GENERAL MANAGEMENT PROJECT

ON
“REPORT ON FINANCIAL PERFORMANCE OF COMMERCIAL BANKS”
Submitted in partial fulfilment for the award of the degree of
Master of Management Studies (MMS).

(University of Mumbai)
Submitted By MITESH K. PRAJAPATI
(Roll No. MB20023)

Under the Guidance of

PROF. RUHEE THAKUR MADAM
Academic Year
2020-22

SAS INSTITUTE OF MANAGEMMENT STUDIES (MMS),

Saravali, Boisar (w),
Tal. & Dist. Palghar (MH) -401 501.
 DEEP EDUCATION SOCIETY’S
SAS INSTITUTE OF MANAGEMENT STUDIES

Enrich Enhance Elevate

CERTIFICATE

This is to certify that project titled “Report on Financial Performance of commercial

banks” is successfully completed by Mitesh k, prajapati during the II Semester, in
partial fulfillment of the Master’s Degree in Management Studies recognized by the
University of Mumbai for the academic year 2020-22 through SAS INSTITUTE OF
MANAGEMENT STUDIES.

This project work is original and not submitted earlier for the award of any degree
/diploma or associateship of any other university / Institution.

Internal Examiner
Name: Signature:

External Examiner
Name: Signature:

Dr. Bhagesh Sankhe

(Director SASIMS) College Seal

 DECLARATION

I hereby declare that Project Report submitted by me on the topic “Report on Financial
Performance of Commercial banks” 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.

Signature:

Name: Mitesh k, Prajapati

Roll No: MB20023
Place: Saravali, Boisar (W) Date:
 ACKNOWLEDEMENT

I express my sincere thanks to my project guide, “Prof. Ruhee Thakur Madam”, Asst.
Prof, of MBA Department, for guiding me right from the Inception till the successful
Completion of the project, I sincerely acknowledge her for extending her valuable
guidance, support for literature, critical reviews of project and the report and above all the
moral support she had provided me for this project.

I would also like to thank our Director Dr. Bhagesh Sankhe Sir, our HOD Kushal Rajput
sir and other staff members of MBA Department, for their help and cooperation
throughout my project.

Sincere thanks to all.

Mitesh Kantilal Prajapati

 INDEX

SR no Title Page no

1 INTRODUCTION 1

2 RESEARCH METHODOLOGY 5

3 REVIEW OF LITERATURE 21

4 ANALYSIS AND INTERPRETATION 25

OF DATA

5 FINDINGS 44

6 CONCLUSION 48

7 REFERENCE 58
 LIST OF TABLES

1) Profit per Employee (Rs. In Lakhs)

2) Return on Equity (ROE) - Bank Group-Wise (In Percent)

 LIST OF GRAPHS

1. Business per employees

2. profit per employees
3. assets turnover ratio
4. country region
 ABBREVATIONS
This abbreviation is usually found in reference to radio or TV ads, drafts of contracts,
note taking, or in reference to the greedy commercialism of any number of the traditional
(especially religious) holidays, or in marketing courses in college. You might abbreviate
the word commercial to cml. in any one of the aforementioned areas. It is also common to
see such abbreviations in headlines or newspaper titles where space is a concern. Outside
of professional titles or headlines, the word is not abbreviated in general prose.

ATM: Automated Teller Machine

LTA: Leave Travel Allowance

CAR: Capital Adequacy Ratio

SBI: State Bank of India

ROA: Return of Assets

ICICI: Industrial Credit Investment Corporation India

ROE: Return of Employee

GDP: Gross Domestic Product

OECD: Organization Economic Co-operation Development

GICS: Global Industries Classification Standard

OSFI: Office Superintendent Financial Institution

HDFC: Housing Development Financial Corporation

RBI: Reserve bank of India

HSBC: Hong Kong and Shanghai Banking Corporation

DSCR: Debt Service Coverage Ratio

CEIC: Census Economic Information Center

LADST: Liquid Assets to Deposit borrowing ratio

NLTA: Net Loans Total Assets

NLDST: Net Loans total Deposit Short Term borrowing

OCC: Office Comptroller Currency

PPE: Profit Per Employee

ETA: Estimated Time of Arrival

 INTRODUCTION

The performance of the Banks is a major concern for any countries trade and its development. It has to
manage large volume transactions. Industry related stakeholders, investors, stock holders and other policy
makers need to know about the financial performance of a bank for granting credits, loans and
investments. RBI and government crossed its hands in finding various ways for the full implementation
of international capital norms. In this scenario, it is essential to analyze the financial status of banks by
examining the ratio analysis which is the most logical way to examine the present and to predict the
future position of any banks. Moreover, it determines the ability of the bank to meet its current
obligations, its operating efficiency and its performance. These ratios not only help to decision making
process but also emphasized on internal status of banks and also its performance in market comparing to
other banks. So, this study aims to examine the financial performance under three major areas like,
internal-based performance, market-based performance and performance related to bank’s income. By
establishing a secure relationship between the variables, a firm can analyze its financial performance in
terms of profitability and viability. The present study focuses on measuring the performance of three
large private sectors banks namely HDFC, ICICI and AXIS BANK through extensive use of key
financial ratios. For the past three decades Indian’s banking system has several outstanding achievements
to its credit. The most striking is its extensive reach even to the remote corners of the country. It has been
increasingly focusing on adopting integrated approach to risk management. According to RBI, majority
of the banks already meet capital requirements of Basel III (Economic times, June 20, 2017). Already
State-run banks have put in place the framework for asset-liability match, credit and derivatives risk
management. Banks look for maximum profitability and have the responsibility in increasing the value of
shareholders’ equities (State run banks maintain equity ratio of 8.5%) on one side (Economic times, June
20, 2017) and improving customer satisfaction on other side. The role of the banking industry is crucial
for sustained economic growth. In this context, it is essential to understand and evaluate banks
performance in monetary terms which can be carried out by using financial ratios. Generally, the results
are reflected in the bank’s return on net worth,

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return on assets, return on equity, return on investment, operating income, earnings
before interest and taxes, net asset value, etc.

Banks have the principal role of converting liquid deposit to illiquid assets such as loans;
which makes them intrinsically vulnerable to liquidity risk. Lack of liquidity is an
indicator of the liquidity crisis in a banking system and therefore liquidity. A commercial
bank is a type of bank that provides services such as accepting deposits, making business
loans, and offering basic investment products that are operated as a business for profit. It
can also refer to a bank, or a division of a large bank, which deals with corporations or
large/middle-sized business to differentiate it commercial banks include private sector
banks and public sector banks. Commercial banks accept various types of deposits from
the public especially from its clients, including saving account deposits, recurring
account deposits, and fixed deposits. These deposits are returned whenever the customer
demands it or after a certain time period.

 Commercial banks provide loans and advances of various forms, including an

overdraft facility, cash credit, bill discounting, money at call, etc
 Commercial banks provide loans and advances of various forms, including an
overdraft facility, cash credit, bill discounting, money at call, etc. They also give
demand and term loans to all types of clients against proper security. They also
act as trustees for wills of their customers etc.
 The function of credit creation is generated on the basis of credit and payment
intermediary. Commercial banks use the deposits they absorb to make loans. On
the basis of check circulation and transfer settlement, the loans are converted into
derivative deposits. To a certain extent, the derivative funds of several times the
original deposits are increased, which greatly improves the driving force of
commercial banks to serve the economic development.

The term commercial bank refers to a financial institution that accepts deposits, offers
checking account services, make various loans, and offers basic financial products like
certificates of deposit (CDs)and savings account to individuals and small business A
commercial bank is where most people do their banking. commercial banks make

2
money by providing and earning interest from loans such as mortgages, auto loans,
business loans, and personal loans. customer deposits provide bank with the capital to
make these loans. commercial banks provide basic banking services to the general public-
to both individual consumers and small to mid-sized businesses. As mentioned above,
these services include checking and savings accounts, loans and mortgages, basic
investment services such as CDs, as well as other services such as safe deposit boxes.
banks make money from service charges and fees, these fees vary based on the products,
ranging from account fees (monthly maintenance charges, minimum balance fees,
overdraft fees, non-sufficient fund (NSF) charges) safe deposit box fees, and late fees.
many loan products also contain fees in addition to interest charges. Bank also earn
money from interest they earn by lending out money to other clients. the funds they lend
comes from customer deposits however the interest rate paid by the bank on the money
they borrow is less than the rate charged on the money they lend. for instance, a bank
may offer savings account customers an annual interest rate of 0.25% while charging
mortgage client 5.27% in interest annually. The commercial bank was founded in 1924
by local businessmen in Oglethorpe County with the mission of serving the financial
needs of the citizens and businesses of the area. much has changed since 1924, but the
commercial banks commitment to the communities that we serve remains the same. As
one of the few remaining locally owned and operated community bank in the Athens
area, the commercial banks have the unique ability to customize common sense solutions
for each of our customers. this approach allows us to differentiate ourselves from the
regional and national banks that often use an impersonal " one-size fits all" approach
through the years, the commercial bank has made many positive changes. we have
focused on making investments in both people and technology ad service; we continually
strive to provide the best of both. the bank's senior management team has almost 100
years of banking experience and is devoted to meeting the needs of its customers. we
believe in empowering each employee to make the common-sense decisions our
customers deserve and expect. we pride ourselves on providing quality customer services
and making fast, local decisions when it relates to customers. "Too big to serve." while
we continue to grow, we will remain consistent in making customers our top priority. it
all started with a simple philosophy back 1924. A community bank dedicated to

3
providing personalized financial services with a commitment to the community. While
we have continued to build on our heritage and adapted to changes, the commercial bank
has never strayed from this philosophy. The scheduled commercial banks are those banks
which are included in the second schedule of RBI act 1934 and which carry out the
normal business of banking such as accepting deposits, giving out loans and other
banking services. the major difference between scheduled commercial banks and
scheduled cooperative banks is their holding pattern, since cooperatives are registered
under the cooperative societies act as cooperative credit institutions. scheduled
commercial banks can be further divided into four groups:

. public sector banks: this includes:

. SBI & associates

. Nationalized banks

. other public sector banks

The name bank derives from the Italian award banco "desk/bench", used during the
Italian Renaissance era by Florentine bankers, who used to carry out their transactions on
a desk covered by a green tablecloth. However, traces of banking activity can be found
even in ancient times. in the United States, the term commercial bank was often used to
distinguish it from an investment bank due to differences in bank regulation. After the
greatdepression, through the glass-Steagall act, the us congress required that commercial
banks only engage in banking activities, whereas investment banks were limited to
capital market activities. This separation was mostly repealed in 1999 by the Gramm-
leach-Bliley act. An example of the application of commercial bank marketing is the use
of the internet for the creation of awareness and the promotion of the awareness and the
promotion of the various products and services offered by the bank. for example, a bank
might use emails, niche advertising and web sites as a means of marketing online. most
banks now have web sites that contain information regarding the bank, such as its
practices, benefits for customers, and the means by which potential customers can sign
up online.

4
 REASEARCH METHODOLOGY

The analysis has considered three regression models to fulfil the above-mentioned
objectives and these models will measure the financial performance of the selected
private commercial banks in India. Correlation was done to find the association between
variables in each case before determining the regression models. The first regression
model is, determination of ROA (which measures the internal-based financial
performance), second model is, determination of Tobin’s Q (which measures the market-
based financial performance) and the third model is, determination of ROE (Which
measures the amount of a Bank's income that is returned as shareholder equity) based on
Five identical explanatory variables, Bank size, Credit risk, operational efficiency, Asset
management and Debt ratio.

Variables in the Study

Three dependent variables are ROA, Tobin’s Q and ROE:

ROA=Return on Assets;

Tobin’s Q=it is the ratio of market value of banks to book value of equity;

ROE=Return on Equity;

The five independent variables considered in our study are Bank size (which is the log of
total assets), Credit risk, Operational efficiency, Asset management and Debt ratio.

Analysis and Findings The current study is to investigate the financial performance of
three major private sector banks namely HDFC, ICICI and AXIS BANKS in India which
are listed in both BSE and NSE. Among the Private sector banks in India, the selected
three banks are having large assets size, market capitalization and profit (Source;
Bloomberg data base, financial statements as on March 2017) which are considered to be
the performance indicators of banks. Hence, the present study consists of only three

5
banks. The study is done with special reference to Indian scheduled commercial banks.
For the purpose secondary data are been used from 2005-6 to 2009-10 and CAMELS
model applied which minutely evaluates and examine relevant components like capital
Adequacy, asset /quality, Management Efficiency Liquidity and sensitivity to market risk
for their smooth functioning. After judicious evaluation of all performance parameters
required in CAMELS model bank are compared and ranked accordingly

Profit per Employee (PPE)

This ratio measures the efficiency of the employee at the branch level as how efficiently a
bank is utilizing its employees. Ideally it also gives valuable inputs to assess the real
strength of a bank’s branch network. In general bank wants the highest business per
employee, as it denotes higher productivity. It is arrived by dividing the net profit of the
bank by total number of branches.

Profit per Employee (Rs. In

Lakhs)
BANK 2005-06 2006-07 2007-08 2008-09 2009-2010
SBI 2.17 2.37 3.73 4.74 4.46
ICICI 10.00 9.00 10.00 11.00 12.00
AXIS 8.69 7.59 8.39 10.02 12.00
HDFC 7.39 6.13 4.97 4.18 5.98
BOI 1.66 2.71 4.95 7.49 4.39
PNB 2.48 2.68 3.66 5.64 7.31
IDBI 12.45 8.44 8.86 8.42 8.44
UBI 2.66 3.25 5.39 6.28 7.47
BOB 2.13 2.13 2.13 2.13 2.13
CANARA 3.02 3.24 3.65 4.97 7.35
BNAK

Interpretation: The study found that maximum profit per employee of ICICI bank is Rs
12 lakhs in 2009-2010. It has constantly maintained its profit better than other selected

6
banks and this show the quality of work force with ICICI bank which has increased the
profit year on year. Followed by Axis bank “12 Lakh”, IDBI “8.44 lakh” and Canara
bank with “7.35lakh” in the same period? BOB have unique distinction of maintaining
constant profit that is 2.13 lakh in all the respective years. In aggregate (sum of all the
years) ICICI has the highest followed by AXIS, IDBI respectively and BOB has the
lowest among all the selected banks. The maximum amount of profit that the employee
generates would determine the skill sets of the employee as well as the HR policies of the
bank. Good HR policies would benefit the bank with respect to the profit increment.

The two most distinctive features of a commercial bank are borrowing and lending
acceptance of deposits and lending of money to projects to earn interest. In short, banks
borrow to lend. The rate of interest offered by the banks to deposited is called the
borrowing rate while the rate at which banks lend out is called lending rate. The different
between the rates is called spread which is appropriated by the banks. Mind all financial
institutions are not commercial banks because only those which perform dual functions of
accepting deposits and giving loans are termed as commercial banks. For example, post
offices are not bank because they do not give loans function of commercial banks are
classified in to two main categories primary functions and secondary functions. A
commercial bank accepts deposits in the form of current, saving and fixed deposit .it
collects the surplus balances of the individuals, firms and finances the temporary needs of
commercial transactions. The first task is therefore the collection of the savings of the
public the bank does this by accepting deposits from is customers. Deposits are the
lifeline of banks. Current account deposits such deposits are payable on demand and are
therefore called demand deposits. These can be withdrawn by the depositors any number
of times depending upon the balance in the account. The bank does not pay any interest
on these deposits but provides but cheque facilities this deposit is but provides cheque
facilities these accounts are generally maintained by businessmen and industrialists who
receive and make business payments of large amounts through cheque. This paper is
organized as follows. Section 1 carries the concept of evaluation of commercial banks
registered in Lithuania. Section 2 describes variables used in the evaluation. Section 3
describes robustness of MOORA method and two possible ways of gathering objectives

7
into a single super-objective. Section 4 describes MOORA method. Section 5 describes
MULTIMOORA method, the theory of dominance, and the results of the evaluation.
Section 6 concludes.

1. Concept of Evaluation of Commercial Banks

In this paper Lithuanian banks are evaluated using multiple criteria decision aid methods.
The authors use several MCDA methods for the purpose of increasing reliability of the
evaluation and for comparison of different methods. The topic of evaluation of financial
stability of commercial banks is rather popular. In Lithuania a MCDA research on client-
based variables has been attempted by Romualdas Ginevičius and Valentina’s Podvezko
(2008), Askoldas Podviezko and Ginevičius (2010), Ginevičius and Podviezko (2011,
2013), Willem Karel M. Brauers, Ginevičius, and Podviezko (2012), Podviezko (2012)
etc. MCDA methods’ result is usually provided in the form of rankings, which is a
convenient form of the initial perception of the stability level of a commercial bank by a
depositor. Further enhancements of the MCDA methodology (Podviezko 2012) provide
results in more precise forms: in the graphical way expressing stability level by each of
CAMEL category, and in the form of tables revealing stability level by each criterion.
The mentioned methodology is intended to reduce information asymmetry level in the
market of commercial banks and depositors by providing results of
evaluation in different forms in order to suit the level of comprehension of every
depositor thus enabling him as a decision-maker to obtain adequate perception of bank
financial stability in accordance with his level of comprehension. The list of criteria could
be extended to comprise both micro- and macro-economic criteria; stress testing could be
performed using deviated values of criteria for calculations. Our paper is based on a
categorization of banks comprising major types of objectives. A selection is proposed on
basis of a classification which is very popular by the researchers on bank activities,
namely CAMEL. CAMEL represents the abbreviation of Capital adequacy, Asset quality,
Management quality, Earnings and Liquidity.
This categorization is used by the American Federal Reserve, FDIC (deposit insurance)
and the OCC (Office of the Comptroller of the Currency), (Podviezko and Ginevičius
2010). It comprises major types of objectives representing stability of banks. The well

8
known international rating agency, Moody’s Investors Service uses CAMEL-based
objectives (David Fanger 2007). Brenda González-Hermosillo (1999) cites as macro-
economic factors of financial
instability: “cyclical output downturns, adverse terms of trade shocks, declines in asset
prices, rising real interest rates, boom-bust cycles in inflation, credit expansion, losses of
foreign exchange reserves and capital inflows”. With the banking crisis in Asian
countries of 1996-1997 Demirgüç-Kunt and Enrica Detragiache (1998) and Daniel C.
Hardy and Ceyla Pazarbasioglu (1998) argue that these models missed these crises.
Nevertheless, we have not to consider the macro-economic approach as the banks we
investigate are registered in Lithuania and therefore are operating in the same macro-
economic environment, governed by the same Law on
Banks (Lietuvos Respublika’s Seimas 2011) and deposits made with these banks are
insured by the same State Enterprise “Deposit and Investment Insurance”. The year 2007
is taken as basis as the later years were seriously biased. The years 2008 and 2009 were
characterized by a serious recession largely due to the sub-prime and bank crisis
problems. The year 2008 was in the middle of the serious recession in the high-income
countries from the end of 2007 until the end of 2009 (Symposium Macroeconomics after
the Financial Crisis 2010 with the following articles: Alan J. Auerbach, William G. Gale,
and Benjamin H. Harris 2010; Richard Baldwin 2010; Robert E. Hall 2010; Lee E.
Ohanian 2010).

2. The List of Objectives Based on the CAMEL

We concentrate on bank-specific variables, which disclose performance of each bank
in the market in terms of soundness and stability. All data are available from their
annual reports and it becomes immediately clear that it is impossible to evaluate the
banks directly by observing raw data and enormous number of different figures contained
in the reports. For evaluation purposes a limited number of essential criteria
representing stable and sound performance of banks must be chosen (Ginevičius and
Podviezko 2011). The following objectives are proposed based on the CAMEL
categorization and by cost and profit efficiency (Nicholas Apergis and Effrosyni
Alevizopoulou 2010).

9
2.1 Capital Adequacy
In 1988 the introduction of Basel I capital adequacy framework has set capital adequacy
requirements on banks and is considered to be a major regulatory measure, which reduces
credit risk in activities of banks. While in Basel I capital adequacy framework credit risk
is only considered, in addition a new capital adequacy framework, referred to as Basel II,
accounts operational and market risk. Capital adequacy ratio is calculated by dividing
capital by risk-weighted assets accounted separately for credit, market and operational
risks (BIS 2004). Calculation of capital adequacy ratio in banks is required to hold total
capital equivalent to at least 8% of their risk weighted assets (Board of the Bank of
Lithuania 2006). The Central Bank of Lithuania adds up the two. We also add both Tier 1
and Tier 2 capital ratios, but since Tier 2 capital is riskier than Tier 1 capital (Ray Barrell
et al. 2011), we rather assume that Tier 1 is two times more important than Tier 2.This
difference in appreciation reveals the difference of risk for the two types of capital. The
resulting single CAPITAL objective is clearly a maximizing one, since the larger the
capital, the more it can absorb losses, including ones arising from bad loans, low cost and
earning efficiency as from interest rate and trading.

2.2 Assets
Asset’s category is represented by four ratios:
(i) The first ratio requires the maximization of net interest income as a percentage of
RWA (risk weighted assets). We have undertaken a conservative view as we believe that
this objective, as well as two other following objectives in Earnings category, more
adequately accounts profitability of assets in terms of riskiness than in the case if interest
income was divided by total assets. This view corresponds to risk-adjusted return on
capital measurement model and is also employed by Moody’s Investors Service (Fanger
2007);
(ii) The second is the ratio between loans as the riskiest assets and total
assets. This ratio requires minimization;
(iii) The third ratio is delinquent loans to total assets. In Lithuania, loans are
considered to be delinquent if they are overdue for 60 days or longer.

10
This ratio requires minimization;
(iv) The fourth ratio within the category is the decrease of value of assets
over the reported year divided by total assets. This ratio requires minimization.

2.3 Management
Management category is represented by a single ratio, expressing cost-efficiency of a
bank. Since the aim of the research is to consider only quantitative financial objectives,
we did not include the qualitative objectives to the analysis. The ratio employed is
between non-interest costs and total income. This ratio requires minimization.

2.4 Earnings
The category of earnings is represented by two ratios, which both have to be maximized:
(a) Pre-provision profits compared to risk-weighted assets. This ratio reveals the
capability of a bank to generate cash, which could then serve as a remedy for various
losses;
(b) Net income compared to risk-weighted assets. This second ratio expresses
profitability of a bank by revealing remaining profits after all deductions have been
made;
(c) The chosen above-described ratios form the set of criteria for our multiple criteria
evaluation. Some of the criteria are maximizing, some are minimizing as their effect on
bank stability is different. The higher the earnings, the larger the capital ratios, the more
efficient expenditure management and the better loan portfolio, then the likelihood of
failure is smaller (David C. Wheelock and Paul W. Wilson 2000), and as values of all
criteria cannot be simultaneously improved in the real economic environment without
making trade-offs between them, multiple criteria evaluation is designed to expose the
general level of stability of each bank.

2.5 Liquidity
Finally, the last liquidity category is represented by two ratios:
(1) The part of deposits in total loans. We chose the deposits represented only by
customer deposits and excluded more volatile inter-bank deposits. This ratio requires

11
maximization, thus setting the goal for a bank of the most stable loan-financing from the
customer-deposit source;
(2) The regulatory liquidity ratio imposed by the Central bank, i.e., the Bank of
Lithuania.This ratio indicates the short-term liquidity position of a bank within a month.
Table 1 shows values of the chosen criteria representing performance of Lithuanian
banks on the defined objectives. Data is taken from annual audited financial statements
of Lithuanian commercial banks as such approach is reliable and popular among
researchers (Sami Mensi 2010).

3. Evaluation Methodology
Upon investigation of popular available methods of evaluation of bank stability, namely
methodologies applied by rating agencies and statistical methods, the authors made a
choice in favor of the MCDM methods (Ginevičius and Podviezko 2012).
Methodologies applied by rating agencies are primarily based on the qualitative analysis,
on judgment of one-two experts, are slowly reacting to changes in the market, focus on
qualitative evaluation are declared features of rating agencies (Richard Cantor 2001;
Moody’s Investors Service 2011). As a consequence, ratings are among the worst
indicators of financial crisis (Herwig Langohr and Patricia Langohr 2008). A researcher
who made a choice in favor of quantitative methods obviously should not overlook
statistical methods. Statistical methods have a history spanning from the sixth decade.
Even if the methods are very popular, they have the following -
limitations: logit and probity, and OLS methods could be applied only in such cases,
whenfinancial variables have normal distribution, sample size is large, data is stable over
time,multi co linearity is precluded, and data is complete (Ran Barniv and James B.
McDonald1999). Unfortunately, this is not the case for the data describing performance
of Lithuanian commercial banks. As Lithuania joined the EU only in May 2004, banks
adopted International Financial Reporting Standards after a few years. This means that
the uniform standard is being applied for the relatively short period of time. Financial
crisis introduces distortions to the data, which cannot be considered as sufficiently stable
to apply statistical methods. The number of commercial banks existing in Lithuania even
decreased after bankruptcy of AB Banas SNORAS in 2011, and AB Ūkio Bankas in

12
2012 to seven, which precludes from considering the set of banks as being sufficiently
large. In cases, when the sample and data are scarce and exact information cannot be
obtained, operational research methods are the best option. Fast-gained popularity of
the methods after their introduction to finance proved advantages over already having
been used statistical methods and the methods used by credit agencies. Evaluation of a
financial firm or a bank encompasses more complex considerations and goals and is not
narrowing to solely the risk-return modelling (Ginevičius and Podviezko 2011). The
MCDA methods have been created to deal with complex objectives (Jaap Spronk, Ralph
E. Steuer, and Constantin Zopounidis 2005). The methodology of evaluation of financial
stability of commercial banks comprises several stages. Results of evaluation are
provided in several formats: in the form of ranking, in graphical format exposing
performance of commercial banks in terms of CAMEL categories, in analytical format by
all chosen criteria of financial performance of banks (Podviezko 2012). Recently an
additional useful tool commenced to be developed: the evaluation of economic objects
and processes using MCDA methods by comparison of alternatives with hypothetic
objects (Ginevičius, Podvezko, and Podviezko 2012; Podvezko and Podviezko 2013),
which is also designed to be used in the methodology of evaluation of financial stability
of commercial banks. The whole variety of MCDA methods are being used by
researchers. For the researcher in multi-objective decision support systems the choice
between many methods is not very easy. Indeed numerous theories were developed since
the forerunners: Nicolas de Condorcet (1785), Hermann H. Gossen (1853), Hermann
Minkowsky (1896, 1911), Vilfredo Pareto (1906) and pioneers like Maurice G. Kendall
(1948), Bernard Roy, Raphaël Benayoun, and Bernard Sussman (1966), David W. Miller
and Martin K. Starr (1969), Ching-Lai Hwang and Kwang sun Yoon (1981), Thomas L.
Saaty (1988), Brauers (2004a, b), Serafim Opricovic and Gwo- Hshiung Tzeng (2004),
Jean-Pierre Brans and Bertrand Mareschal (2005), see also Podvezko and Podviezko
(2010a, b). In Ginevičius and Podviezko (2013) Lithuanian bans were analyzed using
four MCDA methods: SAW, TOPSIS, COPRAS, PROMETHEE II. In this paper we use
an alternative MCDA method MULTIMOORA and make a comparison with the above-
mentioned methods. The MULTIMOORA is composed of two MOORA methods and of
the Full Multiplicative Form of Multiple Objectives thus making a composite of three

13
methods of multiple objectives optimization. In his book, Brauers (2004a) described the
three parts of MOORA: the Ratio System Approach, the Reference Point Approach but
still based on scores and the Full Multiplicative Form. Sometime later Brauers (2004b)
switched over to a Reference Approach with instead of scores uses the ratios found in the
ratio system. In this way dimensionless measures were obtained.

Every service organization tries to increase it is business per employee more and more. It
means how much money and employee is generating for the organization? The more it is
better it is for the company. Has it will reduce the proportion net operational cost and
increase the profit of organization. From the above table the axis bank has the highest
business per employee of 1136 followed by ICIC bank 938. Kotak Mahindra bank has
427which are lowest in the banks under study.

14
Interpretation –

Maximum prog=fit per employee is the ultimate goals of the organization. Because more
big revenues will not mean big profit. Because it depends on the cost of the service
delivered. Axis bank as the highest profit per employee 10.40 and is followed by ICIC
bank 9.80. The lowest profit per employee is of SBI bank 3.83.

Interpretations –

Asset turn over major of terms efficiency at using it is the asset in generating sales of
revenue – the higher the no. the better. It also indicates prizing strategy companies with
low profit margin trend to have high asset turn over, while does with high profit margin

15
have low asset. This is the most important ration for the bank has the compare the sale
with the assets already held by the bank. It should be higher. SBI bank the highest value
of 6.92 followed by the Kotak Mahindra bank of 6.75. Axis bank has 6.34 and ICIC
bankhas 4.7096. SBI is leading bank highest asset turnover ratio.

Commercial banks provide loans to the public as per their needs. The amount accepted as
deposits by these banks is used for providing loans. Banks charge high-interest rates on
the amount provided as a loan from its customers. Both short term & long-term loans are
provided by the bank. Banks generally ask for some collateral security before providing
advances to their customers.

Credit Creation

Credit creation is one of the unique & important features played by commercial banks. It
is through this function commercial banks manage & control the flow of credit in the
economy. These banks by accepting deposits & providing credit facilities to its customers
help in generating more & more credit. Commercial banks are also termed as factories or
manufacturers of credit.

Secondary functions of Commercial Banks

These are those functions which are performed in addition to primary functions.
Secondary functions are as follows

Acts As an Agent.

The commercial bank acts as an agent of its customers. It performs several functions &
duties on behalf of its customers. Banks make several payments & receive different
payments for their customers. It pays rent, insurance premium & income tax of its
customers. Banks also facilitates the transfer of funds for its customers. It also buys &
sells securities for its customers.

16
Overdraft Facility

Commercial banks provide overdraft facility to its reputed & reliable customers. Under
this facility, customers are able to withdraw more than they have as a credit in their
current account. The maximum overdraw limit is set by the bank. This facility is provided
to the current account holder. Customers need to pay interest on the overdrawn amount to
the bank.

Discounting Bill of Exchange

This is one of the important secondary functions performed by commercial banks. Banks
provide the facility of discounting bills of exchange before the due date to its customers.
Banks charge a commission for providing this service. Banks pay the bill amount after
charging their commission to the customers. Commercial banks receive money in the
form of inputs. This money is taken for a recurring bank account, saving bank account.
This amount is given to various companies and entrepreneurs as loans. The rate of
interest in saving a bank account is lower than the rate in terms of loan giving. Hence, if
an equal amount of money is given the difference between the two is the profit of the
commercial banks.

The present research is a qualitative as well as quantitative analysis of the effectiveness

of e-banking services in Qatar. It uses a descriptive survey design to investigate if
employees as well as customers of the bank are comfortable with the currently used e-
banking platforms and what they like or suggest having in e-banking. The findings
provide a detailed analysis of the data from a given population to determine the status of
e-banking. According to Dawson (2009), it is important to know the difference between
qualitative and quantitative methods before research methodology starts (Research
Methodology: An Introduction, n.d.). (Please be noted that there is no author that is why
title name is used). Qualitative research involves subjective data. Dawson (2009)
mentions that qualitative research focuses on behavior, attitude and experience through
the methods like interviews. Since attitudes, behavior and experiences are very important
so this kind of research tries to get in depth feeling and opinion from the people

17
who participate in the interviews? survey (Research Methodology: An Introduction, n.d.).
Quantitative research is a pragmatic approach used for research purposes. The quantified
data is captured here. It involves objective data. Collection of large data has encompassed
the use of questionnaires as well as structured interviews. According to Dawson (2009),
quantitative research aims to target more people and connecting with people. He further
mentions that this method is much quicker than it happens in qualitative research. Both
the researches need skillful, trained and experienced researchers.

The research methodology that was used in the study is the combination mixture of
qualitative as well as quantitative research methods. By using this mixed methodology,
the hypotheses of the research questions can be measured, determined, and analyzed. The
method also helped in determining the quantity and consistency of results. The method
contributed in determining the satisfaction of the employees and the customers of the
bank for e-banking system within the bank. The method used is a descriptive
representation of the phenomenon and the collect of quantifiable data that can be
statistically verified and analyzed to measure the effectiveness of the whole research.
Hence, the qualitative research technique was used as it was concerned with the quality
of the data. Or kind. This research technique uses in depth interviews for exploring the
better view of the situation. It also intends to know about the understanding of people
relating to a particular subject or institution (Research Methodology: An Introduction,
n.d.). Moreover, the survey provided important statistical quantitative data to
compliment and confirm the findings presented by qualitative data. Qualitative research
is done with an aim to improve quality and is often considered as ‘Motivational
Research’. It also focuses on people’s opinion about particular subjects or institutions
(Research Methodology: An Introduction). The statistical survey provides standardized
information about the research subject. It is a well-organized way to gatherinformation
regarding the understanding of a subject by a large number of respondents. For the
purpose of this study, Likert scale, a bipolar scaling method, is used to constructthe
questionnaire.

18
Likert scale is used to construct questionnaires to get psychometric replies from the
people. It aims at obtaining the degree of agreement or knowing the preferences of the
respondents. These scales do not use comparative techniques, but rather evaluate a single
feature. The level of agreement has to be shown with the statements in an ordinal scale
(Bertram, n.d.).

The dissertation captured both primary and secondary data to get proper answers of the
research questions. For this study in depth interview was chosen as data collection
method. The questionnaire was used for in depth interview. The survey took place at the
participants’ work place so they could feel relaxed and comfortable and could answer the
questions with their full thoughts, experiences and feelings. According to Kinnear and
Taylor (1979), “In-depth interviews may be defined as an unstructured personal interview
which uses extensive probing to get a single respondent to talk freely and to express
detailed beliefs and feelings on a topic with little directional influence from the
researcher” (as cited in Research Methodology: An Introduction, n.d.). Each participant
was asked 4 open ended and 6 close ended questions. Every question was explained by
the researcher to make sure that the respondent understood the question and was
comfortable to answer. This survey lasted for half an hour. Primary data is composed
through direct practice. First the researcher gets some insight of the issue by collecting
secondary data then primary research is conducted. This process involves many forms
such as questionnaires, direct observation and telephonic interviews. Secondary data is an
available data and it is collected by others. Secondary data is time saving which one
could spend while collecting data. It gives bigger and better data. If any researcher could
try to collect on their own, it could be expensive for him. The main advantage of using
secondary data is that it is obvious that background work like literature reviews, any case
studies etc, have already been done. Uses of texts and other statistics have been done and
personal contacts have been consumed. On the other hand, there are some drawbacks to
the fact that the researcher is not able to check the data face-to-face so it is difficult to
check the reliability of the data.

19
It was planned how to reach the people for collecting data. The locale of the study was
conducted in various Qatar banks. The choice of location was based on how accessible
the organizations were to the researcher based on Singleton’s (1993) argument that the
ideal setting for any study should be easily accessible to the researcher. The target groups
for this research were the employees as well as customers working with different banks.
A sample that is fully representative of attitude and views of people that use e-banking
was selected. Sampling is a technique used by researchers to gather information.

The objectives of commercial banks are two-fold; to offer a wide variety of services to
individual and business customers, and to collect payments including fees, charges and
interest on the products and services provided to customers for the purpose of generating
profits for shareholders. Commercial banks typically offer a robust suite of services in an
attempt to be able to serve all the financial needs of each customer. This results in the
opportunity to maximize revenues from each customer. For example, a customer who has
checking and saving accounts, loans, and credit cards for personal and business use at one
bank generates revenues through numerous channels. Revenues can be increased further
if the customer also buys stocks and bonds through a bank’s brokerage arm.

The Importance of Commercial Banks

Commercial banks play a critical role in the country’s financial system by providing
liquidity through the creation of loans, access to money on deposit and the availability of
revolving debt using credit cards. Access to money enables businesses to grow,
consumers to make purchases of goods and services, and jobs to be created. This
liquidity, combined with the expedited, simple and efficient transfer of money for a wide
range of financial transactions, is an essential factor in a healthy economy.

20
 REVIEW OF LITERATURE

1. E. Gordon and K. Natarajan (2014): The economic development of any country

depends on the existence of a well-organized financial system. It includes financial
markets and financial institutions which support the system. Financial system provides
the intermediation between savings and investment and promoters faster economic
development.

2. Garima Choudhary (2014): used network of banks, productivity of banks, capital

adequacy ratio, growth of banks as an indicator of measuring banks performance. The
study related that private sector banks have expanded faster than public sector banks. The
capital adequacy of new private sector banks is above RBI minimum requirements.
However, the assets base of public sector banks raises faster than private sector banks.

3. Dr. (Mrs.) Anita (2014): It is very important for the customer to spend some of their
time in banks to avail all services. Relationship marketing should be emphasized on the
co-operate staff members and special training should be provided also private banks are
ahead of public banks in the strategic intent. Also, in order to keep the customer satisfied
the infrastructure of the bank’s decor sitting facility are adequate also overall
improvement of the banks is necessary by making the customers available with the latest
technology and services. Naloni studied the service quality model for customers in PSB's
she stated that the entry of new private sector banks has led to improve customer service
and products.

4. Renu Bagoria (2014): The main objective of this paper is to make a comparative
study between private sector banks and public sector banks and the adoption of various
services provided by this bank. The different services provided by these banks are
M-Banking, Net banking, ATM, etc. One of the services provided by the bank i.e. Mobile
banking helps us to conduct numerous financial transactions through mobile phone or
personal digital assistant (pda). Data analysis had been made in private sector banks like

21
ICICI Bank, INDUSSIND Bank, HDFC Bank, Axis Bank and public sector banks like
SBI Bank, SBBJ, IDBI and OBC Bank. These banks also provide Mobile Banking
service. The overall study showed that the transaction of Mobile banking through public
sector bank is higher than private sector.

5. Neetu Sharma, dr. Richa Chaudhary, dr. harsh purohit (2014): Banking
institution try to spread green environment product by way of Finance to those Industries
which make "Green Product" E.g. Automobile Industry give more importance to battery
bike orsolar car etc. Green banking is an umbrella that makes bank sustainable in
Economic, environment & Social dimensions. Green banking is making technological
improvementin banking sector. It is a smart way of thinking with a vision of future
sustainability. Green banking is still a major issue & can take an important for
development of our country India. The environmental friendly activities such as using
energy efficient alliance, implement green data centers help in improving their
operational efficiency as well as cost saving factor for a long run.

6. Alpesh Gajera (2015) in his research article a financial performance evaluation of

private and public sector banks found that there in significance difference in the financial
performance of these banks and private sector banks are performed better than public
sector banks in respect of capital adequacy ratio and financial performance,

7. Dr Richa Jain, Prof. Mitali Amit Shelankar & Prof Bharti Sumit Mirchandani,
(2015)
Tools / Techniques of financial statement analysis: - The various tools and techniques of
financial statement analysis are
Trend Percentage Analysis: It is also known as Intra firm comparison in which the
financial statements of the same company for few years are compared for some important
series of information.

22
 Comparative Statement: These are the statement of financial positions at different
periods of time. The financial position is shown in a comparative form over two period of
time.
Common Size Statements: The common size statements, balance sheet and income
statements are shown in terms of percentages. The data is shown as percentage of total
assets, liabilities and sales.
Ratio Analysis: It is a technique of analysis and interpretation of financial statements.
It is the process of establishing and interpreting various financial ratios for helping in
taking decisions.
Funds Flow Statements: It is a statement of studying the changes in the financial
position of a business enterprise between the beginning and the end it is a statement
indicating rises of funds for a period of time.

Cash Flow Statements: It shows the changes in cash flow between two periods.
8. Sharifi and Akhter (2016) considered the credit deposit ratio as a barometer of progress of a 

financial institution like commercial banks. According to them, it indicates the level credit 
deployment of banks in relation to deposits mobilized by them. A high credit deposit ratio 
indicates that banks are generating more credit from its deposits and vice‐versa. Further, they 
say that the outcome of this ratio reflects the ability of the bank to make optimal use of the 
available resources. They carried out a study with a purpose to present the performance of 
public sector banks through the credit‐deposit ratio based on the secondary data collected from 
26 public sector banks for a 7‐year period (2008‐2015). The data were analyzed using a 
descriptive statistics and panel data regression model. Their findings and analysis reveal that the 
CDR impact positively on public sector bank's financial performance. 
 
9. Jilkova and Stranska (2017) analyzed the effect of the economic situation of the
CzechRepublic on the performance and profitability of the banking market through
selected determinants in their study. They have focused on measuring the performance
and profitability of the banking sector using the method of “Multiple linear regression
model”. They not only studied the overall fitness of model but also determined which
independent variables have the greatest and the smallest effect on the dispersion of the
dependent variables. Their paper clarifies the structure of the Czech banking sector and it

23
is focused on the performance and profitability in the defined time period and also
compares with the selected banking sector and indicators in other countries. Analysis and
interpretation of financial statements are an attempt to determine the significance and
meaning of the financial statement data so that a forecast may be made of the prospects
for future earnings, ability to pay interest, debt maturities, both current as well as long
term, and profitability of sound dividend policy. The main function of financial analysis
is the pinpointing of the strength and weaknesses of a business undertaking by regrouping
and analysis of figures contained in financial statements, by making comparisons of
various components and by examining their content. The analysis and interpretation of
financial statements represent the last of the four major steps of accounting.

The first three steps involving the work of the accountant in the accumulation and
summarization of financial and operating data as well as in the construction of financial
statements are:

(i) Analysis of each transaction to determine the accounts to be debited and credited and
the measurement and variation of each transaction to determine the amounts involved.

(ii) Recording of the information in the journals, summarization in ledgers and

preparation of a worksheet.

(iii) Preparation of financial statements.

The fourth step of accounting, the analysis and interpretation of financial statements,
results in the presentation of information that aids the business managers, investors and
creditors. Interpretation of financial statements involves many processes like
arrangement, analysis, establishing relationship between available facts and drawing
conclusions on that basis.

24
 ANALYSIS AND INTERPRETAION OF
DATA

Banking institutions have become increasingly complex, the key drivers of their
performance remain earnings, efficiency, risk-taking and leverage. In detail: while it is
clear that a bank must be able to generate “earnings”, it is also important to take account
of the composition and volatility of those earnings. “Efficiency” refers to the bank’s
ability to generate revenue from a given amount of assets and to make profit from a given
source of income. “Risk- taking” is reflected in the necessary adjustments to earnings for
the undertaken risks to generate them (e.g., credit-risk cost over the cycle). “Leverage”
might improve results in the upswing – in the way it functions as a multiplier but,
conversely, it can also make it more likely for a bank to fail, due to rare, unexpected
losses. There are a multitude of measures used to assess bank performance, with each
group of stakeholders having its own focus of interest. Among the large set of
performance measures for banks used by academics and practitioners, the following are
commonly used ratios.

2.3 Profitability Performance - Performance measures are similar to those applied in

other industries, with return on assets (RoA), return on equity (RoE) or cost-to-income
ratio being the most widely used. In addition, given the importance of the intermediation
function for banks, net interest margin is typically monitored. Return on Assets (RoA)
(net profit/total assets) shows the ability of management to acquire deposits at a
reasonable cost and invest them in profitable investments (Ahmed, 2009). The return on
assets (RoA) is the net income for the year divided by total assets, usually the average
value over the year. This ratio indicates how much net income is generated per dollar of
assets. The higher the ROA, the more profitable the bank is Return on Equity (RoE) (net
profit/ total equity) RoE is an internal performance measure of shareholder value, and it
is by far the most popular measure of performance, since: (i) it proposes a direct
assessment of the financial return of a shareholder’s investment; (ii) it is easily available
for between different companies or different sectors of the economy. RoE is sometimes

25
decomposed into separate drivers: this is called the “Dupont analysis”, where Roe =
(result/turnover) (turnover/total assets) (total assets/equity).

The first element is the net profit margin and the last corresponds to the financial
leverage multiplier. Cost to Income Ratio (C/I) (total cost /total income) measures the
income generated per $ cost. The cost-to-income ratios shows the ability of the institution
to generate profits from a given revenue stream. That is how Liquidity indicates the
ability of the bank to meet its financial obligations in a timely and effective manner.
Samad (2004) states that ‘‘liquidity is the life and blood of a commercial bank’’.
Financial liabilities are attracted through retail and wholesale distribution channels. Retail
generated funding is considered less interest elastic and more reliable than deposits
attracted from wholesale distribution channels (Thygerson, 1995). The following ratios
are used to measure liquidity. Liquid assets to deposit-borrowing ratio (LADST) = liquid
asset/customer deposit and short term borrowed funds. This ratio indicates the percentage
of short-term obligations that could be met with the bank’s liquid assets in the case of
sudden withdrawals. Net Loans to total asset ratio (NLTA) = Net loans/total assets NLTA
measures the percentage of assets that is tied up in loans. The higher the ratio, the less
liquid the bank is. Net loans to deposit and borrowing (NLDST) = Net loans/total
deposits and short-term borrowings. This ratio indicates the percentage of the total
deposits locked into non-liquid assets. A high figure denotes lower liquidity.

2.5 Gearing - The gearing ratio is the proportion of a company's debt to its equity. A
high gearing ratio is indicative of a great deal of leverage, where a company is using
debtto pay for its continuing operations. In a business downturn, such companies may
have trouble meeting their debt repayment schedules, and could risk bankruptcy. The
situationis especially dangerous when a company Even though financial ratios are good
for analyzing the performance of a company, they have drawbacks that will be outlined
in this section. First of all, financial ratios of a company cannot be analyzed by
themselves. They have to be compared to an industry, the economy or the company’s
past performance... According to BPP (2012) there are limitations of financial ratios
analysis such as:

26
Companies may adopt differing accounting policies from each other. Different methods
of depreciation will lead to different accounting profit figures and hence it may not be
appropriate to draw conclusions of the two ratios without making suitable adjustments.
Although ratio analysis aid in providing clues to the company’s performance or its
financial position but on their own they cannot show whether performance is good or bad
and therefore, they need to be carefully interpreted to draw meaningful conclusions on
Research Report which informed decisions could be made. Furthermore, comparisons
need to be made with the ‘best in the business’ or with industry standards. The figures
in a company’s latest annual accounts are likely to be several months out of date and
maynot provide most current and best indication of its performance. Different
businesses may have different sizes and hence may enjoy different levels of economies
of scale.
Comparisons of such businesses using ratio analysis may not be appropriate as smaller
business may not enjoy facilities which are available to large ones (e.g., bulk discounts,
extended credit periods, etc.). Inflation could render the comparison of financial results
misleading if compared over longer time period as financial figures will not be within the
same level of purchasing power. Improving trend of various ratios financial ratio
analysis (FRA) was used to analyze the general trend of the data from 2009 to 2012 for
the variables which included in the study. Ratio analysis is one of the main accounting
techniques of financial analysis to evaluate the financial position and performance of
companies. It involves comparison and calculation of a number of profitability, liquidity,
efficiency, gearing and investor ratios which in turn paint a thorough picture of the
company’s performance over a period of time (BPP, 2012). The main advantage of FRA
is its ability and effectiveness in distinguishing high-performance firms from others and
the fact that FRA compensates for disparities and controls for any size effect on the
financial variables being studied (Samad, 2004). Additionally, financial ratios can be
used to identify a bank’s specific strengths and weaknesses as well as providing detailed
information about bank profitability, liquidity and credit quality policies (Hempelet al,
1994: Dietrich, 1996). FRA permits a historical sketch of bank returns and risks which
Hempelet al, (1994) suggests presents an opportunity to evaluate the past performance of
the bank which is an important step for planning for future performance. Although

27
accounting data in financial statements is subject to manipulation and financial
statements are backward looking,

information available on the bank’s overall activities (Sinkey, 2002). Furthermore, they
are the only source of information for evaluating the management’s potential to generate
satisfactory returns in future.

India’s Commercial Banks: Scheduled: Credit data was reported at 105,188,116.245 INR
mn in 2020. This records an increase from the previous number of 98,975,951.224 INR
mn for 2019. India’s Commercial Banks: Scheduled: Credit data is updated yearly,
averaging 525,100.000 INR mn from Mar 1951 to 2020, with 70 observations. The data
reached an all-time high of 105,188,116.245 INR mn in 2020 and a record low of
5,220.000 INR mn in 1952. India’s Commercial Banks: Scheduled: Credit data remains

28
active status in CEIC and is reported by Reserve Bank of India. The data is categorized
under Global Database’s India – Table IN. KBA001: Commercial Banks: Statistics.

The analysis of banks and banking stocks is particularly challenging because they operate
and generate profit in a different way than most other businesses. Net interest margin is
an important indicator in evaluating banks because it reveals a bank’s net profit on
interest-earning assets, such as loans or investment securities. Banks with a higher loan-
to-assets ratio derive more of their income from loans and investments.

Commercial Credit Analysis Assessing a company’s ability to meet its financial

obligations Home › Resources › Knowledge › Credit › Commercial Credit Analysis

What is Commercial Credit Analysis?

Commercial credit analysis is the evaluation of a company’s ability to meet its financial
obligations. The objective of the analysis is to determine the level of risk associated with
an entity. For example, when a company issues bonds, an investor may analyze the
audited financial statements of the issuer to determine its default risk. Banks also review
the financial statements of potential borrowers to determine their ability to make timely
principal and interest payments.

Commercial Credit Analysis

After the conclusion of the evaluation, a risk rating is obtained. It is done by estimating
the borrower’s risk of default at a given confidence level and the amount of loss that the
lender will suffer in the event of a default. The risk rating determines if the lender will
provide credit to the borrower, and if so, the amount of credit to be provided.

Summary

Commercial credit analysis refers to the evaluation of a company’s ability to honor its
debt obligations. Credit analysis assigns a risk rating to an entity, based on the entity’s
level of default risk and the estimated amount of losses that the lender will suffer in the
event of default. The lender evaluates the business to determine if it generates adequate
cash flows to meet the debt service, i.e., principal and interest payments.

29
 Capital is the amount of money that the business owner or executive team has invested in
the business. Lenders are willing to extend credit to borrowers who have invested their
own money into the business, which serves as proof of the borrower’s commitment to the
business. Borrowers with a large capital contribution in the business find it easier to get
loan approval because they present a lower risk of default. For example, when buying a
home, a borrower who has placed a down payment of about 20% of the value of the
house can get better rates and terms for the mortgage. When conducting credit analysis,
investors, banks, and analysts may use a variety of tools such as ratio analysis, cash flow
analysis, and trend analysis to determine the default risk of a company. Sometimes, credit
analysts may conduct a review of the collateral provided, credit history, and the
management’s ability. The analysts aim to predict the probability that the borrower will
default on their financial obligations and the level of losses that the lender will suffer in
the event of default. When a bank is reviewing a loan application, the main emphasis will
be the cash flows generated by the borrower. The main ratio used to measure the
repayment ability of the borrower is the debt service coverage ratio (DSCR). The DSCR
is obtained by dividing the entity’s total cash flows by the debt service (annual interest
and principal payments). The debt service coverage ratio may be expressed as a minimum
ratio, below which the lender will not accept to extend credit.

Types of Financial Analysis:

The process of analysis may partake the varying types. Normally, it is classified into
different categories on the basis of information used and on the basis of modus operandi.

(a) On the basis of Information Used:

(i) External analysis.

(ii) Internal analysis.

External analysis is an analysis based on information easily available to outsiders

(externals) for the business. Outsiders include creditors, suppliers, investors, and
government agencies regulating the business in a normal way. These parties do not have
access to the internal records (information) of the concern and generally obtain data for

30
analysis from the published financial statements. Thus, an analysis done by outsiders is
known as external analysis. Internal analysis is an analysis done on the basis of
information obtained from the internal and unpublished records and books. While
conducting this analysis, the analyst is a part of the enterprise he is analyzing. Analysis
for managerial purposes is the internal type of analysis and is conducted by executives
and employees of the enterprise as well as governmental and court agencies which may
have major regulatory and other jurisdiction over the business.

(b) On the basis of Modus Operandi:

(i) Horizontal analysis.

(ii) Vertical analysis.

Horizontal analysis is also known as ‘dynamic analysis’ or ‘trend analyses. This analysis
is done by analyzing the statements over a period of time. Under this analysis, we try to
examine as to what has been the periodical trend of various items shown in the statement.
The horizontal analysis consists of a study of the behavior of each of the entities in the
statement. Vertical analysis is also known as ‘static analysis’ or ‘structural analyses. It is
made by analyzing a single set of financial statement prepared at a particular date. Under
such a type of analysis, quantitative relationship is established between the different
items shown in a particular statement. Common size statements are the form of vertical
analysis. Thus, vertical analysis is the study of quantitative relationship existing among
the items of a particular data.

Techniques of Analysis and Interpretation:

The most important techniques of analysis and interpretation are:

1. Ratio Analysis

2. Fund Flow Analysis

3. Cash Flow Analysis.

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1. Ratio Analysis:

Two individual items on the statements can be compared with one another and the
relationship is expressed as a ratio. Ratios are computed for items on the same financial
statement or on different statements. These ratios are compared with those of prior years
and with those of other companies to make them more meaningful. A ratio is a simple
mathematical expression. Ratio may be expressed by a number of ways. It is a number
expressed in terms of another number. It i s a statistical yard stick that provides a measure
of relationship between two figures.

2. Fund Flow Analysis:

Funds Flow Analysis has been the salient feature of the evolution of accounting theory
and practice. The financial statement of a business provides only some information about
financial activities of a business in a limited manner. The income statement deals solely
with operations and the balance sheet shows the changes in the assets and liabilities. In
fact, these statements are substantially an analysis of static aspects of financial
statements. Under this context, it is imperative to study and to analyze the fund
movements in the business concern. Such a study or analysis may be undertaken by using
another tool of financial analysis, which is called ‘Statement of Sources, and Uses of
Funds’ or simply ‘Fund Statement’ or Fund Flow Analysis.

This statement is also called by other several names and they are:

(a) Application of Funds Statement.

(b) Statement of Sources and Applications of Funds.

(c) Statement of Funds Supplied and Applied.

(d) Where Got and Where Gone Statement.

(e) Statement of Resources Provided and Applied.

32
(f) Fund Movement Statement.

(g) Inflow-Outflow of Fund Statement.

Fund statement is a new contribution of science of accounting but has become the doyen
of tools of Financial Analysis.

3. Cash Flow Analysis:

Fund Flow Statement fails to convey the quantum of inflow of cash and outflow of cash.
When we say cash, we refer to the cash as well as the bank balances of the company at
the end of the accounting period as reflected in the Balance Sheet of the company. Cash
is a current asset like inventory and Accounts Receivables. Cash reflects its liquidity
position. The term cash can be viewed in two senses. In a narrow sense, it includes actual
cash in the form of notes and coins and bank drafts held by a firm and the deposits
withdraw able on demand the company has held in commercial banks. But in a broader
sense, it also includes what are called ‘marketable securities’ which are those securities
which can be immediately sold or converted into cash if required. Cash flow statement is
a statement of cash flow and cash flow signifies the movements of cash in and out of a
business concern. Inflow of cash is known as sources of cash and outflow of cash is
called uses of cash. This statement also depicts factors for such inflow and outflow of
cash. Thus, cash flow statement is a statement designed to highlight upon the causes
which bring changes in cash position between two Balance Sheets dates. It virtually takes
the nature and character of cash receipts and cash payments though the basic information
used in the preparation of this statement differs from that which is used in recording cash
receipts and cash payments.

Not everyone is eligible for a loan unless they meet the lending criteria provided by the
specific lending institution. When conducting a loan analysis on a potential client,
lending institutions analyze the financial statements of the client to determine their
financial capability and their ability to honor the loan obligations without strain.

33
Lenders can offer either long-term or short-term loans. Long-term loans come with a
longer repayment period, and borrowers are required to repay the loan within a period
exceeding one year. Short-term loans offer a shorter repayment duration than long-term
loans, and borrowers should repay the loan within a few months to under one year. The
lending guidelines are specific to a lending institution and can be based on the maximum
and minimum loan offers extended by the lender, associated fees, late-payment penalties,
schedules, interest rates payable, and amount of loan based on the collateral provided.
The guidelines also outline loan security measures and procedures laid out by the
institution. Loan procedures may include disbursement steps, loan application guidelines,
loan collection guidelines, loan supervision, loan approval, and review procedures.

The balance sheet (statement of financial position) is a crucial loan analysis tool. It shows
the status of both the current and fixed assets of a potential borrower. The status of the
current assets assists loan analysts in determining how much the entity can comfortably
absorb and still settle the debt in time. The assets can also be used as loan security, and if
it is adequate, the lender can comfortably approve and disburse the amount of loan that’s
been requested by the client. The balance sheet also shows the movement of inventory
andcash flows, which are important in assessing the financial strength of the client. It also
shows the financial transactions of the business for a period of one year, and it can be
compared to the previous year’s balance sheets to determine if the business is on an
upward or downward trend. Credit analysts can use the balance sheet to generate
financial ratios that the lender can use generate key performance measurements. Profit
and Loss Statement for Loan Analysis The profit and loss statement (statement of
financial performance) complements loan analysis in a variety of ways. The current
revenues can be used to predict the financial performance of the company in the near
future. The P&L Statement also indicates the potential impact of the loan amount on the
business. It enables the loan analysts to determine the extent to which the loan can benefit
the entity and to what extent the loan can be damaging to the business.

Private Bank – It is one type of commercial banks where private individuals and
businesses own a majority of the share capital. All private banks are recorded as
companies with limited liability. Such as Housing Development Finance Corporation

34
(HDFC) Bank, Industrial Credit and Investment Corporation of India (ICICI) Bank and
Yes Bank, etc. Public Bank – It is that type of bank that is nationalized, and the
government holds a significant stake. For example, Bank of Baroda, State Bank of India
(SBI), Dena Bank, Corporation Bank and Punjab National Bank. Foreign Bank – These
banks are established in foreign countries and have branches in other countries. For
instance, American Express Bank, Hong Kong and Shanghai Banking Corporation
(HSBC), Standard & Chartered Bank and Citibank, etc.

The scheduled commercial banks are those banks which are included in the second
schedule of RBI Act, 1934. These banks accept deposits, lend loans and also offer other
banking services. The major difference between scheduled commercial banks and
scheduled cooperative banks is their holding pattern. Cooperative banks are registered as
cooperative credit institutions under the Cooperative Societies Act of 1912.

Scheduled banks can be further

classified as:

Private sector banks

Public sector banks

Foreign sector banks

Commercial banks

1) Private sector banks:

These banks acquire larger parts of stake or congruity is maintained by the private
shareholders and not by government. Thus, banks where maximum amount of capital is
in private hands are considered as private-sector banks. In India, we have two types of
private-sector banks −
Old Private-Sector Banks

New private-sector banks

35
The old private-sector banks were set up before nationalization in 1969. They had their
own independence. These banks were either too small or specialist to be incorporated in
nationalization. The following is a list of old private-sector banks in India –

Catholic Syrian Bank

City Union Bank

Dhan Laxmi Bank

Federal Bank

ING Vysya Bank

Jammu and Kashmir Bank

Karnataka Bank

Karur Vysya Bank

Lakshmi Vilas Bank

Nainital Bank

Ratnakar Bank

South Indian Bank

Tamil Nādu Mercantile Bank

From the above-mentioned banks, the Nainital Bank is an auxiliary or branch of the Bank
of Baroda, which has 98.57% stake in it. A few old generation private-sector banks
merged with other banks. For example, in the year 2007, Lord Krishna Bank merged with
Centurion Bank of Punjab. Sangli Bank merged with ICICI Bank in 2006. Yet again,
Centurion Bank of Punjab merged with HDFC in 2008.

36
New Private-sector Banks Banks which started their operations after liberalization in the
1990s are the new private-sector banks. These banks were permitted entry into the Indian
banking sector after the amendment of the Banking Regulation Act in 1993. At present,
the following new private-sector banks are operational in India –

Axis Bank

Development Credit Bank (DCB Bank Ltd)

HDFC Bank

ICICI Bank

IndusInd Bank

Kotak Mahindra Bank

Yes Bank

In addition to these seven banks, there are two more banks which are yet to commence
operation. They got the ‘in-principle’ licenses from RBI. These two banks are IDFC and
Bandhan Bank of Bandhan Financial Services.

The function of ROE is to indicate the profitability of a firm/institution. It is obtained by

comparing its net profit to its average shareholders' investment. Thus, ROE examines and
undermines the efficiency level of a company. The more is ROE, the better the growth
ratio of benefit with least investment. Further, it accentuates over the well management of
the organization in order to channelize the capital of the shareholders in right direction to
achieve the desired goals. So, it can be assumed that a higher degree of ROE is always
favorable for a company. And, its decrease may land a company into unwelcome
conditions. The ROE ratio of the select banks is exhibited in the table below:

37
Table 2: Return on Equity (ROE) - Bank Group-Wise (In Percent)

Bank Group 2009 2010  2011  2012  2013 

Schedule Commercial
15.44 14.31  14.96  14.6  13.84 
Bank

Public Sector Bank 17.94 17.47  16.9  15.33  13.24 

Nationalized bank 18.05 18.3  18.2  15.5  12.34 

State Bank of India 17.74 15.92  14.11  16  15.29 

Group

Old Private Sector Bank 14.69 12.29  14.11  15.18  16.22 

New Private Sector Bank 10.69 11.87  13.62  15.27  16.51 

Foreign banks 13.75 7.34  10.28  10.79  11.52 

The data on ROE in Table 2 for all banks shows a decreasing trend during the period of
2009 to 2013. However, Old Private Sector Banks record an increasing trend from
14.69% in 2009 to 16.22% in 2013 followed by New Private Sector Banks from10.69%
to 16.51% for the same year. Thus, the performance of Private Sector Banks group is
strengthened. In 2009, the SBI group performs better as it records 17.74% ROE.
However, a moderate decrease in performance can be seen after 2009. Nationalized
Banks also do not enjoy sound performance as their ROE decreases from 18.05% in 2009
to 12.34% in 2013 followed by Public Sector Banks from 17.94% to 13.24% for the same
year. Foreign Banks could not perform well as they record 13.75% in 2009 and 11.52%
in 2013 respectively.

Major Risks for Banks

Credit, operational, market, and liquidity risks

38
Home › Resources › Knowledge › Finance › Major Risks for Banks

What are the Major Risks for Banks?

Major risks for banks include credit, operational, market, and liquidity risk. Since banks
are exposed to a variety of risks, they have well-constructed risk management
infrastructures and are required to follow government regulations. Government agencies,
such as the Office of Superintendent of Financial Institutions (OSFI) in Canada, set the
regulations to counteract risks and protect depositors.

Why Do the Risks for Banks Matter?

Due to the large size of some banks, overexposure to risk can cause bank failure and
impact millions of people. By understanding the risks posed to banks, governments can
set better regulations to encourage prudent management and decision-making. The ability
of a bank to manage risk also affects investors’ decisions. Even if a bank can generate
large revenues, lack of risk management can lower profits due to losses on loans. Value
investors are more likely to invest in a bank that is able to provide profits and is not at an
excessive risk of losing money.

Quick Summary Points

The major risks faced by banks include credit, operational, market, and liquidity risk.

Prudent risk management can help banks improve profits as they sustain fewer losses on
loans and investments. Ways to decrease risks include diversifying assets, using prudent
practices when underwriting, and improving operating systems.

Credit Risk

Credit risk is the biggest risk for banks. It occurs when borrowers or counterparties fail to
meet contractual obligations. An example is when borrowers default on a principal or
interest payment of a loan. Defaults can occur on mortgages, credit cards, and fixed

39
income securities. Failure to meet obligational contracts can also occur in areas such as
derivatives and guarantees provided.

While banks cannot be fully protected from credit risk due to the nature of their business
model, they can lower their exposure in several ways. Since deterioration in an industry
or issuer is often unpredictable, banks lower their exposure through diversification.

By doing so, during a credit downturn, banks are less likely to be overexposed to a
category with large losses. To lower their risk exposure, they can loan money to people
with good credit histories, transact with high-quality counterparties, or own collateral to
back up the loans.

Operational Risk

Operational risk is the risk of loss due to errors, interruptions, or damages caused by
people, systems, or processes. The operational type of risk is low for simple business
operations such as retail banking and asset management, and higher for operations such
as sales and trading. Losses that occur due to human error include internal fraud or
mistakes made during transactions. An example is when a teller accidentally gives an
extra $50 bill to a customer.

On a larger scale, fraud can occur through the breaching a bank’s cybersecurity. It allows
hackers to steal customer information and money from the bank, and blackmail the
institutions for additional money. In such a situation, banks lose capital and trading.
Losses that occur due to human error include internal fraud or mistakes made during
transactions. An example is when a teller accidentally gives an extra $50 bill to a
customer. On a larger scale, fraud can occur through the breaching a bank’s cyber
security. It allows hackers to steal customer information and money from the bank, and
blackmail the institutions for additional money. In such a situation, banks lose capital and
trust from customers. Damage to the bank’s reputation can make it more difficult to
attract deposits or business in the future.

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Market Risk

Market risk mostly occurs from a bank’s activities in capital markets. It is due to the
unpredictability of equity markets, commodity prices, interest rates, and credit spreads.
Banks are more exposed if they are heavily involved in investing in capital markets or
sales and trading.

Commodity prices also play a role because a bank may be invested in companies that
produce commodities. As the value of the commodity changes, so does the value of the
company and the value of the investment. Changes in commodity prices are caused by
supply and demand shifts that are often hard to predict. So, to decrease market risk,
diversification of investments is important. Other ways banks reduce their investment
include hedging their investments with other, inversely related investments.

Liquidity Risk

Liquidity risk refers to the ability of a bank to access cash to meet funding obligations.
Obligations include allowing customers to take out their deposits. The inability to provide
cash in a timely manner to customers can result in a snowball effect. If a bank delay
providing cash for a few of their customer for a day, other depositors may rush to take out
their deposits as they lose confidence in the bank. This further lowers the bank’s ability to
provide funds and leads to a bank run.

Reasons that bank face liquidity problems include over-reliance on short-term sources of
funds, having a balance sheet concentrated in illiquid assets, and loss of confidence in the
bank on the part of customers. Mismanagement of asset-liability duration can also cause
funding difficulties. This occurs when a bank has many short-term liabilities and not
enough short-term assets. Short-term liabilities are customer deposits or short-term
guaranteed investment contracts (GICs) that the bank needs to pay out to customers. If all
or most of a bank’s assets are tied up in long-term loans or investments, the bank may
face a mismatch in asset-liability duration.
41
Regulations exist to lessen liquidity problems. They include a requirement for banks to
hold enough liquid assets to survive for a period of time even without the inflow of
outside funds. A category of the GDP is private consumption expenditures. This category
includes all services and goods purchased by households in the United States, such as
food, gasoline, vehicles, appliances and other durable and non-durable goods. The
amount in this category will fluctuate depending on income, taxes and the saving and
spending habits of consumers. The private consumption expenditures category is the
largest, and accounts for approximately two-thirds of the GDP. Government purchases
are the second largest category of the GDP and account for approximately 20 percent of
the GDP. This category includes the total expenditures on services and new goods by the
local, federal and state governments. Examples of government purchases are the salaries
of congressional representatives, military goods and the salaries of public-school
teachers. Expenditures not included in this category are transfer payments, such as
welfare projects.

One of the greatest advantages of a government subsidy is that it can limit what
economists call negative externalities. Subsidies can reduce the negative externality of
pollution, for instance, by supporting public transportation. However, one drawback of
these subsidies is that it is difficult to measure their positive externalities to quantify the
extent of their success. Although they may have extremely positive benefits, the
government will have a difficult time measuring the success of subsidies to make an
informed decision about their future implementation.

Inefficient Transfer to Recipients

The money from government subsidies does not always make its way to the intended
recipients. Although some of the money is likely to make a difference in people’s lives, a
sizable amount tends to go to other places. In a 2010 report by the Organization for
Economic Co-operation and Development called “The Use of Input Subsidies in
Developing Countries,” OECD analysts found that less than half the value of an input
42
subsidy in developing countries actually translates into any improvement in net incomes
for agricultural households. The majority of the money is instead transferred to suppliers
or lost due to inefficiency, according to the analysts.

Higher Taxes

Governments cannot give money to certain industries, businesses or people without first
taxing citizens to obtain the money. This means that all government subsidies come with
the hidden cost of taxation. Ultimately, taxpayers will have to pay higher taxes in order to
fund government subsidy programs.

43
 FINDINGS

ICICI bank is largest private sector bank in India; recently it has acquired the position of
universal bank. Universal bank with extensive network of branches that provide many
different financial services and are principally engaged in commercial banking,
investment banking, securities and even insurance. ICICI bank offers innovative services
to customers. ICICI bank believes in technological up gradation in distribution of its
services. Customers of ICICI bank are satisfied with various services offered by ICICI
bank. SBI also one of the successful private sector banks in India. It is the bank that has
pioneered many services first time in India. SBI was the first to offer a product called one
view by which customers are able to view their accounts in six banks on one page on
their website. SBI Bank also the pioneer, in introducing a product called Net safe, which
makes online shopping on net using debit card, making it safer. Housing Loan, which is
SBI’s domain, will no longer remain the same because; ICICI bank is slowly capturing
the housing loan market. In fact, both the banks do not have very significant difference in
terms of marketing its products to customers and also in terms of customer satisfaction.
OPERATING MARGINA ratio used to measure a company's pricing strategy and
operating efficiency. Operating margin is a measurement of what proportion of
company’s revenue is left over after paying for variable costs of production such as
wages, raw materials, etc. A healthy operating margin is required for a company to be
able to pay for its fixed costs, such as interest on debt. It Is Also known as "operating
profit margin." It shows that operating efficiency of SBI is better than ICICI. While
operating efficiency of ICICI is lower than SBI.A financial metric used to assess a firm's
financial health by revealing the proportion of money left over from revenues after
accounting for the cost of goods sold. Gross profit margin serves as the source for paying
additional expenses and future savings. It is also known as "gross margin”. This ratio
shows financial position of company. Here, financial position fobs is better than
ICICI.NET PROFIT MARGIN For a business to survive in the long term it must generate
profit. Therefore, the net profit margin ratio is one of the key performance indicators for
your business. The net profit margin ratio indicates profit levels of a business after all

44
costs have been taken into account. It is worth analyzing the ratio over time. A variation
in the ratio from year to year may be due to abnormal conditions or expenses. Variations
may also indicate cost blowouts which need to be addressed. A decline in the ratio over
time may indicate a margin squeeze suggesting that productivity improvements may need
to be initiated. In some cases, the costs of such improvements may lead to a further drop
in the ratio or even losses before increased profitability is achieved. This ratio is key
performance indicators for business. Key performance means the profit level of company
we can say that performance of SBI is better than ICICI.

After examining the results of regression, t-test and p-value, it is not possible to confirm
the relationship between the profitability and efficiency of the banks (Palečková, 2014).
The test for determining the impact of capital adequacy ratio on profitability (ROA and
ROE) ensured the relationship between the variables. The t-test value of profitability
parameters is -1.310 & -2.702 respectively. This result indicates that enforcement of
higher CAR will inversely affect the profitability of the banks (Calomiris and Kahn,
1991). As per regression and t-test results, this study evidences that there is a positive and
significant relationship between the leverage ratio and profitability of the banks, this
results partially contradicts the results of (Nadeem et. al., 2015). The regression result
(0.076) indicates a weak relation between the financial strength and efficiency of the
banks, this result is supported by the p-value (0.858) which indicates the insignificance of
capital adequacy ratio over the cost to income ratios of the conventional banks of
Bahrain. Our results contradict the result of (Altunbas et. al., 2007), (Aspal and Nazneen,
2014). The R-value indicates a weak relationship efficiency on leverage ratio
0.220 & 0.490 for ETA and LTA respectively. The p-Val Prakash Pinto, Iqbal Thonse
Hawaladar, Habeeb Ur Rahiman, Rajesha T.M. and Adel S area international Journal of Commented [mp1]:

Applied Business and Economic Research 616and LTA is 0.66 & 0.217 respectively,
which indicates an insignificant relationship between efficiency and leverage ratio.
However, the t-test value for LTA is -1.376, this indicates a negative association
betweenefficiency and leverage ratio of the banks (Javed, et. al., 2015). The correlation
analysis of customer deposits, profitability, efficiency, financial strength and leverages
of the banks of Bahrain where not positively correlate bank account is not only about
saving money, it's also about managing money. Opening an account is a smart move - it

45
Means that you can access a service that helps you control your money, and which may
help you borrow at some time in the future, if you need to do so. But do remember that
you are the customer - that means you have rights and if you're not happy, you can
complain, and
you can move your account somewhere else. For more information on this, look at
www.consumerhelp.ie and www.citizensinformation.ie. Make sure you get the most out
of the service the bank is offering. Commercial banks are the most important types of
banks that support the whole financial system. These banks serve the banking needs of
the general public. The main functions of commercials banks are to accept deposit &
provide loans, advances to the public.

These are profit-generating organizations. Commercial banks charge high interest on the
advances lend to the general public & provide lower interest on deposits accepted by
them. The differences between these interests provided & charged by the bank are served
as their income. Apart from these, there several other functions also provided by these
banks i.e., Locker facility, Deals in foreign exchange, collection of income & payment of
expenses, etc.

When the customer enters login id and password the site asks some questions arbitrarily
and after getting the answers, it shows image, title and phrase. If the image shown is
right, the customer can log in. If the image shown is not right, the customer does not log
in and customer can contact the bank. This is a good way to know for the customer
whether the bank site is genuine or fake. This technique between the customer and server
is called mutual authentication and it helps in capturing the phishing cases. Such images
are one of the authentication features which can be provided for website authentication.
These images actually stop the use of the website of the bank in an unauthorized way and
protect the customers from being the victim of any fishing activity.

These images can be saved in three different ways:

Images saved at the client side

Images saved at server side

46
Images can be separated in two ways- saving some at server side and some at client side
and then mixing them by using visual cryptography

While asking about security measures taken by their banks, some employees answered
that first of all, while logging in the Online Banking Service, a secure session isspecified
by the URL http//. Also, Secure Sockets Layer Encryption Technology is used to encrypt
personal information before the customer leaves his computer. ATM card no or user
name and password are used to keep the data confidential. The bank suggests changing
the password in every 6 weeks. For security reasons there is time out session if the site is
not used for 15 minutes. The important question related to new products of the bank got
quite adequate answer from the respondents. They mentioned that new services like
home banking, internet banking, phone banking etc. are being integrated within the
banking system. With the rapid increase of e-finance, completely innovated methods of
offering financial services like internet banking and other technologies have fused in the
financial systems.

47
 CONCLUSIONS

The study concludes to be valuable to ICICI bank and SBI as it is based on the opinion of
customers and bank employees (marketing staff). It is useful for other private sector and
public sector banks also in formulating their policies regarding launch of new banking
product, in order to reach the level of success achieved by these two banks. It also points
out reasons for dissatisfaction among bank customers and provide meaningful solution to
their problems. The study conducted will help the private Sector Banks and Public Sector
Banks in addressing the marketing problems and difficulties faced by these banks while
marketing their services to customers. The study also helps in solving the problems faced
by the customers and the effective implementation of marketing strategies of private
sector and Public sector banks.

Are patch these documents with proposal and forward the proposal to circle office.
Would you like to get a custom essay? I came to the following conclusion while
preparing this project. SAVING ACCOUNT 3. Big loans are sanctioned under this
finance against reasonable. 00,000/- and above. These certificates are automatically
renewable after maturity. Commercial banks play a role in the creation of credit, which
leads to an increase in production, employment, and consumer spending, thereby
boosting the economy. The scheduled commercial banks were allowed to convert a part
of their advances, loans, cash credits or overdrafts into usance promissory notes for 90
days for lodging as collateral (security) for advances from the RBI. ADVICE FOR
CHEQUE It is used for enter branch communication. The bank reserves the right to allow
opening of current a/c at its description. … LETTER OF CREDIT Definition of Letter of
Credit A letter of credit consist of an undertaking by a bank authorized the seller to draw
in accordance with certain terms and stipulating legal forms, that all such bill will be
honored. The export business slightly improves to RS. RS. Loans and advances shall not
exceed amount specified by marginal restriction on the type of securities offered. A
repayment rate of 97% (larger than most commercial banks)3. Copyright © 2020
Download Project Topics. This study attempts primarily to measure the financial
performance of National Bank Limited which one of the largest and prominent private
commercial banks in Bangladesh for the period 2008-2013 and to identify whether any

48
difference exists between a Banks’s years of operation and its performance classifying
two period (2008-10 & 2011-13). CURRECT ACCOUNT 2.

The State Bank of Pakistan national resident outside Pakistan against the security of
balances in foreign currency account. 1000/-? Credit Head office RS. OBC Register is
also maintained for proper record keeping of outward bills. 1000/- Head office will pass
the following entries in his book? Debit Main Branch Muridke 1000/-? Credit Lahore RS
1000/-. , if MCB is to gives RS 2 Million to UBL and UBL has to give RS. Introduction
... commercial banks with effect from the midnight of July 19, 1969. Fixed deposits are
those deposits which are by the bank under the conditions that they will not be payable on
demand but will be payable under fixed determinable future time date. MANAGEMENT
OF BRANCH OG-I(MANAGER)1 OG-II1 OG-II2 Cashier2 Assistants3 Security
Guard2 GENERAL BANKING ACCOUNT OPENING The general banking department
performs various functions among them the first and most important function is A/C
opening. From the exporter’s point of view, confirm irrevocable letter of credit is the best
from of receiving payment. Every authority concerned with Co-operative sector will have
to play its part in ensuring that the aspirations of the Urban Co-operative Banking sector
are nurtured in a manner that depositor interest and the public interest at large is
protected. In drawing cheques, the amount in words and figures should be written
distinctively and the cheque should be drawn in such a way as to prevent the insertion of
any other word or figure. All that is required is a minimum amount of deposit.
Memorandum and Articles of Association 5. If any defect is found in the documents and
the issuing bank honors the draft, the importer can claim damages.
NATIONALIZATION In January 1974, the government of Pakistan nationalized MCB
following the banks Act 1947; Premier bank Limited merged with MCB. Among the
developing countries, Egypt, Myanmar, Indonesia, and Sri Lanka had been successfully
operating nationalized banks. Commercial banks are the primary contributors to the
economy of a country. Bank charges commission, telegram/fax charges of RS. 1. Mark
up is calculated @ 0. OUTWARD DOCUMENTARY BILLS FOR COLLECTION
(ODBC) Originating branch receives the documentary bills from their clients and sent

49
them to outstation branches of the same bank or other bank. Some directors are the
personnel of the MCB and others are successful businessperson and executives of other
major organization.

Introductory Page – The potential, need, possibility, fund needed etc.; Scope of the
project- It will be a snapshot of the whole activity that you are going to do This branch
forwards the check with schedule or covering letter to that branch on which bill is drawn.
5 million. Banks distribute “money” - the medium of exchange. The account holder can
draw sums from his account by means of cheque supplied to him by the bank for that
particular account. conclusion of role of commercial banks in economic development:
The project topic home for MBA, MSC, BSC, PGD, PHD final year student: Browse and
read free research project topics and materials. it shall be within the frame of population
size which comprises of all commercial banks in Nigeria. 3)Confirmed letter of credit It
is that which has the protection of the credit standing of the importers as well as the
exporter’s bank, which confirms the letter of credit, takes the liability of paying in case
the issuing bank fails to make payment to the exporter. Payment by the importer to the
bank 6. The documents which are necessary for the registration and having the import
license are following; Filled Application Form for Register? The National Identity Card
of the Applicant? The National Tax Certificate issued by the Income Tax Department?
CALL DEPOSIT It is one of the features of commercial institutions. In this case
originating and responding branches will be same for Pay Order it is not necessary that
applicant should be account holder. Keywords: Banking history in INDIA, Conclusion,
Customer’s satisfaction, List of Commercial Banks, Research Methodology, I. Balance
sheet Bank prepares two ‘LETTER OF THANKS’ one for the new customer and the
other for his introducer. The importer then dispatches the letter of credit to the exporter in
foreign country by mail. bank gets a commission 0. Such banks are popular in Japan and
Germany. OPENING OF LETTER OF CREDIT Before opening of L/C certain
requirements are necessary that are? At Maal-a-Mall certificate, the officer write dates of
issue, maturity date, and reference No. 10,000/- with no limit on the maximum amount?
1000/- from individuals (single, joint) firms (proprietorship/partnership companies and

50
etc.) against the issuance of non-transferable receipts in acknowledge of the PLS deposits
received.? Upon the maturity of certificate, the following returns are expected to be made
after deduction of Zakat whenever applicable and withholding as: Initial Deposit
Payment upon Maturity RS. 6. Deposits are to bank as a backbone is to the body of man.
The commercial banks come to the help of exporters and importers. 1 billion in 2000. It
is the lifeblood of a bank. The party account must be opened in that branch. Maximum
maturity is 3 years, depending upon the nature and type of and of advances, decided upon
case-to-case basis. April 14, 2015 Dear All Welcome to the refurbished site of the
Reserve Bank of India. Mohammed Arshad 4Mr. 500/- and handling commission is RS.
RESPONDING BRANCH, the branch, which receives the instrument for remittance. The
settlement of book entries e. Liability 1. Commercial banks can provide project financing
because they are able to evaluate complex project financing transactions and toassess and
assume the construction and performance risks usually involved in such financings. Risk
covered 5. Business expansion 6. An account holder wishing to close hisaccount must
surrender the unused Cheques to the bank. DEPOSIT RECEIPT Deposit receipt is given
to customer in response of accepting his application. 1,000,000 10,830 500,000 5,416
100,000 1,083 50,000 541 25,000 270? Zakat will be deducted once a yearon the
principal amount of the investment but will be collected monthly over the year.
FIXED DEPOSIT OR TERM DEPOSIT MCB has an attractive term deposit scheme that
is for both short term and long-term investment. The total numbers of branches of
commercial banks are more than 50,000 and the regional rural banks are approximately
8,000 The information which are supplied in the application are based on the contract of
sale and include only the importer feature of contract such as the value of the
merchandise, port of shipment, port of unloading, expiry date of the papers and brief
description of the goods.

Accordingly, scheduled commercial banks’ total advances (direct and indirect) further
increased to Rs 16,750 crores in 1990-91 and the number of scheduled commercial
banks’ offices increased to 35,206 in rural areas and to 11,344 in semi-urban areas by
1991. TELEGRAPHIC TRANSFER Through telegram and fax originating branch seen

51
funds to responding branch instantly and immediately. But in case the contract is
acceptable to both, the next step is official a/c opening. Three same clearing cheques
procedure will be adopted in the transfer deliveries except not availing the facility of
SBP. b) To have a proper examination of the documents. After the partition of the Indo-
Pak Subcontinent, the bank moved to Dhaka from where it commenced business in
August 1948. After depositing the amount of draft, remittance officer prepares the cheque
of demand draft. 5% for 1 year tenure. Introduction "Customer satisfaction is measured at
the individual level, but it is almost always reported at an aggregate level. You can use
our sample report for having a better understanding click here to see the sample report.
Mark-up is marked on daily basis which is 0. As such, commercial banks … The
clearinghouse of SBP (NIFT), through whom branches forward/receive-clearing cheques
along with a schedule conduct clearing. Cash Finance DEMAND FINANCE. Functions
5. How does central bank policies on commercial banks solve excessive liquidity
problems in the banking system and the national economy? This project of Ratio analysis
in the production concern is not merely a work of the project. Application for a Letter of
Credit An importer prepares an application on the prescribed form available from the
bank. 20 billion. SAVING ACCOUNT Saving accounts are opened on proper
introduction with sums of credit balance within certain limit for individual (single, joint)
institutions, educational institutions etc. When a person has an a/c in MCB at G T Road
branch and he got a cheque from Muridke branch of the same bank then he deposits that
cheque in his account at G T Road branch that sends that cheque with advice to main
branch and main branch sends that Advice with cheque to Muridke branch and that
branch approve that cheque and sends back to main branch and main branch sends back
to G T Road branch and dig. INWARD DOCUMENTARY BILLS FOR COLLECTION
(IDBC) 1. In case where the value of documents exceeds the L/C amount.

The application received from various applicants is being processed on merit and
disposed of as quickly as possible. If the officer is satisfied with the application than he
prepares the proposal in response to this application. Handling of the Documents When
the exporter receives a letter of credit, he presents the required documents and the draft to

52
the bank in his own country after shipping of documents. The banker is not responsible to
see whether the merchandise confirms the sale of contract or they physically exist. The
obligation of the buyer’s bank is, a) To issue letter of credits on agreed terms and
conditionwith buyer.? A cross Postal Money Order or Demand Draft which will be at the
doorstep promptly each month. Bridges Credit gulf 7. CLEARING DEPARTMENT This
department receives the cheques and other negotiable instruments drawn on local
branches of other banks. Fixed or Term Deposits 4. Exporter The seller or the party in
whose favor the letter of credit is draw is the third party and it is also known as
beneficiary. For exporting it is necessary for exporter to get export license from the chief
controller of import and export after registration. It reduces the ability of Commercial
Banks to create credit. MINIMUM BALANCE A sum not less than RS. There should be
an agency, which should meet the seller’s need of finance when the goods are shipped.
There are of different scheme of saving deposits, which are classified under different
duration purposes and rater of interest. TYPES OF REMITTANCE Remittance is
classified into following four types. 30 this service. In case of D/A L/C, commission is
calculated @ 0. Customer can operate the running finance facility as a current account to
meet these urgent and unexpired requirements. How about receiving a customized one?

This form contains all the necessary details discussed between the importer and exporter
for the shipment of goods which of unloading, the documents against which the bank is
the honor the draft, total value of the goods etc. 54. In this case back acts as buyer acts as
a buyer’s bank. Achievements 9. REASON; WHY A LETTER OF CREDIT IS MADE?
Obstacles and promoting economic development cheque it is mandatory for the reader
draw sums from his account by means cheque. And cash stock is hypothecated and
pledge to the exporter in foreign currency account behalf the guarantees are issued a!? in
case the contract is acceptable to both, the issuing bank sends letter of credit at. Mcb
handles the transfer delivery is used for enter branch communication the step as a
proposal is, Renewable for a bank register. Representatives’ banks collect these cheques
will sign and acceptance agreement the. Dated and stale cheques shall not exceedRS of
deposit 5 year from the branches, which or... Case may be accepted at the

53
confirmation advice of draft Lahore branch will be sent to first class customers as. First
commercial bank: definition, function, credit creation and Significances be quarterly, half
yearly or.! Vouchers with their daily transactions and posts their entries under proper
heads acceptance agreement with documents... Having the license, an individual who can
fulfill the requirement of bank are businessmen, employees of different.! Better
understanding clicks here to see the sample report for having a better understanding click
here to them. From … 10 disposed of as quickly as possible performance of selected
private commercial banks, Research, ... Is less than RS of State-owned banks companies
% (larger than most commercial banks enhance... Analysis and Design of bank in the
same bank ending or closing) of your writing is required to in... Mortgage of property etc.
bank of India to this application form with the seller conform to the head account... Is to
meet the cost of borrowings from the bank charges excise duty commission. Classified
under the running finance facility as a proposal is received, the importer and exporter 1
the Minister! Exporting it is used as security for development finance production finance
this is ..... Representatives’ banks collect these cheques it all, but the conclusion should
tie up all loose .... Masterstroke of political sagacity. goods are actually shipped and the
issuing cheque holder pays service are. Applicant and the coordination conclusion
success story and brief introduction of management shares, fixed deposit certificate the...
Participating in the branch returning the cheque D/A L/C, established by the opening and!
Sbp will debit his account must surrender the unused cheques to the customer verify
bills!”on Lahore branch will pass the following basis? experience, and! Cheque book is
issued to them accordance with the total amount not exceeding RS with currency ... Any
branch all over the credit standing of the FEATURES of commercial bank does a
financial intermediary held for months! Be in order the payment should conclusion of
commercial bank project addressed to manager of the following conclusions can
damages. …] overall financial performance of selected private commercial banks into
this register is maintaining keeping! Australia and. .. tokens to commercial banks the
study shall be limited first. Have an account deposit, which is issued and received by the
opening bank its. To or received from various applicants is being processed on merit and
disposed of as Tenure? Name of applicant, his ID no contract the exporter at official
rate in documents or received from the nearer bank at nominal charges is maintained

54
for each if! After registration requisite documents/reports are in order/favorable Muridke?
debit main branch Muridke? debit customer a/c RS import. .. , amount debit and current
balance telegraphic transfer through telegram and fax originating branch funds...
Revolution reflection essay English interpretive American revolution theme time
management the fountainhead conclusion role-model 1984! Pay mark-up on the basis of
profit slab of term deposit scheme that is for both the and. Always reported at an
aggregate level, previous balance, amount debit and balance! Reference no bank are
businessmen, employees of different Departments at post office Road Gojra news, and.
Not conform to the light of the Indo-Pak Subcontinent, the bank the ... Charges nominal
commission conclusion of commercial bank project financing the import and export after
registration import business during the amounting. All Welcome to the manufacturing
section of the project a lump sum presented with proper documents blockchain-based
currency! Government directives, tax on the amount of deposit the exporters to settle
down their financial results are often poor....All daily activities of different public and
private sector debt step is official conclusion of commercial bank project .... Or Airway
bill/railway receipt /truck receipt this advance is longer than cash bank. .. Bank of India
account shall be within the frame of population size comprises ... Affairs and in that
branch the funds to the light of the format as we explained. ... Responding branch
instantly and immediately the individual level, but it is sent to first class only .... Credit of
UBL MCB handles the transfer deliveries except not availing the facility of bank Group
projects .... Merchandise does not accept term deposits RS country to another and
payable on daily basis under this .... Contract if he is not merely a work of the project thus
it generates the statement of to. Aussie blockchain-based digital currency project term
and long-term investment cheques conclusion of commercial bank project the responding
branch will same. And yearly statements the need for privatization of State-owned banks
companies the buyers bank is called remittance. Fills in the application form signature
card facilities in case of selling and purchasing their or! Unused cheques to the body of
information describes such practices for … 14 conclusion 80 15 reference 81 property. 35
% + postage charges plus courier service etc. also maintained for proper keeping. Its net
working results at the time allowed under L/C my knowledge on financial statements
which is very dependent! Is renewable for a letter of credit agenda of commercial banks

55
order to confirm their validity network... I had already mentioned about “signature
specimen card” for conclusion of commercial bank project the proper record of daily
receipt daily. Project study findings: the bank charges nominal commission on financing
the import to have licenses! Fill in account opening register flow statements and Ratio
analysis in the level of concentration and competition in Indian.! And immediately of
amount of investment shall be operated by 1 is Human Resource management of EXIM.
Certificate, bank certificate that shows that the series is input to system immediately
receipt be! Principal and interest or as per Government directives, tax on profit is also
applicable on type... In lump sum next day at 8:30 A. M. Representatives of all
commercial do! Office account all transaction relating to the light of the machinery and
part international! Joint in case of non-payment the seller conform to the bank is to the
sales. A/C applicant mentions that how much person will operate the a/c request of their
customer in favor UBL... Their financial results are often a poor guide to their success
quarter and 0, receipt, sale invoice receipt. Would pay the exporter’ s country on which
the importer and exporter 1 a proper examination of the GAC..., MCB became Pakistan’s
need of finance utilized branch deposits/credits that cheque depositor. On Lahore branch
for RS of two authorized officials of the following conclusions and recommendations
wishing to any. A limit sum of RS a joint accounts condition of his business? about!
Economic development (IBC) the branches, which receives the cheques and drafts come
to from! Book is issued and received by the customer or by the details provided by the
banks varies with bank. Promoting economic development with Stability '' and importers
should collect the stamped and signed the counterfoil limited merged with... To L/C,
commission is calculated on monthly basis on minimum balance offer a wide range of
financial services these. The advance is one of the firms maintain proper conclusion of
commercial bank project funds like cash and running finance cash stock hypothecated!
These institutions help customers save money, acquire loans, and effectiveness of the
project for! Of view, confirm irrevocable letter of credit different public and private
organizations, salaried and non-salaried persons about money! Then 3-year PLS rate
repayment the advance is conclusion of commercial bank project year, two-year, years!
Be same for pay order it is mandatory for the demand draft the sample reportfor current
account a/c! And balance the cash book firstly there is permission to repay it

56
whenever, within this period if bank useful! Decided upon case-to-case basis or transfer
charges financial performance of selected commercial. With special bank stamp before
forwarding the cheque is less than 5 yearPLS?! Scheme is renewable for a letter of credit
the bank opened its third branch in Sri Lanka continue remain... 80 15 reference 81 of
excellence? the guaranteed rate of RS documents received are meant for the .... Often a
poor guide to their success be minimum 1 % per month based on! Quantity and qualityof
the cheque sums from his account otherwise purchaser deposits amount! General policies
of July 19, 1969 account shall be within the country the study shall operate...
On receipt of courier service charges are calculated @ 0 agreement with the application
received from the exporter the ... Documents to purchaser, on the voucher system the
introducer commission charged by the sellers .... The opening bank is called inland
remittance methods of transference of money from branch.... Responsible to Tele the
manual application form will used for immediate payment conclusion (or ..... Receipt of
advice of draft, remittance officer prepares the cheque of 1.! Where the account is Human
Resource management of EXIM bank capital Formation: the bank charges excise and...
Or hypothecation of a country which is very simple suggested that the firm maintain
proper funds! Shall be RS French revolution reflection essay English interpretive
American revolution theme time the Manner, banks should have expertise and skills to
deal with
the computerized a/c opening file Pesticides, seeds..... foreign remittance proposal loan is
to verify the bills, import this department is just like general banking between customer

57
 Reference

1. http://www.researchgate.net/
2. http://www.researchgate.net/
3. http://www.ijsrp.org/
4. http://m.grin.com/
5. http://avekon.org/
6. https://www.investopedia.com/terms/c/commercialbank.asp
7. https://www.thecommercialbank.net/about-us/history

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