PROJECT ON

AN ANALYTICAL STUDY OF AU SMALL FINANCE BANK

SUBMITTED BY

SHAIKH RASHMI MANJUR HUSAIN

M.COM PART II SEM 3 2023-24

PROJECT GUIDE

PROF. YUSUF FAROOQUI

SUBMITTED TO

UNIVERSITY OF MUMBAI

Anjuman-I-Islam’s

AKBAR PEERBHOY COLLEGE OF COMMERCE

& ECONOMICS

M/S SHAUKAT ALI ROAD,

DO TAAKI,
GRANT ROAD MUMBAI-08
 Anjuman-I-Islam’s

AKBAR PEERBHOY COLLEGE OF COMMERCE

& ECONOMICS

M/S SHAUKAT ALI ROAD, DO TAKI,

GRANT ROAD MUMBAI-08

CERTIFICATE

MISS. SHAIKH RASHMI MANJUR HUSAIN of M.COM PART 2

Semester III has undertaken & completed the project work titled AN
ANALYTICAL STUDY OF AU SMALL FINANCE BANK, During the
academic year 2023-2024 under the guidance of Prof. YUSUF FAROOQUI
submitted to this college in fulfillment of the curriculum of Masters of
Commerce (Advance Accountancy), University of Mumbai.

This is a bonafide project work & the information presented is true and original
to the best of our knowledge and belief.

Project Course External Principal

Guide Co-Ordinator Examiner
 Anjuman-I-Islam’s

AKBAR PEERBHOY COLLEGE OF COMMERCE & ECONOMICS

M/S SHAUKAT ALI ROAD, DO TAAKI,

GRANT ROAD MUMBAI-08

DECLARATION

I, SHAIKH RASHMI MANJUR HUSAIN student of Anjuman-I-Islam’s Akbar

Peerbhoy College Of Commerce & Economics ,M.COM (Part-II) Semester III
hereby declare that I have completed the project on AN ANALYTICAL STUDY
OF AU SMALL FINANCE BANK in academic year 2023-2024.

The information submitted is true and original to the best of my knowledge.

Signature of the Student

 ACKNOWLEDGMENT

To list who all have helped me is difficult because they are so numerous and
the depth is so enormous.
I would like to acknowledge the following as being idealistic channels
And fresh dimensions in the completion of this project .
I take this opportunity to thank the University of Mumbai forgiving me
chance to do this project.
I would like to thank my principal, Prof. (Dr.) Shaukat Ali for providing the
necessary facilities required for completion of this project.
I take this opportunity to thank our Coordinator Dr. Anzar for his moral
support and guidance.
I would also like to express my sincere gratitude towards my project guide
Prof. Yusuf whose guidance and care made the project successful.
I would like to thank my College Library, for having provided various
reference books and magazines related to my project.
Lastly, I would like to thank each and every person who directly or indirectly
helped me in the completion of the project especially my Parents and Peers
who supported me throughout my project.
 CONTENTS:-

Chapter No. Name of the concept Page No.

I Introduction 6-12

II History of AU small finance 12-17

bank

III Introsuction to the companies 18-22

IV Review of Literature 23-27

V Research methodology 28-29

VI Data analysis and interpretation 30-46

VII Results and discussion 47-48

VIII Conclusion 49-50

IX recommendations 51

X Reference 52-53

V Annexure 54-56
 Chapter 1

Industry Overview

As per the research done by Reserve Bank of India (RBI) the banking industry in India is well
capitalised and is being regulated with utmost effectiveness. Our Country has remarkable
financial and economic circumstances in comparison with the other economies. Thesis on debt
market, and risk based on liquidity disclose that Indian banks are generally irrepressible and have
done quite well despite the slowdown of economies globally. The intimation of cutting edge
banking procedures, such as payments and small financial institutions, has lately occurred in the
Indian banking business. The RBI's new initiatives may go a long way toward aiding in the
restructuring of the banking system domestically.

India's Immediate Payment Service (IMPS) is the only system in the world to have reached level
five on the Faster Payments Innovation Index, With this the country has accomplished the title
of the most advanced digital payment infrastructure out of a total of 25 countries (FPII). Adding
up , the cooperative credit institutions, in banking system of India, involves 12 public sector
banks, 22 banks of private sector, 46 foreign sector banks, 1485 urban cooperative banks, 56
regional rural banks and 96,000 rural cooperative banks.

Banking is the most important part of the modern economy. The bank is important because it
helps people save money and gives loans to different parts of the economy. A bank is a financial
institution with the goal of accepting deposits, lending money to people and companies, making
payments, investing funds in securities for returns, and safeguarding cash. It manages savings
and checking accounts, provides customers with credit in the form of credit cards and loans, and
serves as a trustee for its clients.
There are different types of banks in India which are as follows:

• “Commercial Banks” These businesses create profits and are among the most
significant types of banks. They receive public deposits and lend money to enterprises, dealers,
farmers, and consumers. Commercial banks, as part of the money market, provide the WC
needs of businesses and industries.

• “Development Banks” They are specialised financial organisations that provide

large and medium-sized businesses with long-term financing. Additionally, they engage in a
variety of marketing initiatives to quicken the nation's rate of capital formation. These banks
support the growth of the economy and industry.

• “Co-operative Banks” These kind of banks aims at providing credit at lower interest
rates than market to the “Primary agriculture credit societies”.

• “Investment Banks” An investment bank acts as a middleman when a company

wishes to launch/issue new stock or debt instruments. This can occur when the company needs
to raise capital. Occasionally, an equity investment is made in these companies by purchasing
shares of the company's stock.

• “Foreign Banks” A foreign bank has a legal responsibility to obey the laws and
regulations of both its home country as well as the country in which it is operating. There are
now 45 international banks that have branches in India.

• “Central Banks” India's central governing bank is the “Reserve bank of India”. It exercises
authority on India’s overall banking sector .

“Recent development in Indian Banking Sector”

The banking industry has seen tremendous transformation in recent years, and these
changes are showcased in banking sector reforms as well. Telecommunications and IT
are the two most core areas that have seen change in a rapid manner It has sped up the
distribution of financial information, cutting the expenses of numerous financial
transactions. Credit Cards, ATMs, Tele-Banking, Electronic Fund Transfer (EFT),
Internet Banking, Mobile Banking, and other innovative products have been introduced
by banks in recent years. These new solutions improve the efficiency of banking by
cutting transaction costs.

“Market Size”

The overall assets of Banks increased across all sectors from FY18 to FY21. The
summation of total assets of the banking industry (including public as well as private
sector banks) increased to $2.48 trillion in FY21.
From Financial Year 2016 to Financial Year 2021, deposits had a compound yearly
growth rate (CAGR) of 12.38%, and by Financial Year 2021, they were worth US$ 2.06
trillion. As of December 31, 2021, banks had an amount of Rs. 162.41 trillion, which is
about $2.17 trillion.

Company Overview

Company Name: AU Small Finance Bank

Headquarters: Jaipur, Rajasthan

Industry- Banking sector

Founder – Mr. Sanjay Agarwal

Area Served – India

Company status – Active

Number of employees – 23,486 (2021)

Website: https://www.aubank.in/

It was established in 1996 in Jaipur as Au Financiers. At that time, it was a NBFC (Non
Banking Financial Company) , and it worked productively while promoting economic
growth, particularly for the category of people who is generally not served by the normal
commercial banks. In April of 2017, Au Financiers rebranded itself as AU Small Finance
Bank, and in that same year, they achieved a prominent listing and won the confidence
of well-known investors. Today, AU stands at a height as a Scheduled Commercial Bank
along with a Fortune India 500 Company that is enabling the banking sector to be more
convenient by launching a variety of industry-first innovations. The shift of AU from a
financial corporation to a bank that provides safeguarding reflects many of the values
that AU stands for, including the following:

“Inclusiveness, Progress for all ,Simplicity, Action and urgency”

These are not simply just words. But, for a matter of fact, they constitute the exact
foundation upon which this Small Finance Bank provides its services to customers,
which constitute the most essential members of the AU family.
It reached the end of its five-year small finance bank tenure in April 2022. The
organisation has been in existence for more than 25 years in terms of operations. AU is
a bank that is focused on retail assets and liabilities and is driven by technology.
The most important thing that sets it apart from its competitors is that it has used new
technology to improve its business.
AU is improving its "phygital" (physical and digital) approach to reach more people in
more places. At the end of the March quarter of 2022, the organisation had 413 branches
and 919 touch points all over the country.
Its business model is also unique in that it takes money from urban markets and gives it
to rural markets. Seventy-seven percent of AU's deposits come from cities, while only
23 percent come from rural areas. When it comes to loans, 64 percent of the bank's
deposits go to rural areas, while only 36 percent go to urban areas.
 Particulars March 31, 2017 March 31, 2022 Growth
(CAGR%)
Branches 301 919 32%

Employees 8,515 27,817 34%

Unique customers 2,66,220 26,14,537 77%

Total Assets (Rs 9781 69078 63%

crore)

Loan (AUM) 10,734 47,831 45%

Net worth (Rs 1,988 7,514 39%

crore)

People were forced to go digital because of the pandemic. It happened when the lender
needed it most. The tailwind pushed the bank ahead of its competitors by a long way.
Customers' use of digital technologies has grown by a huge amount. People are now
starting to conduct transactions via digital platforms. According to the bank's investor
presentation for Q4 FY22, as of March 31 it had implanted over 4.8 lakh QR codes and
issued about 1.7 lakh credit cards.
Comparative Analysis of AU SFB with HDFC, SBI and Ujjivan Small Finance
Bank

•HDFC: Both in terms of market capitalization and assets, HDFC Bank is the most
important financial institution in India. The bank has an almost perfect track record of
providing PAT growth of more than 20 percent over the course of the previous 20 years.
The bank is the industry leader in personal loans, credit cards, and auto loans, making it
a crucial indicator of India's growing consumerism. HDFC bank has the widest
distribution, the most diverse portfolio, and the strongest working capital loan proposal,
allowing it to switch between retail and wholesale loans based on market conditions.

The bank has improved its digital capabilities by

a) tripling the amount of transactions that can be processed through UPI;

b) doubling the amount of transactions that can be processed through mobile and internet
banking. The bank has maintained the best asset quality over asset quality cycles in the
Indian banking sector, despite having the biggest share of unsecured personal loans. This
has been made possible by sound risk management procedures, rigorous monitoring, and
careful customer selection.

•SBI: The State Bank of India is India's most prominent financial institution, holding
approximately 25 percent of the market share in both loans and deposits. The bank has
over 440 million customers that it serves through its broad network of more than 22,000
locations. In addition to this, it serves as the holding company for SBI credit cards, life
and general insurance, mutual funds, and capital market intermediaries. In contrast to
other PSU banks, which have continually given up market share, this bank has grown.
When enormous m/s are considered, it is conceivable that overall growth will resemble
systemic growth. The bank is being careful with its lending to businesses, but it is
experiencing robust

growth in the retail sector, led by unsecured personal loans. The bank has built the largest
Unsecured Personal Loans book with the best NPAs in the business in just three to four
years. The bank's liability business is strong because of its brand, trust, and outreach.
The bank has about 25% of the market share in systemic deposits and sets the prices for
the industry as a whole.

•Ujjivan Small Finance Bank: This Small Finance Bank (USFB) Limited is widely
regarded as one of the most successful small finance banks in the nation. As a mass
market bank, it is still committed to serving the unserved and under-served segments
through financial and digital inclusion. Ujjivan Small Finance Bank is continuously
broadening its market presence and improving the quality of the services it provides its
clients by leveraging technology as a primary enabler. The improved digital interfaces
across regions and languages have made it possible for their customers to get finance
quickly and easily at any time. This has helped the Bank get closer to its customers in
many different places. As of the 30th of September, 2021, the bank has a presence all
across India, serving more than 59.7 lakh customers and providing more than 575
banking touchpoints in 248 districts, 24 states, and 24 Union Territories.

INTRODUCTION TO THE INDUSTRY

HISTORY OF AU SMALL FINANCE BANKS.

AU Small finance banks have encouraged the major financial services in provincial
and unserved area of the economy. AU small bank should have least settled up capital
of 100 crores is needed to qualify as above. According to organizations act 2013 banks
get their permit under area 22 of banking guideline act 1934. They can additionally
apply das a planned business bank whenever discovered reasonable according to area
42 (6) (a) of the reserve bank of India act,1934, Small finance banks assumes a
significant part in legitimate channelizing of saving in a proficient and powerful way
in provincial and semi – metropolitan territories of India, which giving positive
indications in generally advancement.
The populace which is out of the range of other business banks fills in as an objective
populace for small banks. People, Corporate, Trusts or Societies helps in advancing
these banks. As indicated by the rules gave by Reserve bank of India small banks can
loan up to 25 lakhs. The tasks of the bank ought to be completely organized through
innovation. RBI took measures for viable financial consideration and as of late
conceded 'on a fundamental level' licenses for 10 small finance banks with a 18-month
cutoff time to begin tasks.

Out of ten elements, eight are miniature finance institutions. Among them just Equitas
Small
Finance Bank has begun working up until now. As indicated by the RBI rules gave in
November 2014, the target of a small finance bank is to help financial incorporation by
offering credit to small specialty units, miniature and medium endeavours. The rules
express that 75% of their credit portfolio should loan to the need area. These banks can
possibly work practically like a typical business bank, yet at a lot smaller Operating
expense. It can offer essential banking services, acknowledge stores and loan to
potential and immaculate area by connecting them to formal banking area. They help
in the branch extension mission of the Indian Banking framework.

Branch development in the rustic zone is decidedly corresponded to the financial

improvement of the nation. It additionally prompts neediness decrease in these
territories. These banks will assume a critical part in the achievement of financial
consideration in India. Small Banks are actual banks whose point is to give fundamental
banking such as deposits and supply of credit, however in a restricted region of activity.
Small banks are relied upon to meet credit and settlement needs of small organizations,
ranchers, micro and small industries, chaotic area, low pay families and traveler work
power through high innovation minimal effort activities.

Small Finance Banks (SFBs) presented in the Indian Banking Structure in the year 2015
to cook the particular necessity of specialty clients. These banks plan to reinforce
Financial Inclusion and broadening fundamental banking administrations in the
country. Small Finance Bank are those banks give monetary consideration to burdened
area like micro, small and medium business undertakings, and other disorderly areas
who are not been taken consideration by different banks and monetary establishment.
The idea of Small Finance banks isn't totally new as these kinds of establishments have
effectively existed in many created nations. In the year 2015, RBI offers license to 10
candidates to set up Small finance Banks in India. In the year 2015, RBI has started a
monetary consideration strategy by setting up an alternate kind of bank in our country.
RBI has given a temporary license for ten organizations on September 17, 2015 to work
as small finance bank in India. Capital Finance Bank is the principal bank that began
as a small finance bank in the country. They started activities with 47 branches on April
24, 2016.

REGULATIONS:
The small finance banks are governed on the basis of these provisions:

1. Banking Regulation Act, 1949

2. Reserve Bank of India Act, 1934
3. Foreign Exchange Management Act, 1999
4. Payment and Settlement Systems Act, 2007
5. Credit Information Companies (Regulation) Act, 2005
6. Deposit Insurance and Credit Guarantee Corporation Act, 1961

ELIGIBILITY CRITERIA:

▪ Resident people/experts, separately or jointly, each having at any rate 10 years of

involvement with banking and finance at a senior level and Companies and Societies
in the private sector, that are possessed and constrained by residents and having an
effective history of maintaining their organizations for at any rate a time of five years,
will be qualified as advertisers to set up little finance banks.

▪ Existing Non-Banking Finance Companies (NBFCs), Micro Finance Institutions

(MFIs), and Local Area Banks (LABs) in the private sector, that are constrained by
residents and having a fruitful history of maintaining their organizations for in any
event a time of five years, can likewise choose transformation into little finance banks.
Joint ventures by various advertiser bunches to set up little finance banks are not
allowed.
▪ Primary (Urban) Co-usable Banks (UCBs): These are envious of willfully
converting into small finance banks, may intentionally change from Urban Co-usable
Bank into a Small Finance Bank. The base total assets of such small finance banks will
be Rs. 100 crore from the date of commencement of business. Nonetheless, they should
expand their base total assets to Rs 200 crores within a long time from the date of
commencement of business.

SCOPE OF ACTIVITIES OF SMALL FINANCE BANKS

The small finance bank will principally embrace fundamental banking exercises of
acknowledgment of stores and loaning to unserved and underserved segments
including small specialty units, small and negligible ranchers, micro and small
industries, and sloppy area elements. It can likewise embrace other non-hazard sharing
basic monetary administration exercises, not needing any responsibility of own funds,
like the circulation of mutual fund units, insurance items, pension items, and so forth.

With the earlier endorsement the RBI and subsequent to the following necessities of
the sectoral controller for such items. Following a long time from the date of the
beginning of tasks of the bank, the prerequisite for earlier endorsement from the
Reserve Bank will at this point don't matter and the bank will be represented by the
surviving standards as relevant to booked business banks.

The small finance bank can likewise turn into an Authorized Dealer in the unfamiliar trade
business for its customers' prerequisites.

▪ Open banking outlets: Small finance banks will have general consent to open
banking outlets from the date of the beginning of the business subject to the condition
that the prerequisite of opening in any event 25% of its banking outlets in unbanked
provincial focus.
▪ Limitation in the space of activities: There won't be any limitation in the space of
tasks of small finance banks; in any case, the inclination will be given to those
candidates who, in the underlying stage, set up the bank in a bunch of underbanked
States/locale, for example, in the North-East, East and Central areas of the country.
These candidates won't have any obstacle to growing to different districts at the
appointed time.

It is normal that the small finance bank ought to essentially be receptive to nearby
necessities. After the underlying adjustment time of five years, and after an audit, RBI
may change the extent of exercises of the small finance banks. The other financial and
non-financial administration exercises of the advertisers, assuming any, ought to be
kept unmistakably ring-fenced and not mixed together with the banking business.

NORMS:

▪ The rundown of small finance banks in India will be dependent upon all prudential
norms and guidelines of RBI as appropriate to existing business banks including the
necessity of support of Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR).
No avoidance would be given for agreeing on the statutory arrangements.

▪ The small finance banks will be needed to expand 75% of their Adjusted Net
Bank Credit (ANBC) to the areas qualified for grouping as need area loaning
(PSL) by the Reserve Bank. At any rate, 50% of its credit portfolio ought to comprise
advances and advances of up to Rs. 25 lakh.

CAPITAL REQUIREMENT:

▪ The base settled up casting a voting equity capital for little account banks will be
Rs.200 crore, with the exception of such little money banks which are changed over
from UCBs.
▪ Taking into account the innate risk of a little money bank, it will be needed to keep
a base capital sufficiency proportion of 15% of its risk-weighted assets (RWA)
consistently, subject to any higher rate as might be endorsed by RBI every once in a
while.

FOREIGN SHAREHOLDING:

The foreign shareholding in SFBs would be according to the Foreign Direct Investment
(FDI) strategy for private area banks as corrected every once in a while. Right now, the
total FDI in a private area bank from all sources will be permitted up to a limit of 74%
of the settled up capital of the bank.

On account of Foreign Institutional Investors (FIIs)/Foreign Portfolio Investors (FPIs),

individual FII/FPI holding is confined to beneath 10% of the absolute settled up capital.
As far as possible for all FIIs/FPIs/Qualified Foreign Investors (QFIs) can't surpass
24% of the absolute settled up capital. This can be raised to 49% of the all-out settled
up capital by the bank worried through a goal by its Board of Directors followed by an
uncommon goal with that impact by its General Body.

TRANSITION PATH:

On the off chance that the rundown of small finance banks in India tries to travel into
a universal bank, such change won't be programmed however would be dependent upon
it applying to RBI for such transformation and satisfying least settled up capital/total
assets necessity as appropriate to universal banks. Its agreeable exhibition as a small
finance bank for a base time of five years and the result of RBI's expected steadiness
work out. On progress into a universal bank, it will be exposed to every one of the
standards including NOFHC structure as pertinent to universal banks.
 Chapter 2

INTRODUCTION TO THE COMPANIES

INTRODUCTION OF AU SMALL FINANCE BANK.

AU SMALL FINANCE BANK:-

AU was established by Mr. Sanjay Agarwal (managing director and CEO of AU Small
Finance Bank) as a private restricted organization. AU started its excursion in 1996 as
AU lenders and under RBI rules, worked for more than multi decade as retail engaged
client driven, deliberately significant resource financing non banking monetary
organization. It turned out to be Small account Bank in 19 April, 2017. In the a long
time since AU turned into a bank they added almost 1,000,000 new clients and offering
to 27 items and spotlight on arrangements across key verticals of financing stores,
protection, exchange banking, shared assets, business banking and computerized
banking.

The initial step of AU is to engage individuals is to make occupations and work

likewise center to change over consumer loyalty to client enchant. The essential goal
of AU represents comprehensiveness, progress for all, straightforwardness, activity and
desperation. These goals are columns on which AU SFB would serve their clients. AU
is serving low and center pay people, miniature and little endeavours that have
restricted admittance to banking and money channels. AU is assuming a critical part in
Indian Economy.

AU SFB positioned 479 in the rundown of Fortune India 500 organizations with yearly
capitalization of Rs. 17,000 Crores. On its first day of exchanging, the supply of this
bank rose 51%. Because of its set of experiences as a vehicles account organization, as
of walk 2018 practically every one of the credits made by AU SFB was gotten. So AU
bank has developed its stores by having very lower cost.
It is a small finance bank with tasks across its 500+ touch focuses including 306 bank
offices 106 resource communities 23 workplaces 291 ATMs across 11 territories of
North West and Central India and a group of 10000+ representatives. AU Small
Finance Bank Limited was initially joined as L.N. Finco Gems Private Limited on 10
January 1996 as a private restricted organization under the Companies Act 1956 with
the ROC. In year 2000 the organization got authentication of enlistment under segment
45 I An of RBI Act from the RBI to carry on the matter of non-banking monetary
establishment without tolerating public deposits. Pursuant to the difference in name of
the organization to Au Financiers (India) Private Limited to mirror the enhanced money
business a new declaration of consolidation was given by the ROC on May 24 2005.
In 2005 the organization got business partner of HDFC Bank for carrying on the matter
of financing business vehicles. In 2006 the organization extended its activities into
Maharashtra. In 2008 the organization got speculation of Rs 20 crore from India
Business Excellence Fund and India Business Excellence Fund-1.

In 2009 the organization forayed into Gujarat. In 2010 the organization got new
declaration of enrollment under area 45 IA of RBI Act from the RBI compliant with
which RBI arranged the organization as NBFC-ND-AFC. During the year the
organization got speculation of Rs 35 crore Rs 6 crore and Rs 14 crore from IFC IBE
Fund and IBE Fund-I individually. Additionally during the year the organization
achieved the situation with 'Fundamentally Important Non-Deposit Taking Asset
Finance Company’.

In 2011 Au HFL was set up as an auxiliary of the organization to give lodging money
administrations. In 2012 the organization acquired venture of Rs 150 crore and Rs
33.04 crore from Redwood and IFC separately. During the year the organization got
redesign of FICO assessment from CRISIL BBB+/Stable to CRISIL A/Stable for long
haul bank offices by CRISIL Ratings. During the year Au Insurance Broking Services
Private Limited was set up as an auxiliary of the organization to give protection and
broking services.
The organization was changed over into a public restricted organization via a unique
goal passed by Shareholders at the EGM hung on January 10 2013 and the name of the
organization was changed to Au Financiers (India) Limited'. A new declaration of
joining ensuing upon transformation to a public restricted organization was given by
the RoC on 11 January 2013. The organization was conceded the on a fundamental
level endorsement to set up a Small Finance Bank (SFB) by the RBI according to its
letter dated 7 October 2015.

During the year 2015 the organization got redesign of credit score to CARE A+ for
long haul banking offices via CARE Ratings. During the year 2016 the organization
got overhaul in long haul rating of CRISIL A/Watch Positive by CRISIL Ratings. As
per RBI endorsement dated April 6 2016 the organization stripped its shareholding in
Au HFL which was past auxiliary organization. According to RBI endorsement dated
May 18 2016 the organization stripped its whole shareholding in IML. Compliant with
RBI endorsement dated September 6 2016 the organization stripped 29.53% of the all
out shareholding of M Power Micro Finance Private Limited. The organization stripped
its whole shareholding in Au Insurance Broking Services Private Limited (Au IBSPL)
past partner organization. The RBI allowed the last endorsement to the organization to
set up a SFB by its letter dated 20 December 2016.

The name of organization was changed to AU Small Finance Bank Limited' and a new
testament of consolidation was given by the ROC on 13 April 2017. The organization
started tasks as a Small Finance Bank in April 2017.AU Bank's IPO got a mind-
boggling reaction in June 2017 with an oversubscription of around 54 times. On 4
October 2017 AU Small Finance Bank reported that it went into concurrence with
Aditya Birla Health Insurance Company (ABHICL) for Health Insurance Products as
Corporate Agent. On 28 October 2017 AU Small Finance Bank declared that it has
marked a Memorandum of Understanding (MOU) with Small Industries Development
Bank of India (SIDBI) to give a stimulus to subsidizing MSMEs.
Under AU SIDBI Joint Financing Program' both the monetary foundations have chosen
to cooperate in the regions of joint financing of undertakings identifying with MSMEs
in assembling and administration areas. They will embrace a typical methodology
towards project distinguishing proof evaluation observing development and customer
adjusting. The examination of the proposition will be done together by AU Bank and
SIDBI.

Both the monetary organizations would reserve a corpus of Rs 100 crore for loaning
under this MOU for FY 2018. The corpus for the ensuing years would be chosen after
common meeting and seeing the improvement made during FY 2018. The long term
long arrangement will zero in on ideal and satisfactory credit accessibility to Medium
Scale Enterprise (MSEs) units and endeavours will be made for augmenting credit
stream to MSE.AU Small Finance Bank got Scheduled Commercial bank status from
the Reserve Bank of India (RBI) in November 2017.

On 3 November 2017 AU Small Finance Bank declared that the Reserve Bank of India
has conceded endorsement to SBI Mutual Fund to gain shareholding of upto 10%
through its different plans in AU Small Finance Bank. On 28 November 2017 AU
Small Finance Bank reported that it has initiated offering common asset dissemination
for its clients. The bank has banded together with 11 rumored shared asset houses
(AMC) for beginning this item portion. On 19 December 2017 AU Small Finance Bank
reported that it has gone into the Business Correspondent Agreement with M/S Sahaj
E-Village Limited for giving bank and monetary administrations using Business
Correspondent model.

On 12 January 2018 AU Small Finance Bank reported the launch of home advance
item for its clients. AU Small Finance Bank opened 71 new unbanked provincial
financial outlets in March 2018.On 6 March 2018 AU Small Finance Bank declared
that the bank has tied up with Aurionpro Solutions to improve its computerized banking
offering corporate web banking and money Management stage for SME MSMEs and
corporate customers. On 3 April 2018 AU Small Finance Bank reported that it has gone
into concurrence with Future Generali India Life Insurance Company Limited (FGLI)
to go about as corporate specialist for life coverage business. This tie up will be
commonly gainful for the bank and FGLI as far as business market infiltration and
reach. The Board of Directors of AU Small Finance Bank at its gathering hung on 19
May 2018 affirmed issuance of 43.30 lakh completely settled up value portions of the
bank and issuance of 1.01 crore convertible warrants conveying an alternative to buy
in to a comparable number of value shares on particular premise to Camas Investments
Pte Ltd. a roundabout completely possessed auxiliary of Temasek Holdings (Private)
Limited at absolute membership measure of Rs 1000 crore. The whole thought payable
for the issuance of value shares will get payable prior to the date of designation of value
shares.

A sum comparable to in any event 25% of the membership thought payable towards
convertible warrants will get payable at the very latest the date of portion of the
convertible warrants and the equilibrium 75% of the membership thought payable
towards convertible warrants will be paid at the hour of activity of the convertible
warrants by Camas Investments Pte. Ltd. Under the special apportioning the issue cost
of value shares is Rs 692.77 per share and the issue cost of the convertible warrant is
Rs 692.77 per convertible warrant. Camas Investments will be qualified for practice
any or the entirety of the convertible warrants in one or numerous tranches inside year
and a half from the date of portion of convertible warrants. On 30 May 2018 AU Small
Finance Bank declared that it has been given Certificate of Registration under
Securities Exchange Board of India (Bankers to an issue) Regulations 1994 by
Securities Exchange Board of India.
 CHAPTER- 3 REVIEW OF LITERATURE

INTERNATION REVIEWS:

(SLOVAK UNIVERSITY OF TECHNOLOGY in Bratislava, 2016)

The accomplishment of each business endeavour is straightforwardly identified with
the abilities of business the executives. The business undertaking can, thus, make
varieties of
how to move toward the new mind-boggling and changing circumstances of
accomplishment on the lookout. In this way, chiefs are attempting during negative
occasions to change their administration approach, to guarantee long-term and stable
running of the business venture.

(Alamry, 2020) Financial analysis has emerged since the start of the financial capacity
as a free capacity and as different capacities in the firm and has emerged explicitly in
1900 when field examines were led utilizing the analysis in the examination of the
financial situation of the ventures. This capacity of financial analysis was in the United
States of America in 1900, when an examination was led on 981 organizations using
seven financial proportions to examine the situation with these organizations.

(McLeay, 2011) International examination of financial statement data still requires a

decent comprehension of the manner by which legal frameworks, protections laws
furthermore, proprietorship constructions can make impetuses that impact the
supervisors of firms in the manner they draw up their financial statements, and lead to
contracting and checking interest for valid bookkeeping data.

(Junkus, 1982) Financial analysis has been utilized broadly in the analysis of such
issues as the forecast of firm disappointment, bond ratings, stock rates of return, just as
in consolidation study and in beta estimating. As well as introducing an overall outline
of the meaning of financial what's more, working data in financial analysis and
arranging, the five papers in this part look at explicit uses of bookkeeping data in
financial administration.
(Calzon, 2021)Financial analysis and announcing are one of the bedrock of current
business. Financial analysis and revealing offer a degree of knowledge that assists
organizations with staying consistent while smoothing out their pay or user-driven
activities in all cases.

Using financial information with the assistance of online information analysis permits
one to not just offer fundamental data both inside and remotely yet in addition influence
measurements or bits of knowledge to make huge upgrades to the very territory that
permits the business to stream.

(Wen, 2017) The research occurrence King Long Motor in comprehension the
fundamental hypothesis based on monetary administration, to take a blend of
hypothesis and information analysis strategies, joined with a proportion of profitability
related pointers of King Long Engine organization's profitability do a particular
analysis to distinguish factors compelling the profitability of King long organization
exists and the inspiration to improve profitability, which made proposals to improve
the profitability of King long vehicle organization to advance the organization's future
can be the better and quicker turn of events.

(Billah, 2015) Liquidity is a significant monetary marker that actions whether the
organization has the capacity to meet its short-term liabilities (or not) without bringing
about unfortunate losses. Because of the insufficient utilization of resources, liquidity
hazard may emerge which is clearly a most difficult danger contrasted with other
monetary dangers.

(Ibrahim, 2020)Liquidity is a measure of great importance in the study of banking.

Arguably one of the most important mechanisms through which banks can repay their
debts, it is thus an important data point when assessing the financial health of financial
and banking institutions that operate within a given market.

(Feenstra, 2000)The rate of return on invested capital is a focal idea in financial

investigation. The motivation behind ascertaining the rate of return on interest overall
is to quantify the financial exhibition, to survey the attractive quality of an undertaking
and to settle on choices on the valuation of firms. Financial explanation clients utilize
the bookkeeping rate of return (ARR) instead of the economic rate of return (IRR) to
survey the exhibition of organizations and public-area ventures, to assess capital
speculation projects, and to cost financial cases like offers. Since ARR measures
depend on distributed bookkeeping explanations, there has been a long and in some
cases warmed discussion regarding whether such measures have any economic
importance.

(Craig W. Hoden, 2014)The liquidity measurement writing has set up standard

proportions of liquidity that apply to general classes of market microstructure data.
Particular proportions of liquidity have been created to manage data constraints in
explicit business sectors, to give intermediaries from the data, and to survey
institutional exchanging programs.

The overall liquidity writing has set up nearby cross-sectional examples, worldwide
cross-sectional examples, and time-arrangement designs.

NATIONAL REVIEWS:

(pahwa, 2018)The achievement of financial inclusion profoundly relies upon financial

proficiency. The help of small finance banks can assist Government with getting sorted
out workshops to financially instruct individuals. As a financial mediator, the small
bank can bring the immaculate sector of the economy in the ambit of a formal financial
framework. It is a success - win circumstance for both the partners for banks. It sets out
new open doors to extend its activities and develop its image esteem in the unserved
sector and target specialty sector, then again, Government is additionally ready to
execute its arrangements effectively.

(N, 2018) Small finance bank assumes a fundamental part in economic development.
They should focus on building up more small monetary banks in provincial zones as it
would upgrade the exhibition of MSME sector. Individuals in rustic territories can
benefit from fundamental financial offices like advances, internet banking, stores and
so on without intricacy. Small Finance Bank plays an essential job to give help to under
and unserved group all together to upgrade their financial climate of a MSME sector.
(Jagwani , 2019) Small Finance Banks means to give essential banking and financial
services to unbanked and impeded segment of the populace. They should zero in on
setting up additional bank offices in rustic regions. In light of Small Finance Banks
now individuals in rustic territories can without much of a stretch benefit the
fundamental offices like credits, stores, and internet banking. Small Finance Bank plays
a critical part to give help to under and unserved group to upgrade their financial
climate. Small Finance Bank will have a fundamental part in financial turn of events
and will give tremendous help to the Indian financial areas.

(podile, 2020) The term Financial Analysis is made out of each investigation and
mastery of operational efficiency and money related situation of the organization.
Different strategies and methods are completed to examine the relationship between
different announcements. The Financial decrees will supply the appropriate and solid
real factors inside and external customers like dealers, owners coming about because
of association, talented chiefs, leasers and government, etc are the customers of those
components who are in some other case alluded to as friends of a forte unit.

(Palamalai Srinivasan, 2017)The study shows that the financial performance of

private sector banks is moderately better compared to the public area banks all through
the study period. Additionally, the study inspects the effect of liquidity, solvency, and
proficiency on the benefit of the chose Indian business banks by utilizing the board
information assessments, viz. the Fixed Effect and Random Effect mode.

(P.VOHRA, 2015) Banking sector's financial performance shows generally speaking

construction of financial arrangement of any economy and it put an effect on the
performance of the economy. Normally the development of banks fundamentally relies
upon its ordinary business administrations like stores and advances. If there should
arise an occurrence of similar examination consistently factors like development,
benefit and level of non-performing assets (NPAs) are utilized to look at the
performance of the banks.

(Singh, 2015) Profitability is the capacity of a business to procure profit for its
proprietors. The target of this investigation was generally speaking profitability
analysis of various private area banks in India dependent on the exhibition of
profitability proportion like revenue spread, net profit margin, return on long term
funds, return on net worth, return on resources, and changed money margin.
Profitability is an action of productivity and controls it shows the proficiency or
adequacy with which the activities of the business are conveyed on. Profitability
proportions give distinctive valuable bits of knowledge into the monetary wellbeing
and execution of an organization.

(Balaji, 2015) The examination of the financial performance of the organization has
uncovered the financial strength, what's more, the shortcoming of the organization. The
examination shows that the benefit is diminished somewhat recently due to increments
of the costs and the organization should take viable choices at the opportune time in
order to correct the shortcoming and it will prompt the effective working of the
business.

(Dr.P.Ganapathi) A financial statement examination that recognizes leverage that

emerges in financing exercises from the leverage that emerges in tasks. The
examination yields two utilizing conditions, one for acquiring to account activities and
one for acquiring in the course of activities.

(Khan, 2018) Small Finance Banks is a kind of specialty bank in India that can give
fundamental financial help of acknowledgment of deposits and lending. The point
behind setting up such banks is to give monetary consideration to segments of the
general public not being served by the conventional banks, like small specialty units,
small furthermore, minor ranchers, miniature and small enterprises, and sloppy areas.
 CHAPTER – 4

RESEARCH METHODOLOGY

OBJECTIVES OF STUDY

1. To study and analyse the financial performance of AU & Ujjivan Small Finance Banks.

2. To compare and interpret the financial performance of AU & Ujjivan Small Finance
Bank.

RESEARCH HYPOTHESIS

H01 = There is no difference between the financial analysis of Au bank and Ujjivan bank.

SCOPE OF STUDY

The study entitled “Financial analysis of small finance banks with respect to AU and
UJJIVAN small finance bank” is to analyse the financial performance of Au and
Ujjivan bank on the basis of their last 2 years data. The study is based on liquidity
analysis and profitability analysis. Financial Analysis suggests unequivocally even to
the amateurs in the contributing space about the current position of the association with
respect to their capacity to pay short term debts and liabilities in the organization and
the current ratios and Quick Ratios can effectively exhibit this by breaking down the
past patterns in their resources and liabilities.

The reason for financial proclamation analysis is to assess the past, current, and future
execution and financial position of the organization to make the venture, credit, and
other monetary choices.
The main objective of the study is to analyse the financial performance of Au and
Ujjivan banks. The research design is a quantitative and descriptive research design.
For this, secondary data is mainly collected from various websites, articles, and
journals. The author has collected the four year data i.e. from 2016 -17 to 2019-2020
to study the financial analysis of the banks.

LIMITATION OF THE STUDY

1. This study does not contemplate the price level changes.

2. The whole study is done on the basis of secondary data.

3. The given data has been taken into account from the various journals articles and
company’s balance and may fluctuate depending upon the article or journal.

4. Every company has their own strategy for analyzing their financial performance.
In this study it is assumed that both the companies use the same tool to analyse
their financial performance.

5. The various strategies for calculation additionally impact the utility of accounting
ratios. The various ideas utilized for deciding numerator and denominator in a
specific accounting proportion won't help in making dependable inferences even in
indistinguishable circumstances.
 CHAPTER -5

DATA INTERPRETATION AND ANALYSIS

This study has been conducted with the help for four years of data of Au and Ujjivan
small finance bank. To represent the data, the author has used various ratios under
liquidity, leverage, profitability and market value.

1. CURRENT RATIO

The current ratio is a liquidity ratio that measures an organization's capacity to pay
transient commitments or those due within one year. It tells financial backers and
investigators how an organization can augment the current resources on its accounting
report to fulfill its current debt and different payables.

FORMULA = CURRENT ASSETS

CURRENT LIABILITIES

YEAR AU BANK UJJIVAN BANK

2017 0.00 0.75
2018 0.00 1.05
2019 0.39 0.75
2020 0.37 0.66

TABLE- 1.1

CURRENT RATIO
100%
90%
80%
70%
60% UJJIVAN
50% AU
40%
30%
20%
10%
0%
2017 2018 2019 2020

FIG- 1.1
 INTERPRETATION:

Current ratio explains the relationship between current assets and current liability. The mean of
AU bank stood at 0.19 while Ujjivan bank’s stood at 0.78. Standard deviation of AU bank is 0.22
and Ujjivan bank’s stood at 0.19. Coefficient of variance of AU bank was 1.15 whereas, Ujjivan
bank was 0.23.

A higher ratio current ratio is considered more favorable than lower ratio. The ideal ratio is
considered between1.2 to 2. From the table 1.1, we can see that the percentage increase and decrease
of various years starting from 2017 to 2020 of Au and Ujjivan bank’s respectively. Au bank fails to
maintain the ideal ratio, whereas in 2018 Ujjivan bank maintained the ratio but failed in the next
two years.

Therefore, Ujjivan bank was able to make easy payments for their current debt for the year
ending on 31st march 2018 than Au bank. Figure 1.1 depicts the clear representation of both the
banks with respect to their current ratio.

2. TOTAL DEBT TO EQUITY

The debt-equity ratio is a proportion of the overall commitment of the leasers and investors or
proprietors in the capital utilized in business. Basically expressed, ratio of the absolute long term
debt and equity capital in the business is known as the debt-equity ratio.

YEAR AU UJJI
2017 0.00 4.51
2018 0.00 5.27
2019 0.06 7.13
2020 0.04 4.97

TABLE 1.2
 TOTAL DEBT TO EQUITY RATIO
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2017 2018 2019 2020

AU UJJIVAN

INTERPRETATION:

Lower total debt to equity ratio is considered as favorable for the company as it indicates less risk
for the company and it the ideal ratio is less than 1. The 0.025 while Ujjivan bank’s stood at 5.47.
The standard deviation for Au bank was 0.03 whereas Ujjivan bank’s was 1.15. Coefficient of
variance of Au bank was1.2 and Ujjivan bank’s was 0.21.

The table 1.2 demonstrates that Au holds a great ideal ratio than Ujjivan bank as it relies less on the
external liabilities whereas, Ujjivan bank is more reliable on external lenders. In 2019 it shows the
maximum increase in the ratio as compared to other three years.

Therefore AU bank has less risk in dealing with debts. Figure 1.2 depicts the clear representation of

both the banks with respect to their total debt to equity ratio .
 3. NET PROFIT MARGIN

The net profit margin, or just net margin, gauges how much net pay or profit is created
as a level of revenue. It is the proportion of net profits to revenues for an organization
or business section.

Net profit margin is ordinarily communicated as a rate yet can likewise be addressed
in decimal structure. The net profit margin outlines the amount of every dollar in
revenue gathered by an organization converts into profit.

FORMULA: NET PROFIT * 100

REVENUE

YEAR AU UJJIVAN
2017 64.21 0.01
2018 16.52 0.46
2019 12.94 10.87
2020 15.74 12.94

TABLE 1.3

NET PROFIT MARGIN

100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2017 2018 2019 2020

AU UJJIVAN
INTERPRETATION:

A high net profit margin is always considered good for the company. It means that the company
can effectively control its costs and provide goods and services at a price that is actually higher
than its costs.

Mean for the net profit margin of Au bank stood at 27.35 while Ujjivan bank’s stood at 6.07. The
standard deviation of Au bank was 24.61and Ujjivan bank’s was 6.79. Coefficient of variance for
Au bank was 89.94, while Ujjivan bank had 111.18.

Table 1.2 demonstrates the various net profit margin of both the banks. It clearly says that Au
holds a high ratio more than 20% in its first year and maintains average for the next three years.
Ujjivan bank holds a lower percentage in 2017 and 2018 but maintains an average in next two
years.

Therefore Au bank could easily have efficient management and low costs with strong pricing
strategies for the year 2017 and less in next three years but Ujjivan bank can fail to have a effective
cost structure with poor pricing strategies for the first two years and would have covered up in
next two years. Figure 1.2 represents the data of both the bank and their percentage with respect to
their net profit margin.

4. OPERATING PROFIT MARGIN

Operating profit estimates how much profit an organization earns anything of deals subsequent to
paying for variable costs of production, like wages and crude materials, however prior to making
good on premium or assessment. It is determined by partitioning an organization's operating
income by its net deals. Higher proportions are by and large better; outlining the organization is
productive in its tasks and is acceptable at transforming deals into profits.

FORMULA: OPERATING INCOME *100

REVENUE
 YEAR AU UJJIVAN
2017 0.93 -6.28
2018 -5.43 -7.12
2019 -2.71 -0.36
2020 -0.73 1.02
TABLE 1.4

OPERATING PROFIT
100% MARGIN
90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

2017 2018 2019 2020

AU UJJIVAN
 INTERPRETATION:

The mean of operating profit margin ratio for Au bank stood at -1.98 whereas Ujjivan
bank’s stood at -3.18.The standard deviation of Au bank was 2.73 and Ujjivan bank
was 4.11.
Coefficient of variance were stood at -1.37 (Au) and -1.29 (Ujjivan) respectively.

A less in operating margin shows the increasing cost with respect to the profit. This
shows that the bank is not able to achieve a good amount of profit due to their high
costs. The table 1.4 depicts that in the year 2017, Au bank had the highest of operating
margin profit as compared to Ujjivan bank, and had an uneven fall on the preceding
three years. Whereas Ujjivan bank had an increasing margin till 2020.

Therefore, Au bank was able to have a huge profit in 2017 but failed to continue for
the next three years. Ujjivan bank was able to maintain their cost and increase their
profit on 31st march 2020.The figure 1.4 shows the representation of operating profit
from 2017 to 2020 of Au and Ujjivan bank respectively.
.

5. RETURN ON ASSETS

Return on assets (ROA) is an indicator of how profitable an organization is comparative with

its complete assets. ROA gives a chief, investor, or examiner a thought concerning how
productive an organization's administration is at utilizing its assets to create income. ROA is
shown as a rate; the higher the ROA the better.

FORMULA: NET INCOME

TOTAL ASSEST
 YEAR AU UJJIVAN
2017 8.40 0.00
2018 1.55 0.07
2019 1.17 1.44
2020 1.60 1.90
TABLE 1.5

RETURN ON ASSETS
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2017 2018 2019 2020

AU UJJIVAN

INTERPRETATION:

The mean for the returns on asset ratio of Au bank stood at 3.18 and Ujjivan bank’s stood at 0.85.
The standard deviation foe Au bank was 3.48 whereas for Ujjivan bank was 0.96. The coefficient
of variance for au bank was 1.09 and Ujjivan bank’s was 1.12.

It is said that the ratio above 5% is generally considered as the good and over 20% as excellent.
The table 1.5 depicts that in 2017 Au bank had the most increasing percentage of returns on asset.
For the next three years the ratios were subsequently low as compared to 2017. There was an
unusual fall and rise in the ratio. Ujjivan bank did not have any increase in their returns on asset
for the first two years. Later on there was a subsequent increase in their preceding two years.

Therefore Au bank was able to have a higher ROA, which results in more asset efficiency in 2017
whereas Ujjivan bank was unable to have any efficiency over their assets for first two year and has
an average for next preceding years. Figure 1.5 explains the ratios of various years of the banks.
6.RETURN ON EQUITY

Return on equity (ROE) is a proportion of financial performance determined by isolating overall gain
by investors' equity. Since investors' equity is equivalent to an organization's resources less its debt,
ROE is considered the return on net resources. ROE is considered a proportion of the productivity of
a corporation in relation to investors' equity.

FORMULA: NET INCOME

AVERAGE SHAREHOLDERS EQUITY

YEAR AU UJJIVAN
2017 41.35 0.00
2018 12.80 0.47
2019 12.07 12.30
2020 15.41 11.71
TABLE 1.6

RETURN ON EQUITY
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2017 2018 2019 2020

AU UJJIVAN
 INTERPRETATION:

The mean for the returns on equity ratio of Au bank stood 20.4 while Ujjivan bank’s stood at
6.12. The standard deviation of Au bank stands at 14.03 while, Ujjivan bank’s stands at 6.80 with
respect to rate of equity. The coefficient of variance stood at 0.68 (Au) and 1.11 (Ujjivan) respectively.
The percentages in between 15 to 20 are considered as a good return on equity.

From the table 1.6, it is clear that Au bank have the highest ratio in 2017 while, Ujjivan bank fails to
have any ratio. From 2018 to 19 there was a subsequent decline in the percentage of Au whereas there
was some incline in the percentage of Ujjivan bank. In the year 2020 Au bank was able to maintain more
than 15% but Ujjivan bank was facing a decline.

Therefore, Au bank was able to have higher ROE in the year 2017 and 2020 whereas, Ujjivan bank was
having only average ROE which results in less profit generating capacity of the bank and may result in
adding to more capital. Figure 1.6 shows the representation of both the banks with respect to their return
on equity.
7.NET INTEREST MARGIN

Net interest margin (NIM) is an estimation looking at the net interest payments of a financial firm
creates from credit items like advances and home loans, with the active interest it pays holders of
savings accounts and certificates of deposits (CDs).

FORMULA= IR – IE

AVERAGE EARNING ASSETS

WHERE, IR = INVESTMENT RETURN, IE = INTEREST EXPENSES

YEAR AU UJJIVAN
2017 8.01 1.22
2018 4.99 9.08
2019 4.11 8.05
2020 4.52 8.87
TABLE 1.7

NET INTEREST MARGIN

16

14

12

10

0
2017 2018 2019 2020

AU UJJIVAN

FIG 1.7
INTERPRETATION:

The mean for the net interest margin of Au bank stood at 5.40 whereas Ujjivan bank’s stood at
6.80.The standard deviation of Au bank was 1.77 and Ujjivan bank was 3.74. Coefficient of variance
of Au bank stood at 0.32 and Ujjivan bank’s stood at 0.55.

A negative net interest margin shows the inefficiency investment whereas a positive margin shows
the increasing efficiency of banks profitability. The table 1.7 depicts the ratios of various years. In
2017 Au bank had the highest ratio of 8.01 while Ujjivan had 9.08 in the year 2018.
There was a subsequent fluctuation from 2018 to 2020 in case of Au bank. While Ujjivan has a low
ratio in 2017, 19 and 20.

Therefore, both the banks have a positive net interest margin and hence they can increase their
profitability. Figure 1.7 demonstrates the graphical representation of Au bank and Ujjivan bank with
respect to their net interest margin.

8. EARNING PER SHARE RATIO

Earnings per share (EPS) are determined as an organization's benefit separated by the outstanding
shares of its basic stock. The subsequent number fills in as a pointer of an organization's profitability.
It is regular for an organization to report EPS that is adapted to phenomenal things and potential share
weakening.

FORMULA: TOTAL EARNINGS

OUTSTANDING EARNINGS

YEAR AU UJJIVAN

2017 30.18 17.75

2018 10.26 0.08

2019 13.26 1.78

2020 22.78 0.73

TABLE 1.8
 EARNING PER SHARE
60

50

40

30

20

10

0
2017 2018 2019 2020

AU UJJIVAN

FIG 1.8

INTERPRETATION:

The higher earnings per share shows that the bank is more likely to be profitable. The mean for the
EPS of Au bank stood at 19.09 while Ujjivan banks stood at 5.08. The standard deviation of Au bank
was 9.12, while Ujjivan bank’s was 8.47. The coefficient of variance for Au bank stood at 0.47 and
Ujjivan bank stood at 1.66.

From the table 1.8, it is clear that Au bank was having the maximum EPS ratio as compared to Ujjivan.
In 2017, Au bank had the maximum rate of EPS as compared to the preceding three years. On the
same year Ujjivan bank had their highest EPS ratio as compared to the preceding years.

Therefore Au bank is more likely to have profits and is capable to generate dividend for their investors
as compared to Ujjivan bank. The figure 1.8 shows the graphical representation of EPS of both the
banks with respect to the four years.
9. NON PERFORMING ASSET RATIO

A nonperforming asset (NPA) alludes to an arrangement for advances or advances in default or unpaid
debts. An advance is falling behind financially when the head or interest installments are late or
missed. Credit is in default when the moneylender believes the advance consent to be broken and the
debtor can't meet his obligations.

FORMULA = GROSS NPAS - PROVISIONS

YEAR AU UJJIVAN
2017 1.2 0.0
2018 1.3 0.7
2019 1.3 0.3
2020 0.8 1 0.2
TABLE 1. 9

NON PERFORMING ASSET RATIO

2.5

1.5

0.5

0
2017 2018 2019 2020

AU UJJIVAN

FIG 1.9

INTERPRETATION:

A less NPA ratio is considered to be favorable for the bank. The mean of the NPA ratio of Au bank
stood at 1.15 and Ujjivan bank’s stood at 0.4. The standard deviation of Au bank was 0.23 while
Ujjivan bank’s was 0.26. The coefficient of variance of Au bank stood at 0.20 and Ujjivan bank’s
stood at 0.66.

From the table 1.9 we can see that Ujjivan bank has got the less NPA ratio as compared to Au bank.
Therefore Ujjivan Au bank have loans and can become non functional if it got increased or they may
result to not rendering any interest income to the bank. The figure 1.9 shows the graphical
representation of four years data on NPA with respect to both the banks.

10. PROPRIETOR’S RATIO

The proprietor's ratio is utilized to assess the adequacy of the capital structure of an organization. It
is registered by isolating the investors' value by total assets.

FORMULA = PROPRIETORS FUND

TOTAL ASSETS

YEAR AU UJJIVAN
2017 100.00 77.98
2018 22.22 26.69
2019 13.16 17.60
2020 14.18 21.26

TABLE 1.10

PROPRIETOR'S RATIO
200
180
160
140
120
100
80
60
40
20
0
2017 2018 2019 2020
AU UJJIVAN

FIG – 1.10
INTERPRETATION:

The ideal proprietary ratio is 0.5:1. Higher the proprietor’s ratio better will be its long term position
of the banks. The mean for the proprietor’s ratio of Au bank stood at 37.39 while Ujjivan bank’s stood
at 35.88. The standard deviation of Au bank was at 41.93 and Ujjivan bank’s was at 28.31. The
coefficient of variance for Au bank was 1.12 and Ujjivan bank was 0.78.

Table 1.10 depicts the ratios from 2017 to 2020. In the year 2017 Au bank and Ujjivan bank had the
highest ratio from all preceding years. In 2019 both had an average ratio as compared to other years.

Therefore both the banks have got a better long term solvency position. Figure 1.10 shows the
graphical representation of proprietary ratio of both the banks with respect to the four years of their
data.

HYPOTHESIS TESTING

In order to test the significant different in the ratios of two banks the following null hypothesis were
framed by using t-test at 5% level of significance.

H0= There is no significant difference between the financial analysis of Au bank and Ujjivan bank.
Analysis include ratios such as current ratio, total debt to equity ratio, net profit margin, operating
profit margin, return on assets, return on equity, net interest margin, earning per share ratio, non
performance assets ratio, proprietor’s ratio.
 TABLE -2: FINANCIAL ANALYSIS OF AU BANK AND UJJIVAN BANK

CATEGORY VARIABLES DF ‘t’VALUE ‘p’VALUE RESULT

LIQUIDITY CURRENT RATIO 6 -4.8973098 0.00271826 SIGNIFICANT
AND
SOLVENCY
RATIOS
NON 6 4.54021406 0.00393236 SIGNIFICANT
PERFORMING
ASSETS RATIO
PROPRIETOR’S 5 0.14791654 0.88818863 NOT
RATIO SIGNIFICANT
PROFITABILTY NET PROFIT 3 1.6666242 0.19417976 NOT
RATIOS MARGIN SIGNIFICANT
OPERATING 5 0.48589301 0.64758783 NOT
PROFIT SIGNIFICANT
MARGIN
RETURN ON 3 1.28738483 0.28828851 NOT
ASSETS SIGNIFICANT
RETURN ON 4 1.83212144 0.14088026 NOT
EQUITY SIGNIFICANT
NET INTEREST 4 -0.6739306 0.53729477 NOT
MARGIN SIGNIFICANT
LEVERAGE RATIO TOTAL DEBT 3 -9.4667024 0.00249861 SIGNIFICANT
TO EQUITY RATIO

MARKET PER EARNING PER 6 2.25042892 0.06540264 NOT

SHARE VALUE SHARE RATIO SIGNIFICANT
RATIO
*Significant at 5% level.
 CHAPTER -6 RESULTS AND DISCUSSIONS

1 MAJOR FINDINGS

The study was conducted on the basis of ratio analysis of Au bank and Ujjivan bank. Various ratios
were used to study the difference between the financial performances of both the banks. The following
were the observations from the analysis.

▪ Au bank and Ujjivan bank has got a average current ratio in the past four years. Therefore it would
be difficult to make easy payouts for their current debts.

▪ Ujjivan bank relies more upon their external lenders to carry out their activities. There is an
unfavorable match in the bank’s leverage ratio.

▪ Both the bank are having a strong long term solvency position as they are more inclined to have
owners fund rather than debt. The banks hold the strong capacity to maintain their liquidity ratio for
the four years.

▪ Au bank has a strong profitability position as compared to Ujjivan. The bank is has an efficient
method of control costs and increasing their lending capacity.

▪ Both the banks have got an average market per share value. Their dividend generating capacity
fluctuates with respect to the years but can maintain an average amount for their investors.

▪ Au bank has an efficient management with respect to their non performing assets. They have a
limited form of external liabilities with respect to their NPA’s.
2. DISCUSSIONS AND SUGGESTIONS.

▪ Both the banks can have a proper check on their short term adequacy. This would always help
them to pay off their debts easily.

▪ An investor should always analyse and study the banks financial statements before investing.

▪ When compared to other small finance banks of the country, Au bank and Ujjivan bank are more
favorable to invest.

▪ Small finance banks can increase their EPS by lowering their marginal costs. Issuing more new
shares can cause a negative impact on their market value of share.

▪ Small finance banks can earn more profit if they have an adequate planning on their pricing
strategies. A low pricing strategy can affect their net profit margin which leads to inefficient
management.

▪ An investor can easily choose to invest in Au and Ujjivan bank as compared to other small finance
banks.
 CONCLUSION

There is tremendous neglected potential interest lying in the provincial territories and other unbanked
focuses which should be tapped. To tap this neglected interest for financial services, it is felt that it
merits investigating new kinds of foundations for financial consideration. Nonetheless, in a nation
like India where there exist separated business sectors and buyer gatherings, the idea may be
contextualized as indicated by the requirements of the clients.

With respect to the strength of the separated banks, there is a requirement for making harmony
between long-haul maintainability and the financial incorporation objectives. It is turning out to be
progressively obvious that tending to financial prohibition will require a comprehensive methodology
with respect to the banks in making mindfulness about financial items, instruction, and exhortation
on cash the executives, obligation advising, investment funds, and reasonable credit.

The banks would need to develop explicit techniques to extend the effort of their services to advance
financial consideration. Still, the Reserve Bank of India and the Government of India needs to more
fixate on to degree the financial services to country regions and to require the support of mindfulness
program towards guaranteeing admittance to financial services and ideal and sufficient credit where
required by weak gatherings like more vulnerable segments and low pay bunches at a reasonable
expense.

The small finance banks are intended to advance financial incorporation in India. These banks are
performing significantly well and they have great possible all over India as financially prohibited
individuals are on the loose in India. Small Finance banks essentially advance financial consideration
in India by building up practically 95% of their branches in rural and semi-urban areas of the country
and by serving all sorts of individuals including poor also, low pay individuals of those areas. Small
Finance banks need to embrace inventive advances in their retail banking business and during the
time spent offering financial types of assistance to their clients which will fortify their manageability.
 Conclusion and Recommendations

For conclusion AU Small Finance Bank and Ujjivan Bank have been taken, so in terms of Deposits
both the banks were performing better but increase rate at Ujjivan Bank is higher than AU SFB
In terms of Advances, ROCE ratio , Net interest margin and CAR both the banks were performing
as per the expectations
In terms of NPA, Ujjivan Bank after Covid was higher than AU SFB which means Ujjivan banks
has higher number of bad loans
Ujjivan Bank’s has made a loss of Rs. 404 crore during the year 2022 and AU SFB made a profit
of Rs. 1129 crores
So ideally if one wants to invest, then AU SFB bank is better option as it gives dividend of around
0.78% .
 Recommendations

• As Banks CAR ratio decreases from 2021 to 2022. At the same time it’s key performance in Tier2
cities also decreases, So Bank should invest more capital in Tier
2 cities to increase it’s CAR and performance.

• Bank should try to finance more and more projects. As bank collaborated with M FINE company
which is an application to that helps in tracking the health of bank’s employees, provides medical
insurance and support to employees and their families.

• Through this app, bank spend Rs. 1lakh on each of it’s employee which provides benefit to the
bank as well as its employees. Therefore, bank should try to finance and collaborate with more
projects like these for the benefit of the company.

• Bank can also think about improvinits’s day-to-day service to its clients. Such assistance can be
improved by providing prompt service and showing an attitude of cooperation to its clients. It will
help to give a kind of confidence to the public and build a better public image.

• To fulfil the goal of rural development, it should establish more and more branches in various rural
regions of the nation. It will make it easier to assist impoverished rural farmers and those living in
poverty. The bank may hire commission agents for various locations to encourage the general
public to participate in the bank's capital and make additional deposits in AU Bank.

• The bank should simplify the procedure of advances for quick disbursement. So, more and more
people would apply for loans , which would increase interest income for the bank
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• https://www.aubank.in/

• file:///C:/Users/user/Downloads/AU%20SFB%20-%20ET%20Article.pdf

• https://www.goodreturns.in/company/hdfc-bank/ratios.html

• https://money.rediff.com/companies/HDFC-Bank-Ltd/14030055/ratio

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 ANNEXTURE

BALANCE SHEET OF AU BANK WITH REFERENCE OF FOUR YEARS DATA.

Number of Branches 406.00 322.00 306.00 284.00

Number of Employees 17,112.00 12,623.00 11,151.00 8,515.00

Capital Adequacy Ratios (%) 21.99 19.31 19.31 23.04

KEY PERFORMANCE
INDICATORS

Tier 1 (%) 18.36 15.96 18.42 21.46

Tier 2 (%) 3.63 3.35 0.89 1.58

ASSETS QUALITY

Gross NPA 457.78 470.14 269.73 124.51

2.00
Gross NPA (%) 2.00 2.00 2.00

Net NPA 217.30 294.50 169.33 80.46

0.81
Net NPA (%) 1.29 1.27 1.22

Net NPA To Advances (%) 1.00 1.00 1.00 1.00

CONTINGENT LIABILITIES,
COMMITMENTS

Bills for Collection 0.00 0.00 0.00 0.00

Contingent Liabilities 1,360.05 502.14 0.00 0.00