A Study on

‘Financial Statement Analysis of ICICI Bank’

Submitted in partial fulfillment of the requirement of the Bangalore University for the award of
Degree in Bachelor of Business Management

By

SUBHAM PODDAR

Reg. No. 102AC18049

Under the Guidance of

Prof. Anand Patil

ALLIANCE SCHOOL OF MANAGEMENT

Bangalore
 DECLARATION BY STUDENT

I hereby declare that the project report entitled “A STUDY ON FINANCIAL STATEMENT
ANALYSIS OF ICICI BANK ”. It is the original work done by me as per the requirement of the
curriculum of the degree of BBM course of ALLIANCE SCHOOL OF MANAGEMENT and
submitted to ALLIANCE SCHOOL OF MANAGEMENT.

It has not been previously submitted for the award of any other degrees or courses or fellowship. This
is done in partial fulfilment for the requirement for the award of the degree of BBM of ALLIANCE
SCHOOL OF MANAGEMENT for the academic year 2010-2013.

PLACE :BANGALORE NAME : SUBHAM PODDAR

DATE : 08/04/2013 Regd. No : 102AC18049

 ACKNOWLEDGEMENT

I would like to take this opportunity to express my profound gratitude and sincere thanks to all those
who were instrumental in the preparation of dis project report.

To begin with I would like to express immense gratitude to God for his immense guiding hand.

I thank my project guide Prof. Anand Patil,a highly esteemed and distinguished guide for his guidance
in enabling me in the successful of the project. I would also like to thank Mr. Sudhir G Angur
(President , Alliance School of Management) and Prof. Arunabhas bose (H.O.D).

I am deeply grateful to MR. (Branch Manager) for the immense level of

cooperation,constant support and also ideas given by him which helped me work towards the project.

I would like to thank my parents, my brothers, my friends without those support and help nothing can
really take shape.
 Table of contents
Sl. No Titles Pg. No
1. Chapter 1:

General Introduction
2. Chapter 2:

Industry Profile

 About banking
Industrty

 Porter’s Five
Force model

3. Chapter 3:

Company Profile

 About ICICI bank

 SWOT Analysis

4. Chapter 4:

Research Methodology

4.1 Statement of problem

4.2 Objective of study

4.3 Scope of study

4.4 Sources of Data

4.5 Limitations of the

study
5. Chapter 5:

Data Analysis and

Interpretation
6. Chapter 6:

Findings, Suggestions &

Conclusion

7. BIBLIOGRAPHY

8. ANNEXURE
 LIST OF TABLES-
Table Title
No. Page no.
1.1 Showing calculation of Current Ratio

1.2 Showing calculation of Quick Ratio

1.3 Showing calculation of Non Performing Assests Ratio

1.4 Showing calculation of Capital Adequacy Ratio

1.5 Showing calculation of Net Profit Ratio

1.6 Showing calculation of Operating Profit Ratio

1.7 Showing calculation of Return on net worth

1.8 Showing calculation of Return on Capital Employed

1.9 Showing calculation of Debt Equity Ratio

1.10 Showing calculation of Fixed Assets Turnover Ratio

1.11 Showing calculation of Proprietary Ratio

1.12 Showing calculation of Credit Deposit Ratio

1.13 Showing calculation of Earning Per Share

1.14 Showing calculation of Dividend per Share

1.GENERAL
INTRODUCTION
BACKGROUND OF THE STUDY
Financial statement analysis (or financial analysis) the process of understanding the risk and
profitability of a firm (business, sub-business or project) through analysis of reported financial
information, by using different accounting tools and techniques.
Financial statement analysis consists of
1) reformulating reported financial statements.
2) analysis and adjustments of measurement errors.
3) financial ratio analysis on the basis of reformulated and adjusted financial statements.
The first two steps are often dropped in practice, meaning that financial ratios are just calculated on the
basis of the reported numbers, perhaps with some adjustments. Financial statement analysis is the
foundation for evaluating and pricing credit risk and for doing fundamental company valuation.

Tools and Techniques of Financial Statement analysis

Following are the most important tools and techniques of Financial Statement Analysis:

1. Horizontal and vertical analysis

2. Ratio Analysis

1. Horizontal and Vertical Analysis:

Horizontal analysis or Trend analysis:

Comparision of the two or more year’s financial data is known as horizontal analysis, or trend
analysis. Horizontal Analysis is facilitated by showing changes between years in both dollar and
percentage form.

Trend percentage: Horizontal analysis of financial statement can also be carried out by computing
trend percentages. Trend percentages states several years financial data in terms of base year. The base
year equals 100% with all other years stated in percentage of this base.

Vertical Analysis
A vertical financial statement analysis is conducted using common size financial
statements. A common size financial statement shows each item on a financial statement
in a percentage figure for each statement line item. A vertical analysis gives managers a
different option for reviewing financial information; managers may be more comfortable
looking at percentages rather than dollar amounts. The percentage figure represents how
individual line-item amounts compare to the aggregate total of the financial statements.
the total expenses listed on May’s income statement.
RATIO ANALYSIS
It refers to the systematic use of ratios to interpret the financial statements in terms of the operating
performance and financial position of a firm. It involves comparison for a meaningful interpretation of
the financial statements.

In view of the needs of various uses of ratios the ratios, which can be calculated from the accounting data
are classified into the following broad categories

A. Liquidity Ratio
B. Turnover Ratio
C. Long term Solvency or Leverage ratios
D. Profitability ratios

LIQUIDITY RATIO
It measures the ability of the firm to meet its short-term obligations, that is capacity of the firm to pay its
current liabilities as and when they fall due. Thus these ratios reflect the short-term financial solvency of
a firm. A firm should ensure that it does not suffer from lack of liquidity. The failure to meet obligations
on due time may result in bad credit image, loss of creditors confidence, and even in legal proceedings
against the firm on the other hand very high degree of liquidity is also not desirable since it would imply
that funds are idle and earn nothing. So therefore it is necessary to strike a proper balance between
liquidity and lack of liquidity.Following are the important liquidity ratios:

ACTIVITY RATIO
Activity Ratios are calculated to measure the efficiency with which the resources of a firm have been
employed . These ratios are also called turnover ratios because they indicate the speed with which assets
are being turned over into sales . Following are the most important activity ratios.

 Inventory/Stock turnover ratio

 Debtors /Receivables turnover ratio
 Average collection period
 Creditors /payable turnover ratio
 Working capital turnover ratio
 Fixed Assets Turnover ratio
 Over and Under trading
Long Term Solvency Ratio:

Long term solvency ratio or leverage ratios convey a firms ability to meet the interest costs and payment
schedules of its long term obligations . Following are some of the most important long term solvency or
leverage ratios .

 Debt-to-equity ratio
 Proprietary or equity ratio
 Ratio of fixed assets to shareholders funds
 Ratio of current assets to shareholders fund
 Interest coverage ratio
 Capital gearing ratio
 Over and under Capitalization

PROFITABILITY RATIO
Profitability ratios measure the results of business operations or overall performance and effectiveness
of the firm. Some of the most popular profitability ratios are as under.

 Gross profit ratio

 Net profit ratio
 Operating ratio
 Expense ratio
 Return on Shareholders investment or networth
 Return on Equity Capital
 Return on Capital Employed ratio
 Dividend yield ratio
 Dividend payout ratio
 Earning per share ratio
 Price earning ratio

Financial-Accounting-Ratios-Formuulas

A collection of financial ratios formulas which can help you calculate financial ratios in a given problem.

Limitation of Financial Statement Analysis:

Although financial Statement Analysis is highly useful tool, it has two limitation. These two limitations
involve the comparability of financial data between companies and the need to look beyond ratios.
Advantages of Financial statement analysis :
There are various advantages of Financial Statement analysis. The major benefit is that the investors
get enough idea to decide about the investments of their funds in the specific company . Secondly ,
regulatory authorities like International Accounting Standards Board can ensure whether the company is
following accounting standards or not . Thirdly , financial statement analysis can help the government
agencies to analyze the taxation due to the company . Moreover , company can analyse its own
performance over the period of time through financial statement analysis .
 Chapter :2

INDUSTRY
PROFILE
 BANKING INDUSTRY

The Banking Industry was once a simple and reliable business that took deposits from investors at a lower
interest rate and loaned it out to borrowers at a higher rate.

However deregulation and technology led to a revolution in the Banking Industry that saw it transformed.
Banks have become global industrial powerhouses that have created ever more complex products that use risk
and securitisation in models that only PhD students can understand. Through technology development, banking
services have become available 24 hours a day, 365 days a week, through ATMs, at online bankings, and in
electronically enabled exchanges where everything from stocks to currency futures contracts can be traded .

The Banking Industry at its core provides access to credit. In the lenders case, this includes access to their own
savings and investments, and interest payments on those amounts. In the case of borrowers, it includes access to
loans for the creditworthy, at a competitive interest rate.

Banking services include transactional services, such as verification of account details, account balance details
and the transfer of funds, as well as advisory services, that help individuals and institutions to properly plan and
manage their finances. Online banking channels have become key in the last 10 years.

The collapse of the Banking Industry in the Financial Crisis, however, means that some of the more extreme
risk-taking and complex securitisation activities that banks increasingly engaged in since 2000 will be limited
and carefully watched, to ensure that there is not another banking system meltdown in the future.

 Mortgage banking has been encompassing for the publicity or promotion of the various mortgage loans to
investors as well as individuals in the mortgage business.

Online banking services has developed the banking practices easier worldwide.

Banking in the small business sector plays an important role. Find various banking services available for small
businesses.

The growth in the Indian Banking Industry has been more qualitative than quantitative and it is expected to
remain the same in the coming years. Based on the projections made in the "India Vision 2020" prepared by
the Planning Commission and the Draft 10th Plan, the report forecasts that the pace of expansion in the balance-
sheets of banks is likely to decelerate. 

The total assets of all scheduled commercial banks by end-March 2010 is estimated at ` 40,90,000crores. That
will comprise about 65 per cent of GDP at current market prices as compared to 67 per cent in 2002-03. Bank
assets are expected to grow at an annual composite rate of 13.4 per cent during the rest of the decade as against
the growth rate of 16.7 per cent that existed between 1994-95 and 2002-03. It is expected that there will be large
additions to the capital base and reserves on the liability side.

The Indian Banking Industry can be categorized into non-scheduled banks and scheduled banks. Scheduled
banks constitute of commercial banks and co-operative banks. There are about 67,000 branches of Scheduled
banks spread across India. As far as the present scenario is concerned the Banking Industry in India is going
through a transitional phase. 

The Public Sector Banks(PSBs), which are the base of the Banking sector in India account for more than 78 per
cent of the total banking industry assets. Unfortunately they are burdened with excessive Non Performing assets
(NPAs), massive manpower and lack of modern technology. On the other hand the Private Sector Banks are
making tremendous progress. They are leaders in Internet banking, mobile banking, phone banking, ATMs. As
far as foreign banks are concerned they are likely to succeed in the Indian Banking Industry.

In the Indian Banking Industry some of the Private Sector Banks operating are ICICI Bank , HDFC
Bank, IDBI Bank, ING VyasaBank , SBI Commercial and International Bank Ltd, Bank of Rajasthan Ltd. and
banks from the Public Sector include Punjab National bank, Vijaya Bank, UCO Bank, Oriental Bank, Allahabad
Bank among others. ANZ Grindlays Bank, ABN-AMRO Bank, American Express Bank Ltd, Citibank are some
of the foreign banks operating in the Indian Banking Industry.

If there is one industry that has the stigma of being old and boring, it would have to be banking; however, a
global trend of deregulation has opened up many new businesses to the banks. Coupling that with technological
developments like internet banking and ATMs, the banking industry is obviously trying its hardest to shed its
lackluster image. 

There is no question that bank stocks are among the hardest to analyze. Many banks hold billions of dollars in
assets and have several subsidiaries in different industries. A perfect example of what makes analyzing a bank
stock so difficult is the length of their financials - they are typically well over 100 pages. While it would take an
entire textbook to explain all the ins and outs of the banking industry, here we'll shed some light on the more
important areas to look at when analyzing a bank as an investment.

There are two major types of banks in North America: 

 Regional (and Thrift) Banks - These are the smaller financial institutions, which primarily focus on
one geographical area within a country. In the U.S., there are six regions: Southeast, Northeast, Central,
etc. Providing depository and lending services is the primary line of business for regional banks.

 Major (Mega) Banks - While these banks might maintain local branches, their main scope is in
financial centers like New York, where they get involved with international transactions
and underwriting.

Banks also may offer investment and insurance products, which they were once prohibited from selling. As a
variety of models for cooperation and integration among finance industries have emerged, some of the
traditional distinctions between banks, insurance companies, and securities firms have diminished. In spite of
these changes, banks continue to maintain and perform their primary role—accepting deposits and lending
funds from these deposits.

Banking is comprised of two parts: Monetary Authorities—Central Bank, and Credit Intermediation and
Related Activities. The former includes the bank establishments of the U.S. Federal Reserve System that
manage the Nation’s money supply and international reserves, hold reserve deposits of other domestic banks
and the central banks of other countries, and issue the currency we use. The establishments in the credit
intermediation and related services industry provide banking services to the general public. They securely save
the money of depositors, provide checking services, and lend the funds raised from depositors to consumers and
businesses for mortgages, investment loans, and lines of credit.

There are several types of banks, which differ in the number of services they provide and the clientele they
serve. Although some of the differences between these types of banks have lessened as they have begun to
expand the range of products and services they offer, there are still key distinguishing traits. Commercial banks,
which dominate this industry, offer a full range of services for individuals, businesses, and governments. These
banks come in a wide range of sizes, from large global banks to regional and community banks. Global banks
are involved in international lending and foreign currency trading, in addition to the more typical banking
services. Regional banks have numerous branches and automated teller machine (ATM) locations throughout a
multi-state area that provide banking services to individuals. Banks have become more oriented toward
marketing and sales. As a result, employees need to know about all types of products and services offered by
banks. Community banks are based locally and offer more personal attention, which many individuals and small
businesses prefer. In recent years, online banks—which provide all services entirely over the Internet—have
entered the market, with some success. However, many traditional banks have also expanded to offer online
banking, and some formerly Internet-only banks are opting to open branches.

Savings banks and savings and loan associations, sometimes called thrift institutions, are the second largest
group of depository institutions. They were first established as community-based institutions to finance
mortgages for people to buy homes and still cater mostly to the savings and lending needs of individuals.

Credit unions are another kind of depository institution. Most credit unions are formed by people with a
common bond, such as those who work for the same company or belong to the same labor union or church.
Members pool their savings and, when they need money, they may borrow from the credit union, often at a
lower interest rate than that demanded by other financial institutions.

CHANNELS

Banks offer many different channels to access their banking and ither services.

 Automated Teller Machines

 A branch is a retail location
 Call center
 Mail: most banks accept cheque deposits via mail and use mail to communicate to their customers
e.g by sending out statement.
 Mobile banking is a method of using one’s mobile phone to conduct banking transactions.
PRODUCTS
Retail Banking

 Checking account
 Saving account
 Money market account
 Certificate of deposit
 Individual retirement account
 Credit card
 Debit card
 Mortgage
 Home equity loan
 Mutual Fund
 Personal Loan

Business (or commercial/investment) banking

 Business loan
 Capital raising (equity/debt/hybrid)
 Mezzanine finance
 Project Finance
 Revolving credit
 Risk management (FX,interest rates,commodities,derivatives)
 Term loan
 Cash management (Lock Box,Remote deposit capture, Merchant Processing)
Risk and Capital
Banks face a number of risks inorder to conduct their business and how well these risk are managed and
understood is a key driver behind profitability, and how much capital a bank is required to hold . Some of the
main risks faced by banks include:

 Credit risks: risk of loss arising from a borrower who does not make payments as promised
 Liquidity risks: risk that a given security or assets can be traded quickly enough in the market to prevent
a loss (or make the required profit).
 Market risks: risk that the value of portfolio, either an investment portfolio or trading portfolio, will
decrease due to the change in the value of the market risks factors.
 Operational risks: risk arising from execution of a company’s business functions .
 Reputational risk:a type of risk related to the trustworthiness of business.

The capital requirement is a bank regulation which sets a framework on how banks and depository institutions
must handle their capital. The categorization of assets and capital is highly standardized so that it can be risk
weighted .
ROLE OF BANKS IN ECONOMY

Money lending in one form or the other has evolved along with the history of the mankind. Even in the ancient
times there are references to the moneylenders. Shakespeare also referred to ‘Shylocks’ who made unreasonable
demands in case the loans were not repaid in time along with interest. Indian history is also replete with the
instances referring to indigenous money lenders, Sahukars and Zamindars involved in the business of money
lending by mortgaging the landed property of the borrowers.
 
Towards the beginning of the twentieth century, with the onset of modern industry in the country, the need for
government regulated banking system was felt.  The British government began to pay attention towards the
need for an organised banking sector in the country and Reserve Bank of India was set up to regulate the formal
banking sector in the country. But the growth of modern banking remained slow mainly due to lack of surplus
capital in the Indian economic system at that point of time. Modern banking institutions came up only in big
cities and industrial centres. The rural areas, representing vast majority of Indian society, remained dependent
on the indigenous money lenders for their credit needs.
 
Independence of the country heralded a new era in the growth of modern banking. Many new commercial banks
came up in various parts of the country. As the modern banking network grew, the government began to realise
that the banking sector was catering only to the needs of the well-to-do and the capitalists. The interests of the
poorer sections as well as those of the common man were being ignored.
 
In 1969, Indian government took a historic decision to nationalise 14 biggest private commercial banks. A few
more were nationalised after a couple of years. This resulted in transferring the ownership of these banks to the
State and the Reserve Bank of India could then issue directions to these banks to fund the national programmes,
the rural sector, the plan priorities and the priority sector at differential rate of interest.  This resulted in
providing fillip the banking facilities to the rural areas, to the under-privileged and the downtrodden. It also
resulted in financial inclusion of all categories of people in almost all the regions of the country.
 
However, after almost two decades of bank nationalisation some new issues became contextual. The service
standards of the public sector banks began to decline. Their profitability came down and the efficiency of the
staff became suspect. Non-performing assets of these banks began to rise. The wheel of time had turned a full
circle by early nineties and the government after the introduction of structural and economic reforms in the
financial sector, allowed the setting up of new banks in the private sector.
 
The new generation private banks have now established themselves in the system and have set new standards of
service and efficiency. These banks have also given tough but healthy competition to the public sector banks.
 
Modern Day Role 

Banking system and the Financial Institutions play very significant role in the economy. First and foremost is in
the form of catering to the need of credit for all the sections of society. The modern economies in the world
have developed primarily by making best use of the credit availability in their systems. An efficient banking
system must cater to the needs of high end investors by making available high amounts of capital for big
projects in the industrial, infrastructure and service sectors. At the same time, the medium and small ventures
must also have credit available to them for new investment and expansion of the existing units. Rural sector in a
country like India can grow only if cheaper credit is available to the farmers for their short and medium term
needs.
 
Credit availability for infrastructure sector is also extremely important. The success of any financial system can
be fathomed by finding out the availability of reliable and adequate credit for infrastructure projects.
Fortunately, during the past about one decade there has been increased participation of the private sector in
infrastructure projects.
 
The banks and the financial institutions also cater to another important need of the society i.e. mopping up small
savings at reasonable rates with several options. The common man has the option to park his savings under a
few alternatives, including the small savings schemes introduced by the government from time to time and in
bank deposits in the form of savings accounts, recurring deposits and time deposits. Another option is to invest
in the stocks or mutual funds.
 
In addition to the above traditional role, the banks and the financial institutions also perform certain new-age
functions which could not be thought of a couple of decades ago. The facility of internet banking enables a
consumer to access and operate his bank account without actually visiting the bank premises. The facility of
ATMs and the credit/debit cards has revolutionised the choices available with the customers. The banks also
serve as alternative gateways for making payments on account of income tax and online payment of various
bills like the telephone, electricity and tax. The bank customers can also invest their funds in various stocks or
mutual funds straight from their bank accounts. In the modern day economy, where people have no time to
make these payments by standing in queue, the service provided by the banks is commendable.
 
While the commercial banks cater to the banking needs of the people in the cities and towns, there is another
category of banks that looks after the credit and banking needs of the people living in the rural areas,
particularly the farmers. Regional Rural Banks (RRBs) have been sponsored by many commercial banks in
several States. These banks, along with the cooperative banks, take care of the farmer-specific needs of credit
and other banking facilities.
 
Future

Till a few years ago, the government largely patronized the small savings schemes in which not only the interest
rates were higher, but the income tax rebates and incentives were also in plenty. The bank deposits, on the other
hand, did not entail such benefits. As a result, the small savings were the first choice of the investors. But for
the last few years the trend has been reversed. The small savings, the bank deposits and the mutual funds have
been brought at par for the purpose of incentives under the income tax. Moreover, the interest rates in the small
savings schemes are no longer higher than those offered by the banks.
 
Banks today are free to determine their interest rates within the given limits prescribed by the RBI. It is now
easier for the banks to open new branches. But the banking sector reforms are still not complete. A lot more is
required to be done to revamp the public sector banks. Mergers and amalgamation is the next measure on the
agenda of the government. The government is also preparing to disinvest some of its equity from the PSU
banks. The option of allowing foreign direct investment beyond 50 per cent in the Indian banking sector has
also been under consideration.
 
Banks and financial intuitions have played major role in the economic development of the country and most of
the credit- related schemes of the government to uplift the poorer and the under-privileged sections have been
implemented through the banking sector. The role of the banks has been important, but it is going to be even
more important in the future.   
Size of global banking industry
Assets of the largest 1,000 banks in the world grew by 6.8% in the 2008/2009 financial year to a record
US$96.4 trillion while profits declined by 85% to US$115 billion. Growth in assets in adverse market
conditions was largely a result of recapitalization. EU banks held the largest share of the total, 56% in
2008/2009, down from 61% in the previous year. Asian banks' share increased from 12% to 14% during the
year, while the share of US banks increased from 11% to 13%. Fee revenue generated by global investment
banking totaled US$66.3 billion in 2009, up 12% on the previous year.
The United States has the most banks in the world in terms of institutions (7,085 at the end of 2008) and
possibly branches (82,000). This is an indicator of the geography and regulatory structure of the USA, resulting
in a large number of small to medium-sized institutions in its banking system. As of Nov 2009, China's top 4
banks have in excess of 67,000 branches with an additional 140 smaller banks with an undetermined number of
branches. Japan had 129 banks and 12,000 branches. In 2004, Germany, France, and Italy each had more than
30,000 branches—more than double the 15,000 branches in the UK.

Banking Regulation
Currently commercial banks are regulated in most jurisdictions by government entities and require a special
bank license to operate.
Usually the definition of the business of banking for the purposes of regulation is extended to include
acceptance of deposits, even if they are not repayable to the customer's order—although money lending, by
itself, is generally not included in the definition.
Unlike most other regulated industries, the regulator is typically also a participant in the market, being either a
publicly or privately governed central bank. Central banks also typically have a monopoly on the business of
issuing banknotes. However, in some countries this is not the case. In the UK, for example, the Financial
Services Authority licenses banks, and some commercial banks (such as the Bank of Scotland) issue their own
banknotes in addition to those issued by the Bank of England, the UK government's central bank.
Banking law is based on a contractual analysis of the relationship between the bank (defined above) and
the customer—defined as any entity for which the bank agrees to conduct an account.
The law implies rights and obligations into this relationship as follows:

1. The bank account balance is the financial position between the bank and the customer: when the account
is in credit, the bank owes the balance to the customer; when the account is overdrawn, the customer
owes the balance to the bank.
2. The bank agrees to pay the customer's checks up to the amount standing to the credit of the customer's
account, plus any agreed overdraft limit.
3. The bank may not pay from the customer's account without a mandate from the customer, e.g. a check
drawn by the customer.
4. The bank agrees to promptly collect the checks deposited to the customer's account as the customer's
agent, and to credit the proceeds to the customer's account.
5. The bank has a right to combine the customer's accounts, since each account is just an aspect of the same
credit relationship.
6. The bank has a lien on checks deposited to the customer's account, to the extent that the customer is
indebted to the bank.
7. The bank must not disclose details of transactions through the customer's account—unless the customer
consents, there is a public duty to disclose, the bank's interests require it, or the law demands it.
8. The bank must not close a customer's account without reasonable notice, since checks are outstanding in
the ordinary course of business for several days.
These implied contractual terms may be modified by express agreement between the customer and the bank.
The statutes and regulations in force within a particular jurisdiction may also modify the above terms and/or
create new rights, obligations or limitations relevant to the bank-customer relationship.
Some types of financial institution, such as building societies and credit unions, may be partly or wholly exempt
from bank license requirements, and therefore regulated under separate rules.
The requirements for the issue of a bank license vary between jurisdictions but typically include:

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

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

Types of retail banks

National Bank of the Republic, Salt Lake City 1908

ATM Al-Rajhi Bank
National Copper Bank, Salt Lake City 1911

 Commercial bank: the term used for a normal bank to distinguish it from an investment bank. After
the Great Depression, the U.S. Congress required that banks only engage in banking activities, whereas
investment banks were limited to capital market activities. Since the two no longer have to be under
separate ownership, some use the term "commercial bank" to refer to a bank or a division of a bank that
mostly deals with deposits and loans from corporations or large businesses.
 Community banks: locally operated financial institutions that empower employees to make local
decisions to serve their customers and the partners.
 Community development banks: regulated banks that provide financial services and credit to under-
served markets or populations.
 Credit unions: not-for-profit cooperatives owned by the depositors and often offering rates more
favorable than for-profit banks. Typically, membership is restricted to employees of a particular company,
residents of a defined neighborhood, members of a certain labor union or religious organizations, and their
immediate families.
 Postal savings banks: savings banks associated with national postal systems.
 Private banks: banks that manage the assets of high net worth individuals. Historically a minimum of
USD 1 million was required to open an account, however, over the last years many private banks have
lowered their entry hurdles to USD 250,000 for private investors.[citation needed]
 Offshore banks: banks located in jurisdictions with low taxation and regulation. Many offshore banks
are essentially private banks.
 Savings bank: in Europe, savings banks took their roots in the 19th or sometimes even in the 18th
century. Their original objective was to provide easily accessible savings products to all strata of the
population. In some countries, savings banks were created on public initiative; in others, socially committed
individuals created foundations to put in place the necessary infrastructure. Nowadays, European savings
banks have kept their focus on retail banking: payments, savings products, credits and insurances for
individuals or small and medium-sized enterprises. Apart from this retail focus, they also differ from
commercial banks by their broadly decentralized distribution network, providing local and regional
outreach—and by their socially responsible approach to business and society.
 Building societies and Landesbanks: institutions that conduct retail banking.
 Ethical banks: banks that prioritize the transparency of all operations and make only what they consider
to be socially-responsible investments.
 A Direct or Internet-Only bank is a banking operation without any physical bank branches, conceived
and implemented wholly with networked computers.
Types of investment banks

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

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

Other types of banks

 Central banks are normally government-owned and charged with quasi-regulatory responsibilities, such
as supervising commercial banks, or controlling the cash interest rate. They generally provide liquidity to
the banking system and act as the lender of last resort in event of a crisis.
 Islamic banks adhere to the concepts of Islamic law. This form of banking revolves around several well-
established principles based on Islamic canons. All banking activities must avoid interest, a concept that is
forbidden in Islam. Instead, the bank earns profit (markup) and fees on the financing facilities that it extends
to customers.
COLONIAL ERA OF BANKING INDUSTRY

During the colonial era merchants in Calcutta established the Union Bank in 1839, but it failed in 1840 as a
consequence of the economic crisis of 1848–49. The Allahabad Bank, established in 1865 and still functioning
today, is the oldest Joint Stock bank in India, it was not the first though. That honour belongs to the Bank of
Upper India, which was established in 1863, and which survived until 1913, when it failed, with some of its
assets and liabilities being transferred to the Alliance Bank of Simla.

Foreign banks too started to appear, particularly in Calcutta, in the 1860s. The Comptoir d'Escompte de
Paris opened a branch in Calcutta in 1860, and another in Bombay in 1862; branches
inMadras and Pondicherry, then a French possession, followed. HSBC established itself in Bengal in 1869.
Calcutta was the most active trading port in India, mainly due to the trade of the British Empire, and so became
a banking center.

The first entirely Indian joint stock bank was the Oudh Commercial Bank, established in 1881 in Faizabad. It
failed in 1958. The next was the Punjab National Bank, established in Lahore in 1895, which has survived to the
present and is now one of the largest banks in India.

Around the turn of the 20th Century, the Indian economy was passing through a relative period of stability.
Around five decades had elapsed since the Indian Mutiny, and the social, industrial and other infrastructure had
improved. Indians had established small banks, most of which served particular ethnic and religious
communities.

The presidency banks dominated banking in India but there were also some exchange banks and a number of
Indian joint stock banks. All these banks operated in different segments of the economy. The exchange banks,
mostly owned by Europeans, concentrated on financing foreign trade. Indian joint stock banks were generally
under capitalised and lacked the experience and maturity to compete with the presidency and exchange banks.
This segmentation let Lord Curzon to observe, "In respect of banking it seems we are behind the times. We are
like some old fashioned sailing ship, divided by solid wooden bulkheads into separate and cumbersome
compartments."

The period between 1906 and 1911, saw the establishment of banks inspired by the Swadeshi movement. The
Swadeshi movement inspired local businessmen and political figures to found banks of and for the Indian
community. A number of banks established then have survived to the present such as Bank of
India, Corporation Bank, Indian Bank, Bank of Baroda, Canara Bank andCentral Bank of India.

The fervour of Swadeshi movement lead to establishing of many private banks in Dakshina Kannada and Udupi
district which were unified earlier and known by the name South Canara ( South Kanara ) district. Four
nationalised banks started in this district and also a leading private sector bank. Hence undivided Dakshina
Kannada district is known as "Cradle of Indian Banking".
During the First World War (1914–1918) through the end of the Second World War (1939–1945), and two
years thereafter until the independence of India were challenging for Indian banking. The years of the First
World War were turbulent, and it took its toll with banks simply collapsing despite the Indian economy gaining
indirect boost due to war-related economic activities.

At least 94 banks in India failed between 1913 and 1918 as indicated in the following table:

Year Number of banks Authorised capital Paid-up Capital

s that failed (Rs. Lakhs) (Rs. Lakhs)

1913 12 274 35

1914 42 710 109

1915 11 56 5

1916 13 231 4

1917 9 76 25

1918 7 209 1

Post-Independence
The partition of India in 1947 adversely impacted the economies of Punjab and West Bengal, paralysing
banking activities for months. India's independence marked the end of a regime of theLaissez-faire for the
Indian banking. The Government of India initiated measures to play an active role in the economic life of the
nation, and the Industrial Policy Resolution adopted by the government in 1948 envisaged a mixed economy.
This resulted into greater involvement of the state in different segments of the economy including banking and
finance. The major steps to regulate banking included:

 The Reserve Bank of India, India's central banking authority, was established in April 1935, but was
nationalised on 1 January 1949 under the terms of the Reserve Bank of India (Transfer to Public
Ownership) Act, 1948 (RBI, 2005b).[4]
 In 1949, the Banking Regulation Act was enacted which empowered the Reserve Bank of India (RBI)
"to regulate, control, and inspect the banks in India".
 The Banking Regulation Act also provided that no new bank or branch of an existing bank could be
opened without a license from the RBI, and no two banks could have common directors.
Nationalisation in the 1960s
Despite the provisions, control and regulations of Reserve Bank of India, banks in India except the State Bank
of India or SBI, continued to be owned and operated by private persons. By the 1960s, the Indian banking
industry had become an important tool to facilitate the development of the Indian economy. At the same time, it
had emerged as a large employer, and a debate had ensued about the nationalisation of the banking
industry. Indira Gandhi, then Prime Minister of India, expressed the intention of the Government of India in the
annual conference of the All India Congress Meeting in a paper entitled "Stray thoughts on Bank
Nationalisation."The meeting received the paper with enthusiasm.
Thereafter, her move was swift and sudden. The Government of India issued an ordinance ('Banking Companies
(Acquisition and Transfer of Undertakings) Ordinance, 1969')) and nationalised the 14 largest commercial
banks with effect from the midnight of 19 July 1969. These banks contained 85 percent of bank deposits in the
country. Jayaprakash Narayan, a national leader of India, described the step as a "masterstroke of political
sagacity." Within two weeks of the issue of the ordinance, the Parliament passed the Banking Companies
(Acquisition and Transfer of Undertaking) Bill, and it received the presidential approval on 9 August 1969.
A second dose of nationalisation of 6 more commercial banks followed in 1980. The stated reason for the
nationalisation was to give the government more control of credit delivery. With the second dose of
nationalisation, the Government of India controlled around 91% of the banking business of India. Later on, in
the year 1993, the government merged New Bank of India with Punjab National Bank. It was the only merger
between nationalised banks and resulted in the reduction of the number of nationalised banks from 20 to 19.
After this, until the 1990s, the nationalised banks grew at a pace of around 4%, closer to the average growth rate
of the Indian economy.
Liberalisation in the 1990s
In the early 1990s, the then Narasimha Rao government embarked on a policy of liberalisation, licensing a
small number of private banks. These came to be known as New Generation tech-savvy banks, and included
Global Trust Bank (the first of such new generation banks to be set up), which later amalgamated with Oriental
Bank of Commerce, UTI Bank (since renamed Axis Bank),ICICI Bank and HDFC Bank. This move, along with
the rapid growth in the economy of India, revitalised 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.
The next stage for the Indian banking has been set up 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 74% with some restrictions.
The new policy shook the Banking sector in India completely. Bankers, till this time, were used to the 4–6–4
method (Borrow at 4%;Lend at 6%;Go home at 4) of functioning. The new wave ushered in a modern outlook
and tech-savvy methods of working for traditional banks.All this led to the retail boom in India. People not just
demanded more from their banks but also received more.
Current period
By 2010, banking in India was generally fairly mature in terms of supply, product range and reach-even though
reach in rural India still remains a challenge for the private sector and foreign banks. 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 in comparable economies in its region. The Reserve Bank of India is an autonomous
body, with minimal pressure from the government. The stated policy of the Bank on the Indian Rupee is to
manage volatility but without any fixed exchange rate-and this has mostly been true.
With the growth in the Indian economy expected to be strong for quite some time-especially in its services
sector-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.
In March 2006, the Reserve Bank of India allowed Warburg Pincus to increase its stake in Kotak Mahindra
Bank (a private sector bank) to 10%. This is the first time an investor has been allowed to hold more than 5% in
a private sector bank since the RBI announced norms in 2005 that any stake exceeding 5% in the private sector
banks would need to be vetted by them.
In recent years critics have charged that the non-government owned banks are too aggressive in their loan
recovery efforts in connection with housing, vehicle and personal loans. There are press reports that the banks'
loan recovery efforts have driven defaulting borrowers to suicide.
GROWTH OF BANKING INDUSTRY
The progress of Commercial banking in India can be categorised under the following four distinct phases: Phase
I (1 860-1 946 ); Phase I1 (1 947-1968 ); Phase 111 (1969-1 990); Phase IV (1991- till date).

5.2.1 Progress of Banking - Phase I (1860 - 1946)

With the advent of British rule in India, the business of the indigenous bankers had declined. The banks on
western model have come into existence. Financial transactions were handled by them. It was only in 1850's,
the British bank actually reached India. The first western type thrift institution introduced in India was the
Savings department of the Presidency Bank which, opened in the 1840's and was followed in 1870 by District
Savings Bank operated by the treasury and in 1882 by the Postal Saving system. In 1900, the Postal savings
system was the only such institution left in the field besides the indigenous private institutions like chit funds,
nidhi . Life Insurance was still in the early stage of development at the beginning of World War I and
substantial part of this business was done by the British people rather than by the Indian banks.

The Central bank in India came into existence on First April , 1935 The bank was organised as a Joint Stock
Company whose shares were held privately. This bank had two major departments, namely, System department
and Badsing department.The RBI was the largest financial institution in India with about one-third of the assets
of all financial institutions. The Imperial Bank which came next was privately owned joint stock campany with
all its stock owned by the British ancestors living in India. Since the Government deposits were transferred to
RBI after 1935, the Imperial Bank came to rely increasingly on private deposits. About 95 per cent of the total
funds of Imperial Bank in 1946 came only through private funds, 5.2.2 Progress of Banking - Phase I1 (1947-
1968). The structure of the Indian banking till 1947 was not backed by adequate control or directive measures.
The Banking Regulation Act. 1949 provided the much needed framework for proper supervision under RBI.
the Boards of directors of PSB, there was a nominee represented from RBI and Government of India. This
period witnessed the disappearance of many smaller banks due to tight inspection by RBI. Bigger banks' growth
was facilitated by winding of business by smaller ones. This period witnessed consolidation and growth of
larger banks. There were attempts at correcting the regional maldistribution in branch network, which was
marked by heavy concentration of branches at larger urban centres. Through effective branch licensing policy,
many banks were opened in rural unbanked centres. This period witnessed the nationalisation of Imperial Bank,
now called as the SBI and its Associate banks in 1955. Between 1955 and 1968, the SBI and its Associates
opened many branches. About 80 per cent of 1608 branches opened by SBI and its Associates during 1955 -
1968 were at rural and semi-urban centres.

The growth of bank branches during this period can be seen in Table 5.1

Table 5.1: PROGRESS OF BANKING IN INDIA, 1951 - 1968

S1, State Bank of Scheduled Non-Scheduled No. Year India and its Commercial Commercial Total
Associates Banks Banks 3. 1968 3379 5104 207 8690
Source: R. Srinivasan, Priority Sector lend in - A Study of Indian Experience,
HimalayaPublishing House, Bombay 1995, p.6. Though there were welcome signs in increasing more number
of bank branches and intensive banking network, in the absence of policy compulsion. large private sectorbanks
controlled by a few big industrial business houses failed to meet the requirements of small borrowers in
agriculture. activities allied to agriculture, trade. small scale industries, transport operations. Between 196 1-7 1.
the number of accounts had come down. Flow of credit to industrial sector was greater whereas agricultural
sector was languishing for want of funds. Official recognition of the need to have a closer look at the
functioning of the Commercial banking system has necessitated the Social Control of banks in 1968 by the
NCC. The first meeting of the NCC in March, 1968 discussed and generally agreed on matters like deposit
mobilisation and deployment of credit to the targeted groups in the form of PSL with special reference to
agricultural sector.

5.2.3 Progress of Banking - Phase 111 (1969-1990)

The nationalisation of 14 Commercial banks in July, 1969 was theculmination of Social control of banks in
1968. The development of Commercialbanking in India after the introduction of social control and
nationalisation of major banks has certain unique characteristics. The class banking has become mass banking
trying to realise the socially oriented objectives stipulated for the banking system underthe policy directives of
the Government that promote growth with social justice. Thefollowing were the major objectives of bank
nationalisation:
a) to promote social and economic objectives of State policy by effective execution of
plans and achieve the ideals of socialistic pattern of society;
b) to remove the control by a few so as to make contribution of adequate credit for
agricultural and small industries and exports:
c) to give professional bent to bank management;
d) to encourage new class of entrepreneurs; and
e) to provide adequate training and reasonable service to the bank staff.

In April 1980, Six more commercial banks were nationalized making thetotal nationalized PSB to 20. Another
milestone in the progress of the banking sectorwas the setting up of Ws. In July, 1975, the working group under
the chairmanship of Narasimha had recommended the setting up of RRBs as full fledged scheduled banks for
mobilizing savings and deploying credit in rural areas. These RRBs were sponsored
by Commercial banks. At the end of March, 1998 there were 196 IRBs operating in the country.
The banking sector has been made to serve the national economy as a Catalytic agent. It was felt that
nationalisation was very essential to mobilise the deposits On a massive scale and sustain employment and to
secure a more equitable distribution of Credit throughout the country. After the introduction of LBS,
nationalised banks have been identified in different selected districts of the country to prepare a blueprint for
the development of the respective districts. The designated bank in each district known as "Lead Bank"
prepares DCP and ACP. Thus the banking system has been made as anincent towards realizing the social
objectives from its earlier profit oriented approach. Thrust was made towards PSL after nationalisation. The
PSL known as directed credit programme has become an active mechanism and instrument in
transforming the neglected segments. Agriculture and allied activities, small scale and cottage industries. small
road and water transport operators. retail traders were articulated under PSL. RBI has stipulated that 40 per cent
of net hank credit should flow towards priority sector. Weaker sections are taken care of under the Prime
Minister's 20-Point Programme announced first in 1975, revised in 1982 and modified in 1986. Thrust was
made by Government of India to earmark adequate outlay by banks in implementing the 20-Point Programme
after having detailed consultations with RBI. DRI Scheme was introduced to ameliorate the poverty-stricken
masses in rural and urban areas to avail bank credit at four per cent concessional bank interest. Minority welfare
is also taken care by commercial banks after bank nationalisation. Many of bank branches were opened in the
hitherto neglected rural and semi-urban areas. The norms for opening bank branches in different areas are as
follows3:
i. Rural group includes all centres with a population of less than 10,000.

ii. Semi-urban group includes centres with a population of 10,000 to One lakh.

iii* Urban group includes centres with population of One lakh to 10 lakhs.

iv. Metropolitan group includes centres with population of 10 lakhs and more.
NABARD was set up on 12.07.1982 for supporting and promoting agriculture and rural development and to
provide short-term, medium term and long term credit to state Co-operative banks, RRBs and commercial
banks. Refinancing facility is made available for non-fm projects also by NABARD. The Industrial
Development Bank of India (IDBI) was set up in 1964 to serve as an Apex institution for Term finance for
industries in India. Besides, it also plans, promotes and develops industries, undertakes market investments and
serves as a techno-economic agency forthe development of industries. To take care of the small industries on a
sound footing a subsidiary organisation of IDBI. namelj.SIDB1 was set up. Other specialised financial
institutions with Government patronage have come into existence during this phase. This phase had witnessed
the growth of financial assets in leaps and bounds. More bank branches were opened. There was an abnormal
growth of deposits and advances particularly to the priority sectors. The diversification of financial assets had
also taken place in the form of diversified portfolio investment in mutual funds, shares, debentures and equities.
Stock markets had witnessed many changes and many new investors from different strata entered into stock
markets.

5.2.4 Progress of Banking - Phase IV (1991 - Till Date)

The advent of Narasimharn Committee on financial sector reforms introduced sweeping changes in the financial
sector particularly in the functioning of cornrnercial banks with regard to portfolio management and flow of
credit to the target group under PSL. The Narashimham Committee had recommended that directed credit
should be phased out to 10 per cent from the stipulated 40 per cent gradually. This is in tune with the World
Bank suggestions and also due to the integration of Indian economy into global network. Thanks to this
development in financial sector, non-viable bank branches mostly in rural areas were either merged with
existing viable bank branches or closed down. This period has been witnessing many irregularities and
malpractices in various public sector and private banks thereby warranting the necessary corrective action on
the part of the RBI. The issue of Non performing assets has assumed importance due to non-grounding of assets
by beneficiaries. The process of financial sector reforms initiated in 1991-92 is pursued with vigour and
determination to improve the competitiveness, operational efficiency and transparency of the financial sector.
The financial reforms touched a number of areas - monetary and credit policy issues relating to reserve
requirements. interest rates, refinancing facilities and indirect monetary control via the securities market and
matters relating to strengthening and consolidation of banks, the prescription of prudential norms relating to
asset classification and income recognition, adequate provisioning for bad and doubtful assets. introduction of a
capital to risk-weighted assets ratio system for banks (including foreign banks) and establishment of a strong
supervisory system. All of these are expected to bring about a significant improvement in the f~~nctioning of
the banking system. One of the problems faced by banks is the low rate of loan recoveries. This has a bearing
on the accounting standards as well as on current operations of banks. It is in this context that the 'Recovery of
Debts Due to Banks and Financial Institutions Bill, 1993' was passed in August 1993 which facilitated the
establishment of Debt Recovery Tribunals for expeditious adjudication and recovery of debts due to banks and
financial institutions. The provisions of this Act shall not apply where the amount of debt due to any bank or
financial institution or to a consortium of banks or financial institutions is less than Rs, 10 lakh or such amount,
being not less than Rupees One lakh, as the Central Government may, by notification specify. These tribunals
will expeditiously deal with applications made by bankslfinancial institutions and endeavor to dispose of such
applications within six months from the date of receipt of such applications. This period witnessed the
widening gap between the deposits and credit and thereby gradual reduction in CDR eventually affecting the
flow of credit towards PSL.
Porter’s Five Force Model
Porter’s Five Forces Model is a reality check to se if a industry is attractive enough to enter. The Five Forces
are:

1: Threats from new or potential competitors.

2: The intensity of competition among existing firm.

3: The power of the suppliers .

4: The power of customers.

5: The easiness of changing to substitute products. If all of those forces are high then the industry is less
favourable to enter.

Before entering a industry , one firm should check whether those forces is low, so its favourable for the firm to
enter .

Banking Industry is among the most competitive industry. Lets break it down and see how Porter’s Five
Forces Model apply in this industry.
Force 1: Threat from new or potential competitors --Low-- this might be the only force that will score a low.
Opening a bank requires a lot of capital . Every member of the board of directors need to be checked and
verified by the fed , this usually take a long time . The filing also takes a long time for the fed to approve.

Force 2: The intensity of competition among existing firms --High-- As you can see, banks are branching
everywhere . The banks are offering incentives for opening accounts. You might have heard of “free checking
for life ”, “ No ATM Fee Ever”, “FREE $75 for opening a new account “. Some of the bankers are required to
open certain amount of accounts every month. This makes the competition very fierce.

Force 3: The power of the suppliers –High—There is only one supplier, the fed. All bank in the United
States has a account with the Fed . These is account number is their routing number. This means that fed
has total control over the industry. A little change in interest by the fed will have tremendous effect on
the whole industry. Others key influences are fed fund rate , required reserve ratio ,etc.

Force 4: The power of customers --High—if the customer doesn’t like anything and I mean anything of his or
her bank . He /She can open account in another bank , which it wont take him/her more than 30 minutes. This is
why customer service is becoming so important in the industry . The bank I work at offers a tons of stuffs for
the customers , including: free pens, free coining counting machine , lolipops, dog biscuits , even a greeter at the
door , etc.

Force 5: The easiness of changing to substitute products --Medium-- Customers can always put money
somewhere to make a little interests, there are all kind of bonds, mutual funds stocks etc. However , the power
of check clearing of the banks are undeniable. All the paycheques , payments goes through some banks to clear .
imagine if there is no banks to clear checks , then the whole economy will goes in halt. There are other financial
institutions other than banks , such as thrifts , credit union,etc.

Porters Five Forces Model says that banking industry is unfavourable to enter since most of the forces score
high.
 

Adoption of banking technology

The IT revolution had a great impact in the Indian banking system. The use of computers had led to introduction
of online banking in India. The use of the modern innovation and computerisation of the banking sector of India
has increased many fold after the economic liberalisation of 1991 as the country's banking sector has been
exposed to the world's market. The Indian banks were finding it difficult to compete with the international
banks in terms of the customer service without the use of the information technology and computers.

Number of branches of scheduled banks of India as of March 2005

The RBI set up a number of committees to define and coordinate banking technology. These have included:

 In 1984 formed the Committee on Mechanisation in the Banking Industry (1984)[9] whose chairman was
Dr C Rangarajan, Deputy Governor, Reserve Bank of India. The major recommendations of this committee
was introducing MICR technology in all the banks in the metropolis in India.This provided use of
standardized cheque forms and encoders.

 In 1988, the RBI set up the Committee on Computerisation in Banks (1988)headed by Dr. C.R.
Rangarajan which emphasized that settlement operation must be computerized in the clearing houses of RBI
in Bhubaneshwar, Guwahati, Jaipur, Patna and Thiruvananthapuram. It further stated that there should be
National Clearing of inter-city cheques at Kolkata, Mumbai, Delhi, Chennai and MICR should be made
Operational. It also focused on computerisation of branches and increasing connectivity among branches
through computers. It also suggested modalities for implementing on-line banking. The committee
submitted its reports in 1989 and computerisation began from 1993 with the settlement between IBA and
bank employees' association.

 In 1994, Committee on Technology Issues relating to Payment systems, Cheque Clearing and Securities

Settlement in the Banking Industry (1994) was set up under chairman Shri WS Saraf. It
emphasized Electronic Funds Transfer (EFT) system, with the BANKNET communications network as its
carrier. It also said that MICR clearing should be set up in all branches of all banks with more than 100
branches.

 In 1995, Committee for proposing Legislation on Electronic Funds Transfer and other Electronic
Payments (1995) again emphasized EFT system.
Number of ATMs of different Scheduled Commercial Banks of India as on end March 2005
Total numbers of ATMs installed in India by various banks as on end June 2012 is 99,218.The New Private
Sector Banks in India is having the largest numbers of ATMs which is followed by off-site ATMs belonging to
SBI and its subsidiaries and then it is followed by New Private Banks, Nationalised banks and Foreign banks.
While on site is highest for the Nationalised banks of India.

Branches and ATMs of Scheduled Commercial Banks as on end March 2005

Bank type Number of branches On-site ATMs Off-site ATMs Total ATMs

Nationalised banks 33627 3205 1567 4772

States bank of India 13661 1548 3672 5220

Old private sector banks 4511 800 441 1241

New private sector banks 1685 1883 3729 5612

Foreign banks 242 218 582 800

 Chapter 3

COMPANY PROFILE
• INTRODUCTION OF ICICI BANK
• BOARD MEMBERS

• ASSET LIABILITY MANAGEMENT COMMITTEE

• SOCIAL INITIATIVE GROUP (SIG)

 INTRODUCTION TO ICICI BANK

ICICI Bank is India's second-largest bank with total assets of about Rs.1,67,659 croreat March 31, 2005 and
profit after tax of Rs. 2,005 crore for the year ended March 31, 2005 (Rs. 1,637 crore in fiscal 2004). ICICI
Bank has a network of about 560 branches and extension counters and over 1,900 ATMs. ICICI Bank offers a
wide range of banking products and financial services to corporate and retail customers through a variety of
delivery channels and through its specialized subsidiaries and affiliates in the areas of investment banking, life
and non-life insurance, venture capital and asset management.

ICICI Bank set up its international banking group in fiscal 2002 to cater to the cross border needs of clients and
leverage on its domestic banking strengths to offer products internationally. ICICI Bank currently has
subsidiaries in the United Kingdom and Canada, branches in Singapore and Bahrain and representative offices
in the United States, China, United Arab Emirates, Bangladesh and South Africa.

ICICI Bank's equity shares are listed in India on the Stock Exchange, Mumbai and the National Stock Exchange
of India Limited and its American Depositary Receipts (ADRs) are listed on the New York Stock Exchange
(NYSE).

As required by the stock exchanges, ICICI Bank has formulated a Code of Business Conduct and Ethics for its
directors and employees.

At April 4, 2005, ICICI Bank, with free float market capitalization of about Rs. 308.00 billion (US$ 7.00
billion) ranked third amongst all the companies listed on the Indian stock exchanges.

ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian financial institution, and was its
wholly-owned subsidiary. ICICI's shareholding in ICICI Bank was reduced to 46% through a public offering of
shares in India in fiscal 1998, an equity offering in the form of ADRs listed on the NYSE in fiscal 2000, ICICI
Bank's acquisition of Bank of Madura Limited in an all-stock amalgamation in fiscal 2001, and secondary
market sales by ICICI to institutional investors in fiscal 2001 and fiscal 2002. ICICI was formed in 1955 at the
initiative of the World Bank, the Government of India and representatives of Indian industry. The principal
objective was to create a development financial institution for providing medium-term and long-term project
financing to Indian businesses. In the 1990s, ICICI transformed its business from a development financial
institution offering only project finance to a diversified financial services group offering a wide variety of
products and services, both directly and through a number of subsidiaries and affiliates like ICICI Bank. In
1999, ICICI become the first Indian company and the first bank or financial institution from non-Japan Asia to
be listed on the NYSE.
After consideration of various corporate structuring alternatives in the context of the emerging competitive
scenario in the Indian banking industry, and the move towards universal banking, the managements of ICICI
and ICICI Bank formed the view that the merger of ICICI with ICICI Bank would be the optimal strategic
alternative for both entities, and would create the optimal legal structure for the ICICI group's universal banking
strategy. The merger would enhance value for ICICI shareholders through the merged entity's access to low-cost
deposits, greater opportunities for earning fee-based income and the ability to participate in the payments
system and provide transaction-banking services. The merger would enhance value for ICICI Bank shareholders
through a large capital base and scale of operations, seamless access to ICICI's strong corporate relationships
built up over five decades, entry into new business segments, higher market share in various business segments,
particularly fee-based services, and access to the vast talent pool of ICICI and its subsidiaries. In October 2001,
the Boards of Directors of ICICI and ICICI Bank approved the merger of ICICI and two of its wholly- owned
retail finance subsidiaries, ICICI Personal Financial Services Limited and ICICI Capital Services Limited, with
ICICI Bank. The merger was approved by shareholders of ICICI and ICICI Bank in January 2002, by the High
Court of Gujarat at Ahmadabad in March 2002, and by the High Court of Judicature at Mumbai and the Reserve
Bank of India in April 2002. Consequent to the merger, the ICICI group's financing and banking operations,
both wholesale and retail, have been integrated in a single entity.
 BOARD MEMBERS as on January 2012

Board Governance, Remuneration &

Audit Committee 
Nomination Committee 

Mr. Sridar Iyengar, Chairman Mr. Sridar Iyengar, Chairman

Mr. Homi Khusrokhan, Mr. K.V. Kamath
Mr. M.S. Ramachandran Mr. Homi Khusrokhan
Mr. V. Sridar
 

Corporate Social Responsibility Committee  Customer Service Committee 

Mr. M.S. Ramachandran, Chairman Mr. K.V. Kamath, Chairman

Mr. Arvind Kumar Mr. M.S. Ramachandran
Dr. Tushaar Shah Mr. V. Sridar
Ms. Chanda Kochhar  Ms. Chanda Kochhar

Credit Committee Fraud Monitoring Committee

Mr. K.V. Kamath, Chairman Mr. V. Sridar, Chairman

Mr. M.S. Ramachandran Mr. K.V. Kamath
Mr. Homi Khusrokhan Mr. Homi Khusrokhan
Ms. Chanda Kochhar Mr. Arvind Kumar
Ms. Chanda Kochhar
Mr. Rajiv Sabharwal 

Risk Committee
Information Technology (IT) Strategy Committee

Mr. Homi Khusrokhan, Chairman Mr. K.V. Kamath, Chairman

Mr. K.V. Kamath Mr. Sridar Iyengar
Mr. Sridar Iyengar Mr. Arvind Kumar
Ms. Chanda Kochhar  Mr. V. Sridar
Ms. Chanda Kochhar 

 Share Transfer & Shareholders'/ Investors' Grievance Committee  Committee of Executive Directors

Mr. Homi Khusrokhan, Chairman Ms. Chanda Kochhar, Chairperson

Mr. V. Sridar Mr. N.S. Kannan
Mr. N.S. Kannan Mr. K. Ramkumar
Mr. Rajiv Sabharwal
Asset-Liability Management Committee

Ms. Lalita D. Gupte

Ms. KalpanaMorparia

Ms. Chanda D. Kochhar

Dr. NachiketMor
SOCIAL INITIATIVES GROUP (SIG):
ICICI Bank's social sector initiatives aim to resolve some of the most fundamental developmental problems
facing India today. Its involvement is primarily in terms of non-commercial support to fill knowledge and
practice gaps in specific thematic areas— Early Child Health, Elementary Education and Micro Financial
Services.

SIG interactive platform that seeks to:

 Bring together participants in the development process to widen and deepen the discourse informing
development practice. Interactive features include discussion board sand facilities to post papers, articles
or other resources.
 Publish research related to innovations and significant problems within the identified thematic areas.

 Enable online application for funding.

MISSION STATEMENT OF SIG

The mission statement of the SIG is "to identify and support initiatives designed to improve the capacities of the
poorest of the poor to participate in the larger economy". The SIG believes that the three fundamental capacities
any individual should possess to be able to participate in the larger economy are in the areas of health, education
and access to basic financial services. Within these broad areas, infant health at birth, elementary education and
micro financial services define the areas in which the SIG’s work focuses

At a very basic level, the programmes and projects supported by the SIG are required to cater to the poorest.
They should enable them to become active and informed participants in socio-economic processes as opposed
to passive observers. These initiatives must be output oriented, with a focus on producing measurable outcomes
that meet a minimum quality requirement. The initiatives also need to be cost-effective. This is in recognition of
the fact that resources are limited and their efficient use is imperative if the maximum number is to benefit.
Cost-effectiveness also facilitates the adoption of the initiative in other contexts.

The initiative must be scalable. Scalability implies the ability to draw upon important elements of a programme
and adapt them to suit the needs of a specific situation. It should be possible to do so at a national level. Even if
the programme itself is not directly scalable, it should be possible to take away significant lessons from it in
order to enrich work in other settings.

All supported initiatives should have the potential for both near and long-term impact. Consequentially, it is
important that the impact of these programmes, in the near and long term, be carefully understood and analyzed
in a rigorous manner and not through anecdotes. It is critical to clearly understand how an initiative is
performing in terms of its predetermined goals and in comparison to alternatives. There is little doubt that a
complex of factors, very often beyond the control of the program/ organization, will influence the outcome. Yet,
serious and regular impact analysis can only make the program richer and is essential. The SIG assigns greater
value to programmes/ organizations that carefully examine the short-term and long-term implications of their
actions.

In pursuit of its goals in the three focus areas, the SIG tends to support reasonably large-sized initiatives so that
issues such as cost-effectiveness, scalability and impact assessment can be dealt with more directly. These
initiatives not only have the potential to provide key research inputs to other programmes, but also tend to have
a large impact that benefits the communities they work with. The approach of the SIG may thus be
characterized more broadly as ‘action research’, to distinguish it from pure academic research. However, in its
research work and impact assessment, the SIG seeks to adhere to the highest standards of academic rigour. It
often works in partnership with academic institutions such as Institute of Rural Management Anand, KEM,
Massachusetts Institute of Technology, Tata Institute of Social Sciences, University of California, Berkeley and
the University of Southampton.

It is crucial that the programmes supported by SIG be time-bound. This lends clarity to the aim of the
programme and prevents its intent from getting diluted over time.

The SIG works by identifying gaps in knowledge and practice in its focus areas and locating initiatives that
address these gaps in a manner consistent with the SIG’s mission. The identification of research needs is
followed by an in-depth analysis of the short-term and long-term implications of various forms of action.
Among other things, this requires taking a comprehensive overview of work already done in the country and
outside. The SIG, thus, seeks to answer certain fundamental questions in its focus areas through the projects it
supports and, thereby, contribute to findings that help the sector. It should be pointed out that the SIG does not
function as a rollout agency.

An important feature of the SIG’s strategy is the belief in strengthening or supplementing existing systems,
rather than investing in parallel structures. Another key element of its strategy is the building of long-term
relationships with suitable partners. As part of this effort, the SIG works actively to improve the efficacy of
these partners and ensure sustained impact.

In pursuit of its goals, the SIG seeks to work actively with research agencies, Non-Governmental Organizations
(NGOs), Corporates, Government departments, local stakeholders and international organizations. It should also
be noted that the group believes modern technologies, particularly Information and Communication
Technologies (ICT) can prove to be important facilitators if used appropriately.

FOCUS AREAS OF SIG

The SIG has three focus areas:

 Early Child Health

 Elementary Education
 Micro Financial Services
Health: Early Child Health

This focus seems to have the potential for maximum long and short-term impact and appears achievable in the
most cost-effective and therefore scaleable manner.ICICI Bank aims to improve individual capacity by
impacting two important indicators of chronic under nutrition in the first three years at the national level:

 Proportion of babies born with a birth weight of less than 2.5 kg at or beyond 37 weeks of gestation
(Intra-Uterine Growth retardation, IUGR)

 Proportion of children under three years who are stunted.

Education: Elementary Education

Education (and not just literacy) up to the elementary level seems to be almost a necessary condition for any
individual (rich or poor) to be able to participate in any manner in the larger economy Here the goal is to work
towards the universalisation of elementary education all across India, rural and urban, with a substantial
difference being made by 2010. The goal focuses on retention in school and learning achieved.

Money: Micro Financial Services

These services would include basic banking (savings and cash management), finance (debt and equity),
insurance (life and health) and derivatives. The goal here is to facilitate universal access to these four services
by the year 2010.

In addition to its core areas of focus, the SIG, in a limited manner, supports some other initiatives:

1. Non-governmental Organization (NGO) Capacity Building

This is supported through the GIVE (Giving Impetus to Voluntary Effort) Foundation. It seeks to provide a
variety of services to NGOs listed including facilitating the receipt of donations online (Give Online), sale of
NGO products (Shop Online), volunteering of time and skills (Volunteer Online) and news (News Online).

2. Modernization of the Indian Financial System

This involves encouraging appropriate research and institution building efforts on a national basis. It is a virtual
non-profit research centre that acts as a platform to address and encourage debate, and develop a non-partisan
opinion on various issues of concern and interest in financial economics relating to emerging markets. ICICI
Bank has supported the development of various financial institutions such as the National Stock Exchange and
the Bombay Stock Exchange. It has also supported the Institute for Financial Management and Research,
Chennai.

The changed economic climate in India, with a growing emphasis on the market, has hastened the need for an
informed and participatory socio-economic order. As one of the largest players in the economic landscape of the
country, ICICI Bank believes that its involvement in the commercial sector must be backed by a simultaneous
commitment in the social sector. This is particularly so if any of the larger goals of economic liberalisation in
India, and of its players, is to be brought to fruition. ICICI Bank seeks to perform its role in the social sector
through a dedicated not-for-profit group, the Social Initiatives Group (SIG).

Go Green Initiative
The Go Green Initiative is an organisation wide initiative that moves beyond moving people, processes and
customers to cost effective automated channels to build awareness and consciousness of our environment,our
nation and our society.
Objective
ICICI Bank’s Green initiative is to make healthy environment in the organisation i.e; to create intrapersonal
skills amongs the customer and understanding between employees of the organisation.
Broad objectives of the ICICI are:
(a) to assist in the creation, expansion and modernisation of private concerns;
(b) to encourage the participation of internal and external capital in the private concerns;
(c) to encourage private ownership of industrial investment.
Green products and services
Instabanking
It is the platform that brings together all alternate channels under one umbrella and gives customers the option
of banking through Internet banking, i-Mobile banking, IVR Banking. This reduces the carbon footprint of the
customers by ensuring they do not have to resort to physical statements or travel to their branches.
Vehicle Finance
As an initiative towards more environment friendly way of life, Auto loans offer 50% waiver on processing fee
on car models which uses alternate mode of energy. The models identified for the purpose are, Maruti's LPG
version of Maruti 800, Omni and Versa, Hyundai's Santro Eco, Civic Hybrid of Honda, Reva electric cars, Tata
Indica CNG and Mahindra Logan CNG versions.
Branches and ATM’s
ICICI Bank Ltd., a subsidiary of ICICI Limited, was constituted in 1994 headquartered in Mumbai. In the year
2002, ICICI and two of its wholly-owned retail finance subsidiaries, ICICI Personal Financial Services Limited
and ICICI Capital Services Limited, merged with ICICI Bank. The Bank provides a broad spectrum of services
to its wholesale and retail customers through its well manned outlets and subsidiaries. Today ICICI Bank Ltd. is
the second-largest bank in India by its assets. The Bank has a network of 2,758 branches and 9,363 ATMs
across the country and has a presence in 19 countries, including India.

Products and services

Personal banking

 Deposits
 Loans
 Cards
 Investments
 Insurance
 Demat services
 Wealth services

NRI Banking

 Money transfer
 Bank Accounts
 Investments
 Property Soltions
 Insurance
 Loans

Business Banking

 Corporate Net Banking

 Cash Management
 Trade Services
 FX online
 SME services
 Online Taxes
 Custodial Services
Corporate Social Responsibility programmes for Elementary Education
Read to Lead Phase I
Read to Lead is an initiative of ICICI Bank to facilitate access to elementary education for underprivileged
children in the age group of 3–14 years including girls and tribal children from the remote rural areas. The Read
to Lead initiative supports partner NGOs to design and implement programs that mobilise parent and
community involvement in education, strengthen schools and enable children to enter and complete formal
elementary education. Read to Lead has reached out to 100,000 children across 14 states of Andhra Pradesh,
Bihar, Delhi, Gujarat, Haryana, Jharkhand, Karnataka, Maharashtra, Orissa, Rajasthan, Tamil Nadu, Tripura,
Uttar Pradesh and West Bengal.
Read to Lead Phase I is focused on

 Bridge courses to support dropout children to re-enrol in formal education

 Remedial coaching to potential dropout children to ensure their continuation in formal schooling
 Educational kits that include uniforms, books, stationery, woollen clothes etc.
 Inclusive and special education for children with special needs, such as mentally challenged and
physically disabled children
 Health and nutritional support for children
 Community initiatives for sensitisation on importance of education, including parent groups, school
enrolment drives, workshops and seminars, and publications
 Holistic development of children through instruction in arts and crafts, street plays, and life skills
education
Read to Lead Phase II
In Phase II of the Read to Lead programme, ICICI Bank has supported the establishment of 63 libraries that will
reach out to approximately 7,200 children in the rural areas of Jagdalpur block of Bastar district in
Chhattisgarh. The programme includes building libraries, sourcing books and conducting various interactive
activities to make the library a dynamic centre for learning.
Subsidiaries
Domestic

 ICICI Prudential Life Insurance Company Limited

 ICICI Lombard General Insurance Company Limited
 ICICI Prudential Asset Management Company Limited
 ICICI Prudential Trust Limited
 ICICI Securities Limited
 ICICI Securities Primary Dealership Limited
 ICICI Venture Funds Management Company Limited
 ICICI Home Finance Company Limited
 ICICI Investment Management Company Limited
 ICICI Trusteeship Services Limited
 ICICI Prudential Pension Funds Management Company Limited 
International

 ICICI Bank UK PLC

 ICICI Bank Canada
 ICICI Bank Eurasia Limited Liability Company
 ICICI Securities Holdings Inc.
 ICICI Securities Inc.
 ICICI International Limited
Acquisitions

 1996: SCICI Ltd. A diversified financial institution with headquarters in Mumbai

 1997: ITC Classic Finance. Incorporated in 1986, ITC Classic was a non-bank financial firm that
engaged in hire ,purchase, and leasing operations. At the time of being acquired, ITC Classic had eight
offices, 26 outlets, and 700 brokers.
 1998: Anagram Finance. Anagram had built up a network of some 50 branches in Gujarat, Rajasthan,
and Maharashtra that were primarily engaged in retail financing of cars and trucks. It also had some
250,000 depositors.
 2001: Bank of Madura
 2002: The Darjeeling and Shimla branches of Grindlays Bank
 2005: Investitsionno-Kreditny Bank (IKB), a Russian bank
 2007: Sangli Bank. Sangli Bank was a private sector unlisted bank, founded in 1916, and 30% owned by
the Bahte family. Its headquarter were in Sangli in Maharashtra, and it had 198 branches. It had 158 in
Maharashtra and 31 in Karnataka, and others in Gujarat, Andhra Pradesh, Tamil Nadu, Goa, and Delhi. Its
branches were relatively evenly split between metropolitan areas and rural or semi-urban areas.
 2010: Bank of Rajasthan.
Awards
2004

 Best Bank in India Award presented by Euromoney Magazine

2007

 ICICI Bank has been conferred the Euromoney Award 2007 for the Best Bank in the Asia-Pacific
Region
 ICICI Bank wins the Excellence in Remittance Business award by The Asian Banker
2009

 ICICI Bank bags the "Best bank in SME financing (Private Sector)" at the Dun & Bradstreet Banking
awards
2011

 ICICI Bank is the only Indian brand to figure in the BrandZ Top 100 Most Valuable Global Brands
Report, second year in a row
 ICICI Bank ranked 5th in the list of "57 Indian Companies", and 288 th in World Rankings in Forbes
Global 2000 list.
 ICICI Bank has won the "Banking Technology Awards 2010" at The Indian Banks Association in the
following categories
 ICICI Bank was recognized for its Special Citation of the Fully Electronic Branch Service Channel, first
set up at Hiranandani Estate, Thane, at the Financial Insights Innovation Awards held in conjunction with
Asian Financial Services Congress
 For the second year in a row, ICICI Bank was ranked 70th in the Brandirectory league tables of the
worlds most valuable brands by, The BrandFinance® Banking 500
 ICICI Bank was ranked 1st in the Banking and Finance category and 9th in the "2010 Best Companies
To Work For" by Business Today
 ICICI Bank UK, HiSAVE product range has been awarded the Consumer Moneyfacts Awards 2011 for
the 'Best Online Savings Provider'
 For the second consecutive year, ICICI Bank was ranked second in the "India's 50 Biggest Financial
Companies", in The BW REAL 500 by Business World
 ICICI Bank was one of the winners in the Global Awards for Enterprise & IT Architecture Excellence.
ICICI Bank bagged the award in the ‘Business Intelligence and Analytics' category.
 The Brand Trust Report ranks ICICI among the top 4 most trusted financial institutions.
 ICICI Bank awarded "House Of The Year (India)", by Asia Risk magazine, for eighth time in a row
since 2004
 ICICI Bank awarded the most Tech-friendly Bank award by Business World
 ICICI Bank received the Best Trade Finance Bank in India by The Asset Triple A Award, Hong Kong
 ICICI Bank is the first and the only Indian brand to be ranked as the 45th most valuable global brand by
Brand Top 100 Global Brands Report
2012

 Airtel, ICICI among 'top 100 global brands' 

 ICICI Bank won the "Best Bond House (India) 2011", by IFR Asia 
 ICICI Bank awarded the Best Bank (India) by Global Finance 
 ICICI Bank won the "Century International Quality Era Award" at Geneva 
 ICICI Bank was awarded the "Best Foreign Exchange Bank (India)" by Finance Asia Country Awards.
 ICICI Bank received the "Dataquest Technology Innovation Awards 2012" for Data center migration by
Dataquest.
 ICICI Bank was conferred the Best Performance Award for Self Help Group (SHG) Bank Linkage
Programme in NABARD's State Level Awards announced by their Maharashtra Regional Office. The Bank
received the first prize for the year 2010-11 in the Private Sector Bank category and 2nd runner up for the
year 2011-12 in the Commercial Bank category.
 For the second consecutive year, ICICI Bank won the NPCI's NFS Operational Excellence Awards in
the MNC and Private Sector Banks Category for its ATM network.
 Mr.K.V.Kamath was awarded the "Hall Of Fame" by Outlook Money for his long standing contribution
in the financial services sector. 
 ICICI Bank won the Best Bank - India Award by The Banker. 
 Ms. Chanda Kochhar ranked 18th in the Fortune's list of '2012 Businesspersons of the Year'. The 50
global leaders is Fortune's annual ranking of leaders who are "the best in business". 
 Ms. Chanda Kochhar tops the list of "50 Most Powerful Women in Business" by Fortune India.
 ICICI Bank tops the list of "Private sector and Foreign Banks" by Brand Equity, Most Trusted Brands
2012. It ranks 15th in the "Top Service 50 Brands". 
 For the third consecutive year, ICICI Bank ranked second in "India's 50 Biggest Financial Companies"
in The BW Real 500 by Businessworld. 
 For the second year in a row, Ms. Chanda Kochhar, Managing Director & CEO was ranked 5th in the
International list of 50 Most Powerful Women In Business by Fortune.
 ICICI Bank tops the list of most fans in India and globally ranks fifth amongst financial institutions on
Facebook in the social media engagement study conducted by Ketchum Sampark. 
 ICICI Bank in the Private Sector Bank category won the Best Technology Bank Of The Year ,Best
Financial Inclusion Initiative and Best Use Of Technology In Training and e-Learning by Indian Bank's
Association (IBA) Technology Awards. The Bank also received the first runner up for Best Online Bank,
Best Customer Relationship Initiative and Best Use Of Mobility Technology in Banking by IBA
Technology Awards .
 ICICI Bank awarded the Best SME Bank for Treasury and Working Capital (India) by The Asset Triple
A. 
 ICICI Bank received the Best Trade Finance House and Best Cash Management House by The
Corporate Treasurer Alliance Country Awards. 
 ICICI Bank awarded the Best Private Sector Bank in Global Business Development, Rural Reach and
SME financing categories by Dun & Bradstreet - Polaris Financial Technology Banking Awards. 
SWOT ANALYSIS OF ICICI BANK
Strength:
 ICICI Bank has emerged as the second largest bank in India and is among the top 250 banks in the world
within the decades of its operation.
 Currently it has an assests of worth around US$ 81billion with a profit after tax of US$ 896million.
 ICICI Bank is now a global player in the arena of international banking through its operation in 18
countries all over the world.
 ICICI bank has explained its market capitalization through enlistment not only in National Stock
Exchange and Bombay Stock Exchange, but also in becoming the first Non-Asian Japanese bank to get
enlisted in NYSE.
 ICICI bank has successfully diversified its operation to a number of financial spheres, starting from
general banking activities to general insurance, credit card services, mutual funds, stock trading , loans,
etc.
 It has a massive customer pool of around 14 million.
 It has been considered as the pioneer in usage of internet services for online banking from the comforts
of home and offices.
 Much of its success is attributed to aggressive and innovative marketing strategies for its diversified
range of product and services

Weakness

 Its primarily targets Upper middle class and Upper class of the society, thereby losing the business
opportunities concentrated at middle and bottom sections of the economical pyramid.
 ICICI bank levies higher service charges for various transaction making it expensive to afford by the
major sections of the society.

Opportunities

 Expanding business to the middle and lower income groups of the society by introducing economical
version of its services and hence making it affordable.

Threat
 More and more banks are coming up, both in private and public sector with online banking system
(which no longer is the exclusive domain of ICICI Bank), competitive service charges and interest rates,
lucrative loans schemes and insurance policies etc.

In view of the above, ICICI has to re-model its business strategies to cope up with the stiff competition from
the fast growing pool of players in the Indian banking Sector.
 Chapter 4:

RESEARCH
METHODOLOGY
Title: “A study on Financial Statement Analysis of ICICI Bank ltd.”

“FINANCIAL PERFORMANCE ANALYSIS OF ICICI Bank” is essential to highlight the growth of the bank.
A good financial position enables the bank s to attract more customers and enhance the growth in terms of
deposits and loans. Further it is considered for credit rating also.

4.1 Statement of problem

Banking industry is one of the predominant services providing industry. Services are intangible deeds ,
processes and performances that cannot be seen touched or felt but can be experienced . The service sector is
characterized by its diversity. Global opportunities are growing due to accelerated growth of the service
economy. A bank is an integral part of this economy , is concerned with efficient utilization of financial
resources by providing mobility.

A study on Financial Performance Analysis is essential to compare and improve the timely growth , in a more
meaningful manner, to research for accelerating means for contribution to the economic growth and to reward
the functional staff.

4.2 Objective of the study

Objective are the ends that states specifically how goals be achieved. Every study must ghave an objective for
which all the efforts have been done. Without Objective no research can be conducted and no results can be can
be obtained. On the basis of objective, all the research study gives direction through the research problem. It
guides the researcher and keeps him/her on track. I have two objectives regarding my research. These are shown
below:-

 To find long term and short term liquidity position of ICICI Bank Limited.
 To assess the profitability of ICICI Bank Limited.
 To study the financial efficiency and performance of the ICICI Bank Limited.
 To know the strength and weakness of ICICI Bank Limited.

4.3 Scope of study

The study is totally confined to ICICI bank. The annual reports of the company are the important data for the
report . The financial information regarding balance sheet items are based on the balance sheet figures and
Profit and Loss account and balance sheet items are analyzed and interpreted to arrive at the ratio’s . It can be
useful for investors and can be used as reference to other related banks.
Sources of data:
For the purpose of preparing the report the necessary information collected by secondary data:

Secondary data:

 Annual reports of the company

 Induction Material Provided by the company.
 Company’s Publications
 Websites

Analytical tools used:

 Key Financial Ratio’s

4.5 Limitation of the study:

 Some data are confidential to the bank which was not possible to be used in the project.
 Ratio’s are generally calculated on past financial statement and thus forecast for the future is based on
past data.
 As the study is dependent on the data of the last five years there is a requirement to review the findings
before using the study of for other time interval.
 Project is based on ICICI bank so it cannot be generalized to other banks.

The study conducted had time as one of the constraints because the duration of the project was short because of
which there could be possibility that some data might have got overlooked without the knowledge of the
researcher.
 Chapter 5:
DATA ANALYSIS
AND
INTERPRETATION
Financial Ratio Analysis
Ratio analysis is a process of determining and interpreting relationships between the items of financial
statements to provide a meaningful understanding of the performance and financial position of an enterprise.
Ratio analysis is an accounting tool to present accounting variables in a simple, concise, intelligible and
understandable form.

As per Myers “Ratio analysis is a study of relationship among various financial factors in a business”

Objectives of Financial Ratio Analysis

The objective of ratio analysis is to judge the earning capacity, financial soundness and operating efficiency of a
business organization. The use of ratio in accounting and financial management analysis helps the management
to know the profitability, financial position and operating efficiency of an enterprise.

Advantages of Ratio Analysis

The advantages derived by an enterprise by the use of accounting ratios are:

1) Useful in analysis of financial statements:

Bankers, investors, creditors, etc analysis balance sheets and profit and loss accounts by means of ratios.

2) Useful in simplifying accounting figures:

Accounting ratio simplifies summarizes and systematizes a long array of accounting figures to make them
understandable. In the words of Biramn and Dribin, “ Financial ratios are useful because they summarize
briefly the results of detailed and complicated computation”

3) Useful in judging the operating efficiency of business:

Accounting Ratio are also useful for diagnosis of the financial health of the enterprise. This is done by
evaluating liquidity, solvency, profitability etc. Such a evaluation enables management to access financial
requirements and the capabilities of various business units.

4) Useful for forecasting:

Helpful in business planning, forecasting. What should be the course of action in the immediate future is
decided on the basis of trend ratios, i.e., ratio calculated for number of years.

5) Useful in locating the weak spots:

Locating the weak spots in the business even though the overall performance may quite good. Management cab
then pay attention to the weakness and take remedial action. For example if the firm finds that the increase in
distribution expense is more than proportionate to the results achieved, these can be examined in detail and
depth to remove any wastage that may be there.
6) Useful in Inter-firm and Intra-firm comparison:

A firm would like to compare its performance with that of other firms and of industry in general. The
comparison is called inter-firm comparison. If the performance of different units belonging to the same firm is
to be compared, it is called intra-firm comparison. Such comparison is almost impossible without accounting
ratios. Even the progress of a firm from year to year cannot be measured without the help of financial ratios.
The accounting language simplified through ratios are the best tool to compare the firms and divisions of the
firm.

Limitations of Financial Ratio Analysis:

1) False Results:

If Financial Statements are not correct Financial Ratio Analysis will also be correct.

2) Different meanings are put on different terms:

Elements and sun-elements are not uniquely defined. An enterprise may work out ratios on the basis of profit
after Tax and interest while others work on profit before interest and Tax .So, the Ratios will also be different so
cannot be compared. But before comparison is to be done the basis for calculation of ratio should be same.

3) Not comparable:

if different firms follow different accounting Policies. Two enterprises may follow different Policies like some
enterprises may charge depreciation at straight line basis while others charge at diminishing value. Such
differences may adversely affect the comparison of the financial statements.

4) Affect of Price level changes:

Normally no consideration is given to price level changes in the accounting variables from which ratios are
computed. Changes in price level affects the comparability of Ratios. This handicaps the utility of accounting
ratios.

5) Ignores qualitative factors:

Financial Ratios are on the basis of quantitative analysis only. But many times qualitative facts overrides
quantitative aspects .For Example: Loans are given on the basis of accounting Ratios but credit ultimately
depends on the character and managerial ability of the borrower. Under such circumstances, the conclusions
derived from ratio analysis would be misleading.

6) Ratios may be worked out for insignificant and unrelated figures.

Example: A ratio may be worked out for sales and investment in govt. securities. Such ratios will only be
misleading. Care should be exercised to work out ratios between only such figures which have cause and effect
relationship. One should be reasonably clear as to what is the cause and what is the effect.

7) Difficult to evolve a standard Ratio:

It is very difficult to evolve a standard ratio acceptable at all times as financial and economic scenario are
dynamic. Again the underlying conditions for different firms and different industries are not similar, so an
acceptable standard ratio cannot be evolved.
8) Window Dressing:

Financial Ratios will be affected by window dressing. Manipulations and window dressings affect the financial
statements so they are going to affect the ratios also. Therefore a particular ratio may not be a definite indicator
of good or bad management.

9) Personal Bias:

Ratios have to be interpreted, but different people may interpret same ratios in different ways. Ratios are only
tools of financial analysis but personal judgment of the analyst is more important. If he does not posses requisite
qualifications or is biased in interpreting the ratios, the conclusion drawn prove misleading.
Ratio Analysis

To find long term and short term liquidity position of ICICI Bank limited:-
1)Current Ratio:-

Current Ratio or Working Capital Ratio is a relationship of current assets to current liabilities. Current
Assets are the assets that are either in the firm of cash or cash equivalents or can be converted into cash or cash
equivalents in a short time (say, within a year’s time) and Current Liabilities are repayable in a short time. It is
calculated as follows:

Current Ratio = Current Assets

Current Liabilities

Significance:

The objective of calculating Current Ratio is to assess the ability of the enterprise to meet its short-term
liabilities promptly. It shows the number of times the current assets can be converted into cash to meet current
liabilities. As a normal rule current assets should be twice the current liabilities. Low ratio indicates inadequacy
of the enterprise to meet its current liabilities and inadequate working Capital. High Ratio is an indication of
inefficient utilization of funds. An enterprise should have a reasonable current ratio.

Although there is no hard and fast rule yet a current ratio of 2:1 is considered satisfactory.

Current Ratio is calculated at a particular date and not for a particular period.

The following items are included in current assets and Current Liabilities:

Current Assets Current Liabilities

1.Cash and Bank Balance 1.Creditors
2.Debtors(after deducting provision) 2.Bills Payable

3.Bills Receivable (after deducting provisions) 3.Bank Overdraft

4. Stock 4.Short-term Loans

5. Marketable Securities 5.Outstanding Expenses
6.Prepaid Expenses 6.Provision for Tax
7.Advance Payments 7.Unclaimed Dividend

8.Accued Interest 8.Cash credit

Important Points:

1. Working Capital = Current Assets - Current Liabilities.

2. Total Debt =Total Outsider Liability = Long term Liability+ short term Liability (current liability)

3. Total assets = fixed assets + investment +Current assets

 Table 1.1 Showing Calculation of Current Ratio

Year Current Assets Current liabilities Current Ratio

(Rs in Crores) (Rs in Crores)
2008 23551.85 38228.64 0.61
2009 31129.77 42895.38 0.72
2010 34384.06 43746.43 0.78
2011 29997.23 15501.18 1.94
2012 27630.41 15986.35 1.73

Chart Title
2.5

1.5 Column1

1 1.94
1.73

0.5
0.72 0.78
0.61

0
2007-08 2008-09 2009-10 2010-11 2011-12

Graph 1: Showing Current Ratio

Source : Balance sheet of ICICI Bank

Interpretation- An ideal solvency ratio for bank is 1.33:1. The ratio of 1.33 is considered as a safe for
solvency ratio due to the fact that if cuurent assets are more, then the creditors will be able to get their payment
in full.

But here ratio is less than 1.33 in the year 2008-2010 which indicates that the bank has more current liabilities
in the year 2008,2009,2010 and the current liability in the year 2011 and 2012 is less than current assets which
is satisfactory. Therefore the bank has improved on its current assets in the year 2011 and 2012.
Liquidity Ratio or Liquid Ratio or Quick Ratio or Acid Test Ratio:
Liquidity Ratio is a relationship of liquid assets with current liabilities and is computed to assess the short-
term liquidity of the enterprise in its correct form.

This is calculated as follows:

Liquidity Ratio = Liquid assets or quick assets

Current Liabilities

Quick assets= Current assets – (stock + Prepaid Expenses)

Liquid assets are the assets, which are either in the form of cash or cash equivalent or can be converted into cash
within a very short period. Liquid assets include cash, bills receivable, marketable securities and debtors
(excluding bad and Doubtful debts), etc. Stock is excluded from liquid assets as it may take some time before it
is converted into cash. Similarly prepaid expenses do not provide cash at all and are thus excluded from liquid
assets.

A quick ratio of 1:1 is usually considered favorable, since for every rupee of current liabilities, there is a rupee
of current assets.

A high liquidity ratio compared to current ratio may indicate under stocking while a low liquidity ratio while a
low liquidity ratio indicated overstocking.

Table 1.2 Showing Calculation of Quick Ratio

Year Quick Assets Current Liabilities Quick ratio

(Rs in crores) (Rs in crores )
2008 37121.33 38338.64 0.97
2009 38041.13 42895.38 0.88
2010 29966.56 43746.43 0.68
2011 38873.29 15501.18 2.50
2012 34090.08 15986.35 2.13
 3

2.5

1.5
Series 3
2.5
1 2.13

0.5 0.97 0.88

0.68
0
2007-08 2008-09 2009-10 2010-11 2011-12

Graph 2: Showing Quick Ratio

Source: Balance sheet of ICICI Bank

Interpretation :

A quick ratio of 1:1 is considered favourable because for every rupee of current liability, there is atleast 1 rupee
of liquid assets. A higher value is considered favourable, here this year is less in the year 2009 which is less
than 1 and the year 2008-2009is close to 1 which is not satisfactory. This means that the bank has not managed
his funds properly in these years. Although in the year 2011 and 2012 the ratio is more than 1 which is
favourable for the bank.
3) Non Performing Assets
Non Performing Assets are popularly known as NPA. Commercial banks assets are of various types. All those
assets which generate periodical income are called as Performing Assets (PA).While all those assets which do
not generate periodical income are called as Non Performing Assets(NPA).

It is calculated in terms of %. Any failed loan amount of total assets will be counted as Non Performing Assets.
The more the Non Performing Assets the lower the performance of banks. It is computed as given below:

Net NPA to Net customers assets= Net NPA/ Net customers assets*100

Table 1.3 Showing calculations of Net NPA (%)

Year Net NPA Net Customer % of Net NPA to

(Rs in billions) Assets customers needs
(Rs in billions) (in %)
2008 20.19 2053.74 0.98
2009 35.64 2384.84 1.49
2010 46.19 2358.24 1.96
2011 39.01 2091.22 1.87
2012 24.58 2628.16 0.94
 Chart Title
2.5

1.5 Column2

1 1.96 1.87
1.49
0.5 0.98 0.94

0
2008 2009 2010 2011 2012

Graph 3- Showing Net NPA to customer assets .

Souurce – Annual report of ICICI Bank.

Interpretation- The above graph shows the variations in NPA percentage. In the year 2009 and 2010 the NPA
% increased which does not show a good indication ,as the Non Performing Assets had increased during this
years 2011i.e 1.87 and again came down to 0.94% in the year 2012 which shows a good indication. This shows
that the bank Non performing assets has reduced.
4) Capital Adequacy Ratio (CAR)
This ratio is used to protect depositors and promote the stability and efficiency of the financial systems around
the world. Two types of capital are measured : tier one capital which can absorb losses without a bank being
required to cease trading and tier two capital, which can absorb losses in the event of winding upand so provides
a lesser degree of protection to depositors . Also known as “Capital to Risk Weighted Assets Ratio (CRAR).

The RBI has set the minimum capital adequacy ratio at 9 % for all Banks. A ratio below the minimum indicates
that the bank is not adequately capitalized to expand its operations. This ratio ensures that the bank do not
expand their business without having adequate capital.

It is expressed as a percentage of a bank’s risk weighted credit exposures.

CAR = (Tier 1Capital +Tier 2 Capital/Risk Weighted assets) *100

Table 1.4 Showing Capital Adequacy ratio

(As per RBI guidelines BASEL 1)

Year Total Capital= Risk weighted assets Capital adequacy

Tier 1 + Tier 2 (Rs in billions) ratio
(Rs in billions) (in %)

2008 338.96 2899.93 11.69

2009 502.55 3367.55 14.92
2010 549.81 3453.38 15.92
2011 614.18 3208.43 19.14
2012 694.49 3942.19 17.63
 25

20

15

Series 3
10 19.14
17.63
14.92 15.92
11.69
5

0
2008 2009 2010 2011 2102

Graph 4-Showing Capital Adequacy Ratio

Source- Annual report of ICICI Bank

Interpretation- The Capital Adequacy Ratio in the year 2008,2009,2010,2011 and 2012 is
11.69%,14.92%,15.92%, 19.14%, 17.63% respectively. This shows that the bank is successful in maintaining
the standard i.e 9% as per the RBI guidelines. Therefore , the bank has adequate capital to expand its business.
To assess the profitability of ICICI Bank Limited
5) Net Profit Ratio – is the ratio of net profit (after taxes) to net sale . It is expressed as percentage.
Components of Net Profit Ratio:
The two basic components of the net profit ratio are the net profit and sales. The net profit are obtained after
deducting income tax and generally , non operating expenses and incomes are excluded from the net profits for
calculating this ratio. Thus , incomes such as interest on investments outside the business , profit on sales of
fixed assets, etc are excluded.

Net profit Ratio= Net Profit / Net sales X 100

Table 1.5 Showing Calculations of Net Profit Ratio

Year Net Profit Sales Net Profit Ratio

(Rs in crores) (Rs in crores) (in %)
2008 3110.22 22994.29 13.52
2009 4157.73 30788.39 13.50
2010 3758.13 31092.93 12.08
2011 4024.98 25706.93 15.65
2012 5151.38 25974.05 19.83

25

20

15
Column2

10 19.83

15.65
13.52 13.5
12.08
5

0
2007-08 2008-09 2009-10 2010-11 2011-12
Graph 5: Showing net profit ratio

Source : Income statement of ICICI bank

Interpretation- Although the net profit and the sales increased during the year2008,2009 and 2010 but there
is still a downfall in the net profit ratio . During these periods the bank was not doing well because the net profit
did not increased in the same proportion as that of sales. But in the year end 2011 and 2012 the net profit ratio
increased, which indicates the net profit has increased and is in same proportion as that of sales .
Operating profit ratio:
This is calculated as follows:

Operating Profit Ratio: Operating Profit/Net Sales X 100

Te difference between Net Profit and Net Operating Profit Ratio is that net profit is calculated without
considering non-operating expenses and non operating income. If we deduct this ratio from 100, the results will
be operating ratio. Higher operating ratio enables organization to recoup non-operating expenses out of
operating profits and provide reasonable return.

Table 1.6 Showing Calculations of Operating Profit Ratio

Year Operating Profits Net sales Operating Profit ratio

(Rs in Crores) (Rs in Crores) (in %)
2008 5874 22994.29 25.54
2009 7961 30788.39 25.85
2010 8925 31092.93 28.70
2011 9732 25706.93 37.85
2012 9048 25974.05 34.83

40

35

30

25

20
37.85 Series 3
34.83
15 28.7
25.54 25.85
10

0
2007-08 2008-09 2009-10 2010-11 2011-12

Graph 6- Showing Operating Profit Ratio

Source- Annual report of ICICI bank.

Interpretation- From the year 2008-2011 the operating ratio has been increasing which indicates that the
operating profit is increasing and is proportional with the sales . But in the year 2011 there is a downfall in the
operating profit which indicates increase in the operating expenses. Therefore , the bank should check the
unnecessary operating expenses to correct this situation and to provide a sufficient return.
7) Return on net worth: This is the ratio of Profit after tax to Shareholders fund.

Return on net worth=Net Profit after Interest and tax / Shareholders fund X 100

The term “Net-worth” means money belonging to equity share holders and includes reserves net of fictitious
assets awaiting write off. It measures how much income a firm generates for each rupee stockholders have
invested. Higher the percentage the better it is for the company.

Table 1.7 Showing calculation of networth

Year Net Profit After Shareholder’s fund Return on Networth

Interest and Tax (Rs in crores) (in %)
(Rs in crores)
2008 3110 24663 12.6
2009 4158 46820 8.88
2010 3758 49883 7.53
2011 4025 51618 7.79
2012 5151 55091 9.34

14

12

10

Series 3
6

0
2007-08 2008-09 2009-10 2010-11 2011-12

Graph 7: Showing Return on Net worth

Source : Annual report of ICICI Bank

Interpretation- The net profit after interestand tax have increased slowly till the year 2009 and the it
declined in the year 2010 due to high interest payments, operating expenses and taxation liability. The NPAT
again increased in the year 2011 and 2012. Consequently the net worth ratio has declined considerably and only
slightly increased in the year 2012.
Return on Capital Employed
Return on capital employed (ROCE) is the ratio of net operating profit of a company to its capital employed. It
measures the profitability of a company by expressing its operating profit as a percentage of its capital
employed. Capital employed is the sum of stockholders' equity and long-term finance. Alternatively, capital
employed can be calculated as the difference between total assets and current liabilities. The formula to
calculate return on capital employed is:

Net Operating Profit

ROCE = 
Capital Employed
A more accurate value can be calculated by using average capital employed which is the sum of average long-
term finance and average stockholders' equity.

Some analysts use earnings before interest and tax (EBIT) instead of net profit while calculating return on
capital employed.

Since ROCE includes long-term finance in the calculation, therefore it is more comprehensive test of
profitability as compared to return on equity (ROE).

Analysis
A higher value of return on capital employed is favorable indicating that the company generates more earnings
per dollar of capital employed. A lower value of ROCE indicates lower profitability. A company having less
assets but same profit as its competitors will have higher value of return on capital employed and thus higher
profitability.

Examples
The average stockholders' equity and average capital employed of a company during the accounting year ended
December 31, 20X2 were $348,000 and $120,000 respectively. The net profit during the period was $49,000.
Calculate return on capital employed of the company.

Solution
Return on Capital Employed = 49,000 ÷ (348,000 + 120,000) = 10.5%

Table 1.8 Showing Calculation of return on Capital Employed

Year Profit before interest Average Capital Return on Capital

and tax Employed Employed
(Rs in crores) (Rs in crores) (in %)
2008 20006.54 306429.88 6.52
2009 28540.34 356899.66 7.99
2010 27843.9 335554.53 8.29
2011 35902.7 363244.69 8.9
2012 39024.7 390247.32 9.2
 Chart Title
10
9
8
7
6
5
8.9 Series9.2
3
4 7.99 8.29

3 6.52

2
1
0
2008 2009 2010 2011 2012

Graph 8- Showing Return on Capital Employed

Source – Annual Report of ICICI bank.

Interpretation-The above table exhibit the return on capital employed ratio of the bank for last five years. This
ratios measures the earning of the net assets of the business. The return on capital employed has increased
considerablyin the 5 years. It lead to the conclusion that the bank is rising but very little proportion of return is
capital employed.
Debt Equity Ratio

The debt-to-equity ratio (debt/equity ratio, D/E) is a financial ratio indicating the relative proportion of
entity's equity and debt used to finance an entity's assets. This ratio is also known as financial leverage.

Debt-to-equity ratio is the key financial ratio and is used as a standard for judging a company's financial
standing. It is also a measure of a company's ability to repay its obligations. When examining the health of a
company, it is critical to pay attention to the debt/equity ratio. If the ratio is increasing, the company is being
financed by creditors rather than from its own financial sources which may be a dangerous trend. Lenders and
investors usually prefer low debt-to-equity ratios because their interests are better protected in the event of a
business decline. Thus, companies with high debt-to-equity ratios may not be able to attract additional lending
capital.

Calculation (formula)

A debt-to-equity ratio is calculated by taking the total liabilities and dividing it by the shareholders' equity:

Debt-to-equity ratio = Liabilities / Equity

Both variables are shown on the balance sheet (statement of financial position).

Norms and Limits

Optimal debt-to-equity ratio is considered to be about 1, i.e. liabilities = equity, but the ratio is very industry
specific because it depends on the proportion of current and non-current assets. The more non-current the assets
(as in the capital-intensive industries), the more equity is required to finance these long term investments.

For most companies the maximum acceptable debt-to-equity ratio is 1.5-2 and less. For large public companies
the debt-to-equity ratio may be much more than 2, but for most small and medium companies it is not
acceptable. US companies show the average debt-to-equity ratio at about 1.5 (it's typical for other countries
too).

In general, a high debt-to-equity ratio indicates that a company may not be able to generate enough cash to
satisfy its debt obligations. However, a low debt-to-equity ratio may also indicate that a company is not taking
advantage of the increased profits that financial leverage may bring.

Table 1.9 Showing Calculations of Debt Equity Ratio

Year Long term Debt Shareholders fund Debt equity Ratio

(Rs in crores) (Rs in crores)
2008 288766.22 24663 11.7
2009 310079.48 46820 6.6
2010 285671.51 49883 5.72
2011 296280.17 51618 5.73
2012 335156.39 55091 6.08
 14

12

10

Series 3
6 11.7

4
6.6 6.08
5.72 5.73
2

0
2008 2009 2010 2011 2012

Graph 9- Showing Debt Equity Ratio

Source - annual report of ICICI bank.

Interpretation- The debt equity ratio shows the extent to which funds have been provided by
long term creditors as compared to the funds provided by the owners. Here the long term debt is
always high. This shows that the bank is more relying on outside fundsas compared to the
internal sources of capital in its capital structure. From the long term lenderspoit of view this
ratio is not satisfactory.
10) Fixed assets turnover ratio

It is also called as sales to fixed assets ratio. It measures the efficient use of fun assets. This
ratio measures the efficient use of fixed assets. it is calculated as :

Fixed Assets Turnover Ratio= Cost of goods sold or sales / Net Fixed Assets.

Its measures the efficiency and profit earning capacity of the business. Higher the ratiogereter is
the intensive utilization of fixed assets. This ratio has a special importance for manufacturing
concerns, where investment in fixed assest, is very high and the profitability is significantly
dependent on the utilization of this assests.

Table 1.10 Showing calculation of fixed turnover ratio

Year sales Net Fixed assets Fixed Assets

Turnover Ratio
2008 22994.29 3923 5.86
2009 30788.39 3801.6 7.49
2010 31092.93 4108.9 8.17
2011 25706.93 3212.6 8.00
2012 25974.05 4744.2 5.47

5
Series 3
4

0
2008 2009 2010 2011 2012
Graph 10- Showing Fixed Turnover Ratio

Source -Annual report of ICICI bank.

Interpretation- Here the fixed assets has decreased in the year 2008and again accused in the
year 2009. This may be due to the increase in rate of depreciation. Nevertheless , the fixed asset
turnover ratio increased subsequently in the 2010, but again declined in the year 2011 and 2012.
This indicates that the fixed assets have not been used effectively in the business during the year
2011 and 2012.
To study the financial efficiency and performance of the ICICI bank Limited.

11) Proprietary Ratio

It is also called shareholder’s equity to total equity or networth to total assets ratio orequity ratio. It compares
the shareholder’s funds to total assets. It is calculated by dividing shareholders fund by total assets.

Proprietary ratio = Shareholders fund/total assets.

It helps to determine the long term solvency of a company. This ratio measures the protection available to the
creditors. Higher the ratio , lesser is the likelihood of insolvency in the future, as the management has to use
lesser debts and vice versa. Thus, this ratio is of great importance to the creditors.

Table 1.11 Showing Calculation of Proprietary Ratio

Year Shareholder’s fund Total assets Proprietary ratio

(Rs in crores) (Rs in crores)
2008 344658.11 24663 0.07
2009 399795.07 46820 0.12
2010 379300.96 49883 0.13
2011 363399.71 51618 0.14
2012 406233.67 55091 0.13

0.16

0.14

0.12

0.1

0.08
Series 3

0.06

0.04

0.02

0
2008 2009 2010 2011 2012
Graph 11- ShowingProprietary ratio

Source -Annual report of ICICI bank.

Interpretation: The above table exhibits the proprietary ratio of the bank for last five years.
The ratio was 7% in the year 2008 and it is increased to 12%, 13% and 14% in the year
2009,2010 and 2011 respectively. In the year 2012, the ratio reduced and was 13%. Hence, it
leads to the conclusion that the owners have less than 13% stake in the total assets of the bank.
It is not a good sign as far the long term solvency is concerned.
12) Credit Deposit ratio:
This ratio is very important to assess the credit performance of the bank. The ratio shows the relationship
between the amount of deposits generated by the bank as well as their deployment towards disbursement of
loans and advances. Higher credit ratio shows overall good efficiency and performance of any banking
institutions.

Credit deposit ratio= credits/Deposits X100

Credit means disbursement of advances.

Deposits means sum of fixed deposit.

Saving deposits and current deposits.

Table 1.12 Showing Calculations of credit deposit ratio.

Year Credits Deposits Credit Deposit Ratio

(Rs in crores) (Rs in crores) (in %)
2008 195865.60 230510.19 84
2009 225616.08 244431.05 92
2010 218310.85 218347.82 99
2011 181205.60 202016.60 89
2012 216365.90 225602.11 95

250000

200000

Table 1.12 Showing

Calculations of credit deposit ratio. Year
150000 Table 1.12 Showing
Calculations of credit deposit ratio.
Credits (Rs in crores)
Table 1.12 Showing
Calculations of credit deposit ratio.
100000 Deposits (Rs in crores)
Table 1.12 Showing
Calculations of credit deposit ratio.
Credit Deposit Ratio (in %)
50000

0
1 2 3 4 5