A STUDY ON

“RATIO ANALYSIS”
With reference to
THE ARYAPURAM CO-OPERATIVE URBAN BANK LTD,
RAJAHMUNDRY.
A project report submitted to the ADIKAVI NANNAYA UNIVERSITY MSN
CAMPUS, KAKINADA in partial fulfillment of the requirements for the award of

MASTER OF BUSINESS ADMINISTRATION

SUBMITTED BY
PUTTA NAGA VARSHITHA GOWD
REGD NO: 2084410036
Under the esteemed guidance of

DR. D. AJAY RATHAN, MBA, L.L.B, Ph.D

ASSISTANT PROFESSOR

DEPARTMENT OF COMMERCE AND MANAGEMENT STUDIES

ADIKAVI NANNAYA UNIVERSITY MSN CAMPUS
KAKINADA
2020-2022
 DEPARTMENT OF COMMERCE AND MANAGEMENT STUDIES

ADIKAVI NANNAYA UNIVERSITY MSN CAMPUS

KAKINADA – 533005

CERTIFICATE

This is to certify that the record of the project work entitled “RATIO ANALYSIS” with
reference to THE ARYAPURAM CO-OPERATIVE URBAN BANK is the work carried
out by PUTTA NAGA VARSHITHA GOWD with Reg. No: 2084410036 during the
project period of the academic year 2020-2022 in partial fulfilment of requirements for the
award of the Degree of MASTER OF BUSINESS ADMINISTRATION in ADIKAVI
NANNAYA UNIVERSITY MSN CAMPUS KAKINADA is a record work carried out by
him under my guidance and supervision.

SIGNATURE OF THE HEAD SIGNATURE OF THE PROJECT GUIDE

Dr. D. AJAY RATHAN Dr. D. AJAY RATHAN

 DEPARTMENT OF COMMERCE AND MANAGEMENT STUDIES
ADIKAVI NANAYA UNIVERSITY MSN CAMPUS KAKINADA

DECLARATION
I hereby declare that the project report, A study on “RATIOS ANALYSIS” with reference
to “THE ARYAPURAM CO-OPERATIVE URBAN BANK LTD.,” is originally prepared
and submitted by me to AKNU MSN CAMPUS, KAKINADA in partial fulfillment of the
requirement for the award of the degree of MASTER OF BUSINESS ADMINISTRATION.
The empirical findings while preparing the report are based on the data collected by me. It
has not been submitted to any other university or publication at any time before.

PLACE: RAJAMAHENDRAVARAM (P.N.VARSHITHA GOWD)

DATE:
 ACKNOWLEDGEMENT

In this endeavor, I would like to express my deep sense of gratitude to all those who helped
me in carrying out this study and resenting this report successfully.

I am grateful to my project supervisor DR.D. AJAY RATHAN, HEAD OF THE DEPARTMENT,

Department of management studies. AKNU, MSN CAMPUS, KAKINADA for encouraging
and giving me this opportunity to take up this project and guiding me in completing the
project successfully and helping me throughout this project.

I express my respectful and sincere thanks to our principal DR. M. KAMALA KUMARI who
had given this opportunity to do this project.

I take great pleasure to express my thanks to each and every faculty member for giving their
valuable suggestions.

I also wish to thank my organization guide M. Viswa, Financial Manager, THE

ARYAPURAM CO-OPERATIVE URBAN BANK LTD, RAJAMAHENDRAVARAM, for
giving me permission to complete the project work in and helping me meticulously in all the
aspects of my project work.

I also wish to extend my thanks to my family members for helping me to complete my study
successfully.

I thank all my friends for giving their co-operation in completion of the project.

P. N. VARSHITHA GOWD
 CONTENTS

PG.NO
CHAPTER-1
 Introduction
 Need for the study
 Scope of the study
 Objectives of the study
 Methodology of the study
 Limitations
CHAPTER-2
 Industry profile
 Company profile
CHAPTER-3
 Theoretical framework
CHAPTER-4
 Data analysis and interpretation
CHAPTER-5
 Findings
 Suggestions
 Conclusion
 Bibliography
 CHAPTER-1
INTRODUCTION
 1.1 INTRODUCTION
Financial ratios are widely used for modelling purposes both by practitioners and researchers.
The firm involves many interested parties, like the owners, management, personnel,
customers, suppliers, competitors, regulatory agencies, and academics, each having their
views in applying financial statement analysis in their evaluations. Practitioners use financial
ratios, for instance, to forecast the future success of companies, while the researchers' main
interest has been to develop models exploiting these ratios. Many distinct areas of research
involving financial ratios can be discerned. Historically one can observe several major
themes in the financial analysis literature. There is overlapping in the observable themes, and
they do not necessarily coincide with what theoretically might be the best-founded areas.

Financial management is that managerial activity which is concerned with the planning and
controlling of firm’s financial resources. Firstly, let us discuss about finance and firm’s
financial activities. Firms create manufacturing capacities for production of goods, some
provide services. They raise funds to acquire manufacturing and other facilities and to carry
out their day-to-day activities.

Thus, the most important activities of a business are the following three

 Production
 Marketing
 Finance

Financial analysis is the process of identifying the financial strengths and weakness of the
firm by properly establishing relationships between the items of balance sheet and profit &
loss account. It is the process of identifying the strengths and weakness of the firm by parties
outside of the firm, owners, creditors, investors and others.

For example, the creditors of the firm may be interested in receiving the interest on debt in
time of the repayment of the principal amount or on maturity. This is not possible for a firm
unless it is efficiently liquid to meet its obligations. So, the creditors of the firm will be more
interested in knowing the liquidity position of the firm, the supplies of the long-term debt and
about the solvency position of the firm.

The owners, shareholders are more interested in knowing the profitability of the firm as to
assess the return on their investment. The management is interested in knowing the efficiency
of their working, liquidity position of the firm, activity and profitability of the firm. Analyst
should be able to say how well the firm could utilize the resource it has in generating goods
and services. Turnover ratios help the most in this aspect. By doing ratio analysis, an analyst
will be able to say how far a firm can meet its obligations and also indicates the future
performance of the firm under current working conditions.

INTRODUCTION ABOUT CO-OPERATIVE BANKS

co-operative banks are financial entities established on a co-operative basis and belonging to
their members. This means that the customers of a co-operative banks are also its owners.
These banks provide a wide range of regular banking and financial services. Co-operative
banks are often created by persons belonging to the same local or professional community or
sharing a common interest. Co-operative banks differ from stockholder banks by their
organization, their goals, their values and their governance. In most countries, they are
supervised and controlled by banking authorities and have to respect prudential banking
regulations, which put them at a level playing field with stockholder banks. Depending on
countries, this control and supervision can be implemented directly by state entities or
delegated to a co-operative federation or central body.

Co-operative banking is retail and commercial banking organized on a co-operative basis.

Co-operative banking is a retail banking, as carried out by credit unions, mutual savings and
loan associations, building societies and co-operatives, as well as commercial banking
services provided by manual organizations to co-operative businesses.

The structure of commercial banking is of branch-banking type; while the co-operative

banking structure is a three-tier federal one as follows,

 A state co-operative bank works at the apex level.

 The central co-operative bank works at the intermediate level.
 Primary co-operative credit societies at base level.
STATEMENT OF THE PROBLEM
Though the co-operative banks have been established with laudable objective, they are
suffering from various problems and as a result, their financial performance is very
precarious. This is due to many a number of reasons such a slow or negative spread,
mounting nonperforming assets, entry of other banking institutions into the area earmarked
for co-operative banks as a result of which there is an increasing competition, etc. More over
high levels of non- performing assets and high growth in credit of CUBs and rural credit co-
operative institutions continue to be the major area of concern. Therefore, it is necessary to
assess the financial performance of these banks. In this background, the present study intends
to focus on the analysis of “financial performance using ratio analysis” in co-operative banks
and this study will try to identify the problem areas and suggestions to solve them.
 1.2 NEED FOR THE STUDY
Over the past century, the world economic scenario has shown a great progress and is
growing with increased pace. This has given rise to many complex problems to the
management. There arose a need for the management to efficiently tackle such problems and
turn them into opportunities by providing a modern dimension to the business management.
They find solutions to such problems by financial analysis.

Financial statements are helpful to describe the firm’s status, control of sound liquidity and
leverage position. The firm should monitor the key indicators of operating performance and
wherever possible, must compare itself with the competitors in the industry in which it is
operating.

A systematic financial analysis of accounting figures helps to analyse the probable cases of
relation among different items which can be done by analysing and summarizing the past
results which help the firm to prepare budgets and to formulate policies and plans. It’s focus
comprises of relative performance in sales growth and margins, etc. Asset management is a
simple tool in the hands of the firm to take internal decisions through which it can evaluate its
internal strengths and weakness which is a integral part of strategic planning.
 1.3 SCOPE OF THE STUDY
A ratio is a simple arithmetical expression of the relationship of one number to another. It
may be defined as the indicator quotient of two mathematical expressions. It is powerful tool
of financial analysis.

Ratio analysis is a quantitative method of gaining insight into a company’s liquidity,

operational efficiency and profitability by studying its financial statements such as the
balance sheet and income statement. Ratio analysis is a cornerstone of fundamental equity
analysis.

Ratio analysis is a fundamental means of examining the health of a company by studying the
relationships of the key financial variables. Many analysts believe ratio analysis is the most
important aspect of the analysis process. A firm’s ratios are normally compared to the ratios
of other companies in that firm’s industry or tracked over time internally in order to see
trends. For example, the debt ratio compares a company’s total debt to its total assets. If a
firm’s debt ratio is low relative to its competitor’s ratios or has decreased since last year, the
firm is less dependent on debt and is therefore perhaps a less risky investment. To evaluate
companies, analysts use many ratios, including measures of liquidity, profitability, debt,
operating performance, cash flow and valuation.

Ratio analysis is the process of determining and presenting the relationship of items and
group of items in the statement. It is helpful to know about the liquidity, solvency, capital
structure and profitability of an organization. It is helpful tool to aid in applying judgement,
otherwise complex situations.

This study focuses on analyzing the financial performance of THE ARYAPURAM CO-
OPERATIVE URBAN BANK LTD, Main branch, Rajamahendravaram.
 1.4 OBJECTIVES OF THE STUDY
 To study the profitability ratios of “The Aryapuram co-operative urban bank Ltd.”
 To assess the efficiency ratios of “The Aryapuram co-operative urban bank Ltd.”
 To examine the solvency ratios of “The Aryapuram co-operative urban bank Ltd.”
 To analyze the financial position of “The Aryapuram co-operative urban bank Ltd.”
 To suggest ways that will enhance the financial position of “The Aryapuram co-
operative urban bank Ltd.”
 1.5 METHODOLOGY OF THE STUDY
Research Methodology:

Research methodology is a way to systematically solve the research problem. It may

be understood as a science of studying how research is done scientifically. So, the research
methodology not only talks about the research methods but also considers the logic behind
the method used in the context of the research study.

Research Design:

Descriptive research is used in this study because it will ensure the minimization of
bias and maximization of reliability of data collected. The researcher had to use fact and
information already available through financial statements of earlier years and analyze these
to make critical evaluation of the available material. Hence by making the type of the
research conducted to be both Descriptive and Analytical in nature.

From the study, the type of data to be collected and the procedure to be used for this
purpose were decided.

Data collection:
Methodology is a systematic procedure of collecting information in order to analyze and
verify a phenomenon. The data can be collected through two principle sources. They are as
follows:

 Primary data
 Secondary data

Primary data:

According to CR Kothari, “Primary data are those which are collected afresh and for the first
time and thus happens to be in original character”. It is the information collected directly
without any references.

Main sources are collected through interviews, surveys, experiments etc.

Secondary data:

According to CR Kothari, “Secondary data are those which have already been collected by
someone else and which have been already through the statistical process”.

Main sources are collected through journals, textbooks, biographies etc.

Method of data collection:

This study is based on secondary data collected from Annual reports, Published articles,
financial statements and bye-law of “The aryapuram co-operative urban bank ltd.,

Period of study:

The study of financial performance using ratio analysis was conducted at The aryapuram co-
operative urban bank ltd. The study was conducted for a period of 45 days i.e, from 18th may
to 28th June and the study uses past five year’s financial data (2017-2022).
 1.6 LIMITATIONS OF THE STUDY
 Ratios are calculated from past data which may not indicate exact future scenario.
There are no well accepted standards for ratios which can be taken as norms.
 The study is also subjected to the limitations of the difference in the concept of items
of Balance sheet and Profit & loss account.
 The term of 6 weeks is not sufficient for the financial performance appraisal of the
branch.
 There was no scope of gathering current information as the auditing has not been done
at the time of project work.
 Ratios alone are not sufficient to arrive at conclusions.
 Conclusions are affected by personal ability and bias of the analyst.
 CHAPTER – 2
INDUSTRY PROFILE AND COMPANY PROFILE
 INDUSTRY PROFILE
INDIAN BANKING SYSTEM:

Banking segment in India function under the umbrella of Reserve bank of India the
regulatory, central bank. This segment broadly consists of

1. Commercial banks
2. Co-operative banks.

The banking system has three tiers. These are the scheduled commercial banks, the regional
rural banks that operate in rural areas not covered by the scheduled bank & the co-operative
and special purpose rural banks.

1. COMMERCIAL BANKS:

The commercial banks structure in India consists of scheduled and Non-scheduled

banks. There are approximately 50 scheduled commercial banks. India and foreign
almost consists of 200 regional rural banks. More than 350 central co-operative
banks and many land development and primary agriculture credit societies are
established.
2. CO-OPERATIVE BANKS:

There are two main categories of the co-operative banks.

1. Short term lending oriented co-operative bank – within this category of banks,
state co-operative bank, district co-operative bank & primary agricultural co-
operative societies.
2. Long term lending oriented co-operative bank – within the second category there
are land development bank at three levels – state level, district level & village
level.
3. The co-operative banking structure in India is divided into different types of co-
operative banks. They are:
 Primary urban co-operative banks.
 Primary agriculture co-operative societies.
  District central co-operative banks.
 State co-operative banks.
 Land development banks.

ROLE CO-OPERATIVE BANKS

ORIGIN OF CO-OPERATIVE BANKS:

The history of many co-operative banks can be traced back to the financial exclusion faced
by many communities in nineteenth century Europe. With the industrial revolution in full
swing, the emerging financial services sector was primarily focused on wealthy individuals
and large enterprises in urban areas. The rural population, in particular farmers, small
businesses and the communities they supported, were effectively excluded from financial
services. Most co-operative banks were established following the ideas of Hermann Schulze
and Wilhelm Raiffeisen. Independently from each other, they started to promote the idea of
credit co-operatives, with Schulz focusing on helping small business owners and artisans in
urban areas and Raiffeisen seeking to assist the rural poor.

Thus, co-operative banks were originally set up to correct this market failure and to overcome
the associated problems of asymmetric information in favours of borrowers. They could do so
because member/consumers financed the institutions were involved in the decision-making
process. Within small communities, relatively intimate knowledge of each other’s credit and
trustworthiness guaranteed that loans were only provided to borrowers who could be
expected to repay them. Financial incentives for members to monitor each other and the
social relationships among members hence contributed significantly to the flourishing of co-
operative banks. Beginning in Germany, the co-operative banking concept gradually spread
to the rest of the continent and to the Nordic countries.

Despite the fact that they addressed similar issues, different co-operative banking models
emerged in Europe. These variations resulted from country-specific historical and cultural
factors, which shaped national market structures and market environments. In some countries,
the development of co-operative banking was initiated, nurtured and supported by outside
forces, e.g: governments. Consequently, the form, appearance, organization and operation of
co-operative banking groups differ across countries and over time. They vary in terms of their
attitudes to membership and their interpretation of co-operative values. Hence, the co-
operative banking model does not exist.
The beginning co-operative banking in India dates back to about 1904, when official efforts
were made to create a new type of institution based on principles of co-operative organization
& management, which were considered to be suitable for solving the problems peculiar to
Indian conditions. The philosophy of equality, equity and self-help gave way to the thoughts
of self- responsibility and self- administration which resulted in giving birth of co-operative.
The origin on co-operative movement was one such event- arising out of a situation of crisis,
exploitation and sufferings. Co-operative banks in India came into existence with the
enactment of the agricultural credit co-operative societies act in 1904. Co-operative banks
form an integral part of banking system in India. Under the act of 1904, number of co-
operative credit societies were started. Owing to the increasing demand of co-operative
credit, a new act was passed in 1912, which was provided for establishment of co-operative
central banks by a union of primary credit societies and individuals, co-operative banks in
India are registered under the co-operative societies act. The co-operative bank is also
regulated by RBI. They are governed by the banking regulations act 1949 and banking laws
act, 1965.

ROLE OF CO-OPERATIVE BANKING AROUND THE WORLD:

Co-operative banking is retail and commercial banking organized on a cooperative basis.
Cooperative banking institutions take deposits and lend money in most parts of the world.
Cooperative banking, as discussed here, includes retail banking carried out by credit unions,
mutual savings banks, building societies and cooperatives, as well as commercial banking
services provided by mutual organizations to cooperative businesses. The cooperative
banking has been well utilized in developing countries that support people to perform their
business.

ROLE OF CO-OPERATIVE BANKING IN INDIA:

The co-operative bank is an important constituent of the Indian financial system, judging by
the role assigned to co-operative, the expectations the co-operative is supposed to fulfil their
number and the number of offices the co-operative bank operate. Though the co-operative
movement originated in the west, but the importance of such banks have assumed in India is
rarely paralleled anywhere else in the world. The co-operative bank in India plays in
important role even today in rural financing. The business of co-operative bank in the urban
areas also has increased phenomenally in recent year due to the sharp increase in the number
of primary co-operative banks. Co-operative banks in India are registered under the co-
operative societies act. The co-operative bank is also regulated by the RBI. They are
governed by the banking regulations act 1949 and banking laws co-operative societies) act,
1965.

Co-operative banks are much more important in India than anywhere else in the world.
The distinctive character of this bank is service at a lower cost and service without
exploitation. It has gained its importance by the role assigned to them, the expectations they
are supposed to fulfil, their number, and the number of offices they operate. Co-operative
bank role in rural financing continues to be important day by day, and their business in the
urban areas also has increased phenomenally in recent years mainly due to the sharp increase
in the number of primary co-operative banks. In rural areas, as far as the agricultural and
related activities are concerned, the supply of credit was inadequate, and money lenders
would exploit the poor people in rural areas providing them loans at higher rates. So, co-
operative banks mobilize deposits and purvey agricultural and rural credit with a wider
outreach and provide institutional credit to the farmers. Co-operative banks have also been an
important instrument for various development schemes, particularly subsidy-based programs
for poor.

The co-operative banks in rural areas mainly finance agriculture-based activities like:

 Farming
 Cattle
 Milk
 Hatchery
 Personal finance
 Self-employment
 Industries
 Small scale units
 Home finance
 Consumer finance
 Personal finance

Some of the forward-looking co-operative banks have developed sufficient core

competencies to such an extent that they are able to challenge state and private sector banks.
The exponential growth of co-operative banks is attributed mainly to their much better
contacts with the local people, personal interaction with customers, and their ability to catch
the nerve of the local clientele. The total deposits and lending of co-operative banks are much
more than the old private sector banks and the new private sector banks.

AREA OF OPERATIONS OF CO-OPERATIVE BANKS

The area of operation of the bank shall be confined to and in district. The area of operations
may also be extended to the whole panchayat areas and in addition to the places for the
purpose of providing industrial finance and housing loans for a change in the area of
operations prior approval of the bank of India also the registering authority shall be
necessary.

OBJECTIVES OF CO-OPERATIVE BANKS

 To encourage thrift, self-help and co-operation among members.

 To accept deposits of money from the public, repayable on demand or otherwise and
withdraw able by cheque, draft, order or the purpose of lending or investment.
 To borrow or raise money.
 To lend or to advance money either upon or without security to members and other as
permitted by the registrar.
 To draw, make, accept, discount, buy, sell, collect and deal in bills of exchange,
hundies, promissory notes, coupons, drafts bills of landing, railway receipts, warrants,
certificates, scrips and other instruments and other securities whether transferable or
negotiable or not.
 To grant and to issue letters of credit, traveller cheques and circular notes.
 To buy and to sell foreign exchange including foreign bank notes.
 To acquire, to hold, to issue on commission, to underwrite and to deal in stocks,
funds, shares, debentures stock, bonds, obligations, securities and investment of all
kinds.
  To purchase and to sell bonds, scrips, or other forms of securities on behalf of
constituents.
 To acquire, to construct, to maintain and to alter any building or works necessary or
convenient for the purpose of the bank.
 To manage, to sell and to realize any property this may come into the possession of
the bank in satisfaction of any of its claims.
 To open branches and pay office, with the permission of the registrar and the Reserve
bank of India within the area of the bank so as to provide banking services to the
public.
 To establish, to support, or to aid in establishment and support of association,
institution, funds, trust and conveniences, calculated to benefit members, employees
of the bank or the dependents or connection of such persons and to grant pensions.
 To prepare and to finance schemes for amelioration of the financial condition of
members.
 To provide financial and technical assistance to self-employed person for setting up
their own business.
 To enter into participation, arrangements with any other bank or financial institutions
with the object of making loans and advances.
 To do all such other things as are incidental and conducive to the promotion or
advancement of these objects and of the business of the bank.
 To undertake any other form of business which the central or state government or the
RBI may specify as a form of business in which it is lawful for a co-operative banking
institution to engage.

OPERATIONS OF CO-OPERATIVE BANKS:

ESTABLISHMENTS:

 Co-operative bank performs all the main banking functions of deposit mobilization,
supply of credit and provision of remittance facilities.
 Co-operative banks belong to the money market as well as to the capital market.
 Co-operative banks provide limited banking products and are functionally specialists
in agriculture related products. However, co-operative banks now provide housing
loans also.
  Co-operative banks provide working capital loans and term loans as well.

FUNCTIONS OF CO-OPERATIVE BANKS ARE:

 To attract deposit from non-agriculturalist,

 To use excess funds of some societies temporarily to make up for shortage in another,
 To supervise and guide affiliated societies.

THE BASIC PRINCIPLES ON WHICH A CO-OPERATIVE BANK WORKS ARE:

 A co-operative character of activities and trait of mutual aid of credit granted.

 Restriction on the number of individuals votes.
 As a result, during 2007-08, the primary co-operative agriculture and rural
development banks have again started lending for the non-farming sector including
jewel loans.
 Aiming at high rates on deposits and low rates on lending.
 Limitation of dividends out of profits and bonus to depositors and borrowers or grants
to cultural or co-operative endeavour.

These banks are constituted of voluntary association, self-help and mutual aid, one share one
vote and non-discrimination and equality of members. The co-operative banks are the
organizations of and for the people.

FUNDS RAISED BY CO-OPERATIVE BANKS:

Funds may be raised by the following means:

a. Shares.
b. Entrance fee at the rate of Rs.1/ share such a maximum of Rs.10/member.
c. Subscription.
d. Deposits.
e. Loans, cash credits, overdrafts and advancements.
f. Donation, grants, and subsidies.
FIG: 2.1 TYPES OF CO-OPERATIVE BANKS
REGULATION OF CO-OPERATIVE BANKS IN INDIA:

A spate of functioning of these banks can be improved through a variety of ways, including
by enabling depositors to enforce market discipline failures in recent years has raised concern
about the working of cooperative banks.

The question as to whether banks need to be regulated, and to what extent, has been at the
heart of many debates in academia and among central bankers all over the world. Many
academics believe that regulation of central banks should be effectively combined with
market discipline. Though there is no clearcut answer on how much weight should be placed
on the market, there is a growing consensus that market discipline should be an integral part
of any regulatory policy of monitoring banks. Apart from the question about the optimal
weight to be placed on market discipline, another question that arises to the kind of regulatory
policies required by the central bank and the implementation of these policies.

Failure of banks is a subject that is much despised by politicians and central bankers.
Generally, it is very rare that one hears of the failure of banks. Most often, there is a revival
of the failed bank or merger with a healthy bank. The justification that is often provided is
that the social costs of a bank failure are huge. Banks that borrow from the failed bank are
unable to substitute credit and there is a loss of valuable information about borrowers, which
in turn hampers economic development. These arguments hold greater validity in the case of
smaller banks like co-operative banks that primarily deals with small and more opaque
borrowers. This brings us to the issue of co-operative banks in India.
COMPANY PROFILE

The aryapuram co-operative urban bank ltd., Rajamahendravaram. Established in 1919,

January 13th by founder shri. Sarepalli Visweswara prasad rao. At present it has completed
100 years of dedicated service to the members and public as whole with 16 branches presence
in the districts of East Godavari, West Godavari, Guntur and Visakhapatnam districts.

It is one of the oldest co-operative banks in Rajahmundry. Co-operative urban bank has
crossed deposits of Rs. 668crores, loans of Rs. 416 crores.

Bank has core banking system and extending anywhere banking to its customers. Services
cincludes RTGS & NEFT, aadhar based direct benefit transfer, cheque truncation system etc.

Bank’s exclusive rupay debit card (ATM), SMS alerts, loan overdue alerts etc. bank is having
6 ATM machines to serve their customer.

The present board of directors is facilitation to provide all the service to its members/ public
as a whole and increasing the business of the bank.

ADMINISTRATION:

Board of management

Chief executive officer

General manager

Deputy general manager

Assistant general manager

Manager

Assistant manager

Staff assistants

Office attendants

FIG: 2.2
BOARD OF DIRECTORS:

 Lanka Satyanarayana.
 Isukapalli Srinivas.
 Kantipudi paparao.
 Nandam swamy,
 Randhi Bharati devi.
 Mallidi sai Lakshmi.
 Posupo nireekshana james.
 Kasse rajesh babu.
 Karri Satyanarayana.
 Taragam somu.
INTRODUCTION OF CO-OPERATIVE URBAN BANK

The term urban co-operative banks (UCBs) are not formally defined but refers to primary co-
operative banks located in urban and semi-urban areas. Till 1996, these banks were allowed
to lend money only for non-agricultural purposes. This distinction does not hold today. These
banks were traditionally centered on communities and local workgroups as they essentially
lent to small borrowers and businesses. Today, their scope of operations has widened
considerably.

The inspiration for UCB was the success of the experiments related to the co-operative
movement in Britain and the co-operative credit movement in Germany. The origins of the
urban co-operative banking movement in India can be traced back to the 19th century when
such societies were first set up in India.

Co-operative societies are based on the principles of cooperation, mutual help, democratic
decision-making, and open membership. Cooperatives represented a new and alternative
approach to organization as against proprietary firms, partnership firms, and joint-stock
companies which represent the dominant form of commercial organization.

THE SEVEN CO-OPERATIVE PRINCIPLES ARE:

1. Voluntary and open membership

2. Democratic member control
3. Member economic participation
4. Autonomy and independence
5. Education, training and information
6. Cooperation among cooperatives
7. Concern for community

A co-operative bank is a financial entity which belongs to its members, who are at the same
time the owners and the customers of their bank. Cooperative banks are often created by
persons belonging to the same local or professional community or sharing a common interest.
Cooperative banks generally provide their members with wide range of banking and financial
services i.e, loans, deposits banking accounts.
CUSTOMER OWNED ENTITIES:

In a cooperative bank the needs of the customers meet the needs of the owners, as
cooperative bank members as both owners and customers. Consequently, the first aim of a
cooperative bank is not to maximize profit but to provide the best possible products and
services to its members. Some cooperative banks only operate with their members but most
of them also admit non-members clients to benefit from their banking and financial services.

DEMOCRATIC MEMBER CONTROL:

Cooperative banks are owned and controlled by their members, who democratically elect the
board of directors, members usually have equal voting rights, according to the cooperative
principle of “one person, one vote”.

PROFIT ALLOCATION:

In cooperative bank a significant part of the yearly profit, benefits or surplus is usually
allocated to constitute reserves. A part of this profit can also be contributed to the cooperative
member, with legal or statutory limitations in most cases. Profit is usually allocated to
members either through a patronage dividend which is related to the use of the cooperative
products and services by each member or through on interest or a dividend, which is related
to the member of the shares subscribed by each member.
LIST OF THE ARYAPURAM CO-OPERATIVE URBAN BANKS IN
ANDHRA PRADESH

1) The aryapuram co-operative urban bank ltd.

Main branch
Near gokavaram busstand
Manager I/C – Mr. k. shiva prasad.
2) The aryapuram co-operative urban bank ltd.
Fortgate branch
Opposite old vegetables market
Manager I/C – Mr. k. Bhaskara Rama Krishna.
3) The aryapuram co-operative urban bank ltd.
Tadithota branch
Innispeta
Manager I/C – Mr. Y. Surya Narayana.
4) The aryapuram co-operative urban bank ltd.
Katheru branch
P&T colony
Venkateswara swamy temple road
Manager I/C – Mr. P. N. S.S Ramakrishna rao.
5) The aryapuram co-operative urban bank ltd.
Swarajya nagar branch
Alkot gardens
Manager I/C – Mrs. G.D.N.L. Aneela.
6) The aryapuram co-operative urban bank ltd.
Kakinada branch
Ramarao peta
Manager I/C – Mr. P. Venkata kumar.
7) The aryapuram co-operative urban bank ltd.
JN road branch
Prashanthi estates, tilak road
Manager I/C – Mrs. K. Aparanjitha.
8) The aryapuram co-operative urban bank ltd.
Tadepalligudem branch
NTR center
West Godavari
Manager I/C – Mr. T. Srinivasa rao.
9) The aryapuram co-operative urban bank ltd.
Diwancheruvu branch
Rjy rural
Manager I/C – Mr. Y. Jaya venu.
10) The aryapuram co-operative urban bank ltd.
Bhimavaram branch
Tatavarthi vari street
Manager I/C – Mr. P. V. Lakshmi prasad.
11) The aryapuram co-operative urban bank ltd.
Amalapuram branch
Kuchimanchi vari Agraharam
Manager I/C – Mrs. K. Swarajya Lakshmi.
12) The aryapuram co-operative urban bank ltd.
Tanuku branch
Vallu vari street
West Godavari
Manager I/C – Mr. KVR Satyanarayana.
13) The aryapuram co-operative urban bank ltd.
Bommuru branch
Pata peta, Bommuru
Manager I/C – Mr. CH. Radha krishna.
14) The aryapuram co-operative urban bank ltd.
Seethamadhara branch
Vishakapatnam
Manager I/C – Mr. D. Srinivasa rao.
15) The aryapuram co-operative urban bank ltd.
Danavaipeta branch
 Rjy
Manager I/C – Mr. V. Srinivasa rao.
16) The aryapuram co-operative urban bank ltd.
Guntur branch
Near tagore statue, Guntur
Manager I/C – Mrs. shaik feroz alisha
NETWORK OF THE BANK

 There are 16 branches of the bank.

 Bank involves in accepting deposits
 Bank lends loans – short term loans, long term loans, gold loans.
 The customers are the owners of the bank as they will be holding shares concerned
with the bank.

POWERS OF THE BOARD:

The committee of the bank shall subject to the provisions of the act rule bye-laws and the
resolutions of the general body, exercise of the following powers and functions namely:

 Recommend the admission of the members to the general body.

 Raise funds in the form of loans or deposits.
 Recommend allotment of shares to the members and transfer of shares to the general
body.
 Conduct general meetings as prescribed in the act.
 Decide matters connected with the day-to-day management of the bank.

TERM OF THE BOARD:

The term of the office of the committee shall be 5 years from the date of election of the
members of the committee.
 CHAPTER – 3
THEORETICAL FRAMEWORK OF STUDY
 3.1 REVIEW OF LITERATURE
Various studies conducted and numerous suggestions were sought to bring effectiveness in
the working and operations of financial institutions.

A Review of the Theoretical and Empirical Basis of Financial Ratio Analysis Financial ratios
are widely used for modelling purposes both by practitioners and researchers. The firm
involves many interested parties, like the owners, management, personnel, customers,
suppliers, competitors, regulatory agencies, and academics, each having their views in
applying financial statement analysis in their evaluations. Practitioners use financial ratios,
for instance, to forecast the future success of companies, while the researchers' main interest
has been to develop models exploiting these ratios. Many distinct areas of research involving
financial ratios can be discerned. Historically one can observe several major themes in the
financial analysis literature. There is overlapping in the observable themes, and they do not
necessarily coincide with what theoretically might be the best-founded areas, ex post.

The existing themes include:

 The functional form of the financial ratios, i.e. the proportionality discussion,
 Distributional characteristics of financial ratios,
 Classification of financial ratios,
 Comparability of ratios across industries, and industry effects,
 Distributional characteristics of financial ratios,
 Classification of financial ratios,
 Comparability of ratios across banking industries, and banking industry effects,
 Time-series properties of individual financial ratios,
 Bankruptcy prediction models,
 Explaining (other) firm characteristics with financial ratios,
 Stock markets and financial ratios,
 Forecasting ability of financial analysts vs. financial models,
 Estimation of internal rate of return from financial statements
 The history of financial statement analysis dates far back to the end of the
previous century. However, the modern, quantitative analysis has developed into its
various segments during the last two decades with the advent of the electronic data
processing techniques. The empiricist emphasis in the research has given rise to
several, often only loosely related research trends in quantitative financial statement
analysis. Theoretical approaches have also been developed, but not always in close
interaction with the empirical research.
 3.2 INTRODUCTION OF FINANCIAL MANAGEMENT:

Initially the finance managers were considered advent of an event requiring funds. The
finance manager was given a target amount of funds to rise and was given a target amount of
funds to rise and was given the responsibility of procuring those funds. So, his function was
limited to raising funds as and when the need arises. Once the funds were procured, his
function will be completed.

However, over a period the scope of his function has tremendously widened. His presence is
required at every moment whenever any decision having involvement of funds is to be taken.
Now it is the financial management require looking into the financial implication of any
decision in the firm.

The functions of financial management are to manage the funds. Any act, procedures,
decision relating to funds comes under the preview of the financial management since every
activity in the business organization, be it purchase, production, marketing, or capital
expenditure has a financial implication, the finance function is interlinked with all other
areas. In particular, the financial management has to focus his attention on:

 Procurement of required quantum of funds as and when necessary, at the lowest cost.
 Investing those funds in various assets in the most profitable way, and
 Distribute returns to the shareholders in order to satisfy their expectations from the
firm.

SCENARIO USUALLY FACED BY FINANCIAL MANAGEMENT:

 What should be the size of a firm and how fast should it grow?
 What are the various types of assets to be acquired?
 What should be the pattern of raising funds from various sources?

CLASSIFICATION OF FINANCIAL MANAGEMENT DECISION

Depending upon the nature and size of the firm, the finance manager is required to perform
all or some of these functions from time to time. While performing the functions he is
required to take different decisions, which can be broadly classified into three groups:

THE INVESTMENT DECISIONS: Those relating to the resource allocation.

THE FINANCING OR CAPITAL STRUCTURE DECISIONS: Those covering the financing

of these investments.

THE DIVIDEND DECISION: Those determining how much cash to be taken out and how
much to be reinvested.

 FINANCING DECISION:
Requirement of funds at a proper time is most important. Identifying the right source
and amount that can be raised from each source and costs and other consequence
involved have to be done.
 INVESTMENT DECISION:
This relates to investment in capital assets and current assets evaluating of different
capital investment proposals and selection of the best, keeping in view the overall
objectives of enterprise. Investment in current assets depends upon the credit and
inventory policy of the business. Credit policy depends upon the production, prices of
raw materials and availability of funds etc.
 DIVIDEND DECISION:
Determining of dividend policy is an important task. The dividend decision involves
what percentage of profits to be paid to the shareholders. A number of factors
effecting the dividend decision such as market price of the share, earnings, tax
position etc.

OBJECTIVES OF FINANCIAL MANAGEMENT:

Financial decisions are made keeping in view the basic objectives of maximization of
owner’s economic objective. It can be achieved through two widely accepted criteria.

 PROFIT MAXIMIZATION: The efficiency of the firm is measured through the

volume of profits earned by it. It means the rupee income of the firm. Profit
maximization objective may be started in terms of return on investment or profit to
 sales ratios. This would help in profitable utilization of society’s economic resources,
increasing of revenues, controlling costs, minimizing risks.
 WEALTH MAXIMIZATION: wealth maximization objective is a widely recognized
criterion with which the performance of business enterprise is devaluated. The word
“wealth” refers to the net present worth of the firm. The net present worth is the
difference between gross present worth and amount of capital investment required to
achieve the benefits. Gross present worth represents the present value of expected
cash flow discounted at a rate.

IMPORATNCE OF FINANCIAL MANAGEMENT:

Finance is very essential for the smooth running of the business. It has been rightly termed as
universal lubricant, which keeps the enterprise dynamic. It is indispensable in any
organization as it helps in:

 Financial planning and successful promotion of an enterprise.

 Acquisition of funds as and when required at the minimum possible cost.
 Proper use and allocation of funds.
 Taking sound financial decisions.
 Improving the probability through financial controls.
 Increasing the wealth of the investors and the nation.
 Promoting and mobilizing individual and corporate savings.

INTRODUCTION OF FINANCIAL STATEMENT

FINANCIAL STATEMENTS:

The accountant prepares two principal statements, the balance sheet and the profit and loss
account, and an ancillary statement, the cash flow statement.

 BALANCESHEET: The balancesheet shows the financial condition of a business at a

given point of time. It consists of mainly two objects these are as follows:
i. Assets
ii. Liabilities.
 The balancesheet is also called statement of financial position. It shows the assets,
liabilities, and capital as a particular date. It indicates what the firm owns and how these
assets are financed in the form of liabilities or ownership interest.

FEATURES OF BALANCESHEET:

 Balancesheet is prepared as on the specific date. Hence it shows financial position of

the enterprise on that date.
 Balancesheet is usually in two columns which illustrate relationship between the
assets and liabilities.
 Financial position of the firm is shown in the balance sheet on going concern value.

EVALUATION OF BALANCESHEET:

Balance sheet provides the useful information about the firm’s resources and obligation. It
reflects economic results of management policies. It contains information liquidity as well as
solvency position of the firm which is useful to creditors.

 INCOME STATEMENT: Income statement is also called as profit and loss statement,
is a performance report which records changes in income, expenses, profit and loss, as
a result of business operations during the year between two balance sheet dates. The
income statement is commonly divided into four types:
 Gross profit section
 Operating profit section
 Final net profit or net loss section
 Appropriation section

The gross profit section shows the profit on the cost of goods sold. The operating profit
section list the operating income, expenses and residual as operating profit. In final net
profit section, all adjustment in respect of non-operating surplus/deficit is made to this
figure or profit which gives of profit or net loss. The lost section depicts the disposal of
final net profit in the form of dividend declared and the earning retained. The amount
retained earnings increases the aggregate ownership interest in the enterprise.

IMPORTANCE OF FINANCIAL ANALYSIS:

 Analysis of financial statements is carried out to measure the enterprise liquidity,
profitability, solvency and other indicators to assess its operator efficiency, financial
position and performance.

Financial analysis serves the following purpose:

 To know the operational efficiency

 Helpful in measuring the solvency of the firm
 Comparison of past and present statements.
 Helpful in measuring profitability.

3.3 INTRODUCTION ABOUT RATIO ANALYSIS

The term “Ratio” refers to the numerical and quantitative relationship between two items or
variables. This relationship can be exposed as

 Percentages
 Fractions
 Proportion of numbers

Ratio analysis is defined as the systematic use of the ratio to interpret the financial
statements. Hence the strengths and weaknesses of a firm, as well as its historical
performance and current financial condition can be determined. Ratio reflects a quantitative
relationship helps to form a quantitative judgment.

Guidelines or Precautions for Use of Ratios

The calculation of ratios may not be a difficult task but their use is not easy. Following
guidelines or factors may be kept in mind while interpreting various ratios is

 Accuracy of financial statements

 Objective or purpose of analysis
 Selection of ratios
 Use of standards
 Caliber of the analysis
Ratio analysis is one of the techniques of financial analysis where ratios are used as a
yardstick for evaluating the financial condition and performance of a firm. Ratio analysis was
pioneered by Alexander wall who presented a system of ratio analysis in the year 1909.
Ratios are quantitative relationship between two or more variable taken from financial
statement.

Ratio analysis is defined as the systemic use of ratio to interpret the financial statement so
that the strength and weakness of the firm as well as its historical performance and current
financial condition can be determined.

In the financial statement we can find many items are co-related with each other for example
current asset and current liabilities, capital and long-term debt, gross profit and net profit
purchases and sales etc.

Modes of expression of ratios:

 In proportion.
 In rate or times or coefficient.
 In percentage.

ADVANTAGES OF RATIO ANALYSIS:

 Forecasting.
 Managerial control.
 Facilities communication.
 Facilitating investment decision.
 Measuring efficiency.
 Inter firm comparison.
 Useful in measuring financial solvency.

DISADVANTAGES OF RATIO ANALYSIS:

 Practical knowledge.
 Ratios are means.
 Non availability of standards or norms.
 Detachment in preparation of financial statement.
 Accuracy of financial information
 Time lag
  Change in price level
 Consistency in preparation of financial statement.

CLASSIFICATION OF RATIOS:

1) LIQUIDITY RATIO
2) SOLVENCY RATIO
3) PROFITABILITY RATIO

RATIO ANALYSIS IN BANKS:

Analysing ratio’s helps in knowing how the bank has been performing and also makes it
easier for investor to compare it with other banks within the same industry. Ratio’s helps us
to know about financial performance of banks. In this analysis the following ratio’s are
calculated.

EXPLANATION TO RATIO’S USED IN STUDY:

1. LIQUIDITY RATIO:

The importance of adequate liquidity in the sense of the ability of a firm to meet
current/short-term obligations when they become due for payment can hardly be over
stresses. In fact, liquidity is a prerequisite for the very survival of a firm. The short-term
creditors of the firm are interested in the short-term solvency or liquidity of a firm. But
liquidity implies from the viewpoint of utilization of the funds of the firm that funds are
idle or they earn very little. A proper balance between the two contradictory
requirements, that is, liquidity and profitability, is required for efficient financial
management. The liquidity ratios measure the ability of a firm to meet its short-term
obligations and reflect the short-term financial strength and solvency of a firm.

(a) Current Ratio: Current ratio may be defined as the relationship between current assets
and current liabilities. This ratio also known as Working capital ratio is a measure of general
liquidity and is most widely used tomake the analysis of a short-term financial position (or)
liquidity of a firm.

Current Ratio = Current asset / Current liabilities

(b) Quick Ratio: Quick ratio is a test of liquidity than the current ratio. The term liquidity
refers to the ability of a firm to pay its short-term obligations as &when they become due.
Quick ratio may be defined as the relationship between quick or liquid assets and current
liabilities. An asset is said to be liquid if it is converted into cash within a short period
without loss of value.

Quick Ratio = Quick or liquid asset / Current liabilities

(c) Liquid asset to Total asset Ratio: The degree of liquidity performance adopted by the
depicted by this ratio. The liquid assets included cash in hand and balance with other banks.
Total assets included cash in hand, balance with other banks, investment, loan and advances,
fixed assets and other assets.

Liquid assets to Total asset Ratio = Liquid assets / Total Assets.

2. SOLVENCY RATIO:

A key metric used to measure an enterprise’s ability to meet its debt and other
obligations. The solvency ratio indicates whether a company’s cash flow is sufficient
to meet its short-term and long-term liabilities. The lower a company’s solvency ratio,
the greater the probability that it will default on its debt obligations. These ratios
indicate banks involvement in the total resources and provide basis for measuring
leverage ratio. These ratios indicate the ability of the bank to meet its medium as well
as long term obligations and also provide the basis for measuring the leverage effect
on the bank. The various ratios employed were as follows:
(a) Debt-to-equity ratio: Debt-to-equity ratio is the key financial ratio and is used as a
standard for judging a bank's financial standing. It is also a measure of a bank's ability
to repay its obligations. When examining the health of a bank, it is critical to pay
attention to the debt/equity ratio. If the ratio is increasing, the bank is being financed
by creditors rather than from its own financial sources which may be a dangerous
trend. Lenders and investors usually prefer low debt-to-equity ratios because their
interests are better protected in the event of a business decline. Thus, companies with
high debt-to-equity ratios may not be able to attract additional lending capital.
 Debt-to-equity ratio = Long-time debt/ Net worth

(b) Fixed assets to Net worth ratio: Fixed assets to net worth is a ratio measuring the
solvency of the company, this ratio indicates the extend to which the owner’s cash is
frozen in the form of fixed assets, such as property, plant and equipment and the
extent to which funds are available for the company’s operations.
The fixed assets included balance with other banks (fixed deposit account only),
investment, long-term loan and advance, building and furniture. Fixed assets are
considered at their book value (cost-depreciation).

Fixed assets to net worth ratio = Fixed assets / Net worth

(c) Net capital ratio: The ratio indicates the degree of liquidity of the bank in the long-
run. It measures the degree of availability of assets to pay off the long-term liabilities.
This ratio indicates the relationship between total assets and liabilities of the bank.
This ratio would throw light on the real financial strength of the bank.

Net Capital ratio = Total assets / Total liabilities

3. PROFITABILITY RATIO:
A class of financial metrics that are used to access a business ability to generate
earnings as compared to its expenses and other relevant costs incurred during a
specific period of time. For most of these ratios, having a higher value relative to a
competitor’s ratio or the same ratio from a previous period is indicate that the
company is doing well.

These ratios were used to compare the return to the investment. Following are the
important ratios provides a fairly sound method of diagnosis of the financial status
and overall efficiency of the bank. It indicates the profitability of the investment and
credit given by the bank.
a) Net profit to total assets ratio : This is ratio of profit on total assets of the bank and
their employment. An increasing trend over the years indicates the overall efficiency
of the bank.

Net profit to total assets ratio = Net profit / Total assets

b) Net profit to Net worth ratio: A company that is constantly profitable will have a
raising net worth or book value, as long as these earnings are not fully distributed to
shareholder’s but are retained in the business. For public companies, raising book
values over time may be rewarded by an increase in stock market value. The ratio of
net profit to net worth shows whether profitability is being maintained or not.

Net profit to Net worth ratio = Net profit/ Net worth

(d) Net profit to Fixed assets ratio: The ratio indicates whether the fixed assets are
being used profitability. A decline in the ratio shows that either the assets are being
kept idle or the business conditions are bad.

Net profit to Fixed asset ratio = Net profit / Fixed assets

4. EFFICIENCY RATIOS:
Ratios that are typically used to analyse how well a company uses its assets and
liabilities internally, efficiency ratios can calculate the turnover of receivables, the
repayment of liabilities, the quantity and usage of equity and the general use of
inventory and machinery. This test provides a clear picture of financial efficiency of
the bank. It indicates the profits for every rupee spent. Four ratios were adopted to
assess the efficiency of the bank, viz., gross ratio, operating ratio etc.
(a) Gross Ratio: The degree of liquidity performance adopted by the depicted by this
ratio. The liquid assets included cash in hand and balance with other banks. Total
assets included cash in hand, balance with other banks, investment, loan and
advances, fixed assets and other assets.

Gross ratio = Total expenses / Gross income

 CHAPTER-4
DATA ANALYSIS AND INTERPRETATION

4.1 DATA ANALYSIS AND INTERPRETATIONS

LIQUIDITY RATIO’S:
Common liquidity ratios include the current ratio, quick ratio and the operating cash flow
ratio. Different analysts consider different asset to be relevant in calculating liquidity. Some
analysts calculate only the sum of cash and equivalents divided by the current liabilities
because they feel that they are most liquid asset and therefore are the most likely to be used to
cover short term debts in an emergency. A company’s ability to turn short term asset into
cash is of the utmost importance when creditors are seeking payment. Bankruptcy analysts
and mortgage originators frequently use the liquidity ratios to determine whether a company
will be able to continue as going concern.

These ratio’s include the following:

 Current ratio
 Quick ratio
 Liquid assets to total assets ratio.

 CURRENT RATIO:
This ratio measures the degree of short-term liquidity of the bank. It indicates whether
the current assets are sufficient to meet the current liabilities. The standard current
ratio should be 2:1. Higher the ratio greater will be the margin and financial solvency
of the bank.
Current ratio = Current asset / Current liability.

YEAR CURRENT ASSET CURRENT CURRENT

(IN RS.) LIABILITY RATIO
(IN RS.)
2021-2022 3,99,03,16,160 1,24,96,87,798 3.19
2020-2021 3,29,56,76,685 1,01,79,71,346 3.23
2019-2020 2,55,11,92,219 89,91,20,380 2.83
2018-2019 2,54,52,50,393 93,54,29,174.56 2.72
2017-2018 2,42,85,00,974 82,85,03,183.12 2.92
 3,990,316,160
4000000000
3,295,676,685
3500000000

3000000000
2,551,192,2192,545,250,393
2,428,500,974
2500000000

2000000000

1500000000 1,249,687,798
1,017,971,346
899,120,380 935,429,175 828,503,183
1000000000

500000000
0 0 3.19 3.23 2.83 2.72 2.92
0
2021-2022 2020-2021 2019-2020 2018-2019 2017-2018

CURRENT ASSET CURRENT LIABILITY CURRENT RATIO

FIG: 4.1 CURRENT RATIO

INTERPRETATION:

The current ratio is considered as an important barometer to know the liquidity

position of any business concern. The current ratio was found to be more than one for
all the period, and fluctuated over the years. The ratio is highest in 2019-2020 (3.23)
and lowest for the year 2017-2018(2.72). As this ratio actually shows satisfactory
trend it could be concluded that the bank had maintained a reasonable level of the
liquidity position, has sufficient current asset to meet the current liabilities.
 QUICK RATIO:

This quick ratio is also known as acid test ratio or near money ratio. This
represents the ratio between quick assets and current liabilities. The quick assets
included cash in hand and balance with other banks. The current liabilities
included deposits, interest payable, sundry creditors, bills payables and other
short-term liabilities. Excluded short term borrowings.

Quick ratio = Quick asset / Current liability.

YEAR QUICK ASSET CURRENT QUICK

(IN RS.) LIABILITY RATIO
(IN RS.)
2021-2022 3,99,03,16,160 1,24,96,87,798 3.19
2020-2021 3,29,53,35,136 1,01,79,71,346 3.23
2019-2020 2,55,08,62,317 89,91,20,380 2.83
 2018-2019 2,54,46,62,885.37 93,54,29,174.56 2.72
2017-2018 2,42,68,03,108.59 82,85,03,183.12 2.92

3,990,316,160
4000000000
3,295,335,136
3500000000

3000000000
2,550,862,3172,544,662,885
2,426,803,109
2500000000

2000000000

1500000000 1,249,687,798
1,017,971,346
899,120,380 935,429,175 828,503,183
1000000000

500000000
0 0 3.19 3.23 2.83 2.72 2.92
0
2021-2022 2020-2021 2019-2020 2018-2019 2017-2018

QUICK ASSET CURRENT LIABILITY QUICK RATIO

FIG: 4.2 QUICK RATIO

INTERPRETATION:

The standard normal for the quick ratio is 1:1. Quick ratio shown an increasing trend
all over the years. The ratio is highest in 2019-2020 (3.23) and lowest for the year
2017-2018(2.72). As this ratio actually shows a satisfactory trend, it could be
concluded that the bank has satisfied the standard normal rate of quick ratio.
 LIQUID ASSETS TO TOTAL ASSETS RATIO:
The liquid assets include cash in hand and balance with other banks. Total assets
include cash in hand, balance with other banks, investment, loan and advances, fixed
assets and other assets.
Liquid assets to Total assets ratio = Liquid asset / Total asset.

YEAR LIQUID ASSET TOTAL ASSET LIQUID ASSET

(IN RS.) (IN RS.) TO TOTAL
ASSET RATIO
2021-2022 1,31,26,63,034 8,50,53,72,884 0.1543
2020-2021 1,32,74,09,235 7,91,44,00,884 0.16
2019-2020 99,85,85,662 11,80,88,43,730 0.08
2018-2019 1,19,64,54,354 8,24,25,17,578.89 0.14
2017-2018 1,15,62,93,615.50 8,26,27,41,590.27 0.13

11,808,843,730
12000000000

10000000000
8,505,372,884 8,262,741,590
8,242,517,579
7,914,400,884
8000000000

6000000000

4000000000

1,327,409,235998,585,6621,196,454,354
1,312,663,034 1,156,293,616
2000000000
0 0 0.1543 0.16 0.08 0.14 0.13
0
2021-2022 2020-2021 2019-2020 2018-2019 2017-2018

LIQUID ASSET TOTAL ASSET

LIQUID ASSET TO TOTAL ASSET RATIO

FIG: 4.3 LIQUID ASSETS TO TOTAL ASSETS RATIO

INTERPRETATION:

The ratio was less than one during the entire period. The year 2020-2021showed the
largest ratio (0.16). and the year 2017-2018 showed least ratio (0.13). Maintaining
high level of liquid asset in the form of cash reserve which adversely affected its
profitability. The ratio in the present case indicates that the bank has been efficiently
managing the liquid assets.
SOLVENCY RATIO’S:

A solvency ratio measures how well a company’s cash flow can cover its long-term debt.
Solvency ratios are a key metric for assessing the financial health of a company and can be
used to determine the likelihood that a company will default on its debt. Solvency ratios
differ from liquidity ratios, which analyse a company’s ability to meet its short-term
obligations.

These ratio’s include the following:

 Debt equity ratio

 Fixed asset to net worth ratio
 Net profit ratio.
 DEBT EQUITY RATIO:

YEAR LONG-TERM TOTAL ASSETS DEBT EQUITY

LIABILITIES RATIO
2021-2022 8,50,53,72,884
2020-2021 7,74,59,97,470
2019-2020 7,75,06,71,065
2018-2019 7,21,74,23,372
2017-2018 7,10,55,42,145

 FIXED ASSET TO NET WORTH RATIO:
Fixed assets to net worth, also known as the non-current assets to net worth ratio, is a
financial ratio used to measure the solvency of a company. The ratio shows how much
of the owner's cash (net worth) is tied up in the form of fixed assets such as property,
plants and equipment.
Fixed asset to net worth ratio = Fixed assets / Net worth ratio.

YEAR FIXED ASSET NET WORTH FIXEDASSET

(IN RS.) (IN RS.) NETWORTH
RATIO
2021-2022 17,03,21,537 60,08,32,000 0.28
2020-2021 20,67,63,347 53,30,56,000 0.38
2019-2020 21,69,63,551 41,39,83,000 0.52
2018-2019 25,95,77,860 36,76,12,000 0.70
2017-2018 21,31,86,005 33,34,40,000 0.63

700000000
600,832,000
600000000 533,056,000

500000000
413,983,000
367,612,000
400000000 333,440,000
259,577,860
300000000
206,763,347 216,963,551 213,186,005
170,321,537
200000000

100000000
0 0 0.28 0.38 0.52 0.7 0.63
0
2021-2022 2020-2021 2019-2020 2018-2019 2017-2018

FIXED ASSET NET WORTH

FIXEDASSET NETWORTH RATIO

FIG: 4.5 FIXED ASSETS TO NETWORTH RATIO

INTERPRETATION:
Fixed assets to net worth ratio as shown in the table and graph has shown highest in
the year 2018-2019 (0.70) and lowest in 2021-2022 (0.28). This ratio has shown a
decreasing trend. A higher ratio is associated with the problems of liquidation because
the claim of the owner has to be met by the sale of fixed assets which are in non-
liquid form.
 NET CAPITAL RATIO:
The ratio indicates the degree of liquidity of the bank in the long-run. It measures the
degree of availability of assets to pay off the long-term liabilities. This ratio indicates
the relationship between total assets and liabilities of the bank. This ratio would throw
light on the real financial strength of the bank.
Net capital ratio = Total assets / Total liabilities.

YEAR TOTAL TOTAL NET CAPITAL

ASSETS LIABILITIES RTAIO
2021-2022 8,50,53,72,884 8,50,53,72,884 1
2020-2021 7,74,59,97,470 7,74,59,97,470 1
2019-2020 7,75,06,71,065 7,75,06,71,065 1
2018-2019 7,21,74,23,372 7,21,74,23,372 1
2017-2018 7,10,55,42,145 7,10,55,42,145 1

9,000,000,000
8,505,372,884
8,000,000,000 8,505,372,884
7,745,997,470
7,745,997,470
7,750,671,065
7,750,671,065
7,000,000,000 7,217,423,372
7,217,423,372
7,105,542,145
7,105,542,145
6,000,000,000

5,000,000,000

4,000,000,000

3,000,000,000

2,000,000,000

1,000,000,000

0
2021-2022
1 2020-2021
1 2019-2020
1 2018-2019
1 2017-2018
1

TOTAL ASSETS TOTAL LIABILITIES NET CAPITAL RTAIO

FIG: 4.6 NET CAPITAL RATIO

INTERPRETATION:

As the table and graph indicates that the net capital ratio is one all over the years. This
indicated that the total assets were adequate enough to cover the total liabilities. This
ratio indicates the degree of liquidity of the bank in long-run.
PROFITABILITY RATIO’S:

Profitability ratios are a class of financial metrics that are used to assess a business ability to
generate earnings relative to its revenue, operating costs, balance sheet assets or shareholders
equity over time, using data from a specific point in time.

These ratio’s include the following:

 Net profit to total asset ratio

 Net profit to net worth ratio
 Net profit to fixed asset ratio.
 NET PROFIT TO TOTAL ASSETS RATIO:
Net profit to Total asset ratio also known as Return on assets (ROA) is a measure of
how efficiently a company uses the assets it owns to generate profits.
Net profit to Total asset ratio = Net profit / Total assets

YEAR NET PROFIT TOTAL ASSET NETPROFIT

(IN RS.) (IN RS.) TO TOTAL
ASSET RATIO
2021-2022 6,15,72,735 8,50,53,72,884 0.0072
2020-2021 5,89,21,301 7,91,44,00,884 0.0074
2019-2020 5,30,11,710 11,80,88,43,730 0.0044
2018-2019 5,05,46,444.86 8,24,25,17,578.8 0.0061
9
2017-2018 4,47,48,149.70 8,26,27,41,590.2 0.0054
7

11,808,843,730
12000000000

10000000000
8,505,372,884 8,262,741,590
8,242,517,579
7,914,400,884
8000000000

6000000000

4000000000

2000000000
0 0 61,572,735 58,921,301
0.0072 53,011,710
0.0074 50,546,445
0.0044 44,748,150
0.0061 0.0054
0
2021-2022 2020-2021 2019-2020 2018-2019 2017-2018

NET PROFIT TOTAL ASSET

NETPROFIT TO TOTALASSET RATIO

FIG: 4.7 NETPROFIT TO TOTAL ASSET RATIO

INTERPRETATION:

The ratio was positive and increased year by year. The ratio was highest in 2020-
2021(0.0074) and lowest in 2017-2018 (0.0054).
 NET PROFIT TO NETWORTH RATIO:
The ratio of net profit to net worth shows whether profitability is being maintained or
not.
Net profit to Net worth ratio = Net profit/Net worth

YEAR NET PROFIT NET WORTH NET PROFIT

(IN RS.) (IN RS.) TO NET
WORTH
RATIO
2021-2022 6,15,72,735 60,08,32,000 0.1024
2020-2021 5,89,21,301 53,30,56,000 0.1105
2019-2020 5,30,11,710 41,39,83,000 0.1280
2018-2019 5,05,46,444.86 36,76,12,000 0.1374
2017-2018 4,47,48,149.70 33,34,40,000 0.1342

700000000
600,832,000
600000000 533,056,000

500000000
413,983,000
367,612,000
400000000 333,440,000

300000000

200000000
61,572,735 58,921,301 53,011,710 50,546,445 44,748,150
100000000
0 0 0.1024 0.1105 0.128 0.1374 0.1342
0
2021-2022 2020-2021 2019-2020 2018-2019 2017-2018

NET PROFIT NET WORTH

NET PROFIT TO NET WORTH RATIO

FIG: 4.8 NETPROFIT TO NETWORTH RATIO

INTERPRETATION:
 The ratio shows the rate of return on the equity capital of the bank. The ratio is
highest in the year 2017-2018 (0.1342) and lowest in 2021-2022 (0.1024). It indicated
that the overall performance was low.

 NETPROFIT TO FIXED ASSETS RATIO:

This efficiency ratio compares net sales (income statement) to fixed assets (balance
sheet) and measures a company's ability to generate net sales from its fixed-asset
investments, namely property, plant, and equipment (PP&E). The fixed asset balance
is used as a net of accumulated depreciation.
Net profit to Fixed asset ratio = Net profit / Fixed assets.

YEAR NET PROFIT FIXED ASSETS NET PROFIT

(IN RS.) (IN RS.) TO FIXED
ASSET RATIO
2021-2022 6,15,72,735 17,03,21,537 0.3615
2020-2021 5,89,21,301 21,10,95,393 0.2849
2019-2020 5,30,11,710 21,69,63,551 0.2443
2018-2019 5,05,46,444.86 25,95,77,860 0.1947
2017-2018 4,47,48,149.70 21,31,86,005 0.2099

300000000
259,577,860

250000000
211,095,393 216,963,551 213,186,005

200000000 170,321,537

150000000

100000000
61,572,735 58,921,301 53,011,710
50,546,445 44,748,150
50000000
0 0 0.3615 0.2849 0.2443 0.1947 0.2099
0
2021-2022 2020-2021 2019-2020 2018-2019 2017-2018

NET PROFIT FIXED ASSETS

NET PROFIT TO FIXED ASSET RATIO

FIG: 4.9 NET PROFIT TO FIXED ASSET RATIO

 INTERPRETATION:

The ratio was positive for all the years and showed a progressive trend over the five
years. It was found highest in 2021-2022 (0.3615) and lowest in 2018-2019 (0.1947).

EFFICIENCY RATIO’S:

The efficiency ratio is typically used to analyse how well a company uses its assets and
liabilities internally. An efficiency ratio can calculate the turnover of receivables, the
repayment of liabilities, the quantity and usage of equity and the general use of inventory and
machinery.

In this efficiency ratio includes the following:

 Gross ratio.
 GROSS RATIO:
The gross ratio includes interest and discount, commission and brokerage and other
income. The total expenses include interest, salary, allowance, rent, legal expenses,
audit expenses and other provisions.
Gross ratio = Total expenses / Gross income.

YEAR TOTAL GROSS GROSS RATIO

EXPENSES INCOME
(IN RS.) (IN RS.)
2021-2022 73,10,46,899 89,00,86,047 0.82
2020-2021 70,33,27,491.65 87,75,59,434.91 0.80
2019-2020 66,44,96,933 82,74,98,248 0.80
2018-2019 61,77,77,664.62 77,64,97,814.38 0.79
2017-2018 65,38,14,275.86 69,85,62,425.56 0.93

1000000000
890,086,047 877,559,435
900000000
827,498,248
800000000 776,497,814
731,046,899
703,327,492 698,562,426
700000000 664,496,933 653,814,276
617,777,665
600000000
500000000
400000000
300000000
200000000
100000000
0 0 0.82 0.8 0.8 0.79 0.93
0
2021-2022 2020-2021 2019-2020 2018-2019 2017-2018

TOTAL EXPENSES GROSS INCOME GROSS RATIO

FIG: 4.10 GROSS RATIO

INTERPRETATION:
The gross ratio of the bank is found positive all over the five years. Highest ratio 0.93
is in 2017-2018 and lowest ratio 0.8 in 2019-2020 and 2020-2021.

CHAPTER – 5

FINDINGS, SUGGESTIONS AND CONCLUSION

5.1 FINDINGS:

The important findings recorded in this research report are consolidated as follows:

 The current ratio was found to be more than one for all the periods, and fluctuated
over the years. As this ratio actually shows satisfactory trend it is found that the bank
had maintained reasonable level of liquidity position.
 The net worth position of the bank was positive. Net capital ratio is also positive for
all the five years.
 The net profit to total assets ratio showed a decrease in recent year indicating the
profit level to be in moderate relation to total assets of bank.
 The efficiency ratio indicates that the expenses were less than the gross income for all
the years during study period. The gross ratio of bank was found to be positive and
decreasing over the years.
5.2 SUGGESTIONS:

 The banks current liquid assets are sufficient to meet the current liabilities of the
bank.
 The bank needs to change their loan policies.
 The bank should try for qualitative improvement and must maintain adequate liquid
resources to meet the ends.
 The bank should try to increase their deposits by opening branches in business areas,
also meets the needs of the clients, introduce different types of deposit schemes and
offer competitive rates of interest.
 The bank must do efficient utilization of shareholders fund to improve its ROI and
ROE to maintain its goodwill in investors mind. The bank can go for some debt
borrowing to increase E.P.S for shareholders.
5.3 CONCLUSION:

Finance is the life blood of every business. Without effective financial management a bank
cannot survive in this competitive world. A Prudent financial Manager has to measure the
working capital policy followed by the bank.

The bank’s overall position is at a good position. Particularly the current year’s position is
well due to raise in the profit level from the last year position. It is better for the organization
to diversify the funds to different sectors in the present market scenario.

Also other segments are showing promising opportunities to grow. With these many
opportunities at hand along with the potential player who would be able to make use of the
situation well. So from this it can be concluded that there is a better opportunities for
investors to invest in this bank.

The aryapuram co-operative urban bank has maintained reasonable level of solvency
position. The financial position of this bank analyzed by the ratio analysis techniques and it is
found that the position of solvency, liquidity and profitability are satisfactory. The efficiency
ratios indicated a medium level of the expenditure over the gross income.

The current ratio was found to be more than one for all the periods, and fluctuated over the
years. As this ratio actually shows satisfactory trend it is found that the bank had maintained
reasonable level of liquidity position. The co-operative bank net worth is positive.
5.4 BIBILOGRAPHY:

Narasimhan committee (1991) emphasized on capital adequacy and liquidity international

journal of scientific and research publications, volume 2, issue 10, October 2012.

Rajesh and patel (1999) financial performance and efficiency of co-operative banks in India,
journal of co-operative accounting and reporting.

Mukul G. Asher (2007) Reforming governance and regulation of urban co-operative banks in
India. Journal of financing regulation and compliance.

Dutta and basak (2008) studied and suggested that co-operative banks should improve their
recovery performance. An analytical study on financial performance of urban co-operative
bank, golden research thoughts.

Pathania and sharma.s (1997). The ratio analysis aspect of state co-operative agricultural and
rural development bank. Indian co-operative review.

www.ccub.in

www.investopedia.com

www.wikipedia.com

annual reports of the bank

financial statements of the bank

 ANNEXURE

FINANCIAL PARTICULARS FOR THE LAST TWO YEARS

S.NO PARTICULARS 2019-2020 2020-2021

1 Share capital 16,53,35,765 16,30,01,690
2 Statutory reserves 30,87,98,634 37,62,57,629
3 Own funds 40,72,06,328 46,69,57,543
4 Deposits 6,68,44,83,790 7,28,34,43,365
A Current deposits 26,30,53,418 27,55,27,374
B Fixed deposits 91,52,89,528 1,14,06,00,883
5 Borrowings - -
6 Working capital (3+4+5) 7,09,16,90,118 7,75,04,00,908
7 Investments 1,96,79,25,901 2,67,53,126
8 Investments in government securities 1,33,84,67,851 2,63,38,24,126
9 Loans issued 4,16,26,55,795 3,87,71,13,327
A Short term loans 83,40,46,336 -
B Long term loans 3,32,86,09,460 3,20,41,34,304
C Gold loans 5148.88 lakhs 5931.43 lakhs
D Overdrafts - 67,29,79,022
10 CRR 4.45% 4.11%
11 SLR 20.40% 36.75%
12 Return on assets 1.42% 1.16%
13 CAR 10.40% 14.32%
14 Net interest margin 3.30% 3.25%
15 Credit deposit ratio 62.27% 53.23%
16 Net profit before tax 76,22,48,793 76,26,19,634
17 Net profit after tax 5,89,21,301 6,15,72,735
18 Gross NPA 53.87 crores 54.04 crores
19 Net NPA 37.28 crores 27.23 crores
A % of gross NPA 13.49% 14.32%
B % of net NPA 9.74% 7.89%
20 CRAR 10.40% 14.32%
21 Audit classification A A