A Study on Management of Working Capital in Banking Sector - Public and Private

Abstract

In the present era of globalization, liberalization and privatization, management of working capital is of utmost importance. Shifting from conservative approach to aggressive approach is both the need and necessity of modern business. It is seen that the company reduces its working capital to take a greater risk for bigger profits and losses; conversely, if it is interested in improving its liquidity, it increases the level of its working capital. In order to get an adequate working capital a company should maintain a balance between liquidity and profitability. This paper analyses the working capital management by public and private sector banks for the period of 2008 to 2013. For this purpose the financial statements of the banks for the period have been analysed and financial ratios have been computed. The study tries to highlight the major reasons responsible for distress in short term finance of public and private sector banks. It indicates the importance of working capital management in both public and private sector banks and the reason for short term insolvency using T test. It is concluded that banks in public sector as well as in private sector are following the aggressive approach and concentrating on the profit maximization and also short term solvency has not been neglected.