46204922 project union bank of india

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Annual Report 2009-2010

INDUSTRY INTRODUCTION

What is Banking?

The Banking Regulation Act 1949 defines banking as Accepting, for the purpose

of lending or investment, of deposits of money from the public repayable on

demand or otherwise and withdrawal by cheque draft, order or otherwise. In

addition, banks also offer financial services, which include:

Issuing demand draft & travelers cheque.

Credit cards

Collection of cheques, bill of exchange.

Safe deposit lockers

Custodian services.

Investment and Insurance Services.

The business of banking is highly regulated since banks deal with money offered to

them by the public and ensuring the safety of this public money is one of the prime

responsibilities of any bank. That is why banks are expected to be prudent in their

leading and investment activities.

Every bankhas a compliance department, which is responsible to ensure that all

the services offered by the bank, and the processes followed are in compliance

with the local regulations and the Banks corporate police

The major regulations and act governing the banking business are:-

Banking Regulation Act, 1949

Foreign Exchange Management Act,1999

Indian Contract Act

Negotiable Instruments Act, 1881

Bank lend money either for productive purposes to individual, firms, Corporate

etc. of for buying house property, cars and other consumer durables and for

investment purposes to individuals and the others. However, banks do mot finance


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any speculative activity. Lending is risk taking. The Depositor of banks is also

assured of safety of their money by deploying some percentage of deposit in

statutory reserves like SLR & CLR.

BANKING INDUSTRY

Banking System

Banking system is an integral sub-system of the financial system. It represent an

important channel of collecting small saving from the households and ending it to

the corporate sector.

The Indian Banking system has the Reserve Bank of India (RBI) as the apex body

for all matters relating to the banking system. It is the comucopia of Banks of India

and bankers to all others banks as well.

Classification of Banks

1. Non-Schedule BanksThese are banks, which are not included in the second schedule of the

Banking Regulations Act, 1965. It means they do not satisfy the conditions

laid down by that schedule. They are further classified as back:

Central co-operative banks and primary credit societies

Commercial Banks

2. Schedule BanksMust have paid-up capital and reserve of mot less than Rs. 50,00,000. The

must satisfy the RBI t

han its affairs are mot conducted in a manner

detrimental to the interests of its depositors. These are further classified as

follow:

State co-operative Banks

Commercial Banks


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COMPANY PROFILE

Union Bank of India (UBI) is one of India's largest state-owned banks (the

government owns 55.43% of its share capital), is listed on the Forbes 2000. It has

assets ofUSD 13.45 billion and all the bank's branches have been networked with

its 1135 ATMs. Its online Telebanking facility is available to all its Core Banking

Customers - individual as well as corporate. It has representative offices in Abu

Dhabi, United Arab Emirates, and Shanghai, Peoples Republic ofChina, and a

branch in Hong Kong

The Union Bank of India was built up in twentieth century and declared

open by the Father of the Nation, Mahatma Gandhi. The bank with its efficient

value-added services, sustained growth, consistent profitability and development of

new technologies bank has ensured complete customer delight, living up to its

image of, GOOD PEOPLE TO BANK WITH. Bank is offering credit cards,

home loan, union demat, Kisan ATM, International debit card, online tax payment

facility, Railway e-ticketing kiosk, etc., services to its customers through core

banking solution.

The Union Bank of India has 2261 branches out which 1031 branches are

underCBS. All the ATMs are inter-connected through the Banks ATM Switch,

thus facilitating on-line operations in case of CBS customers. The Bank is a

member ofCashTree consortium and also has bilateral arrangement with State

Bank of India, enabling the Banks ATM cardholder access to over 20000 ATMs

across the country. UBI Net connects 65 Offices and 984 branches located in 323

centers, facilitating speedier transmission of MIS data (Network Map). The

network also facilitates the implementation ofCore Banking Solution, apart from

DEMAT services, Cash Management services, fund transfers, messaging system,

etc. The Bank is using VSAT network for connecting branches and ATMs


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wherever leased line connectivity is not feasible. We have 590 VSATs operational,

connecting 194 branches/extension counters and 316 ATMs.

PRODUCTS AND SERVICES

UNION BANK OF INDIA provides various types of product and services .The

wide range of product and services consists of

BANKING

y Accounts & Deposits cumulative deposit scheme, deposit reinvestment

certificate, monthly income scheme, union flexi-deposit, senior citizens

scheme, multi gain savings account, no frills saving account, union super

salary account, union classic current account

y Retail Loans union cash, union home, union health, union miles, union

education, union top up, EMI calculator, union smile.

y Cards - Classic / Silver / Gold, Corporate Credit Cards, Add-On Cards

y Insurance & Investment mutual fund, union healthcare

y Demit demit accounts, online share trade

y Payment

NRI Banking

y Remittance - Union E-Remit, Details for Remittance

y Savings & Deposits - NRO Non Resident Ordinary A/c Scheme, NRE Non

Resident External Rupee, RFC, FCNR(B), Union Unfixed, Foreign

Currency Deposit

y Loan & Services house loans, foreign currency loans, loans against

deposit, immovable property, and shares or debenture

y Payments - Union Bill Pay

Corporate Banking

y CMS - Union Speed, Union Centralized Debits/Credits, Union Prompt


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y E-Tax - Customs and Direct taxes, DGFT, Central Excise and Service Tax

y Trade Finance trade finance for exporters, trade finance for importers,

foreign currency loans, correspondent bankingy Insurance - Non life Insurance Corporate Agency, Insurance- Corporate

Agency

y Syndication of Loans

y MSME Banking

y Loans & Policies

Internet Banking

y Account Information

y Transfer ofFunds

y Bills

y Requests

y Mails

y Trade

y Limits

y Currency

y Uploadsy Customization

y Financial enquiries

y Non Financial enquiries

Vision & Mission

VISION

To be the premier financial institution in the emerging markets

Technologically Strong

Financially Sound

All India presence


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Personalized Services

Value Maximization

Employee SatisfactionSkill Maximization

MISSION

To be premiere bank, responsive to the needs of our target market customers,

recognized for consistently superior service quality innovative products, thereby

delivering superior value to our shareholders

FINANCIAL PERFORMANCE HIGHLIGHT of 2009-2010

y Total Business size of Rs. 2, 91,289 crore as on March 31, 2010 an

increase of 22.9% over previous year.

y Total Deposits ofRs. 1, 70,040 crore, an increase of 22.6%. CASA deposits

grew at 29.4%, its share increased by 166 basis points to 31.73%.

y Total Advances of Rs. 1, 21,249 crore, an increase of 23.4%. Retail

advances grew at 33.8%

y Net Profits ofRs. 2,075 crore, an increase of 20.2% over the previous year.

y Core Fee Income ofRs. 896 crore, an increase of 32.74% over the previous

year.

y Capital Adequacy Ratio (Basel II CAR) stood at 12.51% as on March 31,

2010 as against regulatory minimum of 9.0%. Tier I ratio at 7.91%.

y Return on average assets 1.25%.

y Return on equity recorded at 23.69%.

y Book Value per share ofRs. 173.38, an increase of 25.6% over the previous

year.

y Earnings per share increased to Rs. 41.08, compared to Rs. 34.18 of

previous year.


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y Cost to Income ratio of 40.66%, reduced by 115 basis points over the

previous year.

y Proposed Dividend up from 50% to 55%.

y Pan India reach - Network of2,805 branches and 2327 ATMs as on March

31, 2010.

y Global Expansion: Opened representative offices in Sydney (Australia) and

Beijing (China). Representative office in London opened on April 1, 2010.


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1. As on March 31, 2010, Total Business of the bank stood at Rs. 2.91 lakh crore

as against Rs. 2.37 lakh crore as on March 31, 2009, an increase of 22.9%. The

business growth was broad-based with contribution from retail and corporatecustomers, both on assets and liabilities side.

2. The Bank posted a total income and net profit of Rs. 15,277 crore and Rs. 2,075

crore respectively for the financial year ended March 31, 2010 as against Rs.

13372 crore and Rs. 1727 crore respectively in the previous year. The Earning per

share (EPS) ratio showed improvement to Rs. 41.08 as against Rs. 34.18 in the

previous year, while cost to income ratio declined to 40.66% as against 41.81% in

the previous year.


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Objective of the study

The objective of the study was to know the financial performance (i.e. theprofitability and financial position) ofUnion Bank of India for the financial year

2009-2010.

Some other objectives were as follows:

To study the evaluation and performance of the bank.

To study the financial statement.

To study the source of finance of the bank.

Scope of the study

Each and every project study along with its certain objectives also has scope for

future. And this scope in future gives to new researches a new need to research a

new project with a new scope. Scope of the study not only consist one or two

future business plan but sometime it also gives idea about a new business whichbecomes much more profitable for the researches then the older one.

Scope of the study could give the projected scenario for a new successful strategy

with a proper implementation plan. Whatever scope I observed in my project are

not exactly having all the features of the scope which I described above but also

not lacking all the features

Research study could give an idea of network expansion for capturing more

market and customer with better services and lower cost, withoutcompromising with quality.

In future customer requirements could be added with the product and

services for getting an edge over competitors.


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Different parameter could also be used for the purpose of launching a new

product with extra benefits which are required by customers.

Factors which are responsible for the performance for bank can also be usedfor the modification of the strategy and product for being more profitable.

These all could also be interchanged with each other for each other in banks

strategies for making a final business plan to affect the market with a positive way

without disturbing a lot to market, customers and competitors with disturbance in

market shares.


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Role of Banks

A proper financial sector is of special importance for the economic growth ofdeveloping and underdeveloped countries. The commercial banking sector which

forms one of the backbones of the financial sector should be well organized and

efficient for the growth dynamics of a growing economy. No underdeveloped

country can progress without first setting up a sound system of commercial

banking. The importance of a sound system of commercial banking for a

developing country may be depicted as follows:

C

apitalF

ormation:Th

e rate of saving is generally low in an underdevelopedeconomy due to the existence of deep-rooted poverty among the people. Even the

potential savings of the country cannot be realized due to lack of adequate banking

facilities in the country. To mobilize dormant savings and to make them available

to the entrepreneurs for productive purposes, the development of a sound system of

commercial banking is essential for a developing economy.

Monetization: An underdeveloped economy is characterized by the existence of a

large non monetized sector, particularly; in the backward and inaccessible areas of

the country. The existence of this non monetized sector is a hindrance in the

economic development of the country. The banks, by opening branches in rural

and backward areas, can promote the process of monetization in the economy.

Innovations: Innovations are an essential prerequisite for economic progress. These

innovations are mostly financed by bank credit in the developed countries. But

the entrepreneurs in under developed countries cannot bring about these

innovations for lackof bank credit in an adequate measure. The banks should,

therefore, pay special attention to the financing of business innovations by

providing adequate and cheapcredit to entrepreneurs.

Finance for Priority Sectors: The commercial banks in underdeveloped countries

generally hesitate in extending financial accommodation to such sectors as


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agriculture and small scale industries, on account of the risks involved there in.

They mostly extend credit to trade and commerce where the risk involved is far

less .But for the development of these countries it is essential that the banks takerisk in extending credit facilities to the priority sectors, such as agriculture and

small scale industries.

Provision for Medium and Long term Finance: The commercial banks in

underdeveloped countries invariably give loans and advances for a short period of

time. They generally hesitate to extend medium and long term loans to

businessmen. As is well known, the new business need medium and long term

loans for their proper establishment. The commercial banks should, therefore,change their policies in favor of granting medium and long term accommodation to

business and industry.

Cheap Money Policy: The commercial banks in an underdeveloped economy

should follow cheap money policy to stimulate economic activity or to meet the

threat of business recession. In fact, cheap money policy is the only policy which

can help promote the economic growth of an underdeveloped country. It is

heartening to note that recently the commercial banks have reduced their lending

interest rates considerably.

Need for a Sound Banking System: A sound system of commercial banking is an

essential prerequisite for the economic development of a backward country.

Role of Banks in Indian Economy

In India, as in many developing countries, the commercial banking sectorhas been

the dominant element in the countrys financial system. The sectorhas performed

the key functions of providing liquidity and payment services to the real sector and

hasaccountedfortheBulkofthefinancialintermediationprocess.Besidesinstitutionalizi

ngsavings, the banking sector has contributed to the process of economic


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development by serving as a major source of credit to households, government,

and business and to weaker sectors of the economy like village and small scale

industries and agriculture. Over the years, over 30-40% of gross household savingshave been in the form of bank deposits and around 60% of the assets of all

financial institutions accounted for by commercial banks.

An important landmark in the development of banking sector in recent years has

been the initiation if reforms following the recommendations of the first

Narasimham Committee on Financial System. In reviewing the strengths and

weaknesses of these banks, the Committee suggested several measures to

transform the Indian banking sector from a highly regulated to a more market

oriented system and to enable it to compete effectively in an increasingly

globalised environment. Many of the recommendations of the Committee

especially those pertaining to Interest rate, an institution of prudential regulation

and transparent accounting norms were in line with banking policy reforms

implemented by a host of developing countries since 1970s.

Role of Central Bank (RBI)

The main objectives for the establishment of the Central Bank were as follows:

To manage the monetary and credit system of the country.

To stabilize internal and external value of rupee

For balanced and systematic development of banking in the country

For the development of organized in the money market in the country.

For proper arrangement of agriculture finance.

For proper arrangement of Industrial Finance.

To establish monetary relations with other countries of the world &

international financial institutions.

For proper management of public debts.

For centralization of cash reserves of commercial bank.


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Market Price, Volume of shares traded in Stock Exchanges


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Total Capital Adequacy ratio (CAR), calculated in line with Basel II framework, and stood at

12.51%, well above the regulatory benchmark of 9%. Bank s Tier-I CAR was 7.91%.


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y The operating expenses stood at Rs. 2508 crore compared to Rs. 2214 crore, relatively alower growth of 13.28% compared to 38.98% growth in previous year.

y The operating profit of the Bank registered a growth of 18.72% to Rs. 3659 crore from

Rs. 3082 crore in the previous year.

y Profit after tax net profit increased to Rs. 2075 crore compared to Rs. 1727 crore

achieved during last year. Buoyancy in the core business operations supported by ahealthy growth in Non-Interest Income helped Bank achieve a 20.15% growth in net

profit. Bank s operating profit and net profit CAGR during the financial year 2006- 07 to2009-10 is at 22.3% and 34.9% respectively.


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Net-worth improved by 25.76% to Rs. 8758 crore from Rs. 6964 crore as reported during lastyear. The book value per share increased to Rs. 173.38 from Rs. 137.87. The return on equity

stood at 23.69% and earnings per share increased to Rs. 41.08 from Rs. 34.18 reported duringlast year. The earnings per share grew at CAGR of 34.9% during FY07 to FY10.

Efficient utilization of assets is reflected throughhigher than industry average and stable Returnon Average Assets and reduction in cost to income ratios. The return on average assets is

maintained at a healthy rate of 1.25% as on March 31, 2010. Cost to Income ratio has decreasedby 115bps to 40.66% as compared to 41.81% reported during last year, even though Bank

continued to invest in capacity building for future earnings including investment in delivery

channels and human resources. Operating Expenses to Average Working Fund has also reducedto 1.52% from 1.63% recorded during last year.

The following ratios reflect the productivity per employee and branch each ratio shows

significant improvement over a period of three years.


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Findings

y Total Capital Adequacy ratio (CAR), stood at 12.51%, well above the

regulatory benchmark of 9%.

y Profit after tax net profit increased to Rs. 2075 crore compared to Rs. 1727

crore achieved during last year.

y

The operating expenses registered a lower growth of 13.28% compared to38.98% growth in previous year. The operating profit of the Bank registered

a growth of 18.72%.

y Net-worth improved by 25.76%.

y The return on equity stood at 23.69% and earnings per share increased to Rs.

41.08 from Rs. 34.18.

y . Cost to Income ratio has decreased by 115bps to 40.66% as compared to

41.81% reported during last year.

y The return on average assets is maintained at a healthy rate of 1.25% as on

March 31, 2010.


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Conclusion

The economy of the country is booming and with the investment favorable policies

and their smooth implementation, the role of banks in todays economy has

become an important one.

The banking industry is also reaping the fruits of this economic boom by growing

rapidly over the past few years.

There are a number of mergers

happening in t

he

economy with foreign investment coming into the banking sectors.

The services that union bank provides have a great market penetration not only

because of their features but also the profit and markup rates that they charge.

Furthermore, as the bank is growing, the number of employees at union bank are

also increasing, which shows that union bank is being considered as an employer,

that provides its employees with a challenging environment to work in, where they

can harness their full potential and shows confidence as an employer by the

employees of the bank.


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46204922 project union bank of india

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