For understanding the financial sources of any bank it’s necessary to look at various types of classification like whether the sources are internal or external, whether they are short term, long term or medium term sources of finance.
Furthermore the things covered under all such classified data are:-
Internal – bank overdraft, leasing, share issue, hire purchase, mortgage, govt. grants, trade credit, income from other bank services, loan interest, bank assurance
External – equity, preference capital, venture capital, debt factoring, term loan, debenture, bond, return on investment, leasing
Short term – bank overdraft, trade creditors, factoring, interest on bank services or commission
Medium term – bank loan, leasing, hire purchase, government grants.
Long term – share capital, retained profits, mortgages, long term bank loans, foreign currency.
There are lots of sources of finance for any bank as in some way or other every bank is involved in the money market or capital market.
For the topic of scope two banks have been selected :
| PUBLIC SECTOR | BANK OF MAHARASHTRA |
| PRIVATE SECTOR BANK | BANDHAN BANK |
Bank of Maharashtra
Bank of Maharashtra is one of the oldest banks of INDIA and its foundation was established in 1935 on 16th September. Today the bank is spread across INDIA In form of 1897 branches and 1878 ATMs working as on 16-17 and the system is supported by 12974 employees. The net worth of the bank as on 31-3-17 was Rs.5486.47 crore.
Figures from Balance Sheet to Look At
For understanding the various sources of finance we would use the data of three financial years and compare the same (IN CRORE RUPEES)
| PARTICULARS | 2016-17 | 2017-18 | 2018-19 |
| PROFIT IN FOREX BUSINESS | 101.91 | 110.16 | 132.39 |
| BORROWING | 8136.65 | 4063.71 | 10149.71
(6781.11 is SECURED) |
| COMMISSION FROM BANCASSURANCE | 10.97 | 15.20 | 19.46 |
| COMMISSION FROM GOVT. BUSINESS | 19 | 17.80 | 19.49 |
| INCOME
(INT.+ NON-INT.) |
13570.03 | 12602.47 | 12397.06 |
| CAPITAL FROM GOVT. | 300 | 3173 | 4703 |
| DEPOSITS | 139052.83 | 138981.17 | 140636.22 |
| MONEY AT CALL AND SHORT NOTICE | 1367.30 | 74.89 | 1234.96 |
| INVESTMENTS | 38590.18 | 43622.79 | 59837.27 |
| ADVANCES | 95515.22 | 85797.27 | 82666.21 |
| CASH INFLOWS | 9230.23 | 13896.80 | 5957.81 |
| PROFITS OF PREVIOUS YEAR | 250.14 | LOSS(-1304.74) | LOSS(-2517.16) |
Now talking about segregation there are no major changes or new inclusions from the sources of finance point of view. However there are significant changes in internal share of some of those sources varying from year to year.
Profit in Forex
First of all the profit in forex consists of profit earned from two things: the turnover from foreign business plus turnover from merchant business in foreign domains and their share in foreign profit generation is more or less the same.
Capital from Govt.
Capital from govt. is the infused capital from govt. of INDIA inside the bank for its operations and working. The year 16-17 includes only 300 crore of infused capital and it has been in the form of shares with preferential rights. Rest of the years the govt. has infused the capital by way of dual offering one in the end of third quarter and another in the end of the financial year.
Bancassurance
Income from bancassurance is in the form of commission earned by making life and general insurance policies. Bank handles this work and in return earns commission from LIC (tie up). Commission is received differently, that is to say for making life policy and general policy a different amount of commission is generated and in all the three years life insurance policy has provided less commission in comparison to general insurance policies.
Borrowings
Borrowings have always been classified into two types that are borrowing from institutes or banks or financial institutes from INDIA and those outside INDIA. From INDIA the loan has been taken from institutes like NABARD, EXIM BANK, NHB, MUDRA, SIDBI. Also borrowing is being done in the form of bonds and debenture. Following this type the rest of borrowing is being done from institutes and organisations outside INDIA.
Deposits
Deposits have come from demand deposits, savings deposits and term deposits. Also deposits from branches in INDIA are covered under the scheduled deposits. This allows banks to have a constant flow of money in circulation and hence lessen the problem of immediate need of cash. There is a huge amt. of cash involved while talking about the inflows of cash as well which keeps on increasing from year to year.
Summarizing the Financial Sources for Public Sector Banks
Here in public sector banking, calling money or money from the public by way of shares plays a very crucial role as well. As people trust the government. run the institute more they would invest and buy the shares more and t]hence it would give the bank a significant amt. of money in form of public money which is used for its development and expansion.
Bank has invested in fixed as well as other than fixed assets. It holds foreign currency, immovable property, debentures, bonds, and the government. securities, subsidiaries or joint ventures, certificates of deposits, UTI, commercial papers, investments outside INDIA etc. and it also gives banks a backup for payment to creditors and also generates some additional income in the way of leasing from property and increased value of foreign money resulting in an increase in portfolio for bank foreign currency.
The advances involve bills discounted or purchased, overdrafts, term loans, advance against book debts, unsecured advances etc. they give banks an open arm to get finance whenever required and satisfies short term needs of customers and int. amount to the bank.
Incomes are earned from two ways. One is directly through int. earned out of priority business and second through various other sources of income by means of leasing, sale of investments, profit on exchange transactions, revaluation of investments, miscellaneous income etc.
Bandhan Bank
Bandhan bank was established in 2015 and is one of the newest established private banks. It currently has around 1009 branches and 485 ATM’S working. It has a customer base of around 1.83 crore people and a team of 35468 people working on behalf of the name BANDHAN bank.
The financial sources for the bank is a lot similar to that of a public sector bank (Maharashtra) but there has been a unique inclusion in the list and that is of the money received from shares sold to employees and it has been recorded totally separately and given due space and importance into the annual report.
Figures from Balance Sheet to Look At
The important amounts to be taken into account are as follows (in crore RS.)
| Particulars | 2016-17 | 2017-18 | 2018-19 |
| Deposits | 23229 | 33869 | 43231.62 |
| Capital | 1095.14 | 1192.81 | 1193.08 |
| Borrowings | 1028.93 | 285 | no info |
| Reserves and surplus | 3351.31 | 8189.14 | no info |
| Investments | 5516.64 | 8371.94 | no info |
| Advances | 16839.07 | 29710.03 | 39643.39 |
| Cash Inflow | 6012.06 | 2837.06 | 3879.15 |
| Int. income | 3908.71 | 4802.79 | 4496.10 |
| Other income | 411.41 | 706.87 | 1063.05 |
| Call money | 1352.93 | 2673.51 | 2837.06 |
| Profits | 1111.91 (C.Y.) | 1345.55(C.Y.) |
IPO Income
An IPO was issued and the bank raised funds from the public from the former and they amounted to RS. 3662.40 crore.
Investments
Talking about the investments like debenture and bonds rating has been carried out for them to get their current value every year amounting to 160 cr. For unsecured debentures, 80 crore for term deposits and 3000 Cr. For certificate of deposit.
The investments are done majorly into debentures, approved securities, shares, bonds, government securities, subsidiaries and joint ventures, and MF, Certificate of deposits etc.
Deposits
The deposits have a combination of term deposit, savings account, current account and retail term deposit. Among them all term deposits have contributed almost more than 50% of the amt. Also the deposits involve the amount of deposits received from all the branches across INDIA but being a newly established entity it has no foreign branch as such.
Capital
The authorised capital remains 5000 cr Rs. And the paid up capital or call money stood at the above amt. mentioned for all the years. The reserves and surplus has been a combination of capital reserve, statutory reserve, share premium reserve, investment fluctuation reserve and each used for the purpose as the name itself suggests.
Borrowings
The borrowings here have really come from 2 groups for every year and that includes other banks and other financial institutes. There is no RBI present and no institute outside INDIA included for the same purpose.
Cash
The cash in hand talks about the money in hand and the money located into the savings and other accounts of the people.
The call money is a wide range of instruments consisting of money located at savings and current account as well as in form of other deposit accounts and with banks and financial institutes. It also includes some money from overseas current bank accounts.
The advances form a structure of bills discounted and purchased and term loans along with bank overdraft and loans repayable on demand. It also includes loans secured by tangible assets or some govt. or bank guarantees and unsecured as well. The advances made into business are from the tertiary or less important sector only that is areas other than priority, public sector or banks. Interest earned is from investments, discounted bills, advance bills and int. on balances with RBI. Also other income comprises commission, brokerage, sale of investments, derivative transaction, dividends and misc. income sources.
Public V/S Private Bank
There are not much differences in a way for procuring finance or earning through sources of income between private and public sector banks but yet the difference in amount coming from one particular or other can be easily noticed and that it can be concluded that the earning or financial source differs from type of banking and the network a bank possess not only with its customers but overall business across India and if possible across the globe.
