Introduction
Finance is considered to be the lifeblood of the business. Without finance a business enterprise cannot be started or operated. It is needed for starting the business, for continuing it and also for expanding in future. Finance is scarce resource also. It is also the most important aspect of business. Structure of bank is varying from country to country. The banking sector is one of the most important sectors for national development and occupies the unique place of nation’s economy. The last decade has witnessed many positive developments in the Indian banking sector. Finance and related government and financial sector regulatory entities had made several notable regulations in this sector.1 It includes strengthening prudential norms, enhancing the payments system and integrating regulations between commercial and co-operative banks.
The Indian financial system comprises of a large number of commercial banks and co-operative banks, specialized development banks for industry, agriculture, external trade and housing. Indian banks have favorably on growth, asset quality and profitability with other regional banks. Economic development of the country is evident through the soundness of the banking system.2, 3 Deregulation in the financial market, market liberalization, economic reforms have witnessed important changes in banking industry leading to incredible competitiveness and technological sophistication leading to a new era in banking.
Today large section of people, who have minimal financial literacy, is needed to know the financial performance status of the banks where their deposits are vested.4 Financial performance is not available from the records and files in any organization. It has to be derived by the usage of financial statement analysis techniques. Some of the important commonly used techniques are ratio analysis, comparative statement analysis, common size analysis, and time series analysis.
Financial information is needed to predict, compare and evaluate the earnings ability. It is also required to aid an economic decision making investment and finance decision making. Financial ratios are used in the evaluation of the financial condition and profitability of a company.5 The ratios are calculated from the financial information provided in the balance sheet and income statement. While analyzing the financial statements one should keep in mind the principles and practices that accountant’s use in preparing statements to examine the financial condition and preference of a company.6 Ratio analysis is one of the techniques of financial analysis where ratios are used to evaluate the financial conditions and performance of a firm.
The health of the banking system underpins that of the economy as a whole. Any destabilization in financial markets affects even those who are not in financial markets.7 The solvency or insolvency situations of a bank have been catching a greater attention of the public. Financial ratios are often used to measure the overall financial soundness of a bank and the quality of its management. Hence many of the banks failed to keep their financial stability and this study was undertaken to analyse the financial efficiency, profitability and the structural health of the organization.
Review of Literature
Anita Makkar and Shveta Singh (2013) analysed the financial performance of Indian commercial banks. Rohit Bansal (2014) conducted a comparative analysis of the financial ratios of selected banks in India for the period of 2011-2014. Samir Thakkar, et. al (2020) have conducted financial performance analysis of banking sector in India for the period of 2016-2020. Karunakaran N (2020) analysed the role and challenge of rural banks in the financial inclusive growth of India. Thimmaiah Bayavanda Chinnappa and Karunakaran N (2021), and Chinnappa T B and Karunakaran N (2022) studied the consolidation in the banking industry and opinion of customers on satisfaction in the selected bank branches in India.
Materials and Methods
The data were collected through primary and secondary sources. Primary data were collected from Kerala State Co-operative Bank, Kasaragod using questionnaire, 50 samples were taken for analyzing the customer behaviour towards deposit scheme and five year income statement and balance sheet were used for financial analysis. Analysis of the study is done using common size balance sheet, comparative balance sheet, ratio analysis, and chi-square test.
Table 1
Comparative balance sheet of 2020-2021
Results, Analysis and Discussion
Comparative balance sheet of bank
In 2020-21, other asset showing a decreasing trend. The fixed assets, investment, current assets, other deposit, shares and advances are showing increasing trend (Table 1); for investment there is a high growth rate.
Common size balance sheet
In the year 2021, the advances constituted major share in assets that is more than 60%. Investment in shares was only about 0.00093%. Among liabilities, deposits constitute major share. There is only 2.95% in share capital (Table 2).
Table 2
Common size balance sheet of 2020-2021
Liquidity ratios
Current ratio
The current ratio of bank increased in 2017-2018 and decreased in 2018-2019. By analyzing the current ratio, the organization has a satisfactory level of liquidity (Table 3).
Table 3
Current ratio of bank
.
Proprietary ratio
Proprietary ratio shows a decreasing trend in the first 4 years but it was somewhat high in the year 2020-2021 (Table 4).
Table 4
Proprietary ratio of bank
Debt equity ratio
The ideal debt-equity ratio is 1:1. The debt-equity ratio of 2018-2019 year was 1.11%. Later it started to increase. For the other four years it was less than one percentage; which shows, comparing to the other years debt equity ratio for the year 2018-2019 is good (Table 5).
Table 5
Debt equity ratio of bank
Credit deposit ratio
Shows that, in the year 2016-17 credit deposit ratio was 84.74%, increased to 86.52%. Later years it was decreased. It is clear that in all years above 50% of the deposit are given by the bank as loan.
Table 6
Credit deposit ratio of bank
Investment deposit ratio
hows the investment- deposit ratiofor the year 2018-19 is higher than compared to other years.
Table 7
Investment deposit ratio of bank
Net investment to total asset ratio
Net investment to total asset is 24.69 in 2016-17 and then three years it was a decreasing trend and in the year 2020-21 the ratio increased and it was 34.26 (Table 8).
Table 8
Net Investment tototal asset ratio of bank
Investment in shares to net investment ratio
It is seen that in each year there is an increase in investment in shares (table. 9).
Table 9
Investment in shares to net investment ratio of bank
Cash position ratio
From table.10, it is clear that the cash position ratio is in satisfactory level.
Table 10
Cash position ratio of bank
Table 11
Solvencyratio of bank
Conclusion
If properly analyzed and interpreted financial statement can provide valuable insight into a firm’s performance analysis. Customers are the king of any business, and customer behaviour in relation to their income knows, the trend of investment in various deposit schemes. The comparative statement, common size balance sheet, and ratio analysis shows that the bank has a good financial position. Bank Surplus is increasing except one year and was not high in rate. Bank’s liquidity position is fair and invests more in current asset than the liquid asset.
