A

DISSERTATION REPORT

On
“ANALYSIS OF UNION BUDGET WITH SPECIAL REFERENCE TO
BANKING SECTOR”

SUMBITTED TO
UTTRAKHAND TECHNICAL UNIVERSITY,DEHRADUN

In The Partial Fulfillment for the Degree of Masters of Business Administration

(MBA)

(Session 2010-2011)

Under supervision of: Submitted By:

Dr. Pragya Agarwal Varsha Khanna
(ASST.PROFESSOR) MBA (FINANCE)

COLLEGE OF ENGINEERING ROORKEE-SCHOOL OF MANAGEMENT

 CERTIFICATE

This is to certify that Ms. Varsha khanna D/o Sh. Dharmendra khanna of MBA (4 th
Semester) of college of engineering roorkee- school of management has completed her
dissertation report on the topic titled “ANALYSIS OF UNION BUDGET WITH SPECIAL
REFERANCE TO BANKING SECTOR”.
To the best of our knowledge and belief, this report is original and has not been copied or
submitted anywhere else. Her performance was satisfactory during the period of dissertation
work.

DR. PRAGYA AGARWAL

(ASST.PROFESSOR)

Dated:
 DECLARATION

I, Varsha Khanna, a student of “College Of Engineering Roorkee- School Of Management”

hereby declare that the project entitled. A study on “ANALYSIS OF UNION BUDGET WITH
SPECIAL REFERENCE TO BANKING SECTOR” is submitted in partial fulfillment of MBA is
my original work.

Project guide Signature

 ACKNOWLEDGEMENT

Hard work and dedication is the key to any successful completion of any job and this project is no

different. Although strenuous, yet it is interesting. However, our success to this project cannot be

accounted for by only these factors.

This humble endeavor bears the imprint of many persons who are in one or other way helpful in its

competition. I am extremely grateful to MRS. VEERA LAKSHMI (ASST.PROFESSOR) for his

excellence guidance, wholehearted co-operation and encouragement through out the report.

During the course of this study, many useful suggestions and constructive criticism came across which

really helped a lot in giving this project a professional look. I extend my heartfelt gratitude to my guide

and other faculties for his constant supervision, excellent guidance and encouragement which enabled me

to go ahead and complete the project. I am highly indebted to our respected PROJECT GUIDE in charge

of the project DR. PRAGYA AGARWAL (ASST.PROFESSOR) and for having me an

opportunity for completing my Dissertation Report.

Varsha khanna
 PREFACE

MBA is stepping-stone to management carrier. In order to achieve practical, positive and

concrete results, the theoretical knowledge must be supplement with exposure to real

environment. Theoretical studies in classrooms are not sufficient to understand the functioning of

marketing concepts. Practical project supplements the theoretical study that is it covers what is

left uncovered in the class room .ii exposes a student to invaluable to presser of experiences.

Project work is a part of our curriculum, which helps us to correlate our theoretical

concepts with practical experiences. The topic that I have taken for project is “ANALYSIS OF

UNION BUDGET WITH SPECIAL REFERENCE TO BANKING SECTOR” has been

suggested to me by Mrs. Veera Lakshmi (Asst.Professor).

 LIST OF CONTENTS

CHAPTER PARTICULAR PAGE NO.

ACKNOWLEDGEMENT
CERTIFICATE
DECLARATION
PREFACE
1 INTRODUCTION

UNION BUDGET

BANKING SECTOR
2 OBJECTIVE
3 LITERATURE REVIEW
4 RESEARCH METHODOLGY
5 ANALYSIS AND INTERPRETATION
6 RECOMMENDATIONS
7 CONCLUSION
8 BIBLIOGRAPHY

LIST OF TABLES AND FIGURES

FIGURE PARTICULAR PAGE NO.

1 SAVING DEPOSIT WITH

COMMERCIAL BANK
2 BRANCHES OF SCHEDULED

COMMERCIAL BANK
3 CALL MONEY RATES
4 NON PERFORMING ASSETS OF
 URBAN COOPERATIVE BANKS
5 NON PERFORMING ASSETS OF

RURAL COOPERATIVE BANKS

6 OPERATING PROFIT OF RURAL

DEVELOPMENT BANK
7 PUBLIC DEPOSIT OF NON BANKING

FINANCIAL COMPANY

CHAPTER 1
INTRODUCTION
UNION BUDGET:

Budget is a systematic plan for the expenditure of a usually fixed resource during a financial
year. It is a detailed plan of the government’s finances and it is the most important economic and
financial event in India.

The budget is usually anteceded by an economic survey which gives the general course for the
budget and gives an outlook for the economic performance of the country.

The budget is a detailed account of the Governments finances, in which revenues from various
sources and expenses of all activities undertaken are aggregated. It consists of revenue budget
and capital budget and the budget estimates, which is a financial projection for the next fiscal
year.

The Union Budget of India is presented on the last working day of February by the Finance
Minister of India in the parliament. The Budget has to be passed by both the houses of the
Parliament before it can come to effect on April 1st.The Union Budget is also known as the
generalbudget.

The first budget of independent India was presented by R.K Shanmukham Chetty on November
26, 1947. Morarji Desai has presented the Union Budget for the maximum number of times (8
times).

Union Budget, which is a yearly affair, is a comprehensive display of the Government’s

finances. It is the most significant economic and financial event in India. The Finance Minister

puts down a report that contains Government of India’s revenue and expenditure for one fiscal

year. The fiscal year runs from April 01 to March 31.

The Union budget is preceded by an Economic Survey which outlines the broad direction of the

budget and the economic performance of the country.

The Budget is the most extensive account of the Government`s finances, in which revenues from

all sources and expenses of all activities undertaken are aggregated. It comprises the revenue

budget and the capital budget. It also contains estimates for the next fiscal year called budgeted

estimates.

Barring a few exceptions -- like elections – Finance Minister presents the annual Union Budget

in the Parliament on the last working day of February. The budget has to be passed by the Lok

Sabha before it can come into effect on April 01.

Budget are of two type revenue budget and capital budget.

Revenue Budget
Revenue Budget consists of revenues from tax and other sources and the expenditure covered by
these revenues.

Revenue receipts are divided into tax and non tax revenue. Tax revenues are made up of taxes
such as income tax, corporate tax, excise, customs and other duties which the government levies.
Non tax revenues are made up of interest and dividend on investments made by government, fees
and other receipts for services rendered by Government.

Revenue expenditure is the payment incurred for the normal day to day running of government
departments and various services that it offers to its citizens. The other expenditure for the
government would be interest on its borrowings, subsidies etc.

Usually, expenditure that does not result in the creation of assets, and grants given to state
governments and other parties are revenue expenditures.
However, all grants given to state governments and other parties are also clubbed under revenue
expenditure, although some of them may go into the creation of assets.

The difference between revenue receipts and revenue expenditure is usually negative. This
means that the government spends more than it earns. This difference is called the revenue
deficit.

Capital budget

It consists of capital receipts and payments. Under capital receipts the main subject would be
loans by Government from public, which can also be termed as Market Loans, borrowing from
Reserve Bank and other lenders through the sale of treasury bills, loans received from foreign
governments and recovery loans granted by Central government to State and Union Territory,
corporations and other parties.

Capital payments consist of capital expenditure on acquisition of assets like land, buildings,
machinery, equipment, as also investments in shares, etc., and loans and advances granted by
Central Government to State and Union Territory Governments, Government companies,
Corporations and other parties. Capital Budget also incorporates transactions in the public
account.

Contents of the union budget

The Union Budget highlights the receipts and payments of the government under three
accounts:-

Consolidated Fund: It is the main bank account of the government.

Contingency Fund: It is the amount kept in reserve to guard against losses.

Public Account: Accounts which have funds provided by the entities of government.
The union budget also announces policies and it tells about the government's economic thinking.
It also determines activities such as exports and foreign direct investment. The Union Budget has
both short and long term effect. Short term effect is due to the taxes levied and prices
determined. The announcement of Income Tax has a big impact on the salaried people, who have
fixed income. In the long run, the main factor is inflation. If the government goes on printing
notes to pay off its debts then it will assist inflation.

Rules and regulation of union budget

This Regulation lays down the rules for the establishment and implementation of the general

budget of the European communities, herein after ‘the budget’, and the presentation and the

presentation and auditing of the accounts.

The budget shall be established and implemented in compliance with the principles of unity,

budgetary accuracy, annuality, equilibrium, unit of account, universality, specification, sound

financial management which requires effective and efficient internal control, and transparency

as set out in this regulation.

Principle of unity and of budget accuracy:

1. The budget is the instrument which, for each financial year, forecasts and authorises all
Revenue and expenditure.

2. The budget shall record the guarantee for borrowing-and-lending operations entered into by
the communities and payments to the guarantee fund for external actions.
Principle of annuality:

1. The appropriations entered in the budget shall be authorised for one financial year which shall
run from 1 January to 31 December.

2. The budget shall contain differentiated appropriations, which shall consist of commitment
appropriations and payment appropriations.

3. Commitment appropriations shall cover the total cost of the legal commitments entered into
during the current financial year.

4. Payment appropriations shall cover payments made to honour the legal commitments entered
into the current financial year.

Principle of equilibrium:

1. Budget revenue and payment appropriations must be in balance.

2. The balance from each financial year shall be entered in the budget for the following
financial year as revenue in the case of a surplus or as a payment appropriation in the
case of a deficit.
3. After the presentation of the accounts for each financial year, any discrepancy with the
estimates shall be entered in the budget for the following financial year through an
amending budget devoted solely to that discrepancy. In such a case, the preliminary draft
amending budget must be submitted by the commission within 15 days following the
submission of the provisional accounts.
Principle of unit of account:

The budget shall be drawn up and implemented in euro and the accounts shall be presented in
euro.
However, for the cash-flow purposes referred to in article 61, the accounting officer and, in the
case of imprest accounts, the imprest administrators, and for the needs of the administrative
management of the commission’s external service, the authorizing officer responsible shall be
authorized to carry out operations in national currencies as laid down in the implenting rules.

Principle of sound financial management:

1. Budget appropriations shall be used in accordance with the principle of sound financial
management, namely in accordance with the principles of economy, efficiency and
effectiveness.
2. The principle of economy requires that the resources used by the institution for the pursuit of
Its activities shall be made available in due time, in appropriate quantity and quality and at the
best price.
The principle of efficiency is concerned with the best relationship between resources employed
and results achieved.
The principle of effectiveness is concerned with attaining the specific objectives set and
achieving the intended results.

Budget provisions:

Increase Farm Credit: The FM has further increase the farm credit target for 2009-10 at Rs
325000 crore compared to Rs 287000 crore targeted in 2008-09.

Subvention of 1% to be paid as incentive to farmers: The Budget continued the Interest

subvention scheme for short-term crop loans up to Rs 300000 per farmer at the interest rate of
7% per annum. Also additional subvention of 1% to be paid from this year, as incentive to those
farmers who repay short-term crop loans on schedule. Also additional allocation of Rs 411 crore
over Interim Budget 2009-10 was made for the same.
Debt Waiver for Farmers: The Union Budget 2009-10 extended the debt waiver scheme by six
more months for farmers owing more than 2 hectare of land. The Union Budget 2008-09 allowed
these farmers 25% rebate on loan if they repay 75% of their overdue within stipulated period of
30th June 2009. Currently this facility has been extended from 30th June, 2009 to 31st
December, 2009.

Setting up of separate task force for those not covered under the debt waiver scheme : The
government also announced that it will set up a task force to examine the issue of debt taken by a
large number of farmers in some regions of Maharashtra from private money lenders who were
not covered by the loan waiver scheme announced last year.

Other provisions:

 The threshold for non-promoter public shareholding for all listed companies to be raised
in a phased manner.
 To allow scheduled commercial banks setting up off-site ATMs without prior approval
subject to reporting.
 To provide banking facilities in under-banked/un-banked areas in the next three years. A
sub-committee of State level Bankers Committee (SLBC) would identify and formulate
an action plan for the same.
 The Ministry has also granted Rs 100 crore of grants in aid to ensure provision of at least
one Centre/Point of Sales (POS) for banking services in each of the un-banked blocks.
 STRUCTURE OF BUDGET

(Rs Bn) Revised Estimates Budget Estimates

1) Revenue receipts
2) Tax revenue (net to centre)
3) Non- tax revenue

4) Capital receipt (5+6+7) $

5) Recoveries of loans

6) Other receipts

7) Borrowings and other liabilities *

8) Total receipts (1+4) $

9) Non- plan expenditure

10) On revenue accounts of which

11) Interest payments

12) On capital account

13) Plan expenditure

14) On revenue account

15) On capital account

16) Total expenditure (9+13)

17) Revenue expenditure

18) Capital expenditure

19) Revenue deficit (17-1)

% of GDP

20) Fiscal deficit {16-(1+5+6)}

% of GDP
21) Primary deficit (20-11)

% of GDP

$ Does not include receipts in respect of market stabilization scheme

*Includes draw- down of cash balance

BANKING SECTOR
The banking system in India is significantly different from that of other Asian nations because of
the country’s unique geographic, social, and economic characteristics. India has a large population
and land size, a diverse culture, and extreme disparities in income, which are marked among its
regions. There are high levels of illiteracy among a large percentage of its population but, at the
same time, the country has a large reservoir of managerial and technologically advanced talents.
Between about 30 and 35 percent of the population resides in metro and urban cities and the rest is
spread in several semi-urban and rural centers. The country’s economic policy framework
combines socialistic and capitalistic features with a heavy bias towards public sector investment.
India has followed the path of growth-led exports rather than the “exported growth” of other Asian
economies, with emphasis on self-reliance through import substitution.

These features are reflected in the structure, size, and diversity of the country’s banking and
financial sector. The banking system has had to serve the goals of economic policies enunciated in
successive five-year development plans, particularly concerning equitable income distribution,
balanced regional economic growth, and the reduction and elimination of private sector
monopolies in trade and industry. In order for the banking industry to serve as an instrument of
state policy, it was subjected to various nationalization schemes in different phases (1955, 1969,
and 1980). As a result, banking remained internationally isolated (few Indian banks had presence
abroad in international financial centers) because of preoccupations with domestic priorities,
especially massive branch expansion and attracting more people to the system. Moreover, the
sector has been assigned the role of providing support to other economic sectors such as
agriculture, small-scale industries, exports, and banking activities in the developed commercial
centers (i.e., metro, urban, and a limited number of semi-urban centers).
The banking system’s international isolation was also due to strict branch licensing controls on
foreign banks already operating in the country as well as entry restrictions facing new foreign
banks. A criterion of reciprocity is required for any Indian bank to open an office abroad.
These features have left the Indian banking sector with weaknesses and strengths. A big challenge
facing Indian banks is how, under the current ownership structure, to attain operational efficiency
suitable for modern financial intermediation. On the other hand, it has been relatively easy for the
public sector banks to recapitalize, given the increases in nonperforming assets (NPAs), as their
Government dominated ownership structure has reduced the conflicts of interest that private banks
would face.

Financial Structure

The Indian financial system comprises the following institutions:

1. Commercial banks a. Public sector b. Private sector c. Foreign banks d.
Cooperative institutions
(i) Urban cooperative banks (ii) State cooperative banks (iii) Central cooperative banks
2. Financial institutions a. All-India financial institutions (AIFIs) b. State financial corporation’s
(SFCs) c. State industrial development corporations (SIDCs)
3. Nonbanking financial companies (NBFCs)
4. Capital market intermediaries about 92 percent of the country’s banking segment is under State
control.
Banks In India

Vision of Banks In India

The banking scenario in India has already gained all the momentum, with the domestic and
international banks gathering pace. The focus of all banks in India has shifted their approach to
'cost', determined by revenue minus profit. This means that all the resources should be used
efficiently to better the productivity and ensure a win-win situation. To survive in the long run, it is
essential to focus on cost saving. Previously, banks focused on the 'revenue' model which is equal
to cost plus profit. Post the banking reforms, banks shifted their approach to the 'profit' model,
which meant that banks aimed at higher profit maximization.

Focus of Banks In India

The banking industry is slated for growth in future with a more qualitative rather than quantitative
approach. The total assets of all scheduled commercial banks by end-March 2010 is projected to
touch Rs 40,90,000 crore. This is going to comprise around 65% of GDP at current market prices
as compared to 67% in 2002-03. The bank's assets are estimated to grow at an annual composite
rate of growth of 13.4% during the rest of the decade as against 16.7% between 1994-95 and 2002-
03.

Barring the asset side, on the liability perspective, there will be huge additions to the capital base
and reserves. People will rely more on borrowed funds, pace of deposit growth slowing down side
by side. However, advances and investments would not see a healthy growth rate

Consolidation of Banks In India

Would the banking industry in India get opened up for more international competition? India
would see a large number of global banks controlling huge stakes of the banking entities in the
country. The overseas banking units would bring along with it capital, technology, and
management skills. This would lead to higher competition in the banking frontier and ensure
greater efficiency. The FDI norms in the banking sector would give more leverage to the Indian
banks.

Thus, a consolidation phase in the banking industry in India is expected in the near future with
mergers and acquisitions gathering more pace. One might also see mergers between public sector
banks or public sector banks and private banks. Credit cards, insurance are the next best strategic
places where alliances can be formed.

Future Challenges of Bank In India

The Indian banks are hopeful of becoming a global brand as they are the major source of
financial sector revenue and profit growth. The financial services penetration in India continues
to be healthy, thus the banking industry is also not far behind. As a result of this, the profit for
the Indian banking industry will surely surge ahead. The profit pool of the Indian banking
industry is probable to augment from US$ 4.8 billion in 2005 to US$ 20 billion in 2010 and
further to US$ 40 billion by 2015. This growth and expansion pace would be driven by the chunk
of middle class population. The increase in the number of private banks, the domestic credit
market of India is estimated to grow from US$ 0.4 trillion in 2004 to US$ 23 trillion by 2050.
Third largest banking hub of the globe by 2040 - is that vision too far away?

Banking Sector In India

Immediately after Independence, the government of India initiated measures to play an active
role in the economic life of the nation. In pursuance of this policy, government adopted
Industrial Policy Resolution in 1948 in which it envisaged a mixed economy. From now
onwards, government decided to play an active role in different segments of an economy
including banking and finance.

The Government of India, in a major step nationalized Reserve Bank of India in in 1948. In
1949, the Banking Regulation Act was enacted which empowered the Reserve Bank of India
(RBI) "to regulate, control, and inspect the banks in India.
Government in order to have firm grip over this sector nationalized the private banks first in
1969 and later in 1980. With the second dose of nationalisation, the GOI controlled around 91%
of the banking business of India. After this, until the 1990s, the nationalized banks grew at a pace
of around 4%, closer to the average growth rate of the Indian economy.

In the early 1990s the then Narsimha Rao government embarking on a policy of liberalisation,
gave licences to a small number of private banks, which came to be known as New Generation
tech-savvy banks, which included banks such as Global Trust Bank, UTI Bank, (now re-named
as Axis Bank), ICICI Bank and HDFC Bank. This almost kickstarted the banking sector in India,
which has seen rapid growth with strong contribution from all the three sectors of banks, namely,
government banks, private banks and foreign banks.

FDI in Banking Sector

The next stage for the Indian banking has been setup with the proposed relaxation in the norms
for Foreign Direct Investment, where all Foreign Investors in banks may be given voting rights
which could exceed the present cap of 10%,at present it has gone up to 49% with some
restrictions.

Present Situation

In the present situation, banking in India has attained fair amount of maturity in terms of supply,
product range and reach-even though reach in rural India still remains a challenge for the private
sector and foreign banks. In terms of quality of assets and capital adequacy, Indian banks are
considered to have clean, strong and transparent balance sheets relative to other banks.
Since Indian economy is witnessing strong growth the demand for banking services, especially
retail banking, mortgages and investment services are expected to be strong. One may also
expect M&As, takeovers, and asset sales.

Currently, India has 88 scheduled commercial banks (SCBs) - 28 public sector banks (that is
with the Government of India holding a stake), 29 private banks (these do not have government
stake; they may be publicly listed and traded on stock exchanges) and 31 foreign banks. They
have a combined network of over 53,000 branches and 17,000 ATMs. According to a report by
ICRA Limited, a rating agency, the public sector banks hold over 75 percent of total assets of the
banking industry, with the private and foreign banks holding 18.2% and 6.5% respectively.
Union budget Highlights of Banking Sector Last Five Year

2006-07

Net capital support to banking sector standing at Rs.22,808 crore, to be restructured to facilitate
increased access of banks to additional resources for lending to the productive sectors; Bill on
insurance to be introduced in 2006-07

2007-08

Banking: Under Differential Rate of Interest scheme providing finance at a rate of 4% to weaker
sections of the community engaged in gainful occupations, limit of loan to be raised from
Rs.6,500 to Rs.15,000 and limit of housing loan to be raised from Rs.5,000 to Rs.20,000 per
beneficiary.

Regional Rural Banks: To open at least one branch in 80 uncovered districts in 2007-08;
Securitisation and Reconstruction of Financial Assets and Enforcement of Securitisation of
Interest (SARFAESI) Act to be extended to loans advanced by RRBs; to be permitted to accept
NRE/FCNR deposits; and those which have a negative net worth to be recapitalized.

2008-2009

Public Sector Bank: Around 288 branches to be opened in districts with minority community
concentration.

Manufacturing rate of growth planned to be doubled

RIDF corpus to be raised to Rs 14,000 cr

2009-10

The threshold for non-promoter public shareholding for all listed companies to be
raised in a phased manner.
Scheduled commercial banks allowed to set up off-site ATMs without prior approval
subject to reporting.
A sub-committee of State Level Bankers Committee (SLBC) to identify and
formulate an action plan for providing banking facilities in under-banked/unbanked
areas in the next three years. Rs.100 crore set aside as one-time grant in-aid to
ensure provision of at least one centre/Point of Sales (POS) for banking services in
each of the unbanked blocks.
Government has established Competition Commission of India, an autonomous regulatory body.
An Appellate body headed by a retired judge of Supreme Court also constituted.

2010-11

Appropriate Banking facilities to be provided to habitations having population in

Excess of 2000 by March, 2012.
Insurance and other services to be provided using the Business Correspondent model.
By this arrangement, it is proposed to cover 60,000 habitations.
Augmentation of Rs.100 crore each for the Financial Inclusion Fund (FIF) and the
Financial Inclusion Technology Fund, which shall be contributed by Government
Of India, RBI and NABARD.
CHAPTER 2
OBJECTIVE
 OBJECTIVE

 To study the impact of budget in banking sector.

 To analyse banking budget of last five years.

 CHAPTER 3
LITERATURE REVIEW
 Literature review

Fredrik Ohisson [2010-07-02]

According to him increased distance leads to higher risk-taking by Handelsbanken, and hence,
worsen loan terms or even leads to rejections of loan applications, as it becomes more difficult
for the bank to verify the information analyzed for a possible credit. However, the essay does not
conclude that the increased distance and risk leads to reduction of all banks supply of lending
capital available to small and medium-sized businesses.

Speech Of P.Chidambaram (Minister Of Finance- 2008-09)

He propose to accept two recommendations:

• To advise commercial banks, including RRBs, to add at least 250 rural household accounts
every year at each of their rural and semi-urban branches; and

• To allow individuals such as retired bank officers, ex-servicemen etc to be appointed as

business facilitator or business correspondent or credit counselor.

Banks will be encouraged to embrace the concept of Total Financial Inclusion. Government will
request all scheduled commercial banks to follow the example set by some public sector banks
and meet the entire credit requirements of SHG members, namely, (a) income generation
activities, (b) social needs like housing, education, marriage etc and (c) debt swapping.

.
Carol Ann Northcott

The author reviews the theoretical and empirical literature to examine the traditional perception
that the following trade-off exists between economic efficiency and stability in the banking
system: a competitive banking system is more efficient and therefore important to growth, but
market power is necessary for stability in the banking system. Other factors play a strong role,
including regulatory policies that promote competition, a well-developed financial system, the
effects of branch networks, and the effect and uptake of technological advancements.

Mojdeh ghezelayaqh Lulea Tekniska University [2007]

Banking, one of the most information intensive sectors, is an ideal domain for the successful
development of e-commerce. The present study focuses on e-commerce opportunities for
improving customer services in the Iran banking sector. First part of this study reports on a
survey of 31 top marketing and IT managers from three major Iranian governmental banks. The
results indicate that the potential of e-commerce ranges from simple applications, such as giving
information about services, to more sophisticated ones that involve customers in services design
and customization. Suitable management actions are proposed to Iranian banks in order to fully
benefit from the Internet. At present, one of the key challenges of the Internet as a service
delivery channel is how banks manage service quality, which holds a significant importance to
customer satisfaction.
 CHAPTER 4
RESEARCH
METHODOLOGY
 RESEARCH METHODOLOGY STUDY
Research methodology is a way to systematically solve the research problem. It may be
understood as a science of studying how research is done scientifically. In the research
methodology we study the various steps that are generally adopted by a researcher in studying
his research problem along with the logic behind them. It is necessary for the researcher to know
not only the research methods/techniques but also the methodology
RESEARCH DESIGN

The present investigation is an analytical type of study undertaken to analyse the union
budget with special reference to banking sector. The study identifies the impact budget on
banking sector & analyse of banking budget of last five years.
DATA COLLECTION
SECONDARY DATA

Secondary data has been collected by referring through

Newspaper
Magazines
Internet
Books

DATA ANALYSIS
Data analysis can be done through bar graph, trend analysis. Microsoft Excel were used for the
analysis.
 CHAPTER 5
ANALYSIS
AND
INTERPRETATION

Commercial Bank
A commercial bank is a type of financial intermediary and a type of bank. Commercial banking
is also known as business banking. It is a bank that provides checking accounts, savings
accounts, and money market accounts and that accepts time deposits. The term "commercial
bank" to refer to a bank or a division of a bank primarily dealing with deposits and loans from
corporations or large businesses. In some other jurisdictions, the strict separation of investment
and commercial banking never applied. Commercial banking may also be seen as distinct from
retail banking. This involves the provision of financial services direct to consumers. Many banks
offer both commercial and retail banking services.

Role of commercial bank:

Issuing bank drafts and bank cheques

Accepting money on term deposit

Lending money by overdraft, installment loan, or other means

Cash management and treasury services

Merchant banking and private equity financing

Types of loan granted by commercial bank

Secured loan

A secured loan is a loan in which the borrower pledges some asset (e.g., a car or property) as
collateral (i.e., security) for the loan.

Mortgage loan
A mortgage loan is a very common type of debt instrument, used to purchase real estate. Under
this arrangement, the money is used to purchase the property. Commercial banks, however, are
given security - a lien on the title to the house - until the mortgage is paid off in full. If the
borrower defaults on the loan, the bank would have the legal right to repossess the house and sell
it, to recover sums owing to it.

Unsecured loan

Unsecured loan are monetary loans that are not secured against the borrowers assets (i.e., no collateral is
involved). These may be available from financial institutions under many different guises or marketing
packages: Bank overdrafts, corporate bonds, Credit card debt etc

Savings deposit with commercial bank

YEAR SAVINGS DEPOSITS WITH

COMMERCIAL BANK
2005-06
556303
2006-07 649586

2007-08 747189

2008-09 874046

2009-10 1101171
savings deposits with commercial banks
1200000

1000000

800000 Sources:
savings deposits with
commercial banks
600000 www.rbi.org.in

400000
Figure: 1
200000

0
2005-06 2006-07 2007-08 2008-09 2009-10
Interpretation: In 2005-06 savings deposit with commercial bank is 556303 as it increases in
2006-07 by 649586 , It shows a tremendous growth from 2005-06 to 2009-10.it is good for the
commercial bank to increase in savings deposits, as more deposits more income for the
commercial bank.

Branches of Scheduled Commercial Banks

YEAR BRANCHES OF SCHEDULED

COMMERCIAL BANK
2005 68355

2006 69471

2007 71839

2008 76142

2009 79931

2010 84604
 100000
90000
80000
70000
60000
Branches of scheduled
50000 commercial banks
40000
30000
20000
10000
0
1 2 3 4 5 6

Sources: www.rbi.org.in
 BRANCHES OF SCHEDULED COMMERCIAL
BANK
90000
80000
70000
60000 BRANCHES OF SCHEDULED
COMMERCIAL BANK
50000
40000
30000
20000
10000
0
1 2 3 4 5 6

Figure: 2

Interpretation:

As branches of scheduled commercial bank in 2005 is 68355, which is also increase in 2006 by
69471 as from 2005 to 2010 branches of scheduled commercial bank is increases which is good
for the commercial bank.

Call Money Rates

The call money rate is the rate of interest that is charged by lending institutions when extending
loans to brokers for the purpose of financing margin loans for clients of the brokerage firm.
Sometimes referred to as a broker loan rate, the call money rate is usually a special rate that is
not usually available to individual investors. Part of the provisions for obtaining the call money
rate requires the intervention of the broker, who functions as a reference for the investor and
retains some degree of responsibility in the repayment of the loan.
The call money rate on most margin loans is one of the best interest rate options that are issued
under any circumstances. Of course, a number of factors can impact the rate of interest that is
extended, such as the credit rating of the investor, the relationship of the brokers with the lending
institution in question, current interest rates in general, and the amount of money that is involved
in the transaction. This means that the call money rate actually will save the investor money,
since the ultimate cost of the loan will be less than could be obtained in other ways. Even with
the addition of the surcharge that is applied by the brokerage firm, the overall cost still remains
very competitive.

YEAR CALL MONEY RATES

2006-07 7.22

2007-08 6.07

2008-09 7.06 Sources:

www.rbi.org.in
2009-10 3.24

2010-11 4.51

Figure: 3

Interpretation:
In 2006-07 call money rates is 7.02,but in 2007-08 it is decreased to 6.07,in 2008-09call money
rates is increases as compare to 2007-08 it is 7.06,after that it is declined and in 2010-2011 it
further increases.
Cooperative Bank

Cooperative banking is retail and commercial banking organized on a cooperative basis.

Cooperative banking institutions take deposits and lend money in most parts of the world.
Cooperative banking (for the purposes of this article), includes retail banking, as carried out by
credit unions, mutual savings and loan associations, building societies and cooperatives, as well
as commercial banking services provided by mutual organizations (such as cooperative
federations) to cooperative businesses.

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

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

YEAR NON PERFORMING ASSETS OF

URBAN COOPERATIVE BANK

2005-06 23.2

2006-07 18.9

2007-08 18.3

2008-09 15.5

2009-10 13.33

Non performing assets of urban cooperative

bank
25

20
Non performing assets of
15 urban cooperative bank

10

0
2005-06 2006-07 2007-08 2008-09 2009-10

Sources: www.rbi.org.in
 NON PERFORMING ASSETS OF URBAN
COOPERATIVE BANK
25

20
NON PERFORMING ASSETS
OF URBAN COOPERATIVE
15 BANK

10

0
2005-06 2006-07 2007-08 2008-09 2009-10

Figure: 4

Interpretation: In 2005 nonperforming assets of rural cooperative bank are 23.2; from 2006
to 2010 the non performing assets of rural cooperative are decreased.
Nonperforming assets of rural cooperative bank

YEAR NON PERFORMING ASSETS OF

RURAL COOPERATIVE BANK

2005-06 16.3

2006-07 16.8

2007-08 14.2

2008-09 12.8

2009-10 11.8

Non performing assets of rural cooperative

bank
18
16
14
12 Non performing assets of
rural cooperative bank
10
8
6
4
2
0
2005-06 2006-07 2007-08 2008-09 2009-10

Sources: www.rbi.org.in
 NON PERFORMING ASSETS OF RURAL
COOPERATIVE BANK

NON PERFORMING ASSETS

OF RURAL COOPERATIVE
BANK

2005-06 2006-07 2007-08 2008-09 2009-10

Figure: 5

Interpretation: In 2005 the non performing assets of rural cooperative bank is 16.3. In 2006
the NPA increases it become 16.8 but after 2006 nonperforming assets of rural cooperative bank
is decreases from 2007 to 2010.
Rural Development Bank

NABARD is set up as an apex Development Bank with a mandate for facilitating credit flow for
promotion and development of agriculture, small-scale industries, cottage and village industries,
handicrafts and other rural crafts. It also has the mandate to support all other allied economic
activities in rural areas, promote integrated and sustainable rural development and secure
prosperity of rural areas. In discharging its role as a facilitator for rural prosperity NABARD is
entrusted with
Providing refinance to lending institutions in rural areas
Bringing about or promoting institutional development
Evaluating, monitoring and inspecting the client banks

  The general objective in this area is the sustained improvement of the quality of life of the low-
income rural population while at the same time seeking to assure an effective and efficient
contribution by the rural economy to the national development process. For that purpose, support
will be given to the development of "campesino" economies and other low-income sectors in
rural areas through various combinations of efforts geared to the specific circumstances of each
local community.
Operating profit of rural development bank

YEAR OPERATING PROFIT OF RURAL

DEVELOPMENT BANK
2005-06 310

2006-07 433

2007-08 564

2008-09 793

2009-10 757

Operating profit of rural development bank

900
800
700
600
Operating profit of rural
500 development bank
400
300
200
100
0
2005-06 2006-07 2007-08 2008-09 2009-10

Sources: www.rbi.org.in
 OPERATING PROFIT OF RURAL DEVELOPMENT
BANK
900
800
700 OPERATING PROFIT OF
600 RURAL DEVELOPMENT
500 BANK
400
300
200
100
0
2005-06 2006-07 2007-08 2008-09 2009-10

Figure: 6

Interpretation: In 2005 operating profit of rural development bank 310, in 2006 operating
profit of rural bank is increases it goes to 433,in 2007 & 2008 it shows further increment , but in
2009 it goes on decreasing as compare to 2008 it become 757 .
Non banking financial company

Non-bank financial companies (NBFCs) are financial institutions that provide banking services
without meeting the legal definition of a bank, i.e. one that does not hold a banking license.
Operations are, regardless of this, still exercised under bank regulation. However this depends on
the jurisdiction, as in some jurisdictions, such as New Zealand, any company can do the business
of banking, and there are no banking licenses issued.

Services provided by NBFC

Non-bank institutions frequently

 act as suppliers of loans and credit facilities

 supporting investments in property
 trade money market instruments
 fund private education
Public deposit of non banking financial company

YEAR PUBLIC DEPOSIT OF NON

BANKING FINANCIAL COMPANY

2005 20526

2006 22622

2007 24697

2008 24400

2009 21548

public deposit of non banking financial

company
30000

25000 Sources:
20000 public deposit of non
banking financial company www.rbi.org.in
15000

10000

5000

0
2005 2006 2007 2008 2009
Figure: 7

Interpretation: Public deposit of non banking financial company in 2005 is 20526, it shows
further increment in 2006 is 22622, in 2007 it is also increases but after 2007 there is decline in
2008 & 2009.
 ANALYSIS FINDING

 Saving deposit of commercial bank has increased from 2005 to 2010. As more savings
are there interest rate given by commercial bank is also good. Increase in savings deposit
of commercial bank will lead to future growth of economy.
 Branches of scheduled commercial bank have increased from 2005 to 2010 by 846404.
As more branches are there, the deposit with bank also increases which will further lead
to growth of our economy.
 Call money rate is decreasing from 2006 to 2011 by 2.71 due to various factors like the
rate of interest that is extended, such as the credit rating of the investor, the relationship
of the brokers with the lending institution.
 Nonperforming assets of urban cooperative bank is decreases from 2005 to 2010, if NPA
is decreases it have positive impact on urban cooperative bank.
 Nonperforming assets of rural cooperative bank is decreases from 2005 to 2010, the
decreasing rate of NPA have positive impact on rural cooperative bank.
 Operating profit of rural development is increases from 2005 to 2009 but after 2009 it
goes on decreasing by 36crore.In this respect banks have to take step for improvement of
rural banks in India.
 Public deposit of non banking financial company is increases from 2005 to 2008 but after 2008 it
has been decreases in 2009 and 2010, so NBFC has to take steps for improvement of public
deposit like Provide loan and credit facilities etc.
 Chapter6
RECOMMENDATIONS
 RECOMMENDATIONS

 Increase in number of branches of bank.

 As many as possible privatizations of banks have been done.

 Various liberal schemes have been provided to customers.

 Public deposits of banks have been increased by providing loan and credit facilities.
 Chapter7

CONCLUSION
 CONCLUSION

Budget announcements are expected to have a positive impact on the Banking sector. A number
of measures have been announced, including extension of interest subvention schemes, which are
expected to translate into a higher credit off take for banks, while ensuring affordable credit to
thrust areas like microfinance, agricultural credit and export credit.
Also, the Budget placed significant emphasis on financial inclusion, with measures being
announced towards granting more banking licenses, strengthening the RRBs and the Micro-
Finance Development and Equity Fund. The announcement towards the capitalization of public
sector banks would also provide some stability to the sector. The RBI is considering granting
some additional banking licenses to private sector players. Non-Banking Financial Companies
could also be considered for the licenses, if they meet the eligibility criteria of the RBI.
 Chapter8
BIBLOGRAPHY
 BIBLOGRAPHY

 Bhole, l.m. (2009: financial institutions and market), [fifth edition]

 Website of rbi (www.rbi.org.in)
 Website of union budget (www.indiabudget.nic.in)
 Website of Google (www.google.com)