"WORKING CAPITAL MANAGEMENT AT

PADMAVATHI CO-OPERATIVE URBAN BANK LIMITED"

Submitted in partial fulfillment of the requirements

for the award of the degree of

Bachelor of Business Administration

to

FAIRFIELD INSTITUTE OF
MANAGEMENTAND
TECHNOLOGY

AFFILIATED TO:

(GURU GOBIND SINGH INDRAPASTHA UNIVERSITY

DWARKA, NEW DELHI)

Guide: Sumbitted by:

Mrs. Dr. Laxmi VIDHI
Assistant Professor 03090101722
 CERTIFICATE FROM GUIDE

This is to certify that project title “WORKING CAPITAL

MANAGEMENT AT PADMAVATHI CO-OPERATIVE URBAN
BANK LIMITED” is the original work of “VIDHI,
enrollment no: 03090101722” student of BBA (G) 6th semester
and has been duly completed his project under my guidance
and supervision up to my satisfactory level. This work has been
done in partial fulfillment of the requirement for the award of
the degree of Bachelor of Business Administration from
Fairfield Institute of Management & Technology, New Delhi and
has not been submitted anywhere in any other university for the award
of any degree.

Signature of Guide

Mrs. Dr.Laxmi
Asst. professor
FIMT

|
 STUDENT DECLARTION
I hereby declare that the work, which is being presented in this
project, entitled “WORKING CAPITAL MANAGEMENT AT
PADMAVATHI CO-OPERATIVE URBAN BANK LIMITED”,
under the supervision and guidance of Mrs. Dr. Laxmi
project guide is submitted in the partial fulfillment of the
degree of Bachelor of Business Administration from
“Fairfield Institute of Management and Technology, New
Delhi”. This is my original work and this project work has not
formed the basis for the award of any degree to the best of my
knowledge.

Student Name:
VIDHI

Enrollment no.:
03090101722

Signature of Student

Place: Delhi
Date:
 AKNOWLEDGEMENT

It is pleasure to acknowledge many people who knowingly and

unwittingly helped, to complete my project. First of all, let me praise
god for all the blessings, which carried me through all those years.

I am particularly indebted to Fairfield Institute of Management

Technology, which inculcated in me utmost respect for human values
and groomed me up in the field of software technology to take on the
challenges of the competitive world.
First & foremost, I would like to express my regards to Mrs. Dr.
LAXMI for her constant encouragement and support. I would also
like to express my immense gratitude towards all the lecturers of our
college for providing the invaluable knowledge, guidance,
encouragement extended during the completion of this project.

I extend my sincere gratitude to all my teachers and guide who made

unforgettable contribution. Due to their sincere efforts, I was able to
excel in the work entrusted upon me.
Last but not the least; I am grateful to my parents, my sister, my
brother, my friends and all well – wishers for their moral support and
encouragement during the entire period of time.

Name: VIDHI
Enrolment No: 03090101722
Course: BBA (G)
 EXECUTIVE SUMMARY

This report analyzes the working capital management practices of

Padmavathi Co-operative Urban Bank Limited, with the objective of
assessing the bank’s ability to manage its short-term financial obligations
efficiently. Working capital management involves the effective oversight of
current assets and current liabilities, ensuring that the institution maintains
adequate liquidity while optimizing profitability.

The bank demonstrates a disciplined approach to managing its working

capital. Cash and cash equivalents are maintained at healthy levels,
allowing the bank to meet withdrawal demands and other short-term
liabilities without liquidity strain. Loans and advances, which constitute a
major portion of current assets, are issued based on a robust credit appraisal
process, minimizing the risk of defaults and ensuring timely recovery.

On the liabilities side, the bank effectively manages its short-term

borrowings and deposits. By aligning the maturity of its assets and
liabilities, the bank maintains a stable liquidity position. Interest rate risk
and maturity mismatches are carefully monitored to reduce exposure and
ensure financial soundness.

Furthermore, the bank adopts prudent financial policies such as maintaining

a satisfactory current ratio and operating cycle, which helps in sustaining
cash flow and funding day-to-day operations. The working capital strategy
is aligned with regulatory requirements and the overall goals of financial
inclusion, service reliability, and customer trust.

In conclusion, Padmavathi Co-operative Urban Bank Limited exhibits

sound working capital management practices that support its operational
efficiency and financial resilience. However, continued focus on improving
receivables turnover, optimizing idle cash, and leveraging technology for
real-time monitoring is recommended to further strengthen working capital
efficiency in a dynamic financial environment.
 TABLE OF CONTENTS

CONTENTS PAGE NUMBERS

List of tables i.
List of figures ii.
List of appendices iii.
1.INTRODUCTION 1.
2.REVIEW OF LITERATURE 10.
3.INDUSTRY AND COMPANY PROFILE 19.
4.DATA ANALYSIS & PRESENTATION 24.
5.FINDING, SUGGESTIONS & 37.
CONCLUSION
6.BIBLIOGRAPHY 40.
7.APPENDICES

APPENDIX A 41.
APPENDIX B 42.
APPENDIX C 43.
APPENDIX D 44.
 LIST OF TABLES

TABLE NUMBERS PAGE NUMBERS

Table No. 1 27.
Table No. 2 29.
Table No. 3 30.
Table No. 4 32.
Table No. 5 34.
Table No. 6 36.

i
 LIST OF FIGURES

FIGURES PAGE NUMBERS

Fig. (1) - Structure and Asset 5.
Composition of Scheduled
Commercial Banks.
Fig. (2) – The Operating Cycle of a 12.
Business
Fig. (3) – Working Capital Cycle 13.
Fig. (4) – Working Capital Cycle 14.
for a Manufacturing Firm
Fig. (5) – Current Assets 32.
Fig. (6) – Current Liabilities 34.
Fig. (7) – Net Working Capital 36.

ii
 LIST OF APPENDICES

APPENDIX A: Balance Sheet of Padmavathi co-operative urban bank limited of the year
2019-2020.
APPENDIX B: Balance Sheet of Padmavathi co-operative urban bank limited of the year
2018-2019.
APPENDIX C: Balance Sheet of Padmavathi co-operative urban bank limited of the year
2017-2018.
APPENDIX D: Palmplate of Padmavathi co-operative urban bank limited.

iii
 CHAPTER - 1
INTRODUCTION
In a perfect world, there would be no necessity assets and liabilities because there would be no
uncertainty, no transaction costs, information search costs, or production and technology
constraints. The unit cost of production would not vary with the quantity produced. Borrowing
and lending rates shall be same. Capital, labour, and product market shall be perfectly
competitive and would reflect all available information, thus in such an environment, there
would be no advantage for investing in short term assets.

However, the world we live is not perfect. It is characterized by considerable amount of

uncertainty regarding the demand, Market price, quality and availability of own products and
those of suppliers. There are transaction costs for purchasing or selling goods or securities.
Information is costly to obtain and is not equally distributed. There are spreads between the
borrowings and lending rates for investments and financings of equal risks. Similarly, each
organization is faced with its own limits on the production capacity and technologies it can
employ there are fixed as well as variable costs associated with production goods. In other
words, the markets in which real firm operated are not perfectly competitive.

These real-world circumstances introduce problem’s which require the necessity of

maintaining working capital. For example, an organization may be faced with an uncertainty
regarding availability of sufficient quantity of crucial imputes in future at reasonable price.
This may necessitate the holding of inventory, current assets. Similarly, an organization may
be faced with an uncertainty regarding the level of its future cash flows and insufficient amount
of cash may incur substantial costs. This may necessitate the holding of reserve of short-term
marketable securities, again a short-term capital assets. In corporate financial management, the
term working capital management (net) represents the excess of current assets over current
liabilities.

In simple words working capital is the excess of current Assets over current Liabilities.
Working capital has ordinarily been defined as the excess of current assets over current
liabilities. Working capital is heart of business if it is weak business cannot proper and survives.
It is therefore said the fate of large scale investment in fixed assets is often determined by a
relatively small amount of current assets. As the working capital is important to lifeline of
company. If this lifeline deteriorates so that the company’s ability to fund operation, re-invest
do meet capital requirements and payment. Understanding company’s cash flow health is
1
essential to making investment decision. A good way to judge a company’s cash flow prospects
is to look at its working capital management. The company must have adequate working capital
as much as needed by the company. It should neither be excessive or nor inadequate. Excessive
working capital cuisses for idle funds lying with the firm without earning any profit, where as
inadequate working capital shows the company doesn’t have sufficient funds for financing its
daily needs working capital management involves study of the relationship between firm’s
current assets and current liabilities. The goal for working capital management is to ensure that
a short-term debt and upcoming operational expenses. The better a company manger its
working capital, the less the company needs to borrow. Even companies with cash surpluses
need to manage working capital to ensure those surpluses are invested in ways that will
generate suitable returns for investors.

“The primary objective of working capital management is to ensure that

sufficient cash is available to”

 Meet day to day cash flow needs.

 Pay wages and salaries when they fall due.
 Pay creditors to ensure continued supplies of goods and services.
 Pay government taxation and provider of capital-dividends and
 Ensure the long-term survival of the business entity.

AN OVERVIEW OF THE INDIAN BANKING SECTOR

Banking sector is a ladder to other sectors for their improvement and their growth. Thus a
strong bank sector is required for the economic growth of a country. After the reforms in 1991,
banks are growing by leap and bounds. Commercial banks have a comparative advantage as
providers of capital because of their special knowledge of customers and ability to closely
monitor uses of funds on an ongoing basis.

The major participants of the Indian financial system are the commercial banks, the financial
Institutions (FIs), encompassing Term-Lending Institutions, Investment Institutions,
Specialized Financial Institutions and the State-Level Development Bank, Non-Bank Financial
Companies (NBFCs) and other market intermediaries such as the stock brokers and money-
lenders. The commercial banks and certain variants of NBFCs are among the oldest of the

2
market participants. The Financial Institutions, on the other hand, are relatively new entities in
the financial market place.

HISTORICAL PERSPECTIVE

Bank of Hindustan, set up in 1870, was the earliest Indian Bank. Banking in India on modern
lines started with the establishment of three Presidency Banks under Presidency Bank’s Act
1876 i.e., Bank of Calcutta, Bank of Bombay and Bank of Madras. In 1921, all presidency
banks were amalgamated to form the Imperial Bank of India. Imperial bank carried out limited
central banking functions also prior to establishment of RBI. It engaged in all types of
commercial banking business except dealing with the foreign exchange.

Reserve Bank of India Act was passed in 1934 & Reserve Bank of India (RBI) was constituted
as an apex bank without major government ownership. Banking Regulations Act was passed
in 1949. This regulation brought Reserve Bank of India under government control. Under the
Act, RBI got wide ranging powers for supervision & control of banks. The Act also vested
licensing powers & the authority to conduct inspections in RBI.

In 1955, RBI acquired control of the “Imperial Bank of India”, which was renamed as State
Bank of India. In 1959, SBI took over control of eight private banks floated in the erstwhile
princely states, making them as its 100% subsidiaries.

RBI was empowered in 1960, to force compulsory merger of weak banks with the strong ones.
The total number of banks was thus reduced from 566 in 1951 to 85 in 1969. In July 1969,
government nationalized 14 banks having deposits of Rs.50 crores & above.

In 1980, government acquired 6 more banks with deposits of more than Rs.200 crores.
Nationalization of banks was to make them pay the role of catalytic agents for economic
growth. The Narsimham Committee report suggested wide ranging reforms for banking
practices.

The amendment of Banking Regulation Act in 1933 saw the entry of new private sector banks.
Banking segment in India the regulatory, central bank. This segment broadly consists of:

1. Commercial Banks
2. Co-operative Banks

3
COMMERCIAL BANKS

The commercial banking structure in India consists of:

 Scheduled Commercial Banks

 Unscheduled Banks

Scheduled Commercial Banks constitute those banks which have been included in the second
Scheduled of Reserve Bank of India (RBI) Act, 1934. RBI in turn includes only those banks in
this schedule which satisfy the criteria laid down vide section 42 (60) of the Act. Some co-
operative banks are scheduled commercial banks albeit not all co-operative banks are. Being
part of the second schedule confers some benefits to the bank in terms of access to
accommodation by RBI during the times of liquidity constraints. At the same time, however,
this status also subjects the bank to certain conditions and obligation towards the reserve
regulations of RBI. This sub sector can broadly be classified into:

 Public sector
 Private sector
 Foreign banks

Public sector banks have either the Government of India or Reserve Bank of India as the
majority shareholders. This segment comprises of:

 State Bank of India (SBI) and its subsidiaries;

 Other nationalized banks.

4
 FIGURE SHOWING STRUCTURE AND ASSET
COMPOSITION OF SCHEDULED COMMERCIAL BANKS.

Scheduled Commercial Banks in India

Public Sector Banks Private Sector Banks Foreign Banks

81.01% 12.7% 8.06%

Nationalized State Bank Old Private New Private

Banks Group Banks Banks
62.89% 37.11% 62.93% 37.07%

Fig. (1)

Banking is more than 225 old in our country. The first bank called the bank of Hindustan was
established in 1770. Since then, there has never been any let up and as of today, there are 295
banks with 66514 branches spread across the country.

Note:

1. Scheduled Commercial Banks are exclusive of regional rural banks.

2. Figures in the bracket indicate number of banks each group.
3. Figures in percentage indicate the share of assets of each sub-group in the total assets
of their respective group.
4. The Percentage shares have been using the assets figures as on end March 1999.

5
CO-OPERATIVE BANKS

There are two main categories of the co-operative banks.

a) Short Term Lending Oriented Co-operative Banks – Within this category there are
three sub category of banks viz state co-operative banks, District co-operative banks
and Primary Agriculture co-operative societies.
b) Long Term Lending Oriented Co-operative Banks – Within the second category
there are land development banks at three levels- state level, district level and village
level

The co-operative banking structure in India is divided into following main 5 categories

1. Primary Urban Co-operative Banks

2. Primary Agricultural Credit Societies
3. District Central Co-operative Banks
4. State Co-operative Banks
5. Land Development Banks

BANKING BASICS

Banking Regulation Act of India, 1949 defines Banking as “accepting, for the purpose of
lending or lending in investment of deposits of money from the public, repayable on demand
or otherwise and withdraw able by cheque, draft, order or otherwise.”

Most of the activities a Bank performs are derived from the above definition; In addition, Banks
are allowed to perform certain activities which are ancillary to this business of accepting
deposits and lending. A bank’s relationship with the public, therefore, revolves around
accepting deposits and lending money. Another activity which is assuming increasing
importance is transfer of money – both domestic and foreign – from one place to another. This
activity generally known as “remittance business” in banking parlance. The so called FOREX
(foreign exchange) business is largely a part of remittance albeit it involves buying and selling
of foreign currencies.

6
The law governing banking activities in India is called “Negotiable Instruments Act 1881”.
The banking activities can be classified as:

 Accepting Deposits from public/others (Deposits)

 Lending money to public (Loans)
 Transferring money from one place to another (Remittances)
 Acting as trustees
 Acting as intermediaries
 Keeping valuables in safe custody
 Collection Business
 Government Business

FUNCTIONING OF A BANK

Functioning of a Bank is among the more complicated of corporate operations. Since Banking
involves dealing directly with money, government in most countries regulates this sector rather
stringently. In India, the regulation traditionally has been very strict and in the opinion of
certain quarters, responsible for the present condition of banks, where NPA’s are of a very high
order. The process of financial reforms, which started in 1991, has cleared the cobwebs
somewhat but a lot remains to be done. The multiplicity of policy and regulations that a bank
has to work with makes its operations even more complicated, sometimes bordering on
illogical. This section, which is also intended for banking professional, attempts to give an
overview of the functions in as simple manner as possible.

As per the banking Regulation Act of 1949 and viewed solely from the point of view of the
customers, Banks essentially perform the following functions:

1. Accepting Deposits from public/others (Deposits)

2. Lending money to public (Loans)
3. Transferring money from one place to another (Remittances)
4. Acting as trustees
5. Keeping valuables in safe custody
6. Government Business

But do these functioning constitute banking? The answer must be a no. There are so many
intricacies involved in the activities that a bank performs today, that the above list must sound
7
very simple to a seasoned banker. Bank has to do to give the above services to its customers.
These activities can also be described as bank office banking. Banks are organized in linear
structure to perform these activities at the base of which lies a branch. The corporate office of
bank is normally called Head Office.

CURRENT SCENARIO

Currently overall banking in India is considered as fairly mature in terms of supply, product
range and reaches even though reach in rural India still remains a challenge for the private
sector and foreign banks. Even in terms of quality of assets and capital adequacy, Indian banks
are considered to have clean, strong and transparent balance sheets – as compared to other
banks in 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 the Indian
Rupee is to manage volatility – without any stated exchange rate – and this has mostly 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 retail banking, mortgages
and investment services are expected to be strong. M&As, takeover, assets sales and much
more action ( as it is unravelling in China) will happen on this front in India.

The first time an investor has been allowed to hold more than 5% in a private sector bank since
RBI announced norms in 2005 that any stake exceeding 5% in the private sector banks would
need to be vetted by them.

Currently, India has 88 scheduled commercial banks (SCBs) – 28 public sector banks, 29
private banks (these do not government stake; they may be publicly listed and traded on stock
exchanges) and 31 foreign banks. They have a combined network of over 53000 branches and
17000 ATMs. According to a report by ICRA Limited, a rating agency, the public sector banks
hold over 75% of total assets of the banking industry, with private and foreign banks holding
18.2% and 6.5% respectively.

8
OBJECTIVES OF THE STUDY:

1. To examine the effectiveness of working capital management polices with the help of
accounting ratio.
2. To evaluation the financial performances of the company.
3. To test hypothesis.
4. To make suggestion for policy makers for effective management of Working capital.
5. To study the various components of working capital.

LIMITATIONS OF THE STUDY:

1. The topic working capital management is itself a very vast topic yet very important
also. Due to time restrains it was not possible to study in depth in get knowledge what
practices are followed at Padmavathi co-operative urban bank limited.
2. Many facts and data are such that they are not to be disclosed because of the confidential
nature of the same.
3. Since the financial matters are sensitive in nature the same could not acquired easily.
4. The study is restricted to only the three year data of Padmavathi co-operative urban
bank limited.
5. The study is based on information provided by the company.

SCOPE OF THE STUDY:

1. The project is helpful in knowing the company’s position of funds maintenance and
setting the standards for working capital inventory levels, quick ratio current amount
turnover level and web turnover levels.
2. This project is helpful to the management for expanding the dualism and the project
viability and present availability of funds.
3. This project is also useful as it companies the present year data with the previous year
data and thereby it shows the trend analysis i.e., increasing fund or decreasing fund.
4. The project is useful in further expansion decision to be taken by management.

9
 CHAPTER - 2

LITERATURE REVIEW

WORKING CAPITAL MANAGEMENT

“Working capital refers to a firm’s investment in short term assets-cash, short term securities,
accounts receivable and inventories.”

-Weston & Brigham

Working capital can be classified either on the basis of its concept or on the basis of periodicity
of its requirement.

(l) On the basis of concepts there are two concepts of working capital: -

1. Gross Working Capital

2. Net Working Capital

GROSS WORKING CAPITAL

Gross working capital refers to the firm’s investment in current assets. Current assets are assets
that can be converted into cash within an accounting year. Current assets include cash and bank
balance, Short-term securities, debtors, bills receivables and inventory.

The Gross Working Capital concept focuses attention on two aspects of current assets
management.

a) Optimum investment in current assets

b) Financing of current assets

10
NET WORKING CAPITAL

Net working capital refers to the difference between current assets and current liabilities.
Current liabilities are those claims of outsiders, which are expected to mature for payment
within an accounting year and include bills payable and outstanding expenses. Net working
capacity indicates the liquidity position of the firm. Generally net working capacity is referred
to as working capital.

(ll) On the basis of requirement – According to Gestenberg, the working capital can be
classified into permanent or regular working capital and variable working capital.

OPERATING CYCLE

It is clear that working capital is required because of the time gap between the sales and their
actual realization in cash. This time gap is technically termed as “operating cycle” of the
business. Funds required investing in inventories; debtors and other current assets keep on
changing shape and volume. Like a company has some cash in the beginning. This cash may
be to the suppliers of raw material, to meet labour costs and other overheads. These three
combined would generate WIP, which will be converted into finished goods on completion of
production process. On sale these finished goods gets converted into debtors and debtors pay,
the firm will again have cash. This cash will again used for financing raw materials, WIP, etc.
Thus, there is a complete cycle when cash gets converted into raw material, WIP finished
goods, debtors and finally again cash.

In case of a manufacturing company, the operating cycle is the length of time necessary to
complete the following cycle of events:

1. Conversion of cash into raw material.

2. Conversion of raw material into work-in-progress.
3. Conversion of work-in-progress into finished goods.
4. Conversion of finished goods into accounts receivable, and
5. Conversion of accounts receivables into cash.

11
The operating cycle of a business can be shows as in the following chart.

ACCOUNTS RECEIVABLES SALES

CASH FINISHED GOODS

RAW MATERIALS WORK IN PROGRESS

Fig. (2)

OBJECTIVES OF WORKING CAPITAL MANAGEMENT

The basic objectives of working capital is to provide adequate support for the smooth
functioning of normal business operations of a company. The term adequate working capital is
subjective depending on management’s attitude towards uncertainty/risk.

I. Maintenance of working capital.

II. Availability of ample funds at the time of need.

WORKING CAPITAL CYCLE

The working capital cycle can be defined as

“The period of time which elapses between the point at which cash begins to be expended
on the production of a product and the collection of cash from a customer.”

12
  The diagram below illustrates the working capital cycle

EQUITY AND LOANS

CASH

RECEIVABLE
OVERHEADS
PAYABLES

SALES

INVENTORY

Fig. (3)

Each component of working capital (namely inventory, receivable and payables) has two
dimensions TIME and MONEY. When they comes to managing working capital TIME IS
MONEY. If you can get money to move faster around the cycle (collect monies due from
debtors more quickly) or reduce the amount of money tied up (reduce inventory level relative
to sales). The business will generate more cash or it will need to borrow less money to fund
working capital. As a consequence, you could reduce the cost of bank interest or you will have
additional free money available to support addition sales growth or investment. Similarly, if
you can negotiate improve terms with suppliers e.g., get longer credit or an increased credit
limit, you festively create freed finance to help fund future sales.

A perusal of operational cycle reveals that the cash invested in operations are recycled back in
to cash. However, it takes time to reconvert the cash. Cash flows in cycle into around and out
of a business it the business’s lifeblood and every manager’s primary task to help keep it

13
following and to use the cash flow to generate profits. The shorter the period of operating cycle.
The larger will be the turnover of the funds invested in various purposes.

 The diagram below illustrates the working capital cycle for a manufacturing firm

Work-in-progress

Raw materials stock Finished goods stock

Wages and Overheads Sale

Trade Creditors Trade Debtors

Cash

Taxation Shareholders

Fixed Assets Loan Creditors

Lease Payments

Fig. (4)

The upper portion of the diagram above shows in a simplified form the chain of events in a
manufacturing firm. Each of the boxes in the upper part of the diagram can be seen as a tank
through which funds flow. These tanks, which are concerned with day-to-day activities, have
funds constantly flowing into and out of them.

14
  The chain starts with the firm buying raw materials on credit.
 In due course this stock will be used in production, work will be carried out on the
stock, and it will become part of the firm’s work in progress (WIP)
 Work will continue on the WIP until it eventually emerges as the finished product
 As production progresses, labour costs and overheads will need to be met
 Of course, at some stage trade creditors will need to be paid
 When the finished goods are sold on credit, debtors are increased
 They will eventually pay, so that cash will be injected into the firm

Each of the areas-stocks (raw materials, work in progress and finished goods), trade debtors,
cash (positive or negative) and trade creditors-can be viewed as tanks into and from which
funds flow.

Working capital is clearly not the only aspect of a business that affects the amount of cash;

 The business will have to make payments to government for taxation

 Fixed assets will be purchased and sold
 Lessors of fixed assets will be paid their rent
 Shareholders (existing or new) may provide new funds in the form of cash
 Some shares may be redeemed for cash
 Dividends may be paid
 Long-term loan creditors (existing or new) may provide loan finances, loans will need
to be repaid from time to time, and
 Interest obligations will have to be met by the business.

Unlike movements in the working capital items, most of these ‘non-working capital’ cash
transactions are not every day events. Some of them are annual events (e.g., tax payments, lease
payments, dividends, interest and, possibly, fixed asset purchases and sales). Others (e.g., new
equity and loan finance and redemption of old equity and loan finance) would typically be rarer
events.

15
NEED OF WORKING CAPITAL MANAGEMENT

The need for working capital gross or current assets cannot be over emphasized. As already
observed, the objective of financial decision making is to maximize the shareholders wealth.
To achieve this, it is necessary to generate sufficient profits can be earned will naturally depend
upon the magnitude of the sales among other things but sales cannot convert into cash. There
is a need for working capital in the form of current assets to deal with the problem arising out
of lack of immediate realization of cash against goods sold. Therefore, sufficient working
capital is necessary of sustain sales activity. Technically this 10 is refers to operating or cash
cycle. If the company has certain amount of cash, it will be required for purchasing the raw
material may be available on credit basis. Then the company has to spend some amount for
labour and factory overhead to convert the raw material in work in progress, and ultimately
finished goods. These finished goods convert in to sales on credit basis in the form of sundry
debtors. Sundry debtors are converting into cash after expiry of credit period. Thus, some
amount of cash is blocked in raw materials, WIP, finished goods, and sundry debtors and day
to day cash requirements. However, some part of current assets may be financed by the current
liabilities also. The amount required to be invested in this current assets is always higher than
the funds available from current liabilities. This is the precise reason why the needs for working
capital arise.

TYPES OF WORKING CAPITAL

The operating cycle creates the need for current assets (working capital). However, the need
does not come to an end after the cycle is completed to explain this continuing need of current
assets a destination should be drawn between permanent and temporary working capital.

1) PERMANENT WORKING CAPITAL

The need for current assets arises, as already observed, because of the cash cycle. To carry on
business certain minimum level of working level of working capital is necessary on continues
and uninterrupted basis. For all practical purpose, this requirement will have to be met
permanent as with other fixed assets. This requirement refers to as permanent or fixed working
capital.

16
 2) TEMPORARY WORKING CAPITAL

Any amount over and above the permanent level of working capital is temporary, fluctuating
or variable, working capital. This portion of the required working capital is needed to met
fluctuation in demand consequent upon changes in production and sales as result of seasonal
changes

Graph shows that the permanent level is fairly castanet; while temporary working capital is
fluctuating in the case of an expanding firm the permanent working capital line may not be
horizontal.

This may be because of changes in demand for permanent current assets might be increasing
to support a rising level of activity.

DETERMINANTS OF WORKING CAPITAL

The amount of working capital is depends upon a following factors

1. NATURE OF BUSINESS

Some businesses are such, due to their very nature, that their requirement of fixed capital is
more rather than working capital. These businesses sell services and not the commodities and
that too on cash basis. As such, no founds are blocked in piling inventories and also no funds
are blocked in receivables. E.g., public utility services like railways, infrastructure-oriented
project etc. there requirement of working capital is less. On the other hand, there are some
businesses like trading activity, where requirement of fixed capital is less but more money is
blocked in inventories and debtors.

2. LENGTH OF PRODUCTION CYCLE

In some business-like machine tools industry, the time gap between the acquisition of raw
material till the end of final production of finished products itself is quite high. As such amount
may be blocked either in raw material or work in progress or finished goods or even in debtors.
Naturally there need of working capital is high.

17
 3. SIZE AND GROWTH OF BUSINESS

In very small company the working capital requirement is quite high due to high overhead,
higher buying and selling cost etc. as such medium size business positively has edge over the
small companies. But if the business start growing after certain limit, the working capital
requirements may adversely affect by the increasing size.

4. BUSINESS/ TRADE CYCLE

If the company is the operating in the time of boom, the working capital requirement may be
more as the company may like to buy more raw material, may increase the production and sales
to take the benefit of favourable market, due to increase in the sales, there may more and more
amount of funds blocked in stock and debtors etc. similarly in the case of depression also,
working capital may be high as the sales terms of value and quantity may be reducing, there
may be unnecessary piling up of stack without getting sold, the receivable may not be recovered
in time etc.

5. TERMS OF PURCHASE AND SALES

Sometime due to competition or custom, it may be necessary for the company to extend more
and more credit to customers, as result which more and more amount is locked up in debtors
or bills receivable which increase the working capital requirement. On the other hand, in the
case of purchase, if the credit is offered by suppliers of goods and services, a part of working
capital requirement may be financed by them, but it is necessary to purchase on cash basis, the
working capital requirement will be higher.

6. PROFITABILITY

The profitability of the business may be vary in each and every individual case, which is in
turns its depend on numerous factors, but high profitability will positively reduce the strain on
working capital requirement of the company, because the profits to the extent that they earned
in cash may be used to meet the working capital requirements of the company.

7. OPERATING EFFICIENCY

If the business is carried on more efficiency, it can operate in profits which may reduce the
strain on working capital; it may ensure proper utilization of existing resources by eliminating
the waste and improved coordinate etc.

18
 CHAPTER – 3

INDUSTRY AND COMPANY PROFILE

The bank was established in the year 1998. With the dedicated and courteous services rendered
by the Bank the business is increasing substantially year after year and the Bank has completed
thirteen (13) successful years deriving customers utmost satisfaction. The Bank has paid
dividend at 12%.

MISSION STATEMENT:

To retain the Bank’s position as premiere Indian Financial Services Group, with world class
standards and significant global committed to excellence in customer, shareholders and
employee satisfaction and to play a leading role in expanding and diversifying financial service
while containing emphasis on its development banking rule.

VISION STATEMENT:

 Premier Indian Financial Service Group with prospective world class standards of
efficiency and professionalism and institutional values.
 Maximize the shareholders value through high-sustained earnings per share.
 An institution with cultural mutual care and commitment, satisfying and
 Good working environment and continues learning opportunities.

VALUES:

 Excellence in customer service

 Profit orientation
 Belonging commitment to Bank
 Fairness in all dealings and relations
 Risk taking and innovative
 Team playing
 Learning and renewal
19
  Integrity
 Transparency and discipline in policies and systems.

ORGANISATIONAL STRUCTURE:

The Bank is managed by highly professional and dedicated Board of Directors. The personnel
in the Bank are highly rich experience in Banking who have worked with various Nationalized
Banks in different capacities.

CEO

CHIEF GENERAL MANAGER

MANAGERS (2)

OFFICERS (6)

CLERKS (6)

SUBSTAFF (3)

20
BOARD OF DIRECTORS:

The Bank has 8 directors on the Board and is responsible for the management of the Bank’s
business. The board in addition to monitoring corporate performance also carries out functions
such as approving the business plan, reviewing and approving the annual budgets and
borrowing limits and fixing exposure limits. Mr. S. Anand Kumar is the Chairman of the Bank.
The management’s trust on growth of the Bank in terms of network and size would also ensure
encouraging prospects in time to come.

Sri S. Anand Kumar Chairman

Sri C. Venkateshwar Rao Vice-Chairman

Sri T.R. Ashok Kumar Director

Sri K. Mohan Kumar Director

Sri C.A.K.V.R. Anjaneyulu Director

Dr. G. Shyam Director

Dr. Y. Nagabhushana Rao Director

Sri S. Srinivas Director

BRANCHES:

The Ex-Counter of Padmavathi Co-operative Urban Bank Limited is Located in Saleem Nagar,
Malakpet, Hyderabad established in the year 2001.

SHAREHOLDING AND LIQUIDITY (Till 31st March 2020)

The Bank has started in the year 1998 with a Share capital of Rs.22.00 lakhs. As on 31.03.2020,
the Share capital of the Bank increased to Rs.143.46 lakhs. Reserves increased to Rs.362.79
lakhs and Net worth increased to Rs.506.25 lakhs. The Bank has been maintaining Statutory
Liquidity Ratio and Cash Reserve Ratio as per the norms prescribed by Reserve Bank of India

21
scrupulously. The Bank is strictly maintaining SLR and CRR as per RBI guidelines. The Bank
has invested Rs.1058.58 lakhs in Government Securities (Both Central and State
Governments), Rs. 190.00 lakhs in various Mutual Funds and Rs.850.00 lakhs in fixed deposits
with various Banks as on 31st March 2020. All the Bank’s assets are insured with IFFCO Tokio
General Insurance Co. Ltd., under Banker’s indemnity policy.

PRODUCTS AND SERVICES:

SERVICES:

 All types of deposit accounts

 Loans and Advances of various types
 Safe Deposit Lockers
 NEFT/RTGS Facility /SMS Alerts
 Issuance of DDs/ At Par cheques
 Mee-Seva Services for collection of Utility Bills such as:
Electricity Bills, Water Bills, Telephone Bills, Property Tax and Police Challans

TYPES OF DEPOSITS:

 Savings Bank Accounts

 Current Accounts
 Term Deposits (Cumulative)
 Short Term Deposits
 Term Deposits (Interest Payable monthly/ quarterly)
 Recurring Deposits
 Deposits carry attractive rate of interest
 Extra Interest for Senior Citizens

*Deposits are guaranteed by DICGC upto Rs. 5 lakhs*

22
TYPES OF LOANS AND ADVANCES:

 Gold Loans
 Business Loans
 Loans against deposits
 Vehicle Loans
 Personal Loans
 Mortgage Loans/ Over Draft
 Loan against LIC Policies/ NSCs/ KVPS
 Top up Loans
 Housing Loans
 Education Loans

23
 CHAPTER – 4

DATA ANALYSIS AND INTERPRETATION

HOW TO ANALYZE WORKING CAPITAL

The process of analysis of working capital is a three-step process. This process is included the
following: -

1. Step

 The first step of analysing of working capital begins by determining current

assets
 Current assets are comprised of cash, marketable securities, accounts receivable
and current inventory.
 The sum of the total value of each of the above is called the current assets

2. Step2

 The second step is determining of current liabilities.

 Current liabilities include accounts payable, accrued expenses, notes payable
and the portion of long-term debt that is classified as current.
 The sum of all these above mention accounts are called current liabilities figure.

3. Step3

 Take the total of the current assets and subtract them from the current assets.
 The result will be the working capital.
 In other words, current asset minus current liabilities equals to working capital.

24
Example: -

 The company has $100,000 in cash, $50,000 in securities, $10,000 in account

receivable, and $30,000 in inventory.
 On the current liabilities side, the company has $60,000 in accounts payable, $10,000
in accrued expenses, and $20,000 in current debt.

 The current assets of the company are: -

$100,000 + $50,000 + $10,000 + $30,000 = $190,000.

 The current liabilities are: -

$60,000 + $10,000 + $20,000 = $90,000.

 Now take the current assets of $190,000 and subtract the current liabilities of $90,000
to arrive at the working capital of $100,000.

 $190,000 - $90,000 = $100,000.

25
CURRENT ASSETS

Current Asset is a balance sheet item which equals the sum of cash and cash equivalents,
accounts receivable, inventory, marketable securities, prepaid expenses, and other assets that
could be converted to cash in less than one year. A company’s creditors will often be interested
in how much that company has in current assets, since these assets can be easily liquidated in
case the company goes bankrupt. In addition, current assets are important to most companies
as a source of funds for day-to-day operations.

In accounting, a current asset is an asset on the balance sheet which is expected to be sold or
otherwise used up in the near future, usually within one year, or one operating cycle whichever
is longer. Typical current assets include cash, cash equivalents, accounts receivable, inventory,
the portion of prepaid accounts which will be used within a year, and short-term investments.

Current Assets = Cash + Bank + Debtors + Bills Receivable + Short Term

Investment + Investment + Inventory + Prepaid Expenses

26
 BELOW IS THE LIST OS ASSETS OF PADMAVATHI CO-OPERATIVE
URBAN BANK LIMITED: -

FROM THE BALANCE SHEET OF PADMAVATHI CO-OPERATIVE

URBAN BANK LIMITED (31 MARCH 2020)

Particulars March 2020 March 2019 March 2018

Assets
Cash and Bank Balances 2,75,18,154.31 3,19,85,365.28 2,56,21,935.93
Investments 20,98,58,350.00 18,07,30,850.00 20,62,30,850.00
Loans and Advances 25,37,37,659.31 22,53,19,816.38 19,56,05,284.70
Interest Receivables 49,91,374.00 43,84,010.00 51,20,411.00
Fixed Net Block 55,59,472.59 67,22,779.15 8,93,131.88
Capital Work in Progress 0.00 0.00 63,41,484.94
Other Deposits 12,19,380.00 12,78,880.00 13,73,880.00
Other Assets 28,53,850.85 32,81,941.22 31,47,671.04
Deferred Tax Asset 0.00 0.00 1,53,542.00
Total Assets 50,57,38,241.06 45,37,03,642.03 44,44,88,191.49

Table No. (1)

So,

The Current Assets of Padmavathi co-operative urban bank limited in the year 2020 as per the
Balance Sheet (31 March 2020)

Current Assets = Cash and Bank balances + Loans and Advances + Investments

= 2,75,18,154.31 + 25,37,37,659.31 + 20,98,58,350.00

= 49,11,14,163.62

27
CURRENT LIABILITIES

In accounting, current liabilities are considered liabilities of the business that are to be settled
in cash within the fiscal year or the operating cycle, whichever period is longer.

For example,

Accounts payable for goods, services or supplies that were purchased for use in the operation
of the business and payable within a normal period of time would be current liabilities.

Bonds, mortgages and loans that are payable over a term exceeding one year would be fixed
liabilities or long-term liabilities. However, the payments due on the long-term loans in the
current fiscal year could be considered current liabilities if the amounts were material.

28
 BELOW THERE IS THE LIST OF CURRENT LIABILITIES OF
PADMAVATHI CO-OPERATIVE URBAN BANK LIMITED: -

FROM THE BALANCE SHEET OF PADMAVATHI CO-OPERATIVE

URBAN BANK LIMITED (31 MARCH 2020)

Particulars March 2020 March 2019 March 2018

Liabilities
Deposits 43,86,41,377.55 39,13,97,479.58 38,22,69,432.70
Reserve Fund & Other reserves 3,62,78,966.42 3,76,05,335.49 3,40,77,870.85
Unclaimed Dividends 4,56,189.30 6,04,505.10 6,26,389.90
Interest payable on deposits 17,110.00 23,792.00 39,320.00
Provision for Taxation 15,37,792.00 14,33,290.00 17,91,544.00
Other Provisions 67,13,943.47 16,62,202.00 15,97,202.00
Deferred Tax Liability -20,145.00 58,946.00 0.00
Profit and Loss Account 45,36,249.38 42,77,694.56 49,62,478.74
Other Liabilities 32,30,407.94 31,05,047.30 62,84,803.30
Total Liabilities 49,13,91,891.06 44,01,68,292.03 426686562.75

Table No. (2)

So,

The current Liabilities of Padmavathi co-operative urban bank limited in the year 2020 as per
the Balance sheet (31 March 2020)

Current Liabilities = Deposit + Unclaimed Dividends + Interest payable on deposits +

Provision for Taxation + Other Provisions

= 43,86,41,377.55 + 4,56,189.30 + 17,110.00 + 15,37,792.00 + 67,13,943.47

= 44,73,66,412.32
29
 ANALYSIS OF ASSETS AND LIABILITIES

FROM THE BALANCE SHEET OF PADMAVATHI CO-OPERATIVE

URBAN BANK LIMITED (31 MARCH 2020)

Particulars March 2020 March 2019 March 2018

Assets
Cash and Bank Balances 2,75,18,154.31 3,19,85,365.28 2,56,21,935.93
Investments 20,98,58,350.00 18,07,30,850.00 20,62,30,850.00
Loans and Advances 25,37,37,659.31 22,53,19,816.38 19,56,05,284.70
Interest Receivables 49,91,374.00 43,84,010.00 51,20,411.00
Fixed Net Block 55,59,472.59 67,22,779.15 8,93,131.88
Capital Work in Progress 0.00 0.00 63,41,484.94
Other Deposits 12,19,380.00 12,78,880.00 13,73,880.00
Other Assets 28,53,850.85 32,81,941.22 31,47,671.04
Deferred Tax Asset 0.00 0.00 1,53,542.00
Total Assets 50,57,38,241.06 45,37,03,642.03 44,44,88,191.49
Liabilities
Deposits 43,86,41,377.55 39,13,97,479.58 38,22,69,432.70
Reserve Fund & Other reserves 3,62,78,966.42 3,76,05,335.49 3,40,77,870.85
Unclaimed Dividends 4,56,189.30 6,04,505.10 6,26,389.90
Interest payable on deposits 17,110.00 23,792.00 39,320.00
Provision for Taxation 15,37,792.00 14,33,290.00 17,91,544.00
Other Provisions 67,13,943.47 16,62,202.00 15,97,202.00
Deferred Tax Liability -20,145.00 58,946.00 0.00
Profit and Loss Account 45,36,249.38 42,77,694.56 49,62,478.74
Other Liabilities 32,30,407.94 31,05,047.30 62,84,803.30
Total Liabilities 49,13,91,891.06 44,01,68,292.03 426686562.75

Table No. (3)

30
So,

The current Assets of Padmavathi co-operative urban bank limited in the year 2020, 2019, 2018
as per the Balance sheet (31 March 2020)

2020

CURRENT ASSETS = Cash and Bank balances + Loans and Advances + Investments

= 2,75,18,154.31 + 25,37,37,659.31 + 20,98,58,350.00

= 49,11,14,163.62

2019

CURRENT ASSETS = Cash and Bank balances + Loans and Advances + Investments

= 3,19,85,365.28 + 22,53,19,816.38 + 18,07,30,850.00

= 43,80,36,031.66

2018

CURRENT ASSETS = Cash and Bank balances + Loans and Advances + Investments

= 2,56,21,935.93 + 19,56,05,284.70 + 20,62,30,850.00

= 42,74,58,070.63

31
  INCREASE OR DECREASE OF CURRENT ASSETS OF
PADMAVATHI CO-OPERATIVE URBAN BANK LIMITED

PARTICULAR 2018 2019 2020

Current Assets 42,74,58,070.63 43,80,36,031.66 49,11,14,163.62

Increase (/Decrease) 1,05,77,961.03 5,30,78,131.96
% Increase (/Decrease) 2.47% 12.11%

Table No. (4)

CURRENT ASSETS

500000000
490000000
480000000
470000000
460000000 CURRENT
ASSETS
450000000
440000000
430000000
420000000
410000000
400000000
390000000
2018 2019 2020

Fig. (5)

32
Now,

The Current Liabilities of Padmavathi co-operative urban bank limited in the year 2018, 2019
and 2020 as per the Balance Sheet (31 March 2020)

2020

Current Liabilities = Deposit + Unclaimed Dividends + Interest payable on deposits +

Provision for Taxation + Other Provisions

= 43,86,41,377.55 + 4,56,189.30 + 17,110.00 + 15,37,792.00 + 67,13,943.47

= 44,73,66,412.32

2019

Current Liabilities = Deposit + Unclaimed Dividends + Interest payable on deposits +

Provision for Taxation + Other Provisions

= 39,13,97,479.58 + 6,04,505.10 + 23,792.00 + 14,33,290.00 + 16,62,202.00

= 39,51,21,268.68

2018

Current Liabilities = Deposit + Unclaimed Dividends + Interest payable on deposits +

Provision for Taxation + Other Provisions

= 38,22,69,432.70 + 6,26,389.90 + 39,320.00 + 17,91,544.00 + 15,97,202.00

= 38,63,23,888.6

33
  INCREASE OR DECREASE OF CURRENT LIABILITIES OF

PADMAVATHI CO-OPERATIVE URBAN BANK LIMITED

PARTICULAR 2018 2019 2020

Current Liabilities 38,63,23,888.6 39,51,21,268.68 44,73,66,412.32
Increase (/Decrease) 87,97,380.08 5,22,45,143.64
% Increase (/Decrease) 2.27% 13.22%

Table No. (5)

CURRENT LIABILITIES

450000000
440000000
430000000
420000000
410000000
CURRENT
400000000 LIABILITIES
390000000
380000000
370000000
360000000
350000000
2018 2019 2020

Fig. (6)

34
Therefore, from the above calculation we get that the working capital of Padmavathi co-
operative urban bank limited in the year 2018, 2019 and 2020 as per the Balance sheet (31
March 2020)

2020

Net working capital = Current Assets – Current Liabilities

= 49,11,14,163.62 - 44,73,66,412.32

= 4,37,47,751.3

2019

Net working capital = Current Assets – Current Liabilities

= 43,80,36,031.66 - 39,51,21,268.68

= 4,29,14,762.98

2018

Net working capital = Current Assets – Current Liabilities

= 42,74,58,070.63 - 38,63,23,888.6

= 4,11,34,182.03

35
  INCREASE OR DECREASE OF NET WORKING CAPITAL OF
PADMAVATHI CO-OPERATIVE URBAN BANK LIMITED

PARTICULAR 2018 2019 2020

Current Assets 42,74,58,070.63 43,80,36,031.66 49,11,14,163.62
Current Liabilities 38,63,23,888.6 39,51,21,268.68 44,73,66,412.32
Net Working Capita (NWC) 4,11,34,182.03 4,29,14,762.98 4,37,47,751.3
Increase (/Decrease) In NWC 17,80,580.95 8,32,988.32
% Increase (/Decrease) In NWC 4.32% 1.94%

Table No. (6)

NET WORKING CAPITAL OF PADMAVATHI CO-OPERATIVE

URBAN BANK LIMITED FROM 2018 – 2020 IN GRAPHS:-

NET WORKING CAPITAL OF PCUBL

44000000

43500000

43000000
42500000
NET WORKING CAPITAL
42000000 OF PCUBL
41500000

41000000

40500000
40000000

39500000
2018 2019 2020

Fig. (7)
36
 CHAPTER – 5

FINDINGS, SUGGESTIONS AND CONCLUSION

FINDINGS

The research is conducted with the data of past three years. And from these past three years
data the things that I have finds after the resource done are: -

1) Working capital of the company was increasing and showing positive working capital
per year. It shows good liquidity position.
2) In the year 2018-2019 the company’s working capital has increase 4.32%.
3) In the year 2019-2020 the company’s working capital has increase 1.94%.
4) Positive working capital indicates that company has the ability of payments of short
terms liabilities.
5) Working capital increased because of increment in the current assets is more than
increase in the current Liabilities.
6) The Company’s current assets were always more than requirement it affect on
profitability of the company.
7) Current assets are more than current liabilities indicate that company used long-term
funds for short-term requirement, where long-term funds are most costly then short-
term funds.
8) Current assets components shows sundry debtors were the major part in current assets
it shows that the inefficient receivables collection management.

37
SUGGESTIONS

The research is conducted with the data of past three years. However, better insight could be
obtained if the research is continued with the data for more number of years.

1) There should maintain proper management in inventory.

2) Current assets should not be exceeding over because it is increase the investment of the
company.
3) The Net Working Capital should be in a balance condition it should not be fluctuate
excessively

All over company should manage the Net Working Capital of the company in such a way that
it should enhance the effectiveness and efficiency of the company’s profitability.

38
CONCLUSION

Working capital management is important aspect of financial management. The study of

working capital management of Padmavathi co-operative urban bank limited has revealed that
the current ratio is in an increasing trend. The study has been conducted on working capital
management which will help the company to manage its working capital efficiently and
effectively.

Over all the company has good liquidity position and sufficient funds to repayment of
liabilities. Company has accepted conservative financial policy and thus maintaining more
current assets balance. Company is increasing sales volume per year which supported to the
company for sustain in the number one position.

From this research I found that the over all working capital (WC) of Padmavathi co-operative
urban bank limited is increased by more than 50% in the last three years. Which are a significant
trend and this trend is giving a good sound for the health of the company.

39
 BIBLIOGRAPHY

For the purpose of collecting information the following sources were referred:

 Textbooks

 AUTHORS - Shashi k. Gupta and Dr. R.K. Sharma and Neeti Gupta,
TEXT BOOK – Financial Management,
PUBLISHER – Kalyani publishers

 Manuals from Padmavathi co-operative urban bank limited

 Websites

 www.wikipedia.com
 www.scribd.com
 www.google.com
 www.rbi.com
 care@padmavathibank.com

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