A PROJECT REPORT

ON

“WORKING CAPITAL”

In partial fulfillment for the award of the degree of:

Master of Business Administration

DEPARTMENT OF MANAGEMENT STUDIES

BABA GHULAM SHAH BADSHAH UNIVERSITY

RAJOURI (185234)

SUBMITTED BY: UNDER SUPERVISION

NASIR AHMAD DR. GAURAV SEHGAL

MBA (2021-2023) ASSISTANT PROFFESOR

ROLL NO: 04-MBA-2021 SCHOOL OF MANAGEMENT STUDIES

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 CERTIFICATE

This is to certify that Nasir Ahmad S/O Nazir ud Din student of MBA, ROLL NO: 04-MBA-2021 is a
bonafide student of this institute. He has completed the project report on the topic "Working Capital”
under the supervision of Dr. Gaurav Sehgal for the fulfillment of requirement for awarding the degree
of Masters of Business Administration.

Dr. Gaurav Sehgal Ms. Mamta Choudhary

(Supervisor) (H.O.D)

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3
 DECLARATION

I hereby declare, that the Project Report on the Topic “Working Capital” is completed and submitted
under the guidance and supervision of Dr. Gaurav Sehgal. It is my original work & preparation of the
project report is based on my personal findings, several visits of the organization, and interaction with
the officials/employees/customers and consultation with the eminent scholars and secondary sources.

NASIR AHMAD

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 Acknowledgement

I express my deep sense of gratitude to my guide Dr. Gaurav Sehgal for his keen interest and
valuable guidance during the course of this Project. His suggestions benefited me immensely. I am
deeply indebted to the J & K Bank manager and the staff for providing me the opportunity to
undertake this live project. I am grateful to all the respondents without their cooperation this study
would not have been possible. I am beholden to my family and my friends for their blessings &
necessary support.

NASIR AHMAD

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 PREFACE

The project work is specially designed to link the knowledge with the real life situation. This project
is based on Working Capital & the training has been done in J&K Bank for 1 Month & 10 days.

Jammu and Kashmir Bank is a recognized bank and is an important factor of banking sector in the
UT. The project basically contains all the facilities given by the bank to its customers and what is the
satisfaction level of the customers after using these facilities. Working Capital is individual’s
perception of level of service rendered in reaction to his/her expectations. Sampling plan procedure is
used for data collection and the questionnaire is used for interviewing the respondents. Respondents
are the different customers of Jammu and Kashmir Bank. The data is collected and tabulated
according to the respondent’s response using percentages. It is analyzed further with the help of bar
diagrams and pie charts.

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 TABLE OF CONTENTS

Topics Page no.

CHAPTER-1 08
INTRODUCTION

CHAPTER-2 36
RESEARCH METHODOLOGY

CHAPTER-3 41
DATA ANALYSIS

CHAPTER-4 53
FINDINGS

CHAPTER-5 56
SUGGESTIONS

CHAPTER-6 58
CONCLUSSIONS

CHAPTER-7 60
BIBLOGRAPHY

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 CHAPTER _1

INTRODUCTION

ASSESMENT OF WORKING CAPITAL

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WHAT IS WORKING CAPITAL?

For any activity whether trading or industrial, two types of assets are required- Fixed assets and
current assets.

Fixed assets i.e. land, building, plant and machinery etc. constitute the infrastructure for industrial
activity. These assets remain more or less permanently in the business and are not meant for sale.
Hence, the funds utilized for acquiring these assets remain permanently locked up and are known as
Fixed (or sunk) capital. These long term funds come from the owner’s contributions/banks /directors
/relatives and friends / general public.

Current assets i.e. stock in trade, receivables, debtors etc., are the means of production activity. They
go through the production cycle and are meant for eventual sale. ‘Production cycle’ refers to the
period in which raw materials are processed into finished goods.

Funds required for financing the production cycle and other current assets are called ‘working
capital’. Its main sources are bank borrowing and sundry creditors.

Working capital cycle represents the time span within which, the cash utilized or procuring raw
materials, payment of wages and incurring overheads is reconverted into cash through sales
realization.

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CONCEPT OF WORKING CAPITAL

There are two concepts of working capital viz. quantitative and qualitative. Some people also define
the two concepts as gross concept and net concept. According to quantitative concept, the amount of
working capital refers to ‘total of current assets’. Current assets are considered to be gross working
capital in this concept.

The qualitative concept gives an idea regarding source of financing capital. According to qualitative
concept the amount of working capital refers to “excess of current assets over current liabilities.” L.J.
Guttmann defined working capital as “the portion of a firm’s current assets which are financed from
long–term funds.”

The excess of current assets over current liabilities is termed as ‘Net working capital’. In this concept
“Net working capital” represents the amount of current assets which would remain if all current
liabilities were paid. Both the concepts of working capital have their own points of importance. “If the
objectives is to measure the size and extent to which current assets are being used, ‘Gross concept’ is
useful; whereas in evaluating the liquidity position of an undertaking ‘Net concept’ becomes pertinent
and preferable.
It is necessary to understand the meaning of current assets and current liabilities for learning the
meaning of working capital, which is already explained earlier in the project report.
Circulating capital – working capital is also known as ‘circulating capital or current capital.’ “The
use of the term circulating capital instead of working capital indicates that its flow is circular in
nature.”

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GROSS AND NET WORKING CAPITAL
‘Gross working capital’ refers to the funds required for financing the total current assets. ‘Net working
capital’ refers to the difference between current assets and current liabilities. Current liabilities include
liabilities payable or expected to be turned over within one year from the date of the balance sheet.
Current assets are those assets which are reasonably expected to be realized in cash or sold, consumed
or turned over during the operating cycle of the business, usually not exceeding one year.

Desirably, net working capital should be positive i.e. current assets should exceed current liabilities or
Current ratio (current assets / current liabilities) should be higher than 1:1. This would signify
liquidity and availability of adequate working funds. For a banker, it would connote a ‘cushion’ of
safety for the funds lent.

Positive net working capital is same as liquid surplus i.e. the difference between long term sources
(liabilities) and long term assets (uses). This means long term sources should be sufficient to finance
not only fixed and non-current assets but also a part of current assets. In current assets, there is always
a hard core i.e. a certain irreducible minimum level which would have to be maintained more or less
permanently for smooth operations of the production cycle. It is but logical that this portion of current
assets should be financed from long term sources.

It may be seen that working capital required for financing current assets is generated from three
sources, namely bank borrowings long term funds and other current liabilities. The net working
capital is positive and signifies margin contribution of long term funds to finance current assets. It
may also be possible for a unit to work with negative working capital, where short-term liabilities
including bank borrowings are used to finance part of long term assets. This may signify diversion of
bank funds for other unapproved uses. It may also not be in the interest of a unit to have very large
NWC or liquid surplus which may indicate a position of idle funds or lower turnover in working
capital. The assessment of working capital will, therefore, involve the following two aspects:

(a) The level of current assets required to be held by any unit including the composition of
current assets for efficient functioning.

(b) The mode of financing these assets.

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STRUCTURE OF WORKING CAPITAL
The different elements or components of current assets and current liabilities constitute the structure
of working capital which can be illustrated in the shape of a chart as follows:

Structure of Current Liabilities and Current Assets

Current Liabilities Current Assets

Bank Overdraft Cash and Bank Balance
Inventories:
Creditors Raw-Materials
Work-in-progress
Finished Goods
Outstanding Expenses Spare Parts
Bills Payable Accounts Receivables
Short-term Loans Bills Receivables
Proposed Dividends Accrued Income
Provision for Taxation, etc. Prepaid Expenses
Short-term Investments

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CIRCULATION OF WORKING CAPITAL

At one given time both the current assets and current liabilities exist in the business. The current
assets and current liabilities are flowing round in a business like an electric current. However, “The
working capital plays the same role in the business as the role of heart in human body. Working
capital funds are generated and these funds are circulated in the business. As and when this circulation
stops, the business becomes lifeless. It is because of this reason that the working capital is known as
the circulating capital as it circulates in the business just like blood in the human body.”

The sale of goods may be for cash or credit. In the former case, cash is directly received while in later
case cash is collected from debtors. Funds are also generated from operation and sale of fixed assets.
A portion of profit is used for payment of interest, tax and dividends while remaining is retained in the
business. This cycle continues throughout the life of the business firm.

Fig. depicting ‘Working Capital Cycle’ makes it clear that the amount of cash is obtained mainly from
issue of shares, borrowing and operations. Cash funds are used to purchase fixed assets, raw materials
and used to pay to creditors. The raw materials are processed; wages and overhead expenses are paid
which in result produce finished goods for sale.

CLASSIFICATION OF WORKING CAPITAL

The quantitative concept of Working Capital is known as gross working capital while that under
qualitative concept is known as net working capital.
Working capital can be classified in various ways. The important classifications are as given below:
CONCEPTUAL CLASSIFICATION
There are two concept of working capital viz., quantitative and qualitative. The quantitative concept
takes into account as the current assets while the qualitative concept takes into account the excess of
current assets over current liabilities. Deficit of working capital exists where the amount of current
liabilities exceeds the amount of current assets. The above can be summarized as follows:

(i) Gross Working Capital = Total Current Assets

(ii) Net Working Capital = Excess of Current Assets over Current Liabilities
(iii) Working Capital Deficit = Excess of Current Liabilities over Current Assets.

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 CLASSIFICATION ON THE BASIS OF FINANCIAL REPORTS:
The information of working capital can be collected from Balance Sheet or Profit and Loss
Account; as such the working capital may be classified as follows:

• Cash Working Capital: This is calculated from the information contained in profit and loss
account. This concept of working capital has assumed a great significance in recent years as it shows
the adequacy of cash flow in business. It is based on ‘Operating Cycle Concept’s which is explained
later.
• Balance Sheet Working Capital: The data for Balance Sheet Working Capital is collected
from the balance sheet. On this basis the Working Capital can also be divided in three more types,
viz., gross Working Capital, net Working Capital and Working Capital deficit.

Classification on the Basis of Variability

Gross Working Capital can be divided in two categories viz., (i) permanent or fixed working capital,
and (ii) Temporary, Seasonal or variable working capital. Such type of classification is very important
for hedging decisions.

i. Temporary Working Capital : Temporary Working Capital is also called as fluctuating or

seasonal working capital. This represents additional investment needed during prosperity and

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 favorable seasons. It increases with the growth of the business. ”Temporary working capital is the
additional assets required to meet the variations in sales above the permanent level.” This can be
calculated as follows:
Temporary Working Capital = Total Current Assets – permanent Current Assets

ii. Permanent Working Capital: It is a part of total current assets which is not changed due to
variation in sales. There is always a minimum level of cash, inventories, and accounts receivables
which is always maintained in the business even if sales are reduced to a minimum. Amount of such
investment is called as permanent working capital. “Permanent Working Capital is the amount of
working capital that persists over time regardless of fluctuations in sales.” This is also called as
regular working capital.
WORKING CAPITAL MANAGEMENT

The management of current assets, current liabilities and inter-relationship between them is termed as
working capital management. “Working capital management is concerned with problems that arise in
attempting to manage the current assets, the current liabilities and the inter-relationship that exist
between them.” In practice, “There is usually a distinction made between the investment decisions
concerning current assets and the financing of working capital.”
From the above, the following two aspects of working capital management emerge:
1. To determine the magnitude of current assets or “level of working capital” and
2. To determine the mode of financing or “hedging decisions
SCOPE OF WORKING CAPITAL MANAGEMENT

The management of working capital helps us to maintain the working capital at a satisfactory level by
managing the current assets and current liabilities. It also helps to maintain proper balance between
profitability, risk and liquidity of the business significantly. By managing the working capital, current
liabilities are paid in time. If the firm makes payment to it creditors for raw material in time, it can
have the availability of raw material regularly, which doesn’t t cause any obstacles in production
process. Adequate working capital increases paying capacity of the business but the excess working
capital causes more inventories, increases the possibility of delay in realization of debts. On the other
hand, absence of adequate working capital leads to decrease in return on investment. The goodwill
of the firm is also adversely affected due to the inability to pay current liabilities in time. Hence, the
management of working capital helps to manage all the factors affecting the working capital in the
most profitable manner.

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 A schematic diagram of the ‘working capital cycle’ is given below:

CALCULATION OF WORKING CAPITAL

The calculation of working capital requirement during the entire project was done as per the following
three methods:

o OPERATING CYCLE METHOD

o NET WORKING CAPITAL METHOD
o ON THE BASIS OF SALES

 Operating Cycle Method

As per the Operating cycle method the working capital requirement is calculated as under:

Debtor days XX
Add:- Inventory days XX
XXX
Less:- creditors days XX
Operating days XX

Operating cycle = 365 = XX

Operating Days
Working capital requirement = Sales = XXX = XX
O/cycle XX

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 Net Working Capital Method
As per the Net Working Capital method the working capital requirement is calculated as under:

Net Working Capital = [Capital + Unsecured Loan + Term Loans– F/Assets –Investments – Loans &
Advances]

Permissible amount is 3 times the net working capital as per above formula.

Working capital Requirement = [Capital + Unsecured Loan + Term Loans – F/Assets – Investments
– Loans & Advances] x 3

 On The Basis Of Sales

Bank can allow a max CC limit of 25% of sales to a manufacturing unit and 15% of sales to a trading
unit.

J&K Bank mostly allows 20% of sales as CC limit to manufacturing units.

So, 20% of sales = 20/100 * Sales

=Rs XXX

So the as per bank policy allowable amount as CC is Rs XXX.

STEPS IN WORKING CAPITAL ASSESSMENT

The working capital finance by banks is meant to assist the borrower in meeting a portion of
requirement of funds needed for day to day operations. Hence, it is obvious that working capital
finance should be made only after ascertaining the genuine needs of the borrower. The following
considerations may be kept in this regard.

1) Financial Statements (Balance Sheet & profit & loss A/c Should be obtained for the last 3
years as well as estimates for current year and projections for next year.

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 2) The sales figure is the focal point for consideration since the requirement of working capital
will depend on the level of sales the borrower expects to achieve, in the next year. To make a realistic
assessment of sales projected for the next year; the trend in sales during previous years, the potential
for growth, the production capacity, demand for product, expertise of entrepreneur in locating
markets, export potential, type of product, quality of product etc. will have to be taken into account.
But, ultimately it is the judgment of the credit appraiser which is vital for making a reasonable
estimate of sales.

3) Once the projected figure is assessed, the next step is to find out the requirement of W.C. that
is to ascertain as to what should be the optimum level of holding current assets so that the projected
sales are achieved. The levels of holding of inventory (Raw material, semi-Finished Goods and
Finished Foods) and receivables will depend on the period of holding inventory and receivables.
Hence thorough appraisal will have to be made to find out as to what should be the reasonable period
of holding of inventory and receivables. Once the period of holdings is scientifically ascertained, the
investment in CA. (i.e. W.C) can be calculated on the basis of the following:
i. R.M holding –calculated on the basis of so many months of R.M consumed.
ii. SFG holding –calculated on the basis of so many months of cost of sales,
iii. F.G holding –calculated on the basis of so many months of cost of sales,
iv. Receivables holding- calculated on the basis of so many months of sales.

4) Once the total requirement of C.A. is assessed, the next step is to explore the alternate sources
available, other than bank finance,

In fact, the sources of financing C.A. are three:

i. Sources like sundry creditors, advance payments from customers etc.

ii. Bank finance, and
iii. NWC, which is the contribution from long term sources.

In principle bank finance can be calculated as follows.

Total Current assets …….

Less:- Sources like S.cr

Difference (Working capital gap) .……

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 Of the gap, Bank Finance will be 75% to 80% depending upon margin requirements which will have to
come from long term sources (in the form of NWC).

POINTS TO NOTE
1. Sales and period of holding of inventory and receivables are the areas where slight misjudgment will
result in unrealistic assessment. Hence, these two are the most important areas requiring closer
analysis and scrutiny.
2. The MPBF reflects the maximum limit up to which the bank can finance but is not an entitlement to
borrow. If the NWC available is more than the stipulated margin, the limit of bank finance will be
corresponding reduced.

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 DETAILED INFORMATION ABOUT ONE OF THE TYPE OF FINANCE
AVAILABLE UNDER WORKING CAPITAL LOAN PROVIDED BY JK BANK
LTD

Nature of Facility Facility to be extended by way of:

i) Running Account in the form of Secured Overdraft / Cash Credit Facility
ii) Cheque Purchase Facility
iii) Bank Guarantee Facility

Purpose To facilitate the contractors for meeting working capital requirements for
executing contracts/works allotted by Government Departments / Undertakings,
Autonomous Bodies, Defense Departments, etc.

Eligibility Construction Contractors approved by / registered with the Government / Defense

agencies that are established / experienced in the business for a minimum period
of 1 year and must have successfully executed and completed 2 to 3 contracts.

Quantum of finance Maximum Limit under this product shall be 2.00 Crore. For limits exceeding
2.00 Crore, assessment shall be carried out as per the norms / guidelines laid
down in the Bank's credit policy.

Margin on Bank
Guarantee 25% cash margin

Security Assignment of Receivables and hypothecation of raw materials and consumable

stores.

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 INDUSTRY PROFILE

OVERVIEW OF THE INDUSTRY AS A WHOLE

BANKING IN INDIA

The economic reforms undertaken in the last 15 years have brought about a considerable improvement
in the health of banks and financial institutions in India. The banking sector is a very important sector
of the Indian economy. The sector has made marked improvements in the liberalization period. There
has been extraordinary progress in the financial health of the commercial banks with respect to capital
adequacy, profitability assets quality and risk management. Deregulation has opened new doors for
banks to increase revenues by entering into to investment banking, insurance, credit cards, depository
services, mortgage, securitization etc. Currently, banking in India is generally fairly mature in terms
of supply, product range and reach even through reach in rural India still remains a challenge for the
private sector and foreign banks. In terms of quality of assets and capital adequacy, Indian banks are
considered to have clean, strong and transparent balance sheet relative to other banks in comparable
economies in its region. The Reserve Bank of India is an autonomous body, with minimal pressure
from the government. The stated policy of the bank of Indian Rupee is to manage volatility but
without any fixed exchange rate and this has mostly been true. With the growth in the Indian economy
expected to be strong for quite some time especially in its services sector the demand for banking
services are expected to be strong. In March 2006, the Reserve Bank of India allowed Warburg Pincus
to increase its stake in Kotak Mahindra Bank (a private sector bank) to 10%. This is the first time an
investor has been allowed to hold more than 5% in a private sector bank since the RBI announced
norms in 2005 that any stake exceeding 5% in the private sector banks would need to be vetted by
them.
Currently, India has 96 scheduled commercial banks (SCBs) 31 private sector banks and 27 are public
sector banks and 38 foreign banks. They have a combined network of over 53000 branches and 49000
ATMs. According to a report by ICRA Limited, a rating agency, the Downloaded from
mbahotspot.com 20 Project Made on Analysis of Working Capital in Banking (J&K) by Shameem
Ahamad public sector banks hold over 75 percent of total assets of the banking industry with the
private and foreign banks holding 18.2% and 6.5% is just say. Liberalization and globalization have
created a more challenging environment in banking sector as well as the other segments of the
financial sector such as mutual funds, non-banking finance companies, post offices, capital market,
venture capitalist etc. Now the challenge faced by the sector would be gaining profitability,
21
reinforcing technology, maintaining global standards, corporate governance, risk management and the
most important of all, to establish customer intimacy.

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COMPANY PROFILE:

HISTORY

In its formative years, the bank had to encounter several serious problems, particularly around the
time of independence, when out of it total 10 branches, two branches of Muzafarabad and Mirpure fell
to the other side of the line of control (now Pakistan administrated Kashmir) along with cash and other
assets in 1947.However state government came to its rescue with the assistance 6.00 Lakh to meet
the claim. The bank steadfastly overcome its difficulties and kept growing. Following the extensions
of central laws to the state of Jammu & Kashmir, the bank was defined as a government company as
per the provisions of the Indian companies Act 1956. The bank had its first full time chairman in
1971, following the social control measure in banks. The year in 1971 was the turning point for the
bank on conferment of scheduled bank status and witnessed remarkable progress in all the vital fields
of operations. Reserve Bank of India declared the bank as “A” class bank in 1976.

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INTRODUCTION TO J&K BANK

J&K Bank functions as a universal bank in Jammu & Kashmir and as a specialized bank in the rest of
the country. It is also the only private sector bank designated as RBI’s agent for banking business, and
carries out the banking business of the Central Government, besides collecting central taxes for
CBDT.

J&K Bank follows a two-legged business model whereby it seeks to increase lending in its home
state which results in higher margins despite modest volumes, and at the same time, seeks to capture
niche lending opportunities on a pan-India basis to build volumes and improve margins.

J&K Bank operates on the principle of 'socially empowering banking' and seeks to deliver innovative
financial solutions for household, small and medium enterprises.

The Bank, incorporated in 1938, and is listed on the NSE and the BSE. It has a track record of
uninterrupted profits and dividends for four decades.

J&K Bank is the only Bank in the country with majority ownership vested with a state government.

PRELUDE
The Jammu & Kashmir Bank is today one of the fastest growing banks in India with a network of
more than 750 branches/offices spread across the country offering world class banking
products/services to its customers. The dip in the profits is in line with overall industry trend which
witnessed diminishing yields in the securities portfolio held by banks and consequential booking of
losses

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Type Private

Traded as NSE: J&KBANK, BSE: 532209 @ 1800 (approx.)

Industry Banking, Financial services

Founded October 1, 1938

Headquarters Srinagar, Jammu and Kashmir, India

Key people BALDEV PRAKASH (Chairman & CEO)

Products Credit cards, Consumer banking, Corporate banking,

finance and insurance, Mortgage, loan, private banking

Revenue 7501.56 crore (2021-2022)

Net income 501.56 crore (2021-22)

Total assets 509818 crore as on March 31, 2022

Earnings (EPS) 243.92 as on March 31, 2021

Employees > 12307 as on 31st Mar 2021

Website www.jkbank.net

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VISION

“To catalyses economic transformation and capitalize on growth.”

Our vision is to engender and catalyze economic transformation of Jammu and Kashmir and capitalize
from the growth induced financial prosperity thus engineered. The Bank aspires to make Jammu and
Kashmir the most prosperous state in the country, by helping create a new financial architecture for
the J&K economy, at the center of which will be the J&K Bank.

MISSION

Our mission is two-fold:

To provide the people of J&K international quality financial service and solutions; and
To be a super-specialist bank in the rest of the country. The two together will make us the most
profitable Bank in the country.

STABILITY

The J&K Bank is rated P1+, indicating the highest degree of safety by Standard & Poor and CRISIL.

BANK'S NEW IDENTITY

The new identity for J&K Bank is a visual representation of the Bank's philosophy and business
strategy. The three colored squares represent the regions of Jammu, Kashmir and Ladakh. The
counter-form created by the interaction of the squares is a falcon with outstretched wings - a symbol
26
 of power and empowerment. The synergy between the three regions propels the bank towards new
horizons. Green signifies growth and renewal, blue conveys stability and unity, and red represents
energy and power. All these attributes are integrated and assimilated in the white counter-form.

OBJECTIVES OF J&K BANK

1) To increase the visibility in the market and enhance the market share in the banking and financial
services.
2) High quality of customer service.
3) To integrate technology and business so as to deliver more products to more customers and to control
operating costs.
4) To maintain high for standards asset quality through disciplined credit risk management.
5) To develop innovative products and services that meets the needs and wants of targeted customers and
address inefficiencies in the Indian financial sector.
6) To continue to develop products and services that reduces our cost of funds.
7) To focus on high earnings growth low volatility.

SECURITY PROVIDED BY J&K BANK

The forms of security either by way of primary security or collateral security is given here under:-

1. Hypothecation
Under hypothecation, the borrower is provided with working capital finance by the bank against the
security of movable property to the bank, generally inventories. The borrower does not transfer the
property to the bank, it remains in the possession of the borrower, and however, the title of the
property is transferred in the name of bank or lending institutions. Thus hypothecation is a charge
against property for an amount of debt where neither ownership nor possession is passed to the
creditor. Banks generally grant under hypothecation only to first class customers with highest
integrity. Banks do not usually grant hypothecation facility to new customers.

27
 2. Pledge
Under this agreement, the borrower is required to transfer the physical possession of the property
offered as security to bank to obtain credit. The bank has the right of lien and can retain possession of
the goods pledged unless payment of the principle, interest and any other expenses is obtained from
the borrower. In case of default, the bank may either
a)Sue the borrower for the amount due or
b) Sue for the sale of goods pledged.

3. Mortgage
Mortgage is the transfer of the legal or equitable interest in a specific immovable property for security
against the debt. In case of mortgage, the possession of the property may remain with the borrower,
however, the lender get the full legal title. The transferor of interest (borrower) is called mortgagor,
the transferee is called the mortgagee and the instrument of the transfer is called the mortgage deed.

4. Banking Facilities
Financing is the act of providing funds for business activities, making purchases or investing.
Financial institutions and banks are in the business of financing as they provide capital to business,
consumers and investors to help them achieve their respective goals. There are two ways of providing
funds i.e. financing to the borrowers used by banks or financial institutions as given.
A. FUND BASED FINANCING

The fund based financing provided by banks involve immediate outlay of funds, which must be
provided by before hands. This facility includes term loans facilities, cash credit limit, overdraft etc.

I. Term loans:

A term loan is usually a single loan for a stated period of time or a series of loans on specified dates.
They are used for specific purposes such as acquiring machinery, renovating a building, refinancing
debt, entering into new business and so on and so forth. Term loans are of maturity of 1 year and
above and are repaid on an amortized basis. Term loans are mostly given to the borrowers who
propose to set up a unit (project) for example a manufacturing unit, or it may be to set up a power
plant or constructions of complexes, buildings, roads etc.

The maturity of term loans called tenor of the loan comprises of following below mentioned
components: They are:-
28
  Construction period

Time taken for completion of construction activity by the unit holder.

 Moratorium period

Holiday period given to repay the term loan.

 Repayment period

Period in which the term loan is repaid.

II. Cash Credit:

Cash credit facility is the most popular method of bank finance to the borrowers adopted by the
lenders. Under cash credit facility, the borrower is allowed to withdraw funds from the bank up to the
sanctioned credit limit. He is not required to borrow the entire credit sanctioned once, rather he can
withdraw periodically to the extent of his requirements and repay by depositing surplus funds in his
cash credit account.

III. Overdraft

Under the overdraft facility, the borrower is allowed to withdraw funds in excess of balance in his
current account up to a certain specified limit during a stipulated period. Overdrawn amount is repaid
on demand. Over draft generally continue for a long period by annual renewals of the limits.

B. NON FUND BASED FINANCING

Non fund based financing are essentially in nature of promises made by banks in favors of a third
party to provide monetary compensation on behalf of their clients if certain situations emerge. These
non-fund based facilities may be in nature of banks guarantee or letter of credit.

1. Letter of credit

Suppliers particularly the foreign suppliers insist that the buyer should ensure that his bank will make
the payment if he fails to honor his obligations. This is ensured through a letter of credit (L/C)
29
arrangement. A bank opens a L/C in favors of a customer to facilitate his purchase of goods. If the
customer does not pay to the supplier within the credit period, the bank makes the payment under the
L/C arrangement. Bank charges the customer for opening the L/C. Banks extends such facility to
financially sound customers.

2. Line Of Credit

The line of credit is the maximum amount that can be borrowed under the term of loan. The loans are
made for the period of one year or less; and they should be used to finance the seasonal increase in
inventory and accounts receivables. When the inventory is sold, receivables are collected and the
funds are used to reduce the loan. The loans are usually payable on demand by the banks or within
ninety days.

PROCEDURE FOR WORKING CAPITAL FINANCE

Credit Sanction Process

The revised credit process is introduced with a view of reducing the time lag in the sanction of credit
besides clearly delineating the areas of responsibilities of various functionaries. As per this the revised
process is divide into two components that is Pre-sanctioning and Post sanctioning In the pre
sanctioning it is the only time that the bank can take due assessment and precautions to make sure that
the investments are done for the benefit of the bank. The post sanctioning is the follow of the
payment. In case the payment defaults then the account will go into NPA in stages and the bank is
then said to scrutinize the said account.
30
 PRE SANCTION PROCESS:
Obtain Loan Application

When a customer required loan he is required to complete application form and submit the same to the
bank also the borrower has to be submit the required information along with the application form. The
information, which is generally required to be submitted by the borrower along with the loan
application, is under:
· Audited balance sheets and profit and loss accounts for the previous three year (in case borrower
already in the business)
· Estimated balance sheet for current year.
· Projected balance sheet for next year.
· Profile for promoters/directors, senior management personnel of the company.
· In case the amount of loan required by borrower is 50 Lakh and above he should be submit the
CMA Report.
Appraisal & Recommendation, Assessment & Sanctioning

 Examine for preliminary appraisal

 RBI guidelines. Policies

 Prudential exposure norms and bank lending policy

 Industry exposure restriction and related risk factors.

 Compliance regarding transfer of borrowers accounts from one bank to another bank.

 Government regulation / legislation impact on the industry.

 Acceptability of the promoter and applicant status with regards to other unit to industries.

 Arrive at the preliminary decision.

 Examine/analysis /assessment

 Financial statement (in the prescribed forms) refers figure WC cycle & BS assessment thumb rules.

 Financial ratio & Dividend policy.

 Depreciation method
31
 Revaluation of fixed assets.

 Records of defaults (Tax, dues etc.)

 Pending suits having financial implication (Customs, excise etc.)

 Qualifications to balance sheet auditors remarks etc.

 Trend in sales and profitability and estimates /projection of sales.

 Production capacities and utilization: past & projected production efficiency and cost.

 Estimated working capital gap W.R.T acceptable buildup of inventory/receivables/other current assets

and bank borrowing patterns.

 Assess MPBF –determine facilities required

 Management quality, competence, track records

 Company’s structure and system

 Market shares of the units under comparison.

32
POST SANCTION PROCESS

Supervision and Follow Up

Sanction credit limit of working capital requirement after proper assessment of proposal is alone not
sufficient. Close supervision and follow up are equally essential for safety of bank credit and to ensure
utilization of fund lend. A timely action is possible only close supervision and followed up by using
following techniques.

 Monthly stock statement

 Inspection of stock
 Scrutiny of operation in the account
 Quarterly/half quarterly statements.
 Under information system
 Annual audited report

Credit Monitoring Arrangement

Consequent upon the withdrawal of requirement of prior authorization under the erstwhile credit
authorization scheme (CAS) and introduction of a system of post sanction scrutiny under credit
monitoring arrangement (CMA) the database forms have been recognized as CMA database. The
revised forms for CMA database as drawn up by the sub-committee of committee of directions have
come into use from 1st April 1991.
The existing forms prescribed for specified industries continue to remain in force. With a view to
imparting uniformity to the appraisal system, database from all borrowers including SSI units
enjoying working capital limits of Rs. 50 Lakh and more from the banking system should be obtained.
The revised sets of forms have been separately prescribed for industrial borrowers and
traders/merchant exporters. The details of forms are as under: -

Form 1:- Particulars Of The Existing/Proposed Limit From The Banking System.

Form 2: - Operating Statement.

33
It contains data relating to gross sales, net sales, cost of raw material, power and fuel, etc. It gives the
operating profit and the net profit figures.

Form 3: - Analysis Of Balance Sheet.

It is complete analysis of various items of last years balance sheet; current years estimate and
following years projection are given in this form.

Form 4: - Comparative Statement Of Current Asset And Liabilities.

Details of various items of current asset and current liabilities are given. The figures in this form must
tally with those in Form III.

Form 5: - Computation Of Maximum Permissible Bank Finance For Working Capital.

The calculation of MPBF is done in this form to obtain the fund based credit limits to be granted to
the borrower.

Form 6: - Fund Flow Statement

It provides the details of fund flow from long term sources and uses to indicate whether they are
sufficient to meet the borrower’s long term requirements.

CREDIT RATING MODEL

The various risk faced by any company may be broadly classified as follows:
Industry Risk: It covers the industry characteristic, compensation, financial data etc.

Company/ business risk: It considers the market position, operating efficiency of the company etc.

Project risk: It includes the project cost, project implementation risk, post project implementation
etc.

Management risk: It covers the track record of the company, their attitude towards risk,
Propensity for group transaction, corporate governance etc.

Financial risk: financial risk includes the quality of financial statements, ability of the company to
raise capital, cash flow adequacy etc.

34
SECURITY NEEDED BY BANKS

Banks need some security from the borrowers against the credit facilities extended to them to avoid
any kind of losses. Securities can be created in various ways. Banks provide credit on the basis of the
following modes of security from the borrowers.

Hypothecation: under this mode of security, the banks provide credit to borrowers against the
security of movable property, usually inventory of goods. The goods hypothecated, however, continue
to be in possession of the owner of the goods i.e. the borrower. The rights of the banks depend upon
the terms of the contract between borrowers and the lender. Although the bank does not have the
physical possession of the goods, it has the legal right to sell the goods to realize the outstanding
loans.
Hypothecation facility is normally not available to new borrowers.

Mortgage: It is the transfer of a legal / equitable interest in specific immovable property for
securing the payment of debt. It is the conveyance of interest in the mortgaged property. This interest
terminated as soon as the debt is paid. Mortgages are taken as an additional security for working
capital credit by banks.

Pledge: The goods which are offered as security are transferred to the physical possession of the
lender. An essential prerequisite of pledge is that the goods are in the custody of the bank. Pledge
creates some kind of liability for the bank in the sense that ‘Reasonable care’ means care, which a
prudent person would take to protect his property.
In case of non-payment by the borrower, the bank has the right to sell the goods.

Lien: The term lien refers to the right of a party to retained goods belonging to other party until a
debt due to him is paid. Lien can be of two types viz.
 Particular lien i.e. A right to retain goods until a claim pertaining to these goods are fully
paid, and
 General lien, which is applied till all dues of the claimant are paid. Banks usually enjoyed
general lien.

35
 CHAPTER_2

Research methodology

36
OBJECTIVES OF THE STUDY

1. To assess and evaluate the working capital briefly.

2. To evaluate the liquidity position of the bank.
3. To assess the profitability of the bank year after year
4. To measure how far assets of bank have been utilized to increase the sales.
5. To know the Sources of working capital provided by the bank.
6. To compare lending rates of J&K bank with SBI.

37
RESEARCH METHODOLOGY

Research Methodology is a systematic method of finding solutions to problems. It is essentially an

investigation, a recording and an analysis of evidence for the purpose of gaining knowledge.
Success or failure of any project entirely depends upon methodology adopted by the researcher.
Methodologies basically use different methods of research systematically and scientifically.
Objectives of the study, its research design, its sampling design, coding and editing methods,
presentations and analysis of the data together with interpretation of the data are essential part of
research methodology.

Research Type • Analytical

• Quantitative
Source of Data • Primary
• Secondary
Sample Unit • Business units applying for loan

Analysis Tool used • Financial Statements

RESEARCH DESIGN

Analytical
This is analytical research area where we analyses information with cause and its effects relationship.
This analysis leads to the study of the assessment of working capital and drawing conclusions of
whether to lend money to the institution for working capital requirement based on the various
parameters which I try to make it easy to understand with the help of case studies at the end.
Also if the money is lend then there is reality the norms are not always perfect and hence it is essential
to priorities stringent parameters and secondary parameters.

38
 Quantitative
This is Quantitative research type of research also, relates to aspects that can be quantified or can be
expressed in terms of quantity. It involves the measurement of quantity or amount. The various
available statistical and econometric methods are adopted for analysis in such research.

DATA COLLECTION
Data collection is an essential part of every project. Success or failure of any project entirely depends
on the way of collection of data. The data in this research were collected from the following two
ways.

Primary Data
• Observation, Discussion with the Project coordinator.
• The company profile, annual reports have been obtained from JK Bank.

Secondary Data
Secondary data relating to the procedure of assessment of working capital finance, old sanction
proposals, RBI guidelines, JK Bank norms etc. have been sourced from reference books.

RESEARCH SAMPLE
Different types of cases representing different situations which a bank generally faces while financing
the working capital to those who require these funds.

ANALYTICAL TOOLS USED

Since this is the analytical as well as quantitative type of research so the tools and techniques which
are used in this project are Financial Statements, Performance reports, Illustrations.

39
LIMITATIONS OF THE STUDY

 Time limit of 45 days was not enough to study the financial statement of the bank
 Annexures were not provided to me of financial statements.
 Financial data was provided to me of the year 2021 which was not the recent data.
 Financial statements of JK bank are made by very much high professionals with their
standards so analysis of those statements was very tough time.
 Support from staff of JK bank was not so good because they have very busy schedule.
 My lack of experience in the field of research creates so many problems during the
study.

40
 Chapter_3

DATA ANALYSIS

41
 DATA ANALYSIS AND DISCUSSIONS

RATIO ANALYSIS

Ratio Analysis is a very important tool of financial analysis. It is the process of establishing the
significant relationship between the items of financial statements to provide meaningful understanding
of the performance and financial position of a firm. Ratios are classified as under:-

• Liquidity Ratios.
• Activity Ratios.
• Leverage Ratios.
• Profitability Ratios.

Financial ratio analysis is a useful tool for users of financial statement. It has following advantages:

ADVANTAGES

1. It simplifies the financial statements.

2. It helps in comparing companies of different size with each other.
3. It helps in trend analysis which involves comparing a single company over a period.
4. It highlights important information in simple form quickly. A user can judge a company by just
looking at few numbers instead of reading the whole financial statements.

LIMITATIONS
Despite usefulness, financial ratio analysis has some disadvantages. Some key demerits of financial
ratio analysis are:

1. Different companies operate in different industries each having different environmental conditions
such as regulation, market structure, etc. Such factors are so significant that a comparison of two
companies from different industries might be misleading.

42
2. Financial accounting information is affected by estimates and assumptions. Accounting standards
allow different accounting policies, which impairs comparability and hence ratio analysis is less
useful in such situations.
3. Ratio analysis explains relationships between past information while users are more concerned about
current and future information.

BENCH MARK OF KEY FINANCIAL RATIOS IN J&K BANK:

Financial ratios are the only tools and not an end in credit appraisal process. They are means to an end
and the only pass guiding signals. Analysis of a combination of critical financial ratios can help in
proper decision making. They are also practical constraints in evolving industry wise benchmarks for
key financial indicators.

Some important ratios are used during analysis of the financial statement by the banks to ascertain the
credit worthiness of the borrowers are described as under:

CALCULATION OF RATIOS

1. Current Ratio: - Current ratio is calculated by current assets upon current liabilities. It
measures short term paying ability of the firm.

Year 2022 2021 2020

Current Assets 94813.74 87465.29 83749.34

Current Liabilities 5414.05 3389.99 2670.81

Current Ratio 17.51 25.80 31.35

Significance: - An ideal current ratio is 2:1. This ratio is used for short term paying ability of the firm.
Approximate of 1 of current ratio the creditors will be able to get their payment in full.

43
 2. Quick Ratio: - This ratio is also known as liquid ratio. It measures short term paying
ability by measuring short term liquidity. It is calculated by current assets(-) minus
inventory upon by current liabilities.

Year 2022 2021 2020

Liquid Assets 94813.74 87465.29 83749.34

Current Assets 5414.05 3389.99 2670.81

Liquid Ratio 17.51 25.80 31.35

Significance: - This ratio is able to payment for its creditors. This ideal figure is 1.

3. Gross profit ratio: - Gross profit ratio indicates the efficiency of the production or
operation of trading. It expresses relation between gross profit and net sales.

G.P. Ratio= Gross profit/net sales* 100

Year 2022 2021 2020

Gross Profit 774.45 958.21 1149.49

Net Sales 53934.51 60294.39 70869.57

G.P.R 14.3% 15.8% 16.2%

Significance:- This ratio indicates the degree to which the selling price of goods per unit may decline
without resulting in losses from operations to the firm. If there is continuous increment in gross profit
ratio then it means the selling price of goods is increasing day by day.

44
 4. Net Profit Ratio: - Net profit ratio indicates efficiency of P&L A/C of the firm. It
intends relation between net profit and net sales.

Net Profit Ratio= N.P. /Net sales*100

Year 2022 2021 2020

Net Profit 243.49 512.38 615.2

Net Sales 53934.51 60294.39 70869.57

N.P.R 7.5% 8.4% 8.6%

Significance: - Net profit ratio indicates net margin on sales. This margin is continuously increasing
year to year.

45
 5. Fixed assets Turnover Ratio: - It indicates the investment in fixed assets has been
judicious or not. It calculated by the following formula;

FATOR = Net sales /Net fixed assets

Net fixed assets = Fixed assets – depreciation

Year 2022 2021 2020

Net Sales 53934.51 60294.39 70869.57

Net Fixed Assets 1,994,1.43 3,937,7.02 1,920,0.15

FATOR 2.7 Times 1.53 Times 3.69 Times

Significance: - It indicates the extent to which the investment in fixed assets contributes towards
sales. It compared with the previous period, it indicates whether the investment in fixed assets has
been judicious or not.

6. Working capital Turnover Ratio: Working capital ratio is talking about

utilization of working capital for the firm. Working capital turnover ratios express the
relation between net sales and working capital. It is calculate by the following formula;

WCTOR = Net Sales/Working capital

{Working capital = Current assets – current liabilities}

Year 2022 2021 2020

Net Sales 53934.51 60294.39 70869.57

Working Capital 37371.65 42343.9 50116.52

WCTOR 1.44 Times 1.42 Times 1.41 Times

Significance: - Working capital turnover ratios express the relation between net sales and working
capital. The ratio of the bank is decreasing year after year

46
 7. Total assets turnover ratio: - Total assets turnover ratio intends to the total assets to
total turnover. It indicates to efficiency of total assets and total turnover. This ratio is very
important for estimate the position of the firm. This ratio is calculated by the following
formula;

TATOR = Total assets/total turnover

Year 2022 2021 2020

376,932,318 327,559,871 425,467,948

Total assets

Turnover 53934.51 60294.39 70869.57

TATOR 69% 54% 60%

Significance:- The Bank’s aggregate business crossed yet another psychological mark and stood at
70,869.57 Crores at the end of the financial year 2020-21. The Bank’s total business increased by `
10,575.18 Crores from the previous year’s figure of 60,294.39 Crores, registering a growth of 17.54%

The above parameters are used for critical analysis of financial position. With the evaluation of each
component, the financial position from different angles is tried to be presented in well and systematic
manner. By critical analysis with the help of different tools, it becomes clear how the financial
manager handles the finance matters in profitable manner in the critical challenging atmosphere, there
commendation are made which would suggest the organization in formulation of a healthy and strong
position financially with proper management system. I sincerely hope, through the evaluation of
various percentage, ratios and comparative analysis, the organization would be able to conquer it‟s in
efficiencies and makes the desired changes.

47
DIFFERENT TYPES WORKING CAPITAL LOANS EXTENDED BY JK
BANK ALONG WITH INTEREST RATES (w.e.f. 2021-22)

NATURE LOANS COST OF FINANCE

COMMERCIAL PREMISES FINANCE 15%-15.50%

CONSTRUCTION EQUIPMENT 13.75%-14.75%

TERM CREDIT FINANCE

CRAFT DEVELOPMENT FINANCE 13.25%- 13.75%

LOAN AGAINST MORTGAGE 14%-15%

IMMOVABLE PROPERTY

CONTRACTOR FINANCE 13.25% - 14.25%

WORKING
CAPITAL FAIR PRICE SHOP SCHEME 14.75%
FACILITY
DASTKAR FINANCE 10.75%

KHATAMBAND CRAFTSMEN FINAN 13.25%-13.75%

CASHCREDIT/
OVERDRAFT MORTGAGE LOAN FOR TRADE & 14.75-16.25
SERVICE SECTOR

LETTER OF CREDIT BILLS DISCOUNT 10.25%-10.75%

48
 COMPARATIVE ANALYSIS OF THE AVERAGE LENDING RATES OF
WORKING CAPITAL LOAN BETWEEN JK BANK AND SBI

JK BANK SBI % DIFFERENCE

WORKING 13.33% 15% -1.67%
CAPITAL FACILITY
TERM LOAN 14.375% 14% +0.375%
CASH CREDIT 14.5% 18% -3.50%
LETTER OF CREDIT 10.50% 11% 0.50%

AVERAGE LENDING RATES

RATE OF INTEREST (%)

WCF TERM LOAN CASH CREDIT LC

JK BANK 13.33 14.375 14.5 10.5
SBI 15 14 18 11

The analysis shows comparative average lending rates of various types of working capital loan
provided by J&K BANK and SBI. From the above analysis we came to know about the following
finding:

49
1. The average interest rate of working capital facility provided JK BANK is quite comparatively
low up to 13.33% as compared to SBI rate of 15%. Thus, having a difference of 1.67% in JK
BANK
2. While as in case of term loan SBI rate is low against JK BANK rate by 0.375%. But this
difference is not too much that can be negotiated.
3. In cash credit facility there is a lot of difference between the rate charged by JK BANK that is
14.5% and the rate of SBI that is 18% thereby JK BANK leading by margin of 3.5%
4. Now in case of letter of credit type of funding that is usually in the form of bills discounting, there
is also not much difference between JK BANK and SBI that is 10.5% and 11% respectively

50
 EARNING UPDATES AS ON 31 DEC 2020-21

Performance Highlights for the 3rd quarter ended December 2020-21

 Net Profit up 11.02 % at 321.29 crore for the quarter ended Dec as compared to 289.40 crore
earned during the quarter ended Dec 2020-21.
 EPS for the quarter ended Dec, 2020-21 at 66.28 up 11.02 % from 59.70 earned during the
corresponding quarter of previous financial year.
 NIMs (Net Interest Margins) Ratio for the quarter ended Dec, 2020-21 at 3.97 % (annualized) vis-à-
vis 4.07 % for the corresponding quarter of previous financial year.
 Post tax Return on Assets at 1.88 % (annualized) for the quarter ended Dec, 2020-21 compared to
1.87 % for the corresponding period of the previous financial year.
 Post Tax Return on Average Net-Worth (annualized) for the quarter ended Dec, 2020-21 at 22.80 %
compared to 24.35 % recorded for the corresponding quarter of last financial year.
 The Cost of Deposits (Annualized) for the quarter ended Dec, 2020-21 at 6.94 % compared to 6.74 %
recorded for the corresponding quarter of last financial year.
 The Yield on Advances (annualized) for the quarter ended Dec, 2021 stood at 12.24 % as compared
to 12.60 % for the quarter ended Dec, 2020
 Business as per Employee and Net profit per Employee (annualized) were at 11.36 crore and
13.71 Lakh respectively for the quarter ended Dec, 2021 compared to 9.91 crore and
12.37 Lakh pertaining to the quarter ended Dec, 2020
 Gross and Net NPA’s as percentages to Gross and Net Advances as on Dec 2021 at 1.65 % and 0.22
% respectively compared to 1.61 % and 0.14 % a year ago.
 NPA Coverage Ratio as on Dec, 2021 at 90.24 % well above RBI stipulated norm of 70 %.
 Cost to Income Ratio stood at 39.94 % for the quarter ended Dec, 2021 as compared to 36.50 % for
the quarter ended Dec, 2020.
 Capital Adequacy Ratio (Basel III) stood at 13.01 % as on Dec, 2021 well above RBI stipulated norm
of 9 %.

51
 Performance Highlights for the Nine months ended December 31, 2021

 Net Profit up 15.76 % at 931.87 crore for the nine months ended Dec, 2021 as compared to 805.02
crore earned during the nine months ended Dec, 2020.
 EPS for the nine months ended Dec, 2021 at 192.23 up 15.76 % from 166.06 earned during the
corresponding nine months of previous financial year.
 NIMs (Net Interest Margins) Ratio for the nine months ended Dec, 2021 at 4.18 % (annualized) vis-à-
vis 3.93 % for the corresponding nine months of previous financial year.
 Post tax Return on Assets at 1.88 % (annualized) for the nine months ended Dec, 2021 compared to
1.78 % for the corresponding period of the previous financial year.
 Post Tax Return on Average Net-Worth (annualized) for the nine months ended Dec, 2021 at 23.31 %
compared to 23.88 % recorded for the corresponding nine months a year ago.
 The Cost of Deposits (Annualized) for the nine months ended Dec, 2021 at 6.70 % compared to 6.92
% recorded for the corresponding nine months of last financial year.
 The Yield on Advances (annualized) for the nine months ended Dec, 2021 stood at 12.25 % as
compared to 12.61 % for the nine months ended Dec, 2020.
 Business per Employee and Net profit per Employee (annualized) were at 11.36 crore and 13.25
Lakh respectively for the nine months ended Dec, 2021compared to 9.91 crore and 11.47 Lakh
pertaining to the nine months ended Dec, 2020.
 Gross and Net NPA’s as percentages to Gross and Net Advances as on Dec, 2021 at 1.65 % and 0.22
% respectively compared to 1.61 % and 0.14 % a year ago.
 NPA Coverage Ratio as on Dec, 2021 at 90.24 % well above RBI stipulated norm of 70 %.
 Cost to Income Ratio stood at 37.31 % for the nine months ended Dec, 2021 as compared to 34.98 %
for the nine months ended Dec, 2020.

52
Chapter_4

FINDINGS

53
FINDINGS

 An ideal current ratio is 2:1. This ratio is used for short term paying ability of the firm.
Approximate of 1 of current ratio the creditors will be able to get their payment in full.

 This ratio indicates the degree to which the selling price of goods per unit may decline
without resulting in losses from operations to the firm. If there is continuous increment
in gross profit ratio then it means the selling price of goods is increasing day by day

 Net profit ratio indicates net margin on sales. This margin is continuously increasing
year to year.

 The Bank’s aggregate business crossed yet another psychological mark and stood at `
70,869.57 Crores at the end of the financial year 2020-21. The Bank’s total business
increased by ` 10,575.18 Crores from the previous year’s figure of 60,294.39 Crores,
registering a growth of 17.54%

 The above parameters are used for critical analysis of financial position. With the
evaluation of each component, the financial position from different angles is tried to be
presented in well and systematic manner. By critical analysis with the help of different
tools, it becomes clear how the financial manager handles the finance matters in
profitable manner in the critical challenging atmosphere, there commendation are made
which would suggest the organization in formulation of a healthy and strong position
financially with proper management system. I sincerely hope, through the evaluation of
various percentage, ratios and comparative analysis, the organization would be able to
conquer it’s in efficiencies and makes the desired changes.

54
OTHER FINDINGS
• A listed company with 53% equity of J&K state.
• Bankers to the Govt. of J&K state.
• Four decades of un-interrupted profitability & Dividends. Dividends 50% for the year 2020 as
compared to 40% of previous year. Business as on march 2020 crossed 1935 cores registering an
increase of 21% Credit take off recorded a remarkable growth of 35% as against national growth of
12.8% Fastest growing bank in India with a network of 451 branches spread across the country. ATM
facility available at 1038 branches as on 31.03.2022 .Tele-banking facility available at 40 branches
Kashmir (17), Jammu (10 ) & outside (13). Swift facility available at almost all the forex branches.
Co-branded J&K bank Amex credit cards available. Providing depository services accredit with ISO
9002 certification & a depository participant of NSDL. Entered into alliance with Bajaj Allianz to
distribute their non-life insurance products on terms & conditions of 17.5% (15% commission & 2.5%
service charges).
• Launched MetLife insurance operations in joint venture with MetLife international (USA) in
the country in respect of %age as under:-

MetLife Int’l Inc. Holding 26%

Jammu & Kashmir Bank Ltd. 25%

M. Pallonji & co 31%

Other small investors 18%

55
 Chapter_5

SUGGESTIONS

56
 SUGGESTIONS

 Closely monitoring and inspecting the activities and stocks of the borrowers from time to time can
avoid the misuse of working capital.
 While working out the working capital limits, banks must exclude the loans and advances from the
current assets. The assessment should be done mainly stock and the inventory level of borrower.
 Bank must extend working capital finance through non-fund based facilities.
 Another ideal method would be to use LC as the primary source of extending, working capital
clubbed with bill discounting. This would ensure that the credit is put to the right use by the borrower
and repayment is guaranteed to the bank.
 The bank must further secure themselves by holding a second charge on all the fixed assets of the
borrower.
 The time period taken by the banks to sanction the limits should be significantly reduced to allow the
borrowers to make use of the credit when the need is most felt.

57
 Chapter_6

CONCLUSIONS

58
 CONCLUSIONS

 The requirement of working capital finance is ever increasing.

 Loans and advances formed a major portion of the current assets of the firm because of which the
working capital gap is large.
 The bank prefers to use the second method of lending working capital under the MPBF rather than
evolving their own method.
 In most of the cases, hypothecation and/or mortgage are used to create securities for the banks.
 After doing the assessment of the financial indicators it is up to the judgment of the top management
of the bank to sanction such loan. The very decision could be against the assessment result.
 Bank has their own internal credit rating procedure to rate the clients (Borrowers).
 If the company is with bank from inception stage then they are given preference, as credible and loyal
party over their financial indicators.
 There is a stiff competition to the nationalized banks from the foreign investors as their lending rates
are much lower than nationalized banks.
 Today the foreign investors are very big threat to business and its existence.

59
 Chapter_7

BIBLIOGRAPHY

60
REFERENCES
During the completion of this project work I have taken references from various sources which
include:
 Annual report of The Jammu and Kashmir Bank ltd.
 Magazines such as Business Economics, Newspaper such as Greater Kashmir, Bank
Dairy, Bank Catalogue, Bank magazine etc.
 Yearly journals of the Jammu and Kashmir Bank Ltd.
 Website of the bank;

 Circulars of J&K Bank

61