Financial Appraisal of Idbi Bank

Topics: Capital requirement, Fractional-reserve banking, Bank Pages: 17 (6486 words) Published: January 18, 2011
Case Study

Financial appraisal of IDBI Bank Ltd. through financial indicators Pradeep Kumar Singh

This paper examines the soundness or otherwise of liquidity position and capital adequacy as well as effectiveness of various financial indicators to reflect the performance of IDBI Bank by applying various statistical techniques like t-test and correlation

his research work is concerned with banking organization that offers a personalized service. The bank uses various indicators for measuring its financial performance. These indicators are of great importance and tell us the true financial position of the bank. These indicators help in identifying the strengths and weaknesses of the bank and suggesting improvements in its future working. It is, thus, very important for a banking or business concern to analyze its financial performance at the end of each financial year. The objectives of the Bank as set out in the Memorandum of Association are to establish and carry on the business of banking in all forms whether in India or outside India and to provide latest automation and technology enabling superior product delivery and cost efficiency and so on. To achieve the required objectives, information is collected through primary data like observation, direct interview, personnel interview, group discussion & secondary data like budget, statistical report, annual report, financial stateAsstt. Professor, Deptt. of Commerce and Management, Rajeev Gandhi College, Bhopal


ment, balance sheet, profit & loss account and their schedules and also secondary data like field study. All the information, which is collected through annual report and interview to the employees of the concern, is relevant to the objectives so that the objectives can be easily fulfilled. This research work is mainly done : To find the overall financial position of the bank; To understand the overall performance of the bank through financial indicators; To measure the liquidity position of the bank; To find out the profitability position of the bank to the given level of investment and turnover; To analyze the adequacy of the capital, based on the level of activity by the bank; & To identify the financial strengths and weaknesses of the bank so as to suggest improvements for the future. In order to achieve the above said objectives, the different hypothesis are framed. These hypothesis states that The liquidity position as well as the earning potential of the Bank is very sound; Bank’s total Capital Adequacy Ratio (CAR) stands healthy; The financial information found out by financial indicators is very helpful and these financial indicators are helpful in improving the financial performance of

the bank as well as effective in indicating the financial performance of the bank. To test the validity of these hypothesis, the help of various statistical tools such as Correlation and T - test has also been taken. These tools are of great help in telling us whether the hypothesis assumed are positive or negative in nature. The various finanacial indicators which have been used under the research work are :Capital Adequacy Ratio Non -performing Assets Priority Sector Advances Statutory Liquidity Ratio Cash Reserve Ratio Credit Deposit Ratio. These financial indicators serve as an important tool for measuring the financial performance of a bank as indicated below :It provides reliable financial information, economic resources and obligations to the bank. It provides reliable information about the changes in net resources arising out of various banking activities. It provides financial information that assist in estimating the earning potential of the bank.

Case Study It is also very helpful in indicating the variances which arise while calculating the ratios. Thus, necessary steps can be taken to improvise on that. The financial appraisal of IDBI Bank Ltd. has been done with the help of the above mentioned indicators. Thus, it becomes easier to know...
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