PERFORMANCE OF VIJAYA BANK

1. INTRODUCTION
1.1Finance:
Finance is one of the major elements, which activates the overall growth of economy; Finance is the lifeblood of economic activity. A well-knit financial system directly contributes to the growth of the economy. An efficient financial system calls for the effective performance of financial institutions, financial instruments and financial markets.

Importance of finance
Finance is regarded as the lifeblood of a business enterprise; this is because in the modern money-oriented economy finance is one of the basic foundations of all kinds of economy activities. It is the master key, which provides access to all the sources for being employed in manufacturing and merchandising activities. It has rightly been said that business needs money to make more money. However, it is also true that money begets more money. The bank efficient management of every business enterprise is closely linked with efficient management of its finances.

Scope of finance
The firm secures capital it needs and employs finance activities, which generate return on invested capital. The business firm mainly engages in activities to perform the functions of finance, thus it requires a number of real assets (plant, machines, furniture) and financial asset (shares and bonds) to receive return on its investments and distributes returns. These processes of raising funds are known respectively as financing,

Investment and dividend decisions. Retained earnings are other undistributed returns on equity capital; they are, therefore, rightfully a part of equity capital. The retention of earnings can be considered as a form of raising new capital. If a company distributes all earnings to shareholders, then, it can reacquire new capital from the same sources by issuing new shares.

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The finance function of raising and using money although has a significant effect on other function, yet it needs not necessarily limit or constraint the general running of the business. A company in a tight financial position will, of course, give more weight to financial considerations.

Finance functions: There are four important finance functions:

1. Investment decision
Investment decision or capital budgeting is the oldest area of the recent thinking in finance. Its one very significant aspect is the risk of measuring the prospective

profitability of new investments. Future benefits are difficult to measure and cannot be predicted with certainly, Because of the uncertain future. Capital budgeting decision involves risk. Investment proposals should therefore, be evaluated in terms of both expected return and risk.

2. Financing decision
Financing decision is the 2nd important function to be performed by the financial manager. Broadly, he must decide when, where and how to acquire funds to meet the firms investment needs. The central issue before him is to determine the proportion of equity and debt. The mix of debt and equity is known as the firms capital structure.

3. Dividend decision
The dividend policy should be determined in terms of its impact on the shareholders value. The optimum dividend policy is one, which maximizes the market value of the firms shares. Thus, if shareholders are not indifferent to the firms dividend policy, the financial manager must determine the optimum dividend payout ratio.

4. Liquidity decision
Investment in current asset affects firms profitability, liquidity and risk. A conflict exists between profitability and liquidity while managing the current assets. It may become illiquid. But it could lose profitability, as idle current assets would not earn

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any thing. Thus a proper trade off must be achieved between profitability and liquidity.

Financial services: Many financial institutions giving services to the public these are: 1. Bank 2. Co-operative societies 3. Financial institutions 4. Private Banks 5. Foreign Banks 6. Nationalized Bank 7. Non-Banking financial institutions.

Meaning of Financial Statements:

The term financial statement refers to the statements, which are prepared the business concern or banks at the end of the each financial year, i.e. which start from 1st April of current year to 31st March of next year. The statements are (a) INCOME STATEMENTS or PROFIT & LOSS ACCOUNTS which is prepared in order to know whether the concern has earned profits or sustained loss during the specific financial period. (b) POSITION STATEMENT or BALANCE SHEET with the respective schedules forming a part of Balance sheet, which is prepared by the concern in order to know their financial position. The Financial Auditors and accountants, Board OF Directors (BOD), usually prepare these.

To these statements are added the statements of retained earnings and statements such as Funds Flow Statements (FFS); Cash Flow Statements (CFS); Ratio analysis, in order to know the positions regarding Profitability, Liquidity and solvency.

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Nature of Financial Statements:

Financial statements are prepared for the purpose of presenting a periodical review or report by the management and deal with state of investment in business and result achieved during the period under view. They reflect a combination of recorded facts, accounting conventions and personal judgments. From this it is clear that three things affect financial statements i.e. 1. Recorded facts. 2. Accounting conventions. 3. Personal judgments.

Only those facts, which are recorded in the business books, will be reflected in the financial statements. The following points reflect truly the nature of financial statements of business entities: (i) These are reports or summarized reviews about the performance, achievements and weaknesses of the concern. (ii) These are prepared at the end of the accounting period so that various parties may take decisions of their future actions in respect of the relationship with the concerns. (iii) The reliability of financial statements depends on the reliability of the accounting data. These statements cannot be said to be true and fair representatives of the strengths or profitability of the concern if there are numerous frauds and defalcations in the accounts. (iv) The figures in the financial statements are a combination of recorded facts. 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. Moreover, fixed assets are recorded at historical value without taking into consideration the change in their values due to price level fluctuations. (v) These statements are prepared as per accounting concepts and conventions. (vi) These statements are influenced by the personal judgment of the accountant though he is expected to be more objective in his approach. These judgments may relate to valuation of inventory, depreciation of fixed assets and while making distinction between capital and revenue.

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Meaning of Analysis of Financial Statements:

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 help of different techniques or tools for the purpose. Analyzing financial statements is a process of evaluating relationship between component parts of financial statements 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 in a series of statements. The analysis of financial statements thus refer tot the treatment of the information contained in the financial statements in a way so as to afford a full diagnosis of the profitability and financial position of the firm concerned. For this purpose financial statements are classified methodically, analyzed and compared with the figures of previous years or other similar firms.

Objectives of Financial Analysis:

Financial Analysis is helpful in assessing the financial position and profitability of a concern. This is done through comparison by ratios for the same concern over a period of years; or for one concern against another; or for one concern against the industry as a whole (Inter-firm comparison); or for one concern against the predetermined standards; or for one department of a concern against other departments of the same concern (Intra-firm comparison). Accounting ratios calculated for a number of years show the trend of the change of position, i.e., whether the trend I upward or downward or static. The ascertainment of trend helps us in making estimates for the future. Keeping in view the importance of accounting ratios the accountant should calculate the ratios in appropriate form, as early as possible, for presentation to the management for managerial control. The main objectives of analysis of financial statements are to assess: (i) The present and future earning capacity or profitability of the concern,

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(ii) The operational efficiency of the concern as a whole and of its various parts or departments, (iii) The short term and long term solvency of the term for the benefit of the debenture holders and trade creditors, (iv) The comparative study in regard to one firm with another firm or one department with another department, (v) The possibility of developments in the future by making forecast and preparing budgets, (vi) The financial stability of a business concern, (vii) The real meaning and significance of financial data, and (viii)The long-term liquidity of its funds.

Types of Financial Statements analysis:

Different types of financial statements analysis can be made on the basis of: (i) The nature of the analyst and the material used by him, (ii) The objective of the analysis, and (iii) The modus operandi of the analysis.

i) The nature of the analyst and the material used by him:

a. External analysis: It is made by the persons who are not connected with the enterprise. They do not have access to the enterprise. They do not have access to the detailed record of the company and have to depend mostly on the published statements. Such type of analysis is made by investors, credit agencies, governmental agencies and research scholars. b. Internal analysis: The internal analysis is made by the persons who have access to the books of accounts. They are members of the organization. Analysis of financial statements or other financial data for managerial purpose is the internal type of analysis. The internal analyst can give more reliable result than the external analyst because every type of information is at his disposal.

(ii) According to the objective of the analysis:

a. Long term analysis: This analysis is made in order to study the long term financial stability, solvency and liquidity as well as profitability and earning capacity of

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a business concern will be able to earn a minimum amount which will be sufficient to maintain a reasonable rate of return on the investment so as to provide the funds required for modernization, growth and development of the business and to meet its costs of capital. This type of analysis helps the long term financial planning which is essential for the continued success of the business. b. Short term analysis: This is made to determine the short-term solvency, stability and liquidity as well as earning capacity of the business. The purpose of this analysis is to know whether in the short run a business concern will have adequate funds readily available to meet its short-term requirements and sufficient borrowing capacity to meet contingencies in the near future. This analysis is made with reference to items of current assets and current liabilities (Working capital analysis) to have fairly sufficient knowledge about the companys current position which may be helpful for short-term financial planning and long term planning.

(iii) According to the Modus operandi of the analysis:

a. Horizontal (or dynamic) Analysis: This analysis is made to review and analyze financial statements of a number of years and therefore based on financial data taken from several years. This is very useful for long term trend analysis and planning. b. Vertical (or static) analysis: This analysis is made to review and analyze the financial statements of one particular year only. Ratio analysis of the financial year relating to a particular accounting year is an example of this type of analysis.

Ratio:
Ratio is one of the important and most powerful tools of the financial analysis. A ratio can be defined as The indicated quotient of two mathematical expression, and as the relationship between two or more things. Ratio is thus, the numerical or an arithmetical relationship between two figures. It is expressed where one figure is divided by another. A ratio can be used as a yardstick for evaluating the financial position and performance of a concern, because the absolute according data cannot provide meaning full understanding and interpretation. A ratio is the relationship between two accounting items expressed mathematically. Ratio analysis helps the analysts to

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make quantitative judgments with regard to concerns financial position and performance.

Ratio analysis:
Ratio analysis is the technique of the calculation of a number of accounting ratios from the data or figures found in the financial statements, the comparison of the accounting ratios with those of the previous years or with those of other concerns engaged in similar line of activities or with those of standard or ideal ratios, and the interpretation of the comparison. Following are the four steps involved in the ratio analysis: (1) Selection of relevant data from the financial statements depending upon the objective of the analysis. (2) (3) Calculations of appropriate ratios form the above data. Comparison of the calculated ratios with the ratios of the same firm in the past, or the ratios of some other firms of the comparison with ratios of the industry to which the firm belong. (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 in isolation. But single ratios may be studied in relation to certain rules of thumb which are based upon well proven conventions as for example 2:1 is considered to be a good ratio for current assets to current liabilities.

2. Group of ratio: -

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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 earliest and most popular ways of evaluating the performance of the firm is to compare its present ratio with the past ratios called comparison overtime. When financial ratios are compared over a period of time, it gives an indication of the direction of change and reflects whether the firms performance and financial position has improved, deteriorated or remained constant over a period of time.

4. Projected ratios: Ratios can also be calculated for future standards based upon the projected or proforma 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 variances.

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.

Guidelines or precautions for use of ratios:

1. Accuracy of financial statements 2. Objective or purpose of analysis. 3. Selection of ratio. 4. Use of standards. 5. Calibre of the analyst. 6. Ratios provide only a base.

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Classification of Ratios:
Ratios may be classified as follows keeping in view the particular purpose.

(i)

Profitability Ratios: Profitability ratios are utmost importance for a

concern. These ratios are calculated to enlighten the end results of business activities which is sole criterion of the overall efficiency of a concern.

The following are the profitability ratios: 1. Return on Capital employed (overall Profitability ratio) 2. Return on shareholders fund. 3. Return on Equity shareholders fund. 4. Return on Total Assets. 5. Earning per share. 6. Payout ratio. 7. Ratio of Net profit to total income. 8. Ratio of Net profit to Total deposits. 9. Ratio of Net to Spread. 10. Ratio of interest earned to Total income. 11. Ratio of Interest expended to Total income. 12. Ratio of total income to working capital.

(ii) Financial Ratios:

These ratios are calculated to judge the financial position of the concern from long term as well as short term solvency point of view.

1. Liquidity Ratios: If it is decided to study position of the concerns, in order to

highlight the relative strength of the concerns in meeting their current obligations to maintain sound liquidity and pinpoint the difficulties if any in it, then liquidity ratios are calculated. These ratios are used to measure the firms ability to meet short term obligations. They compare short term obligations to short term (or current) resources available to meet these obligations. From these ratios, much insight can be obtained into the present cash solvency of the firm and firms ability to remain solvent in the event of adversity. The important ratios are: 1. Current Ratio (or Working capital ratio).

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2. Stability Ratios:
These ratios help in ascertaining long term solvency of a firm which depends on firms adequate resources to meet its long term funds requirements, appropriate debt equity mix to raise long term funds and earnings to pay interest and installment of long term loans in time. The following ratios can be calculated for this purpose: 1. Fixed Assets Ratio. 2. Ratio of Current assets to fixed assets. 3. Debt Equity Ratio.

(iii). Solvency Ratios:

To run a bank successfully financial strength of the bank is very important. In order to assess the financial strength, solvency ratios are determined. a. Ratio of Cash to deposits. b. Ratio of Credit to Deposits. c. Ratio of Cash Management.

Uses of ratio analysis

Ratio analysis simplifies the understanding of financial statements by establishing an inter-relationship between the various financial figures. 1. Ratio analysis is an instrument to diagnosis the financial health or condition of a business. Ratios tell the whole story of the changes in the financial condition of an enterprise. They evaluate the important aspects of the conduct of a business like liquidity, profitability, solvency etc. 2. Ratio analysis is an invaluable aid to the management in the efficient discharge of its basic functions of forecasting, planning, communication, control etc. By an analytical study of ratios, the past performance of the business trends can be understood and on the basis of these trends the future events can be forecasted. 3. Information as to what happened in the business during a particular year can be easily conveyed through ratios.

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4. Ratios are a useful instrument of management control particularly in the areas of sales and costs. 5. Ratio analysis facilitates inner-firm and intra-firm comparisons. Ratio analysis is useful not only to the management but also to the outsiders like creditors and investor. A creditor can ascertain the extent of security that is available for the payment of the amount due to him through the computation and interpretation of ratios. An investor can know that past performance of company through the calculation and the interpretation of ratios like, return on capital employed etc.

Limitations of ratio analysis

Ratio analysis is, no doubt, useful in many respects, but its importance should not be exaggerated. This is because; ratio analysis suffers from a lot of limitations. Some are: 1. Ratios are calculated from the data found in the financial statements. The

financial statements may lack accuracy and suffer from many limitations so ratios, derived from such statements are also subject to those limitations. 2. There is no consistency in the meaning of certain ratios. As such, the items used in the calculation of ratios differ from one analyst to another. This means that ratios are non comparable. 3. Ratios are just supplementary to and not substitute of the original absolute figures. Thus they become meaningless. If detached from details of their derivation. 4. Financial analysis based on ratios may give misleading results if the effects of changes in price level are not taken into account while their computation. 5. Ratios alone are not adequate for judging, the financial position of a business as they give only a fraction of information needed for the decision. 6. There is a danger of window dressing into ratio analysis. On account of

possibility of window dressing, a particular ratio cannot be taken as a definite indicator of profitability of a concern. 7. Ratios are tools of quantitative analysis only. Qualitative factors, which also influence the conclusions drawn, are ignored in ratios analysis.

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8. A ratio is hyper sensitive. A new entry of a transaction can change its magnitude drastically. 9. Ratios gain significance only when they are compared with standards. But it is very difficult to lay down fixed standards for ideal ratios. In the absence of reliable standards for comparison, the interpretation of ratios becomes mostly subjective. Thus, in words of Erich A Helfert, Ratios are not ends in themselves rather, on selective basis, they may help to answer significant questions.

Need for the study

Ratio analysis can be applied to financial statements and similar data in order to assume the performance of a company; to determine whether it is solvent and financially healthy to assess the risk attached to its financial structure and to analyze the return generated for its shareholders and other interested parties. Ratio analysis then, can provide useful information to inform the decision of the: -

(a) Investors:
To make the decisions about whether to buy or sell their securities.

(b) Company management:

To assess and compare the performance of different divisions without the company and performance of company as a whole against its competitors and against its competitors and against previous years.

(c) Financial Institutions:

To make decisions about whether or not to agree to the requests for debt finance from companies and about the terms and conditions under which such finance will be made available. Ratio are useful for measuring the performance and helpful in cost control. Ratios are a very important communication media as they can communicate the strength and financial standing of the firm to the internal and external parties.

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2. DESIGN OF STUDY
STATEMENT OF THE PROBLEM OF THE STUDY SELECTED
Ratio analysis gives first hand information about the financial aspect of the business. It is used as analytical tool in all business. But, is ratio analysis useful as an analytical tool in service industry.

To find out the extent of utility of ratio analysis in measuring the growth trend of a bank, this study has been selected and stated as: -

As an analytical tool to measure the growth trend in Vijaya Bank.

SCOPE OF THE STUDY :The study has been done to analyze the financial position of Vijaya Bank for the year 2002-03 & 2007-2008. This study helps to understand the various components involved in the Ratio analysis of Vijaya Bank. Analysis of financial performance by use of ratio has a very wide scope. This could be useful in understanding the strengths and weakness.

OBJECTIVES OF THE STUDY:

1. To measure the profitability of a concern & thus reveal the total effect of the business transaction on the profit position & to indicate how far the enterprise has been successful in its aim. 2. To know budgeting decisions policies of Vijaya bank 3. To know the solvency position of the bank. 4. To know dividend policy, earning per share, and capital structure of the bank. 5. To give suggestions and to conclude on the findings.

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HYPOTHESIS
As the study is made a financial aspect with regard to financial statements, there is no hypothesis to be proved or disproved.

OPERATIONAL DEFINITIONS OF CONCEPTS: CAPITAL EMPLOYED = Equity share capital + Reserve & surplus + Long term liabilities. Equity shareholders fund = Equity share capital + capital Reserves + Revenue reserves + Balance of profit and loss account. Spread = Interest earned Interest expended. EPS = Earning per share Working capital = current assets current liabilities. Operating profit = Net profit after tax + provisions & contingencies. Current assets = Cash & balance with RBI + Balance with banks & money at call + advances + other assets. Current liabilities = Demand deposits (from banks & from others) + savings bank deposits + other liabilities & provisions.

RESEARCH METHODOLOGY SECONDARY DATA: Secondary sources of data are those sources in which data already collected and published are assembled. The data so collected are called the secondary data. The task of gathering secondary data is the task of compilation of data from various published sources. This was collected through the, 1. Bank Broachers. 2. Bank records. 3. Annual reports. 4. Information from Internet.

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LIMITATION TO THE STUDY: 1. This study is limited to Vijaya Bank.

2. The study is limited to the techniques of calculating ratios used by the Bank. 3. Non-availability of certain data in an in-depth manna. 4. The study is limited to certain ratios only. Those are ratios applicable to Bank. 5. Restrictions on behalf of the Bank officials to divulge important information.

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3. COMPANY PROFILE

HISTORY OF BANKING

Origin of the word Bank and Banking History in India

Opinion is not uniform with regard to the origin of the word Bank. According to some authors, the word bank is derived from the Words Bancus or Banquet that is a bench where the transaction takes place.

Evolution of Banking:
Money lending developed as an occupation in India from 500 B.C. But the 1st modern bank was set up in Madras in 1688. Agency houses started by the British in India paved the way for establishing joint stock banks in India Bank of Hindustan was established in 1770 in Calcutta. General BOI (Bank of India) was established in 1786. Three presidency banks namely Bank of Calcutta, Bank of Bombay & Bank of Madras was established. These 3 banks subsequently emerged tighter to form Imperial bank of India in 27th January 1921, which was nationalized in 1955 & named as State Bank of India.

Many other banks like The Allahabad bank, The Punjab national bank, The Syndicate bank, The Bank of India, The Indian bank, Bank of Baroda & Central bank of India, The Dena bank, The Union bank of India, The Bank of Maharastra, The Indian overseas bank, The Canara Bank, The united Bank of India and The United commercial bank came into existence. However Indian banking system has experienced a series of crisis & as a consequence witnessed a number of bank failures. This is more so during the post world war I period. RBI was therefore established in 1935 to regulate and control banking in India.

Definition and meaning of Bank:

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Section 5( c ) of the Banking Regulation Act of 1949 defines a Banking company as Any company which transacts the business of banking in India. The term Banking is defined in Section 5 ( b ) of the same Act as Accepting, for the purpose of lending or investing, of deposits of money from the public, repayable on demand or otherwise, and withdraw able by cheque, draft, order or other wise. A Bank is an institution, which deals in money. It means that a bank receives money in the form of Deposits from public and lends for the Purpose of Development of Trade and commerce

Professor. Hart says that a banker is one who in the Ordinary courses of business, receives money which he repays by Honoring the cheques of persons from whom or on whose account he Receives it.

Professor. Kinley defines a bank as an establishment, which makes to individuals such advances of money as, may be required and safely made and to which individuals entrust money that they do not require it for use.

Main functions of Banking:

A Banking company can perform the following forms of business: A. The pure banking business of accepting of deposits of money from the public and lending of funds to the needy as specified in Section 5(b) of the banking Act, 1949.

B. Other forms of banking business enumerated in section 6 of the Banking Regulation Act, viz.: 1. The raising, taking or borrowing of money. 2. Lending or advancing of money, with or without security. 3. Drawing, making, accepting, discounting, purchasing, selling, collecting and dealing in bills of exchange, hundis, promissory notes, drafts, coupons, bills of lading, railway receipts, warrants, debenture certificates and other instruments, whether negotiable or not. 4. Granting and issuing letters of credit, circular notes and

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Travelers cheque. 5. Buying, selling and dealing in bullion. 6. Buying and selling of foreign exchange. 7. Acquiring, holding, issuing on commission, underwriting and dealing in stocks, shares, debentures, bonds, securities and investments of all kinds. 8. Purchasing and selling of bonds and other forms of securities on behalf of customers. 9. Negotiating of loans and advances. 10. Receiving of all kinds of bonds and securities and valuables for safe custody. 11. Acting as an agent for the government, local authority or any other person. 12. Participating in any issue of loans or securities made by the central government, state governments, municipalities, corporations, companies or any other association. 13. Transacting of every kind of guarantee or indemnity business. 14. Acquiring, selling and releasing any property which may come into its possession in satisfaction of the claims. 15. Undertaking and executing trusts and administering administers. 16. Acquiring, constructing or altering any building or works necessary for its own purposes. 17. Selling, leasing or mortgaging or otherwise dealing with any of its properties and rights. estates as executors or

History:
Vijaya bank was founded by late shri.A.B shetty on 23rd Oct 1931 in mangalore. The Bank became a scheduled Bank in 1958. It was nationalized on 15th April 1980. In the year 1885, Vijaya Bank sponsored its first grameena Bank in it lead district mandya. True to it tradition. The Bank promoted Vijaya Rural development foundation which conducts training programs in rural areas. In year 1995, a housing finance subsidiary

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was established named Vijaya Bank housing finance limited, the objective of the founders was essentially to promote banking habits, thrift and entrepreneurship among the farming community of Dakshina kannada District in Karnataka.

BRANCHES:Vijaya bank has a network of 843 branches spread over 28 states and 4 union territories. It has 43 specialized branches which include and 1881 branches commercial and personal banking branches, overseas branches, corporate banking branches and a specialized branch for women, small scale industries, agricultural finance, and asset recovery management funds transfer. It has three tier organizational structures, Head office, Regional office and the branches. The head office hosts various functional departments that are instrumental in policy formulation and monitoring of performance of the regions and branches. The banks have 17 regional offices exercise immediate supervision and control over the branches under their jurisdiction.

SERVICES:Vijaya bank has comes up with various innovative services to its customers apart from offering saving accounts, current account and fixed deposits for the customers to deposit their money. It offers various deposits schemes such as Jeevan Nidhi deposits and recurring deposits schemes.

The Bank provides loans like home loans, educational loans, vehicle loans etc., it also provides advances to small scale industries, agricultural activities (under special agricultural credit plan) as directed by the Reserve Bank of India, the bank has come out with a charter for women and implanted various points to met credit needs of women to make them self reliant and economically independent.

To stay ahead in the global environmental, the Vijaya Bank has diversified into various fields it has established ATMs it also provides various credit card schemes such

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as pre-approved credit card schemes and special credit cards for staff members etc., the bank has diversified its merchants banking activities into specialized services.

BOARD OF DIRECTORS
CHAIRMAN AND MANAGING DIRECTOR:-SHRI M.S. KAPUR EXECTIVE DIRECTOR: SHRI P.A. SETHI Mr. Ashok Kumar Mr. Ashok Kumar Shetty Mr. P Shantharam Shetty Mr. Nishank Kumar Jain Mr. T Valliappan Mr. S Ananthan Mr. R Vaidyanathan Mr. G B Singh Mr. Albert Tauross Mr. Ranjan Shetty Mr. Sridhar Cherukuri Mr. K Venkatappa Mr. S C Kalia Mr. Brij Mohan Sharma

Director Director Director Director Executive Director Nominee Director Director Director Chairman and Managing director Director Non Official PartTime Director Director Executive Director Director

Customer service:
The banking being essentially a service industry, efficient service is the most

important factor to attract and retain a customer. The Bank is committed to provide its customers with a high standard of services. The Bank considers that no man is too small for Banking and no complaint is too insignificant to attend to. Keeping this in view, an exclusive section dealing with customer grievances is set up in Central Inspection Department at Head Office to keep strict vigil over complaints received from the customers. The Department is headed by a General Manager who Is the Nodal Office for customer grievances.

Our aim is to respond to the complaint with efficiency, courtesy and fairness. The customer can make a complaint over phone, in person or by e-mail. Every complaint is acknowledged and efforts are made to resolve the matter within a period of 7 days.

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The Chairman and Managing Director also keep a close watch on the redressed of customer complaints and grievances. A detailed review note on the status of complaint is being placed before him every fortnight.

Marketing setup:
To meet the increasing competition from the new generation private sector, foreign and also many of the public sector banks, the bank has set-up a marketing cell and has recruited marketing graduates with specialization in marketing as marketing managers who have varied experience to market the diverse products of the bank and also increase the clientele base in different regions in the country.

The marketing cell has formulated various strategies for marketing the asset and liability products of the bank which would assist the branches in not only improving the business but also help in getting good publicity and mileage in the market.

Merchant Banking and Allied activities:

The bank is registered with SEBI for activities like category 1 Merchant Banker, Debenture Trustee and Bankers to the issue. The Bank has associated itself as

collecting bankers for collecting subscriptions related to public/rights issue etc. The bank has also acted as Debenture Trustee for about 52 assignments.

During the year, the bank has handled over 660 payment bankers assignments. The number of instruments paid through our designated branches was about 70 lakhs. The bank is also extending at par facility in respect of corporate customers of a number of private/foreign sector banks who do not have the required branch network of their own. The bank is therefore able to leverage its vast network to generate fee-based income, float balance apart from optimum utilization of its manpower and infrastructure.

The bank is also extending collection and payment services for correspondent banks in the public and private sector including foreign banks.

PUBLICITY AND PUBLIC RELATIONS:

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The has gone for massive advertisement and publicity by way of constant release of corporate advertisements, both in print and electronic media for enhancing the corporate image and to market its follow on public issue. Due to this, gee expenditure on From this advertisement

advertisement and publicity has gone up substantially.

campaign, the visibility of the bank has reached the nook and corner of the country and Bank has already derived utmost advantage evidenced by overwhelming response to the follow on Public Issue by way of subscription of over 17 times of the issue size and its share valve having gone up substantially thereafter in the stock markets.

COMPUTERISATION:
Vijaya Bank has taken up many initiatives in the technological front today 78.6% of the total business of the bank is begin handled by Computerized branches amounting to 356 Branches. The Bank has implemented the corporate E-mail solution using

INFINET infrastructure institute of institution for development and research in banking technology.

MANPOWER, STAFF PRODUCTIVITY AND RECRUITMENT:

The total staff strength of the Bank stood at 11624 in March 2008 as compared to 11723 in March 2007. Of the total staff, 3615 are officers, 5462 are clerical staff, 1925 re sub-staff and 622 are part-time employees in sub-ordinate cadre. The number of women employees as at the end of March 2008 stood at 1942 consisting of 339 officers and 1211 award staff constituting 16.7% of total employees belonging to handicapped category and 475 employees belonging to Ex-servicemen category.

TECHNOLOGICAL UPGRADATION:
The Bank has created a Department of information technology at the corporate office, the primary objective of this department is to promote computer literacy among employees, to upgrade communication and information technology and to develop electronic Banking capabilities. At present 80 branches were fully computerized and 77 partially computerized. These branches cover 53% of total business of the Bank.

23

PERFORMANCE OF VIJAYA BANK

Besides, the Bank has installed 12 ATMs in 9 branches located in Mumbai, Bangalore, Delhi, Chennai and Mangalore. The Bank also introduced Any branch Banking

system by networking its 6 fully computerized branches in Mumbai using leased telecom lines, the Mobile Banking facilities have been provides at branches and hobby Banking facilities at 2 branches. E-mail connection has installed and made operational in 30 centers. The Bank has taken up the task of re-engineering the computerization at the Head office. This exercise includes setting up corporate local area network,

establishing connectivity with zonal/regional offices major branches.

INVESTMENT AND FUNDS MANAGEMENT:

The gross investments of the Bank stood at Rs.8913.88 crores as on march 31 2007 and the net investments stood at Rs.8861.61 crores (Net investments are arrived at by reducing provisions for depreciation and Non-performing investment from gross investments) The average yield on investment (Excluding special securities) Stands at 10.56% as on march 31 2007. The Bank continued to remain active in trading of securities and earned a profit of Rs.225.08 crores during the year from sale of investment.

BANKS PERFORMANCE:
The Bank improved its performance under various parameters during the year. The major business focus of the Bank during the year has been on stepping up the growth of Saving Bank deposits and retail credit, especially the housing loans. The recovery of non-performing assets was yet another thrust area. The highlights of the performance are given below:

1. The net profit increased to Rs.411.31 Crore for the year 2007-04 as against Rs.196.56 Crore in 2002-03. The gross profit recorded 100% increase from Rs.432.36 Crore in 2002-03 to Rs.865.64 Crore in 2007-04.

24

PERFORMANCE OF VIJAYA BANK

2. The total business crossed Rs.30000 Crore mark and stood at Rs.32350.10 Crore in March 2008 as compared to Rs.25203.80 Crore in March 2007, recording 28.35%increase. 3. The total deposits of the Bank increased from Rs.17019.81 Crore in March 2007 to Rs.21015.05 Crore in March 2008, recording 23.47% increase. Savings Bank Deposits grew by 26.7% from Rs.3511.13 Crore in March 2007 to Rs. 4447.31 Crore in March 2008. 4. Gross credit of the Bank increased from Rs.8183.99 Crore in March 2007 to Rs.11335.05 Crore in March 2008, recording 38.50% increase. Housing Loans more than trebled from Rs.591.73 Crore in March 2007 to Rs.1811.75 Crore in March 2008. 5. The net non-performing advances as percentage to net advances declined from 2.61% as on 31-3-2007 to 0.91% as on 31-3-2008. Cash recoveries under NPAs, interests on NPAs and recovery under prudentially written off accounts amounts to Rs.203.74 Crore in 2007-04 as compared to Rs.115.00 Crore in 2002-03. 6. The Capital Adequency Ratio stood at 14.11% at the year end, much above the prescribed requirement of 9%.

MISSION: Our mission is to emerge as a prime national bank backed by modern technology meeting customer aspiration with professional banking services growth contributing to national development.

25

PERFORMANCE OF VIJAYA BANK

ORGANISATION CHART:
BOARD OF DIRECTORS CHAIRMAN & MANAGING DIRECTORS EXECUTIVE DIRECTOR GENERAL MANAGERS

CREDIT OPERATION

CRIDET RECOVERY

T&P MANAGEMENT

VISULANCE

DIT DEPT & INFO TECH

REGIONAL MANAGER

DEPUTY GENERAL MANAGER

CRIDET RECOVERY

CRIDET RECOVERY

CRIDET RECOVERY

ASSISTANT MANAGERS

MANAGERS

SENIOR MANAGERS

CHIEF MANAGERS

ASST GENERAL MANAGERS

AWARD STAFF

SUB STAFF

Designation wise staff strength SL No. Designation ASSISTANT GENERAL MANAGERS 1 CHIFE MANAGERS 2 SENIOR MANAGERS 3 MANAGERS 4 ASSISTANT MANAGERS 5 AWARD STAFF 6 SUB STAFF 7
Total

Strength 25 200 1000 1500 4000 8700 4000 19425

26

PERFORMANCE OF VIJAYA BANK

4. ANALYSIS AND INTERPRETATION

Analysis of objective:
The first objective of the study is to arrive at the short-term solvency or the liquidity position and to portray ratios which measure the stake (risk) of creditors as against owners and thus picture of the long-term financial position of the concern.

1. Profitability Ratios: Return on Capital employed (overall Profitability ratio):

This ratio is an indicator of earning capacity of the capital employed in the business. The ratio is calculated as follows:

Here, Capital Employed= Profit before Tax Capital Employed= Equity share capital + Reserves & Surplus Liabilities. A project Yielding higher return is Favored. Particulars Operating Profit Capital Employed ratio Percentage 2006 4355633 15012328 0.290 29.01% 2007 8712007 22701522 0.384 38.38% 2008 10221737 25850122 0.395 39.54% 2009 11798271 29355623 0.402 40.19% + Long term

Table no. 1.1

Calculation of Operating Profit (Profit before Tax):

Particulars Net Profit after Tax Add: Provisions Contingencies
2006 2007 2008 2009

1984662 & 2370971

4149638 4562368

5286452 4935285

6165820 5632451

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PERFORMANCE OF VIJAYA BANK

Profit Before Tax

4355633

8712007

10221737

11798271

Particulars Equity share Capital Add: Reserves & Surplus Add: Long term Liabilities Capital Employed

2006

2007

2008

2009

3335178 4777523 6899627 15012328

4335178 9020174 9346170 22701522

5325638 9812650 10711834 25850122

5870662 11285186 12199775 29355623

Graph 1:

Showing Operating Profit to Capital Employed:

Operating Profit to Capital Employed
35000000 30000000

Amount 25000000
20000000 15000000 10000000 5000000 0 1 2
Years

Series1 Series2

Graph 2:

Showing Operating Profit to Capital Employed in Percentage:

Operating Profit to Capital Em ployed In %

0.5 0.4 0.3 Percentage 0.2 0.1 0

40.19% 39.54% 38.38% 29.01%

Series2 Series3

2 Year

28

PERFORMANCE OF VIJAYA BANK

Interpretation:
The Ratio of return on capital employed has increased by 38.73% in the year 2007 as compared to that of 2006, which has decreased by 29.01% and Ratio of return on capital employed has increased by 40.19% in the year 2009 as compared to that of 2008, which has decreased by 39.54%

Return on shareholders fund:

When it is desired to work out the profitability of the company from the shareholders point of view, then it is calculated by the following formula:

The ratio of net profit to shareholders funds shows the extent to which profitability objective is being achieved. Higher the ratio, better it is.

Particulars Operating Profit Shareholders' funds Ratio Percentage Table 1.2

2006 1984662 173229852 0.011 1.15%

2007 4149638 185030798 0.022 2.24%

2008 5286452 194568920 0.027 2.19%

2009 6165820 206542350 0.030 2.56%

Calculations of Shareholder Funds:

Particular 2006 Operating profit= Net Profit 1984662 i.e. Shareholders funds= 10000000 Share capital 0 Add: reserves & surplus 73229852 17322985 Total 2
2007 2008 2009

4149638 10000000 0 85030798 18503079 8

5286452 12000000 0 91030850 21103085 0

6165820

150000000 96152354 246152354

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PERFORMANCE OF VIJAYA BANK

Interpretation:
The ratio of return on shareholders fund has increased by 2.24% in the year 2007 as compared to that of 2006 which has decreased by 1.15%. and ratio of return on shareholders fund has increased by 2.56% in the year 2009 as compared to that of 2008 which has decreased by 2.19%.

30

PERFORMANCE OF VIJAYA BANK

Graph 3:

Showing Operating Profit to Shareholders funds:

operating profit to Shareholders Funds
250000000 200000000

Amount
150000000 100000000 50000000 0 Operating Profit Shareholders' funds

2006

2007

2008

2009

year

Graph 4:

Showing Operating Profit to Shareholders Funds in Percentage:

Operating Profit to Shareholders Funds

3.00% 2.00%
Percentage

2.24% 2.19% 1.15%

2.56%

1.00% 0.00%

2
year

Return on Equity Shareholders Fund

This ratio is a measure of the percentage of net profit to equity shareholders funds. The ratio is expressed as follows: Return on equity shareholders fund = Net profit after Tax X 100 Equity shareholders funds

31

PERFORMANCE OF VIJAYA BANK

Here, Equity shareholders fund= Equity share capital + Capital Reserves + Revenue reserves + Balance of profit and loss account. Higher the ratio, better it is.
Particulars Operating Profit Equity shareholders' funds ratio Percentage 2006 1984662 101304840 0.019 1.95% 2007 4149638 103224423 0.04002 4.02% 2008 5286452 125625865 0.0421 3.13% 2009 6165820 146583250 0.0421 3.17%

Table 1.3

Calculations Equity Shareholders Fund:

Particulars 2006 Operating profit= Net Profit 1984662 i.e. Shareholders funds= Share capital 100000000 Add: Capital reserve -----Add: Revenue reserve 1304840 Total 101304840

2007
4149638 100000000 ----3224423 103224423

2008
5286452 120000000 3526850 123526850

2009
6165820 150000000 3826523 153826523

Interpretation:
The ratio of return on equity shareholders fund has increased by 4.02% in the year 2008 as compared to that of 2007 which has decreased by 1.95% and ratio of return on equity shareholders fund has increased by 3.17% in the year 2009 as compared to that of 2008 which has decreased by 3.13%.

32

PERFORMANCE OF VIJAYA BANK

Graph 5:

Showing Operating Profit to Equity Shareholders Funds:

Return on Equity Shareholders Fund

140000000 120000000 100000000 Amount 80000000 60000000 40000000 20000000 2006 2007 2008 2009

Operating Profit Equity shareholders' funds

Year

Graph 6:

Showing Operating Profit to Equity Shareholders Funds in Percentage:

Operating Profit Shareholders Fund

5.00% 4.00% 3.00% Percentage 2.00% 1.00% 0.00%

4.00% 1.96%

4.57% 4.87%

2
year

Return on Total Assets:

This ratio is calculated to measure the profit after Tax against the amount invested in total assets to ascertain whether assets are being utilized properly or not. It is calculated as under: Return on Total assets= Net profit after Tax X 100 Total assets

33

PERFORMANCE OF VIJAYA BANK

Higher the ratio, better it is.

Particulars Net Profit Total Assets Ratio Percentage 2006 1984662 190722849 0.0104 1.04%

2007
4149638 240710182 0.017 1.72%

2008
5286452 252652852 0.0209 2.09%

2009
6165820 261245965 0.0236 2.36%

Table 1.4

Interpretation:
The ratio of return on total assets has increased by 1.72% in the year 2008 as compared to that of 2007, which has decreased by 1.04% and ratio of return on total assets has increased by 2.36% in the year 2009 as compared to that of 2008, which has decreased by 2.09%. Graph 7:

Showing Net Profit to Total Assets:

Net Profit to Tatol Assets
300000000 250000000 200000000 Amount 150000000 100000000 50000000 0 2006 2007 2008 2009 year Net Profit Total Assets

34

PERFORMANCE OF VIJAYA BANK

Graph 8:

Showing Net Profit to Total Assets in Percentage:

Net profit to Total Assets

3.00% Percentage 2.00% 2.36% 2.09% 1.72% 1.00% 1.04% 0.00% 1 2 3 4 year

Series1

Earnings per share:

This helps in determining the market price of equity shares of the company and in estimating the companys capacity to pay dividend to its equity shareholders. It is calculated as follows: Earnings per share= Net profit after Tax X 100 No. Of equity share

Particulars Net Profit No. of Equity shares Ratio Percentage

2006 1984662 10000000 0.1984 19.84%

2007 4149638 10000000 0.4149 41.49%

2008 5386452 12000000 0.4405 44.05%

2009 6165820 13500000 0.4567 45.67%

Table 1.5

Calculations of No. of Equity Shares:

Particulars Net Profit after Tax No. of Equity shares= Amount/ Face value 2006 1984662 100000000/10 10000000

2007
4149638 100000000/10 10000000

2008
5286452 120000000/10 12000000

2009
6165820 135000000/10 13500000

35

PERFORMANCE OF VIJAYA BANK

Interpretation:
The ratio of earning per share has increased by 41.49% in the year 2007 as compared to that of 2006, which has decreased by 19.84% and ratio of earning per share has increased by 45.67% in the year 2009 as compared to that of 2008, which has decreased by 44.05%. Graph 9:

Showing Net Profit to No. of Equity Shares:

Net Profit to No of Equity Shares
16000000 14000000 12000000 10000000 Amount 8000000 6000000 4000000 2000000 0 2006 2007 2008 2009 Year

Net Profit No. of Equity shares

Graph 10:

Showing Earning Per Share Ratio:

Earning per Share
50.00% 40.00% Percentage30.00% 20.00% 10.00% 0.00% 45.67% 41.49% 44.05% 19.84%

2 Year

36

PERFORMANCE OF VIJAYA BANK

Payout ratio:
This ratio indicates as to proportion of earning per share has been used for paying dividend. This ratio is very important from shareholders point of view as it tells that if a company has used whole or substantially the whole of its earning for paying dividend and retained nothing for the future growth and expansion purposes, then there will be very dim chances of capital appreciation in the price of the shares. In other words, an investor who is more interested in capital appreciation must look for a company having low payout ratio. This is determined as follows: Payout ratio= Dividend per equity share Earning per share Here, Dividend per equity share = Dividend declared No. Of equity share Dividend declared= Interim dividend + Final dividend

Particulars Dividend Per Equity share EPS Ratio Percentage

2006
0.9

2007
1.5

2008
2.0

2009
2.4

5.89 0.1528 15.28%

11.07 0.1355 13.55%

12.05 0.1660 16.60%

14.1 0.1681 16.81%

Table 1.6

Calculations of Dividend Per Equity Share:

Particulars Dividend declared=Interim div.d+ Final Div.d. Dividend per share= Dividend declared/ No. of equity shares 2006 9000000 9000000/ 10000000
0.9

2007
15000000 15000000/ 10000000
1.5

2008
24000000 24000000/ 12000000
2.0

2009
32000000 32000000/ 13500000
2.4

37

PERFORMANCE OF VIJAYA BANK

Interpretation:
The ratio of payout ratio has decreased by 13.55% in the year 2007 as compared to that of 2006, which has increased by 15.28% and ratio of payout ratio has decreased by 16.81% in the year 2009 as compared to that of 2008, which has increased by 16.60%. Graph 11:

Showing Dividend Per Equity Share to EPS:

Divident Per Equity Share to EPS
16 14 12 10 Amount 8 6 4 2 0 14.1 11.07 12.05 Dividend Per Equity share 5.89 0.9 2006 1.5 2.0 2.4 EPS

2007

2008

2009

Year

Graph 12:

Showing Dividend Per Equity share to EPS in Percentage:

Divident Per Equity Share to EPS
20.00% 15.00% Percentage 10.00% 5.00% 0.00% 1 2 year 3 4 15.28% 13.55%

16.60%

16.81%

38

PERFORMANCE OF VIJAYA BANK

Ratio of Net profit to Total income:

The bank should ensure that a consistent and higher level of profitability is aimed at and achieved. The bank must be vigilant to see that expenditure is controlled and profitable employment of funds is used and increase non-funded income. Ratio is given by= Net profit X 100

Total income Higher the ratio, better it is.

Particulars Net Profit Total income Ratio Percentage 2006 1984662 20346473 0.0976 9.76% 2007 4149638 24834904 0.167 16.70% 2008 5286452 25652852 0.206 20.61% 2009 6165820 27245965 0.226 22.63%

Table 1.7

Calculations:
Net Profit after Tax Total Income 1984662 20346473 4149638 24834904 5286452 25652852 6165820 27245965

Interpretation:
The ratio of net profit to total income has increased by 16.70% in the year 2007 than, that of 2006 which has decreased by 9.76% and ratio of net profit to total income has increased by 22.63% in the year 2009 than, that of 2008 which has decreased by 20.61%

39

PERFORMANCE OF VIJAYA BANK

Graph 13: Showing Net Profit to Total Income:

Net Profit to Total Income

30000000 25000000 20000000 Amount 15000000 10000000 5000000 0 2006 2007 2008 2009 Year Net Profit Total income

Graph 14:

Showing Net Profit to Total Income in Percentage:

Net Profit to Total Income
25.00% 20.00% Percentage 15.00% 10.00% 5.00% 0.00% 1 2 year 3 4 9.76% 16.70% 22.63%

20.61%

40

PERFORMANCE OF VIJAYA BANK

Net profit to Total deposits: The bank needs to mobilize deposits and other funds more of cost and low of deposits. Advancing than of maintaining excess of liquidity over the statutory requirement can employ efficient funds. Ratio is given as= Net profit X 100 Total deposits Lower the ratio, better it is.
Particulars Net Profit Total Deposits ratio Percentage 2006 1984662 170429571 0.0116 1.16%

2007
4149638 210334695 0.0197 1.97%

2008
5286452 224156890 0.024 2.36%

2009
6165820 256254235 0.024 2.41%

Table 1.8

Calculations:
Net Profit after Tax Total Deposits 1984662 170429571 4149638 210334695 5286452 224156890 6165820 256254235

Interpretation:
The ratio of net profit to total deposits has increased by1.97% In the year 2007 than the previous year 2006 which has decreased by 1.16% and ratio of net profit to total deposits has increased by 2.41% In the year 2009 than the previous year 2008 which has decreased by 2.36%.

41

PERFORMANCE OF VIJAYA BANK

Graph 15:

Showing Net Profit to Total Deposits:

Net Profit to Total Deposit
300000000 250000000 200000000 Amount 150000000 100000000 50000000 0 2006 2007 2008 2009 Year Net Profit Total Deposits

Graph 16:

Showing Net Profit to Total Deposits in Percentage:

Net Profit to Total Deposit
2.50% 2.00% Percentage1.50% 1.00% 0.50% 0.00% 1 2 Year 3 4 1.16% 1.97% 2.36% 2.41%

42

PERFORMANCE OF VIJAYA BANK

Ratio of Net to Spread:

This ratio indicates the relationship between interest Earned on advances and interest Expended on deposits. More of interest earned than interest expended is a good ratio indicator. Ratio is given as= Net profit Spread Here, Spread refers to Interest earned less interest expended. Particulars Net Profit Spread ratio Percentage 2006 1984662 6479302 0.3067 30.67% 2007 4149638 8428810 0.4923 49.23% 2008 5286452 8525920 0.620 62.00% 2009 6165820 9806520 0.629 62.87% X 100

Table 1.9

Calculations of Spread:
Particulars Net Profit after Tax Spread= earnedExpended 2006 1984662 Interest 6479302= Interest 1688375110404449

2007
4149638 8428810= 1956645511137645

2008
5286452 8525920= 2102563012499710

2009
6165820 9806520= 2315625013349730

Interpretation:
The ratio of net to spread has increased by 49.23% in the year 2007 than, that of 2006 which has decreased by 30.67% and ratio of net to spread has increased by 62.87% in the year 2009 than, that of 2008 which has decreased by 62%.

43

PERFORMANCE OF VIJAYA BANK

Graph 17:

Showing Net Profit to Spread:

NET PROFIT TO SPREAD 10000000 9000000 8000000 7000000 6000000 5000000 4000000 3000000 2000000 1000000 0 1 2
Years

Amount

Series1 Series2

Graph 18:

Showing Net Profit to Spread in Percentage:

Net Profit to Speread
80.00% 60.00% Percentage 40.00% 20.00% 0.00% 30.67% 62.00% 62.87% 49.23%

2
Year

44

PERFORMANCE OF VIJAYA BANK

Ratio of interest earned to Total income:

As known, interest is a major source of income for any bank. It would be advantageous to the bank it steps are taken to enhance its income from non-interest like commission, locker rents etc. Ratio is given as= Interest earned X 100 Total income Higher the ratio, better it is.
Particulars Interest earned Total income Ratio Percentage 31-3-2006 16883751 20346473 0.8298 82.98% 31-3-2007 19566455 24834904 0.7878 78.78% 31-3-2008 21025630 25652852 0.8196 81.96% 31-3-2009 23156250 27245965 0.8499 84.99%

Table 1.10

Interpretation:
The ratio of Interest earned to total income has decreased by 78.78% in the year 2007 as compared to that of 2006, which has increased by 82.98% and ratio of Interest earned to total income has decreased by 84.99% in the year 2009 as compared to that of 2008, which has increased by 81.96%. Graph 19:

Showing Interest Earned to Total Income:

Interest Earned to Total Incom e 30000000 25000000
Amount

20000000 15000000 10000000 5000000 0 2005 2006 2007 2008 Year Interest earned Total income

45

PERFORMANCE OF VIJAYA BANK

Graph 20:

Showing Interest Earned to Total Income in Percentage:

Interest Earned to Total Incom e

86.00% 84.00% 82.00% Percentage 80.00% 78.00% 76.00% 74.00%

84.99% 82.98% 78.78% 81.96%

2
Year

Ratio of Interest expended to Total income:

Interest expended on borrowings and deposits are the main expenditure for any bank. The ratio expended to total income indicated the extent of total drained out for the payment on deposits and borrowings. Ratio is given as= Interest expended X 100 Total income Lower the ratio, better it is. Particulars Interest Expended Total income ratio Percentage 31-3-2006 10404449 20346473 0.5113 51.13% 31-3-2007 11137645 24834904 0.4484 44.84% 31-3-2008 12499710 25652852 0.4873 48.73% 31-3-2009 13349730 27245965 0.4900 49.00%

Table 1.11

Calculations:
Interest Expended Total income 10404449 20346473 111137645 24834904 12499710 25652852 13349730 27245965

Interpretation:
The ratio of Interest expended to total income has decreased by 44.84% in the year 2007 as compared to that of 2006, which has increased by 51.13% and ratio of

46

PERFORMANCE OF VIJAYA BANK

Interest expended to total income has decreased by 49% in the year 2009 as compared to that of 2008, which has increased by 48.73%.

Graph 21:

Showing

Interest

Expended

to

Total

Income:

INTEREST EXPENDED TO TOTAL INCOME

30000000 27000000 24000000 21000000 18000000 15000000 12000000 9000000 6000000 3000000 0 1 2
Years

Amount

Series1 Series2

Graph 22:

Showing

Interest

Expended

to

Total

Income

in

Percentage:

INTEREST EXPENED TO TOTAL INCOME 51.13% 48.73% 49.00% 44.84%

50.00% 40.00% Percentage 30.00% 20.00% 10.00% 0.00%

2
Years

47

PERFORMANCE OF VIJAYA BANK

Ratio of Total income to Working capital:

By working out this ratio the income earning capacity of the bank is arrived at respect to the working capital. Ratio is given as= Total income X 100 Working capital
Particulars Total income Working Capital ratio Percentage 31-3-2006 20346473 78889139 0.2579 25.79% 31-3-2007 24834904 93560777 0.2654 26.54% 31-3-2008 25652852 94152250 0.2725 27.25% 31-3-2009 27245965 91530640 0.2977 29.77%

Table 1.12

Calculations Working Capital:

Particulars Total income Working capital= Current assetscurrent liabilities 2006 20346473 78889139= 100512831179401970

2007
2483904 93560777= 130427578223988355

2008
25652852 94152250= 157103980251256230

2009
27245965 98530640= 173135220271665860

Interpretation:
The ratio of total income to working capital has higher by 26.54% in the year 2007 as compared to that of 2006 which has decreased by 25.79% and ratio of total income to working capital has higher by 29.77% in the year 2009 as compared to that of 2008 which has decreased by 27.25%

48

PERFORMANCE OF VIJAYA BANK

Graph 23:

Showing Total Income to Working Capital:

TOTAL INCOME TO WORKING CAPITAL 100000000 80000000
Amount

60000000 40000000 20000000 0 1 2 3

Years

Series1 Series2

Graph 24:

Showing Total Income to Working Capital in Percentage:

Total Incom e to Working Capital

30.00% 29.00% 28.00% Percentage 27.00% 26.00% 25.00% 24.00% 23.00%

29.77% 27.25%

26.54% 25.79%

2
Year

49

PERFORMANCE OF VIJAYA BANK

2. Financial Ratios: Liquidity Ratios:

Current Ratio:
This is most widely used ratio. It is the ratio Current assets to current liabilities. It shows a firms ability to cover its current liabilities with its current assets. It is expressed as follows:

Current Ratio=Current Assets Current Liabilities Generally 2:1 is considered ideal for concern i.e. current assets should be twice than Current liabilities.

Particulars Current Assets Current Liabilities Ratio

31-3-2006 100512831 179401970 0.56

31-3-2007 130427578 223988355 0.58

31-3-2008 157103980 251256230 0.625

31-3-2009 173135220 271665860 0.637

Table 2.1 Graph 25:

Showing the Current Assets to Current Liabilities:

CURRENT ASSETS TO CURRENT LIABILITIES

300000000 250000000
Amount

200000000 150000000 100000000 50000000 0 1 2

Years Series1 Series2

50

PERFORMANCE OF VIJAYA BANK

Graph 26:

Showing the Current Ratio:

Current Ratio

0.64 0.62 0.6

Ratio 0.58

0.63

0.64

0.58 0.56

0.56 0.54 0.52

2 Year

Stability Ratios: Fixed assets ratio:

This ratio explains whether the firm has raised adequate long-term funds to meet its fixed requirements and is calculated as under: Fixed assets ratio= Fixed Assets Capital employed This ratio gives an idea as to what part of the capital employed has been used in purchasing the fixed assets for the concern. If the ratio is less than one then it is good for the concern. The ideal ratio is 0.67. Particulars Fixed Assets Capital employed Ratio Table 2.2 31-3-2006 1593881 15012328 0.106 31-3-2007 1912711 22701522 0.084 31-3-2008 2215612 25850122 0.0857 31-3-2009 2865350 29355623 0.0976

Calculations:
Fixed assets Capital employed 1593881 15012328 1912711 22701522 2215612 25850122 2865350 29355623

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PERFORMANCE OF VIJAYA BANK

Interpretation:
The fixed assets ratio has decreased by 0.084 ratio in the year 2007 than that of 2006 which has increased by 0.106 ratio and fixed assets ratio has decreased by 0.0976 ratio in the year 2009 than that of 2008 which has increased by 0.0857 ratio. Graph 27:

Showing Fixed Assets to Capital Employed:

FIXED ASSETS TO CAPITAL EM PLOYED 30000000 25000000 20000000
Amount

15000000 10000000 5000000 0 1 2

Years

Series1 Series2

Graph 28:

Showing Fixed Assets Ratio:

FIXED ASSETS RATIO

0.12 0.1 0.08 Ratio 0.06 0.04 0.02 0

0.106 0.084 0.086

0.098

2
Ye ars

52

PERFORMANCE OF VIJAYA BANK

Ratio of Current assets to fixed assets:

This ratio will differ from industry to industry, and therefore; no standard can be laid down. Ratio of Current assets to fixed assets= Current assets Fixed assets
Particulars Current Assets Fixed Assets Ratio 31-3-2006 100512831 1593881 63.06 31-3-2007 130427578 1912711 68.18 31-3-2008 157103980 2215612 70.91 31-3-2009 173135220 2865350 60.42

Table 2.3

Calculations:
Current Assets Fixed Assets 100512831 1593881 130427578 1912711 157103980 2215612 173135220 2865350

Interpretation:
The ratio of current assets to fixed assets has increased by 68.18 in the year 2007 as compared to 2006, which has decreased by 63.06 and ratio of current assets to fixed assets has decreased by 60.42 in the year 2009 as compared to 2008, which has increased by 70.91. Graph 29:

Showing Current Assets to Fixed Assets:

CURRENT ASSETS TO FIXED ASSETS 200000000 175000000 150000000 125000000 100000000 75000000 50000000 25000000 0 1 2
Years

amount

Series1 Series2

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PERFORMANCE OF VIJAYA BANK

Graph 30:

Showing Current Assets to Fixed Assets Ratio:

CURRENT ASSETS TO FIXED ASSETS 80 60 Ratio 40 20 0

70.91 63.06 68.18 60.42

2
Years

Debt equity Ratio:

It measures the extent of equity covering the debt. This ratio is calculated to measure the relative proportions of outsiders funds and shareholders funds invested in the company. This ratio is determined to ascertain the soundness of long term financial policies of the company and is known as external-internal equity ratio. It is calculated as follows: Debt equity Ratio= Long term debts Shareholders funds Share holders funds= Equity share capital + Profit & loss a/c (Cr.bal.) + Capital reserves + Revenue reserves + Reserves for contingencies, sinking funds for renewal of fixed assets or redemption of debentures. The ideal case for this is 2:1.
Particulars Long term debts Share holders' funds ratio 31-3-2006 4031843 173229852 0.023 31-3-2007 4219641 185030798 0.022 31-3-2008 4423850 198535160 0.022 31-3-2009 4542256 214896520 0.021

Table 2.4

Calculations:
Particulars Long term debts i.e. Borrowings Shareholders' funds 2006 4031843 173229852

2007
4219641 185030798

2008
4423850 198535160

2009
4542256 214896520

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PERFORMANCE OF VIJAYA BANK

Interpretation:
The debt equity ratio has decreased by 0.022 in the year 2007 than, that of 2006 which has increased by 0.023 and debt equity ratio has decreased by 0.021 in the year 2009 than, that of 2008 which has increased by 0.022. Graph 31:

Showing Long-term Debts to Equity Shareholders Funds:

LONG TERM DEBTS TO EQUITY SHAREHOLDERS FUND
250000000 225000000 200000000 175000000 150000000 125000000 100000000 75000000 50000000 25000000 0

Amount

Series1 Series2

2
Years

Graph 32:

Showing Debt-equity Ratio:

DEBT EQUITY RATIO 0.025 0.02
Ratio

0.022 0.023 0.022

0.021

0.015 0.01 0.005 0 1 2

Years

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PERFORMANCE OF VIJAYA BANK

3.2 Ratio of Cash Management:

This is to be worked out with refernce to the total cost of establishment expenditure to working capital. It reveals the cost for operating and managing the bank. The bank should inculcate cost consiousness among its staff and management so that higher profits can be achieved. Ratio of Cash Management= Total Expenditure X 100 Working Capital Solvency ratios is very important to understand whether bank is standing on a sound path.

Particulars Total Expenditure Working Capital ratio Percentage

31-3-2006 3179691 78889139 0.0403 4.03%

31-3-2007 5674294 93560777 0.0606 6.06%

31-3-2008 6525350 94152250 0.0693 6.93%

31-3-2009 7121650 98530640 0.0723 7.23%

Table 3.1

Calculations:
Particulars Total Expenditure Working Capital 2006 3179691 78889139

2007
5674294 93560777

2008
6525350 94152250

2009
7121650 98530640

Interpretation:
The ratio of cash management has increased 6.06% in the year 2007 as compared to 2006, which has decreased by 4.03% and ratio of cash management has increased 7.23% in the year 2009 as compared to 2008, which has decreased by 6.93%.

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PERFORMANCE OF VIJAYA BANK

Graph 33:

Showing Total Expenditure to Working Capital:

TOTAL EXPENDITURE TO WORKING CAPITAL 120000000 100000000
Amount

80000000 60000000 40000000 20000000 0 1 2

Years Series1 Series2

Graph 34:

Showing Total Expenditure to Working Capital in Percentage:

TOTAL EXPENDITURE TO WORKING CAPITAL 6.93% 6.06% 4.03% 7.23%

7.00% 6.00% 5.00% 4.00% percentage 3.00% 2.00% 1.00% 0.00%

2
Years

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PERFORMANCE OF VIJAYA BANK

5. FINDINGS, SUGGESTIONS AND CONCLUSION Findings

1. The ratio of return on capital employed is better when higher, according to table 1.1 there is an increase of 9.36% than the previous year 2. The ratio of return on shareholders fund is better when higher, according to

table 1.2 there is an increase of 10.97% than the previous year. 3. The ratio of return on equity share holders fund is better when higher, according to table 1.3 there is an increased of 2.07% than the previous year. 4. 5. 6. The return on total assets has increased by 0.68% than, that of previous year. The ratio of earning per share has increased by 0.2% than the previous year. The payout ratio has decreased by 1.73% than the previous year.

7. Net profit to total income is better when higher. According to table 1.7 there is an increased of 6.94% than the previous year. 8. Net profit to total deposits is better when lower, According to table 1.8 there is an increase of 0.81 than the previous year. 9. The ratio of net to spread has increased by 18.56% than the previous year, which seems to be a good indicator as because the interest earned is more than, that of interest expended. 10. As per the table 1.10 the ratio of interest earned to total income has decreased by 4.2% than the previous year, because they did not invest their deposits in other securities. 11. The ratio of interest expended to total income is better when lower, according to table 1.11 there is a decrease of 6.29% .It is good indicator because the income is more than that of expenditure. 12. As per the table 1.12 the ratio of total income to working capital increased by 0.75% than the previous year. 13. Current ratios should be 2:1 that means current assets should be twice than current liabilities, according to table 2.2.1 the current ratios difference is 0.02 than the previous year. 14. Fixed assets ratios should less than 1 then it is good, according to table 2.2.1 there is a difference of 0.022 than the previous year. 15. As per the table 2.2.2 the ratio of current assets to fixed assets difference is 5.12 than the previous year.

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PERFORMANCE OF VIJAYA BANK

16. The ratio of debt equity should be 2:1, according to table 2.2.3 there is a difference of 0.001 than the previous year. 17. As per the table 3.1 the ratio of cash to deposits decreased by 2.21 than the previous year. 18. As per the table 3.2 the ratio of cash management has increased by 2.03% than previous year. 19. As per the table 3.3 the ratio of credit to deposit is increased by 6.25% than the previous year.

Suggestions:
1. In order to increase the return on total assets bank should increase the turnover by advancing relatively safer loans. 2. The bank needs to increase the return on capital employed by earning more profits, as this depicts the profitability position. 3. The bank should put more efforts in recovering the non-performance assets (NPA). 4. The bank should ensure the customers satisfaction by providing them convenient facilities and offering them new products and services.

Conclusion:
Vijaya bank has shown a very good progress over the years and this has been clearly reflected in the study made.

The growth trend of the Vijaya bank has been analyzed through ratios and as a result, Vijaya Bank has emerged as a financially strong, progressive and ideally profitable company which always keeps its customers and stake holders looking ahead.

Ratio analysis was considered as the main analytical tool to measure the growth trend of Vijaya bank.

Ratio analysis has succeeded in providing a clear insight to the financial position and performance of the Vijaya Bank and thus has been successful as an analysis tool to measure the growth trend of Vijaya Bank.

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PERFORMANCE OF VIJAYA BANK

Cost and Management Accounting Jain & Narang

Banking Theory and PracticeReddy and Appanniah

Cost and Management AccountingM.N. Arora

Banking Theory and PracticeDr. P.K. Srivastava Advanced Accountancy (Bank Accounts)R.L. Gupta & M. RamaSwamy

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