jugal final project

8/6/2019 Jugal Final Project

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A Training report submitted in partial fulfillment of the requirements of theaward of the Master of the bachelor of business administration (industryintegrated), gauhati university on

Comparative analysis of mutual fund and ULIPwith respect to Dhanalaxmi Bank

Under the guidance of : Under the guidance of :

Mr. Srimurali Krishna M Mrs. K.Rajani Priya

Agency manager (AM) Head of the Department (HOD)

Dhanalaxmi Bank SITAM

Prepared and Submitted by

Mr. Jugal Kishore Badatya

G.U.Regd No. 09010277


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Certificate

This is certify that Jugal KIshore Badatya, with regd.No.09010277, a student of Gauhati University has prepared Training

Report entitled comparative analysis of mutual fund and ULIPwith respect to Dhanalaxmi Bank under my guidance. He has

fulfilled all requirements under the regulation of the MBA (IIP)

Gauhati University, leading to the M.B.A (IIP) Degree. This work

is the result of his own investigation and the project; neither as a

whole nor any part of it was submitted to any other university or

educational institution for any research or diploma.

I wish him all success in life Mrs. K Rajani Priya

Head of the Department

SITAM, VIZAG 16


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Student Declaration

I hereby declare that the Training report entitled

COMPARATIVE ANALYSIS OF MUTUAL FUND

OF Dhanlaxmi Bank

Conducted at

DHANALAXMI BANK

Under the Guidance of

Mrs. K. Rajani Priya

Submitted in partial fulfillment of the requirements for the award of Degree of

MASTER OF BUSINESS ADMINISTRATION(Industrial Integrated)

To

GAUHATI UNIVERSITY, GUAHATI

Is my original work and the same has not been submitted for the award of any other Degree/Diploma/fellowship or other similar titles or prizes.

Place : Signature of Student

Date : Regd.No: 09010277


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ACKNOWLEDGEMENT

I render my sincere thanks to Mr. Srimurali Krishna, Agency manager(AM) and Mr. Vishal Kukreja, Senior vice president Human Resourceof Dhanalaxmi Bank for giving us an opportunity of doing the project work in this esteemed organization.

I am thankful to Mr. Srikant Jasti, C&MD, Mrs. Asha Jasti, ED, Mrs. K Rajani Priya, HOD of SUN INSTITUTE OF TECHNOLOGY ANDMANAGEMENT for their valuable support extended during the project.

As a token of my gratitude. I would like to acknowledge special thanks tothe Faculty members of Sun Inistitute of Technology and Managementfor guidance and support extended through the period of study

I would like to acknowledge my sincere thanks to all for their encouragement through the academic period.

Jugal Kishore Badatya


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Chapter 1: Introduction of Banking industry

1.1 General Introduction of Banking Sector 1.2 Industry profile

a) Origin and development of the Banking industry b) Growth and present status of the Banking industryc) Future of the Banking industry


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1 - Introduction to Banking Sector

1.1 Introduction to Banking Industry

The Indian Banking industry, which is governed by the Banking Regulation Act of India,1949 can be broadly classified into two major categories, non-scheduled banks andscheduled banks. Scheduled banks comprise commercial banks and the co-operative

banks. In terms of ownership, commercial banks can be further grouped into nationalized banks, the State Bank of India and its group banks, regional rural banks and private sector banks (the old/ new domestic and foreign). These banks have over 67,000 branchesspread across the country.

The first phase of financial reforms resulted in the nationalization of 14 major banks in1969 and resulted in a shift from Class banking to Mass banking. This in turn resulted in

a significant growth in the geographical coverage of banks. Every bank had to earmark aminimum percentage of their loan portfolio to sectors identified as priority sectors. Themanufacturing sector also grew during the 1970s in protected environs and the bankingsector was a critical source. The next wave of reforms saw the nationalization of 6 morecommercial banks in 1980. Since then the number of scheduled commercial banksincreased four-fold and the number of bank branches increased eight-fold.

After the second phase of financial sector reforms and liberalization of the sector in theearly nineties, the Public Sector Banks (PSB) s found it extremely difficult to competewith the new private sector banks and the foreign banks. The new private sector banks

first made their appearance after the guidelines permitting them were issued in January1993. Eight new private sector banks are presently in operation. These banks due to their late start have access to state-of-the-art technology, which in turn helps them to save onmanpower costs and provide better services.

During the year 2000, the State Bank Of India (SBI) and its 7 associates accounted for a25 percent share in deposits and 28.1 percent share in credit. The 20 nationalized banksaccounted for 53.2 percent of the deposits and 47.5 percent of credit during the same

period. The share of foreign banks (numbering 42), regional rural banks and other scheduled commercial banks accounted for 5.7 percent, 3.9 percent and 12.2 percentrespectively in deposits and 8.41 percent, 3.14 percent and 12.85 percent respectively incredit during the year 2000.


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1.2 Industry Profile

a) Origin and development of the Banking Industry :

Banking in India originated in the last decades of the 18th century. The first banks wereThe General Bank of India which started in 1786, and the Bank of Hindustan, both of which are now defunct. The oldest bank in existence in India is the State Bank of India,which originated in the Bank of Calcutta in June 1806, which almost immediately

became the Bank of Bengal. This was one of the three presidency banks, the other two being the Bank of Bombay and the Bank of Madras, all three of which were establishedunder charters from the British East India Company. For many years the Presidency

banks acted as quasi-central banks, as did their successors. The three banks merged in1921 to form the Imperial Bank of India, which, upon India's independence, became theState Bank of India.

Indian merchants in Calcutta established the Union Bank in 1839, but it failed in 1848 asa consequence of the economic crisis of 1848-49. The Allahabad Bank, established in1865 and still functioning today, is the oldest Joint Stock bank in India.( Joint Stock Bank : A company that issues stock and requires shareholders to be held liable for thecompany's debt) It was not the first though. That honor belongs to the Bank of Upper India, which was established in 1863, and which survived until 1913, when it failed, withsome of its assets and liabilities being transferred to the Alliance Bank of Simla.

When the American Civil War stopped the supply of cotton to Lancashire from the

Confederate States, promoters opened banks to finance trading in Indian cotton. Withlarge exposure to speculative ventures, most of the banks opened in India during that period failed. The depositors lost money and lost interest in keeping deposits with banks.Subsequently, banking in India remained the exclusive domain of Europeans for nextseveral decades until the beginning of the 20th century.

Foreign banks too started to arrive, particularly in Calcutta, in the 1860s. The Comptored'Escompte de Paris opened a branch in Calcutta in 1860, and another in Bombay in1862; branches in Madras and Pondicherry, then a French colony, followed. HSBCestablished itself in Bengal in 1869. Calcutta was the most active trading port in India,mainly due to the trade of the British Empire, and so became a banking center.

The first entirely Indian joint stock bank was the Oudh Commercial Bank, established in1881 in Faizabad. It failed in 1958. The next was the Punjab National Bank, establishedin Lahore in 1895, which has survived to the present and is now one of the largest banksin India.

Around the turn of the 20th Century, the Indian economy was passing through a relative period of stability. Around five decades had elapsed since the Indian Mutiny, and the


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social, industrial and other infrastructure had improved. Indians had established small banks, most of which served particular ethnic and religious communities.

The presidency banks dominated banking in India but there were also some exchange banks and a number of Indian joint stock banks. All these banks operated in different

segments of the economy. The exchange banks, mostly owned by Europeans,concentrated on financing foreign trade. Indian joint stock banks were generally under capitalized and lacked the experience and maturity to compete with the presidency andexchange banks. This segmentation let Lord Curzon to observe, "In respect of banking it

seems we are behind the times. We are like some old fashioned sailing ship, divided by solid wooden bulkheads into separate and cumbersome compartments."

The period between 1906 and 1911, saw the establishment of banks inspired by theSwadeshi movement. The Swadeshi movement inspired local businessmen and politicalfigures to found banks of and for the Indian community. A number of banks establishedthen have survived to the present such as Bank of India , Corporation Bank , Indian

Bank , Bank of Baroda , Canara Bank and Central Bank of India .The fervor of Swadeshi movement lead to establishing of many private banks inDakshina Kannada and Udupi district which were unified earlier and known by thename South Canara ( South Kanara ) district. Four nationalised banks started in thisdistrict and also a leading private sector bank. Hence undivided Dakshina Kannadadistrict is known as "Cradle of Indian Banking".

The partition of India in 1947 adversely impacted the economies of Punjab and WestBengal , paralyzing banking activities for months. India's independence marked the endof a regime of the Laissez-faire for the Indian banking. The Government of India initiated

measures to play an active role in the economic life of the nation, and the IndustrialPolicy Resolution adopted by the government in 1948 envisaged a mixed economy . Thisresulted into greater involvement of the state in different segments of the economyincluding banking and finance. The major steps to regulate banking included:

y The Reserve Bank of India , India's central banking authority, was nationalized onJanuary 1, 1949 under the terms of the Reserve Bank of India (Transfer to PublicOwnership) Act, 1948 (RBI, 2005b).[Reference www.rbi.org.in]

y In 1949, the Banking Regulation Act was enacted which empowered the Reserve Bank of India (RBI) "to regulate, control, and inspect the banks in India."

y The Banking Regulation Act also provided that no new bank or branch of an existing bank could be opened without a license from the RBI, and no two banks could have

common directors.


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Nationalisation

Banks Nationalization in India: Newspaper Clipping, Times of India , July, 20 , 1 969

Despite the provisions, control and regulations of Reserve Bank of India , banks in Indiaexcept the State Bank of India or SBI, continued to be owned and operated by private

persons. By the 1960s, the Indian banking industry had become an important tool tofacilitate the development of the Indian economy . At the same time, it had emerged as alarge employer, and a debate had ensued about the nationalization of the bankingindustry. Indira Gandhi , then Prime Minister of India , expressed the intention of theGovernment of India in the annual conference of the All India Congress Meeting in a

paper entitled "Stray thoughts on Bank Nationalization." The meeting received the paper with enthusiasm.

Thereafter, her move was swift and sudden. The Government of India issued anordinance and nationalized the 14 largest commercial banks with effect from themidnight of July 19, 1969. Jayaprakash Narayan , a national leader of India, describedthe step as a "masterstroke of political sagacity." Within two weeks of the issue of theordinance, the Parliament passed the Banking Companies (Acquisition and Transfer of Undertaking) Bill, and it received the presidential approval on 9 August 1969.

A second dose of nationalization of 6 more commercial banks followed in 1980. Thestated reason for the nationalization was to give the government more control of creditdelivery. With the second dose of nationalization, the Government of India controlledaround 91% of the banking business of India. Later on, in the year 1993, the governmentmerged New Bank of India with Punjab National Bank . It was the only merger

between nationalized banks and resulted in the reduction of the number of nationalized banks from 20 to 19. After this, until the 1990s, the nationalized banks grew at a pace of around 4%, closer to the average growth rate of the Indian economy.


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Liberalization :

In the early 1990s, the then Narsimha Rao government embarked on a policy of liberalization, licensing a small number of private banks. These came to be known as

New Generation tech-savvy banks , and included Global Trust Bank (the first of such new

generation banks to be set up), which later amalgamated with Oriental Bank of Commerce, Axis Bank (earlier as UTI Bank) , ICICI Bank and HDFC Bank . Thismove, along with the rapid growth in the economy of India, revitalized the banking sector in India, which has seen rapid growth with strong contribution from all the three sectorsof banks, namely, government banks, private banks and foreign banks.

The next stage for the Indian banking has been set up with the proposed relaxation in thenorms for Foreign Direct Investment, where all Foreign Investors in banks may be givenvoting rights which could exceed the present cap of 10%,at present it has gone up to 74%with some restrictions.

The new policy shook the Banking sector in India completely. Bankers, till this time,were used to the 4-6-4 method (Borrow at 4%;Lend at 6%;Go home at 4) of functioning.The new wave ushered in a modern outlook and tech-savvy methods of working for traditional banks. All this led to the retail boom in India. People not just demanded morefrom their banks but also received more.

Currently (2007), banking in India is generally fairly mature in terms of supply, productrange and reach-even though reach in rural India still remains a challenge for the privatesector and foreign banks. In terms of quality of assets and capital adequacy, Indian banksare considered to have clean, strong and transparent balance sheets relative to other banksin comparable economies in its region. The Reserve Bank of India is an autonomous

body, with minimal pressure from the government. The stated policy of the Bank on theIndian Rupee is to manage volatility but without any fixed exchange rate-and this hasmostly been true.

With the growth in the Indian economy expected to be strong for quite some time-especially in its services sector-the demand for banking services, especially retailbanking , mortgages and investment services are expected to be strong. One may alsoexpect M&As, takeovers, and asset sales.

In March 2006, the Reserve Bank of India allowed Warburg Pincus to increase its stakein Kotak Mahindra Bank (a private sector bank) to 10%. This is the first time an investor

has been allowed to hold more than 5% in a private sector bank since the RBI announcednorms in 2005 that any stake exceeding 5% in the private sector banks would need to bevetted by them.


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Banks in India :

Central bank : Reserve Bank of India

Nationalized banks

Allahabad Bank

Andhra Bank

Bank of Baroda

Bank of India

Bank of Maharashtra

Canara Bank Central Bank of India Corporation Bank Dena Bank IDBI Bank Indian Bank Indian Overseas Bank Oriental Bank of Commerce Punjab & SindBank Punjab National Bank Syndicate Bank UCO Bank Union Bank of India United Bank of India Vijaya Bank

State Bank Group

State Bank of India State Bank of Bikaner & Jaipur State Bank of Hyderabad StateBank of Indore State Bank of Mysore State Bank of Patiala State Bank of Travancore

Private banks

Axis Bank Bank of Rajasthan Bharat Overseas Bank Catholic Syrian Bank Dhanalakshmi Bank South Indian Bank City Union Bank Federal Bank HDFCBank ICICI Bank IndusInd Bank ING Vysya Bank Jammu & Kashmir Bank Karnataka Bank Limited Karur Vysya Bank Kotak Mahindra Bank Lakshmi VilasBank Nainital Bank Ratnakar Bank Saraswat Bank Tamilnad Mercantile Bank Limited Yes Bank

Foreign banks

ABN AMRO Abu Dhabi Commercial Bank Antwerp Diamond Bank Arab

Bangladesh Bank

Bank International Indonesia

Bank of America

Bank of Bahrain &Kuwait Bank of Ceylon Bank of Nova Scotia Bank of Tokyo Mitsubishi UFJ Barclays Bank Citibank India HSBC Standard Chartered Deutsche Bank RoyalBank of Scotland

Regional Rural banks : North Malabar Gramin Bank South Malabar GraminBank Pragathi Gramin Bank Shreyas Gramin Bank


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1.2, a) Growth and Present Status Of The Banking Industry

It is true that banks in India are facing difficulty in getting deposits. There are manyreasons behind this problem.

Two points for what was happening in banking and investment sector in the last 5 years

1. Increased consumerism: If we look at the consumption pattern in last 5 years, people were moving from being savers to consumers, i.e., more emphasis on benefits gained today rather than gains received through savings in future, thischanging attitude is one of the reasons for higher growth in lending compared todeposits.

2. Alternatives and risks: People were looking for more alternatives like mutualfunds, different insurance schemes, stock market, etc. People were moving tothese products with higher return expectations. These instruments also havehigher risk and increased income level people who deposit high amounts of money into banks were ready to take these high-risk alternatives.

But now the situation will be slightly better for banking system in India because investorsare losing a lot of wealth in stock markets and mutual funds. People will realize theimportance of safer investment vehicle and will start diversifying their portfolio withincreased exposure to safer instruments like bank deposits.

The banks in India generate their funds from two types of sources:

Long-Term Sources:

1. Tier one and Tier two Capital in the form of equity/subordinatedebts/debentures/preference shares.

2. Internal accrual generated out of profits.3. Long-term fixed deposits generated from public and corporate clients, financial

institutions, and mutual funds, etc.4. Long-term borrowings from financial institutions like NABARD/SIDBI.

Short-Term Sources:

1. Call money market, i.e., funds generated among interbanking transactions wherethere is online trading of money between bankers.

2. Fixed deposits generated from public and corporate clients, FIs, and MFs, etc.3. Market-linked borrowings from RBI.4. Sale of liquid certificate deposits in the open market.5. Borrowing from RBI under Repo (Repurchase option).6. Short and medium-term fixed deposits generated from public and corporate

clients, mutual funds, and financial institutions, etc.7. Floating in current and saving accounts.8. Short-term borrowings from FIs by way of rated papers placed, etc.


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Current Scenario :

The industry is currently in a transition phase. On the one hand, the PSBs, which are themainstay of the Indian Banking system are in the process of shedding their flab in termsof excessive manpower, excessive non Performing Assets (Npas) and excessive

governmental equity, while on the other hand the private sector banks are consolidatingthemselves through mergers and acquisitions.

PSBs, which currently account for more than 78 percent of total banking industry assetsare saddled with NPAs (a mind-boggling Rs 830 billion in 2000), falling revenues fromtraditional sources, lack of modern technology and a massive workforce while the new

private sector banks are forging ahead and rewriting the traditional banking businessmodel by way of their sheer innovation and service. The PSBs are of course currentlyworking out challenging strategies even as 20 percent of their massive employee strengthhas dwindled in the wake of the successful Voluntary Retirement Schemes (VRS)schemes.

The private players however cannot match the PSBs great reach, great size and access tolow cost deposits. Therefore one of the means for them to combat the PSBs has beenthrough the merger and acquisition (M& A) route. Over the last two years, the industryhas witnessed several such instances. For instance, Hdfc Banks merger with Times Bank Icici Banks acquisition of ITC Classic, Anagram Finance and Bank of Madura.Centurion Bank, Indusind Bank, Bank of Punjab, Vysya Bank are said to be on thelookout. The UTI bank- Global Trust Bank merger however opened a pandoras box and

brought about the realization that all was not well in the functioning of many of the private sector banks.Private sector Banks have pioneered internet banking, phone banking, anywhere banking,

mobile banking, debit cards, Automatic Teller Machines (ATMs) and combined variousother services and integrated them into the mainstream banking arena, while the PSBs arestill grappling with disgruntled employees in the aftermath of successful VRS schemes.Also, following Indias commitment to the W To agreement in respect of the servicessector, foreign banks, including both new and the existing ones, have been permitted toopen up to 12 branches a year with effect from 1998-99 as against the earlier stipulationof 8 branches.

Talks of government diluting their equity from 51 percent to 33 percent in November 2000 has also opened up a new opportunity for the takeover of even the PSBs. The FDIrules being more rationalized in Q1FY02 may also pave the way for foreign banks taking

the M& A route to acquire willing Indian partners.Meanwhile the economic and corporate sector slowdown has led to an increasing number of banks focusing on the retail segment. Many of them are also entering the new vistas of Insurance. Banks with their phenomenal reach and a regular interface with the retailinvestor are the best placed to enter into the insurance sector. Banks in India have beenallowed to provide fee-based insurance services without risk participation, invest in aninsurance company for providing infrastructure and services support and set up of a


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separate joint-venture insurance company with risk participation.

Aggregate Performance of the Banking Industry

Aggregate deposits of scheduled commercial banks increased at a compounded annual

average growth rate (Cagr) of 17.8 percent during 1969-99, while bank credit expandedat a Cagr of 16.3 percent per annum. Banks investments in government and other approved securities recorded a Cagr of 18.8 percent per annum during the same period.

In FY01 the economic slowdown resulted in a Gross Domestic Product (GDP) growth of only 6.0 percent as against the previous years 6.4 percent. The WPI Index (a measure of inflation) increased by 7.1 percent as against 3.3 percent in FY00. Similarly, moneysupply (M3) grew by around 16.2 percent as against 14.6 percent a year ago.

The growth in aggregate deposits of the scheduled commercial banks at 15.4 percent inFY01 percent was lower than that of 19.3 percent in the previous year, while the growth

in credit by SCBs slowed down to 15.6 percent in FY01 against 23 percent a year ago.

The industrial slowdown also affected the earnings of listed banks. The net profits of 20listed banks dropped by 34.43 percent in the quarter ended March 2001. Net profits grew

by 40.75 percent in the first quarter of 2000-2001, but dropped to 4.56 percent in thefourth quarter of 2000-2001.

On the Capital Adequacy Ratio (CAR) front while most banks managed to fulfill thenorms, it was a feat achieved with its own share of difficulties. The CAR, which at

present is 9.0 percent, is likely to be hiked to 12.0 percent by the year 2004 based on theBasle Committee recommendations. Any bank that wishes to grow its assets needs to also

shore up its capital at the same time so that its capital as a percentage of the risk-weightedassets is maintained at the stipulated rate. While the IPO route was a much-fancied one inthe early 90s, the current scenario doesnt look too attractive for bank majors.

Consequently, banks have been forced to explore other avenues to shore up their capital base. While some are wooing foreign partners to add to the capital others are employingthe M& A route. Many are also going in for right issues at prices considerably lower thanthe market prices to woo the investors.


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1.3. c) Future of the Banking Industry

V ision of Banks in India

The banking scenario in India has already gained all the momentum, with the domesticand international banks gathering pace. The focus of all banks in India has shifted their approach to 'cost', determined by revenue minus profit. This means that all the resourcesshould be used efficiently to better the productivity and ensure a win-win situation. Tosurvive in the long run, it is essential to focus on cost saving. Previously, banks focusedon the 'revenue' model which is equal to cost plus profit. Post the banking reforms, banksshifted their approach to the 'profit' model, which meant that banks aimed at higher profitmaximization.

Focus of banks in India

The banking industry is slated for growth in future with a more qualitative rather thanquantitative approach. The total assets of all scheduled commercial banks by end-March2010 is projected to touch Rs 40,90,000 crore. This is going to comprise around 65% of GDP at current market prices as compared to 67% in 2002-03. The bank's assets areestimated to grow at an annual composite rate of growth of 13.4% during the rest of thedecade as against 16.7% between 1994-95 and 2002-03.

Barring the asset side, on the liability perspective, there will be huge additions to thecapital base and reserves. People will rely more on borrowed funds, pace of depositgrowth slowing down side by side. However, advances and investments would not see ahealthy growth rate.

Consolidation of Banks in India

Would the banking industry in India get opened up for more international competition?India would see a large number of global banks controlling huge stakes of the bankingentities in the country. The overseas banking units would bring along with it capital,technology, and management skills. This would lead to higher competition in the bankingfrontier and ensure greater efficiency. The FDI norms in the banking sector would givemore leverage to the Indian banks.

Thus, a consolidation phase in the banking industry in India is expected in the near futurewith mergers and acquisitions gathering more pace. One might also see mergers between public sector banks or public sector banks and private banks. Credit cards, insurance arethe next best strategic places where alliances can be formed.


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Future challenges of Banks in India

The Indian banks are hopeful of becoming a global brand as they are the major source of financial sector revenue and profit growth. The financial services penetration in Indiacontinues to be healthy, thus the banking industry is also not far behind. As a result of

this, the profit for the Indian banking industry will surely surge ahead. The profit pool of the Indian banking industry is probable to augment from US$ 4.8 billion in 2005 to US$20 billion in 2010 and further to US$ 40 billion by 2015. This growth and expansion pacewould be driven by the chunk of middle class population. The increase in the number of

private banks, the domestic credit market of India is estimated to grow from US$ 0.4trillion in 2004 to US$ 23 trillion by 2050. Third largest banking hub of the globe by2040 - is that vision too far away?

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Chapter 2 Profile of the Dhanalaxmi Bank

2.1) Origin of the Dhanalakshmi Bank

2.2) Growth and Development of Dhanalakshmi Bank

2.3) Present Status of the Dhanalakshmi Bank

2.4) Functional Department of Dhanalakshmi Bank

2.5) Organization Structure of Dhanalakshmi Bank

2.6) Product and Services of Competitors

2.7) Market Profile of the Dhanalakshmi Bank


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2.1) Origin of the Dhanalakshmi Bank Dhanalakshmi Bank was founded on 14th November 1927by a gathering of enterprising entrepreneurs at Thrissur, a capital city of Kerala.

The group started of with around Rs.11, 000 and only 7 employees. Dhanalakshmi bank then became among the commercial banks in India in 1977.

The Dhanalakshmi banks to date has attained a national stature consisting of 181 branches and 26 Extension that have spread over the states of Kerala, Tamil Nadu,Karnataka, Andhra Pradesh, Maharashtra, Gujarat, Delhi and West Bengal.

The Dhanalakshmi Bank has of late got approval from the reserve bank of India for opening more branches that range around 66 and about 380 ATMs across India accordingto the 2009 calendar. With this development their will be an increase of customer outletsfrom the current number 279 to around 725.

Dhanalakshmi bank has also been allowed by the Reserve bank of India to open other 5regional offices in Kerala at Thiruvananthapuram, Ernakulam, Thrissur, Palakad andKozihikode and 2 others in central processing places at Thissur and Hyderabad.

The Dhanalakshmi bank has serviced a business of Rs.8212 crores from 31st March 2009deposits of Rs.4969 crores and advances of Rs.3243 crores. The Dhanalakshmi bank hada net profit of Rs.57.45 crores for the nine months that ended on 31st March 2009. The

banks capital ratio around 31/03/2009 was 14.44%.


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Dhanalakshmi Bank is a tech sawy and has proved the technology that it is capable of being an instrument to give quality service to the banks customers. It has brought about acentralized Banking Solution (CBS) so that it extends anywhere to its clients throughdouble delivery channels.

The Dhanalakshmi bank has introduced the Centralized Banking Solution in all the branches covering to around 100% of total business. The Dhanalkshmi bank has a state-of the-art DATA CENTRE in Bangalore, to keep the networked in operation for 24 hrs aday and through out the week.

The Dhanalakshmi Bank stresses on customizing services and personalizing relationsamong them and their clients. The Dhanalakshmi bank has brought the use of international Debit cards in a tie-up with the Visa International.

As an improvement the Dhanalakshmi has joined effort with the CASHNET which is theindependent nation wide atm that emerged first in India and is shared among atm

networks that was promoted by the Reserve Bank of India and Public sector banks.The Dhanalkshmi bank is also capable of tele-banking and has the online banking

benefits in all its branches the bank also has centralized CMS software that operatesthrough locating the CMS hub at the corporate office in Thrissur hence enabling all TheCentralized Banking Solutions to Operate on CMS


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2.2) Growth and Development of Dhanalakshmi Bank

YEAR EVENTS 1927 - The Dhanalakshmi Bank Limited (DBL) was incorporated. Ittook banking business of all kinds.

1991 - 2,30,000 shares issued.

1992 - The Bank opened a branch at Veerappan Chatram. It also opened an ExtensionCounter at Hyderabad; Our Extension Counter at Nanthencode, Trivandrum wasupgraded to a full fledged branch.

- On 22nd April, the bank opened a branch at Peelamedu.

- 3,50,000 shares issued to the public.

1993 - Modernisation has begun in the Bank with the inauguration of EDP Section inthe Central

Office on 28-01-'93 . Computer support has been extended to all the three RegionalOffices also.

- Computer supported banking will be introduced in several selected branches during thecourse of the year 1993-'94. Some of the branches will be provided with on-line computer facilities. Efforts are also on to build up in house expertise in software development.

1994 - Rights equity shares issued at a prem. of Rs 25 per share.

1995 - The Bank has co-managed 5 issues, participated in 60 public issues in thecapacity of Bankers to the Issue and extended underwriting support to 104 Public Issues.

- The the Bank has entered in the field of project appraisal. Requests for 26 bridge loanswere also entertained.

- New branches of the bank were opened at Chevarambalam (Kozhikode Dist.), Ponnani(Malappuram Dist.) and Muvattupuzha (Ernakulam Dist.).

- 80,00,000 No. of equity shares of Rs 10 each issued at a prem. of Rs 40 per share.

1996 - The bank had offered 80 lacs equity shares of Rs.10/- each at a premium of Rs.40/- on each share aggregating to Rs.40 crores.

- The bank entered into leasing business.

- New branches of the bank were opened at Karur (Tamilnadu), Dasarahalli (Bangalore),Chembur Mumbai (Maharashtra), T. Nagar Chennai (Tamilnadu) and Valancherry


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- The Bank has opened seven-day banking in select branches in Thiruvananthapuram,Ernakulam and Bangalore.

2001 --Dhanalakshmi Bank inaugurated its first ATM Centre in Chennai at Anna Nagar on August 23

--Dhanalakshmi Bank has opens its first ATM in bangalore

2002 - Dhanalakshmi Bank introduces new home loan scheme called Dhanam platinum jubilee home loan advantage

-The Dhanlakshmi Bank Ltd has fixed February 16, 2002 as the record date for the purpose of issue of four equity shares of Rs 10/- each at a premium of Rs 5/- per share onrights basis for every three existing equity shares held.

-Ties up with MetLife India to distribute life insurance products of MetLife India

2003 - Dhanalakshmi Bank sets up 3 branches in Thrissur -Unveils co-branded productDhanLife with MetLife India, makes foray into insurance

-Ties up with United India Insurance Co. in order to market insurance products via all the bank's branches

-Mr B Muthuswamy, Managing Director and CEO has resigned and the charge handedover to Mr K A Menon, Executive Director.

-Dhanalakshmi Bank inaugurates its Mumbai Treasury Department on Oct 29

- Dhanalakshmi Bank has taken over a 18,000 square feet property of PentasoftTechnologies under Securitisation Act

2004- Dhanalakshmi Bank introduces new bill payment services

-Dhanalakshmi Bank takes possession of part of Devaki Hospital

-Dhanalakshmi Bank unveils new loan scheme for 2 wheelers

-Dhanalakshmi Bank Ltd has informed that Sri TR Madhavan has been appointed as itsManaging Director & Chief Executive Officer at the Board Meeting held on February 23,2004.

- Launches heath insurance scheme in association with United India Insurance company

-Delist from Madras Stock Exchange (MSE) with effect from September 7, 2004


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2005 - Dhanalakshmi Bank joins IDRBT managed ATM network

-Dhanalakshmi Bank inks rupee-drawing agreement with Oman firm

-Dhanalakshmi Bank appoints Mr Prasad as new CEO

-Dhanalakshmi Bank unveils new housing loan product

2007- Dhanalakshmi Bank Ltd has appointed Mr. K Srikanth Reddy as AdditionalDirector, at the Board meeting held on October 29, 2007.

2008 - Dhanalakshmi Bank Ltd has appointed Mr. S Santhanakrishnan as AdditionalDirector, at the Board meeting held on June 30, 2008.

-The company has issued rights in the ratio of 1:1 at a premium of Rs. 52/-Per Share.

2009 - Dhanalakshmi Bank has appointed Mr Bipin Kabra as Chief Financial Officer (CFO), who has over 16 years of experience in financial services industry. His pastassignments include stints in ICICI as well as SBI and Reliance group. Prior to joiningthe Dhanalakshmi Bank, he was associated with Zee group. He has spent considerable

period in banking, insurance, merchant banking and treasury.


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2.3 Present Status of Dhanalaxmi Bank

Mar'1012Month

Mar'0912Month

Mar'0812Month

Mar'0712Month

Mar0612Month

INCOME:Sales Turnover 561.05 430.63 327.84 252.62 216.20Excise Duty 0.00 0.00 0.00 0.00 0.00NET SALES 561.05 430.63 327.84 252.62 216.20Other Income 0.00 0.00 0.00 0.00 0.00TOTAL INCOME 624.17 488.53 352.39 276.04 232.42EXPENDITURE:Manufacturing Expenses 0.00 0.00 0.00 0.00 0.00Material Consumed 0.00 0.00 0.00 0.00 0.00

Personal Expenses 109.08 62.56 47.37 43.71 41.82Selling Expenses 0.59 0.70 0.33 0.64 0.77Administrative Expenses 75.32 44.26 38.57 42.65 37.39Expenses Capitalised 0.00 0.00 0.00 0.00 0.00Provisions Made 7.15 6.77 1.86 3.12 2.83TOTAL EXPENDITURE 192.14 114.30 88.13 90.12 82.81Operating Profit -17.95 36.31 28.07 15.85 9.32EBITDA 439.19 381.00 266.13 189.04 152.43Depreciation 10.30 7.55 8.06 8.82 7.15Other Write-offs

0.00 0.00 4.02 0.00 0.00EBIT 428.88 373.46 254.05 180.22 145.28Interest 394.02 286.80 213.51 149.77 126.89EBT 27.71 79.89 38.68 27.33 15.56Taxes 5.12 22.62 10.22 11.22 6.05Profit and Loss for the Year 22.59 57.27 28.46 16.11 9.51

Non Recurring Items 0.71 0.18 0.00 0.03 0.00Other Non Cash Adjustments 0.00 0.00 0.00 0.00 0.00Other Adjustments 0.00 0.00 0.00 0.00 0.00REPORTED PAT 23.30 57.45 28.46 16.14 9.52KEY ITEMSPreference Dividend 0.00 0.00 0.00 0.00 0.00Equity Dividend 6.41 6.41 6.41 3.21 2.24Equity Dividend (%) 10.00 10.00 20.00 10.00 6.99Shares in Issue (Lakhs) 641.16 641.16 320.58 320.58 320.58EPS - Annualised (Rs) 3.63 8.96 8.88 5.03 2.97


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2.5 Organization Chart:

NAME DESIGNATIONG.N. BAJPAI CHAIRMAN

AMITABH CHATURVEDI MANAGING DIRECTOR K.SRIKANTH REDDY DIRECTOR

V.R. CHALASANI DIRECTOR S. SANTHAKRISHNA DIRECTOR

SHAILESH V HARIBHAKTI DIRECTOR GHANSHYAM DASS DIRECTOR

G.JAYKUMAR EXECUTIVE DIRECTOR

BOARD

Chairman& CEO

Ch. Set

Co . Set

ExecutiveDirector

CommercialBanking

RetailBanking

Risk-Management

Recovery Account Treasury HRD &Per./Admn.

Invest Forex HRD Per. & Adm


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2.6 Product and Service of the Dhanalaxmi Bank Competitors

Axis Bank Ltd Saving Bank Accounts,

Current Accounts,

Fixed Deposits,

Gold loans,

Locar Facility,

NRI Accounts

Bank of RajasthanCenturion Bank of PunjabCity Union Bank LtdDevelopment Credit Bank LtdHDFC Bank LtdICICI Bank Ltd

IndusInd Bank LtdING Vysya Bank LtdKotak Mahindra Bank Ltd

2.7 Market Profile of the Dhanalaxmi Bank:

y Basically Dhanalaxmi Bank is a Kerlian Bank whose Head Office is at Kerela. y Dhanalaxmi Bank provides all the facilities that other banks providing. y Out of 280 branches 160 is situated at Kerela. y Dhanalaxmi Banks other task is to provide loan to the NRI Kerlians who are used

to come on Pngal and festivals and vice-versa. y Bajaj Allianz is a tie-up company for LIC and GIC. y Dhanalaxmi Bank is the distributor of the Kotak Mahindra, UTI mutual funds,

IDFC. y Dhanalaxmi Banks another service is trading, tie-up with DMSL(Deshi money

security limited)

.

=============================================================


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CHAPTER 3 : DISCUSSION ON TRAINING

3.1 Students Work Profile

3.2 Key learning.


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S econd Phase 1987-1993 (Entry of Public Sector Funds):

1987 marked the entry of non- UTI, public sector mutual funds set up by public sector

banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation

of India (GIC).

SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987 followed

by Canara Bank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89),

Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual

Fund (Oct 92). LIC established its mutual fund in June 1989 while GIC had set up its

mutual fund in December 1990.At the end of 1993, the mutual fund industry had assets

under management of Rs.47,004 crores.

T hird Phase 1993-2003 (Entry of Private Sector Funds):

With the entry of private sector funds in 1993, a new era started in the Indian mutual fund

industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the

year in which the first Mutual Fund Regulations came into being, under which all mutual

funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer

(now merged with Franklin Templeton) was the first private sector mutual fund registered

in July 1993.

The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive

and revised Mutual Fund Regulations in 1996. The industry now functions under the

SEBI (Mutual Fund) Regulations 1996.The number of mutual fund houses went on

increasing, with many foreign mutual funds setting up funds in India and also the

industry has witnessed several mergers and acquisitions. As at the end of January 2003,

there were 33 mutual funds with total assets of Rs. 1,21,805 crores. The Unit Trust of

India with Rs.44,541 crores of assets under management was way ahead of other mutual

funds.


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Fourth Phase since February 2003:

In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was

bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust

of India with assets under management of Rs.29,835 crores as at the end of January 2003,representing broadly, the assets of US 64 scheme, assured return and certain other

schemes. The Specified Undertaking of Unit Trust of India, functioning under an

administrator and under the rules framed by Government of India and does not come

under the purview of the Mutual Fund Regulations. The second is the UTI Mutual Fund

Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions

under the Mutual Fund Regulations.

With the b ifurcation 1 of the erstwhile UTI which had in March 2000 more thanRs.76,000 crores of assets under management and with the setting up of a UTI Mutual

Fund, conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking

place among different private sector funds, the mutual fund industry has entered its

current phase of consolidation and growth. As at the end of September, 2004, there were

29 funds, which manage assets of Rs.153108 crores under 421 schemes.


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OPERATION OF MUTUAL FUND

CHART 3.1 Mutual Fund Operation Flow C hart

1. Bifurcation= Splitting something into two pieces. For example, an investor might wish to

run portfolio analysis under different market conditions, such as if an interest rate cut occurs or

does not occur.


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STRUCTURE OF MUTUAL FUND IN INDIA

CHART -3.2 Mutual Funds Structure

The Fund Sponsor

Sponsor is defined under SEBI Regulations as any person who, acting alone or in

combination with another body corporate establishes a mutual fund. The sponsor of afund is akin to the promoter of companies he gets the fund registered with SEBI. The

sponsor will form a Trust and appoint a Board of Trustees. All these appointments are

made in accordance with the SEBI Regulations. As per the existing SEBI Regulations,

for a person to qualify as a sponsor, must contribute at least 40% of the net worth of the

AMC and issues a sound financial track over five years prior to registration.

Mutual Funds as Trusts

Mutual Fund in India is constituted in the form of a Public Trust under the Indian Trust

Act 1882. The fund invites investors to contribute their money in the common pool by

subscribing to units issued by various schemes established by the Trust as evidence of

their beneficial interest in the fund. The Trust or Fund has no legal capacity itself rather it

is the Trustee(s) who have legal capacity and therefore the trustees take all acts in relation

to the Trust itself.


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Investors:

Every investor, given his financial position and personal disposition, has a certain

tendency preference to take risk 1 (risk profile / risk appetite ). The hypothesis is that by

taking an incremental risk (of losing capital, wholly or partly), it would be possible for

the investor to earn an incremental return 2

But assuming risk without regularly monitoring it is foolhardy. Therefore, it would be

prudent for investors who take a risk to be able to manage this risk.

MF is a solution for investors who lack the time, or the inclination or the skills to actively

manage their investment risk in individual securities . They can delegate this role to the

MF, while retaining the right and the obligation to monitor their investments in the

scheme (which, in turn, invests in individual securities ).

In the absence of a MF option, the moneys of such passive these investors would lieeither in bank deposits or other safe investment options, thus depriving the investors of

the possibility of earning a better return.

Investing through a MF would make economic sense for an investor if his investment,

over the medium to long term, fetches a return (net of all costs and expenses) that is

higher than what she would otherwise have earned by investing directly.

Because the goal of investing is to accumulate real wealth an enhanced ability to pay

for goods and services the ultimate focus of the long-term investor must be on real, not

nominal, returns.

Trustees:

Trustees are the people within the mutual fund organization, who are responsible to

ensure for ensuring that investors interests are properly taken care of In return for their

services, they are paid trustee fees, which is normally charged to the scheme.


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Asset Management Company (AMC)

AMCs manage the investment portfolios of schemes. An AMCs Income for an AMC

comes through from the management fees that are it charges to the schemes. The

management fee is calculated as a percentage of net assets managed . Some countries

provide for performance based management fees as well.

1 .Risk= The quantifiable likelihood of loss or less-than-expected returns.

2.Return= The annual return on an investment, expressed as a percentage of the

total amount invested, also called rate of return.

Distributors

Distributors earn a commission for bringing investors into the schemes of a MF. This

commission is an expense for the scheme, although there are occasions when the AMC

chooses to bear the cost, wholly or partly.

Depending on the financial and physical resources at their disposal, they distributors

could be:

y Tier 1 distributors (having an owned or franchised network reaching out to

investors all across the country); or

y Tier 2 distributors (regional players with some reach within their region); or

y Tier 3 distributors (marginal players).It is paradoxical that distributors earn a commission from the AMC, but are expected to

safeguard the financial health of investors from whom they do not earn a fee.

It is almost like a doctor earning a commission from the pharmaceutical company, but

expected to safeguard the physical health of the patient who does not pay him anything.

Bankers

A funds activities involved dealing with the money on a continuous basis primarily with

respect to buying and selling units, paying for investment made, receiving the proceeds

from sale of investment and discharging its obligations towards operative expenses. A

funds banker therefore plays a crucial role with respect to its financial dealings.

Registrars

The investors holding in various schemes is typically tracked by the schemes Registrar

and Transfer agent (R&T). Some AMCs prefer to handle this role in-house.


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The registrar / AMC maintains an account of the investors investments in and

disinvestment from the scheme. Requests to invest more money into a scheme, or to

recover moneys against existing investments in the scheme are processed by the R&T.

Custodian / Depository

The custodian maintains custody of the securities in which the scheme invests (as distinct

from the registrar who tracks the investment by investors in the scheme ). This ensures an

ongoing independent record of the investments of the scheme. The custodian also follows

up on various corporate actions, such as rights, bonus and dividends declared by invested

companies.

In a situation where securities are increasingly being dematerialized, the role of the

depository for such independent record of investments is increasing growing.

SEBI GUIDELINES FOR PUBLIC ISSUE OF MUTUAL FUNDS

1. An issue advertisement should be true, fair and clear and diversified of

untrue and misleading statements that are likely to be misunderstood or

likely to disguise any significance.

2. Advertisement should not exploit the investors lack of experience or

knowledge.

3. As investors may not be well versed in legal or financial matters, care

should be taken to ensure that the advertisement is set forth in a clear,

concise and understandable language. Extensions of technical legal

terminology and the inclusive of excessive details that may distract the

investors should be avoided.

4. An issue advertisement shall not contain any statement, which promises or

guaranteed an approximately or rapid profits particularly when it cannot be sustained.

5. An issue shall not contain language that is inconsistent with the offer

documents. Moreover, it should not contain any other information other

than appearing in the offer documents filed with the registrar of companies

or the stock exchange.


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6. All issue advertisement shall specifically mention at least the particulars of

the issue, the risk factors, the names of the merchant bankers, registrars

and collecting bank associated with the issue.

7. Models, celebrities, should not be displayed.

8. Methods and annualized compounded rate return. If the scheme is to be

listed on a stock exchange, this should be brought out.

9. The pattern of investment should clearly bring out the deployment of

funds in equities, debentures, fixed income securities and money market

instruments.

10. All information regarding the Board of Trustees, members of the AMC

and their liabilities should be clearly brought out.

THE OBJECTIVES OF ASSOCIATION OF MUTUAL FUNDS

(AMFI) IN INDIA

The Association of Mutual Funds of India works with 30 registered AMCs of the

country. It has certain defined objectives which juxtaposes the guidelines of its Board of

Directors. The objectives are as follows:

This mutual fund association of India maintains high professional and ethical

standards in all areas of operation of the industry.

It also recommends and promotes the top class business practices and code of conduct

which is followed by members and related people engaged in the activities of mutual

fund and asset management. The agencies who are by any means connected or

involved in the field of capital markets and financial services also involved in this

code of conduct of the association.

AMFI interacts with SEBI and works according to SEBIs guidelines in the mutualfund industry.

Association of Mutual Fund in India does represent the Government of India, the

Reserve Bank of India and other related bodies on matters relating to the Mutual Fund

Industry.


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It develops a team of well qualified and trained Agent distributors. It implements a

program of training and certification for all intermediaries and other engaged in the

mutual fund industry.

AMFI undertakes all India awareness programmed for investors in order to promote

proper understanding of the concept and working of mutual funds.

At last but not the least association of mutual fund of India also disseminate

informations on Mutual Fund Industry and undertakes studies and research either

directly or in association with other bodies

NET ASSET VALUE (NAV)

Net Asset Value (NAV) is the actual value of one unit of a given scheme on any given

business day. The NAV reflects the liquidation value of the fund's investments on that

particular day after accounting for all expenses. It is calculated by deducting all

lia b ilities 2 (except unit capital) of the fund from the realizable value of all assets and

dividing it by number of units outstanding.

The net asset value, or NAV, is the current market value of a fund's holdings, less the

fund's liabilities, usually expressed as a per-share amount. For most funds, the NAV is

determined daily, after the close of trading on some specified financial exchange, butsome funds update their NAV multiple times during the trading day.

The public offering price, or POP, is the NAV plus a sales charge. Open-end funds sell

shares at the POP and redeem shares at the NAV, and so a process order only after the

NAV is determined. Closed-end funds (the shares of which are traded by investors) may

trade at a higher or lower price than their NAV; this is known as a premium or discount,

respectively.

Market/Fair Value of Schemes investments + Receivables + Accrued

Income + Other Assets Accrued expenses Payables Other Liabilities

NAV= ----------------------------------------------------------------------------------------------

Number of Units outstanding


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Factors affecting N AV:

1. Variation in investment portfolio:

Variation in the investment portfolio causes changes in the NAV of the fund,

which in turn may affect the overall value of the fund. Since, same investment

portfolios with different NAV gives same returns in percentage terms, therefore,

the securities that we have in the portfolio play pivotal importance. Changing the

portfolio or replacing any security with the existing security may change the

overall NAV of the fund, which in turn may change the value of the entire fund..

2. Sale and repurchase of units:

Sale and repurchase of any unit that we have in our portfolio changes the overall

NAV of the fund. For example, we have a portfolio in which the security A is

priced at Rs 100. We sell this security and after one week when the price of the

security becomes Rs 80 we buy it, keeping all other investments intact, then the

NAV of the portfolio will come down, which in turn will result in better valuation

for the fund. Therefore, sale and repurchase also affects the NAV of the fund.

3. Valuations of assetsThe value that the underlying asset has, whose portfolio the fund has managed or

is managing, if the value of that asset changes, it can change the overall NAV of

the fund.

4. Cost associated with the Fund

The cost associated with the fund also affects the NAV of the fund. All the

charges accumulated during the selling of a security are known as Sales charges.

Funds with low expense ratios are always preferred as they decrease the overall

cost of the security.


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UNIT LINKED INSURANCE POLICY (ULIP)

A unit linked insurance policy is one in which the customer is provided with a life

insurance cover and the premium paid is invested in either debt or equity products or acombination of the two. In other words, it enables the buyer to secure some protection for

his family in the event of his untimely death and at the same time provides him an

opportunity to earn a return on his premium paid. In the event of the insured person's

untimely death, his nominees would normally receive an amount that is the higher of the

sum assured (insurance cover) or the value of the units (investments).However, there are

some schemes in which the policyholder receives the sum assured plus the value of the

investments.

Every insurance company has four to five ULIPs with varying investment options,

charges and conditions for withdrawals and surrender. Moreover, schemes have been

tailored to suit different customer profiles and, in that sense, offer a great deal of choice.

The advantage of ULIP is that since the investments are made for long periods, the

chances of earning a decent return are high.

Just as in the case of mutual funds, buyers who are risk averse can buy into debt schemes

while those who have an appetite for risk can opt for balanced or equity schemes.

However, the charges paid in these schemes in terms of the entry load, administrative

fees, underwriting fees, buying and selling charges and asset management charges are

fairly high and vary from insurer to insurer in the quantum as also in the manner in which

they are charged.

Tax benefits

The premiums paid for ULIPs are eligible for tax rebates under section 80 which allows a

a maximum of Rs. 1,00,000 premiums paid for taxable income below Rs 8,50,000 and

Proceeds from ULIPs are tax-free under section 10(10D) unlike those from a mutual fund

which attract short term capital gains tax.


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Key features

Premiums paid can be single, regular or variable. The payment period too can be regular or variable. The risk cover (insurance cover) can be increased or decreased.As in allinsurance policies, the risk charge (mortality rate) varies with age. However, for anindividual the risk charge is always based on the age of the policyholder in the year of commencement of the policy. These charges are normally deducted on a monthly basisfrom the unit value. For instance, if there is an increase in the value of units due tomarket conditions, the sum at risk (sum assured less the value of investments) reducesand so the risk charges are lower. The maturity benefit is not typically a fixed amount andthe maturity period can be advanced (early withdrawal) or extended.

Investments can be made in gilt funds (government securities), balanced funds (part debt, part equity), money-market funds; growth funds (equities) or bonds (corporate bonds).

The policyholder can switch between schemes (for instance, balanced to debt or gilt toequity). The investment risk is transferred to the policyholder. The maturity benefit is thenet asset value of the units. The value would be high or low depending on the marketconditions during the period of the policy and the performance of the fund manager.

Thus there is no capital protection on maturity unless the scheme specially provides for it.There could be policies that allow the policyholder to remain invested beyond thematurity period in the event of the maturity value not being satisfactory.

POINTS TO REMEMBER ABOUT ULIP

First-year charges: Usually, a minimum of 15 per cent. However, high premiums attract

lower charges and vice versa. Charges can be as high as 70 per cent if the scheme affords

a lot of flexibility. Subsequent charges: Usually lower than first-year charges. However,

some insurers charge higher fees in the initial years and lower them significantly in the

subsequent years.

Administration charges: This ranges between Rs 15 per month to Rs 60 per month and

is levied by cancellation of units and also depends on the nature of the scheme.


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Risk charges: The charges are broadly comparable across insurers.

Asset management fees: Fund management charges vary from 0.6 per cent to 0.75 per

cent for a money market fund, and around 1.5 per cent for an equity-oriented scheme.

Fund management expenses and the brokerage are built into the daily net asset value.

Switching charges: Some insurers allow four free switches in every year but link it to aminimum amount. Others allow just one free switch in each year and charge Rs 100 for every subsequent switch. Some insurers don't charge anything.

Top-ups: Usually attracts 1 per cent of the top-up amount. Top-up normally goes directlyinto your investment account (units) unless you specifically ask for an increase in the risk cover.

Surrender value of units: Insurers levy certain charges if the policy is surrendered prematurely. This levy varies between insurers and could be around 75 per cent in thefirst year, 60 per cent in the second year, 40 per cent in the third year and nil after thefourth year.

Fund performance: You could check out the performance of similar schemes (balancedwith balanced; equity with equity) across insurance companies.

Look at NAV performance over a period of at least two to three years. This can only give

you some indication about the credibility of the fund manager because past performanceis no guarantee to future returns, especially in insurance products where the emphasis ison long-term performance (10 years or more).

Since insurance is a product, which entails a long-term commitment on the part of theinsurer, it is important not to go only by the features or the cost advantages of schemes

but by the parentage of the insurer as well.

Comparing schemes based on costs is a fairly complex exercise. As a rule, the higher theinitial years' expenses the longer it takes for the policy to outperform its peers with low

initial years' costs and slightly higher subsequent year expenses.

Retire unhurt

Pension plans are essentially tailored to meet old age financial requirements. But thereare certain advantages in joining a pension plan.


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First of all, contribution to pension funds upto Rs 10,000 is eligible for tax deductionunder section 80CCC. In other words, your pension contribution will get deducted fromyour taxable income.

So if you are in the top tax bracket, liable to pay to a 30.6 per cent tax, then your taxsavings will be that much.

All life insurance companies offer pension products - both conventional and unit-linked.In both cases you pay a certain premium amount for a specified length of time.

Usually, the minimum entry age is 18 years and the maximum age is 60 years. You canchoose to pay the premium for five to 30 years. When the policy matures, you receiveone-third of the value of the accumulated amount as a lump-sum payment.

For the remaining, you can buy annuities either from the existing insurer or any other insurer.

While in a conventional scheme, your money is managed through the insurer's pooledinvestment account and you are entitled to bonuses every year, in a ULIP you receive thevalue of the investment in your individual account.

In a ULIP you have the flexibility to choose between a conservative scheme or anaggressive scheme with high allocation to equities. Pension policy imposes huge

penalties for early termination.


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HOW DOES ULIP WORK

Sara is a thirty-year old who wants a product that will give him market-linked returns aswell as a life cover. He wants to invest Rs 50,000 a year for 10 years in an equity-based

scheme. Based on this premium, the sum assured works out to Rs 532,000, the exactamount of premium being Rs 50,032.

Based on the current NAV of the plan that Sara chooses to invest in, he is allotted units inthe scheme. Then, units equivalent to the charges are deducted from his portfolio.

The charges in the first year include a 14 per cent sales charge, an administration charge(7 per cent for the first Rs 20,000 and 3 per cent for the remaining Rs 30,000) andunderwriting charges, which are deducted monthly.

Besides, mortality charges or the charges for the life cover are also deducted. For theremaining nine years a 3.5 per cent sales charge and an administrative charge of 4 per cent (for the first Rs 20,000 and 2 per cent for the remaining Rs 30,000) are levied inaddition to mortality charges.

Fund management fee of 1.5 per cent (equity) and brokerage are also charged. This costis built into the calculation of net asset value.

On maturity - that is, after 10 years - Sara would receive the sum assured of Rs 532,000or the market value of the units whichever is higher.

Assuming the growth rate in the market value of the units to be 6 per cent per annum Sarawould receive Rs 581,500; assuming the growth rate in the market value of the units to be10 per cent, Sara would receive Rs 7,24,400.

In case of Sara's untimely death at the end of the ninth year, his beneficiaries wouldreceive the sum assured of Rs 532,000 or the market value of the units whichever ishigher. Assuming the growth rate in the market value of units is 6 per cent per annum, thevalue of investment would be Rs 510,200.

However, his family will get Rs 532,000 as it is the sum assured.

Assuming a growth rate of 10 per cent per annum, the value of units at the end of theninth year would be Rs 621,900. Hence, the beneficiaries would get Rs 621,900.


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ADVANTAGES OF ULIP

y Can easily rebalance your risk between equity and debt without any tax

implications.

y Best suited for medium risk taking individuals who wish to invest in equity and

debt funds (at least 40% or higher exposure to debt). No additional tax burden for

those investing mainly in debt unlike in MFs.

y Switching facility i.e a investor can switch his/her money to equity fund or debt

fund according to the market condition.

RISKS ASSOCIATED WITH ULIPS

ULIPS as the name suggests are directly linked with the investments made by theinsured. Though he does not have a direct say in this but he does offer his choice in theform of investment.

With stock markets soaring high a few months back, ULIPs were offering a good rate of return, but now with a sudden downfall of the stocks, ULIPs are bound to becomenegative investments.

At present, a policy-holder cannot understand the growth of his investments vis--visother funds in the market, since there is no benchmark to measure one fund against theother. Usually a policy-holder could ask his investment in a ULIP to be, for example, 55

per cent in equity and 45 per cent in debt. These components can be mixed according tohis risk-taking ability. An investor, therefore, would have to look at quarterly statements,where the fund would be compared with benchmarks. However, this may not be a truerepresentation of the NAV, as the ULIP could be a mix of debt, liquid and equityinvestments.

The reality is that most of the ULIPs take more than 5 years to break even. Policies wherethe costs are 65 per cent and upwards have not even recovered the principal despite thestrongest bull market we have ever witnessed.


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COMPARISON OF ULIP VS MUTUAL FUNDUnit Linked Insurance Policies (ULIPs) as an investment avenue are closest to mutual

funds in terms of their structure and functioning. As is the cases with mutual funds,

investors in ULIPs are allotted units by the insurance company and a net asset value(NAV) is declared for the same on a daily basis.

Similarly ULIP investors have the option of investing across various schemes similar to

the ones found in the mutual funds domain, i.e. diversified equity funds, balanced funds

and debt funds to name a few. Generally speaking, ULIPs can be termed as mutual fund

schemes with an insurance component.

However it should not be construed that barring the insurance element there is nothing

differentiating mutual funds from ULIPs

1. Mode of investment/ investment amounts

Mutual fund investors have the option of either making lump sum investments or

investing using the systematic investment plan (SIP) route which entails commitments

over longer time horizons. The minimum investment amounts are laid out by the fund

house.ULIP investors also have the choice of investing in a lump sum (single premium)

or using the conventional route, i.e. making premium payments on an annual, half-yearly,

quarterly or monthly basis. In ULIPs, determining the premium paid is often the starting

point for the investment activity.

This is in stark contrast to conventional insurance plans where the sum assured is the

starting point and premiums to be paid are determined thereafter.

ULIP investors also have the flexibility to alter the premium amounts during the policy's

tenure. For example an individual with access to surplus funds can enhance the

contribution thereby ensuring that his surplus funds are gainfully invested; conversely an

individual faced with a liquidity crunch has the option of paying a lower amount (thedifference being adjusted in the accumulated value of his ULIP). The freedom to modify

premium payments at one's onvenience clearly gives ULIP investors an edge over their

mutual fund counterparts.


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2. Expenses

In mutual fund investments, expenses charged for various activities like fund

management, sales and marketing, administration among others are subject to pre-

determined upper limits as prescribed by the Securities and Exchange Board of India.

For example equity-oriented funds can charge their investors a maximum of 2.5% per

annum on a recurring basis for all their expenses; any expense above the prescribed limit

is borne by the fund house and not the investors.

Similarly funds also charge their investors entry and exit loads (in most cases, either is

applicable). Entry loads are charged at the timing of making an investment while the exit

load is charged at the time of sale.

Insurance companies have a free hand in levying expenses on their ULIP products with

no upper limits being prescribed by the regulator, i.e. the Insurance Regulatory and

Development Authority. This explains the complex and at times 'unwieldy' expense

structures on ULIP offerings. The only restraint placed is that insurers are required to

notify the regulator of all the expenses that will be charged on their ULIP offerings.

Expenses can have far-reaching consequences on investors since higher expenses

translate into lower amounts being invested and a smaller corpus being accumulated.

3. Portfolio disclosureMutual fund houses are required to statutorily declare their portfolios on a quarterly basis,

albeit most fund houses do so on a monthly basis. Investors get the opportunity to see

where their monies are being invested and how they have been managed by studying the

portfolio.

There is lack of consensus on whether ULIPs are required to disclose their portfolios.

During our interactions with leading insurers we came across divergent views on this

issue.

While one school of thought believes that disclosing portfolios on a quarterly basis is

mandatory, the other believes that there is no legal obligation to do so and that insurers

are required to disclose their portfolios only on demand.

Some insurance companies do declare their portfolios on a monthly/quarterly basis.

However the lack of transparency in ULIP investments could be a cause for concern


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considering that the amount invested in insurance policies is essentially meant to provide

for contingencies and for long-term needs like retirement; regular portfolio disclosures on

the other hand can enable investors to make timely investment decisions.

4. Flexibility in altering the asset allocation

As was stated earlier, offerings in both the mutual funds segment and ULIPs segment are

largely comparable. For example plans that invest their entire corpus in equities

(diversified equity funds), a 60:40 allotment in equity and debt instruments (balanced

funds) and those investing only in debt instruments (debt funds) can be found in both

ULIPs and mutual funds.

If a mutual fund investor in a diversified equity fund wishes to shift his corpus into a debt

from the same fund house, he could have to bear an exit load and/or entry load.On the other hand most insurance companies permit their ULIP inventors to shift

investments across various plans/asset classes either at a nominal or no cost (usually, a

couple of switches are allowed free of charge every year and a cost has to be borne for

additional switches).

Effectively the ULIP investor is given the option to invest across asset classes as per his

convenience in a cost-effective manner.

This can prove to be very useful for investors, for example in a bull market when the

ULIP investor's equity component has appreciated, he can book profits by simply

transferring the requisite amount to a debt-oriented plan.

5. Tax benefits

ULIP investments qualify for deductions under Section 80C of the Income Tax Act. This

holds good, irrespective of the nature of the plan chosen by the investor. On the other

hand in the mutual funds domain, only investments in tax-saving funds (also referred to

as equity-linked savings schemes) are eligible for Section 80C benefits.

Maturity proceeds from ULIPs are tax free. In case of equity-oriented funds (for example

diversified equity funds, balanced funds), if the investments are held for a period over 12

months, the gains are tax free; conversely investments sold within a 12-month period

attract short-term capital gains tax @ 10%.


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Similarly, debt-oriented funds attract a long-term capital gains tax @ 10%, while a short-

term capital gain is taxed at the investor's marginal tax rate.

Despite the seemingly similar structures evidently both mutual funds and ULIPs have

their unique set of advantages to offer. As always, it is vital for investors to be aware of

the nuances in both offerings and make informed decisions.


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5 1

Chapter 4 Study of Selected Research Problem

4.1) Statement of Research Problem4.2) Statement of Research Objective

4.3) Research Design and Methodology


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4.1 - statement of research problem:

Comparative analysis of Mutual Fund and ULIP with respect toDhanalaxmi Bank.

4.2 Statement of research objectives:

To know the role of mutual fund in banking sector.

To find out the role of the mutual fund in investment portfolio.

To know the growth of the bank through distribution of mutual fund.

To examine the better investment policy for a investor in current scenario.

Role of the bank in distributing mutual fund and ULIPS.

Profitability of the bank in distributing three party products.

To find out the better portfolio for the investor.

To know how the bank safe guards the investors money through bank inmutual fund and ULIPS.

To find out the better return provider, and which investment would besafe for the investor.

To find out how the smart investment through mutual fund and ULIPmaximizes the investors fund.


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4.3 Research design and methodology

The project entitled comparative analysis of mutual fund and ULIP

with respect to Dhanalaxmi Bank in Dhanalaxmi Bank. The studywas carried out by collecting analyzing the data collected from

primary as well as secondary sources.

Primary data is collected through questioner and face to faceinterview. Secondary data is collected from different booklets and

bank issues provided from bank.

=========================================================


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Chapter - 5 Data Analysis:

5.1 Analysis of Data

5.2 Summery of Findings


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(C) Age:

Age

Frequency Percent Valid Percent

Cumulative

Percent

Valid 20-30 6 12.0 12.0 12.0

30-40 14 28.0 28.0 40.0

40-50 17 34.0 34.0 74.0

50-60 11 22.0 22.0 96.0

60-70 2 4.0 4.0 100.0

Total 50 100.0 100.0

INTERPRETATION :

The graph shows that majority of the sample respondents were in the age group of 40-50

yrs ie,34%, 12% were in the age group of 20-30 yrs & 28% of them were 30-40 yrs, 22%

were in the age group of 50-60 yrs and 4% were in the age group of 60-70 yr


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(D) Occupation:

O ccupation


Cumulative

Percent

Valid Government 18 36.0 36.0 36.0

Private service 14 28.0 28.0 64.0

Business 11 22.0 22.0 86.0

NRIs 3 6.0 6.0 92.0

Others 4 8.0 8.0 100.0

Total 50 100.0 100.0

INTERPRETATION :

The graph shows that majority of the policy holders are working in the Government

sector i.e.36% , 28% of them are engaged in Private service, 22% of them are business

field, 6% of them are NRIs and 8% of them are engaged other works.


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(E) Annual Income:

Annual income


Cumulative

Percent

Valid Below 2 lakhs 19 38.0 38.0 38.0

2-4 lakhs 23 46.0 46.0 84.0

4-6 lakhs 6 12.0 12.0 96.0

6-8 lakhs 2 4.0 4.0 100.0

Total 50 100.0 100.0

INTERPRETATION :

The graph shows that 46% of the policy holders get a salary of 2-4 lakhs, 38% of the

policy holders get a salary of below 2 lakhs, 12% of the policy holders get a salary of 4-6

lakhs, 3 of the policy holders get a salary below 2 lakhs and 4% of them above 6-8 lakhs .


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2. Factors that influence your investment decision in a particularcompany.

Factors that influence your investment decisions in a particular company.


Cumulative

Percent

Valid Attractive schemes 2 4.0 4.0 4.0

Tax benefits 27 54.0 54.0 58.0

High reputation 3 6.0 6.0 64.0

Rate of return 14 28.0 28.0 92.0

Variety of products 4 8.0 8.0 100.0

Total 50 100.0 100.0

INTERPRETATION :

54% customers agree that the tax benefit is influence them to buy policy ,28%looks the rate of return what they will earn, variety of products from the company attracts8% customers, and high reputation of the company attracts 6% of the customers, andremaining 4% pointing out the attractive schemes.


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3. You generally like to invest money in.

Y ou generally like to invest money.


Cumulative

Percent

Valid Insurance 13 26.0 26.0 26.0

Stock market 1 2.0 2.0 28.0

Mutual fund 6 12.0 12.0 40.0

Bank deposit 28 56.0 56.0 96.0

Both insurance and mutual

fund

2 4.0 4.0 100.0

Total 50 100.0 100.0

INTERPRETATION :

From a sample of 50 customers, 56% of the customers invest money in bank deposit,

26% in insurance sector,12% in mutual fund, then 4% in both insurance and mutual

fund,and remaining 2% in stock market.


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4. According to you who among the following life insurance company isbest.

According to you who among the following life insurance companies is best.

Frequency Percent Valid PercentCumulative

Percent

Valid Bajaj Allianz 27 54.0 54.0 54.0

HDFC Standard life 5 10.0 10.0 64.0

Tata AIG 4 8.0 8.0 72.0

Aviva Life 3 6.0 6.0 78.0

SBI Life 11 22.0 22.0 100.0

Total 50 100.0 100.0

INTERPRETATION :

From a sample of 50 customers,54% customers select Bajaj Allianz is the best insurance

company, and 22% customers choose SBI Life,10% select HDFC,8% for Tata AIG and

remaining 6% stands for Aviva life insurance company.


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5 . How would you rate our products .

How would you rate our products.


Cumulative

Percent

Valid Excellent 2 4.0 4.0 4.0

Good 37 74.0 74.0 78.0

Fair 9 18.0 18.0 96.0

Poor 2 4.0 4.0 100.0

Total 50 100.0 100.0

INTERPRETATION :

From a sample of 50 customers,74% customers thinks that the products offered by Bajaj

Allianz Life insurance co. is good,4% thinks its excellent,18% of them select Bajaj

Allianz products are fair, and remaining 4% not satisfied with our products.


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6 . I would like to invest money in ULIP .

I would like to invest money in ULIP.


Percent

Valid Strongly agree 2 4.0 4.0 4.0

Agree 33 66.0 66.0 70.0

Neutral 8 16.0 16.0 86.0

Disagree 5 10.0 10.0 96.0

Strongly disagree 2 4.0 4.0 100.0

Total 50 100.0 100.0

INTERPRETATION :

From a sample of 50 customers, 66% agree, 4% of them strongly supporting that fact, and

16% has no opinion about it. And 4% strongly disagreed, remaining 10% also disagree

with investment in ULIP .


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7 . Reason for c h oosing ULIPs because of insurance coverage .

Reason for choosing ULIPs because of insurance coverage.


Percent


Agree 32 64.0 64.0 92.0

Neutral 2 4.0 4.0 96.0

Disagree 2 4.0 4.0 100.0

Total 50 100.0 100.0

INTERPRETATION :

From a sample of 50 customers, 64% of the customers agree, ,28% of them strongly

support it,4% customers didnt say anything, and remaining 4% disagree with that fact.

So we can see that most of the Customers choose ULIP because of insurance coverage.


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8 . I would like to invest money in Mutual Funds .

I would like to invest money in mutual funds.


Percent


Agree 13 26.0 26.0 32.0

Neutral 14 28.0 28.0 60.0

Dsagree 18 36.0 36.0 96.0


Total 50 100.0 100.0

INTERPRETATION :

From a sample of 50 customers,26% of the customers agree with that fact,6% of the

customers strongly support it,and 28% customers have no idea about it.And remaining

10% disagreed,out of this 10%, 4% strongly disagreed with it.


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9 . Mutual funds are more risky t h an ULIP products .

Mutual funds are more risky than ULIP products.


Percent


Agree 27 54.0 54.0 88.0

Neutral 4 8.0 8.0 96.0

disagree 2 4.0 4.0 100.0

Total 50 100.0 100.0

INTERPRETATION :

From a sample of 50 customers,54% of the customers thinks that mutual funds are more

risky than ULIP products,34% strongly agree with this statement.8% customers have no

opinion about it,and remaining 4% disagree with it.


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10 . ULIPs h ave advantage over Mutual funds .

ulip has advantage over mutual funds.


Percent


Agree 31 62.0 62.0 86.0

Neutral 5 10.0 10.0 96.0

Disagree 2 4.0 4.0 100.0

Total 50 100.0 100.0

INTERPRETATION :

62% of the customers agree with ULIP have advantage over mutual fund statement.24%

customers strongly agree with this fact. And 4% of customers not supporting the

statement. And remaining 10% have no opinion about it.


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11. Do you think the safety factor is important in your investment inULIP.

S afety


Cumulative

Percent


Agree 26 52.0 52.0 60.0

Neutral 2 4.0 4.0 64.0

Disagree 15 30.0 30.0 94.0


Total 50 100.0 100.0

jugal final project

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