A

PROJECT REPORT
on
WORKING CAPITAL MANAGEMENT OF AXIS BANK “”

Submitted in Partial Fulfillment of the Requirement for

the Award of the Degree of
Master of Business Administration
Batch: 2018-2020

UNDER THE GUIDANCE OF SUBMITTED BY

PROF. MUNISH TIWARI ABHIJEET KUMAR
Faculty Guide MBA (2018-2020)
GNIOT , Greater Noida Roll No. 1815270003

Mangalmay Institute of Management and Technology

Greater Noida

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 CERTIFICATE

This is to certify that Mr. ABHIJEET KUMAR , Student of MBA , Roll Number 1815270003 of

Mangalmay Institute of Management and Technology, Greater Noida has carried out project

report entitled “WORKING CAPITAL AXIS Bank” for the award of MBA for the Academic

Batch (2018-20) under my guidance.

(PROF. MUNISH TIWARI)

Faculty Guide

Date: _______________
Place: ______________

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 DECLARATION

I, “MOHD VANISH to declare that the Project report entitled “WORKING CAPITAL

MANAGEMENT OF AXIS BANK” submitted to the institute in partial fulfillment of the

requirement for the award of Master of Business Administration is the original work conducted

by me.

The information and data given in the report is authentic to the best of my knowledge.

Place:

Date: ABHIJEET KUMAR

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 ACKNOWLEDGMENT

I have benefited a lot from project during the of our course

MBA 3th sem this project has been a rewarding knowledge. I have got into the various aspect of

AXIS BANK.

I take this opportunity to acknowledge the invaluable assistance of those people who helped me in

successful completion of this Dissertation project report.

I also thank my college and my mentor PROF. MUNISH TIWARI for steering my confidence and
capability for giving me insight into training by giving me exposure to the arena of competitive and
real world.

Last but not the least, I express my thanks to all the person and friends who always encourage me

and provided me support at all times. I am thankful to my friend who always helped & guided me.

ABHIJEET KUMAR

MBA 3th sem

PREFACE
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This project has been prepared in partial fulfillment for the degree of Masters of Business

Administration.

A project is a work plan devised through investigation and analysis to achieve a set object within a

specified time period. A student is assigned a topic and required to prepare a report after making a

study of working of any organization.

I was assigned to prepare a Dissertation project report on Working Capital Management of AXIS

BANK. Financial Management has emerged as interesting and exiting areas for academic studies as

well as for the practical financial managers. Financial Management covers the decision taken by

individuals or a business firm, which have financial implications. In case of corporate form of

organization where there is a separation of ownership and management, as well as in other forms, the

financial implications of decisions are evaluated in terms of maximization of the value of the firm.

So the decision process is oriented towards the objective of maximization of wealth of shareholders

as reflected in the market price of the share.

Working Capital or net current assets is the excess of current assets over current liabilities. In a

different perspective we can say Working Capital as that part of current assets financed by long term

funds. All organizations have to carry Working Capital in one form or the other. The efficient

management of Working Capital is important from the point of view of both liquidity and

profitability. Poor management of Working Capital means that firms are unnecessary tied up in idle

assets, hence, reducing the liquidity and also reducing the ability to invest in productive assets such

as plant and machinery.

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 CONTENTS
S.No.

1. CHAPTER-1 INTRODUCTION 7

2. CHAPTER-2 ABOUT THE RESEARCH 32

TOPIC

3. CHAPTER-3 IMPORTANT OF THE 35

RESEARCH TOPIC

4. CHAPTER-4 OBJECTIVE OF THE REVIEW 37

5. CHAPTER-5 LITERATURE REVIEW 39

6. CHAPTER- 6 INTRODUCTION OF THE 43

RESEARCH PROBLEM

7. CHAPTER- 7 BRIEF PROFILE OF PRODUCTION

LINE OF THE COMPANY 77

8. CHAPTER- 8 COMPETITORS PROFILE IN BRIEF 80

9. CHAPTER-9 ANALYSIS OF THE DISSERTATION 83

PROJECT RESEARCH

10. CHAPTER-10 SUGGESTION TO THE COMPANY 99

11. CHAPTER-11 LIMITATIONS 101

12. CHAPTER-12 CONCLUSION 106

13. QUESTIONNAIRE 108

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INTRODUCTION

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CHAPTER- 1. INTRODUCTION

AXIS BANK - BRIEF HISTORY

Axis Bank was the first of the new private banks to have begun operations in 1994, after the

Government of India allowed new private banks to be established. The Bank was promoted jointly

by the Administrator of the specified undertaking of the Unit Trust of India (UTI - I), Life Insurance

Corporation of India (LIC) and General Insurance Corporation of India (GIC) and other four PSU

insurance companies, i.e. National Insurance Company Ltd., The New India Assurance Company

Ltd., The Oriental Insurance Company Ltd. and United India Insurance Company Ltd.

The Bank today is capitalized to the extent of Rs. 357.71 crore with the public holding (other than

promoters) at 57.49%.

The Bank's Registered Office is at Ahmedabad and its Central Office is located at MuBBAi.

presently, the Bank has a very wide network of more than 671 branch offices and Extension

Counters. The Bank has a network of over 2764 ATMs providing 24 hrs a day banking convenience

to its customers. This is one of the largest ATM networks in the country.

The Bank has strengths in both retail and corporate banking and is committed to adopting the best

industry practices internationally in order to achieve excellence

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ACHIEVEMENTS

AXIS bank one of the biggest banks in private sector in India. As on the year ended March 31, 2010

the Bank had a net worth of Rs. 2872.19 Crore with the public holding (other than promoters) at

56.65%. Net Profit for the year was up 44.98% to Rs 485.08 cores. At the end of April 2012, the

Bank has a very wide network of more than 671 branch offices and Extension Counters. The Bank

has a network of over 2764 ATMs. The Bank's Registered Office is at Ahmedabad and its Central

Office is located at Mumbai.

MISION OF THE BANK

Customer Service and Product Innovation tuned to diverse needs of individual and corporate

clientele Continuous technology up gradation while maintaining human values.

Progressive globalization and achieving international standards.

Efficiency and effectiveness built on ethical practices.

Values

Customer Satisfaction through providing quality service effectively and efficiently

 Smile, it enhances your face value" is a service quality stressed on

 Periodic Customer Service Audits

 Maximization of Stakeholder

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CURRENT SITUATION OF THE BANK

Today, more than a century after those tentative first steps, AXIS BANK fairy tale is not only going

strong but blazing new standards, and that minuscule initial investment has grown by leaps and

bounds to crores of rupees in wealth for AXIS BANK shareholders. The company’s offerings are

spread across the spectrum with service. Having succeeded in garnering the trust of almost one-third

of India’s one billion populations and a strong management at the helm means axis will continue to

dream big on its path of innovation. And millions of customer will favour the results, happily ever

after.

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STRUCTURE OF ORGANISATION

P. J. Nayak Chairman & Managing Director

Surendra Singh Director

N. C. Singhal Director

T. Pannir Selvam Director

J. R. Varma Director

R. H. Patil Director

Rama Bijapurkar Director

R. B. L. Vaish Director

S. B. Mathur Director

M. V. Subbiah Director

Ramesh Ramanathan Director

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BOARD OF DIRECTORS

During the year, Shri S. Chatterjee, Executive Director (whole-time Director) retired from the

services of the Bank w.e.f. 31 December 2006. The Board of Directors place on record their

appreciation and gratitude to Shri S. Chatterjee for the valuable services rendered by him during his

Tenure as Executive Director of the Bank. In accordance with the provisions of the Companies Act,

1956 and the Articles of Association of the Bank, Shri Surendra Singh, Shri R. H. Patil and Smt.

Rama Bijapurkar retire by rotation at the Thirteenth Annual General Meeting and, being eligible,

offer themselves for re-appointment as Directors of the Bank.

SUBSIDIARIES The Bank has set up two wholly owned subsidiaries viz.

UBL Sales Ltd. and UBL Asset Management Company Ltd. UBL Sales Ltd have been set up for

marketing credit cards and other retail asset products.

The objective of this subsidiary is to build a specialized force of sales personnel, optimize

operational efficiency and productivity and thereby reduce costs. The sales subsidiary also seeks to

provide greater control and monitoring of the sales effort vis-à-vis the current DSA model. The

second subsidiary of the Bank, UBL Asset Management Company Ltd. has been formed primarily to

carry on the activities of managing (directly or indirectly) investments, venture capital funds, off-

shore funds etc.

The performance of these subsidiaries along with their Directors' Report and financial statements are

enclosed as Annexures to this report. In line with the Accounting Standard 21 (AS 21) issued by the

Institute of Chartered Accountants of India, the consolidated financial results of the Bank along with

its subsidiaries for the year ended 31 March 2012 are enclosed as an Annexure to this report.

DIRECTORS' RESPONSIBILITY STATEMENT

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The Board of Directors hereby declares and confirms that:

► The applicable accounting standards have been followed in the preparation of the annual

accounts and proper explanations have been furnished, relating to material departures.

► Accounting policies have been selected, and applied consistently and reasonably, and prudent

judgements and estimates have been made so as to give a true and fair view of the state of

affairs of the Bank and of the Profit & Loss of the Bank for the financial year ended 31

March 2012.

► Proper and sufficient care has been taken for the maintenance of adequate accounting records,

in accordance with the provisions of the Companies (Amendment) Act, 2000, for

safeguarding the assets of the Bank and for preventing and detecting fraud and other

irregularities.

► The annual accounts have been prepared on a going concern basis.

STATUTORY DISCLOSURE

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Considering the nature of activities of the Bank, the provisions of Section 217(1)(e) of the

Companies Act, 1956 relating to conservation of energy and technology absorption do not apply to

the Bank. The Bank has, however, used information technology extensively in its operations.

The statement containing particulars of employees as required under Section 217(2A) of the

Companies Act, 1956 and the rule made there under, is given in an Annexure appended hereto and

forms part of this report. In terms of Section 219(1) (iv) of the Act, the Report and Accounts are

being sent to the shareholders excluding the aforesaid annexure. Any shareholder interested in

obtaining a copy of the Annexure may write to the Company Secretary at the Registered Office of

the Bank.

AUDITORS

M/s S. R. Batliboi & Co., Chartered Accountants, statutory auditors of the Bank since 2006 retire on

the conclusion of the Thirteenth Annual General Meeting and are eligible for re-appointment, subject

to the approval of Reserve Bank of India, and of the shareholders. As recommended by the Audit

Committee, the Board has proposed the appointment of S.R. Batliboi & Co., Chartered Accountants

as statutory auditors for the financial year 2011-12. The shareholders are requested to consider their

appointment.

PERFORMANCE OF THE ORGANISATION

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Net interest income up 45.34% to Rs.1, 567.08 Crores

Network of branches and extension counters increased from 450 to 561.

Total number of ATMs went up from 1891 to2341.

Net NPA ratio as a percentage of net customer assets down to0.61% from 0.75%.

Capital Adequacy Ratio stood at11.57% as against the minimum regulatory norm of 9%.

Proposed Dividend up from 35% to45%

Fee & Other income up 60.72 earning per share (Basic) increased from Rs. 17.45 to Rs.23.50. % to

Rs. 824.39 Crores.

Deposits up 46.55% to Rs. 58,785.60 Crores

Advances up 65.26% to Rs. 36,876.48 Crores.

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Retail assets up 37.56% to Rs. 8,927.54 Crores.

Demand deposits up 46.11% to Rs. 23,430.19 Crores.

Profit after tax up 35.86% to Rs. 659.03 Crores.

Both business and earnings continued to display high growth in 2010-2011. And the Bank earned a

net profit of Rs. 659.03 crores against Rs. 485.08 crores in the previous year, registering a

growth of 35.86%.

The total income of the Bank increased by 53.95% to Rs. 5,570.52 crores from Rs. 3,618.42

crores last year, while the operating profit rose by 37.11% to Rs. 1,362.60 crores from Rs.

993.81crores last year.

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17
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OVERVIEW OF FINANCIAL AND BUSINESS PERFORMANCE

During the year 2010-2011, the Bank has witnessed a strong growth in business volumes as well as

profits, with the net profit increasing by 35.86% to Rs. 659.03 crores from Rs. 485.08 crores the

previous year.

The total income of the Bank rose by 53.95% to Rs. 5,570.52 crores from Rs. 3,618.42 crores the

previous year.

During the same period, the operating revenue increased by 42.55% to Rs. 2,577.19 crores, while

operating profit increased by 37.11% to Rs. 1,362.60 crores. On 31 March 2011, the Bank's total

assets increased by 47.31% to Rs.73, 257 crores.

The total deposits of the Bank grew by 46.55% to Rs.58, 786 crores, while the total advances grew

by 65.26% to Rs. 36,876crores.

The total demand deposits (savings bank and current account deposits) have increased by 46.11% to

Rs. 23,430.19 crores, constituting39.86% of total deposits.

The Bank has increased its market share of aggregate deposits in All Scheduled Commercial Banks

(ASCB), which rose from 1.76% as on 31 March 2010 to 2.08% on 30 March 2011, While its share

of advances rose from 1.50% to 1.78% during the same period.

In the financial year 2010-11, the Bank's incremental market share of aggregate deposits in ASCB

was 3.39% while its incremental share in advances was 2.75%. The solid performance of the Bank

despite higher provisioning on standard assets, increase in risk weights on select asset classes,

reduction on interest paid on CRR and a hardening of interest rates due to tightening of the overall

liquidity situation underscores the efficacy of the business model adopted by the Bank.

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The Bank continued to enhance shareholder value and the diluted earnings per share for the year

2010-11 increased to Rs. 22.79 from Rs. 17.08 the previous year. As on 31 March 2011, the book

value per share of the Bank has increased to Rs. 120.50 from Rs. 103.06 as on 31 March 2010.

The Bank will continue to derive benefit from the infrastructure created over the years and will

continue to pursue a strategy of profitable growth through stronger corporate relationships and an

accelerated retail customer expansion programmed driven by the Bank's multiple channels. In 2011-

12, the Bank's strategy. The Bank will continue to emphasize growth opportunities through higher

Levels of customer satisfaction and loyalty, and deepening relationships with existing customers. It

seeks to maintain and enhance a strong retail and corporate franchise, strengthen the structures and

delivery channels for increasing SME and agricultural businesses, exploit cross-sell opportunities,

offer private banking for high-net worth customers, consolidate new business initiatives such as

Credit Cards, Wealth Management and Banc assurance for Life Insurance, and encase opportunities

through overseas offices for cross-border trade finance, syndication of debt and NRI business

development.

The Bank will continue to focus on high-quality earnings growth through an emphasis on core

income streams such as NII and fee-based income and on maintaining a high standard of asset

quality by providing emphasis on rigorous risk-management practices. The Bank will continue to use

Technology extensively to maintain competitive advantage and continue to up-grade the technology

platform to provide leverage for bringing in higher cost efficiencies.

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1

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 Performance Summary

Interest income grows by 55% YoY on the back of 50% YoY growth in advances. Net interest

margin improves to 3.3% due to lower cost of funds and higher proportion of CASA.

Cost to income ratio remains stable at 50%.

Bottom line grows by 66% YoY aided by strong traction in fee income, despite higher

provisioning.

Capital adequacy ratio (CAR) comfortable at 16.9%.

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 Rs (m) 3QFY11 3QFY12 Change 9mFY11 9mFY12 Change
Interest income 11,648 18,023 54.7% 31,201 49,898 59.9%
Interest expense 7,737 10,550 36.4% 20,908 32,329 54.6%
Net Interest
3,911 7,473 91.1% 10,293 17,569 70.7%
Income
Net interest
      2.9% 3.3%  
margin (%)
Other Income 2,797 4,879 74.4% 7,090 12,390 74.8%
Other Expense 3,369 5,629 67.1% 8,715 14,928 71.3%
Provisions and
515 2,001 288.5% 1,864 4,154 122.9%
contingencies
Profit before tax 3,339 6,723 101.3% 8,668 15,031 73.4%
Tax 977 1,654 69.3% 2,333 3,780 62.0%

1,847 3,068 66.1% 4,471 7,097 58.7%

Profit after tax/

(loss)
Net profit margin
15.9% 17.0%   14.3% 14.2%  
(%)
No. of shares (m)       281.2 357.4  
Book value per
        234.3  
share (Rs)
P/BV (x)*         4.7  

Axis Bank touched the 50% mark in its advance growth for the tenth consecutive quarter in 3QFY08.

What makes the growth more sustainable is that the bank has not concentrated its exposure to any

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single segment but has been altering its asset mix depending upon the industry scenario and its risk

appetite. Also, a rise in the proportion of CASA (current and savings accounts) suggests a cost

conscious strategy with respect to deposit accretion.

Cost centric growth..

% of % of
(Rs m) 9mFY11 9Mfy12 Change
total total
Advances 323,370   486,320   50.4%
Agriculture 23,370 7.2% 36,790 7.6% 57.4%
Retail 91,780 28.4% 120,090 24.7% 30.8%
SMEs 57,210 17.7% 90,080 18.5% 57.5%
Large corporates 151,010 46.7% 239,360 49.2% 58.5%
Deposits 509,200   685,510   34.6%
CASA 188,830 37.1% 310,320 45.3% 64.3%

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 Term deposits 320,370 62.9% 375,190 54.7% 17.1%
Credit deposit
63.5%   70.9%    
ratio

Continuing with the trend seen in the past few quarters, Axis Bank's fee income registered a strong

growth of 81% YoY during 3QFY012 and 71% YoY during 9mFY12. The proportion of fee income

to total income remained stable at 30%. Although the trading profits grew by 65% YoY, the share of

trading profits to operating revenue decreased marginally to 11% in 3QFY12 from 12% in 3QFY11.

While the bank's net NPAs as a percentage of advances have shrunk to 0.4% in 3QFY12

against 0.7% in 3QFY11, the bank has also succeeded in arresting the incremental delinquencies (in

absolute terms) this quarter. The provisions held together with accumulated write-offs as a

proportion of gross NPAs amounted to 83.1% in 9mFY12. If the accumulated write-offs are

excluded, then the provisions held as a proportion of gross NPAs amounted to 47.7%.

During 2QFY12, Axis Bank successfully raised US$ 218 m by way of a GDR offering, Rs 17 bn

through a QIP and Rs 19 bn through a preferential allotment to promoters. This made the bank well

equipped to sustain its growth in the medium term.

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PRODUCTS & SERVICES OF THE ORGANISATION

Types of Deposit Accounts

While various deposit products offered by the Bank are assigned different names. The deposit

products can be categorised broadly into the following types.

"Demand deposits" means a deposit received by the Bank which is withdraw able 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.

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" Term Deposit" means a deposit received by the Bank for a fixed period withdraw able only

after the expiry of the fixed period and include deposits such as Recurring/Reinvestment Income

Certificate/ Encash 24/Short term Deposits/ Fixed Deposits/ Monthly Income Certificate/ Quarterly

Income Certificate etc.

"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

► The Bank before opening any deposit account will carry out due diligence as required under

"Know Your Customer" (KYC) guidelines issued by RBI and or such other norms or procedures

adopted by the Bank. In the Bank, the authority to open a Deposit Account is vested in the Branch

Head. In very rare case clarifications are required to be sought from the higher authority.

► 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.

► 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

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governing operation of such account. For Saving Bank Account the Bank may also place restrictions

on number of transactions, cash withdrawals, etc., for given period. Similarly, the Bank may specify

charges for issue of cheques books, additional statement of accounts, duplicate pass book, 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 for 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 / proprietorship firms/ partnership firms / Private and

Public Limited Companies / HUFs / Associations / Societies / Trusts, etc.

Term Deposits Accounts can be opened by individuals / proprietorship firms/ partnership firms /

Private and Public Limited Companies / HUFs/ Associations / Societies / Trusts, 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. Obtaining introduction

of the prospective depositor from a person acceptable to the Bank or through self introduction by

way of production of certain documentary evidence 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 (known as account in single name)

or by more than one individual in their own names (known as Joint Account) .

Savings Bank Account can also be opened by a minor jointly with natural guardian or with mother as

the guardian (known as Minor's Account). Minors above the age of 12 will also be allowed to open

and operate saving bank account independently.

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► 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 Savings Bank Account

opened by minor jointly with natural guardian / guardian can be operated by natural guardian only.

► The joint account holders can give any of the following mandates for the disposal of balance in

the above accounts:

Either or Survivor : If the account is held by two individuals say, A & B, the final balance along

with interest, if applicable, will be paid to survivor on death of anyone of the account holders.

► Anyone or Survivor/s : If the account is held by more than two individuals say, A, B and C, the

final balance along with interest, if applicable, will be paid to the survivor on death of any two

account holders.

The above mandates will be applicable to or become operational only on or after the date of maturity

of term deposits. This mandate can be modified by the consent of all the account holders.

► At the request of the depositor, the Bank will register mandate / power of attorney given by him

authorizing another person to operate the account on his behalf.

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 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.

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Advertising and Marketing

Axis will make sure that all advertising and promotional material is clear, fair, reasonable and not

misleading.

Axis will seek your specific consent for giving details of your name and address to any third party,

including other entities in our group, for marketing purposes.

Axis would like to provide you with the entire range of financial services products, some of which

are our own products while some others are the products of our group/associate/entities or companies

with whom we have tie-up arrangements.

Axis will however tell you about our associate / group entities or companies having business tie-up

arrangements with us and if you so desire, direct their staff / agents for marketing their products.

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EMPLOYEE STOCK OPTION PLAN (ESOP)

To enable employees including whole-time Directors of the Bank to participate in the future growth

and financial success of the Bank, the Bank has instituted an Employee Stock Option Scheme under

which 2,78,00,000 options can be granted to employees. The employee stock option scheme is in

accordance with the Securities and Exchange Board of India (Employee Stock Option and Employee

Stock Purchase Scheme) Guidelines, 1999. The eligibility and number of options to be granted to an

employee is determined on the basis of the employee's work Performance and is approved by the

Board of Directors.

The Bank's shareholders approved plans in February 2001, June 2004 and June 2006 for the issuance

of stock options to employees. Under the first two plans and up to the grant made on 29 April 2004,

the option conversion price was set at the average daily high-low price of the Bank's equity shares

traded during the 52 weeks preceding the date of grant at the Stock Exchange which has had the

maximum trading volume of the Bank's equity share during that period (presently the NSE). Under

the third plan and with effect from the grant made by the Company on 10 June 2005, the pricing

formula has been changed to the closing price of the previous day of the grant date. The

Remuneration and Nomination Committee granted options under these plans on six occasions, of

options of 11,18,925; 17,79,700; 27,74,450; 38,09,830; 57,08,240 and 46,95,860 during 2005-06,

2006-07, 2007-08, 2008-09, 2009-10 and 2010-11 respectively. The options granted, which are non-

transferable, vest at the rate of 30%, 30% and 40% on each of three successive anniversaries

following the granting, subject to standard vesting conditions, and must be exercised within three

years of the date of vesting. As of 31 March 2011, 79, 64,083 options had been exercised and

98,72,910 options were in force. Other statutory disclosures as required by the revised SEBI

guidelines on ESOPs are given in the Anne.

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ABOUT THE

RESEARCH

TOPIC

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CHAPTER- 2. ABOUT THE RESEARCH TOPIC
The methodology describes the process of research work. This contains the overall research design,

the data collection methods, the sampling procedure, the field survey method and the analysis

procedure.

 Descriptive Research

 Primarily based on primary data collection.

 Follow questionnaire method.

 Quantitative Research

 Non- Probabilistic convenience sampling.

THE STUDY

RESEARCH DESIGN

A Research design is a framework or blueprint for conducting the marketing research project.

Exploratory Research

Purpose Exploratory Research

 Formulating a problem or define a problem more precisely.

 Identify alternative courses of action.

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  Development hypothesis.

 Isolate key variables and relationships for further examination.

 Gain insights for developing an approach to the problem.

 Establish priorities for further research.

Exploratory research design has been used.

SAMPLE

 SAMPLING UNIT: The sampling units selected were all above 18 years of age with

diverse socio-economic background.

 SAMPLING TECHNIQUE: Samples were collected by way of convenient sampling and

questions were asked to the respondents when they were coming out of their respective banks

after availing the services there.

 SAMPLE SIZE: A total sample size of 40 was selected.

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IMPORTANCE
OF RESEARCH
TOPIC

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CHAPTER- 3. IMPORTANCE OF RESEARCH TOPIC

1.Time devoted to working capital management:-

The largest portion of financial manager 's time is devoted to day to day internal operation the firm.

This may be appropriately sum up under the heading "WORKING CAPITAL MANAGEMENT".

2.Investment in current assets :- current assets represent more than half of the total assets of

a business firm. Because they represent largest investment and because this investment tends to

relatively volatile,current assets are worthy for the financial manager's careful attention.

3.Importance for small firm:-

current assets are similarly important for the financial manager's of small firm.Further small firm are

relatively limited access to the long term markets,it must necessarily rely on the trade credit and

short term bank loan , both of net effect on net working capital by increased current liabilities.

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ONECTIVES OF
THE
RESEARCH

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CHAPTER- 4. OBJECTIVES OF THE RESEARCH
The following are the objectives of research conducted:

 To understand the strategies of bank.

 To understand the banking industry.

 To understand the company’s functions.

 To suggest ways for improving the market share, profit margin.

 To make an effective advertising campaign.

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LITERATURE

REVIEW

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CHAPTER- 5. LITERATURE REVIEW
'Doing a Literature Review' is a practical and comprehensive guide to researching, preparing and

writing a literature review, a major component of research projects. It is an essential tool not only

for postgraduate students but also for undergraduate and novice researchers across the social

sciences and humanities.

A literature review is an examination of the research that has been conducted in a particular field of

study. Hart (1998) defines it as:

 The selection of available documents (both published and unpublished) on the topic, which

contain information, ideas, data and evidence. [This selection is] written from a particular

standpoint to fulfil certain aims or express certain views on the nature of the topic and how it

is to be investigated, and

 The effective evaluation of these documents in relation to the research being proposed

DATA COLLECTION METHODS

Data Collection is an important aspect of any type of research study. Inaccurate data collection can

impact the results of a study and ultimately lead to invalid results.

Data collection methods for impact evaluation vary along a continuum. At the one end of this

continuum are quantitative methods and at the other end of the continuum are Qualitative methods

for data collection

Quantitative and Qualitative Data collection methods

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The Quantitative data collection methods, rely on random sampling and structured data collection

instruments that fit diverse experiences into predetermined response categories. They produce results

that are easy to summarize, compare, and generalize. 

Quantitative research is concerned with testing hypotheses derived from theory and/or being able to

estimate the size of a phenomenon of interest. Depending on the research question, participants may

be randomly assigned to different treatments. If this is not feasible, the researcher may collect data

on participant and situational characteristics in order to statistically control for their influence on the

dependent, or outcome, variable. If the intent is to generalize from the research participants to a

larger population, the researcher will employ probability sampling to select participants.

Typical quantitative data gathering strategies include:

 Experiments/clinical trials.

 Observing and recording well-defined events (e.g., counting the number of patients waiting in

emergency at specified times of the day).

 Obtaining relevant data from management information systems.

 Administering surveys with closed-ended questions (e.g., face-to face and telephone

interviews, questionnaires etc).

DATA COLLECTION SOURCES

Poverty maps are not only influenced by the selection of a conceptual approach to define poverty and

by the choice of a specific poverty indicator. The data collection method itself can determine the

resolution of the poverty map and the type of analysis to conduct.

A brief review of different data collection methods will highlight the pros and cons of various

subjective and objective methods and the trade-off between survey and census data. A short section
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summarizing major sources for international poverty maps will show that the pool of existing data

for a global poverty map is limited. Additional investments in data collection and modeling need to

be made to produce maps with higher resolution, more comprehensive poverty measures, and a wider

international country coverage.

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INTRODUCTION

OF THE

RESEARCH

PROBLEM

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CHAPTER-6 INTRODUCTION OF THE RESEARCH

PROBLEM
The requirement of working capital is very limited in public utility undertaking such as Electricity,

Water Supply and Railways because they offer cash sales only and supply services not products and

no funds are tied up in inventories and receivables. On the other hand, the trading and financial firm

requires less investment in fixed assets but have to invest large amounts in current assets. The

manufacturing undertaking requires sizable amount of working capital along with fixed investments.

1. PRODUCTION POLICY: -

The determination of working capital needs depends upon the production policy of the business. The

demand for certain products is seasonal i.e.; such products are purchased in certain months

of a year. For such industries, two types of production policy can be followed. Firstly they can

produce the goods in the months of demand or secondly, they produce for the whole year. If the

second alternative were followed, it would mean that until the time of demand finishes, product

would have to be kept in stock. It would require additional working capital.

2. LENGTH OF PRODUCTION CYCLE: -

The longer the manufacturing time, the raw material and other supplies have to be carried for a

longer time in the process with progressive increment of labor and service costs before the final

product is obtained. Therefore, working capital is directly proportional to the length of the

manufacturing process.

4. RATE OF STOCK TURNOVER: -

There is an inverse co-relationship between the quantum of working capital and the velocity or speed

with which the sales are affected. A firm having a higher rate of stock turnover will need lower

amount of working capital as compared to a firm having a low rate of turnover.

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5. CREDIT POLICY: -

Credit policy affects the working capital requirements in two ways:

(a) Terms of credit allowed by customer to the firm,

(b) Terms of credit available to the firm.

A concern that purchases its requirements on credit and sells its product/services on cash

requires lesser amount of working capital and vice-versa.

6. WORKING CAPITAL CYCLE: -

The speed with which the working cycle completes one cycle determines the requirements of

working capital. Longer the cycle larger is the requirement of working capital.

DEBTORS

CASH FINISHED
GOODS

WORK IN
RAW MATERIAL
PROGRESS

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The banking industry has come under increasing pessimism of late because of rising short and long-

term interest rates. The banking industry's market capitalization made a substantial decline. Most

investors are concerned with whether the industry can sustain continued profitability as a result of

these factors. Banks have responded in recent years to these problems by diversifying away from

interest sensitive products and services. But interest rates are the fundamental aspect of any financial

services. Therefore, I believe the financial services industry will be deeply affected by rising interest

rates. Banks have experienced good business factors over the past two years. Interest rates were low,

credit quality was good, and inflation was low. These factors are usually predictive of the types of

earnings banks should report. But good times can't continue because interest rate hikes because

reduced lending activity, damaged credit quality, and reduced values of bond portfolios. Porter's Five

Forces Analysis: 1. Rivalry among competing sellers: The banking industry is continuing to

restructure and position itself for our changing economy as a result, many mega-mergers have

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occurred in recent years. Citicorp and Travelers Insurance agreed to merge in April 1998 at a value

of $70 billion. Bank of America and Nation's Bank also agreed to merge shortly afterwards which

became the largest bank in the United States. Bank mergers are usually consummated as a cost-

cutting measure but also to compete with non-bank providers of financial services. Bank rivalries are

very strong, and as we've seen many of the largest banks are merging to increase their power. In fact,

Charlotte, NC is practically owned by Bank of America and First Union. 2. Potential entry of new

competitors: There is virtually no chance of a new entrant significantly affecting the major banks'

market share. The only place that new entrants may have a chance in the industry is through Internet

banking, because of its low cost. 3. Firms offering substitute products: This is not really an issue

within the banking industry, because there aren't really any legal alternatives, except buying a safe

and borrowing from a loan shark 4. Competitive pressures stemming from supplier and buyer

bargaining power: I grouped these two categories together because in the banking industry the buyers

are the suppliers and vice versa, so I might as well just discuss the situation as a whole. Interest rates

are the single most important aspect of bank profitability they are the bargaining power. Most bank

profits are derived from net interest income. This is interest income received on loans minus interest

expense for borrowed funds. Interest rates determine the amount of money a bank can earn. Another

measure is a banks' net interest margin which is a bank's net interest income divided by its average

earning assets. This is a common measure of a bank's ability to squeeze profits from its loans. When

interest rates fall, they have a positive effect on a bank. First, net interest margin can expand. Second,

the value of a bank's fixed rate of investment portfolio is enhanced by declining rates, since a bond

with a higher stated interest rate becomes more valuable as prevailing rates drop. Third, falling rates

lower the cost of credit, which stimulates loan demand and reduces delinquency rates. Opportunities:

1. Because of the increasing amount of technology Internet banking will begin to replace traditional

banking, thus cutting personnel costs. 2. Incorporating investment banking into the banking industry,

as some major companies are doing, lets the bank increase profits and promote economic growth

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while improving company image. Threats: 1. An increase in interest rates causing a decline in bank

activity. 2. A collapse of the Fed leading to bank failures, a repeat of the crash of 1929. 3. A decline

in the US economy leading to a fall in the value of the dollar, thus causing an instable economy.

From there the US banking system would be less secure in terms of dollar values that many people

would move their money overseas into a more stable economic situation. Similar to the situation in

many South American countries. (A little far-fetched, but possible) Key Success Factors: ·

Capability to use the internet for banking, investing, and general e-commerce · Size of company,

name recognition, innovative local marketing · Best rates (loans, checking, savings, etc.) ·The

capability to have the fastest and simplest banking through design, innovation, and location

MEANING OF WORKING CAPITAL MANAGEMENT

Working Capital is commonly defined as the difference between current assets and current liabilities.

Efficient working capital management requires that firms should operate with some amount of

working capital, the exact amount varying from firm to firm and depending, among other things on

the nature of industry.

Capital required for a business can be classified in two main categories viz.

1) Fixed capital, and

2) Working capital.

Every business needs funds for two purposes-for establishments and to carry out its day-to-day

operations. Long-term funds are required to create production facilities.

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ABHIJEET KUMAR
Through purchase of fixed assets such as plants and machinery, land, building, furniture, etc.

Investments in these assets represents that part of firm’s capital which is blocked on permanent or

fixed basis and is called fixed capital. Funds are also needed for short-term purpose for the purchase

of raw material, payment of wages and other day-to-day expenses, etc. These funds are known

working Capital. In simple words, working capital refers to that part of the firm’s capital, which

is required for financing short-term or current assets such as cash, marketable securities,

debtors and inventories. Funds thus invested in current assets keep revolving fast and are being

constantly converted into cash and these cash flows out again in exchange for other current assets.

Hence, it is also known as revolving or circulating capital or short-term capital.

CLASSIFICATION OF WORKING CAPITAL

Working Capital may be classified on two basis: -

a) On the basis of Concept: -

On the basis of concept, working capital can be classified as,

 Gross Working Capital

 Net Working Capital

b) On the basis of Time: -

On the basis of time, working capital can be classified as,

 Permanent or Fixed Working Capital

 Temporary or Variable Working Capital

Gross Working Capital: -

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The Gross Working Capital is the Capital invested in the total current assets of the enterprises.

Current assets are those assets, which can be converted into cash within a short period, normally an

accounting year.

Gross Working Capital = Total Current Assets

Net Working Capital: -

The term Net Working Capital refers to the excess of current assets over current liabilities, or say,

Net Working Capital = Current Assets – Current Liabilities

Net Working Capital can be positive or negative. When the current assets exceed the current

liabilities the working capital is positive and the negative working capital results when the current

liabilities are more than the current assets. Current liabilities are those liabilities, which are intended

to be paid in the ordinary course of business within a short period of normally one accounting year

out of the current assets of the income of the business. The gross working capital concept is

financial or going concern concept whereas net working capital is an accounting concept of working

capital. Both the concepts have their own merits.

The gross concept is sometime preferred to the concept of working capital for the following reasons:

 It enables the enterprise to provide correct amount of working capital at correct time.

 Every management is more interested in total current assets with which it has to operate then the

sources from where it is made available.

 It takes into consideration of the fact every increase in the funds of the enterprise would increase

its working capital.

 The concept is also useful in determining the rate of return on investments in working capital.

 The net working capital concept, however, is also important for the following reasons:-

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 It is a qualitative concept, which indicates the firm’s ability to meet its operating expenses the

short-term liabilities.

 It indicates the margin of protection available to short term creditors.

 It is an indicator of financial soundness of enterprise.

 It suggests the need of financing a part of working capital requirement out of the permanent

sources of funds.

Permanent or Fixed Working Capital: -

Permanent or fixed capital is the minimum amount, which is required to ensure effective utilization

of fixed facilities and for maintaining the circulation of current assets. Every firm has to maintain a

minimum level of current assets is called permanent or fixed working capital as this part of working

capital is permanently blocked in current assets. As the business, grow the requirement of working

capital also increases due to increase in current assets.

Temporary or Variable Working Capital: -

Temporary or variable working capital is the amount of working capital, which is required to meet

the seasonal demands and some special exigencies. Variable working capital can further be classified

as seasonal working capital and special working capital. The capital required to meet the seasonal

need of the enterprise is called the seasonal working capital. Special working capital is that part of

working capital which is required to meet special exigencies such as launching of extensive

marketing campaign for conducting research etc.

Temporary working capital differ from permanent working capital in the sense that it is required for

short periods and cannot be permanently employed gainfully in business

Calculate current assets to fixed asset ratio

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A firm needs current and fixed assets to support a particular level of output. However, to support

the same level of output the firm can have different levels of current assets. As the firm’s output and

sales increases, the need for current asset increases. Generally the current assets do not increase in

direct proportion to output ; current assets may increase at a decreasing rate with input. This

relationship is based upon the notion that it takes a greater proportional investment in current assets

when only a few units of output are produced than it does later on when the firm can use its

current assets more efficiently.

The level of the current assets can be measured by relating current assets to fixed assets.

There are three policies:-

1) conservative current assets policy:

CA/FA is higher. It implies greater liquidity and lower risk.

2) aggressive current assets policy:

CA/FA is lower . it implies higher risk and poor liquidity.

3) moderate current assets policy:

CA/FA ratio falls in the middle of conservative and aggressive policies.

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ESTIMATING WORKING CAPITAL NEEDS

1. Liquidity Vs. Profitability: Risk Return Trade Off.

The firm would make just enough investment in current assets if it were possible to estimate working

capital needs exactly. Under perfect certainty, current assets holdings would be at the minimum

level. A larger investment in current assets under certainty would mean a low rate of return of

investment for the firm, as excess investment in current assets will not earn enough return. A small

invest in current assets, on the other hand, would mean interrupted production and sales, because of

frequent stock-cuts and inability to pay to creditors in time due to restrictive policy.

As it is not possible to estimate working capital needs accurately, the firm must decide about levels

of current assets to be carried.

2. The Cost Trade Off:

A different way of looking into the risk return trade off is in terms of the cost of maintaining a

particular level of current assets. There are two types of cost involved:-

I. Cost of liquidity

II. cost of illiquidity

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 --If the firm’s level of current assets is very high , it has excessive liquidity. Its return on

assets will be low, as funds tied up in idle cash and stocks earn nothing and high level of

debtors reduce profitability. Thus, the cost of liquidity increases with the level of current

assets.

 --the cost of illiquidity is the cost of holding insufficient current assets. The firm will not be

in a position to honour its obligations if it carries to little cash. This may force the firm to

borrow at high rates of interests. This will also adversely affect the credit-worthiness of the

firm and it will face difficulties in obtaining funds in the future. All this may force the firm

into insolvency.

Similarly, the low levels of stock will result in loss of sales and customers may shift to

competitors. Also, low level of debtors may be due to right credit policy, which would impair

sales further. Thus the low level of current assets involves cost that increase as this level falls.

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Policies for financing current assets

-Public deposits

LONG TERM FINANCING:

The sources of long term financing include ordinary shares capital, preference share capital

debentures, long term borrowings from financial institutions and reserves and surplus. The manages

its long term financing from capital reserve, share premium A/C, foreign project reserve, bonds

redemption reserve and general reserve.

SHORT TERM FINANCING:

The short term financing is obtained for a period less than one year. It is arranged in advance from

banks and other suppliers of short-term finance include working capital funds from banks, public

deposits, commercial paper, factoring of receivables etc.

The Manages secured loans as:-

1) Loans and advances from banks

2) Other loans and advances:

a)Debentures/bonds

b)Loans from State Govt.

c)Loans from financial institutions(secured by pledge of PSU

bonds and bills accepted guaranteed by banks)

3) Interest accrued and due on loans

(a) from State Govt.

(b) from financial institutions bonds and other

The Manages unsecured loans as: -

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 1) Public deposits

2) Short term loans and advances:

a)From banks

b)Commercial papers

c)From campanies

d)From financial institutions

3)Other loans and advances

a)From banks

b)From others

-from govt. of India

-from state govt.

-from financial institutions

-from foreign financial institution

-post shipment credit exim bank

-credit for assets taken on lease

4)Interest accured and due on

-Post shipment credit

-Govt. credit

-State Govt. loans

-Credits for assets taken on lease

-Financial institutions and others

-Foreign financial institutions

Spontaneous financing refers to the automatic sources of short term funds arising in the normal

course of a business. Trade Credit and outstanding expenses are examples of spontaneous financing.

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A firm is expected to utilise these sources of finances to the fullest extent. The real choice of

financing current assets, once the spontaneous sources of financing have been fully utilized, is

between the long term and short term sources of finances.

What should be the mix of short and long term sources in financing current assets?

Depending on the mix of short and long term financing, the approach followed by a company may be

referred to as :

1. Matching Approach

2. Conservative Approach

3. Aggressive Approach

Matching approach

The firm can adopt a financial plan which matches the expected life of assets with the

expected life of the source of funds raised to finance assets. Thus, a ten year loan may be raised to

finance a plant with an expected life of ten year; stock of goods to be sold in thirty days may be

financed with a thirty day commercial paper or a bank loan. The justification for the exact matching

is that, since the purpose of financing is to pay for assets, the source of financing and the asset should

be relinquished simultaneously. Using long term financing for short term assets is expensive as funds

will not be utilized for the full period. Similarly, financing long term assets with short term financing

is costly as well as inconvenient as arrangement for the new short term financing will have to be

made on a continuing basis.

When the firm follows matching approach (also known as hedging approach) long term

financing will be used to finance fixed assets and permanent current assets and short term financing

to finance temporary or variable current assets. How ever, it should be realized that exact matching is

not possible because of the uncertainty about the expected lives of assets.

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 The firm fixed assets and permanent current assets are financed with long term funds and as

the level of these assets in increases, the long term financing level also increases. The temporary or

variable current assets are financed with short term funds and as their level increases, the level of

short term financing also increases. Under matching plan, no short term financing will be used if the

firm has a fixed current assets need only.

Conservative approach

A firm in practice may adopt a conservative approach in financing its current and fixed

assets. The financing policy of the firm is said to be conservative when it depends more on long term

funds for financing needs. Under a conservative plan, the firm finances its permanent assets and also

a part of temporary current assets with long term financing. In the period when the firm has no need

for temporary current assets, the idle long term funds can be invested in the tradable securities to

conserve liquidity. The conservative plan relies heavily on long term financing and, therefore, the

firm has less risk of facing the problem of shortage of funds. The conservative financing policy is

shown below. Note that when the firm has no temporary current assets, the long term funds released

can be invested in marketable securities to build up the liquidity position of the firm.

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Aggressive Approach

A firm may be aggressive in financing its assets. An aggressive policy is said to be followed

by the firm when it uses more short term financing than warranted by the matching plan. Under an

aggressive policy, the firm finances a part of its permanent current assets with short term financing.

Some extremely aggressive firms may even finance a part of their fixed assets with short term

financing. The relatively more use of short term financing makes the firm more risky. The aggressive

financing is Illustrated in fig below.

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NEEDS AND OBJECTIVES FOR WORKING CAPITAL

Every business needs some amount of working capital. The needs for working capital, arises due to

time gap between production and realization of cash from sales. There is an operating cycle

involved in sales and realization of cash. There are time gaps in purchase of raw material and

production, production and sales, and realization of cash.

Thus, working capital is needed for the following purposes: -

 For the purchase of raw material, component and spares.

 To pay wages and salaries.

 To incur day- to- day expenses and overhead costs such as fuel, power and office expenses etc.

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

 To provide credit facilities to the customers.

 To maintain the inventories of raw material, work in progress, store, spares, and finished stock

.For studying the need of working capital in a business, one has to study the business under varying

circumstances such as new concern, as a growing and one, which has attained maturity. A new
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ABHIJEET KUMAR
concern requires a lot of funds to meets its initial requirement such as promotion and formation etc.

These expenses are called preliminary expenses and are capitalized. The amount needed for working

capital depends upon the size of the company and the ambition of its promoters. Greater the size of

the business unit, generally will be the requirement of the working capital. The requirement of the

working capital goes on increasing with the growth and expansion of the business until its gains

maturity. At maturity, the amount of working capital required is called normal working capital.

FACTORS DETERMINING THE WORKING CAPITAL

REQUIREMENT

NATURE OF BUSINESS

Each component of working capital (namely inventory, receivables and payables) has two

dimensions ... TIME ......... and MONEY. When it comes to managing working capital - TIME IS

MONEY. If you can get money to move faster around the cycle (e.g. collect monies due from

debtors more quickly) or reduce the amount of money tied up (e.g. reduce inventory levels relative to

sales), the business will generate more cash or it will need to borrow less money to fund working

capital. As a consequence, you could reduce the cost of bank interest or you'll have additional free

money available to support additional sales growth or investment. Similarly. if you can negotiate

improved terms with suppliers e.g. get longer credit or an increased credit limit, you effectively

create free finance to help fund future sales

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 If you ... Then ...

Collect receivables (debtors)

You release cash
faster
from the cycle
 Collect receivables (debtors)
Your receivables
slower
soak up cash
 Get better credit (in terms of
You increase your
duration or amount) from
cash resources
suppliers
7. RATE OF GROWTH AND EXPANSION OF BUSINESS: -

The larger size businesses require more permanent and variable working capital in comparison to

small business. If a company is growing, its working capital requirements will also go on increasing.

Thus, the growing concerns require more working capital as compared to the stable industries.

8. SEASONAL VARIATION: -

Generally, during the busy season, a firm requires larger working capital than in the slack season.

9. BUSINESS FLUCTUATION: -

In period of boom, when the business is prosperous, there is a need for larger amount of working

capital due to rise in sales, rise in prices, optimistic expansion of business etc. On the contrary in

time of depression, the business contracts, sales decline, difficulties are faced in collection from

debtors and the firm may have a large amount of working capital idle.

10. EARNING CAPACITY AND DIVIDEND POLICY :-

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Some firms have more earning capacity than other due to quality of their products, monopoly

conditions, etc. Such firms may generate cash profits from operations and contribute to their working

capital. The dividend policy also effects the requirement of

working capital. A firm maintaining a steady high rate of cash dividend irrespective of its profit

needs more working capital than the firm that retain larger part of its profits and does not pay so high

rate of cash dividend.

11.PRICE LEVEL CHANGES: -

Price level changes also affect working capital needs. If the prices of different goods increase, to

maintain same level of production, more working capital is needed.

12.AVAILABILITY OF RAW MATERIAL: -

Availability of raw material on the continuos basis affects the requirement of working capital. There

are certain types of raw materials, which are not available regularly. In such a situation firm requires

greater working capital to meet the requirements of production. Some raw materials are available in

particular season only for example wool, cotton, oil seeds, etc. They have to keep greater working

capital.

13. MAGNITUDE OF PROFIT: -

Magnitude of profit is different for different businesses. Nature of product, control on the market and

ability of managers etc. determine the quantum of profit. If the profit margin is high, it will help to

arrange funds internally, which will also increase the working capital.

14. OTHER FACTOR: -

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 a) Operating efficiency

b) Management ability

c) Irregularities of supply

d) Import policy

e) Asset structure

f) Importance of labor

CAPITAL MANAGEMENT

The Bank strives for the continual enhancement of shareholder value. Its capital management

framework helps to optimise the use of capital by ensuring the right composition of capital in relation

to business growth and the efficient use of capital through an optimal mix of products and services.

During the year, the Bank continued to attract investor interest from domestic and foreign

institutional investors, with a sizeable increase in trading volume and price. During 2010-11, the

Bank has raised capital aggregating Rs. 1,762.81 crores through Innovative Perpetual Debt

Instrument (IPDI), eligible as Tier I capital and Tier II capital in the form of Upper Tier II and

subordinated bonds (unsecured redeemable nonconvertible debentures). Of this, the Bank has raised

US Dollars 196 million (equivalent to Rs. 852.01 crores) by way of Hybrid Tier I capital and Upper

Tier II capital from Singapore under the MTN Programme. This additional capital enabled the Bank

to reinforce its growth strategy and shore up its capital adequacy ratio. Consequently, as on 31 March

2011, the Bank's capital adequacy ratio rose to 11.57% from 11.08% last year.

The following table sets forth the risk-based capital, risk-weighted assets and capital

adequacy ratios computed in accordance with the applicable RBI guidelines 20. The Bank has

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ABHIJEET KUMAR
always focused on innovation and differentiation. In this direction, during the year, the Bank has

opened specialised Priority Banking branches for the high networth customer segment. Priority

Banking branches have been conceived as a single stop shop for affluent Customers, catering to all

their banking and investment needs, and the Bank is the first to launch such a concept in India.

These branches are exclusive boutique banking branches with a plush ambience catering to high

networth individuals, that takes the Priority Banking product to an experiential level, offering service

in a discreet manner while maintaining comfort and confidentiality for the customers. During 2010-

11, three such branches were opened in the cities of Pune, Mumbai and Kolkata, with plans to open

more such branches at other urban centers in 2011-12.

The Bank is very sensitive to the privacy of its customers and does not engage in unsolicited

tale-calling. In this regard, the Bank has taken proactive measures to seek positive customer consent

on cross-selling initiatives. The Bank launched project 'Sampark', which involves meeting customers

face-to-face at branch locations, or outside ATMs and seeking their written consent for cross-selling

initiatives. The project is an intensive logistical exercise and by end-March 2011, 8 lacs customer

consents have been acquired. This gives the Bank a fully compliant internal database for cross-sell

initiatives such as for investment advisory services and insurance products. This will facilitate in

boosting the fee income from cross-sell of various products. In its constant endeavor to provide

convenience to its customers, the Bank has been aggressively developing its alternative banking

channels, namely the ATM network, Internet Banking and Mobile Banking. These channels have

received overwhelming response from its customers with registration and transaction figures

increasing substantially over the previous year. During the year, the Bank added 450 ATMs, thereby

taking the network size to 2,341 on 31 March 2011. The Bank offers access to its customers to over

19,000 ATMs across the country through bilateral and multilateral ATM sharing arrangements.

Beginning 2001, the Bank had identified the ATM channel as a strong tool for customer acquisition

and convenience. At 4.70 ATMs per branch, the Bank has the highest ATM to branch ratio in the
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ABHIJEET KUMAR
country. The high ATM to branch ratio has been part of the growth strategy and has been a major

factor in the high growth of savings bank deposits accounts and balances. Continuing with its efforts

in providing the utmost in convenience and safety to its customers, the Bank has promoted its mobile

banking services to enable customers to access their accounts on their mobile phones. The service

also sends out specific transaction alerts on the mobile phones of registered customers, informing the

customer of the activity in the account, thereby giving an added level of safety to the customer. The

mobile channel has found increasing acceptance among the Bank's customers. During the financial

year, 40% of the incremental customers signed on for mobile banking services. With 1.10 million

customers registered for mobile banking, the Bank has among the highest mobile registration

penetration levels among bank customers. The Bank is uniquely poised to take advantage of the

growth of mobile commerce in the country. On the Internet Banking front, the registered user base of

the Bank rose from 1.89 million accounts as on 31 March 2010 to 3.35 million accounts as on 31

March 2011. To give the customers more reliable service, the Internet Banking platform was

revamped in the current year. To counter phasing attacks on our customers, the Bank has;

Introduced an added security measure whereby the customer has to enter certain additional details

from his debit card number in addition to his Login Identification and password for conducting a

financial transaction.

The Bank has set up a Call Centre, available 24/7, providing assistance in 11 languages. The Call

Centre as of March 2011 handled over 20,000 calls per day. With 508 branches, 53 extension

counters, 2,341 ATMs, 3.35 million internet banking customers and 1.10 million mobile registered

customers, the Bank provides one of the best networks in the country with real time on-line access to

it customers.

CORPORATE BANKING

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Corporate Banking business of the Bank provides quality products to large and mid-sized clients.

The products include credit, trade finance for domestic as well as international transactions,

structured finance, and project finance and syndication services.

The Bank continues to pursue a two-pronged strategy of widening the customer base as well as

deepening existing client relationships. Careful choice of new customers based on appropriate risk-

return guidelines forms the basis for the strategy of widening the customer base. The deepening of

existing client relationships is achieved by a careful account strategy focusing on increasing the

cross-sell of various corporate banking products, as also products from other divisions of the Bank

including investment banking and retail products.

During the year, large corporate advances grew by 76% to Rs. 16,346 crores from Rs. 9,286 crores in

the previous year. The Bank took steps to focus on fee income mainly from trade finance facilities

and document handling. This method of fee generation is stable and sustaining. Given the Increasing

overseas presence of the Bank, the trade finance business is set to grow significantly over the coming

years. The Bank takes selective Exposure to project financing in areas of infrastructure as well as

manufacturing projects set up by reputed industry groups. It constantly works to upgrade its skills in

financial structuring to be able to continue providing value to its corporate customers.

The overseas presence has enabled the Bank to leverage its existing relationships further by granting

loans towards ECBs by Indian corporate as well as to enable acquisition financing. The Bank has

also contributed towards financing infrastructure projects and other forms of project finance through

its overseas branches. Channel finance also grew on the back of strong corporate demand. The

centralised Channel Finance Hub continued to deliver seamless service to various channel finance

customers. Syndication and underwriting of corporate debt also increased in volumes and resulted in

rising fee income. Corporate Banking increased its focus on Risk Management and on improving

portfolio quality. The identification, measurement, monitoring, management and pricing of client

risk are the key activities that enable all corporate banking business. The Bank has in place

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ABHIJEET KUMAR
procedures and practices to ensure regular updation of risks taken by the Bank on various client

accounts. Portfolio diversification remains the key for managing asset quality and preventing

concentration risks. The credit risk in corporate banking is evaluated and managed by groups

organized with an industry sector focus. The Bank also has a Risk Management Department, whose

views are critical for decision-making with regard to credit exposures. Overall, the risk control

mechanism adopted by the Bank has continued to serve the Bank well, as is observed in the ratio of

net NPA to net customer assets being at 0.61%. Corporate Banking scrupulously adheres to all

statutory, regulatory and related guidelines for all its businesses.

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68
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TREASURY

The integrated Treasury manages the global funding of the balance sheet, domestic and foreign

currency resources of the Bank, compliance with statutory reserve requirements, as well as optimizes

on opportunities in the markets through managing proprietary positions in foreign exchange and

interest rate markets. With the expansion of the Bank overseas, the Treasury will look to leverage on

the network to widen product scope as well as increase revenue generation from opportunities in the

global markets.

The continued thrust on maximizing returns from customer relationships in the Treasury has resulted

in growth of 51% in customer exchange turnover and 60% in revenues. The Treasury offered

structured solutions to customers using foreign exchange and derivatives offerings, which has

resulted in significant value addition to customer relationships. In its continued effort to offer top of

the line payment solutions to customers, the Bank has offered Real Time Gross Settlement (RTGS)

and National Electronic Funds Transfer (NEFT) through 470 branches and extension counters across

the country. Throughput in RTGS grew by 251% over the previous year. Despite a challenging

interest rate environment, the Bank's holding in government securities has been substantially

protected from market risk as it is held as per specified guidelines of RBI. The portfolio gave a return

of 7.64%. The Bank established a Medium Term Note (MTN) Programme for Euro One billion as a

part of the funding plan for its overseas operations.

During the year, the Bank raised USD 150 million as Upper Tier-II (the first hybrid capital issuance

out of India) and USD 46 million as Hybrid Tier-I capital in terms of recent guidelines issued by

RBI. The Bank also raised senior debt through the issuance of USD 250 million of three-year

floating rate notes (FRN) under the MTN programme. The Asset Magazine published in Hong Kong

voted the Bank's Upper Tier-II issue as “Best Deal, India”. While the Upper Tier-II issue was

oversubscribed six times, the Floating Rate Note (FRN) issue was priced at the lowest coupon ever

for an Indian bank debt issuance.

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BUSINESS BANKING

Business Banking has consistently focused on procuring low cost funds by offering a range of

current account products and cash management solutions across all business segments covering

corporate, institutions, Central and State Government Ministries and Undertakings as well as small

business customers. Cross selling of transactional banking products to develop account relationships,

aided by product innovation and a customer-centric approach have borne fruit in the form of growing

current account deposit balances and increasing realisation of transaction banking fees. Sourcing of

current account deposits is a focus area for growth. As of 31 March 2011, current account deposits

grew by 41.83% to Rs. 11,304.31 crores from Rs. 7,970.08 crores in the previous year. On a daily

average basis, current account deposits grew from a level of Rs. 4,428 crores for the year 20008-09

to Rs. 7,193 crores for the year 2010-11. During 2010-11, the Bank sourced 97,857 new current

accounts as against 77,264 in the previous year. There was a greater focus on acquisition of high

value current accounts, thus accelerating the pace of growth in current account deposit balances

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CASH MANAGEMENT

Cash Management Services (CMS) initiatives leveraged the Bank's growing branch net work and

robust technology to provide a wide range of customised solutions to suit the dynamic requirements

of its clients. The Bank offers CMS solutions for collections and payments with an ideal blend of

structured MIS and funds movement so that clients are able to enhance their fund management

capabilities. Also the Bank's Web CMS initiative allows them to view their daily transactions on a

real time basis. The strong correspondent bank alliance with partner banks offers corporate clients a

wide geographical coverage. CMS foray is not only emerging as an important source of fee income

but is also contributing significantly towards garnering zero cost funds, forging large relationships.

The Bank has established a strong presence by offering collecting bank services in the IPO/FPO

segment and Dividend/Refund Warrant segments.

During the year, the CMS throughput grew by 80% to Rs. 3, 79,067 crores compared to Rs. 2,10,977

crores last year. During the same period, the number of CMS clients has grown to 2,164 clients from

1,432 clients. The Bank has acted as an Agency Bank for transacting Government Business for the

last 6 years, offering banking services to various Central Government Ministries and Departments

and other State Governments and Union Territories. Currently, the Bank accepts Income Tax and

Other Direct Taxes through its 214 Authorized Branches at 137 locations, and Central Excise and

Service Taxes through its 56 Authorised Branches at 13 locations. The Bank also handles

disbursement of Civil Pension through 218 Authorised Branches and Defence Pension through 151

Authorised Branches. Additionally, the Bank is providing collection and payment services to four

Central Government Ministries and Departments and seven State Governments and Union

Territories. The Bank has further strengthened its association with the e-Governance initiatives of

various State Governments in India aimed at providing better citizen services by setting up integrated

citizen facilitation centers. During the year, the Bank associated with the 'Choices' Project of the

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ABHIJEET KUMAR
Government of Chhattisgarh and the 'e-Suvidha' initiative of Government of Uttar Pradesh. During

2010-11, the Bank has also extended the business of Stamp Duty Collection through franking in

Rajasthan, in addition to Maharashtra and Gujarat. The Bank also launched an e-Tax Payment

Facility for payment of Direct Taxes on behalf of the Central Board of Direct Taxes (CBDT) through

the internet for its customers. Additionally, the Bank also launched an e-Payment facility for

payment of Commercial Taxes on behalf of the Department of Commercial Taxes, Government of

Chhattisgarh. During 2010-11, the total Government business throughput registered a growth of 36%

to Rs. 37,932 crores against Rs. 27,888 crores in the previous year.

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LENDING TO AGRICULTURE, SME AND MID CORPORATES

To fully exploit the business potential of the Small and Medium Enterprises (SME) and Mid

Corporate segments, to bring greater focus on priority sector lending, to achieve the small scale

industry and agricultural lending targets fixed by RBI and to explore new avenues of lending like

microfinance, a separate business focus was provided during the year. Further, a separate business

group was formed to target specific segments in SME and Mid Corporate business by rolling out

schematic loan products where the appraisal is based on systematically designed scoring sheets and

simple appraisal techniques so as to reduce turnaround time and quickly increase the customer base.

Advances Cells located at important business centers in the country have given a fillip to the Bank's

SME, Mid-corporate and Agricultural lending business. During 2010-11, the Bank added 5 more

Advances Cells, bringing the total number to 15. This has resulted in significant improvement in

performance and portfolio quality. Dedicated marketing teams at the Advances Cells and in certain

branches have given an impetus to new business relationships.

The Bank's focus on SSI lending was amply demonstrated by a 72% growth during the year. The

Bank gave priority sector lending paramount importance and for the sixth year in a row, the Bank

was compliant with the overall priority sector norms stipulated by RBI.

The Bank has also laid down a well thought out strategy to grow the retail agricultural lending

business. The Bank categorised centres across the country based on agricultural productivity,

irrigation potential, infrastructure facilities and loan repayment track record, and chose districts with

the good potential for agricultural lending. Further, the Bank is bringing branches in a district or even

nearby districts under the umbrella of an 26 agriculture cluster for focused agriculture lending. The

Bank has so far opened 18 such agriculture clusters. In keeping with the focus of the government on

increasing direct agricultural lending, the Bank rolled out several new loan products for the farming

community. The Bank also fine-tuned its existing loan products to fully suit the varied requirements

73
ABHIJEET KUMAR
of its agriculture business clientele. During the year, the total agricultural advances of the Bank grew

by an impressive 115%, with direct agricultural lending recording a 91% growth over the previous

year. Thus, for the second year in succession, the Bank's direct agricultural lending has grown by

over 90%. At the end of the year, direct agricultural advances stood at 9.59% of the net bank credit,

which is the highest ever achieved by the Bank. The Bank would continue the focus on building up

its agriculture business on profitable lines and is recruiting agriculture business personnel to sustain

growth plans and maintain portfolio quality.

The micro-finance business of the Bank witnessed increasing outreach through 64 micro-finance

relationships. The portfolio under micro-finance increased by 161% during the year, which

corresponds to a client outreach of 6.62 lacs, the majority being poor women in rural areas. The Bank

also initiated the process of extending micro credit to self-help groups through village organisations.

The Bank has also been implementing various government-sponsored schemes. With a view to

expanding our reach in the Northeastern region of the country, the Bank has signed a Memorandum

of Understanding with South Asia Enterprises Development Facility, a multi-donor facility managed

by the International Finance Corporation of the World Bank. The scope of the collaboration includes

developing a profitable micro, small and medium enterprises business model supporting service

based marketing linkages and export oriented operations, particularly to enterprises involved in value

added agricultural production.

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INTERNATIONAL BANKING

With increasing integration of the Indian economy globally and consequent two way flows of funds

and services, the Bank had identified international banking as a key opportunity to leverage the skills

and strengths built in its domestic operations in serving the requirements of its clients in the areas of

trade and corporate banking, as also investment banking by establishing presences at strategic

international financial hubs in Asia. In this direction, the first overseas branch of the Bank was

opened in Singapore in April 2010 and, subsequently, a branch in Hong Kong and a representative

office in Shanghai in China commenced operation during the year 2010-11. In addition, the Bank has

also set up a branch in the Dubai International Financial Centre, UAE in early April 2011. The

Bank's presence at these locations, through which the bulk of the trade in

Asia gets routed, would enable the Bank to provide services at every cycle of the trade finance

products, besides providing an opportunity to foray in the international investment banking markets.

In its first year of operations, the Singapore branch has been active in the area of corporate banking

and has been able to participate in and facilitate the debt raising activities of Indian corporates in the

international markets. The Singapore branch also provides trade finance and treasury solutions. As of

March 31, 2007 the total assets at the overseas branches stood at US Dollars 731 million.

75
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BRIEF PROFILE

OF THE

PRODUCT LINE

OF THE

COMPANY
76
ABHIJEET KUMAR
CHAPTER- 7. BRIEF PROFILE OF THE PRODUCT LINE

OF THE COMPANY
AXIS Bank is one of the fastest growing banks in private sector. The Bank operates in four

segments, namely treasury, retail banking, corporate/ wholesale banking and other banking business.

The treasury operations include investments in sovereign and corporate debt, equity and mutual

funds, trading operations, derivative trading and foreign exchange operations on the account, and for

customers and central funding. Retail banking includes lending to individuals/ small businesses

subject to the orientation, product and granularity criterion. It also includes liability products, card

services, Internet banking, automated teller machines (ATM) services, depository, financial advisory

services, and non resident Indian (NRI) services. The corporate/ wholesale banking segment includes

corporate relationships not included under retail banking, corporate advisory services, placements

and syndication, management of publics issue, project appraisals, capital market related services, and

cash management services. The Bank's registered office is located at Ahmedabad and their Central

Office is located at Mumbai. The Bank has a very wide network of more than 1042 branches

(including 56 Service Branches/ CPCs as on June 30, 2010). The Bank has a network of over 4,474

ATMs providing 24 hrs a day banking convenience to their customers. This is one of the largest

ATM networks in the country. The Bank has five wholly-owned subsidiaries namely Axis Securities

and Sales Ltd, Axis Private Equity Ltd, Axis Trustee Services Ltd, Axis Asset Management

Company Ltd and Axis Mutual Fund Trustee Ltd. Axis Bank was incorporated in the year 1993 with

the name UTI Bank Ltd. The Bank was the first private banks to have begun operations after the

Government of India allowed new private banks to be established. The Bank was promoted jointly

by the Administrator of the specified undertaking of the Unit Trust of India (UTI - I), Life Insurance

Corporation of India (LIC) and General Insurance Corporation of India (GIC) and other four PSU

insurance companies, i.e. National Insurance Company Ltd, The New India Assurance Company

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ABHIJEET KUMAR
Ltd, The Oriental Insurance Company Ltd and United India Insurance Company Ltd. In the year

2001, the bank along with Global Trust Bank (GTB) had a merger proposal to create the largest

private sector bank, but due to media's issues both the banks withdraw the merger proposal.

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 COMPETITORS

PROFILE IN

BRIEF

CHAPTER- 8. COMPETITORS PROFILE IN BRIEF

T he Competitors page for axis bank ltd. Analyzes the current price ,book value, P/E ratio and market

capitalization of its peer group and allows you to directly compare it with its competitors.

LIABILITIES no: (Rs in,000)

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ABHIJEET KUMAR
Capital 1 2,816,308

Reserves & Surplus 2 31,068,175

Employees' Stock

Options Outstanding (Net) 17(4.15) 89,783

Deposits 3 587,850,227

Borrowings 4 51,956,030

Other liabilities and provisions 5 58,779,259

TOTAL 732,559,782

ASSETS

Cash and Balances with

Reserve Bank of India 6 46,610,303

Balances with banks and

money at call and short notice 7 22,572,748

Investments 8 268,871,605

Advances 9 368, 764,60

Fixed Assets 10 6,778,359

Other Assets 11 18,962,161

TOTAL 732,559,782

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Contingent liabilities 12 1,841,653,501

Bills for collection 62,746,332

Significant Accounting Policies

And Notes to Accounts 17

Schedules referred to above form an integral part of the Consolidated Balance SheetAs

per our report of even date For UTI BANK LTD.

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 ANALYSIS
OF THE
DESSERTATION
PROJECT
RESEARCH

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CHAPTER- 9. ANALYSIS OF THE DESSERTATION

PROJECT RESEARCH

MANAGEMENT DISCUSSION AND ANALYSIS

MACRO-ECONOMIC ENVIRONMENT

While macro-economic fundamentals have generally been strong in 2012-13, inflation, largely due to

supply-side constraints, had become an overriding concern in the closing months of fiscal 2012-13.

The GDP is expected to show a growth of 9.2% for the fiscal 2010-11 against 9% last fiscal year.

Agriculture and allied sectors are expected to grow at a rate of 2.7% in 2012-13, while industrial

production is expected to grow by about 10%.

growth in industrial production was driven mainly by the manufacturing sector, which grew by

11.3% in 2012-13 following a growth of 9.1% in the previous fiscal. The momentum of growth in

the services sector continued with a growth of 11.2% in fiscal 2010-11. Among the three sub-sectors

of services, 'trade, hotels, transport and communication services' has continued to boost the sector by

growing at double-digit rates for the fourth successive year. Inflation, with its roots in supply-side

factors, was accompanied by buoyant growth of money and credit in the last two years. Starting with

a rate of 3.98%, the rate of inflation in 2010-11 has been on a generally upward trend with

intermittent falls. However, average inflation during 2010-11 remained at 5%, with continuing fiscal

and monetary policy interventions aimed at controlling price levels. Liquidity conditions remained

fairly comfortable up to early September 2010. With year-on-year inflation stubbornly above 5% in
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ABHIJEET KUMAR
the second half of the year, RBI announced further measures to stem inflationary expectations and

also to contain the credit growth that put pressure on the liquidity position, thereby hardening interest

rates in the economy.

Growth trends were accompanied by robustness of overall macro-economic fundamentals,

particularly with tangible progress towards fiscal consolidation and a strong balance of payments

position. With an upsurge in investment, the outlook is distinctly upbeat. However, the major

challenges lie in taking macro-economic level corrective action to tackle the supply side constraints

to keep inflation at an acceptable level. Interest rates have already shown signs of hardening, which

may affect further investments in the industrial sector. In order to maintain the GDP growth over 9%

in the coming years, the major challenge lies in balancing of current pace of growth with non-

accelerating inflation. The current policy measures adopted by monetary authorities to tighten

liquidity in order to fight inflation led to an increase in interest rates, which could slow down

economic growth in the coming year, particularly in respect of infrastructure and other core sector

projects.

Against the backdrop of generally strong economic fundamentals in the last year, the banking system

seems to have done well during 2010-11, reflected in the growth of business in the form of aggregate

deposits and advances. In terms of the Weekly Statistical Supplement published by RBI, the

aggregate deposits of All Scheduled Commercial Banks (ASCB) as on 30 March 2011 have grown

by 24.27% from 31 March 2010, while bank credit has grown by 28.51%. However, there continue

to be areas of concern, primarily hardening interest rates that may result in pressure upon the net

interest margins. The continuing rise in interest rates may make various projects economically

unviable, resulting in higher NPAs and also affect valuations. Lastly, the sharp increase in provisions

on standard assets will impact the profitability of banks.

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ABHIJEET KUMAR
COMPETITOR ANALYSIS

Axis Bank stands apart from its private sector competitors — ICICI Bank and HDFC Bank — in one

crucial respect. While the other two banks have envisaged retail banking as a key area of strategic

emphasis — with the share of the retail business (both on the funding and asset sides) growing

strongly year after year— the share of retail business, particularly retail assets, has actually come

down quite sharply in the case of Axis Bank.

The numbers here are quite interesting. For ICICI Bank, retail loans now (as of June 2011) account

for as much as 70 per cent of the bank’s total loan book of Rs 2,00,000 crore. For HDFC Bank, retail

assets are around 57 per cent (Rs 28,000 crore) of the total loans as of March 2011.

In the case of Axis Bank, retail loans have declined from 30 per cent of the total loan book of Rs

25,800 crore in June 2010 to around 23 per cent of loan book of Rs.41,280 crore (as of June 2011).

Even over a longer period, while the overall asset growth for Axis Bank has been quite high and has

matched that of the other banks, retail exposures grew at a slower pace.

If the sharp decline in the retail asset book in the past year in the case of Axis Bank is part of a

deliberate business strategy, this could have significant implications (not necessarily negative) for

the overall future profitability of the business.

Despite the relatively slower growth of the retail book over a period of time and the outright decline

seen in the past year, the bank’s fundamentals are quite resilient. With the high level of mid-

corporate and wholesale corporate lending the bank has been doing, one would have expected the net
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ABHIJEET KUMAR
interest margins to have been under greater pressure. The bank, though, appears to have insulated

such pressures. Interest margins, while they have declined from the 3.15 per cent seen in 2003-04,

are still hovering close to the 3 per cent mark. (The comparable margins for ICICI Bank and HDFC

Bank are around 2.60 per cent and 4 per cent respectively. The margins for ICICI Bank are lower

despite its much larger share of the higher margin retail business, since funding costs also are

higher).

Such strong emphasis and focus on lending also does not appear to have had any deleterious impact

on the overall asset quality. The bank’s non-performing loans are even now, after five years of

extremely rapid asset build-up, below 1 per cent of its total loans.

From a medium-term perspective, it appears that Axis Bank could be charting out a niche for itself in

the private bank space. It appears to be following a business strategy quite different from the high-

volume and commodity-style approach of ICICI Bank and HDFC Bank. That strategy also has its

pluses in terms of the relatively higher margins in some segments of the retail business and the in-

built credit risk diversification (and mitigation) achieved through a widely dispersed retail credit

portfolio. But, as indicated above, Axis Bank has been to able to maintain the quality of its loan

portfolio despite the concentrated nature of wholesale corporate lending

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ABHIJEET KUMAR
GRAPHS

RATE OF DIVEDEND DECLAIRED BY AXIS BANK

YEAR DIVEDEND
2003-2004 12%
2004-05 15%
2005-06 20%
2006-07 22%
2007-08 25%
2008-09 28%
2009-10 35%
2010-11 45%
2011-12 60%
`

RETAIL LIABILITIES
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ABHIJEET KUMAR
 SB DEPOSIT (RS.

YEAR CRORE)

2006-2007 1423
2007-2008 2585
2008-2009 4891

2009-2010 8061

2010-2011 12165

RETAIL LIABILITIES

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ABHIJEET KUMAR
 RETAIL

YEAR DEPOSIT(RS.CRORE)
2006-2007 4941
2007-2008 6296
2008-2009 8616
2009-2010 13618
2010-2011 19220

ENHANCING SHARE HOLDER VALUE OF AXIS BANK

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 TABLES

RATIO ANALYSIS OF AXIS BANK

  Mar ' 08 Mar ' 07  Mar ' 06  Mar ' 05  Mar ' 04 
90
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 Capital
 0.00  11.57  11.08s  12.66  11.21
Adequacy Ratio 
 EARNINGS
         
RATIOS 
 Income from

Fund Advances as
 0.00  49.48  42.51  42.56  36.28
a % of Op

Income 
 Operating

Income as a % of   14.81  16.10  14.73  22.59

Working Funds 
 Fund based

income as a % of 100.00  85.58  86.07  85.28  91.28

Op Income 
 Fee based income

as a % of Op 0.00  14.41  13.92  14.71  8.71

Income 
 PROFITABLITY
         
RATIOS 
 Yield on Fund
   7.32  6.84  6.27  8.19
Advances 
 Break-Even
   8.11  8.11  7.64  10.90
Yield Ratio 
 Cost of Funds
 4.73  4.67  4.23  3.56  4.75
Ratio 
 Net Profit
 12.17  12.01  13.47  14.33  13.14
Margin 
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 Adjusted Return
 12.21  19.50  16.94  13.54  24.01
On Net Worth 
 Reported Return
 12.21  19.42  16.88  13.89  24.49
On Net Worth 
 BORROWING
         
RATIOS 
 Borrowings from

RBI as % to Total 0.00  0.00  0.00  0.00  0.00

Borrowings 
 Borrowings from

other banks as a
 0.00  11.54  32.37  9.55  18.61
% to Total

Borrowings 
 Borrowings from

others as a % to 100.00  23.17  45.64  63.42  57.36

Total Borrowings 
 Borrowings

within India as a
 100.00  34.71  78.02  72.98  75.97
% to Total

Borrowings 
 Borrowings from

outside India as a
 0.00  65.28  21.97  27.01  24.02
% to Total

Borrowings 
 DEPOSIT
         
RATIOS 
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ABHIJEET KUMAR
 Demand Deposit
 100.00  19.22  19.86  22.56  25.74
of Total Deposits 
 Saving Deposit
 0.00  20.62  20.10  15.42  12.33
of Total Deposits 
 Time Deposit of
 0.00  60.14  60.02  62.01  61.92
Total Deposits 
 Deposits within

India as % to   99.63  100.00  100.00  100.00

Total Deposits 
 Deposits Outside

India as % to   0.36  0.00  0.00  0.00

Total Deposits 
 PER BRANCH
         
RATIOS 
 Operating

Income Per   9.74  7.99  6.78  8.39

Branch 
 Operating Profit
   2.13  2.11  1.82  1.96
Per Branch 
 Net Profit Per
   1.18  1.08  0.96  1.08
Branch 
 Personnel

Expenses Per   0.68  0.53  0.52  0.48

Branch 
 Administrative

Expenses Per   1.54  1.28  0.89  1.86

Branch 
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ABHIJEET KUMAR
 Financial

Expenses Per   5.34  4.02  3.52  4.05

Branch 
 Borrowings Per
   9.26  5.96  5.25  2.09
Branch 
 Deposits Per
   104.79  89.14  93.55  83.15
Branch 
 PER

EMPLOYEE          

RATIOS  
 (Rs. in Units)           
 Operating

Income Per   5,472,542.38  5,485,206.78  4,829,294.06  6,137,279.66

Employee 
 Operating Profit
   1,195,476.65  1,451,095.07  1,293,245.96  1,430,794.89
Per Employee 
 Net Profit Per
   663,264.93  742,839.77  685,089.48  791,634.17
Employee 
 Personnel

Expenses Per   382,110.32  366,552.42  371,465.66  351,755.15

Employee  
 Deposits Per
   58,903,407.92 61,213,995.57 66,607,855.70 60,788,809.11
Employee 
 Fund Advances
   36,950,383.97 34,051,931.02 32,772,362.74 27,162,590.66
Per Employee 

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SWOT ANALYSIS FOR THE AXIS

STRENGTHS:

 High quality service provide

 Strong and well management.

 Second largest private bank all over India

 AXIS Bank has been to able maintain the quality of its loan portfolio

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WEAKNESSES:

 Strengthening of rupee hitting profits

 Ability to pass through price increases in various markets due to

 Intense competition.

 Manpower problem is big problem.

OPPORTUNITIES:

 Development of modern banking.

 Potential for growth through increased penetration.

 Opportunity to no:1 bank all over india

 Increasing popularity in overseas markets

THREATS/CHALLENGES:

 Environment with diverse players

 Rising competitors for private banking

 Change in fiscal benefits/laws

 People attraction & retention

 Management of country risk.

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 SUGGESTIONS

TO THE

COMPANY

CHAPTER- 10. SUGGESTIONS TO THE COMPANY

 An increase in interest rates is the reason of decline in bank activity so interest rate should

appropriate.

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 Technology should improve in banking sector because new technology replace traditional

banking and reduced personnel cost.

 Bank should solved the problem of lack of efficient employees , so that man power could not

become a hurdle in success of bank.

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LIMITATIONS

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CHAPTER- 11. LIMITATIONS

Credit risk management

The changing operating environment for banks entails managing complex and variable risks in a

disciplined fashion. The key challenges for effective management of variegated risks emanate from

creation of skill sets within the Bank with appropriate domain knowledge and developing a

functional framework to monitor risks with triggers in cases of breaches in the pre-accepted levels of

identified risks. The Bank, since the inception of the Risk Department, has developed in-house skills

to manage key areas of risk viz., credit risk, market risk and operational risk.

Credit Risk

Credit risk covers the inability of a borrower or counter-party to honour commitments under an

agreement and any such failure has adverse impact on the financial performance of the Bank.

Accordingly, the Bank strives to effectively assess, administer, monitor and enforce recovery of

loans to various clients.

The Additional measures of risk containment at the individual exposures and at the portfolio level

are:

• Rating linked exposures norms adopted by the Bank are conservative in comparison to the

regulatory prudential exposure norms.

• Industry-wise exposure ceilings are based on the industry performance, prospects and the

competitiveness of the sector.

• Exposures with bullet repayments, long gestation projects, longer tenor exposures, and longer

moratorium are assessed with additional care.

Committee of Directors Risk Management Committee

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Audit Committee Board of Directors

Credit Committees & ALCO Operational Risk

Investment Committees Management Committee

28 Distributions of Credit Risk Assets by Asset Quality

Industry analysis plays an important part in assessing the potential concentration risk from within the

loan portfolio. Particular attention is given to industry sectors where the Bank believes there is a high

degree of risk or potential for volatility in the future..

Consumer Credit Risk Management

The Bank's continuing aggressive foray into retail banking has resulted in a sharp build up in the

retail asset portfolio. The key challenge for a healthy retail asset portfolio is to ensure a stable risk

adjusted earnings stream by maintaining customer defaults within acceptable levels. The Bank

periodically carries out a comprehensive portfolio level analysis of retail asset portfolio with a risk

return perspective. Risk measurement for the retail portfolio is assessed primarily on a credit scoring

basis. During the year, the Bank has initiated a project to revamp its existing credit scoring models

for retail assets with external support from a reputed international vendor.

Market Risk

Market risk is the risk to the Bank's earnings and capital due to changes in the market level of

interest rates or prices of securities, foreign exchange and equities, as well as the volatilities of those

changes. The Bank is exposed to market risk through its trading activities, which are carried out both

for customers and on a proprietary basis. The Bank adopts a comprehensive approach to market risk

management for its trading, investment and asset/liability portfolios. The Bank uses various risk

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metrics, both statistical and non-statistical, including non-statistical measures like position, gaps and

sensitivities (duration, PVBP, option Greeks); Value at Risk (VaR); sensitivity of net interest income

(EaR); and sensitivity of the Economic Value of Equity (EVE).

Liquidity Risk

Liquidity risk arises in any bank's general funding of its activities. As part of the liquidity

management contingency planning, the Bank assesses potential trends, demands, events and

uncertainties that could reasonably result in an adverse liquidity condition. The Bank considers the

impact of these potential changes on its sources of short term funding and long term liquidity

planning. The Bank's ALM policy defines the gap limits for the structural liquidity and the liquidity

profile of the Bank is analysed on a static as also a dynamic basis by tracking all cash inflows and

outflows in the maturity ladder based on the expected occurrence of cash flows. The Bank

undertakes behavioural analysis of the non-maturity products viz. savings and current deposits and

cash credit/ overdraft accounts, on a periodic basis to ascertain the volatility of residual balances in

those accounts. The renewal pattern and premature withdrawals of term deposits and draw downs of

unavailed credit limits are also captured through behavioural studies.

Country Risk

The Bank has put in place a risk monitoring system for the management of country risk. The Bank

uses the seven-category classification viz. insignificant, low, moderate, high, very high, restricted

and off-credit followed by the Export Credit Guarantee Corporation of India Ltd. (ECGC) and

ratings of international rating agency Dun & Bradstreet for monitoring the country exposures. The

ratings of countries are being undertaken at monthly intervals or at more frequent intervals if the

situation so warrants i.e. in case of a significant change in the condition of a country involving sharp
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deterioration of its ratings. Exposure to a country includes all credit-related lending, trading and

investment activities, whether cross border or locally funded. The Bank has set up exposure limits

for each risk category as also individual country exposure limits, and the exposure limits are

generally monitored at weekly intervals.

Operational Risk

Operational risk is the risk of loss resulting from inadequate or failed internal processes, people or

systems, or normal external events. The Bank is in the process of rolling out a software solution for

an operational risk management framework with emphasis on identification of key risk indicators at

the unit level, monitoring identified risk at the unit level and then aggregating at a higher

organizational level. The business units put in place the baseline internal controls as approved by the

Product Management Committee to ensure a sound and well controlled operating environment

throughout the organization. Each new product or service introduced is subject to a rigorous risk

review and signoff process where all relevant risks are identified and assessed by departments

independent of the risk taking unit proposing the product. Variations of existing products, as well as

outsourcing, are also subject to a similar process.

Risk Management framework for Overseas Operations.

The Bank has put in place a comprehensive Risk Management policy for its global operations and

has also formulated country specific risk policy for these operations based on the host country

regulators' guidelines. The Asset Liability Management and all the risk exposures for the overseas

operations are monitored centrally by implementing sound systems and controls, and also by

adopting the norms as specified by the regulators in the host country.

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CONCLUSION

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CHAPTER- 12. CONCLUSION
The banking industry's market capitalization made a substantial decline. Most investors are

concerned with whether the industry can sustain continued profitability as a result of these factors.

Banks have responded in recent years to these problems by diversifying away from interest sensitive

products and services. But interest rates are the fundamental aspect of any financial services.

I believe the financial services industry will be deeply affected by rise Interest rates have

already shown signs of hardening, which may affect further investments in the industrial sector. In

order to maintain the GDP growth over 9% in the coming years, the major challenge lies in balancing

of current pace of growth with non-accelerating inflation. The current policy measures adopted by

monetary authorities to tighten liquidity in order to fight inflation led to an increase in interest rates,

which could slow down economic growth in the coming year, particularly in respect of infrastructure

and other core sector projects.ng interest rates.

Axis Bank stands apart from its private sector competitors — ICICI Bank and HDFC Bank

-in one crucial respect. While the other two banks have envisaged retail banking as a key area of

strategic emphasis — with the share of the retail business (both on the funding and asset sides)

growing strongly year after year— the share of retail business, particularly retail assets, has actually

come down quite sharply in the case of Axis Bank.

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ANNEXURE

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QUESTIONNAIRE

1. What is your full time profession?

a) Business b) Govt. Service

c) Private Jobs d) Retired

e) Housewife

2. What efforts can be made to bring about more awareness amongst people?

a) Media Ads b) Banners

c) Newspaper d) Agents

e) Event Sponsorship f) Any Other

3. You like to work in market/field and want to interact with people?

a) Yes b) No

4. From how many years you live in NCR?

a) Below 6 months b) 6 months – 1 year

c) 1 year- 2 year d) more than 2 years

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5. How many people do you know in NCR?

a) Less than 200 b) 200-500

c) 500-1000 d) Above 1000

6. Do you like to earn some extra money?

a) Yes b) No

7. Are you involved in Banking Service?

a) Yes b) No

If YES, than answer the following question:

A. Duration of working?

a) Below 6 months b) 6 months – 1 year

c) 1 – 2 years d) 2 – 3 years

e) Above 3 years

B. Annual Productivity given to company?

a) Below 50,000 b) 50,000 – 1, 00,000

c) 1, 00,000 – 2, 00,000 d) 2, 00,000 – 3, 00,000

e) 3, 00,000 – 4, 00,000 f) Above 3, 00,000

C. Are you satisfied with your company?

a) Yes b) No

D. Which age group do you belong?

a) Below 25 b) 25 – 30

c) 30 – 35 d) Above 35

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E. Are you married?

a) Yes b) No

F. What is your Educational Background?

a) 10+2 b) Graduation

c) Post Graduation d) Professional

e) Other

G. What is your Household income?

a) Below 2 lacks b) 2 – 5 lacks

c) 5 – 8 lacks d) Above 8 lacks

H. How much time you provide easily besides your job hours?

a) 0-2 hrs - 22 b) 2-4 hrs

c) 4-6 hrs - 15 d) Time Full

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