AN ANALYTICAL STUDY OF EARNINGS, EXPENSES AND by thu16555

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									AN ANALYTICAL STUDY OF EARNINGS, EXPENSES AND
APPROPRIATIONS OF PUBLIC SECTOR BANKS IN INDIA
                      (A CASE STUDY OF UNION BANK OF INDIA)




                             SUMMARY OF THESIS
  SUBMITTED TO M.J.P. ROHILKHAND UNIVERSITY, BAREILLY
                FOR THE DEGREE OF Ph. D. IN COMMERCE


                                     2007
                                SUBMITTED BY

                               Niharika Rastogi
                                    M. Com.

Co-Supervisor                                                      Surpervisor
Dr. Anurag Agarwal                                          Dr. Vinay Kumar
Reader, Deptt. of Commerce                        Reader, Deptt. of Commerce
S.S.(P.G.) College,                                       Upadhi (P.G.) College,
Shahjahanur                                                              Pilibhit




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     AN ANALYTICAL STUDY OF EARNINGS,
      EXPENSES AND APPROPRIATIOS OF
       PUBLIC SECTOR BANKS IN INDIA
                  (A CASE STUDY OF UNION BANK OF INDIA)



SUMMARY

                In this dynamic age, banking is also witnessing rapid changes. In the Indian Context,
it has been happening most as ours is a developing socialistic economy in which all the major
commercial banks, besides the apex institutions associated with finance and banking, are in the
public sector. The process of development in each field of the economy, especially in the sphere of
finance and banking, has to assimilate innovations in styles and techniques, whether imported or
indigenous, to suit various needs of the society.

                 Banking on European lines started in India, when two British managing agency
houses, namely, Ferguson and Co., and Alexander and Co., set up three banks. The first joint stock
bank was established in 1786 in the name of General Bank of India. Later the Bank of Hindustan and
the Bengal Bank were established. The Bank of Hindustan could continue only up to 1806, while the
other two banks had failed earlier. Then came the era of ‘Presidency Banks’. With the sanction of the
British Parliament, the Bank of Bengal (New) was established in 1809 as the first Presidency Bank.
One fifth of its capital was contributed by the State and the rest by the East India Co. This was
followed by the establishment of the Bank of Bombay in 1840 and the Bank of madras in 1843 as
Presidency Banks bringing their total number to three.

                   Union Bank of India was originally incorporated on November 11, 1919 in Mumbai as
‘Union Bank of India Limited’ under the Companies Act 1913. The registered office of the bank was
initially situated at 7. Marzban Road, Fort Mumbai.

                 The Union Bank of India is making its efforts to increases the standard of society and
industrial development. The present study attempts to reveal the quantum and rate of earnings,
expenses and appropriations of Union Bank of India. It highlights upon:

1.      Earnings and their Rate
2.      Expenses and their analysis
3.      Appropriations and analysis of appropriations

                 The present study interpret the financial results of U. B. I. In different ways and will
suggest to improve the financial working of U. B. I.. Although the final published accounts are
available and Bank published its accounting information every year, we have collected so many
accounting information’s about the Bank. We use different management techniques and statistical
techniques to raise the purpose of study, whether the earnings, expenses and appropriations are
satisfactory or not.

                  Complete research work is divided into eight chapter. The seconds chapter is ‘Public
Sector Banking in India’. This chapter thrown light on origin and development of banking business
from historical point of view and also shows the changer comes in banking business in pre and post
nationalization period. In third chapter i.e. ‘Union Bank of india : At a Glance’ History of Union Bank of
India, its establishment and evolution organizational structure and its present position are shown.
Forth chapter is ‘Definitions and Concepts’ which throws light on the concepts of different terms used
in study. Chapter five is ‘Earning and Analysis of Earning of U. B. I.’. This chapter throws light on
different earnings of U. B. I. and there analysis. Chapter six is ‘Expenses and Analysis of Expenses
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of U. B. I.’. This chapter throws light on different types of expenses and there analysis. Chapter
seven is ‘Appropriations and Analysis of Appropriations of U. B. I.’ This chapter throws light on
different appropriations and there analysis. Last chapter of the study is ‘Conclusion’. This chapter
covers findings and suggestions related to the study.




FINDINGS

1.      Union Bank of India has 86 years of glorious performance and an uninterrupted profit record,
        serving generation after generation around the globe.

2.      Major sources of earning of Union Bank of India are interest earned and other income of
        which interest earned covers major portion which varies between 84% to 92%.

3.      Major sources of interest earning of Union Bank of India are interest on advances, income on
        investments, interest on balances with R. B. I. and others.

4.      Trend of operating profit of Union Bank of India shows a increasing trend during the period
        except 1998-99. Highest growth in operating profit was of 70.06% during the year 2001-02.

5.      Trend of net profit of Union Bank of India shows highest increment during the year 2001-02.
        In this year it increases by 102.58% but during the previous year i. e. 2005-06 it declines by
        6.12%.
6.      Earning to equity capital of Union Bank of India increases from 63.81% in 1996-97 to
        133.67% in 2005-06.

7.      Ratio of interest income to average working fund shows a continuous declining trend and
        comes to 7.49% in 2005-06.

8.      Ratio of non- interest income to average working fund shows a fluctuating trend and comes to
        0.80% in 2005-06 as compared to 0.96% in 1996-97.

9.      Earning per share of Union Bank of India with slight variation shows a increasing trend during
        the period of ten years and comes to Rs. 13.37 per share in 2005-06 as compared to Rs.
        6.38 per share in 1996-97.

10.     Different types of expenses of Union Bank of India are interest expended, operating
        expenses and provision & contingencies, out of which major portion of expenses are covered
        by interest expended which varies between 58% to 69%.

11.     Ratio of interest expenses to average working fund shows a continuous declining trend
        during the period and comes to 4.46 in 2005-06 as compared to 7.47 in 1996-97.

12.     Ratio of operating expenses to average working fund also shows a continuous declining trend
        during the period and comes to 1.79 in 2005-06 as compared to 3.01 in 1996-97.

13.     Dividend pay out ratio of Union Bank of India shows a increasing trend except 2001-02 and
        comes to 26.99 in 2005-06 as compared to 20.00 in 1996-97.

14.     Net profit to average working fund declines during the period and comes to 0.86 in 2005-06
        against 1.03 in 1996-97.

SUGGESTIONS

                Based on the observations in the process of this study and short comings wasted we
may serialize the suggestion as under :




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1.      It can be clearly explained that that the low profitability of Union bank of India is the result of
        two sets of factors those responsible for declining interest income for banks on the one side
        and those responsible for increasing cost of bank operation on the other.

2.      To augment the fee based income like commission, exchange and brokerage.

3.      To adopt new information technology for better and extended customer convenience as well
        as faster decision making.

4.      To retain and improve market share in deposits and advances by concerted marketing of our
        products supported by good customer service and quick delivery.

5.      Bank’s net interest income improved to Rs. 2,375 crore in 2005-06 from Rs. 2,065 crore in
        2004-05, there by registering a growth of 15.01%. The increase is attributed to the substantial
        increases in interest income arising from volume growth in advances.

6.      Bank achieved an operating profit level of Rs. 1597 crore for the year ended March 2006
        growing at 1.53 %. The operating profit was impacted on account of higher interest
        expenditure on resources and fall in treasury income.

7.      During the year Union bank of India raised additional share capital os Rs. 45 crore by way of
        a follow on public offer.

     8. During the year 2005-06, Bank opened 31 new braches and 6 extension Counters. To
        facilitate all the facilities of a branch, 5 extension counters were upgraded to full fledged
        branches. The total branch network went up to 2082 and is supported by 145 extension
        Counters.




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