A STUDY ON THE FINANCIAL PERFORMANCE OF INDIAN OVERSEAS BANK FOR THE PERIOD 2009-2012

Submitted as a part of MBA I year Course Requirement By SATHYA. S 3511140229

Under the guidance of Mr. Ganesh Kumar MBA Faculty, SRM B-School, VadapalaniCampus, Chennai

SRM B-SCHOOL FACULTY OF ENGINEERING AND TECHNOLOGY SRM UNIVERSITY (RAMAPURAM II) VADAPALANI, CHENNAI

BONAFIDE CERTIFICATE

This is to certify that SATHYA.S is a Bonafide Student of SRM B-School, SRM University, Vadapalani, Chennai. She is in the I year of Masters Degree Program in Business Administration (MBA). She / He has done this project under my guidance and supervision towards part fulfillment of I year MBA course.

Project Guide Date: Place:

HOD

DEPARTMENT SEAL

DECLARATION

I SATHYA.S (3511140229) studying in I year MBA program at SRM B-School, SRM University, Vadapalani, Chennai, hereby declare that this project is an original work of mine and I have not verbatim copied / duplicated any material from sources like internet or from print media, excepting some vital company information / statistics, which are provided by the company itself.

Signature of the Student Date: Place:

ACKNOWLEDGEMENT

I wish to place on record my thanks for our esteemed institution S.R.M University for providing me with opportunity to pursue my studies in this institution I am extremely thankful and indebted to my supervisor, Mr.Ganesh Kumar BE MBA, Lecturer at S.R.M B-School,Vadapalani, for his valuable guidance and advice at each and every stage in the progress of my project work by for sharing with me his time, knowledge and helping in every step during the process of data collection for my study. I also express my sincere thanks to all my dear teachers of the Department of Business Administration for their constant support and encouragement. Special and warm thanks to Ms. Gayathri,M.Phil; Senior Lecturer at S.R.M B School,Vadapalani for her help and motivation to go ahead with this topic for study. My heartfelt thanks goes to the staffs of Indian Overseas Bank, Chintadripet branch, Chennai; for providing me with the opportunity to conduct my summer internship project at their organisation and for providing me the inspiration to work on this topic as well as for being so cooperative during my data collection. I would finally like to thank my family and friends for the constant support and encouragement.

ABSTRACT
Banks play an important role in the economic development of every nation. They have control over a large part of the supply of money in circulation. A bank is a financial intermediary that accepts deposits and channels those deposits into lending activities. Banks are a fundamental component of the financial system and are also active players in financial markets. Financial performance refers to the achievement of the bank in terms of profitability. The profitability of a bank denotes the efficiency with which a bank deploys its total resources to optimize its net profits and thus serve as an index to the degree of asset utilization and managerial effectiveness. In this study an attempt is made to see the financial performance of Indian Overseas Bank with the different norms. For this study, Indian overseas bank was chosen on the basis of opportunity obtained; however the summer internship project served an excellent exposure to get valuable insights into the financial performance of an international public bank. Further in the study, the bank at a glance can be found along with a thorough and systematic procedure at deriving financial solutions to the crucial issues extracted out of the data. The result of the study has been largely positive on the growth trend of the bank. With adequate policy adjustments and enhancing performance the bank can be ensured high productivity and efficiency. The methods to arrive at such results are discussed in this study with sufficient reference to the past and current trends on the financial functioning and positioning of the bank.

TABLE OF CONTENTS Page Number CHAPTER 1

1.1 1.2 1.3 1.4 1.5 INDUSTRY PROFILE COMPANY PROFILE OBJECTIVE OF THE STUDY NEED FOR THE STUDY SCOPE AND SIGNIFICANCE

INTRODUCTION

CHAPTER 2
2.1 2.2 2.3

DATA ANALYSIS & INTERPRETATION

PROBLEM IDENTIFIED ANALYSIS MAJOR FINDINGS

CHAPTER 3
3.1 3.2 CONCLUSIONS

CONCLUSION& SUGGESTIONS

SUGGESTIONS FOR IMPROVEMENT

CHAPTER 1 INTRODUCTION

1.1

INDIAN BANKING INDUSTRY PROFILE

A good bank is not only the financial heart of the community, but also one with an obligation of helping in every possible manner to improve the economic conditions of the common people

A bank is a financial intermediary that accepts deposits and channels those deposits into lending activities. Banks are a fundamental component of the financial system, and are also active players in financial markets. The essential role of a bank is to connect those who have capital (such as investors and depositors), with those who seek capital (such as individuals wanting a loan or business wanting to grow). Banks thus play an important role in the economic development of every nation. They have control over a large part of the supply of money in circulation. Through their influence over the volume of bank money, they can influence in nature and character of production in any country. Economic development is a dynamic and continuous process. Banks are the main stay of economic progress of a country, and in the modern economy, banks have become a part and parcel of all economic activities in India.

Indian Banking Industry Vs Global Economy Currently, amidst all the turmoil of global economic recession, Indias banking industry has been amongst the few to maintain resilience. The tempo of development for the Indian banking industry has been remarkable over the past decade. It is evident from the higher

pace of credit expansion; expanding profitability and productivity similar to banks in developed markets, lower incidence of non-performing assets and focus on financial inclusion have contributed to making Indian banking vibrant and strong. Indian banks have begun to revise their growth approach and re-evaluate the prospects on hand to keep the economy rolling.

Structure of Indian Banking Industry Banking industry in India functions under the sunshade of Reserve Bank of IndiaThe regulatory, central bank. Banking industry mainly consists of: Commercial banks Co-operative banks

The commercial banking structure in India consists of : schedules Commercial Banks and Unscheduled Bank. Scheduled commercial banks constitute those banks which have been included in the second schedule of Reserve Bank of Indian (RBI) Act. 1934. RBI in turn includes only those banks in this schedule which satisfy the criteria laid down vide section 42 (60) of the Act. Some co-operative banks are scheduled commercial banks although not all co-operative banks are. Being a part of the second schedule confers some benefits to the banks in terms of access to accommodation by RBI during the times of liquidity constraints. At the same time, however this status also subjects the bank certain conditions and obligation towards the reserve regulation of RBI. For the purpose of assessment of performance of banks the RBI categories them as public sector banks, old private sector banks, new private sector banks and foreign banks.

Reserve Bank of India

Bank

Financial Institution

Scheduled Commercial banks

Co-Operative credit institutions

All India Financial Institution

State level Instituition

Other Institution

Public Sector Banks

Private Sector Banks

Foreign Banks

Regional Rural Banks

Urban Cooperative

Rural Cooperative Cedit Institutions

Figure 1.1 Structure of Indian Commercial Banking Sector

S.NO NATIONALISED Corporation Bank Ltd BANKS Allahabad Bank Ltd Dena Bank Ltd OLD PRIVATE KarurVysya Bank Ltd BANKS Catholic Syrian bank Ltd. Lakshmi Vilas Bank Ltd NEW PRIVATE BANKS Axis Bank Ltd FOREIGN BANKS Bank of Tokyo Mitsubishi UFJ

8 1 9 10 2 11 12 3 13 4 14 5 6 15 16 7

AbuDhabi Barclays Bank PLC Commercial Bank Idbi Bank Ltd Nainital Bank Ltd BNP Paribas Andhra Bank Ltd City Union Bank Ltd Development Credit American Express Indian Bank Ltd Ratnakar Bank Ltd Caylon Bank Bank Ltd Bank Indian overseas Bank Ltd SBI Commercial and China trust Bank of Baroda Ltd Dhanalakshmi Bank Ltd HDFC Bank Ltd Bank International International Bank Ltd Commercial Indonesia Oriental Bank of South Indian Bank Ltd Citi Bank N.A Bank of India Ltd Federal Bank Ltd ICICI Bank Ltd Standard Chartered Commerce Ltd Bank Punjab and Sind Bank Ltd Tamil Nadu Mercantile DBS Bank Bank of Maharashtra Ltd ING Vysya Bank Ltd Induslnd Bank Ltd Bank of America Bank Ltd Canara Bank Ltd Punjab National Bank Ltd Syndicate Bank Ltd Central Bank of India Ltd Jammu Bank Ltd Karnataka Bank Ltd and Kashmir Kotak Bank Ltd Yes Bank Ltd Mahindra Bank of Ceylon Deutsche Bank AG HSBC Bank of Nova Scotia

25 17 26 18 27 19 20

State Bank of Patiyala Ltd UCO Bank Ltd State Bank of Travancore Union Bank of India United Bank of India Ltd Vijaya Bank Ltd

State of JPMorganBank Chase Mauritius Bank UBS Thai Bank Krung VTB Mashreq Bank psc Mizuho Bank Corporate

21

State Bank of Bikaner and Jaipur Ltd

Royal Scotland

Bank

of

22

State Bank of Hyderabad Ltd

Shinhan Bank

23 24

State Bank of India Ltd State Bank of Mysore LTd

Societe Generale Sonali Bank

Challenges Faced By Indian Banking Industry Developing countries like India, still has a huge number of people who do not have access to banking services due to scattered and fragmented locations. But if we talk about those people who are availing banking services, their expectations are raising as the level of services are increasing due to the emergence of information technology and competition. Since, foreign banks are playing in Indian market the number of services offered has increased and banks have laid emphasis on meeting the customer expectations. Now, the existing situation has created various challeneges and opportunity for Indian commercial banks. In order to encounter the general scenario of banking industry we need to understand the challenges and opportunities lying with banking industry of India. Rural Market

Banking in India is generally fairly mature in terms of supply, product range and reach, even though reach in rural India still remains a challenge for the private and foreign banks. In terms of quality of asset and capital adequacy, Indian banks are considered to have clean, strong and transparent balance sheets relative to other banks in comparable economies in this region. Management of Risks The growing competition increases the competitiveness among banks. But, existing global banking scenario is seriously posing threats for Indian Banking Industry. We have already witnessed the bankruptcy of some foreign banks. However according to certain studies there is a positive association between changes in risk and capital. Market Discipline and Transparency Transparency and disclosure norms as part of internationally accepted corporate governance practices are assuming greater importance in the emerging environment. Banks are expected to be more responsive and accountable to the investors. Banks have to disclose in their balance sheets a plethora of information on the maturity profiles of assets and liabilities, lending to sensitive sectors, movements in NPAs, capital, provisions, shareholdings of the government, value of investment in India and abroad, operating and profitability indicators, the total investments made in the equity share, units of mutual funds, bonds, debentures, aggregate advances against shares and so on. Human Resource Management When relations between human resources management (HRM), work climate and organizational performance in the branch network of a retail bank. Significant correlations were found between work climate, human resource practices, and business performance. The results showed that the correlations between climate and performance cannot be explained by their common dependence on HRM factors, and that the data are consistent with a mediation model in which the effects of HRM practices on business performance are partially mediated by work climate. Global Banking

It is practically and fundamentally impossible for any nation to exclude itself from world economy. Therefore, for sustainable development, one has to adopt integration process in the form of liberalization and globalization becomes challenges for the domestic enterprises as they are bound to complete with global players. If we look at the Indian banking industry, then we find that there are 36 foreign banks operating in India, which becomes a major challenge for nationalize and private sector banks, these foreign banks are larger in size, technically advanced and having presence in global market, which gives more and better options and services to Indian traders. Financial Inclusion Financial inclusion has become a necessity in todays business environment. Whatever is produced by business houses that have to be under the check from various perspectives like environmental concerns, corporate governance social and ethical issues. Apart from it to bridge the gap between rich and poor the poor people of the country should be given proper attention to improve their economic condition. Employees Retention The banking industry has transformed rapidly in the last ten years, shifting from transactional and consumer service-oriented to an increasingly aggressive environment, where competition for revenue is on top priority. Long-time banking employees are becoming disenchanted with the industry and are often resistant to perform up to new expectations. The diminishing employee morale results in decreased revenue. Due to the intrinsically close ties between staff and clients, losing those employees completely can mean the loss of valuable customer relationships. The retail banking industry is concerned about employee retention from all levels: from tellers to executives to customer service representatives because competition is always moving in to hire them away. Customer Retention

The major determinants of customer satisfaction and future intentions in the retail bank sector include service quality dimensions (such as getting it right the first time), service features (such as competitive interest rates), service problems, service recovery and products used. It was found, in particular, that service problems and the banks service recovery ability have a major impact on satisfaction and intentions to switch. Thus, these challenges and opportunities like rural market, transparency, customer expectations, management of risks, growth in banking sector, human factor, global banking, environment concern, social, ethical issues, employee and customer retentions, banks are striving to combat the competition. The competition from global banks and technological innovation has compelled the banks to rethink their policies and strategies.

INDIAN OVERSEAS BANK

THE COMPANY PROFILE
At home or abroad, Indian Overseas Bank wants to provide a safe haven for clients' rupees. Company information : Full name: Indian Overseas Bank Legal Form: Public Limited Company (BSE 532388) Legal Address/HQ: 763 Anna Salai, Central Office, ; Chennai; Tamil Nadu; Tel: 044-28524212 / 28415702 / 28519491 Incorporation Date: February 10, 1937 Total Employees: 25,626 Revenue: INR 34,550 cr Net Income: INR 19,578 cr Total Assets: INR 921,841 cr Website: www.iob.in Company Description Indian Overseas Bank (IOB) is one of India's largest state-controlled banks and provides banking and financial services throughout the country. Established with a focus on foreign exchange and overseas banking, IOB has some 1,800 domestic branches and about a halfdozen international branches. It provides deposit, lending, mortgage, currency transfer, agri-business consultation, and credit card services. Specialized branches offer services

related to such concerns as commercial and industrial credit, industrial finance, and hightech agriculture. Organizational expansion Pre-World War II In 1937, Thiru.M. Ct. M. Chidambaram Chettyar establishes the Indian Overseas Bank (IOB) to encourage overseas banking and foreign exchange operations. IOB started up simultaneously at three branches, one each in Karaikudi, Madras (Chennai) and Rangoon (Yangon). It then quickly opened a branch in Penang and another in Singapore. The bank served the Nattukottai Chettiars, who were a mercantile class that at the time had spread from Chettinad in Tamil Nadu state to Ceylon (Sri Lanka), Burma(Myanmar), Malaya, Singapore, Java, Sumatra, and Saigon. As a result, from the beginning IOB specialized in foreign exchange and overseas banking (see below). After World War II In the 1960s, the banking sector in India was consolidating by the merger of weak private sector banks with the stronger ones; IOB absorbed five banks, including Kulitali Bank (est. 1933). Then in 1969 the Government of India nationalized IOB. At one point, probably before nationalization, IOB had twenty of its eighty branches located overseas. After nationalization it, like all the nationalized banks, turned inward, emphasizing the opening of branches in rural India. In 1988-89, IOB acquired Bank of Tamil Nadu in a rescue. The new millennium In 2000, IOB engaged in an initial public offering (IPO) that brought the government's share in the bank's equity down to 75%. In 2001 it acquired the Mumbai-based AdarshaJanataSahakari Bank, which gave it a branch in Mumbai. Then in 2009 IOB took over Shree SuvarnaSahakari Bank, which was founded in 1969 and had its head office in Pune. Shree SuvarnaSahakari Bank has been in administration since 2006. It had nine branches in Pune, two in Mumbai and one in Shirpur. The total employee strength was estimated to be little over 100. International expansion

As mentioned above, IOB was international from its inception with branches in Rangoon, Penang, and Singapore. In 1941, IOB opened a branch in Malaya that presumably closed almost immediately because of the war. In 1946, after the War, IOB opened a branch in Ceylon. More overseas branches followed quickly. In 1947, IOB opened a branch in Bangkok and re-opened others. In i948 United Commercial Bank (see below) opened a branch in Malaya. In 1949, IOB opened a branch in Bangkok. Then in 1963, The Burmese government nationalized IOBs branch in Rangoon. In 1973, IOB, Indian Bank and United Commercial Bank established United Asian Bank BerhadinMalaysia. (Indian Bank had been operating in Malaysia since 1941 and United Commercial Bank Limited had been operating there since 1948.) The banks set up United Asian to comply with the Banking Law in Malaysia, which prohibited foreign government banks from operating in the country. Also, IOB and six Indian private banks established Bharat Overseas Bank as a Chennai-based private bank to take over IOB's Bangkok branch. In 1977: IOB opened a branch in Seoul. Two years later, IOB opened a Foreign Currency Banking Unit in Colombo, Sri Lanka. International expansion slowed thereafter, for a while. In 1992 Bank of Commerce (BOC), a Malaysian bank, acquired United Asian Bank (UAB). In the new millennium, international expansion picked up once again. In 2007, IOB took over Bharat Overseas Bank. Three years later, Malaysia awarded a commercial banking license to a locally incorporated bank to be jointly owned by Bank of Baroda, Indian Overseas Bank and Andhra Bank. The new bank, India International Bank (Malaysia), will reside in Kuala Lumpur, which has a large population of Indians. Andhra Bank will hold a 25% stake in the joint-venture, Bank of Baroda will own 40% and IOB the remaining 35%.

Product and Service Profile Constituents accounts Savings account Current and cash credit account

Term deposits Safe deposits- Lockers & safe custody service Nominations and settlement Advances : 1. Advances against banks term deposits & RD 2. Advances against LIC policies 3. Advances against Central & State Govt 4. Advances against NSC/IVP/KVP securities 5. Advances against units of mutual funds 6. Advances against shares & debentures 7. Advances against gold ornaments 8. Advances against goods 9. Advances against immovable properties 10. Clear advances 11. Personal loans 12. Pensioners loan scheme 13. Advances to HP concerns 14. Advances to leasing concerns 15. Loans/overdrafts to NRIs & their relatives 16. Advances against book debts

Bank guarantees: Advances to staff members 1. Staff housing loans 2. Loan against NSC 3. Loan against gold ornament 4. Staff consumer loan 5. Vehicle loan for supervisory staff 6. Vehicle loan for clerical staff 7. Conveyance loan from subordinate staff 8. Car loan for clerical staff

Management of non-performing assets Rehabilitation of sick industrial units Suit filed accounts

Foreign Exchange Operation 1. Rupee A/C of NRI 2. Foreign currency A/C in India 3. Remittances 4. Foreign travel 5. Exports 6. Imports 7. Forward Contract 8. Foreign currency loans 9. Precious Metal Business 10. Import of gold

I.O.B Gold Deposit Scheme Government accounts, Accounting procedures & other matters 1. Cash & currency chest 2. Civil, defense, railway pension 3. SwatantraSainikSamman Pension scheme 4. Telecom pension 5. State Govt Pension 6. Chennai Port Trust Pension 7. T.N.E.B Pension 8. Employees PF organisation& Pension scheme 9. Malaysian Govt Pension Scheme 10. PPF Scheme 1968 11. Collection of Income Tax & other Direct Taxes 12. Collection of central excise, customs and other duties 13. Special deposit scheme 14. Deposit scheme for retiring Govt Employees,1998 15. Accounting of planning commission and national information centre 16. Post office collection A/C 17. Compulsory deposit (Income Tax Payers) scheme

Priority sector advances (other than SSI) Agricultural advances: 1. Crop loans

2. Term loans for land development/reclamation 3. Term loan for plantation and horticulture 4. Term loan for dry land development 5. Term loan for farm forestry/waste land development 6. Term loan for tractor/power tiller/agricultural machinery and implement 7. Term loan for combine harvesters 8. Term loan for bullocks/bullock carts 9. Term loan for farmers for purchase of vehicle from transport/conveyance 10. Term loan for pisciculture 11. Credit facilities for animal husbandry 12. Term deposit for gobar gas plants 13. Financial appraisal of agricultural projects

Small & Micro enterprises Small Loans Forest collections services Agri business consultancy Personal banking Corporate banking E- banking Atm services Trading services

CHAPTER 2: DATA ANALYSIS & INTERPRETATION

2.1 PROBLEMS IDENTIFIED An analysis of the factors responsible for the steep increase in the capital from 2011 to 2012 Enquiry into the reason why there has been no increase in the Net Profit of the Bank for the period 2011-2012, although there has been commendable increase in the Net Income Generally fixed assets will decline every year due to the deductions of depreciation. Although the Bank has declared an increase in its fixed assets. The causes for sudden increase in loan advances in 2012 when compared to any other financial year of the Bank.

These are few of the prominent issues identified by the researcher while analyzing financial statements of the Bank for the period 2011-2012. The study has been thus designed on

basis of these questions, such that a systematic analysis and reasoning can be provided. The issues have been analysed and resolved from the point of view of the Banks policy as well as the overall Public Sector Banking Scenario.

2.2

OBJECTIVES

To study the financial performance and positioning of the Indian Overseas Bank through assessment of financial statements for the period 2011-2012 To identify critical financial phenomenon in the functioning of the Bank and its performance. To reveal the trend of profits and other important facts, through a comparative study of the financial statements for the Bank.

2.3

NEED FOR THE STUDY

To understand the banking industry functioning overall To analyse and understand the financial statement by using financial analysis techniques. To forecast and prepare the plans for the future as suggestions for Banks further improvement.

2.4 DATA COLLECTION: Primary data : Interview with the Manager. Discussions with other personnel such as advisors and trainers.

Secondary data: Annual Report. IOB web site.

2.5

SCOPE & SIGNIFICANCE :

In this study the method comparative statement is used to find, analyze and interpret the data of the bank to know the financial position of the bank and then arrive at suggestions to improve or contribute to improvement of the Banks functioning.

2.6

LIMITATION OF THE STUDY: Time constraint Restriction on the availability of primary data on bank financials Lack of availability of empirical secondary data

2.7 DATA ANALYSIS AND INTERPRETATION Analysis and interpretation is used by the financial manager to ascertain the financial performance of their firm. It has become a useful tool in the analytical kit. This is because the financial statement, i.e., the Balance Sheet has a limited role to perform. .The Balance Sheet is merely a static statement. It is a statement of asset and liabilities as on a particular date. 1. COMPARATIVE STATEMENTS:

The elements of financial position are shown in a comparative form so as to give an idea of financial position at two or more periods .Any statement prepared in a comparative form will be covered in comparative statements. From practical point of view, generally financial statements (balance sheet) are prepared in comparative form for financial analysis purpose. A comparative statement showS: Absolute figures ( rupee amounts ) Changes in absolute figures i.e., increase or decrease in absolute figures. Absolute data in terms of percentages. Increase or decrease in terms of percentages.

The financial data will be comparative only when same accounting principles are used in preparing these statements. In case of any deviation in the use of accounting principles this fact must be mentioned at the foot of financial statements and the analyst should be careful in using these statements.

COMPARATIVE BALANCE SHEET: The comparative balance sheet analysis is the study of the trend of the same items, group of items and computed items in two or more balance sheet of the same bank on different dates. The changes in periodic balance sheet items reflect the conduct of a business. The changes can be observed by comparison of the balance sheet at the begining and at the end of period and these changes can help in forming an opinion about the progress of an enterprise. PROCEDURE OF PREPARE A COMPARATIVE BALANCE SHEET: The Comparative balance sheet has two columns for the data of original balance sheet.

 Third column is used to show increases in figures. The Fourth column is use to give percentages of increase or decrease

Comparative Balance Sheet of IOB For The Year Ending 2011-12

ABSOLUTE INCRESE/DECREAS E % INCREASE/DECR EASE

PARTICULARS CAPITAL & LIABILITES EQUITY SHARE CAPITAL RESERVE & SURPLUS DEPOSITS BORROWINGS CURRENT LIABILITES TOTAL LIABILITES ASSETS CASH BALANCE BANK INVESTMENT ADVANCES FIXED ASSETS OTHER ASSETS TOTAL ASSETS

SCHEDU LES

2011

2012

1 61,87,493 2 8,70,61,807 1,45,22,87, 3 511 19,35,54,04 4 6 5 4,87,51,928 1,78,78,42, 785 10,01,08,94 6 3 7 2,00,77,614 48,61,04,54 8 0 1,11,83,29, 9 775 10 1,68,11,068 11 4,64,10,845 1,78,78,42, 785

79,69,982 11,13,06,54 0 1,78,43,41, 764 23,61,38,47 1 5,67,24,995 2,19,64,81, 752 10,19,89,12 4 6,06,21,862 55,56,58,81 1 1,40,72,44, 443 1,74,40,479 5,35,27,033 2,19,64,81, 752

17,82,489 2,42,44,733 33,20,54,253 4,25,84,425 79,73,067 40,86,38,967

28.8 27.84 22.86 22 16 22.85

18,80,181 4,05,44,248 6,95,54,271 28,89,14,688 6,29,411 71,16,188 40,86,38,967

1.87 20 14.3 25.83 3,74 15.33 22.85

MAJOR FINDINGS FROM THE COMPARATIVE BALANCE SHEET: From the above Balance Sheet of IOB it is clear that the bank is progressing well. This analysis is made by comparing it with the past year balance sheet i.e., 2011 with the 2012. The Net Profit of the Bank has been decreased from 10725427 to 10501262. The reason for the decline in Net Profit is because of huge number of deposits. Deposits have risen from 145228711 to 1784341764. There is an increase of 22.86%. This increase in % is mainly due to the increase of term deposit where it is the deposit held at a financial institution that has a fixed term. These are generally short term with maturities ranging anywhere from a month to a few years. When a term deposit is purchased, the lender (the customer) understands that the money can only be withdrawn after the term has ended. By having the money tied up hell generally get a higher rate with a term deposit compared with any other deposits. Since there is huge number of deposits from 2011 to 2012 there is a decline in Net Profit though there is increase in Net Income. Bank, on the other hand lends loans to the Customers with a higher rate of interest and hence, the Term Deposit amount is rotated in this way.

This leads to pay higher interest to them and thus, Net Profit decreases. Advances have increased to 25.83%.The interest earned from these loans also would have given rise to Net Profit but since there was a dealing with Shareholders they were to give it to the Shareholders as dividend.

The reason for the increase in Share Capital from 6187493 to 7969982 is because the Bank promised to pay the Shareholders a dividend of 45%. Dividends are payments given to Shareholder members. When they earn Profit a portion of amount is given as Dividend.

The reason attribute for the increase in borrowings from 2011 to 2012 is because of the expansion of IOB. The borrowing has been increased to 22% because of opening of branches. During the year the Bank opened 44% branches across the Country, highest in the history of Bank. The maximum amount of borrowing has been borrowed from RBI Rs 6, 50, 00,000.

Fixed Assets have also been increased from 16811068 to 17440479. This rise is because of introduction of New Asset (fixed) like furniture & fittings, premises, etc. Though there is some amount of deductions from depreciation for the existing asset, the cost of purchasing New Asset is more. The reason for purchasing Fixed Assets like furniture & fittings & premises is because of the expansion of Banks in an around the World.

2. TREND ANALYSIS

The second popular method for analysis of financial performance of an institution is through a trend analysis. Trend analysis is a form of comparative analysis that is often employed to identify current and future movements of an investment. The process may involve comparing past and current figure in order to project how long the current trend will continue. This type of information is extremely helpful to investors who wish to make the most from their investments. To calculate the percentage change between two periods: Calculate the amount of the increase/(decrease) for the period by subtracting

the earlier year from the later year.

If the difference is negative, the change is a decrease and if the difference is

positive, it is an increase. change. Now this method is used to perform a trend analysis on the deposits and profit acquired by Indian Overseas Bank, for the period 2011-2012. Divide the change by the earlier year's balance. The result is the percentage

TREND ANALYSE FOR THE YEAR 2011-2012

YEAR 2008 2009 2010 2011 2012 DEPOSITS(In Lakhs) 1,652 1,956 2,162 2,856 3,507 RATIO 0 118 130 172 212 % 0 18% 30% 72% 112%

TREND ANALYSIS INTERPRETATION: From the above two graph it is very clear that the Net Profit varies in significant to the amount of deposits. This shows the inverse effect. Meaning to say they are inverse relationship.

When there is decrease in NP there is increase in deposit. In the year 2011 Net Profit is decreased from 1326 to 707 say (+10% to -42%) but there is increase in deposits from 195550 to 216229 say (18% to 30%) On comparing 2011 with 2012, as said above it is verified. When Net Profit declines from 1073 to 1050 deposit on the other hand increase from 285610 to 350653.

This makes us understand better that Banking refers to accepting deposits and lending loans. Therefore Banks are concentrating on both aspects by rendering service along with profit motive. From the above analysis it is clear that why the Net Profit of 2012 is have reduced from 2011. This is just because of huge amount of domestic as well as global deposits especially term or fixed deposit.

CHAPTER 3 CONCLUSIONS & SUGGESTIONS

3.1 SUGGESTIONS The performance of the Bank is commendable from the financial records it has declared. The Director, Mr.Narendra has come forward with a promise of greater increase in the share value of the Bank for following financial year. To make this a reality the bank has few agendas that it has to seriously focus on. There has to wider propaganda of the brand among the people, to make them aware about the benefit of becoming IOB Bank customers. The Bank should provide life time valid ATM card to all its customers, which can encourage them for active participation in banking endeavours. Simultaneously it is important to make people understand about the various benefits of its products. Thus propagating the marketability of the brand among the focus group. From observation as an intern in the branch, the service speed and efficiency can be further improved through adequate quality control measures in the every branch. The employees are mostly excessively occupied with work load and so, there is no proper response to the customers at times. Thus, it creates dissatisfaction in the minds of the customers on overall public sector banks. To avoid this, there can be a person allotted to meet the queries of the customers like to help fill the vouchers or guide them with banking procedures, thus enhancing Banks productivity as well as customer satisfaction. Add finaicial suggestions

3.2

CONCLUSIONS:

The main aim of the training was to understand Banking activities and management. The objective was to bridge the gap between the theories and practice, in an actual working bank environment. Thus, during the course of the training I learnt many things about the Bank working and its functions. The bank already has good number of employees on board and is still recruiting to increase the head count. It is on the brim of increasing its customers through its attractive schemes and offer. The demand for banking sector is increasing day by day. There is tough competition ahead for the company from its major competitors in the banking sector. From the Financial Analysis, it can be concluded that the Net Profit can be risen even more by attracting more number of customers through their financial schemes. Last but not the least I would like to thank IOB Bank and SRM University for giving me an opportunity to work in the field of finance.

REFERENCES
1. Spice Telcom takes a giant leap in VAS, www.thetimesofindia.com, 21st June 2010. 2. TRAI holds back number portability, Business Line, 6th April 2008. 3. http://www.hoovers.com/company/Indian_Overseas_Bank/rckscri-1-1njht41njhft.html 4. http://www.hoovers.com/company/Indian_Overseas_Bank/rckscri-1.html 5. http://www.securities.com/Public/companyprofile/IN/Indian_Overseas_Bank_en_1624469.html 6. http://economictimes.indiatimes.com/indian-overseas-bank/stocks/companyid11713.cms 7. http://in.reuters.com/finance/stocks/analyst?symbol=IOBK.BO 8. http://www.indiainfoline.com/Markets/Company/Background/CompanyProfile/Indian-Overseas-Bank/532388

ANNEXURES

CHAIRMAN OF IOB

HEAD OFFICE AT ANNA SALAI