“A STUDY ON FINANCIAL PERFORMANCE OF CANARA

BANK”

Project Report submitted to

UNIVERSITY OF CALICUT

In partial fulfillment of the requirement for the award of the degree of

BACHELOR OF COMMERCE

Submitted by

SANDEEP SUDHIR
(CCASBCM172)

Under the supervision of

Ms. SHINY A.O

DEPARTMENT OF COMMERCE

CHRIST COLLEGE (AUTONOMOUS), IRINJALAKUDA

MARCH 2021
 CHRIST COLLEGE (AUTONOMOUS), IRINJALAKUDA

CALICUT UNIVERSITY

DEPARTMENT OF COMMERCE
CERTIFICATE

This is to certify that the project report entitled “A STUDY ON FINANCIAL

PERFORMANCE OF CANARA BANK” is a bonafide record of project done
by SANDEEP SUDHIR, Reg. No. CCASBCM172, under my guidance and
supervision in partial fulfillment of the requirement for the award of the degree
of BACHELOR OF COMMERCE and it has not previously formed the basis for
any Degree, Diploma and Associateship or Fellowship.

Prof. K.J.JOSEPH Ms. SHINY A.O

Co-Ordinator Project Guide
 DECLARATION

I, SANDEEP SUDHIR, hereby declare that the project work entitled “A

STUDY ON FINANCIAL PERFORMANCE OF CANARA BANK” is a record
of independent and bonafide project work carried out by me under the
supervision and guidance of Ms. SHINNY A.O, Assistant Professor, Department
of Commerce, Christ College, Irinjalakuda.

The information and data given in the report is authentic to the best of my
knowledge. The report has not been previously submitted for the award of any
Degree, Diploma, Associateship or other similar title of any other university or
institute.

Place: Irinjalakuda SANDEEP SUDHIR

Date: CCASBCM172
 ACKNOWLEDGEMENT

I would like to take the opportunity to express my sincere gratitude to all people
who have helped me with sound advice and able guidance.

Above all, I express my eternal gratitude to the Lord Almighty under whose
divine guidance; I have been able to complete this work successfully.

I would like to express my sincere obligation to Rev.Dr. Jolly Andrews,

Principal-in-Charge, Christ college Irinjalakuda for providing various facilities.

I am thankful to Prof. K.J.Joseph, Co-Ordinator of B.Com (Finance), for

providing proper help and encouragement in the preparation of this report.

I am thankful to Ms. Smitha Antony Class teacher for her cordial support,
valuable information and guidance, which helped me in completing this task
through various stages.

I express my sincere gratitude to Prof. baby john, Assistant Professor, whose

guidance and support throughout the training period helped me to complete this
work successfully.

I would like to express my gratitude to all the faculties of the Department for
their interest and cooperation in this regard.

I extend my hearty gratitude to the librarian and other library staffs of my college
for their wholehearted cooperation.

I express my sincere thanks to my friends and family for their support in

completing this report successfully.
 TABLES OF CONTENTS

CHAPTER NO. CONTENTS PAGE NO:

LIST OF TABLES

LIST OF FIGURES

CHAPTER 1 INTRODUCTION 1–4

CHAPTER 2 REVIEW OF LITERATURE 5 – 17

INDUSTRY AND
CHAPTER 3 18 – 24
COMPANY PROFILE

DATA ANALYSIS AND

CHAPTER 4 25 – 38
INTERPRETATION

FINDINGS, SUGGESTIONS
CHAPTER 5 39 – 42
& CONCLUSION

BIBLIOGRAPHY

APPENDIX
 LIST OF TABLES

TABLE
TITLE PAGE NO:
NO:

4.1 Table showing current ratio 26

4.2 Table showing absolute liquid ratio 27

4.3 Table showing debt equity ratio 28

4.4 Table showing proprietary ratio 29

4.5 Table showing total liabilities to total assets ratio 30

4.6 Table showing return on investment 31

4.7 Table showing return on shareholders fund 32

4.8 Table showing return on assets 33

4.9 Table showing net working capital 34

Table showing comparative balance sheet of the

4.10 financial year 2016 and 2017 35

Table showing comparative balance sheet of the

4.11 financial year 2017 and 2018 36

Table showing comparative balance sheet of the

4.12 financial year 2018 and 2019 37

Table showing comparative balance sheet of the

4.13 financial year 2019 and 2020 38

 LIST OF CHARTS

FIGURE
TITLE PAGE NO:
NO:

4.1 Table showing current ratio 26

4.2 Table showing absolute liquid ratio 27

4.3 Table showing debt equity ratio 28

4.4 Table showing proprietary ratio 29

4.5 Table showing total liabilities to total assets ratio 30

4.6 Table showing return on investment 31

4.7 Table showing return on shareholders fund 32

4.8 Table showing return on assets 33

4.9 Table showing net working capital 34

 CHAPTER 1
INTRODUCTION
1.1 Introduction
The word 'Performance is derived from the word "parfourmen', which means to
do', 'to carry out or 'to render'. It refers the act of performing; execution,
accomplishment, fulfillment, etc. In border sense, performance refers to the
accomplishment of a given task measured against preset standards of accuracy,
completeness, cost, and speed. In other words, it refers to the degree to which an
achievement is being or has been accomplished. In the words of Frich Kohlar "The
performance is a general term applied to a part or to all the conducts of activities
of an organization over a period of time often with reference to past or projected
cost efficiency, management responsibility or accountability or the like. Thus, not
just the presentation, but the quality of results achieved refers to the performance.
Performance is used to indicate firm's success, conditions, and compliance.
Financial performance refers to the act of performing financial activity. In broader
sense, financial performance refers to the degree to which financial objectives
being or has been accomplished. It is the process of measuring the results of a
firm's policies and operations in monetary terms. It is used to measure firm's
overall financial health over a given period of time and can also be used to
compare similar firms across the same industry or to compare industries or sectors
in aggregation.

Financial performance analysis is the process of identifying the financial strengths

and weaknesses of the firm by properly establishing the relationship between the
items of balance sheet and profit and loss account it also helps in the short term
and long term forecasting and growth can be identified with the help of financial
performance analysis the analysis of financial statements is a process of evaluating
the relationship between the component parts of financial statements to obtain a
better understanding of the firm's position and performance.
My topic is the financial performance analysis of Canara Bank. By the analysis we
can examine the past and current financial data so that the bank's financial position
1
and its performance can be evaluated and the future risk and potential of the
company can be estimated.

1.2 Statement of the Problem

Analyzing financial performance, is the process of evaluating the common parts of
financial statements to obtain a better understanding of banks position and
performance. It also enables the investors and the creditors evaluate the past and
the current performance, financial position, and to predict future performance.
Financial statement is used to judge the profitability and financial soundness of a
bank. In this study an attempt is made to identify the financial strength and
weakness of the bank by properly establishing relationship between the items in
the balance sheet and profit and loss account of Canara Bank.

1.3 Significance of the Study

As a result of the new economic policy, foreign banks are entering into the
banking sector hence the competition in the sector is increasing rapidly. So proper
study is required to increase the profitability and growth of the bank. The bank
should be able to provide more facilities and services to customers. Financial
statement analysis provides valuable information for managerial decisions. The
present study aims to analyse whether the financial performance of Canara Bank is
satisfactory or not. When analysed over several accounting periods, the balance
sheet may assist in identifying underlying trends in the financial position of the
bank.

1.4 Scope of the study

The study was carried at Canara Bank to analyse the financial performance of the
past 5 years. The data are collected from the previous 5 years audit book, profit
and loss account and balance sheet. The study aims to analyse the liquidity,
profitability, solvency position of the bank. The project is conducted in order
2
to know the

3
functioning of the bank. It will help in determining the negatives and positives of
the business concern. The study will also help in the future growth and decision
making of the bank.

1.5 Objective of Study

 To evaluate working capital position of Canara Bank
 To analyze liquidity, solvency and profitability position.

1.6 Research Design

1.6.1 Nature of Study
The nature of the study is analytical

1.6.2 Source of Data

The secondary data published from the bank is used for the collection of
information required for the report.

1.6.3 Nature of Data

The present study is primarily based on secondary data. Apart from that primary
data is collected through instructed interview with the manager of the bank. The
major source of data that was collected through the profit and loss account and
balance sheet for a period of 5 years and other published sources.

1.6.4 Period of Study

For the purpose of the study, data of five financial year that is from 2016-2020 of
Canara Bank has been taken into consideration. It took 3 weeks to collect the data
and come to a conclusion on the study.

4
1.7 Tools for Analysis
Ratio analysis is the main tool used for analyzing the working capital, liquidity,
solvency and profitability of the company. Comparative balance sheet is also used
as a tool. Mainly three types of ratios are used: liquidity ratio, solvency ratio and
profitability ratio.

1.9 Chapterisation
Chapter 1 - Introduction
Chapter 2- Review of literature
Chapter 3- Industry and Company profile
Chapter 4- Data analysis and interpretation
Chapter5-Findings, suggestions and conclusions.

5
 CHAPTER 2

REVIEW OF LITERATURE
2.1 Introduction

A literature review or narrative review is a type of review article. A literature

review is a scholarly paper, which includes the current knowledge including
substantive findings, as well as theoretical and methodological contributions to a
particular topic.
Literature reviews are secondary sources and do not report new or original
experimental work. Most often associated with academic journals, and are not be
confused with book reviews that may also appear in the same publication.
Literature reviews are a basis for research in nearly every academic field. The
main types of literature reviews are evaluative, exploratory and instrumental.

2.2 Conceptual Review

Ratio analysis is a technique of analysis and interpretation of financial statements.

It is the process of establishing and interpreting various ratios for helping in
making certain decision. However, ratio analysis is not an end in itself, it is only a
means of better understanding of financial strength and real weakness of a firm the
interpretation of ratio is an important factor. Thorough calculations of ratio are
also important. But it is only a clerical task whereas interpretation need skill,
intelligence and foresightedness.
The inherent limitation of ratio and analysis should be kept in mind while
interpreting them. The impact of factor such a s price level changes, changes in
accounting policies, window dressing etc, should also be kept in mind while
attempting to interpret ratio. There are mainly two classification and functional
classification. On the functional classification it is classified to test the ratio into:
  Liquidity ratios
 Solvency ratios
 Activity ratios
 Profitability ratios

Liquidity ratio

Liquidity refers to the ability of a concern to meet its current obligation as and
when these becomes due. The short-term obligations are met by realizing amounts
from current, floating or circulating events. The current assets should either be
liquid or near liquidity. These should be convertible into cash for paying obligations of
short- term nature. The sufficiency or insufficiency of current asset should be
assessed by comparing them with short term current liabilities. If the current assets
can pay off current liabilities then liquidity position will be satisfactory. The below
stated are the different types of liquidity ratios:

1. Current ratio or working capital ratio

Current ratio may be defined as the relationship between current assets and current
liabilities. This rate is a measure of liquidity and is most widely used to make the
analysis of a short-term financial position or liquidity of the firm.
Current Ratio = Current Asset
Current Liability
The standard current ratio is considered to be 2:1.
2. Quick or liquid ratio
Quick ratio is also known as acid test of liquid ratio, is a more rigorous test of
liquidity than the current ratio. The term liquidity refers to the ability of a firm to
pay its short-term obligations as and when they become due. Quick ratio may be
defined as the relationship between quick assets and current liabilities. Current
assets except inventories and prepaid expenses constitute the liquid asset. And
quick liabilities do not include bank overdraft and includes all other current
liabilities

Quick Ratio = Quick Assets

Current/liquid liabilities
The standard liquid ratio is considered as 1:1.

3. Absolute liquid ratio

Although receivables, debtors and bill receivables all are generally more liquid
than inventories, yet there may be doubts regarding their realization into cash
immediately or in time. Hence absolute liquid ratio should be calculated excluding
receivables from the liquid asset

Absolute liquid ratio = Cash + Bank +Short term securities

Current Liabilities

The standard absolute liquid ratio is considered to be 0.5:1

Solvency Ratio

The term solvency refers to the ability of a concern to meet its long-term obligations.
The long-term indebtedness of a firm includes debenture holders. financial
institutions providing medium- and long-term loans and other creditors selling
goods on instalment basis. The long-term creditors of a firm are primarily
interested in knowing the firm's ability to pay regularly interest on long term
borrowings, repayment of the principle amount etc. According long-term solvency
ratios indicates a firm's ability to meet the fixed interest and costs and repayment
schedule associated with long term borrowings. Some of the ratios that serve the
purpose of determining the solvency of the concern are discussed below.

1. Debt-Equity ratio:

Debt-Equity ratio, also known as external-internal equity ratio is calculated to

measure the relative claims of outsiders and the owners against the firm's asset.
This ratio indicates the relation between the external equities or the outsider funds
and the internal equities or the shareholders' funds.

Debt-Equity Ratio = Outsiders Funds (Long Term Debt)

Shareholder’s Funds

A ratio of 1:1 may be considered satisfactory ratio although there cannot be any
rule of thumb" or standard norms for all types of business. In some business a high
ratio 2:1 or even more may be considered satisfactory.

2. Proprietary Ratio or Equity Ratio:

A variant to the debt equity ratio is the proprietary ratio which is also known as
equity ratio or shareholders to equities ratio or net worth to total assets ratio. This
ratio establishes the relationship between shareholder's funds to total assets of the
firm. The ratio of proprietor's funds to total assets is an important ratio for
determining long term solvency of a firm. The components of this ratio are
shareholder's funds and total assets.

Proprietary Ratio Shareholders Funds = Shareholder’s Funds

Total Assets

There is no ideal ratio, higher the ratio or the shareholder's in the total capital of
the company, better is the long-term solvency position of the company,

3. Total liabilities to Total Assets Ratio:

This ratio indicates the relationship between the total liabilities to outsiders to total
assets of the firm and can be calculated as follows

Solvency ratio = Total Liabilities to Outsiders

Total Assets

Generally, lower the ratio of total liabilities to total assets, more satisfactory or
stable is the long-term solvency position of a firm

4. Debt-Service Ratio or Interest Coverage Ratio:

Net income to debt service or simply debt service ratio is used to test the debt serving
capacity of the firm. This ratio is also known as interest coverage ratio.
Interest coverage ratio = Net profit (before interest and tax)

Fixed Interest Charges

Generally higher the ratio, safer are the long-term creditors because even if
earnings of the firm fall, the firm shall be able to meet its commitment of fixed
interest charges. But a too high interest coverage ratio may not be good for the
firm because it may imply that the firm is not using the debt as a source of finance so
as to increase the earnings per share.

Profitability Ratios

The primary objective of a business undertaking is to earn profits. Profit earning is

considered essential for the survival of the business. Profit to the management are
the test of efficiency and measurement of control to owners, a measure of worth of
their investment etc. generally profitability ratios are calculated either in relation to
sales or in relation to investment. The various types of profitability ratios used in
this study are discussed below:

Profitability ratios based on investment

1. Return on investment (ROI)

When a firm invests money in a business, it naturally expects adequate return on
its investment. Therefore, the firm wants to know how much profit is earning on
its investment. It is for knowing this, ROI is computed. ROI measures the
overall
profitability. It establishes relationship between profit or return and investment. It
is also called accounting rate of retum.it is computed as follows:

ROI = Profit before interest and tax

Capital employed

2. Return on shareholders fund

This is the ratio of net profit to shareholder's fund or net worth; it measures the
profitability from the shareholder's point of view. This ratio is called the 'mother of
all the ratio This is perhaps the most important ratio because it measures the return
that is earned on the owner's capital. It is calculated as follows:

Return on the shareholders’ funds = Net Profit after interest and tax
Shareholders fund

3. Return on assets ratio (ROA)

This ratio is an indicator of how profitable company is relative to its total assets.
ROA gives a manager, investor, or analyst an idea as to how efficient a company's
management is at using its assets to generate earnings. It is calculated as follows:
Return on assets = Net Income
Total assets
Higher ROA indicates more asset efficiency.
WORKING CAPITAL MANAGEMENT
Working capital is a financial metric which represents operating finance available
to business, organizations or other entities, including government entity, along
with fixed asset such as plant and equipment. Working capital is considered a part
of operating capital. Net working capital is calculated as current assets minus
current liabilities. It is a derivation of working capital which is commonly used in
valuation techniques such as discounted cash flow. If current assets are less than
current liabilities and entity has a working capital deficiency, also called working
capital deficit

A company has endorsed with assets and profitability but short of liquidity is its
assets can’t readable be converted into cash. Positive working capital is required to
ensure thus at a firm is able to continue its operations and that it has sufficient to
satisfy both maturing short-term debt and upcoming operational expenses. The
management of working capital involves managing inventory account receivable
and payable and cash working capital is how much is liquid asset that a company
has on hand. Working capital is needed to pay for planned and unexpected
expenses to meet the short-term obligations of the business, and to build the
business.

The account formula used to calculate the available working capital of a business
is current asset - current liability = working capital, it may be positive or negative.
When the current asset exceeds the current liability, the working capital is positive
and negative working capital results when current liability is more than the current
assets
There are two concepts of working capital: - gross working capital and net
working capital. Gross working capital refers to working capital as the total of
current asset, whereas the net working capital as excess of current asset over
current liability. In
the other words, net working capital refers to current asset financing by long term
funds.
Gross working capital= total current assets
Net working capital = current assets - current liability
Here the profitability refers to the profit after expenses risk and refers to the
profitability that a firm will become technically insolvent where it will be unable
to meet obligation when they become due for payment.
2.3 Empirical Literature

Dr. Ibrahim Syed M. (2011) Operational Performance of Indian Scheduled

Commercial Banks an Analysis, International Journal of Business and Management,
Vol-6, No-5. The banking sector is the core segment of the Indian financial system
which decides the progress of the country. Banks play an important role in the
mobilization and allocation of resources in an economy. The sound financial
position of a bank is the guarantee not only to its depositors but equally important
for the whole economy of the nation. Several committees have emphasized the
need to improve the performance of the commercial banks. In India, the priorities
in banking operations underwent far reaching changes since the banking sector
reforms have been set in motion. In this paper, an effort has been made to evaluate
the operational performance of the commercial banks in India with especial
reference to the Scheduled Commercial Banks since 2000. The study is diagnostic
and exploratory in nature and makes use of secondary data. The study finds and
concludes that the Scheduled Commercial Banks in India have significantly
improved their operational performance.

Srinivas K. Saroja L. (2013), Compared and analyzed the Financial Performance

of SBI and CANARA Bank. For the purpose of analysis of comparative financial
performance of the selected banks using CAMELS model with test. The result
showed that there is no significance difference between the CANARA and SBI
bank? Financial performance but the CANARA bank performance is slightly less
compared with SBI.

Selvam Paneer&et.al. (2013) A Study on The Financial Performance of

Nationalized Banks In India: A Post Liberalization Analysis, International Journal
of Current Research, Vol-4, Issue-I In this study three financial variables namely
reserves.net worth and deposits have been analyzed for three private sector banks
which includes ICICI, Axis bank and HDFC bank using linear trend model and
their future growth is also predicted up to the financial year 2018.

Sai Naga Radha V (2013), concluded that net profit margin, operating profit
margin, return on capital employed, return on equity and debt equity ratio there is
no significant difference in these ratios before after merger. Significant difference
with respect to gross profit margin.

GoelCheenu&RekhiBhutaniChitwan (2013)A Comparative Study On The

Performance Of Selected Public Sector And Private Sector Banks In India, Journal
Of Business Management & Social Sciences Research Vol-2, No 7 Efficiency and
profitability of the banking sector in India has assumed primal importance due to
intense competition, greater customer demands and changing banking reforms.
Since competition cannot be observed directly, various indirect measures in the
form of simple indicators or complex models have been devised and used both in
theory and in practice. This study attempts to measure the relative performance of
Indian banks. For this study, we have used public sector banks and private sector
banks. We know that in the service sector, it is difficult to quantify the output
because it is intangible. Hence different proxy indicators are used for measuring
productivity of banking sector. Segmentation of the banking sector in India was
done on bank assets size. Overall, the analysis supports the conclusion that new
banks are more efficient that old ones. The public sector banks are not as
profitable as other sectors are. It means that efficiency and profitability are
interrelated. The key to increase performance depends upon ROA, ROE and NIM.

Bansal Rohit (2014) A Comparative Analysis of The Financial Ratios or Selected

Banks in The India For the Period of 2011 2014, Research Journal of Finance and
Accounting, Vol-5, No 19. Most financial statement analyses focus on firms
belonging to industries that either contribute significantly to economic figures or
posit in a highly competitive business environment. The objective of this paper is
an analysis done to see the extent to which a company has implemented using
rules financial performance is good and right. This study investigates performance
of commercial banking sector for the period of April 2011 to March -2014.
Financial statements of Axis bank, ICICI bank, Federal bank and HDFC bank for the
indicated periods were obtained from database such as CMIE, Prowess, money
control and yahoo finance.

Ms. Gupta Shikha (2014) An Empirical Study of Financial Performance of ICICI

Bank- A Comparative Analysis, IITM Journal of Business Studies (JBS) Vol-1,
Issue 1. And the present study focused on operational control, profitability and
solvency etc. This research paper is aimed to analyses and compare the Financial
Performance of ICICI Bank and offer suggestions for the improvement of
efficiency in the bank.

VNaseer Abdul (2014) Financial Performance and Employee Efficiency: A

Comparative Study of Indian Banks, Indian Journal of Applied Research, Vol.4,
Issue-5. The study compares the financial performance and employee efficiency of
Indian banks during 2007 to 2013. The study has taken into account all the banks
working in India. The financial performance of the banks was measured using
standard financial performance and employee efficiency was measured using
accounting ratios related with employee’s efficiency.

Sharma Pooja Hemlata (2014) Financial Performance of ICICI Bank and SBI
Bank: A Comparative Analysis, International Journal of Research Aspects 16Of
Engineering and Management Vol-1, Issue-1 The purpose of the study is to
examine
the financial performance of SBI and ICICI Bank, public sector and private sector
respectively. The research is descriptive and analytical in nature. The data used for
the study was entirely secondary in nature. The present study is conducted to
compare the financial performance of SBI and ICICI Bank on the basis of ratios
such as credit deposit, net profit margin etc. The period of study taken is from the
year 2007-08 to 2011-12. The study found that SBI is performing well and
financially sound than ICICI Bank but in context of deposits and expenditure
ICICI bank has better managing efficiency than SBI.

Dr. TamilarasuA (2014) Role of Banking Sector on Financial Inclusion

Development in India An Analysis, Galaxy Interdisciplinary Research Journal, and
Vol-2 (2) Financial Inclusion growth is possible only through proper mechanism
which channelizes all the resources to all the direction of the customers. It is an
innovative concept which makes alternative techniques to promote the banking
habits of the rural people. Because India is considered as largest rural populations
in the world and belongs to agriculture activities. financial inclusion is aimed at
providing banking and financial services to all people in a fair, transparent and
equitable manner at affordable cost. Households with low income often lack
access to bank account and have to spend time and money for multiple visits to
avail the banking services, be it opening a savings bank account or availing a loan,
these families find it more difficult to save and to plan financially for the future.
This paper is an attempt to discuss the overview of financial inclusion in India.
 CHAPTER 3
INDUSTRY AND COMPANY
PROFILE
3.1 Introduction
Industry analysis is the analysis of a specific branch of manufacturing. service, or
trade. Understanding the industry in which a company operates provide an
essential framework for the analysis of the individual company that is company
analysis. Equity analysis and credit analysis are often conducted by analysts who
concentrate on one or several industries, which result in synergies and efficiencies
in gathering and interpreting information.

3.2 Industry Profile

The modern banking industry is a network of financial institutions licensed by the
state to supply banking services. The principal services offered relate to storing.
transferring, extending credit against, or managing the risks associated with
holding various forms of wealth. The precise bundle of financial services offered
at any given time has varied considerably across institutions, across time, and
across jurisdictions, evolving in step with changes in the regulation of the industry,
the development of the economy, and advances in information and
communications technologies.

Function
Banks as financial intermediaries are party to a transfer of funds from the ultimate
saver to the ultimate user of funds. Often, banks usefully alter the terms of the
contractual arrangement as the funds move through the transfer process in a
manner that supports and promotes economic activity. By issuing tradable claims
(bank deposits) against itself, the bank can add a flexibility to circulating media of
exchange in a manner that enhances the performance of the payments system.
These deposits may support the extension of personal credit to consumers (retail
banking) or short-term credit to nonfinancial businesses commercial (retail
banking) or short- term credit to nonfinancial businesses (commercial banking).
If so, the bank aids
the management of liquidity, thus promoting household consumption and
commerce. By facilitating the collection of funds from a large number of small
savers, each for a short period, the bank promotes the pooling of funds to lend out
in larger denominations for longer periods to those seeking to finance investment
in larger capital projects. Financing investment may take the form of underwriting
issues of securities (investment banking) or lending against real estate (mortgage
banking). By specializing in the assessment of risk, the bank can monitor borrower
performance; by diversifying across investment projects, the bank minimizes some
types of risk and promotes the allocation of funds to those endeavors with the
greatest economic potential. By extending trade credit internationally (merchant
banking), the bank can facilitate international trade and commerce. As one last
example, by lending to other banks in times of external pressures on liquidity, the
bank can manage core liquidity in the financial system, thus potentially stabilizing
prices and output (central banking).
To discharge its various functions, banks of all types manage highly leveraged
portfolios of financial assets and liabilities. Some of the most crucial questions for
the banking industry and state regulators center on questions of how best to
manage the portfolio of deposit banks, given the vital role of these banks in
extending commercial credit and enabling payments. With bank capital (roughly
equal to the net value of its assets after deduction of its liabilities) but a small
fraction of total assets, bank solvency is particularly vulnerable to credit risk,
market risk, and liquidity risk. An increase in non-performing loans, a drop in the
market price of assets, or a shortage of cash reserves that forces a distress sale of
assets to meet depositors' demand can each, if transpiring over a period of time too
short for the bank to manage the losses, threaten bank solvency.
ORIGINS OF MODERN BANKING
The modern banking industry, offering a wide range of financial services, has a
relatively recent history, Clements of banking have been in existence for centuries,
however. The idea of offering safe storage of wealth and extending credit to
facilitate trade has its roots in the early practices of receiving deposits of objects of
wealth (gold, cattle, and grain, for example), making loans, changing money from
one currency to another, and testing coins for purity and weight.

The innovation of fractional reserve banking early in this history permitted greater
profitability (with funds used to acquire income earning assets rather than held as
idle cash reserves) but exposed the deposit bank to a unique risk when later paired
with the requirement of converting deposits into currency on demand at par, since
the demand at any particular moment may exceed actual reserves. Douglas Diamond
and Philip Dybvig have, for example, shown in their 1983 article "Bank Runs,
Liquidity, and Deposit Insurance that in such an environment, a sufficiently large
withdrawal of bank deposits can threaten bank liquidity, spark a fear of
insolvency, and thus trigger a bank run.

Means of extending short-term credit to support trade and early risk-sharing

arrangements afforded by such devices as marine insurance appear in medieval
times. Italian moneychangers formed early currency markets in the twelfth century
CE at cloth fairs that toured the Champagne and Brie regions of France. The bill of
exchange, as a means of payment, was in use at this time as well.

Over the course of the seventeenth and eighteenth centuries, the industry
transformed from a system composed of individual moneylenders financially
supporting merchant trade and commerce, as well as royalty acquiring personal
debt to finance colonial expansion, into a network of joint-stock banks with a
national
debt under the control and management of the state. The Bank of England, for
example, as one of the oldest central banks, was a joint-stock bank

20initially owned by London's commercial interests and had as its primary purpose
the financing of the state's imperial activities by taxation and the implementing of
the permanent loan. This period was also marked by several experiments with
bank notes (with John Law's experiment in France in 1719-1720 among the most
infamous) and the emergence of the check as simplified version of the bill of
exchange

Eighteenth-century British banking practices and structures were transported to

North America and formed an integral part of the colonial economies from the
outset. The first chartered bank was established in Philadelphia in 1781 and in
Lower Canada in 1817. Experiments with free banking as a largely unregulated
business activity in which commercial banks could issue their own bank notes and
deposits, subject to a requirement that these be convertible into gold have
periodically received political support and have appeared briefly in modern
Western financial history. Public interest in minimizing the risk of financial panics
and either limiting or channeling financial power to some advantage has more
often, however, dominated and justified enhanced industry regulation.

3.3 Company Profile

Canara Bank was founded in 1906 by Sri, Ammembal Subba Rao Pai. The bank
was initially named as canara bank hindu permanent fund. It blossomed into a
limited company in 1910 and was renamed as Canara Bank Itd in 1969 the bank
was nationalized and thereafter came to be known as "CANARA BANK".
Today canara bank is one of the premier banks in the country with a network of
2578 branches spread all over the country. The bank has many distinctions to its
name. It was the first bank to be conferred FICCI award for contribution to rural
development. Canara bank was the first among banks to launch networked ATM's
and obtain ISO certification.

Canara Bank has covered a niche for itself in providing IT based service with
100%computerisation of the branches. The bank provides a wide array of services,
such as networked ATM's anywhere banking, telebanking, remote access
terminals, internet and mobile banking, debit cards etc.
For the year 2004-2005 canara bank had the highest net profit (Rs.110crocre) among
nationalized banks, with significant improvement in capital adequacy ratio
(12.78%) and asset quality (net NPA ration of 1.88%). Mysore canara bank
regional office (CBROM) was upgraded from regional office on April 1998. The
functions of circle office have been laid down by the bank. However, on account
of changing times, a review of these functions has been made, rather than
replicating existing ones. Sections at regional offices will look for policy support
from head office. All operational and administrative work relation to their
functions shall be handled by the respective sections within the policy parameters
set out by head office. Mysore canara bank regional office has a network of 111
level branches scattered over 4 districts namely Mysore, Mandy, C.H nagar,
Hassan. In addition to these five currencies chest are functioning in all four
districts catered to the cash requirements of these branches.

Nature of the business carried:

Canara bank group's principle activities are to provide a full range of banking and
other financial services through 2578 branches office in India and abroad. The
services include accepting deposits, commercial and institutional credit, treasury,
investment, risk management and other related financial services. It operates
through two segments. Banking operation consist of corporate banking, retail
banking, personal and commercial banking, cash management services,
deposits and other allied services. Treasury operations consist of dealing in SLR
and Non SLR securities and money market operations.

Vision, Mission, and Quality Policy

"A good bank is not only the financial health of the community, but also one with
an obligation of helping in every possible manner to improve the economic
conditions of the common people".
- A. Subba Rao Pai

Corporate vision:
To emerge as a world class bank with best practices in realms of asset portfolio,
customer orientation, product innovation, profitability and enhanced value to
stakeholders
Business segment and treasury products to wholesale and retail customers. The
bank has two key business segments and they are as follow:

Wholesale banking services

The bank's target market ranges from large, blue chip manufacturing companies in
the Indian corporate to small and mid-sized corporate and agribased businesses

For these customers, the bank provides a wide range of commercial and
transactional banking services, including working capital finance, trade services,
transactional service, cash management etc. The bank is also a leading provider of
structured solutions, which combine cash management services with vendor and
distributor finance for facilitating superior supply chains management for its
corporate customers. Based on its superior product delivery/services levels and
strong customer orientations, the bank has made significant inconds into the banking
consortia of a number of leading Indian corporate including multinationals,
companies from the domestic business houses and prime public sector companies.
It is recognized as a leading provider of cash management and transactional
banking solutions to corporate customer and banks Retail banking services:

The objective of the retail bank is to provide its target market customers a full
range of financial products and banking services, giving the customer a one stop
window for all his/her banking requirements. The products are backed by world
class service and delivered to the customer through the growing branch network.
as well as through alternative delivery channels like ATM's, phone banking, net
banking and mobile banking.
 CHAPTER 4
DATA ANALYSIS AND
INTERPRETATION
Data Analysis and Interpretations

Data analysis and interpretations is the main heart of the study. It is the process of
inspecting, cleansing and transforming and modelling data with the goal of
discovering useful information, suggestion, conclusion and supporting decision
making. For this purpose, secondary sources are mainly used in this study. The
collection of secondary data was done by examination of relevant information
from the companies already published sources. The main tool used for data
analysis and interpretation is ratio analysis.

The ratio analysis is one of the most powerful tools of financial analysis. It is the
process of establishing and interpreting various ratios. The ratio analysis is used to
study the liquidity, profitability and solvency position of the company. It is with
the help of ratios that the financial statements can be analyzed more clearly and
decision making can be made from such analysis.
4.1 Liquidity Ratio
4.1.1 Current Ratio (ideal ratio=2:1)
Current Ratio = Current Asset
Current Liability
Table 4.1: Showing Current ratio

Year Currents assets Current Liability Current ratio

(in cr) (in cr)
2016 534347.89 473724.99 1.1:1
2017 534205.9 47948.94 1.1:1
2018 563360.44 495266.34 1.1:1
2019 589742.75 524846.98 1.1:1
2020 663324.06 599123.02 1.1:1
(Source: Secondary data)

Figure 4.1:Showing Current ratio

1.2

0.8

0.6
Current

0.4

0.2

2016 2017 2018 2019 2020

Year

Current ratio of the bank is not in a good position because it does not maintain idle
ratio. Bank should try to increase its current assets twice above the current
liability.
4.1.2 Absolute liquid ratio (ideal ratio=0.5:1)

Absolute liquid ratio = Cash + Bank +Short term securities

Current Liabilities
Table 4.2: Showing absolute liquid ratio
Year Absolute liquid Current Absolute
assets Liabilities liquid ratio
(in crs) ( in crs)
2016 48647.56 473724.99 0.10:1
2017 56743.74 479748.94 0.11:1
2018 58967.38 495266.34 0.12:1
2019 50224.61 524846.98 0.09:1
2020 66531.24 599123.02 0.11:1
(Source: Secondary data)

Figure 4.2:Showing absolute liquid ratio

0.14

0.12

0.1
Absolute liquid

0.08

0.06

0.04

0.02

2016 2017 2018 2019 2020

Year
The figure shows that the company is maintaining low rate of absolute liquid ratio.
In 2019 the bank has gone below 0.10 But in the next year it shows an increasing
trend and to become 0.11. Bank also should try to keep the ratio idle.
4.2 Solvency Ratio

4.2.1 Debt Equity Ratio (ideal

ratio=2:1) Debt-Equity Ratio = Debt (Long

Term Debt)
Shareholder’s Funds
Table 4.3: Showing debt equity ratio
Year Long term debt (in Shareholders fund Debt equity ratio
crs) (in crs)
2016 25762.82 32491.71 0.8:1
2017 26963.42 32409.67 0.83:1
2018 39591.76 34685.40 1.1:1
2019 38909.50 36897.69 1.1:1
2020 41042.64 37689.24 1.1:1
( Source:Secondary data)

Figure 4.3:Showing debt equity ratio

1.2

0.8

0.6
debt equity

0.4

0.2
2018
0 2016 2017 2019 2020
Year

The figure shows that the company is maintaining a good equity ratio. This clearly
indicates that the long-term solvency position of the company is good. In the year
2016 and 2017 ratio was 0.8,0.83 then ratio shows an increasing trend and it
became 1.1:1.
4.2.2 Proprietary Ratio (ideal ratio=0.5:1)

Proprietary Ratio Shareholders Fund = Shareholder’s Funds

Total Assets
Table 4.4: Showing proprietary ratio
Year Shareholders fund Total assets Proprietary ratio
(in crs) (in crs)
2016 32491.71 558557.55 0.06:1
2017 32409.67 563724.92 0.06:1
2018 34685.40 596158.75 0.06:1
2019 36897.69 631435.47 0.06:1
2020 37689.24 711782.81 0.05:1
(Source: Secondary Data)

Figure 4.4: Showing proprietary ratio

0.062
0.06
0.058
0.056
0.054
0.052
0.05
proprietary

0.048
0.046
0.044

2016 2017 2018 2019 2020

Year

The figure shows that the company is having a low ratio which indicates that there
will be a higher risk to the creditors. A low ratio indicates that the firm is more
dependent on creditors or its working capital.
4.2.3 Total Liabilities to Total Asset Ratio (ideal ratio = 0.5:1)

Solvency ratio = Total Liabilities to Outsiders

Total Assets
Table 4.5: Showing total liabilities to total asset ratio

Year Total debt Total Assets Solvency ratio

(in crs) (in crs)
2016 499487.81 558557.55 0.89:1
2017 506712.36 563724.92 0.89:1
2018 534858.1 596158.75 0.89:1
2019 563756.48 631435.47 0.89:1
2020 640165.66 711782.81 0.89:1
(Source: Secondary Data)

Figure 4.5:Showing solvency ratio

1
0.9
0.8
0.7
0.6
0.5
0.4
0.3
solvency

0.2
0.1
0

2016 2017 2018 2019 2020

Year

The figure shows that the company’s solvency ratio is not satisfactory. The
company is having more debt and the ratio is more than 0.5, it shows that the
company’s assets are financed through debt and shows higher financial risk.
4.3 Profitability Ratio
4.3.1 Return on Investment
ROI = Profit before interest and tax
Capital employed X 100
Table 4.6: Showing return on investment
Year Profit before Capital employed ROI
interest and tax (in crs)
(in crs)
2016 2858.02 58254.53 4.91%
2017 -2670.30 59373.09 -4.5%
2018 1233.61 74277.16 1.67%
2019 -4087.32 75807.19 -0.05%
2020 547.15 78731.88 0.069%
(Source: Secondary Data)

Figure 4.6:Showing Return on investment

6.00%

4.00%

2.00%

0.00% 2018
2016 2019 2020
Return on

2017
-2.00%

-4.00%

-6.00%
Year

The figure shows the bank is not having sufficient return of capital employed. Its
ideal ratio is 15%. In the year 2016,2018 and 2020 it has incurred net profit and
shows the lower ROI, and in the year 2017 and 2019 it has incurred net loss. Overall,
the bank’s profitability is low and less in the efficient use of capital employed.
4.3.2 Return on Shareholders fund

Return on the shareholders’ funds = Net Profit after interest and tax
Shareholders fund X 100
Table 4.7: Showing return on shareholders fund

Year Net profit after Shareholders fund Return on

interest and tax (in crs) shareholders fund
(in crs)
2016 2858.02 32491.71 8.8%
2017 -2670.30 32409.67 -8.2%
2018 1233.61 34685.40 3.6%
2019 -4087.32 36897.69 -11.07%
2020 547.15 37689.24 1.5%
(Source: Secondary Data)

Figure 4.7:Showing return on shareholders fund

10.00%

5.00%
return on shareholders

0.00%
2016 2018 2020
-5.00%

-10.00% 2017

2019
-15.00%
Year

The figure shows that the bank is not having sufficient return on shareholders
fund. In the year 2016,2018 and 2020 it has incurred net profit but still it is below
the ideal ratio. Overall, the bank’s profitability is low and indicates low ratio with
lower utilization of funds and lower productivity
4.3.3 Return on Assets
Return on assets = Net Income
Total assets
Table 4.8: Showing return on assets

Year Net income Total assets Return on assets

(in crs) (in crs)
2016 2858.02 558557.55 0.5%
2017 -2670.30 563724.92 -0.5%
2018 1233.61 596158.75 0.21%
2019 -4087.32 631435.47 -0.64%
2020 547.15 711782.81 0.08%
(Source: Secondary Data)

Figure 4.8:Showing Return on Asset

0.60%

0.40%

0.20%

0.00%
RO

2016 2018 2020

-0.20%

-0.40%

-0.60% 2017

-0.80% 2019
Year

The figure shows that the company is having less return on assets. It has the ideal
ratio of 5% and the bank is having less than 5%. A low ROA indicates that the
bank is not able to make maximum use of its assets for getting more profit.
4.4 Net Working Capital
Net working capital = Current assets – Current Liabilities
Table 4.9: Showing net working capital
Year Current assets Current Liabilities Networking
(in crs) (in crs) capital
(in crs)
2016 534347.89 473724.99 60622.9
2017 534205.9 479748.94 54456.96
2018 563360.44 495266.34 68094.1
2019 589742.75 524846.98 64895.77
2020 663324.06 599123.02 64201.04
(Source: Secondary Data)

Figure 4.9:Showing Working capital

80000

70000

60000

50000
net working

40000

30000

20000

10000

0 2016 2017 2018 2019 2020

Year

The figure shows that the bank has sufficient working capital in all the years. In
the year 2018 the working capital is the highest and in 2017 the working capital is
lowest.
Comparative Balance Sheet

Table 4.10: Table showing comparative balance sheet of the financial year
2016 and 2017

PARTICULARS 2016 2017 Increase/decrease Percentage

Capital and
liabilities
Capital 475.20 542.99 67.79 14.26%
Reserves and 26610 26422.02 -187.98 -0.70%
Surplus
Deposits 473724.99 479748.94 6023.95 1.27%
Borrowings 25762.82 26963.42 1200.6 4.66%
Other Liabilities 26199.388 24153.66 -2045.72 -7.80%
TOTAL 558557.55 563724.92 5167.37 0.92%
Asset
Cash 21976.76 20665.03 -1311.73 -5.96%
Balance with bank 26670.80 36078.71 9407.91 35.27%

Investment 155406.46 152469.80 -2936.66 -1.88%

Advances 330293.87 324992.36 -5301.51 -1.60%
Fixed Asset 6969.99 7205.76 235.77 3.38%
Other Asset 17329.66 22313.25 4983.59 28.75%
TOTAL 558557.55 563724.92 5167.37 0.92%

In the financial year 2017 the fixed asset of the bank increased by 3.38% from the
previous year. There was 14.26% increase in the capital of the bank. While the
balances with other banks also increased 35.27% in the year. While advances and
investment has decreased by 1.60% and 1.88% respectively
Table 4.11: Table showing comparative balance sheet of the financial year
2017 and 2018

PARTICULARS 2017 2018 Increase/decrease Percentage

Capital and liabilities

Capital 542.99 597.29 54.3 10%
Reserves and Surplus 26422.02 28714.96 2292.94 8.67%
Deposits 479748.94 495266.34 15517.4 3.23%

Borrowings 26963.42 39591.76 12628.34 46.83%

Other Liabilities 24153.66 26117.18 1963.52 8.125%

TOTAL 563724.92 596158.75 32433.83 5.75%

Asset
Cash 20665.03 19924.49 740.54 3.58%

Balance with bank 36078.71 39042.89 2964.27 8.21%

Investment 152469.80 162072.92 9603.12 6.29%

Advances 324992.36 342320.14 17327.78 5.33%

Fixed Asset 7205.76 7185.00 -20.76 -0.288%

Other Asset 22313.25 25613.32 3300.07 14.78%

TOTAL 563724.92 596158.75 32433.83 5.75%

During the financial year 2018 the fixed asset of the bank decreased by 0.288%.
There was 10% increase in the capital of the bank. The deposits of the bank
increased by 3.23% and advances was also increased by 5.33%.
Table 4.12: Table showing comparative balance sheet of the financial year
2018 and 2019

PARTICULARS 2018 2019 Increase/decrease Percentage

Capital and
liabilities
Capital 597.29 733.24 135.95 22.76%
Reserves and 28714.96 29639.72 924.76 3.22%
Surplus
Deposits 495266.34 524846.69 29580.35 5.97%

Borrowings 39591.76 38909.50 -682.26 -1.72%

Other Liabilities 26117.18 30259.50 4142.32 15.86%

TOTAL 596158.75 631435.47 35276.72 5.91%

Asset

Cash 19924.49 22102.42 2177.93 10.93%

Balance with bank 39042.89 28122.19 -10920.7 -27.97%
Investment 162072.92 157443.56 -4629.36 -2.85%
Advances 342320.14 382074.58 39754.44 11.61%
Fixed Asset 7185.00 833530 1150.3 16.00%
Other Asset 25613.32 33357.43 7744.11 30.23%

TOTAL 596158.75 631435.47 35276.76 5.91%

In the financial year 2019 the fixed asset of the bank increased by 16% from the
previous year. There was 22.76% increase in the capital of the bank. While the
balances with other banks also decreased by 27.97% in the year. While advances
increased by 11.61% and investments decreased by 2.85%
Table 4.13: table showing comparative balance sheet of the financial year
2019 and 2020

PARTICULARS 2019 2020 Increase/decrease Percentage

Capital and
liabilities
Capital 733.24 753.24 20 2.72%
Reserves and 29639.72 30487.82 848.1 28.61%
Surplus
Deposits 524846.98 599123.02 74276.04 14.15%

Borrowings 38909.50 41042.64 2133.14 5.48%

Other Liabilities 30259.50 33260.04 3000.54 9.91%

TOTAL 631435.47 711782.81 80347.34 12.72%

Asset

Cash 22102.42 29921.43 7819.01 35.37%

Balance with bank 28122.19 36609.81 8487.62 30.18%

Investment 157443.56 168678.05 11234.49 7.13%

Advances 382074.58 428114.77 46040.19 12.05%
Fixed Asset 8335.30 8432.78 97.48 1.16%
Other Asset 33357.43 40025.97 6668.54 20%

TOTAL 631435.47 711782.81 803477.34 12.72%

In the financial year 2020 the fixed asset of the bank increased by 1.16% from the
previous year. There was 2.76% increase in the capital of the bank. While the
balances with other banks also increased by 30.18% in the year. While advances
increased by 12.05% and investments increases by 7.13%.
 CHAPTER 5

FINDINGS, SUGGESTIONS
AND CONCLUSION
5.1 Findings

1. The current ratio of the bank not in a good position because it does not maintain
idle ratio. Under current ratio, we have taken current assets as cash and balance
with reserve bank, balance with banks money at call and short notice, investments
and advances and current liabilities as deposits. The ideal ratio of current ratio is
2:1.

2. The banks absolute liquid ratio is in low rate. In the year 2019 it shows the
lowest ratio that is 0.09, then in the year 2016, 2017, 2018, and 2020 it is above
0.10.

3. The debt equity ratio reveals that the debt equity of the company is trying to
maintain a satisfactory level. In 2016 and 2017 the ratio is 0.8 and in the year
2018, 2019 and 2020 the ratio is 1:1.

4. The proprietary ratio shows that the company is having a low ratio and it is far
away from its ideal ratio that is 0.5:1. The low ratio indicates that there will be
higher risk to the creditors. A low ratio indicates that the firm is more dependent
on creditors on its working capital.

5. The total liability to total asset ratio is quite not satisfactory. The company is
having more debt than the total assets. From the year 2016 to 2020 it shows 0.8
that is above the ideal ratio (0.5:1). This reveals that the company's assets are
financed through debt and shows higher financial risk.

6. The company is not having sufficient return on capital employed. In the year

3
2016, 2018 and 2020 it has incurred net profit before interest and tax but still
shows a lower ROI, and in the year 2017 and 2019, it has incurred net loss.
Overall, the

4
company's profitability is low and shows that there is a low efficient use of capital
employed.

7. The company is not having sufficient return on shareholders fund. In the year
2016, 2018 and 2020 it has incurred net profit but still it is below the ideal ratio.
Overall, the company's profitability is low and indicates low ratio which indicates
that less utilization of funds and lower productivity.

8. The company is not having sufficient return on assets. It is far away from the
ideal ratio that is 5%, and the company is having low ratio indicates that they are
not able to make maximum use of their assets for getting more profit.

9. The company is having sufficient working capital in all years. In the year 2018
it shows the highest working capital and in the year 2017 the working capital is
lowest. In all these five years it shows a positive level of working capital that
means that the currents assets are more than the current liabilities.

10. During the year 2016 and 2017 the fixed asset increased by 3.38% and the
balance with other banks increased by 35.27%. Advances decreased by 1.60%.

11. During the year 2017 and 2018 the fixed asset decreased by 0.288% and there
was capital increase by 10%. Advances increased by 5.33%.

12. During the year 2018 and 2019 the fixed asset increased by 16% and there was
capital increase by 22.76%. While the balances with other banks decreased by
27.97%.

4
13. During the year 2019 and 2020 the fixed asset increased by 1.16% and there
was capital increase by 2.76%. While the balances with other banks
increased by 30.18%.

5.2 Suggestions:

 Bank may improve current assets to maintain the satisfactory level, bank
should try to increase its current assets twice above current liability.
 Return on assets ratio should be maintained at higher level because it is
beneficial the company
 It is advisable that the company has to earn more profits by efficient use of
capital employed.

4
5.3 Conclusion:

Canara bank is one of the nationalized banks in the country. The present study was
conducted with main objective of analyzing the financial performance of Canara
bank and for this purpose I have taken five years financial statements This
included analyzing the working capital management, liquidity, profitability and
solvency position of Canara Bank. The study reveals that the liquidity position and
solvency position is not that much satisfactory. The study also indicates that they
have incurred low profitability in the last five years. The working capital
management of the company is in a good position. But still the bank runs in a good
manner and the overall performance of the company is satisfactory.

4
BIBLIOGRAPHY
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• Gupta, S. K. Sharma RK Management accounting Kalyani publishers. New

Delhi 110,2.
• Brigham, E, F., & Ehrhardt, M. C. (2013). Financial management: Theory
& practice. Cengage Learning

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Nationalized Banks in India :4 Post Liberalization Analysis. International Journal
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WEBSITES:

 www.canarabank.com
 www.moneycontrol.com
 www.economictimes.indiatimes.com
APPENDIX