A STUDY ON THE PERFORMANCE OF DEPOSIT SCHEMES IN KARNATAK
BANK LIMITED
CHAPTER – 1
INTRODUCTION
1.1 ABOUT THE INDUSTRY
Banking in India originated in the last decades of the 18th century. The first banks were The
General Bank of India, which started in 1786, and Bank of Hindustan, which started in 1790; both are
now defunct. The oldest bank in existence in India is the State Bank of India, which originated in the
Bank of Calcutta in June 1806, which almost immediately became the Bank of Bengal. This was one of
the three presidency banks, the other two being the Bank of Bombay and the Bank of Madras, all three
of which were established under charters from the British East India Company. For many years the
Presidency banks acted as quasi-central banks, as did their successors. The three banks merged in 1921
to form the Imperial Bank of India, which, upon India's independence, became the State Bank of
India in 1955.
HISTORY OF BANKING
Indian merchants in Calcutta established the Union Bank in 1839, but it failed in 1848 as a
consequence of the economic crisis of 1848-49. The Allahabad Bank, established in 1865 and still
functioning today, is the oldest Joint Stock bank in India.(Joint Stock Bank: A company that issues
stock and requires shareholders to be held liable for the company's debt) It was not the first though. That
honour belongs to the Bank of Upper India, which was established in 1863, and which survived until
1913, when it failed, with some of its assets and liabilities being transferred to the Alliance Bank of
Simla.
When the American Civil War stopped the supply of cotton to Lancashire from
the Confederate States, promoters opened banks to finance trading in Indian cotton. With large exposure
to speculative ventures, most of the banks opened in India during that period failed. The depositors lost
money and lost interest in keeping deposits with banks. Subsequently, banking in India remained the
exclusive domain of Europeans for next several decades until the beginning of the 20th century.
Foreign banks too started to arrive, particularly in Calcutta, in the 1860s. The Comptoire
d'Escompte de Paris opened a branch in Calcutta in 1860, and another in Bombay in 1862; branches
in Madras and Pondicherry, then a French colony, followed. HSBC established itself in Bengal in 1869.
Calcutta was the most active trading port in India, mainly due to the trade of the British Empire, and so
became a banking centre.1
The first entirely Indian joint stock bank was the Oudh Commercial Bank, established in
1881 in Faizabad. It failed in 1958. The next was the Punjab National Bank, established in Lahore in
1895, which has survived to the present and is now one of the largest banks in India. Around the turn of
the 20th Century, the Indian economy was passing through a relative period of stability. Around five
decades had elapsed since the Indian Mutiny, and the social, industrial and other infrastructure had
improved. Indians had established small banks, most of which served particular ethnic and religious
communities.
The presidency banks dominated banking in India but there were also some exchange banks
and a number of Indian joint stock banks. All these banks operated in different segments of the
economy. The exchange banks, mostly owned by Europeans, concentrated on financing foreign trade.
Indian joint stock banks were generally undercapitalized and lacked the experience and maturity to
compete with the presidency and exchange banks. This segmentation let Lord Curzon to observe, "In
respect of banking it seems we are behind the times. We are like some old fashioned sailing ship,
divided by solid wooden bulkheads into separate and cumbersome compartments."
The period between 1906 and 1911, saw the establishment of banks inspired by
the Swadeshi movement. The Swadeshi movement inspired local businessmen and political figures to
found banks of and for the Indian community. A number of banks established then have survived to the
present such as Bank of India, Corporation Bank, Indian Bank, Bank of Baroda, Canara
Bank and Central Bank of India. The fervour of Swadeshi movement lead to establishing of many
private banks in Dakshina Kannada and Udupi district which were unified earlier and known by the
name South Canara ( South Kanara ) district. Four nationalised banks started in this district and also a
leading private sector bank. Hence undivided Dakshina Kannada district is known as "Cradle of Indian
Banking". During the First World War (1914–1918) through the end of the Second World War (1939–
1945), and two years thereafter until the independence of India were challenging for Indian banking.
POST INDEPENDENCE
The partition of India in 1947 adversely impacted the economies of Punjab and West
Bengal, paralyzing banking activities for months. India's independence marked the end of a regime of
the Laissez-faire for the Indian banking. The Government of India initiated measures to play an active
role in the economic life of the nation, and the Industrial Policy Resolution adopted by the government
in 1948 envisaged a mixed economy. This resulted into greater involvement of the state in different
segments of the economy including banking and finance. The major steps to regulate banking included:
2
The Reserve Bank of India, India's central banking authority, was established in April 1934, but
was nationalized on January 1, 1949 under the terms of the Reserve Bank of India (Transfer to
Public Ownership) Act, 1948 (RBI, 2005b).[Reference www.rbi.org.in]
In 1949, the Banking Regulation Act was enacted which empowered the Reserve Bank of India
(RBI) "to regulate, control, and inspect the banks in India."
The Banking Regulation Act also provided that no new bank or branch of an existing bank could
be opened without a license from the RBI, and no two banks could have common directors.
NATIONALISATION
Despite the provisions, control and regulations of Reserve Bank of India, banks in India
except the State Bank of India or SBI, continued to be owned and operated by private persons. By the
1960s, the Indian banking industry had become an important tool to facilitate the development of
the Indian economy. At the same time, it had emerged as a large employer, and a debate had ensued
about the nationalization of the banking industry. Indira Gandhi, then Prime Minister of India, expressed
the intention of the Government of India in the annual conference of the All India Congress Meeting in a
paper entitled "Stray thoughts on Bank Nationalisation." The meeting received the paper with
enthusiasm.
A second dose of nationalization of 6 more commercial banks followed in 1980. The stated
reason for the nationalization was to give the government more control of credit delivery. With the
second dose of nationalization, the Government of India controlled around 91% of the banking business
of India. Later on, in the year 1993, the government merged New Bank of India with Punjab National
Bank. It was the only merger between nationalized banks and resulted in the reduction of the number of
nationalised banks from 20 to 19. After this, until the 1990s, the nationalised banks grew at a pace of
around 4%, closer to the average growth rate of the Indian economy.
LIBERLIZATION
In the early 1990s, the then Narasimha Rao government embarked on a policy of liberalization,
licensing a small number of private banks. These came to be known as New Generation tech-savvy
banks, and included Global Trust Bank (the first of such new generation banks to be set up), which later
amalgamated with Oriental Bank of Commerce, Axis Bank(earlier as UTI Bank), ICICI
Bank and HDFC Bank. This move, along with the rapid growth in the economy of India, revitalized the
banking sector in India, which has seen rapid growth with strong contribution from all the three sectors
of banks, namely, government banks, private banks and foreign banks.
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The new policy shook the Banking sector in India completely. Bankers, till this time, were used
to the 4-6-4 method (Borrow at 4%; Lend at 6%; Go home at 4) of functioning. The new wave ushered
in a modern outlook and tech-savvy methods of working for traditional banks. Currently (2010),
banking in India is generally fairly mature in terms of supply, product range and reach-even though
reach in rural India still remains a challenge for the private sector and foreign banks.
ADOPTION OF BANKING TECHONOLGY
The IT revolution had a great impact in the Indian banking system. The use of computers had
led to introduction of online banking in India. The use of the modern innovation and computerisation of
the banking sector of India has increased many folds after the economic liberalisation of 1991 as the
country's banking sector has been exposed to the world's market. The Indian banks were finding it
difficult to compete with the international banks in terms of the customer service without the use of the
information technology and computers.
RESERVE BANK OF INDIA
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Scheduled banks
Co-operative banksCommercial banks
Urban Co-operatives (52)
Old (22)
Regional rural banks (196)
Public Sector banks (27)
State Co-operatives (16)
Other Nationalised banks (19)
Foreign banks (40)
Private Sector banks (30)
New (8) State bank of India and Associate banks (8)
RESERVE BANK OF INDIA
Central bank and supreme monetary authority
Reserve Bank of India was established on April 1, 1935 in accordance with the provisions of the
Reserve Bank of India Act, 1934. Though initially RBI was privately owned, it was nationalized in
1949. Its central office is in Mumbai where the Governor of RBI sits.
India has a well developed banking system. Most of the banks in India were founded by Indian
entrepreneurs and visionaries in the pre-independence era to provide financial assistance to traders,
agriculturists and budding Indian industrialists. The origin of banking in India can be traced back to the
last decades of the 18th century.
The role of central banking in India is looked by the Reserve Bank of India, which in 1935
formally took over these responsibilities from the then Imperial Bank of India. Reserve Bank was
nationalized in 1947 and was given broader powers. In 1969, 14 largest commercial banks were
nationalized followed by six next largest in 1980. But with adoption of economic liberalization in 1991,
private banking was again allowed. The commercial banking structure in India consists of: Scheduled
Commercial Banks and Unscheduled Banks. Scheduled commercial Banks constitute those banks,
which have been included in the Second Schedule of Reserve Bank of India (RBI) Act, 1934.
Indian banks can be broadly classified into public sector banks (those banks in which the
Government of India holds a stake), private banks (government does not have a stake in these banks;
they may be publicly listed and traded on stock exchanges) and foreign banks.
India has a strong and vibrant banking sector comprising state-owned banks, private sector
banks, foreign banks, financial institutions and regional banks including cooperative banks, rural banks
and local area banks. In addition there are non-banking financial companies (NBFCs), housing finance
companies, Nidhi companies and chit fund companies which play the role of financial intermediaries.
India is also committed to further open the banking sector for foreign investment in pursuance to its
commitment to the World Trade Organisation (WTO).
As monetary authority of the country, the Reserve Bank of India (RBI) regulates the banking
industry and lays down guidelines for day-to-day functioning of banks within the overall framework of
the Banking Regulation Act, 1949, Foreign Exchange Management Act, 1999 and Foreign Direct
Investment (FDI) policy of the government.
STATE-OWNED BANKS
The Indian banking sector is dominated by 28 state-owned banks which operate through a
network of about 50,000 branches and 13,000 ATMs. The State Bank of India (SBI) in the largest bank
in the country and along with its seven associate banks has an asset base of about Rs. 7,000 billion
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(approximately US$150 billion). The other large public sector banks are Punjab National Bank, Canara
Bank, Bank of Baroda, Bank of India and IDBI Bank.
PUBLIC SECTOR BANKS
The public sector banks have overseas operations with Bank of Baroda topping the list with 51
branches, subsidiaries, joint ventures and representative offices outside India, followed by SBI (45
overseas branches/offices) and Bank of India (26 overseas branches/offices). Indian banks, including
private sector banks, have 171 branches/offices abroad. SBI is present in 29 countries followed by Bank
of Baroda (20 countries) and Bank of India (14 countries).
PRIVATE SECTOR BANKS
Private sector banks India has 29 private sector banks including nine new banks which were
granted licences after the government liberalised the banking sector. Some of the well known private
sector banks are Karnataka Bank, ICICI Bank, HDFC Bank and IndusInd Bank. Yes Bank is the latest
entrant to the private sector banking industry.
In terms of reach the private sector banks with an asset of over Rs 5,700 billion (about
US$124 billion) operate through a network of 6,500 branches and over 7,500 ATMs.
FOREIGN BANKS
Foreign banks have brought latest technology and latest banking practices in India. They have
helped made Indian Banking system more competitive and efficient. Government has come up with a
road map for expansion of foreign banks in India.
Foreign banks As many as 29 foreign banks originating from 19 countries are operating in
India through a network of 258 branches and about 900 ATMs. With total assets of more than Rs 2,000
billion (about 44 billion US dollars) they are present in 40 centres across 19 Indian states and Union
Territories.
Some of the leading international banks that are doing brisk business in India include
Standard Chartered Bank, HSBC Bank, Citibank N.A. and ABN-AMRO Bank.
REGIONAL BANKS
Rural areas in India are served through a network of Regional Rural Banks (RRBs), urban
cooperative banks, rural cooperative credit institutions and local area banks. Many of these banks are
not doing well financially and the government is currently engaged in restructuring and consolidating
them.
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Local area banks were of recent origin and as on March 31, 2006 four such banks were
operating in the country.
NATIONALISED BANKS
Nationalised banks dominate the banking system in India. The history of nationalised banks in
India dates back to mid-20th century, when Imperial Bank of India was nationalised (under the SBI Act
of 1955) and re-christened as State Bank of India (SBI) in July 1955.
FINANCIAL INSTITUTIONS
Financial institutions India has seven major state-owned financial institutions which include
Industrial Development Bank of India (IDBI), Industrial and Financial Corporation of India (IFCI),
Tourism Finance Corporation of India (TFCI), Small Industries Development Bank of India (SIDBI),
National Bank for Agriculture and Rural Development (NABARD) and National Housing Bank (NHB).
These institutions provide term loans and arrange refinance. There are also specialised
institutions like the Power Finance Corporation (PFC), Indian Railway Finance Corporation (IRFC), and
Infrastructure Development Finance Company (IDFC) and state-level financial corporations.
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1.2 ABOUT THE COMPANY
Karnataka Bank Ltd, a premier private sector bank, is a leading 'A' Class Scheduled
Commercial Bank in India. The Bank offers a total value package, a one-stop shop for all the banking
needs. They provide Working Capital Finance, Term Loans and Infrastructure Finance to help the
Business grow. The Bank operates in four business segments, namely treasury, corporate and wholesale
banking, retail banking and other banking operations.
Karnataka Bank Ltd was incorporated on February 18, 1924 as The Karnataka Bank Ltd at
Mangalore in Karnataka. The Bank was established to cater to the banking needs of the South Kanara
Region. In May 23, 1924, the Bank obtained the certificate to commence business. In April 4, 1966,
they received their license to carry on the banking business in India. The Bank was promoted by B R
Vysarayachar and other leading members of the South Kanara Region. Under the table guidance of K S
N Adiga, the second chairman of the Bank who held the post for a period of 21 years, the Bank made
significant progress thereby providing a strong foundation and as a result grew in stature in terms of
number of branches, deposits, advances etc.
In the year 1964, the Bank took over the assets and liabilities of the Chitaldurg Bank Ltd. In
the 1966, they took over the assets and liabilities of the Bank of Karnataka Ltd, Hubli and opened 14
new branches in places where the Bank of Karnataka Ltd was formerly functioned.
In the year 1997, the Bank became an authorized dealer of foreign exchange and established
specialized branches for financing foreign exchange, industry and agriculture, etc. In the year 1989, they
opened a merchant banking division. In the year 1995, the Bank came out with the public cum right
issue aggregating Rs 81 crore.
In the year 2000, they signed a MoU with Infosys Technologies Ltd for implementation of
Finacle, a Core Banking Solution. In the year 2002, they made a pact with Corporation Bank for sharing
ATM's. Also, they made a tie-up with MetLife India for the distribution of insurance products as a
corporate agent. In the year 2003, the Bank took up Corporate Agency for distribution of products of
Bajaj Allianz General Insurance Co Ltd.
The Bank in association with MetLife India launched K-Life a term product designed for
SB/current account holders of the bank. Also, the Bank launched a credit product 'KBL Insta Cash' for
consumption purposes, and 'KBL Vahana Mitra' for the purchase of new vehicles. The Bank along with
Western Union Financial Services made tie-up with Bharat Overseas Bank to provide inbound money
transfer services.
In the year 2004, the Bank launched the 'Gold Card Scheme' for the exporters. In the year
2005, the Bank launched real time gross settlement (RTGS) system under the name of Money Quick.
Also, they inked an agreement with National Financial Switch for ATM connectivity and launched 'no
frills' accounts. 8
In the year 2006, they made a tie up with Franklin Templeton (I) Private Limited for
distribution of their mutual funds. They launched CDSL-DP services at select branches. In the year
2007, the Bank signed MoU with Allahabad Bank, Indian Overseas Bank, Sompo Japan Insurance Inc.
and Dabur Investment Corporation to form a joint venture for undertaking General Insurance business.
During the year 2008-09, the Bank opend 16 branches at Moradabad, New Delhi - Karol
Bagh, Thane, Mumbai - Vile Parle, Bommasandra, Bangalore - Chandra Layout, Bangalore -
Sadashivanagar, Mysore - J P Nagar, Belgaum - Udyambag (Extension Counter upgraded), New Delhi -
East of Kailash, Bangalore -Yelahanka New Town, Pune-Dhankawadi, Doddaballpur, Uppal Kalan,
Bellandur and Hoskote.
The Bank added 30 ATM outlets at various locations. Also, they shifted 15 branches/ offices
to new premises. The Bank won the prestigious Sun and NDTV Green IT award instituted by Sun
Microsystems and NDTV, for use of eco efficient green technologies to run business. During the year
2009-10, the Bank opened 17 branches in Patna, Kanakapura, Tambaram, Vellore, Dhanbad, Kolkata -
Bhowanipore, Naganathapura, Gundlupet, New Delhi - Ashokvihar, Ujjain, Ghaziabad, Kancheepuram,
Chennai - Annanagar (West), Brahmapur, Serillingampally, Durg and Rajarhat - Kolkata. The Bank
added 46 ATM outlets at various locations. Also, they shifted 16 branches/offices to new premises.
In April 2010, the opened their 9th Regional Office at Hyderabad. The Bank bagged 'Special
Award for use of IT for Internal effectiveness' for the year 2009, instituted by Institute for Development
and Research in Banking Technology (IDRBT). As on March 31, 2010, the Bank had 464 branches, 217
ATM outlets, 8 Regional Offices, one International Division, one Data Centre, one Customer Care
Centre, 5 Service branches, 2 Currency Chests, 6 Extension Counters and two Central processing
centers, spread across 20 states and 2 Union Territories. Further, for better ambience and improved
customer service.
In September 2010, the Bank launched a new product exclusively for women, i.e. the new
saving bank account for women named KBL Vanitha to encourage saving habit among the womenfolk
and also to allay the fear of managing their wealth. The Bank plans to increase their total number of
business units to 780, by increasing the total number of branches to 480 and own ATM network to 300
by March 2011.
MISSION
"Our mission is to be a technology savvy, customer centric progressive bank with a national
presence, driven by the highest standards of corporate governance and guided by sound ethical values."
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BRANCHES AND BUSINESS
Karnataka bank has expanded its reach to various parts of India, over the 85 years of its
existence. Today, the bank has a total of 447 branches, spread across 19 states and 2 Union Territories,
with a total business of about Rs. 31248 Crore. The bank presently employs over 4,900 employees and
is answerable to about 71,822 shareholders and over 3.7 million customers. The bank has specialized
branches like Agricultural Development Branch, Overseas Branches, Foreign Exchange Branches,
Specialized SSI Branches, Asset Recovery Management Branches, Currency Chests, Central Processing
Centre spread across the length and breadth of the country.
FACILITIES AND CUSTOMER SERVICE
Karnataka Bank provides a broad range of customized products and services suitable for all
kinds of market, trade and perceived requirements, be it business or personal. It deals in personalized
banking, business banking, money transfer, internet banking and insurance services. The facilities
include borrowing facilities, deposits, optimum returns on surplus funds and helping with smooth
overseas transactions. As a part of personalized banking, Karnataka Bank provides services for high
earning deposits, simple & convenient loans, life insurance, money transfer, utility bill payments and
thus, efficiently keeps a track of your finances.
BOARD OF DIRECTORS
Chairman Ananthakrishna
Managing Director & CEO P Jayarama Bhat
Director
S R Hegde
R V Shastri
U R Bhat
T S Vishwanath
Sitarama Murty M
S V Manjunath
D Harshendra Kumar
H Ramamohan
T R Chandrasekaran
Company Secretary Y V Balachandra
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MULTI BRANCH BANKING
Multi Branch Banking facility is a value added service to our customers taking advantage of
"Core Banking Solution". It is a 'technology driven-anywhere banking' facility and 'at par' facilities for
Savings Bank and Current account with structured schedule of services and charges. Now the customer
can access his account at all branches of the Bank.
The salient features of the scheme are as under:
1. The concept of 'anywhere' banking is extended to all domestic SB and Current Accounts except
NO Frills Accounts. Even SB-General and Current-General accounts are eligible for MBB facility with
Multicity Cheques.
2. SB-General (SBGEN),SB-Money Sapphire, SB-Money Platinum, Current A/c General
(CAGEN),CA- Money Pearl, CA - Money Ruby, CA- Money Diamond, CA-Money
Platinum, are MBB accounts with structured free services and Multicity Cheque facility
with cheques payable at par at all Branches.
FACILITIES AVAILABLE UNDER MBB
PAYMENT SERVICES:
Any where Cash withdrawal for self cheques only
Multicity Cheques
Funds Transfer
Funds Transfer through RTGS/NEFT
COLLECTION SERVICES:
Any where Cash Deposit- By self only
Collection of out station cheques
Any where Deposit of cheques for collection
OTHER FACILITIES:
Internet Banking
Mobile Banking (SMS alerts)
Demat Account
'MoneyPlant' Visa International Debit Card
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INTERNET BANKING
Karnataka bank has been introduced Internet Banking facility MoneyClickTM to manage our
finances in the comfort of our home or our office as per our convenience. MoneyClickTM is a Self-
Service Channel, which is available 24 hours a day and 365 days a year in an absolutely simple, friendly
but secured environment.
In MoneyClickTM, a mere touch of a button or click of a mouse makes you accessible to a
host of Banking Services, called Fingertip Banking. We can carry out your banking transactions safely
and with total confidentiality by enjoying online banking without wasting your time or losing your
peace of mind.
Money ClickTM – Retail
It offers different online services to our retail/individual customers, like balance enquiry,
requests for Chequebooks, recording stop-payment instructions, balance transfer instructions, account
opening and other forms of traditional banking services. This also offers utility bill payment services to
our valued customers for payment of BSNL Mobile, Electricity, Water bills etc.
MoneyclickTM – Corporate
In addition to the above services, our Corporate Customers can avail Trade Finance
Facilities such as Import/ Export Credit facilities, Requests for Forward Contracts, Inland Trade, and
Bank Guarantee etc. Also MoneyclickTM facilitates access control at Corporate User level wherein
various users at different hierarchy levels have varying powers to operate a corporate account.
MoneyClickTM – Cyber Kids
Children between 12-18 years who are having Account with us are eligible for this special e-
banking facility.
MOBILE BANKING
Karnataka Bank offers Mobile Banking for the convenience of paying for utility bills, mobile
recharge, movie tickets, online purchases, retail shopping and much more at over 15,000 merchants
directly from our mobile.
Karnataka Bank mobile payment service is independent of the handset model and service
providers and works on even the most basic handsets and across all telecom operators (GSM or
CDMA).
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FEATURES
Mobile payment facility will be an additional facility to our customer for making Payment
through their mobile for the goods purchased by them.
On registration for Mobile Payment solution, the customer will be enabled to make secured
payments directly from their registered mobile phone, authorized by using their ATM PIN.
Customers can use this facility round the clock.
This facility is extended to the users free of cost.
This facility saves time; avoid hassles of travelling, waiting in long queues to make bill payment,
ticket booking etc.
At present the facility will be extended to customers subject to a daily cap of Rs.50, 000/- per
customer for transaction involving purchase of goods/services (as per RBI guidelines).
BENEFITS
EASY:
Works on even the simplest mobile handsets across all operators (GSM or CDMA)
Doesn't require GPRS connectivity, SIM change or application download
SMS & Interactive Voice based transaction platform makes it very easy-to-use
SECURE:
Confidential PIN Based Transaction
PIN entry only through an IVR call where the PIN is transmitted in a DTMF format(Just as the
PIN entry system for tele banking)
No financial details divulged during the transaction process
CONVENIENT:
Transact over-the-counter, online, on the telephone or from just about anywhere
Save time and effort by paying bills from anywhere, anytime
Turn your mobile phone into a debit card
REGISTRATION:
Existing Debit Card holders (Classic/GOLD) who are above 18years are eligible for mobile
banking facilities. In case existing customers do not have debit cards, they have to first apply for Debit
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Cards and upon receipt of the same they can register for Mobile Payment facility. A customer would be
able to register to use Pay mate services in any one of the following:
DEMAT ACCOUNT
A Bank where it’s Head Office provides the facility of opening and conduct of Accounts
through its branches, a Depository institution extends various services to the investors through its agents
known as Depository Participant. In India, now there are two Depositories. They are CDSL and NSDL.
Participant can be anybody who complies with the eligibility requirements. Participant (DP) can be a
Bank also. All the various functions undertaken and enabled through Demat accounts are referred to as
DP activity. Under the depository system, a demat account holder or holder/owner of securities who is
entitled to all the benefits (such as dividend or interest/bonus or right shares etc), is known as a
Beneficial Owner (BO).
PREREQUISITES OF OPENING A DEMAT ACCOUNT:
The formalities involved in opening a bank account and a demat account are similar. An
investor desirous of holding his securities in electronic form can open a demat account with a DP of his
choice by completing necessary account opening formalities after furnishing proof of his/her identity,
photograph and proof of address. An agreement with the DP in the prescribed format is to be executed
by paying requisite stamp duty.
DEMATERIALISATION OF SECURITIES:
After getting the demat account number from the DP, the BO can cause credit of fresh
purchases of securities to his demat account and/or transfer the balances held in demat account held with
other DP to this newly opened demat account. He can also tender the securities held by him/her in
physical form to DP for dematerialization and credit to the demat account. After necessary verification,
DP forwards the physical securities (duly defaced) either to the company or to their duly appointed RTA
(Registrar and Transfer Agent) who, after necessary scrutiny, destroys the certificates in physical form
and authorizes the depository to give corresponding (electronic) credit to the subject demat account.
FREE FACILITIES BY CDSL TO ITS DEMAT ACCOUNT HOLDERS:
The evolution of the Indian capital market has seen several enhancements during the past few
years and this has been a result of innovative use of newer technologies. In the reduced settlement cycle
era, investors require updated demat account information at a much faster pace than ever before. In other
words, the quest for account status information has raised manifold.
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In order to facilitate a CDSL demat account holder to easily adapt to the fast reducing
settlement cycle, CDSL has introduced Internet-enabled services called "easi" and "easiest" to empower
a demat account holder in managing his securities 'anytime-anywhere' in an efficient and convenient
manner, all in a state-of-the-art secure environment. Further to effective risk control mechanism for
monitoring of demat account, CDSL has also introduced "smart" facility.
MONEY PLANT ATM
Karnataka Bank has entered into ATM sharing arrangement with NPCI-NFS
and CashTree ATM network. The NFS network with NPCI has 66 Member Banks and covers around
86,793 ATMs while CashTree network has 13 member Banks and covers around 7400 ATMs. All Debit
& MoneyplantTM International Visa Debit Card/MoneyplantTM ATM card holding customers of
Karnataka Bank can avail the facility of withdrawal through Banks' MoneyPlantTM ATMs and shared
network ATMs.
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1.3 ABOUT THE STUDY
One of the important functions of the Bank is to accept deposits from the public for the purpose
of lending. In fact, depositors are the major stakeholders of the Banking System. The depositors and
their interests form the key area of the regulatory framework for banking in India and this has been
enshrined in the Banking Regulation Act, 1949. The Reserve Bank of India is empowered to issue
directives advices on interest rates on deposits and other aspects regarding conduct of deposit accounts
from time to time. With liberalization in the financial system and deregulation of interest rates, banks
are now free to formulate deposit products within the broad guidelines issued by RBI.
This policy document on deposits outlines the guiding principles in respect of formulation of
various deposit products offered by the Bank and terms and conditions governing the conduct of the
account. The document recognises the rights of depositors and aims at dissemination of information
with regard to various aspects of acceptance of deposits from the members of the public, conduct and
operations of various deposits accounts, payment of interest on various deposit accounts, closure of
deposit accounts, method of disposal of deposits of deceased depositors, etc., for the benefit of
customers.
While adopting this policy, the bank reiterates its commitments to individual customers
outlined in 'Code of Banks' Commitment to Customers'.
The various deposit products offered by the Bank can be categorised broadly into the following
types. Definitions of major deposits schemes are as under:
"Demand deposits" means a deposit received by the Bank which is withdrawable on demand.
"Savings deposits" means a form of demand deposit which is subject to restrictions as to the
number of withdrawals as also the amounts of withdrawals permitted by the Bank during any
specified period.
"Term deposit" means a deposit received by the Bank for a fixed period withdrawable only after
the expiry of the fixed period.
"Current Account" means a form of demand deposit wherefrom withdrawals are allowed any
number of times depending upon the balance in the account or up to a particular agreed amount
and will also include other deposit accounts which are neither Savings Deposit nor Term
Deposit.
ACCOUNT OPENING AND OPERATION OF DEPOSIT ACCOUNTS
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The Bank before opening any deposit account will carry out due diligence as required under
"Know Your Customer" (KYC) guidelines issued by RBI Anti-Money Laundering rules and
regulations and or such other norms or procedures as per the "Know Your Customer"(KYC)
policy of the bank. If the decision to open an account of a prospective depositor requires
clearance at a higher level, reasons for any delay in opening of the account will be informed to
the customer and the final decision of the Bank will be conveyed at the earliest to the customer.
The bank is committed to providing basic banking services to disadvantaged sections of the
society. Banking services will be offered to them through 'no frill' accounts and accounts will be
opened with relaxed customer acceptance norms as per regulatory guidelines.
The account opening forms and other material would be provided to the prospective depositor by
the Bank. The same will contain details of information to be furnished and documents to be
produced for verification and/or for record, it is expected of the Bank official opening the
account, to explain the procedural formalities and provide necessary clarifications sought by the
prospective depositor when he approaches for opening a deposit account.
The regulatory guidelines require banks to categorize customers based on risk perception and
prepare profiles of customers for the purpose of transaction monitoring. Inability or
unwillingness of a prospective customer to provide necessary information/details could result in
the bank not opening an account.
Inability of an existing customer to furnish details required by the bank to fulfil statutory
obligations could also result in closure of the account after due notice(s) is provided to the
customer.
For deposit products like Savings Bank Account and Current Deposit Account, the Bank will
normally stipulate certain minimum balances to be maintained as part of terms and conditions
governing operation of such accounts. Failure to maintain minimum balance in the account will
attract levy of charges as specified by the Bank from time to time. For Saving Bank Account, the
Bank may also place restrictions on number of transactions, cash withdrawals, etc., for a given
period. Similarly, the Bank may specify charges for issue of cheque books, additional statement
of accounts, duplicate passbook, folio charges, etc. All such details, regarding terms and
conditions for operation of the accounts and schedule of charges for various services provided
will be communicated to the prospective depositor while opening the account.
Savings Bank Accounts can be opened by eligible person/ persons and certain organizations/
agencies (as advised by Reserve Bank of India (RBI) from time to time).
Current Accounts can be opened by individuals/partnership firms/ Private and Public Limited
Companies/HUFs/ Specified Associates/Societies/ Trusts, Departments of Authority created by
Government (Central or State), Limited Liability Partnership etc.
17
Term Deposits Accounts can be opened by individuals/partnership firms/ Private and Public
Limited Companies/HUFs/ Specified Associates/Societies/ Trusts, Departments of Authority
created by Government (Central or State), Limited Liability Partnership etc.
The due diligence process, while opening a deposit account will involve satisfying about the
identity of the person, verification of address, satisfying about his occupation and source of
income. Obtaining introduction of the prospective depositor from a person acceptable to the
Bank and obtaining recent photograph of the person/s opening/ operating the account are part of
due diligence process.
In addition to the due diligence requirements under KYC norms, the Bank is required by law to
obtain Permanent Account Number (PAN) or General Index Register (GIR) Number or
alternatively declaration in Form No. 60 or 61 as specified under the Income Tax Act/ Rules.
Deposit accounts can be opened by an individual in his own name (status: known as account in
single name) or by more than one individual in their own names (status: known as Joint
Account). Savings Bank Account can also be opened by a minor jointly with natural guardian or
with mother as the guardian (Status: known as Minor’s Account). Minors above the age of 10
will also be allowed to open and operate saving bank account independently. However no
overdrafts will be granted to these minors.
Operation of Joint Account: The Joint Account opened by more than one individual can be
operated by single individual or by more than one individual jointly. The mandate for operating
the account can be modified with the consent of all joint account holders. The Savings Bank
Account opened by minor jointly with natural guardian/guardian can be operated by natural
guardian only till the minor attains majority.
The term deposit account holders at the time of placing their deposits can give instructions with
regard to closure of deposit account or renewal of deposit for further period on the date of
maturity. In the absence of such mandate, the Bank will seek instructions from the depositor/s as
to the disposal of the deposit by sending intimation before 15 days of the maturity date of term
deposit by post or courier at the last known address of the depositor.
Nomination facility is available on all deposit accounts opened by individuals. Nomination is
also available to a sole proprietary concern account. Nomination can be made in favour of one
individual only.
Nomination so made can be cancelled or changed by the account holder/s any time. While
making nomination, the signature of the account holder/s in the nomination forms (DA1, DA2 &
DA3) need not be attested by witnesses. However, thumb impression of the accountholder/s is
required to be attested by two witnesses.
18
Nomination can be modified by the consent of account holder/s. Nomination can be made in
favour of a minor also. Nomination facility is also available for joint deposit accounts and in
such cases nomination should be made by all depositors jointly.
NRI SERVICES
An Indian citizen or a foreign citizen of Indian origin who stays abroad for
employment/carrying on business or vocation or under circumstances indicating an intention for an
uncertain duration of stay abroad is a Non-Resident Indian (NRI). (Those who stay abroad on business
visit, medical treatment, study or such other purposes which do not indicate an intention to stay there for
an indefinite period will not be considered as NRIs).
An NRI is a person resident outside India who is a citizen of India or is a person of Indian
origin. Under the Foreign Exchange Management Act (FEMA), generally, a person is resident outside
India if he is in India for less than 182 days during the course of the preceding financial year and also
includes any person who stays abroad:
For the purposes of carrying out employment or any business or vocation;
Under circumstances indicating an intention to stay outside India for an uncertain duration;
Any Indian citizen deputed outside India for a temporary period in connection with employment
For education
Bank offers vide range of deposit schemes for Non Resident Indians which includes Non
Resident Rupee account (NR (E) RA), Foreign Currency Non-Resident Account (FCNR), Non-Resident
Ordinary Account (NRO), and Resident Foreign Currency (Domestic) Account (RFCD).
Opening and maintaining of Bank Accounts of Non- Resident Indian is guided by the Foreign
Exchange Management Act-1999 (FEMA) and interest on terms deposits are revised based on LIBOR
rates from time to time.
19
1.3.1 OBJECTIVES OF THE STUDY
PRIMARY OBJECTIVE
To study the performance of deposit schemes in Karnataka Bank
SECONDARY OBJECTIVES
1) To evaluate the performance of cash inflow in the form of deposits
2) To analyze the return on investment of deposit schemes
3) To find out the performance of demand deposits, savings bank deposits and term deposits
4) To analyze the efficiency of management
5) To find out the relationship between the deposits and loans
20
1.3.2 SCOPE OF THE STUDY
The present study attempts to obtain a general view of deposit schemes practice in Karnataka
bank. The study to know their increase or decrease of various schemes is also analyzed in order to give a
true and clear picture of its performance. The present study aims at studying deposits of the Karnataka
bank. The study focuses only the views of the bank. But it does include the views of the others who are
directly or indirectly associated with the bank. It is concerned to the administration of assets & liabilities
to analysis the profitability liquidity of the organization with the help of ratios.
21
1.3.3 IMPORTANCE OF THE STUDY
Cash flow statement shows efficiency of a firm in generating cash inflows from its regular
operations.
Return on investment can be used to measure the value of the bank or of a specific investment
that they might make.
Percentage analysis is help to evaluate and compare the deposits.
Ratio analysis is an important technique of financial statement analysis. Accounting ratios are
useful for understanding the financial position of the company. Different users such as investors,
management, bankers and creditors use the ratio to analyze the financial situation of the
company for their decision making purpose.
The effect of correlation is to reduce the range of uncertainty. The prediction based on
correlation analysis is likely to be more variable and near to reality.
22
1.3.4 LIMITATIONS OF THE STUDY
The analysis is based on the secondary data. Hence there is a limitation of doubtful accuracy.
The data collected is limited to 5 years and hence it does not give the whole picture.
As the present business moves from the cash basis to accrual basis, the prepaid and credit
transactions might be represented an increase in working capital and it would be misleading to
equate net income to cash flow because a number of non cash items would affect the net income.
Return of investment does not take into account the time value of money. It does not account for
the variable nature of annual net cash inflows.
The ratios are generally calculated from past financial statements and thus are no indicator of
future.
23
CHAPTER – 2
REVIEW OF LITERATURE
Mr. Joseph (2005) studied the performance of Lead Bank Scheme in Kerala, the mobilisation
of bank deposits in Kerala by commercial Banks. He observed that competition from co-operative and
other institutions was the main obstacles to achieving the deposit mobilisation target. The popularity of
private financial institutions was due to their personal relations with local people. 56.4 percent of the
customers (self employed) surveyed had their first percent dealing with banks for taking loans.
Mr. Laurent (2006) studied the perception of customers on five competing banks in a
medium size city in UK for private deposits. He observed that these five banks differed from each other
as a result of oligopolistic market situation only on seven attributes i.e., friendliness, quality of
service, community spirit, modem facilities, convenience, range of services and ownership. These seven
attributes accounted for 91 percent of the overall differences between the five banks. The study revealed
that on the basis of perception of overall image of the five banks relative to each other, there existed the
different market segments.
K. Avadhani (2007) studied the performance of rural branches of some commercial banks in
order to identify the factors influencing deposit mobilisation in rural areas in different states. He came
out with the opinion that there existed sufficient relationship between the deposits of a rural branch and
its age. The growth of deposits is at a faster rate in the first six years and tapers off subsequently. The
growth rate in deposits of commercial banks cannot be explained in terms of price differentials as co-
operatives offer high rates of interest. Therefore product differentials would offer a better explanation
of the disparate growth rates in deposits.
Mr. Nag and Mr. Shivaswamy (2008) studied the comparative performance of foreign and
Indian banks and observed that there was a distinct preference of bank customers to bank with foreign
banks notwithstanding the fact that foreign banks stipulate relatively high levels of minimum amounts to
be maintained as deposits and charge relatively high interest rates and service costs. In respect of deposit
supplies, their strategy had been to procure from a segmented part of the total supplies of deposits of
24
large size from a relatively small number of depositors. Large accretion of non-resident deposits with
foreign banks was mainly because of the familiarity of the names of foreign banks operating in India to
banks abroad.
Raju (2009) studied the levels of savings and the manner of their distribution among different
physical and financial assets of household sector in Kerala and identified the factors influencing their
savings behaviour. He found that major portions of the savings of households in Kerala were in the form
of financial savings and that too in the form of bank deposits.
Subramanian (2010) analyzed the empirical analysis on dis-intermediation from the household
sectors portfolio preferences point of view based on demand model of five assets including bank
deposits The study revealed that the household sectors preferences between bank deposits and lending
to private corporate sector tended to be in favour of the latter and against the former.
Nalini (2011) studied on the impact of mutual funds on the deposit mobilisation of commercial
banks examined the awareness level and adoption level of mutual funds among household investors in
Thiruvananthapuram district. She found that the advent of mutual funds has brought in expected
changes in the growth of bank deposits and their ownership pattern, but the changes were not of a
significant magnitude.
25
CHAPTER – 3
RESEARCH METHODOLOGY
Research Methodology is a way to systematically solve the research problem. It may be
understand as a science of studying as research is done scientifically in this we study various steps that
are generally adopted by a researcher in studying the research problem along with logic behind them.
RESEARCH DESIGN
A Research design is a system of conditions for collection and analysis of data which aims
to provide the precise information. Research is a systematic way of exploring, analysing and
conceptualizing social life in order to extend and verify knowledge to see this research helps to construct
a theory. This method is simply a systematically planned way of doing things to achieve the desired
result.
A Research design of this study is analytical in nature. It is an arrangement of condition of collection
and analysis of data in a proper that aims to combine relevance to the research purpose with economy in
procedure.
DATA DESIGN
Collection of data is the process remuneration together with the proper record of research.
Those data which are already been passed through the statistical process. In this study is based on the
secondary sources. Secondary data is the data that have been already collected by and readily available
from other sources. Such data are cheaper and more quickly obtainable than the primary data and also
may be available when primary data cannot be obtained at all.
It is economical.
It saves efforts and expenses
It helps to make primary data collection more specific since with the help of secondary data, we
are able to make out what are the gaps and deficiencies and what additional information needs to
be collected
It helps to improve the understanding of the problem
26
It provides a basis for comparison for the data that is collected by the researcher
The secondary data for the study is mainly collected through
Annual reports
Circulars
Internet
TOOLS USED FOR ANALYSIS
RETURN OF INVESTMENT:
A performance measure used to evaluate the efficiency of an investment or compare the
efficiency of a number of different investments. To calculate ROI, the return on an investment is divided
by the cost of the investment; the result is expressed as a percentage or a ratio.
Return on investment is a popular metric because it is versatile and simple to use. If an investment does
not have a positive ROI or if there are alternative investment opportunities with a higher ROI, the
investment should not be undertaken.
EBIT
Return of Investment = __________________
Capital Employed
PERCENTAGE ANALYSIS
Percentage analysis consists of reducing a series of related amounts to a series of percentages
of a given base. Two approaches are often used. The first, called horizontal analysis, indicates the
proportionate change in financial statement items over a period of time, such analysis is most helpful in
evaluating trends. Vertical analysis (common-size analysis) is proportional expression of each item on
the financial statements in a given period to a base amount. It analyzes the composition of each of the
financial statements from different years
(a) To detect trends not evident from the comparison of absolute amounts and
(b) To make intercompany comparisons of different sized enterprises.
27
100
PERCENTAGE = __________________ × CURRENT YEAR
BASE YEAR
RATIO ANALYSIS:
Ratio analysis is the process of determining and presenting the relationship of items and
group of items in the statements. According to Batty J. Management Accounting “Ratio can assist
management in its basic functions of forecasting, planning coordination, control and communication”.
It is helpful to know about the liquidity, solvency, capital structure and profitability of an
organization. It is helpful tool to aid in applying judgement, otherwise complex situations.
According to Accountant’s Handbook by Wixon, Kell and Bedford, “a ratio is an expression of the
quantitative relationship between two numbers”. A tool used by individuals to conduct a quantitative
analysis of information in a company's financial statements. Ratios are calculated from current year
numbers and are then compared to previous years, other companies, the industry, or even the economy
to judge the performance of the company. Ratio analysis is predominately used by proponents of
fundamental analysis.
CURRENT RATIO
This ratio explains the relationship between current assets and current liabilities of a
business.
Current Assets
Current Ratio = __________________
Current Liabilities
Current Assets:-‘Current assets’ includes those assets which can be converted into cash with in a year’s
time.
Current Assets = Cash in Hand + Cash at Bank + B/R + Short Term Investment + Debtors (Debtors –
Provision) + Stock(Stock of Finished Goods + Stock of Raw Material + Work in Progress) + Prepaid
Expenses.
28
Current Liabilities: - ‘Current liabilities’ include those liabilities which are repayable in a year’s time.
Current Liabilities = Bank Overdraft + B/P + Creditors + Provision for Taxation + Proposed Dividend +
Unclaimed Dividends + Outstanding Expenses + Loans Payable within a Year.
Significance:
According to accounting principles, a current ratio of 2:1 is supposed to be an ideal ratio.
It means that current assets of a business should, at least, be twice of its current liabilities. The
higher ratio indicates the better liquidity position; the firm will be able to pay its current liabilities more
easily. If the ratio is less than 2:1, it indicates lack of liquidity and shortage of working capital.The
biggest drawback of the current ratio is that it is susceptible to “window dressing”. This ratio can be
improved by an equal decrease in both current assets and current liabilities.
RATIO OF CURRENT LIABILITIES TO PROPRIETOR’S FUND:
This ratio explains the relationship between current liabilities and shareholder’s fund of a
business.
Current Liabilities
Ratio of Current Liabilities to Proprietor’s fund = __________________
Shareholder’s fund
Significance:
This ratio should be 33% or more than that. In other words, the proportion of shareholders funds
to total funds should be 33% or more. A higher proprietary ratio is generally treated an indicator of
sound financial position from long-term point of view, because it means that the firm is less dependent
on external sources of finance. If the ratio is low it indicates that long-term loans are less secured and
they face the risk of losing their money.
INTEREST COVERAGE RATIO
This ratio is also termed as ‘Debt Service Ratio’. This ratio is calculated as follows:
29
EBIT
Interest Coverage Ratio = ______________________________________
Fixed Interest Charges
Significance:
This ratio indicates how many times the interest charges are covered by the profits available to
pay interest charges. This ratio measures the margin of safety for long-term lenders. This higher the
ratio, more secure the lenders is in respect of payment of interest regularly.
If profit just equals interest, it is an unsafe position for the lender as well as for the company also, as
nothing will be left for shareholders. An interest coverage ratio of 6 or 7 times is considered appropriate.
DEBT EQUITY RATIO
This ratio expresses the relationship between outsider’s fund and shareholder’s fund.
Outsider’s fund
Debt Equity Ratio = ________________________________________
Shareholder’s fund
Outsider’s Funds: - These refer to long term liabilities which mature after one year. These include
Debentures, Mortgage Loan, Bank Loan, and Loan from Financial institutions and Public Deposits etc.
Shareholder’s Funds: - These include Equity Share Capital, Preference Share Capital, Share Premium,
General Reserve, Capital Reserve, Other Reserve and Credit Balance of Profit & Loss Account.
Significance:
This Ratio is calculated to assess the ability of the firm to meet its long term liabilities.
Generally, debt equity ratio of is considered safe. If the debt equity ratio is more than that, it shows a
rather risky financial position from the long-term point of view, as it indicates that more and more funds
invested in the business are provided by long-term lenders. The lower this ratio, the better it is for long-
term lenders because they are more secure in that case. Lower than 2:1 debt equity ratio provides
sufficient protection to long-term lenders.
30
WORKING CAPITAL RATIO
This ratio shows the difference between the current assets and current liabilities.
Working Capital Ratio = Current Assets – Current Liabilities
Significance:
This ratio is of particular importance in non-manufacturing concerns where current assets play
a major role in generating sales. It shows the number of times working capital has been rotated in
producing sales.A high working capital turnover ratio shows efficient use of working capital and quick
turnover of current assets like stock and debtors. A low working capital turnover ratio indicates under-
utilisation of working capital.
CASH FLOW STATEMENT
The cash flow statement is a financial statement that shows how changes in balance sheet
accounts and income affect cash and cash equivalents, and breaks the analysis down to operating,
investing, and financing activities. Essentially, the cash flow statement is concerned with the flow of
cash in and cash out of the business.
The statement captures both the current operating results and the accompanying changes in the
balance sheet. As an analytical tool, the statement of cash flows is useful in determining the short-term
viability of a company, particularly its ability to pay bills.
The cash flow statement is distinct from the income statement and balance sheet because it
does not include the amount of future incoming and outgoing cash that has been recorded on credit.
Therefore, cash is not the same as net income, which, on the income statement and balance sheet,
includes cash sales and sales made on credit. The money coming into the business is called cash inflow,
and money going out from the business is called cash outflow.
CORRELATION
The correlation is one of the most common and most useful statistics. A correlation is a single
number that describes the degree of relationship between two variables.
31
r=∑ (x−x¿)∑( y− y )
√∑ (x−x) ²√∑ ( y− y) ²¿
CHAPTER – 4
DATA ANALYSIS AND INTERPRETATIONS
4.1 RETURN OF INVESTMENT
A performance measure used to evaluate the efficiency of an investment or compare the
efficiency of a number of different investments. Return on investment is a popular metric because it is
versatile and simple to use. If an investment does not have a positive ROI or if there are alternative
investment opportunities with a higher ROI, the investment should not be undertaken.
EBIT
Return of Investment = __________________
Capital Employed
TABLE 4.1.1
RETURN ON INVESTMENT
(RS.IN CRORES)
YEARS EBIT CAPITAL
EMLOYED
ROI
2007 0.18 1.66 0.11
2008 0.25 1.52 0.16
32
2009 0.27 1.57 0.17
2010 0.17 2.17 0.08
2011 0.21 3.52 0.06
Source: Secondary data
INTERPRETATION:
The above table shows that the performance of return on investment is based on
deposits. The return on investment has been increased up to 2009. In 2010, the earning before in tax
started to decrease, so the return on investment also started to decrease in the year. The highest rate of
return on investment is 0.17 Crores in the year 2009.
CHART 4.1.1
RETURN ON INVESTMENT
2007 2008 2009 2010 20110
0.02
0.04
0.06
0.08
0.1
0.12
0.14
0.16
0.18
0.11
0.160.17
0.0800000000000002
0.0600000000000002
Years
Rs. I
n Cr
ores
33
4.2 PERCENTAGE ANALYSIS
Percentage analysis consists of reducing a series of related amounts to a series of
percentages of a given base. Two approaches are often used. The first, called horizontal analysis,
indicates the proportionate change in financial statement items over a period of time, such analysis is
most helpful in evaluating trends. Vertical analysis (common-size analysis) is proportional expression of
each item on the financial statements in a given period to a base amount. It analyzes the composition of
each of the financial statements from different years
(a) To detect trends not evident from the comparison of absolute amounts and
(b) To make intercompany comparisons of different sized enterprises.
100
PERCENTAGE = __________________ × CURRENT YEAR
BASE YEAR
TABLE 4.2.1
DEMAND DEPOSITS
YEARS AMOUNTS (Rs) PERCENTAGE
2007 10,806,889 100
2008 11,192,915 103.57
2009 11,570,171 107.06
34
2010 17,064,834 157.91
2011 18,560,921 171.75
Source: Secondary data
INTERPRETATION:
The percentage analysis about demand deposits will be presented in the above table. The
year 2007 was taken as the base year for find out the percentage of deposits increased for remaining
years (i.e., 2008 to 2011). The percentage of deposits increased compare to previous years because of
increasing customers year by year.
CHART 4.2.1
DEMAND DEPOSITS
2007 2008 2009 2010 20110
20
40
60
80
100
120
140
160
180
200
100 103.57 107.06
157.91171.75
Years
Perc
enta
ge
35
TABLE 4.2.2
SAVINGS BANK DEPOSITS
YEARS AMOUNTS (Rs) PERCENTAGE
2007 21,998,110 100
2008 26,483,683 120.39
2009 28,994,262 131.80
2010 38,136,801 173.36
2011 49,465,383 224.86
Source: Secondary data
INTERPRETATION:
The above table shows the performance of savings bank deposits for the last five years
with the help of percentage analysis. The year 2007 was taken as the base year for find out the
percentage of deposits increased for remaining years (i.e., 2008 to 2011). The percentage of deposits
increased compare to previous years because of increasing customers year by year.
CHART 4.2.2
SAVINGS BANK DEPOSITS
36
2007 2008 2009 2010 20110
50
100
150
200
250
100120.39
131.8
173.36
224.86
Years
Perc
enta
ge
TABLE 4.2.3
TERM DEPOSITS
YEARS AMOUNTS (Rs) PERCENTAGE
2007 107,569,355 100
2008 132,485,325 123.16
2009 162,768,420 151.31
2010 182,104,853 169.29
2011 205,338,159 190.89
Source: Secondary data
INTERPRETATION:
The above table shows the performance of term deposits for the last five years with the
help of percentage analysis. The year 2007 was taken as the base year for find out the percentage of
deposits increased for remaining years (i.e., 2008 to 2011). The percentage of deposits increased
compare to previous years because of increasing customers year by year.
CHART 4.2.3
TERM DEPOSITS
37
2007 2008 2009 2010 20110
50
100
150
200
250
100
123.16
151.31169.29
190.89
Years
Perc
enta
ge
4.3 RATIO ANALYSIS
Ratio analysis is the process of determining and presenting the relationship of items and
group of items in the statements. According to Batty J. Management Accounting “Ratio can assist
management in its basic functions of forecasting, planning coordination, control and communication”.
4.3.1 CURRENT RATIO
Current Assets
Current Ratio = __________________
Current Liabilities
TABLE
4.3.1 CURRENT RATIO
(RS.IN CRORES)
Years Current Assets Current Liabilities Current Ratio
2007 10.71 4.22 2.53
2008 12.83 4.71 2.72
38
2009 13.27 5.01 2.65
2010 16.24 6.99 2.32
2011 19.33 8.73 2.21
Source: Secondary data
INTERPRETATION:
The current ratio of the company this shows that the current ratio is more than the standard
level 2:1 so they should maintain this for future
CHART 4.3.1
CURRENT RATIO
2007 2008 2009 2010 20110
0.5
1
1.5
2
2.5
3
2.532.72 2.65
2.322.21
Years
Rs.In
Cro
res
39
4.3.2 RATIO OF CURRENT LIABILITIES TO PROPRIETOR’S FUND:
This ratio explains the relationship between current liabilities and shareholder’s fund of a
business.
Current Liabilities
Ratio of Current Liabilities to Proprietor’s fund = __________________
Shareholder’s fund
TABLE 4.3.2
RATIO OF CURRENT LIABILITIES TO PROPRIETOR’S FUND
(RS.IN CRORES)
Years Shareholder’s fund Current Liabilities Ratio of Current
Liabilities to
Proprietors fund
2007 1.24 4.22 3.40
2008 1.38 4.71 3.41
2009 1.57 5.01 3.19
40
2010 1.83 6.99 3.82
2011 2.43 8.73 3.59
Source: Secondary data
INTERPRETATION:
The above table reveals that ratio of current liabilities to Proprietors fund does not
have same level of ratio. In 2008, the ratio has been increased when compare to the previous year. But in
2009, the ratio has decreased. Then again the ratio has started to increase in 2010 and decrease in 2011.
CHART 4.3.2
RATIO OF CURRENT LIABLITIES TO PROPRIETORS FUND
2007 2008 2009 2010 20112.8
3
3.2
3.4
3.6
3.8
4
3.4 3.41
3.19
3.82
3.59
Years
Rs. I
n Cr
ores
41
4.3.3 INTEREST COVERAGE RATIO
This ratio is also termed as ‘Debt Service Ratio’. This ratio is calculated as follows:
EBIT
Interest Coverage Ratio = ______________________________________
Fixed Interest Charges
TABLE 4.3.3
INTEREST COVERAGE RATIO
(RS.IN CRORES)
Years EBIT Fixed Interest
Charges
Interest Coverage
Ratio
2007 0.18 0.83 0.22
2008 0.26 1.10 0.24
2009 0.28 1.44 0.19
2010 0.17 1.71 0.10
42
2011 0.21 1.76 0.12
Source: Secondary data
INTERPRETATION:
The above table reveals that ratio of current liabilities to Proprietors fund does not
have same level of ratio. In 2008, the ratio has been increased when compare to the previous year. But in
2009, the ratio has decreased. Then again the ratio has started to increase in 2010 and decrease in 2011.
CHART 4.3.3
INTEREST COVERAGE RATIO
2007 2008 2009 2010 20110
0.05
0.1
0.15
0.2
0.25
0.3
0.220.24
0.19
0.10.12
Years
Rs. I
n Cr
ores
43
4.3.4 DEBT EQUITY RATIO
This ratio expresses the relationship between outsider’s fund and shareholder’s fund.
Outsider’s fund
Debt Equity Ratio = ________________________________________
Shareholder’s fund
Outsider’s Funds: - These refer to long term liabilities which mature after one year. These include
Debentures, Mortgage Loan, Bank Loan, and Loan from Financial institutions and Public Deposits etc.
Shareholder’s Funds: - These include Equity Share Capital, Preference Share Capital, Share Premium,
General Reserve, Capital Reserve, Other Reserve and Credit Balance of Profit & Loss Account.
TABLE 4.3.4
DEBT EQUITY RATIO
(RS.IN CRORES)
Years Outsiders fund Shareholder’s fund Debt Equity Ratio
2007 0.94 1.24 0.76
2008 0.94 1.38 0.68
44
2009 0.96 1.57 0.61
2010 1.47 1.83 0.80
2011 1.93 2.43 0.79
Source: Secondary data
INTERPRETATION:
The above table reveals that interest coverage ratio during the year 2007 was 0.76 and it is
gradually decreasing to 0.68 and 0.61 in the next years. But in 2010, the ratio is increasing to 0.80. And
again the ratio is decreasing to 0.79.
CHART 4.3.4
DEBT EQUITY RATIO
2007 2008 2009 2010 20110
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.90.7600000000000
06
0.68 0.610000000000001
0.8 0.79
Years
Rs. I
n Cr
ores
45
4.3.5 WORKING CAPITAL RATIO
This ratio shows the difference between the current assets and current liabilities.
Working Capital Ratio = Current Assets – Current Liabilities
TABLE 4.3.5
WORKING CAPITAL
(RS.IN CRORES)
Years Current Assets Current Liabilities Working Capital
2007 10.71 4.22 6.49
2008 12.83 4.71 8.12
2009 13.27 5.01 8.26
46
2010 16.24 6.99 9.25
2011 19.33 8.73 10.6
Source: Secondary data
INTERPRETATION:
The above table reveals that working capital has been increasing every year. It shows this
ratio have more value in the future.
CHART 4.3.5
WORKING CAPITAL
2007 2008 2009 2010 20110
2
4
6
8
10
12
6.49
8.12 8.26
9.25
10.6
Years
Rs. I
n Cr
ores
47
4.4 CASH FLOW STATEMENT
TABLE 4.4.1
CASH FLOW STATEMENT FOR THE YEAR ENDED 31st MARCH 2007
Particulars
Rs
March 31,
2007
Rs
48
A.CASH FLOW FROM OPERATING ACTIVITIES
Net profit before tax and extra ordinary items
Adjustments for :
Depreciation on Fixed Assets including
Least Adjustment charges
Provisions and Contingencies
Amortisation of premium on Held to Maturity Investments
Rights Issue Expenses
Operating profit before working capital changes Adjustment
for :
Advances & Other Assets
Investments
Deposits, Borrowings & Other Liabilities
Cash generated from operations
Direct taxes paid
Net cash flow from operating activities (A)
166,081
837,800
107,220
0
-16,552,492
4,509,462
9,484,091
2,730,376
1,111,101
3,841,477
-2,558,939
1,282,538
1,212,431
70,107
Source: Secondary data
INTERPRETATION:
The above table shows the performance of cash inflow and outflow of March 31st 2007,
the total amount of deposits was 9,484,091. It evaluates the cash inflow and outflow is based on
deposits.
TABLE 4.4.2
CASH FLOW STATEMENT FOR THE YEAR ENDED 31st MARCH 2008
Particulars
Rs
March 31,
2008
Rs
49
A.CASH FLOW FROM OPERATING ACTIVITIES
Net profit before tax and extra ordinary items
Adjustments for :
Depreciation on Fixed Assets including
Least Adjustment charges
Provisions and Contingencies
Amortisation of premium on Held to Maturity Investments
Rights Issue Expenses
Operating profit before working capital changes Adjustment
for :
Advances & Other Assets
Investments
Deposits, Borrowings & Other Liabilities
Cash generated from operations
Direct taxes paid
Net cash flow from operating activities (A)
174,558
577,000
103,505
0
-12,493,493
-8,994,232
27,882,669
3,435,443
855,063
4,290,506
6,394,944
10,685,450
1,662,277
9,023,173
Source: Secondary data
INTERPREATION:
The above table shows the performance of cash inflow and outflow of March 31st
2008, the amount of deposits has been increased when compare to March 31st 2007.
TABLE 4.4.3
CASH FLOW STATEMENT FOR THE YEAR ENDED 31st MARCH 2009
Particulars
Rs
March 31,
2009
Rs
50
A.CASH FLOW FROM OPERATING ACTIVITIES
Net profit before tax and extra ordinary items
Adjustments for :
Depreciation on Fixed Assets including
Least Adjustment charges
Provisions and Contingencies
Amortisation of premium on Held to Maturity Investments
Rights Issue Expenses
Operating profit before working capital changes Adjustment
for :
Advances & Other Assets
Investments
Deposits, Borrowings & Other Liabilities
Cash generated from operations
Direct taxes paid
Net cash flow from operating activities (A)
198,281
805,000
119,484
0
-9,192,728
-26,504,345
31,663,643
4,061,484
1,122,765
5,184,249
-4,033,430
1,150,819
1,681,016
-530,197
Source: Secondary data
INTERPRETATION:
The above table shows the performance of cash inflow and outflow of March31st 2009,
the amount of deposits has been increased when compare to March 31st 2008.
TABLE 4.4.4
CASH FLOW STATEMENT FOR THE YEAR ENDED 31st MARCH 2010
Particulars
Rs
March 31,
2010
R
51
s
A.CASH FLOW FROM OPERATING ACTIVITIES
Net profit before tax and extra ordinary items
Adjustments for :
Depreciation on Fixed Assets including
Least Adjustment charges
Provisions and Contingencies
Amortisation of premium on Held to Maturity Investments
Rights Issue Expenses
Operating profit before working capital changes Adjustment
for :
Advances & Other Assets
Investments
Deposits, Borrowings & Other Liabilities
Cash generated from operations
Direct taxes paid
Net cash flow from operating activities (A)
221,451
710,830
288,649
0
-26,628,891
-10,412,005
37,932,753
1,930,483
1,220,930
3,151,413
891,857
4,043,270
1,025,830
3,017,440
Source: Secondary data
INTERPRETATION:
The above table shows the performance of cash inflow and outflow of March31st 2010,
the amount of deposits has been increased when compare to March 31st 2009.
TABLE 4.4.5
CASH FLOW STATEMENT FOR THE YEAR ENDED 31st MARCH 2011
Particulars
Rs
March 31,
2011
R
52
s
A.CASH FLOW FROM OPERATING ACTIVITIES
Net profit before tax and extra ordinary items
Adjustments for :
Depreciation on Fixed Assets including
Least Adjustment charges
Provisions and Contingencies
Amortisation of premium on Held to Maturity Investments
Rights Issue Expenses
Operating profit before working capital changes Adjustment
for :
Advances & Other Assets
Investments
Deposits, Borrowings & Other Liabilities
Cash generated from operations
Direct taxes paid
Net cash flow from operating activities (A)
229,918
1,203,520
71,445
0
-27,235,702
-15,603,686
34,360,220
2,354,458
1,504,883
3,859,341
8,479,168
-4,619,827
1,274,120
-5,893,947
Source: Secondary data
INTERPRETATION:
The above table shows the performance of cash inflow and outflow of March31st 2011,
the amount of deposits has been decreased when compare to March 31st 2010.
TABLE 4.4.6
NET CASH FLOW FROM OPERATING ACTIVITIES
(RS.IN LAKHS)
Years Net Operating activities
53
2007 0.7
2008 90.23
2009 -5.3
2010 30.17
2011 -58.93
Source: Secondary data
INTERPRETATION:
The above table shows the deposits are one of the main factors of net cash flow from
operating activities. The cash inflow is based on the deposits. If the amount of deposits increased, the
net cash flow also increased.
CHART 4.4.1
NET OPERATING ACTIVITIES
2007 2008 2009 2010 2011
-80
-60
-40
-20
0
20
40
60
80
100
0.700000000000001
90.23
-5.3
30.17
-58.93
Years
Rs. I
n La
khs
4.5 CORRELATION
The correlation is one of the most common and most useful statistics. A correlation is a
single number that describes the degree of relationship between two variables.
54
r=∑ (x−x¿)∑( y− y )
√∑ (x−x) ²√∑ ( y− y) ²¿
TABLE 4.5.1
CORRELATION:
(RS.CRORES)
Years Deposits(x) Loans(y)
2007 14 10
2008 17 11
2009 20 12
2010 24 14
2011 27 17
Source: Secondary data
RESULT:
r = 0.98
INTERPRETATION:
The above calculation shows the positive correlation. So there is significant relationship
between two variables.
CHAPTER – 5
FINDINGS AND SUGGESTIONS
55
5.1 FINDINGS
The deposits of Karnataka bank have been increasing every year
The highest net cash flow from operating activities is 90.23 lakhs in the year 2008 and the lowest
net cash flow from operating activities -58.93 lakhs in the year 2011
The percentage analysis helps to identify the percentage of demand deposits, savings bank
deposits and term deposits have been increasing every year
The percentage of savings bank deposits has been doubled in the year 2011
The current ratio of the bank from the year, 2007-2011 is to be above 2:1and it is satisfactory
The highest ratio of current liabilities to proprietor’s fund is 3.82 crores in the year 2010
The lowest interest coverage ratio is 0.10 crores in the year 2010
The highest debt equity ratio is 0.80 crores in the year 2010
The working capital of the bank have been increasing every year, so the bank shall use the
capital effectively
The result of correlation shows positive correlation.
5.2 SUGGESTIONS
56
The deposit schemes are showing an unconstructive sign. So the bank keeps in control for the
future period
The percentage analysis are essentially concerned with the identification of significant
accounting data relationships, which give the decision-maker insights into the financial
performance of a company
Ratio analysis has a major significance in analysing the financial performance of a company over
a period of time.
The bank shall improve their level of cash and bank balances because it is playing a vital role for
additional improvement
The result of correlation shows positive correlation. So there is a good relationship between
deposits and loans in the bank
CONCLUSION
57
The study is made on the topic deposit schemes by using financial tools & with five years data at
Karnataka bank Ltd. This tools used for the study helped in determining the position of the concern
consequently for the past five years. The analysis of financial statements is a process of evaluating the
relationship between component parts of financial statements to obtain a better understanding of the
firm’s position and performance. The bank’s overall financial position is satisfactory. The bank deposit
schemes have been increasing year by year, so the bank gets more growth in every year.
BIBLIOGRAPHY
58
Web sites
www.karnatakabank.com
www.wikipedia.org
www.google.com
Books referred
“Basic Financial Management” – MY Khan & PK Jain
“Financial Management” – Prasanna Chandra
“Financial Accounting” – Jon Ben Hoyle & CJ Skender
Annual reports
Annual report 2006 – 2007
Annual report 2007 – 2008
Annual report 2008 – 2009
Annual report 2009 – 2010
Annual report 2010 – 2011
APPENDIX
KARNATAKA BANK (P) LTD59
MARCH-11 MARCH-10 MARCH-09 MARCH-08 MARCH-07
CAPITAL AND
LIABILITIES
Capital
Reserves and
Surplus
Deposits
Borrowings
Other Liabilities
and Provision
1,882,004
22,408,866
273,364,463
10,863,339
8,411,403
1,339,861
16,987,632
237,306,488
3,416,403
11,301,159
1,215,847
14,454,423
203,332,853
39,728
9,535,209
1,213,533
12,582,500
170,161,923
1,421,955
8,018,267
1,213,533
11,172,744
140,374,354
4,207,383
5,257,148
TOTAL 316,930,075 270,351,543 228,578,060 193,398,178 162,225,162
ASSETS
Cash & balances
with RBI
Balances with
Banks and Money
at Call & Short
Notice
Investments
Advances
Fixed Assets
19,398,055
462,519
115,063,393
173,480,709
1,455,268
17,430,979
624,503
99,920,463
144,356,833
1,480,758
13,649,830
957,539
89,614,883
118,100,450
1,384,876
14,822,059
5,020,429
59,637,087
108,419,746
1,197,731
8,268,237
3,346,911
50,481,644
95,526,799
1,068,216
60
Other Assets 7,070,131 6,538,007 4,870,482 4,301,126 3,533,355
TOTAL 316,930,075 270,351,543 228,578,060 193,398,178 162,225,162
Contingent
Liabilities
90,358,016
9,628,992
101,192,384
10,322,427
100,427,447
9,289,287
69,590,090
7,646,757
34,279,000
6,728,849
61
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