Investment Management

Shivaji University, Kolhapur.
A
PROJECT REPORT
ON
STUDY OF INVESTMENT MANAGEMENT
WITH SPECIAL REFERANCE TO
SHRIPATRAODADA SAHAKARI BANK LTD., KOLHAPUR.
SUBMITTED TO
SHIVAJI UNIVERSITY, KOLHAPUR.
IN PARTIAL FULFILLMENT OF THE DEGREE OF
BACHELOR OF BUSINESS ADMINISTRATION [B.BA]
BY
MR. HENIL GAUTAM SHAH
UNDER THE GUIDANCE OF
Prof. Vivek Shinde
(M.B.A)
THROUGH
THE DIRECTOR
KOLHAPUR INSTITUE OF TECHNOLOGYS
INSTITUTE OF MANAGEMENT EDUCATION AND RESEARCH [K.I.TS
I.M.E.R], KOLHAPUR-416234
2011 2012
K.I.Ts I.M.E.R
DECLARATION
I the undersigned hereby declare that the project entitled
Study of Investment Management in Shripatraodada Sahakari
Bank Ltd., Kolhapur written and submitted by me under the
guidance of Prof. Vivek Shinde is my original work.
I understand that any such copying will be punished
anywhere by the university authority. This work has not been
submitted earlier.
Date :
/ /2012
Place :
Kolhapur.
Mr. Henil Gautam Shah.
Prof. Vivek Shinde.

K.I.Ts I.M.E.R
ACKNOWLEDGEMENT
I express my gratitude to the management of
Shripatraodada Sahakari Bank Ltd., Kolhapur for their kind
co-operation and permission to undertake this project in their
reputed organization. I would like to thank Prof. Vivek Shinde
for their valuable guidance. I am indeed greatful to for his
valuable guidance and encouragement throughout this project
work. I would also like to thank our director Dr. Vishakha Apte.
Also I sincerely thank my parents for helping me in all
aspects to complete the project work. Finally, I would also like
to appreciate my friends, colleagues for their direct and indirect
contribution.
Mr. Henil Gautam Shah.
K.I.Ts I.M.E.R
INDEX
Sr. No.
Name of the topic
Page
No.
05
1.
Introduction To Study
2.
Introduction To Organization
12
3.
Theoretical Background
17
4.
26
5.
Data analysis and

Interpretation
Findings
6.
Suggestion and Conclusion
65
Bibliography
67
K.I.Ts I.M.E.R
63
1
INTRODUCTION
TO STUDY
K.I.Ts I.M.E.R

Bank is an organization which provides financial services. Banks has long
traditional history. The process of development of banking sector started in India
from British rule. Bank has two primary functions i.e.
1. Accepting deposits
2. Advancing loans
The difference between interest charged and received is the profit for bank.
In India there are 289 commercial banks. Banks are governed by reserve
bank of India 1934 act. In 1969 20 leading commercial banks were nationalized
by the government of India. Further, in 1980 another 18 banks were nationalized
for the interest of social security. Banks has various types;
1. Nationalized Banks
2. Commercial Banks
3. Private Banks
4. Foreign Banks
5. Regional Rural Banks etc.
Banks are playing a vital role in development of India.
Investment:
According to people, an investment is a psychological process. Hence, it
means many things to many persons. Investment is an activity which is taken by
those who have savings. Investment is an activity which deals with any financial or
physical assets with future expectations of returns. It involves waiting for reward.
In simple language, investment means an employment of fund with the aim of
achieving future income. The term investment is taken differently by different
experts and economists. It has been confused with the term speculation. Investment
K.I.Ts I.M.E.R

is done with positive expectation of returns in future. One can earn interest,
dividend, premium, pension benefits by making investment into various assets.
Hence, investment should involve an expectation of reward.
Classification of Investment:
Investments are classified into two main type's i. e.
1) Financial Investments.
2) Economic Investments.
In case of financial investments, the investor invests his/her savings into different
avenues for future income in the form of interest, dividend, and other benefits these
investments may be in shares, debentures, bonds, post office, and Insurance these
assets are also called as financial assets.
On the other hand, economic investments are considered with expectation of
fluctuation in capital stock, goods and services in current economy. The production
of goods and services consist in capital stock e. g. Investment in plant and
machinery, inventories.
Characteristics of Investment:
The following are the main features of the characteristics of investment.
1) Return:
The main features of investment and the expectation of the investor is
to achieve return on all investments. Returns can be achieved through capital
appreciation, dividend or interest on investment in securities. Returns from
investments depend upon the nature; maturity period and market demand
there are many investment alternatives which help in deriving profit.
K.I.Ts I.M.E.R
2) Risk:
Every investment is not risky. Hence it is inherent. It relates to loss of
capital delay in payment, non-payment of dividend/interest the investment in
government avenues or bank is riskless.
In case of period, a greater risk involves in longer maturity period.

The uncertainty in return leads to a higher risk level; therefore the investors
should take care while making investment in different securities. The risk
and return have interrelationship. It is supposed that high risk high return
and low risk low return. Though it is theoretically applicable, the investor
has to analyze practically for judgment.
3) Safety:
Safety is another important characteristic of investment. The investor
has to analyze the economic and industry trends before selecting investment
alternative. The safety of investment is possible through diversifying
investment. A proper combination of avenues avoids risk and losses. It gets
safer and safer when the investor diversifies his/her investment.
4) Liquidity:
Liquidity refers the conversion of any asset in cash. The investor
prefers liquidity through easily saleable or marketable securities without any
loss. In case of emergencies, the investor requires a minimum liquidity, in
his investment. The investor has to develop the portfolio in this regard.
K.I.Ts I.M.E.R
Avenues of Investment:
There are a number of investment avenues. These avenues are classified
into- marketable and liquid and other avenues are non-marketable. All investments
are not risky, some investments are risky and some are riskless in nature. The
investor has to select proper investment avenue for future returns.
Broadly investment avenues are classified as follows:
1. Corporate securities.
A) Equity Shares.
B) Preference Shares.
C) Debentures/Bonds.
D) GDRs/ADRs.
E) Warrants.
F) Derivatives.
2. Bank deposits and non-banking company deposits.
3. Post office-saving deposits and certificates.
4. LIC and other schemes.
5. Provident fund schemes.
6. National saving certificate.
7. Kissan Vikas Patra.
8. Equity linked saving schemes.
9. Pension plan.
K.I.Ts I.M.E.R

10. Government and semi-government securities.
11. Mutual fund schemes.
12. Real assets.
13. Gilt edged securities.
Objectives of the Study

1. To study investment management in bank.
2. To observe the interest rates on deposits & loans.
3. To observe the NPA percentage of the loans & to get the conclusion about grade
of the bank.
4. To judge the financial health of the bank.
Research Methodology
1. Primary Data:
Primary Data is data that has not been previously published, i.e. the data is
derived from a new or original research study and collected at the source.
Investment list, list of rate of interest on LOANS and DEPOSITS provided
by the bank as well as discussion with bank staff.
K.I.Ts I.M.E.R
10
2. Secondary Data:
Secondary data is the data that have been already collected by and
readily available from other sources.
Balance sheet of three consecutive years.
Scope & Limitations of the Study

Scope:
1. To study in-depth about investment & depth for last three years.
2. Sources of funds & applications of funds regarding with cost of the funds &
yield of the funds.
3. Income generating capacity regarding with the interest not recovered and bad
debts of the portfolio of the loans.
4. To observe RBI guidelines has been followed regarding with SLR investment.
Limitations:
1. Yield of deposits has been calculated on gross basis only.
2. The information about rate of interest and maturity of deposits with other banks
has not been disclosed by the bank under study.
K.I.Ts I.M.E.R
11
2
INTRODUCTION
TO
ORGANIZATION
K.I.Ts I.M.E.R
12
Introduction to 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, nonscheduled banks and scheduled banks. Scheduled banks comprise commercial
banks and the co-operative banks. In terms of ownership, commercial banks can be
further grouped into nationalized banks, the State Bank of India and its group
banks, regional rural banks and private sector banks (the old/ new domestic and
foreign).
These banks have over 67,000 branches spread across the country.
The first phase of financial reforms resulted in the nationalization of 14 major
banks in1969 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 1970s 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
four-fold and the number of bank branches increased eightfold. After the second
phase of financial sector reforms and liberalization of the sector in the early
nineties, the Public Sector Banks (PSB) s found it extremely difficult to compete
with the new private sector banks and the 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.
These banks due to their late start have access to state-of the-art technology,
which in turn helps them to save on manpower costs and provide better services.
During the year 2000, the State Bank of India (SBI) and its 7 associates accounted
for a25 percent share in deposits and 28.1 percent share in credit. The 20
nationalized banks accounted for 53.2 percent of the deposits and 47.5 percent of
credit during the same period.
K.I.Ts I.M.E.R
13

Name of the bank
Shripatraodada Sahakari Bank Ltd., Kolhapur.
Established
13 January 1995.
Head office
573 E Vyapari Peth, Shahupuri, Kolhapur-01.
Date of Registration
13/01/1995 KPR/BANK (104).
RBI License
1136 P.
Jurisdiction
Kolhapur Jurisdiction.
(Figures in Lacs except No. 01,02,07,08,09,10)

01] No. of branches (incl. H.O) :
3.
02] Membership (Regular)
3364.
988.
03] Paid up Share Capital
65.41.
04] Total reserves and Funds
433.74.
05] Deposits (Savings)
430.03.
Deposits (Current)
178.86.
Deposits (Fixed)
1784.96.
06] Advances (Secured)
1445.63.
Advances (Unsecured)
24.36.
Total % of priority
79.37%.
Membership (Nominal)
K.I.Ts I.M.E.R
14

Total % of weaker section :
20.63%.
07] Sub-Staff
7.
08] Other staff
18.
09] Total staff
25.
10] Working Capital
3104.01
Organization Structure
P.N.Patil-Sadolikar
(President)
Ganpatrao Patil
(Vice-President)
Deepak Patil
Subhash Bondre
Ramesh Kamat
(Director)
(Director)
(Director)
K.I.Ts I.M.E.R
15
Branches Address
1] Sai Mandir, Kalamba Road, Karveer, Kolhapur.
2] 514-d, Gangavesh, Kolhapur.
Products and Services:

1] Deposits:
Current Accounts.
Savings Accounts.
Fixed Accounts.
2] Loans and Advances:

Loan against gold.
Car loan.
Home loan.
Loan for farming equipments.
K.I.Ts I.M.E.R
16
3
THEORETICAL
BACKGROUND
K.I.Ts I.M.E.R
17
Investments:
The investment environment encompasses the kinds of marketable securities
that exist and where and how they are bought and sold. The investment process is
concerned with how an investor should proceed in making decisions about what
marketable securities to invest in, how extensive the investment should be, and
when the investment should be made. Before discussing the investment
environment and process in more detail, the term investment will be described.
Investment, in its broader sense, means the sacrifice of current dollars for
future dollars. Two different attributes are generally involved: time and risk. The
sacrifice takes place in the present and is certain. The reward comes later, if at all,
and the magnitude is generally uncertain. In some cases the element of time pre
dominates (for example, government bonds). In other cases risk is the dominant
attribute (for example, call options on common stocks). In yet others both time and
risk are important (for example, shares of common stock).
A distinction is often made between investment and savings. Savings is
defined as foregone consumption; investments restricted to "real" investment of the
sort that increases national output in the future. While this definition may prove
useful in other contexts, it is not especially helpful here however; it is useful to
make a distinction between real and financial investments.
Real investments generally involve some kind of tangible asset, such as land,
machinery or factories. The financial investment involves contracts written on
pieces of paper, such as common stocks and bonds. In primitive economies most
investment is of the real variety. Whereas, in a modern economy, much investment
is of the financial variety. Highly developed institutions for financial investment
greatly facilitate real investment. By and large, the two forms of investments are
complementary, not competitive.
K.I.Ts I.M.E.R
18
The third schedule to the banking regulation act, 1949 requires the
disclosure of investment in the b/s as follows:
Investment in India-in
a.
General sector.
b.
Other approved sector.
c.
Shares.
d.
Debentures and bonds.
e.
Subsidiaries and/or joint venture.
f.
Other investments (to be specified) Investment outside India-in
a.
General sector (including local authorities)
b.
Subsidiaries and/or joint venture abroad
c.
Other investments (to be specified)
The following are some of the terms which are commonly used in relation to
Investments of banks.
(a) Approved Securities: section 5(a) of the banking regulation act, 1949 defines
approved securities' to mean securities in which a trustee may invest money under
clauses (a) to (d) and (f) of section 20 of the Indian trusts act 1882. Approved
securities comprise primarily the securities issued or guaranteed by the central or
state government or any other security expressly authorized by the central
government by notification in the official gazette.
K.I.Ts I.M.E.R
19

(b) Prudential Exposure Limits: the RBI from time to time prescribes the limit
up to which investments in any one type of security or in any one company/group
of companies can be made by a bank. These limits are known as 'prudential
exposure limits.'
(c) Government Security: a government security is an instrument issued by the
central or a state government which is redeemable after a fixed period and carries a
fixed rate of interest.
(d) Treasury Bills: t-bills are government securities representing obligations
which mature in one year or less.
(e) Yield-To-Maturity (YTM): this is the average compound rate of return on a
security (taking in to account both the interest and the redemption value) which the
investor will earn if he holds it till maturity.
Investment policy:
Bank should frame and implement a suitable investment policy to ensure
that operations in securities are conducted in accordance with sound and acceptable
:1 business practices.
With the approval of respective boards, bank should clearly lay down the '.i
broad investment objectives to be followed while undertaking transactions in !:securities on their own investment a/c and on behalf of clients, clearly define the
,authority to put through deals, procedure to be followed while putting through
deals, -various prudential exposure limits and the reporting system. While lying
down such, investment policy guidelines, bank should strictly observe reserve
bank's detailed instructions on the following aspects:
A)
Ready forward (buy back) deals.
B)
Transactions through SGL a/c.
C)
Use of bank receipts (BR)
K.I.Ts I.M.E.R
20

D)
Retailing of general sector.
E)
Internal control system. Dealings through brokers.
G)
Audit, review and reporting.
H)
Non- SLR investment.
Classification of investment:
The entire investment portfolio of the banks (including SLR securities and
non- SLR securities) should be classified under 3 categories viz. `FITM', `AFS' and
`FIFT'. However in the b/s, the investment will continue to be disclosed as per the
existing six classifications viz.
A) General sector.
B) Other approved sector.
C) Shares.
D) Debentures & Bonds.
E) Subsidiaries/ joint venture.
F) Others (CP, MF, units etc.).
Bank should decide the category of the investment at the time of the
acquisition and the decision should be recorded on the investment proposals.
K.I.Ts I.M.E.R
21
Held to Maturity:
The securities acquired by the banks with the intension to hold them up to
maturity will be classified under HTM.
The investment included under 'Held to Maturity' should not exceed 25
percent of the bank's total investments. The banks may include, at their discretion
under `FITM' category securities less than 25 percent of total investment.
The following investments will be classified under `FITM' but will not be
counted for the purpose of ceiling of 25% specified for this category:
A)
Re-capitalization bonds received from the government of India towards their
re-capitalization requirements and held in their investment portfolio. This will not
include re-capitalization bonds of other books acquired for investment purpose.
B)
Investments in subsidiaries and joint ventures. (A joint venture would be one
in which the bank, along with its subsidiaries, holds more than 25% of the equity.)
C)
The investments in debentures/bonds, which are deemed to be in the nature
of an advance.
Available for Sale & Held for Trading:

The securities acquired by the banks with the intension to trade by taking
advantage of the short term price/interest rate movements will be classified under
'held for trading'.
The securities which do not fall within the above two categories will be
classified under 'Available for Sale'
K.I.Ts I.M.E.R
22

The investment classified under held for trading category would be those
from which the bank expects to make a gain by the movement in the interest
rates/market rates. These securities are to be sold within 90 days.
Profit or loss on sale of investments in both the categories will be taken to
the profit and loss account.
Shifting among categories:

i)
ii)
iii)
Bank may shift investments to/from held to maturity category with the
approval of the board of directors once a year. Such shifting will
normally be allowed at the beginning of the accounting year. No further
shifting to/from this category will be allowed during remaining part of
that accounting year.
Banks may shift investments from 'Available For Sale' category to 'Held
for Trading' category with the approval of their board of directors/AssetLiability Committee (ALCO) / investment committee. In case of
exigencies, such shifting may be done with the approval of the bank/head
of the ALCO, but should be ratified by the board of directors/ALCO.
Shifting of investments from 'held for trading' category to 'available for
sale' category is generally not allowed. However, it will be permitted
only under exceptional circumstances like not being able to sell the
security within 90 days due to tight liquidity conditions or extreme
volatility or market becoming unidirectional, such transfer is permitted
only with the approval of the board of directors/ALCO/investment
committee.
Transfer of scrips from one category to another, under all circumstances,

should be done at the acquisition cost/book value/market value on the date of
transfers whichever is the least and the depreciation, if any, on such transfer
should be fully provided for.
K.I.Ts I.M.E.R
23
Valuation:
Held to maturity
Investments classified under `FITM' category need not marked to market
and will be carried at acquisition cost unless it is more than the face value, in
which case the premium should amortized over the period remaining to maturity.
Bank should recognize any diminution, other than temporary, in the value of
their investments in subsidiaries/joint ventures which are included under 'held to
maturity' category and provide therefore. Such diminution should determine and
provided for each investment individually.
Available for sale

The individual scrips in the 'Available for Sale' category will be marked to
market at the quarterly or at more frequent intervals. While the net depreciation
under each classification referred to in Para (I) of 'classification of investments'
given above should be recognized and fully provided for the net appreciation under
each classification referred in that Para should be ignored. The book value of the
individual securities would not undergo any change after the revolution.
The provisions required to be created an account of depreciation in the 'AFS'
category in any year should be debited to the P&L a/c and an equivalent amount
(net of tax benefit, if any, and net of consequent reduction in the transfer to
statutory reserve) or the balance available in the investment fluctuation reserve
account whichever is less, shall be transferred from the IFR a/c to the P&L a/c. In
the event provisions created on account of depreciation in the 'AFS' category are
found to be in excess of the required amount in any year, the excess should be
credited to the P&L a/c and an equivalent amount (net of taxes, if any, and net of
transfer to statutory reserve as applicable to such excess provision) should be
appropriated to the investment fluctuation reserve account to be utilized to meet
future depreciation requirement for investment in this category.
K.I.Ts I.M.E.R
24

The amounts debited to the P&L a/c for provision and the amount credited to
the P&L a/c for reversal of excess provision should be debited and credited
respectively under the head "expenditure provisions and contingencies." The
amounts appropriated from the P&L a/c and the amount transferred from the IFR
to the P&L a/c should be shown as 'below the line' items after determining the
profit for the year.
Held for Trading:

The individual scrips in the held for trading category will be marked to
market at monthly or at more frequent intervals as in the case of those in the AFS
category. The book value of the individual securities in this category would not
undergo any change after marking to market.
K.I.Ts I.M.E.R
25
4
DATA ANALYSIS
AND
INTERPRETATION
K.I.Ts I.M.E.R
26
The RBI has given investment norms. Each and every bank has to follow
these investment norms, the guidelines for SLR & non-SLR investments. So in this
unit we will see norms & data and try to analyze and interpret it in very simple &
lucid language.
Reserve Bank of India has given following non-SLR securities guidelines.
So that bank has to invest in money market.
Non-SLR securities-guidelines:
In order to contain risks arising out of the non-SLR investment portfolio of
banks, the banks should adhere to the following guidelines:Coverage: with a view to allowing UEB's greater flexibility in making nonSLR investments would be governed by the following guidelines:
Guidelines:
Non-SLR investments will be limited to 10% of a banks total deposits as on
march 31st of the previous year. Investments will be limited to "A" or equivalent
rated commercial papers (CP) debentures and bonds that are redeemable in nature.
Investments in perpetual debt instruments are however not permitted.
2.
Investments in unlisted securities should not exceed 10% of the total nonSLR investments at any time. Where banks have already exceeded the said limit,
no incremental investments in such securities will be permitted. Investments in
units of mutual funds except debt mutual funds and money market mutual funds
will not be permitted. The existing holdings in units of other than debt mutual
funds and money market mutual funds, including those in UTI should be
K.I.Ts I.M.E.R
27

disinvested. Till such time that they are held in the books of the bank, they will be
reckoned as non-SLR investments for the purpose of the limit at (1) above.
Fresh investment in shares of all India financial institutions (AIFI) will also not be
permitted. The existing share holding in these institutions may be phased out and
till such time they are held in the books of the bank, they will be reckoned as nonSLR investments for the purpose of the limit (1) above.
All fresh investments under non-SLR category should be classified under
held for trading (HFT)/available for sale (AFS) categories only and marked to
market as applicable to these categories of investments.
Balances held in deposit a/cs with commercial banks and in permitted
scheduled UCBs and investments in certificate of deposits issued by commercial
banks, will be outside the limit of 10% of total deposits prescribed for non-SLR
investments.
7.
The total amount of funds placed as inter-bank deposits (for all purposes
including clearing, remittances) shall not exceed 10% of the DTL of UCB as on
March 31st of the previous year. The prudential inter-bank exposure limit of 10%
of DTL would be call and notice money. The only exception is made for tier 1
UCB's which may place deposits up to 15% of their NDTL with PSB's over
&above the said prudential limit of 10% of NDTL.
8.
Exposure to any single bank should not exceed 2% of the depositing banks
DTL as on march 31st of the previous year, inclusive of its total non-SLR
investments and deposit placed with that bank.
Deposits, if any, placed for availing CSGL facility currency chest facility and non
fund based facilities like bank guarantee (B.G.), letter of credit (L/C) would be
excluded to determine the single bank exposure limit for this purpose.
9.
All investment as above, bearing deposits placed with banks for which
prudential limits have been prescribed at Para 2(9) above, will be subject to the
prescribed prudential individual/group exposure limits.
K.I.Ts I.M.E.R
28

10. All investments, other than those in CP, and CD, shall be in instruments with
an original maturity of at least one year.
11. The non-scheduled primary (urban) co-operative banks, having single
branch-cum-head office or having multiple branches within a single district, having
a deposit base of Rs. One hundred crores (Rs. 100 crores) or less have been
exempted from maintaining SLR in prescribed assets up to 15% of their DTL on
keeping the required amount, in interest bearing deposits with state bank of India
and its subsidiary banks and the public sector banks including industrial
development bank of India ltd. In terms of the RBI's circular dated February 17,
2006. Such deposits are not covered under these guidelines and the limits
prescribed at (7) above are exclusive of such deposits.
K.I.Ts I.M.E.R
29
Analysis and Interpretation:

List Of Investment As On 31.03.2008.
(A) Central Government/State Government other trustee

securities.
1.
12.25% NSDL LOAN 2010
Where,
YTM = Yield To Maturity.
C = Coupon/Interest payment.
M = Face value.
P = Price.
n = Years to maturity.
K.I.Ts I.M.E.R
30

In the same manner rest of the securities give following yield.
SR. NO.
NAME OF SECURITY
YIELD
1.
7.38% GOI 2015
5.0%
2.
8.07% GOI 2017
5.8%
3.
UTI CONTRA FUND
NO EFFECT
4.
7.40% GOI 2012
4.9%
5.
8.07% GOI 2017
5.5%
6.
7.95% GOI 2032
6.6%
7.
8.35% GOI 2022
6.0%
8.
5.69% GOI 2018
5.3%
9.
6.17% GOI 2023
6.0%
10.
6.01% GOI 2028
6.0%
11.
7.46% GOI 2017
5.3%
12.
8.30% APSFC BONDS

2012
11.33% WBFC BONDS
2010
12.50% KSFC BONDS 2009
5.3%
IIBI DEEP DISCOUNT

BONDS (NON SLR) 2028
NSDL Loan 2010
4.0%*
13.
14.
15.
16.
K.I.Ts I.M.E.R
3.9%
2.1%
12.25%
31

The above table shows that the bank has invested in 16 different securities,
which are providing an yield ranging from 2.1% to 12.25%. The highest yield is on
NSDL and lowest on KSFC Bonds 2009. The other investments are giving
moderate returns averaging 5 6%.
Deep Discount Bonds:
WHERE,
Mv = Maturity Value.
kd = Required rate of return.
n = Maturity Period.
NOTE: Here required rate of return (kd) is not available. Thats why it is assumed
4% so further calculations are not possible.
(B) Investment in Shares:

RS.
RETURN
2,05,000.00
NIL
The bank has invested 2,05,000.00 in shares of two Banks viz. ICICI Bank
Ltd. and LIC housing finance Ltd. It invested 1,05,000.00 in ICICI Bank Ltd. and
1,00,000.00 in LIC housing finance Ltd. Bank has earned no returns on these
investments.
K.I.Ts I.M.E.R
32
(C) Deposit with Nationalized Banks:

NAME OF THE
BANK
SBI
AMOUNT
INT.@7%
1,86,27,900.00
14,02,100.00
PNB
4,92,90,000.00
37,10,000.00
TOTAL
6,79,17,900.00
51,12,100.00
(6,79,17,900.00 + 51,12,100.00)
7,30,30,000.00
TOTAL (Amt. + Int.)
Return Rs. 51,12,100.00
(D) Deposit with State Co-Op Banks:

NAME OF THE BANK
MSC BANK LTD.
TOTAL (Amt. + Int.)
AMOUNT
INT.@8%
2,30,000.00
20,000.00
(2,30,000.00 + 20,000.00)
2,50,000.00
Return Rs. 20,000.00
(E) Deposits with DCC Banks:

NAME OF THE BANK
KDCC CALL DEPOSIT
KDCC FDR R/F
PDCC FDR
TOTAL
TOTAL (Amt. + Int.)
AMOUNT
0.00
INT.@8%
0.00
4,83,92,000.00
42,08,000.00
5,88,80,000.00
10,72,72,000.00
51,20,000.00
93,28,000.00
(10,72,72,000.00 + 93,28,000.00)
11,66,00,000.00
Return Rs. 93,28,000.00
K.I.Ts I.M.E.R
33
(F) Deposit with other Co-Op Banks:

NAME OF THE BANK
SARASWAT BANK
IDBI BANK LTD.
ICICI BANK LTD.
ICHALKARANJI JANATA SAH.
BANK LTD.
HDFC BANK LTD.
FEDERAL BANK LTD.
TOTAL
TOTAL (Amt. + Int.)
AMOUNT
1,14,92,306.04
92,00,920.00
1,38,00,000.00
1,40,76,000.00
INT.@8%
9,99,330.96
8,00,080.00
12,00,000.00
12,24,000.00
92,00,000.00
8,00,000.00
92,00,000.00
8,00,000.00
6,69,69,226.04
58,23,410.96
(6,69,69,226.04 + 58,23,410.96) 7,27,92,637.00
Return Rs. 58,23,411.00

Total Investments = (A)+(B)+(C)+(D)+(E)+(F) = Rs. 68,42,54,055.35
% With Total Investments
(A)
Share of Bonds:
= 61.58%.
K.I.Ts I.M.E.R
34
(B)
Investment in Shares:
(C)
Total Deposits:
= 38.39%
Total Investment
70
61.58
60
50
38.39
40
Share of bonds
Investment in shares
30
Total deposits
20
10
0.03
0
Share of bonds
K.I.Ts I.M.E.R
Total deposits
35
A)
Weighted Yield Of Bond Investment:

SR.NO.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
TOTAL
SHARE IN
TOTAL BOND
INVESTMENT
0.47%
2.65%
2.76%
2.37%
2.62%
30.99%
13.80%
5.82%
4.85%
9.63%
9.47%
2.74%
1.60%
2.86%
4.27%
3.01%
CALCULATED
YIELD
WEIGHTED
YIELD
12.25%
5.00%
5.8%
8.00%
4.9%
5.5%
6.6%
6.0%
5.3%
6.0%
6.0%
5.3%
5.3%
3.9%
2.1%
4.0%
5.75%
13.25%
16.00%
18.96%
12.83%
170.44%
91.08%
34.92%
25.70%
57.78%
56.82%
14.52%
8.48%
11.15%
8.96%
12.04%
559.04%
= 5.59%
In the above table the bank has highest share in total bond investment is
30.99% where as the lowest share in total bond investment is 0.47%. The
Weighted Yield calculated is 5.59%.
B) Investment In Shares : Nil.

K.I.Ts I.M.E.R
36
C) Deposits With Banks :

DEPOSIT WITH NATIONALIZED BANKS
DEPOSIT WITH STATE CO-OP BANKS
DEPOSIT WITH DISTRICT CENTRAL CO-OP BANKS
DEPOSIT WITH OTHER CO-OP BANKS
YIELD = % SHARE
RETURN
DEPOSITS WITH :
1)
2)
3)
4)
K.I.Ts I.M.E.R
37
Total Yield = % Of Total Investment x Weighted Yield
Investments
A
B
C
TOTAL
K.I.Ts I.M.E.R
% Of Total Weighted Yield

Investment
61.58
5.59
0303
0
38.39
7.75
Total Yield
344.23
0.00
297.52
641.75
38
List Of Investment As On 31.03.2009

(A) Central Government/State Government other
securities.
trustee
1. 12.25% NSDL Loan 2010
Where,
M = Face value.
P = Price.
K.I.Ts I.M.E.R
39

SR. NO.
NAME OF SECURITY
YIELD
1.
7.38% GOI 2015
5.3%
2.
8.07% GOI 2017
5.6%
3.
7.40% GOI 2012
4.9%
4.
8.07% GOI 2017
5.6%
5.
7.95% GOI 2032
6.6%
6.
8.35% GOI 2022
6.0%
7.
5.69% GOI 2018
5.4%
8.
6.17% GOI 2023
6.0%
9.
6.01% GOI 2028
6.0%
10.
7.46% GOI 2017
5.4%
11.
8.30% APSFC BONDS

2012
11.33% WBFC BONDS
2010
12.50% KSFC BONDS
2009
IIBI DEEP DISCOUNT
BONDS (NONSLR) 2028
NSDL Loan 2010
5.3%
12.
13.
14.
15.
K.I.Ts I.M.E.R
3.2%
-0.9%
4.0%*
12.25%
40

which are providing an yield ranging from -0.9% to 12.25%. The highest yield is
on NSDL and lowest on KSFC Bonds 2009, which is negative. The other
investments are giving moderate returns averaging 5 6%.
WHERE,

RS.
RETURN
2,05,000.00
NIL
investments.
K.I.Ts I.M.E.R
41

NAME OF THE BANK
SBI
PNB
AMOUNT
0.00
2,46,45,000.00
INT.@7%
0.00
18,55,000.00
TOTAL
2,46,45,000.00
18,55,000.00
TOTAL (Amt. + Int.)
(2,46,45,000.00 + 18,55,000.00)
2,65,00,000.00
Return Rs. 18,55,000.00

NAME OF THE BANK
MSC BANK LTD.
TOTAL (Amt. + Int.)
AMOUNT
INT.@8%
2,30,000.00
20,000.00
(2,30,000.00 + 20,000.00)
2,50,000.00

NAME OF THE BANK
KDCC CALL DEPOSIT
KDCC FDR R/F
PDCC FDR
TOTAL
TOTAL (Amt. + Int.)
AMOUNT
0.00
INT.@8%
0.00
4,36,08,000.00
37,92,000.00
16,88,20,000.00
21,24,28,000.00
1,46,80,000.00
1,84,72,000.00
(21,24,28,000.00 + 1,84,72,000.00)
23,09,00,000.00
Return Rs. 1,84,72,000.00
K.I.Ts I.M.E.R
42

NAME OF THE BANK
SARASWAT BANK
IDBI BANK LTD. FDR
ICICI BANK LTD. FDR
ICHALKARANJI JANATA
SAH. BANK LTD.
KARAD URBAN CO-OP
BANK LTD.
RATNAKAR BANK LTD.
TOTAL
TOTAL (Amt. + Int.)
AMOUNT
1,61,71,726.88
1,61,37,208.48
1,38,00,000.00
1,61,00,000.00
INT.@8%
14,06,237.12
14,03,235.52
12,00,000.00
14,00,000.00
1,60,27,161.76
13,93,666.24
55,20,000.00
8,37,55,997.00
(8,37,55,997.00 + 72,83,139.00)
4,80,000.00
72,83,139.00
9,10,39,136.00
Return Rs. 72,83,139.00

% With Total Investment

(A)
Share of Bonds:
= 53.81%.
K.I.Ts I.M.E.R
43
(B)
(C)
Total Deposits:
= 46.16%
Total Investment
60
53.81
50
46.16
40
Share of bonds
30
Total Deposits
20
10
0.03
0
Share of bonds
K.I.Ts I.M.E.R
Total Deposits
44
(A)Weighted Yield Of Bond Investment:

SR.NO.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
TOTAL
SHARE IN
TOTAL BOND
INVESTMENT
0.49%
2.75%
2.87%
2.67%
31.62%
14.23%
5.96%
5.03%
9.97%
9.81%
2.80%
1.63%
2.84%
4.19%
3.14%
CALCULATED
YIELD
WEIGHTED
YIELD
12.25%
5.3%
5.6%
4.96%
5.62%
6.66%
6.06%
5.4%
6.02%
6.05%
5.41%
5.32%
3.28%
-0.87%
4.0%
6.00%
14.58%
16.07%
13.24%
177.70%
94.77%
36.12%
27.16%
60.02%
59.35%
15.15%
8.67%
9.32%
-3.65%
12.56%
547.06%
K.I.Ts I.M.E.R
45

YIELD = % SHARE
K.I.Ts I.M.E.R
RETURN
46
DEPOSITS WITH :
K.I.Ts I.M.E.R
47
Investment
A
B
C
TOTAL
K.I.Ts I.M.E.R
% Of Total Weighted Yield

Investment
53.81
5.47
0.03
0
46.16
7.75
Total Yield
294.34
0.00
357.74
652.08
48
List Of Investment As On 31.03.2010
(A) Central Government/State Government other trustee

securities.
1. 12.25% NSDL Loan 2010
Where,
M = Face value.
P = Price.
K.I.Ts I.M.E.R
49

SR. NO.
NAME OF SECURITY
YIELD
1.
7.38% GOI 2015
5.0%
2.
8.07% GOI 2017
5.0%
3.
7.40% GOI 2012
5.0%
4.
8.07% GOI 2017
5.0%
5.
7.95% GOI 2032
6.0%
6.
8.35% GOI 2022
6.0%
7.
5.69% GOI 2018
5.0%
8.
6.17% GOI 2023
5.0%
9.
6.01% GOI 2028
7.0%
10.
7.46% GOI 2017
5.0%
11.
8.30% APSFC BONDS

2012
11.33% WBFC BONDS
2010
IIBI DEEP DISCOUNT
BONDS (NONSLR) 2028
NSDL Loan 2010
5.0%
12.
13.
14.
K.I.Ts I.M.E.R
3.0%
4.0%*
12.25%
50

which are providing an yield ranging from 3.0% to 12.25%. The highest yield is on
NSDL and lowest on WBFC Bonds 2010. The other investments are giving
moderate returns averaging 5 7%.
WHERE,

RS.
RETURN
2,05,000.00
NIL
investments.
K.I.Ts I.M.E.R
51

NAME OF THE BANK
AMOUNT
INT.@7%
93,00,000.00
7,00,000.00
PNB
3,25,50,000.00
24,50,000.00
TOTAL
4,18,50,000.00
31,50,000.00
SBI
TOTAL (Amt. + Int.)
(4,18,50,000.00 + 31,50,000.00)
4,50,00,000.00
Return Rs. 31,50,000.00

NAME OF THE BANK
MSC BANK LTD.
TOTAL (Amt. + Int.)
AMOUNT
INT.@8%
2,30,000.00
20,000.00
(2,30,000.00 + 20,000.00)
2,50,000.00
K.I.Ts I.M.E.R
52

NAME OF THE BANK
KDCC CALL DEPOSIT
AMOUNT
4,88,25,000.00
INT.@7%
36,75,000.00
KDCC FDR R/F
3,58,98,000.00
27,02,000.00
8,13,75,000.00
16,60,98,000.00
61,25,000.00
1,25,02,000.00
PDCC FDR
TOTAL
TOTAL (Amt. + Int.)
(16,60,98,000.00 + 1,25,02,000.00)
17,86,00,000.00
Return
KDCC Call Deposit @ 6% = Rs. 31,50,000.00
KDCC FDR R/F
@ 8% = Rs. 30,88,000.00
PDCC FDR
@ 8% = Rs. 70,00,000.00
For weighted average purpose the return is assumed @ 7%.

Return Rs. 1,25,02,000.00
K.I.Ts I.M.E.R
53

NAME OF THE BANK
SARASWAT BANK
KARAD URBAN CO-OP
BANK LTD.
IDBI BANK LTD.
ICICI BANK LTD.
ICHALKARANJI JANATA
SAH. BANK LTD.
RATNAKAR BANK
THE COSMOS CO-OP
BANK LTD.
DOMBIWALI CO-OP
BANK LTD.
SHAMRAO VITTHAL COOP BANK LTD.
TOTAL
TOTAL (Amt. + Int.)
AMOUNT
1,47,20,000.00
2,11,60,000.00
INT.@8%
12,80,000.00
18,40,000.00
46,00,000.00
0.00
3,03,60,000.00
4,00,000.00
0.00
26,40,000.00
1,84,00,000.00
2,99,00,000.00
16,00,000.00
26,00,000.00
1,38,00,000.00
12,00,000.00
92,00,000.00
8,00,000.00
14,21,40,000.00
(14,21,40,000.00 + 1,23,60,000.00)
1,23,60,000.00
15,45,00,000.00
Return Rs. 1,23,60,000.00

% With Total Investment

(A)
Share of Bonds:
= 49.80%.
K.I.Ts I.M.E.R
54

(B)
(C)
Total Deposits:
= 50.17%
Total Investment
60
50
50.17
49.8
40
Share of Bonds
30
Investment in Shares
Total deposits
20
10
0.03
0
Share of Bonds
K.I.Ts I.M.E.R
Investment in Shares
Total deposits
55
A) Weighted Yield Of Bond Investment:

SR.NO.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
TOTAL
SHARE IN
TOTAL BOND
INVESTMENT
0.53%
2.97%
3.10%
2.83%
33.62%
15.34%
6.37%
5.42%
8.19%
10.62%
3.00%
1.71%
2.90%
3.40%
CALCULATED
YIELD
WEIGHTED
YIELD
12.25%
5.00%
5.00%
5.00%
5.00%
6.00%
6.00%
5.00%
5.00%
7.00%
5.00%
5.00%
3.00%
4.00%
6.49%
14.85%
15.50%
14.15%
168.10%
92.04%
38.22%
27.10%
40.95%
74.37%
15.00%
8.55%
8.70%
13.60%
537.59%
K.I.Ts I.M.E.R
56

YIELD = % SHARE
K.I.Ts I.M.E.R
RETURN
57
DEPOSITS WITH :
K.I.Ts I.M.E.R
58
Investment
A
B
C
TOTAL
K.I.Ts I.M.E.R
% of Total Investment Weighted Yield

49.80
5.47
0.03
0
50.17
7.00
Total Yield
267.42
0.00
315.19
618.61
59

The capital redemption adequacy ratio must be 9.00% as per RBIs rule.
This bank has followed RBI guideline and able to maintain it.
YEAR
ACTUAL RATIO
2007-08
REQUIRED
RATIO
9.00%
14.57%
DIFFERENCE (+/)
5.57%
2008-09
9.00%
14.66%
5.66%
2009-10
9.00%
15.56%
6.56%
It shows that in respective years bank would have been able to lend more.
But bank had not lent it. If bank would have been lent in excess of CRAR the
position would be as follows:
PARTICULARS
LOANS
ADD (+)
TOTAL
INVESTMENT
LESS (-)
TOTAL
K.I.Ts I.M.E.R
2007-08
89,58,05,562
3,81,12,950
(@5.57%)
93,39,18,512
68,42,54,055
3,81,12,950
(@5.57)
64,61,41,105
2008-09
97,08,02,819
4,26,97,357
(@5.66%)
1,01,35,00,176
75,43,70,281
4,26,97,357
(@5.66%)
7,11,67,924
2009-10
1,12,34,06,426
4,94,69,011
(@6.56)
17,28,75,437
75,41,00,782
49469011
(@6.56%)
70,46,31,771
60

Now we have to consider the interest which is not recovered on short term
loan.
For 2007-08
Total Short Term loan Disbursed
27,10,60,994
Interest Not Recovered
30,96,267
Percentage of unrecovered interest
1.14%
23,08,09,487
31,52,941
1.36%
27,27,97,972
32,21,271
1.58%
For 2008-09
For 2009-10
K.I.Ts I.M.E.R
61

If bank would have been disbursed the loan as per above table we could
consider above percentage which in not recovered on short term loan as expected
NPA (Non Performing Assets). So the returns would be that much low.
PARTICULARS
2007-08
2008-09
2009-10
EXCESS CRAR
5.57%
5.66%
6.56%
LESS (Int. not recovered on

short term loan)
ACTUAL RETURNS
1.14%
1.36%
1.18%
4.43%
4.30%
5.38%
The source of funds for bank is as follows :

1. Share capital.
2. Reserve and surplus.
3. Deposits.
The application of funds for bank is as follows :
1. Investment.
2. Loan.
Difference between source of funds and application of funds is profit for

bank. Shripatraodada Shakari Bank Ltd. is able to maintain remarkable profit level
because of good fund management.
YEAR
2007-08
TOTAL YIELD ON
INVESTMENT
6.42%
TOTAL YIELD ON
LOAN
11.01%
2008-09
6.52%
11.50%
2009-10
6.18%
11.86%
K.I.Ts I.M.E.R
62
5
FINDINGS
K.I.Ts I.M.E.R
63

In this topic, findings are mentioned and suggestions are provided. I hope
that these efforts will help the bank in its future period of time.
1.
Total loans are increased in 2008 8.37 % & in 2009 - 15.71 %.
2.
Bad debt percentage with total loan is 6.64% in 2010 leads to good signal
about recovery of loan.
3.
Percentage of three year's average of unsecured loans with total loans should
below 10%. Actually it is decreased in 2009 & 2010, may lead to better recovery in
next year. (avg. = 8.52%)
4.
In 2009, bank decreased the ratio of interest not recovered leads to better
loan management.
5.
Bad debts leads to decreasing overall returns of the bank and bank has to
provide for these loans leads to less dividend to shareholders.
6.
Loan against deposit in 2007 61.79%, in 2008 61.52% & in the year
2008-09 65.79%. (Standard ratio is in between 60% & 70%) It shows better
management for bank as well as the depositors of the bank.
7.
The Ratio of unsecured to total loans for 2007-08 was 9.88%. In 2008-09 the
ratio of unsecured to total loans decreased to 8.36% and in 2009-10 the ratio of
unsecured to total loans again decreased to 7.34%. The average ratio is 8.52%.
Ratio of unsecured to total loans has reduced year by year and it is a good sign.
K.I.Ts I.M.E.R
64
6
SUGGESTIONS
AND
CONCLUSION
K.I.Ts I.M.E.R
65
Suggestions
1)
Purchasing and selling in debt market securities should be done by expert
personnel as bank suffered huge losses in debt market securities and still writing
off these losses leads to less return to shareholders.
2)
Risk-averse attitude of the directors also has other side that there is
deployment of funds to lesser than optimum level and invested in less yield giving
spheres. Directors should change their attitude to some extent and deploy the funds
in loan category.
3)
Portfolio of loans should increase in numbers as well as features and more
categories should involve in loan giving activity of the bank so that it will increase
the volume of operations of the bank.
4)
There is large gap between interest rates of deposits and loans; margin
should be at most 3%.
Conclusion
Financial health of the bank is good and financial health indicates show
better achievements by management in studied period. Co-operative principles are
followed in letters and spirit. Shareholders are satisfied by getting better returns on
their investment.
In competitive era interest charged on loans and interest offered on deposits
is key factor which plays very important role for expansion of the unit better way.
K.I.Ts I.M.E.R
66
BIBLIOGRAPHY
K.I.Ts I.M.E.R
67
1] PRASANNA CHANDRA, FINANCIAL MANAGEMENT, 2007 EDI.
2] WILLIAM F SHARPE, GOODON J. ALEXANDER, JEFFERY V. BAILEY,

INVESTMENTS, 5TH EDI.
3] V. PATTABHIRAM, S. D. BALA, FIRST LESSONS IN MANAGEMENT

ACCOUNTING AND FINANCIAL ANALYSIS, 2ND EDI.
4] PRIMARY (URBAN) CO-OPERATIVE BANKS, RBI MASTER CIRCULAR

ON INVESTMENT, (Updated up to June 30, 2008)
5] www.rbi.org.in
K.I.Ts I.M.E.R
68
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Shivaji University, Kolhapur.

Shivaji University, Kolhapur.

Mr. Henil Gautam Shah.

Prof. Vivek Shinde.

Shivaji University, Kolhapur.

Mr. Henil Gautam Shah.

Shivaji University, Kolhapur.

Name of the topic

Data analysis and

Suggestion and Conclusion

Shivaji University, Kolhapur.

Shivaji University, Kolhapur.

Shivaji University, Kolhapur.

Shivaji University, Kolhapur.

In case of period, a greater risk involves in longer maturity period.

Shivaji University, Kolhapur.

Shivaji University, Kolhapur.

Objectives of the Study

Shivaji University, Kolhapur.

Scope & Limitations of the Study

Shivaji University, Kolhapur.

Shivaji University, Kolhapur.

Introduction to Banking Industry

Shivaji University, Kolhapur.

Shripatraodada Sahakari Bank Ltd., Kolhapur.

573 E Vyapari Peth, Shahupuri, Kolhapur-01.

13/01/1995 KPR/BANK (104).

(Figures in Lacs except No. 01,02,07,08,09,10)

02] Membership (Regular)

03] Paid up Share Capital

04] Total reserves and Funds

05] Deposits (Savings)

06] Advances (Secured)

Shivaji University, Kolhapur.

08] Other staff

09] Total staff

10] Working Capital

Shivaji University, Kolhapur.

Products and Services:

2] Loans and Advances:

Shivaji University, Kolhapur.

Shivaji University, Kolhapur.

Shivaji University, Kolhapur.

Other approved sector.

Debentures and bonds.

Subsidiaries and/or joint venture.

Other investments (to be specified) Investment outside India-in

General sector (including local authorities)

Subsidiaries and/or joint venture abroad

Other investments (to be specified)

Shivaji University, Kolhapur.

Ready forward (buy back) deals.

Transactions through SGL a/c.

Use of bank receipts (BR)

Shivaji University, Kolhapur.

Retailing of general sector.

Internal control system. Dealings through brokers.

Audit, review and reporting.

Non- SLR investment.

Shivaji University, Kolhapur.

Available for Sale & Held for Trading:

Shivaji University, Kolhapur.

Shifting among categories:

Transfer of scrips from one category to another, under all circumstances,