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A STUDY ON

FINANCIAL PERFORMANCE OF FEDERAL BANK

Prepared By,
Athulya C.
4th Sem M.Com

INTRODUCTION
Indian banking scene has been undertaking a sea change since economic reforms initiated by
the government in the year 1990. The financial sector reform has brought about new challenges and
opportunities to commercial banks. As an attempt to deregulate the banking industry and encourage
healthy competition, the Reserve Bank of India allowed the entry of new private sector banks and
initially nine banks were given permission to set up banking operation in India.
The present commercial banking scene in India is reflected by the existence of 27 public
sector banks, the old private sector banks, the new generation private sector banks and foreign
banks. The Indian banking system is the largest in the world, with a network of branches exceeding
82,000 and a staff strength of over 18,00,000.
Kerala Banking Scene
Banking was one of the more preferred lines of business in Kerala as well as in the
princely states of Travancore and Cochin and the Malabar Province of British India that originally
comprised it- in the twentieth century. There were more than 27 that operated in that territory during
that period. Due to various reasons most of them were either closed or amalgamated with other
banks, leaving only a handful now.
In 2011, Kerala has become the first total banking state in the country, with the unique
distinction of each household in all the 14 districts having at least one bank account and banking
facilities available within the reach of people everywhere. The state has the highest bank population
ratio of one branch for every 9000 people, while the national average is on branch for every 15000
people. The state's banking scene is dominated by the presence of very large number of branches of
Indian banks like State Bank of India, State Bank of Travancore, Federal Bank etc. The head office
of six commercial banks were situated in the state. Currently 3 private sector banks and 1 Public
Sector bank have head office in Kerata. The Deposits base of these banks includes a large number
of Non Resident Indians, beside domestic segment comprising agriculturist, labours, trader,
employees etc.
Recent Developments
With the introduction of financial sector reforms and follow-up action by Reserve Bank of
India based on the Narasimham Committee recommendations, the banking system is also
undergoing rapid changes. Today bank have to meet fierce competition from both development
banks, non banking financial companies beside the new private sector banks. It is appropriate to
compare modern commercial banking with customer industry operating in a highly competitive
environment. Banks are given more Autonomy in deciding the cost inputs in the form of deposits
and price of their products in the form of interest charged on loans and advances. In the liberalized
regime a bank must be competitive and economical in its operations. Improving profitability and
productivity through raising efficiency are the strategies for long terms survival and growth for
banking companies in India as elsewhere.
Statement of the problem
2

The problem under study is the analysis of the financial performance of Federal bank.
Financial performance is the process of determining the financial strength and weakness by
establishing strategic relationship between components of Balance Sheet and income statement and
other operating data. It also included a study of trends of various important factors over the past
years based on the published financial data.
Profitability is the yardstick of measuring the financial health of any business including
banking business. It can be measured as the difference between the interest spread and burden.
While interest spread is the excess of interest earned over interest paid, burden is the net of Noninterest expenses and Non-interest incomes.
Besides profitability, performance is also evaluated on the basis of growth in deposits,
deployment of funds, quality of assets, productivity and all over performance. The study also
includes the analysis of factors contributing to profitability, productivity and over performance.
Objectives of study
The objectives are the following:
1. To analyse the present operation and services of bank.
2. To analyse the operational profitability of the bank.
3. To analyse the growth of the bank's business in terms of deposit mobilization and
employment of fund.
4. To analyse the overall performance and productivity of the bank.
5. To arrive at conclusion and make suitable recommendation and suggestions for
improvement of performance.
Rationale of the study
Indian banking is in the midst of changes facing unprecedented challenges and
opportunities. Indian banks would have to face competition from foreign banks, financial
institutions, non-banking companies and mutual funds from mobilization of resources and
deployment of funds. The focus in the coming years would be on quality of service instead of
volume of business. Profitability and productivity are the key words in the evaluation of
performance of a bank.
Banks need to be rationalised and consolidated their operations so as to make the
competitive. They will be more cost conscious and closely regulated in future. Banks would change
their mindset to cope up with rapid environment and technological changes. Banks have to strive for
higher standards of risk management and find solutions to the problems faces in increasing
productivity, efficiency and profitability while sub serving their necessary socio-economic
objectives.
Keeping the above background, analysis of past performance would reveal the efficiency of
the bank's operations. It would also highlights the areas where the bank needs to focus its attention
for improving efficiency and economy. In this context the performance evaluation of Federal Bank
assumes greater significance. Hence it is worth studying the financial performance of the bank.

Data collection and methodology


Both primary and secondary data were collected for the purpose of the study. Primary data
were collected by direct interview with officials of the bank. Data relating to income, costs, profits,
deposits, loans and advances, capital etc. were collected from secondary sources. These include past
annual financial statements, reports and schedules.
Period of Study
A study like this requires a moderate lengthy period so to arrive at meaningful and
purposeful conclusions. The reference period of the study consists of three months commencing
from January 2015 to March 2015.
Limitations of the study
Even though the study is extensive, innovative and pioneering in sum wspects, it suffers
from these limitations:
1. Stringency of time forced to cover limited area.
2. Finance available for the study was limited which prevent from making and in depth
analysis.
3. Non availability of adequate secondary data relating to financial performnce of the bank
orevented the researcher from an accurate and detailed study.
Analysis of data
Mainly ratio technique has been used for the purpose of the study. Other statistical
techniques like averages, graphs, percentage, schedules etc. also used wherever required.

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