MAJOR PROJECT REPORT ON An Analysis of SBI Mutual Fund
SUBMITTED BY – SACHIN KUMAR MISHRA Student of BBA (B&I) Semester 6th
DELHI COLLEGE OF ADVANCE STUDY AFFILIATED TO G.G.S.I.P.U B-7 SHANKAR GARDEN, VIKASPURI, NEW DELHI-110018
DECLARATION
I hereby declare that the major project report, entitled “An Analysis of SBI Mutual
Fund”, is
based on my original study and has not been submitted submitted earlier for award of any degree degree or diploma to any institute or university.
The work of other author(s), wherever used, has been acknowledged at appropriate place(s).
Place: New Delhi
Candidate’s Signature
Date: 4th April, 2011
Name: Sachin Kumar Mishra Enrol. No.: 0581221808
Countersigned
Name: Ms. Neha Ralli
Name: Dr. J.P. Varshney
Supervisor
Director
Delhi College of Advanced Studies
Delhi College of Advanced Studies
DECLARATION
I hereby declare that the major project report, entitled “An Analysis of SBI Mutual
Fund”, is
based on my original study and has not been submitted submitted earlier for award of any degree degree or diploma to any institute or university.
The work of other author(s), wherever used, has been acknowledged at appropriate place(s).
Place: New Delhi
Candidate’s Signature
Date: 4th April, 2011
Name: Sachin Kumar Mishra Enrol. No.: 0581221808
Countersigned
Name: Ms. Neha Ralli
Name: Dr. J.P. Varshney
Supervisor
Director
Delhi College of Advanced Studies
Delhi College of Advanced Studies
ACKNOWLEDGEMENT
An independent project is a contradiction. Every project involves contribution of many people. This project also bears the imprints of many people and it is a pleasure for me to acknowledge and thank them all.
I am deeply indebted to Ms. Neha Ralli who acted as a mentor and guide, providing knowledge and giving me their valuable time out of their busy schedule, at every step throughout the research. It is only because of her this project came into being.
I also thank the Director of Delhi College of Advanced Studies, for providing an opportunity of doing this project under his leadership.
I also take opportunity to express my sincere gratitude to each and every person, who directly or indirectly helped me throughout the project and without anyone of them the research, would not have been possible. The immense learning from this project would be indelible forever.
Sachin Kumar Mishra 0581221808
EXECUTIVE SUMMARY
State Bank of India is the largest and one of the oldest commercial bank in India, in existence for more than 200 years. The bank provides a full range of corporate, commercial and retail banking services in India. Indian central bank namely Reserve Bank of India (RBI) is the major share holder of the bank with 59.7% stake. The bank is capitalized to the extent of Rs.646bn with the public holding (other than promoters) at 40.3%. SBI has the largest branch and ATM network spread across every corner of India. The bank has a branch network of over 14,000 branches (including subsidiaries). Apart from Indian network it also has a network of 73 overseas offices in 30 countries in all time zones, correspondent relationship with 520 International banks in 123 countries. In recent past, SBI has acquired banks in Mauritius, Kenya and Indonesia.
The bank had total staff strength of 198,774 as on 31st March, 2006. Of this, 29.51% are officers, 45.19% clerical staff and the remaining 25.30% were sub-staff. The bank is listed on the Bombay Stock Exchange, National Stock Exchange, Kolkata Stock Exchange, Chennai Stock Exchange and Ahmedabad Stock Exchange while its GDRs are listed on the London Stock Exchange. SBI group accounts for around 25% of the total business of the banking industry while it accounts for 35% of the total foreign exchange in India. With this type of strong base, SBI has displayed a continued performance in the last few years in scaling up its efficiency levels. Net Interest Income of the bank has witnessed a CAGR of 13.3% during the last five years. During the same period, net interest margin (NIM) of the bank has gone up from as low as 2.9% in FY02 to 3.40% in FY06 and currently is at 3.32%.
Chapter-1: Introduction
The origin of the State Bank of India goes back to the first decade of the nineteenth century with the establishment of the Bank of Calcutta in Calcutta on 2 June 1806. Three years later the bank received its charter and was re-designed as the Bank of Bengal (2 January 1809). A unique institution, it was the first joint-stock bank of British India sponsored by the Government of Bengal. The Bank of Bombay (15 April 1840) and the Bank of Madras (1 July 1843) followed the Bank of Bengal. These three banks remained at the apex of modern banking in India till their amalgamation as the Imperial Bank of India on 27 January 1921. Primarily Anglo-Indian creations, the three presidency banks came into existence either as a result of the compulsions of imperial finance or by the felt needs of local European commerce and were not imposed from outside in an arbitrary manner to modernise India's economy. Their evolution was, however, shaped by ideas culled from similar developments in Europe and England, and was influenced by changes occurring in the structure of both the local trading environment and those in the relations of the Indian economy to the economy of Europe and the global economic framework. The three banks were governed by royal charters, which were revised from time to time. Each charter provided for a share capital, four-fifth of which were privately subscribed and the rest owned by the provincial government. The members of the board of directors, which managed the affairs of each bank, were mostly proprietary directors representing the large European managing agency houses in India. The rest were government nominees, invariably civil servants, one of whom was elected as the president of the board.
Objectives of Study
Thus the basic objectives of this study are following: 1. To find out the Preferences of the investors for Asset Management Company. 2. To know the Preferences for the portfolios. 3. To know why one has invested or not invested in SBI Mutual fund. 4. To find out the most preferred channel. 5. To find out what should do to boost Mutual Fund Industry Scope of the study
A big boom has been witnessed in Mutual Fund Industry in resent times. A large number of new players have entered the market and trying to gain market share in this rapidly improving market. The study will help to know the preferences of the customers, which company, portfolio, mode of investment, option for getting return and so on they prefer. This project report may help the company to make further planning and strategy. A big boom has been witnessed in Mutual Fund Industry in resent times. A large number of new players have entered the market and trying to gain market share in this rapidly improving market.
The research was carried on in Bangalore. I had been sent at one of the branch of State Bank of India Bangalore where I completed my Project work. I surveyed on my Project Topic “A study of preferences of the Investors for investment in Mutual Fund” on the visiting customers of the SBI Mico Layout Branch.
The study will help to know the preferences of the customers, which company, portfolio, mode of investment, option for getting return and so on they prefer. This project report may help the company to make further planning and strategy.
R esearch Methodology
This report is based on primary as well secondary data, however primary data collection was given more importance since it is overhearing factor in attitude studies. One of the most important users of research methodology is that it helps in identifying the problem, collecting, analyzing the required information data and providing an alternative solution to the problem .It also helps in collecting the vital information that is required by the top management to assist them for the better decision making both day to day decision and critical ones.
Data Sources
Research is totally based on primary data. Secondary data can be used only for the reference. Research has been done by primary data collection, and primary data has been collected by interacting with various p eople. The seconda ry data has been collected through various journals and websites.
Duration of Study
The study was carried out for a period of 45 Days, from 1 st July to 14th August.
Sampling
The sample was selected of them who are the customers/visitors of State Bank if India, Mico Layout Branch, irrespective of them being investors or not or availing the services or not. It
was also collected through personal visits to persons, by formal and informal talks and through filling up the questionnaire prepared. The data has been analyzed by using mathematical/Statistical tool.
Sample Size
The sample size of my project is limited to 200 people only. Out of which only 120 people had invested in Mutual Fund. Other 80 people did not have invested in Mutual Fund.
Sample Design
Data has been presented with the help of bar graph, pie charts, line graphs etc.
Business
The business of the banks was initially confined to discounting of bills of exchange or other negotiable private securities, keeping cash accounts and receiving deposits and issuing and circulating cash notes. Loans were restricted to Rs.one Lakh and the period of accommodation confined to three months only. The security for such loans was public securities, commonly called Company's Paper, bullion, treasure, plate, jewels, or goods 'not of a perishable nature' and no interest could be charged beyond a rate of twelve per cent. Loans against goods like opium, indigo, salt woollens, cotton, cotton piece goods, mule twist and silk goods were also granted but such finance by way of cash credits gained momentum only from the third decade of the nineteenth century. All commodities, including tea, sugar and jute, which began to be financed later, were either pledged or hypothecated to the bank. Demand promissory notes were signed by the borrower in favour of the guarantor, which
was in turn endorsed to the bank. Lending against shares of the banks or on the mortgage of houses, land or other real property was, however, forbidden. Indians were the principal borrowers against deposit of Company's paper, while the business of discounts on private as well as salary bills was almost the exclusive monopoly of individuals Europeans and their partnership firms. But the main function of the three banks, as far as the government was concerned, was to help the latter raise loans from time to time and also provide a degree of stability to the prices of government securities. First Five Year Plan
In 1951, when the First Five Year Plan was launched, the development of rural India was given the highest priority. The commercial banks of the country including the Imperial Bank of India had till then confined their operations to the urban sector and were not equipped to respond to the emergent needs of economic regeneration of the rural areas.
In order, therefore, to serve the economy in general and the rural sector in particular, the All India Rural Credit Survey Committee recommended the creation of a state-partnered and state- sponsored bank by taking over the Imperial Bank of India, and integrating with it, the former state-owned or state-associate banks. An act was accordingly passed in Parliament in May 1955 and the State Bank of India was constituted on 1 July 1955. More than a quarter of the resources of the Indian banking system thus passed under the direct control of the State.
Later, the State Bank of India (Subsidiary Banks) Act was passed in 1959, enabling the State Bank of India to take over eight former State-associated banks as its subsidiaries (later named Associates).
The State Bank of India was thus born with a new sense of social purpose aided by the 480 offices comprising branches, sub offices and three Local Head Offices inherited from the Imperial Bank. The concept of banking as mere repositories of the community's savings and lenders to creditworthy parties was soon to give way to the concept of purposeful banking sub serving the growing and diversified financial needs of planned economic development. The State Bank of India was destined to act as the pacesetter in this respect and lead the Indian banking system into the exciting field of national development.
Competitors
Competitors and other players in the field
TopPerformingPublicsectorbanks
Andhra Bank Allahabad Bank Dena Bank Vijaya Bank Punjab National Bank
Top Performing Private Sector Banks
Kotak Mahindra Bank Centurion Bank of Punjab
Top performing foreign Banks
Citibank Standard Chartered HSBC Bank ABN AMRO Bank American Express
Chapter-2: Data Reduction & Presentation
The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the initiative of the Government of India and Reserve Bank. Though the growth was slow, but it accelerated from the year 1987 when non-UTI players entered the Industry. In the past decade, Indian mutual fund industry had seen a dramatic improvement, both qualities wise as well as quantity wise. Before, the monopoly of the market had seen an ending phase; the Assets Under Management (AUM) was Rs67 billion. The private sector entry to the fund family raised the Aum to Rs. 470 billion in March 1993 and till April 2004; it reached the height if Rs. 1540 billion. The Mutual Fund Industry is obviously growing at a tremendous space with the mutual fund industry can be broadly put into four phases according to the development of the sector. Each phase is briefly described as under.
First Phase – 1964-87
Unit Trust of India (UTI) was established on 1963 by an Act of Parliament by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. The first scheme launched by UTI was Unit scheme 1964. At the end of 1988 UTI had Rs.6700 crores of assets under management.
Second 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 Canbank 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.
Third Phase – 1993-2003 (Entry of Private Sector Funds)
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. As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1, 21,805 crores.
Fourth Phase – Since Feb 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 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. Consolidation and growth. As at the end of September, 2004, there were 29 funds, which manage assets of Rs.153108 crores under 421 schemes
Categories of Mutual Fund
Mutual Funds Can Be Classified As Follow
Based On Their Structure Open-Ended Funds
Investors can buy and sell the units from the fund, at any point of time.
Close-Ended Funds
These funds raise money from investors only once. Therefore, after the offer period, fresh investments can not be made into the fund. If the fund is listed on a stocks exchange the units can be traded like stocks (E.g., Morgan Stanley Growth Fund). Recently, most of the New Fund Offers of close-ended funds provided liquidity window on a periodic basis such as monthly or weekly. Redemption of units can be made during specified intervals. Therefore, such funds have relatively low liquidity.
Based On Their Investment Objective Equity Funds
These funds invest in equities and equity related instruments. With fluctuating share prices, such funds show volatile performance, even losses. However, short term fluctuations in the market, generally smoothens out in the long term, thereby offering higher returns at relatively lower volatility. At the same time, such funds can yield great capital appreciation as, historically, equities have outperformed all asset classes in the long term. Hence, investment in equity funds should be considered for a period of at least 3-5 years. It can be further classified as:
i) Index funds-
In this case a key stock market index, like BSE Sensex or Nifty is tracked.
Their portfolio mirrors the benchmark index both in terms of composition and individual stock weightages.
ii) Equity diversified funds-
100% of the capital is invested in equities spreading across
different sectors and stocks.
iii) Dividend yield funds-
it is similar to the equity diversified funds except that they invest
in companies offering high dividend yields.
iv) Thematic funds-
Invest 100% of the assets in sectors which are related through some
theme. e.g. -An infrastructure fund invests in power, construction, cements sectors etc.
v) Sector funds-
Invest 100% of the capital in a specific sector. e.g. - A banking sector fund
will invest in banking stocks.
vi) ELSS- Equity Linked Saving Scheme provides tax benefit to the investors.
Balanced Fund
Their investment portfolio includes both debt and equity. As a result, on the risk-return ladder, they fall between equity and debt funds. Balanced funds are the ideal mutual funds vehicle for investors who prefer spreading their risk across various instruments. Following are balanced funds classes:
i) Debt-oriented funds - Investment below 65% in equities.
ii) Equity-oriented funds - Invest at least 65% in equities, remaining in debt.
Debt Fund
They invest only in debt instruments, and are a good option for investors averse to idea of taking risk associated with equities. Therefore, they invest exclusively in fixed-income instruments like bonds, debentures, Government of India securities; and money market instruments such as certificates of deposit (CD), commercial paper (CP) and call money. Put your money into any of these debt funds depending on your investment horizon and needs.
i) Liquid funds- These
funds invest 100% in money market instruments, a large portion
being invested in call money market.
ii) Gilt funds ST-
They invest 100% of their portfolio in government securities of and T-bills.
iii) Floating rate funds -
Invest in short-term debt papers. Floaters invest in debt
instruments which have variable coupon rate.
iv) Arbitrage fund-
They generate income through arbitrage opportunities due to mis- pricing
between cash market and derivatives market. Funds are allocated to equities, derivatives and money markets. Higher proportion (around 75%) is put in money markets, in the absence of arbitrage opportunities.
v) Gilt funds LT-
securities.
They invest 100% of their portfolio in long-term government
vi) Income funds LT-
Typically, such funds invest a major portion of the portfolio in long-
term debt papers.
vii) MIPs-
Monthly Income Plans have an exposure of 70%-90% to debt and an
exposure of 10%-30% to equities.
viii) FMPs-
fixed monthly plans invest in debt papers whose maturity is in line WITH
THAT OF THE FUND.
Investment stradegies
Systematic Investment Plan
under this a fixed sum is invested each month on a fixed
date of a month. Payment is made through post dated cheques or direct debit facilities. The investor gets fewer units when the NAV is high and more units when the NAV is low. This is called as the benefit of Rupee Cost Averaging (RCA).
Systematic Transfer Plan
under this an investor invest in debt oriented fund and give
instructions to transfer a fixed sum, at a fixed interval, to an equity scheme of the same mutual fund.
Systematic Withdrawal Plan
if someone wishes to withdraw from a mutual fund then
he can withdraw a fixed amount each month. Risk V/S.
R eturn
Company Profile and Product Profile
Introduction to SBI Mutual Fund
SBI Fun ds Man agement Pvt . Ltd. is one of the leading fund houses in the country with an investor base of over 4.6 million and over 20 years of rich experience in fund management consistently delivering value to its investors. SBI Funds Management Pvt. Ltd. is a joint venture between 'The State Bank of India' one of India's largest banking enterprises, and Society General Asset Management (France), one of the world's leading fund management companies that manages over US$ 500 Billion worldwide.
Today the fund house manages over Rs 28500 crores of assets and has a diverse profile of investors actively parking their investments across 36 active schemes. In 20 years of operation, the fund has launched 38 schemes and successfully redeemed 15 of them, and in the process, has rewarded our investors with consistent
returns. Schemes
of the Mutual Fund have time after time
outperformed benchmark indices, honored us with 15 awards of performance and have emerged as the preferred investment for millions of investors. The trust reposed on us by over 4.6 million investors is a genuine tribute to our expertise in fund management. SBI Funds Management Pvt. Ltd. serves its vast family of investors through a network of over 130 points of acceptance, 28 Investor Service Centres,46 Investor Service Desks and 56 District Organizers. SBI Mutual is the first bank- sponsored fund to launch an offshore fund – Resurgent India Opportunities Fund. Growth through innovation and stable investment policies is the SBI MF credo.
Products of SBI Mutual Fund
Equity Schemes
The investments of these schemes will predominantly be in the stock markets and endeavour will be to provide investors the opportunity to benefit from the higher returns which stock markets can provide. However they are also exposed to the volatility and attendant risks of stock markets and hence should be chosen only by such investors who have high risk taking capacities and are willing to think long term. Equity Fun ds incl ude diver sifi ed Equi ty Fund s, Sectoral Funds and Index Funds. Diversified Equity Funds invest in various stocks across different sectors while sectoral funds which are specialized Equity Funds restrict their investments only to shares of a particular sector and hence, are riskier than Diversified Equity Funds. Index Funds invest passively only in the stocks of a particular index and the performance of such funds move with the movements of the index.
•
Magnum COMMA Fund
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Magnum Equity Fund
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Magnum Global Fund
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Magnum Index Fund
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Magnum Midcap Fund
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Magnum Multicap Fund
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Magnum Multiplier plus 1993
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Magnum Sectoral Funds Umbrella
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MSFU- Emerging Business Fund
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MSFU- IT Fund
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MSFU- Pharma Fund
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MSFU- Contra Fund
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MSFU- FMCG Fund
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S BI A rb it ra ge O pp or tun itie s F un d •
S BI B lu e c hi p F un d
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SB I Inf rast ru ctur e Fu nd - S erie s I
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S BI M ag nu m Ta xg ai n Sc he me 1 99 3
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SB I ONE I nd ia Fu nd
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SB I TAX ADVANTAG E FUND - S ERIES I
Debt Schemes
Debt Funds invest only in debt instruments such as Corporate Bonds, Government Securities and Money Market instruments either completely avoiding any investments in the stock markets as in Income Funds or Gilt Funds or having a small exposure to equities as in Monthly Income Plans or Children's Plan. Hence they are safer than equity funds. At the same time the expected returns from debt funds would be lower. Such investments are advisable for the risk-averse investor and as a part of the investment portfolio for other investors. •
Magnum Children’s benefit Plan
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Magnum Gilt Fund
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Ma g nu m I nc om e F un d
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Ma gnu m In s ta Cas h F un d
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Magnum Income Fund- Floating Rate Plan
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Magnum Income plus Fund
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Ma g nu m In s ta C ash F un d - Li qu id F lo at er P la n
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Ma g nu m M on t hl y I n co me P la n
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Ma gnum Mon thly I nc ome P la n- Floater
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Ma g nu m N RI I n ve s tm en t F u nd
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S BI P re mie r Li q ui d F un d
Balanced Schemes
Magnum Balanced Fund invests in a mix of equity and debt investments. Hence they are less risky than equity funds, but
at
the
same
time
provide
commensurately lower returns. They provide a good investment opportunity to investors who do not wish to be completely exposed to equity markets, but is looking for higher returns than those provided by debt funds.
Competitors of SBI Mutual Fund
Some of the main competitors of SBI Mutual Fund in Bangalore are as follows:
i.
ICICI Mutual Fund
ii.
Reliance Mutual Fund
iii.
UTI Mutual Fund
iv.
Birla Sun Life Mutual
Fund
vii.
v.
Kotak Mutual Fund
vi.
HDFC Mutual Fund
Sundaram Mutual Fund viii.
LIC Mutual Fund
ix.
Principal
x.
Franklin Templeton
Awards and
Achievements
SBI Mutual Fund (SBIMF) has been the proud recipient of the ICRA Online Award – 8 times, CNBC TV - 18 Crisil Award 2006 - 4 Awards, The Lipper Award (Year 20052006) and most recently with the CNBC TV - 18 Crisil Mutual Fund of the Year Award 2007 and 5 Awards for our schemes.
VISION & MISSION
Vision
Premier Indian financial services group with global perspective, world class standards of the efficiency and professionalism and core institutional values. Retain its position in the country as a pioneer in developing countries. Maximize shareholder value through high sustained earnings per share. An institution with a culture of mutual care and commitment a satisfying and exciting. Work environment and continuous learning opportunity.
Mission
To retain the banks position as the premier Indian financial services. Group with world class standards and significant global business commitment to excellence in customer, shareholder and employee satisfaction and to play a leading role in the expanding and diversifying financial service sector while continuing emphasis on its development banking role.
Business Quality Objective
1. Development of the banking in rural areas. 2. Establishment of the powerful bank.
3. Provide help for agriculture sector. 4. Normal help. Organizational structure
Definition
Formal and informal framework of policies and rules, within which an organization arranges its lines of authority and communications, and allocates rights and duties. Organizational structure determines the manner and extent to which roles, power , and responsibilities are delegated, controlled, and coordinated, and how information flows between levels of management. This structure depends entirely on the organization's objectives and the strategy chosen to achieve them. In a centralized structure, the decision making power is concentrated in the top layer of the management and tight control is exercised over departments and divisions. In a decentralized structure, the decision making power is distributed and the departments and divisions have varying degrees of autonomy. An organization chart illustrates the organizational structure.
Importance of Organizational Structure
Organisation structure involves how a business organizes, categorizes and delegates tasks to achieve a specific goal. A company's organizational structure determines how business decisions are made and implemented at all levels of the business.
Organizational Chart
An organizational chart shows how departments, divisions and various levels of an organization interact with one another. Organizational charts are expressed as a visual illustration or outline. Chain of Command
An important purpose of organizational structure is to identify who's involved in the decision-making process and how those decisions are actualized.
Distribution of Authority
Organizational structure plays a role in determining how a structure distributes authority throughout an organization. Important factors must be addressed for an organization to effectively pursue a goal, such as whether subordinates are involved in the decisionmaking or if that is reserved for a few main authority figures within the departments. Departmentalization
Organizational structure defines how specific tasks and activities are assigned to their functional departments. For example, sale representatives may be grouped within a sales department or division. Span of Control
Span of control defines the number of employees over whom a manager exercises authority.
Types of organisational structure
Different types of Organisation structure can be created on the basis of arrangement of activities. Accordingly, three broad types of structural forms are: · Functional Structure · Divisional Structure, and · Adaptive Structure Functional Structure
When units and sub-units of activities are created in organisation on the basis of functions, it is known as functional structure. Thus, in any industrial organisation, specialised functions like manufacturing marketing, finance and personnel constitute as separate units of the organisation. All activities connected with each such function are placed in the same unit. As the volume of activity increases, sub-units are created at lower levels in each unit and the number of persons under each manager at various levels gets added. This results in the interrelated positions taking the shape of a pyramid.
Divisional Structure
The divisional organisation structure is more suited to every large enterprise particularly those which deal in multiple products to serve more than one distinctive markets. The organisation is then divided into smaller business units which are entrusted with the business
related to different products or different market territories. In other words, independent divisions (product divisions or market division), are created under the overall control of the head office. Each divisional manager is given autonomy to run all functions relating to the product or market segment or regional market. Thus, each division may have a number of supporting functions to undertake. The divisional structure is characterised by decentralisation of authority. Thus, it enables managers to take Decisions promptly and resolve problems appropriate to the respective divisions. It also provides opportunity to the divisional managers to take initiative in matters within their jurisdiction. But such a structure involves heavy financial costs due to the duplication of supporting functional units for the divisions. Moreover, it requires adequate number of capable managers to take charge of the respective divisions and their functional units.
Adaptive Structure
Organisation structures are often designed to cope with the unique nature of undertaking and the situation. This type of structure is known as adaptive structure. There are two types in structures. i) Project Organisation, and ii) Matrix Organisation
Project Organisation:
When an enterprise undertakes any specialised, time-bound work
involving one-time operations for a fairly long period, the project organisation is found most suitable. In this situation the existing organisation creates a special unit so as to engage in a project work without disturbing its regular business. This becomes necessary where it is not possible to cope with the special task or project. Within the existing system, the project may consist of developing a new project, installing a plant, building an office complex, etc.. A
project organisation is headed by a project manager in charge, who holds a middle management rank and reports directly to the chief executive. Other managers and personnel in the project organisation are drawn from the functional departments of the parent organisation. On completion of the project they return to their parent departments.
Matrix Organisation:
This is another type of adaptive structure which aims at combining
the advantages of autonomous project organisation and functional specialisation. In the matrix organisation structure, there are functional departments with specialised personnel who are deputed to work full time in different projects sometimes in more than one project under the overall guidance and direction of project managers. When a project work is completed, the individuals attached to it go back to the irrespective functional department to be assigned again to some other project. This arrangement is found suitable where the organisation is engaged in contractual project activities and there are many project managers, as in a large construction company or engineering firm.
Organisational Structure of SBI
ORGANISATIONAL STRUCTURE
CHAIRMAN
DMD&CFO CORPORATE
DMD&CCO
CENTRE
DMD(I&MA) DMD&CDO CVO DMD(IT)
BUSINESS GROUPS
MD&GE(CB)
MD&GE(NB)
DMD&GE(IB)
DMD&GE(A&S)
Functioning of the department (finance)
The State Bank of India acts as an agent of the Reserve Bank of India and performs the following functions 1. Borrows money The Bank borrows money from the public by accepting deposits
such as current account deposits, fixed deposit and savings deposits.
2.
Lends money
It lends money to merchants and manufacturers for short periods. It
also lends to farmers and co-operative institutions. It lends mostly on the security of easily realizable commodities like rice, wheat, cotton, oil-seeds, cloth, gold and government securities. The Bank can lend against agricultural bills upto a maximum period of fifteen months and in case of other bills upto a maximum period of six months.
3. Banker’s Bank The State Bank of India acts as the banker’s bank. In discharging
this responsibility, the bank provides loans to commercial bank when required and also rediscount their bill. It also acts as the clearing house of the commercial bank.
4. Government’s Bank The State Bank of India also acts as the agent of the Reserve
Bank of India. As an agent, the State Bank of India maintains the treasuries of the State Government. The Bank also manages the debts floated by the State Governments.
5. Remittance The State Bank of India facilitates remittance of money from one place
to another. It also helps in the transfer on the funds of the State and Central Government.
6. Functions as Central Bank The State Bank of India performs the functions of a
Central Bank.
7. Subsidiary functions The State Bank performs various subsidiary services also. It
collects checks, drafts, bill of exchange, dividends interest, salaries and pensions on behalf of its customers. It purchases and sells securities on behalf of its customer. It receives valuables and documents for safe custody and maintains safe deposit vaults.
HRD functions in SBI Bank
I
Staff Meetings
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Staff Meeting aims at group synergy, team building, open culture, family feeling and talent recognition which individually and cumulatively benefit the organizations.
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Goals/Targets set for the unit/Bank is discussed in the monthly Staff Meetings conducted at all branches/units and action plan is drawn in achieving them.
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The forum is being effectively utilized for harmonious functioning of all the branches and administrative units through greater involvement and collective contribution of all staff members.
II Brain Storming Sessions
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This is a technique for generating ideas and suggestions on topics of relevance and also to provide alternate solutions to problems by simulative thinking and imaginative power of cross section of employees.
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Corporate Topics are selected for each quarter and BSS are conducted in administrative offices/ braches on the topic during every quarter.
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Worthy implement able suggestions emanated are circulated for necessary action.
III Study Circle
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Concept of Study Circle aims at self development of employees by kindling the desire to acquire/update knowledge, information and experience.
•
Guest lectures/ Power Point Presentation / Group Discussions, etc are arranged on topics of general interest by inviting experts in the field.
•
Study Circle Meeting are conducted once in two months in administrative offices and once in a quarter in braches
Marketing functions at SBI
The trend in financial marketing is more and more toward micro-marketing. This means the bank tailors its products, services, communications, service levels, and sales to meet the local needs of niche markets. In major cities, markets may vary dramatically from block to block. In other communities, the market may vary by section of town or even county. It is the responsibility of marketing to insure the bank acts in accordance with local needs. From time-to-time, this may involve market research to determine the precise strategy needed. But at a minimum, the marketing function can help tailor the sales and marketing
plan to each market by staying abreast of changing local conditions using input from the bank's personnel. The marketing audit relies heavily on the ideas and needs expressed by bank officers and employees. Frankly, a good idea can come from anywhere within the organization. By talking with tellers, customer service representatives and secretaries on a regular basis in each branch, the bank's marketing department can solicit input and feedback on customer needs without incurring a huge market research bill. And, it can avoid expensive mistakes. A savvy marketing plan in one area can easily fail in another. The same concept also holds true for specialized functions within the bank. Functions such as investments, trust, cash management, mortgage banking, credit cards and others require specialized marketing plans. While these functions may benefit from the bank's overall marketing plan, they frequently target unique markets. Therefore, these functions often require mini-marketing plans of their own. Strengths
•
The growth for SBI in the coming years is likely to be fueled by the following factors:
•
Continued effort to increase low cost deposit would ensure improvement in NIMs and hence earnings.
•
Growing retail & SMEs thrust would lead to higher business growth.
•
Strong economic growth would generate higher demand for funds pursuant to higher corporate demand for credit on account of capacity expansion.
Weakness
The weakness that could ensue to SBI in time to come are as under:
SBI is currently operating at a lowest CAR. Insufficient capital may
•
restrict the growth prospects of the bank going forward. •
Delay in technology upgradation could result in loss of market shares.
•
Management structure.
•
Non-performing asset.
Opportunities
•
Merger of associate banks.
•
Addition of branches.
•
Opportunity to expand in foreign soil.
Threats
•
Stiff competition especially in retail segment could impact retail growth of SBI and hence slowdown in earnings growth.
•
Low down in domestic company would pose a concern over credit off – take thereby impacting earnings growth.
•
Venturing of private banks.
•
Employee strikes.
Ethical Practices And Safety In SBI
Ethics Towards Employees Ethical Code of Conduct
•
•
To provide services in professional, efficient, courteous,diligent and speedy manner. Not to discriminate on the basis of religion, caste, sex,descent or any of them.
•
To be fair and honest in advertisement and marketing.
•
To provide accurate and timely disclosure of terms, costs,rights and liabilities.
•
To comply with all the regulatory requirements.
•
To spread general awareness about potential risks in contracting loans
•
To provide financial advice to the customers.
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Low loan interest rates and high interest rates on deposits.
•
Medical reimbursements, accommodation, insurance, PF,pension, etc.
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Healthy, safe and productive work environment.
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Still unrest in employees. Latest SBI strike!
Ethics Towards Customers
•
•
•
Keep customer information confidential. Notify interest rate changes. Send details for all charges payable by customers.
Ethics Towards Society
A
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Interest free loans for crop production, horticulture and plantation crops etc.
•
Launched ”Gram Nivas Scheme” with focus on the poor for Housing Loans.
•
Contributed in poverty alleviation programme by Micro finance.
Chapter-3: Data Analysis 1. (a) Age distribution of the Investors of Bangalore
Age Group
<= 30
31-35
36-40
41-45
46-50
>50
No. of
12
18
30
24
20
16
35 l a u t u M 30 n i d e t s e v 25 n i s r o t s d e n v u20 n F I
15
30 24
10
5
20
18
16
12
0 <=30
31-35
36-40
41-45
46-50
>50
Age group of the Investors Interpretation:
According to this chart out of 120 Mutual Fund investors of Bangalore the most are in the age group of 36-40 yrs. i.e. 25%, the second most investors are in the age group of 4145yrs i.e. 20% and the least investors are in the age group of below 30 yrs.
(b). Educational Qualification of investors of Bangalore
Educational Qualification
Number of Investors
Graduate/ Post Graduate
88
Under Graduate
25
Others
7
Total
120
6%
23%
71%
Graduate/Post Graduate
Under Graduate
Others
Interpretation:
Out of 120 Mutual Fund investors 71% of the investors in Bangalore are Graduate/Post
Graduate, 23% are Under Graduate and 6% are others (under HSC). c). Occupation of the investors of Bangalore
Occupation
No. of Investors
Govt. Service Pvt. Service Business Agriculture Others
30 45 35 4 6
50
s r o t s e v n I
40
f o . o 30 N
20
45 35
30 10
0 Govt.
Pvt.
Service
Service
Business
Occupation of the
Interpretation:
4
6
Agriculture
Others
customers
In Occupation group out of 120 investors, 38% are Pvt. Employees, 25% are Businessman, 29% are Govt. Employees, 3% are in Agriculture and 5% are in others.
(d). Monthly Family Income of the Investors of Bangalore.
Income Group
No. of Investors
<=10,000 10,001-15,000 15,001-20,000 20,001-30,000 >30,000
5 12 28 43 32
50 45 40 s r o t s 35 e v n I f 30 o . o N 25 43
20
15
32
28
10 12
5 5 0
<=10
10-15
15-20
20-30
> 30
Income Group of the Investorsn (Rs. in Th. )
Interpretation:
In the Income Group of the investors of Bangalore out of 120 investors, 36% investors that is the maximum investors are in the monthly income group Rs20,001 to Rs. 30,000, Second one i.e. 27% investors are in the monthly income group of more than Rs. 30,000 and the minimum investors i.e. 4% are in the monthly income group of below Rs. 10,000.
2. Preference Of Factors While Investing
Factors
(a) Liquidity
(b) Low Risk
(c) High Return
(d) Trust
No. of
40
60
64
36
18 %
20 %
30 % 32 %
Liquidity Low R isk High R eturn
Trust
Interpretation:
Out of 200 People, 32% People prefer to invest where there is High Return, 30% prefer to invest where there is Low Risk, and 20% prefer easy Liquidity and18% prefer Trust.
3. Awareness About Mutual Fund And Its Operations
Response No. of Respondents
Yes 135
No 65
33%
67%
Yes
No
Interpretation:
From the above chart it is inferred that 67% People are aware of Mutual Fund and its operations and 33% are not aware of Mutual Fund and its operations.
4. Source Of Information For Customers About Mutual Fund
Source of information
No. of Respondents
Advertisement Peer Group Bank Financial Advisors
18 25 30 62
70 e
.
d n
s o f o t o p n
N
s e
R
60 50 40 62
30 20
10
18
25
30
0 A
dvertisement Pee r Group Banks
Financial
Advisors S
ource of Inf ormation
Interpretation:
From the above chart it can be inferred that the Financial Advisor is the most important source of information about Mutual Fund. Out of 135 Respondents, 46% know about Mutual fund Through Financial Advisor, 22% through Bank, 19% through Peer Group and 13% through Advertisement.
5. Investors Invested In Mutual Fund
Response
No. of Respondents
YES NO
120 80
Total
200
No
40%
Yes
60%
Interpretation:
Out of 200 People, 60% have invested in Mutual Fund and 40% do not have invested in Mutual Fund.
6. Reason For Not Invested In Mutual Fund
Reason
No. of Respondents
Not Aware Higher Risk Not any Specific Reason
65 5 10
6 % 13 %
81 %
Not Aware Higher R isk Not Any
Interpretation:
Out of 80 people, who have not invested in Mutual Fund, 81% are not aware of Mutual Fund, 13% said there is likely to be higher risk and 6% do not have any specific reason.
8. Investors Invested In Different Assets Management Co. (AMC)
Name of AMC
No. of Investors
SBIMF UTI HDFC Reliance ICICI Prudential Kotak Others
55 75 30 75 56 45 70
Others
70
HDFC
30
C M A f Kotak o e m a NSBIMF
45
55
ICICI
56
Reliance
75
UTI
75 0
20
40
No. of Investors Interpretation:
60
80
In Bangalore most of the Investors preferred UTI and Reliance Mutual Fund. Out of 120 Investors 62.5% have invested in each of them, only 46% have invested in SBIMF, 47% in ICICI Prudential, 37.5% in Kotak and 25% in HDFC.
8. Reason For Invested In SBIMF
Reason Associated with SBI Better Return Agents Advice
No. of Respondents 35 5 15
27 %
64 %
9%
Ass ociated
with SBI
Bett er R eturn
AgentsAdvice
Interpretation:
Out of 55 investors of SBIMF 64% have invested because of its association with Brand
SBI, 27% invested on Agent’s Advice, 9% invested because of better return. 9. Reason For Not Invested In SBIMF
Reason
Not Aware Less Return Agent’s Advice
No. of Respondents
25 18 22
34 % 38
28
%
Not Aware
LessR eturn Agent'sAdvice
Interpretation:
Out of 65 people who have not invested in SBIMF, 38% were not aware with SBIMF, 28% do not have invested due to less return and 34% due to Agent’s Advice.
10. Preference Of Investors For Future Investment In Mutual Fund
Name of AMC
No. of Investors
SBIMF UTI HDFC Reliance ICICI Prudential Kotak Other
76 45 35 82 80 60 75
75
Others
60
K otak
f o e
ICICI Prudential
C m a M N A
80
R eli ance
HDFC UTI
82 35 45
SBIMF
76 0
20
40
60
No. of
Investors
80
10 0
Interpretation:
Out of 120 investors, 68% prefer to invest in Reliance, 67% in ICICI Prudential, 63% in SBIMF, 62.5% in Others, 50% in Kotak, 37.5% in UTI and 29% in HDFC Mutual Fund.
11. Channel Preferred By The Investors For Mutual Fund Investment
Channel No. of Respondents
Financial Advisor 72
Bank 18
AMC 30
25%
15
60%
%
Financial Advisor
Bank
AMC
Interpretation:
Out of 120 Investors 60% preferred to invest through Financial Advisors, 25% through AMC
and 15% through Bank. 12. Mode Of Investment Preferred By The Investors
Mode of Investment No. of Respondents
One time Investment
Systematic Investment Plan (SIP)
78
42
35 %
65 %
One time
Investment SIP
Interpretation:
Out of 120 Investors 65% preferred One time Investment and 35 % Preferred through Systematic Investment Plan.
13. Preferred Portfolios By The Investors
Portfolio
Equity Debt Balanced
No. of Investors
56 20 44
37% 46 %
17 %
Equity
Debt Balance
Interpretation:
From the above graph 46% preferred Equity Portfolio, 37% preferred Balance and 17% preferred Debt portfolio
14. Option For Getting Return Preferred By The Investors
Option
Dividend Payout
No. of Respondents
25
Dividend
Growth
10
85
21 %
8% 71 %
Dividend Payout R einvestment
Dividend
Growth
Interpretation:
From the above graph 71% preferred Growth Option, 21% preferred Dividend Payout and 8% preferred Dividend Reinvestment Option.
15. Preference of Investors Whether To Invest In Sectoral Funds
Response
No. of Respondents
Yes
25
No
95
21%
79%
Yes No
Interpretation:
Out of 120 investors, 79% investors do not prefer to invest in Sectoral Fund because there is maximum risk and 21% prefer to invest in Sectoral Fund.
Chapter-4: Summary and Conclusions
Running a successful Mutual Fund requires complete understanding of the peculiarities of the Indian Stock Market and also the psyche of the small investors. This study has made an attempt to understand the financial behaviour of Mutual Fund investors in connection with the preferences of Brand (AMC), Products, Channels etc. I observed that many of people have fear of Mutual Fund. They think their money will not be secure in Mutual Fund. They need the knowledge of Mutual Fund and its related terms. Many of people do not have invested in mutual fund due to lack of awareness although they have money to invest. As the awareness and income is growing the number of mutual fund investors are also growing.
“Brand” plays important role for the investment. People invest in those Companies where they have faith or they are well known with them. There are many AMCs in Bangalore but only some are performing well due to Brand awareness. Some AMCs are not performing well although some of the schemes of them are giving good return because of not awareness about Brand. Reliance, UTI, SBIMF, ICICI Prudential etc. they are well known Brand, they are performing well and their Assets
Under Management is larger than
others whose Brand name are not well known like Principle, Sunderam, etc. Distribution channels are also important for the investment in mutual fund. Financial Advisors are the most preferred channel for the investment in mutual fund. They can change investors’ mind from one investment option to others. Many of investors directly invest their money through AMC because they do not have to pay entry load. Only those people invest directly who know well about mutual fund and its operations and those have time.
Limitation of the Study
•
Some of the persons were not so responsive.
•
Possibility of error in data collection because many of investors may have not given actual answers of my questionnaire.
•
Sample size is limited to 200 visitors of State Bank of India , Mico Layout Branch, Bangalore out of these only 120 had invested in Mutual Fund.
•
The sample size may not adequately represent the whole market.
•
Some respondents were reluctant to divulge personal information which can affect the validity of all responses.
•
The research is confined to a certain part of Bangalore.
Findings
•
In Bangalore in the Age Group of 36-40 years were more in numbers.
The second most Investors were in the age group of 41-45 years and the least were in the age group of below 30 years.
•
In Bangalore most of the Investors were Graduate or Post Graduate and
below HSC there were very few in numbers.
•
In Occupation group most of the Investors were Govt. employees, the second
most Investors were Private employees and the least were associated with Agriculture.
•
In family Income group, between Rs. 20,001- 30,000 were more in numbers,
the second most were in the Income group of more than Rs.30,000 and the least were in the group of below Rs. 10,000.
•
About all the Respondents had a Saving A/c in Bank, 76% Invested in Fixed
Deposits, Only 60% Respondents invested in Mutual fund.
•
Mostly Respondents preferred High Return while investment, the second
most preferred Low Risk then liquidity and the least preferred Trust.
•
Only 67% Respondents were aware about Mutual fund and its operations
and 33% were not.
•
Among 200 Respondents only 60% had invested in Mutual Fund and 40% did
not have invested in Mutual fund.
•
Out of 80 Respondents 81% were not aware of Mutual Fund, 13% told there
is not any specific reason for not invested in Mutual Fund and 6% told there is likely to be higher risk in mutual fund. •
Most of the Investors had invested in Reliance or UTI Mutual Fund, ICICI
Prudential has also good Brand Position among investors, SBIMF places after ICICI Prudential according to the Respondents.
•
Out of 55 investors of SBIMF 64% have invested due to its association
with the Brand SBI, 27% Invested because of Advisor’s Advice and 9% due to better
return.
•
Most of the investors who did not invested in SBIMF due to not Aware of
SBIMF, the second most due to Agent’s advice and rest due to Less Return.
•
For Future investment the maximum Respondents preferred Reliance Mutual
Fund, the second most preferred ICICI Prudential, SBIMF has been preferred after them.
•
60% Investors preferred to Invest through Financial Advisors, 25% through
AMC (means Direct Investment) and 15% through Bank.
•
65% preferred One Time Investment and 35% preferred SIP out of both type
of Mode of Investment.
•
The most preferred Portfolio was Equity, the second most was Balance
(mixture of both equity and debt), and the least preferred Portfolio was Debt portfolio.
•
Maximum Number of Investors Preferred Growth Option for returns, the
second most preferred Dividend Payout and then Dividend Reinvestment.
•
Most of the Investors did not want to invest in Sectoral Fund, only 21%
wanted to invest in Sectoral Fund.
Suggestions and Recommendations
•
The most vital problem spotted is of ignorance. Investors should be made aware
of the benefits. Nobody will invest until and unless he is fully convinced. Investors should be made to realize that ignorance is no longer bliss and what they are losing by not investing.
•
Mutual funds offer a lot of benefit which no other single option could offer.
But most of the people are not even aware of what actually a mutual fund is? They only see it as just another investment option. So the advisors should try to change their mindsets. The advisors should target for more and more young investors. Young investors as well as persons at the height of their career would like to go for advisors due to lack of expertise and time.
•
Mutual Fund Company needs to give the training of the Individual Financial
Advisors about the Fund/Scheme and its objective, because they are the main source to influence the investors.
•
Before making any investment Financial Advisors should first enquire
about the risk tolerance of the investors/customers, their need and time (how long they want to invest). By considering these three things they can take the customers into consideration.
•
Younger people aged under 35 will be a key new customer group into the
future, so making greater efforts with younger customers who show some interest in investing should pay off.
•
Customers with graduate level education are easier to sell to and there is a
large untapped market there. To succeed however, advisors must provide sound advice and high quality.
Systematic Investment Plan (SIP) is one the innovative products launched by Assets Management companies very recently in the industry. SIP is easy for monthly salaried person as it provides the facility of do the investment in EMI. Though most of the prospects and potential investors are not aware about the SIP. There is a large scope for the companies to tap the salaried persons.
References and Bibliography
Questionnaire
A Study Of Preferences Of The Investors For Investment In Mutual Funds.
1. Personal Details:
(a). Name:-
(b). Add: -
Phone:- (c). Age:-
(d). Qualification:-
Graduation/PG
Under Graduate
Others
(e). Occupation. Pl tick (√)
Govt. Ser
Pvt. Ser
Business
Agriculture
Others
(g). What is your monthly family income approximately? Pl tick (√).
Up to
Rs. 10,001 to
Rs. 15,001 to
Rs. 20,001 to
2. While investing your money, which factor will you prefer?
.
Rs. 30,001 and
(a) Li Liquidity
3.
(b) Low Risk
(c) High Return
(d) Trust
Are you aware about Mutual Mutual Funds Funds and and their operations? operations? Pl tick (√).Yes (√).Yes No
4. If yes, how did you know about Mutual Fund?
a. Advertisement
b. Peer Grou
c. Banks
5. Have you ever invested in Mutual Fund? Pl tick (√).
d. Fi F inancial Advisors
Yes
No
6. If not invested in Mutual Fund then why?
(a) Not aware of MF (b) Higher risk (c) Not any specific reason
7. If yes , in which Mutual Fund you have invested? Pl. tick (√). All applicable.
a. SBIMF
b. UTI c. HDFC d. Reliance
e. Kotak
f. Other. s ecif
8. If invested in SBIMF, you do so because (Pl. tick (√), all applicable).
a. SBIMF is associated with State Bank of India. b. The have a record record of ivin ood returns returns ear after after ear. c. A ent’ ent’ Adv Advic icee
9. If NOT invested in SBIMF, you do so because (Pl. tick (√) all applicable).
a. You are not aware of SBIMF. b. SBIMF SBIMF gives less less return return compared compared to the the others. others. c. A ent’ ent’ Adv Advic icee
10. When you plan to invest your money in asset management co. which AMC will you
prefer? prefer?
Assets Management Co. a. SBIMF b. UTI c. Reliance d. HDFC e. Kotak f. ICICI 11. Which Channel will you prefer while investing in Mutual Fund ?
(a) Financial Advisor
(b) Bank
(c) AMC
12. When you invest in Mutual Funds which mode of investment will you prefer? Pl. tick (√).
a. One Time Investment
b. Systematic Investment Plan (SIP)
13. When you want to invest which type of funds would you choose?
a. Having only
b. Having debt equity
c. Only equity
debt portfolio
portfolio
portfolio.
14. How would you like to receive the returns every year? Pl. tick (√).
a. Dividend payout
b. Dividend re-investment
c. Growth in NA
15. Instead of general Mutual Funds, would you like to invest in sectorial funds?
Please tick (√).Yes
No
