Upcoming SlideShare
Loading in...5







Total Views
Views on SlideShare
Embed Views



0 Embeds 0

No embeds


Upload Details

Uploaded via as Microsoft Word

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
Post Comment
Edit your comment


  • 1
  • 2 ACKNOWLEDGEMENT I would like to express my gratitude to almighty God without whose blessing I wouldn’t have been able to take initial step in this research. Words are insufficient to express my gratitude to Mr. Sushil Mittal my industry guide for his guidance and support in preparing this project. I would also like to thank my faculty guide whose support and suggestions has helped me to complete this project successfully. My sincere thanks to all those people who gave me their valuable time and input by filling my questionnaires. Finally I would like to thank my parents, family members and friends for their support.
  • 3 DECLARATION I hereby declare that the work presented in the project report, titled ‘Retail Banking & Evaluation Of The Financial Performance Of Bank Of Rajasthan’ was carried out by me as a part of MBA curriculum during 8 weeks summer training program in the 3rd semester. The report is an authentic record of my work carried out under the guidance of Mr. Sushil Mittal in Bank Of Rajasthan. It is further declared that the report has not been submitted earlier for any other degree or diploma.
  • 4 PREFACE India is a developing country and we all know that banking sector plays a very important role. In development with the increasing use of banking and finance in every field, new trends in their technology and modern use are being evolved day to day to meet the requirements. Infact “BANKING” has become the need of today. The purpose of PROJECT REPORT is to expose the students in the market and in the field of banking, finance and investments and to develop the ability in the students to deal with all types of customers. Preparing project report in the summer vacations and under going the summer training is the indispensable part of the college period. It provides the opportunity to review what we have gained in the training period and also provides the way to convey the knowledge and ideas to others. The present project provides the information on the ‘BANK OF RAJASTHAN’ Learning is not possible in solitude and has to have the support and able guidance of some people around us in various roles and capacities. The satisfaction and euphoria that accompanies the successful completion of any task would be incomplete without the mention of the people who made it possible because success is the epitome of hard work, undeterred missionary zeal, fast determination, and consideration. Therefore, we consider it a pleasant duty to express our heartiest appreciation, gratitude, and indebtedness to our project guide Mr. Sushil Mittal for his keen interest, sincere extortion, invaluable and pain taking excellent guidance, continuous calm endurance, inspiration and encouragement during each phase of the present project.
  • 5 EXECUTIVE SUMMARY The Bank was successful in establishing a new identity in the market in a short span of time. The Bank once again met with considerable success over the past year and achieved all its key objectives. This encouraging performance not only underscored the sustain ability of the Bank' s high tempo of growth , but also helped to move closer to its objective of being one of the more customer -focused bank s in the country. This is reflected in the robust growth in both business and revenue during 2008-09 and in various financial parameters. In 2008-09, the Bank achieved a total income of Rs. 8,800.80 crores, up 60.84 % from 2006-07. During this period, operating revenue was Rs. 4,380.84 crores, up 76 .76% from the previous year, while operating profit was up by 76.12% to reach Rs. 2,225.92 crores. The strong growth in income was largely driven by a strong increase in both net interest income by 76.07% to Rs. 2,585.35 crores, and fee and other income by 77.75% to Rs. 1,795.49 crores. The strong income growth reflects the solid business growth across all banking segments and the successful execution of growth initiatives . The strong growth in incomes was partly offset by an increase in operating expenses, including depreciation, by 77.42% to Rs. 2,154.92 crores. The Bank has developed a branch network which is built on customer-convenience and service, helping it particularly in the acquisition of low-cost retail deposits, retail assets, lending to agriculture, SME and midcorporates and facilitating the cross-selling of third-party products.
  • 6 CONTENTS CHAPTER 1 INTRODUCTION ………………. …………… 1.1 General Introduction………………………………………………. 1.2 Industry Profile…………………………………………………… a. Origin and Development of the industry…………………………… b. Growth and Present Status of the industry………………………... c. Future of the industry ……………… CHAPTER 2 PROFILE OF THE ORGANISATION…………… 2.1 Origin of the Organization ……………………………………… 2.2 Growth and Development of the Organization ………………… 2.3 Present Status of the Organization ……………………………… 2.5 Market Profile of the Organization …………………… CHAPTER 3 STUDY OF SELECTED RESEARCH PROBLEM 3.1 Statement of Research Problem………….. …………………… 3.2 Statement of Research Objectives...…………………………… 3.3 Research Design and Methodology………………………………… 3.4 Analysis of Data ………………………………………………. . CHAPTER 4 RETAIL BANKING----------------------------------- 4.1 Introduction ------------------------------------------------- 4.2 Segmentation of the saving Bank--------------------------- 4.3 Wealth Management ---------------------------------------- 4.5 Internet Banking Channels ---------------------------------- 4.6Mobile Banking ----------------------------------------------- 4.7 Cards ----------------------------------------------------------- CHAPTER 5 FINANCIAL PERFORMANCE ---------- 5.1 Highlights ------------------------------------------------------ 5.2 Overview ------------------------------------------------------- 5.3 Capital Management ------------------------------------------ 5.4 Balance Sheet -------------------------------------------------- 5.5Profit & Loss Account ---------------------------------------- 5.6 Cash Flow ------------------------------------------------------ 6 . FINDINGS ------------------------------------------- 7. Glossary Banking ----------------------------------- 8 BIBLIOGRAPHY -------------------------------------------
  • 7
  • 8
  • 9 Type Private (BSE), Founded Udaipur, 1943 Regd. Office, Headquarters Clock Tower, Udaipur India Key people P. L. Ahuja (MD & CEO) Banking Industry Loan Capital Markets and allied industries Products Loans, Savings, Investment vehicles, etc. Rs. 150733.44 lakhs (year ended March, Revenue 2009) Net income ▲ Rs. 117.7119 Crore (March 2009) INTRODUCTION
  • 10 The Indian banking industry can be broadly categorized into nationalized (government owned), private banks and specialized banking institutions. The Reserve Bank of India acts as a centralized body monitoring any discrepancies and shortcoming in the system. Since the nationalization of banks in 1969, the public sector banks or the nationalized banks have acquired a place of prominence and have since then seen tremendous progress. The need to become highly customer focused has forced the slow-moving public sector banks to adopt a fast track approach. The unleashing of products and services through the net has galvanized players at all levels of the banking and financial institutions market grid to look anew at their existing portfolio offering. Conservative banking practices allowed Indian banks to be insulated partially from the Asian currency crisis. Indian banks are now quoting at higher valuation when compared to banks in other Asian countries (viz. Hong Kong, Singapore, Philippines etc.) that have major problems linked to huge Non Performing Assets (NPAs) and payment defaults. Co-operative banks are nimble footed in approach and armed with efficient branch networks focus primarily on the ‘high revenue’ niche retail segments. INDIAN BANKING SYSTEM COMERCIAL BANKS COPERATIVE BANKS PUBLIC SECTOR FOR INDUSTRY & FOR AGRICULTURE BANKS TRADE PRIVATE SECTOR URBAN CO- APEX BANKS BANKS OPERATIVE BANKS DISTRICT CO- FOREIGN BANKS OPERATIVE BANKS REGIONAL RURAL BANKS NEW PRIVATE BANKS
  • 11 1.2 Industry Profile:- a.) Origin and development of the industry:- Banking in India originated in the first decade of 18th century. The first banks were The General Bank of India, which started in 1786, and Bank of Hindustan, both of which are now defunct. The oldest bank in existence in India is the State Bank of India, which originated in the "The Bank of Bengal" in Calcutta in June 1806. This was one of the three presidency banks, the other two being the Bank of Bombay and the Bank of Madras. The presidency banks were established under charters from the British East India Company. They merged in 1925 to form the Imperial Bank of India, which, upon India's independence, became the State Bank of India. The Reserve Bank of India formally took on the responsibility of regulating the Indian banking sector from 1935. After India's independence in 1947, the Reserve Bank was nationalized and given broader powers. The first banks seem to have arisen in connection with the business of exchanging money. In ancient times and especially in the middle Ages the varieties of coins were greater even than at the present day, and they were much less perfectly and honestly minted. Specialists were, therefore, required to determine their exact value and equivalence and to exchange coins of one mintage for those of another, and their BANK were in great demand at fairs and other places where merchants of different nations met for purposes of trade. The Bank of Amsterdam was the most important and may be regarded as typical of these early institutions. From the earliest times also, bankers have been the chief agents through which foreign exchanges have been conducted. As dealers in coin and bullion they had international connections and knowledge of international affairs not possessed by other merchants, and was, therefore, in a position to undertake the settlement of international accounts by means of orders drawn on bankers in other countries or other cities with whom they had regular business transactions. As keepers of other people's money they also promoted saving, and banks thus became in time the chief savings institutions of the country.
  • 12 b. Growth and present status of the industry: - Currently (2009), banking in India is generally fairly mature in terms of supply, Product range and reach-even though 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 sheets relative to other banks in comparable economies in its region. 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, especially retail banking, mortgages and investment services are expected to be strong. One may also expect M&As, takeovers, and asset sales. 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 88 scheduled commercial banks (SCBs) - 27 public sector banks (that is with the Government of India holding a stake) after merger of New Bank of India in Punjab National Bank in 1993, 29 private banks (these do not have government stake; they may be publicly listed and traded on stock exchanges) and 31 foreign banks. They have a combined network of over 53,000 branches and 17,000 ATMs. According to a report by ICRA Limited, a rating agency, the 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% respectively Introduction of many more products and facilities in the banking sector in its reforms measure. In 1991, under the chairmanship of M Narasimham, a committee was set up by his name which worked for the liberalization of banking practices. The country is flooded with foreign banks and their ATM stations. Efforts are being put to give a satisfactory service to customers. Phone banking and net banking is introduced. The entire system became more convenient and swift. Time is given more importance than money. Banking industry over the 15 years from 1979 to 1994. The banking industry was transformed during that period, according to the paper (p. 127), by “the massive reduction in the number of banking organizations; the significant increase in the number of failures; the dramatic rise in off-balance sheet activities; the major expansion in lending to U.S. corporations by foreign banks; the widespread adoption of
  • 13 ATMs; and the opening up of interstate banking markets.” The paper went on to explain that most of these major changes in banking could be traced to two developments: (1) The extraordinary number of major regulatory changes during the period, from Deposit deregulation in the early 1980s to the relaxation of branching restrictions later in the decade; and (2) Clearly identifiable innovations in technology and applied finance, including improvements in information processing and telecommunication technologies, the securitization and sale of bank loans, and the development of derivatives markets. Other research would later confirm the paper’s assessments and its explanation of the course of events in the banking industry over the period 1979–1994. Over the two decades 1984–2003, the structure of the U.S. banking industry indeed underwent an almost unprecedented transformation—one marked by a substantial decline in the number of commercial banks and savings institutions and by a growing concentration of industry assets among a few dozen extremely large financial institutions. This is not news. As mentioned above, the decline in the number of banking organizations has been ongoing for more than two decades and has been well documented in the literature.3 Nevertheless, a brief overview will serve to clarify both the scope of the decline and the increasing concentration of assets among the nation’s largest banking organizations
  • 14 At year-end 1984, there were 15,084 banking and thrift organizations (defined as commercial bank and thrift holding companies, independent banks, and independent thrifts). By year-end 2003, that number had fallen to 7,842—a decline of almost 48 percent (figure 1). Distributed by size, nearly all the decline occurred in the community bank sector (organizations with less than $1 billion in assets in 2002 dollars), and especially among the smallest size group (less than $100 million in assets in 2002 dollars). Yet the community banking sector still accounts for 94 percent of banking organizations c. Future of the industry:- The burden of reporting and other regulatory requirements will fall heavily and disproportionately on small banks unless remedial action is taken. Further advances in information technology will permit the development of new products, BANK, and risk- management techniques but may also pose important competitive and supervisory issues. Nonbank entities will continue to offer bank-like products in competition with banks, raising a new the question of whether banks are still “special” and, more fundamentally, whether banks are sufficiently different from nonbank firms to justify
  • 15 the maintenance of a safety net for banks. It is useful, therefore, to try to chart the course of the banking industry in the next five to ten years and to consider what policy issues the industry and regulators will face. They are mindful of the many financial predictions that were once offered with confidence but turned out to be wrong or premature. This study is perhaps best described as an exercise in strategic thinking. Its approach is to analyze what has happened in the recent past, consider in detail reasons for expecting recent trends to continue or to change, and draw the consequences for bank and regulatory policies. The future-of-banking study addresses three broad questions: 1. What changes in the environment facing banking can be expected in the next five to ten years? 2. What are the prospects for different sectors of the banking industry in this? anticipated environment? Because the banking industry is not monolithic and different segments of the industry have, to some degree, different opportunities and vulnerabilities, the study considers separately the prospects for large, complex banking organizations; regional and other midsize banks; community banks; and limited- purpose banks. 3. What policy issues are the industry and regulators likely to face in the years ahead? Separate consideration is given to Origin of the Organization:- The Bank Of Rajasthan Ltd. was established at Udaipur, the city of lakes in Rajasthan on the auspicious day of Akshya Tritiya on May 8, 1943. The credit for the birth of the Bank goes to, the then finance minister of the erst-while Mewar Government, late Shri Rai Bahadur P.C. Chatterji, who persuaded The Mansingka brothers of Bhilwara for establishing a joint stock bank with its registered Office at Udaipur. The Bank was established with an initial capital of Rs.10.00 lacs. Late Seth Shri Govind Ram Seksaria, an eminent Industrialist of the country, was the founder Chairman. The first Broad of Directors comprised such men of eminence as Shri Rai Bahadur Seth Rameshwarlal Ji Duduwala, Seth Shri Subhhag Mal Ji Lodha besides the Mansighka brothers, Seth Shri Pusa Lalji Mansighka and Seth Shri Damodar Lal ji Mansighka. The
  • 16 other members of the board were Major Rajadhiraj Amar Singhji of Banera and the then Accountant General of Mewar,Rai Bahadurlala Sukhdayalji. In line with the contemporary practice of naming the bank after the location or princely state, the suggested names for the bank were Bank of Mewar State or Bank of Udaipur. The promoters, being very clear in their vision, expressed the view that the word 'Rajasthan' will be more advantageous in future for expanding activities in other princely states since under the new constitution grouping of the then local princely states was expected under one umbrella. As now is history, the individual princely states were merged under the final name for the state - Rajasthan. The naming of the bank, The Bank of Rajasthan Ltd., glaringly reflected the foresight of the promoters Growth and Development of the Organization: - • In the year 1948, the Bank was included in the second schedule by the Reserve Bank of India • .In 1955, the Bank was given license under Section 22 of Banking Regulation Act, 1949 by the Reserve Bank of India (RBI). • The Bank was among the first banks to take banking at the door step of customers by introducing the concept of mobile branches, when it opened its first mobile branch in Japer on 5th August, 1960. • The Bank received license to deal in foreign exchange in 1973 from the RBI. • The Bank was among the first banks in the private sector to have been assigned Lead Bank responsibility which it shared with an associate of State Bank of Beaker & Jaipur in Udaipur District. • The Bank became one of the earliest banks in private sector sponsoring any rural (Gramin) bank, when it established the Mewar Anchlik Gramin Bank in Udaipur District in Rajasthan on 26th January, 1983. • In 1993, the Bank received authority to deal as class-I merchant Banker. • The currency chest of the Bank was also started in the year 1993 . • Bank's 1st, 100th, 200th,300th and 400th branches were opened in the year 1943, 1973, 1980, 1997 and 2006 at Bhilwara, Barmer, Jodhpur(Sardarpura), Cochin and Jaipur(Nirman Nagar) respectively.
  • 17 • The bank achieved a unique distinction when its C-scheme, Jaipur branch qualified for ISO-9002:94 certification (quality system certified) by DET NORSKE VERITAS (DNV) LONDON U.K in 1997. • The Bank started its first ATM services in the series of Quality services to its customers at C-Scheme Jaipur branch from 1st July 1998. For 65 years, it has been our endeavor to achieve the growth on consistent basis (see Table). With 463 online branches nationwide the Bank is the largest private sector. Our Growth over Five Decades: ( Millions) Dec. Dec. Dec. Mar. Mar. Mar. 60 70 80 90 2000 2009 Deposits 53.63 196.05 1256.48 7204.39 32421.02 138493.47 Advances 26.33 115.44 720.06 3642.31 17284.41 74338.76 Capital 0.92 2.00 3.00 17.50 627.62 1344.58 Reserves 0.80 2.31 8.42 82.55 1936.13 8041.56 No. of Branches 36 70 210 274 306 463 *including Capital Reserve The Central Office of the bank is operating in its own building located at C-3, Sardar Patel Marg, C- Scheme, Jaipur 302001 (Rajasthan, India). Present Status of the Organization:- The population groupwise classification is given hereunder : Branches (as on) * Offsite ATMs (as on) Onsite ATMs (as on) Category# 31.03.200 31.03.200 31.03.200 31.03.200 31.03.200 31.03.2009 8 9 8 9 8 Metropolitan 142 142 19 19 25 29 Urban 19 19 2 2 16 20 Semi-Urban 90 90 2 2 16 20 Rural 102 102 2 2 2 3 Total 463 463 29 29 67 82
  • 18 # Reclassified as per Part-II of the Uniform Code No. (Population range wise) circulated vide RBI letter no. DESACS.BSD.7070/03.09.62/2005-06 dated 12.06.2006. * Including six service branches (Delhi, Jaipur, Jodhpur, Kota, Mumbai & Ambala). Market profile of the organization:- Bank of Rajasthan provides various financial products and services. It Treasury. The Retail Banking segment provides various deposit products,including savings accounts, current accounts, fixed deposits, and demat accounts. It also offers auto, personal, commercial vehicle, home, gold, and educational loans; loans against securities, property, and rental receivables; and health care finance working capital finance, construction equipment finance, and warehouse receipt loans, as well as credit cards, debit cards, depository, investment advisory, bill payments, and transactional services. In addition, this segment sells third party financial products, such as mutual funds and insurance, as well as distributes life and general insurance products through its tie-ups with insurance companies and mutual fund houses. The wholesale banking segment provides loans, non-fund facilities, and transaction services to large corporate, emerging corporate, small and medium enterprise, supply chain, public sector undertaking, central and state government departments, and institutional customers. It offers deposit and transaction banking products, supply chain financing, working capital and term finance, agricultural loans, and funded, non-funded treasury, and foreign exchange products. These segments services include trade services, cash management, money market, custodial, tax collection, and electronic banking. In addition, it provides correspondent bank services to co-operative banks, private banks, foreign banks, and regional rural banks; and wealth management products for non-resident Indians. The Treasury Services segment operates primarily in areas, such as foreign exchange, money market, interest rate trading, and equities. As of March 31, 2009, Bank of Rajasthan had a network of 463 branches and 111 automated teller machines in India.
  • 20 RESEARCH METHODOLOGY All the findings and conclusions obtained are based on the survey done in the working area within the time limit. I tried to select the sample representative of the whole group during my job training. I have collected data from people linked with different profession at Ambala RESEARCH PLAN: Preliminary Investigation: In which data on the situation surrounding the problems shall be gathered arrive at · The correct definition of the problem. · An understanding of its environment. Exploratory Study: To determine the approximate area where the problem lies. RESEARCH DESIGN: Research was initiated by examining the secondary data to gain insight into the problem. By analyzing the secondary data, the study aim is to explore the short comings of the present system and primary data will help to validate the analysis of secondary data besides on unrevealing the areas which call for improvement. DEVELOPING THE RESEARCH PLAN:
  • 21 The data for this research project has been collected through self Administration. Due to time limitation and other constraints direct personal interview method is used. A structured Questionnaire was framed as it is less time consuming, generates specific and to the point Information, easier to tabulate and interpret. Moreover respondents prefer to give direct answers.In questionnaires open ended and closed ended, both the types of questions has been used. COLLECTION OF DATA: 1: Secondary Data: It was collected from internal sources. The secondary data was collected on the basis of organizational file, official records, management books, preserved information in the company’s database and website of the company. 2: Primary data: All the people from different profession were personally visited and interviewed. They were the main source of Primary data. The method of collection of primary data was direct personal interview through a structured questionnaire & through telephonic conversation SAMPLING PLAN: Since it is not possible to study whole universe, it becomes necessary to take sample from the universe to know about its characteristics. f Sampling Units: Different professionals Chartered Accountants, Tax  Consultants, Lawyers, Business Man, Professionals and House Wives of Ambala L Sample Technique: Random Sampling.  R Research Instrument: Structured Questionnaire.  S Contact Method: Personal Interview. 
  • 22 . SAMPLE SIZE: My sample size for this project was 200 respondents. Since it was not possible to cover the whole universe in the available time period, it was necessary for me to take a sample size of 200 respondents. QUESTIONNAIRE Dear respondent this questionnaire is meant for the purpose of research on the topic“RETAIL BANKING & EVALUATION ON THE FINANCIAL PERFORMANCE OF BANK OF RAJASTHAN” for a continuous evaluation of summer internship as part of MBA (G) program of AIMT,K.U.K University. It will be assured that the data collected will not be misused. Name:------------------------- Contact No:-------------------------- Q 1 What is your Occupation? (a) Business (b) Salaried (c) Self Employed (d) Others Q 2 What is your Monthly Transaction in your account ? a) 2-5 lakhs b) 5-10 lakhs c) 10-20 lakhs d) 20 lakhs and above Q 3 Do you have a Saving Account? a) Yes b) No Q 4 In Which Bank? a) HDFC b) ICICI c) Bank of Rajasthan d) Others
  • 23 Q 5 Which Factors do you consider for opening a Savings Account? a) Accessibility b) Minimum balance c) ATM Facility d) other reasons Q 6 Which mode of transaction do you avail of frequently? a) Cheque b) Pay Order c) DD d) Other modes Q 7 Which types of transaction do you make ? a) Within City b) Outside City c) Both Q 8 Does your bank assist you in case of any problem? a) Yes b) No RETAIL BANKING
  • 24 Treating retail financing as a major tool for keeping pace with the changing financial scenario, your Bank has stepped in for larger coverage by introducing several products viz. consumer loans to institutional employees, mortgage loan, home loan, education loan and vehicle loan. During the financial year 2008-09 an aggregate sum of Rs. 24610 lacs was disbursed touching total advances under retail sector to the tune of Rs. 84418 lacs. With the changing market conditions the Schemes were revamped on regular basis. During the year 2008-09 Bank has disbursed housing loan of Rs. 4842 lacs. The total housing loan has reached to Rs. 28716 lacs by 31st March, 2009. The Retail Banking business of the Bank is divided into following sub-units: Retail Liabilities Retail Assets Cards The focus of the Retail Banking Department is to : 1. Increase share of Retail Deposits 2. Increase share of Retail Assets 3. Increase Fee Based Income In order to achieve the above mentioned, the following strategies are used: 1. Introduce New Products based on Customer Need and to address targeted segments. 2. A strong Sales Focus. 3. An extensive network and effective utilization of the banking channels. RETAIL ASSEST The Retail Assets portfolio of the Bank grew from Rs. 8,928 crores on 31 March 2007 to Rs. 13,592 crores on 31st March 2008, a growth of 52%. The segment constitutes 23% of the Bank's total loan portfolio on 31 March 2008 of which 79.83% is secured and 20.17% comprises unsecured loans. Retail loans are extended by the Bank through 70 Retail Asset Centres (RACs) in select cities of the country, as also through the Bank's branches in other cities and towns. The Bank's strategy of focusing on the prime customer segments and staying away from small ticket loans, and the deployment of robust credit and back-office processes, has contributed to the
  • 25 continued health of the retail asset portfolio. CARDS The Cards business of the Bank comprises two key products -credit cards, debit cards, . DEBIT CARD As principal member to VISA the Bank has been issuing .International Debit Cards to its customers, which also serve as.ATM cards. Bank’s Debit Cards are accepted in more than 170 countries. Customers are enjoying free of cost cash withdrawal and balance enquiries from 1.4.09 on all ATMs in India and can use the card at any of the more than 3.26 lacs Merchants establishments in India and 26.85 million points of sale world over. The number of Debit Cards has increased from 234647 to 312180 during the year under report. The Bank offered innovative schemes to customers to improve usage of debit card at merchant establishments during the year under report. CREDIT CARD Bank has come out with two new unique variants of Credit Cards namely (a) Corporate Credit Card with Corporate Liability (CCCL). (b) Corporate Credit Card with Individual Liability (CCIL). These globally accepted cards have been launched with various salient features including 50 days grace period, Rs. 200/- Cash Back on mere activation and Zero percent Fuel Surcharge at any Petrol Pumps across the Country besides free Insurance coverage on Air accident of Rs. 20 lakh and Rs. 5 lakh on Road accident. Free Hospitalization Expenses are covered up toRs.50,000/- in case of rail or road accident, Free Baggage Insurance covered up to Rs. 15,000 for loss of baggage during Air Travel and Free Purchase Protection covered up to Rs. 40,000/- against loss/ damage of goods. Free Credit shield protection is up to Rs. 50,000/- in case of road accidental death of cardholder. Similarly various promotional schemes were offered for
  • 26 the present Gold Credit Card and Silver Credit Card holders.Consequently, the Credit Card Customer base has touched 25529 figures with sourcing of 7608 new cards, which shows 45% increase during the year. The Card authorization and personalisation is outsourced to M/s. Electra Card Services and CMS Computers Ltd. Specialized SMS alerts are being sent on regular basis to credit card customers on events like birthdays, statement dispatch, value transaction alerts, outstanding balances reminders with due date. e-statement / e-Messages facility is also extended to the customers. Bank is also planning to come out with various reward programmes in the coming financial year with a view to increase the card base customer and usage cycle. Bank is also geared up to come out with new variant of the credit card in form of co-branded cards. RETAIL LIABILITES– An overview of the products.The Bank has launched customized savings account products for various categories of customers – Senior Citizens, Students & Trusts/NGOs besides a very competitive offering in the Salary Accounts category. SEGMENTATION OF THE SAVING BANK A Product Manger is in-charge of one or more of these segments. SAVING BANK ACCOUNTS "Savings Bank Account " is deposit providing any time liquidity with interest earnings. An Individual singly or jointly, H U F, Trust, Societies, Associations etc. can open a savings bank account with a Eligibility prescribed minimum balance. A minor who has attained the age of 10 years can also open a savings bank account independently. Interest Attract interest , presently @ 3.5% p.a. paid at half yearly interval Tax Deduction at No Source Nomination Accepted Transferability Available within Bank's Branches. Option Other facilities 1)Can be used for secured overdraft facility.
  • 27 2)Standing Instruction Facility is accepted. 3)Debit cum ATM Card, Mobile Banking, Internet Banking, SMS Services are available. RAJBANK SAVING PRIVILEGE ACCOUNT The Bank has introduced a new Savings Bank Deposit product. W.e.f. 16.04.2007 under the name “Rajbank Saving Bank Privilege Account” . The basic features of the new product are outlined below: The new SB accounts should be opened with a minimum of Rs.25,000/-.& a minimum monthly average balance of Rs.25, 000/- will have to be maintained in the account and a penalty of Rs.100/- p.m. will be charged for non maintenance of the prescribed Minimum Average Balance. The account holders of this scheme will enjoy the following privileges. 1. Free Demat account (Till the account continues) 2. Free ABB facility 3. Free Cheque book 4. Free Credit Card 5. Free ATM cum debit Card 6. Free Internet Banking facility 7. Free Sweep in/sweep out facility 8. Free DD/Pay order upto Rs.25000/- in a month through Transfer mode . All other charges as applicable will be recovered. Auto sweep will be allowed on balance of over Rs.5,000/- only in case of linked FFD account. RAJBANK SMALL SAVING ACCOUNTS (NO FRILLS) A No-Frills Savings Account
  • 28 1. Name of Account "Rajbank Small Savings Account (RBSS account)" 2. Eligibility Individuals - singly or jointly 3. Minimum initial Deposit Account can be opened with zero balance and even can run with zero balance without any requirement of keeping minimum balance. 4. Documents required The account will be opened with relaxed KYCnorms as per guidelines of RBI, in terms of which the accounts can be opened on thebasis of a) introduction from another account holderwhose account has been subjected to fullKYC norms and which is at least 6 monthsold and has run satisfactorily , or b) any other evidence as to the identity &address of the customer subject to satisfaction of the branch. 5. Maximum balance Rs.50,000 (Rs. fifty thousand )at any point of time.The account will be treated a regular Savings account in case this balance is exceeded. 6. Aggregate Credits The aggregate credits in the account duringone year should not exceed Rs. 1,00,000 (Rs. one lac) and if this limit is exceeded, the account willbe treated as regular SB account. 7. Product availability The Account will be made available at all our branches. 8. Cash withdrawal facility On a request in writing from the account holders of these accounts Bank mayprovide one cheque book( 20 leaves ) per annum free of charge with the condition that no further free cheque book will be issued to them and subsequent cheque books may be provided after recovering usual charges. However, cash withdrawals will be allowed upto a maximum of 5 withdrawals per month either through Withdrawal Slips or Cheque leaves. 9. Pass book At the time of opening the account customers will be issued a pass book. The pass book will have the Photograph of the account holder duly authenticated by the officer of the branch. In the case of illiterate customers, alongwith
  • 29 Photographs, his/ her Left/ right thumb impression will be obtained on the pass book as well as on the account opening form duly authorised by the concerned officer of the branch. 10. Collection of Cheques a)Third Party Cheques: Third party cheques drawn in favour of customer upto a value of Rs.25000/- (Rs. twenty five thousand) per transaction will allowed. b)Out station cheques: Normally collection of cheques will not be encouraged in this account. However, no charges will be levied for instruments upto Rs.2500/- drawn on our branches. In case of instruments drawn on other banks actual charges levied by other bank plus out of pocket expenses will be recovered. 11. Account closure charges Nil 12. Issue of Pay order/ DD/ Banker's cheques 50%of charges as applicable in the case of normal SB account. 13. Cheque return charges In case of cheques deposited by customer in his account being returned unpaid, charges as applicable in the case of normal SB account will be recovered. 14. Nomination facility Nomination facility will be available as in case of normal SB account. 15. General Condition If the conditions relating to Maximum Balance and total credits in RBSS Account opened by a customer are violated the account will cease to be a No- frill Account. Further operations will be permitted only upon implementation of full KYC norms except for withdrawals of the entire balance for closure of the accountthrough account Payees Pay order or Demand Draft. RAJBANK SAVING ACCOUNT Rajbank – Savings Plus Account , a unique high end SB product for all individuals (Jointly or severally) including professionals such as Doctor, Lawyer, C.As., Executive
  • 30 working in MNC, Software Companies, Public / Private Sector and business people, High Net Worth Individuals, CEOs, IAS and IPS. Monthly Average Minimum Balance - Rs. 5000.00 Privileges: 1. Free Life Time Debit cum ATM Card a.No Renewal Charges b.Free Cash Withdrawal on Banks’ own ATMs & ATMs of Cash Tree, Bi-lateral Member Banks e.g. SBI Group, Axis Bank, Corporation Bank etc 1. Free ECS ( Credit / Debit) 2. Free Inward NEFT / RTGS remittances 3. Free Demat account – No AMC till continuance of the account 4. Free Internet Banking 5. Free ABB facility other than business transaction 6. Free Standing Instructions 7. Free Statement of Account on E-Mail / Passbook 8. Free SMS Alerts 9. Free Mobile Facility ( Account Position) 10. Free DD/Pay Order - equivalent to average monthly balance or Rs. 5,000/- in a month whichever is higher. Similarly, in quarter the facility can be used 3 times of MAB or Rs. 15,000/- in a quarter, whichever is higher. 11. Group Accidental Cover upto Rs. 50000/- ( cost to be borne by the Account Holder) RAJBANK EASY SWEEP SAVING ACCOUNT Monthly Average Minimum Balance ( MAB) - Rs. 10,000/- Privileges:
  • 31 1. The amount in multiples of Rs. 5,000/- above the prescribed limit shall be transferred to FFD A/c with reverse sweep in multiples of Rs. 5,000/- 2. Free Life Time Debit cum ATM Card No Renewal Charges Free Cash Withdrawal on Banks’ own ATMs & ATMs of Cash Tree, Bi-lateral Member Banks. 3. Free ECS ( Credit / Debit) 4. Free RTGS / NEFT remittances 5. Free Demat account – No AMC till continuance of the account. 6. Free Internet Banking 7. Free Statement of Account on E-Mail/ Pass Book 8. Free SMS Alerts 9. Free Mobile Facility ( Account Position) 10. Free DD/Pay Order - equivalent to Monthly Average Balance or Rs. 10,000/- in a month, whichever is higher. Similarly, in quarter the facility can be used 3 times of MAB or Rs. 30000/- , whichever is higher Wealth Management The Focus of the Wealth Management group is to increase fee income earned by the bank through cross sales of third Party Products. The Wealth Management Unit is further divided into two distinct parts the Financial Advisory Services and the Wealth Advisory Services. A dedicated research cell supports both these sub units. Financial Advisory Services These Services are pegged at the “mass affluent” customers at the retail end of the market. The bank offers Mutual Funds, Bonds and General Insurance Advise under these Services. The Bank is having an arrangement with M/s. United IndiaInsurance Company Limited, which is one of the leading public
  • 32 sector non-life insurance service providers in the country and having a large network of its branches/divisional offices across the country. The Bank has also entered into an agreement for selling of Group Mediclaim Policies of United India InsuranceCompany for its customers in the name of “RAJBANK AROGYA NIDHI” which has special features and have an edge over other homogeneous Health Insurance Products available in the market with lower insurance premium and cover for maximum persons of a family. During the FY 2008-09 total premium of Rs. 3.50 crores was booked through our branches and the Bank earned income of Rs. 0.63 crore by way of commission and reimbursement of publicity expenses. A separate sales channel of Investment Advisors and the Bancassurance Advisors Online trading is also being launched shortly to facilitate equity investments for the retail customers drives the sales at the branch level. These advisors are specialists in their respective fields and are AMFI or IRDA certified. The services of the Financial Advisory group LIFE INSURANCE: The Bank has tied up with M/s Aviva Life Insurance Company for referral arrangement wherein AVIVA uses our infrastructure, database and technology for this purpose & deploy/provide dedicated sales force for the purpose, which take leads from the Bank and convert them into sales.During the FY 2008-09 total annualized premium of Rs. 49.94 crores was booked through our branches and the Bank earned income of Rs. 5.90 crores towards commission on business booked. From April 2009 & onwards, Bank will act as a Corporate Agent for AVIVA and It is expected that life insurance business will increase substantially. The Bank expects to receive handsome income by way of commission during current year. Wealth Advisory Services This service focuses on the “Seriously Rich” segment and caters to all the banking and investment needs of a customer. Along with Mutual fund and Bond investments, Mohur also offers investments in equity through Non – Discretionary Portfolio Management
  • 33 services. Mohur aims at providing a one-point contact for all banking and investment services of its customers. The sales are driven through a channel of Wealth Managers and Service Managers working together to deliver a seamless service to the client. Based on the research recommendations of the research team the wealth managers manage 16 the portfolios of their clients. The day-to-day transactions are taken care of by the service manager. Besides investments the Wealth Manager is also responsible for cross selling other products of the bank i.e. loans, cards etc. DEMAT SERVICES: The Bank has been providing depository services to its customers since Sept. 2000 by becoming the Depository participant (DP) of Central Depository Services (India) Limited (CDSL). Presently all branches of the Bank are providing Demat facility. During the Financial Year 2008– 09, Bank has earned revenue to the tune of Rs. 2.12 crores by providing services to its 57345 Depository customer accounts. ON-LINE TRADING OF SECURITIES: The Bank has tied up with IDBI Capital Markets Ltd; and Religare Securities Ltd to provide online trading facility to its customers. As a part of the alliance, customers of the Bank are provided with the facility of a 3-in-1 online investing account wherein the Savings Bank account, Demat Account and the trading account are interlinked. With this facility, the Bank’s customers can enjoy the convenience of trading and managing their portfolio from any part of the world. ECGC LTD. The Bank is also having Bancassurance arrangement with the Export Credit Guarantee Corporation of India Ltd. for soliciting and procuring business of ECGC General Insurance policies for & on behalf of them on agency basis. MUTUAL FUNDS: Due to buoyancy in capital markets mutual funds have delivered good returns to its investors and hence mutual funds have become
  • 34 more popular in the market. Keeping in view the requirement of the customers, Bank has made arrangements with the following Mutual Funds:- 1. LIC Mutual Fund 2. Prudential ICICI Mutual AMC 3. Principal PNB Mutual AMC 4. ING Vysya AMC 5. Reliance Mutual Fund 6. Birla Sun Life Mutual Fund 7. DSP Merrill Lynch Mutual Fund 8. Sundaram BNP Paribas Mutual Fund 9. Franklin Templeton Asset Management (India) Pvt. Ltd. 10. TATA Mutual Fund 11. UTI Mutual Fund 12. Edelweiss Mutual Fund 13. Kotak Mahindra Mutual Fund. During the Financial Year 2008-09, Bank has fetched total business of Rs. 22.50 crores and has earned commission of Rs. 25.34 lacs . WESTERN UNION MONEY TRANSFER: The Bank is providing Western Union Money Transfer services as a sub-agent. The services are available at all on-line branches of the Bank. The Bank earned gross income of Rs. 2.65 lacs during the year ended 31st March, 2009 from this activity. CASH MANAGEMENT SERVICE With good network of online branches and particularly in the State of Rajasthan many banks/customers are approaching for having arrangements with the Bank for Cash Management Services. Accordingly, Cash
  • 35 Management Services were provided to various banks/institutions like ICICI Bank, IDBI Bank, ING Vysya Bank, Corporation Bank, HDFC Bank, Centurion Bank, Kotak Mahindra Bank, ICICI Home Finance Company, GE Capital, Reliance Communication Infrastructural Ltd., Tata Finance Ltd. etc. BOOKING OF RAILWAY TICKETS OVER INTERNET In the pursuit of our endeavour to provide our esteemed customers with state of the art technology-enabled products and services to transact from the comfort and convenience of home or office or transact even while on move, the Bank has signed an agreement with Indian Railway Catering & Tourism Corporation (IRCTC) to provide facility to our valued customers for booking Railway Tickets over internet. STAMP FRANKING ACTIVITY: The Bank is undertaking the business of Stamp Duty collection by providing stamp- franking services through various branches in the States of Maharashtra, Rajasthan, Gujarat, Goa & Bihar. The Bank was pioneer in providing this facility in the State of Maharashtra in 2004. On receiving an overwhelming response of public in Maharashtra State, the Bank has further expanded Stamp Franking activity in other States. The Bank plans to commence this activity in the States of Andhra Pradesh & Haryana in due course. The Bank has generated revenue to the tune of Rs. 3.15 crores through this activity SALIENT FEATURES: • Cost Free Service , No additional charges required to pay. • No chances of fraud / Fake Document. • Risk free service. • Facility available at 62 selected branches(*). REAL TIME GROSS SETTLEMENT CHARGES
  • 36 (RTGS) / NATIONAL ELECTRONIC FUND TRANSFER (NEFT) Bank is providing RTGS / NEFT facility which is an electronic settlement system without involvement of papers. The payment instructions between banks are processed and settled individually and continuously by Reserve Bank of India. Looking to the wide acceptability of the system with low per transaction cost our Bank became member of RTGS / NEFT. All branches are RTGS / NEFT enabled. e-PAYMENT OF TAXES ON BEHALF OF THE CUSTOMERS. To facilitate the customers for effecting payment of taxes by electronic mode, the Bank has been providing the facility through NSDL w.e.f. 01.08.2008. Customers desirous to avail this facility can contact any of our branches to effect remittance which has been operationalised through our Nodal Branch at M.I. Road, Jaipur MOBILE BANKING SMS Alert/Mobile Banking: Bank of Rajasthan provides SMS Alert/Mobile Banking facility to its customers. Customers willing to avail the facility may get registered for the facilities through their parent branch. Registration Form is also available in Forms Center section of the website. The silent features of both the schemes are as under SMS Alert Facility: In SMS Alert services, SMS will be sent to registered customer’s mobile automatically. Presently following information is provided under SMS Alert Services: 1. Day end Balance Information 2. Transaction Alert (Over the prescribed ‘Default threshold Limits’) 3. Other Charges / Interest debited/Credited Alerts
  • 37 4. Internet Banking Related Alerts 5. ATM related Alerts Mobile Banking: For Mobile Banking services, registered customer are required to send request SMS on Bank’s designated mobile number and in response can receive the following information: 1. Balance Enquiry 2. Last 5 Transactions 3. Cheque Status 4. Request For Cheque Book 5. Request for Statement by Post Customers having more than one account can avail this facility for these accounts by having one account as Primary account and other accounts as linked account. Customer can get the above information for Primary as well as linked accounts through Mobile Banking. INTERNET BANKING All Branches/ Offices of the Bank have been provided with email functionality on Bank’s domain and networked under the close user group (CUG). Service tax submission has been centralized. The Centralised pay roll system has also been implemented in the Bank. The Cheque Truncation System has been made live in National Capital Region, Delhi. The centralized account DD issue and payment system has been implemented. Online share Trading gateway facility is being provided through two brokers viz.. M/s IDBI Capital & M/s Religare. Cash Management Software has been developed in-house and running live. CALL CENTER Bank is going to start live operations of own call center and implementation process is going on for IVRS and Medius. Call Center will be made live shortly.
  • 38 FINANCIAL PERFORMANCE HIGHLIGHTS • Profit after tax up 62.52% to Rs.1,071.03 crores. • Net Interest Income up 76.07% to Rs.2,585.35 crores. • Fee & Other Income up 65.91% to Rs.1,367.75 crores. • Deposits up 49.06% to Rs. 87,626.22 crores. • Demand Deposits up 70.84% to Rs. 40,026.99 Crores. • Retail Assets up 52.24% to Rs. 13,591.68 crores. • Network of branches and extension counters increased from 561 to 671. • Total number of ATMs went up from 2341 to 2764. • Net NPA ratio as a percentage of net customer assets down to 0.36% from0.61%. • Earning per share (Basic) increased from Rs. 23.50 to Rs 32.15. • Proposed Dividend up from 45% to 60%. • Capital Adequacy Ratio stood at 13.73% as against the minimum regulatory norm of 9%. CAPITAL MANAGEMENT The Bank believes in the continual enhancement of shareholder value and its capital management framework helps to optimize the use of capital by ensuring the most favorable allocation of capital through an appropriate mix of products and services. The
  • 39 Bank focused on developing an asset structure which was sensitive to the importance of enlarging the proportion of low risk weighted assets in order that capital is more efficiently deployed. During the year, the Bank continued to attract investor interest from domestic and foreign institutional investors, with a perceptible increase in trading volume and price. To augment capital for maintaining the momentum of business growth, the Bank raised equity capital of Rs. 4,534 crores in 2007-08 through simultaneous offerings of follow-on Global Depositary Receipts (GDRs), a Qualified Institutional Placement (QIP) and a preferential allotment of equity shares to the promoters of the Bank. In addition, the Bank has also raised US Dollars 60 million (equivalent to Rs. 243.12 crores) as Upper Tier II Capital from Singapore under its MTN Programme. As of 31st March 2008, the Bank had implemented the Revised Framework of the International Convergence of Capital Measurement and Capital Standards (or Basel II). In terms of RBI guidelines for implementation of Basel II, capital charge for credit and market risk for the financial year ending 31st March 2008 will be required to be maintained at the higher of the levels implied by Basel I and Basel II. In terms of regulatory guidelines on Basel II, the Bank has computed capital charge for operational risk under the Basic Indicator Approach and the capital charge for credit risk estimated under the Standardised Approach. The Bank's Capital Adequacy Ratio was 13.73%, as on 31st March 2008, against the minimum rgulatory requirement of 9%. The following table sets forth the riskbased capital, risk-weighted assets and capital adequacy ratios computed as on 31st March 2008 in accordance with the applicable RBI guidelines under Basel I and Basel II. (In Rs. Crore)
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49 SCHEDULE –17: BASIS OF PREPARATION OF FINANCIAL STATEMENTS: The financial statements have been prepared on historical cost basis, unless otherwise stated, by following the going concern concept and are in accordance with statutory provisions. The accounting and reporting policies of the Bank used in the preparation of these financial statements conform to the statutory requirements, the Generally
  • 50 Accepted Accounting Practices prevailing within the banking industry in India (“Indian GAAP”), and the guidelines issued by Reserve Bank of India (“RBI”) from time to time.The preparation of financial statements requires the management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) as of the date of the financial statements and the reported income and expenses during the reporting period. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable. Future results could differ from these estimates. SIGNIFICANT ACCOUNTING POLICIES 1. Revenue Recognition: 1.1 Income and expenditure are generally recognised on accrual basis. In case of Non Performing Advances and Investments, such income is accounted for only on realization in accordance with the guidelines issued by RBI. 1.2 Hitherto, the Bank recognised interest on matured term deposits at the time of renewal / withdrawal of the same. In pursuance of RBI circular DBOD.No.Leg.BC.34/09.07.005/2008-09, the Bank has provided interest on outstanding matured term deposits as on 31st March 2009 at the savings bank rate of 3.50% for the year. 1.3 In accordance with the guidelines issued by the RBI, prior period disclosures are made in respect of any item which exceeds one percent of the total income/total expenditure as, accounted for in the profit and loss account. 2. Investments: 2.1 The investment portfolio of the Bank is classified in accordance with the Reserve Bank of India (RBI) guidelines, into “Held for Trading”, “Available for Sale” and “Held to Maturity” categories. These are further identified as Performing or Non- performing as per Income Recognition, Asset Classification and Provisioning norms of RBI. However, for disclosure in the balance sheet, these are classified under six groups as follows : - Government securities - Other approved securities - Shares - Debentures and Bonds - Subsidiary/sponsored institution
  • 51 - Others 2.2 Basis of Classification: Classification of an Investment is done at the time of purchase into following categories: 2.2.1 Held to Maturity These comprise of Investments which the bank intends to hold till maturity. 2.2.2 Held for Trading Securities which are held for resale within 90 days from the date of purchase. 2.2.3 Available for Sale Investments which cannot be classified in the above two categories. 2.3 Transfer of Securities between categories: The transfer / shifting of securities between the three categories of Investments is accounted at the least of acquisition cost/ book value / market value on the date of transfer and the depreciation, if any, on such transfer is fully provided for. 2.4 Valuation: The valuation of Investments is made in accordance with the RBI guidelines. 2.4.1 Held to Maturity The Investments classified under this category are valued at acquisition cost. The excess of acquisition cost/book value over the face value is amortised equally over the remaining period of maturity. 2.4.2 Available for Sale Investments under this category are valued scrip-wise and net depreciation in each classification of securities is provided for, while the net appreciation in each classification of securities is ignored. 2.4.3 Held for Trading Investments under this category are valued scrip-wise on monthly basis and net depreciation under each classification is provided for, without adjusting the book value of the securities. However, unrealized gain on such valuation is ignored. 2.5 Recognition of Income & Expenditure 2.5.1 Dividend on equity and preference shares is recognised as income on receipt of the same and income from units of mutual fund is accounted on cash basis in accordance with the RBI guidelines. 2.5.2 The profit or loss on sale/redemption of Investments is taken to the Profit and Loss Account. However, in case of profit on sale / redemption of Investments from
  • 52 “Held to Maturity” category, an equivalent amount is appropriated to the “Capital Reserve”. 2.5.3 In respect of securities included in any of the three categories of Investments where interest/principal is in arrears for more than 90 days, income is not reckoned and appropriate provision for the depreciation in the value of the Investments is made, as per prudential norms applicable to non-performing advances. The depreciation / provision requirement in respect of non-performing Investments is not set off against the appreciation in respect of performing Investments. 2.5.4 Brokerage, incentive, front-end fees, etc. received on purchase of securities are reduced from the cost of Investments. 2.5.5 Expenses such as brokerage, fees, commission or taxes incurred at the time of acquisition of securities are charged to revenue. 2.5.6 The excess of acquisition cost/book value over the face value on “Held To Maturity” category is amortised in “Schedule 14 – Other Income under sub-head – Profit /(Loss) on Revaluation of Investment” as a deduction in conformity with RBI guidelines. The book value of the securities has been reduced to that extent. 2.6 Determination of Cost Cost of Investments is determined on the basis of weighted average cost method. 3. Advances – Provisioning & Classification: 3.1 Advances are classified as standard, sub-standard, doubtful or loss assets and provisions for losses are made on substandard, doubtful and loss assets as per the prudential norms of RBI as under : 3.1.1 Sub-standard 10%/20% of the amount outstanding as per books. 3.1.2 Doubtful 100% of the unsecured portion of the advance plus 20% to 100% of the secured portion depending upon the period for which advance has been considered doubtful as under : Upto one year : 20% One to two years: 30% More than two years: 100% 3.1.3 Loss Assets 100% of the amount outstanding as per books (net of DICGC/ ECGC claims, FDRs, Cash Margins etc. if any). 3.2 Advances are net of unrealized interest on non performing advances, Bills Rediscounted, DICGC/ECGC claims received and provision made for non-performing advances.
  • 53 3.3 Provision in respect of standard advances is made, as per the guidelines of RBI as under and is included under the head “Other Liabilities and Provisions” under the sub- head “Others (including provisions)” Category of standard asset Rate of provisioning Direct advances to agricultural and SME sectors 0.25% All other loans and advances 0.40% 4. Fixed Assets/Depreciation: 4.1 Premises, (other than those which are revalued) and other fixed assets are stated at historical cost less accumulated depreciation. Cost includes incidental expenses related to the acquisition and installation of the asset. 4.2 Hitherto, the Bank provided for depreciation on immovable properties at the rates mentioned in Schedule XIV of the Companies Act, 1956. Rates of depreciation in respect of these properties have been arrived at in a manner so as to depreciate 95% of the revalued amount over their remaining estimated useful life. Residual life as on 31st March, 2008 Rate Upto 30 years 4.75% 31 – 40 years 3.07% 41 – 46 years 2.32% 47 – 52 years 2.02% 53 – 58 years 1.79% Above 58 years 1.63% 4.3 In accordance with the Guidance note on treatment of Reserves created on revaluation of fixed assets issued by the Institute of Chartered Accountants of India, the additional depreciation relatable to revaluation is adjusted against Revaluation Reserve by transfer to Profit & Loss account. 4.4 Leasehold land is amortised over the period of lease. 4.5 Fixed assets are depreciated to the extent of 95% of original cost. If the book value of any asset is less than 5% of the original cost or revalued amount, as the case may be, no further depreciation is provided on such assets. 4.6 Depreciation on Fixed Assets is provided on monthly pro rata basis from the month of acquisition. Depreciation is not provided on assets sold during the year.
  • 54 4.7 Depreciation on ATMs & Computers (including softwares forming integral part of hardware) is provided @ 33.33% on straight-line method basis in accordance with the guidelines of RBI. 4.8 Depreciation on all Other Fixed Assets is provided as per straight-line method basis at the rates prescribed in Schedule XIV to the Companies Act, 1956. 5. Non-Banking Assets Non-Banking Assets are shown at cost or net realisable value whichever is lower. 6. Foreign exchange transactions 6.1 Monetary Foreign currency assets and liabilities and outstanding forward exchange contracts, guarantees, acceptances, endorsements and other obligations are translated on the Balance Sheet date at the exchange rates notified by Foreign Exchange Dealers’ Association of India (FEDAI), as per the guidelines issued by RBI and the resultant gain/ loss is taken to the Profit and Loss account. 6.2 Foreign currency income and expenditure items are accounted at the exchange rates ruling on the date of transaction. 7. Employee Benefits 7.1 Annual contribution to Gratuity, Pension Fund and Provision for leave encashment are determined on the basis of actuarial valuation. 7.2 In respect of employees who have opted for Provident fund scheme, a matching contribution is made by the Bank. 8. Taxes on Income The provision for tax for the year comprises of, current tax liability computed in accordance with the applicable tax laws,appellate orders in favour of the Bank though contested by the tax department in some cases, as the case may be. Taxes include Deferred Tax Adjustment on account of timing differences between taxable income and accounting income and Fringe Benefit Tax. 9. Impairment of Assets The bank assesses at each balance sheet date whether there is any indication that an asset may be impaired. Impairment loss,if any, is provided in the profit and loss account to the extent the carrying amount of assets exceeds their estimated recoverable amount. 10. Earnings Per Share (“EPS”) Basic earnings per share is calculated by dividing the net profit or loss for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year.
  • 55 Share as required by Accounting Standard 20 “Earning Per Share.” 11. Segment Reporting The bank had hitherto identified business segments into three broad categories namely treasury operations, banking operations and others / residual. This was done on the basis of differences in the risk and reward in these three broad categories. Treasury Treasury includes the entire investment portfolio and also the dealing in Government Securities and Money Market Operations. Corporate/Wholesale Banking All advances (funded and non-funded) where the limit sanctioned or the outstanding as on 31st March, 2009 exceeds Rs.5 Crores or average annual turnover of last three years is Rs.50 crores or more are classified under Corporate / Wholesale Banking. Retail Banking Advances not classified under the Corporate / Wholesale Banking segment are included in the Retail Banking segment
  • 56
  • 58 Interpretation: Here we can see that the current liabilities of the bank is very high but on the other hand bank don’t have enough assets so the result is Working Capital of the Bank is decreasing year by year which is not a good sign for the bank. Its shows the bank don’t have a enough money to pay their day to day expenses. B) Working capital turnover ratio Interpretation: The working capital turnover ratio is used to analyze the relationship between the
  • 59 money used to fund operations and the sales generated from these operations. In a general sense, the higher the working capital turnover, the better because it means that the company is generating a lot of sales compared to the money it uses to fund the sales. In the case of BANK OF RAJASTHAN working capital turnover ratio is negative in most of the year only in the year 2004-05 is a positive as well as high. So its shows the bank has used a more funds in compare to generate sales which is not show a good sign for bank. 2) PROFITABILITY RATIOS A) OPERATING MARGIN Interpretation: In the year 2007-08 Operating Margin was 23.25, in the year 2006-07 it was 21.84. This shows that Operating profit margin is increasing which is good for the bank. Interpretation: Here we can see that the there is no much up and downs in Gross profit margin of BANK OF RAJASTHAN but In the year 2007-08 Gross Profit Margin has increased from 19.79 to 21.44, it’s a 8.43 % growth in gross profit margin of bank that shows the performance of bank is increasing which is a good sign for bank.
  • 60 Interpretation: Net profit margin of BANK OF RAJASTHAN is not up to mark. Although it has increased from 13.14 in the year 2003-04 to 14.33 in year 2004-05 but after the year 2004-05 to 2007-08 it is continuously decreasing which is a major issue of concern for bank 3) MANAGEMENT EFFECTIVENESS
  • 61 A) RETURN ON ASSETS Interpretation: Return on assets (ROA) is an indicator of how profitable a company is relative to its total assets. ROA gives an idea as to how efficient management is at using its assets to generate earnings. In the case of BANK OF RAJASTHAN ROA is decreasing from the year 2003-04 to 2006-07 but after the year 2006-07 it has increased so we can say that previously the bank was not utilize their assets efficiently but now the bank is doing which may be a good sign for bank in future. B) RETURN ON INCOME Interpretation: ROI tells that how much a firm has take back of their investment. More ROI means the company is performing well. In the case of BANK OF RAJASTHAN in year 2003 04 ROIwas highest which shows that bank was performing good in year 2003-04 but in the financial year 2007-08 ROI is lowest which refers that in year 2007-08 company didn’t earn as return as they had invested.
  • 62 C) RETURN ON CAPITAL EMPLOYED Interpretation: It simply shows that there is volatility on return on capital employed. But if we see from last year 2006-07 the return is 1.40% & now at present 2007-08 it has registered a robust growth rate of 33%. In short company is performing well. C) RETURN ON AVERAGE NETWORTH Interpretation: Here we can see that a fluctuation in Return on average net worth of BANK OF RAJASTHAN It has decreased in 2007-08 16.1 from 2006-07 21.8 . D) EARNING PER SHARE (RS)
  • 63 Interpretation: Earning per share is increasing year by year which is a good sign for an investors of BANK OF RAJASTHAN it shows that an investor can invest in BANK OF RAJASTHAN to get good profits. 4) LEVERAGE RATIOS A) DEBT EQUITY RATIO Interpretation: The debt equity ratio is calculated to measure the extent to which debt financing has been used in business. It indicates what proportion of equity and debt the company is using to finance its assets. As a genera rule there should be a mix of owner find and outside find. The BANK OF RAJASTHAN is having high debt equity ratio in the year 2003-04 and 2006-07 its means the bank was very aggressive in financing its growth with debt. B) FIXED ASSET TURNOVER RATIO
  • 64 Interpretation: Fixed assets are used in the business for producing goods to be sold. The effective utilization of fixed assets will result in increased production and reduced cost. Fixed Assets Turnover ratio is increasing which shows that fixed assets are efficiently utilized. In the case of The BANK OF RAJASTHAN the fixed asset turnover ratio is continuously increasing from the year 2005-06 to 2007-08 and in the year 2007-08 it was very high its reflects that bank was utilizing their assets in a efficient manner. 5) LIQUIDITY RATIO A) CURRENT RATIO Interpretation: Current ratio indicates the short term financial soundness of thecompany. It judges whether current assets are sufficient to meet the current liabilities.The company must be able to meet its current obligations out of the current assets. The standard current ratio is 2:1 it means the company should have such total current assets which are twice of their current liabilities but in the case of The BANK OF RAJASTHAN the current ratio is not match up with standard ratio and is not increasing continuously year by year it shows the bank doesn’t have enough assets to pay their liabilities. B) QUICK RATIO
  • 65 Interpretation: An indicator of a company's short-term liquidity. The quick ratio measures a company's ability to meet its short-term obligations with its most liquid assets. It is called liquid because it can be easily converted in to cash. The higher the quick ratio, the better the position of the company. It is said that standard ratio of liquidity must be 1:1 so we can ay that in the case of The BANK OF RAJASTHAN the ratio is more than standard ratio in every year. So its shows the bank is able to meet their short term obligation which is a good sign for bank. 6) TREND ANALYSIS Interpretation: If we analyze the trend of sales of bank so it’s increasing year by year and in the year 2007-08 it was 7005.31 and in the same years total Income and Net profit before tax also increases respectively so after seeing the trend of the sales, total income and net profit before tax of bank for last five years we can predict that in the future also these will increase and the overall performance of bank will be great. 7) TOTAL DEPOSITS
  • 66 Interpretation: Both Saving Bank deposits and current bank deposits is increasing year by year which is a good sign for the bank and it’s shows the image of bank is becoming more good in the eyes of customers and public and the customers have satisfied with the services of bank so the result they are keeping more faith on bank and that’s why they are depositing more money in the bank. 8) TOTAL ADVANCES Interpretation: This is a positive trend in Retail assets and Non Retail advances. 9) NET INTEREST INCOME
  • 67 Interpretation: Net Interest Income of the bank is increasing in every year and in the year 2007-08 is 2585; it has growth of 76.08 % from the year 2006-07 its shows that bank deposits are increasing or bank is earning more income from the interest of that deposit. FINDINGS • Working Capital of the Bank is decreasing year by year which is not a good sign for the bank • .In the year 2007-08 Operating Margin was 23.25, in the year 2006-07 it was 21.84. This shows that Operating profit margin is increasing which is good for the bank. • In the year 2007-08 Gross Profit Margin was 21.44, in the year 2006-07 it was 19.79. This shows that Gross profit margin is increasing which is good for the bank. • Net profit margin is increasing year by year. • Debt / Equity is decreasing. • Fixed Assets Turnover ratio is increasing which shows that fixed assets are efficiently utilized.
  • 68 • Current Ratio is increasing which is showing a sound financial position of the company. • Quick Ratio of the bank is increasing it shows that position of the bank is improving. • Sales of the Bank is increasing year by year in the year 2007-08 it was 70005.31 inthe same year Total Income and Net profit Before tax also increases respectively. • Both Saving Bank deposits and current bank deposits is increasing year by year which is a good sign for the bank. • This is a positive trend in Retail assets and Non Retail advances. • Earning per share is increasing which shows that a investor can invest in The BANK OF RAJASTHAN to get good profits. SWOT ANALYSIS STRENGTH H Good Brand Name of the company in all over India. H Flexible products H Expertise in the field of mutual fund H Sound financial resources of the company as well as sponsors. WEAKNESS S Less awareness regarding mutual fund among investors S Yet to build strong distribution network S Cannot tap rural market OPPORTUNITIES:
  • 69 Bank’s strong fundamentals, a country wide network of 463 fully computerized, on line branches, full range of financial products, strong customer franchise in markets served by it, dedicated 4000 plus employees and services rendered with a traditional, yet modern touch will continue to be key drivers of performance in the coming years. y Untapped rural market y THREAT Increasing competition both from domestic and international banks, technological upgradation to meet ever changing customer requirements, managing risk in the context of changing global financial markets, information security, enterprise management systems, benchmarking of services, managing human resources, are some of the key challenges identified by the Bank, for which effective steps have been already initiated by the Bank b The numbers of players are increasing which further increases the competition. b Product Innovation done by other Asset Management companies and is able to collect large amounts. c Customer mindsets are still rigid and they mostly prefer traditional pattern of investments
  • 70 Glossary Banking ALM
  • 71 The System of scientific management of Assets and Liabilities of a company or an entity is known as Asset Liability Management. Through this system, the In flows and the out flows of the funds are managed to effectively handle the mismatches. ALM is concerned with risk management and provides a comprehensive and dynamic framework for measuring, monitoring and managing liquidity interest rate, foreign exchange and equity and commodity price risks of a bank that needs to be closely integrated with the banks’ business strategy. ALM involves assessment of various types of risks and altering asset-liability portfolio in a dynamic way in order to manage risks. ATM Automated Teller Machine is a device (initially) used for dispensation of cash to banks’ customer. The present version of ATMs perform several other functions. Mr.Luther George Simjian invented the ATM. The modern version of the successful ATM was invented by Mr.Don Wetzel. BANK RATE Bank Rate is the rate at which RBI allows finance to commercial banks. Normally, different types of refinance facilities by RBI to banks are linked to a Bank Rate. Bank Rate is a tool which RBI uses for short-term purposes. Any revision in Bank Rate by RBI is a signal to banks to revise deposit rates as well as Prime Lending Rate. For greater effectiveness, this tool is used together with other measures like Cash Reserve Ratio and Repo Rate. At present, the bank rate is 6 % p.a BANCASSURANCE The phenomenon whereby a financial institution combines the selling of banking products and insurance products through the same distribution channel. Popular in the early 1990s bancassurance rested on the premise that it is easy to cross-sell banking and insurance services because customers feel confident buying insurance from the same institution where they keep their savings. BANK GUARANTEE This is a Non-Fund Based facility which can be defined as a financial commitment by the bank to the beneficiary on account of bank’s client. Bank guarantees are contingent liabilities in nature and are of two types viz., financial
  • 72 guarantee and performance guarantee. BILLS DISCOUNTED Finance against Bill of exchange payable after the specified period (Time/Usance bill). BILLS PURCHASED Finance against bill of exchange payable on demand. CAMELS RATING This is a system of evaluating the performance of a bank based on six parameters viz., Capital Adequacy; Asset Quality; Management, Earnings; Liquidity and Systems and Control. Each rating factor will be scored on a scale of 1 to 5. based on the individual scores for the six areas, an overall rating for the bank on a five score scale of A to E will be given. CASH CREDIT Cash Credit is a Fund Based, Working Capital Credit facility allowed against Stocks/inventory The Cash Credit account will have a Sanctioned Limit and operated by the account holder through a running account. The drawings are permitted upto the Sanctioned Limit subject to the Drawing Power which is determined by the Value of Stock. CAPITAL ADEQUACY Under the Prudential Accounting Norms introduced in the Indian Banking industry from the year 1992-93, banks are required to maintain adequate capital in proportionate to the (Risk Weighted) Assets of their Balance Sheet. This proportion of capital to Risk Weighted Assets is known as Capital Adequacy Ratio.
  • 73 CENTRAL BANK The bank in any country, which is authorized by the government to: ➢ control the amount of credit in the country; ➢ carry out the business of the government and maintain its accounts; ➢ control note issue; ➢ and manage the country's foreign exchange reserves and ➢ control the financial sector. The Reserve Bank of India is the Central Bank for India. COMMERCIAL PAPER It is a money market instrument raised by companies in the form of Usance Promissory Note to meet their short term funds requirements. CREDIT CARD A plastic card issued by a bank that allows the client to make purchases now and pay for them later. The bank will send a periodical statement of the card utilization and payment details. The banks charge interest on the amount remain outstanding. CRR Among the tools available to the Central Bank of a country to influence and control the monetary aggregates of the country, the most powerful is that relating to cash reserve requirements imposed on banks. Under section 42 (1) of RBI act, 1934, every scheduled commercial bank is required to maintain with the RBI every fortnight a minimum average daily cash reserve equivalent to the stipulated percentage of its Net Demand and Time Liabilities (NDTL) outstanding as on the Friday of the previous week. The RBI is empowered to vary the CRR. RBI is using the CRR either to impound the excess liquidity or to release funds needed for the economy from time to time. DEPOSITORY PARTICIPANTS (D.P.) A Depository interfaces with investors through agents known as Depository participants. Institutions which are eligible to function as D.P. are Scheduled Commercial Bank, Bank approved by RBI, Public Financial Institutions, State
  • 74 Financial Corporation, Clearing Corporations, NBFC, SEBI registered brokers and SEBI registered custodians. The institution must have a minimum net worth of rupees one crore. The concerned depository has the right to choose D.P. subject to approval of SEBI. A D.P. opens accounts of the investors. DEBIT CARD A banking card enhanced with ATM (automated teller machine) and POS (point-ofsale) features that can be used to purchase goods and services electronically. The card replaces cash or cheques. Transactions are deducted from the cardholder's bank account either immediately (or within one to three days). Depending upon the type of card, a debit card may require the user to sign his or her name or enter a PIN (personal identification number) into special equipment. INTER BANK ELECTRONIC FUND TRANSFER SYSTEM (EFT SYSTEM) To promote and develop an electronic funds transfer mechanism whereby banks would be able to provide remittance to their customers from any of their branches, at "designated centres" to any other branch of the same or other banks at the same or any other "designated centre". LETTER OF CREDIT A document issued by one bank to another authorizing the latter of honouring cheques or bills etc issued/drawn by the beneficiary mentioned in the document to the tune of the amount and confirming with the conditions as stipulated therein. A Letter of Credit may be a foreign or inland. OVERDRAFT Overdraft is a Fund Based, Credit facility allowed against receivables and other paper security. The Overdraft account will have a Sanctioned Limit and operated by the account holder through a running account. The drawings are permitted upto the Sanctioned Limit subject to the Drawing Power which is determined by the Value of Security.
  • 75 REAL TIME GROSS SETTELMENT (RTGS) Concept designed to achieve sound risk management in the settlement of interbank payments. Transactions are settled across accounts held at the Central Bank on a continuous gross basis where settlement is immediate, final and irrevocable. SAFE DEPOSIT VAULT/LOCKER This is an ancillary service in which a small portion of our bank’s premises (restricted to the capacity of a metallic box) is leased to the client against rent. The clients are free to keep their belongings in the space leased out to them (ie.Lockers). SCHEDULED BANK A bank included in the Second Schedule to the Reserve Bank of India Act, 1934. RBI is empowered to include the name of a bank in the second schedule of the Act subject to the condition that the bank satisfies the conditions laid down in Section 42 (6) of the said Act. SLR Under section 24 (b) of the Banking Regulation Act, 1949, every bank is required to maintain at the close of business every day, a minimum proportion of their Net Demand and Time Liabilities as liquid assets in the form of cash, gold and unencumbered approved securities. The ratio of liquid assets to demand and time liabilities is known as Statutory Liquidity Ratio (SLR). Present SLR is 25%. The RBI is empowered to increase the SLR upto 40%..
  • 77 Bibliography/References Books ✔ Dr. I.M. Pandey- Financial Management, Vikas Publication Delhi ✔ M.Y. Khan P.K. Jain- Financial Management , Tata Mc Graw Hill Publishing company Limited, New Delhi Websites ✔ ✔ ✔