SAKET

DECLARATION
I Saket Sahu & Deepansh Katakwar student of M.B.A. II semester in Department of

Management, Bhilai Institute of Technology, Durg (C.G.) hereby declare that the
research report work entitled “(Title of the Report)” is the record of original work
done by me and the matter enclosed has not been submitted for the award of any
other degree or diploma in the university or anywhere.
Date: 14-04-2018 Saket Sahu

Place: Durg Deepansh Katakwar
MBA II Semester, Sec-“__”2018,
Examination Roll No.-
Enrollment No.-
CERTIFICATE BYTHE EXAMINERS
This is to certify that the project entitled
(A Study of liquidity Ratio Analysis of public sector bank in India)
Submitted by
Saket Sahu, Roll no. - Enrollment No.:…………………..
Deepansh Katakwar Roll No.:………….. Enrollment No.:…………………..
Has been examined by the undersigned as apart of the examination for the award of Master of
Business Administration degree of Chhattisgarh Swami Vivekanand Technical University,
Bhilai (C.G.).
________________ __________________
________________ __________________
Name & Signature of Name & Signature of
Internal Examiner External Examiner
Date: Date:
Forwarded by
Head
Department of Management
ACKNOWLEDGEMENT
Literature Review
Data is collected from money control, RBI. This data for past 15
years, 5-5 year’s interval about the line position of a bank (Balance
select) different liquid Assets and Current liability are collected.
ABSTRACT
The present study attempts to evaluate the financial performance of selected

public sector bank for the period from 2013 to 2017.The study comprises 4
commercial bank representing public sector, and the financial performance of
these banks are analyzed using the financial ratio. The study shows that the
financial performance of public sector banks throughout the study. Besides, the
study examines the impact of Liquidity, solvency and efficiency on the
profitability of selected Indian commercial banks .The empirical result from the
panel data estimation revealed then the liquidity ratio and solvency ratio, and
the turnover ratio and solvency ratio are found to have positive and significant
impact on the profitability of selected public sector bank, respectively, bearing
testimony to the fact that profitability is a function of those ratios.
For this study four Public Sector Banks are selected. The Indian banking system
faces several difficult challenges. The selected public sector banks have
performed well on the sources of growth rate and financial efficiency during
the study period. The old private sector banks and new private sector banks play
a vital role in marketing of new type of deposits and advances schemes.
Chapter – I
Introduction
INTRODUCTION
A BANK is a financial institution that accepts deposits from the public

and creates credit.[1] Lending activities can be performed either directly
or indirectly through capital markets. Due to their importance in the
financial stability of a country, banks are highly regulated in most
countries. Most nations have institutionalized a system known
as fractional reserve banking under which banks hold liquid assets
equal to only a portion of their current liabilities. In addition to other
regulations intended to ensure liquidity, banks are generally subject
to minimum capital requirements based on an international set of
capital standards, known as the Basel Accords.
The Banking Sector is a very important financial intermediary in tapping

savings and transforming them into consequent investments.
Liquidity and Solvency are inseparable attributes of a successful banking
business. The Liquidity of banks depends on the banks’ ability to pay off its
liabilities and to timely discharge of their obligations. Liquidity crunch arises
when the deposits are demanded and the bankers fail to honor their commit-
ments to repay the same. Asset-Liability mismatch in the period of maturity
leads to liquidity risk, resulting in solvency.
Liquidity can be defined as the ability of a firm to make good its short term
obligations. Most businesses function on credit. Hence to run a business firms
have to both extend credit as well as ensure that they receive credit as well.
Liquidity ratios measure the relationship between the amounts of short term
capital that the firm has locked in its receivables versus the short term interest
free debt it has acquired in the form of accounts payables.
Range of activities
Activities undertaken by banks include personal banking, corporate
banking, investment banking, private banking, transaction
banking, insurance, consumer finance, foreign exchange trading, commodity
trading, trading in equities, futures and options trading and money market
trading.
Products
Retail
 Savings account
 Recurring deposit account
 Fixed deposit account
 Money market account
 Certificate of deposit (CD)
 Individual retirement account (IRA)
 Credit card
 Debit card
 Mortgage
 Mutual fund
 Personal loan
 Time deposits
 ATM card
 Current accounts
 Cheque books
 Automated Teller Machine (ATM)
Business (or commercial/investment) banking
 Business loan
 Capital raising (equity / debt / hybrids)
 Revolving credit
 Risk management (foreign exchange (FX)), interest
rates, commodities, derivatives)
 Term loan
 Cash management services (lock box, remote deposit capture, merchant
processing)
 Credit services
The Reserve Bank of India (RBI)
is India's central banking institution, which controls the monetary policy of

the Indian rupee. It commenced its operations on 1 April 1935 in accordance
with the Reserve Bank of India Act, 1934.[6] The original share capital was
divided into shares of 100 each fully paid, which were initially owned entirely
by private shareholders.[7] Following India's independence on 15 August 1947,
the RBI was nationalised on 1 January 1949.
OBJECTIVES OF THE STUDY
The major objective of the study is to analyze the Liquidity ratio of the
selected public sector banks. The following are the specific objectives of the
study.
1) To enlighten on the establishment of public sector banks.
2) To analyze the liquidity ratio of selected public sector banks.
3) To offer suggestions for improving the performance of the banks
Nature and scope of the study .

The world has become a global market in modern and Globalization has
affected the banking sector also. Banking sector returns in India strive, to
increase efficiency and profitability of the banking institution has to face the
global competition. As a consequence, there has not only been rapid expansion
in the number of banking institutions in the country, but the banking horizon of
the country. Scope of the study is wider covers the banking sectors in India.
There is huge emerging issue of financial conditions of banking sector in India.
But, study is only going to cover selected nationalize four public banks in India.
The time period is limited from 2002, 2007, 2012, 2017 as it will give exact
impact performance of banks. The study may helpful for further descriptive
studies on the ideas that will be explored. Moreover, it would be beneficial to
gain knowledge regarding maintain the sound financial performance of banking
sectors through vary factory
Variables of the study
(A) Liquidity ratios
What are 'Liquidity Ratios'
Liquidity ratios measure a company's ability to pay debt obligations and
its margin of safety through the calculation of metrics including the current
ratio, quick ratio and operating cash flow ratio. Current liabilities are analyzed
in relation to liquid assets to evaluate the coverage of short-term debts in an
emergency. Bankruptcy analysts and mortgage originators use liquidity ratios
to evaluate going concern issues, as liquidity measurement ratios indicate cash
flow positioning.
Examples of Liquidity Ratios
The most basic liquidity ratio or metric is the calculation of working capital.
Working capital is the difference between current assets and current liabilities.
If a business has a positive working capital, this indicates it has more current
assets than current liabilities and in the event of an emergency, the business
can pay all of its short-term debts. A negative working capital indicates that a
company is illiquid.
The current ratio divides total current assets by total current liabilities. This
ratio provides the most basic analysis regarding the coverage level of current
debts by current assets. The quick ratio expands on the current ratio by only
including cash, marketable securities and accounts receivable in the
numerator. The quick ratio reflects the potential difficulty in selling inventory
or prepaid assets in the result of an emergency.
 Current Ratio - The current ratio is mainly used to give an idea of a

company's ability to pay back its liabilities (debt and accounts payable)
with its assets (cash, marketable securities, inventory, accounts
receivable). As such,current ratio can be used to make a rough
estimate of a company's financial health.
 Quick Ratio - The quick ratio is a measure of how well a company can
meet its short-term financial liabilities. Also known as the acid-
test ratio, it can be calculated as follows: (Cash + Marketable Securities
+ Accounts Receivable) / Current Liabilities.
 Cash ratio - The cash ratio is the ratio of a company's total cash and
cash equivalents to its current liabilities. The metric calculates a
company's ability to repay its short-term debt; this information is useful
to creditors when deciding how much debt, if any, they would be
willing to extend to the asking party. The cash ratio is generally a more
conservative look at a company's ability to cover its liabilities than
many other liquidity ratios because other assets, including accounts
receivable, are left out of the equation.
Chapter-2
HISTORY AND PROFILE OF

ORGANIZATION
BANKING
India cannot have a healthy economy without a sound and effective banking
system. The banking system should be hassle free and able to meet the new
challenges posed by technology and other factors, both internal and external
India’s banking has earned several outstanding achievements to its credit.
The most striking is its extensive reach. It is no longer confined to
metropolises or cities in India. In fact, Indian banking has reached even to
the remote corners of the country. This is one of the main aspects of India’s
growth story.
In India, banks are playing a crucial role in socio-economic progress of the
country after independence. The banking sector is dominant in India as it
accounts for more than half the assets of the financial sector. Indian banks
have been going through a fascinating phase through rapid changes brought
about by financial sector reforms, which are being implemented in a phased
manner.
HISTORY OF BANKING IN INDIA

The first bank in India, though conservation, was established in 1786.
From 1786 till today, the journey of Indian banking system can be
segregated into three distinct phases:
METHODOLOGY
To accomplish the objectives of the study, secondary data were used. It has
been collected from bank records, published financial reports, journals,and
websites. The study is chronological and covers a period from 2002 to 2017.
Financial performance of the selected public sector banks were analyzed for
the period of ten years with the help of the following tools and techniques,
Ratio Analysis, Correlation, Regression.
PUBLIC SECTOR BANKS

The term public sector banks are used commonly in India. This refers to banks
that have their shares listed in the stock exchanges NSE and BSE and also the
government of India holds majority stake in these banks. They can also be
termed as government owned banks. Following Public Sector Banks are
selected for the study. Bank of India, Indian bank, Indian overseas bank, Canara
bank, Union bank of India and State bank of India.
Chapter-4
DATA ANALYSIS AND INTERPRETATION

LIQUIDITY RATIO
 These Ratios analyse the short-term financial postion of a firm and indicate the
ability of the firm to meet its short term commitments (current liabilites) out of its
short term resources (current assets).
These are also known as solvency ratio.

The ratios which indicate the liquidity of a firm are:
 Current ratio
 Quick ratio
 Cash ratio
Current Ratio
 An indication of a company ability to meet short term debt obligation.
 Higher the ratio the more liquid the company is.
 If current assets are more the twice of the current liabilities then it is considered to
have good short-term financial strength and if current liabilities exceed current
assets then company may have problem to meet its short term obligation.
 Formula
Current Ratio= Current Assets
Current Liabilities
Quick Ratio
 Measure of a company liquidity and ability to meet its obligation.
 Also referred to as acid-test ratio liquid asset ratio.
 Liquid asset means all current asset except closing stock and prepaid expenses
 Formula
Quick ratio= liquid assets
Current liabilities
Cash ratio
 The cash ratio is the value of marketable securities and cash and cash equivalents
divided by liabilities of the company.
 Formula
Cash ratio = Cash .
Current liabilities
I.
BANK OF BARODA
2002 2007 2012 2017
Liabilities
Other Liabilities & Provisions 4585.19 8437.7 11400.46 22285.56
Assets
Cash & Balances with RBI 2581.07 6413.52 21651.46 22780.21
Balance with Banks, Money at Call 6366.34 11866.85 42517.08 127689.7
Other Assets 3774.16 5212.5 10224.73 25757.37
CURRENT ASSTES 12721.57 23492.87 74393.27 176227.28
1. Current ratio
YEAR Current ratio
in times
2002 2.774491352
2007 2.784274151
2012 6.52546213
2017 7.907689105

Current Liabilities
Current ratio in times
8
7
6
5
Axis Title
4
3
2
1
0
2002 2007 2012 2017
Current ratio in times 2.774491352 2.784274151 6.52546213 7.907689105
Interpretation
 To measure whether or not a company has enough resources to pay its
debt over the next business cycle, I have calculated the current ratio,
which shows a fluctuating trend of 2.77 in 2002 then 2.78 in 2007 and
Finally a speedup from 6.52 in 2012 to 7.90 in 2017.Though the general
rule is a company should always have sufficient liquidity and as we
know that the thumb rule is 2:1 but the calculated current ratio show an
in sufficient liquidity.
2. Quick Ratio
Year Quick ratio
in times
2002 1.951371699
2007 2.166511016
2012 5.62859218
2017 6.75190168
Quick ratio = liquid assets
Current liabilities
Quick ratio in times
7
6
5
Axis Title
4
3
2
1
0
2002 2007 2012 2017
Quick ratio in times 1.951371699 2.166511016 5.62859218 6.75190168
Interpretation
 We have also calculated Quick ratios to show a fluctuating and a decline
at the end of the year 2017. Though, the thumb rule is that companies
with a quick ratio are sufficiently able to meet their short term liabilities
but here the company has low quick ratio indicating the company
liquidity position is not good enough.
3. Cash Ratio
Year Cash ratio
in times
2002 0.562914514
2007 0.760102872
2012 1.899174244
2017 1.022195987
Cash ratio = Cash .
Current liabilities
Cash ratio in times

Axis Title
2002 2007 2012 2017

Cash ratio in times 0.562914514 0.760102872 1.899174244 1.022195987
Interpretation
 To check whether the liquidity position of the company is good or not
we have also calculated Cash ratio and as we can see in every year the
cash ratio is lower than thumb rule that is 1:2,so the company liquidity
position isn’t good.
II.
BANK OF INDIA
Mar-02 Mar-07 Mar-12 Mar-17
Liabilities
Other Liabilities & Provisions 3,902.49 9,239.05 13,243.43 14,384.52
Assets
Cash & Balances with RBI 3,632.16 7,196.89 14,986.71 27,347.66
Balance with Banks, Money at Call 2,973.07 10,208.65 19,724.54 68,540.29
other assets 2,101.64 3,013.50 11,465.69 27,650.93
Current Assets 8,706.87 20,419.04 46,176.94 123,538.88
1. Current Ratio
YEAR Current ratio
in times
2002 2.231106294
2007 2.210080041
2012 3.486780993
2017 8.588321334

Current Liabilities
10
Axis Title
6
0
2002 2007 2012 2017
Interpretation
2. Quick Ratio
Year Quick ratio
in times
2002 1.692568078
2007 1.883910142
2012 2.62101661
2017 6.666051422
Current liabilities
7
6
5
Axis Title
4
3
2
1
0
2002 2007 2012 2017
Interpretation
3. Cash Ratio
Year Cash ratio
in times
2002 0.930728842
2007 0.778964287
2012 1.131633572
2017 1.901186831
Cash ratio = Cash .

Current liabilities
Cash ratio in times
1.5
Axis Title
0.5
0
2002 2007 2012 2017
Interpretation
III.
STATE BANK OF INDIA

Liabilities
Assets
Other Assets 14,934.36 25,292.31 53,113.02 154,007.72
CURRENT assests 79,864.52 77,261.01 150,276.19 325,979.37
1. Current Ratio
Current Liabilities
YEAR
Current ratio
in times
2002 1.503479871
2007 1.28677718
2012 1.857208464
2017 2.099906407
2.5
Axis Title
1.5
0.5
0
2002 2007 2012 2017
Interpretation
2. Quick ratio
Current liabilities
Year Quick ratio
in times
2002 1.222334882
2007 0.865535375
2012 1.200804077
2017 1.10781357
1.4
1.2
1
Axis Title
0.8
0.6
0.4
0.2
0
2002 2007 2012 2017
Interpretation
3. Cash Ratio
Cash ratio = Cash .
Current liabilities
Year Cash ratio

in times
2002 0.411758671
2007 0.484266082
2012 0.668304762
2017 0.824539977
Cash ratio in times
0.8
Axis Title
0.6
0.4
0.2
0
2002 2007 2012 2017
Interpretation
IV.
UNION BANK OF INDIA

Liabilities
Assets
other Assets 1,921.41 3,058.24 3,954.86 17,371.99
Current Liabilities 66,851.57 55,026.94 101,118.03 189,343.64
1. Current Ratio
Current Liabilities
YEAR Current ratio
in times
2002 1.258506153
2007 0.916470166
2012 1.249680746
2017 1.219721121
1.4
1.2
1
Axis Title
0.8
0.6
0.4
0.2
0
2002 2007 2012 2017
Interpretation
2. Quick Ratio
Current liabilities
Year Quick ratio

in times
2002 1.222334882
2007 0.865535375
2012 1.200804077
2017 1.10781357
1.4
1.2
1
Axis Title
0.8
0.6
0.4
0.2
0
2002 2007 2012 2017
Interpretation
3. Cash Ratio
Cash ratio = Cash .
Current liabilities
Year Cash ratio

in times
2002 0.411758671
2007 0.484266082
2012 0.668304762
2017 0.824539977
Cash ratio in times
0.9
0.8
0.7
0.6
Axis Title
0.5
0.4
0.3
0.2
0.1
0
2002 2007 2012 2017
Interpretation

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DECLARATION

I Saket Sahu & Deepansh Katakwar student of M.B.A. II semester in Department of

Date: 14-04-2018 Saket Sahu

Examination Roll No.-

This is to certify that the project entitled

(A Study of liquidity Ratio Analysis of public sector bank in India)

Saket Sahu, Roll no. - Enrollment No.:…………………..

Deepansh Katakwar Roll No.:………….. Enrollment No.:…………………..

Name & Signature of Name & Signature of

Internal Examiner External Examiner

The present study attempts to evaluate the financial performance of selected

A BANK is a financial institution that accepts deposits from the public

The Banking Sector is a very important financial intermediary in tapping

Business (or commercial/investment) banking

is India's central banking institution, which controls the monetary policy of

Nature and scope of the study .

Examples of Liquidity Ratios

 Current Ratio - The current ratio is mainly used to give an idea of a

HISTORY AND PROFILE OF

HISTORY OF BANKING IN INDIA

PUBLIC SECTOR BANKS

DATA ANALYSIS AND INTERPRETATION

These are also known as solvency ratio.

Cash & Balances with RBI 2581.07 6413.52 21651.46 22780.21

Balance with Banks, Money at Call 6366.34 11866.85 42517.08 127689.7

Other Assets 3774.16 5212.5 10224.73 25757.37

CURRENT ASSTES 12721.57 23492.87 74393.27 176227.28

Current Ratio= Current Assets

Quick ratio in times

Cash ratio in times

2002 2007 2012 2017

Other Liabilities & Provisions 3,902.49 9,239.05 13,243.43 14,384.52

Cash & Balances with RBI 3,632.16 7,196.89 14,986.71 27,347.66

Balance with Banks, Money at Call 2,973.07 10,208.65 19,724.54 68,540.29

other assets 2,101.64 3,013.50 11,465.69 27,650.93

Current Assets 8,706.87 20,419.04 46,176.94 123,538.88

YEAR Current ratio

Current Ratio= Current Assets

Year Quick ratio

Quick ratio in times

Year Cash ratio

Cash ratio = Cash .

Cash ratio in times

STATE BANK OF INDIA

Other Liabilities & Provisions 53,119.78 60,042.26 80,915.09 155,235.19

Cash & Balances with RBI 21,872.53 29,076.43 54,075.94 127,997.62

Balance with Banks, Money at Call 43,057.63 22,892.27 43,087.23 43,974.03

Other Assets 14,934.36 25,292.31 53,113.02 154,007.72

CURRENT assests 79,864.52 77,261.01 150,276.19 325,979.37

Quick ratio in times

Year Cash ratio

Cash ratio in times

UNION BANK OF INDIA

Balance with Banks, Money at Call 43,057.63 22,892.27 43,087.23 43,974.03

other Assets 1,921.41 3,058.24 3,954.86 17,371.99

Current Liabilities 66,851.57 55,026.94 101,118.03 189,343.64

YEAR Current ratio

Year Quick ratio

Quick ratio in times

Year Cash ratio

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