CHAPTER-II

REVIEW OF LITERATURE

1
This part represents the review of those studies that have been carried out in the financial
performance.
Rao (1993) discussed in his research about ‘Financial appraisal of
Indian

Automotive Tyre Industry’. Main objective of study was intended to probe into

the financial condition-financial strength and weakness-of the Indian tyre industry. He has
been measured and evaluates the financial performance through inter-company and inter-
sector analysis for the period of 1981-1988. He has found that the fixed assets utilisation in
many of the tyre undertakings was not as productive as expected and inventory was managed
fairly well. He has considered that the tyre industry's overall profit performance was
subjected to inconsistency and ineffective. He has suggested some recommendations to
improve financial performance.

Rao (1993) has made a study about inter-company financial analysis of tea industry-
retrospect and prospect. He wished to analyses the important variables of tea industry and
projected future trends regarding sales and profit for the

2
next 10 year periods, with a view to help the policy makers to take appropriate decisions. He
have been calculated various financial ratios for analyzing the financial health of the industry.
After the comparison of ratios, he has concluded that the forecast of sales and profits of tea
manufacturing companies showed that the Indian tea industry has bright prospects. He has
also revealed that the recent changes in the Indian economic policies may boost up the
foreign exchange earnings, which may benefit those companies, which are exporting to hard
currency areas.

Pai, Vadivel & Kamala (1995) have studied about the diversified companies and financial
performance. Main purpose of research was found out the relationship between diversified
firms and their financial performance. For the purpose of research, they have selected seven
large firms and analysed those firm which having different products-both related and
otherwise-in their portfolio and operating in diverse industries. In this study, a set
ofperformance measures / ratios was employed to determine the level of financial
performance and variation in performance from one firm to another has been observed and
statistically established.They revealed that the diversified firms studied have been healthy
financial performance.
Vijayakumar A. (1996) has studied about ‘Assessment of
Corporate

Liquidity - a discriminate analysis approach’ in this research he has revealed that the
growth rate of sales, leverage, current ratio, operating expenses to sales and vertical
integration was the important variables which determine the profitability of companies in the
sugar industry. Also he has studied the short-term liquidity position in twenty-eight selected
sugar factories in co-operative and private sectors. In research a discriminate analysis has
been used by the researcher, to undertaken to distinguish the good risk companies from poor
risk companies based on current and liquidity ratios. In this study discriminating

‘Z’ scores have been calculated with the help of discriminate function and according to
the ‘Z’ scores the companies are ranked in the order of liquidity. Loundes (1998)
studied on his research paper regarding “performance of Australian Government
Trading Enterprises: An overview”. He has provided

3
an overview of GTE performance over the 5 years to 1996 using the IBIS Enterprise
Database, following the method of analyzing firm performance as outlined by the steering
committee (1998). He has made comparative analysis and its results indicate that there are
large differences in performance across firms, and more particularly, across the industries.
Assessing the performance of Government Trading Enterprises (GTEs) has become
increasingly important in the context of the push towards privatisation.

Dhankar (1998) has studied about the criteria of performance measurement for business
enterprises in India study of public sector undertakings. The author gives a new model for
measuring the performance of a business enterprise in India, wherein, the basis is to
compare its actual rate of return with its expected risk adjusted rate of return. Realizing the
importance and controversy of public sector in India, an attempt was made to measure the
performance of all public sector undertakings, which were started up to 1964 and were in
operation until 1983. It is shocking to know that half of them on an average want to talk of
making excess returns, have not been able to earn equal to their cost of capital.

Sengupta (1998) studied concerning the performance of the fertilizers industry in India. By
Analysing of cost functions and cobb-douglas production function have been made to check
the performance of the industry. Analysis of shifting cost functions further highlight that the
firms belonging to this industry expand capacities, even before fully exploiting the existing
capacity conforming to the oligopolistic behavioural tendency of the firms belonging to the
fertilizers industry. The results showed that the industry was subject to the law of increasing
costs. He founded that, to get further support from the examination of the production
function, which revealed that the average productivity of labour exceeds its marginal
productivity..

D’Souza & Megginson (1999) have studied concerning the financial and operating
performance of privatized firms during the 1990s. They made comparison about the pre and
post privatization financial and operating performance of 85 companies from 28
industrialized countries that were

4
privatized through public share offerings for the period from 1990 to 1996. They have
noticed that the significant increases in profitability, output, operating efficiency, dividend
payments and significant decreases in leverage ratios for the full sample of firms after
privatization. They have also concluded that the capital expenditures increase significantly in
absolute terms, but not relative to sales and Employment declines, but insignificantly. As per
findings, they strongly recommended that privatization yields significant performance
improvements.

Raghunathan & Das (1999) have discussed in their paper regarding corporate performance
of post-Liberalization. They analysed the performance of Indian Manufacturing sector in the
last 8 years since liberalization on the parameters of profitability, liquidity, leverage and
solvency. They also observed that the solvency and profitability ratios were encouraging till
1996 they have been gradually diminishing after that and this problem gets more pronounced
when the EVA was calculated which showed that the Indian Manufacturing sector has
destroyed wealth, while the MNCs have generated wealth for their shareholders. They have
pointed out after the analysis; the poor corporate performance has led to an economic
slowdown and not the other way round and corporate raised funds during the blacken days
of equity markets and ended up investing these funds at below their cost of capital. In short,
the outcome has been a prolonged economic slowdown.

Nitsure & Joseph (1999) have studied about, “Liberalisation and the Behaviour of
Indian Industry (A Corporate - Sector Analysis based on Capacity Utilisation), and
examined the impact of economic reform on productive capacity creation and utilization
across various industries in the nineties. They analyzed the determinants of capacity use such
as credit flows, import liberalization, fiscal consolidation and demand conditions, using
panel 35 data for 802 firms for the period 1993-98 to suggest an optimum combination of
policies that is critical for realizing the unused capacity. They suggested that although
substantial achievements occurred initially in creation

5
and utilization of capacities in the various industries, there was significant room for further
improvement in utilization.

Rajeswari (2000) studied about the Liquidity Management of Tamil Nadu Cement
Corporation Ltd. Alangulam-A Case Study. She concluded from the analysis; the liquidity
position of TANCEM was not stable. After the comparative analysis regarding liquidity
ratios, she has found there was too much of liquidity in the first two years of the study period
and also a very high degree of liquidity was also bad as idle assets earn nothing and affects
profitability. In short, she concluded that the liquidity management of TANCEM is poor and
is not satisfactory.

Aggarwal & Singla (2001) have studied about developed a single index of financial
performance through the technique of Multiple Discriminate Analysis (MDA), by selecting
11 ratios and selected ratios used as inputs. For the purpose of analysis they selected only
those ratios, which was relevant in distinguish between profit making units and loss making
units in Indian paper industry. They concluded that, the model has correctly classified 82.14
percent of units selected as profit making and loss marking. They mentioned in their study
the inventory turnover ratio, interest coverage ratio, net profit to total assets and earnings per
share are the most important indicators of financial performance. Also they suggested
suggests that the results of Multiple Discriminate Analysis could be used as predictor of
future profitability / sickness.

Sur (2001) studied in his paper about the Liquidity Management: An overview of four
companies in Indian Power Sector using the data for the period of 1987-1988 to 1996-1997.
He had applied accounting techniques of comparative analysis regarding the liquidity
management in Electricity generation and distribution industry. He revealed that the overall
liquidity should be managed in such a way that not only it should not hamper profitability
but also its contribution towards increase in profitability should be positive.

6
Sur, Biswas & Ganguly (2001) have studied about the Liquidity Management in Indian
Private Sector Enterprises - A case study of Indian Primary Aluminium industry. From the
analysis, they had summarized that the overall performance regarding liquidity management
at INDAL was better in terms of efficient utilization of short term funds, whereas
HINDALCO was unable to do so. They found that a very high degree of positive correlation
between liquidity and profitability in case of both the companies was a notable feature,
reflecting the favourable effect of liquidity on profitability.
Loundes (2001) analyzed ‘The Financial performance of
Australian

Government Trading Enterprises Pre &Post-Reform’ revealed that during the 1990's.
Main objectives of the study was to discover whether there had been any change in the
financial performance of government trading enterprises operating in electricity, gas, water,
railways and ports industries as a result of these changes. He had concluded that that it did
not appear to have been a noticeable enhancement in the financial performance of most of
this business, although railways have improved slightly, from a low base. He has suggested
several measures introduced to improve the efficiency and financial performance of
government trading enterprises in Australia.

Rogers (2001) studied in his research about the effect of diversification on firm performance
analyses the association between diversification and firm performance by using a sample of
up to 1449 large Australian firms for the period of 1994 to 1997. He has analysed the firm
performance by measuring profitability and, for quoted firms, market value. From the
comparative analysis of selected sample, the results showed that all the selected firms have
more focused to maintain higher profitability and also controls for firm specific effects and
other determinants of profitability. However, this association was not found in sub-sample
regressions for listed firms. He concluded that for measuring the performance of the firm,
firm select either profitability or market value. The results indicated that listed firms may be
under closer scrutiny and competitive pressures that ensure, on average, that these firms are
at their optimal degree of diversification.

7
Bosworth & Loundes (2002) have studied about the Dynamic performance of Australian
Enterprises investigate the interaction of discretionary investments, innovation, productivity
and profitability within a dynamic framework of firm performance. They haveset up a
dynamic and closed model for firm performance and the result empirical model was tested as
a series of recursive equations by using a four-year balanced panel data set of Australian
firms drawn from the Business Longitudinal Survey. After comparatively analysis, they
found that the current economic profit has an important role to play in enabling firms to
invest. They mentioned in the findings regarding investments complements and also
substitutes. They concluded from analysis the impact of these discretionary investments on
innovation and total factor productivity performance. Finally, the impact of past
discretionary investments both directly and indirectly (that is, via innovation and
productivity performance) on current profitability was examined. They also revealed that
thepast values of these investments have a significant influence on current profit, effectively
closing the model.

Mulla (2002) discussed in his paper about the ‘Use of ‘Z’ score analysis for evaluation of
financial health of textile mills - A case study’ has been made an insight into the financial
health of ShriVenkatesh Co-operative Textile Mills Ltd., Arunageri of Dharwad District. For
the purpose of analysis, the ‘Z’ score analysis has been applied to evaluate the general
trend in financial health of a firm over a period by using many of the accounting ratios. From
the analysis he was concluded that the textiles mill under study was just on the verge of
financial falls down and on the one hand, current assets declined because of the negative
profitability performance, whereas on the other hand, the current liabilities were on the
increase because of poor liquidity performance of the mill.

Wolfgang Aussenegg & Jelic (2002) examined about operating performance of 154 Polish,
Hungarian and Czech companies that were fully or partially privatized between January
1990 and December 1998. They have revealed that privatized firms in the sample did not
manage to increase profitability, and

considerably reduced efficiency and output in the post privatization period. They concluded
that the enterprises privatized through mass privatization programs (Czech SOEs) achieved
lower profitability in the post-privatization period compared to their counterparts privatized
through case-by-case method. After comparative analysis they came to know the Czech
8
companies have also maintained much higher bank borrowings after privatizations than their
polish and Hungarian counterparts. The study further revealed that private sector IPOs
underperforms their privatization complements in terms of profitability, efficiency, capital
investments and output. Finally, they concluded that firm’s size did not seem to influence
key performance measures in selected countries. Kakani, Saha & Reddy (2003) have
studied about an empirical validation of the widely held existing theories on the
determinants of firm performance in the Indian context. In their study they have used
financial statements and capital market data of 566 large Indian firms over a time frame of
eight years divided into two sub-periods (1992-96 and 1996-2000) and to analyse Indian

firm’s financial performance across various dimensions viz., shareholder value,

accounting profitability and its components, growth and risk of the sample

firms. They have found that size, marketing expenditure and international

diversification had a positive relation with a firm’s market evaluation. They have also
concluded that a firm’s ownership compositions, particularly the

level of equity ownership by domestic financial institution and dispersed public

shareholders, and the leverage of the firm were important factors affecting its financial
performance.

Petia (2004) discussed in his study about performance of India’s non-financial corporate
sector since 1989, by using firm level data and evaluated its financial vulnerabilities. He has
found that promising trends in liquidity, profitability and leverage of the sector emerged in
the early 1990s; he has experienced a reversal after 1996. Nevertheless, most indicators were
still at comfortable levels, and there was evidence of improvement in 2002. The study also
revealed that a number of firms still face problems servicing their debt obligations, posing a
risk to lenders. He has concluded that aggregate interest

coverage of the corporate sector indicated that potential non-performing loans of the
corporate sector remain high and this underscores the need of the corporate sector remain

9
high. He suggested this underscores the need for close monitoring of the corporate sector in
the future.

Weill (2004) discussed in his paper about comparison of leverage and corporate
performance-a frontier efficiency analysis provides new empirical evidence on a major
corporate governance issue and also the relationship between leverage and corporate
performance. To analyse the leverage and corporate performance, he has applied frontier
efficiency techniques to obtain performance measures for companies from several countries
(France, Germany and Italy). This study proceeds to regressions of corporate performance
on a various set of variables including leverage. He has found mixed evidence depending on
the country; while significantly negative in Italy, the relationship between leverage and
corporate performance was significantly positive in France and Germany.

Patra (2005) has studied about the impact of liquidity on profitability by using current ratio,
acid test ratio. Current assets to total assets ratio, inventory turnover ratio, working capital
ratio, receivable turnover ratio, cash turnover

ratio of selected two company’s viz., Tata Iron & Steel Company Limited for

the period 1999 to 2005. Using mean, standard deviation, co-efficient variation, correlation
and co-efficient of relation. He has concluded that Out of seven liquidity ratios selected for
this study, four ratios namely current ratio, acid test ratio, current assets to total assets ratio
and inventory turnover ratio showed negative correlation with profitability ratio. Whereas
The remaining three ratios namely working capital turnover ratio, receivable turnover ratio
and cash turnover ratio have shown positive association with the profitability ratio, all of
which are statistically significant at 5% level of significance. He found that the impact of
liquidity ratios on profitability showed both negative and positive association. However,
these correlation co-efficient were not statistically significant. The result showed that all the
correlation co-efficient is as desirable except correlation co-efficient between inventory
turnover ratio
and ROI while undesirable sign between ITR and ROI was not supported by the multiple
regression analysis, which indicated the positive association between these two variables.
He mentioned that growing of profitability which was depends upon many factors including
liquidity.
10
 CHAPTER-IV

INDUSTRY PROFILE

&

COMPANY PROFILE

11
A bank is a financial institution that accepts deposits and channels those deposits into
lending activities. Banks primarily provide financial services to customers while enriching
investors. Government restrictions on financial activities by banks vary over time and
location. Banks are important players in financial markets and offer services such as
investment funds and loans. In some countries such as Germany, banks have historically
owned major stakes in industrial corporations while in other countries such as the United
States banks are prohibited from owning non-financial companies. In Japan, banks are
usually the nexus of a cross-share holding entity known as the keiretsu. In France,
bancassurance is prevalent, as most banks offer insurance services (and now real estate
services) to their clients.

Introduction
India’s banking sector is constantly growing. Since the turn of the century, there has been a
noticeable upsurge in transactions through ATMs, and also internet and mobile banking.
Following the passing of the Banking Laws (Amendment) Bill by the Indian Parliament in
2012, the landscape of the banking industry began to change. The bill allows the Reserve
Bank of India (RBI) to make final guidelines on issuing new licenses, which could lead to a
bigger number of banks in the country. Some banks have already received licenses from the
government, and the RBI's new norms will provide incentives to banks to spot bad loans and
take requisite action to keep rogue borrowers in check.
Over the next decade, the banking sector is projected to create up to two million new jobs,
driven by the efforts of the RBI and the Government of India to integrate financial services
into rural areas. Also, the traditional way of operations will slowly give way to modern
technology.

Market size
Total banking assets in India touched US$ 1.8 trillion in FY13 and are anticipated to cross
US$ 28.5 trillion in FY25.
Bank deposits have grown at a compound annual growth rate (CAGR) of 21.2 per cent over
FY06–13. Total deposits in FY13 were US$ 1,274.3 billion.
Total banking sector credit is anticipated to grow at a CAGR of 18.1 per cent (in terms of
INR) to reach US$ 2.4 trillion by 2017.
In FY14, private sector lenders witnessed discernable growth in credit cards and personal
loan businesses. HDFC Bank witnessed 141.6 per cent growth in personal loan disbursement

12
in FY14, as per a report by Emkay Global Financial Services. Axis Bank's personal loan
business also rose 49.8 per cent and its credit card business expanded by 31.1 per cent.
Investments
Bengaluru-based software services exporter Mphasis Ltd has bagged a five-year contract
from Punjab National Bank (PNB) to set up the bank’s contact centers in Mangalore and
Noida (UP). Mphasis will provide support for all banking products and services, including
deposits operations, lending services, banking processes, internet banking, and account and
card-related services. The company will also offer services in multiple languages.
Microfinance companies have committed to setting up at least 30 million bank accounts
within a year through tie-ups with banks, as part of the Indian government’s financial
inclusion plan. The commitment was made at a meeting of representatives of 25 large
microfinance companies and banks and government representatives, which included
financial services secretary Mr. GS Sandhu.
Export-Import Bank of India (Exim Bank) will increase its focus on supporting project
exports from India to South Asia, Africa and Latin America, as per Mr.YaduvendraMathur,
Chairman and MD, Exim Bank. The bank has moved up the value chain by supporting
project exports so that India earns foreign exchange. In 2012–13, Exim Bank lent support to
85 project export contracts worth Rs 24,255 crore (US$ 3.96 billion) secured by 47
companies in 23 countries.

Government Initiatives
The RBI has given banks greater flexibility to refinance current long-gestation project loans
worth Rs 1,000 crore (US$ 163.42 million) and more, and has allowed partial buyout of
such loans by other financial institutions as standard practice. The earlier stipulation was
that buyers should purchase at least 50 per cent of the loan from the existing banks. Now,
they get as low as 25 per cent of the loan value and the loan will still be treated as
‘standard’.
The RBI has also relaxed norms for mortgage guarantee companies (MGC) enabling these
firms to use contingency reserves to cover for the losses suffered by the mortgage guarantee
holders, without the approval of the apex bank. However, such a measure can only be
initiated if there is no single option left to recoup the losses.
SBI is planning to launch a contact-less or tap-and-go card facility to make payments in
India. Contact-less payment is a technology that has been adopted in several countries,

13
including Australia, Canada and the UK, where customers can simply tap or wave their card
over a reader at a point-of-sale terminal, which reads the card and allows transactions.
SBI and its five associate banks also plan to empower account holders at the bottom of the
social pyramid with a customer call facility. The proposed facility will help customers get an
update on available balance, last five transactions and cheque book request on their mobile
phones.

Road Ahead
India is yet to tap into the potential of mobile banking and digital financial services. Forty-
seven per cent of the populace have bank accounts, of which half lie dormant due to reliance
on cash transactions, as per a report. Still, the industry holds a lot of promise.
India's banking sector could become the fifth largest banking sector in the world by 2020
and the third largest by 2025. These days, Indian banks are turning their focus to servicing
clients and enhancing their technology infrastructure, which can help improve customer
experience as well as give banks a competitive edge.
Exchange Rate Used: INR 1 = US$ 0.0163 as on October 28, 2014

The level of governmentregulation of the banking industry varies widely, with countries
such as Iceland, having relatively light regulation of the banking sector, and countries such
as China having a wide variety of regulations but no systematic process that can be followed
typical of a communist system.

The oldest bank still

in existence is Monte deiPaschi di Siena, headquartered in Siena, Italy, which has been
operating continuously since 1472.

History

Origin of the word

The name bank derives from the Italian word banco "desk/bench", used during the
Renaissance by Jewish Florentine bankers, who used to make their transactions above a desk
covered by a green tablecloth. However, there are traces of banking activity even in ancient

14
times, which indicates that the word 'bank' might not necessarily come from the word
'banco'.

In fact, the word traces its origins back to the Ancient Roman Empire, where moneylenders
would set up their stalls in the middle of enclosed courtyards called macella on a long bench
called a bancu, from which the words banco and bank are derived. As a moneychanger, the
merchant at the bancu did not so much invest money as merely convert the foreign currency
into the only legal tender in Rome—that of the Imperial Mint.

The earliest evidence of money-changing activity is depicted on a silver drachm coin from
ancient Hellenic colony Trapezus on the Black Sea, modern Trabzon, c. 350–325 BC,
presented in the British Museum in London. The coin shows a banker's table (trapeza) laden
with coins, a pun on the name of the city.

In fact, even today in Modern Greek the word Trapeza (Τράπεζα) means both a table and a
bank.

Traditional banking activities

Banks act as payment agents by conducting checking or current accounts for customers,
paying cheques drawn by customers on the bank, and collecting cheques deposited to
customers' current accounts. Banks also enable customer payments via other payment
methods such as telegraphic transfer, EFTPOS, and ATM.

Banks borrow money by accepting funds deposited on current accounts, by accepting term
deposits, and by issuing debt securities such as banknotes and bonds. Banks lend money by
making advances to customers on current accounts, by making installment loans, and by
investing in marketable debt securities and other forms of money lending.

Banks provide almost all payment services, and a bank account is considered indispensable
by most businesses, individuals and governments. Non-banks that provide payment services
such as remittance companies are not normally considered an adequate substitute for having
a bank account.

Banks borrow most funds from households and non-financial businesses, and lend most
funds to households and non-financial businesses, but non-bank lenders provide a significant

15
and in many cases adequate substitute for bank loans, and money market funds, cash
management trusts and other non-bank financial institutions in many cases provide an
adequate substitute to banks for lending savings to.

Entry regulation

Currently in most jurisdictions commercial banks are regulated by government entities and
require a special bank licence to operate.

Usually the definition of the business of banking for the purposes of regulation is extended
to include acceptance of deposits, even if they are not repayable to the customer's order—
although money lending, by itself, is generally not included in the definition.

Unlike most other regulated industries, the regulator is typically also a participant in the
market, i.e. a government-owned (central) bank. Central banks also typically have a
monopoly on the business of issuing banknotes. However, in some countries this is not the
case. In the UK, for example, the Financial Services Authoritylicences banks, and some
commercial banks (such as the Bank of Scotland) issue their own banknotes in addition to
those issued by the Bank of England, the UK government's central bank.

Accounting for bank accounts

Bank statements are accounting records produced by banks under the various accounting
standards of the world. Under GAAP and IFRS there are two kinds of accounts: debit and
credit. Credit accounts are Revenue, Equity and Liabilities. Debit Accounts are Assets and
Expenses. This means you credit a credit account to increase its balance, and you debit a
debit account to decrease its balance.

This also means you debit your savings account every time you deposit money into it (and
the account is normally in deficit), while you credit your credit card account every time you
spend money from it (and the account is normally in credit).

However, if you read your bank statement, it will say the opposite—that you credit your
account when you deposit money, and you debit it when you withdraw funds. If you have
cash in your account, you have a positive (or credit) balance; if you are overdrawn, you have
a negative (or deficit) balance.

16
 The reason for this is that the bank, and not you, has produced the bank statement. Your
savings might be your assets, but the bank's liability, so they are credit accounts (which
should have a positive balance). Conversely, your loans are your liabilities but the bank's
assets, so they are debit accounts (which should also have a positive balance).

Where bank transactions, balances, credits and debits are discussed below, they are done so
from the viewpoint of the account holder—which is traditionally what most people are used
to seeing.

Economic functions

1. issue of money, in the form of banknotes and current accounts subject to cheque or payment
at the customer's order. These claims on banks can act as money because they are negotiable
and/or repayable on demand, and hence valued at par. They are effectively transferable by
mere delivery, in the case of banknotes, or by drawing a cheque that the payee may bank or
cash.
2. netting and settlement of payments – banks act as both collection and paying agents for
customers, participating in interbank clearing and settlement systems to collect, present, be
presented with, and pay payment instruments. This enables banks to economise on reserves
held for settlement of payments, since inward and outward payments offset each other. It
also enables the offsetting of payment flows between geographical areas, reducing the cost
of settlement between them.
3. credit intermediation – banks borrow and lend back-to-back on their own account as middle
men.
4. credit quality improvement – banks lend money to ordinary commercial and personal
borrowers (ordinary credit quality), but are high quality borrowers. The improvement comes
from diversification of the bank's assets and capital which provides a buffer to absorb losses
without defaulting on its obligations. However, banknotes and deposits are generally
unsecured; if the bank gets into difficulty and pledges assets as security, to raise the funding
it needs to continue to operate, this puts the note holders and depositors in an economically
subordinated position.
5. maturity transformation – banks borrow more on demand debt and short term debt, but
provide more long term loans. In other words, they borrow short and lend long. With a
stronger credit quality than most other borrowers, banks can do this by aggregating issues
(e.g. accepting deposits and issuing banknotes) and redemptions (e.g. withdrawals and
17
 redemptions of banknotes), maintaining reserves of cash, investing in marketable securities
that can be readily converted to cash if needed, and raising replacement funding as needed
from various sources (e.g. wholesale cash markets and securities markets).

Law of banking

Banking law is based on a contractual analysis of the relationship between the bank (defined
above) and the customer—defined as any entity for which the bank agrees to conduct an
account.

The law implies rights and obligations into this relationship as follows:

1. The bank account balance is the financial position between the bank and the customer: when
the account is in credit, the bank owes the balance to the customer; when the account is
overdrawn, the customer owes the balance to the bank.
2. The bank agrees to pay the customer's cheques up to the amount standing to the credit of the
customer's account, plus any agreed overdraft limit.
3. The bank may not pay from the customer's account without a mandate from the customer,
e.g. a cheque drawn by the customer.
4. The bank agrees to promptly collect the cheques deposited to the customer's account as the
customer's agent, and to credit the proceeds to the customer's account.
5. The bank has a right to combine the customer's accounts, since each account is just an aspect
of the same credit relationship.
6. The bank has a lien on cheques deposited to the customer's account, to the extent that the
customer is indebted to the bank.
7. The bank must not disclose details of transactions through the customer's account—unless
the customer consents, there is a public duty to disclose, the bank's interests require it, or the
law demands it.
8. The bank must not close a customer's account without reasonable notice, since cheques are
outstanding in the ordinary course of business for several days.

These implied contractual terms may be modified by express agreement between the
customer and the bank. The statutes and regulations in force within a particular jurisdiction
may also modify the above terms and/or create new rights, obligations or limitations
relevant to the bank-customer relationship.

18
 Some types of financial institution, such as building societies and credit unions, may be
partly or wholly exempt from bank licence requirements, and therefore regulated under
separate rules.

The requirements for the issue of a bank licence vary between jurisdictions but typically
include:

1. Minimum capital
2. Minimum capital ratio
3. 'Fit and Proper' requirements for the bank's controllers, owners, directors, and/or senior
officers
4. Approval of the bank's business plan as being sufficiently prudent and plausible.

Types of banks

Banks' activities can be divided into retail banking, dealing directly with individuals and
small businesses; business banking, providing services to mid-market business; corporate
banking, directed at large business entities; private banking, providing wealth management
services to high net worth individuals and families; and investment banking, relating to
activities on the financial markets. Most banks are profit-making, private enterprises.
However, some are owned by government, or are non-profit organizations.

Central banks are normally government-owned and charged with quasi-regulatory

responsibilities, such as supervising commercial banks, or controlling the cash interest rate.
They generally provide liquidity to the banking system and act as the lender of last resort in
event of a crisis.

Types of retail banks

 Commercial bank: the term used for a normal bank to distinguish it from an investment
bank. After the Great Depression, the U.S. Congress required that banks only engage in
banking activities, whereas investment banks were limited to capital market activities. Since
the two no longer have to be under separate ownership, some use the term "commercial
bank" to refer to a bank or a division of a bank that mostly deals with deposits and loans
from corporations or large businesses.

19
 Community Banks: locally operated financial institutions that empower employees to make
local decisions to serve their customers and the partners.
 Community development banks: regulated banks that provide financial services and credit to
under-served markets or populations.
 Postal savings banks: savings banks associated with national postal systems.
 Private banks: banks that manage the assets of high net worth individuals.
 Offshore banks: banks located in jurisdictions with low taxation and regulation. Many
offshore banks are essentially private banks.
 Savings bank: in Europe, savings banks take their roots in the 19th or sometimes even 18th
century. Their original objective was to provide easily accessible savings products to all
strata of the population. In some countries, savings banks were created on public initiative;
in others, socially committed individuals created foundations to put in place the necessary
infrastructure. Nowadays, European savings banks have kept their focus on retail banking:
payments, savings products, credits and insurances for individuals or small and medium-
sized enterprises. Apart from this retail focus, they also differ from commercial banks by
their broadly decentralised distribution network, providing local and regional outreach—and
by their socially responsible approach to business and society.
 Building societies and Landesbanks: institutions that conduct retail banking.
 Ethical banks: banks that prioritize the transparency of all operations and make only what
they consider to be socially-responsible investments.
 Islamic banks: Banks that transact according to Islamic principles.

Types of investment banks

 Investment banks "underwrite" (guarantee the sale of) stock and bond issues, trade for their
own accounts, make markets, and advise corporations on capital market activities such as
mergers and acquisitions.
 Merchant banks were traditionally banks which engaged in trade finance. The modern
definition, however, refers to banks which provide capital to firms in the form of shares
rather than loans. Unlike venture capital firms, they tend not to invest in new companies.

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 Both combined

 Universal banks, more commonly known as financial services companies, engage in several
of these activities. These big banks are very diversified groups that, among other services,
also distribute insurance— hence the term bancassurance, a portmanteau word combining
"banque or bank" and "assurance", signifying that both banking and insurance are provided
by the same corporate entity.

Other types of banks

 Islamic banks adhere to the concepts of Islamic law. This form of banking revolves around
several well-established principles based on Islamic canons. All banking activities must
avoid interest, a concept that is forbidden in Islam. Instead, the bank earns profit (markup)
and fees on the financing facilities that it extends to customers.

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ABOUT US
YES BANK has been recognized amongst the Top and Fastest Growing Banks in various
Indian Banking League Tables by prestigious media houses and Global Advisory Firms,
and has received several national and international honours for our various Businesses
including Corporate Investment Banking, Treasury, Transaction Banking, and Sustainable
practices through Responsible Banking. YES BANK is steadily evolving as the
Professionals’ Bank of India with the long term mission of ‘Finest Quality Large Bank in
India’ by 2020
YES BANK, India’s fourth largest private sector Bank, is an outcome of the professional
entrepreneurship of its Founder Rana Kapoor and his highly competent top management team, to
establish a high quality, customer centric, service driven, bank catering to the “Sunrise Sector of
India”. YES BANK is the only Greenfield Bank license awarded by the RBI in the last two decades,
associated with the finest pedigree investors. YES BANK, a "Full Service Commercial Bank”, has
steadily built a Corporate, Retail & SME Banking franchise, with a comprehensive product suite of
Financial Markets, Investment Banking, Corporate Finance, Branch Banking, Business
and Transaction Banking, and Wealth Management business lines across the country. To read the
complete story of YES BANK,
VISION AND MISSION
Brand Ethos
To be the Professionals’ Bank of India
Vision:
Building the Finest Quality Large Bank of the World in India
Mission
To establish a high-quality, customer-centric, service-driven, private Indian Bank catering to
the ‘Future Businesses of India’
CORPORATE BANKING
We, at YES BANK, provide our corporate clients with a complete suite of investment
and Banking services both in India and internationally, in collaboration with our financial
partners.
Our experienced Senior Relationship Managers have significant understanding of the
dynamic financial requirements of our Large Indian Corporate & MNC clients, and are
adequately supported by our Knowledge bankers, who provide highly specialized, industry-
specific solutions for your business.

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BRANCH BANKING
YES BANK provides you an all-inclusive banking experience through an extensive branch
banking network of over 1000 Branches and 1,800 ATMs. YES BANK strives to expand its
branch presence in line with its strategy of building the highest quality branch banking
network. This network will covering major cities and towns across India to service your
needs at any location in the country.
Know more
KNOWLEDGE BANKING
YES BANK has adopteda Knowledge driven approach to offer financial solutions, which go
beyond the traditional realm of banking. At YES BANK, we arecommitted to supporting the
sustainable growth and development of sunrise sectors like amongothers. Food &
Agribusiness, Telecommunications, Information Technology, Lifesciences, Renewable
Energy, Media & Entertainment, Manufacturing and Textiles, among others.
BRAND PILLARS
The YES BANK brand is built around key Brand Pillars, which epitomize the growing
strengths of the Bank. All communication and advertising has been created around these key
brand pillars.
 Growth: YES BANK's core promise is growth for its internal and external
stakeholders symbolized in ‘Say YES to Growth!’
 Trust: YES BANK's Promoters, Investors, and Top Management team are all of the
highest pedigree with a demonstrated track record, thus inspiring and establishing a
Trust Mark – ‘Say YES to Trust!’
 Human Capital: YES BANK has adopted a knowledge-driven, entrepreneurial
management approach and offers financial solutions beyond the traditional realm
of banking. YES BANK's top quality Human Capital represents the finest talent in
Indian banking, chosen from India and abroad
 Innovation & Technology: YES BANK is establishing the highest standards in
customer service by adopting cutting-edge, innovative Technology. The only thing
constant about technology used at YES BANK is Evolution
 Transparency : YES BANK considers Transparency and Accountability to be of
utmost importance. YES BANK has established one of the most stringent Corporate
Governance norms

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  Responsible Banking : YES BANK has a vision to be the Benchmark Financial
Institution for Inclusivity and Sustainability. YES BANK’s mission is to link CSR
and Sustainable Development with stakeholder value creation through innovative
solutions and services & weave sustainability principles into its core business
strategy and processes

KEY MILESTONES

Building the Finest Quality Bank of the World in India by 2020

2017
Raised INR 4906.68 Cr (USD 750 Mn) QIP which is India’s largest private sector QIP in
INR terms
2016

YES BANK signs MoU with IFC and Goldman Sachs 10,000 women for USD 50 Million
Loan
Youngest Indian Company to be part of the Forbes Global 2000 List
FMO, Dutch Development Bank signs definitive agreement to invest USD 50 Mn in YES
BANK’s Green Infrastructure Bond

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2015

April
YES BANK launched its first International representative office in Abu Dhabi, UAE
March
YES BANK was added to NIFTY 50, the benchmark index of the National Stock Exchange
February
Raised India’s FIRST Green Infrastructure Bonds for an amount of 1000 Crores (USD 160
million)
2014

December
Raised USD 200 mn Unsecured Loan from Asian Development Bank for financing working
capital & investment loans targeted towards small farm households & rural women in SHGs
September
First Indian Bank to receive the “Global Performance Excellence Award-2014” in the
Services Category by APQO, Chicago, USA
Received the 'Best Transaction Bank for Payments' by The Banker's Transaction Banking
Awards, London

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May
Raised USD 500 million through a global QIP
March
Raised USD 500 Million in Longer Tenure FCY Loan and FCNR Funds in FY 2013-14
FIRST bank in India to receive the Business Excellence trophy at the prestigious IMC
Ramkrishna Bajaj National Quality Awards
2013

August
Recommends Dividend for FY 13 at 60%
June
Retail Banking footprint expands to 500 branches covering all 28 states and 7 Union
Territories across India
March
Awarded the Best Managed Bank in India (2011-2013) by The Asian Banker

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