FINAL VERSION

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Finance:Finance is the application of skills and care to

manipulation, use and control of money. Finance has

aptly been called the “science of money”. It deals with

the principles and the method of money from those who

have saved it and administrating it by those who

control it passes. Finance is the process of converting

accumulated funds to productive use. Different scholars

have inter prated the term finance differently.

Different views points on finance have categorized in

to the 3 following major group.

According to the first approach finance concerns with

acquiring funds on reasonable terms and conditions to

pay bills promptly

According to second approach to finance look on it as

being concerned with cash.

The third approach to finance looks on it as being

concerned with procurement of funds and their wise

application.

BBM @ B.M.S College for Women 1

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Finance is one of the major elements, which activate

the overall growth of the economy activity. A well-kit

financial system directly contributes to the growth of

the economy. An efficient financial system calls for

the effective performance of institutions, financial

instruments and financial markets.

According to our present day economy, “Finance is

defined as the provision of the money at the time when

it is required. Every enterprise whether it is small,

medium or big needs finance to carry on its operations

and to achieve its targets. In fact, finance is so

indispensable today that it is called the lifeblood of

an enterprise. Without adequate finance no enterprise

can possibly accomplish its objectives.

According to Bonneville and Dewey “Finance consists of

rising, providing and managing of all the money,

capital or funds of any kind to be used in connection

with business.”



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A finance industry may be defined as the collection of

organization that intermediate and facilities financial

transactions individuals and institutions.

The subject of finance has been classified in to two

classes:

a) Public finance

b) Private finance

Public Finance:

The Public finance deals with the receipts and

requirements and disbursement of funds in government

institutions like states, central government and local

self-governments.

Private Finance:

The Private finance is concerned with the receipts,

requirements and disbursements of an individual and

non-profit seeking business organization and non-profit

organization. Personal or individual finance deals with

the analysis of principles and practices involved in

managing daily needs of funds.

Organization of Finance Department:BBM @ B.M.S College for Women 3


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The organization structure of finance is an important

functional department. Experts feel that finance has

more significance than the other functional

departments. It is established directly under the

control of board of directors. The structure and the

size of finance department differ from one industry to

another

industry. If the size of the industry is small, owners

themselves will have the responsibility of finance

function. If the size of the organization is big an

individual finance department will be established. It

may in form of centralized or decentralized unit. The

top management controls the finance function, because

the survival and growth mainly depends upon the sound

financial decisions taken by the firm.

The finance function, although is controlled by the top

management. There will be a separate expert team look

after their activities and this function will be sub-

divided according to the needs. A common structure of

finance department cannot be evolved, as the size of

the firm and nature of business vary from firm to firm.BBM @ B.M.S College for Women 4


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However a general organizational structure can be

thought of:

The finance function can be broadly dividend into two

parts:

1) Routine matters or day to day functional

transactions like custody of cash and bank

accounts, collection of loans, payments of cash

for transactions ect.

2) Special financial function like:

Functional planning and budgeting

Investment decisions

Cost accounting

Profit analysis

Financial accounting

Internal audit

Finance Manager:

Finance manager is a person who heads the department of

finance. He forms important activities in connectionBBM @ B.M.S College for Women 5


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with each of the general functions of management. He

groups activities in such a way that areas of

responsibility and accountability are clearly defined.

His focus is on profitability of the firm. The profit

center is a technique by which activities are

decentralized for the developed of strategic control

point. The determination of nature and extend of

staffing is aided by financial budgeting programmers.

Planning involves heavy reliance on financial tools and

analysis. Control requires the use of techniques of

financial ratios and standard. Briefly, an informed and

enlightened use of financial information is necessary

for the purpose of co-coordinating the activities of an

enterprise. Every business, irrespective of its size,

should therefore, have a financial manager who has to

take key decisions on the allocation of funds to

various departments of the business. If the financial

manager handles each of these tasks well, his firm is

on top management; he should shape his decisions and

recommendations to contribute to over all progress of

the business. It is primarily objective, to maximize

the value of the firm to its stockholders.



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Functions of Finance Manager:

The following are some of the important functions of

the finance manager:

He should anticipate and estimate the total

financial requirements of the firm.

He has to select the right sources at the right

time and at the right cost.

He has to allocate the available funds in the

profitable avenues.

He has to maintain liquidity position of firm at

the peak.

He should analyze financial performance and plan

for its growth.

He has to administrate of working capital

management.

He has to protect the interest of creditors,

shareholders and employees.



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He has to concentrate more on fulfilling the

social obligation of business unit.

Financial Management:

Financial management as an academic discipline, has

undergone, fundamental changes with respect to its

scope and coverage. In the early years of its

evolution, it was treated synonymously with the raising

of funds. In the current literature pertaining to these

growing disciplines, a broader scope, so as to include

in addition to procurement of funds efficient use of

resource is universally recognized. The academic is

thinking with respect to the objects of financial

management and also characterized by a change over the

years.

Financial management is the area of business management

devoted to a judicious use of capital and a careful

selection of sources of capital in order to enable a

business firm to move in the direction of reaching its

goal. It is a managerial activity, which is concerned

with the planning and controlling of the firm’s

financial resources. As a separate activity on

discipline it is of recent origin. It was a branch ofBBM @ B.M.S College for Women 8


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economics till 1890. Still today, it has no unique body

of knowledge of its own, and draws heavily on economics

for its theoretical concepts.

The company is made to know of cash. Management,

inventory management, ratio analysis account receivable

management, working capital finance, the customer

delight, through proper observations findings, to

enhance its strength over the activities of financial

management and service, where it is a need.

As the company is not so aware about the above aspects,

I have taken an opportunity to suggest the company,

over its activities regarding financial management to

the customers, which help the company to enhance its

sales, the financial strength over the period of time,

which helps me apply the theoretical Study into

practical to gain exposure about the activities of the

company and gain experience over companies.

Financial management helps the company to know where

the funds will be obtained, in what amount fund would



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be raised, how much to invest in a particular work, how

to plan the proper utilization of the available fund

and also to avoid the misuse of available fund.

Definitions of Financial Management:According to Professor EZIRA SOLOMAN “Financial

management has concerned with the efficient use of and

important economic resources namely capital funds. The

company is made to know of cash. Management, inventory

management, ratio analysis account receivables

management, working capital finance, the customer

delight, through proper observations and findings, to

enhance its strength over the activities of financial

management and services, where it is a need.

According to PHILIPPTOS “Financial management is

concerned with the managerial decision, the results in

the acquisitions and financing of long term and short

term assets for the company. As such it deals with the

situation that requires

the selection of specific assets, selection of specific

liability as well as the problem of size and growth of



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enterprise. The analysis of these decisions is based on

the expected and inflow and outflow of funds and their

effects upon managerial objectives.

Financial management has concerned with the efficient

use of and important economic resources namely capital

funds. Financial management is concerned with the

managerial decision that results in the acquisitions

and financing of long term and short term assets for

the company. As such it deals with the situation that

requires the selection of specific assets, selection of

specific liability as well as the problem of size and

growth of enterprise. The analysis of these decisions

is based on the expected and inflow and outflow of

funds and their effects upon managerial objectives.

Financial management is the area of business management

devoted to a judicious use of capital and a careful

selection of sources of capital in order to enable a

business firm to move in the direction of reaching its

goal. It is a managerial activity, which is concerned

with the planning and controlling of the firms

financial resources. As a separate activity on

discipline it is of recent origin. It was a branch of



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economics till 1890. Still today, it has no unique body

of knowledge of its own and draws heavily on economics

for its theoretical concepts.

Objectives of Financial Management:

The objectives provide a framework for optimum

financial decision-making. In other words they are

concerned with designing a method of operating the

internal investments and financing of a firm. We

discuss in this section the alternative approaches in

financial literature.

Financial management of any business firm has to set

goals for and to interpret them in relation to the

objectives of the firm. Broadly there are only two

alternatives goals/objectives of financial management.

The goals/objectives of financial management can be

broadly classified into two categories namely:

1) Primary objectives

2) Secondary objectives



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Primary objective:

1) Maintenance of adequate liquid assets of the

company:

Maintenance of adequate liquid assets in the company

is one of the basic objectives of financial

management. This objective implies the financial

management should ensure the availability of

adequate fund in the hands of the organization

throughout to meet its obligations.

2) Profit maximization:

Profit earning is the main aim of every economic

activity. A business being an economic institution

must earn profits to cover its costs and provide

funds for growth. No business can survive without

earning profits. Profits also serve as a measure

of efficiency of a business enterprise. The

accumulated profits enable a business to face

risks like fall in prices, competition from other

units, adverse government policies etc. Thus

profit maximization is considered as the main

objective of business.



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3) Wealth maximization:

It is the appropriate objective of an enterprise.

Wealth maximization guides the management in

framing consistent strong dividend policy to reach

maximum returns to the equity holders. Financial

theory asserts that wealth maximizes the

stockholders wealth; the individual stockholders

can use this wealth to maximize his utility. It

means that by maximizing stockholders wealth the

firm is operating consistently towards maximizing

stockholders utility.

Secondary objectives:

1) Ensuring maximum operational efficiency through

proper planning, implementing and controlling

the utilization of funds that is through the

effective employment of funds.

2) Enforcing financial management disciplines in

the use of financial management through the co-



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ordination of the operations of various

departments in the organizations.

3) Building up adequate reserves for financial

growth and expansions.

4) Ensuring a fair retain of the shareholders of

their investments.

Importance of Financial Management:

1) Finance is the lifeblood of business. Every

business unit needs money and it happen only when

it is managed properly. That means sound financial

management is absolutely necessary for every

business units, which wants to make more money.

2) “Bad production management and bad sales

management make stain in hundreds but faculty

finance is changing thousands”- says Collin

Brooks, who elucidates has important, it is to

manage the flow of funds in an organization.

3) Financial management helps a company in making the

effective employment of funds by away fixed assets



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that is, fixed capital as well as current assets

that is working capital.

4) Financial management helps a company that is

optimizing the output from given input of funds.

5) Financial management helps a company n profit

planning, capital budgeting, controlling,

inventories and account receivables etc.

6) Financial management is important even for non-

profit making organization as it helps them to

control the costs and to use the funds at their

disposing the most useful manner.

7) Where the funds will obtained, in what amount fund

would be raised, how much to invest in a

particular work, hoe to plan the proper

utilization of the available fund and also to

avoid he misuse of available fund.

8) Financial management is absolutely necessary for

every business unit, which wants to make money.

9) Financial management helps the company to optimize

the output from the given input of funds, and

helps a company in profit planning.



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10) Financial management is very important to

manage the flow of funds in an organization.

Financial Management Process:The financial management process begins within the

financial planning and decisions. While

implementations of these decisions the firm has to

acquire certain risk and return characteristic.

These characteristics determine the market process

must include the feedback system to enable it take

corrective measures if required

Decisions in Financial Management:1) Investment decision: Capital expenditure and

revenue expenditure.

2) Financing decision: Long term and short term.

3) Dividend decisions: Increased dividend and

increased capital gain.



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4) Current asset management: Continuous flow of

materials and money and maintaining liquidates.

A’s of Financial Management: Anticipating financial needs

Acquiring financial resources

Allocating fund in business

Administrating the allocation of funds

Analyzing the performance of finance

Accounting and reporting to the management

Meaning of financial statements:

A Financial statement is an organized collection of

data according to logical and consistent accounting

procedures. Its purpose is to convey an understanding

of

some financial aspects of a business firm. It may show

opposition at a movement of time as in the case of

balance sheet, or may reveal a series of activities

over a given period of time.



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A financial statement is an organized collection of

data according to logical and consistent accounting

procedures. Its purpose is to convey an understanding

of some financial aspects of a business firm. It may

show opposition at a movement of time as in the case of

balance sheet, or may reveal a series of activities

over a given period of time.

Thus, the term financial statement generally refers to

two basic statements:

Income statement or balance sheet

Profit and loss account

Balance sheet :

The balance sheet shows the financial condition of a

business at a given point of time, in terms of assets

and liabilities.

Assets are classified into the following categories:

1) Fixed assets

2) Investments

3) Current assets

4) Loans and advances



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5) Miscellaneous expenditures and losses.

Liabilities are classified as follows:

1) Share capital

2) Reserves and surplus

3) Secured loans

4) Unsecured loans

5) Current liabilities and provisions

As per the companies act, the balance sheet of the

company shall be in either the horizontal form or the

vertical form.

Profit and loss account :

The profit and loss account technically is an adjunct

to the balance sheet because it provides details

relating to net profit, which reprints the change in

owner’s equity. Yet, in practice it is often considered

to be more important than the balance sheet because the

details of revenues and expenses is provided in the

profit and loss account shed considerable light on the

performance of the business. There is no prescribed



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standard format to make this account. However, the

companies act does require that the information

provided should be adequate to reflect a true and a

fair picture if the operation of the company for the

accounting period. The important items in the profit

and loss account are:

Net sales

Cost of goods sold

Gross profit

Operating expenses

Operating profit

Non-operating surplus/deficit

Profit before interest and tax

Interest

Profit before tax

Profit after tax

To these statements are added the statement of retained

earnings and some other statements (as fund flow

statements, cash flow statements etc) and schedules of

fixed assets (as investments, current assets etc). All

these statements are collectively called as package of

financial statements.



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Statement of Retained Earnings:

It is also termed as profit and loss appropriation

account. The statements or the account gives details of

the distribution of earnings during a particular

accounting period. The balance shown by the income

statement is transferred to the balance sheet through

these statements after making necessary appropriations.

The balance of this account represents the retained

earnings that is, accumulated excess of earnings over

losses and dividends. The statements are connecting

link between the balance sheet and income statements.

Nature of Financial Statements:

a) These are reports or summarized reviews about the

performance, achievements and weakness of the

business.

b) These are prepared at the end of the accounting

period so that various parties may take decision

of their future actions in respect of the

relationship with the business.



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c) The reliability of financial statements depends on

the reliability of accounting data. These

statements cannot be said to be true and fair

representative of the strength or profitability of

the concerned if there are numerous frauds and

defalcations in the accounts.

d) There may be certain developments and factors,

which may be very important for the business, are

not taken into account, as these are not recorded

in the routine of accounting.

e) These statements are prepared as per accounting

concepts and conventions.

Significance of Financial Statements:

1) OWNERS: The owners provide funds for the

operations of a business and they want to know

whether their funds are being properly

utilized or not. The financial statements

prepared from time to time satisfy their

curiosity.



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2) INVESTORS: Prospective investors, who want to

invest money in a firm, would like to make an

analysis of the financial statements of that

firm to know how safe proposed investment will

be.

3) GOVERNMENT: Central and state governments are

interested in the financial statements because

they reflect the earnings for a particular

period for purposes of taxation. Moreover,

these financial are used for compiling

statistics concerning business, which in turn,

help in compiling national accounts.

4) CONSUMERS: Consumers are interested I the

establishment of good accounting control so

that cost of production may be reduced with

the resultant reduction of the prices of goods

they buy.

Limitations of Financial Statements:

1) Interim and not final reports: Financial

statements do not depict the exact position and

are essentially interim reports.



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2) Lack of precision and definiteness: Financial

statements may not be realistic because these are

prepared by following certain basic concepts and

conventions.

3) Lack of objective judgments: Financial statements

are influenced by the personal judgments of the

accountant.

4) Record only monetary facts: Financial statements

disclose only monetary facts that are those

transactions are recorded in the books of

accountants, which can be measured in monetary

terms.

5) Artificial view: These statements do not give a

real and correct report about the worth of the

assets and their loss of value as these are shown

on historical cost basis.

6) Scope of manipulations: These statements are

sometimes prepared according to the needs of the

situation or the whims of the management.

Analysis of Financial Statements:



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Analysis is the process of critically examining in

detail accounting information given in the financial

statements. For the purpose of analysis, individual

items are studied: their interrelationship with other

related figures established, the data is sometimes

rearranged to have better understanding of the

information with the help of different techniques or

tools for the purpose. Analysis financial statements is

a process of evaluating relationship between component

parts of financial statements to obtain a better

understanding to obtain a better understanding of firms

position and performance.

In the words of Myer, “Financial statements analysis is

largely a study of relationship among the various

financial factors in a business as disclosed by a

single set of statements and a study of the trend of

these factors as shown in a series of statements”.

Financial Performance:

Financial performance is about knowing how the firm

is doing and what its financial condition is. The



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stakeholders of a firm, viz. shareholder, creditors,

suppliers, managers, employees, tax, authorized and

others are interested in broadly knowing about the

firm’s financial conditions. Of course, their

specific concerns may differ. Trade creditors and

short-term liquidity of the firm and its ability to

pay is due in next 12 months or so on. Term lending

institution and debentures holders have a relatively

longer time horizon and are concerned about the

ability of the firm to services its debt over the

next five to ten years. Long-term shareholders and

mangers that want to make a career with the firm are

interested in the profitability and growth of the

firm over an extended period of time.

To understand the financial performance and

condition of a firm, its stakeholders look at their

financial statements:

a) The Balance sheet

b) The profit and loss account

c) The sources and uses of funds statements

Financial Analysis:BBM @ B.M.S College for Women 27


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The term “financial analysis” is also known as the

analysis and interpretation of financial statement

refers to the process of determining financial strength

and

weakness of the firm establishing strategic

relationship between the items of the balance sheet,

profit and loss account and operative data.

Definition of Financial Analysis:

According to Metalf and Titard, “It is a process of

evaluating the relationship between components part of

a financial statement to obtain a better understanding

of a firm’s position and performance”.

In the words of Myers “Financial statements analysis is

largely a study or relationship among the various

financial factors in a business as described by a

single set of statements and a study of the trend of

these factors as shown in a series of statements.”

Needs of Financial Analysis:



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Lenders’ need financial analysis for carrying out the

following:

Technical Appraisal

Commercial Appraisal

Financial Appraisal

Economic Appraisal

Management Appraisal

Uses of Financial Analysis:

1) The present and future earning capacity or

profitability of the concern.

2) The operational efficiency of the concern as

whole and of its various parts or departments.

3) The short-term and long-term solvency of the

concern for the benefit of the debenture

holders and trade creditors.

4) The financial stability of the business

concern.

5) The long-term liquidity of its funds.



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Techniques of Financial Analysis:

The analysis and interpretation of financial statements

is used to determine the financial position and results

of operations as well. A number of methods or devices

are used to study the relationship between different

statements. They are as follows:

1)Comparative financial statements :Comparative financial statements are those

statements that have been so designed in a way so as

to provide time perspective to the consideration of

various elements of financial position embodied in

such statements. In these statements, figures for

two or more periods are placed side by side to

facilitate comparison. Both the income statements

and balance sheet can be prepared in the form of

comparative financial statements.

a) Comparative income statement : The income

statement discloses net profit or net loss on

account of operations. A comparative income

statement will show the absolute figures for

two or more periods, the absolute change from



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one period to another and if desired the

change in terms of percentage. Since the

figures for two or more periods are shown side

by side, the reader can quickly ascertain

whether sales have increased or decreased,

whether cost of sales has increased or

decreased etc. Thus, only a reading of data

include in comparative income statements will be

helpful in deriving meaning full conclusions.

b) Comparative balance sheet : The comparative

balance sheet as on two or more different

dates can be used for comparing assets and

liabilities and finding out any increase or

decrease in those items. Thus, while in a

single balance sheet the emphasis is on

present position, it is on change in the

comparative balance. Such a balance sheet is

very useful in studying the trends in an

enterprise.

Comparative financial statements can be

prepared for more than two periods or on more



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than two decades. However, it becomes very

cumbersome to study the trend with more than

two period data.

2)Common size financial statements: Common size financial statements are those in which

figures reported are comforted into percentage to

some common base. In the income statement the sales

figures is assumed to be 100 and all figures are

expressed as a percentage of sales. Similarly in the

balance sheet the total of assets or liabilities is

taken 100 and all the figures are expressed as a

percentage of this total.

a) Common size balance sheet : In the common size

balance sheet, total assets or liabilities is

taken as 100 and all the figures are expressed

as percentage of total. Comparative common size

balance sheet for different period helps to

highlight the trends in different items.

b) Common size income statements : In such

statements, sales figure is assumed to be equal



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to 100 and all other figures of cost or expenses

are

expressed as a percentage of sales. Comparative

income statements for different periods help to

reveal the efficiency or otherwise have incurring

any cost or expenses.

3)Trend percentages : Trend percentages are immensely helpful in making a

comparative study of financial statements for

several years. The method of calculating trend

percentages involves the calculation of percentage

relationship that each item bears to the same item

in the base year. Any year item may be taken as the

base year. Each item of the base year is taken as

100 and on that basis the percentages for each of

the items of each of the years are calculated. These

percentages can be taken as index numbers showing

the related changes in the financial data resulting

with the passage of time. The method of trend

percentages is a useful, analytical device for the

management since by substitution of percentages forBBM @ B.M.S College for Women 33


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large amounts; the brevity and readability are

achieved. However, trend percentages are not

calculated for all the items in the financial

statements. They are usually calculated for major

items since the purpose is to highlight important

changes.

4)Funds flow analysis: Fund flow analysis has become an important tool in

the analytical kit of financial analysis; credit

granting institution and financial managers. This is

because the balance sheet of a business reveals its

financial status at a particular point of time. It

does not sharply focus those major financial

transactions, which have been behind the balance

sheet changes. Fund flow analysis reveals the

changes in working capital position. It tells about

the

source from which it was used. It brings out in open

the change, which have taken place behind the

balance sheet. Working capital being the lifeblood



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of the business such an analysis is extremely useful

growth of the business.

5)Cost volume profit analysis : Cost volume profit analysis is an important tool of

profit planning; it studied the relationship between

cost volume of production, sales and profit. Of

course it is not strictly a technique used for

analysis of financial statements. It is an important

tool for the management for decision making from the

data provided by both cost and financial records. It

tells the volume of sales at which the firm will

breakeven, the effort on profit on account of

variation in output, selling prices and cost, and

finally, the quantity to be produced and sold to

reach the target profit level.

6)Cash flow analysis : This statement is prepared to know clearly the

various items of inflow and outflow of cash. It is

an essential tool for short-term financial analysis

and is very helpful in the evaluation of current



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liability of a business concern. It helps the

business executives in efficient cash management and

the internal financial management.

7)Ratio analysis :

Ratio analysis is a technique of calculation of

number of accounting ratios from the data found in

the financial statements, the comparison of these

accounting ratios with those of the previous years

or with those of others

concerns engaged in similar line of activities or

with those of standard ratios and interpretation of

its comparison. Ratio analysis means a tool used by

individuals to conduct a quantitative analysis of

information in a company's financial statements.

Ratios are calculated from current year numbers and

are then compared to previous years, other

companies, the industry, or even the economy to

judge the performance of the company. Ratio analysis



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is predominately used by proponents of fundamental

analysis.



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RATIO ANALYSIS

Meaning of Ratio:

The term ratio refers to expressing the relationship

between two quantities of the same kind. In other

words, it expresses one number in terms of another

number. It is a measure of the relationship between two

magnitudes. It may be defined as the indicated quotient

of two mathematical expression of the quant able

between two numbers.

Ratio analysis means a tool used by individuals to

conduct a quantitative analysis of information in a

company's financial statements. Ratios are calculated

from current year numbers and are then compared to

previous years, other companies, the industry, or even

the economy to judge the performance of the

company. Ratio analysis is predominately used by

proponents of fundamental analysis.

It’s a tool, which enables the banker or lender to

arrive at the following factors:

Liquidity position

Profitability



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Solvency

Financial Stability

Quality of the Management

Safety & Security of the loans & advances to be or

already been provide.

A ratio is a simple arithmetical expression of the

relationship of one number to another. According to

ACCOUNTANTS HANDBOOK by WIXON, KELL and BEDFORD, A

ratio is “an expression of the quantitative

relationship between two numbers”.

The ratio analysis is one of the most powerful tools of

financial analysis. It is the process of establishing

and interpreting various ratios. It is with the help of

ratios that the financial statements can be analyzed

more clearly and decisions can be made more

effectively.

A financial ratio is the relationship between two

accounting figures expressed mathematically. In simple

terms it is one number expressed in terms of another



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and can be worked out by dividing one number into the

other. Therefore ratio analysis is a tool to present

the figures of financial statements in simple, concise

and intelligible form. Ratio analysis, in this way is

the process of establishing meaningful relationship

between two figures or set of figures of financial

statements

Nature of Ratio Analysis:

Ratio analysis is a technique of analysis and

interpretation of financial statements. It is the

process of establishing and interpreting various ratios

for helping in making certain decisions. It is a means

of better understanding of financial strengths and

weakness of a firm.

The following are the four steps involved in the ratio

analysis:

1) Selection of relevant data from the financial

statements depending upon the objectives of the

analysis.

2) Calculation of appropriate ratios from the above

data.



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3) Comparison of calculated ratios with the ratios of

the same firm in the past, or the ratios developed

from projected financial statements or the ratios

of some other firms or the comparison with ratios

of the industry to which the firm belongs.

4) Interpretation of the ratios.

Interpretation of the Ratios:

The interpretation of ratios is an important factor.

Though calculation of ratios is also important but it

is only a clerical task whereas interpretation needs

skill, intelligence and foresightedness.

The interpretation of the ratios can be made in the

following ways:

1) Single Absolute Ratio : Generally speaking one

cannot draw any meaningful conclusion when a

single ratio is considered insulation. But single

ratio may be studied in relation to certain rules

of thumb which are based upon well proven

conventions are for examples 2:1 is considered to



Ratio analysis at

be a good ratio for current assets to current

liabilities.

2) Group of Ratios : Ratios may be interpreted by

calculating a group of related ratios. A single

ratio supported by other related additional ratios

becomes more understandable and meaningful. For

example, the ratio of current assets to current

Liabilities may be supported by the ratio of

liquid assets to liquid liabilities to draw more

dependable conclusions.

3) Historical Comparison : One of the easiest and most

popular ways of evaluating the performance of the

firm is to compare its present ratios with the

past ratios called comparison overtime. When

financial ratios compared over a period of time,

it gives an indication of the direction of change

and

reflects whether the firm’s performance and financial

position has improved, deteriorated or remained



Ratio analysis at

constant over a period of time. But while

interpreting ratios from comparison over time, one

has to be careful about the changes, if any, in the

firm’s policies and accounting procedures.

4) Projected Ratios : Ratios can also be calculated

for future standards based upon the projected or

Performa financial statements. These future ratios

may be taken as standard for comparison and the

ratios calculated on actual financial statements

can be compared with the standard ratios to find

out variance, if any. Such variances help in

interpreting and taking corrective action for

improvement in future.

5) Inter-firm Comparison : Ratios of one firm can also

be compared with the ratios of some other selected

firms in the same industry at the same point of

time. This kind of comparison helps in evaluating

relative financial position and performance of the

firm. But while making use of such comparison one

has to be very careful regarding the different



Ratio analysis at

accounting methods, policies and procedures

adopted by different firms.

Ways of Ratio expressed:

As Percentage - such as 25% or 50%. For example if

net profit is Rs.25, 000/- and the sales is Rs.1,

00,000/- then the net profit can be said to be 25%

of the sales.

As Proportion - The above figures may be

expressed in terms of the relationship between net

profits to sales as 1: 4.

As Pure Number /Times - The same can also be

expressed in an alternatively way such as the sale

is 4 times of the net profit or profit is 1/4th of

the sales.



Ratio analysis at

Significance of Ratio Analysis:

Helps in decision making

Helps in financial forecasting and planning

Helps in communication strength and weakness of

the firm

Helps in co-ordination

Helps in control

Useful in budgetary control and standard

costing

Uses of Ratio Analysis:

Ratio analysis simplifies the understanding of

financial statements.



Ratio analysis at

Ratio analysis establishes the inter-relationship

between the he various financial figures.

Ratio analysis is an instrument for diagnosing the

financial health of the business

Ratio analysis facilitates inter-firm and intra-

firm comparison.

Ratio analysis is invaluable aid to the management

in the efficient discharge of its basic functions.

Ratios are very helpful in establishing standard

costing system and budgetary control system.

Ratio analysis is useful not only to the

management but also to the outsiders like

creditor’s investor’s banks and other financial

institutions.

Objectives of Ratio:

1) Measurement of the profitability

2) Judging the operational efficiency of

management

3) Assessing the efficiency of the business



Ratio analysis at

4) Measuring short and long term financial

position of the company

5) Facilitating comparative analysis of the

performance

6) Indicator of true efficiency

7) Helpful in budgeting and forecasting

8) Helpful in simplifying accounting figures

Limitations of Ratios Analysis:

Ratios are calculated from the financial

statements. The financial statements are

suffering from a number a number of limitations.

The

ratios derived from such financial statements are

also subject to those limitations.

There is no consistency in the meaning of

certain accounting ratios.

There is a danger of window dressing (that is

showing the position in a favorable manner than

what actual it is) in ratio analysis.



Ratio analysis at

Ratios become meaningless if they detached from

the details from which they are derived.

Rations alone are not adequate for judging the

financial position of the business.

Ratios are tools of quantitative analysis only.

Qualitative aspects such as efficiency, honesty

etc are ignored in ratio analysis.

Ratios may give misleading impression especially

to a layman.

Classifications of Ratios:

As there are many ratios, they may be classified

into different categories. According to some

writers, there are as many as 429 business ratios.

But all these ratios need not be calculated at a

time. Depending upon the nature of the business,

purpose of the analysis, and the particular

questions to be answered from ratio analysis,

certain ratios are generally selected.

Ratios may be classified on different bases

depending on their nature, importance, source and

function.BBM @ B.M.S College for Women 48


Ratio analysis at

On the basis of their nature : on the basis of the

nature of items. The relationships of which are

explained by the ratio, they may be classified as

financial ratio and operating ratios financial ratio

deal with items, which are financial [or non-

operational] in nature current ratio. Quick ratio,

Debt-equity

ratio etc, are examples s of financial ratio. On

the other hand the operating ratios explain the

relationship between items of operations of the

enterprise. Turnover ratios, earning ratios expenses

ratios, etc are examples of these ratios.

On the basis of their importance : ratios may also be

classified on the basis of their importance as

primary ratios and secondary ratios. Operating

profit to operating capital employed is generally

described a primary ratio. Other related ratios

under this category are net sales to capital

employed, operating profit to value of production

etc. on the other hand, some examples of secondary

ratios of direct material cost to value ofBBM @ B.M.S College for Women 49


Ratio analysis at

production, ratio of output to factory employees,

etc.

On the basis of their function : ratio con also be

classified on the basis of the purpose served or

function, which the ratios are expected to perform.

This basis of classification is called functional

classification and the ratios called functional

ratios. In fact, this the most commonly adopted

classifications of ratios. Examples of functional

ratios are liquidity ratios, solvency ratios,

turnover ratios and profitability ratios.

On the basis of source of data: on the basis of the

source from which they are calculated, ratios may

also be classified into three categories:

1) Balance sheet ratios

2) Profit and loss account ratios

3) Combined ratios



Ratio analysis at

Balance sheet ratios deal with the relationship

between two items or groups of items contained in

balance sheet and they generally indicate short-term

or long-term financial position of business.

Profit and loss account ratios deals with the

relationship between items or group of items

contained in profit and loss account. They generally

indicate the profitability and efficiency of control

over expenses of the business.

Combined ratios deal with the relationship between

items or group of items contained in both profit and

loss account and balance sheet. They generally

indicate the operational efficiency of the business.

Types of Ratios:

Balance sheet ratios:

1)Current ratio:

Current ratio establishes the relationship between

current assets and current liabilities. The

difference between current assets and current

liabilities is known as working capital.



Ratio analysis at

Therefore, the current ratio is also called

working capital ratio. The purpose of this ratio

is to find out the extend of current assets

available against each rupee of current liability

of the firm.

Current ratio=Current

assets/current liabilities

Interpretation: The current ratio reveals the ability

of the firm to meet all the obligations maturing within

a year. Conventionally it is said that the current

ratio should be 2:1. It means that for every one rupee

for current liability the firm must have to rupee worth

of current assets. The reason for this conventional

norm is that, all the current assets cannot be

converted into cash immediately.

2)Liquid ratio:

Liquid ratio is also called quick ratio or acid

test ratio. It established=s the relationships

between liquid assets are those which can be

converted into cash without any loss or delay. All



Ratio analysis at

current assets, excepting stock and prepaid

expenses, are considered to be liquid assets.

Liquid liabilities are those liabilities which are

payable immediately. All current liabilities,

excepting bank overdraft, are considered to be

liquid liabilities.

Liquid ratio=Liquid

assets/liquid liabilities

Interpretation: Generally, a quick ratio of 1:1 is

considered to be satisfactory, because it takes into

account only liquid assets whose realizable value is

almost certain. A firm with 1:1 quick ratio is expected

to be able discharge all its current obligations.

3)Absolute liquid ratio:

Absolute liquid ratio establishes the relationship

between absolute liquid assets and liquid

liabilities. Absolute liquid assets include cash

in hand, cash at bank and marketable securities.

Absolute liquid ratio=Absolute liquid



Ratio analysis at

assets/liquid liabilities

Interpretation: Generally, an absolute liquid ratio of

0.5:1 is considered to be satisfactory.

4)Debt-equity ratio:

Debt-equity ratio shows the relationship between

borrowed funds and owner’s funds. The purpose of

this ratio is to show the extend of the firm’s

dependence on external liabilities. In order to

calculate its ratio, the required components are

external liabilities and owner’s equity. External

liability includes both long-term as well as

short-term borrowings. He term owners funds

include equity share capital, preference share

capital., reserves and surplus, but excludes past

accumulated losses such preliminary expenses,

discount on issue of share or debentures,

underwriting commission and profit and loss

account debit balance ect.

Debt-equity ratio=long

term debt/equity



Ratio analysis at

Debt-equity ratio=total

debt/equity

Interpretation: For analyzing the capital structure,

debt-equity ratio gives an idea about the relative

share of funds of outside and owners invested in the

business. The ratio of long-term debt of equity is

generally regarding as safe if it is 2:1.

5)Proprietary ratio:

Proprietary ratio shows the relationship between

owner’s equity and total assets of the firms. This

ratio is also known as equity ratio or net worth

to total assets ratio. The purpose of this ratio

is to indicate the extend of owner’s contribution

towards the total value of assets. In, other

words, it gives an idea about the extent to which

the owners own the firm. The

components required to compute this ratio are

proprietor’s funds and total assets.



Ratio analysis at

Interpretation: There is no definite norm for this

ratio. Some financial experts hold the view that

proprietor’s funds should be 33% to 55% of the total

capital employed and outsider’s fund should from 67% to

50% of the total assets.

Profit and loss account ratio:

1)Gross profit ratio:

Gross profit ratio is the ratio, which establishes

the relationship between gross profit and net

sales. This is also known as gross profit to sales

ratio. This ratio is useful particularly in the

case of wholesale and retail trading firms. Its

purpose is the shown the amount of gross profit

generated for each rupee of sales.

Gross profit ratio=Gross

profit /net sales*100

Interpretation: A high margin enables all operating

expenses to be covered and provide a reasonable return

to the shareholders. In order to keep the ratio high,BBM @ B.M.S College for Women 56


Ratio analysis at

management has to minimize cost of goods sold and

improve sale performance.

2)Net profit ratio:

Net profit ratio is also called net profit to

sales ratio and explains the relationship between

net profit after taxes and net sales.

Net profit ratio=Net profit after

taxes/net sales*100

Interpretation: It is a measure of overall

profitability of the firm. The higher the ratio, the

greater would be the returns to the shareholder and

vice versa. A net profit margin of 10% is considered

normal. This ratio is very useful to control cost and

to increase the sales.



Ratio analysis at

3) Operating ratio:

Operating ratio establishes the relationship between

operating cost and sales.

Interpretation: The operating ratio shows the overall

operating efficiency of the business. High operating

ratio is undesirable as it leaves a small portion of

income to meet other non-operating expenses like

interest on loans. A low ratio is better and reflects

the efficiency of the management. The lower ratio, the

higher would be the profitability.

4) Operating profit ratio:

Operating profit ratio studies the relationship between

operating profit (that is EBIT-Earnings before Interest

and Tax) and sales. The purpose of this ratio is to


Operation ratio= operation

cost/net sales*100.


Ratio analysis at

find out the amount of operating profit for each rupee

of sales.

Interpretation: A high ratio is an indicator of the

operational efficiency and a low ratio stands for

operational inefficiency of the firm.

5) Expenses ratio:

a) Factory expenses ratio : This ratio studies the

relationship between factory expenses and sales.

This ratio shows the manufacturing efficiency of

the firm.

Factory expenses ratio=Factory expenses/net

sales*100

b) Administrative expenses ratio : This ratio

studies the relationship between administrative

expenses and sales. This ratio shows the

administrative efficiency of the organization.


Operating profit ratio=Operating

profit/net sales*100.


Ratio analysis at

Administrative expenses ratio=Administration

expense /net sales*100

c) Selling and distribution expenses ratio : This

ratio studies the relationship between selling

and distribution expenses and sales. This ratio

shows the efficiency of sales of the

organization.

Selling and distribution expenses ratio=Selling

and distribution expenses/net sales*100.

Combined ratios:

The ratio which is calculated by taking one item or one

group of item form trading and profit and loss account

and another item or the group of another item is taken

from balance sheet is called mixed ratio.

Some of the important mixed ratios are:

1)Debtor turnover ratio:



Ratio analysis at

Debtor turn over ratio shows the relationship

between credit sales and debtor. In other words,

it indicates the number of times on an average the

debts are collected in year.

Debtors turnover ratio=credit

sales/average debtors or debtors.

Interpretation: A high debtor’s turnover ratio reflects

short collection period and indicates that debtors are

prompt in their payment. On the contrary, a low

debtor’s turnover ratio or a high collusion period

implies that debtors pay their dues very slowly.

2)Debt collection period ratio: The debt collection period ratio indicates the

average numbers of days that the firm has to wait

for collecting the money after goods are sold on

credit.



Ratio analysis at

This ratio is also known as “average collection

period ratio” or “debtor’s velocity ratio”.

Debt collection period ratio=Average

debtors/credit sales*365.

3)Creditors turnover ratio: Creditor’s turnover ratio establishes relationship

between credit purchases and average creditors.

The purpose of this ratio is to know the speed

with which payments are made to the creditors.

Creditors turnover ratio=Credit purchases/average

creditors

Interpretation: The shorter the turnover ratio, the

longer would be the average payments period and vice

versa.

4)Debt payment period ratio : Debt payment ratio indicates the number of days

that the firm can postpone, on an average, its

payments to the creditors. This is also known as

creditor’s velocity ratio.BBM @ B.M.S College for Women 62


Ratio analysis at

Debt payment ratio=Average creditors/credit

purchases*365.

5)Total assets turnover ratio: Total assets turnover ratio establishes the

relationship between sales and total assets. The

purpose is to judge weather the firm is generating

adequate sales from the total assets employed.

Further, it is also used to determine

whether there is adequate investment, or over

investment or under investment in assets of the

firm.

Total assets turnover ratio=Sales/total assets

Interpretation: A high ratio is an indication of

efficient utilization of assets in generating sales and

a low ratio is an index of inefficient utilization of

assets.



Ratio analysis at

6) Return on capital employed:

Return on capital employed establishes the

relationship between total capital and profit

before interest and tax. The purpose of this ratio

is to find out weather return on capital employed

is reasonable or not. This ratio is also known as

return on investment.

Return on capital employed=net profit (before

interest on tax)/average capital employed *100

6)Return on shareholders equity: Return on shareholders equity ratio shows the

relationship between net profit after taxes and

shareholders equity. It reveals the rate of return

on owner’s funds.

Return on shareholders equity=Net profit after

taxes/share holders equity*100



Ratio analysis at

7)Return on total resources: Return on total resource ratio shows the

relationship between net profit after taxes and

total assets. It reveals the rate of return on

total assets. This ratio is also known net profit

to total assets.

Return on total resources=Net profit after

taxes/total assts*100

8)Earnings per share: Earnings per share ratio show the relationship

between net profit after taxes and preferences

dividend and number of equity shares. This ratio

is also known as earnings per equity share.

Earnings per share=Net profit after taxes-

preference dividend /number of equity shares

10) Price earning ratio:



Ratio analysis at

Price earning ratio shows the relationship between

market price per equity share and earnings per

share.

Price earning ratio=Market price per equity

share/earnings per share

11) Interest coverage ratio: Interest coverage ratio shows the relationship

between net profit before

interest and tax interest.

Interest coverage ratio=net profit (before

interest and tax)/interest

12) Dividend pays out ratio:Dividend pay out ratio shows the relationship

between dividend per equity share and earnings per

share.

Dividend pay out ratio=Dividend per equity

share/earnings per share



Ratio analysis at

Ratios used for the study:

1) Cost of deposits

2) Cost of funds

3) Yield on advances

4) Net interest margin (on average earning assets)

5) Credit deposit ratio

6) %Low cost deposit to total deposit

7) Cost income ratio

8) Return on average assets

9) Return on equity

10) Net interest income/Total income

11) Other income/Total income

12) Staff cost/Total income

13) Gross NPA ratio

14) Net NPA ratioBBM @ B.M.S College for Women 67


Ratio analysis at

15) Capital adequacy ratio

16) Net profit to average working funds

Other earning parameters:

1) Interest income to average working funds

2) Interest expenses to average working funds

3) Net interest income to average working funds

4) Non -interest income to average working funds

5) Total income to average working funds

6) Staff cost to average working funds

7) Other operating expenses to average working funds

8) Total operating expenses to average working funds

9) Operating profit to average working funds

10) Provisions to average working

funds

11) PBT to average working funds

12) Tax provisions to average

working funds

13) Net profit to average working

funds

14) CAGR=(Current year/Base year)



Ratio analysis at

INDIAN BANKING STURUCTURE:



Ratio analysis at



Ratio analysis at

Introduction to bank:

The name bank derives from the Italian word

banco”desk/bench”, used during the Renaissance by

Florentines bankers, who used to make their

transactions above the desk covered by a green table

cloth. However, there are traces of banking activity

even in ancient times.

In, fact the word traces its origin back to the Ancient

Roman Empire, where money lenders would set up their

stalls in the middle of the enclosed courtyards called

macella on a long bench called a bench, from which the

words banco and bank are derived. As a moneychanger,

the merchant at the banco did not so much invest money

as merely convert the foreign currency into the only

legal tender in Rome – that of the imperial mint.

Meaning of bank:

Bank is an institution, which deals with money and

credit. It borrows money by accepting deposits from the

public and lend to those who are in needs of funds. It



Ratio analysis at

also helps the businessmen in receiving and making

payments.

A bank is a financial institution whose primary

activity is to act as a payment agent for customers and

to borrow and lend money. It is an institution for

receiving, keeping, and lending the money. The first

modern bank was founded in Italy in Genoa in 1406,

[citation needed] its name was Banco di San Giorgio

(bank of St.George).

Banking industry has revolutionized the transaction and

financial services system worldwide. Through the

development in technology banking services has been

availed to the customers at all times, even after the

normal banking hours, on a 24/7 basis. Banking industry

services is nothing but the access of most of the

banking services (such as verification of account

details, going with the transaction, etc.). In today’s

world, progress of online services is available to all

customers of the concerned bank and can be accessed at

any point of time and from anywhere provided the place



Ratio analysis at

is equipped with the internet facility. Now a day,

almost all the banks all over the world, especially the

multinational ones, provide their customers with online

banking facility.

Definition of bank:

According to Herbert.L.Hart, “The banker is a person or

company carrying on the business of receiving money and

collecting drafts for customers subject to the

obligation of honoring the cheque drawn upon him from

time to time by customers up to the amount available on

their current account”.

Receiving money on current account

Paying against cheque drawn by account holders

Collecting of draft on behalf of the customers

According to the bank regulation act 1949 section(1)

(bandc) a bank is “ the accepting of for the purpose of

lending or investing of deposits of money from the

public repayable on demand or other and with drawl by

cheque, draft, or order form”.



Ratio analysis at

According to John Paget suggest that a bank is an

institution which:

Take deposits account

Take current accounts

Issues and pays cheques

Main functions of bank:

Borrowing

Lending

Agency service

General service

Indian banking industry:

The Indian Banking industry, which is governed by the

Banking Regulation Act of India, 1949 can be broadly

classified into two major categories, non-scheduled

banks and scheduled banks. Scheduled banks comprise

commercial banks and the co-operative banks. In terms

of ownership, commercial banks can be further grouped



Ratio analysis at

into nationalized banks and private sector banks (the

old/new domestic and foreign). These banks have over

67000 branches spread across the country.

The first phase of financial reforms resulted in the

nationalization of 14 major banks in 1969 and resulted

in a shift from class banking to mass banking. This in

turn resulted in a significant growth in the

geographical coverage of banks. Every bank had to

earmark a minimum percentage of their loan portfolio to

sectors identified as “priority sectors”. The

manufacturing sector also grew during the 1970’s in

protected environs and the banking sector was a

critical source. The next wave of reforms saw the

nationalization of 6 more commercial banks in 1980.

Since then the number of scheduled commercial banks

increased in four-fold and the number of bank branches

increased eight-fold.

After the second phase of financial sector reforms and

liberalization of the sector in the early nineties, the

public sector banks (PSB) found it extremely difficult

to



Ratio analysis at

compete with the new private sector banks and foreign

banks. The new private sector banks first made their

appearance after the guidelines permitting them were

issued in January 1993. Eight new private sector banks

are presently in operation. The bank due to their late

start have access to state-of-the –art technology,

which in turn helps them to save on manpower cost and

provide better services.

Evolution of banking industry in India:

Banking in India originated in the last decades of the

18th century. The first banks were the General Bank of

India, which started in 1786, and the 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 bank of Calcutta in June 1806,

which almost immediately became the bank of Bengal.

This was one of the presidency banks, the other two

being the bank of Bombay and bank of Madras, all were

of which were established under charters from the

British East India company. For many years the

presidency banks acted as quasi-central banks, as did

their successors. The three banks merged in 1925 to



Ratio analysis at

form the Imperial Bank of India, which, upon, India’s

independence, became the State bank of India.

The first fully Indian owned bank was the Allahabad

Bank, established in 1865. When the American Civil War

stopped the supply of cotton to Lancashire from the

Confederate States, promoters opened banks to finance

trading in Indian cotton. With large exposure to

speculative ventures, most of the banks opened in India

during that period failed. The depositors lost money

and lost interest in keeping deposits with banks.

Subsequently, banking in India remained the exclusive

domain of Europeans for the next several decades until

the beginning of the 20th century.

Foreign banks too start to arrive, particularly in

Calcutta, in the 1860s. The comptoired Escompte de

Paris opened a branch in Calcutta in 1860 and another

in Bombay in 1862, branches in Madras and Pondicherry,

then in French colony, followed. Calcutta was the most



Ratio analysis at

active trading port in India, mainly due to trade of

British Empire and so became a banking center.

Around the turn of 20th century, the Indian economy was

passing through relative period so stability. Around

five decades had elapsed since the Indian mutiny and

the social, industrial and other infrastructure had

improved. Indians had established small banks, most of

which served particular ethnic and religious

communities.

The presidency banks dominated banking in India but

there were also some exchange banks and a number of

Indian joint stock banks. All these banks were operated

in different segments of the economy. The exchange

banks, mostly owned by Europeans, concentrated on

financing foreign trade. Indian joint stock banks were

generally undercapitalized and lacked the experience

and maturity to compete with the presidency and

exchange banks. This segment let Lord Curzon to

observe, “In respect of banking it seems we are behind

the times. We are like some old fashioned sailing

ships, divided by solid wooden bulk heads into

separated and cumbersome compartments.”



Ratio analysis at

By the 1900s, the market expanded with the

establishment of banks such as Punjab national bank in

1859 in Lahore and bank of India in 1906, in Mumbai –

both of which were founded under private ownership.

Punjab national bank was the first swadeshi bank

founded by the leaders like Lala Lajpat Rai, Sardar

Dyal Singh matithian. The swadeshi movement

particularly inspired local businessmen and political

figures to found bank of and for Indian community. A

number of banks

established then have survived to the present such as

bank of India, corporation bank Indian bank, bank of

Baroda, Canary bank and central bank of India.

Current scenario of India banking industry:

The industry is currently in a transition phase. On the

one hand, the PSBs, which are the mainstay of the

Indian Banking systems, are in progress of shedding

their flab in terms of excessive manpower, excessive

non-performing asset and excessive governmental equity,

while on the other hand the private sector banks are



Ratio analysis at

consolidating themselves through mergers and

acquisitions.

PSBs which currently account for more than 78% of total

banking industry assets are saddled with NPAs (a mind-

boggling Rs 830 billion in 2000), falling revenues from

traditional sources, lack of modern technology and a

massive workforce while the new private sector banks

are forging ahead and rewriting the traditional banking

business model by way of their sheer innovation and

services. The PSBs are of course currently working out

challenging strategies even as 20% of their massive

employee strength has dwindled in the wake of the

successful Voluntary Retirement Schemes (VRS) Schemes.

The private players however cannot match the PSBs great

reach great size and successes to low cost deposits.

Therefore one of the means for them to combat the PSBs

has been through the mergers and acquisitions route.

Over the last two years, the industry has witnessed

several such instances. For instances, HDFC bank

mergers with Times bank, ICICI bank’s acquisition of

ITC Classic, Anagram Finance and bank of Madura.

Centurion bank, Indusind bank, bank of Punjab, Vysya



Ratio analysis at

bank are said to be on the lookout. The UTI bank-Global

Trust bank mergers however opened a Pandora’s box and

brought about the realization that all was not well in

the functioning of many of the private sector banks.

Private sector banks have pioneered internet banking,

phone banking, anywhere banking mobile banking, debit

cards, automatic teller machines (ATM) and combined

various other services and integrated them into the

mainstream banking arena, while the PSBs are still

grappling with disgruntled employees in the aftermath

of successful VRS schemes. Also, following India’s

commitment to the agreement in respect of the services

sector, foreign banks, including both new and the

existing ones, have been permitted to open up to 12

branches a year with effect from 1998-99 as against the

earlier stipulation of 8 branches.

Meanwhile the economic and corporate sector slowdown

has led to an increasing number of banks focusing on

the retail segment. Many of them are also entering the

new vistas of insurance. Banks with their phenomenal

reach and a regular interface with the retail investorsBBM @ B.M.S College for Women 81


Ratio analysis at

are the best placed to enter into the insurance sector.

Banks in India have been allowed to provide fee-based

insurance services without risk participation invest in

an insurance company or providing infrastructure and

services support and set up of a separate joint-venture

insurance company with risk participation.

Future of the banking industry:

The futures of banking industry are into the area of

the following:

1) Rural banking

2) Ban assurance

3) Financial cards

4) Mobile banking

5) Role of technology in rural banking

6) Pension funds-pension fund industry to be taken at

Marco level

7) Customer relationship through technology and

innovations

8) Enterprise CRM in retail banking

9) Fresh openings in retail operations

10) Micro financeBBM @ B.M.S College for Women 82


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11) Opportunities in non agricultural credit

12) Risk management and Basel 2

13) Customer protection

14) Skilled manpower

15) Non-performing assets

16) Technology

Indian banking sector scenario:

1)Central bank :The reserve bank of India is the central bank that

is fully owned by the government. It is governed by

a central board (headed by a governor) appointed by

the central government. It issues guidelines for the

functioning of all banks operating within the

country.

2)Public sector banks: The public sector banks of in India are as follows:

State bank of India and its associated banks

called the State Bank Group.

20 nationalized banksBBM @ B.M.S College for Women 83


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Regional rural banks mainly sponsored by

public sector banks

3)Private sector banks: The types of private sector banks in India are as

follows:

Old generation private banks

New generation private banks

Foreign banks operating in India

Scheduled co-operative banks

Non-scheduled banks

4)Co-operative sector: The types of co-operative banks in India are as

follows:

The co-operative sector is very much useful

for rural people. The co-operative banking

sector is divided into the following

categories.

State co-operative banks



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Central co-operative banks

Primary agriculture credit societies

5)Development banks/financial institutions: The types of development credit banks in India are

as follows:

IFCI

IDBI

ICICI

IIBI

SCICI ltd

NABARD

Export-import bank of India

National housing bank

Small industries development bank of India

North eastern development finance corporation

6) Retail banking sector:



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Retail banking refers to the banking in which

banking institution executes transaction directly

with consumers, rather than corporations or other

banks. Services offered include: savings and

checking accounts, mortgages, personal loans, debit

cards and so forth.

7)Opportunities and challenges of Indian banking

industry:The banking industry in India is undergoing a major

transformation due to changes in economic conditions

and continuous deregulation.

Deregulation: This continuous deregulation has made the

Banking market extremely competitive with greater

autonomy, operational flexibility, and decontrolled

interest rate and liberalized norms for foreign

exchange. The deregulation of the industry coupled with

decontrol in interest rates has led to entry of a

number of players in the banking industry. At the same

time reduced corporate credit off take thanks to



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sluggish economy has resulted in large number of

competitors battling for the same pie.

New rules: As a result, the market place has been

redefined with new rules of the game. Banks are

transforming to universal banking, adding new channels

with lucrative pricing and freebees to offer. Natural

fall out of this has led to a series of

innovation product offerings catering to various

customers segments, specifically retail credit.

Efficiency: This in turn has made it necessary to look

for efficiencies in the business. Banks need to access

low cost funds and simultaneously improve the

efficiency. The banks facing pricing pressure, squeeze

on spread and have to give thrust on retail assets.

Diffused customer loyalty: This will definitely impact

customer preferences, as they are bound to react to the

value added offerings. Customers have become demanding

and the loyalties are diffused. There are multiple

choices; the wallet share is reduced per bank with



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demand on flexibility and customized service and hassle

free, flawless service delivery.

Misaligned mindset: These changes are creating

challenges as employees are made to adapt to changing

conditions. There is resistance to change from

employees and the seller market mindset is yet to be

changed coupled with fear of uncertainty and control

orientation. Acceptance of technology is slowly

creeping in but the utilization is not maximized.

Competency gap: Placing the right skill at the right

place will determine success. The competency gap needs

to be addressed simultaneously otherwise there will

miss opportunities. The focus of people will be on

doing work but not providing solutions, on escalating

problems rather than solving them and on disposing

customers instead of using the opportunity to cross

sell.



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Key business services:

Banking in India is so convenient and hassle free that

one (individual, groups or whatever the case may be)

can easily process transactions as when required. The

most common services offered by banks in India are as

follow:

Bank accounts: It is the most common services of

the banking sector. An individual can open a bank

account, which can be savings, current or term

deposits.

Loans: You can approach all banks for different

kinds of loans. It can be a home loan, car loan,

personal loans, loan against shares and

educational loans.

Money transfer: Banks can transfer money from one

corner of the globe to the other by issuing demand

drafts, money orders or cheques.

Credit and debit cards: Most banks offer credit

cards to their customers, which can be used to

purchase products and services, or borrow money.



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Lockers: Most banks have safe deposits lockers,

which can be used by the customers for storing

valuables, like important documents or jewelers.

Meaning of Research:

A systematic search for an answer to a question or a

solution to a problem is called research. Research

simply means a search for facts-answers to questions

and solutions to problems. It is a purposive

investigation. It is an “organized inquiry”. It seeks

to find explained phenomenon, to clarify the doubtful

propositions and to correct the misconceived facts.

Definition of Research:



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Ker linger defines research as a “systematic,

controlled, empirical and critical investigation of

hypothetical propositions about the presumed relations

among natural phenomena.”

Research design:

Research design is the arrangements of conditions of

the study and collection of data in a manner that aims

to continue relevance to continue relevance to the

purpose of the study. A research design is a logical

and systematic plan prepared for directing a research

study. It specified the objectives of the study, the

methodology and technique to be adopted for achieving

the objectives. It constitutes the blue print for the

collection, measurement and analysis of data. It

provides a systematic plan of procedure for the

researcher to follow.

Definition of research design :

According to C. Selltic” A research design is the

arrangement of conditions for collection and analysis

of data in a manner that aims to combine relevance to

the research purpose with the economy in procedure”



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Types of research design:

According to the nature and purpose of the research

study we can classify the research designs into three

broad categories:

1) Exploratory research design

2) Descriptive and diagnostic research design

3) Hypothesis testing research design

Title of the study:

A REPORT ON FINANCIAL STATEMENT THROUGH RATIO ANALYSIS

AT ING-VYSYA BANK

Objectives of the study :

To know myself about the subject and to get better

and good knowledge regarding the financial matters

as well as analyze that to in an ING-VYSYA BANK.



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To know from where the funds will be obtained in

what amount fund would be raised, how mush to

invest in a particular work, how to plan the

proper utilizations of the available fund and also

to avoid the misuse of available fund.

To analyze the management efficiency of the

company.

To study the financial matters in detail.

To evaluate the liquidity and profitability of the

company.

To gain a practical knowledge about the various

financial activities of the company

Rationale behind the study:

The main reason for selecting the “financial management

and ratio analysis” as field of my project work is to

know the financial activities as well as economic and

marketing role-played by the company and to get the

knowledge about the difference in theory and practice.

It also helps me to know more about the financial



Ratio analysis at

management system in practice as I have selected

“finance” as my optional subject in my final year BBM,

it will help me future and for my higher studies.

Scope of the study:

This report is mainly done for academic purpose and for

the employees of the company. This report would give

details of financial statements through ratio analysis

of ING-VYSYA BANK. The study was conducted as per the

requirements of Bangalore University BBM program.

Statement of the study:

Financial soundness in terms of liquidity, leverage,

profitability and activity is the main objectives in

from of growing organization. To analyze in this view

and drawn meaningful conclusion to come to a right

decision, analytical techniques are required, among

such techniques ratio analysis is one valuable

technique in the hands of a financial analyst.

Therefore the study conducted to analyze the financial

management and financial ratios in the evaluation of

ING-VYSYA BANK limited financial soundness.



Ratio analysis at

Methodology used:

By taking the financial statements of the company the

various financial details, analysis and interpretation

have been done.

Graphical representations are been given with the

analysis and the interpretation.

Limitations of the study:

1) The data has been collected through secondary

sources; there are possibilities of occurrence of

errors.

2) Only ratio analysis has been performed to evaluate

the financial performance of ING-VYSYA BANK.

3) A detailed analysis in respect of external,

internal, horizontal, vertical analysis and the

others could not be performed due to time

constraint.

4) Inviolability of secondary data

5) The data was collected across predefined

parameters.

6) The research work is limited only to the

information provided in ING-VYSYA BANK only.



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7) The research work could have been done in more

than one bank for a comparison study, but to time

constraint it was not possible.

8) The study has been made considering board

criteria’s and there may be insufficient to draw

any conclusions.

9) Certain parameters in the study change over time.

The study is limited in scope and cannot be

applied to the industry as the whole.

10) The study is only based on

financial management.

11) Much of the information is

related to financial activities have not been

gathered due to company secrecy maintenance.

Need for the study:

1) To gain an exposure towards the actual management

f the organization.

2) To gain the theoretical and practical knowledge of

the subject.



Ratio analysis at

3) To find out the variations from the actual and

theoretical organization.

4) To gain experience and knowledge from the study.

Sources of data:

Data is collected from primary and secondary sources.

1) Primary data:

Primary data is collected by conducting informal

interviews with the key personnel’s that is with

the manager and also with the concerned staff of

the bank.

2) Secondary data:

Secondary data was collected from the sources

such as annual reports of the last 5 years,

brochures, from standard banking books and

website (www.ingvysyzabank.com)

Importance of the report:

The increasing profit of the company year after, in

terms of amount as well as in terms percentages helps


http://www.ingvysyzabank.com/


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to know the entrepreneurs to feel that the company is

in good position but they must give importance to only

to the past, but also for the present and future

situation. This gives an idea to the promoters of the

company

that they must maintain their increasing trends of

earnings profit for the organization that is future

also.

Research methodology

Company documents

Published sources

Personal observation

The above are the materials that have been adopted to

carry out thesis. With the above I have added

relevant graphs and charts related to my research,

which are drawn from the company’s financial aspects

to make this more interesting to reader.



Ratio analysis at

Period of study:

The study was conducted for a period of one month, from

10december 2009 till 10january 2010.

Chart representation:

The diagrammatic representation used by the researcher

in this research is BAR DIAGRAM. Bar diagram consists

of rectangular bars on a common base. Bars with equal

width and are equally spaced. Comparisons are based on

the length of the bars.

Sampling procedure:

The sampling procedure followed in the study is the

random study is the random sampling.

Plan of analysis:



Ratio analysis at

The analysis is done using various statistical

techniques like graphs and charts for better comparison

and interpretation.

Overview of the chapters:

Chapter-1: INTRODUCTIONThe report starts with an introduction of finance,

organization of finance department, finance manager,

meaning and definition of financial management,

Financial statements, techniques of financial analysis,

meaning and definition of ratio analysis,

interpretation of ratios, uses of ratios, significance

of ratios, objectives of ratio, limitations of ratio,

classifications of ratios, types of ratios, ratios used

in the study, , Indian banking structure

Chapter-2: RESEARCH DESIGNThe second chapter provides information regarding

meaning and definition of research and research design,

statement of problem, methodology, scope of study,

limitations of study, types of research, rational

behind the study title of study, source of data, need

of study, period of study, chart representation.



Ratio analysis at

Chapter-3: COMPANY PROFILEThe third chapter contains the profile of bank, history

of bank, milestones of bank. Overview of company,

origin, profile, vision, mission, corporate statement,

identity, strengths, functions, achievements, award,

strategy, latest news, product profile, brand

positioning, management, key competitors, knowledge

management tool, quick review.

Chapter-4: DATA ANALYSIS AND INTREPATIONThe forth chapter contains the ratios, tables, analysis

and interpretations.

Chapter-5: FINIDINGS, SUGGESTIONS AND CONCLUSIONThe fifth chapter put forth the findings of the study,

conclusion that have been arrived and suggestions given

and SWOT analysis.

BIBLIOGRAPHY



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ANNEXTURE

ING-VYSYA BANK:

History:

ING Vysya Bank Ltd is the prominent Bank in India,

formed with the Vysya Bank Ltd, a premier bank in the

Indian Private Sector and ING Group, a global financial

powerhouse of Dutch origin, in the year 2002. WithBBM @ B.M.S College for Women 102


Ratio analysis at

their core Banking Solution, IT oriented products and

focused Retail Banking and Wholesale Banking Services,

the Bank aims for sustainable growth to benefit all the

stakeholders, clients and employees and society at

large.

Bank was originally incorporated on March 29, 1930 as

The Vysya Bank Ltd. In the year 1948, the Bank acquired

the status of Scheduled Bank. Since then the Bank has

grown in size and stature and has reached the coveted

position of number one private sector bank in India.

Since then the Bank has grown in size and stature and

has carved a distinct identity of being India's Premier

Private Sector Bank. Subsequent to acquisition of stake

in the Bank by ING Group NV in August 2002, the name of

the Bank was changed from Vysya Bank Ltd to ING Vysya

Bank Ltd. In the year 1987, the Bank incorporated the

Vysya Bank Leasing Ltd for leasing and merchant banking

activities along with Karur Vysya Bank Ltd. In the year

1990, they incorporated Vysya Bank Housing Finance Ltd

for housing finance activities.

In the year 1996, the Bank signed a Strategic Alliance

with BBL. In March 2000, The Vysya Leasing Ltd became



Ratio analysis at

the wholly owned subsidiary of the Bank and in November

2000, they opened data center at Information Technology

Park Ltd, Bangalore. In the year 2001, the Bank along

with ING Group promoted a joint venture company called

ING Vysya Life Insurance Company Pvt Ltd for

undertaking life insurance business throughout India.

In the year 2002, the Bank launched a range of products

& services like the Vys Vyapar Plus, the range of loan

schemes for traders, ATM services, Smart services,

personal assistant service, Save & Secure, an account

that provides accident hospitalization and insurance

cover, Sambandh, the International Debit Card and the

mi-bank net banking service.

ING takes over the Management of the Bank from October

7, 2002 and the name of the Bank was changed from The

Vysya Bank Ltd to ING Vysya Bank Ltd with effect from

December 7, 2002. Bank Brussels Lambarta made a

strategic investment in our bank between 1996 and 2002.

ING Group N.V., a global financial conglomerate of

Dutch origin, later acquired bank Brussels Lambert. The

name of our bank was consequently changed to “ING VYSYA



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BANK Ltd” on November 1 2002 and our license to carry

on RBI to reflect our new name amended the banking

business. ING Group N.V. as its presence in India

trough ING VYSYA LIFE INSURANCE COMPANY LIMITED and ING

INVESTMENT MANAGEMENT (India) private limited.

During the year 2003-04, the wholly owned subsidiary

of the Bank, Vysya Bank Financial Services Ltd

commenced the distribution of various financial

products such as insurance products, mutual funds etc.

The name of the company was changed to ING Vysya

Financial Services Ltd. Also, they introduced customer

friendly products like Orange Savings, Orange Current

and Protected Home Loans.

In July 2003, the Bank divested their entire stake in

Vysya Bank Housing Finance Ltd to Dewan Housing Finance

Ltd for Rs 23.20 crore. In September 2003, the bank

issued Tier II Bonds (second series) aggregating to Rs

200 crore at a

competitive coupon rate of 6.25%. During the year 2005-

06, the company divested their entire stake of 14.87%



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in ING Vysya Life Insurance Company Pvt Ltd to Gujarat

Abuja Cements Ltd. In April 2007, the Bank sold their

entire shareholding of 9930000 shares in Investment

Management (India) Pvt Ltd, during the year 2007-08,

the Retail Branch Banking business launched a slew of

products to provide clients with enhanced solutions to

meet their financial needs besides the traditional

deposit products. ING Bank N V is investing in the Tier

I issue of ING Vysya Bank Ltd, by way of Innovative

Perpetual Bonds (IPDs) in foreign currency for an

amount of Rs 94.50 crore with a call option at the end

of 10 years.

The table below sets for the certain key information

about the bank:

As of June 30, 2009 as of march 31, 2009

Total advances

161487 167509

Total deposits

226083 248899



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Total low-cost deposits 65016

67129

Retail loans

94564 98252

ING are one of the oldest private sector banks in India

with a 79year long history and are engaged in offering

a wide variety of wholesale, retail and private banking

products and service to our customer.

As of March 31, 2008 ING-VYSYA were the seventh largest

private sector bank in India in terms of deposits and

the eighth largest private sector bank in India in

terms of advances.

Company overview:

It's been a long journey since then and the Bank has

grown in size and stature to encompass every area of



Ratio analysis at

present-day banking activity and has carved a distinct

identity of being India's Premier Private Sector Bank.

The company was originally incorporated as” The Vysya

Bank Limited” on march 29,1930 with limited liability

under the Mysore companies regulations, 1917. They

received certificate of commencement of business on

July 24, 1930. RBI granted them license to carry on

banking business in India under the banking regulations

act 1949 on June 6, 1958. ING-VYSYA is a scheduled

commercial bank within the meaning of the RBI act 1934.

In 1980, the Bank completed fifty years of service to

the nation and post 1985; the Bank made rapid strides

to reach the coveted position of being the number one

private sector bank. In 1990, the bank completed its

Diamond Jubilee year. At the Diamond Jubilee

Celebrations, the then Finance Minister Prof. Madhu

Dandavate, had termed the performance of the bank

‘Stupendous’. The 75th anniversary, the Platinum

Jubilee of the bank was celebrated during 2005.

ING Vysya Bank Ltd., is an entity formed with the

coming together of erstwhile, Vysya Bank Ltd, a premier



Ratio analysis at

bank in the Indian Private Sector and a global

financial powerhouse.

ING of Dutch origin, during Oct 2002. The origin of the

erstwhile Vysya Bank was pretty humble. It was in the

year 1930 that a team of visionaries came together to

found a bank that would extend a helping hand to those

who weren't privileged enough to enjoy banking

services.

It's been a long journey since then and the Bank has

grown in size and stature to encompass every area of

present-day banking activity and has carved a distinct

identity of being India's Premier Private Sector Bank.

In 1980, the Bank completed fifty years of service to

the nation and post 1985; the Bank made rapid strides

to reach the coveted position of being the number one

private sector bank. In 1990, the bank completed its

Diamond Jubilee year. At the Diamond Jubilee

Celebrations, the then Finance Minister Prof. Madhu



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Dandavate, had termed the performance of the bank

‘Stupendous’. The 75th anniversary, the Platinum

Jubilee of the bank was celebrated during 2005.

The origin of ING Group:

On the other hand, ING group originated in 1990 from

the merger between National – Nederland NV the largest

Dutch Insurance Company and NMB Post Bank Group NV.

Combining roots and ambitions, the newly formed company

called “International Nederland Group”. Market circles

soon abbreviated the name to I-N-G. The company

followed suit by changing the statutory name to “ING

Group N.V.”.

ING VYSYA BANK:



Ratio analysis at

Type Private BSE: 531807

Founded 1930, India.

Headquart

ersIndia

Key

people

Vaughn Richtor, MD & CEO

K.R Ramamurthy, Non-Executive Part-

time Chairman

IndustryFinancial

Commercial banks

Website www.ingvysyabank.com

Milestones of ING-VYSYA BANK:


http://www.ingvysyabank.com/scripts/retailbanking.aspx

http://en.wikipedia.org/wiki/Website

http://en.wikipedia.org/wiki/Commercial_banks

http://en.wikipedia.org/wiki/Financial

http://en.wikipedia.org/wiki/Industry

http://en.wikipedia.org/wiki/India

http://www.bseindia.com/price_finder/stockreach.asp?scripcd=531807

http://en.wikipedia.org/wiki/Bombay_Stock_Exchange

http://en.wikipedia.org/wiki/Category:Types_of_companies


http://en.wikipedia.org/wiki/File:Flag_of_India.svg


Ratio analysis at

The long journey of seventy-five years has had several

milestones. They are:

1930: Set up in Bangalore

1948: Scheduled bank

1985: Largest private sector bank

1987: The VYSYA bank leasing Ltd. Commenced

1988: Pioneered the concept of co-branding of credit

cards

1990: Promoted VYSYA bank housing finance Ltd

1992: Deposits cross Rs.1000 crores

1993: Number of branches crossed 300

1996: Signs strategic alliance with BBL, Belgium,

Two national awards by Gem and Jeweler export

promotion council for excellent performance in

export promotion.

1998: Cash management services and commissioning of

VSAT.

1999: “Golden Peacock award”- for the best HR

practices by Institute of directors. Rated as



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domestic bank in India by global

finance(International finance journal-June 1999)

2000: State-of –the-art, date centre at ITPL,

Bangalore. RBI clears setting up of “ING-VYSYA LIFE

INSURANCE”.

2001: ING-VYSYA commenced “LIFE INSURANCE BUSINESS”.

2002: The bank launched a range of products and

services like the Vyaya Vyapar plus, the range of

loan schemes for traders, ATM service, smart

services, personal assistance service, save and

secure, an account that provides accident

hospitalization and insurance cover, sambandh, the

international debit card and the mi-bank net banking

service.

2002: ING takes over the Management of the bank from

October 7th 2002.

2002: RBI clears the name of the bank as “ING VYSYA

BANK ltd”; vide their letter of 17/12/02.

2003: Introduced customer friendly products like

orange savings, orange current and protected home

loans.



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2004: Introduced protected home loans-a housing loan

product.

2005: Introduced solo- my own account for youth and

customer service line and also introduced “Phone

banking.

2006: Bank has networked all the branches to

facilitate “AAA: transactions that is “Anywhere

banking, anytime banking and anyhow banking”.

ING in India:

In India, ING is present in all three fields of

banking, insurance and asset management in the form of

ING, ING Vysya Life Insurance and ING Investment

Management respectively. The presence in all three

fields signifies the importance that the group attaches

to the Indian markets and the group's operations here,

as well as its bullish future outlook on the country.

ING and ING Vysya Life Insurance are headquartered at

Bangalore, while the corporate office of ING Investment

Management is situated at Mumbai. The



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synergies arising out of the three distinct but

complimentary businesses are bound to be an asset to

the group in the changing market dynamics of the

future. The first such signs are already visible on the

horizon with combined products being successfully

launched by the different entities of the group in

conjunction with each other.

Profile:

ING has gained recognition for its integrated approach

of banking, insurance and asset management.

Furthermore, the company differentiates itself from

other financial service providers by successfully

establishing life insurance companies in countries with

emerging economies, such as Korea, Taiwan, Hungary,

Poland, Mexico and Chile. Another specialization is ING

Direct, an Internet and direct marketing concept with

which ING is rapidly winning retail market share in

mature markets. Finally, ING distinguishes itself

internationally as a provider of ‘employee benefits’,

i.e. arrangements of nonwage benefits, such as pension

plans for companies and their employees.



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Vision:

To make banking systems a more effective part in the

business.

Mission Statement:

ING`s mission is to be a leading, global, client-

focused, innovative and low-cost provider of financial

services through the distribution channels of the

client’s preference in markets where ING can create

value.

ING Financial Markets, based out of Mumbai is a leading

player in the Indian Financial Markets providing one of

the widest ranges of products for large corporate,

small and medium enterprises as well as individual

needs. Supported by state-of-the-art systems and the

capabilities of the ING Group, we offer competitive

pricing and efficient execution across markets and a

comprehensive suite of products. Financial Markets unit



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is an active market maker on most rupee interest rate

and currency products. Within the bank, we play a key

role in the Asset Liability Management and ALM

strategy. To our corporate and institutional clients,

we offer a comprehensive range of products for

transactions and risk management needs through the

sales desks at Mumbai, Delhi, and Bangalore & Chennai.

The Financial Markets business is driven by a highly

qualified and knowledge driven team that brings

together a deep understanding of local and global

markets as well as complex financial products.

The new identity: The immediate benefit to the bank, ING Vysya Bank, has

been the pride of having become a Member of the global

financial giant ING. As at the end of the year December

2008, ING's total assets exceeded 1332 billion Euros,

employed over 125000 people, and served over 85 million

customers, across 50 countries. This global identity

coupled with the backup of a financial powerhouse and

the status of being the first Indian International

Bank, would also help to enhance productivity,



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profitability, to result in improved performance of the

bank, for the benefit of the entire stakeholder.

ING’s Corporate Statement:

At ING life, we strongly believe that the life is

different at every stage; life insurance must offer

flexibility and choice to go with that stage. We are

fully prepared and committed to guide you on insurance

products and services through our well-trained

advisors, backed by competent and customer services, in

best possible way. It is our aim to become one of the

top private life insurance companies in India and to



Ratio analysis at

become a cornerstone of ING’s integrated financial

service business in India.

Functions of ING Vysya:

Business Compliance

Regulatory Guidelines Dissemination & Advisory

Financial Economic Crime (FEC) & Sanctions Desk

Policy Framework & MIS

Training & Communication

Strengths:

Banking experience of 79years

Association with ING Group N.V.

Professional management

Strong market presence and recognition among small

and medium enterprise customers

Centralized and modern technology platform

Multiple delivery channels and distribution

infrastructure


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Distribution Channels:

ING Vysya Life has a diversified distribution platform.

While Tied Agency remains the strongest channel, the

alternate Channels business within ING Vysya Life is

one of the fastest growing distribution channels. ING

Vysya Life has strengthened its position as the

unparallel leader in the life insurance industry in

cooperative banks tie-ups. The company currently has

tie-ups with 130 Co-operative banks across the country.

The Alternate Channels division has Banc assurance,

ING, Corporate Agents and SMINCE.

The Brand Positioning:

In 2007, ING Vysya Life developed its unique brand

positioning ‘Mera farz’. This positioning means, ING

Vysya Life helps its customers fulfill their

responsibilities towards themselves and their families.

This powerful positioning has helped ING Vysya Life

create a distinct identity for itself. The latest brand

campaign with a very catchy jingle dwells on how a

little planning and a helping hand from ING



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Vysya life can help lighten the burden of

responsibilities that often come with happy moments and

let you enjoy your life without any worries.

Achievements:

A few achievements are highlighted below:

First investment manager to launch a packaged

concept in Asset Management Industry.

Awarded “Abby Gold 2006” for its advertising

Campaign for ING LION Fund.

Two CRISIL AAAf * products in Debt Fund space.

(ING Liquid Fund & ING Floating Rate Fund).

First Asset Manager to launch a debt fund based on

Credit risk with a portfolio based on credit

monitor. (ING Select Debt Fund).

First Private Sector Mutual Fund to launch a

concept dedicated to women. (Mahilanivesh).

Asia Asset Monitor awarded “Most Innovative

Product” ING Dynamic Asset Allocation Fund.



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ING Mutual Fund recently launched India’s first

DAILY TRANSFER PLAN called Zoom Investment Pac

(ZIP).

ING Mutual fund has also pioneered a new reality

show on television called Indian Investor of the

year.

Strategy:

ING’s objective is to enhance its position as a premier

provider of banking and other financial services in

India. Some of the business strategies that have

envisaged are as follows:

Enhance the quality and spread of banking

franchise

Continue to leverage on the synergies with ING

Grope N.V.

Attract and retain talent

Continue the focus on operational efficiency and

risk management



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Social Objectives:

The key objective of the ING Chances for Children

program is to improve the well-being of children aged

4-12 worldwide by giving them access to free,

compulsory basic schooling that aims to develop each

child's ability to the fullest. ING Chances for

Children will be doing this by giving children access

to education, by providing the necessary skills and

through investment in educational organizations.

The main targets of the ING Chances for Children

program are:

To provide primary education for 50,000 children

over a period of three years.

To improve the quality of education in the

communities in which ING business are active.

To involve as many of the ING group’s 115,000

employees as possible , either as ambassadors,

volunteers or donors.



Ratio analysis at

The latest..

ING News

News release on the working result of the bank for

the quarter year ended 30th September 2009.

ING VYSYA BANK shareholders approve capital

rising.

ING VYSYS BANK raises 415 crores through

successful QIP and a preferential placement.

Shailendra Bhandari appointed as MD and CEO of ING

VYSYA BANK Ltd.

ING VYSYA BANK Q1 net profit up 48%.

ING VYSYA BANK CEO steps down on completion of

tenure.

ING VYSYA BANK launches kids portal

www.kidzzbank.com.

Banking and Financial News - November 2009

(updated as of 30-11-2009):

Banks should reach unbanked areas:Patel


http://www.kidzzbank.com/


Ratio analysis at

RBI to fine tine norms on credit default swaps.

RBI may hire external hands.

Banks asked to disclose to customer’s fees,

commissions received from mutual funds.

Move for single regulator gathers steam.

Stimulus rollback not at one go.

Crisis management-effect on the RBI’s balance

sheet.

Behave wants IPO processing time cut to 7 days.

Center asks PSB’s to hunt for mergers and

acquisitions.

Banks sitting on pile of sanctioned loans.

Banks find DRT a better recovery mechanism.

Moody’s retains its negative view on Indians

banking sector.

Banks to get six more months to cover NPAs.



Ratio analysis at

Government may do away with lock in period for FDI

in real estate.

Products and Services

Foreign Exchange Transaction

Hedging Solutions

Money Market Products

Management of risk continues to be one of the most

important aspects of running successful businesses.

Financial Markets at ING help manage different kinds

of risks by matching client’s risk management needs

with appropriate solutions; offering them world-class

solutions and services for managing different risks

in their businesses, dealings in foreign currency for

import/export or short term assets or liabilities.

Mutual Funds:

As a distributor of Mutual Funds, they are tied up with

almost all the Asset Management Companies thereby

assisting their clients to invest in mutual fund

schemes, which meet with their investment requirements.



Ratio analysis at

Life Insurance:

ING is actively engaged in selling ING Life Insurance

products.

ING Life Insurance provides a range of products

including endowment, pension & unit linked plans.

More details on ING Life Insurance products are

available at the link www.ingvysyalife.com

Product profile of ING-VYSYA bank:

The product profile of ING-VYSYA bank are given in

brief, the product offered by ING-VYSYA are the

Platinum preferred banking: savings account (orange

savings account, general savings account, solo savings

account, saral savings account, orange salary account,

advantage salary account, freedom account, ING formula

savings account).

The current accounts( orange current account advantage

current account, general current account and comfort

current account), and the term deposits (fixed


http://www.ingvysyalife.com/


Ratio analysis at

deposits, cumulative deposits, akshaya deposits, and

advantage deposits) and demat account.

Services:

The services offered by ING-VYSYA bank are advisory

services, non-discretionary, portfolio management,

operational and regulatory services, transactions

services, trust and estate planning, private investment

banking among the others.

NRI services:

The NRI services rendered by ING-VYSYA BANK are

accounts and deposits (rupee savings account, NRE

savings account, NRO savings account, rupee

current account, NRE current account, NRO current

account, rupee fixed deposits, NRE fixed deposits, NRO

fixed deposits, NRO Akshya deposits, NRE Akshya

deposits, NRE cumulative deposits, NRO cumulative

deposits, foreign currency deposits, FCNR Akshya

deposits, FCNR deposits, NRI home loans remittances

(Mi-remi, Telegraphic/wire transfers, funds transfers’



Ratio analysis at

cheque, DDs/TCs/Western union money transfer, corporate

services, (small and medium enterprise, agri and rural

banking, Wholesale banking and financial markets).

Loans:

The loans and advances rendered and offered by ING-

VYSYA BANK are personal loans, home loans, home equity

loans and NRI loans, agricultural loans (terms loans

and short term loans).

Cards:

The different types of credit cards and debit cards

offered by ING-VYSYA BANK are credit cards and debit

cards (ING regular debit card, ING formula debit Card

and ING patina debit card).

Insurance:

ING Vysya Life Insurance Company Limited, a part of the

ING Group, the world’s largest financial services

provider, entered the private life insurance industry

in India in September 2001. Headquartered at Bangalore,

ING Vysya Life is currently present in 246 cities and

has a network of over 300 branches, staffed by 7,000



Ratio analysis at

employees and over 51,000 advisors, serving over 5.5

lakhs customers.

Investments:

ING-VYSYA BANK offers Mutual funds and Government of

India and tax savings bonds.

Management:

Board of directors:

K R Ramamurthy (Non-Executive Part-time Chairman)

Shailendra Bhandari (Managing Director & Chief

Executive Officer)

Arun Thiagarajan (Director)

Wilfred Nagel (Director)

Aitya Krishna (Director)

Philippe Damas (Director)


http://ingvysyabank.com/scripts/About_ourteam.aspx





Ratio analysis at

Richard Cox (Director)

Ryan Andre Padgeet (Director)

Santosh Raamesh Desai (Director)

M.Damodaran (Director)

Santosh Ramesh Desai(Director)

Vaughn Nigel Richto (director)

Senior Management Team:

Kshitij Jain (Managing Director and Chief

Executive officer)

B. Ashwin (Chief Operating officer)

Rahul Agarwal (Chief Distribution Officer)

Marco Fredrik (Financial Controller)

Amit Gupta (Director - Marketing & Communication)

Priya Gopalakrishnan (Director - Human Resources)

T K Uthappa (Director, Sales - Tied Agency)BBM @ B.M.S College for Women 131



Ratio analysis at

Rene van der Poel (Director - Alternate Channels)

Ravishankar Subramanian (Director-Information

Technology & Corporate Services)

Hemamalini Ramakrishna (Appointed Actuary and CIRO

-Chief Insurance Risk Officer)

Corporate Social Responsibility:

The bank as a part of its Corporate Social

Responsibility has undertaken many purposeful

activities.

ING Vysya Foundation was set up almost three years ago

actively supported by the three business units of ING

Vysya (ING Vysya Bank, ING Vysya Life Insurance and ING

Vysya Mutual Fund) to promote its Corporate Social

Responsibility. The mandate for the foundation is to

promote primary education for under privileged

children.

Accordingly, ING Vysya Foundation’s commitment to

empower children through primary education has been the

focus in the last three years. In a country with an



Ratio analysis at

estimated 50 million children deprived of basic primary

education and health care, enormous support, dedication

and firm belief is necessary to make a difference and

to change the scenario. The foundation's efforts have

been very successful in reaching out to underprivileged

children and providing them with a platform to learn,

grow and achieve through partnerships with 4 nonprofit

organizations located in India.

Today, the Foundation partners with eight organizations

in India. It contributes hugely to the Global

initiative – ING Chances for Children in partnership

with UNICEF.

The Foundation has been able to support 1 lakhs

children from all over India to be in school with the

active support of the employees across the ING

businesses in India.

Responsibility: ING strives to be a good citizen. Ethical, social and

environmental considerations play an integral part in

their business decisions. ING is committed to playing

an active role as a community sponsor. It does this

through a wide range of local sponsorships and through



Ratio analysis at

its global Chances for Children initiative, which

provides access to primary education to underprivileged

children in developing countries who would otherwise

not have the chance to attend school.

Key competitors :

The key competitors of ING-VYSYA BANK are ICICI Bank,

HDFC Bank, Axis Bank, Kotak Mahindra Bank, Federal

Bank, Yes Bank, JK Bank, IndusInd Bank and Karur Vysya

Bank.

Product Portfolio:

ING Vysya Life follows a “customer centric approach”

while designing its products. The Company’s product

portfolio offers products that cater to every financial

requirement, at all life stages.

In fact, the company has developed the LifeMakerTM a

simple tool, which can be used to choose a plan most

suitable to a specific customer, based on his needs,

requirements and current life stage. This tool helps


http://www.inglife.co.in/lifemaker.htm


Ratio analysis at

you build a complete financial plan for life at every

life stage, whether the requirement is Protection,

Savings, Investment or Retirement. Suitable products

from ING Vysya Life Insurance’s product portfolio for

each such requirement, makes selection of your plan an

easy exercise.

The Company aims to make customers look at life

insurance afresh, not just as a tax saving device but

as a means to live life to the fullest. It believes in

enhancing the very quality of life, in addition to

safeguarding an individual's security

ING Chances for Children - India initiative:

In India, along with the ING Vysya Foundation, the ING

and UNICEF partnership is focused to provide quality

education for working children in Tamil Nadu. 15,000

children will benefit from quality education in 200

learning centers for former child workers under the

National Child Labor Elimination Project (NCLP).

The project focuses on strategies to provide quality

education for children who is either already working in

low-paid, low-skilled industries or who are out-of-


http://www.inglife.co.in/productcenter.htm





Ratio analysis at

school and therefore extremely vulnerable to becoming

child laborers. In Tamil Nadu the project emphasizes on

child-friendly schools, quality education, community

involvement and responsibility in ensuring children can

learn and build a solid

foundation for a hopeful future and make a strong basis

for ensuring that children remain in school and

complete a course in primary education. Activities will

especially focus on preventing child labor, protecting

children’s rights and promoting quality education.600

teachers will be reinvigorated through capacity

building and professional training pedagogy and

motivation. Through workshops with some 180 staff from

government departments, UNICEF will cultivate and

reinforce supportive alliances in order to ensure

quality education.

Knowledge Management Tools

Bank has to follow the norms prescribed by various

regulatory authorities on a wide range of issues for

the protection of investors, consumers and for theBBM @ B.M.S College for Women 136


Ratio analysis at

development of the country as a whole. These norms are

amended / modified by the regulators from time to

time. Functional Departments, Branches, Regional

Offices and employees in the bank find it difficult to

search these guidelines. To provide easy search and

access, Compliance Department has availed the KMT.

Knowledge Management Tool (KMT) is a tool availed from

M/s. Alpha plus Technologies Ltd. by Compliance

Department for the purpose of instant references by all

the employees of our bank branches/departments with

easy search options, on the rules, regulations,

guidelines, policies, laws, statutes, Circulars, Master

circulars, Compliance etc. of various regulators. This

is a tool of External Guidelines. i.e., guidelines by

regulatory and other authorities. However for internal

operations, the manuals and circulars may be referred

and where there is some doubt, Compliance Department

may be approached for clarification.



Ratio analysis at

Quick review:

ING-VYSYA BANK:

VYSYA BANK-Founded in 1930

Number.1 Private Sector bank 1985

Scheduled bank 1948

ING- International Netherladen Group

Founded 1990

Merge between National Dutch Insurance Company and

NNB post bank group

43.99% share in the bank

7/15 directors in the board

ING-VYSYA BANK merged in 2002

300 branches



Ratio analysis at

KEY RATIOS:

YEAR 2005 2006 2007 2008 2009

COST OF DEPOSITS 4.90% 4.87% 5.28% 6.28% 6.83%

COST OF FUNDS 5.42% 5.29% 5.78% 6.56% 6.92%

YIELD ON ADVANCES 8.62% 8.78% 9.34%10.49%

11.48%

NET INTEREST MARGIN 2.92% 3.24% 2.79% 2.77% 2.84%

CREDIT DEPOSIT RATIO72.24%

76.73%

77.67%

71.61%

67.30%

% LOW COST DEPOSIT TO TOTALDEPOSIT

24.23%

27.01%

28.91%

31.54%

26.97%

COST INCOME RATIO79.28%

83.62%

69.06%

66.47%

64.52%

RETURN ON AVERAGE ASSETS 2.00% 0.06% 0.51% 0.75% 0.71%



Ratio analysis at

RETURN ON EQUITY-5.28% 0.90% 8.34%

12.03%

11.62%

NET INTEREST INCOME74.41%

77.56%

60.93%

54.35%

54.26%

OTHER INCOME11.02%

10.22%

18.39%

19.65%

19.65%

STAFF COST46.33%

45.14%

45.00%

49.61%

50.77%

GROSS NPA RATIO 4.98% 4.09% 2.55% 1.38% 1.86%

NET NPA RATIO 2.14% 1.76% 0.95% 0.70% 1.23%

CAPITAL ADEQUACY RATIO 9.10%10.67%

10.67%

10.56%

11.68%

NET PROFIT TO AVERAGE WORKINGFUNDS

-0.25% 0.05% 0.05% 0.52% 0.70%

Cost of deposits ratio:

Table 1:



Ratio analysis at

YEAR

INTEREST ON

DEPOSITS

AVERAGE

DEPOSITS PERCENTAGE

2005 516 10526 4.90%

2006 617 12667 4.87%

2007 713 13492 5.28%

2008 1046 16668 6.28%

2009 1401 20516 6.83%

Analysis:

The above table states that the cost of deposits in the

year 2005 was 4.90% it decreased to 4.87% in the year

2006 and it saw a gradual increase during 2007, 2008

and 2009 as 5.28%, 6.28% and 6.83% respectively.

Graph 1:BBM @ B.M.S College for Women 141


Ratio analysis at

Interpretation:

Graph showing the cost of deposits of ING-VYSYA BANK of

past five years.

The cost of deposits of ING VYSYA BANK increased year

to year because the rate of interest at bank was also

increasing year to year.



Ratio analysis at

Cost of funds ratio :

Table 2:

YEAR

INTEREST

EXPENDED

AVERAGE

LIABILITIES PERCENTAGE

2005 647 7503 5.42%

2006 825 9393 5.29%

2007 960 10278 5.78%

2008 1297 12361 6.56%

2009 1748 15220 6.92%

Analysis:



Ratio analysis at

The above table states that in the year 2005 the cost

of funds was 5.42%, it has decreased to 5.29% in the

year 2006, and there was again increase in the year

2007 to 5.78%, in 2008 it has increased to 6.56% and

also in the year to 6.92%.

Graph 2:



Ratio analysis at

Interpretation:

Graph showing the cost of funds of ING-VYSYA BANK of

past five year.

From the above graph we can see the cost of funds ratio

has been gradually increasing year to year as the

company showed more interest on the investment of the

company and funded on them more.

Yield on advances ratio:

Table 3:

YEARINTEREST ONADVANCES AVG ADVANCES PERCENTAGE

2005 647 7503 8.62%



Ratio analysis at

2006 825 9393 8.78%

2007 960 10278 9.34%

2008 1297 12361 10.49%

2009 1748 15220 11.48%

Analysis:

The above table gives you the percentage of yield on

advances of ING-VYSYA BANK.

In the year 2005 the yield on advances was 8.62%,

increase to 98.78% in 2006, in the year 2007 the yield

on advances was 9.34% and increased to 10.49% and also

again increase in 2009 by 11.48%.

Graph 3:



Ratio analysis at

Interpretation:

Graph showing the yield on advances of ING-VYSYA BANK

of past five years.

The yield on advances of ING VYSYA BANK has increased

year to year because the company has concentrated on

their deposits.



Ratio analysis at

Net interest margin ratio:

Table 4:

YEARNET

INTEREST AVG EARNING ASSETS PERCENTAGE

2005 357 12217 2.92%

2006 481 14865 3.24%

2007 446 5952 2.79%

2008 498 18008 2.77%

2009 650 22892 2.84%

Analysis:

From the above table we get the information about Net

interest margin (on average earning assets) of ING-

VYSYA BANK.



Ratio analysis at

In the year 2005 the net interest margin percentage was

2.92% and increased to 3.24% in the year 2006, suddenly

the net interest margin was decreased to 2.79% in 2007

and again decrease to2.77% in 2008 and in the next

financial year 2009 it increase to 2.84%.

Graph 4:

Interpretation:



Ratio analysis at

Graph showing the net interest margin (on average

assets) of ING-VYSYA BANK of past five years.

There is lot of fluctuations on net interest margin due

to less sales and direct expenses are increased to

increase the net interest margin the company has to

increase the sales and decrease the direct expenses.

.

Credit deposit ratio:

Table 5:

YEAR ADVANCES DEPOSITS PERCENTAGE

2005 9081 12569 72.24%



Ratio analysis at

2006 10232 13335 76.73%

2007 11976 15419 77.67%

2008 14650 20458 71.61%

2009 16751 24890 67.30%

Analysis:

From the above table we get the information about

credit deposit ratio of ING-VYSYA BANK of past five

years.

In the year 2005 credit deposit ratio percentage was

72.24% and increased to 76.73% in the year 2006, and

was again increased by 77.67%, gradually the credit

deposit ratio was decreased to 71.61% in 2008 and again

decrease to 67.30% in 2009.

Graph 5:



Ratio analysis at

Interpretation:

Graph showing the credit deposit ratio of ING-VYSYA

BANK of past five years.

The graph states that there is lot of fluctuations on

credit deposit ratio due to the deposits that the

company have to be received by public have not received

properly and if the ratio must be raised then the

company should look after their deposits on correct

time.



Ratio analysis at

Percentage low cost deposit to total deposits

ratio:

Table 6:

YEAR % LOW COST DEPOSITSTOTAL

DEPOSITS PERCENTAGE

2005 3046 12569 24.23%

2006 3602 13335 27.01%

2007 4458 15419 28.91%

2008 6452 20458 31.54%

2009 6713 24890 36.97%



Ratio analysis at

Analysis

From the above table we get the information about

percentage low cost deposit to total deposits of ING-

VYSYA BANK.

In the year 2005 percentage low cost deposit to total

deposit was 24.23% and increased to 27.01% in the year

2006, and was again increased by 28.91%, in 2007 and in

2008 by 31.54% and in 2009 the %low cost deposits to

total deposits gradually decreased to 26.97%.

Graph 6:



Ratio analysis at

Interpretation:

Graph showing the percentage low cost deposit to total

deposit of ING VYSYA BANK of past five years.

The graph states that the percentage low cost deposits

have been gradually increased year to year as the

company’s rate of interest is low on the deposits and

the company have received more deposits.



Ratio analysis at

Cost income ratio:

Table 7:

YEAROPERATINGEXPENSES COST INCOME PERCENTAGE

2005 380 479 79.28%

2006 519 621 83.62%

2007 505 731 69.06%

2008 609 917 66.47%

2009 772 1198 64.52%

Analysis:

From the above table we get to see the information

about cost income ratio of ING-VYSYA BANK.

In the year 2005 percentage of cost income ratio was

79.28% and increased to 83.62% in the year 2006, and

gradually decreased to 69.06% in 2007 and also



Ratio analysis at

decreased in 2008 to 66.47% and finally decreased in

2009 by 64.52%.

Graph 7:

Interpretation:



Ratio analysis at

Graph showing the cost income ratio f ING VYSYA BANK of

past five years.

The graph states that the cost income ratio is

decreasing gradually form year to year as the income of

the company is decreasing because of the low sales, if

the sales of the company increase then the cost income

ratio also increases.

Return on average assets;

Table 8:

YEAR NET PROFIT AVG ASSETS PERCENTAGE

2005 -38 13203 2.00%



Ratio analysis at

2006 9 15839 0.06%

2007 89 17265 0.51%

2008 157 20832 1.75%

2009 189 26751 0.71%

Analysis:


about return on average assets of ING-VYSYA BANK.

In the year 2005 the percentage of return on average

assets was 2.00% and gradually decreased to 0.06% in

the year 2006 and increased to 0.51% in 2007, 0.75%

increased in 2008 and decreased to 0.71% in 2009.

Graph 8:



Ratio analysis at

Interpretation:

Graph showing the return on average assets ratio of ING

VYSYA BANK of past five years.

The graph states that the return on average assets

ratio is decreasing gradually from year to year because

the current assets converted into cash immediately.



Ratio analysis at

Return on equity ratio:

Table 9:

YEAR NET PROFIT AVG EQUITY PERCENTAGE

2005 -38 723 -5.28%

2006 9 1009 0.90%

2007 89 1066 8.34%

2008 157 1305 12.03%

2009 189 1624 11.62%

Analysis:


about return on equity of ING-VYSYA BANK of past five

years.

In the year 2005 the percentage of return on equity

ratio was negative value -5.28% and gradually increased

to 0.90% in the year 2006 and increased to 8.34% in



Ratio analysis at

2007, 12.03% increased in 2008 and decreased to 11.62%

in 2009

Graph 9:

Interpretation:

Graph showing the return on equity ratio of ING VYSYA

BANK of past five years.BBM @ B.M.S College for Women 162


Ratio analysis at

The graph states that the return on equity ratio comes

up from negative value to positive value and there is

no standard or ideal return on equity ratio. If the

return on equity ratio is high then the company is in

good position.

Net interest income/total income ratio:

Table 10:

YEARNET INTEREST

INCOME TOTAL INCOME PERCENTAGE

2005 357 479 74.41%

2006 481 621 77.56%

2007 446 731 60.93%



Ratio analysis at

2008 498 917 54.35%

2009 650 1198 54.26%

Analysis:


about net interest /total income of ING-VYSYA BANK of

past five years.

In the year 2005 the percentage of net interest

income/total income was 74.41% and gradually increased

to 77.56% in the year 2006 and gradually decreased to

60.93% in 2007, 54.35% decreased in 2008 and decreased

to 54.26% in 2009.

Graph 10:



Ratio analysis at

Interpretation:

Graph showing the net interest income /total income

ratio of ING VYSYA BANK of past five years.

The graph states that the net interest income of the

company is gradually decreasing due to the company is

not potential enough to meet its immediate commitments

on time to increase their interest income.



Ratio analysis at

Other income ratio:

Table 11:

YEAR 0THER INCOME TOTAL INCOME PERCENTAGE

2005 123 1113 11.02%

2006 139 1362 10.22%

2007 286 1553 18.39%

2008 419 2099 19.65%

2009 548 2788 19.65%

Analysis:


about other income/total income of ING-VYSYA BANK of

past five years.

In the year 2005 the percentage of other income/total

income was 11.02% and decreased to 10.22% in the year



Ratio analysis at

2006 and gradually increased to 18.39% in 2007, and

again increased to 19.65% in 2008 an remain same in

2009.

Graph 11:

Interpretation:



Ratio analysis at

Graph showing the other income ratio of ING VYSYA BANK

of past five years.

The graph states that the other income ratio is

gradually increasing year to year because assets or

other income investment are mostly financed out of

loans. This type of indication means the financial

soundness of the company is increasing year to year.

Staff cost ratio :

Table 12:

YEAR STAFF COSTOPERATINGEXPENSES PERCENTAGE

2005 176 380 46.33%



Ratio analysis at

2006 234 516 45.14%

2007 227 505 45.00%

2008 302 609 49.61%

2009 392 772 50.77%

Analysis:


about staff cost/total operating cost of ING-VYSYA BANK

of past five years.

In the year 2005 the percentage of staff cost/total

operating cost was 46.33% and decreased to 45.14% in

the year 2006, and again decreased to 45.00% in 2007,

and gradually increased to 49.61% in 2008, and 50.77%

in 2009.

Graph 12:



Ratio analysis at

Interpretation:

Graph showing the staff cost ratio of ING VYSYA BANK of

past five years.

The graph states that the staff cost ratio has lot of

fluctuations due to maintaince of the management in the

company is not efficient, there must be much rotation

of the employees.



Ratio analysis at

Gross net profit ratio:

Table 13:

YEARS PERCENTAGE

2005 4.98%

2006 4.09%

2007 2.55%

2008 1.38%

2009 1.86%

Analysis:


about gross NPA ratio of ING-VYSYA BANK of past five

years.



Ratio analysis at

In the year 2005 the percentage of gross NPA ratio was

4.98% and decreased to 4.09% in the year 2006, and

again decreased to 2.55% in 2007, 1.38% in 2008 and

gradually increased to 1.86% in 2009.

Graph 13:

Interpretation:



Ratio analysis at

Graph showing the gross NPA ratio of ING VYSYA BANK of

past five years.

The graph states that the gross NPA ratio has lot of

fluctuations due to the sales of the company must be

low and the direct expenses must be increased, to

overcome the sales of the company must be increased.

Net profit ratio :

Table 14:

YEARS PERCENTAGE

2005 2.14%



Ratio analysis at

2006 1.76%

2007 0.95%

2008 0.70%

2009 1.23%

Analysis:


about net NPA ratio of ING-VYSYA BANK of past five

years.

In the year 2005 the percentage of net NPA was 2.14%

and decreased to 1.76% in the year 2006, and again

decreased to 0.95% in 2007 and 0.70% in 2008, increased

to1.23% in 2009

Graph 14:



Ratio analysis at

Interpretation:

Graph showing the net NPA ratio of ING VYSYA BANK of

past five years.

The graph states that the net NPA ratio has lot of

fluctuations due to the company profits have gradually

decreased, it the net profit ratio is high it indicates

that the profitability of the company is good



Ratio analysis at

Capital adequacy ratio:

Table 15:

YEARS PERCENTAGE

2005 9.10%

2006 10.67%

2007 10.56%

2008 10.20%

2009 11.68%

Analysis:


about capital adequacy ratio of ING-VYSYA BANK of past

five years.



Ratio analysis at

In the year 2005 the percentage of capital adequacy

ratio was 9.10% and increased to 10.67% in the year

2006, and decreased to 10.56% in 2007, and again

decreased to 10.20% in 2008, and increased to11.68% in

2009.

Graph 15:

Interpretation:



Ratio analysis at

Graph showing the capital adequacy ratio of ING VYSYA


The graph states that the capital adequacy ratio is

gradually increasing year to year, this shows the

financial position of the company is good and the it

also indicates the share holders fund is also high.

The above graph states you that there is lot of

fluctuations in capital adequacy ratio of ING-VYSYA

BANK from year to year.

Net profit to average working funds:

Table 16:

YEARNET

PROFIT AVG WORKING FUNDS PERCENTAGE

2005 -38 15271 -0.25%



Ratio analysis at

2006 9 18113 0.05%

2007 89 17098 0.52%

2008 157 21257 0.74%

2009 189 27122 0.70%

Analysis:


about net profit to average working funds of ING-VYSYA


In the year 2005 the percentage of net profit to

average working funds was negative value -0.257%, in

the year 2006 increased to 0.05% and saw a growth in

2007 to 0.52%, and in 2008 increased to 0.74% and

decreased to 0.70% in 2009.

Graph 16:



Ratio analysis at

Interpretation:

Graph showing the net profit to average working funds

of ING VYSYA BANK of past five years.

The graph states that the net profit to average working

funds have grown up from negative value to positive

value and it also indicates that the current assets and

current liabilities are also high and the company is

financial good.



Ratio analysis at

.

FINDINGS:

1) It is observed that the cost of deposits ratio

increased from year to year that is from 4.90% to

6.83%.

2) It is observed that the cost of funds ratio is

5.42% in 2005 and it is decreased in 2006 at

5.29%and it showed again increase in 2007,2008 and

2009 as 5.78%, 6.56%and 6.92% respectively.

3) It is observed that yield on advances ratio have

been gradually increased from 8.62% to 11.48%.

4) It is observed that the net interest margin ratio

on average earning assets was 2.92% during 2005

and it decreased to 2.79% during 2007 and

increased thereafter.

5) It is observed that the credit deposit ratio was

decreased during 2008 and 2009 by 71.61% and

67.30%.BBM @ B.M.S College for Women 181


Ratio analysis at

6) It is observed that the percentage low cost

deposit ratio was decreased during the year 2009

by 26.97%.

7) It is observed that the cost income ratio was

83.62%in 2006 and decreased during the 220,2008

and 2009 by 69.06%, 66.47%and 64.52%.

8) It is observed that the return on average assets

was decreased during 2006 and 2009 by 0.06% and

0.71%.

9) It is observed that the return on equity ratio was

increased from negative value to positive value

that is from –5.28% in 2005 and increased to

11.62%in 2009.

10) It is observed that the net interest ration

was decreased during 2007, 2008 and 2009 by

60.93%, 54.35% and 54.26% respectively.

11) It is observed that the other income ratio was

decreased during the year 2006 by 10.22% and



Ratio analysis at

increased thereafter and remains same during 2008

and 2009 by 19.65%.

12) It is observed that the staff cost ratio was

decreased during the year 2006 and 2007 by 45.14%

and 45.00% and increased thereafter.

13) It is observed that the gross NPA ratio was

4.98% during the year 2005 and decreased

thereafter to 4.09% in 2006, 2.55% in 2007 and

1.38% in 2008 and increased during 2009 by 1.86%.

14) It is observed that the net NPA ratio was

decreased during the year 2006, 2007 and 2008 by

1.76%, 0.95%, and 0.70% respectively and increased

thereafter

15) It is observed that the capital adequacy ratio

was decreased during the year 2007 and 2008 by

10.56% and 10.20% and increased thereafter.

16) It is observed that the net profit to average

working funds ratio was increased from negative

value to positive value that is from the year 2005

to 2008 by –0.257% to 0.74% and decreased during

2009 by 0.70%.



Ratio analysis at

General Findings:

1) ATM (Automated teller machine): ING-VYSYA BANK has

at present 207 ATM’s all over the country.

2) Branches: ING-VYSYA BANK has 480 branches all over

the country.

3) Products: ING-VYSYA BANK has a total of 18

products to its credit.

4) Total number of loans: ING-VYSYA BANK offers 8

types of loans



Ratio analysis at

Suggestions:

ING-VYSYA Bank has shown a better performance

in the parameters like deposits, advances,

total assets, other income and profit after

tax, cost of deposits, yield on advances and

cost of funds.

Whereas the net interest income, operating

expenses, credit deposits ratio, cost incomeBBM @ B.M.S College for Women 185


Ratio analysis at

ratio, return on equity, net profit to average

working funds, percentage low cost deposits to

total deposits have shown a competitive edge

over the industry,

At the same time, gross NPA ratio, net NPA

ratio, capital adequacy ratio, staff

cost/total operating cost, net interest

income, return on average assets and net

interest margin are areas that need more

focus, so that they are on par with the

industry as a whole part.

Proper planning of internal and external funds

is suggested.

The company must maintain their issuing of

finance effectively.

A financial aid for other financial

institution and company’s has to be

effectively utilized.

ING VYSYA should finance all sort of companies

in India.

Customers delight has to be ensured so that

they don’t divert to other companies.



Ratio analysis at

Conclusion:

The ING VYSYS BANK LIMITED is a company with a

history of more than 79years.

The company has spread its roots and branches all

over the world widely.

It has the international partnership, which has

added up to its reputation and goodwill.

Bank is offering good services to customers at

right time

Performance of ING-VYSYA BANK is satisfactory in

the current year compare to its previous year.

Bank is offering more attractive ways to increase

its customers.



Ratio analysis at

Bank is offering more number of loans schemes for

the developments of the business.

The net sales of the company and net income of the

company has been increasing which shows that

increase in sales increase the income and the

profitability position of the company is good.

ING VYSYA BANK has joined feathers to its wings to

render service in various fields such as:

1) ING VYSYA Banking.

2) ING VYSYA Mutual funds

3) ING VYSYA Life insurance.

SWOT Analysis:

Swot analysis stands for strengths, weakness,

opportunities and threats.

Strengths:

o The brand is ING VYSYA BANK LIMITED, dedicated

to excellence completely for financing.



Ratio analysis at

o VYSYA BANK has international partnership with

ING LIMITED.

o ING VYSYA group caters to the financial needs

of individual and corporate.

o ING VYSYA uses modern and top software

technologies.

o It is a premiere global provider of the best

quality.

Weakness:

o There is less diversification.

Opportunities:

o More number of competitors.

o They are planning to establish their branches

all over India.

o Market share can be covered at a much possible

rate.

Threats:

o The main threat is from private sector

organization because of liberalization.



Ratio analysis at



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