Credit management & npa of co operative bank ltd.1

Financial Statement Analysis of RDC Bank, Rajkot.
A PROJECT ON
FINANCIAL
STATEMENT
ANALYSIS
S.K.PATEL INSTITUTE OF MANAGEMENT AND COMPUTER STUDIES

FINANCIAL STATEMENT ANALSIS OF
RAJKOT DISTRICT
CO-OPERATIVE BANK LTD.
(RDC BANK)
A PROJECT REPORT SUBBMITTED IN PARTIAL FULFILLMENT OF THE M.B.A. DEGREE
PROJECT GUIDE
Mr. PARSOTAMBHAI TALAVIYA, STATISTICS OFFICER,
RDC BANK LTD.
SUBMITTED BY
DHAMSANIA VISHAL (ROLL NO. )
GANDHINAGAR, INDIA
JULY 2005

RAJKOT DISTRICT CO-OPEARTIVE BANK (H.O.)

Preface
The banking activities play a crucial role in overall economic
development, in case of developing country. This now progresses rapidly along
with its various activities.
I represent to you SHRI RAJKOT DISTRICT CO-OPERATIVE
BANK a joint venture sector enterprise promoted by the Gujarat state co-operative
bank.
The Rajkot District Co-Operative Bank provided me the golden
opportunity for me to enrich my knowledge by comparing theoretical knowledge
with practical knowledge, and also helped me to understand how important it is
to important aspect of any study. It helps to students to observe and analysis real
life practical with the help of theoretical knowledge. Project report is a part of
study in the curriculum to know the practical aspect of activities in banking. It
provides opportunity to work with people and interact with them.
It was a privilege for me to work in such a reputed bank like RDC bank,
RAJKOT. This has given me an opportunity to work in truly professional
environment where teamwork scores over individual efforts. This study was
undertaken during the project work for the period of June-July 2006, as partial
fulfillment of MBA programme of GUJARAT UNIVERSITY.
DATE :-
VISHAL DHAMSANIA

We learn in Management is “Manage + Men + T (Time, Task, etc.)”. I agree
with this statement & wish to include that it would have been not possible to
complete this project with out help and support of many people. I am thankful to
all of them.
First and foremost I am thankful to Mr. M. B. Ladani, Additional Deputy
Manager and my Project Guide Mr. P. S. Talaviya, RDC Bank for giving me
this valuable opportunity to have our Summer Project at the well-known Co-
Operative Bank, RAJKOT DISTRICT CO-OPERATIVE BANK LTD. I thank
them to take keen interest in my work, and guide me throughout the project.
I would like to take this opportunity to thank my college, S. K. PATEL
INSTITUTE OF MANAGEMENT AND COMPUTER STUDIES,
GANDHINAGAR, for giving me this tremendous opportunity to work in the
banking industry for the real-time project.
It is with a deep sense of gratitude that I would like to acknowledge our
Director Prof. S Chinnam Reddy and all Faulty members who have been kind
enough to me in regard to completion of the project.
I would like to acknowledge with thanks the resource full service and
support rendered by Librarian and Lab assistant at SKPIMCS.
It would be an incomplete acknowledgement if I don’t remember my
Parents. This report would not have become a reality without blessing of my
Parents who constantly inspired me, supported me, and contributed their
precious knowledge toward my project. I sincerely extend my gratitude to them
for their inspiration and prayer.
Last but not the least I thank to almighty GOD who gave an opportunity to
me to work on this project with the co-operation of others and I have reached
this milestone successfully. I am also thankful to my seniors, my classmates and
other friends who helped me in getting through this project work, smoothly.
Special thanks to those who inspired me to go for this project, and also to those
who think “Why This & Why Not This”!

OVERVIEW OF
BANKING
INDUSTRY

INDIAN BANKING INDUSTRY
The Indian banking can be broadly categorized into nationalized
(government owned), private banks and specialized banking institutions. The
Reserve Bank of India acts as centralized body monitoring any discrepancies and
shortcoming in the system. Since the nationalization of banks in 1969, the public
sector banks or the nationalized banks have acquired a place of prominence and
has since then seen tremendous progress. The need to become highly customer
focused has forced the slow-moving public sector banks to adopt a fast track
approach. The unleashing of products and services through the net has
galvanized players at all levels of the banking and financial institutions market
grid to look a new at their existing portfolio offering. Conservative banking
practices allowed Indian banks to be insulated partially from the Asian currency
crisis. Indian banks are now quoting all higher valuation when compared to
banks in other Asian countries (viz. Hong Kong, Singapore, Philippines etc.) that
have major problems linked to huge Non Performing Assets (NPAs) and
payment defaults. Co-operative banks are nimble footed in approach and armed
with efficient branch networks focus primarily on the ‘high revenue’ niche retail
segments.
The Indian banking has finally worked up to the competitive dynamics of
the ‘new’ Indian market and is addressing the relevant issues to take on the
multifarious challenges of the globalization. Banks that employ IT solutions are
perceived to be ‘futuristic’ and proactive players capable of meeting the
multifarious requirements of the large customer’s base, Private Banks have been
fast on the uptake and are reorienting their strategies using the internet as a
medium. The internet has emerged as the new and challenging frontier of

marketing with the conventional physical world tenets being just as applicable
like in any other marketing medium.
The Indian banking has came from a long way from being a sleepy
business institution to a highly proactive and dynamic entity. This
transformation has been largely brought about by the large dose of liberalization
and economic reforms that allowed banks to explore new business opportunities
rather than generating revenues from conventional streams (i.e. borrowing and
lending). The banking in India is highly fragmented with 30 banking units,
contributing to almost 50% of deposits and 60% advances. Indian nationalized
banks (banks owned by the government) continue to be the major lenders in the
economy due to their sheer size and penetrative networks which assures them
high deposit mobilization. The Indian banking can be broadly categorized into
nationalized, private banks and specialized banking institutions.
The Reserve Bank of India acts as a centralized body monitoring any
discrepancies and shortcoming in the system. It is the foremost monitoring body
in the Indian financial sector. The nationalized banks (i.e. government-owned
banks) continue to dominate the Indian banking arena. Industry estimates
indicate that out of 274 commercial banks operating in India, 223 banks are in
the public sector and 51 are in the private sector. The private sector bank grid
also includes 24 foreign banks that have started their operation here. Under the
ambit of the nationalized banks come the specialized banks institutions. These
co-operatives, rural banks focus on areas of agriculture, rural development etc.
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 bank structure in India consist of
A) Scheduled Commercial bank
B) Nonscheduled bank.
 Scheduled & Non Scheduled Bank :
There are approximately 50 scheduled commercial banks. Indian &
foreign almost 200 regional rural banks. More than 350 central co-operative
banks. 20 land development bank and No. of primary agriculture credit societies.
1. Co-Operative Banks :
There are two main categories of the co-operative banks.

A) 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.
B) Long Term lending oriented co-operative bank – within the second
category there are land development bank at three level, state level,
district level & village level.
The Co-Operative banking structure in India is divided into different co-operative
banks.
i) Primary urban Co-operative banks.
ii) Primary Agricultural co-operative societies
iii) District central co-operative banks
iv) State co-operative banks
v) Land development banks.
BANKING INSTITUTIONS :
The magnitude of resource mobilization by banking institutions is related
to the capacity of these institutions to reach numbers and their success and
efficiency in looking after their clientele. For instance, if the banking offices
were confirmed to a few centers of the country only, very naturally, the capacity
of the banks to mobilize deposits from the public would remain limited to that
extent. And if the network of banking offices were extended to all parts of the
country and most of the population could reach one or the other bank office
conveniently, the deposits would be of a larger order. Similarly, if the banking

institutions functioned efficiently and made rigorous efforts to provide
satisfaction to the savers irrespective of the fact how big were the deposits of a
saver-the bank could still improve their effectiveness in deposit collections. In
developing economy banking institutions have a special role in making people
‘bank minded.’ For a large majority of those who can save, opening of an
account in a bank would be a new experience. And therefore utmost care would
need be taken in seeing to it that the experience is not so unfortunate that an
average saver would decide to never visit a bank office again. If a visit to a bank
office could be made a pleasant experience the banks would become still better
institutions of deposit mobilization. This aspect needs to be underlined since
very often it is not realized that in undeveloped economies, the savers are not as
enlightened as to always bother to look into the economies of returns of their
savings. Their values and decisions are dependent upon, at least equally, on
considerations other than the interest rates. And one of the important factors is
the security of definite and the personalized service and the consideration they
would receive from the bank staff. The importance of enhancing savings may
not be fully appreciated by an ordinary man. For this one can only say that if the
banks can draw out financial surpluses from the community by way of the
deposits to that extent the buying power in the community gets contracted. And
by the magnitude there is a reduction in the aggregate consumption with a
corresponding release of physical resources which can be diverted towards the
creation of additional national capital.
Similarly, by practicing selected credit policies the banks can influence
the consumption pattern in the society. The banks are important agencies for
ensuring greater savings to help economic development. The capacity and will to
save on the part of the savers is not itself sufficient to ensure deposits. What is
equally important is the existence of an institutional framework which makes it

convenient to save. One has no measure to assess the level of willingness but it
would not be too wrong to presume that everyone, whether rich or poor, would
have a desire to save. The degree of will power would, however, vary from one
individual to another. In a county which recognizes private property and rights to
inheritance an average man would undoubtedly like to save. But the real
problem is that of impressing upon the savers that the function of saving was
also a national obligation and each person must save by habit and in an
organized manner. The task of making ‘saving’ conscious is only possible if
there was an institutional framework which would undertake this task vigorously
and continuously. And further to this the set up must ensure the necessary
physical and organizational conveniences to the savers. It is in the context that
one has to evaluate the capacity of the existing financial structure as instruments
of enhancing and further mobilization of savings.
It has been pointed out that the commercial banking in India has remained
concentrated in urban centers and also in the comparatively advanced states of
the country. It would not be correct to form an impression that banking offices
are evenly spread over space within the urban centers or in the comparatively
better off states.
From this view point of savings potential, it would be appropriate to
mention the general belief that the poorer sections in the Indian society have
very little savings capacity is completely misplaced. In fact the savings with the
lower income groups in the urban centers which will equal the middle income
groups of the rural population are of a significant order. While the middle
income groups enter into a race for consumption of ‘prestige goods’ and become
victims of the ‘demonstration effect’ and have lesser savings willingness to save
in the lower-income groups are still conservative and do effect savings.

Considering the number involved even small saving when aggregated
would come to a fairly significant order. There is no doubt that dealing with very
small amounts and with large numbers of comparatively lesser educated
depositors would involve higher costs of administration of these bank offices.
The same is true about rural areas. But the benefits of such savings are many
times more than the costs of deposit collections. But this approach can only be
followed by such institutions which have the proper perspective of their role and
are even prepared to bear short term promotional losses in the overall and long
term interests of the societies.
RURAL BANKING
For a long time the official view regarding the provision of banking facilities to
the rural areas has been that extension of banking facilities to the rural sector
should be earmarked for the cooperatives and urban banking should be largely
left for the commercial banks. The Imperial Bank of India, it also argued that the
private commercial banks cannot reach the villages because opening of branches
in the rural areas was not a profitable proposition. It was, therefore, suggested
that with the nationalization of the Imperial Bank, the State Bank of India would
have special responsibility to provide banking facilities in smaller towns and
villages. Thus, the official attitude seems to have been that the State Bank of
India and the cooperatives would specialize in rural banking and the private
commercial banks would confine their activities to the urban centers. The
implication of this division of areas between the public sector banking (State
Bank of India) and the cooperatives vis-à-vis the private commercial banks is
that the non profitable banking should be the main responsibility of the public

sector institutions whereas the profitable ones should be earmarked for private
banking institutions. It is recognized that since rural banking is not a profitable
business (and that is why private banks do not attempt this) therefore, the
cooperatives and the State Bank of India have to be adequately subsidized for
such bank offices which run under loss and were opened with the intention of
covering rural area.
Such an approach would be all right if it was clearly understood that the
cooperatives and the public sector banks were not to be judged on the same
criteria as the other commercial banking institutions. The public sector banking
institutions may, therefore, be judged on different standards than the private
ones. But unfortunately it is argued that private banks do not want to go to rural
areas because it was not profitable and therefore the public sector (State Bank of
India) should undertake the responsibility of entering into the losing business. In
the same breath it is also expected that the State Bank should show at least the
same profits as other private banks. This really means that the non-profitable
propositions are meant for the pubic sector and the profitable ones for the private
sector. And then we turn bank to judge the efficiency on private profit criteria.
No logic could strange than this.

CO-OPERATIVE BANKING
Co-Operative Societies :
As for the role of co-operatives in rural banking is concerned, it is high
time that we understood what the cooperatives can do and what these cannot.
We must understand the structural handicaps of the cooperative credit system in
an economy like ours. It is only after a proper appreciation of the capacity of the
cooperatives that one can decide a to how far the cooperatives can offer a
solution to the problem of providing banking facilities in the rural areas.
It should, however, be made clear that we do not doubt the importance and
the role that cooperatives in ameliorating the economic and social conditions of
the rural areas in general and the farmers in particular. Basically, the
cooperatives movement is a sound one and has many a merit. For instance,
agricultural, marketing, service, industrial and consumers’ cooperatives are of
great significance in a developing society like ours. However, the need for
opening of bank offices in rural areas is not purely the provision of credit ot
agriculture. It is more than this. In this respect that we need to understand some
of the structural and other inherent limitations of the cooperative credit societies.
Also one has to take due note of the present defects in the cooperative
movement. No doubt some of the defects in the cooperative credit movement
can be set right with appropriate reforms. But, the inherent limitations of this
movement for purposes of extending banking facilities to rural areas can hardly
be met by such actions. At the same time we visualize that opening of branches
of the organized banking institutions in rural areas would help to strengthen the
cooperative credit movement in the country side. The existence of organized

banking is not a substitute or a rival development to cooperative credit societies.
On the other hand, in our view organized banking is a complementary and a pre-requisite
for effective functioning of the cooperative credit institutions. In
principle the credit cooperative societies need not necessarily be dependent upon
the governmental finance alone. The objective of establishing cooperatives in
India, as also anywhere else in the world, is to bring the various economic
functionaries together for mutual help.
For instance, credit societies, it was expected, would receive deposts from
those of their members who had surplus resources, and in turn, these resources
would be lent to those who need financial assistance. In this manner, the
cooperatives could eliminate the money lenders who discharged this function of
receiving deposits and lending credit to the farmers. In this manner the
cooperatives could provide a system of mutual help and eliminate the
exploitation of the private moneylenders. The cooperatives, viewed from this
angle, are an institutional reform where intermediaries are attempted to be
eliminated. This is the spirit of cooperative movement. In the initial stages, the
Government and other public institutions could provide financial assistance to
the cooperatives if the requirements of the members of the cooperatives were
more than what the cooperatives could raise from their own members. But
unfortunately, in India cooperative credit movement has come to a stay as
heavily dependent upon the governmental finance. It is evident from the fact that
out of a total working capital of the cooperative credit institutions of Rs. 2101.44
crores in 1963-63, nearly Rs. 500 crores was the share capital and resources. The
rest was provided by the Reserve Bank of India, by the Government and other
public institutions. Since the credit cooperating societies have not succeeded in
resource mobilization from their members or otherwise, these have remained
instruments of one way flow of finance from the Government to the members of

these cooperatives. Thus the credit cooperatives are in practice only credit
distributing agencies.
No doubt this is an important function in itself. But this certainly is not
banking for rural area. The cooperative movement has been heavily subsidized
by the way of cheap and easy credit by the Reserve Bank of India. Because of
this most of the cooperatives were organized by those only who wanted to avail
of the governmental financial assistance. Right from the beginning the objective
of organizing cooperative credit societies was to avail facilities rather than to
become a forum to local farmers and other ruralities for mutual help. Secondly,
the cooperative societies’ being each independent of the other has to function in
isolation and therefore these societies cannot offer the normal banking facilities
which an organized bank can. Due to this handicap, very naturally the depositors
prefer to maintain their surplus either with the moneylenders or hoard the
amounts in cash with them than handing over the same to a local cooperative
credit society which cannot allow similar and easy withdrawal facilities as a
private moneylender can. Of course provision of other banking facilities like
transfer of funds from one place to another and safe deposit facilities are out of
question. Therefore, the depositors are not encouraged to use the cooperative
credit societies as institutions where they can deposit their surplus financial
resources. Also, because of the advantage offered and the considerable subsidy
element, the membership of the cooperatives (which is true about all types of
cooperatives) is taken to be closed for others and is confined to a small section
of the population of a village. A number of studies conducted by the Reserve
Bank of India and other scholars on the working of the cooperative credit
societies indicate that majority of the cooperatives can hardly be described as
genuine cooperative societies. These are either group organization or family
organizations.

A study of the Central Cooperative Banks would also indicate that the
control and management of the cooperative finance is generally in the hands of a
family or a group of persons and the functioning of the cooperative banks is not
much at variance from any other private financial institution. Even as credit
distributing agencies the cooperatives have not made the desired impact. The
main reason for this has been the unwillingness on the part of the cooperatives to
depart from the credit-worthiness criteria for extending financial
accommodation. As a result of this cooperative credit has been availed by those
only who could even otherwise raise capital of their own if they choose to do so.
A study of the Cooperative credit distribution would indicate that a large share
of total credit has gone to a fraction of the population comprising of big
landlords and so on. This to some is unavoidable in a society whose membership
comprises of a heterogeneous groups with a few dominating the decisions and
functioning of the society. There cannot be any meaningful cooperation between
the unequal. The situation can, however, be better dealt with by such organized
agencies which are independent of local and vested interest and would function
on considerations of merit, not always, and only based on the conventional
criteria of credit worthiness of a borrower.
Another structural defect of the cooperatives, mainly dealing with farmers
is that a good part of the financial resources remain idle during the year. For
instance credit needs of the farmers are the most in the sowing seasons and the
pre-harvest periods. The loan recoveries are made after the harvest. Since there
is time gap between the sowing and harvesting seasons, during the middle
periods the finances of the cooperatives cannot be idle. However, the
requirements of the agricultural trade and processing industries are the most in
the post-harvest period. But because of the absence of any institutional mutual

arrangements the idle resources of the cooperatives do not become available for
the latter purposes. This cannot be helped if the cooperatives remain in isolation
of the organized banking structure. The net result of the division of
responsibility between the private commercial banks and the Reserve Bank of
India in financing of industry and the trade on the one hand and agriculture on
the other respectively has been a fragmentation of India’s financial system into
two water tight compartments. The private commercial banking system operates
in unplanned isolation from the needs of the rural sector while the cooperative
banking system finances agriculture without any coordination with the needs of
the industrial and urban sectors. The inevitable economic consequence is that
there is misallocation of financial resources between the two sector. This comes
about because the funds earmarked for the rural sector remain idle for a major
part of the year while the idle funds of the private commercial system during the
lean period cannot be utilized for short term financing of the agricultural
operations. Inevitably, too much finance is thus tied up merely because the
financial system is fragmented into thee two broad divisions. If the private
banking system were to be nationalized, it would be possible for the Government
to integrate the financial system of the country into one complete whole. This
would help to save idle resources of both financing sectors as well as help to
coordinate and integrate their financing operations into a system of planned
development. Moreover, the killed personnel of the cooperative financial sector
as well as of the private commercial banks can be integrated with one another in
order to provide a much large cadre of trained personnel in banking operations
of the country. Such integration of two major financing sectors in the country
would also help to curb the flow of financial resources into the unorganized
money market which plays havoc with the economy in the present situation of
acute scarcities and shortages. Once the two financing sectors, that is the private
commercial banks and the cooperative sectors are integrated, they would

constitute a major source of attraction for all voluntary savings of the
community in so far as they would reach out to all the areas of the country from
the highest to the lowest range of society, and provide the best security for the
deposits of all savers, big or small. Moreover, in the presence of such a unified
financial system the unorganized money market would lose much of its
attraction and concealed power to engage any financing operations which will be
beyond the purview of the organized financial system. Let us not imagine that
the unorganized money market in the country operates entirely outside the
banking system. There are strategic points of linkage, between the unorganized
money market and the banking system. These linkages would come to full view
once the banking system is fully unified under the State control, and it will be
easy to keep a watch and regulate the activities of the unorganized money
market far more effectively than has been possible hitherto.
REGULATION OF COOPERATIVE 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
the world over. Many academics believe that regulation b central banks should
be effectively combined with market discipline. Though there is no clear cut
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 pertains 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. Firms 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 cooperative banks that primarily deals with small and
more opaque borrowers. This brings us to the issue of cooperative banks in
India.

BALANCE SHEET
OF
RAJKOT DISTRICT CO-OPEARTIVE BANK Rs. In lacs
Sr.
No. CAPITAL & LIABILITIES Dt. 31/03/06
Amt. Rs.
Dt. 31/03/05
Amt. Rs.
Dt. 31/03/04
Amt. Rs.
1. Share Capital 2135.00 1903.44 1851.65
2. Reserve Fund & Other Reserve 8548.01 7896.05 7298.27
3. Deposits & Other Accounts 67767.62 67545.72 66149.87
4. Subsidiary State Partnership
Fund A/c 5.36 6.01 7.88
5. Loans 11906.90 8279.02 12915.59
6. Bills for Collection 60.91 65.60 61.21
7. Bank Adjustment 137.45 134.37 48.66
8. Overdue Interest Reserve 1187.09 1188.09 1200.00
9. 31.24 32.84 37.15
10. 386.37 87.58 95.42
11. Payable Interest 149.98 147.19 152.99
12. Other Liabilities 979.77 587.93 732.17
13. Profit & Loss A/c 1065.00 950.00 1000.00
94360.75 88823.91 91550.92

BALANCE SHEET
OF
RAJKOT DISTRICT CO-OPEARTIVE BANK
Rs. In lacs
Sr.
No. ASSETS & RECEIVABLES Dt. 31/03/06
Amt. Rs.
Dt. 31/03/05
Amt. Rs.
Dt. 31/03/04
Amt. Rs.
1. Cash 2779.01 2978.45 2648.21
2. Bank Balance (in other banks) 5967.36 12121.58 23102.41
3. Investment 12923.47 13239.67 9532.67
4. Subsidiary State Partnership
Fund Investment 5.36 6.01 7.88
5. Loans 67397.13 56681.31 51853.78
6. 386.37 87.58 95.42
7. Interest Receivables 2780.65 2363.43 3326.44
8. Bills for Receivables 60.91 65.60 61.21
9. Branch Adjustments -- -- --
10. Building (less Depri.) 1217.04 1068.48 721.21
11. Furniture (less Depri.) 694.39 123.23 117.48
12. Computer (less Depri.) 30.70 11.80 13.96
13. Other Assets 118.33 76.71 70.20
94360.75 88823.91 91550.92

PROFIT AND LOSS A/c
OF
Rs. In lacs
Sr.
No. DEBIT Dt. 31/03/06
Amt. Rs.
Dt. 31/03/05
Amt. Rs.
Dt. 31/03/04
Amt. Rs.
1. Interest on deposits and Loan’s 4827.25 4828.30 6201.15
2. Salary, allowances & Provident
Fund 1761.94 1629.53 1551.15
3. Fees & allowances to Director &
Local Committee 6.53 6.62 5.86
4. Rent, taxes, insurance,
electricity, repairing etc. 118.11 101.59 70.11
5. Law Charges 4.37 1.23 1.86
6. Postage & telegraph 17.96 14.61 13.66
7. Audit Fees 14.67 15.57 14.66
8. Depreciation 127.96 58.46 56.56
9. Stationery Printing 1.27 10.32 9.47
10. Other Expenses 158.44 115.27 64.38
11. Other Provisions 369.60 82.01 410.29
12. Profit 1065.00 950.00 850.00
8473.15 7811.56 8905.70

PROFIT AND LOSS A/c
OF
Rs. In lacs
Sr.
No. CREDIT Dt. 31/03/06
Amt. Rs.
Dt. 31/03/05
Amt. Rs.
Dt. 31/03/04
Amt. Rs.
1. Interest from Advances &
Investment 8336.05 7647.74 9774.70
2. Commission, Discount received,
Brokerage 44.13 30.05 29.25
3. Subsidy and Donation received -- -- --
4.
Income from non-banking assets
and profit from sale of or dealing
with such assets
13.48 -- --
5. Other Income 79.48 133.75 79.32
8473.15 7811.56 9883.26

ACCOUNTING POLICIES
Accounting policies refers to the specific accounting principles and the
methods of applying that principle adopted by the enterprise in the preparation
of the financial statement. There is no single list of accounting principles, which
are applicable to all the circumstances. An enterprise operates in a situation of
diverse and complex economic activities. The choice of the appropriate
accounting policies and the methods of applying those principle in the specific
circumstances of each enterprise call for considerable judgment by the
management of the enterprise/bank.
The purpose of accounting policies and standard is to promote better
understanding of financial statement. It also facilitates more meaningful
comparison between financial statement of different enterprise/bank.

RATIO ANALYSIS
Ratio analysis is widely used tool of financial anaylsis. It is defined as the
systematic use of ratio to interpret the financial statement so that the strength and
weakness of the firm as well as its historic performance and current financial
condition can be dertermined. The term ratio refers to the numerical or
quantitative relationship between two items/variables. This relationship can be
expressed as
 Percentage
 Fraction
 Proportion of number
These alternative methods of expressing items, which are related to each
other, are for the purpose of financial analysis refered to as ratio analysis. The
rational of the ratio analysis lies in the fact that it makes related information
comparable. A single figure byitself has no meaning but when expressed in term
of a related figure, it yields significant interference.
Since we are using the terms “RATIO”

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