TABLE OF CONTENT

SR NO. TITLE PAGE NO.

EXECUTIVE SUMMARY 9

CHAPTER 1. INRODUCTION
1. Introduction 11
2. Objective 12
3. Scope 12
4. Company profile
13
5. Organization chart
6. Research methodology 14
6.1. Primary data 15
6.2. Secondary data

CHAPTER 2. CONCEPTUAL RELEVANCE

1. What is working capital 17
2. Definition of working capital 17
3. Importance Working capital 17
4. Working capital management 18
4.1. Introduction
4.2. Composition of working capital
5. Concept of working capital
5.1. On the basis of concept
5.2. On the basis of time 19
6. Determinants of working capital needs 20
7. Approaches to managing working capital 21-23
8. Adequacy of working capital
24
25-26

CHAPTER 3. PRACTICAL APPLICATION OF IOB

1. Working capital assessment in IOB 28
2. Computation of working capital limit 29
3. Case study analysis 30-33

CHAPTER 4. REVIEW OF LITERATURE 34-36

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CHAPTER 5. GROWTH AND PERFORMANCE OF IOB
1. Balance sheet of IOB 38
2. Profit & loss A/C of IOB 39
2.1. Analysis of NWC of IOB 40-46
3. Comparison of IOB with their competitors
47
3.1. Analysis & interpretation of IOB with their
competitors 48-60

CHAPTER 6. FINDINGS, SUGGESTIONS & CONCLUSION 61

1. FINDINGS 62
2. SUGGESTIONS 63
3. CONCLUSION 64

CHAPTER 7. BIBLIOGRAPHY 65-66

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 TABLE OF CHART & ILLUSRATION

SR NO. CONTENT PAGE

NO.
1. Organization of chart 13
2. Assessment of working capital 32
3. IOB balance sheet as at 31.3.13 37
4. IOB profit & loss a/c as at 31.3.13 38
5. Analysis of net working capital
5.1. graph for Current assets 39
5.2. graph for current liabilities 40
5.3. graph for net working capital 41
6. Graph of current ratio 42
7. Graph of quick ratio 43
8. Graph of working capital ratio 44
9. Comparison of IOB with their competitors 46
9.1. analysis & interpretation of IOB with their 47-60
competitors

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 EXECUTIVE SUMMARY

Management of working capital includes consideration for net working capital, by managing
current assets to current liabilities. This means organization have to factor in a certain amount of
risk-return trade-offs in the decision making process.

In order to avoid problems organization have to make good decisions which overlap between
current assets and current liabilities are used.

The essence of the study is that the highest valued assets of a banking company is its working
capital which constitutes the major part of total capital of the banking company. It helps to know
the current condition of the bank the total amount of its current assets & total amount of current
liabilities.

I am releving theoretical aspects related to working capital management in the IOB, profile of
IOB, major other banks who is the competitors of IOB and analysis of their performance &
growth, analysis & interpretation of working capital of IOB gives overall financial view of IOB
in the banking sector.

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 CHAPTER 1

INTRODUCTION

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 1. INTRODUCTION

The overall success of the company depends upon its working capital position. So it should be
handled properly because it shows the efficiency & financial strength of a company.

WCM is highly important in firms as it is used to generate further returns for thr stakeholders.
Working Capital Management is a very important fact of financial management due to:
➢ Investments in current assets represent a substantial portion of
total investment.
➢ Investment in current assets & the level of current liabilities have to be geared quickly to
change sales.

The working capital is the life blood & nerve centre of a business firm. The importance of
working capital in any industry needs no special emphasis. No business can run effectively
without a sufficient quantity of working capital.

It is crucial to retain right level of working capital. WCM is one of the most important functions
of corporate management. A business enterprises with ample working capital is always in a
position to avail advantages of any favourable opportunity either to buy raw material or to
implement a special order or to wait for enhanced market status.

Working capital can be utilized for operating costs that are involved in the everyday life of
business. Even very successful business owners may need working capital funds when the
unexpected circumstances arises.

WCM is highly important in firms as it is used to generate further return for the stakeholders.
When working capital is managed improperly, allocating more than enough of it will render
management non-efficient & reduce the benefits of short term investments. On the other hand, if
working capital is too low, the company may miss a lot of profitable investment opportunities or
suffer short term liquidity crises, leading to degradation of company credit, as it cannot respond
effectively to temporary capital requirements.

Some the points to be studied under this topic are:

 How much cash should a firm hold?
 What should be the firms credit policy?
 How to & when to pay the creditors of the firm?

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 2. OBJECTIVES

The objectives of project on Management of working capital are as follows-:

➢ To determine policy regarding profitability, liquidity and risk by considering

company s objectives.
➢ To determine the quantum and structure of current assets.
➢ Determining the relationship between the current assets and current liabilities and
hence liquidity is determined.
Optimization of the amount of sales and investment in receivables.
Analysis of Financial Statements

3. SCOPE

The management of working capital helps us to maintain the working capital at a

satisfactory level by managing the current assets and current liabilities. It also helps to
maintain proper balance between profitability, risk and liquidity of the business
significantly.
By managing the working capital, current liabilities are paid in time. If the firm makes
payment to it creditors for raw material in time, it can have the availability of raw
material regularly, which doesn t cause any obstacles in production process. Adequate
working capital increases paying capacity of the business but the excess working capital
causes more inventory, increases the possibility of delay in realization of debts.
On the other hand, absence of adequate working capital leads to decrease in return on
investment. The goodwill of the firm is also adversely affected due to the inability to pay
current liabilities in time.
Hence, the management of working capital helps to manage all the factors affecting the working
capital in the most profitable manner.

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 4. COMPANY PROFILE

Established in 1937, Indian Overseas Bank (IOB) is a leading bank based in Chennai, India. IOB
had the distinction of simultaneously commencing operations in three branches at Karaikudi,
Chennai, and Yangon (Myanmar). Since IOB aimed to encourage overseas banking and foreign
exchange operations, it soon opened its branches in Penang and Singapore. Today, Indian
Overseas Bank boasts of a vast domain in banking sector with over 1400 domestic branches and
6 branches overseas.

IOB was the first bank to venture into consumer credit, as it introduced the popular Personal
Loan scheme. In 1964, the Bank started computerization in the areas of inter-branch
reconciliation and provident fund accounts. Indian Overseas Bank was one of the 14 major banks
which were nationalized in 1969. After nationalization, the Bank emphasized on opening its
branches in rural parts of India. In 1979, IOB opened a Foreign Currency Banking Unit in the
free trade zone in Colombo.

In the year 2000, Indian Overseas Bank undertook an initial public offering (IPO) that brought
the government's share in the bank's equity down to 75%. The equity shares of IOB are listed in
the Madras Stock Exchange (Regional), Bombay Stock Exchange, and National Stock Exchange
of India Ltd., Mumbai. Since its inception, IOB has absorbed various banks including the latest
— Bharat Overseas Bank — in 2007.
The Bank's IT department has developed software, which is used by its 1200 branches to provide
online banking to customers. Indian Overseas Bank also has a network of about 500 ATMs
throughout India. Its International VISA Debit Card is accepted at all ATMs belonging to the
Cash Tree and NFS networks. IOB also offers Internet Banking; it's one of the banks that the
Govt. of India has approved for online payment of taxes.

Indian Overseas Bank offers investment options like Mutual Funds and Shares. It provides a
wide range of consumer and commercial banking services, including Savings Account, Current
Account, Depositary Services, VISA Cards, Credit Cards, Debit Cards, Online Banking, Any
Branch Banking, Home Loans, NRI Account, Agricultural Loans, Payment of Bills / Taxes,
Provident Fund Scheme, Forex Collection Services, Retail Loans, etc.
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RESEARCH METHODOLOGY

4.1. Primary Data:

The information is collected through the primary sources like:

➢ Talking with the employees of the department.

➢ Getting information by observations e.g. in manufacturing processes.
➢ Discussion with the head of the department.

4.2. Secondary Data:

The data is collected through the secondary sources like:

➢ Annual Reports of the company.

➢ Office manuals of the department.
➢ Magazines, Reports in the company.
➢ Policy documents of various departments.

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CUSTOMERS ARE BROADLY CLASSIFIED INTO TWO:

 Personal Customers: Individuals having accounts singly or jointly (including minors)

 Non Personal Customers: Non individual customers like Proprietary concerns, Partnerships,
Companies, Trusts, Associations, Clubs, Societies, Institutions, Govt. Departments, NGOs, SHG
etc.

Accounts are broadly classified into two:

 Customer accounts (external accounts) : Deposit accounts (Savings Bank, Current Account etc),
Loan Accounts (Demand Loan, Term Loan etc) and Contingent accounts (Bank Guarantee etc)

 Office accounts. (Internal accounts): Cash Balance accounts, fixed assets account, Drafts account,
Sundry Deposit account, Interest account etc.

BASIC DEPOSITS ACCOUNT:

 Savings Bank : Running account for saving with restriction in number of withdrawal

 Current Account: Running account without restriction on number of withdrawals

 Term Deposit : Deposit of an amount for a fixed period where interest is paid monthly/Quarterly

 Special Term Deposit : Deposit of an amount for a fixed period where interest is compounded
(Capitalized) and paid on maturity.
 Recurring Deposit: Regular (Monthly) deposit of a fixed amount for a fixed period.

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Types of Loan Account:

 Overdraft

 Demand Loan

 Term Loan

 Cash Credit

Overdraft:

 A Current account when permitted to overdraw (allowing withdrawal more than deposited or
without deposits ) becomes an overdraft account

 Can be operated by cheque, ATM, INB

 A type of advance of temporary nature/ to valued clients sometimes against Term Deposit, NSC etc.

 A running account where further withdrawals (debits) can be permitted as and when deposits
(credits) come.

Demand Loan:

 Basically an advance payable on demand.

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  Payment in installments also generally allowed.

 Given against Bank deposits, NSCs, Insurance policies

 Gold loans and Pension Loans are given as Demand loans

 Only one Debit allowed for disbursement. Cannot be operated by

cheque & ATM.

Term Loan:

 Loan payable as per pre-determined installments over a fixed term.

 Extended for acquisition of assets like house, car, land, building, Plant & Machinery etc.

 Installments are to be paid out of the income of the person in case of Personal Segment loans

 Installments are to be paid out of the income of the activity financed in case of non-personal
segment loans.

Cash Credit:

 An advance facility for financing the working capital needs of commercial activities.

 A running account on the lines of Overdraft.

 An account where all the receipts and payments of the activity on account of day-to-day operations
are expected to be reflected.

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  Extended against the stocks and receivables of the unit. (Stocks: raw materials, semi finished goods,
finished goods etc, Receivable means money to be received towards sales).

Security and Margin:

 The physical or financial asset for / against which the advance is made is referred as security. A car
is a security for which a car loan is given.

 Assets acquired out of bank finance is called primary security. Any additional security offered by
the borrower is called collateral. However, in CBS parlance all securities are referred as collaterals.

 The amount contributed by the borrower to the project cost / the percentage value of the assets
owned by him is referred as margin.

Charge:

 An asset offered to the creditor (who lends the money) becomes a security only if a legally
enforceable interest is created in his favour. This process is called the creation of Charge.

 Lien, Pledge, Hypothecation and Mortgage are different types of charges applicable to different
types of securities.

Transaction:
There are three types of transactions:

 Cash: Where receipt payment of physical cash is involved

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  Transfer: Where funds are transferred from one account to another account without

 Clearing: Transfer transactions where funds are exchanged with other banks through clearing

Introduction to State Bank of India:

Evolution of SBI:
 Born as Bank of Calcutta (2 June 1806).

 Renamed Bank of Bengal (2 January 1809).

 Bank of Bombay (15 April 1840).

 Bank of Madras (1 July 1843).

 All three were called Presidency Banks.

 Amalgamated as Imperial Bank of India on 27 January 1921.

Birth of SBI:

 An Act was passed in Parliament in May 1955 and the State Bank of India was constituted on 1 July
1955.

 State Bank of India (Subsidiary Banks) Act was passed in 1959, enabling the State Bank of India to
take over eight former State-associated banks as its subsidiaries (later named Associates).

 State Bank of India was thus born with a new sense of social purpose with 480 offices, 3 Local Head
Offices and a Central Office.

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 CHAPTER 2.

CONCEPTUAL RELEVANCE OF WCM IN IOB

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 1. WHAT IS WORKING CAPITAL?
Working capital refers to the investment by the company in short terms assets such as cash,
marketable securities. Net current assets or net working capital refers to the current assets less
current liabilities.
Symbolically, it means,
Net Current Assets = Current Assets Current Liabilities.

2. DEFINITIONS OF WORKING CAPITAL:

The following are the most important definitions of Working capital:

1) Working capital is the difference between the inflow and outflow of funds. In other words it is
the net cash inflow.

2) Working capital represents the total of all current assets. In other words it is the Gross working
capital, it is also known as Circulating capital or Current capital for current assets are rotating in
their nature.

3) Working capital is defined as The excess of current assets over current liabilities and
provisions. In other words it is the Net Current Assets or Net Working Capital

3. IMPORTANCE OF WORKING CAPITAL

Working capital may be regarded as the lifeblood of the business. Without insufficient working
capital, any business organization cannot run smoothly or successfully.

In the business the Working capital is comparable to the blood of the human body. Therefore the
study of working capital is of major importance to the internal and external analysis because of
its close relationship with the current day to day operations of a business. The inadequacy or
mismanagement of working capital is the leading cause of business failures.

To meet the current requirements of a business enterprise such as the purchases of services, raw
materials etc. working capital is essential. It is also pointed out that working capital is nothing
but one segment of the capital structure of a business.

In short, the cash and credit in the business, is comparable to the blood in the human body like
finance s life and strength i.e. profit of solvency to the business enterprise. Financial
management is called upon to maintain always the right cash balance so that flow of fund is
maintained at a desirable speed not allowing slow down.

Thus enterprise can have a balance between liquidity and profitability. Therefore the
management of working capital is essential in each and every activity.

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 4. WORKING CAPITAL MANAGEMENT

4.1. INTRODUCTION:
Working Capital is the key difference between the long term financial management and short
term financial management in terms of the timing of cash.
Long term finance involves the cash flow over the extended period of time i.e 5 to 15 years,
while short term financial decisions involve cash flow within a year or within operating cycle.
Working capital management is a short term financial management.

Working capital management is concerned with the problems that arise in attempting to manage
the current assets, the current liabilities & the inter relationship that exists between them. The
current assets refer to those assets which can be easily converted into cash in ordinary course of
business, without disrupting the operations of the firm.

4.2. COMPOSITION OF WORKING CAPITAL:

4.2.1 Major Current Assets

1) Cash
2) Accounts Receivables
3) Inventory
4) Marketable Securities

4.2.2 Major Current Liabilities

1) Bank Overdraft
2) Outstanding Expenses
3) Accounts Payable
4) Bills Payable

The Goal of Working Capital Management is to manage the firm s current assets & liabilities, so
that the satisfactory level of working capital is maintained.
If the firm cannot maintain the satisfactory level of working capital, it is likely to become
insolvent & may be forced into bankruptcy. To maintain the margin of safety current asset should
be large enough to cover its current assets.
Main theme of the theory of working capital management is interaction between the current
assets & current liabilities.

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 5. CONCEPT OF WORKING CAPITAL:

The term working capital denotes the requirement of then money by a manufacturing enterprises
for its day-to-day financing of:-
i. Purchase a raw material, stores & spares.
ii. Payment of wages to employees.
iii. Payment of other expenses towards energy, fuel & water consumption, statutory dues,
rates & taxes carriage expenses etc.
iv. Other expenses required to be incurred in connection with the production, selling &
administration etc

There are 2 types of working capital:

I) On the basis of concept

i) Gross working capital
ii) Net working capital
II) On the basis of time
i) Permanent/fixed working capital
ii) Fluctuating/ variable working capital

5.1 ON THE BASIS OF CONCEPT:-

5.1.1 Gross working capital: -

Grosss working capital means the firm’s investment in total current or floating (circulating)
assets.

➢ Optimum investment in current assets:

Excessive investments impairs firm s profitability, as idle investment earns nothing. Inadequate
working capital can threaten solvency of the firm because of its inability to meet its current
obligations. Therefore there should be adequate investment in current assets.

➢ Financing of current assets:

Whenever the need for working capital funds arises, agreement should be made quickly. If
surplus funds are available they should be invested in short term securities.

5.1.2 Net working capital (NWC):- defined by 2 ways,

Difference between current assets and current liabilities
Net working capital is that portion of current assets which is financed with long term funds.

NET WORKING CAPITAL = CURRENT ASSETS CURRENT

LIABILITIES

If the working capital is efficiently managed then liquidity and profitability both will improve.
They are not components of working capital but outcome of working capital. Working capital is
basically related with the question of profitability versus liquidity & related aspects of risk.

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5.2 ON THE BASIS OF TIME:-

5.2.1 Permanent/fixed working capital:-

Permanent working capital may be defined as a minimum level of current assets. Which is
required by a firm to carry on its business operation. Every firm has to maintain a minimum
level of raw materials, WIP, finished goods and cash balances.

For e.g:- extra inventory of finished goods will have to be maintained to support the peak
periods of sales permanent working capital is permanently needed for the business & therefore, it
should be financed out of long term funds.

Fixed working capital remaining constant overtime

5.2.2 Fluctuate/variable working capital:-

It is the extra working capital needed to support the changing production & sales
activities of the firm. The amount of temporary working capital keeps on fluctuating on time
to time on the basis of business activities.

Both king of working capital-permanent & variable(temporary) are necessary to

facilitates production & sales through the operating cycle. The amount over & above
permanent working capital is temporary variable of fluctuates.

Fixed working capital increasing over time

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6 DETERMINANTS OF WORKING CAPITAL NEEDS
There are no set rules or formulas to determine the working capital requirements of a firm. The
corporate management has to consider a number of factors to determine the level of working
capital. The amount of working capital that a firm would need is affected not only by the factors
associated with the firm itself but is also affected by economic, monetary and general business
environment. Among the various factors the following are important ones.

6.1. Nature and Size of Business

The working capital needs of a firm are basically influenced by the nature of its business.
Trading and financial firms generally have a low investment in fixed assets, but require a large
investment in working capital. Retail stores, for example, must carry large stocks of a variety of
merchandise to satisfy the varied demand of their customers. Some manufacturing businesses'
like tobacco, and construction firms also have to invest substantially in working capital but only
a nominal amount in fixed assets. In contrast, public utilities have a limited need for working
capital and have to invest abundantly in fixed assets. Their working capital requirements are
nominal because they have cash sales only and they supply services, not products. Thus, the
amount of funds tied up with debtors or in stocks is either nil or very small. The working capital
needs of most of the manufacturing concerns fall between the two extreme requirements of
trading firms and public utilities.

The size of business also has an important impact on its working capital needs. Size may be
measured in terms of the scale of operations. A firm with larger scale of operations will need
more working capital than a small firm. The hazards and contin-gencies inherent in a particular
type of business also have an influence in deciding the magnitude of working capital in terms of
keeping liquid resources.

6.2 Manufacturing Cycle

The manufacturing cycle starts with the purchase of raw materials and is completed with the
production of finished goods. If the manufacturing cycle involves a longer period the need for
working capital will be more, because an extended manufacturing time span means a larger tie-

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up of funds in inventories. Any delay at any stage of manufacturing process will result in
accumulation of work-in-process and will en-hance the requirement of working capital. You may
have observed that firms making heavy machinery or other such products, involving long
manufacturing cycle, attempt to minimize their investment in inventories (and thereby in
working capital) by seeking advance or periodic payments from customers.

6.3 Business Fluctuations

Seasonal and cyclical fluctuations in demand for a product affect the working capital requirement
considerably, especially the temporary working capital requirements of the firm. An upward
swing in the economy leads to increased sales, resulting in an increase in the firm's investment in
inventory and receivables or book debts. On the other hand, a decline in the economy may
register a fall in sales and, consequently, a fall in the levels of stocks and book debts.

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Seasonal fluctuations may also create production problems. Increase in production level may be
expensive during peak periods. A firm may follow a policy of steady production in all seasons to
utilise its resources to the fullest extent. This will mean accumulation of inventories in off-season
and their quick disposal in peak season. Therefore, financial arrangements for seasonal working
capital requirement should be made in advance. The financial plan should be flexible enough to
take care of any seasonal fluctuations.

6.4 Production Policy

If a firm follows steady production policy, even when the demand is seasonal, inven-tory will
accumulate during off-season periods and there will be higher inventory costs and risks. If the
costs and risks of maintaining a constant production schedule are high, the firm may adopt the
policy of varying its production schedule in accordance with the changes in demand. Firms
whose physical facilities can be utilised for manufacturing a variety of products can have the
advantage of diversified activities. Such firms manufacture their main products during the season
and other products during off-season. Thus, production policies may differ from firm to firm,
depending upon the circumstances. Accordingly, the need for working capital will also vary.

6.5 Turnover of Circulating Capital

The speed with which the operating cycle completes its round (i.e., cash → raw materials →
finished product → accounts receivables → cash) plays a decisive role in influencing the
working capital needs.

6.6 Credit Terms

The credit policy of the firm affects the size of working capital by influencing the level of book
debts. Though the credit terms granted to customers to a great extent depend upon the norms and
practices of the industry or trade to which the firm belongs; yet it may endeavor to shape its
credit policy within such constraints. A long collection period will generally mean tying of larger
funds in book debts. Slack collection procedures may even increase the chances of bad debts.

The working capital requirements of a firm are also affected by credit terms granted by its
creditors. A firm enjoying liberal credit terms will need less working capital.
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6.7 Growth and Expansion Activities

As a company grows, logically, larger amount of working capital will be needed, though it is
difficult to state any firm rules regarding the relationship between growth in the volume of a
firm's business and its working capital needs. The fact to recognize is that the need for increased
working capital funds may precede the growth in business activities, rather than following it.
The shift in composition of working capital in a company may be observed with changes in
economic circumstances and corporate practices. Growing industries require more working
capital than those that are static.

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6.8 Operating Efficiency

Operating efficiency means optimum utilization of resources. The firm can minimize its need for
working capital by efficiently controlling its operating costs. With in-creased operating
efficiency the use of working capital is improved and pace of cash cycle is accelerated. Better
utilization of resources improves profitability and helps in relieving the pressure on working
capital.

6.9 Price Level Changes

Generally, rising price level requires a higher investment in working capital. With increasing
prices the same levels of current assets need enhanced investment. However, firms which can
immediately revise prices of their products upwards may not face a severe working capital
problem in periods of rising levels. The effects of increasing price level may, however, be felt
differently by different firms due to variations in individual prices. It is possible that some
companies may not be affected by the rising prices, whereas others may be badly hit by it.

6.10 Other Factors

There are some other factors, which affect the determination of the need for working capital. A
high net profit margin contributes towards the working capital pool. The net profit is a source of
working capital to the extent it has been earned in cash. The cash inflow can be calculated by
adjusting non-cash items such as depreciation, out-standing expenses, losses written off, etc,
from the net profit, (as discussed in Unit 6).

The firm's appropriation policy, that is, the policy to retain or distribute profits also has a bearing
on working capital. Payment of dividend consumes cash resources and thus reduces the firm ',s

working capital to that extent. If the profits are retained in the business, the firm's working
capital position will be strengthened.

In general, working capital needs also depend upon the means of transport and communication.
If they are not well developed, the industries will have to keep huge stocks of raw materials,
spares, finished goods, etc. at places of production, as well as at distribution outlets.
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5. APPROACHES TO MANAGING WORKING CAPITAL
Two approaches are generally followed for the management of working capital: (i) the
conventional approach, and (ii) the operating cycle approach.

5.1. The Conventional Approach

This approach implies managing the individual components of working capital (i.e. inventory,
receivables, payables, etc) efficiently and economically so that there are neither idle funds nor
paucity of funds. Techniques have been evolved for the man-agement of each of these
components. In India, more emphasis is given to the man-agement of debtors because they
generally constitute the largest share of the invest-ment in working capital. On the other hand,
inventory control has not yet been practiced on a wide scale perhaps due to scarcity of goods (or
commodities) and ever rising prices.

5.2. The Operating Cycle Approach

This approach views working capital as a function of the volume of operating ex-penses. Under
this approach the working capital is determined by the duration of the operating cycle and the
operating expenses needed for completing the cycle. The duration of the operating cycle is the
number of day involved in the various stages, commencing with acquisition of raw materials to
the realisation of proceeds from debtors. The credit period allowed by creditors will have to be
set off in the process. The optimum level of working capital will be the requirement of operating
expenses for an operating cycle, calculated on the basis of operating expenses required for a year.

In India, most of the organisations use to follow the conventional approach earlier, but now the
practice is shifting in favour of the operating cycle approach. The banks usually apply this
approach while granting credit facilities to their clients.

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 OPERATING CYCLE OF WORKING CAPITAL

8. ADEQUACY OF WORKING CAPITAL

The firm should maintain a sound working capital position. It should have adequate working
capital to run its business operations. Both excessive as well as inadequate working capital
positions are dangerous from the firms point of view. Excessive working capital not only
impairsthe firms profitability but also result in production interruptions and inefficiencies.

8.1. The dangers of excessive working capital are as follows:

➢ It results in unnecessary accumulation of inventories. Thus, chances of

inventory mishandling, waste, theft and losses increase.
➢ It is an indication of defective credit policy slack collections period.
Consequently, higher incidence of bad debts results, which adversely
affects profits.
➢ Excessive working capital makes management complacent which
degenerates into managerial inefficiency.
➢ Tendencies of accumulating inventories tend to make speculative
profits grow. This may tend to make dividend policy liberal and difficult
to cope with in future when the firm is unable to make speculative

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profits.

8.2. Inadequate working capital is also bad and has the following dangers:

➢ It stagnates growth. It becomes difficult for the firm to undertake

profitable projects for non- availability of working capital funds.
➢ It becomes difficult to implement operating plans and achieve the firm s
profit target.
➢ Operating inefficiencies creep in when it becomes difficult even to meet
day commitments.
➢ Fixed assets are not efficiently utilized for the lack of working capital
funds. Thus, the firm s profitability would deteriorate.
➢ Paucity of working capital funds render the firm unable to avail
attractive credit opportunities etc.
➢ The firm loses its reputation when it is not in a position to honour its
short-term obligations.

As a result, the firm faces tight credit terms.

An enlightened management should, therefore, maintain the right amount of working capital on a
continuous basis. Only then a proper functioning of business operations will be ensured. Sound
financial and statistical techniques, supported by judgment, should be used to predict the
quantum of working capital needed at different time periods.

A firm s net working capital position is not only important as an index of liquidity but it is also
used as a measure of the firm’s risk.

Risk in this regard means chances of the firm being unable to meet its obligations on due date.
The lender considers a positive net working as a measure of safety. All other things being equal,
the more the net working capital a firm has, the less likely that it will default in meeting its
current financial obligations. Lenders such as commercial banks insist that the firm
should maintain a minimum net working capital position.
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 CHAPTER 3

PRACTICAL APPLICATION OF IOB

28 | P a g e
1. WORKING CAPITAL ASSESSMENT IN IOB

➢ Borrowers with working capital limit upto Rs.2crores (Rs.7.5crore for MSME borrowers)
will be assessed as per Nayak Committee Recommendation i.e.Turnover Method.

➢ When the working capital limits are fixed under turnover method. It is based on sales
projections.

➢ Borrowers enjoying working capital limit of Rs.2crore and upto Rs.10crore in respect of
MSME borrowers the existing traditional method of arriving at the permissible bank
finance calling CMA data will be continued.

➢ FOR E.G:

If the holding period of raw material in a borrower unit is more than the normal average
period in general in a particular industry and in that level if the borrower is really doing
well then we have to based on past experience of the borrower.

➢ CURRENT RATIO:

It is stipulated by IOB that the current ratio of 1.33:1 (1.25:1) for MSE units continued as
benchmark for deciding the working capital requirements of borrower. However, in
justifiable cases lower current ratio can be considered acceptable on a case to case basis
depending upon then components of current assets and current liabilities.

➢ MONITARING AND FOLLOW UP:

Borrower with working capital limit of above 10crore who has opted for cash budget
system has to submit cash budget with Annexure relating to position of C.A & C.L every
month.

29 | P a g e
2. COMPUTATION OF W.C LIMIT:

A) MSME units requiring fund based working capital limits upto Rs.7.5crore to be provided
the limits computed on the basis of 20% of their projected annual turnover method.
The units would be required to bring in 5% of their annual turnover margin money.
25% of the annual turnover should be compared as working capital requirement of which
one fifth should be met by the borrower contributions and balance by the bank. Gross sales
are the basis for the projected turnover.

B) In case the W.C cycle is shorter than three months, the working capital required would be
less than 25% of projected turnover. The bank finance need not be 20% of turnover.
However, borrower’s consent should be obtained in waiting for sanctioning reduced limit.

C) If ne W.C or margin in the system is already in excess of 5% of turnover. The working

capital limit from bank could be fixed less than 20%. However, the genuine
requirement of the units are to be met adequately. There is no restriction on extending
finance at a level that is higher than 20% of turnover.

D) For the purpose of working out bank finance in case of an existing unit, the basis officials
and entrepreneurs should work out an agreed growth rate and projected turnover based on
the past performance, the likely prospects and few other factors like modernization/
expansion of existing manufacturing capacity government policy on taxation etc.

E) For those sectors in the industry which are recording positive growth & when the
individual unit in the industry has also recorded positive growth during the last 2 to 3 yrs
growth rate of a minimum of 15% over the current year’s turnover may be accepted for
arriving at projected sales turnover.

F) For new units. Break even level of capacity/sales or nearby that level may be accepted as
the accepted projected sales turnover for sanction of necessary working capital limit.The
projection accepted by the term lending institutions for the first year of operation may be
accepted by the bank for accessing working capital requirement of new units.

G) For fixing limits against stocks, receivables etc. the existing syatems and procedure
should continue. The operations of the limits should be allowed after taking into account
the value of stock & unpaid stocks.

30 | P a g e
3. CASE STUDY ANALYSIS
BRANCH –THANE

A/C- ADITI BROOMS PVT.LTD.

ACTIVITY- MANUFACTURING & SELLING OF NATURAL BROOMS.

PURPOSE OF NOTE: TO CONSIDER THE REQUEST OF THE COMPANY TO SANTION

THEM WORKING CAPITAL LIMIT IN THE FORM OF CASH CREDIT OF RS.300.LACS

3.1. BACKGROUND OF THE CO.

M/S. Aditi Brooms Pvt.Ltd. is a pvt ltd co. incorporated on 17.01.2011 with following as its
directors.

1) Mr. mayur L gala

2) Mr. bhawanji M karani

The company is engaged in manufacturing & selling of natural brooms.

Mr. mayor L gala is the key promoter of the company, has vast experience of business in this
field.

He was engaged with his father shri laliji gala in the business.

Shri laliji gala had started the business of manufacturing & traditional brooms during 1945 in the
name of m/s. laliji ravji & co. at masjid bunder, Mumbai.

31 | P a g e
3.2. FINANCIAL INDICATOR OF SUBJECT COMPANY

Year Ending 31.3.2011 31.3.2012 31.3.2013 31.3.2014

Audit status Audited Estimated Projection Projection

Netsales 43.37 699.04 1000 1150

Operating profit 0.61 26.64 41.33 52.09
Net profit after tax 0.61 18.65 28.93 36.46
Cash generation 0.61 18.65 28.93 36.46
Net working capital 81.6 100.27 139.2 179.66
Current ratio 1.83:1 1.26:1 1.34:1 1.38:1
TNW 1.6 44.27 73.2 109.66

TOL/TNW 111.6 10.05 6.74 5.97

Year Ending
Adjusted TOL/TNW 31.3
1.21 .2011 31.3
1.26 .2012 31.
0.96 3.2013
Audit Status Audited Provisional Projection
Term liability/TNW 50 -1.07 0.63
LIABILITIES:
capital reserves 1.6 44.27 73.2
long term liabilities 80 56 70
3.3. current liabilities 98.72 389.17 423.49
TOTAL LIABILITIES 180.32 489.44 566.69

ASSESTS:
fixed assets Nil nil nil
non current assets Nil nil nil
current assets 180.32 489.44 566.69
intangible assests Nil nil nil
TOTAL ASSETS 180.32 489.44 566.69
FINANCIAL POSITION OF SUBJECTED COMPANY

32 | P a g e
 3.4. COMMENTS ON FINANCIAL/PERFORMANCE OF THE COMPANY

As the company has started their activity during third quarter of the financial year, their balance
sheet shows the performance of a quarter for the year ended 2010-11.As this was their first year,
the past performance cannot be ascertained.

SALES:

They have achieved sales of Rs.105.00 lacs which is for two months sales.

As per provisional B/S as of 31.3.2012 they achieved sales of Rs.699.04 lacs as against projected
turnover of Rs 1000 lacs for 2011-12.

The co. stated that they could not achieve the targeted sales as the crop was not upto the mark
during the year 2011-12 and also this was their first year of operation.

Though the bank have sanctioned a CC limit of Rs.300 lacs, the avg utilisation was less.

It is informed that they started their another unit at banglore, put together the sales projected for
Rs.1000 lacs may be achievable for the year 2012-13

PROFITS:

The main cost is towards raw material and labour charges. As the company could not achieved
the estimated sales, they could not achieve the estimated profit also for the financial yr 2011-12.

TNW:

The directors have brought Rs.25 lacs as capital with plough back of profit this is increased to
Rs. 44.27 lacs as on 31.3.2012

In addition to this Rs.56 lacs is brought in as unsecured loan which will be in the business as
projected.

TOL/TNW:

TOL/TNW is very high for 2011 & 12. By taking the USL as quasi equity this will improve.

NWC & CR:

NWC is positive & shown increasing with the NWC increasing the current ratio also projected
above the benchmark level.

33 | P a g e
Overall financial projected appears satisfactory.

3.5. ASSESSMENT OF WORKING CAPITAL (Rs. In lacs)

Particulars 31.3.2013
Current assets :
Stock 293.59
Sundry debtors 246.58
Other current assets 26.53
Total current assets 566.69

Less: Current liabilities:

Sundry creditors 110.10
Other current liabilities 13.39
Total current liabilities 123.49

Working capital gap (WCG) 443.20

Less: 25% of C.A 141.67
Projected NWC for 2013 301.53
MPBF 300.00
Cash credit requested 300.00

34 | P a g e
 CHAPTER 4

REVIEW OF LITERATURE

35 | P a g e
 The corporate finance literature has traditionally focused on the study of long-term financial decisions.
However, short-term assets and liabilities are important components of total assets and needs to be carefully
analyzed. Management of these short-term assets and liabilities warrants a careful investigation since the
working capital management plays an important role for the firm’s profitability and risk as well as its value.
The optimal level of working capital is determined to a large extent by the methods adopted for the
management of current assets and liabilities.

A research study on working capital management of paper industries in India was conducted by R.
Sivarama and Prasad (2001). They reported that the chief executives properly recognized the role of
efficient use of working capital in liquidity and profitability, but in practice they could not achieve it. Again
they reported a clear reveal of a suboptimum utilization of working capital in paper industry.

A study on working capital management of horticulture industry in himachal Pradesh by Joginder

Singh Dulta (2001) observed the size of current assets and current liabilities with all variations, registered a
slight increase, but due to inefficient use of the various components of working capital of Himachal Pradesh
Horticulture Produce Marketing and Processing Corporation Ltd, the current liabilities increased
proportionately at a faster rate than current assets and net working capital position was worsened
continuously.

1. WORKING CAPITAL:

Working capital is the fund available for meeting day to day requirement. Difference between
current assets and current liabilities is called working capital.

2. CURRENT ASSETS:

Current asset are resources, which are in cash or will soon be converted into cash within
accounting year.

3. CURRENT LIABILITIES:

Current liabilities are committment which will soon require settlement within the accounting
year.

A] A study on woking capital management with special reference to HMT MACHINE TOOL
LTD. Kala massery was done by ms.smitha saviout on june 2007.
36 | P a g e
 The objective of the study is to analyse the liquidity position of the company to compute the
average collection & payment period & to analyse the short term solvency of the concern.
The conclusion of the study is that the working capital of the company is found not
satisfactory. Analyzing the various liquidity ratios, it is found that all the liquidity ratios are not
good than the normal concepts.
The large holding of current assets strengthens firms liquidity position but it also reduces the
overall profitability.
Effort of reducing working capital is a continuous exercise & it is an opportunity for
improvement.

B] A study on WCM IN APPOLO TYRES LTD, KOCHI was done by ms. Faizal a on june
2007.
The objective of the study is to analyse the management of different components of w.c in the
concern to examine the liquidity position of the company, to compute the average collection
period & to project the working capital needs of the company.
The conclusion of the study is that the sufficient working capital should be maintained. The
performance of the company is very impressive. The company’s financial management &
inventory department are working very effective & efficient.
The suggestions made will be of much useful to the company for their better management of
working capital.

C] A study on WCM is done by Prakash Kumar Sharma on STATE BANK OF INDIA on 12 th

june, 2010. He had taken into consideration the current assets & the current liabilities of the state
bank of india. It shows that in the year 2007 & 2008 the net working capital is so high but in the year
2009 it was so low, but in the year 2010 SBI is able to manage the working capital properly.

D] A study on WCM at NALCO done by RAKESH KUMAR BARAL have studied the
components of working capital management system of NALCO. It is found that the company has
a sound & effective policy & its performance is very good even in this bad recession situation
37 | P a g e
 company has managed to past good profit. Company is competing well at the domestic as well as
the international level & it is among the low cost producer of aluminium in the world only
because of its proper management of finance, specially the short term finance known as the
working capital.

A study on working capital management is done by me Prakash Kumar Sharma on State Bank Of India on
12 june 2010. I had taken into consideration the current assets and the current liabilities of the State Bank
Of India. It shows that in the year 2007 and 2008 the net working capital is so high but in the year 2009 it
was so low , but in the year 2010 SBI is able to manage the working capital properly.

State Bank of Bikaner and Jaipur:

State Bank of Bikaner and Jaipur was established in 1963 after amalgamation of erstwhile State Bank of
Jaipur (established in 1943) with State Bank of Bikaner (established in 1944) as a subsidiary of State Bank
of India. The Bank took over the business of the Govind Bank Pvt. Ltd. on 25.04.1966. The Bank's main
area of operation is Rajasthan, with presence at all important centers in the country.

The Bank follows transparent corporate governance policies and is preparing itself for smooth
migration to Basel II. On technology front, during 2005-06, the Bank migrated all branches to Core
Banking Solution (CBS). The Bank has installed 336 ATMs and all ATMs are the part of over 5500 ATMs
of State Bank Group. The Bank has been earning profit continuously since its inception and the Bank's
business crossed the level of Rs. 49,245 crores with a net profit of Rs. 305.80 crores at the end of March,
2007.

38 | P a g e
State Bank of Hyderabad:

State Bank of Hyderabad of India was established on August 8, 1941. It was then known as Hyderabad
State Bank. The bank was the central bank of the erstwhile princely State of Hyderabad during pre-
independence days. Hyderabad State Bank was responsible for managing Osmania Sikka-the currency of
Hyderabad state in those days. The first branch of Hyderabad State Bank opened at Gunfoundry, Hyderabad
on April 5, 1942. Hyderabad State Bank came under operational control of Reserve Bank of India (RBI) in
1953. The bank became RBI's subsidiary. Hyderabad State Bank was also renamed State Bank of
Hyderabad in the same year. It became an associate of State Bank of India on October 1, 1959.
Current business turnover is Rs. 88600 crores in the Financial Year ending March 31, 2008.

State Bank of Mysore:

State Bank of Mysore was established in the year 1913 as Bank of Mysore Ltd. under the patronage of the
erstwhile Govt. of Mysore, at the instance of the banking committee. Subsequently, in March 1960, the
Bank became an Associate of State Bank of India. State Bank of India holds 92.33% of shares. The Bank's
shares are listed in Bangalore, Chennai, and Mumbai stock exchanges.

39 | P a g e
State Bank of Patiala:

State Bank of Patiala was founded by Late Bhupinder Singh, Maharaja of erstwhile Patiala state, with one
branch by the name of 'Chowk Fort to the year 1917.’Patiala State Bank' was state owned and setup for the
explicit purpose of fostering growth of agriculture, trade and industry. The constitution, scope and
operations of the Bank underwent a sea change with the formation of the Patiala and east Punjab States
Union (PEPSU) in 1948.The Bank was then reorganized and brought under the control of Reserve Bank of
India. Another milestone in history of the Bank was its becoming a subsidiary of the State Bank of India on
1st April,1960 when it was named as the State Bank of Patiala and since then it has grown significantly
both in size and volume of business. During these glorious years, the Bank has been playing an important
role in banking sphere. The bank has now added a golden chapter to its history by fully computerizing all its
branches on 24th January 2003 and became the first fully computerized Public Sector Bank in the country.

Bank of Saurashtra:

The origins of State Bank of Saurashtra can be traced to Bhavnagar Darbar Bank, which was established
in the year 1902. In 1948, when princely states were integrated to form Saurashtra state, the Bhavnagar
Darbar Bank was formed into a statutory corporation, called State Bank Of Saurashtra, and the four Darbar
Banks - Rajkot State Bank, Porbandar State Bank, Palitana Darbar Bank and Vadia State Bank - were
merged with it with effect from 1st July, 1950 as its branches. In 1960, the State Bank of Saurashtra joined
the State Bank family as one of its fully owned subsidiaries. At the close of 1950, the Bank had only 9
branches and deposits of Rs.7 crores. By 31.03.2005, the total deposits amounted to Rs. 12613.04 crores
and total advances reached the level of Rs. 6714.07 crores. Presently, the Bank has a network of 423
branches spread over 15 states and the Union Territory of Daman and Diu.

40 | P a g e
State Bank of Travancore:

State Bank of Travancore (SBT) was originally established as Travancore Bank Ltd. in 1945 sponsored
by the erstwhile Princely State of Travancore. Under a special statute of the Indian Parliament (SBI
subsidiary Banks Act 1959) it has been made an Associate of the State Bank of India and a member of the
State Bank Group. Now it has network of 712 branches with total business of Rs. 66644 Crores.

State Bank of Indore:

State Bank of Indore popularly known as Indore Bank in Malwa Region, originally known as Bank of
Indore Ltd. was incorporated under a special charter of His Highness Maharaja Tukojirao Holker-III, the
then ruler of this region. In terms of State Bank of India (Subsidiary Banks) Act, 1959 the Bank of Indore
Ltd. became a subsidiary of State Bank of India w.e.f. 1st January 1960 and was renamed as State Bank of
Indore The Bank acquired business of The Bank of Dewas Ltd. in 1962 and The Dewas Senior Bank Ltd. in
1965 and was up-graded to class 'A' category bank in 1971. Ever since, the Bank has been making steady
progress and at the end of September 2008, the business turnover has crossed Rs.45000 crore.

41 | P a g e
LIMITATIONS:-

1) The survey was conducted in the Bangalore.

2) Managers were too busy persons, so it was difficult to get their time and view for specific
questions.

3) Area covered for the project while doing job also was very large and it was very difficult to correlate
two different customers / respondents’ views in a one.

42 | P a g e
 CHAPTER 5.

GROWTH AND PERFORMANCE OF IOB

43 | P a g e
 INDIAN OVERSEAS BANK

BALANCE SHEET AS AT 31.03.2013

-------IN RS. CR-------

Particulars Mar '12 Mar '11 Mar '10 Mar '09 Mar '08
12 mths 12 mths 12 mths 12 mths 12 mths
Capital and Liabilities:
Total Share Capital 797 618.75 544.8 544.8 544.8
Equity Share Capital 797 618.75 544.8 544.8 544.8
Net Worth 11,927.66 9,324.93 7,524.58 7,150.96 4,856.67
Deposits 178,434.18 145,228.7 110,794.71 100,115.89 84,325.58
5
Borrowings 23,613.85 19,355.40 8,982.20 6,548.28 6,353.65
Total Debt 202,048.03 164,584.1 119,776.91 106,664.17 90,679.23
5
Other Liabilities & 5,672.50 4,875.19 3,794.90 7,258.26 6,323.84
Provisions
Total Liabilities 219,648.19 178,784.2 131,096.39 121,073.39 101,859.7
7 4
Mar '12 Mar '11 Mar '10 Mar '09 Mar '08
12 mths 12 mths 12 mths 12 mths 12 mths
Assets:
Cash & Balances with RBI 10,198.91 10,010.89 7,666.45 5,940.44 9,124.23
Balance with Banks 6,062.19 2,007.76 2,158.19 4,981.46 1,217.09
Advances 140,724.44 111,832.9 79,003.93 74,885.27 60,423.84
8
Investments 55,565.88 48,610.45 37,650.56 31,215.44 28,474.71
Gross Block 2,699.76 2,535.57 2,460.53 2,352.74 1,102.80
Accumulated Depreciation 970.66 859.36 768.63 655.95 569.11
Net Block 1,729.10 1,676.21 1,691.90 1,696.79 533.69
Capital Work In Progress 14.95 4.9 7.67 13.07 24.88
Other Assets 5,352.70 4,641.08 2,917.70 2,340.93 2,061.29
Total Assets 219,648.17 178,784.2 131,096.40 121,073.40 101,859.7
7 3
Contingent Liabilities 42,601.94 33,490.63 31,288.74 31,016.27 24,173.83
Bills for collection 24,927.12 15,838.45 11,252.80 10,839.82 10,215.01
Book Value (Rs) 135.34 131.96 116.54 109.06 87.05

44 | P a g e
 INDIAN OVERSEAS BANK

Profit and loss a/c on 31.3.2013

---IN Rs.CR---

Particulars Mar’ 12 Mar’ 11 Mar’ 10 Mar’ 09 Mar’ 08

12mths 12mths 12mths 12mths 12mths
Income: 17,897.08 12,101.47 10,245.77 9,641.40 7,968.25
Interest Earned 1,716.02 1,278.02 1,196.59 1,713.07 1,075.46
Other Income 19,613.10 13,379.49 11,442.36 11,354.47 9,043.71
Total Income
Expenditure 12,880.91 7,893.44 7,077.91 6,771.81 5,288.79
Interest expended 2,082.98 1,741.14 1,734.75 1,271.84 949.68
Employee Cost 2,031.78 1,473.33 1,320.98 737.99 419.34
Selling and Admin Expenses 111.06 105 111.76 100.94 75.1
Depreciation 1,456.25 1,094.04 490 1,146.10 1,108.46
Miscellaneous Expenses 0 0 0 0 0
Preoperative Exp Capitalised 4,633.23 3,606.12 3,385.96 2,307.20 1,610.73
Operating Expenses 1,048.84 807.39 271.53 949.67 941.85
Provisions & Contingencies 18,562.98 12,306.95 10,735.40 10,028.68 7,841.37
Total Expenses 1,050.13 1,072.54 706.96 1,325.79 1,202.34
Mar’ 12 Mar’ 11 Mar’ 10 Mar’ 09 Mar’ 08
Net Profit for the Year 0 0 0 0 0
Extraordionary Items 0 0 0 0 0
Profit brought forward 1,050.13 1,072.54 706.96 1,325.79 1,202.34
Total 0 0 0 0 0
Preference Dividend 416.83 359.56 223.09 286.82 203.96
Equity Dividend 0 0 0 0 0
Corporate Dividend Tax 13.18 17.33 12.98 24.34 22.07
Earning Per Share (Rs) 45 50 35 45 35
Equity Dividend (%) 135.34 131.96 116.54 109.06 87.05
Book Value (Rs)
Appropriations 586 324.98 356.29 1,029.30 409.16
Transfer to Statutory Reserves 47.3 388 127.58 9.67 589.22
Transfer to Other Reserves 416.83 359.56 223.09 286.82 203.96

Proposed Dividend 0 0 0 0 0
Balance c/f to Balance Sheet 1,050.13 1,072.54 706.96 1,325.79 1,202.34
Total

45 | P a g e
 FROM THE B/S OF IOB (31ST MARCH 2012) ……
RS IN CR….

2.1. ANALYSIS OF NET WORKING CAPITAL OF IOB

PARTCULARS MAR’08 MAR’09 MAR’10 MAR’11 MAR’12

CURRENT ASSETS 2061.29 2340.93 2917.70 4641.08 5352.70

LESS:CURRENT 6323.84 7858.26 3794.90 4875.19 5672.50

ASSETS

NET WORKING (4262.55) (4917.34) (877.20) (234.11) (319.80)

CAPITAL

GRAPH FOR CURRENT ASSETS

Series 1
6000
5352.7
5000
4641.08
4000
Series 1
3000 2917.7
2340.93
2000 2061.29

1000

0
2008 2009 2010 2011 2012

46 | P a g e
INTERPRETATION:-

As you can see, this graph shows that the flow of current assets was go on increasing and there is
15.33% increase in current assets in 2012. It means the increase in current assets shows the
liquidity soundness of the IOB.

GRAPH FOR CURRENT LIABILITES

Series 1
8000
7000 7258.26
6323.84
6000
5672.5
5000 4875.19 Series 1
4000 3794.9
3000
2000
1000
0
2008 2009 2010 2011 2012

INTERPRETATION:-

Current liabilities shows company short term debts pay to outsiders. In 2009, current liabilities
was increased heavily but suddenly in 2010 it was go down and again in 2012 it was increase
upto 16.35% as compare to 2011.

As we see the last 5 years current assets is less than current liabilities. It means that the company
not having enough fund to meet its pay to outsiders.

47 | P a g e
 GRAPH FOR NET WORKING CAPITAL

Series 1
0
2008 2009 2010 2011 2012
-234.11 -319.8
-1000
-877.2

-2000
Series 1

-3000

-4000
-4262.55
-5000
-4917.34

-6000

INTERPRETATION:-

Working capital to finance day to day operatons of a firm. In every company or bank there
should be an optimum level of working capital. It should not be too less or not too excess.

In the IOB there is too less working capital, the decreasing in working capital arises because the
high current liabilities in the business.

CALCULATION OF CURRENT RATIO

48 | P a g e
 BALANCE SHEET ON MAR’08 MAR’09 MAR’10 MAR’11 MAR’12
31ST DEC

CURRENT ASSETS 2061.29 2340. 93 2917.70 4641.08 5352.70

CURRENT LIABILIITES
6323.84 7258.26 3794.90 4875.19 5672.50

CURRENT RATIO 0.33 0.32 0.76 0.95 0.94

Series 1
1
0.95 0.94
0.9
0.8
0.76
0.7
0.6 Series 1
0.5
0.4
0.3 0.33 0.32
0.2
0.1
0
2008 2009 2010 2011 2012

INTERPRETATION:-

If current assets is below 1 it indicates that current liabilities exceeds current assets, then the
company may have problems paying its bills on time.

So usually, a higher current ratio is better than a lower current ratio with regard to maintaining
liquidity.

CALCULATION OF QUICK RATIO

49 | P a g e
 FORMULA

QUICK ASSETS = CURRENT ASSETS + BANK BAL + CASH IN HAND +

ADVANCES- INVENTORY

----------------------------------------------------------------------------

PARTICULARS MAR’08 MAR’09 MAR’10 MAR’11 MAR’12

CURRENT 2,061.29 2,340.93 2,917.70 4,641.08 5,352.70

ASSETS
BANK BAL 1,217.09 4,981.46 2,158.19 2,007.76 6,062.19

CASH IN HAND 9,124.23 5,940.44 7,666.45 10,010.89 10,198.81

ADVANCES 60,423.84 1,11,832.98 1,40,724.4

74,885.27 79,003.93
4
CURRENT 6,323.84 7,258.26 3,794.90 4,875.19 5,672.50
LIABILITIES
QUICK RATIO 11.32 11.46 23.61 25.94 27.55

30
27.55
25 25.94
23.61

20

15 Column2
11.32 11.46
10

0
2008 2009 2010 2011 2012

50 | P a g e
 INTERPRETATION:-
Quick Ratio is an indicator of company's short-term liquidity. Quick ratio specifies whether the
assets that can be quickly converted into cash are sufficient to cover current liabilities.

Ideally, quick ratio should be 1:1 this indicates that the business can meet its current financial
obligations with the available quick funds on hand.

IOB quick ratio has increasing year by year it indicates that many lenders are interested in this
ratio.

CALCULATION OF WORKING CAPITAL TURNOVER RATIO

FORMULA

COST OF SALES

WORKING CAPITAL TURNOVER RATIO =

------------------------------

PARTICULARS MAR’08 MAR’09 MAR’10 MAR’11 MAR’12

COST OF SALES 1535.64 2206.25 3274.20 3501.11 4522.17

NET WORKING
CAPITAL (4262.55) (4917.34) (877.20) (234.11) (319.80)

WCTR (0.36) (0.44) (3.73) (14.95) (14.14)

51 | P a g e
 Series 1
0 -0.36 -0.44
2008 2009 2010 2011 2012
-2
-4 -3.73
-6 Series 1
-8
-10
-12
-14 -14.14
-14.95
-16

INTERPETATION:-
WCTR was goes on increasing in negative form year by year. It shows that cost of sales goes on
increasing but as compare to net working capital it was very high and NWC is low, it indicates
that cost is high as compare to profit.

52 | P a g e
 Particulars IOB Hdfc SBI BOB PNB
bank
Market Performance 10 of 100 8 of 100 22 of 100 23 of 100 18 of 100
Probability Of Bankruptcy 29.56 % 29.0% 1.0 % 39.38 % 35.6 %
Operating Margin 29.30 % 46.76% 36.42 % 53.61 % 50.18 %
Profit Margin 23.12 % 31.93 % 23.48 % 44.63 % 35.16 %
Price to Book N/A 4.47 T 1.18 T 0.92 T 0.79 T
Return On Asset 0.53 % 1.61 % 0.92 % 1.28 % 1.18 %
Price to Earning 5.72 T 25.63 T 7.09 T 5.06 T 4.79 T
Gross Profit 34.37 B 98.68 B 606.78 B 82.86 B 106.9 B
Price to Earnings To 0.23 T N/A 0.53 T 0.47 T 0.58 T
Growth
Return On Equity 9.88 % 16.60 % 16.27 % 20.87 % 19.27 %
Cash Flow from Operations (295.13 B) (496 B) (1890 B) (663.75 (682.01
B) B)
One Year Low 68.75 400.45 N/A 618.3 703.45
N/A 2.36 B 671.04 M 1.15 B 339.18 M
Working Capital (1047 B) (1291.34B N/A (831.41 (778.44
) B) B)
Cash per Share 90.97 T 101.46 T 916 T 339.13 T 82.27 T
Market Capitalization N/A 1430 B 1310 B 278.97 B 240.58 B
Total Asset 1470 B 1834.03B N/A 1166.8 B 1046.86
B
Current Liabilities 1181.42 B 1493.88 B N/A 982.74 B 885.64 B
Retained Earnings N/A 65.28 B N/A 50.63 B 14.15 B

Net Income 10.78 B 55.79 B 177.05 B 52.49 B 50.25 B

Total Debt 236.14 B 260.64 B 1580 B 73.19 B 50.48 B
Price to Sales N/A 8.08 T 1.66 T 2.24 T 1.62 T
Revenue 46.63 B 174.77 B 754.23 B 117.6 B 142.95 B
Cash and Equivalents 72.5 B 239.67 B 614.74 B 139.42 B 27.9 B
Current Asset 134.42 B 202.54 B N/A 151.33 B 107.2 B
Earnings Per Share N/A 23.64 T 274.83 T 134.01 T 148.17 T
Current Valuation 217.55 B 1430 B 2210 B 199.7 B 254.4 B

COMPARISON OF IOB WITH THEIR COMPETITORS

3.1. ANALYSIS AND INTERPRETATION OF IOB WITH THEIR COMPETITORS.

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1) Operating Margin for IOB

Operating Margin shows how much operating income a company makes on each dollar of sales.
It is one of the profitability indicators which helps analysts to understand whether the firm is
successful or not making money from everyday operations.

OPERATING MARGIN= operating income X 100

= 29.30%

A good Operating Margin is required for a company to be able to pay for its fixed costs or pay
out its debt which implies that the higher the margin, the better. This ratio is most effective in
evaluating the earning potential of a company over time when comparing it against firm's
competitors.

OPERATING MARGIN COMPARISON

IOB is currently under evaluation in operating margin category among related companies.

Series 1
60
50 53.61
50.18
40
Series 1
30 36.42
29.3
20
10
0
IOB SBI BOB PNB

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2) Profit Margin for IOB

Profit Margin measures overall efficiency of a company and shows its ability to withstand
competition as well as defend against adverse conditions such as rising costs, falling prices,
decline in sales or management distress. Profit margin tells investors how well the company
executes on its overall pricing strategies as well as how effective the company in controlling its
costs.

PROFIT MARGIN = NET INCOME X 100 =

23.12%

REVENUE

In a nutshell, Profit Margin indicator shows the amount of money the company makes from total
sales or revenue. It can provide a good insight into companies in the same sector, as well as help
to identify trends of a company from year to year.

PROFIT MARGIN COMPARISON

Indian is currently under evaluation in profit margin category among related companies.
Profit margin of IOB & SBI are almost in the same level, but IOB should increase their
profit to be in the market.

Series 1
50

40 44.63

30 35.16
Series 1

20 23.12 23.48

10

0
IOB BOB SBI PNB

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3) Return On Asset for IOB

Return on Asset or ROA shows how effective is the management of the company in generating
income from utilizing all of the assets at their disposal. It is a useful ratio to evaluate the
performance of different departments of a company as well as to understand management
performance over time.

RETURN ON ASSETS = NET INCOME X 100

= 0.53%

Return on Asset measures overall efficiency of a company in generating profits from its total
assets. It is expressed as the percentage of profits earned per dollar of Asset. A low ROA
typically means that a company is asset-intensive and therefore will needs more money to
continue generating revenue in the future.

RETURN ON ASSET COMPARISON

IOB is currently under evaluation in return on asset category among related companies.
As IOB having low % of ROA as compare to other banks so IOB need to generate revenue
in future with better management of assets.

Series 1
1.8
1.6
1.61
1.4
1.2 1.28
1 1.18 Series 1
0.8
0.6
0.53
0.4
0.2
0 IOB HDFC BANK PNB BOB

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4) Gross Profit for IOB

Gross Profit is the most basic measure of business operational efficiency. It is simply the
difference between sales revenue and the cost associated with making a product or providing a
service. It is calculated before deducting administrative expenses, taxes, and interest payments.

GROSS PROFIT = REVENUE - COST OF

REVENUE = 34.37B

Gross Profit varies significantly from one sector to another and tells investor how much money a
business would have made if it didn't have to pay any overhead expenses such as salary, taxes, or
rent.

GROSS PROFIT COMPARISON

Indian is currently under evaluation in gross profit category among related companies.
As compare to their competitors IOB having low gross profit. To make increasing in the
gross profit. IOB must have to concentrate on their sales apart and to reduce their cost on
revenue.

Series 1
700
600
606.78
500
400 Series 1
300
200
100
82.86 106.9
0 34.37
IOB SBI BOB PNB

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5) Return On Equity for IOB

Return on Equity or ROE tells company stockholders how effectually their money is being
utilized or reinvested. It is a useful ratio when analyzing company profitability or the
management effectiveness given the capital invested by the shareholders. ROE shows how
effecently a company utilizes investments to generate income.

RETURN ON EQUITY = NET INCOME X

100 = 9.88%

For most industries Return on Equity between 10% and 30% are considered desirable to provide
dividends to owners and have funds for future growth of the company. Investors should be very
careful using ROE as the only efficiency indicator because ROE can be high if a company is
heavily leveraged.

RETURN ON EQUITY COMPARISON

Indian is currently under evaluation in return on equity category among related

companies.
It means that IOB is coming under the range of 10% to 30% & having limited fund to
growth of their bank as compare to other banks as follows.

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 Series 1
25

20 20.87
19.27
15 16.27 Series 1

10
9.88
5

0
IOB SBI BOB PNB

6) Cash Flow from Operations for IOB

Operating Cash Flow reveals the quality of a company's reported earnings and is calculated by
deducting company's income taxes from earnings before interest, taxes and depreciation
(EBITDA). In other words, Operating Cash Flow refers to the amount of cash a firm generates
from the sales or products or from rendering services. Operating Cash Flow typically excludes
costs associated with long-term investments or investment in marketable securities and is usually
used by investor or analyst to check on the quality of a company earnings.

Operating cash flow = EBITDA – Taxes =

( 295.13B)

Operating Cash Flow shows the difference between reported income and actual cash flows of the
company. If a firm does not have enough cash or cash equivalents to cover its current liabilities,
then both investors and management should be concerned about company having enough liquid
resources to meet current and long term debt obligations.

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 Series 1
0
IOB
-295.13 HDFC BANK SBI BOB
-200
-400 -496
-600 -663.75

-800 Series 1

-1000
-1200
-1400
-1600
-1800 -1890
-2000

7) Working Capital for IOB

Working Capital is measure of company efficiency and operating liquidity. The working capital
is usually calculated by subtracting Current Liabilities from Current Assets. It is important
indicator of the firm ability to continue its normal operations without additional debt obligations.

WORKING CAPITAL = CURRENT ASSET – CURRENT

LIABILITIES = (1047B)

Working Capital can be positive or negative, depending on how much of current debt the
company is carrying on its balance sheet. In general terms, companies that have a lot of working
capital will experience more growth in the near future since they can expand and improve their
operations using existing resources. On the other hand, companies with small or negative
working capital may lack the funds necessary for growth or future operation. Working Capital
also shows if the company has sufficient liquid resources to satisfy short-term liabilities and
operational expenses.

WORKING CAPITAL COMPARISON

Indian is currently under evaluation in working capital category among related companies.

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It means IOB having negative working capital it indicates that it will suffer the problems in
future & will have a need of funds to stable % extend its business.

Series 1
0
IOB BOB PNB HDFC BANK
-200

-400

-600 Series 1
-778.44
-800 -831.41

-1000 -1047

-1200 -1291.34
-1400

8) Current assets for IOB

Current Asset is all of company's assets that can be used to pay off current liabilities within
current fiscal period or over next 12 months. Current Asset includes cash or cash equivalents,
accounts receivable, short-term investments, and the portion of prepaid liabilities which will be
paid within next 12 months. Because these assets are easily turned into cash, they are sometimes
referred to as liquid assets.

CURRENT ASSETS = CASH + DEPOSITS + LIQUID

ASSETS = 134.42B

Current Asset is important to company's creditors and private equity firms as they will often be
interested in how much that company has in current assets, since these assets can be easily
liquidated in case the company goes bankrupt. However it is usually not enough to know if a
company is in a good shape just based on current asset alone; the amount of current liabilities
should always be considered.

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 CURRENT ASSET COMPARISON

Indian is currently under evaluation in current asset category among related companies.

Series 1
250

200
202.54

150
151.33 Series 1
134.42
100 107.2

50

0
IOB BOB PNB HDFC BANK

9) Current Liabilities for IOB

Current Liabilities is company's short term debts. This usually includes obligations that are due
within next 12 months or within one fiscal year. Current liabilities are very important in
analyzing a company's financial health as it requires the company to convert some of its current
assets into cash.

CURRENT LIABILITIES = PAYABLES + ACCRUED DEBT

= 1181.42B

Current liabilities appear on the company's balance sheet and include all short term debt
accounts, accounts and notes payable, accrued liabilities as well as current payments due on the
long-term loans. One of the most useful applications of Current Liabilities is the current ratio
which is defined as current assets divided by its current liabilities. High current ratios mean that
current assets are more than sufficient to pay off current liabilities.

CURRENT LIABILITIES COMPARISON

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Indian is currently under evaluation in current liabilities category among related
companies.
It means IOB having burden of debts & have to pay huge liabilities to creditors.

Series 1
1600
1400 1493.88
1200
1181.42
1000
982.74 Series 1
800 885.64
600
400
200
0
IOB BOB PNB HDFC BANK

10) Total Asset for IOB

Total Asset is everything that a business owns. It is the sum of current and long-term assets
owned by a firm at a given time. These assets are listed on a balance sheet and typically valued
based on their purchasing prices, not the current market value.

TOTAL ASSETS = TANGIBLE ASSETS =

1470B

Total Asset is typically divided on the balance sheet on current asset and long-term asset. Long-
term is the value of a company property, and other capital assets that are expected to be useable
for more than one year. Long term assets are reported net of depreciation. On the other hand

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current assets are assets that are expected to be sold or converted to cash as part of normal
business operation.

TOTAL ASSET COMPARISON

Indian is currently under evaluation in total asset category among related companies.
But as compare to BOB & PNB it having better total assets.

Series 1
2000
1800
1831.03
1600
1400 1470
1200 Series 1
1000 1166.8
1046.86
800
600
400
200
0
IOB BOB PNB HDFC BANK

11) Net Income for IOB

Net income is the profit of a company for the reporting period which is derived after taking
revenues and gains and subtracting all expenses and losses. Net income is one of the most
watched numbers by money managers as well as individual investors.

NET INCOME = (REVENUE + GAIN) – (EXPENSES +

LOSS) = 10.70B

Because income is reported on the Income Statement of a company and is measured in dollars
some investors prefer to use Profit Margin which measures income as a percentage of sales.

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To make the net profit IOB has to increase profit margin % in respect of increase in sales. It will
help them to increase in net income of the bank.

NET INCOME COMPARISON

Indian is currently under evaluation in net income category among related companies.
In other words, IOB is very behind in terms of net income as compare to other banks.

SERIES 1 IN B
200
180
177.05
160
140
120 SERIES 1 IN B
100
80
60
40 52.49 50.25
20
0 10.78
IOB SBI BOB PNB

12) Total Debt for IOB

Total Debt refers to the amount of long term interest-bearing liabilities that a company carries on
its balance sheet. That may include bonds sold to public, notes written to banks or capital leases.
Typically, debt can help a company magnify its earnings, but the burden of interest and principle
payments will eventually prevent the firm from borrow excessively.

TOTAL DEBT = BONDS + NOTES =

236.14B

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In most industries, total debt may also include current portion of long-term debt. Since debt
terms vary widely from one company to another, simply comparing outstanding debt obligations
between different companies may not be adequate. It is usually meaningful to compare total debt
amounts between companies that operate within the same sector.

TOTAL DEBT COMPARISON

Indian is currently under evaluation in net income category among related companies.

Series 1
1800
1600
1580
1400
1200
1000 Series 1
800
600
400
200
236.14
0 73.19 50.48
IOB SBI BOB PNB

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13) Revenue for IOB

Revenue is income that a firm generates from business activities such us rendering services or
selling goods to customers. It is a crucial part of business and is important item when evaluating
financial statements of a company. Revenues from a firm's main business operations can be
reported on the income statement as sales revenue, net sales, or simply sales, depending on the
industry in which given company operates.

REVENUE =MONEY RECEIVED – DISCOUNT AND RETURNS =

46.63B

Revenue is typically recorded when cash or cash equivalents are exchanged for services or goods
and can includes product or services discounts, promotions, as well as early payments on
invoices or services rendered in advance.

REVENUE COMPARISON

Indian Overseas Bank is rated below average in revenue category among related companies.
Market size based on revenue of Money Center Banks industry is currently estimated at about
2.02 Trillion. Indian holds roughly 46.63 Billion in revenue claiming about 2.31% of all equities
under Money Center Banks industry.

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 Sales

IOB
14% 4%
SBI
12% BOB
PNB
10% HDFC BANK
61%

Chapter 6

68 | P a g e
 FINDINGS, SUGGESTIONS & CONCLUSION

1. FINDINGS

While interpreting ratios’s of IOB with other competitors wo founf that:-

 Relationship of Working Capital to Current Asset for Indian Overseas Bank is rated
below average in working capital category among related companies. It is rated below
average in current asset category among related companies .

 Relationship of Current Liabilities to Current Asset for Indian Overseas Bank is rated
second overall in current liabilities category among related companies.

 Relationship of Current Liabilities to Working Capital for Indian Overseas Bank is rated
fifth overall in current liabilities category among related companies. It is rated below
average in working capital category among related companies .

While interpreting, ratio’s to working capital we found that:-

 Current assets are less than current liabilities it indicates that company used short term
funds for short term requirement where long term funds are most costly then short term
funds.

 Quick ratio is goes on increasing at each year with sum percentage. It indicate that
current financial obligations can meet with quick funds.

 Negative working capital turnover shows because of high cost of sales and low in net
working capital.

Project findings reveal that SBI is sanctioning less Credit to agriculture, as compared with its key
competitor’s viz., Canara Bank, Corporation Bank, Syndicate Bank
·

Recovery of Credit: SBI recovery of Credit during the year 2006 is 62.4% Compared to other Banks
SBI ‘s recovery policy is very good, hence this reduces NPA

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· Total Advances: As compared total advances of SBI is increased year by year. State Bank Of India is
granting credit in all sectors in an Equated Monthly Installments so that any body can borrow money easily
· Project findings reveal that State Bank Of India is lending more credit or
sanctioning more loans as compared to other Banks.
· State bank Of India is expanding its Credit in the following focus areas:

1. SBI Term Deposits

2. SBI Recurring Deposits

3. SBI Housing Loan

4. SBI Car Loan

5. SBI Educational Loan

6. SBI Personal Loan …etc

Working capital Management in State Bank Of India In case of indirect agriculture advances, SBI is
granting 3.1% of Net Banks
Credit, which is less as compared to Canara Bank, Syndicate Bank and
Corporation Bank. SBI has to entertain indirect sectors of agriculture so that it can have more number of
borrowers for the Bank.
·
SBI’s direct agriculture advances as compared to other banks is 10.5% of the Net Bank’s Credit, which
shows that Bank has not lent enough credit to direct agriculture sector.
·
Credit risk management process of SBI used is very effective as compared with other banks.

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 2. SUGGESTIONS

 Normally, all the performance of Indian overseas bank compare to other banks are under
valuation.
 We can say, that the growth & performance of the IOB is not well as compare to their
competitors.
 IOB must improve the working capital management with effective proper cash flow
forecasting.
 This should take into account the impact of unforeseen events, market cycles, loss of
prime customer and actions by competitors.
 To make efficient working capital management proper collaboration with your customer
instead of being focused only on your own operations will also yield good results.
 If feasible, helping them to plan their inventory requirement efficiently to match your
production with their consumption will help reduce inventory levels.
 IOB has to work on the important measure to manage working capital because it will help
the company’s operational and financial efficiency.
 Current asset of IOB as compare to their competitors was good but the current liabilities
of IOB is not well, high current liabilities reduce the working capital which was happen
with IOB.
 The IOB can make better working capital by raise funds, which comparatively
economical as compare to long term funds.

Proper control on the debtor’s collection period which is major part of current assets.
 IOB take control on cash balance because cash is non earning assets and increasing cost
of funds.
 IOB has to reduce the inventory holding period with use of zero inventory concepts.
 Current assets should be managed more efficiently so as to avoid unnecessary blocking of
capital that could be used for other purposes.

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3. CONCLUSION

Analysis of working capital management is an in depth analysis. It covers the entire

financial management of the company.

The INDIAN OVERSEAS BANK is a company which give preference to the common
mans by providing better customer services.

Any change in the working capital will have an effect on a business’s cash flows. A
positive change in working capital indicates that the business has paid out cash.

Hence, an increase in working capital will have a negative effect on the business’s cash
holding.

However, a negative change in working capital indicates lower fund to pay off short term
liabilities ( current liabilities), which may had bad indirect effect to the future of the
company.

For the best management to the working capital strict eye watch should be their now-a-
days.

WCM is imp aspect of financial management in the bank. The evaluation of WCM in
INDIAN OVERSEAS BANK has revealed that the current ratio is in increasing trend.
The analysis has been conducted on WCM which will help the company to manage its
working capital efficiently & effectively.

Overall the company has good liquidity position but as see to current liabilities. They not
having sufficient funds to repayment of liabilities.

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 In this study I investigated the efficiency of managing working capital of seven associate banks of State
Bank of India for the period from 1990-91 to 2003-04. But traditional methods of analyzing working capital
ratios are not used here. Three index values, Performance index, Utilization index and efficiency index have
been used to find individual bank’s efficiency in working capital management. Regression analysis also has
been done to find the comparative speed of achieving targeted level of efficiency by individual banks
during the study period.

This report will be very helpful for my future career because this project is going to give me a broad idea
about the working capital management which is one of the most important part of an organisation as well as
SBI.
Working capital is a very vital part of an organisation weather it is a Bank or any other organisation
and this project is going to help me in my future a lot.

From this study, it is observed that the associates’ average efficiency level was satisfactory. Average of
average values of all the years for the group of banks is showing good position (greater than 1). But it does
not mean that most of the banks performed well through out the period. Rather, all the banks except state
bank of Travancore were not satisfactory. In my study period no bank has shown steady improving state of
efficiency in managing working capital. Fluctuation was a common trend for all the banks.

In the case of achieving the target level (all the banks’ average) of efficiency by the banks, State Bank of
Patiala was the most successful bank followed by State bank of Indore, Saurashtra, Hydrabad, Travancore,
Mysore and Bikaner and Jaipur. Observing banks’ beta values, suggestion can be given to all the banks
except state bank of Patiala and Indore to take necessary steps in order to improve their efficiency in

73 | P a g e
managing working capital. Again, a further study can be conducted to find the problems of the individual
banks in managing working capital efficiently.

The project undertaken has helped a lot in gaining knowledge of the “Credit Policy and working capital
Management” in Nationalized Bank with special reference to State Bank Of India. Credit Policy and Credit
Risk Policy of the Bank has become very vital in the smooth operation of the banking activities. Working
capital of the Bank provides the framework to determine (a) whether or not to extend credit to a customer
and (b) how much credit to extend. The Project work has certainly enriched the knowledge about the
effective management of “Working capital” and “Working capital Management” in banking sector.

· “Working capital Management” is a vast subject and it is very difficult to cover all the aspects within a
short period. However, every effort has been made to cover most of the important aspects, which have a
direct bearing on improving the financial performance of Banking Industry.

To sum up, it would not be out of way to mention here that the State Bank Of India has given special
inputs on “Credit Policy” and “Working capital management”. In pursuance of the instructions and
guidelines issued by the Reserve Bank of India, the State bank Of India is granting and expanding credit to
all sectors. The concerted efforts put in by the Management and Staff of State Bank Of India has helped the
Bank in achieving remarkable progress in almost all the important parameters. The Bank is marching ahead
in the direction of achieving the Number-1 position in the Banking.

This group comprises of the State Bank of India and its seven subsidiaries viz., State Bank of Patiala,
State Bank of Hyderabad, State Bank of Travancore, State Bank of Bikaner and Jaipur, State Bank of
Mysore, State Bank of Saurashtra, State Bank of India State Bank of India (SBI) is the largest bank in
India. If one measures by the number of branch offices and employees, SBI is the largest bank in the world.

Established in 1806as Bank of Bengal it is the oldest commercial bank in the Indian subcontinent. SBI
provides various domestic, international and NRI products and services, through its vast network in India
and overseas. With an asset base of $126 billion and its reach, it is a regional banking behemoth. The

74 | P a g e
government nationalized the bank in1955, with the Reserve bank of India taking a 60% ownership stake. In
recent years the bank has focused on two priorities, 1), reducing its huge staff through Golden
handshakeschemes known as the Voluntary Retirement Scheme, which saw many of its best and brightest
defect to the private sector, and 2), computerizing its operations. Credit Risk Management in State Bank Of
India The State Bank of India traces its roots to the first decade of19th century, when the Bank of culcutta,
later renamed theBank of bengal, was established on 2 jun 1806. The government amalgamatted Bank of
Bengal and two other Presidency banks, namely, the Bank of Bombay and the bank of Madras, and named
the reorganized banking entity the Imperial Bank of India. All these Presidency banks were incorporated
ascompanies, and were the result of theroyal charters. The Imperial Bank of India continued to remain a
joint stock company. Until the establishment of a central bank in India the Imperial Bank and its early
predecessors served as the nation's central bank printing currency. The State Bank of India Act 1955,
enacted by the parliament of India, authorized the Reserve Bank of India, which is the central Banking
Organisationof India, to acquire a controlling interest in the Imperial Bank of India, which was renamed the
State Bank of India on30th April 1955. In recent years, the bank has sought to expand its overseas
operations by buying foreign banks. It is the only Indian bank to feature in the top 100 world banks in the
Fortune Global 500 rating and various other rankings. According to the Forbes 2000 listing it tops all Indian
companies.

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 BIBLIOGRAPHY

1. BOOKS
A. Financial management by I.M.PANDEY
B. Financial management by PRASSANA CHANDRA

2. MANUAL FROM IOB

3. WEBSITES
A. www.iob.com
B. www.wikipedia.com
C. www.google.com
D. http://www.globusz.com/ebooks/workingcapital/
E. http://www.macroaxis.com/invest/compare/IOB.NS
F. www.moneycontrol.com

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