TO BANKING SYSTEM IN INDIA

Banking System in India

CHAPTER 2ND
INTRODUCTION TO BANKING

[16]
 INTRODUCTION TO BANKING INDUSTRY

BANKING INDUSTRY
The Banking Industry was once a simple and reliable business that took
deposits from investors at a lower interest rate and loaned it out to
borrowers at a higher rate. However deregulation and technology led to a
revolution in the Banking Industry that saw it transformed. Banks have
become global industrial powerhouses that have created ever more
complex products that use risk and securitization in models that only PhD
students can understand. Through technology development, banking
services have become available 24 hours a day, 365 days a week, through
ATMs, at online banking, and in electronically enabled exchanges where
everything from stocks to currency futures contracts can be traded. The
Banking Industry at its core provides access to credit. In the lenders case,
this includes access to their own savings and investments, and interest
payments on those amounts. In the case of borrowers, it includes access
to loans for the creditworthy, at a competitive interest rate. Banking
services include transactional services, such as verification of account
details, account balance details and the transfer of funds, as well as
advisory services that help individuals and institutions to properly plan
and manage their finances. The collapse of the Banking Industry in the
Financial Crisis, however, means that some of the more extreme risk-
taking and complex securitization activities that banks increasingly
engaged in since2000 will be limited and carefully watched, to ensure that
there is not another banking system melt down in the future.
The banking sector in India originated in the late 18th century, when The
General Bank of India started its operations in 1786. Since then it has
grown significantly after going through various phases of development
and is now one among the well-organized banking sectors in the world.
The oldest bank inexistence in India is the State Bank of India which is
also the largest commercial bank in the country. The Reserve Bank of India
(incorporated in 1935) which regulates, controls, and inspects the banks in
India as per the Banking Regulation Act 1949, is the supreme authority of
Indian Banking Sector.
Definition of Bank
An organization, usually a corporation, chartered by a state or federal
government, which does most or all of the following: receives demand
deposits and time deposits, honours instruments drawn on them,
and pays interest on them; discounts notes, makes loans, and invests in
securities; collects checks, drafts, and notes; certifies depositor's checks;
and issues drafts and cashier's checks.

The word bank is derived from the German word bank meaning joint
stock fund. Subsequently, it was Italianized into banca, banque and
bank which means a bench at a marketplace for transactions involving
keeping valuables and withdrawing the same as and when required.

THE BANKING SYSTEM IN INDIA

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The commercial banking structure in India consists of:
Scheduled Commercial Banks in India Unscheduled Banks in India
Scheduled Banks in India constitute those banks which have been
included in the Second Schedule of Reserve Bank of India (RBI) Act, 1934.
RBI in turn includes only those banks in this schedule which satisfy the
criteria laid down vide section 42 (6) (a) of the Act. As on 30th June, 1999,
there were 300 scheduled banks in India having a total network of
64,918 branches. The scheduled commercial banks in India comprise of
State bank of India and its associates (8), nationalized banks (19), foreign
banks (45), private sector banks (32), co-operative banks and regional
rural banks."Scheduled banks in India" means:

The State Bank of India constituted under the State Bank of India Ac
t, 1955 (23 of 1955) or,
A subsidiary bank as defined in the State Bank of India (Subsidiary B
anks) Act, 1959 (38 of 1959) or
A corresponding new bank constituted under section 3 of the Bankin
g Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5
of 1970), or under section 3 of the Banking Companies(Acquisition
and Transfer of Undertakings) Act, 1980 (40 of 1980) or,

Any other bank being a bank included in the Second Schedule to th

e Reserve Bank of India Act,1934 (2 of 1934), but does not include a
co-operative bank."Non-scheduled bank in India" means a banking
company as defined in clause (c) of section 5 of the Banking
Regulation Act, 1949 (10 of 1949), which is not a scheduled bank".

o HISTORY
The first bank in India, though conservative, was established in 1786.
From 1786 till today, the journey of Indian Banking System can be
segregated into three distinct phases. They are as mentioned below: Early
phase from 1786 to 1969 of Indian Banks Nationalization of Indian Banks
and up to 1991 prior to Indian banking sector
Reforms New phase of Indian Banking System with the advent of Indian Fi
nancial & Banking SectorReforms after 1991To make this write-up more
explanatory, we divide scenario in
Phase I, Phase II and Phase III

Phase I
The General Bank of India was set up in the year 1786. Next were Bank of
Hindustan and Bengal Bank. The East India Company established Bank of
Bengal (1809), Bank of Bombay (1840) and Bank of Madras (1843) as
independent units and called it Presidency Banks. These three banks were
amalgamated in 1920 and Imperial Bank of India was established which
started as private shareholders banks, mostly Europeans shareholders .In
1865 Allahabad Bank was established and first time exclusively by
Indians, Punjab National Bank Ltd. was set up in 1894 with headquarters
at Lahore. Between 1906 and 1913, Bank of India, Central Bank of India,

[18]
Bank of Baroda, Canara Bank, Indian Bank, and Bank of Mysore were set
up. Reserve Bank of India came in 1935.During the first phase the growth
was very slow and banks also experienced periodic failures between1913
and 1948. There were approximately 1100 banks, mostly small. To
streamline the functioning and activities of commercial banks, the
Government of India came up with The Banking Companies Act,1949
which was later changed to Banking Regulation Act 1949 as per amending
Act of 1965.

Phase II
Government took major steps in this Indian Banking Sector Reform after
independence. In 1955, it nationalized Imperial Bank of India with
extensive banking facilities on a large scale especially in rural and semi-
urban areas. It formed State Bank of India to act as the principal agent of
RBI and to handle banking transactions of the Union and State
Governments all over the country. Seven banks forming subsidiary of
State Bank of India was nationalized in 1960 on 19th July, 1969,major
process of nationalization was carried out. It was the effort of the then City
Minister of India, Mrs. Indira Gandhi. 14 major commercial banks in the
country were nationalized. Second phase of nationalization Indian Banking
Sector Reform was carried out in 1980 with seven more banks. This step
brought 80% of the banking segment in India under Government
ownership. The following are the steps taken by the Government of India
to Regulate Banking Institutions in the Country: 1949: Enactment of
Banking Regulation Act.1955: Nationalization of State Bank of India.1959:
Nationalization of SBI subsidiaries.1961: Insurance cover extended to
deposits.1969: Nationalization of 14 major banks.1971: Creation of credit
guarantee corporation.1975: Creation of regional rural banks.1980:
Nationalization of seven banks with deposits over 200 core.

Phase III
This phase has introduced many more products and facilities in the
banking sector in its reforms measure. In 1991, under the chairmanship of
M Narasimham, a committee was set up by his name which worked for the
liberalization of banking practices. The country is flooded with foreign
banks and their ATM stations. Efforts are being put to give a satisfactory
service to customers. Phone banking and net banking is introduced. The
entire system became more convenient and swift. Time is given more
importance than money. The financial system of India has shown a great
deal of resilience. It is sheltered from any crisis
triggered by any external macroeconomics shock as other East Asian Coun
tries suffered. This is all due to a flexible exchange rate regime, the
foreign reserves are high, the capital account is not yet fully convertible,
and banks and their customers have limited foreign exchange exposure.
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

[19]
 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.

BANKING SECTORS IN INDIA BANKS

BP
Au
Nb l
Ki c
SSSS
e
c t
o
r
B
a
n
k
s

Co-operation means voluntary association on the basis of equality and for

some common purpose. In the word of H. Calvert, co-operation is a form
of organization where in persons voluntarily associate together as human
beings on the basis of equality for the promotion of their economic
interest. A co-operative bank is a co-operative society registered either
under the central act, multiunit co-operative societies act or under a state
act governing co-operative societies and carrying on banking business. A
co-operative bank is a co-operative society engaged in the business of
banking. If a co-operative bank is operating in more than one state, the
central act applies. In other cases, state laws apply. The banking laws
(Application to co-operative societies) Act, 1965extented to the co-
operative banking sector provides certain provisions of the banking
regulations Act and the Reserve Bank of India Act. This policy
planning and control including statutory audit functions are supervised by
the government whilefunctional aspects like licensing, permission to
undertake foreign exchange business and inspection are looked after by
the RBI.

[20]
 INTRODUCTION TO BANKING

o Customers are broadly classified into two:

Personal Customers: Individuals having accounts singly or jointly

(including minors)

Non Personal Customers: Non individual customers like

Proprietary concerns, Partnerships, Companies, Trusts, Associations,
Clubs, Societies, Institutions, Govt. Departments, NGOs, SHG etc.

o Accounts are broadly classified into two:

Customer accounts (external accounts) : Deposit accounts

(Savings Bank, Current Account etc), Loan Accounts (Demand Loan,
Term Loan etc) and Contingent accounts (Bank Guarantee etc)

Office accounts. (Internal accounts): Cash Balance accounts, fixed

assets account, Drafts account, Sundry Deposit account, Interest
account etc.

o BASIC DEPOSITS ACCOUNT:

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 Savings Bank : Running account for saving with restriction in
number of withdrawal

Current Account: Running account without restriction on number

of withdrawals

Term Deposit : Deposit of an amount for a fixed period where

interest is paid monthly/Quarterly

Special Term Deposit : Deposit of an amount for a fixed period

where interest is compounded (Capitalized) and paid on
maturity.

Recurring Deposit: Regular (Monthly) deposit of a fixed amount

for a fixed period.

o TYPES OF LOAN ACCOUNT:

Overdraft

Demand Loan

Term Loan

Cash Credit

o OVERDRAFT:

A Current account when permitted to overdraw (allowing

withdrawal more than deposited or without deposits ) becomes an
overdraft account

Can be operated by cheque, ATM, INB

A type of advance of temporary nature/ to valued clients sometimes

against Term Deposit, NSC etc.

A running account where further withdrawals (debits) can be

permitted as and when deposits (credits) come.

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o DEMAND LOAN:

Basically an advance payable on demand.

Payment in instalments also generally allowed.

Given against Bank deposits, NSCs, Insurance policies

Gold loans and Pension Loans are given as Demand loans

Only one Debit allowed for disbursement. Cannot be operated by

cheque & ATM.

o TERM LOAN:

Loan payable as per pre-determined instalments over a fixed term.

Extended for acquisition of assets like house, car, land, building,

Plant & Machinery etc.

Instalments are to be paid out of the income of the person in case of

Personal Segment loans

Instalments are to be paid out of the income of the activity financed

in case of non-personal segment loans.

o CASH CREDIT:

An advance facility for financing the working capital needs of

commercial activities.

A running account on the lines of Overdraft.

An account where all the receipts and payments of the activity on

account of day-to-day operations are expected to be reflected.

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 Extended against the stocks and receivables of the unit. (Stocks:
raw materials, semi finished goods, finished goods etc, Receivable
means money to be received towards sales).

o SECURITY & MARGIN:

The physical or financial asset for / against which the advance is

made is referred as security. A car is a security for which a car loan
is given.

Assets acquired out of bank finance are called primary security. Any
additional security offered by the borrower is called collateral.
However, in CBS parlance all securities are referred as collaterals.

The amount contributed by the borrower to the project cost / the

percentage value of the assets owned by him is referred as margin.

o CHARGE :

An asset offered to the creditor (who lends the money) becomes a

security only if a legally enforceable interest is created in his favour.
This process is called the creation of Charge.

Lien, Pledge, Hypothecation and Mortgage are different types of

charges applicable to different types of securities.

o TRANSACTION:

There are three types of transactions:

Cash: Where receipt payment of physical cash is involved

Transfer: Where funds are transferred from one account to another

account without

[24]
 Clearing: Transfer transactions where funds are exchanged with
other banks through clearing

CHAPTER 3RD
COMPANY PROFILE

o WHAT IS A CO-OPERATIVE BANK?

Meaning of Co-operative Banking
Evolution of Co-operative Banks in India

o THE CO-OPERATIVE BANK

Company Profile

[25]
CHAPTER 3RD
COMPANY PROFILE

WHAT IS A CO-OPERATIVE BANK ?

According to the International Co-operative Alliance Statement of co-

operative identity, a co-operative is an autonomous association of persons
united voluntarily to meet their common economic, social, and cultural
needs and aspirations through a jointly-owned and democratically-
controlled enterprise. Co-operatives are based on the values of self-help,
self-responsibility, democracy, equality, equity and solidarity. In the

[26]
 tradition of their founders, co-operative members believe in the ethical
values of honesty, openness, social responsibility and caring for others.

The 7 co-operative principles are:

1. Voluntary and open membership

2. Democratic member control
3. Member economic participation
4. Autonomy and independence
5. Education, training and information
6. Co-operation among Co-operatives
7. Concern for Community

A Co-operative Bank is a financial entity which belongs to its members,

who are at the same time the owners and the customers of their bank. Co-
operative banks are often created by persons belonging to the same local
or professional community or sharing a common interest. Co-operative
banks generally provide their members with a wide range of banking and
financial services (loans, deposits, banking accounts...).

Co-operative Banks differ from stockholder banks by their organization,

their goals, their values and their governance. In most countries, they are
supervised and controlled by banking authorities and have to respect
prudential banking regulations, which put them at a level playing field
with stockholder banks. Depending on countries, this control and
supervision can be implemented directly by state entities or delegated to
a co-operative federation or central body.

EVOLUTION OF CO-OPERATIVE BANK

The beginning co-operative banking in India dates back to about1904,

when official efforts were made to create a new type of institution based
on principles of co-operative organization & management, which were
considered to be suitable for solving the problems peculiar to Indian
conditions.

Co-operative banks in India came into existence with the enactment of the
Agricultural Credit Co-operative Societies Act in 1904. Co-operative bank
form an integral part of banking system in India. Under the act of 1904, a
number of co-operative credit societies were started. Owing to the
increasing demand of co-operative credit, anew act was passed in 1912,
which was provided for establishment of co-operative central banks by a
union of primary credit societies and individuals.

[27]
Co-operative Banks in India are registered under the Co-operative
Societies Act. The cooperative bank is also regulated by the RBI. They are
governed by the Banking Regulations Act 1949 and Banking Laws (Co-
operative Societies) Act, 1965.

THE CO-OPERATIVE BANK

COMMITED TO DEVELOPMENT

DEFINATION_____________
A Co-operative bank, as its name indicates is an institution
consisting of a number of individuals who join together to pool
their surplus savings for the purpose of eliminating the
profi ts of the bankers or money l e n d e r s w i t h a v i e w t o
distributing the same amongst the depositors and
borrowers. The Co-operative Banks Act, of 2007 (the Act) defines a co-
operative bank as a co-operative registered as a co-operative bank in
terms of the Act whose members _

1 . Are of similar occupation or profession or who are employed by a

common employer or who are employed within the same business district;
or

2. Have common membership in an association or organization, including

a business, religious, social, co-operative, labour or educational group; or

3. Have common membership in an association or organization, including

a business, religious, social, co-operative, labour or educational group; or

4. Reside within the same defined community or geographical area.

[28]
 COMPANY PROFILE

Co-operative banks organizational rules can vary according to their

respective national legislations, co-operative banks share common
features as follows:

(i).CUSTOMER 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 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.

(ii).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 one person, one vote .

(iii).PROFT 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-operatives 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.

Co-operative banks are deeply rooted inside local areas and communities.
They are involved in local development and contribute to the sustainable
development of their communities, as their members and management
board usually belong o the communities in which they exercise their
activities. By increasing banking access in areas or markets where other
banks are less present, farmers in rural areas, middle or low income
households in urban areas co-operative banks reduce banking exclusion
and foster the economic ability of millions of people. They play an
influential role on the international financial system.

o LIST OF CO-OPERATIVE BANKS IN INDIA

Co-Operative Banks
The Anyone Co-operative Bank in India is the first cooperative bank in
Asia. Co operative Banks in India are registered under the Co-operative
Societies Act. Co operative Banks are governed by the Banking

[29]
Regulations Act 1949 and Banking Laws Act, 1965. The Co Operative bank
is regulated by the RBI. Cooperative banks are an important constituent of
the Indian financial system. They are the primary financiers of agricultural
activities, some small-scale industries and self-employed workers.

List of Co Operative Banks in India :

Andaman and Nicobar State Co-operative Bank Ltd.

Andhra Pradesh State Co-operative Bank Ltd.

Arunachal Pradesh State co-operative Apex Bank Ltd.

Assam Co-operative Apex Bank Ltd.

Bihar State Co-operative Bank Ltd.

Chandigarh State Co-operative Bank Ltd.

Chhattisgarh Rajya Sahakari Bank Maryadit

Delhi State Co-operative Bank Ltd.

Goa State Co-operative Bank Ltd.

Gujarat State Co-operative Bank Ltd.

Haryana State Co-operative Apex Bank Ltd.

Himachal Pradesh State Co-operative Bank Ltd.

Jammu and Kashmir State Co-operative Bank Ltd.

Karnataka State Co-operative Apex Bank Ltd.

Kerala State Co-operative Bank Ltd.

Madhya Pradesh Rajya Sahakari Bank

Maharashtra State Co-operative Bank Ltd.

Manipur State Co-operative Bank Ltd.

Meghalaya Co-operative Apex Bank Ltd.

Mizoram Co-operative Apex Bank Ltd.

[30]
 Nagaland State Co-operative Bank Ltd.

Orissa State Co-operative Bank Ltd.

Pondicherry State Co-operative Bank Ltd.

Punjab State Co-operative Bank Ltd.

Rajasthan State Co-operative Bank Ltd.

Sikkim State Co-operative Bank Ltd.

Tamil Nadu State Apex Co-operative Bank Ltd.

Tripura State Co-operative Bank Ltd.

Uttar Pradesh Co-operative Bank Ltd.

Uttaranchal Rajya Sahakari Bank Ltd.

West Bengal State Co-operative Bank Ltd.

o TYPES OF CO-OPERATIVE BANKS

o

CLASSIFICATION OF CO-PERATIVE BANKS:

1. URBAN CO-OPERATIVE BANKS

2. RURAL CO-OPERATIVE BANKS

a. SHORT TERM RURAL CO-OPERATIVE BANKS

State Co-operative Banks

Central Co-operative Banks
Primary Agriculture Credit Societies

b. LONG TERM RURAL CO-OPERATIVE BANKS

* State Co-Agricultural & Development

Banks (SCARBDs)

[31]
 Primary Co-Agricultural & Development
Banks (PCARBDs)

CU R
LB A
AN
SC O
S-
IO P
FE R
IA T
CI V
AE
TTBB AA
IN K
OS
N

O
F
THE CO-PERATIVE BANKING STRUCTURE IN INDIA COMPRISES OF:

1. URBAN CO-OPERATIVE BANKS

2. RURAL CO-OPERTAIVE BANKS

1. URBAN CO-OPERATIVE BANKS:

Urban Co-operative Banks is also referred as Primary Co-operative banks

by the Reserve Bank of India. Among the non-agricultural credit societies
urban co-operative banks occupy an important place. This bank is started
in India with the object of catering to the banking and credit requirements
of the urban middle classes.

The RBI defines Urban Co-operative banks as small sized co-operatively

organized banking units which operate in metropolitan, urban and semi-
urban centers to cater mainly to the needs of small borrowers, viz. owners

[32]
of small scale industrial units, retail traders, professional and salaries
classes.

The objectives and functions of the Urban Co-operative banks:

Primarily, to raise funds for lending money to its members.

* To attract deposits from members as well as non-members.

* To encourage thrift, self-help ad mutual aid among members.

* To draw, make, accept, discount, buy, sell, collect and deal in bills of
exchange, drafts, certificates and other securities

* To provide safe-deposit vaults.

.2. RURAL CO-OPERATIVE BANKS:

Rural Cooperative Banking plays an important role in meeting the growing

credit needs of rural population of India. It provides institutional credit to
the agricultural and rural sector. The inadequacy of rural credit engaged
the attention of RBI and Government throughout the 1950s and 1960s.
One important feature of providing agriculture credit in India has been the
existence of a widespread network of rural financial institutions.

I. Short-term Rural Co-operatives,

II. Long-term Rural Co-operatives.

I. Short-Term Rural Co-operatives:

The short-term rural co-operatives provide crop and other working capital
loans to farmers and rural artisans primarily for short-term purpose. These
institutions have federal three-tier structure. At the Apex of the system is
a State Co-operative bank in each state. At the middle (or district) level,
there are Central Co-operative Banks also known as District Co-operative
banks. At the lowest (or village) level, are the Primary Agricultural Credit
Societies.

1. State Co-operative Banks

2. Central Co-operative Banks
3. Primary Agriculture Credit Societies

[33]
i. State Co-operative Banks:

State Co-operative Banks are the apex of the three-tier Co-operative

structure dispensing mainly short/medium term credit. It is the principal
society in a State which is registered or deemed to be registered under
the Government Societies Act, 1912, or any other law for the time being in
force in India relating to co-operative societies and the primary object of
which is the financing of the other societies in the State which are
registered or deemed to be registered.

ii. Central Co-operative Banks:

Central Co-operative Banks form the middle tier of Co-operative credit

institutions. These are the independent units in as much as the State Co-
operative Banks have control to control or supervise their affairs. They are
of two kinds i.e. pure and mixed.

Their own share capital and reserves

Deposits from the public and

Loans from the state co-operative banks

iii. Primary Agriculture Credit Societies:

Primary Agricultural Credit Societies is the foundation of the co-operative

credit system on which the superstructure of the short-term co-operative
credit system rests. It deals directly with individual farmers, provide short
and medium term credit, supply agricultural inputs, distribute consume
articles and also arrange for the marketing of products of its members
through a c-operative marketing societies.

II. Long-Term Rural Co-operatives:

The long-term rural co-operative provide typically medium and long-term

loans for making investments in agriculture, rural industries and, in the
recent period, housing. Generally, these co-operatives have two tiers, i.e.
State Co-operative Agriculture and Development Banks (SCARBDs) at the
state level and Primary Co-operative Agriculture and Rural Development

[34]
Banks (PCARDBs) at the taluka or tehsil level. However, some States have
a unitary structure with the state level banks operating through their own
branches.

1. State Co-operative Agriculture And Development

Banks (SCARBDs)

2. Primary Co-operative And Rural Development

Banks (PCARBDs)

i. State Co-operative Agriculture And Development Banks

(SCARBDs)

State Co-operative Agriculture and Development Banks constitute the

upper-tier of long term co-operative credit structure. Though long term
credit co-operatives have been allowed to access public deposits under
certain conditions, such deposits constitute a relatively small proportion of
their total liabilities.

ii. Primary Co-operative Agriculture And Rural Development Banks

(PCARDBs):

Primary Co-operative Agriculture and Rural Development Banks are the

lowest layer of long term credit co-operatives. It is primarily dependent on
the borrowings for their lending business. They provide credit for
developmental purposes like minor irrigation, cultivation of plantation
crops and for diversified purposes like poultry, dairying and sericulture on
schematic basis. They get requisite financial assistance from the
Cooperative State Agriculture and Rural Development Bank.

Some Facts About Co-operative Banks In India:

* Some cooperative banks in India are more forward than many of the
state and private sector banks.

* The total deposits & lending of Cooperative Banks in India is much more
than Old Private Sector Banks & also the New Private Sector Banks.

* This exponential growth of Co operative Banks in India is attributed

mainly to their much better local reach, personal interaction with
customers, and their ability to catch the nerve of the local clientele.

[35]
 CHAPTER 4TH
OBJECTIVES

o OBJECTIVES OF THE STUDY

Objectives
Scope
Duration of Study
Literature Review

CHAPTER 4TH
[36]
 OBJECTIVES
OBJECTIVES OF THE STUDY

Objectives are the futuristic goals, and the main objectives of this study
are as follows:

1. Maintenance of working capital at appropriate level, and

2. Measures of maintaining working capital at appropriate
level with proper management.

To accomplishment of these two objectives, the management has

considered the composition of assets pool. The working capital position
sets the various policies in the business world for general operations
like purchasing, financing, expansion and dividends etc.

The subsidiary objective of Working Capital Management is to prove

the smooth functioning of the normal business operations of a
company. Which is divided into two parts:-
1. Liquidity
2. Profitability

LIQUIDITY

The availability of liquid assets to a company or an organisation. Liquidity

means how quickly you can get your hands on your cash. In simpler
terms, liquidity is to get your money whenever you need it.

PROFITABILITY

Profitability is the ability of a business to earn a profit. A profit is what is

left of the revenue a business generates after it pays all expenses directly
related to the generation of the revenue, such as producing a product, and
other expenses related to the conduct of the business activities.

o SCOPE OF THE PROJECT

Personal visit to the branch of CO-OPERATIVE Bank, was done to collect

[37]
the first hand information. Study is done with the special reference to the

area, Nakodar City.

o DURATION OF THE STUDY

The study was carried out for a period of 8 weeks, from 6 th June 2016 to
22th July 2016.

LITERATURE REVIEW

The corporate finance literature has traditionally focused on the study of

long-term financial decisions. However, short-term assets and liabilities
are important components of total assets and needs to be carefully
analyzed. Management of these short-term assets and liabilities warrants
a careful investigation since the working capital management plays an
important role for the firms profitability and risk as well as its value. The
optimal level of working capital is determined to a large extent by the
methods adopted for the management of current assets and liabilities.

A research study on working capital management of paper industries in

India was conducted by R. Sivarama and Prasad (2001). They reported
that the chief executives properly recognized the role of efficient use of
working capital in liquidity and profitability, but in practice they could not
achieve it. Again they reported a clear reveal of a suboptimum utilization
of working capital in paper industry.

A study on working capital management of horticulture industry in

Himachal Pradesh by Joginder Singh Dulta (2001) observed the size of
current assets and current liabilities with all variations, registered a slight
increase, but due to inefficient use of the various components of working
capital of Himachal Pradesh Horticulture Produce Marketing and
Processing Corporation Ltd, the current liabilities increased
proportionately at a faster rate than current assets and net working
capital position was worsened continuously.

Various studies conducted and numerous suggestions were sought to

bring effectiveness in the working and operations of financial institutions.

Narsimham Committee (1991) emphasized on capital adequacy and

liquidity, Padamanabhan Committee (1995) suggested CAMEL rating (in

the form of ratios) to evaluate financial and operational efficiency,

Tarapore Committee (1997) talked about Non-performing assets and asset

quality, Kannan Committee (1998) opined about working capital and

[38]
lending methods, Basel committee (1998 and revised in 2001)

recommended capital adequacy norms and risk management measures.

Kapoor Committee (1998) recommended for credit delivery system and

credit guarantee and Verma Committee (1999) recommended seven

parameters (ratios) to judge financial performance and several other

committees constituted by Reserve Bank of India to bring reforms in the

banking sector by emphasizing on the improvement in the financial health

of the banks. Experts suggested various tools and techniques for effective

analysis and interpretation of the financial and operational aspects of the

financial institutions specifically banks. These have focus on the analysis

of financial viability and credit worthiness of money lending institutions

with a view to predict corporate failures and incipient incidence of

bankruptcy among these institutions. Bhaskaran and Josh (2000)

concluded that the recovery performance of co-operative credit

institutions continues to unsatisfactory which contributes to the growth of

NPA even after the introduction of prudential regulations. They suggested

legislative and policy prescriptions to make co-operative credit institutions

more efficient, productive and profitable organization in tune with

competitive commercial banking. Jain (2001) has done a comparative

performance analysis of District Central Cooperative Banks (DCCBs) of

Western India, namely Maharashtra, Gujarat and Rajasthan and found that

DCCBs of Rajasthan have performed better in profitability and liquidity as

compared to Gujarat and Maharashtra. Singh and Singh (2006) studied

the funds management in the District Central Cooperative Banks (DCCBs)

of Punjab with specific reference to the analysis of financial margin. It

noted that a higher proportion of own funds and the recovery concerns

have resulted in the increased margin of the Central Co-operative Banks

[39]
and thus had a larger provision for non-performing assets. Mavaluri,

Boppana and Nagarjuna (2006) suggested that performance of banking in

terms of profitability, productivity, asset quality and financial

management has become important to stable the economy. They found

that public sector banks have been more efficient than other banks

operating in India. Pal and Malik (2007) investigated the differences in the

financial characteristics of 74 (public, private and foreign) banks in India

based on factors, such as profitability, liquidity, risk and efficiency. It is

suggested that foreign banks were better performers, as compared to

other two categories of banks, in general and in terms of utilization of

resources in particular. Campbell (2007) focused on the relationship

between nonperforming loans (NPLs) and bank failure and argued for an

effective bank insolvency law for the prevention and control of NPLs for

developing and transitional economies as these have been suffering

severe problems due to NPLs. Singla(2008) emphasized on financial

management and examined the financial position of sixteen banks by

considering profitability, capital adequacy, debt-equity and NPA. Dutta and

Basak (2008) suggested that Co-operative banks should improve their

recovery performance, adopt new system of computerized monitoring of

loans, implement proper prudential norms and organize regular workshops

to sustain in the competitive banking environment. Chander and Chandel

(2010) analyzed the financial efficiency and viability of HARCO Bank and

found poor performance of the bank on capital adequacy, liquidity,

earning quality and the management efficiency parameters.

[40]
 CHAPTER 5TH
RESEARCH METHODOLOGY

o RESEARCH METHODOLOGY
Research Design
Collection of Data
Sampling
Questionnaire Development
Limitations

CHAPTER 5TH
RESEARCH METHODOLOGY
[41]
 RESEARCH METHODOLOGY

The Research and Methodology adopted for the present study has been
systematic and was done in accordance to the objectives set which has
been detailed as below.

Research Definition:-

Research is a process in which the researcher wishes to find out the end
result for a given problem and thus the solution helps in future course of
action.

According to Redman & Mory, research is defined as a Systemized effort

to gain new knowledge.

Nature of Research:

Research is basically of two types.

1. Descriptive research

2. Explorative research

1. Descriptive Research:

My research design is descriptive as descriptive research

Describe the characteristics of certain groups/ samples / populations.

Estimate proportions in specified populations.

Make specific predictions.

Determining sources of Data:

There are two main sources of data

1. Primary data

2. Secondary data

Collection of data:

[42]
Primary Data

It consists of original informations collected for specific Purpose. Primary

data for this research, data are collected through a direct source like

survey to obtain the first hand information is others resources are written

below.

a. Observation Method

b. Interview Method

c. Structured Questionnaire

d. Face to face interaction

Secondary Data

It consists of information that already exists somewhere and has been

collected for some specific purpose in the study. The secondary data for

this study is collected from various sources like,

a. Annual reports of the bank

b. Manual of instructions on loans and advances

c. Books

d. Articles and Research Papers

e. Internet (websites)

f. Newspapers

g. Financial Magazines (weekly, business world etc.)

[43]
Questionnaire Development:

Questionnaire is the most common instrument in collecting primary

data. In order to gather primary data from viewers. The present
questionnaire consists closed ended type of questions.

Sampling:-

Sampling is that part of statistical practice concerned with the selection

of individual observations intended to yield some knowledge about a
population of concern, especially for the purposes of statistical inference.

In my survey, I have taken convenience sampling.

My sampling is probability sampling as probability sampling that has been

selected using simple random selection each unit in the population has a
known chance of being selected.

Moreover, my sampling technique is simple random technique as in

simple Random sampling; each unit of the population has an equal
probability of inclusion in the sample. In my survey, each respondent have
equal opportunity to be selected and the data, which I collected, was from
customers of SBI who had taken loan.

SAMPLING UNIT: The Study population includes the employees and

customers of bank and Sampling Unit for Study was Individual Customer.

SAMPLING SIZE: 100 Respondents

LIMITATIONS
The survey was conducted in the Nakodar, Distt - Jalandhar (Punjab).

Managers were too busy persons, so it was difficult to get their time
and view for specific questions.

Area covered for the project while doing job also was very large and it

was very difficult to correlate two different customers / respondents

views in a one

[44]
 CHAPTER 6TH
DATA ANALYSIS &
INTERPRETATION

o ANALYSIS OF DATA & RESULT

INTERPRETATION
Working Capital of Co-operative Bank
Working Capital of Co-operative Bank for
last 4 years
Present Working Capital of Co-operative
Bank

CHAPTER 6TH
DATA ANALYSIS & INTERPRETATION

Data Analysis & Interpretation

o Working Capital = Current Assets Current Liabilities

1. WORKING CAPITAL OF CO-OPERATIVE BANK

[45]
 WORKING CAPITAL
CURRENT LIABILITIES CURRENT ASSETS

43%

57%

INTERPRETATION:

CA > CL

From the finding I found that CO-OPERATIVE BANK is able to manage

the Working capital from the above graph we can see that the bank is
having 56.75% of current assets and 43.25% of current liabilities, it
means that the bank is good in working capital management.

ASSETS 2014 2015 2016

31st March 31st March 31st March
CURRENT ASSETS
Cash and cash equivalents \159,007 \126,313 \142,582
Time deposits 1,518 1,141 1,233
Cash required to be
313,817 266,267 318,909
segregated under regulations
Trade notes and accounts 10,985 7,915 8,484

[46]
 receivable
Operational investment
115,717 105,236 121,576
securities
Valuation allowance for
operational investment (4,967) (6,207) (8,424)
securities
Operational loans receivable 66,261 47,868 34,694
Real estate inventory 32,895 36,515 28,768
Trading assets 1,728 7,725 3,515
Margin transaction assets:
Receivables from customers 274,887 134,792 221,107
Cash deposits as collateral for
17,995 46,009 40,534
securities borrowed
Loans secured by securities - 1 -
Short-term guarantee
13,414 8,846 5,944
deposits
Deferred tax assetscurrent 1,053 5,921 7,667
Prepaid expenses and other
66,723 46,951 55,767
current assets
Allowance for doubtful
(1,762) (2,703) (2,033)
accounts
TOTAL CURRENT ASSETS 1,069,271 832,590 980,323
PROPERTY AND EQUIPMENT-
12,652 8,578 20,614
Net

INVESTMENTS AND OTHER ASSETS

Investment securities 15,972 10,088 11,248
Investments in unconsolidated
subsidiaries and affiliated 25,923 23,781 29,956
companies
Software, net of accumulated
8,816 9,370 11,671
amortisation

[47]
Rental deposits 6,801 7,375 7,144
Goodwill 60,874 136,354 133,088
Long-term trade receivables 50 47 10
Deferred tax assets-non-current 10,595 10,602 14,197
Other assets 12,109 47,093 31,536
Allowance for doubtful accounts (4,769) (6,644) (9,767)
TOTAL INVESTMENTS AND
136,371 238,066 229,003
OTHER ASSETS
1,219,24 1,079,23
TOTAL \1,229,940
7 4
2014 2015 2016
LIABILITIES AND
31st 31st 31st
SHAREHOLDERS' EQUITY
March March March
CURRENT LIABILITIES
Short-term borrowings 53,832 54,658 \55,615
Current portion of long-term
112,743 63,033 125,968
debt
Income taxes payable 9,352 2,625 4,954
Margin transaction liabilities:
Payables to financial institutions 81,583 56,726 48,813
Proceeds of securities sold for
62,531 89,545 101,224
customers' accounts
Loans secured by securities-
repurchase agreement 35,441 46,588 63,781
transactions
Consignment guarantee money 272,006 229,184 222,530
received for margin
transactions
Customers' deposits as
collateral for commodity 39,574 28,885 59,844
futures
Customers' deposits for
20,147 23,488 31,176
securities transactions
Unearned income 1,893 2,085 2,049

[48]
Accrued expenses 3,280 3,035 2,897
Contingent reserve 22 - -
Deferred tax liabilities-current 8,867 6 2,960
Other current liabilities 39,363 23,5914 25,280
TOTAL CURRENT LIABILITIES 740,634 623,449 747,091
LONG-TERM LIABILITIES
Long-term debt, less current
77,149 13,894 27,620
portion
Deferred tax liabilities-non-
300 566 540
current
Other long-term liabilities 5,431 15,043 18,855
TOTAL LONG-TERM
82,880 29,193 47,015
LIABILITIES
NET ASSETS
Common stock 55,158 55,215 55,284
Capital surplus 116,762 219,012 218,969
Retained earnings 112,339 86,866 87,276
Treasury stock-at cost (53,064) (636) (247)
Unrealised gain on available-for-
10,134 (5,946) (559)
sale securities
Foreign currency translation
(122) (966) (1,507)
adjustments
Deferred hedged profit/loss 9 (26) 15
Stock acquisition right 4 12 12
Minority Interest 146,546 65,808 69,372
TOTAL NET ASSETS 387,766 419,338 428,615
1,219,24 1,079,23
TOTAL \1,229,940
7 4

[49]
2. WORKING CAPITAL OF CO-OPERATIVE BANK FOR LAST 3 YEARS

2.5

1.5 Series 1
Series 2
Series 3
1
Series 4

0.5

0
2013 2014 2015 2016

INTERPRETATION:

Reason for increasing in working capital from 2013 to 2014 and

reason for decreasing working capital in 2015 and again
increasing in working capital in 2016:-

In the year 2013 Co-operative has the equal distribution of assets

and liabilities so working capital is accurate.

In the year 2014, due to recession all the people were with
drawling their money so the liabilities of the bank was very low
so the working capital was increased double of 2013.

[50]
 Again in the year 2015 the working capital is very low because
after the recession people ware want to deposit the money in
bank , so that liabilities of the Bank was increased and the
working capital was decreased more than half of the year 2014.

In the year 2016 Co-operative Banks is able to manage the

working capital properly so it is able to balance both assets and
liabilities.

3. CO-OPERATIVE BANK TODAY

BALANCE SHEET AS AT 31ST MARCH 2016

Balance Sheet size 7,21,526

Aggregate Deposits 5,37,404

Total Advances 4,16,768

Capital Funds 69,762.64

Net Profit 6,729.12

Paid-up Capital 631.47

(In Percentage Terms):-

BALANCE SHEET AS AT 31ST MARCH 2016

Yield on Advances (Domestic) 9.90

Cost of Deposits (Domestic) 5.59

Net Interest Margin 3.07

Gross NPA Ratio 3.04

Net NPA Ratio 1.78

Capital Adequacy Ratio 13.47

[51]
Return on Average Assets 1.01

AS AT 31ST MARCH 2016

No. of Branches 10,186

No. of Head Offices 84

No. of Branches on CBS All Branches

No. of employees 1,79,205

No. of ATMs > 8,000

INTERPRETATION:

The Bank handles almost the entire gamut of financial services. It is

a financial supermarket.

The Bank extends banking services to:

Corporate Sector
SMEs
Rural sector, especially Agriculture and
allied activities
Retail sector, i.e., Personal Segment

The Bank has designed both Deposits as well as Advances products

for specific segments as per their requirements.

The loans range from Rs.100/- to say, Rs. 10,000 crores.

[52]
4. POLICIES FOR THE MANAGEMENT OF COOPERATIVE BANKS
WORKING CAPITAL

4.5

3.5

2.5 Series 1
Series 2
2
Series 3
1.5

0.5

0
NO POLICY FORMAL POLICY INFORMAL POLICY

CHAPTER 7TH
FINDINGS & CONCLUSION

o FINDINGS
Research Findings

o CONCLUSION
[53]
Conclusion of the research Report
CHAPTER 7TH
FINDINGS & CONCLUSION

Findings & Conclusion

o Research Findings:

Project findings reveal that Co-operative is sanctioning more Credit to

agriculture, as compared with its key competitors viz., Canara Bank, State
Bank of India, Syndicate Bank .

Recovery of Credit: Co-operative recovery of Credit during the year

2012 is 62.4% Compared to other Banks Co-operatives recovery policy is
very good, hence this reduces NPA.

Total Advances: As compared total advances of Co-operative is

increased year by year. Co-operative is granting credit in all sectors in an
Equated Monthly Instalments so that anybody can borrow money easily

[54]
Project findings reveal that Co-operative is lending more credit or
sanctioning more loans as compared to other Banks.

Co-operative Banks are expanding its Credit in the following focus areas:

1. Co-operative Term Deposits

2. Co-operative Recurring Deposits

3. Co-operative Housing Loan

4. Co-operative Car Loan

5. Co-operative Educational Loan

6. Co-operative Personal Loan etc

CONCLUSION
In this study I investigated the efficiency of managing working capital of
associate banks of co-operative of India for the period from 2013-2014 to
2015-16. But traditional methods of analyzing working capital ratios are
not used here. Three index values, Performance index, Utilization index
and efficiency index have been used to find individual banks efficiency
in working capital management. Regression analysis also has been done
to find the comparative speed of achieving targeted level of efficiency by
individual banks during the study period.

This report will be very helpful for my future career because this project
is going to give me a broad idea about the working capital
management which is one of the most important parts of an organisation
as well as Co-operative Banks of India.

Working capital is a very vital part of an organisation weather it is a

Bank or any other organisation and this project is going to help me in my
future a lot.

[55]
Credit Policy and working capital Management in Nationalized Bank with
special reference to Co-operative Bank. Credit Policy and Credit Risk Policy
of the Bank has become very vital in the smooth operation of the banking
activities. Working capital of the Bank provides the framework to
determine (a) whether or not to extend credit to a customer and (b) how
much credit to extend. The Project work has certainly enriched the
knowledge about the effective management of Working capital and
Working capital Management in banking sector.

Working capital Management is a vast subject and it is very difficult to

cover all the aspects within a short period. However, every effort has been
made to cover most of the important aspects, which have a direct bearing
on improving the financial performance of Banking Industry.

CHAPTER 8TH
SUGGESTIONS &
RECOMMENDATIONS

o SUGGESTIONS & RECOMMENDATIONS

Suggestions and Recommendations for Co-
operative Banks

CHAPTER 8TH

[56]
 SUGGESSITIONS & RECOMMENDATIONS

Suggestions & Recommendation

Managing Working Capital actively throughout the organisation.

Consider alternative funding.

Investigate the benefits of e-procurement.

Match significant cash outlays with similar cash inflow amounts.

Obtain a reasonable line of credit based on the net value of the

business.

Collect amounts due from customers as quickly as possible, and do

not hesitate to offer discounts for fast payment terms.

Do not hesitate to ask for deposits from certain customers, or for

certain types of policies.

In order to increase the profitability of the Bank, it is suggested to

control the cost of and operating expenses.

The management of Bank should try to adopt cost reduction

techniques in their Banking strategies to get over the critical
situation.

CHAPTER 9TH
ANNEXURE

o BIBLIOGRAPHY
References, Links , websites on Internet,
Books. [57]
o QUESTIONNAIRE
Questionnaire
CHAPTER 9TH
BIBLIOGRAPHY
Websites
www. sharekhan.com
www.indiainfoline.com

www.cooperative.co.in

www.investopedia.com

www..wikepedia.com

www.studyatfinance.com

www.financeprinciples.com

www.mbaguys.com

Links

http://www.ece.cmu.edu/~koopman/essays/abstract.html

http://www.rpi.edu/dept/llc/writecenter/web/abstracts.html>accessed

http://discuss.itacumens.com/index.php/topic,52179.0/prev_next,prev.html
#new

[58]
http://discuss.itacumens.com/index.php/topic,52179.0/prev_next,prev.html
#new

http://www.ifad.org/gender/tools/hfs/anthropometry/ant_3.htm

https://www.mysavingsatwork.com/atwork/1080912163747/11007886844
37/1127740752644.htm

Books
I.M.PANDEY FINANCIAL MANAGEMENT

KHAN AND JAIN FINANCIAL MANAGEMENT

S.M.D MAHESWARI FINANCIAL MANAGEMENT

o Newspapers (weekly, business world, etc)

o Financial Reports
Financial Statements of the Bank

o Historical Data & Accounts Records

[59]
 QUESTIONNAIRE

QUESTIONNAIRE

Questionnaire

Dear Sir/ Madam,

As part of my MBA curriculum, I am Navdeep Kaur,

is conducting a Finance research regarding the working
capital management on Co-operative Banking for which I
need your personal views regarding the net working capital
in shape of a questionnaire designed by me. The data being
collected are solely for academic purpose. I request you to
kindly extend your co-operation.

For Employees / Staff of the Bank:

1. Personal Details:

(a). Name of Concerned Person:-

(b). Add:-

(c). Age:-

[60]
(d). Contact No.

(d). Qualification:-

Graduation/PG Under Graduate Others_______________

______

(e). Designation / Post in the Bank:

Q.1. Does your bank have an overall policy for the management of its
working capital?

Formal Policy No Policy Informal Policy

Q.2. Who sets the management policy for working capital for your bank?

o Board of Management [ ]
o President/ Chairman [ ]
o Finance Committee [ ]
o Financial Controller [ ]
o Other [ ]

Q.3. How often the management policy for working capital reviewed?

o Monthly [ ]
o Quarterly [ ]
o Semi-annually [ ]
o Annually [ ]
o Whenever necessary [ ]

Q.4. How do you manage the working capital?

[61]
Q.5. How much current Assets do you have?

Q.6. How do you distribute the current asset?

Q.7. How much current liabilities do you have?

Q.8. In which areas do you distribute the current liabilities?

Q.9. Can you give me the net working capital of last four years?

Q.10. Why in the year 2013 the working capital is in the good level?

Q.11. Why in the year 2014 it was increased so much?

Q.12. Why in the year 2015 net working capital is decreased more than
half?

[62]
Q.13. How in the year 2016 Co-operative Bank is able to manage the net
working capital?

Thank you for your kindly co-operation.

................................................

Signature

THANKS

[63]


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