Allahabad Bank

 

Allahabad Bank

Allahabad Bank was founded by a group of Europeans in Allahabad on 24^th April 1865 (154 years ago). Allahabad Bank is a public sector undertaking (PSU) which means that those companies are owned by the union government of India or one of the many state or territorial governments or both. In simple words, Government have the major holds of shares. Allahabad Bank is one of them. S.S. Mallikarjuna Rao is Managing Director and CEO of Allahabad Bank.

Allahabad Bank was a nationalized bank with its headquarters located in Kolkata. India. Until its merger with the Indian Bank, it was the oldest joint stock bank in India. In 2018, Allahabad Bank had over 3245 branches across India.

In June 2018, the bank market capitalization was US $573 million and it ranked 1,882 on the Forbes Global 2000 list. On 30 August 2019, the Finance Minister Nirmala Sitharaman announced merger of Allahabad Bank with Indian Bank. The proposed merger would create the seventh largest public sector bank in the country with assets of ₹8.08 lakh crore. The Union Cabinet approved the merger on 4 March 2020. Indian Bank assumed control of Allahabad Bank on 1 April 2020. 

The government's ownership of Allahabad Bank shrank in October 2002 after the bank engaged in an Initial Public Offering (IPO) of ₹100 million of shares, each with a face value ₹ 10. The IPO reduced the Government's shareholding to 71.16%. Then in April 2005 the bank conducted a second public offering of ₹ 100 million of shares, each with a face value ₹ 10 and selling at a premium of ₹ 72. This offering reduced the Government's ownership to 55.23%.

In June 2006 the bank opened its first office outside India when it opened a representative office in Shenzen, Mainland China. In February 2007, Allahabad Bank opened its first overseas branch, in Hong Kong. In March, the bank's business crossed the ₹ 10 million mark. 

In October 1989, Allahabad Bank acquired United Industrial Bank, Allahabad Bank established AllBank Finance Ltd, a wholly owned Merchant Banking, subsidiary. On July 13, 2019, Allahabad

Bank disclosed that it detected a fraud, worth ₹1,774.82 crore by Bhushan Power & Steel Ltd  (BPSL). 

The bank also detected another fraud of ₹688.27 crore by SEL Manufacturing Ltd., a Ludhianabased textile company on July 17, 2019.

Vision: - To put the Bank on a higher growth path by building a Strong Customer-base through Talent Management, induction of State-of-the-art Technology and through Structural Reorganization.

Mission: - To ensure anywhere and anytime banking for the customer with latest state-of-the-art technology and by developing effective customer centric relationship and to emerge as a worldclass service provider through efficient utilization of Human Resources and product innovation. 

Analysis the Source of Finance of Allahabad Bank

Depository Services and loans: Every bank is setup to accept deposit from general public and to provide long term or short-term loans, in the return they charge interest on loans. This is the main source of finance of every bank. In the year 2019, Allahabad Bank do income depository operations at Rs.0.69 Cr. which has grown 27.78% in comparison to the income earned last year i.e. Rs.0.54 Cr in the year 2018.

Introducing of saving Scheme: - Every bank tries to increase their customer to generate a huge source of finance from their respective customers by encourage them to open account in their bank, so they come up new scheme to attract customers. Following are some scheme which Allahabad bank use: -

❖  AllBank Salaam Savings Account: - The Bank has introduced a new Savings Banks account which specially designed for Indian Soldiers who work in far flung locations of the country to ensure national security. 

 

❖  AllBank Kishore: - This scheme is for Minors in the Age Group of 10-18 years, Bank has introduced AllBank Kishore for educating them the art of ''Saving'' and tenets of financial discipline. The product envisages various benefits like minimum opening amount of Rs.500/- with no average minimum balance requirement.  

 

❖  Capital Gains Accounts Scheme 1988 :- Government of India, Ministry of Finance, Department of Revenue (Central Board of Direct Taxes) formulated a Scheme called the Capital Gains Accounts Scheme,1988” for the tax payers to avail the benefit of exemption from Capital Gains on or before due date of filing return of income Tax.

 Insurance Business: - This is second major source of finance of Allahabad Bank.

➢  Life Insurance: - Allahabad Bank has a corporate agency with M/S Life Insurance Corporation of India and SBI Life Insurance. In year 2019, Income under Life Insurance business witnessed a growth of 49.12% on Y-O-Y (year on year) basis registering an income of Rs.11.81 Cr. But in the year 2018, Rs.7.92 Cr. they can registering an income.

➢  Non-Life Insurance: Allahabad Bank as a corporate agent of M/s. Universal Sompo General Insurance Company Limited, earned revenue of Rs.17.53 crore in the Financial year 2019.

 Mutual Funds: - Allahabad Bank is distributing the Mutual Fund schemes of 6 AMCs i.e. Reliance Nippon AMC, PNB Principal AMC, Kotak Mutual Fund AMC, UTI MF AMC, Franklin Templeton AMC and Essel AMC.

Allahabad Bank earned commission of Rs.53 lacs from distribution of Mutual Fund.

International Banking: - Allahabad Bank has opted for centralization of foreign exchange business through its Forex Processing Cells at Kolkata and Mumbai. The Bank also has a centralized fully equipped Forex dealing room at Integrated Treasury Branch, Mumbai which handles forex transactions in 9 currencies. The Bank is also catering to the needs of Non-Resident Indians through its branches by providing various types of deposit & loan.

Online Trading Account: - Bank is providing Broking facility to the Demat customers of the Bank in association with M/s. Aditya Birla Money Limited. Bank received award from NSDL (National Securities Depository Limited) for opening the maximum number of Demat Accounts under PSU Banks category in the Eastern region.

Shares and Debentures: - Another source of finance is that Allahabad bank raise capital through issues equity shares and long-term debentures. The Bank has equity portfolio stood at Rs.1496.26 crores, which included Rs.940.89 crores of shares received through conversion of Debentures in the financial year 2019.

Comparison of Source of Finance of AU Small Finance Bank and Allahabad Bank

1.)    Allahabad bank has a limit of 1 lakh on deposit per account on payment account; AU Small finance bank do not have limit.  AU Small Finance Banks is for small people. Loan amounts are small and cater to the needs of small borrowers. The accept deposit and make small loans.

2.)    As AU Small Finance Bank having an asset or cash reserve in Reserve Bank of India in FY 2017 (Rs. 1,34,304,000), FY 2018 (RS. 49,21,236,000) and FY 2019 (81,11,424,000) While Allahabad Bank has cash reserve in Reserve Bank of India in FY 2017 (RS.

85,857,980,000), FY 2018 (RS. 92,909,660,000) and FY 2019 (RS. 96,723,216,000).

 

3.)    Allahabad Bank has Market Capital Rs. 34441 Cr. as Current Price of each share is Rs. 7.60. The book value of the share is Rs. 20.75 and face value is Rs. 10 in 2020. While AU Small Finance Bank has Market Capital Rs. 15,097 Cr. as Current Price of each share is Rs. 496.40. The book value of the share is Rs. 65.75 and face value is Rs. 10 in 2020.

 

4.)    AU Small Finance Bank charge interest through loans in ending of financial year 2017 is Rs. 704 Cr., In 2018 Rs. 1,361 Cr. and in 2019 Rs. 2,239. The interest rate of AU Small Finance Bank is 8.65% to 11.10% While Allahabad Bank charge interest through loans in financial year 2017 is Rs. 12,373 Cr., In 2018 is Rs. 11,627 Cr., and in 2019 Rs. 11,354 Cr. The interest rate of Allahabad bank is 12.15% to 12.65%.

 

Conclusion

Based on the study conducted it can be concluded that all bank is seen to be taking lot of initiative in attracting customers, stakeholder, big multinational company, helping them financially. This is act as a major source of finance of both these banks and provide expert support. When required to its nearby business units to either setup or expand its operations. 

Allahabad Bank is a public sector bank, so it has abided by the plans that the Government of India makes and help the GOVT to achieve its targets. Both banks have successfully made a positive contribution in the economy of India. Its profit is gradually increasing. But now I think that due to Covid-19 both Bank profit is going to decrease. AU Small Finance Bank plays a great role in collecting scattered Deposit, loan settlement and International trade, etc. 

AU Small Finance Bank and Allahabad Bank ensures quality service to its customers. For better growth and healthy economic position. I hope that AU Small Finance bank come with newer scheme as a to increase more finance, so that they compete with all others bank not even Allahabad bank.

To keep pace with ever changing uncertain domestic business environment and face the challenges of revised global economic scenario, the bank should be more pro-active and responsive to introduce new marketing strategy to hold the strong position to get a source of finance through abroad. I hope both two Banks do more work for socio-economic development besides their banking business.

As Allahabad Bank merger with Indian Bank. The proposed merger would create the seventh largest public sector bank in the country. So many investors like to invest in these types of bank to earn more profits. AU Small bank already win the trust of marquee investors like International Finance Corporation (IFC), Warburg Pincus (New York-based private equity firm focused on growth investing with offices in the United States), Temasek Holdings (Singaporean holding company. It is owned by the Government of Singapore.), Nomura (is a Japanese financial holding company), SBI MF, Kotak Mahindra MF, etc. These sectors are the major source of finance of AU Small bank.