Shivaji University, Kolhapur. K.I.Ts I.M.E.R 1 A PROJECT REPORT ON STUDY OF INVESTMENT MANAGEMENT WITH SPECIAL REFERANCE TO SHRIPATRAODADA SAHAKARI BANK LTD., KOLHAPUR. SUBMITTED TO SHIVAJI UNIVERSITY, KOLHAPUR. IN PARTIAL FULFILLMENT OF THE DEGREE OF BACHELOR OF BUSINESS ADMINISTRATION [B.BA] BY MR. HENIL GAUTAM SHAH UNDER THE GUIDANCE OF Prof. Vivek Shinde (M.B.A) THROUGH THE DIRECTOR KOLHAPUR INSTITUE OF TECHNOLOGYSINSTITUTE OF MANAGEMENT EDUCATION AND RESEARCH [K.I.TS I.M.E.R], KOLHAPUR-416234 2011 2012 Shivaji University, Kolhapur. K.I.Ts I.M.E.R 2 DECLARATION I the undersigned hereby declare that the project entitled Study of Investment Management in Shripatraodada Sahakari Bank Ltd., Kolhapur written and submitted by me under the guidance of Prof. Vivek Shinde is my original work. I understand that any such copying will be punished anywhere by the university authority. This work has not been submitted earlier. Date : / /2012 Place : Kolhapur. Mr. Henil Gautam Shah. Prof. Vivek Shinde. Shivaji University, Kolhapur. K.I.Ts I.M.E.R 3 ACKNOWLEDGEMENT I express my gratitude to the management of Shripatraodada Sahakari Bank Ltd., Kolhapur for their kind co-operation and permission to undertake this project in their reputed organization. I would like to thank Prof. Vivek Shinde for their valuable guidance. I am indeed greatful to for his valuable guidance and encouragement throughout this project work. I would also like to thank our director Dr. Vishakha Apte. Also I sincerely thank my parents for helping me in all aspects to complete the project work. Finally, I would also like to appreciate my friends, colleagues for their direct and indirect contribution. Mr. Henil Gautam Shah. Shivaji University, Kolhapur. K.I.Ts I.M.E.R 4 INDEX Sr. No.Name of the topicPage No. 1.Introduction To Study05 2.Introduction To Organization12 3.Theoretical Background17 4.Data analysis and Interpretation 26 5.Findings63 6.Suggestion and Conclusion65 Bibliography67 Shivaji University, Kolhapur. K.I.Ts I.M.E.R 5 1 INTRODUCTION TO STUDY Shivaji University, Kolhapur. K.I.Ts I.M.E.R 6 Bank is an organization which provides financial services. Banks has long traditional history. The process of development of banking sector started in India from British rule. Bank has two primary functions i.e. 1. Accepting deposits 2. Advancing loans The difference between interest charged and received is the profit for bank. In India there are 289 commercial banks. Banks are governed by reserve bank of India 1934 act. In 1969 20 leading commercial banks were nationalized by the government of India. Further, in 1980 another 18 banks were nationalized for the interest of social security. Banks has various types; 1. Nationalized Banks 2. Commercial Banks 3. Private Banks 4. Foreign Banks 5. Regional Rural Banks etc. Banks are playing a vital role in development of India. Investment: According to people, an investment is a psychological process. Hence, it means many things to many persons. Investment is an activity which is taken by those who have savings. Investment is an activity which deals with any financial or physical assets with future expectations of returns. It involves waiting for reward. In simple language, investment means an employment of fund with the aim of achieving future income. The term investment is taken differently by different experts and economists. It has been confused with the term speculation. Investment Shivaji University, Kolhapur. K.I.Ts I.M.E.R 7 is done with positive expectation of returns in future. One can earn interest, dividend, premium, pension benefits by making investment into various assets. Hence, investment should involve an expectation of reward. Classification of Investment:Investments are classified into two main type's i. e. 1) Financial Investments. 2) Economic Investments. In case of financial investments, the investor invests his/her savings into different avenues for future income in the form of interest, dividend, and other benefits these investments may be in shares, debentures, bonds, post office, and Insurance these assets are also called as financial assets. On the other hand, economic investments are considered with expectation of fluctuation in capital stock, goods and services in current economy. The production of goods and services consist in capital stock e. g. Investment in plant and machinery, inventories.

Characteristics of Investment: The following are the main features of the characteristics of investment. 1) Return:The main features of investment and the expectation of the investor is to achieve return on all investments. Returns can be achieved through capital appreciation, dividend or interest on investment in securities. Returns from investments depend upon the nature; maturity period and market demand there are many investment alternatives which help in deriving profit. Shivaji University, Kolhapur. K.I.Ts I.M.E.R 8 2) Risk:Every investment is not risky. Hence it is inherent. It relates to loss of capital delay in payment, non-payment of dividend/interest the investment in government avenues or bank is riskless. In case of period, a greater risk involves in longer maturity period. The uncertainty in return leads to a higher risk level; therefore the investors should take care while making investment in different securities. The risk and return have interrelationship. It is supposed that high risk high return and low risk low return. Though it is theoretically applicable, the investor has to analyze practically for judgment. 3) Safety:Safety is another important characteristic of investment. The investor has to analyze the economic and industry trends before selecting investment alternative. The safety of investment is possible through diversifying investment. A proper combination of avenues avoids risk and losses. It gets safer and safer when the investor diversifies his/her investment. 4) Liquidity:Liquidity refers the conversion of any asset in cash. The investor prefers liquidity through easily saleable or marketable securities without any loss. In case of emergencies, the investor requires a minimum liquidity, in his investment. The investor has to develop the portfolio in this regard.

Shivaji University, Kolhapur. K.I.Ts I.M.E.R 9 Avenues of Investment: There are a number of investment avenues. These avenues are classified into- marketable and liquid and other avenues are non-marketable. All investments are not risky, some investments are risky and some are riskless in nature. The investor has to select proper investment avenue for future returns. Broadly investment avenues are classified as follows: 1. Corporate securities. A) Equity Shares. B) Preference Shares. C) Debentures/Bonds. D) GDRs/ADRs. E) Warrants. F) Derivatives. 2. Bank deposits and non-banking company deposits. 3. Post office-saving deposits and certificates. 4. LIC and other schemes. 5. Provident fund schemes. 6. National saving certificate. 7. Kissan Vikas Patra. 8. Equity linked saving schemes. 9. Pension plan. Shivaji University, Kolhapur. K.I.Ts I.M.E.R 10 10. Government and semi-government securities. 11. Mutual fund schemes. 12. Real assets. 13. Gilt edged securities. Objectives of the Study 1. To study investment management in bank. 2. To observe the interest rates on deposits & loans. 3. To observe the NPA percentage of the loans & to get the conclusion about grade of the bank. 4. To judge the financial health of the bank. Research Methodology

1. Primary Data: Primary Data is data that has not been previously published, i.e. the data is derived from a new or original research study and collected at the source. Investment list, list of rate of interest on LOANS and DEPOSITS provided by the bank as well as discussion with bank staff. Shivaji University, Kolhapur. K.I.Ts I.M.E.R 11 2. Secondary Data: Secondary data is the data that have been already collected by and readily available from other sources. Balance sheet of three consecutive years. Scope & Limitations of the Study Scope: 1. To study in-depth about investment & depth for last three years. 2. Sources of funds & applications of funds regarding with cost of the funds & yield of the funds. 3. Income generating capacity regarding with the interest not recovered and bad debts of the portfolio of the loans. 4. To observe RBI guidelines has been followed regarding with SLR investment. Limitations: 1. Yield of deposits has been calculated on gross basis only. 2. The information about rate of interest and maturity of deposits with other banks has not been disclosed by the bank under study. Shivaji University, Kolhapur. K.I.Ts I.M.E.R 12 2 INTRODUCTION TO ORGANIZATION Shivaji University, Kolhapur. K.I.Ts I.M.E.R 13 Introduction to Banking Industry The Indian Banking industry, which is governed by the Banking Regulation Act of India, 1949 can be broadly classified into two major categories, non-scheduled banks and scheduled banks. Scheduled banks comprise commercial banks and the co-operative banks. In terms of ownership, commercial banks can be further grouped into nationalized banks, the State Bank of India and its group banks, regional rural banks and private sector banks (the old/ new domestic and foreign). These banks have over 67,000 branches spread across the country. The first phase of financial reforms resulted in the nationalization of 14 major banks in1969 and resulted in a shift from Class banking to Mass banking. This in turn resulted in a significant growth in the geographical coverage of banks. Every bank had to earmark a minimum percentage of their loan portfolio to sectors identified as priority sectors. The manufacturing sector also grew during the 1970s in protected environs and the banking sector was a critical source. The next wave of reforms saw the nationalization of 6 more commercial banks in 1980.Since then the number of scheduled commercial banks increased four-fold and the number of bank branches increased eightfold. After the second phase of financial sector reforms and liberalization of the sector in the early nineties, the Public Sector Banks (PSB) s found it extremely difficult to compete with the new private sector banks and the foreign banks. The new private sector banks first made their appearance after the guidelines permitting them were issued in January 1993. Eight new private sector banks are presently in operation. These banks due to their late start have access to state-of the-art technology, which in turn helps them to save on manpower costs and provide better services. During the year 2000, the State Bank of India (SBI) and its 7 associates accounted for a25 percent share in deposits and 28.1 percent share in credit. The 20 nationalized banks accounted for 53.2 percent of the deposits and 47.5 percent of credit during the same period. Shivaji University, Kolhapur. K.I.Ts I.M.E.R 14 Name of the bank:Shripatraodada Sahakari Bank Ltd., Kolhapur. Established:13 January 1995. Head office:573 E Vyapari Peth, Shahupuri, Kolhapur-01. Date of Registration:13/01/1995 KPR/BANK (104). RBI License :1136 P. Jurisdiction:Kolhapur Jurisdiction. (Figures in Lacs except No. 01,02,07,08,09,10) 01] No. of branches (incl. H.O) :3. 02] Membership (Regular):3364. Membership (Nominal):988. 03] Paid up Share Capital:65.41. 04] Total reserves and Funds:433.74. 05] Deposits (Savings):430.03. Deposits (Current):178.86. Deposits (Fixed):1784.96. 06] Advances (Secured):1445.63. Advances (Unsecured):24.36. Total % of priority:79.37%. Shivaji University, Kolhapur. K.I.Ts I.M.E.R 15 Total % of weaker section:20.63%. 07] Sub-Staff:7. 08] Other staff:18. 09] Total staff:25. 10] Working Capital:3104.01 Organization Structure P.N.Patil-Sadolikar (President) Deepak Patil (Director) Subhash Bondre (Director) Ramesh Kamat (Director) Ganpatrao Patil (Vice-President) Shivaji University, Kolhapur. K.I.Ts I.M.E.R 16 Branches Address 1] Sai Mandir, Kalamba Road, Karveer, Kolhapur. 2] 514-d, Gangavesh, Kolhapur. Products and Services: 1] Deposits: Current Accounts. Savings Accounts. Fixed Accounts. 2] Loans and Advances: Loan against gold. Car loan. Home loan. Loan for farming equipments. Shivaji University, Kolhapur. K.I.Ts I.M.E.R 17 3 THEORETICAL BACKGROUND Shivaji University, Kolhapur. K.I.Ts I.M.E.R 18 Investments: The investment environment encompasses the kinds of marketable securities that exist and where and how they are bought and sold. The investment process is concerned with how an investor should proceed in making decisions about what marketable securities to invest in, how extensive the investment should be, and when the investment should be made. Before discussing the investment environment and process in more detail, the term investment will be described. Investment, in its broader sense, means the sacrifice of current dollars for future dollars. Two different attributes are generally involved: time and risk. The sacrifice takes place in the present and is certain. The reward comes later, if at all, and the magnitude is generally uncertain. In some cases the element of time pre dominates (for example, government bonds). In other cases risk is the dominant attribute (for example, call options on common stocks). In yet others both time and risk are important (for example, shares of common stock). A distinction is often made between investment and savings. Savings is defined as foregone consumption; investments restricted to "real" investment of the sort that increases national output in the future. While this definition may prove useful in other contexts, it is not especially helpful here however; it is useful to make a distinction between real and financial investments. Real investments generally involve some kind of tangible asset, such as land, machinery or factories. The financial investment involves contracts written on pieces of paper, such as common stocks and bonds. In primitive economies most investment is of the real variety. Whereas, in a modern economy, much investment is of the financial variety. Highly developed institutions for financial investment greatly facilitate real investment. By and large, the two forms of investments are complementary, not competitive. Shivaji University, Kolhapur. K.I.Ts I.M.E.R 19 The third schedule to the banking regulation act, 1949 requires the disclosure of investment in the b/s as follows: Investment in India-ina.General sector. b.Other approved sector. c.Shares. d.Debentures and bonds. e.Subsidiaries and/or joint venture. f.Other investments (to be specified) Investment outside India-ina.General sector (including local authorities) b.Subsidiaries and/or joint venture abroad c.Other investments (to be specified)

The following are some of the terms which are commonly used in relation to Investments of banks. (a)Approved Securities: section 5(a) of the banking regulation act, 1949 defines approved securities' to mean securities in which a trustee may invest money under clauses (a) to (d) and (f) of section 20 of the Indian trusts act 1882. Approved securities comprise primarily the securities issued or guaranteed by the central or state government or any other security expressly authorized by the central government by notification in the official gazette. Shivaji University, Kolhapur. K.I.Ts I.M.E.R 20 (b)Prudential Exposure Limits: the RBI from time to time prescribes the limit up to which investments in any one type of security or in any one company/group of companies can be made by a bank. These limits are known as 'prudential exposure limits.' (c)Government Security: a government security is an instrument issued by the central or a state government which is redeemable after a fixed period and carries a fixed rate of interest. (d)Treasury Bills: t-bills are government securities representing obligations which mature in one year or less. (e) Yield-To-Maturity (YTM): this is the average compound rate of return on a security (taking in to account both the interest and the redemption value) which the investor will earn if he holds it till maturity. Investment policy: Bank should frame and implement a suitable investment policy to ensure that operations in securities are conducted in accordance with sound and acceptable :1 business practices. With the approval of respective boards, bank should clearly lay down the '.i broad investment objectives to be followed while undertaking transactions in !:-securities on their own investment a/c and on behalf of clients, clearly define the ,authority to put through deals, procedure to be followed while putting through deals, -various prudential exposure limits and the reporting system. While lying down such, investment policy guidelines, bank should strictly observe reserve bank's detailed instructions on the following aspects: A)Ready forward (buy back) deals. B)Transactions through SGL a/c. C)Use of bank receipts (BR) Shivaji University, Kolhapur. K.I.Ts I.M.E.R 21 D)Retailing of general sector. E)Internal control system. Dealings through brokers. G)Audit, review and reporting. H)Non- SLR investment. Classification of investment: The entire investment portfolio of the banks (including SLR securities and non- SLR securities) should be classified under 3 categories viz. `FITM', `AFS' and `FIFT'. However in the b/s, the investment will continue to be disclosed as per the existing six classifications viz. A) General sector. B) Other approved sector. C) Shares. D) Debentures & Bonds. E) Subsidiaries/ joint venture. F) Others (CP, MF, units etc.). Bank should decide the category of the investment at the time of the acquisition and the decision should be recorded on the investment proposals. Shivaji University, Kolhapur. K.I.Ts I.M.E.R 22 Held to Maturity: The securities acquired by the banks with the intension to hold them up to maturity will be classified under HTM. The investment included under 'Held to Maturity' should not exceed 25 percent of the bank's total investments. The banks may include, at their discretion under `FITM' category securities less than 25 percent of total investment. The following investments will be classified under `FITM' but will not be counted for the purpose of ceiling of 25% specified for this category: A)Re-capitalization bonds received from the government of India towards their re-capitalization requirements and held in their investment portfolio. This will not include re-capitalization bonds of other books acquired for investment purpose. B)Investments in subsidiaries and joint ventures. (A joint venture would be one in which the bank, along with its subsidiaries, holds more than 25% of the equity.) C)The investments in debentures/bonds, which are deemed to be in the nature of an advance. Available for Sale & Held for Trading: The securities acquired by the banks with the intension to trade by taking advantage of the short term price/interest rate movements will be classified under 'held for trading'. The securities which do not fall within the above two categories will be classified under 'Available for Sale' Shivaji University, Kolhapur. K.I.Ts I.M.E.R 23 The investment classified under held for trading category would be those from which the bank expects to make a gain by the movement in the interest rates/market rates. These securities are to be sold within 90 days. Profit or loss on sale of investments in both the categories will be taken to the profit and loss account. Shifting among categories: i)Bank may shift investments to/from held to maturity category with the approval of the board of directors once a year. Such shifting will normally be allowed at the beginning of the accounting year. No further shifting to/from this category will be allowed during remaining part of that accounting year. ii) Banks may shift investments from 'Available For Sale' category to 'Held for Trading' category with the approval of their board of directors/Asset-Liability Committee (ALCO) / investment committee. In case of exigencies, such shifting may be done with the approval of the bank/head of the ALCO, but should be ratified by the board of directors/ALCO. iii)Shifting of investments from 'held for trading' category to 'available for sale' category is generally not allowed. However, it will be permitted only under exceptional circumstances like not being able to sell the security within 90 days due to tight liquidity conditions or extreme volatility or market becoming unidirectional, such transfer is permitted only with the approval of the board of directors/ALCO/investment committee. Transfer of scrips from one category to another, under all circumstances, should be done at the acquisition cost/book value/market value on the date of transfers whichever is the least and the depreciation, if any, on such transfer should be fully provided for. Shivaji University, Kolhapur. K.I.Ts I.M.E.R 24 Valuation: Held to maturity Investments classified under `FITM' category need not marked to market and will be carried at acquisition cost unless it is more than the face value, in which case the premium should amortized over the period remaining to maturity. Bank should recognize any diminution, other than temporary, in the value of their investments in subsidiaries/joint ventures which are included under 'held to maturity' category and provide therefore. Such diminution should determine and provided for each investment individually. Available for sale The individual scrips in the 'Available for Sale' category will be marked to market at the quarterly or at more frequent intervals. While the net depreciation under each classification referred to in Para (I) of 'classification of investments' given above should be recognized and fully provided for the net appreciation under each classification referred in that Para should be ignored. The book value of the individual securities would not undergo any change after the revolution. The provisions required to be created an account of depreciation in the 'AFS' category in any year should be debited to the P&L a/c and an equivalent amount (net of tax benefit, if any, and net of consequent reduction in the transfer to statutory reserve) or the balance available in the investment fluctuation reserve account whichever is less, shall be transferred from the IFR a/c to the P&L a/c. In the event provisions created on account of depreciation in the 'AFS' category are found to be in excess of the required amount in any year, the excess should be credited to the P&L a/c and an equivalent amount (net of taxes, if any, and net of transfer to statutory reserve as applicable to such excess provision) should be appropriated to the investment fluctuation reserve account to be utilized to meet future depreciation requirement for investment in this category. Shivaji University, Kolhapur. K.I.Ts I.M.E.R 25 The amounts debited to the P&L a/c for provision and the amount credited to the P&L a/c for reversal of excess provision should be debited and credited respectively under the head "expenditure provisions and contingencies." The amounts appropriated from the P&L a/c and the amount transferred from the IFR to the P&L a/c should be shown as 'below the line' items after determining the profit for the year.

Held for Trading: The individual scrips in the held for trading category will be marked to market at monthly or at more frequent intervals as in the case of those in the AFS category. The book value of the individual securities in this category would not undergo any change after marking to market. Shivaji University, Kolhapur. K.I.Ts I.M.E.R 26 4 DATA ANALYSIS AND INTERPRETATION Shivaji University, Kolhapur. K.I.Ts I.M.E.R 27 The RBI has given investment norms. Each and every bank has to follow these investment norms, the guidelines for SLR & non-SLR investments. So in this unit we will see norms & data and try to analyze and interpret it in very simple & lucid language. Reserve Bank of India has given following non-SLR securities guidelines. So that bank has to invest in money market. Non-SLR securities-guidelines: In order to contain risks arising out of the non-SLR investment portfolio of banks, the banks should adhere to the following guidelines:- Coverage: with a view to allowing UEB's greater flexibility in making non- SLR investments would be governed by the following guidelines: Guidelines: Non-SLR investments will be limited to 10% of a banks total deposits as on march 31st of the previous year. Investments will be limited to "A" or equivalent rated commercial papers (CP) debentures and bonds that are redeemable in nature. Investments in perpetual debt instruments are however not permitted. 2.Investments in unlisted securities should not exceed 10% of the total non- SLR investments at any time. Where banks have already exceeded the said limit, no incremental investments in such securities will be permitted. Investments in units of mutual funds except debt mutual funds and money market mutual funds will not be permitted. The existing holdings in units of other than debt mutual funds and money market mutual funds, including those in UTI should be Shivaji University, Kolhapur. K.I.Ts I.M.E.R 28 disinvested. Till such time that they are held in the books of the bank, they will be reckoned as non-SLR investments for the purpose of the limit at (1) above. Fresh investment in shares of all India financial institutions (AIFI) will also not be permitted. The existing share holding in these institutions may be phased out and till such time they are held in the books of the bank, they will be reckoned as non-SLR investments for the purpose of the limit (1) above. All fresh investments under non-SLR category should be classified under held for trading (HFT)/available for sale (AFS) categories only and marked to market as applicable to these categories of investments. Balances held in deposit a/cs with commercial banks and in permitted scheduled UCBs and investments in certificate of deposits issued by commercial banks, will be outside the limit of 10% of total deposits prescribed for non-SLR investments. 7.The total amount of funds placed as inter-bank deposits (for all purposes including clearing, remittances) shall not exceed 10% of the DTL of UCB as on March 31st of the previous year. The prudential inter-bank exposure limit of 10% of DTL would be call and notice money. The only exception is made for tier 1 UCB's which may place deposits up to 15% of their NDTL with PSB's over &above the said prudential limit of 10% of NDTL. 8.Exposure to any single bank should not exceed 2% of the depositing banks DTL as on march 31st of the previous year, inclusive of its total non-SLR investments and deposit placed with that bank. Deposits, if any, placed for availing CSGL facility currency chest facility and non fund based facilities like bank guarantee (B.G.), letter of credit (L/C) would be excluded to determine the single bank exposure limit for this purpose. 9.All investment as above, bearing deposits placed with banks for which prudential limits have been prescribed at Para 2(9) above, will be subject to the prescribed prudential individual/group exposure limits. Shivaji University, Kolhapur. K.I.Ts I.M.E.R 29 10.All investments, other than those in CP, and CD, shall be in instruments with an original maturity of at least one year. 11.The non-scheduled primary (urban) co-operative banks, having single branch-cum-head office or having multiple branches within a single district, having a deposit base of Rs. One hundred crores (Rs. 100 crores) or less have been exempted from maintaining SLR in prescribed assets up to 15% of their DTL on keeping the required amount, in interest bearing deposits with state bank of India and its subsidiary banks and the public sector banks including industrial development bank of India ltd. In terms of the RBI's circular dated February 17, 2006. Such deposits are not covered under these guidelines and the limits prescribed at (7) above are exclusive of such deposits.

Shivaji University, Kolhapur. K.I.Ts I.M.E.R 30 Analysis and Interpretation: List Of Investment As On 31.03.2008. (A) Central Government/State Government other trustee securities. 1.12.25% NSDL LOAN 2010

Where, YTM = Yield To Maturity. C = Coupon/Interest payment. M = Face value. P = Price. n = Years to maturity.

Shivaji University, Kolhapur. K.I.Ts I.M.E.R 31 In the same manner rest of the securities give following yield. SR. NO.NAME OF SECURITYYIELD 1.7.38% GOI 20155.0% 2.8.07% GOI 20175.8% 3.UTI CONTRA FUNDNO EFFECT 4.7.40% GOI 20124.9% 5.8.07% GOI 20175.5% 6.7.95% GOI 20326.6% 7.8.35% GOI 20226.0% 8.5.69% GOI 20185.3% 9.6.17% GOI 20236.0% 10.6.01% GOI 20286.0% 11.7.46% GOI 20175.3% 12.8.30% APSFC BONDS 2012 5.3% 13.11.33% WBFC BONDS 2010 3.9% 14.12.50% KSFC BONDS 20092.1% 15.IIBI DEEP DISCOUNT BONDS (NON SLR) 2028 4.0%* 16.NSDL Loan 201012.25% Shivaji University, Kolhapur. K.I.Ts I.M.E.R 32 The above table shows that the bank has invested in 16 different securities, which are providing an yield ranging from 2.1% to 12.25%. The highest yield is on NSDL and lowest on KSFC Bonds 2009. The other investments are giving moderate returns averaging 5 6%. Deep Discount Bonds: NOTE: Here required rate of return (kd) is not available. Thats why it is assumed 4% so further calculations are not possible. (B) Investment in Shares: RS.RETURN 2,05,000.00NIL The bank has invested 2,05,000.00 in shares of two Banks viz. ICICI Bank Ltd. and LIC housing finance Ltd. It invested 1,05,000.00 in ICICI Bank Ltd. and 1,00,000.00 in LIC housing finance Ltd. Bank has earned no returns on these investments.

WHERE, Mv = Maturity Value. kd = Required rate of return. n = Maturity Period. Shivaji University, Kolhapur. K.I.Ts I.M.E.R 33 (C) Deposit with Nationalized Banks: NAME OF THE BANK AMOUNTINT.@7% SBI1,86,27,900.0014,02,100.00 PNB4,92,90,000.0037,10,000.00 TOTAL6,79,17,900.0051,12,100.00 TOTAL (Amt. + Int.)(6,79,17,900.00 + 51,12,100.00)7,30,30,000.00 Return Rs. 51,12,100.00 (D) Deposit with State Co-Op Banks: NAME OF THE BANK AMOUNTINT.@8% MSC BANK LTD.2,30,000.0020,000.00 TOTAL (Amt. + Int.)(2,30,000.00 + 20,000.00)2,50,000.00 Return Rs. 20,000.00 (E) Deposits with DCC Banks: NAME OF THE BANKAMOUNT INT.@8% KDCC CALL DEPOSIT0.000.00 KDCC FDR R/F4,83,92,000.0042,08,000.00 PDCC FDR5,88,80,000.0051,20,000.00 TOTAL10,72,72,000.0093,28,000.00 TOTAL (Amt. + Int.)(10,72,72,000.00 + 93,28,000.00)11,66,00,000.00 Return Rs. 93,28,000.00 Shivaji University, Kolhapur. K.I.Ts I.M.E.R 34 (F) Deposit with other Co-Op Banks: NAME OF THE BANKAMOUNT INT.@8% SARASWAT BANK 1,14,92,306.049,99,330.96 IDBI BANK LTD.92,00,920.008,00,080.00 ICICI BANK LTD.1,38,00,000.0012,00,000.00 ICHALKARANJI JANATA SAH. BANK LTD. 1,40,76,000.0012,24,000.00 HDFC BANK LTD.92,00,000.008,00,000.00 FEDERAL BANK LTD.92,00,000.008,00,000.00 TOTAL6,69,69,226.0458,23,410.96 TOTAL (Amt. + Int.)(6,69,69,226.04+ 58,23,410.96)7,27,92,637.00 Return Rs. 58,23,411.00 Total Investments = (A)+(B)+(C)+(D)+(E)+(F) = Rs. 68,42,54,055.35 % With Total Investments (A)Share of Bonds:

= 61.58%. Shivaji University, Kolhapur. K.I.Ts I.M.E.R 35 (B)Investment in Shares:

(C)Total Deposits:

= 38.39% 61.58 0.03 38.39 0 10 20 30 40 50 60 70 Share of bondsInvestment in sharesTotal deposits Total Investment Share of bonds Investment in shares Total deposits Shivaji University, Kolhapur. K.I.Ts I.M.E.R 36 A)Weighted Yield Of Bond Investment: SR.NO.SHARE IN TOTAL BOND INVESTMENT CALCULATED YIELD WEIGHTED YIELD 1.0.47%12.25%5.75% 2.2.65%5.00%13.25% 3.2.76%5.8%16.00% 4.2.37%8.00%18.96% 5.2.62%4.9%12.83% 6.30.99%5.5%170.44% 7.13.80%6.6%91.08% 8.5.82%6.0%34.92% 9.4.85%5.3%25.70% 10.9.63%6.0%57.78% 11.9.47%6.0%56.82% 12.2.74%5.3%14.52% 13.1.60%5.3%8.48% 14.2.86%3.9%11.15% 15.4.27%2.1%8.96% 16.3.01%4.0%12.04% TOTAL559.04%

= 5.59% In the above table the bank has highest share in total bond investment is 30.99% where as the lowest share in total bond investment is 0.47%. The Weighted Yield calculated is 5.59%. B) Investment In Shares : Nil. Shivaji University, Kolhapur. K.I.Ts I.M.E.R 37 C) Deposits With Banks : DEPOSIT WITH NATIONALIZED BANKS

DEPOSIT WITH STATE CO-OP BANKS

DEPOSIT WITH DISTRICT CENTRAL CO-OP BANKS

DEPOSIT WITH OTHER CO-OP BANKS

DEPOSITS WITH : 1) 2)3) 4) YIELD = % SHARERETURN Shivaji University, Kolhapur. K.I.Ts I.M.E.R 38

Total Yield = % Of Total Investment x Weighted Yield

Investments% Of Total Investment Weighted YieldTotal Yield A61.585.59344.23 B030300.00 C38.397.75297.52 TOTAL641.75

Shivaji University, Kolhapur. K.I.Ts I.M.E.R 39 List Of Investment As On 31.03.2009 (A) Central Government/State Government other trustee securities. 1. 12.25% NSDL Loan 2010

Where, YTM = Yield To Maturity. C = Coupon/Interest payment. M = Face value. P = Price. n = Years to maturity.

Shivaji University, Kolhapur. K.I.Ts I.M.E.R 40 In the same manner rest of the securities give following yield. SR. NO.NAME OF SECURITYYIELD 1.7.38% GOI 20155.3% 2.8.07% GOI 20175.6% 3.7.40% GOI 20124.9% 4.8.07% GOI 20175.6% 5.7.95% GOI 20326.6% 6.8.35% GOI 20226.0% 7.5.69% GOI 20185.4% 8.6.17% GOI 20236.0% 9.6.01% GOI 20286.0% 10.7.46% GOI 20175.4% 11.8.30% APSFC BONDS 2012 5.3% 12.11.33% WBFC BONDS 2010 3.2% 13.12.50% KSFC BONDS 2009 -0.9% 14.IIBI DEEP DISCOUNT BONDS (NONSLR) 2028 4.0%* 15.NSDL Loan 201012.25% Shivaji University, Kolhapur. K.I.Ts I.M.E.R 41 The above table shows that the bank has invested in 15 different securities, which are providing an yield ranging from -0.9% to 12.25%. The highest yield is on NSDL and lowest on KSFC Bonds 2009, which is negative. The other investments are giving moderate returns averaging 5 6%. Deep Discount Bonds: NOTE: Here required rate of return (kd) is not available. Thats why it is assumed 4% so further calculations are not possible. (B) Investment in Shares: RS.RETURN 2,05,000.00NIL The bank has invested 2,05,000.00 in shares of two Banks viz. ICICI Bank Ltd. and LIC housing finance Ltd. It invested 1,05,000.00 in ICICI Bank Ltd. and 1,00,000.00 in LIC housing finance Ltd. Bank has earned no returns on these investments.

WHERE, Mv = Maturity Value. kd = Required rate of return. n = Maturity Period. Shivaji University, Kolhapur. K.I.Ts I.M.E.R 42 (C) Deposit with Nationalized Banks: NAME OF THE BANKAMOUNT INT.@7% SBI0.000.00 PNB2,46,45,000.0018,55,000.00 TOTAL2,46,45,000.0018,55,000.00 TOTAL (Amt. + Int.)(2,46,45,000.00 + 18,55,000.00)2,65,00,000.00 Return Rs. 18,55,000.00 (D) Deposit with State Co-Op Banks: NAME OF THE BANKAMOUNT INT.@8% MSC BANK LTD.2,30,000.0020,000.00 TOTAL (Amt. + Int.)(2,30,000.00 + 20,000.00)2,50,000.00 Return Rs. 20,000.00 (E) Deposits with DCC Banks: NAME OF THE BANKAMOUNT INT.@8% KDCC CALL DEPOSIT0.000.00 KDCC FDR R/F4,36,08,000.0037,92,000.00 PDCC FDR16,88,20,000.001,46,80,000.00 TOTAL21,24,28,000.001,84,72,000.00 TOTAL (Amt. + Int.)(21,24,28,000.00 + 1,84,72,000.00)23,09,00,000.00 Return Rs. 1,84,72,000.00 Shivaji University, Kolhapur. K.I.Ts I.M.E.R 43 (F) Deposit with other Co-Op Banks: NAME OF THE BANKAMOUNT INT.@8% SARASWAT BANK1,61,71,726.8814,06,237.12 IDBI BANK LTD. FDR1,61,37,208.4814,03,235.52 ICICI BANK LTD. FDR1,38,00,000.0012,00,000.00 ICHALKARANJI JANATA SAH. BANK LTD. 1,61,00,000.0014,00,000.00 KARAD URBAN CO-OP BANK LTD. 1,60,27,161.7613,93,666.24 RATNAKAR BANK LTD.55,20,000.004,80,000.00 TOTAL8,37,55,997.0072,83,139.00 TOTAL (Amt. + Int.)(8,37,55,997.00 + 72,83,139.00)9,10,39,136.00 Return Rs. 72,83,139.00 Total Investments = (A)+(B)+(C)+(D)+(E)+(F) = Rs. 75,54,84,934.00 % With Total Investment (A)Share of Bonds:

= 53.81%. Shivaji University, Kolhapur. K.I.Ts I.M.E.R 44 (B)Investment in Shares:

(C)Total Deposits:

= 46.16% 53.81 0.03 46.16 0 10 20 30 40 50 60 Share of bondsInvestment in sharesTotal Deposits Total Investment Share of bonds Investment in shares Total Deposits Shivaji University, Kolhapur. K.I.Ts I.M.E.R 45 (A)Weighted Yield Of Bond Investment: SR.NO.SHARE IN TOTAL BOND INVESTMENT CALCULATED YIELD WEIGHTED YIELD 1.0.49%12.25%6.00% 2.2.75%5.3%14.58% 3.2.87%5.6%16.07% 4.2.67%4.96%13.24% 5.31.62%5.62%177.70% 6.14.23%6.66%94.77% 7.5.96%6.06%36.12% 8.5.03%5.4%27.16% 9.9.97%6.02%60.02% 10.9.81%6.05%59.35% 11.2.80%5.41%15.15% 12.1.63%5.32%8.67% 13.2.84%3.28%9.32% 14.4.19%-0.87%-3.65% 15.3.14%4.0%12.56% TOTAL547.06%

In the above table the bank has highest share in total bond investment is 31.62% where as the lowest share in total bond investment is 0.49%. The Weighted Yield calculated is 5.47%. Shivaji University, Kolhapur. K.I.Ts I.M.E.R 46 B) Investment In Shares : Nil. C) Deposits With Banks : DEPOSIT WITH NATIONALIZED BANKS

DEPOSIT WITH STATE CO-OP BANKS

DEPOSIT WITH DISTRICT CENTRAL CO-OP BANKS

DEPOSIT WITH OTHER CO-OP BANKS

YIELD = % SHARERETURN Shivaji University, Kolhapur. K.I.Ts I.M.E.R 47 DEPOSITS WITH :

Total Yield = % Of Total Investment x Weighted Yield Shivaji University, Kolhapur. K.I.Ts I.M.E.R 48

Investment% Of Total Investment Weighted Yield Total Yield A53.815.47294.34 B0.0300.00 C46.167.75357.74 TOTAL652.08

Shivaji University, Kolhapur. K.I.Ts I.M.E.R 49 List Of Investment As On 31.03.2010 (A) Central Government/State Government other trustee securities. 1. 12.25% NSDL Loan 2010

Where, YTM = Yield To Maturity. C = Coupon/Interest payment. M = Face value. P = Price. n = Years to maturity.

Shivaji University, Kolhapur. K.I.Ts I.M.E.R 50 In the same manner rest of the securities give following yield. SR. NO.NAME OF SECURITYYIELD 1.7.38% GOI 20155.0% 2.8.07% GOI 20175.0% 3.7.40% GOI 20125.0% 4.8.07% GOI 20175.0% 5.7.95% GOI 20326.0% 6.8.35% GOI 20226.0% 7.5.69% GOI 20185.0% 8.6.17% GOI 20235.0% 9.6.01% GOI 20287.0% 10.7.46% GOI 20175.0% 11.8.30% APSFC BONDS 2012 5.0% 12.11.33% WBFC BONDS 2010 3.0% 13.IIBI DEEP DISCOUNT BONDS (NONSLR) 2028 4.0%* 14.NSDL Loan 201012.25% Shivaji University, Kolhapur. K.I.Ts I.M.E.R 51 The above table shows that the bank has invested in 14 different securities, which are providing an yield ranging from 3.0% to 12.25%. The highest yield is on NSDL and lowest on WBFC Bonds 2010. The other investments are giving moderate returns averaging 5 7%. Deep Discount Bonds: NOTE: Here required rate of return (kd) is not available. Thats why it is assumed 4% so further calculations are not possible. (B) Investment in Shares: RS.RETURN 2,05,000.00NIL The bank has invested 2,05,000.00 in shares of two Banks viz. ICICI Bank Ltd. and LIC housing finance Ltd. It invested 1,05,000.00 in ICICI Bank Ltd. and 1,00,000.00 in LIC housing finance Ltd. Bank has earned no returns on these investments.

WHERE, Mv = Maturity Value. kd = Required rate of return. n = Maturity Period. Shivaji University, Kolhapur. K.I.Ts I.M.E.R 52 (C) Deposit with Nationalized Banks: NAME OF THE BANKAMOUNT INT.@7% SBI93,00,000.007,00,000.00 PNB3,25,50,000.0024,50,000.00 TOTAL4,18,50,000.0031,50,000.00 TOTAL (Amt. + Int.)(4,18,50,000.00 + 31,50,000.00)4,50,00,000.00 Return Rs. 31,50,000.00 (D) Deposit with State Co-Op Banks: NAME OF THE BANKAMOUNT INT.@8% MSC BANK LTD.2,30,000.0020,000.00 TOTAL (Amt. + Int.)(2,30,000.00 + 20,000.00)2,50,000.00 Return Rs. 20,000.00 Shivaji University, Kolhapur. K.I.Ts I.M.E.R 53 (E) Deposits with DCC Banks: NAME OF THE BANKAMOUNT INT.@7% KDCC CALL DEPOSIT4,88,25,000.0036,75,000.00 KDCC FDR R/F3,58,98,000.0027,02,000.00 PDCC FDR8,13,75,000.0061,25,000.00 TOTAL16,60,98,000.001,25,02,000.00 TOTAL (Amt. + Int.)(16,60,98,000.00 + 1,25,02,000.00)17,86,00,000.00 Return KDCC Call Deposit @ 6% = Rs. 31,50,000.00 KDCC FDR R/F@ 8% = Rs. 30,88,000.00PDCC FDR @ 8% = Rs. 70,00,000.00For weighted average purpose the return is assumed @ 7%. Return Rs. 1,25,02,000.00 Shivaji University, Kolhapur. K.I.Ts I.M.E.R 54 (F) Deposit with other Co-Op Banks: NAME OF THE BANKAMOUNT INT.@8% SARASWAT BANK1,47,20,000.0012,80,000.00 KARAD URBAN CO-OP BANK LTD. 2,11,60,000.0018,40,000.00 IDBI BANK LTD.46,00,000.004,00,000.00 ICICI BANK LTD.0.000.00 ICHALKARANJI JANATA SAH. BANK LTD. 3,03,60,000.0026,40,000.00 RATNAKAR BANK1,84,00,000.0016,00,000.00 THE COSMOS CO-OP BANK LTD. 2,99,00,000.0026,00,000.00 DOMBIWALI CO-OP BANK LTD. 1,38,00,000.0012,00,000.00 SHAMRAO VITTHAL CO-OP BANK LTD. 92,00,000.008,00,000.00 TOTAL14,21,40,000.001,23,60,000.00 TOTAL (Amt. + Int.)(14,21,40,000.00 + 1,23,60,000.00)15,45,00,000.00 Return Rs. 1,23,60,000.00 Total Investments = (A)+(B)+(C)+(D)+(E)+(F) = Rs. 75,41,00,782.85 % With Total Investment (A)Share of Bonds:

= 49.80%. Shivaji University, Kolhapur. K.I.Ts I.M.E.R 55 (B)Investment in Shares:

(C)Total Deposits:

= 50.17% 49.8 0.03 50.17 0 10 20 30 40 50 60 Share of BondsInvestment in SharesTotal deposits Total Investment Share of Bonds Investment in Shares Total deposits Shivaji University, Kolhapur. K.I.Ts I.M.E.R 56 A) Weighted Yield Of Bond Investment: SR.NO.SHARE IN TOTAL BOND INVESTMENT CALCULATED YIELD WEIGHTED YIELD 1.0.53%12.25%6.49% 2.2.97%5.00%14.85% 3.3.10%5.00%15.50% 4.2.83%5.00%14.15% 5.33.62%5.00%168.10% 6.15.34%6.00%92.04% 7.6.37%6.00%38.22% 8.5.42%5.00%27.10% 9.8.19%5.00%40.95% 10.10.62%7.00%74.37% 11.3.00%5.00%15.00% 12.1.71%5.00%8.55% 13.2.90%3.00%8.70% 14.3.40%4.00%13.60% TOTAL537.59%

In the above table the bank has highest share in total bond investment is 31.62% where as the lowest share in total bond investment is 0.49%. The Weighted Yield calculated is 5.47%. Shivaji University, Kolhapur. K.I.Ts I.M.E.R 57 B) Investment In Shares : Nil. C) Deposits With Banks : DEPOSIT WITH NATIONALIZED BANKS

DEPOSIT WITH STATE CO-OP BANKS

DEPOSIT WITH DISTRICT CENTRAL CO-OP BANKS

DEPOSIT WITH OTHER CO-OP BANKS

YIELD = % SHARERETURN Shivaji University, Kolhapur. K.I.Ts I.M.E.R 58 DEPOSITS WITH :

Total Yield = % Of Total Investment x Weighted Yield Shivaji University, Kolhapur. K.I.Ts I.M.E.R 59

Investment% of Total InvestmentWeighted YieldTotal Yield A49.805.47267.42 B0.0300.00 C50.177.00315.19 TOTAL618.61

Shivaji University, Kolhapur. K.I.Ts I.M.E.R 60 The capital redemption adequacy ratio must be 9.00% as per RBIs rule. This bank has followed RBI guideline and able to maintain it. YEARREQUIRED RATIO ACTUAL RATIODIFFERENCE (+/-) 2007-089.00%14.57%5.57% 2008-099.00%14.66%5.66% 2009-109.00%15.56%6.56% It shows that in respective years bank would have been able to lend more. But bank had not lent it. If bank would have been lent in excess of CRAR the position would be as follows: PARTICULARS2007-082008-092009-10 LOANS89,58,05,56297,08,02,8191,12,34,06,426 ADD (+)3,81,12,950 (@5.57%) 4,26,97,357 (@5.66%) 4,94,69,011 (@6.56) TOTAL93,39,18,5121,01,35,00,17617,28,75,437 INVESTMENT68,42,54,05575,43,70,28175,41,00,782 LESS (-)3,81,12,950 (@5.57) 4,26,97,357 (@5.66%) 49469011 (@6.56%) TOTAL64,61,41,1057,11,67,92470,46,31,771

Shivaji University, Kolhapur. K.I.Ts I.M.E.R 61 Now we have to consider the interest which is not recovered on short term loan. For 2007-08 Total Short Term loan Disbursed:27,10,60,994 Interest Not Recovered:30,96,267 Percentage of unrecovered interest:1.14% For 2008-09 Total Short Term loan Disbursed:23,08,09,487 Interest Not Recovered:31,52,941 Percentage of unrecovered interest:1.36% For 2009-10 Total Short Term loan Disbursed:27,27,97,972 Interest Not Recovered:32,21,271 Percentage of unrecovered interest:1.58% Shivaji University, Kolhapur. K.I.Ts I.M.E.R 62 If bank would have been disbursed the loan as per above table we could consider above percentage which in not recovered on short term loan as expected NPA (Non Performing Assets). So the returns would be that much low. PARTICULARS2007-082008-092009-10 EXCESS CRAR5.57%5.66%6.56% LESS (Int. not recovered on short term loan) 1.14%1.36%1.18% ACTUAL RETURNS4.43%4.30%5.38% The source of funds for bank is as follows : 1. Share capital. 2. Reserve and surplus. 3. Deposits. The application of funds for bank is as follows : 1. Investment. 2. Loan. Difference between source of funds and application of funds is profit for bank. Shripatraodada Shakari Bank Ltd. is able to maintain remarkable profit level because of good fund management. YEARTOTAL YIELD ON INVESTMENT TOTAL YIELD ON LOAN 2007-086.42%11.01% 2008-096.52%11.50% 2009-106.18%11.86% Shivaji University, Kolhapur. K.I.Ts I.M.E.R 63 5 FINDINGS Shivaji University, Kolhapur. K.I.Ts I.M.E.R 64 In this topic, findings are mentioned and suggestions are provided. I hope that these efforts will help the bank in its future period of time. 1.Total loans are increased in 2008 8.37 % & in 2009 - 15.71 %. 2.Bad debt percentage with total loan is 6.64% in 2010 leads to good signal about recovery of loan. 3.Percentage of three year's average of unsecured loans with total loans should below 10%. Actually it is decreased in 2009 & 2010, may lead to better recovery in next year. (avg. = 8.52%) 4.In 2009, bank decreased the ratio of interest not recovered leads to better loan management. 5.Bad debts leads to decreasing overall returns of the bank and bank has to provide for these loans leads to less dividend to shareholders. 6.Loan against deposit in 2007 61.79%, in 2008 61.52% & in the year 2008-09 65.79%. (Standard ratio is in between 60% & 70%) It shows better management for bank as well as the depositors of the bank. 7.The Ratio of unsecured to total loans for 2007-08 was 9.88%. In 2008-09 the ratio of unsecured to total loans decreased to 8.36% and in 2009-10 the ratio of unsecured to total loans again decreased to 7.34%. The average ratio is 8.52%. Ratio of unsecured to total loans has reduced year by year and it is a good sign. Shivaji University, Kolhapur. K.I.Ts I.M.E.R 65 6 SUGGESTIONS ANDCONCLUSION Shivaji University, Kolhapur. K.I.Ts I.M.E.R 66 Suggestions 1)Purchasing and selling in debt market securities should be done by expert personnel as bank suffered huge losses in debt market securities and still writing off these losses leads to less return to shareholders. 2)Risk-averse attitude of the directors also has other side that there is deployment of funds to lesser than optimum level and invested in less yield giving spheres. Directors should change their attitude to some extent and deploy the funds in loan category. 3)Portfolio of loans should increase in numbers as well as features and more categories should involve in loan giving activity of the bank so that it will increase the volume of operations of the bank. 4)There is large gap between interest rates of deposits and loans; margin should be at most 3%. Conclusion Financial health of the bank is good and financial health indicates show better achievements by management in studied period. Co-operative principles are followed in letters and spirit. Shareholders are satisfied by getting better returns on their investment. In competitive era interest charged on loans and interest offered on deposits is key factor which plays very important role for expansion of the unit better way. Shivaji University, Kolhapur. K.I.Ts I.M.E.R 67 BIBLIOGRAPHY Shivaji University, Kolhapur. K.I.Ts I.M.E.R 68 1] PRASANNA CHANDRA, FINANCIAL MANAGEMENT, 2007 EDI. 2] WILLIAM F SHARPE, GOODON J. ALEXANDER, JEFFERY V. BAILEY, INVESTMENTS, 5TH EDI. 3] V. PATTABHIRAM, S. D. BALA, FIRST LESSONS IN MANAGEMENT ACCOUNTING AND FINANCIAL ANALYSIS, 2ND EDI. 4] PRIMARY (URBAN) CO-OPERATIVE BANKS, RBI MASTER CIRCULAR ON INVESTMENT, (Updated up to June 30, 2008) 5] www.rbi.org.in HenilShah