A STUDY ON FINANCIAL PERFORMANCE WITH REFERENCE”

AT

STATE BANK OF INDIA

BY

N. VENKATESH
(HT. NO: 1305-19-672-125)

UNDER THE GUIDANCE OF

Mrs. Dr. N. RENUKA
Professor

Project submitted in partial fulfillment for the award of Degree of

MASTER OF BUSINESS ADMINISTRATION

From: OSMANIA UNIVERSITY

AVANTHI DEGREE AND PG COLLEGE

(APPROVED BY AICTE & AFFILIATED TO OSMANIA UNIVERSITY)
Dilsukhnagar, Hyderabad - 500036
ACADEMIC YEAR: 2019-2021.
 DECLARATION

I hereby declare that this Project report titled “FINANCIAL PERFORMANCE

WITH REFERENCE AT STATE BANK OF INDIA” submitted by me to the

Department of Business Management, O.U., Hyderabad, is a bonafide work undertaken

by me and it is not submitted to any other University or Institution for the award of any

degree diploma/certificate or published any time before.

Name of the Student Signature of the Student

N. VENKATESH DATE:
 ACKNOWLEDGEMENT

In the completion of this project report, I have received encouragement and support from
various quarters, which need special mention.

Firstly I would like to offer my sincere thanks to Mr. M. SRINIVAS RAO GARU,
CHAIRMAN, AVANTHI GROUP OF INSTITUTIONS for his support and
encouragement.

I would like to thank Dr. S. APPARAO, PRINCIPAL, AVANTHI PG COLLEGE for

sparing his valuable time in giving the valuable information and suggestions all through, for
successful completion of my project. I express my gratitude to Dr. N. RENUKA, HOD,
AVANTHI PG COLLEGE for her valuable suggestions, encouragement and open minded
discussions have been a source of inspiration during this project work.

I would like to thank my project guide, Mrs. Dr. RENUKA ( Professor) For her guidance
and suggestion and his kind help and motivation in completing the project.

I wish to express my deep and sincere gratitude to the management of STATE BANK OF
INDIA. For their gesture of allowing me to undertake this project. I wish to express my
profound thanks to project guide Mr. MOHD SAAD FAROOQUI (Accounts Officer) for
providing the initial guidance and the employees who lent their hand towards the completion
of this study.

I express my deep gratitude to my parents who were always there as a backbone to me in

motivating and upholding me in all my trials and tribulations.

I thank everyone whom I could not mention by name who extended their help in completion
of this work.
 ABSTRACT

A financial performance (or financial report) is a formal record of the financial

activities of a business, person, or other entity. In British English—including United
Kingdom company law—a financial statement is often referred to as an account, although
the term financial statement is also used, particularly by accountants.

For a business enterprise, all the relevant financial information, presented in a

structured manner and in a form easy to understand, are called the financial performance.
They typically include four basic financial performance:

For large corporations, these performance are often complex and may include an
extensive set of notes to the financial performance and performance discussion and analysis.
The notes typically describe each item on the balance sheet, income statement and cash flow
statement in further detail. Notes to financial performance are considered an integral part of
the financial performance.

Purpose of financial performance by business entities

"The objective of financial performance is to provide information about the financial
position, performance and changes in financial position of an enterprise that is useful to a
wide range of users in making economic decisions." Financial performance should be
understandable, relevant, reliable and comparable. Reported assets, liabilities and equity are
directly related to an organization's financial position. Reported income and expenses are
directly related to an organization's financial performance.

Financial performance are intended to be understandable by readers who have "a

reasonable knowledge of business and economic activities and accounting and who are
willing to study the information diligently." Financial performance may be used by users for
different purposes.
 INDEX
S.No CHAPTER Page No
1 CHAPTER - I 01-08
  INTRODUCTION
  NEED OF THE STUDY
  SCOPE OF THE STUDY
  OBJECTIVES OF THE STUDY
  RESEARCH METHODOLOGY
  LIMITATIONS OF THE STUDY
2 CHAPTER - II 09-31
  REVIEW OF LITERATURE
3 CHAPTER - III 32-43
INDUSTRY PROFILE
COMPANY PROFILE
4 CHAPTER - IV 44-71
  DATA ANALYSIS &INTERPRATATION
5 CHAPTER - V 72-74
  FINDINGS
  SUGGESTIONS
  CONCLUSION
  BIBLIOGRAPHY 75
 
 
 CHAPTER-I
INTRODUCTION
 INTRODUCTION

In our present day economy, “FINANCE” is defined as the provision of money at the time
when it is required. Every enterprise, whether big, medium of small, needs finance to carry
on its operations and to achieve its targets.

Finance is so indispensable today that it is the lifeblood of an enterprise. Without adequate

finance, no enterprise can possibly accomplish its objectives.

“Finance” is the life blood and nerve system of any business organization. Just as circulation
of blood, is necessary in the human body to maintain life. Finance is necessary in the business
org. for smooth running of the business.

Financial Performance involves managerial activities concerned with the procurement and
utilization of funds for business purpose the finance function does with procurement of
money taking in to consideration of today’s as well as future need and its effective utilization.
Since finance is required to purchase of machinery and raw materials, to pay salaries and
wages also for day-to-day expenses.

Financial Performance entails planning for the future of a person or a business enterprise to
ensure a positive cash flow. It includes the administration and maintenance of financial
assets. Besides, Financial Performance covers the process of identifying and managing risks.

The primary concern of Financial Performance is the assessment rather than the techniques of
financial quantification. A financial manager looks at the available data to judge the
performance of enterprises. Managerial finance is an interdisciplinary approach that borrows
from both managerial accounting and corporate finance.

Some experts refer to Financial Performance as the science of money management. The
primary usage of this term is in the world of financing business activities. However, Financial
Performance is important at all levels of human existence because every entity needs to look
after its finances.
Financial Performance: Levels
Broadly speaking, the process of Financial Performance takes place at two levels. At the
individual level, Financial Performance involves tailoring expenses according to the financial
resources of an individual. Individuals with surplus cash or access to funding invest their
money to make up for the impact of taxation and inflation. Else, they spend it on
discretionary items. They need to be able to take the financial decisions that are intended to
benefit them in the long run and help them achieve their financial goals.

From an organizational point of view, the process of Financial Performance is associated with
financial planning and financial control. Financial planning seeks to quantify various
financial resources available and plan the size and timing of expenditures. Financial control
refers to monitoring cash flow. Inflow is the amount of money coming into a particular
company, while outflow is a record of the expenditure being made by the company.
Managing this movement of funds in relation to the budget is essential for a business.

At the corporate level, the main aim of the process of managing finances

Is to achieve the various goals a company sets at a given point of time. Businesses also seek
to generate substantial amounts of profits, following a particular set of financial processes.

Financial managers aim to boost the levels of resources at their disposal. Besides, they
control the functioning on money put in by external investors. Providing investors with
sufficient amount of returns on their investments is one of the goals that every company tries
to achieve. Efficient Financial Performance ensures that this becomes possible.
NEED FOR THE STUDY

 Need of Financial Performance study to diagnose the information contain in financial

statement. So as to judge the profitability and financial position of the firm.

 Financial analyst analyses the financial statements with various tools of analysis
before commanding upon the financial health of the firm.

 Essential to bring out the history.

 Significance and meaning of the financial statements.

SCOPE OF THE STUDY
Analysis of financial statement can be undertaken by different persons and for
different purposes, therefore, the scope of the AFS may be varying from one
situation to another. However, the following are some the techniques of the AFS:

 Comparative financial statements.

 Common-size financial statements.

 Trend percentage analysis.

 Statement of changes in financial position.

 Cost-volume-profit relations, and

 Ratio analysis and others.

The last technique i.e. The ratio analysis is the most common, comprehensive and
powerful tool of the AFS. The importance of ratio analysis lies in the fact that
it presents facts on a comparative basis. As such, this study focuses only on this (ratio)
analysis.
OBJECTIVES OF FINANCIAL STATEMENT ANALYSIS
The Financial Performance is generally concerned with procurement, allocation and control
of financial resources of a concern. The objectives can be-

 To ensure regular and adequate supply of funds to the concern in State bank of india.

 To ensure adequate returns to the shareholders this will depend upon the earning
capacity, market price of the share, expectations of the shareholders in State bank of
india.

 To ensure optimum funds utilization. Once the funds are procured, they should be
utilized in maximum possible way at least cost.

 To ensure safety on investment, i.e, funds should be invested in safe ventures so that
adequate rate of return can be achieved.

 To plan a sound capital structure-There should be sound and fair composition of

capital so that a balance is maintained between debt and equity capital.
RESEARCH METHODOLOGY
RESEARCH DESIGN
This is a systematic way to solve the research problem and it is important component
for the study without which researches may not be able to obtain the format. A research
design is the arrangement of conditions for collection and analysis of data in a manager that
aims to combine for collection and analysis of data relevance to the research purpose with
economy in procedure.

MEANING OF RESEARCH DESIGN

The formidable problem that follows the task of defining the research problem is the
preparation of design of the research project, popularly known as the research design,
decision regarding what, where, when, how much, by what means concerning an inquiry of a
research study constitute a research design. A research design is the arrangement of
conditions for collection and analysis of data in a manager that aims to combine for collection
and analysis of data relevance to the research purpose with economy in procedure.

SOURCES OF DATA
Data we collected based on two sources.

 Primary data.

 Secondary data.

Primary data
The Primary data are those information’s, which are collected afresh and for the first
time, and thus happen to be original in character.

Secondary Data:
The Secondary data are those which have already been collected by some other
agency and which have already been processed. The sources of Secondary data are Annual
Reports, browsing Internet, through magazines.
 1. It includes data gathered from the annual reports of State bank of india.

2. Articles are collected from official website of State bank of india.

METHODOLOGY USED:
1. TYPES OF FINANCIAL STATEMENTS ADOPTED:
Following two types of financial statements are adopted in analyzing the firm
financial position

a. Balance Sheet.

b. Profit and Loss statements.

2. TOOLS OF FINANCIAL STATEMENT ANALYSIS USED

The following financial analysis tools are used in order to interpret the financial
position of the firm.
LIMITATIONS OF THE STUDY:
1. ONLY INTERIM REPORTS:
Only interim statements don’t give a final picture of the concern. The data given in
these statements is only approximate. The actual position can only be determined when the
business is sold or liquidated.
2. DON’T GIVE EXTRA POSITION:
The financial statements are expressed in monetary values, so they appear to give
final and accurate position. The values of fixed assets in the balance sheet neither represent
the value for which fixed assets can be sold nor the amount which will be required to replace
these assets.
3. HISTORICAL COSTS:
The financial statements are prepared on the basis of historical costs or original costs.
The value of assets decreases with the passage of time current price changes are not taken
into account. The statements are not prepared keeping in view the present economic
conditions. The balance sheet loses the significance of being an index of current economic
realities.
4. ACT OF NON MONITORY FACTORS IGNORED:
There are certain factors which have a bearing on the financial position and operating
results of the business but they don’t become a part of these statements because they can’t be
measured in monetary terms. Such factors may include in the reputation of the management.
NO PRECISION:
The precision of financial statement data is not possible because the statements deal
with matters which can’t be precisely stated. The data are recorded by
 CHAPTER-II
REVIEW OF LITERATURE
2.1 LITERATURE REVIEW
Agarwal, Jaffe and Mandelkar (1992), Study on “The Post-Merger Performance of
Acquiring Firms: a Re-examination of an Anomaly.” The study measures the postmerger
performance of acquiring firms after adjusting for the firm‟s size effect and beta risk. The
sample consisted of 937 mergers and 227 tender offers which took place in U S during the
period 1955 to 1987. Analysis was based on two alternative methodologies, both adjusted for
beta risk and market capitalization. The study showed that stockholders of acquiring firms
experienced a statistically significant wealth loss of about 10% over five years after the
merger completion date. The result has fit to a variety of specifications and did not seem to be
caused by changes in beta. Finally, the study concluded that the efficient market anomaly of
negative post merger performance highlighted by Jenson and Ruback (1983) was not
resolved.
Moreover, the causes for large negative returns after a merger were not known. One
possibility would be that market was slow to adjust to the merger event. Then, the long run
performance should reflect that part of net present value of merger to the acquirer which was
not captured by the announcement period returns. However, the results of the study were not
consistent with this hypothesis also. The study was left anomaly as a challenge for future
research.

Healey, Palepu, and Ruback (1992), studied on “Does Corporate Performance Improve
after Mergers?‟‟. This study was examined the post-merger cash flow performance of
acquiring and target firms and explores the sources of merger-induced changes in cash flow
performance. The sample comprises acquisitions involving the 50 largest the US companies
which was listed on the NYSE or ASE in the period from 1979 to 1983.The target and
acquirer were not financial or regulated companies. The notable thing in this study was that
the industry-adjusted performance of the target and bidding firms was used as primary
benchmark to evaluate the post merger performance. Industry-adjusted performance measures
were calculated by subtracting the industry median from the sample firm value. The study
result revealed that the development in post merger cash flows was not attained at the
expense of the merging firms‟ long-term viability, since the sample firms maintained their
capital expenditure and research and development rates in relation to their industries.
Moreover, the study also found that acquirer firm

Cornette and Tehranian (1992), study entitled “Changes in Corporate Performance

Associated with Bank Acquisitions,” and analysed the post merger performance of sample
banks. The study is based on sample of 30 the US large banks which acquisitions undergone
between 1982 and 1987.The study was compared the pre and post merger performance for
years -1 to -3 before merger and +1 to +3 after the merger. The study result revealed that the
mean annual industry-adjusted cash flow returns was (-0.2) % in pre merger for the all
sample banks and Increased by 1% in post merger. The study concluded the post-merger
performance of sample banks had increased by 1.2 % as compared to pre merger. A
limitation of their research was this study pertained specifically to the US banking industry
and hence its results may not be generalized across other industries.

Rau, R. and Vermaelen, T. (1998), study on “Glamour, Value and The Post Acquisition
Performance of Acquiring Firms” They examined the performance of acquiring firms in
mergers and tender offers, with bids announced and completed between January 1980 and
December 1991. The full sample comprised of 3169 mergers and 348 tender offers from the
US. The study result revealed that acquirers in merger offers were underperform in the three
years after the acquisition while acquirers in tender offers earn a small but statistically
significant positive abnormal return. However, the long-term under performance of acquiring
firms in merger offers was not uniform across firms. It was predominantly caused by the poor
postacquisition performance of (-17) % abnormal returns in mergers offers. The study
concluded that fully cash-financed and fully equity-financed mergers significantly
underperform after the merger with referenced to value bidders, glamour bidders.
2.2 THEORITICAL BACKGROUND

FINANCIAL PERFORMANCE ANALYSIS

Financial performance analysis is the process of identifying the financial strengths and
weaknesses of the firm by properly establishing the relationship between the items of balance
sheet and profit and loss account. It also helps in short-term and long term forecasting and
growth can be identified with the help of financial performance analysis. The dictionary
meaning of ‘analysis’ is to resolve or separate a thing in to its element or components parts
for tracing their relation to the things as whole and to each other. The analysis of financial
statement is a process of evaluating the relationship between the component parts of financial
statement to obtain a better understanding of the firm’s position and performance. This
analysis can be undertaken by management of the firm or by parties outside the namely,
owners,creditors,investors.

The analysis of financial statement represents three major steps:

 The first step involves the re-organization of the entire financial data contained  the
financial statements. Therefore the financial statements are broke down into individual
components and re-grouped into few principle elements according to their
resemblances and affinities. Thus the balance sheet and profit and loss accounts are
completely re-casted and presented in the condensed form entirely different from their
original shape.

 The second step is the establishment of significant relationships between the individual
components of balance sheet and profit and loss account. This is done through the
application tools of financial analysis like Ratio analysis, Trend analysis, Common size
balance sheet and comparative Balance sheet.

 Finally, the result obtained by means of application of financial tools is evaluated.

 In brief financial analysis is the process of selection, relation and evaluation of financial
statements. The tools of analysis are used for determining the investment value of the
business, credit rating and for testing efficiency of operation.
Thus financial analysis helps to highlight the facts and relationships concerning managerial
performance, corporate efficiency, financial strength and weakness and credit worthiness of
the company.

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, particularly annual and quarterly reports.

Financial statement analysis consists of 1) reformulating reported financial statements, 2)

analysis and adjustments of measurement errors, and 3) financial ratio analysis on the basis of
reformulated and adjusted financial statements. The two first 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.

1) Financial statement analysis typically starts with reformulating the reported financial
information. In relation to the income statement, one common reformulation is to divide
reported items into recurring or normal items and non-recurring or special items. In this way,
earnings could be separated in to normal or core earnings and transitory earnings. The idea is
that normal earnings are more permanent and hence more relevant for prediction and
valuation. Normal earnings are also separated into net operational profit after taxes (NOPAT)
and net financial costs. The balance sheet is grouped, for example, in net operating assets
(NOA), net financial debt and equity.

2) Analysis and adjustment of measurement errors question the quality of the reported
accounting numbers. The reported numbers can for example be a bad or noisy representation
of invested capital, for example in terms of NOA, which means that the return on net
operating assets (RNOA) will be a noisy measure of the underlying profitability (the internal
rate of return, IRR). Expensing of R&D is an example when such investment expenditures
are expected to yield future economic benefits, suggesting that R&D creates assets which
should have been capitalized in the balance sheet. An example of an adjustment for
measurement errors is when the analyst removes the R&D expenses from the income
statement and put them in the balance sheet. The R&D expenditures are then replaced by
amortization of the R&D capital in the balance sheet. Another example is to adjust the
reported numbers when the analyst suspects earnings management.
3) Financial ratio analysis should be based on regrouped and adjusted financial statements.
Two types of ratio analysis are performed: 3.1) Analysis of risk and 3.2) analysis of
profitability:

3.1) Analysis of risk typically aims at detecting the underlying credit risk of the firm. Risk
analysis consists of liquidity and solvency analysis. Liquidity analysis aims at analyzing
whether the firm has enough liquidity to meet its obligations when they should be paid. A
usual technique to analyze illiquidity risk is to focus on ratios such as the current ratio and
interest coverage. Cash flow analysis is also useful. Solvency analysis aims at analyzing
whether the firm is financed so that it is able to recover from a loss or a period of losses. A
usual technique to analyze insolvency risk is to focus on ratios such as the equity in
percentage of total capital and other ratios of capital structure. Based on the risk analysis the
analyzed firm could be rated, i.e. given a grade on the riskiness, a process called synthetic
rating.

Ratios of risk such as the current ratio, the interest coverage and the equity percentage have
no theoretical benchmarks. It is therefore common to compare them with the industry average
over time. If a firm has a higher equity ratio than the industry, this is considered less risky
than if it is above the average. Similarly, if the equity ratio increases over time, it is a good
sign in relation to insolvency risk.

3.2) Analysis of profitability refers to the analysis of return on capital, for example return on
equity, ROE, defined as earnings divided by average equity. Return on equity, ROE, could be
decomposed: ROE = RNOA + (RNOA - NFIR) * NFD/E, where RNOA is return on net
operating assets, NFIR is the net financial interest rate, NFD is net financial debt and E is
equity. In this way, the sources of ROE could be clarified.

Unlike other ratios, return on capital has a theoretical benchmark, the cost of capital - also
called the required return on capital. For example, the return on equity, ROE, could be
compared with the required return on equity, kE, as estimated, for example, by the capital
asset pricing model. If ROE < kE (or RNOA > WACC, where WACC is the weighted
average cost of capital), then the firm is economically profitable at any given time over the
period of ratio analysis. The firm creates values for its owners.
Insights from financial statement analysis could be used to make forecasts and to evaluate
credit risk and value the firm's equity. For example, if financial statement analysis detects
increasing superior performance ROE - kE > 0 over the period of financial statement
analysis, then this trend could be extrapolated into the future. But as economic theory
suggests, sooner or later the competitive forces will work - and ROE will be driven toward
kE.

A financial statement (or financial report) is a formal record of the financial activities of a
business, person, or other entity. In British English—including United Kingdom company
law—a financial statement is often referred to as an account, although the term financial
statement is also used, particularly by accountants.

For a business enterprise, all the relevant financial information, presented in a structured
manner and in a form easy to understand, are called the financial statements. They typically
include four basic financial statements, accompanied by a management discussion and
analysis:

1. Statement of Financial Position: also referred to as a balance sheet, reports on a

company's assets, liabilities, and ownership equity at a given point in time.

2. Statement of Comprehensive Income: also referred to as Profit and Loss statement

(or a "P&L"), reports on a company's income, expenses, and profits over a period of
time. A Profit & Loss statement provides information on the operation of the
enterprise. These include sale and the various expenses incurred during the processing
state.

3. Statement of Changes in Equity: explains the changes of the company's equity

throughout the reporting period

4. Statement of cash flows: reports on a company's cash flow activities, particularly its
operating, investing and financing activities.

For large corporations, these statements are often complex and may include an extensive set
of notes to the financial statements and explanation of financial policies and management
discussion and analysis. The notes typically describe each item on the balance sheet, income
statement and cash flow statement in further detail. Notes to financial statements are
considered an integral part of the financial statements.
Purpose of financial statements by business entities
"The objective of financial statements is to provide information about the financial position,
performance and changes in financial position of an enterprise that is useful to a wide range
of users in making economic decisions." Financial statements should be understandable,
relevant, reliable and comparable. Reported assets, liabilities, equity, income and expenses
are directly related to an organization's financial position.

Financial statements are intended to be understandable by readers who have "a reasonable
knowledge of business and economic activities and accounting and who are willing to study
the information diligently." Financial statements may be used by users for different purposes:

 Owners and managers require financial statements to make important business decisions
that affect its continued operations. Financial analysis is then performed on these
statements to provide management with a more detailed understanding of the figures.
These statements are also used as part of management's annual report to the stockholders.

 Employees also need these reports in making collective bargaining agreements (CBA)
with the management, in the case of labor unions or for individuals in discussing their
compensation, promotion and rankings.

 Prospective investors make use of financial statements to assess the viability of investing
in a business. Financial analyses are often used by investors and are prepared by
professionals (financial analysts), thus providing them with the basis for making
investment decisions.

 Financial institutions (banks and other lending companies) use them to decide whether to
grant a company with fresh working capital or extend debt securities (such as a long-term
bank loan or debentures) to finance expansion and other significant expenditures.

 Government entities (tax authorities) need financial statements to ascertain the propriety
and accuracy of taxes and other duties declared and paid by a company.

 Vendors who extend credit to a business require financial statements to assess the
creditworthiness of the business.

 Media and the general public are also interested in financial statements for a variety of
reasons.

Government financial statements

The rules for the recording, measurement and presentation of government financial
statements may be different from those required for business and even for non-profit
organizations. They may use either of two accounting methods: accrual accounting, or cash
accounting, or a combination of the two (OCBOA). A complete set of chart of accounts is
also used that is substantially different from the chart of a profit-oriented business

Financial statements of not-for-profit organizations

The financial statements that not-for-profit organizations such as charitable organizations and
large voluntary associations publish, tend to be simpler than those of for-profit corporations.
Often they consist of just a balance sheet and a "statement of activities" (listing income and
expenses) similar to the "Profit and Loss statement" of a for-profit. Charitable organizations
in the United States are required to show their income and net assets (equity) in three
categories: Unrestricted (available for general use), Temporarily Restricted (to be released
after the donor's time or purpose restrictions have been met), and Permanently Restricted (to
be held perpetually, e.g., in an Endowment).

Personal financial statements

Personal financial statements may be required from persons applying for a personal loan or
financial aid. Typically, a personal financial statement consists of a single form for reporting
personally held assets and liabilities (debts), or personal sources of income and expenses, or
both. The form to be filled out is determined by the organization supplying the loan or aid.

Audit and legal implications

Although laws differ from country to country, an audit of the financial statements of a public
company is usually required for investment, financing, and tax purposes. These are usually
performed by independent accountants or auditing firms. Results of the audit are summarized
in an audit report that either provide an unqualified opinion on the financial statements or
qualifications as to its fairness and accuracy. The audit opinion on the financial statements is
usually included in the annual report.

There has been much legal debate over who an auditor is liable to. Since audit reports tend to
be addressed to the current shareholders, it is commonly thought that they owe a legal duty of
care to them. But this may not be the case as determined by common law precedent. In
Canada, auditors are liable only to investors using a prospectus to buy shares in the primary
market. In the United Kingdom, they have been held liable to potential investors when the
auditor was aware of the potential investor and how they would use the information in the
financial statements. Nowadays auditors tend to include in their report liability restricting
language, discouraging anyone other than the addressees of their report from relying on it.
Liability is an important issue: in the UK, for example, auditors have unlimited liability.

In the United States, especially in the post-Enron era there has been substantial concern about
the accuracy of financial statements. Corporate officers (the chief executive officer (CEO)
and chief financial officer (CFO)) are personally liable for attesting that financial statements
"do not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by th[e] report."
Making or certifying misleading financial statements exposes the people involved to
substantial civil and criminal liability. For example Bernie Ebbers (former CEO of
WorldCom) was sentenced to 25 years in federal prison for allowing WorldCom's revenues to
be overstated by billion over five years.

Standards and regulations

Different countries have developed their own accounting principles over time, making
international comparisons of companies difficult. To ensure uniformity and comparability
between financial statements prepared by different companies, a set of guidelines and rules
are used. Commonly referred to as Generally Accepted Accounting Principles (GAAP), these
set of guidelines provide the basis in the preparation of financial statements, although many
companies voluntarily disclose information beyond the scope of such requirements.

Recently there has been a push towards standardizing accounting rules made by the
International Accounting Standards Board ("IASB"). IASB develops International Financial
Reporting Standards that have been adopted by Australia, Canada and the European Union
(for publicly quoted companies only), are under consideration in South Africa and other
countries. The United States Financial Accounting Standards Board has made a commitment
to converge the U.S. GAAP and IFRS over time.

Inclusion in annual reports

To entice new investors, most public companies assemble their financial statements on fine
paper with pleasing graphics and photos in an annual report to shareholders, attempting to
capture the excitement and culture of the organization in a "marketing brochure" of sorts.
Usually the company's chief executive will write a letter to shareholders, describing
management's performance and the company's financial highlights.

In the United States, prior to the advent of the internet, the annual report was considered the
most effective way for corporations to communicate with individual shareholders. Blue chip
companies went to great expense to produce and mail out attractive annual reports to every
shareholder. The annual report was often prepared in the style of a coffee table book.

Moving to electronic financial statements

Financial statements have been created on paper for hundreds of years. The growth of the
Web has seen more and more financial statements created in an electronic form which is
exchangeable over the Web. Common forms of electronic financial statements are PDF and
HTML. These types of electronic financial statements have their drawbacks in that it still
takes a human to read the information in order to reuse the information contained in a
financial statement.

More recently a market driven global standard, XBRL (Extensible Business Reporting
Language), which can be used for creating financial statements in a structured and computer
readable format, has become more popular as a format for creating financial statements.
Many regulators around the world such as the U.S. Securities and Exchange Commission
have mandated XBRL for the submission of financial information.

The UN/CEFACT created, with respect to Generally Accepted Accounting Principles,

(GAAP), internal or external financial reporting XML messages to be used between
enterprises and their partners, such as private interested parties (e.g. bank) and public
collecting bodies (e.g. taxation authorities). Many regulators use such messages to collect
financial and economic information.

In financial accounting, a balance sheet or statement of financial position is a summary of

the financial balances of a sole proprietorship, a business partnership, a corporation or other
business organization, such as an LLC or an LLP. Assets, liabilities and ownership equity are
listed as of a specific date, such as the end of its financial year. A balance sheet is often
described as a "snapshot of a company's financial condition". Of the four basic financial
statements, the balance sheet is the only statement which applies to a single point in time of a
business' calendar year.
A standard company balance sheet has three parts: assets, liabilities and ownership equity.
The main categories of assets are usually listed first, and typically in order of liquidity. Assets
are followed by the liabilities. The difference between the assets and the liabilities is known
as equity or the net assets or the net worth or capital of the company and according to the
accounting equation, net worth must equal assets minus liabilities.

Another way to look at the same equation is that assets equals liabilities plus owner's equity.
Looking at the equation in this way shows how assets were financed: either by borrowing
money (liability) or by using the owner's money (owner's equity). Balance sheets are usually
presented with assets in one section and liabilities and net worth in the other section with the
two sections "balancing."

A business operating entirely in cash can measure its profits by withdrawing the entire bank
balance at the end of the period, plus any cash in hand. However, many businesses are not
paid immediately; they build up inventories of goods and they acquire buildings and
equipment. In other words: businesses have assets and so they cannot, even if they want to,
immediately turn these into cash at the end of each period. Often, these businesses owe
money to suppliers and to tax authorities, and the proprietors do not withdraw all their
original capital and profits at the end of each period. In other words businesses also have
liabilities.

Types
A balance sheet summarizes an organization or individual's assets, equity and liabilities at a
specific point in time. We have two forms of balance sheet. They are the report form and the
account form. Individuals and small businesses tend to have simple balance sheets. Larger
businesses tend to have more complex balance sheets, and these are presented in the
organization's annual report. Large businesses also may prepare balance sheets for segments
of their businesses. A balance sheet is often presented alongside one for a different point in
time (typically the previous year) for comparison.

Personal balance sheet

A personal balance sheet lists current assets such as cash in checking accounts and savings
accounts, long-term assets such as common stock and real estate, current liabilities such as
loan debt and mortgage debt due, or overdue, long-term liabilities such as mortgage and other
loan debt. Securities and real estate values are listed at market value rather than at historical
cost or cost basis. Personal net worth is the difference between an individual's total assets and
total liabilities.

A small business bump that balance sheet lists current assets such as cash, accounts
receivable, and inventory, fixed assets such as land, buildings, and equipment, intangible
assets such as patents, and liabilities such as accounts payable, accrued expenses, and long-
term debt. Contingent liabilities such as warranties are noted in the footnotes to the balance
sheet. The small business's equity is the difference between total assets and total liabilities.

Public Business Entities balance sheet structure

Guidelines for balance sheets of public business entities are given by the International
Accounting Standards Board and numerous country-specific organizations/company’s.

Balance sheet account names and usage depend on the organization's country and the type of
organization. Government organizations do not generally follow standards established for
individuals or businesses.

If applicable to the business, summary values for the following items should be included in
the balance sheet: Assets are all the things the business owns, this will include property, tools,
cars, etc.

Assets
Current assets
1. Cash and cash equivalents
2. Accounts receivable
3. Inventories
4. Prepaid expenses for future services that will be used within a year

Non-current assets (Fixed assets)

1. Property, plant and equipment
2. Investment property, such as real estate held for investment purposes
3. Intangible assets
4. Financial assets (excluding investments accounted for using the equity method,
accounts receivables, and cash and cash equivalents)
5. Investments accounted for using the equity method
 6. Biological assets, which are living plants or animals. Bearer biological assets are
plants or animals which bear agricultural produce for harvest, such as apple trees
grown to produce apples and sheep raised to produce wool.

Liabilities
See Liability (accounting)
1. Accounts payable
2. Provisions for warranties or court decisions
3. Financial liabilities (excluding provisions and accounts payable), such as promissory
notes and corporate bonds
4. Liabilities and assets for current tax
5. Deferred tax liabilities and deferred tax assets
6. Unearned revenue for services paid for by customers but not yet provided

Equity
The net assets shown by the balance sheet equals the third part of the balance sheet, which is
known as the shareholders' equity. It comprises:
1. Issued capital and reserves attributable to equity holders of the parent company
(controlling interest)
2. Non-controlling interest in equity

Formally, shareholders' equity is part of the company's liabilities: they are funds "owing" to
shareholders (after payment of all other liabilities); usually, however, "liabilities" is used in
the more restrictive sense of liabilities excluding shareholders' equity. The balance of assets
and liabilities (including shareholders' equity) is not a coincidence. Records of the values of
each account in the balance sheet are maintained using a system of accounting known as
double-entry bookkeeping. In this sense, shareholders' equity by construction must equal
assets minus liabilities, and are a residual.Regarding the items in equity section, the following
disclosures are required:
1. Numbers of shares authorized, issued and fully paid, and issued but not fully paid
2. Par value of shares
3. Reconciliation of shares outstanding at the beginning and the end of the period
4. Description of rights, preferences, and restrictions of shares
5. Treasury shares, including shares held by subsidiaries and associates
6. Shares reserved for issuance under options and contracts
 7. A description of the nature and purpose of each reserve within owners' equity

Income statement (also referred to as profit and loss statement (P&L), revenue statement,
statement of financial performance, earnings statement, operating statement or statement
of operations) is a company's financial statement that indicates how the revenue (money
received from the sale of products and services before expenses are taken out, also known as
the "top line") is transformed into the net income (the result after all revenues and expenses
have been accounted for, also known as Net Profit or the "bottom line"). It displays the
revenues recognized for a specific period, and the cost and expenses charged against these
revenues, including write-offs (e.g., depreciation and amortization of various assets) and
taxes. The purpose of the income statement is to show managers and investors whether the
company made or lost money during the period being reported.

The important thing to remember about an income statement is that it represents a period of
time. This contrasts with the balance sheet, which represents a single moment in time.

Charitable organizations that are required to publish financial statements do not produce an
income statement. Instead, they produce a similar statement that reflects funding sources
compared against program expenses, administrative costs, and other operating commitments.
This statement is commonly referred to as the statement of activities. Revenues and expenses
are further categorized in the statement of activities by the donor restrictions on the funds
received and expended.

The income statement can be prepared in one of two methods. The Single Step income
statement takes a simpler approach, totaling revenues and subtracting expenses to find the
bottom line. The more complex Multi-Step income statement (as the name implies) takes
several steps to find the bottom line, starting with the gross profit. It then calculates operating
expenses and, when deducted from the gross profit, yields income from operations. Adding to
income from operations is the difference of other revenues and other expenses. When
combined with income from operations, this yields income before taxes. The final step is to
deduct taxes, which finally produces the net income for the period measured.

Usefulness and limitations of income statement

Income statements should help investors and creditors determine the past financial
performance of the enterprise, predict future performance, and assess the capability of
generating future cash flows through report of the income and expenses.However,
information of an income statement has several limitations:
 Items that might be relevant but cannot be reliably measured are not reported (e.g.
brand recognition and loyalty).
 Some numbers depend on accounting methods used (e.g. using FIFO or LIFO
accounting to measure inventory level).
 Some numbers depend on judgments and estimates (e.g. depreciation expense
depends on estimated useful life and salvage value).

Guidelines for statements of comprehensive income and income statements of business

entities are formulated by the International Accounting Standards Board and numerous
country-specific organizations, for example the FASB in the U.S..

Names and usage of different accounts in the income statement depend on the type of
organization, industry practices and the requirements of different jurisdictions.

If applicable to the business, summary values for the following items should be included in
the income statement:

Operating section
 Revenue - Cash inflows or other enhancements of assets of an entity during a period
from delivering or producing goods, rendering services, or other activities that
constitute the entity's ongoing major operations. It is usually presented as sales minus
sales discounts, returns, and allowances. Every time a business sells a product or
performs a service, it obtains revenue. This often is referred to as gross revenue or
sales revenue.
 Expenses - Cash outflows or other using-up of assets or incurrence of liabilities
during a period from delivering or producing goods, rendering services, or carrying
out other activities that constitute the entity's ongoing major operations.
o Cost of Goods Sold (COGS) / Cost of Sales - represents the direct costs
attributable to goods produced and sold by a business (manufacturing or
merchandizing). It includes material costs, direct labour, and overhead costs (as in
absorption costing), and excludes operating costs (period costs) such as selling,
administrative, advertising or R&D, etc.
 o Selling, General and Administrative expenses (SG&A or SGA) - consist of
the combined payroll costs. SGA is usually understood as a major portion of non-
production related costs, in contrast to production costs such as direct labour.
 Selling expenses - represent expenses needed to sell products (e.g. salaries of sales
people, commissions and travel expenses, advertising, freight, shipping, depreciation
of sales store buildings and equipment, etc.).
 General and Administrative (G&A) expenses - represent expenses to manage the
business (salaries of officers / executives, legal and professional fees, utilities,
insurance, depreciation of office building and equipment, office rents, office supplies,
etc.).
 Depreciation / Amortization - the charge with respect to fixed assets / intangible
assets that have been capitalised on the balance sheet for a specific (accounting)
period. It is a systematic and rational allocation of cost rather than the recognition of
market value decrement.
 Research & Development (R&D) expenses - represent expenses included in
research and development.

Expenses recognised in the income statement should be analysed either by nature (raw
materials, transport costs, staffing costs, depreciation, employee benefit etc.) or by function
(cost of sales, selling, administrative, etc.). (IAS 1.99) If an entity categorises by function,
then additional information on the nature of expenses, at least, – depreciation, amortisation
and employee benefits expense – must be disclosed. (IAS 1.104) The major exclusive of costs
of goods sold, are classified as operating expenses. These represent the resources expended,
except for inventory purchases, in generating the revenue for the period. Expenses often are
divided into two broad sub classicifications selling expenses and administrative expenses.

Non-operating section
 Other revenues or gains - revenues and gains from other than primary business
activities (e.g. rent, income from patents). It also includes unusual gains that are either
unusual or infrequent, but not both (e.g. gain from sale of securities or gain from
disposal of fixed assets)
 Other expenses or losses - expenses or losses not related to primary business
operations, (e.g. foreign exchange loss).
  Finance costs - costs of borrowing from various creditors (e.g. interest expenses,
bank charges).
 Income tax expense - sum of the amount of tax payable to tax authorities in the
current reporting period (current tax liabilities/ tax payable) and the amount of
deferred tax liabilities (or assets).

Irregular items
They are reported separately because this way users can better predict future cash flows -
irregular items most likely will not recur. These are reported net of taxes.
 Discontinued operations is the most common type of irregular items. Shifting
business location(s), stopping production temporarily, or changes due to technological
improvement do not qualify as discontinued operations. Discontinued operations must
be shown separately.

Cumulative effect of changes in accounting policies (principles) is the difference between

the book value of the affected assets (or liabilities) under the old policy (principle) and what
the book value would have been if the new principle had been applied in the prior periods.
For example, valuation of inventories using LIFO instead of weighted average method. The
changes should be applied retrospectively and shown as adjustments to the beginning
balance of affected components in Equity. All comparative financial statements should be
restated. (IAS 8)However, changes in estimates (e.g. estimated useful life of a fixed asset)
only requires prospective changes.

No items may be presented in the income statement as extraordinary items under IFRS
regulations, but are permissible under US GAAP. Extraordinary items are both unusual
(abnormal) and infrequent, for example, unexpected natural disaster, expropriation,
prohibitions under new regulations. [Note: natural disaster might not qualify depending on
location (e.g. frost damage would not qualify in Canada but would in the tropics).]

Additional items may be needed to fairly present the entity's results of operations.

Disclosures
Certain items must be disclosed separately in the notes (or the statement of comprehensive
income), if material, including:
  Write-downs of inventories to net realisable value or of property, plant and equipment
to recoverable amount, as well as reversals of such write-downs
 Restructurings of the activities of an entity and reversals of any provisions for the
costs of restructuring
 Disposals of items of property, plant and equipment
 Disposals of investments
 Discontinued operations
 Litigation settlements
 Other reversals of provisions

Earnings per share

Because of its importance, earnings per share (EPS) are required to be disclosed on the face
of the income statement. A company which reports any of the irregular items must also report
EPS for these items either in the statement or in the notes.

There are two forms of EPS reported:

 Basic: in this case "weighted average of shares outstanding" includes only actual
stocks outstanding.
 Diluted: in this case "weighted average of shares outstanding" is calculated as if all
stock options, warrants, convertible bonds, and other securities that could be
transformed into shares are transformed. This increases the number of shares and so
EPS decreases. Diluted EPS is considered to be a more reliable way to measure
EPS.

Sample income statement

The following income statement is a very brief example prepared in accordance with IFRS. It
does not show all possible kinds of items appeared a firm, but it shows the most usual ones.
Please note the difference between IFRS and US GAAP when interpreting the following
sample income statements.

Bottom line
"Bottom line" is the net income that is calculated after subtracting the expenses from revenue.
Since this forms the last line of the income statement, it is informally called "bottom line." It
is important to investors as it represents the profit for the year attributable to the shareholders.

After revision to IAS 1 in 2003, the Standard is now using profit or loss for the year rather
than net profit or loss or net income as the descriptive term for the bottom line of the income
statement.

Requirements of IFRS
, the International Accounting Standards Board issued a revised IAS 1: Presentation of
Financial Statements, which is effective for annual periods beginning.A business entity
adopting IFRS must include:
 a Statement of Comprehensive Income or
 two separate statements comprising:
1. an Income Statement displaying components of profit or loss and
2. A Statement of Comprehensive Income that begins with profit or loss (bottom line of the
income statement) and displays the items of other comprehensive income for the
reporting period.

All non-owner changes in equity (i.e. comprehensive income ) shall be presented in either in
the statement of comprehensive income (or in a separate income statement and a statement of
comprehensive income). Components of comprehensive income may not be presented in the
statement of changes in equity.

Comprehensive income for a period includes profit or loss (net income) for that period and
other comprehensive income recognized in that period.

All items of income and expense recognized in a period must be included in profit or loss
unless a Standard or an Interpretation requires otherwise. Some IFRSs require or permit that
some components to be excluded from profit or loss and instead to be included in other
comprehensive income.

Items and disclosures

The statement of comprehensive income should include:
1. Revenue
 2. Finance costs (including interest expenses)
3. Share of the profit or loss of associates and joint ventures accounted for using the
equity method
4. Tax expense
5. A single amount comprising the total of (1) the post-tax profit or loss of discontinued
operations and (2) the post-tax gain or loss recognized on the disposal of the assets or
disposal group(s) constituting the discontinued operation
6. Profit or loss
7. Each component of other comprehensive income classified by nature
8. Share of the other comprehensive income of associates and joint ventures accounted
for using the equity method
9. Total comprehensive income

The following items must also be disclosed in the statement of comprehensive income as
allocations for the period:
 Profit or loss for the period attributable to non-controlling interests and owners of the
parent
 Total comprehensive income attributable to non-controlling interests and owners of
the parent

No items may be presented in the statement of comprehensive income (or in the income
statement, if separately presented) or in the notes as extraordinary items.

Financial statement analysis is, of course, the underlying purpose of preparing financial
statements. Everyone who looks at your financial statements will be automatically
performing some form of analysis. Your banker will quickly analyze them to determine your
capability of paying back a loan.

Your investor(s) will always perform a financial statement analysis to determine if you have
been performing according to plan, and/or whether your business is a good investment.

Your suppliers will analyze your financial statements to determine your credit worthiness—
and so on.
The important thing to remember is: everyone who looks at your financial statements will
conduct a financial statement analysis, in one form or another. That is why your statements
need to be as accurate and truthful as possible.

You, as well as your business, will be judged according to your financial statements.

But the most important aspect of financial statement analysis is the analysis you perform
yourself.

There are three major analyses you need to make. There are many others as well, but we’ll
stick to the three major ones here, as follows:
1. Actual vs. Planned Performance
You did considerable business planning before you started your business (and you likely
updated it for the banks, investors, or suppliers), complete with pro forma financial statements
(no matter how crude).

So, after your business is operating, you will need to compare your actual performance (from
your financial statements) against your planned performance (from your pro forma financial
statements).

This financial statement analysis should be performed line item by line item. If you had fewer
sales than planned … you should know or find out why. If any costs were greater than
planned … again, you should know or find out why.

Ever dollar received, and every dollar spent shows up on your financial statements, and every
dollar that is different than you planned should be analyzed. This could be a good thing as
you may need to change your planning.

This is where it becomes important to have an advisory group where you can bounce
information, and ideas, around.

2.Trend Analysis
By comparing current financial statements to previous financial statements you can see which
areas of your business have changed, and by how much. Then you need to determine why the
change occurred, whether positive or negative:
 Are sales trending up?
  Are costs trending down (which ones aren’t)?
 Are profits trending up?
 Is your cash flow improving?

These are the types of things you will want to look at in your financial statement analysis.
Like the performance analysis, you need to analyze your financial statements line item by
line item to determine trends … and don't be afraid to change your planning if you see a new
trend emerging.

3.lIndustry Comparisons
This analysis is not only a comparison or your business’s performance to others in your
industry, but also to standards set by your banker, your investor(s), your advisory group, or
even yourself. These comparisons are usually made in the form of financial “ratios.”Here are
a few of the more common financial ratio analyses:

 Balance Sheet Ratios.

Balance Sheet ratios typically measure the strength of your business, using the following
formulas:

 Current Ratio — This is one of the most widely used tests of financial strength, and
is calculated by dividing Current Assets by Current Liabilities. This ratio is used to
determine if your business is likely to be able to pay its bills. Obviously, a minimum
acceptable ratio would be 1:1; otherwise your company would not be expected to pay
its bills on time. A ratio of 2:1 is much more acceptable, and the higher, the better.

 Quick Ratio — This is sometimes called the “acid test” ratio because it concentrates
on only the more liquid assets of your business. It is calculated by dividing the sum of
Cash and Receivables by Current Liabilities. It excludes inventories or any other
current asset that might have questionable liquidity. Depending on your history for
collecting receivables, a satisfactory ratio is 1:1.

 Working Capital — Bankers especially, watch this calculation very closely as it

deals more with cash flow than just a simple ratio. Working Capital equals Current
Assets minus Current Liabilities. Quite often your banker will tie your loan approval
amount to a minimum Working Capital requirement.

 Inventory Turnover Ratio — Not every business has an inventory that needs to be
of concern, and if that is your situation you can ignore this ratio. This ratio tells you if
 your inventory is turning over fast enough, and is calculated by dividing Net Sales by
your average Inventory (at cost).If you are concerned about your inventory, then you
definitely should watch this ratio carefully when comparing it to industry guidelines.

 Leverage Ratio — This is another of the analyses used by bankers to determine if

your business is credit worthy. It basically shows the extent your business relies on
debt to keep operating. This ratio is calculated by dividing Total Liabilities by Net
Worth (total assets minus total liabilities). Obviously, the higher the ratio is, the more
risky it becomes to extend credit to your business. This is often the calculation a
supplier to your business will make before extending credit to you.

 P&L Ratios

Profit and Loss (P&L) financial statements also have some important ratio
calculations for your financial statement analysis:

 Gross Profit Ratio — This is the most common calculation on your P&L—it is
simply your Gross Profit divided by Net Sales. Often, different industries will have
standard guidelines that you can compare your business’s numbers to. It is also
desirable to watch your trends and not let this number move too far from your target.

 Net Profit Ratio — This calculation is simply Net Pre-tax Profit divided by Net
Sales. Other than wanting this number to be as large as possible, I usually don’t pay
too much attention to it because it includes too many non-operating costs
(depreciation, amortization, etc.) to be of any real analysis value. (Your banker may
be interested however.)

 Management Ratios.There are a couple of other ratios that interested outside parties
will want to analyze:

 Return on Assets — This is calculated by dividing Net Pre-tax Profit by Total

Assets. The ratio is supposed to indicate how efficiently you are utilizing your assets.
To me, this is a useless analysis for helping you run your business. However, bankers
and investors will always calculate this ratio if you don’t.

 Return on Investment (ROI) — To a bank or investor this is the most important

ratio of all. It is supposed to tell you—the business owner—if you are investing your
time, and money, properly, or should you just liquidate your business and put the
money into a savings account.
This, of course, is pure bull … concocted by non-entrepreneurs and academics who have no
idea what it means to be an entrepreneur.

Having said that, I do realize it can be of some value to a banker or investor—they likely
want to know if they could make a better return on their money by investing or loaning it to
someone other than you. So, for that purpose, it can be valuable … to them. To calculate your
Return on Investment, divide your Net Pre-tax Profit by your Net Worth (total assets minus
total liabilities).

CHAPTER-III
INDUSTRY PROFILE
&
COMPANY PROFILE
 3.1INDUSTRY PROFILE

The Indian banking system consists of 12 public sector banks, 22 private sector banks, 44 foreign
banks, 56 regional rural banks, 1,485 urban cooperative banks and 96,000 rural cooperative
banks in addition to cooperative credit institutions. As of August 2020, total number of ATMs in
India increased to 209,110 and is expected to reach 407,000 by 2021.

According to Reserve Bank of India (RBI), India’s foreign exchange reserve reached US$

560.53 billion as on October 23, 2020. According to the Reserve Bank of India (RBI), bank
credit and deposits stood at Rs. 103.43 lakh crore (US$ 1.39 trillion) and Rs. 143.02 lakh crore
(US$ 1.92 trillion), respectively, in the fortnight ending October 9, 2020.

Credit to non-food industries stood at Rs. 102.80 lakh crore (US$ 1.38 trillion) as of October 9,
2020.

Asset of public sector banks stood at Rs. 107.83 lakh crore (US$ 1.52 trillion) in FY20.

Total assets across the banking sector (including public, private sector and foreign banks)
increased to US$ 2.52 trillion in FY20.

Indian banks are increasingly focusing on adopting integrated approach to risk management. The
NPAs (Non-Performing Assets) of commercial banks has recorded a recovery of Rs. 400,000
crore (US$ 57.23 billion) in FY19, which is highest in the last four years.

As per Union Budget 2019-20, investment-driven growth required access to low cost capital, and
this would require investment of Rs. 20 lakh crore (US$ 286.16 billion) every year.

RBI has decided to set up Public Credit Registry (PCR), an extensive database of credit
information, accessible to all stakeholders. The Insolvency and Bankruptcy Code (Amendment)
Ordinance, 2017 Bill has been passed and is expected to strengthen the banking sector. Total
equity funding of microfinance sector grew 42% y-o-y to Rs. 14,206 crore (US$ 2.03 billion) in
2018-19.

Bank accounts opened under the Government’s flagship financial inclusion drive Pradhan Mantri
Jan Dhan Yojana (PMJDY) reached 40.05 crore and deposits in Jan Dhan bank accounts stood at

41
 more than Rs. 1.30 lakh crore (US$ 18.44 billion). Rising income is expected to enhance the
need for banking services in rural areas, and therefore, drive the growth of the sector.

The digital payments revolution will trigger massive changes in the way credit is disbursed in
India. Debit cards have radically replaced credit cards as the preferred payment mode in India
after demonetisation. Payments on Unified Payments Interface (UPI) hit an all-time high of 1.49
billion in terms of volume with transactions worth nearly Rs. 2.90 lakh crore (US$ 41.22 billion)
in July 2020.

As per the Reserve Bank of India (RBI), India’s banking sector is sufficiently capitalised and
well-regulated. The financial and economic conditions in the country are far superior to any
other country in the world. Credit, market and liquidity risk studies suggest that Indian banks are
generally resilient and have withstood the global downturn well.

Indian banking industry has recently witnessed the roll out of innovative banking models like
payments and small finance banks. RBI’s new measures may go a long way in helping the
restructuring of the domestic banking industry.

The digital payments system in India has evolved the most among 25 countries with India’s
Immediate Payment Service (IMPS) being the only system at level five in the Faster Payments
Innovation Index (FPII). *

Market Size

The Indian banking system consists of 12 public sector banks, 22 private sector banks, 46 foreign
banks, 56 regional rural banks, 1485 urban cooperative banks and 96,000 rural cooperative banks
in addition to cooperative credit institutions. As of August 2020, the total number of ATMs in
India increased to 209,110 and is further expected to increase to 407,000 by 2021.

 Asset of public sector banks stood at Rs. 107.83 lakh crore (US$ 1.52 trillion) in FY20.
 During FY16-FY20, bank credit grew at a CAGR of 3.57%. As of FY20, total credit
extended surged to US$ 1,698.97 billion.
 During FY16-FY20, deposits grew at a CAGR of 13.93% and reached US$ 1.93 trillion
by FY20. Credit to non-food industries stood at Rs. 102.80 lakh crore (US$ 1.38 trillion)
as of October 9, 2020.

42
 Investments/Developments

Key investments and developments in India’s banking industry include:

 On November 6, 2020, WhatsApp started UPI payments service in India on receiving the
National Payments Corporation of India (NPCI) approval to ‘Go Live’ on UPI in a
graded manner.
 In October 2020, HDFC Bank and Apollo Hospitals partnered to launch the ‘HealthyLife
Programme’, a holistic healthcare solution that makes healthy living accessible and
affordable on Apollo’s digital platform.
 In 2019, banking and financial services witnessed 32 M&A (merger and acquisition)
activities worth US$ 1.72 billion.
 In March 2020, State Bank of India (SBI), India’s largest lender, raised US$ 100 million
in green bonds through private placement.
 In February 2020, the Cabinet Committee on Economic Affairs gave its approval for
continuation of the process of recapitalization of Regional Rural Banks (RRBs) by
providing minimum regulatory capital to RRBs for another year beyond 2019-20 - till
2020-21 to those RRBs which are unable to maintain minimum Capital to Risk weighted
Assets Ratio (CRAR) of 9% as per the regulatory norms prescribed by RBI.
 In October 2019, Department of Post launched the mobile banking facility for all post
office savings account holders of CBS (core banking solutions) post office.
 Deposits under Pradhan Mantri Jan Dhan Yojana (PMJDY) stood at Rs. 1.06 lakh crore
(US$ 15.17 billion.
 In October 2019, Government e-Marketplace (GeM) signed a memorandum of
understanding (MoU) with Union Bank of India to facilitate a cashless, paperless and
transparent payment system for an array of services.
 In August 2019, the Government announced major mergers of public sector banks, which
included United Bank of India and Oriental Bank of Commerce to be merged with Punjab
National Bank, Allahabad Bank to be amalgamated with Indian Bank and Andhra Bank
and Corporation Bank to be consolidated with Union Bank of India.

43
  The NPAs (Non-Performing Assets) of commercial banks recorded a recovery of Rs.
400,000 crore (US$ 57.23 billion) in the last four years including record recovery of Rs.
156,746 crore (US$ 22.42 billion) in FY19.
 Allahabad Bank’s board approved the merger with Indian bank for the consolidation of
10 state-run banks into the large-scale lenders.
 The total equity funding of microfinance sector grew at 42 y-o-y to Rs. 14,206 crore
(US$ 2.03 billion) in 2018-19.

Government Initiatives

 As per Union Budget 2019-20, the Government proposed fully automated GST refund
module and an electronic invoice system that will eliminate the need for a separate e-way
bill.
 Under the Budget 2019-20, Government proposed Rs. 70,000 crore (US$ 10.2 billion) to
the public sector banks.
 Government smoothly carried out consolidation, reducing the number of Public Sector
Banks by eight.
 As of September 2018, the Government of India made Pradhan Mantri Jan Dhan Yojana
(PMJDY) scheme an open-ended scheme and added more incentives.
 The Government of India planned to inject Rs. 42,000 crore (US$ 5.99 billion) in public
sector banks by March.

Achievements
Following are the achievements of the Government:
 In October 2020, Unified Payments Interface (UPI) recorded 2.07 billion transactions
worth Rs. 3.86 lakh crore (US$ 52.10 billion).
 As on March 31, 2019, the number of debit and credit cards issued were 925 million and
47 million, respectively.
 According to RBI, India’s foreign exchange reserve stood at approximately US$ 414.14
billion as of April 19, 2020.

44
  To improve infrastructure in villages, 204,000 point of sale (PoS) terminals have been
sanctioned from the Financial Inclusion Fund by National Bank for Agriculture & Rural
Development (NABARD).
 Deposits under Pradhan Mantri Jan Dhan Yojana (PMJDY) increased to Rs. 1.28 lakh
crore (US$ 18.16 billion) during the week ended April 8, 2020.

Road Ahead

Enhanced spending on infrastructure, speedy implementation of projects and continuation of

reforms are expected to provide further impetus to growth in the banking sector. All these factors
suggest that India’s banking sector is poised for a robust growth as rapidly growing businesses
will turn to banks for their credit needs.

Also, the advancement in technology has brought mobile and internet banking services to the
fore. The banking sector is laying greater emphasis on providing improved services to their
clients and upgrading their technology infrastructure to enhance customer’s overall experience as
well as give banks a competitive edge.

India’s digital lending stood at US$ 75 billion in FY18 and is estimated to reach US$ 1 trillion
by FY23 driven by the five-fold increase in the digital disbursements.

EVOLUTION OF THE INDIAN BANKING SECTOR

45
THE STRUCTURE OF INDIAN BANKING SECTOR

INDIAN BANKING SECTOR HAS GROWN AT A HEALTHY PACE…(1/2)

 Credit off-take has been surging ahead over the past decade, aided by strong economic
growth, rising disposable incomes, increasing consumerism and easier access to credit.
 During FY16-FY20, bank credit grew at a CAGR of 3.57%. As of FY20, total credit
extended surged to US$ 1,698.97 billion.
 Demand has grown for both corporate and retail loans. Services, real estate, consumer
durables and agriculture allied sectors have led the growth in credit.
 According to the Reserve Bank of India (RBI), bank credit and deposits stood at Rs.
103.43 lakh crore (US$ 1.39 trillion) and Rs. 143.02 lakh crore (US$ 1.92 trillion),
respectively, in the fortnight ending October 9, 2020.
 Credit to non-food industries stood at Rs. 102.80 lakh crore (US$ 1.38 trillion) as of
October 9, 2020.

46
 Access to banking system has also improved over the years due to persistent effort from
Government to promote banking technology and promote expansion in unbanked and
non-metropolitan regions.
 At the same time, India’s banking sector has remained stable despite global upheavals,
thereby retaining public confidence over the years.
 Strong growth in savings amid rising disposable income levels are the major factors
influencing deposit growth.
 Bank accounts opened under the Government’s flagship financial inclusion drive Pradhan
Mantri Jan Dhan Yojana (PMJDY) reached 40.05 crore and deposits in Jan Dhan bank
accounts stood at more than Rs. 1.30 lakh crore (US$ 18.44 billion).
 Opportunity:
• Significant growth possible in private sector lending as credit disbursal by private
sector banks is expected to increase.
• Market share of private banks in advances is expected to increase from 27.7% in
2017-18 to nearly 35% in 2019-20.

47
ASSETS BASE CONTINUES TO EXPAND

 In FY17-FY20, bank assets across sectors increased. Total assets across the banking
sector (including public, private sector and foreign banks) increased to US$ 2.52 trillion
in FY20.
 In FY20, total assets in the public and private banking sectors were US$ 1,529.72 billion
and US$ 814.42 billion, respectively.
 Assets of public sector banks accounted for 60.62% of the total banking assets (including
public, private sector and foreign banks).

48
INTEREST INCOME HAS SEEN ROBUST GROWTH

 Public sector banks accounted for over 58% interest income in FY20.
 Interest income of public banks reached US$ 101.60 billion in FY20.
 In FY20, interest income in the private banking sector reached US$ 63.64 billion,
whereas those of foreign banks stood at US$ 9.45 billion.

GROWTH IN ‘OTHER INCOME’ ALSO ON A POSITIVE TREND

 Public sector banks accounted for about 50.9% of other income.

 ‘Other income’ for public sector banks stood at US$ 16.75 billion in FY20.
 In FY20, ‘other income’ in the private banking sector was US$ 13.83 billion and in
foreign banks was US$ 2.35 billion.

49
INVESTMENT DEPOSIT RATIO AND LOAN-TODEPOSIT RATIO
SHOWING AN UPTREND

 Loan-to-Deposit ratio for banks across sectors has increased over the years.
 Private and foreign banks have posted high return on asset than nationalised and public
banks. This has prompted most of the foreign banks to start their operations in India.

50
 COMPANY PROFILE

STATE BANK OF INDIA

State Bank of India (SBI) is the largest state-owned banking and financial services company in
India. The bank provides banking services to the customer. In addition to the banking services,
the bank through its subsidiaries, provides a range of financial services, which include life
insurance, merchant banking, mutual funds, credit card, factoring, security trading, pension fund
management and primary dealership in the money market.

The Bank operates in four business segments, namely Treasury, Corporate/ Wholesale Banking,
Retail Banking and Other Banking Business. The Treasury segment includes the investment
portfolio and trading in foreign exchange contracts and derivative contracts. The Corporate/
Wholesale Banking segment comprises the lending activities of Corporate Accounts Group, Mid
Corporate Accounts Group and Stressed Assets Management Group. The Retail Banking
segment consists of branches in National Banking Group, which primarily includes personal
banking activities, including lending activities to corporate customers having banking relations
with branches in the National Banking Group.

SBI provides a range of banking products through their vast network of branches in India and
overseas, including products aimed at NRIs. The State Bank Group, with over 16,000 branches,
has the largest banking branch network in India. The State bank of India is the 10th most reputed
company in the world according to Forbes.

The bank has 190 overseas offices spread over 36 countries. They have branches of the parent in
Colombo, Dhaka, Frankfurt, Hong Kong, Johannesburg, London and environs, Los Angeles,
Male in the Maldives, Muscat, New York, Osaka, Sydney, and Tokyo. They have offshore

51
banking units in the Bahamas, Bahrain, and Singapore, and representative offices in Bhutan and
Cape Town.

State Bank of India was incorporated in the year 1955. The Bank traces their ancestry to British
India, through the Imperial Bank of India, to the founding in 1806 of the Bank of Calcutta,
making them the oldest commercial bank in the Indian Sub-continent. The Government of India
nationalized the Imperial Bank of India in the year 1955, with the Reserve Bank of India taking a
60% stake, and name was changed to State Bank of India.

In the year 2001, the SBI Life Insurance Company was started by the Bank. They are the only
Bank that have been permitted 74% stake in the insurance business. The Bank's insurance
subsidiary 'SBI Life Insurance Company' is a joint venture with Cardiff S.A in which Cardiff
holds 26% of the stake.

During the year 2005-06, the bank introduced 'SBI e-tax' an online tax payments facility for
direct and indirect tax payment. They also launched the centralized pension processing. The
Bank made a partnership with Tata Consultancy Services for setup C-Edg Technologies and
consulting services to the banking, financial services and insurance industry. The bank was noted
as 'The most preferred bank' in a survey by TV 18 in association with AC Nielsen-ORG Marg.
Also, the Bank was voted as 'The most preferred housing loan provider' in AWAAZ consumer
awards for the year 2006.

In the customer loyalty survey 2006-07 conducted by 'Business World', the Bank was ranked
number one in all parameters of customer satisfaction, service orientation, customer care/ call
center, customer loyalty and home loans. SBI Funds was judged 'Mutual fund of the year' by
CNBC/TV-18/CRISL. The Bank introduced new products and services such as web-based
remittance, instant fund transfer, and online-trading and comprehensive cash management.

During the year 2007-08, the Bank launched 965 branches all over the country. They inaugurated
a new state-of-the art Dealing Room with online connectivity to all active forex intensive
Branches at Corporate Centre in Mumbai. They launched a new product, Construction
Equipment Loan to cater to construction Companies. Also, they introduced new products such as
SBI Reverse Mortgage Loan and SBI Home Plus in the areas of Home Loans.

52
During the year, the RBI transferred their entire shareholding in the Bank representing 59.73% of
the issued capital of the Bank to the Government of India. The Bank acquired 92.03% of equity
of Global Trade Finance Ltd. Consequently, GTFL became a subsidiary of the Bank. They
signed anMoU with the Indian railways for installing ATMs at 682 railway stations. In March
2008, the Bank opened their 10,000th branch and became only the second bank in the world to
have more than 10,000 branches after China's ICBC.

During the year 2008-09, the company launched Import factoring, a new product in association
with SBI Factors & Commercial Services Ltd. They increased the number of branches for retail
sale of gold coins from 250 to 518. Also, they re-launched Gold Deposit Scheme at 50 branches
to mobilize gold from domestic market for deployment as metal loans to jewelers.

During the year, the Bank opened their 11,111th Branch at Sonapur (Kamrup District) in Assam.
They introduced three new products viz., SBI Special Home Loan, SBI Happy Home Loan and
SBI Lifestyle in response to the stimulus package announced by the Government of India. Also,
they entered into an exclusive arrangement with Tata Motors for handling the booking process of
Tata 'Nano' cars.

During the year, the Bank launched on their web-site an on-line application form for registering
Auto Loan enquiries and expeditiously monitoring and converting these leads into Auto Loans.
Also, they launched 'e-invest' for the ASBA (applications supported by blocked accounts) to aid
investors for their equity subscriptions, IPO and Rights applications.

During the year, the Bank set up a custodial services company namely SBI Custodial Services
Pvt. Ltd., in joint venture with SocieteGenerale, France. They signed letter of intent for setting
up of joint venture Company for undertaking General Insurance Business. Also, they divested
10% equity stake in its wholly owned subsidiary SBI Pension Fund Pvt. Ltd at cost in favor of its
subsidiaries. In October 2008, the Bank signed aMoU with State General Reserve Fund (SGRF)
of Oman, for a general purpose private equity fund.

State Bank of Saurashtra (SBS), a wholly owned subsidiary of the Bank, amalgamated with the
Bank with effect from August 13, 2008. They signed a joint venture agreement with Insurance
Australia Group for undertaking General Insurance business. Also, they signed a joint venture

53
agreement with Macquarie Capital Group, Australia and IFC, Washington for setting up an
Infrastructure fund of USD 3 billion for investing in various infrastructure projects in India.

During the year 2009-10, the Bank opened 1,049 branches. In July 2009, SBI introduced 'SBI
Loan to Affluent Pensioners' enabling the government pensioners to avail personal loans up toRs
3 lakh. During the year, the Bank designed a special package, the Defense Salary Package, for
personnel of the three Armed Forces i.e. the Army, Navy and Air Force who maintain their
Salary accounts with them. In June 2009, the company increased their shareholding in Nepal SBI
Bank Ltd to 55.02% and thus Nepal SBI Bank Ltd became a subsidiary of the Bank with effect
from June 14, 2009.

In May 2010, the Bank selected consortium of Elavon Incorporation, USA and Visa
International, USA as their joint venture (JV) partner for Merchant Acquiring Business. They set
up a wholly owned subsidiary, namely SBI Payment Services Pvt Ltd for conducting Merchant
Acquiring Business.

In August 2010, State Bank of Indore was amalgamated with the Bank as per the scheme of
amalgamation approved by the Central Board.

During the year 2010-11, the Bank introduced 2 new products, namely 'PushpaUllas' and 'Arthias
Plus' on pilot basis. They made substantial progress in establishing itself as a leading PE fund
player of the country. Also, they signed a Joint Venture agreement with State General Reserve
Fund (SGRF) of Sultanate of Oman, a sovereign entity, to set up a general purpose private equity
fund with an initial corpus of USD 100 million, expandable further to USD 1.5 billion.

During the year, the Bank opened 576 new branches besides merger of 470 branches of erstwhile
State Bank of Indore. Also, they opened 14 foreign offices during the year, taking the total to
156. In July 1, 2010, the Bank launched their 'Green Channel Counter' at select branches across
the country.

In General Insurance business, the Bank launched limited operations in April 2010 for the
Corporate and Mid Corporate customers based at Mumbai, and it was expanded to six other
major locations in July 2010. In the Retail segment, the Bank launched their Long Term Home
Insurance business at Mumbai in October 2010, which was gradually extended to cover 56

54
RACPCs and RASMECCs. General Insurance SME business was launched on a pilot basis in
Mumbai and Chennai in February 2011.

During the first quarter of the financial year 2011-12, the Government of India issued the
'Acquisition of State Bank of India Commercial & International Bank Ltd. vide notification
dated July 29, 2011. Consequent to the said notification, the undertaking of State Bank of India
Commercial & International stands transferred to and vest in State Bank of India with effect
from July 29, 2011.

In 2012, State Bank of India signed a Preliminary Non-Binding Memorandum of Understanding

with Russian Direct Investment Fund (RDIF), to facilitate advancing bilateral economic
cooperation and trade between Russia and India aimed at exploring investment opportunities in
both the countries. State Bank of India (SBI) also entered into an agreement with StarAgri
Warehousing Ltd (StarAgri), India's leading agro-services & solutions provider, for
Warehousing Receipt Financing and Collateral Management Services during the year under
review. The bank launched virtual debit cards to check online fraud and promote ecommerce.

In 2013, State Bank of India (SBI) inaugurated its 2nd branch in China in Tianjin, a major port
city in northeastern China. The bank introduced smart pre-paid card for students, blue collar
workers.In 2014, State Bank of India launched new digital Online and self-service banking
solutions with support from Accenture. The bank also unveiled 6 digital branches.

In 2015, State Bank of India launched a RuPay Platinum debit card in association with National
Payment Corporation of India (NPCI). The bank also introduced online facility for overdraft
against FDs. SBI partners with Amazon. SBI entered into a MoU with PayPal, an American
online money transfer services provider firm, for facilitating cross-border transactions. State
Bank of India launched SBI eforex. SBI also launched an initiative to provide doorstep services
and expedite home loans application process. State Bank of India jointly launched a cyber-crime
awareness campaign.

On 26 March 2015, State Bank of India (SBI) announced that consequent upon the promulgation
of the Insurance Laws (Amendment) Ordinance, 2014 and subsequently passed by both the
houses of parliament, the Executive Committee of the Central Board (ECCB) of the bank has
decided to initiate the necessary action as per JV agreement for dilution of SBI's stake in SBI

55
General Insurance from 76% to 51% with corresponding increase of stake of IAG from 26% to
49%, including appointment of a valuer to facilitate valuation and price discovery.

On 31 March 2015, State Bank of India (SBI) announced that the Executive Committee of the
Central Board (ECCB) of the bank has authorized divestment of SBI's stake in SBI Life
Insurance Co. Ltd. by up to 10%.The Committee of Directors for Capital Raising of the bank at
its meeting held on 1 April 2015 considered and accorded approval to allot 10.04 crore equity
shares on preferential basis to Government of India (GoI) at an issue price of Rs 295.59 per share
aggregating Rs 2969.99 crore.

The Committee of Directors for Capital Raising of the bank at its meeting held on 29 September
2015 considered and accorded approval to allot 19.65 crore equity shares on preferential basis to
Government of India (GoI) at an issue price of Rs 274.37 per share aggregating Rs 5392.99
crore.On 21 December 2015, State Bank of India announced that the Committee of Directors,
duly authorized by the Board authorized the bank to raise up to Rs 12000 crore by way of issue
of Basel III compliant Tier II bonds, at par, through private placement.

State Bank of India and Reliance Industries Limited (RIL) signed the shareholders agreement on
30 June 2016 for setting up Payments Bank. The Subscription and Shareholders' Agreement was
signed by RIL as promoter with a 70% equity contribution and SBI as joint Venture partner with
30% equity contribution. The Payments Bank will leverage SBI's nationwide distribution
network and risk management capabilities alongwith the substantial investments made by RIL in
its retail and telecom businesses.

On 4 July 2016, State Bank of India announced that it has sold 5% stake in National Stock
Exchange of India Limited (NSE) constituting 22.50 lakh equity shares of NSE to Veracity
Investments Limited, a Mauritius based FII, at Rs 4,050 per share for a total consideration of Rs
911.25 crore. Post this transaction, SBI holds 5.19% stake in NSE while its subsidiary SBI
Capital Markets Limited holds another 4.33% in the NSE.

The Committee of Directors for Capital Raising of the bank at its meeting held on 24 August
2016 authorized the bank to raise up to Rs 11100 crore Additional Tier 1 capital by way of issue
of Basel III compliant Perpetual Debt instrument in USD and/or INR, at par, through private
placement to overseas and/or Indian investors.

56
The Executive Committee of the Central Board (ECCB) of State Bank of India (SBI) at its
meeting held on 14 October 2016 approved to dilute up to 5% stake of SBI in its subsidiary SBI
Life Insurance Company Limited to a non-promoter entity.

On 25 October 2016, SBI announced that it has issued and allotted 25,000 AT1 Basel III
compliant Non-convertible, Perpetual, Subordinated, Unsecured Debt instrument in the nature of
debenture, of face value Rs 10 lakh each at par through private placement bearing coupon at
8.39% p.a. payable annually with call option after 5 years or any coupon payment date thereafter
aggregating to Rs 2500 crore in third tranche.

The Executive Committee of the Central Board (ECCB) of State Bank of India at its meeting
held on 9 December 2016 approved divestment of 3.9 crore equity shares constituting 3.9% stake
in SBI Life Insurance Company Ltd. at a price of Rs 460 per share, subject to all regulatory
approvals.

On 17 January 2017, SBI announced that it has concluded the issue of USD 500 million Fixed
Rate Senior Unsecured Notes having a maturity of 5 years at a coupon of 3.25 percent payable
semi-annually under Regulation-S. The bonds will be issued through the bank's London Branch
and listed on Singapore Stock Exchange.

The Committee of Directors for Capital Raising of State Bank of India considered and approved
on 20 January 2017 by circulation the allotment of 21.07 crore equity shares at an issue price of
Rs 269.59 per share on preferential basis to Government of India aggregating Rs 5680.99 crore.

The Executive Committee of the Central Board of State Bank of India at its meeting held on 15
March 2017 accorded approval for infusing additional capital of up to Rs 1160.04 crore in credit
card joint venture companies viz. SBI Cards & Payment Services Ltd. and GE Capital Business
Process Management Services Ltd. through purchase of equity shares from GE Capital so as to
increase the bank's stake in both the companies to 74%.

SBI merged five of its associate banks viz. State Bank of Bikaner & Jaipur, State Bank of
Mysore, State Bank of Travancore, State Bank of Patiala and State Bank of Hyderabad and
BhartiyaMahila Bank with itself with effect from 1 April 2017. In February 2017, the Union
Cabinet approved the acquisition by State Bank of India of its subsidiary banks namely State

57
Bank of Bikaner and Jaipur, State Bank of Mysore, State Bank of Travancore, State Bank of
Patiala and State Bank of Hyderabad.

On 8 June 2017, State Bank of India (SBI) announced closure of qualified institutional
placement of equity shares. The bank successfully raised about Rs 15000 crore from issue of
52.21 crore equity shares at a price of Rs 287.25 per share to qualified institutional buyers.

The Central Board of State Bank of India at its meeting held on 27 December 2017 accorded
approval to raise Additional Tier 1 capital by way of issuance of Basel III compliant debt
instrument in USD and/or INR to the tune of Rs 8000 crore from domestic/international market
including rupee denominated Masala Bonds till 31 March 2018.

The Executive Committee of the Central Board of State Bank of India at its meeting held on 8
January 2018 approved long term fund raising in single or multiple tranches up to USD 2 billion
under Reg-S/144A, through a public offer and/or private placement of senior unsecured notes in
US Dollar or any other convertible currency during FY 2018 and FY 2019.

The Executive Committee of Central Board of State Bank of India at its meeting held on 17
January 2018 approval the proposal for issuance of long term bonds of Rs 20000 crore for
financing of infrastructure and affordable housing in domestic and overseas market in FY 2018
and FY 2019.

MANAGEMENT

Rajnish Kumar - Chairman

Sanjiv Malhotra - Director (Shareholder)

Parveen Kumar Gupta - Managing Director

Girish Kumar Ahuja - Nominee (Govt)

PushpendraRai - Nominee (Govt)

58
 Dinesh Kumar Khara - Managing Director

Chandan Sinha - Director

BhaskarPramanik
Director -
(Shareholder) Director (Shareholder) Vice President &

CS Nominee
Basant Seth -

Director(PartTimeNonofficial)
Sanjay Abhyankar - Managing Director

Director(Shareholders)
Rajiv Kumar -

Purnima Gupta - Director

ArijitBasu - Director(PartTimeNonofficial)

B Venugopal
SBI -
Home Loans is India's largest mortgage lender, helping more than 30 lakh families realize
their dream home.
Ravi Mital -
Our values
•SanjeevMaheshwari
Trust -
• Transparency
• Integrity
• Excellence
Value for customers
 Large product range
 Interest calculation for the daily reduction of the balance
 Overdraft facility available
 Low interest rates
 No hidden costs

59
 Low processing fees
 No prepayment
Our presence

 24,000+ branches
 More than 1,600 member’s strong sales team

Recognitions

 Winner of the Best Home Loan Provider at the 2016 CNBZ Awaaz Real Estate Awards.

INTEREST RATES

60
Fees

Processing fee

 Zero until December 31, 2018.

 Plus applicable taxes

Pre-Sanction

 Attorney fee for Property Search and Title Investigation Report.

 Valuation report for the valuation report.

Post- sanction

 Stamp duty for loan contract and mortgage.

 Property insurance premium.

CERSAI Registration Fee from Rs 50 + GST up to Rs 5 Lakh Limit; and Rs100 + GST for limits
over Rs 5 lakh.

61
 CHAPTER-IV&V
DATA ANALYSES
&
INTERPRETATION

Table -4.1 Comparative Statement Analysis 2020 of State bank of india

Amount in Rs. Cr…
ABSOLUTE CHANGE
INCREASE/ IN %
DECREAES
  Mar '19 Mar '20
Sources Of Funds
Total Share Capital 157.92 157.92 0 0

Equity Share Capital 157.92 157.92 0 0

Reserves 1573.17 1609.25 -36.08 -0.0224

Networth 1731.09 1767.17 -36.08 -0.0204
Secured Loans 36.92 86.2 -49.28 -0.5717
62
Unsecured Loans 0 0 0  
Total Debt 436.92 86.2 350.72 4.06868
Total Liabilities 2168.01 1853.37 314.64 0.16977
Application Of Funds        
Gross Block 0.76 0.76 0 0
Less: Accum. Depreciation 0.41 0.28 0.13 0.46429
Net Block 0.35 0.48 -0.13 -0.2708
Investments 2356.61 2152.37 204.24 0.09489
Sundry Debtors 1.3 9.16 -7.86 -0.8581
Cash and Bank Balance 0.56 0.16 0.4 2.5
Total Current Assets 1.86 9.32 -7.46 -0.8004
Loans and Advances 96.69 97.51 -0.82 -0.0084
Total CA, Loans & Advances 98.55 106.83 -8.28 -0.0775
Current Liabilities 287.03 406.08 -119.05 -0.2932
Provisions 0.02 0.23 -0.21 -0.913
Total CL & Provisions 287.05 406.31 -119.26 -0.2935
Net Current Assets -188.5 -299.48 110.98 -0.3706
Total Assets 2168.01 1853.37 314.64 0.16977
Contingent Liabilities 9618.8 10341.8 -723.04 -0.0699
Book Value (Rs) 10.96 11.19 -0.23 -0.0206

400

200

0
l s s t ds tion nts nce ces ities ons sets (Rs)
ita rve oan Deb n e
p
Ca ese d L tal
u a la an il si s e
-200e R e o O f F reci estm Ba dv Liab rovi al A alu
ar r T p v nk A t P o t V
Sh cu on De In Ba nd en & T k
al Se cati m. d ns a urr l CL Boo
t i n
To -400 pl cc
u a oa C
ot
a
Ap s: A a sh L T
s C
Le
-600

-800
Graph – 5.1
Interpretation:

63
 From the above table the net worth is in the year 2019 is 1767.17 but it was slightly decrease in the
year 2020 with 30%. Secondly about the total debt is in the year 2019 is 86.20 afterwards it was more than
the above percentage, In addition to, total liability is in the year 2019 of 1853.37 and then drastically
increased with the percentage by the year 2020. After then the investments are in the year 2019 is 2152.37
and then it was increased by the year 2020 with the 2356.61. About the net block is in the year 2017 is 0.48
but it was fluctuated in the year 2020. After then the net current asset is in the year 2019 is -299.48. then
slightly increases with the year 2020 with -188.50 .Finally the total assets are in the year 2019 is 1853.37
then it increased with the percentage 2168.01 by the year 2020.

Table – 4.2 Comparative Statement Analysis 2019 of State bank of india

Amount in Rs. Cr…
ABSOLUTE CHANGE IN
INCREASE/ %
DECREAES
  Mar '18 Mar '19
Sources Of Funds
Total Share Capital 157.92 157.92 0 0
Equity Share Capital 157.92 157.92 0 0
Reserves 1609.25 2061.09 -451.84 -0.21922
Networth 1767.17 2219.01 -451.84 -0.20362
Secured Loans 86.20 143.50 -57.3 -0.3993
Unsecured Loans 0.00 0.00 0 0.00
64
Total Debt 86.20 143.50 -57.3 -0.3993
Total Liabilities 1853.37 2362.51 -509.14 -0.21551
Application Of Funds
Gross Block 0.76 1.82 -1.06 -0.58242
Less: Accum. Depreciation 0.28 1.19 -0.91 -0.76471
Net Block 0.48 0.63 -0.15 -0.2381
Investments 2152.37 1703.95 448.42 0.263165
Sundry Debtors 9.16 7.32 1.84 0.251366
Cash and Bank Balance 0.16 0.89 -0.73 -0.82022
Total Current Assets 9.32 8.21 1.11 0.135201
Loans and Advances 97.51 900.68 -803.17 -0.89174
Total CA, Loans & Advances 106.83 908.89 -802.06 -0.88246
Current Liabilities 406.08 235.73 170.35 0.722649
Provisions 0.23 15.23 -15 -0.9849
Total CL & Provisions 406.31 250.96 155.35 0.619023
Net Current Assets -299.48 657.93 -957.41 -1.45519
Total Assets 1853.37 2362.51 -509.14 -0.21551
Contingent Liabilities 10341.48 11622.27 -1280.79 -0.1102
Book Value (Rs) 11.19 14.05 -2.86 -0.20356

600
400
200
0
al s s t k k s s s s ts s
-200 pit erve oan Deb Bloc Bloc btor sset nce sion sse ilitie
a s L l a i
C
Re red Tota ros
s t
Ne ry D rent
e A v v t A Liab
re Ad Pro ren
ha
-400 cu G nd Cur ns & ur nt
alS Se Su l a C n ge
t ta , Lo t ti
To -600 To Ne on
A C
lC
-800 o ta
T
-1000
-1200
-1400
Graph – 5.2
Interpretation:

From the above table the net worth is in the year 2018 is 2219.01but it was slightly decrease in the
year 2019 with 1767.17. Secondly about the total debt is in the year 2018 is 143.50 afterwards it was below
65
the above percentage, In addition to, total liability is in the year 2018 of 2362.51and then drastically
decreased with the percentage by the year 2019. After then the net block are in the year 2018 is 0.63 and
then it was decreased by the year 2019 with the 0.48. About the investments is in the year 2018 is 1703.95
but it was fluctuated in the year 2019. After then the net current asset is in the year 2018 is 657.93 then
slightly decreases with the year 2019 with -299.48. Finally the total assets are in the year 2018 is 2362.51
then it decreased with the percentage 1853.37 by the year 2019.

Table – 4.3 Comparative Statement Analysis 2018 of State bank of india

Amount in Rs. Cr…
ABSOLUTE CHANGE IN
INCREASE/ %
DECREAES

  Mar '17 Mar '18

Sources Of Funds
Total Share Capital 157.92 157.92 0 0
Equity Share Capital 157.92 157.92 0 0
Reserves 2061.09 2190.70 -129.61 -0.05916
Networth 2219.01 2348.62 -129.61 -0.05519
Secured Loans 143.50 428.80 -285.3 -0.66535
Unsecured Loans 0.00 33.90 -33.9 -1
Total Debt 143.50 462.70 -319.2 -0.68986
Total Liabilities 2362.51 2811.32 -448.81 -0.15964

66
Application Of Funds
Gross Block 1.82 1.82 0 0
Less: Accum. Depreciation 1.19 1.03 0.16 0.15534
Net Block 0.63 0.79 -0.16 -0.20253
Investments 1703.95 1480.76 223.19 0.150727
Sundry Debtors 7.32 3.75 3.57 0.952
Cash and Bank Balance 0.89 8.91 -8.02 -0.90011
Total Current Assets 8.21 12.66 -4.45 -0.3515
Loans and Advances 900.68 1644.96 -744.28 -0.45246
Current Liabilities 235.73 324.64 -88.91 -0.27387
Provisions 15.23 3.21 12.02 3.744548
Total CL & Provisions 250.96 327.85 -76.89 -0.23453
Net Current Assets 657.93 1329.77 -671.84 -0.50523
Total Assets 2362.51 2811.32 -448.81 -0.15964
Contingent Liabilities 11622.27 10348.88 1273.39 0.123046
Book Value (Rs) 14.05 14.87 -0.82 -0.05514

1500

1000

500

0
l s s t k k s s s s ts )
pita rve oan Deb l oc loc tor sset litie i on sse (Rs
Ca e L B B b i vis e
Re
s d al s t e A b l A alu
are
-500 ure Tot r os Ne ry D rent t Lia Pro ota V
h c G nd Cur rren L & T ok
alS Se S u l C B o
t ta Cu tal
To To To
-1000
Graph – 5.3
Interpretation:
From the above table the net worth is in the year 2017 is 2348.62. but it was slightly increased in the
year 2018 with the percentage of 2219.01. Secondly about the total debt is in the year 2017 is
462.70afterwards it was more than the below the percentage, In addition to, total liability is in the year 2017

67
of 2811.32 and then drastically decreased with the percentage by the year 2018. After then the net block are
in the year 2017 is 0.79and then it was decreased by the year 2018 with the 0.63. About the investments is in
the year 2017 is 1480.76 but it was fluctuated in the year 2018. After then the net current asset is in the year
2017 is 1329.77then gradually increases with the year 2018 with the 657.93% . Finally the total assets are in
the year 2017 is 2811.32 then it decreased with the percentage 2362.51 by the year 2018.
.

Table – 4.4 Comparative Statement Analysis 2017 of State bank of india

Amount in Rs. Cr…
ABSOLUTE CHANGE IN
INCREASE/ %
DECREAES
  Mar '16 Mar '17
Sources Of Funds
Total Share Capital 157.92 157.92 0 0
Equity Share Capital 157.92 157.92 0 0
-129.83 -0.055948426
Reserves 2190.70 2320.53
-129.83 -0.052383546
Networth 2348.62 2478.45
-34.89 -0.075244236
Secured Loans 428.80 463.69
Unsecured Loans 33.90 0.00 33.9
-0.99 -0.002135047
Total Debt 462.70 463.69
-131.09 -0.044551915
Total Liabilities 2811.32 2942.41
Application Of Funds
68
Gross Block 1.82 1.82 0 0
Less: Accum. Depreciation 1.03 0.73 0.3 0.410958904
-0.3 -0.275229358
Net Block 0.79 1.09
Investments 1480.76 1406.20 74.56 0.05302233
Sundry Debtors 3.75 3.70 0.05 0.013513514
-7.7 -0.463576159
Cash and Bank Balance 8.91 16.61
-7.65 -0.376661743
Total Current Assets 12.66 20.31
Loans and Advances 1644.96 1591.51 53.45 0.033584458
Total CA, Loans & Advances 1657.62 1611.82 45.8 0.028415084
Current Liabilities 324.64 74.86 249.78 3.336628373
Provisions 3.21 2.11 1.1 0.521327014
Total CL & Provisions 327.87 76.97 250.9 3.259711576
-205.08 -0.133615663
Net Current Assets 1329.77 1534.85
-130.82 -0.044464234
Total Assets 2811.32 2942.14
-279.45 -0.026292936
Contingent Liabilities 10348.88 10628.33
-0.82 -0.052262588
Book Value (Rs) 14.87 15.69

300

200

100

0
l s s t ds tion nts nce ces ities ons sets (Rs)
ita rve oan Deb n e
p
Ca ese d L tal
u a la an il si s e
-100e R e o O f F reci estm Ba dv Liab rovi al A alu
ar r T p v nk A t P o t V
Sh cu on De In Ba nd en & T k
al Se cati m. d ns a urr l CL Boo
t i n
To -200 pl cc
u a oa C
ot
a
Ap s: A a sh L T
s C
Le
-300
Graph – 5.4
Interpretation:
From the above table the net worth is in the year 2016 is 2478.62. but it was slightly decreased in the year
2017 with the percentage of 2348.62. Secondly about the total debt is in the year 2016 is 463.69 afterwards

69
it was more than the above percentage, In addition to, total liability is in the year 2016 of 2942.41 and then
drastically increased with the percentage by the year 2017. After then the net block are in the year 2016 is
1.09 and then it was decreased by the year 2017 with the 0.79. About the investments is in the year 2016 is
1406.20 but it was drastically increased in the year 2017. After then the net current asset is in the year 2016
is 1329.77 then gradually increases with the year 2017 with the 1534.85% . Finally the total assets are in the
year 2016 is 2811.32 then it increased with the percentage 2942.14 by the year 2017.

Table – 4.5 Comparative Statement Analysis 2016 Of State bank of india

Amount in Rs. Cr…
ABSOLUTE CHANGE IN
INCREASE/ %
DECREAES
  Mar '15 Mar '16
Sources Of Funds
Total Share Capital 157.92 157.92 0 0
Equity Share Capital 157.92 157.92 0 0
Reserves 2320.53 2343.96 -23.43 -0.01
Networth 2478.45 2501.88 -23.43 -0.00936
Secured Loans 463.69 423.50 40.19 0.0949
Unsecured Loans 0.00 0.00 0 0
Total Debt 463.69 423.50 40.19 0.0949
Total Liabilities 2942.41 2925.38 17.03 0.005821
Application Of Funds

70
Gross Block 1.82 1.81 0.01 0.005525
Less: Accum. Depreciation 0.73 0.55 0.18 0.327273
Net Block 1.09 1.26 -0.17 -0.13492
Investments 1406.20 1404.91 1.29 0.000918
Sundry Debtors 3.70 2.99 0.71 0.237458
Cash and Bank Balance 16.61 23.39 -6.78 -0.28987
Total Current Assets 20.31 26.38 -6.07 -0.2301
Loans and Advances 1591.51 1500.97 90.54 0.060321
Total CA, Loans & Advances 1611.82 1527.35 84.47 0.055305
Current Liabilities 74.86 6.86 68 9.912536
Provisions 2.11 1.28 0.83 0.648438
Total CL & Provisions 76.97 8.14 68.83 8.455774
Net Current Assets 1534.85 1519.21 15.64 0.010295
Total Assets 2942.14 2945.38 -3.24 -0.0011
Contingent Liabilities 10628.33 4393.01 6235.32 1.419373
Book Value (Rs) 15.69 15.84 -0.15 -0.00947

7000
6000
5000
4000
3000
2000
1000
0
-1000

Graph – 5.5

INTERPRETATION:

From the above table the net worth is in the year 2015 is 2501.88. but it was slightly decreased in the year
2016 with the percentage of 2478.45. Secondly about the total debt is in the year 2016 is 423.50 afterwards
71
it was more than the above percentage, In addition to, total liability is in the year 2015 of 2925.38 and then
drastically increased with the percentage by the year 2016. After then the net block are in the year 2015 is
1.26 and then it was decreased by the year 2016 with the 1.09. About the investments is in the year 2015 is
1404.91 but it was drastically decreased in the year 2016. After then the net current asset is in the year 2015
is 1519.21 then gradually increases with the year 2016 with the 1534.85% . Finally the total assets are in the
year 2015 is 2945.38 then it increased with the percentage 2942.14 by the year 2016.

Table -4.6 Common size statement of State bank of indiathe year 2020:
Amount in Rs. Cr…

  Mar '20 Change in % Mar '19 Change in %

Sources Of Funds

Total Share Capital 157.92 7.284099243 157.92 8.520694734

Equity Share Capital 157.92 7.284099243 157.92 8.520694734
Reserves 1573.17 72.56285718 1609.25 86.82831814
Networth 1731.09 79.84695643 1767.17 95.34901288
Secured Loans 36.92 1.702944175 86.2 4.650987121
Unsecured Loans 0 0 0 0
Total Debt 436.92 20.15304357 86.2 4.650987121
Total Liabilities 2168.01 100 1853.37 100

Application Of Funds    
Gross Block 0.76 0.035055189 0.76 0.041006383

72
Less: Accum.
Depreciation 0.41 0.018911352 0.28 0.015107615
Net Block 0.35 0.016143837 0.48 0.025898768
Investments 2356.61 108.6992219 2152.37 116.1327744
Sundry Debtors 1.3 0.059962823 9.16 0.494234826
Cash and Bank
Balance 0.56 0.025830139 0.16 0.008632923
Total Current Assets 1.86 0.085792962 9.32 0.502867749
Loans and Advances 96.69 4.459850277 97.51 5.261226846
Total CA, Loans &
Advances 98.55 4.54564324 106.83 5.764094595
Current Liabilities 287.03 13.23933008 406.08 21.91035789
Provisions 0.02 0.000922505 0.23 0.012409826

Total CL & Provisions 287.05 13.24025258 406.31 21.92276772

Net Current Assets -188.5 -8.69460934 -299.48 -16.15867312
Total Assets 2168.01 100 1853.37 100
Contingent Liabilities 9618.8 443.6695403 10341.84 558.00191
Book Value (Rs) 10.96 0.505532724 11.19 0.603765033

Graph – 5.6.1

73
 Graph – 5.6.2
Interpretation
From the above table the net worth is in the year 2019 is 1767.17. but it was slightly decreased in the year
2020 with the percentage of 1731.09. Secondly about the total debt is in the year 2019 is 86.2 afterwards it
was more than the above percentage, In addition to, total liability is in the year 2019 of 1853.37 and then
drastically increased with the percentage by the year 2020. After then the net block are in the year 2019 is
0.48 and then it was decreased by the year 2019 with the 0.35. About the investments is in the year 2017 is
2152.37 but it was slightly increased in the year 2019. After then the net current asset is in the year 2019 is -
299.48 then gradually increases with the year 2020 with the -188.5 . Finally the total assets are in the year
2019 is 1853.37 then it increased with the percentage 2168.01 by the year 2020
Table -4.7 Common size statement of State bank of indiathe year 2019:
Amount in Rs. Cr…

  Mar '19 Change in % Mar '18 Change in %

Sources Of Funds
Total Share Capital 157.92 8.520694734 157.92 6.684416151
Equity Share Capital 157.92 8.520694734 157.92 6.684416151
Reserves 1609.3 86.82831814 2061.09 87.24153549
Networth 1767.2 95.34901288 2219.01 93.92595164
Secured Loans 86.2 4.650987121 143.5 6.074048364
Unsecured Loans 0 0 0 0
Total Debt 86.2 4.650987121 143.5 6.074048364

74
Total Liabilities 1853.4 100 2362.51 100

Application Of Funds    

Gross Block 0.76 0.041006383 1.82 0.077036711

Less: Accum. Depreciation 0.28 0.015107615 1.19 0.050370157
Net Block 0.48 0.025898768 0.63 0.026666554
Investments 2152.4 116.1327744 1703.95 72.12456244
Sundry Debtors 9.16 0.494234826 7.32 0.309839958
Cash and Bank Balance 0.16 0.008632923 0.89 0.037671798
Total Current Assets 9.32 0.502867749 8.21 0.347511757
Loans and Advances 97.51 5.261226846 900.68 38.12385979

Total CA, Loans & Advances 106.83 5.764094595 908.89 38.47137155

Current Liabilities 406.08 21.91035789 235.73 9.977947183
Provisions 0.23 0.012409826 15.23 0.644653356
Total CL & Provisions 406.31 21.92276772 250.96 10.62260054
Net Current Assets -299.48 -16.1586731 657.93 27.84877101
Total Assets 1853.4 100 2362.51 100
Contingent Liabilities 10342 558.00191 11622.27 491.9458542
Book Value (Rs) 11.19 0.603765033 14.05 0.594706477

75
 Graph – 5.7.1

Graph – 5.7.2
Interpretation
From the above table the net worth is in the year 2018 is 2219.01. but it was slightly decreased in the year
2019 with the percentage of 1767.2. Secondly about the total debt is in the year 2018 is 143.5 afterwards it
was less than the above percentage, In addition to, total liability is in the year 2018 of 2362.51 and then
drastically decreased with the percentage by the year 2019. After then the net block are in the year 2018 is
0.63 and then it was decreased by the year 2019 with the 0.48. About the investments is in the year 2018 is
1703.95 but it was slightly increased in the year 2019. After then the net current asset is in the year 2018 is
657.93.then gradually decreases with the year 2019 with the -299.48 . Finally the total assets are in the year
2018 is 2362.51 then it increased with the percentage 1853.4 by the year 2019.

Table-4.8 Common size statement of State bank of indiathe year 2018:

Amount in Rs. Cr…

  Mar '18 Change in % Mar '17 Change in %

Sources Of Funds
Total Share Capital 157.92 6.684416151 157.92 6.72394853

Equity Share Capital 157.92 6.684416151 157.92 6.72394853

Reserves 2061.09 87.24153549 2190.7 93.2760515

Networth 2219.01 93.92595164 2348.62 100
Secured Loans 143.5 6.074048364 428.8 18.25753
76
 Unsecured Loans 0 0 33.9 1.44340081
Total Debt 143.5 6.074048364 462.7 19.7009308
Total Liabilities 2362.51 100 2811.32 119.700931
Application Of
       
Funds
Gross Block 1.82 0.077036711 1.82 0.07749231
Less: Accum.
1.19 0.050370157 1.03 0.04385554
Depreciation
Net Block 0.63 0.026666554 0.79 0.03363677
Investments 1703.95 72.12456244 1480.76 63.0480878
Sundry Debtors 7.32 0.309839958 3.75 0.15966823
Cash and Bank
0.89 0.037671798 8.91 0.37937172
Balance

Total Current Assets 8.21 0.347511757 12.66 0.53903995

Loans and Advances 900.68 38.12385979 1644.96 70.0394274

Total CA, Loans &

908.89 38.47137155 1657.62 70.5784674
Advances
Current Liabilities 235.73 9.977947183 324.64 13.8225852
Provisions 15.23 0.644653356 3.21 0.13667601
Total CL &
250.96 10.62260054 327.87 13.9601127
Provisions

Net Current Assets 657.93 27.84877101 1329.77 56.6192062

Total Assets 2362.51 100 2811.32 119.700931

Contingent
11622.27 491.9458542 10348.88 440.636629
Liabilities
Book Value (Rs) 14.05 0.594706477 14.87 0.63313776

77
 Graph – 5.8.1

Graph – 5.8.2
Interpretation
From the above table the net worth is in the year 2017 is 2348.62. but it was slightly decreased in the year
2018 with the percentage of 2219.01. Secondly about the total debt is in the year 2017 is 462.7afterwards it
was less than the above percentage, In addition to, total liability is in the year 2017 of 2811.32 then
drastically decreased with the percentage by the year 2018. After then the net block are in the year 2017 is
0.79and then it was decreased by the year 2018 with the 0.63. About the investments is in the year 2017 is
1480.76 but it was slightly increased in the year 2018. After then the net current asset is in the year 2017 is
1329.77.then gradually decreases with the year 2018with the 657.93. Finally the total assets are in the year
2017 is 2811.32then it increased with the percentage 2362.51 by the year 2018

78
Table-4.9 Common size statement of State bank of indiain the year 2017
Amount in Rs. Cr…

  Mar '17 Change in % Mar '16 Change in %

Sources Of Funds
Total Share Capital 157.92 6.723948531 157.92 5.367029068
Equity Share Capital 157.92 6.723948531 157.92 5.367029068
Reserves 2190.7 93.27605147 2320.53 78.86494404
Networth 2348.62 100 2478.45 84.23197311
Secured Loans 428.8 18.25752995 463.69 15.75885074
Unsecured Loans 33.9 1.443400806 0 0
Total Debt 462.7 19.70093076 463.69 15.75885074
Total Liabilities 2811.32 119.7009308 2942.41 100
Application Of Funds      
Gross Block 1.82 0.077492315 1.82 0.061854058
Less: Accum.
1.03 0.043855541 0.024809595
Depreciation 0.73
Net Block 0.79 0.033636774 1.09 0.037044464
Investments 1480.76 63.04808781 1406.2 47.79075656
Sundry Debtors 3.75 0.159668231 3.7 0.125747262
Cash and Bank Balance 8.91 0.379371716 16.61 0.564503247
Total Current Assets 12.66 0.539039947 20.31 0.690250509
Loans and Advances 1644.96 70.03942741 1591.51 54.08865522
Total CA, Loans &
1657.62 70.57846736 54.77890573
Advances 1611.82
Current Liabilities 324.64 13.82258518 74.86 2.544172974
Provisions 3.21 0.136676005 2.11 0.071709925
Total CL & Provisions 327.87 13.96011275 76.97 2.615882899
Net Current Assets 1329.77 56.61920617 1534.85 52.16302283
Total Assets 2811.32 119.7009308 2942.14 99.99082385
Contingent Liabilities 10348.88 440.6366292 10628.33 361.2117278
Book Value (Rs) 14.87 0.633137757 15.69 0.533236361

79
 Graph – 5.9.1

Graph –5.9.2
Interpretation
From the above table the net worth is in the year 2016 is 2478.45. but it was slightly decreased in the year
2017 with the percentage of 2219.01. Secondly about the total debt is in the year 2016 is 463.69 afterwards
it was less than the above percentage, In addition to, total liability is in the year 2016 of 2942.41then
drastically decreased with the percentage by the year 2017. After then the net block are in the year 2016 is
0.79 and then it was decreased by the year 2017 with 1.09. About the investments is in the year 2014 is
1480.76 but it was slightly increased in the year 2016. After then the net current asset is in the year 2017 is
1329.77.then gradually increases with the year 2017 with the 1534.85. Finally the total assets are in the year
2016 is 2811.32 then it increased with the percentage 2942.14 by the year 2017.

80
Table-4.10 Common size statement of State bank of indiain the year 2016
Amount in Rs. Cr…
  Mar '16 Change in % Mar '15 Change in %
Sources Of Funds
Total Share Capital 157.92 5.36702907 157.92 5.39821769
Equity Share Capital 157.92 5.36702907 157.92 5.39821769
Reserves 2320.53 78.864944 2343.96 80.1241535
Networth 2478.45 84.2319731 2501.9 85.5223712
Secured Loans 463.69 15.7588507 423.5 14.4766033
Unsecured Loans 0 0 0 0
Total Debt 463.69 15.7588507 423.5 14.4766033
Total Liabilities 2942.41 100 2925.4 99.9989745
Application Of Funds   0   0
Gross Block 1.82 0.06185406 1.81 0.06187167

Less: Accum. Depreciation 0.73 0.02480959 0.01880078

0.55
Net Block 1.09 0.03704446 1.26 0.04307089
Investments 1406.2 47.7907566 1404.9 48.0243795
Sundry Debtors 3.7 0.12574726 2.99 0.1022079
Cash and Bank Balance 16.61 0.56450325 23.39 0.79954605
Total Current Assets 20.31 0.69025051 26.38 0.90175394
Loans and Advances 1591.51 54.0886552 1500.97 51.3080218
Total CA, Loans &
1611.82 54.7789057 52.2097757
Advances 1527.35
Current Liabilities 74.86 2.54417297 6.86 0.23449704
Provisions 2.11 0.07170992 1.28 0.04375455
Total CL & Provisions 76.97 2.6158829 8.14 0.2782516
Net Current Assets 1534.85 52.1630228 1519.2 51.9315241
Total Assets 2942.14 99.9908238 2945.38 100.682639
Contingent Liabilities 10628.33 361.211728 4393.01 150.167327
Book Value (Rs) 15.69 0.53323636 15.84 0.54146256

81
 Graph – 5.10.1

Graph – 5.10.2
Interpretation
From the above table the net worth is in the year 2015 is 2501.9. but it was slightly decreased in the year
2016 with the percentage of 2478.45. Secondly about the total debt is in the year 2015 is 423.5 afterwards it
was less than the above percentage, In addition to, total liability is in the year 2015 of 2925.4 then drastically
decreased with the percentage by the year 2016. After then the net block are in the year 2015 is 1.26 and
then it was decreased by the year 2016 with 1.09. About the investments is in the year 2015 is 1404.9 but it
was slightly increased in the year 2016. After then the net current asset is in the year 2015 is 1519.2.then
gradually increases with the year 2016 with the 1534.85. Finally the total assets are in the year 2015 is
2945.38then it increased with the percentage 2942.14 by the year 2016.

82
Size and growth of current assets and liabilities and Net working capital of State bank of indiaduring the
period 2015-16 to 2019-2020.

NET WORKING CAPITAL = CURRENT ASSETS – CURRENT LIABILITIES

Table-4.11 (All amounts are in Cr)

Year Current Assets Current Liabilities Net W.C

2015-16 20.31 74.86 -54.55
2016-17 12.66 324.64 -311.98
2017-18 8.21 235.73 -227.52
2018-19 9.32 406.08 -396.76
2019-20 1.86 287.03 -285.17

Net W.C
0 2015-16 2016-17 2017-18 2018-19 2019-20

-50
-100
-150
-200
-250
-300
-350
-400

Graph – 5.11

Interpretation:
From the above analysis networking capital continuously decreasing trend. In the year of 2015-16 net
working capital was – 54.55 and 2019-20 net working capital is -285.17.

83
WORKING CAPITAL TURNOVER RATIO
(All amounts are in Cr)
Table-4.12
Year Sales Networking Capital Ratio
2015-16 26.76 -54.55 -0.49
2016-17 26.28 -311.98 -0.084
2017-18 27.18 -227.52 -0.068
2018-19 28.16 -396.76 -0.070
2019-20 16.54 -285.17 -0.058

Graph – 5.12
Interpretation
From the above table working capital turnover ratio 2014-15 year -0.49%, 2015-16 to 2018-19 ratio
increased i.e -0.084,-0.068,-0.070 and-0.068. working capital turnover ratio continuously increased.

84
Current Ratio:
It is the ratio of the current assets current liabilities this ratio is used to know the company’s ability to meet
its current obligations. The standard norm for the current ratio is 2:1
Current ratio = current Assets / Current liabilities.
Table showing current ratio of State bank of indiaduring the period 2015-2016 to 2019-20
(All amounts are in Cr)
Table-4.13
Year Current Assets Current Liabilities Ratio
2015-16 20.31 74.86 0.271
2016-17 12.66 324.64 0.038
2017-18 8.21 235.73 0.034
2018-19 9.32 406.08 0.022
2019-20 1.86 287.03 0.006

Current ratio
0.3

0.25

0.2

0.15

0.1

0.05

0
2015-16 2016-17 2017-18 2018-19 2019-20

Graph – 5.13
Interpretation
It is observed that the State bank of indiacurrent rationing a increasing trend; The company’s liquidity
position is satisfactory the current ratio increased slightly up to 2015-16. also in 2018-19 it inclined because
of decrease in current liabilities and assets, and then it started to decrease as 0.006. If the company maintains
to increase the ratio it can meet obligations.

85
Quick Ratio:
Quick ratio is relation between quick assets and current liabilities. The term quick assets, which can be
converted into cash with a short notice. This category also includes cash bank balances short – term
investments and receivables.
Quick ratio = Quick Assets / current liabilities
Table showing quick ratio of State bank of indiaduring the period 2015-16 to 2019-20.
(All amounts are in Cr)
Table-4.14

Year Quick Assets Current Liabilities Ratio

2015-16 -17.98 74.86 -0.24
2016-17 -27.24 324.64 -0.083
2017-18 -0.83 235.73 -0.003
2018-19 -1.37 406.08 -0.003
2019-20 -8.29 287.03 -0.028

Quick ratio
0 2015-16 2016-17 2017-18 2018-19 2019-20

-0.05

-0.1

-0.15

-0.2

-0.25

Graph – 5.14
Interpretation
It is observed from the table that the State bank of indiaQuick Ratio is satisfactory. The company has
noted a maximum ratio of 0.73 in the year of 2015-16.

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Except the 2015-16 year, the remaining is below the standard of the norm 1:1. But we observed the ratio of
the company, it is decreasing gradually. i.e 0.50 in the year 2019-20 So it is a bad sign for the company.

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Cash ratio:

Indicates a conservative view of liquidity such as when a company has pledged its receivables and its
inventory, or the analyst suspects severe liquidity problems with inventory and receivables.

Cash ratio= Cash Equivalents + Marketable Securities

Current Liabilities

Table-4.15 (All amounts are in Cr)

Marketable Current
Year Cash Ratio
security’s Liabilities
2015-16 277.5 1.02 74.86 29.2996
2016-17 213.94 1.12 324.64 29.9964
2017-18 2235.2 1.12 235.73 32.9566
2018-19 2217.74 0.99 406.08 44.4253
2019-20 199.32 0.98 287.03 40.6851

Cash Ratio
45
40
35
30
25
20
15
10
5
0
2015-16 2016-17 2017-18 2018-19 2019-20

Graph – 5.15
Interpretation
It is observed from the table that the State bank of indiaCash Ratio is satisfactory. The company has noted
a maximum ratio of 44.43 in the year of 2018-19.

We observed the ratio of the company, it is increasing gradually. i.e 29.29 in the year 2015-16 to 44.43 in
the year of 2018-19. But 2018-19 year cash ratio has decreased i.e 40.69.

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Net Working Capital Ratio

The different between current assets and current liabilities excluding short-term bank borrowings is called
net working capital (NWC) or net current assets (NCA). NWC is sometimes used as a measure of firm’s
liquidity.
Net working capital (NWC)
NWC ratio = -------------------------------------
(Current liabilities)
Table-4.16 (All amounts are in Cr)

Year Net working capital Current Liabilities NWC

2015-16 -54.55 74.86 -0.728
2016-17 -311.98 324.64 -0.961
2017-18 -227.52 235.73 -0.965
2018-19 -396.76 406.08 -0.977
2019-20 -285.17 287.03 -0.993

Graph – 5.16
Interpretation:
The net working capital ratio has decreased form 2015-16 to 2019-20. In the year of 2015-16 net working
capital ratio has -0.728 and 2019-20 ratio is -0.993.

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Debt Ratio

The relationship describing the lenders contribution for each rupee of the owner’s contribution is
called debt-equity (DE) ratio is directly computed by dividing total debt by net worth:

Total debt (TD)

Debt – equity ratio = -----------------------
Net worth (NW)
Table-4.17 (All amounts are in Cr)
Year Total Debt Net Worth D/E Ratio
2015-16 463.69 2478.45 0.187
2016-17 462.7 2348.62 0.197
2017-18 143.5 2219.01 0.064
2018-19 86.2 1767.17 0.048
2019-20 436.92 1731.09 0.252

D/E Ratio
0.3

0.25

0.2

0.15

0.1

0.05

0
2015-16 2016-17 2017-18 2018-19 2019-20

Graph – 5.17
Interpretation:
The debt equity ratio of 2015-16 has 0.187 increased in the year 2016-17 and continuously decreased to
2018-19 finally 2019-20 debt equity ratio was increased i.e 0.252

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Net Profit ratio

Net profit is obtained when operating expenses; interest and taxes are subtracted from the gross profit

margin ratio is measured by dividing profit after tax by sales:

Net Profit
Net Profit Ratio = --------------- X 100
Sales

Table-4.18 (All amounts are in Cr)

Year Net Profit Sales Net Profit Ratio

2015-16 -23.43 26.76 -87.55
2016-17 -129.83 26.28 -494.02
2017-18 -129.61 27.18 -476.85
2018-19 -271.01 28.16 -962.39
2019-20 -36.08 16.54 -218.13

Net Profit Ratio

0 2015-16 2016-17 2017-18 2018-19 2019-20
-100
-200
-300
-400
-500
-600
-700
-800
-900
-1000

Graph – 5.18

Interpretation:

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The net profit ratio was decreased form 2015-16 to 2018-19. Overall the company running decreasing trend .
Net profit of the company satisfy compare to previous year.

CHAPTER-VI
FINDINGS
SUGGESSIONS
CONCLUSION

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 FINDNGS

1. From the above table the net worth is in the year 2019 is 1767.17(in crores) but it was slightly
decrease in the year 2020 with 30%.

2. Secondly about the total debt is in the year 2018 is 86.20 afterwards it was more than the above
percentage, In addition to, total liability is in the year 209 of 1853.37(in crores) and then drastically
increased with the percentage by the year 2020

3. After then the net block are in the year 2018 is 0.48 and then it was increased by the year 2019 with
the 0.63.

4. It is the ratio of the current assets current liabilities this ratio is used to know the company’s ability to
meet its current obligations. The standard norm for the current ratio is 2:1

5. Quick ratio is relation between quick assets and current liabilities. The term quick assets, which can
be converted into cash with a short notice. This category also includes cash bank balances short –
term investments and receivables

6. Indicates a conservative view of liquidity such as when a company has pledged its receivables and its
inventory, or the analyst suspects severe liquidity problems with inventory and receivables

7. It is observed from the table that the Cash Ratio is satisfactory. The company has noted a maximum
ratio of 44.43 in the year of 2018-19.

 We observed the ratio of the company, it is increasing gradually. i.e 29.29 in the year 2015-16 to
44.43 in the year of 2018-19. But 2019-20 year cash ratio has decreased i.e 40.69.

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 SUGGESTIONS
1. The company has to maintain the optimal capital structure and leverage so that in coming years it can
contribute to the wealth of the shareholders.

2. The mining loyalty contracts should be revised so that it will decrease the direct in the production

3. The company has to exercise control over its outside purchases and overheads which have effect on
the profitability of the company.

4. As the interest rates in pubic Financial institutions are in a decreasing trend after globalization the
company going on searching for loan funds at a less rate of interest as in the case of Bank.

5. Efficiency and competency in managing the affairs of the company should be maintained.

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 CONCLUSION
The budgeting exercise in SBI also covers the long term capital budgets, including annual planning and
provides long term plan for application of internal resources and debt servicing translated in to the corporate
plan. The scope of capital budgeting also includes expenditure on plant betterment, and renovation,
balancing equipment, capital additions and commissioning expenses on trial runs generating units. To
establish a close link between physical progress and monitory outlay and to provide the basis for plan
allocation and budgetary support by the government. The manual recommends the computation of NPV at a
cost of capital / discount rate specified from time to time. A single discount rate should not be used for all
the capacity budgeting projects. The analysis of relevant facts and quantifications of anticipated results and
benefits, risk factors if any, must be clearly brought out. Inducting at least three non -official directors the
mechanism of the Search Committee should restructure the Boards of these PSUs. Feasibility report of the
project is prepared on the cost estimates and the cost of generation.

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 BIBILIOGRAPHY
BOOKS:
1. Khan, M Y and P K Jain, Financial Management, Tata McGraw-Hill
Publishing Co., New Delhi, 2007.

2. I M Pandey, Essentials of Financial Management, Vikas Publishing House Pvt Ltd, New Delhi,
1995.

3. Ramesh, S and A Gupta, Venture Capital and the Indian Financial Sector, Oxford university
press, New Delhi, 1995.

4. Anthony, R N and J S Reece, Management Accounting Pincipls, Taraporewala, Bombay.

5. Jain, P K , Josette peyrard and Surendra S Yadav, International Financial Management,

Macmillan India Ltd, New Delhi, 1998.

6. Prasanna Chandra, financial Management, Tata McGraw-Hill Publishing Co., New Delhi, 2007.

NEWS-PAPERS & JOURNALS:

1. Business Today
2. The Economic Times

WEBSITES & SEARCH ENGINES

 www.lancoinfratech.co.in
 www.slideshare.com
 www.scribd.com
 www.ibef.org
 www.moneycontrol.com
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 www.googlefinance.com

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