Arshi Project

8/2/2019 Arshi Project

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A PROJECT REPORT

ON

To study the level of Non-Performing assets with reference toNagpur district central co-operative bank, (Nagpur)

Submitted to:

Rashtrasant Tukdoji Maharaj Nagpur University, Nagpur.

In partial fulfillment of

Degree of Master of Business Administration

For the academic year 2010-2012Geographical Area: - Nagpur

SUBMITED BY:

Miss. Arshi KhanResearcher

(Enroll no.RTMNU/A8/2755)

Under The Supervision of

Internal Guide External GuideProf. madhu menon Mr. waghmareG.H.R.C.E., Nagpur NDCC bank

DEPARTMENT OF MANAGEMENT STUDIESG. H. RAISONI COLLEGE OF ENGINEERING, NAGPUR

(An Autonomous Institute Under UGC Act 1956 )Digdoh Hills, CRPF Gate No. 3 , Hingana Road , Nagpur


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e14 Declaration

CERTIFICATE

This is to certify that Miss. Arshi khan the students of MBA IInd year of G.H.Raisoni

College of Engineering, Nagpur have completed their Grand Project To study the level

of Non-performing assets with reference to NDCC bank in the year 2010-2012 in

partial fulfillment of Nagpur University requirements for the award of the degree of Master

of Business Administration.

(HOD) PROJECT GUIDE

Dr.K.S.Mukherjee Prof.Madhu Menon

DirectorDr. Preeti Bajaj

G.H.Raisoni College of Engineering


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Declaration

I hereby declare that the project report entitled To study the level of non-

performing assets with reference to Nagpur district central co-operative

bank, Nagpur or any part thereof has not been submitted earlier to any

institution or university for the award of any other diploma or degree, nor

the data has been derived from any thesis of any university.

The source of material & data used in this study have been duly

acknowledged.

Place : Nagpur

Date:


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Acknowledgement

The study is the outcome of the support, guidance and co-operation of several person towhom owe my sincere gratitude.

First and foremost I would like to express my deepest gratitude to the project guide Prof.

Madhu Menon for valuable guidance and constant encouragement in conducting the studyand completing the work.

I am privileged to extend my sincere thanks to Dr. Kaustubh Mukhrjee, head of departmentfor his inspiration and guidance rendered to members for necessary support and

information.

The study would be impossible if the respondents employee had not contributed their

valuable information. I acknowledge and thank the entire respondents for their valuablecontribution.

I thank god for giving me good health and motivation and my family who is source of all

my inspiration and strength in completing the work.

Lastly, I express a word of gratitude to one and all that helped me in one other way to

complete my study.

ARSHI KHAN

GHRCE, NAGPUR


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INDEX

SR. NO. TITLE PAGE.NO

1. Executive summary 62. Company profile

3. Significance of study

4. What is bank and banking?

5. What is RBI?

6. Co-operative banks in India

7. Objective of the study

8. Introduction of NPA

9. Guidelines for classification ofNPA

10. Management of NPA

11. Importance of recovery of NPA

12. Steps taken by govt. forrecovering NPA

13. Research and methodology

14. Data collection

15. Scope of study

16. Benefits of study17. Limitations of study

18. Credit appraisal policy atNDCC bank

19. NPA norms of NDCCB


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Executive summary


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EXECUTIVE SUMMARY

A project has been prepared under the title of To study the level of Non Performing Assetswith reference to NDCC bank, nagpur.

First of all the information regarding the co-operative banking is given. In that

various facts regarding the co-operative bank is being provided.after that the structure f

bank is given. Also the various types of non performing assets. The brief introduction of

non performing assets is given. Then the objective of doing the project is mentioned. In this

the definition

Then Various benefits, objective, limitation etc. Regarding NPA are mentioned. Then a

analysis of data is made. After that analysis comes. At the last me find Conclusion &Suggestion. In this part first of all the details about the non performing assets by me is

given.

INTRODUCTION OF PROJECT :


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My objective of study is to research about the financial analysis of non performing assets and to understand the performing assets and non performing assets and

to detect the discrepancies of existing recovery process ofNagpur District Central Co-

Operative Bank. In order to minimize the events of defaults that lead to non performingassets.

As an investor (depositors) or creditors point of view NPA of any co-operative,nationalized or private bank is an important thing in study of the financial position of a

bank. If NPA is greater than the PA, then it would create a problem or can cause failure of

a bank in near future. So from a safety point of view it is very necessary to study NPA of

any bank. I selected to do research about the financial analysis of NDCC BANK in whichmy main focus is an NPA of the bank because from last ten years, a no. of co-operative

banks are being failure due to high NPA ratios. So it is very important for success of any

bank to maintain PA and having less or zero NPA.

SIGNIFICANCE OF THE STUDY:-

Co-operative banks play very important role in providing banking services tocommon man in their area of co-operation. A small depositor or a small borrower feels

comfortable in dealing with the local staff of co operative bank than to the staff of

nationalized banks and private sector banks. If co-operative banks go in liquidationdue to abnormal increase of NPA not only customers and staff members of that

particular co-operative bank will suffer but all other co-operative banks will also get a

major setback. Leading to severe damage to the reputation of entire co-operativesector which is very important for the balance of economic development of ourcountry.

Banking is the life blood of Indian economy. Banking has three types of sectors,which provide finance to different sectors i.e. private sector, public sector and cooperative

sector.

The co-operative banking sector in India plays an important role in expanding

rural economy as well as banking structure and its services to the last man of the

society. The co-operative banking structure has developed very fast in India but still it

lags in so many things like ideal liquidity position due to NPA of customer as well asstaff, modernization of banking structure etc.

The NPA impact on the performance of the bank in which it reduces its interestincome, the net worth of the bank, demoralized the staff, hardens Capital Risk

Adequacy Ratio which also restricts recycling of fund and hinders the desirable yield.

Looking to the situation of banks it is desirable to take effective measures to reduce theNPAs as low as possible. Not only reduction but up gradation of quality of


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such assets would also be desirable for improvement.

Managing these Non performing assets is required in order to protect the interest ofShareholders, depositors as well as increase the credit worthiness of bank. It is also

advisable to increase the profitability by making the provision as well as expansion

plan. NPA should be reduced for sustaining the economic growth, to increase thewelfare of employees, to maintain reputation of the banks as well as to create job

opportunities for future generation.


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CHAPTER: 1

INTRODUCTION OF

NDCC BANK


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INTRODUCTION OF NDCC BANK:

NDCCbank stands for Nagpur district central co-operative bank. The NDCC

bank was started in 1911. And has successfully completed its 100 years of century in

2010.NDCC bank have total 86 branches. NDCC Bank has total 554 no. of employee

working in its banks.

In April 2002, because of serious scam, as per Maharashtra sahakari sanstha

provision of 1960 act (a)(3), the director committee was suspended, in may 2002, thereon

there is a

On 27-07-2009 Mr. S.N Kadam was appointed as district deputy administrator at

shakari sanstha, Nagpur, he is currently looking after the banking management and

administration.

Because of that scam the bank has to suffer a loss of 121.11 crore in 2002-2003,

due to this the net worth of bank had decreased badly and the bank came under the B.R act

of 1949 under 11[1].

Under the supervision and guidance of Mr. S.N Kadam, the administration and

employee unit worked tough and hard. In 2006-2007 without taking any financial help

from anyone they have started getting profit in their banking transactions. It helped in

improving the financial position of NDCC bank. At that time, the bank by fulfilling all the

needs of finance to the farmer as well as to other customers has made goodwill and a

positive mark of a NDCC bank in their customers mind.


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BRANCHES OF NDCC BANK

DISTRICT BRANCH NAME

NAGPUR 1. Main branch

2. Mahal3. Ganeshpeth

4. Dhanyaganj

5. Panchpaoli

6. Hanuman nagar

7. Ram nagar

8. Dhantoli

9. Zilla parishad

10.Gandhi bagh

11.Kalamna market

12.Jaripatka

13.Shakkardara14.Takli

15.Fetri

16.Vaai

17.Hudkeshwar

KAMTHI 18.Kamthi19.Butibori

20.Peth

21.Vihirgaon

22.Vadoda

23.Dighori station

24.Koradi25.Kanholi bara

26.Hingna

27.Gumgaon

28.Kaodas

29.Takadgath

30.Mohgaon zilpi

31.Adegaon

RAMTEK 32.Ramtek33.Paoni

34.Devlapar

35.MansarPARSIVNI 36.Parsivni

37.Kanhan

38.Nave gaon khairi

MAODA 39.Maoda40.Tarsa

41.Aroli

42.Khaat


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43.Dhanla

44.Marodi

45.Chacher

46.Revrad

KATOL 47.Katol

48.Kondhali49.Reghora

50.Yenwa

51.Paradsinga

52.Metpanjra

53.Murti

NARKHED 54.Narkhed55.Mohad

56.Jalalkheda

57.Savargaon

58.Pipla

59.Lohari saonga60.Thadi paoni

61.Belona

62.Mendhala

SAONER 63.Saoner64.Patansaongi

65.Khapa

66.Bade gaon

67.Kelvad

68.Nandagomukh

69.Khaperkheda

KALMESHWAR70.Kalmeshwar

71.Mohpa

72.Dhapewada

73.Kohli

UMRED 74.Umred75.Sirsi

76.Bela

77.Panch gaon

78.Makardhokda

79.Bamni

80.Shedeshwar

BHEWAPUR81.Bhewapur

82.Nand

83.Javdi

84.Besur

KUHI 85.Kuhi86.Beltur

87.Mandhar

88.ghothangaon


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e14 Organization structure

DEFINITION OF BANK

An organization, usually a corporation, chartered by a state or federal government,

which does most or all of the following: receives demand deposits and time deposits,

honors instruments drawn on them, and pays interest on them; discounts notes, makes

loans, and invests in securities; collects checks, drafts, and notes; certifies depositor'schecks; and issues drafts and cashier's checks.

DEFINITION OF BANKING

In general terms, The business activity of accepting and safeguarding money

owned by other individuals and entities, and then lending out this money in order to earn a

profit So we can say that Banking is a company, which transacts the business of banking.

The Banking Regulations Acts defines the business as banking by stating the essentialfunction of a banker.

The term banking is defined as Accepting for the purpose of leading orinvestment, deposits of money from the public, repayable on demand or otherwise andwithdrawal by cheque, draft, order or otherwise.

HISTORY OF BANKING IN INDIA

Without a sound and effective banking system in India it cannot have a healthy

economy. The banking system of India should not only be hassle free but it should be ableto meet new challenges posed by the technology and any other external and internal

factors.

For the past three decades India's banking system has several outstanding

achievements to its credit. The most striking is its extensive reach. It is no longer confined

to only metropolitans or cosmopolitans in India. In fact, Indian banking system has reachedeven to the remote corners of the


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country. This is one of the main reasons of India's growth process. The government's

regular policy for Indian bank since 1969 has paid rich dividends with the nationalization

of 14 major private banks of India.Not long ago, an account holder had to wait for hours at the bank counters for

getting a draft or for withdrawing his own money. Today, he has a choice. Gone are days

when the most efficient bank transferred money from one branch to other in two days. Nowit is simple as instant messaging or dials a pizza. Money has become the order of the day.

The first bank in India, though conservative, was established in 1786. From 1786till today, the journey of Indian Banking System can be segregated into three distinct

phases. They are as mentioned below:

Early phase from 1786 to 1969 of Indian Banks.

Nationalization of Indian Banks and up to 1991 prior to Indian banking

sector Reforms.

New phase of Indian Banking System with the advent of Indian Financial &

Banking Sector Reforms after 1991To make this write-up more explanatory, we

divide scenario in Phase I, Phase II and Phase III

PHASE I

The General Bank of India was set up in the year 1786. Next were Bank of

Hindustan and Bengal Bank. The East India Company established Bank of Bengal (1809),Bank of Bombay (1840) and Bank of Madras (1843) as independent units and called it

Presidency Banks. These three banks were amalgamated in 1920 and Imperial Bank of

India was established which started as private shareholders banks, mostly Europeans

shareholders.

In 1865 Allahabad Bank was established and first time exclusively by Indians,

Punjab National Bank Ltd. was set up in 1894 with headquarters at Lahore. Between 1906and 1913, Bank of India, Central Bank of India, Bank of Baroda, Canara Bank, IndianBank, and Bank of Mysore were set up.

Reserve Bank of India came in 1935. During the first phase the growth was very slow and

banks alsoexperienced periodic failures between 1913 and 1948. There were approximately 1100

banks, mostly small. To streamline the functioning and activities of commercial banks, the

Government of India came up with The Banking Companies Act, 1949 which was later


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changed to Banking Regulation Act 1949 as per amending Act of 1965 (Act No. 23 of

1965). Reserve Bank of India was vested with extensive powers for the supervision of

banking in India as the Central Banking Authority.

PHASE II

Government took major steps in this Indian Banking Sector Reform after

independence. In 1955, it nationalized Imperial Bank of India with extensive banking

facilities on a large scale especially in rural and semi-urban areas. It formed State Bank of

India to act as the principal agent of RBI and to handle banking transactions of the Unionand State Governments all over the country. Seven banks forming subsidiary of State Bank

of India was nationalized in 1960 on 19th July, 1969, major process of nationalization was

carried out. It was the effort of the then City Minister of India, Mrs. Indira Gandhi. 14

major commercial banks in the country were nationalized. Second phase of nationalizationIndian Banking Sector Reform was carried out in 1980 with seven more banks. This step

brought 80% of thebanking segment in India under Government ownership.

The following are the steps taken by the Government of India to Regulate Banking

Institutions in the Country:

1949: Enactment of Banking Regulation Act.

1955: Nationalization of State Bank of India.

1959: Nationalization of SBI subsidiaries.

1961: Insurance cover extended to deposits.

1969: Nationalization of 14 major banks.

1971: Creation of credit guarantee corporation.

1975: Creation of regional rural banks.

1980: Nationalization of seven banks with deposits over 200 crore.

Banking in the sunshine of Government ownership gave the public implicit faith and

immense confidence about the sustainability of these institutions.


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PHASE III

This phase has introduced many more products and facilities in the banking sectorin its reforms measure. In 1991, under the chairmanship of M Narasimham, a committee

was set up by his name which worked for the liberalization of banking practices. The

country is flooded with foreign banks and their ATM stations. Efforts are being put to givea satisfactory service to customers. Phone banking and net banking is introduced. The

entire system became more convenient and swift. Time is given more importance than

money. The financial system of India has shown a great deal of resilience. It is sheltered

from any crisis triggered by any external macroeconomics shock as other East AsianCountries suffered. This is all due to a flexible exchange rate regime, the foreign reserves

are high, the capital account is not yet fully convertible, and banks and their customers

have limited foreign exchange exposure.

RESERVE BANK OF INDIA (RBI)

The central bank of the country is the Reserve Bank of India (RBI). It was

established in April 1935 with a share capital of Rs. 5 crores on the basis of therecommendations of the Hilton Young Commission. The share capital was divided into

shares of Rs. 100 each fully paid which was entirely owned by private shareholders in thebeginning. The Government held shares of nominal value of Rs. 2, 20,000Reserve Bank of India was nationalized in the year 1949. The general

superintendence and direction of the Bank is entrusted to Central Board of Directors of 20

members, the Governor and four Deputy Governors, one Government official from theMinistry of Finance, ten nominated Directors by the Government to give representation to

important elements in the economic life of the country, and four nominated Directors by

the Central Government to represent the four local Boards with the headquarters atMumbai, Kolkata, Chennai and New Delhi. Local Boards consist of five members each

Central Government appointed for a term of four years to represent territorial and

economic interests and the interests of co-operative and indigenous banks.

The Reserve Bank of India Act, 1934 was commenced on April 1, 1935. The Act,1934 (II of 1934) provides the statutory basis of the functioning of the Bank.

The Bank was constituted for the need of following:

To regulate the issue of banknotes to maintain reserves with a view to securing monetary

stability and


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To operate the credit and currency system of the country to its advantage

RBIS REGULATION TO NPA:-

In order to ensure transparency in the borrowers accounts and to reflect actualhealth of banks in their balance sheets RBI introduced regulations relating to NPA, the

most important 4 aspects are as follows:

a) Suspended Interest Account:

it means an account where previously accrued but uncollected interest or loans or

advances required placing on non-accrual status is reserved out of income of the bank.

A separate account is opened in the name of suspended interest account, the

uncollected interest amount transfer to this account.

b) Classification Of Loan Or Advances:-

As per the RBIS directive, bank should classify all loans and advances in the

following categories:

1. Standard:

These are loans which do not have any problem and less risky.

2. Substandard :

These are assets which comes under the category of NPA for a period of less

than 12 month

3. Doubtful:

These are NPA which are exceeding 12 months

4. Loss:

These are the NPA which are identified as unreliable by internal inspector of

bank or auditor or by RBI.

CO-OPERATIVE BANKS

The Co operative banks in India started functioning almost 100 years ago. The

Cooperative bank is an important constituent of the Indian Financial System, judging by

the role assigned to co operative, the expectations the co operative is supposed to fulfill,


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their number, and the number of offices the cooperative bank operate. Though the co

operative movement originated in the West, but the importance of such banks have

assumed in India is rarely paralleled anywhere else in the world. The cooperative banks inIndia play an important role even today in rural financing. The business of cooperative

bank in the urban areas also has increased phenomenally in recent years due to the sharp

increase in the number of primary co-operative banks.

Co operative Banks in India are registered under the Co-operative Societies Act. The

cooperative bank is also regulated by the RBI. They are governed by the BankingRegulations Act 1949 and Banking Laws (Co-operative Societies) Act, 1965.

Co-operative banks in india

In India, there is a plethora of banks providing almost all services that an individual

requires. But most of the banks that people use are either private (which makes up a major

chunk of the numbers) or nationalized banks. However, there is another sector of banks that

is used by a large number of the middle class sections of the society --co-operative banks.

Co-operative banks are small-sized units organized in the co-operative sector which

operate both in urban and non-urban centers. These banks are traditionally centered aroundcommunities, localities and work place groups and they essentially lend to small borrowers

and businesses.

The term Urban Co-operative Banks (UCBs), though not formally defined, refers to

primary cooperative banks located in urban and semi-urban areas. These banks, until 1996,

could only lend for non-agricultural purposes.

However, today this limitation is no longer prevalent. While the co-operative banksin rural areas mainly finance agricultural based activities including farming, cattle, milk,

hatchery, personal finance, et cetera, along with some small scale industries and self-employment driven activities, the co-operative banks in urban areas mainly finance various

categories of people for self-employment, industries, small scale units and home finance.

Co operative Banks in India are registered under the Co-operative Societies Act.

The cooperative bank is also regulated by the RBI. They are governed by the Banking

Regulations Act 1949 and Banking Laws (Co-operative Societies) Act, 1965.

These banks provide most services such as savings and current accounts, safe

deposit lockers, loan or mortgages to private and business customers. For middle classusers, for whom a bank is where they can save their money, facilities like Internet banking

or phone banking is not very important.

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

Primary Urban Co-op Banks

Primary Agricultural Credit Societies


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District Central Co-op Banks

State Co-operative Banks

Land Development Banks

Co-operative banks function on the basis of 'no-profit no-loss'. Co-operative banks, as a

principle, do not pursue the goal of profit maximization. Therefore, these banks do notfocus on offering more than the basic banking services. So, co-operative banks finance

small borrowers in industrial and trade sectors, besides professional and salary classes.

Some cooperative banks in India are more forward than many of the state and privatesector banks.

According to NAFCUB (National Federation of Urban Co-operative Banks andCredit Societies Ltd), the total deposits and lending of cooperative banks in India is much

more than old private sector banks and also some new public sector banks.

This exponential growth of co-operative banks in India is attributed mainly to their muchbetter local reach, personal interaction with customers, and their ability to catch the nerve

of the local clientele.

Although they are not better than private banks in terms of facilities provided, theirinterest rates are definitely competitive. For example, the interest rates on auto loans are

anywhere less than 5%-7% than that offered by private banks.

However, unlike private banks, the documentation process is lengthy if not

stringent and getting a loan approved quickly is rather difficult. The criteria for getting a

loan from a UCB are less stringent than for a loan from a commercial bank. For instance,when taking an education loan, it does not matter whether the course you are going for is

recognized or not.

So, it makes better sense to bank with UCBs today, what with the rates some offer

being the best in the industry. And with the risk of a run minimized, they are almost on an

equal footing with commercial banks when it comes to vying for your attention.

However, to get a loan, you have to be a member of the SCB: own its shares worth

at least 2.5 per cent of the loan amount, or a maximum of Rs. 25,000. This amount earns a

return of 12-20 per cent.

A word of caution: Only approach those co-operative banks which have a good history.

Since, a lot of co-operative banks have political interests, providing social help is not one

of their priorities sometimes..

FACTS ABOUT CO-OPERATIVE BANK:


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Some cooperative banks in India are more forward than many of the state and

private sector banks.

According to NAFCUB the total deposits & lendings of Cooperative Banks in India

is much more than Old Private Sector Banks & also the New Private Sector Banks.

This exponential growth of Co operative Banks in India is attributed mainly to their muchbetter local reach, personal interaction with customers, their ability to catch the nerve of the

local clientele.

Co-Operative Bank Finance in Rural Area As Under:


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Co-Operative Banks Finance in Urban Area As Under:

Objective Of The Study:-

The present study To study the level of non-performing assets with reference to

NDCC bank. has been initiated to fulfill certain objectives which are as follows:

Main objective:-

To study the NPA characteristics and effect on the financial position of the banks.

Secondary objective:-

1. To study %tage of non-performing assets in NDCC bank.


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2. To find out the reason of High level of NPA.

3. To Study the steps taken to reduce the level of NPA.

4. To study the credit appraisal procedure of the bank.

5. To study and understand the concept of NPA

6. To analyze the banks policy to recover the level of NPA

7. To understand the effect of NPA on banks profit and its prestige

8. To understand how corrective measures taken by bank for NPA

9. To understand RBIS rules and regulations for the control of NPA


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INTRODUCTION

OF

NON-PERFORMING

ASSETS


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Introduction Of The Topic:-

NON-PERFORMING ASSETS

Non-performing assets also called as non-performing loans are loans, made by abank or a finance company, on which repayment or interest payment are not being made on

time.

An asset which ceases to generate income of the bank is called non-performingassets. An asset becomes non-performing when it ceases to generate income for the bank.

Earlier an asset was considered as non performing asset based on the concept of past due.

DEFINITION

A NPA was defined as credit in respect of which interest and/or installment of principal hasremained past due for a specific period of time. The specific period of time was reduced

in a phased manner as under:

Year ended March,31 Specific Period

1997-4 Quarters

1998-3 Quarters

1999-2 Quarters

20010-1 Quarters

An amount is considered as past due, when it remains outstanding for 30 days beyond the

due date. However, with effect from March31, 2001 the past due concept has been

dispensed with and the period is reckoned from the due date of payment.


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Norms For Identification of NPA:

With an intense to use the international best practice and to ensure greater transparency,90 days overdue norms are accepted for the identification of NPA from the year ended

March 31, 2004.

With effect from March 31, 2004, a NPA shall be counted on loan and advances where:

A. Interest and / or installment of principal remain overdue for a period of more

than 90 days in respect of a term loan.

B. The account remains out of order for a period of 90 days, in respect of an

Overdraft/ Cash Credit (OD/CC).

C. The bill remains overdue for a period of more than 90 days in the case of bills

purchased and discounted.

D. Any amount to be received remains overdue for a period of more than 90 days inrespect of any other accounts.

Tier 2 bank like all the Urban Co-Operative Banks (UCBs) other than the Tier 1

bank i.e. Unit bank shall classify their loan accounts as NPA as per 90 day norm as

hitherto.


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DEFINITION AS PER THE CLASSIFICATION OF ASSETS:

Reserve Bank of India (RBI) has issued guidelines on provisioning requirement

with respect to bank advances. In terms of these guidelines, bank advances are mainly

classified in to following categories:


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READY RECKONER FOR ASSET CLASSIFICATION

NO. WHEN DATE OF NPA FALLS? ASSET

CLASSIFICATION ASON 31-3-2011

1 Between 1-10-2010 & 31-3-2011 Sub-standard assets

2 Between 1-10-2009 & 31-3-2010 Doubtful up to 1 year

3 Between 1-10-2007 & 31-3-2006 Doubtful asset of more

than 3 year

4 On or before 30-09-2007 Doubtful assets of more

than 3 years

5 No NPA date Loss assets

6 No security or salvage value security is less

than 5%

7 Chance of realization of dues from all

available sources is practically negligible or

zero

8 Account has been identified by the bank or

internal/external auditor of RBI inspector asloss an asset, which has not been written off.


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GUIDELINES FOR CLASSIFICATION OF ASSETS

The guidelines are as follows

1. BASIC CONSIDERATION:

In simple terms the classification of assets should be done by considering the well

defined credit weaknesses & extent of dependence on collateral security for realization of

dues.

In accounts where there is a potential threat to recovery on account and existence of

other factor such as fraud committed by borrowers it will not be prudent for bank to

classify that account first as sub-standard and then as doubtful. Such account should bestraight away classified as doubtful asset or loss asset, as appropriate, irrespective of the

period for which it has remained as NPA.

2. ADVANCES GRANTED UNDER REHABILITATION PACKAGES:

Banks are not permitted to do classification of any advances in respect of whichthe term have been re-negotiated unless the package of re-negotiated terms has worked

satisfactory for a period of one year. A similar relaxation is also made in respect of SSI

units which are identified as sick by banks themselves and where rehabilitation packagesprograms have been drawn by the banks themselves or under consortium arrangements.

3. INTERNAL SYSTEM FOR CLASSIFICATION OF ASSETS AS NPA:

Banks should establish appropriate internal systems to eliminate the tendency todelay or postpone the identification of NPAs, especially in respect of high value accounts.

The banks may fix a minimum cut-off point to decide what would constitute a high value

account depending upon their respective business levels. The cut-off point should be valid


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for the entire accounting year. Responsibility and validation level for proper assets

classification may be fixed by bank.

The system should ensure that doubts in asset classification due to any reason are

settled through specified internal channels with in one month from the date on which the

account would have been classified as NPA as per extant guidelines.

INCOME RECOGNITION POLICY

According to the act of 1st April, 1992 the income recognition policy is as

follows The policy of income recognition has to be objective and based on the record of

recovery. Income from non-performing assets is not recognized on accrual basis but is

booked as income only when it is actually received. Therefore, banks should not take to

income account interest on non-performing assets on accrual basis.

However, interest on advances against term deposits, NSCs, IVPs, KVPs, and Life

policies may be taken to income account on the due date, provided adequate margin is

available in the accounts.

Fees and commissions earned by the banks as a result of re-negotiations or

rescheduling of outstanding debt should be recognized on an accrual basis over the period

of time covered by the re-negotiated or rescheduled extension of credit.

If Government guaranteed advances becomes overdue and there by NPA, the

interest on such advances should not be taken to income account unless the interest has

been realized.

PROVISIONING NORMS

According to the norms the provisions should be made on the non-performing

assets on the basis of classification of assets as we have already discussed.

Taking in to account this provisioning norms the banks have to make provision on

different assets like Loss Assets, Doubtful Assets and Standard Assets as below :->

( | ). LOSS ASSETS


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The entire assets should be written off after obtaining necessary approval from the

competent authority and as per the provisions act of co-operative society Act. If the assets

are permitted to remain in the books for any reason, 100% of the outstanding should beprovided for.

If expected salvage value of the loss asset is negligible then 100% provision should bemade on it.

( || ). SUB-STANDARD ASSETS

A general provision of 10% on the total outstanding should be made on theadvances given.

( ||| ). DOUBTFUL ASSETS

On doubtful assets provision is made from 20% to 100% as per the period of asset.

The table below shows the provision on doubtful assets.

Period for which the advance has Provision Requirement remained in doubtfulcategory Up to one year 20% One to Three year 30% - 50% as on March 31, 2007 More

than Three year - 60% as on March 31, 2008

( | ) Outstanding NPA as on March 31,2007 - 75% as on March 31, 2009 - 100% as on

March 31, 2010

( || ) Advances classified as doubtful for more than three years on or after April1, -100% 2007

( |V ). STANDARD ASSETS

From the year ended March 31, 2000, the banks should make a general provision of

a minimum of 0.25% on the standard assets. However, Tier 2 banks are required to dohigher provisioning on standard assets as under:-

A. General provisioning requirement is 0.40% from the present level of 0.25%. But incase

of agriculture or in SME investors the provisioning rate is required to be 0.25%.


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( V| ). HIGHER PROVISIONS

There is no objection if the banks create bad and doubtful debts reserve beyond the

specified limits on their own or if provided in the respective State Co-operative Societies

Acts.

MANAGEMENT OF NPA

It is very necessary for bank to keep the level of NPA as low as possible. Because

NPA is one kind of obstacle in the success of bank so, for that the management of NPA in

bank is necessary. And this management can be done by following way:

1.Framing reasonably well documented loan policy and rules.

2. Sound credit appraisal on well-settled banking norms.

3. Emphasizing reduction in Gross NPAs rather then Net NPAs

4. Pasting of sale notice/ wall posters on the house pledged as security.

5. Recovery effort starts from the month of default itself. Prompt legal action should be

taken.

6. Position of overdue accounts is reviewed on a weekly basis to arrest slippage of fresh

account to NPA.

7. Half yearly balance confirmation certificates are obtained from the borrowers regularly.

8. A committee is constituted at Head Office, to review irregular accounts.

9. Due to lower credit risk and consequent higher profitability, greater encouragement is

given to small borrowers.

10. Recovery competition system is extended among the staff members. The recovering

highest amount is felicitated.


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11. Adopting the system of market intelligence for deciding the credibility of the borrowers

12. Creation of a separate Recovery Department with Special Recovery Officer

appointed by the RCS

RECOVERY OF NPA

IMPORTANCE OF RECOVERY:

1. Increase in the income of bank.

2. Increase in the trust of share holder in bank.

3. Level of NPAreduces as the recovery done.

4. Decrease in provisioning requirements.

Steps Taken By Government For Recovering NPA:

1. SECURITIZATION ACT

---- Now this act is also applicable to all Urban Co-Operative Banks. According to this actBank can take direct possession of the movable and immovable property mortgages against

loans and sell out the same for such recovery, without depending on legal process in the

court.

2. Maharashtra state has also by amending under co-op soc, act empower co-op bank toappoint their staff as recovery officer on getting order from the board of nominees.

Above both act are benefited to bank for the recovery of NPA.


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Research Design:-

. Here the research design is exploratory which helps me to explore the NPA

problem of bank.

Research Methodology:

Research is a one kind of process to get knowledge about some topic. Research is done sothat systematic analysis can be done and problem can also be solved.

Research Instrument:

As a research instrument I have taken guidance from the of NDCC bank and also

my faculty of college.

Research Problem:

NPA always affect the profit of bank and also the prestige of bank. So here the research

problem is to identify the causes for the NPA and to identify the action plan to reduce the

NPA.

Source of Data Collection:-

The study focuses on entire condition of non performing assets of NDCC bank. As

its an exploratory type of Research, there is no dependence on primary data.

Secondary Sources:-

Secondary data are taken from


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Annual reports (Balance Sheets, Profit & Loss Accounts) of the NDCC bank,

Internal circulated matter from RBI,

RBI S guidelines,

Trend & Progress reports of RBI,

Co-operative journals, Co-operative diary and from the web sites available on net.

SCOPE OF THE STUDY:-

The study is mostly related to Personal and business loans provided by the NDCC

bank.

This study enables to improve knowledge about the banking sector, specifically on

account of NPAs. This study also enables the banks to know its actual position on NPA management

in last three years.

Limitations of the study:-

The following are the major limitations of the present study:

a) Since the primary data & secondary data used in this work are collected from the

personnel of NDCC bank and published annual reports of respective bank respectively,they have inherited limitations.

b) The limitations of tools and techniques applied for the analysis are inherent in thepresent study.

d) lack of information otherwise useful for a deeper study, due to the RBI restrictions on

disclosure of data on part of higher officials.

In spite of all these limitations this study throws light on the important challengingproblems of the NDCC bank.

BENEFITS FROM THE STUDY


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It helps me to know more about NPA and the situation of NPA in bank.

It helps me to know the strategies adopted by banks to reduce the NPA level and to

understand the NPA provisions norms in bank.

CHAPTER

NAGPUR DISTRICT

CENTRAL CO. BANK

&

NON-PERFORMING

ASSETS


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CREDIT APPRAISAL POLICY AT NDCC BANK

INTRODUCTION

At the time of registration of bank, Loan rules were framed and approved by the

NDCC bank ,nagpur. Thereafter with the approval of Board, loan rules were changed

considering guidelines issued by RBI from time to time. Now in view to increasing branch

network in numbers of geographically also, one common document viz. Appraisal policy is

framed.

POLICY ON PRE-SANCTION

1. Application for loan should be in standardized form as devised by the bank.

2. Branch to collect all the papers/information/documents as suggested in the respective

application form.

3. Branch to visit the borrowers office/factory/residence and to satisfy themselves before

recommending any loan to higher authority and to keep record of such visit.

4. If applicant maintains loan/current/saving account with any other bank/financial

institutions, branch to verify such account statement and to satisfy them.

5. Branch to ascertain the promptness of applicant in making payment of Power

bill/Property Tax/LIC Premium/Existing loan interest or installment, before recommending

the proposal to higher authority.

APPRAISAL

A. WORKING CAPITAL FACILITY

1. Working capital requirement to be assessed properly considering past performance,

holding period for debtors as also for inventory at various level, sales, etc

2. Working capital facilities beyond Rs. 5 lacs should not be considered in the form of

overdraft.


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3. Margin for CC against stock be 30% and for receivables 50%.

B. TERM FINANCE

1. Term loan limit to be arrived @ 25% margin in respect of Machinery/Equipment and

Vehicles while 50% against land & building, electrification, furniture fixtures.

2. Sources for margin money to be ascertained.

3. Repayment capacity, considering existing earning to be ascertained.

4. Moratorium period to be fixed considering time required going in for commercial

production.

C. GENERAL

1. Credit facilities should not exceed segment wise, individual as also group exposures.

2. In case of switch over from other bank, branch to obtain credit information report from

the concerned bank.

3. In case of existing borrower/group borrower, branch to satisfy themselves about their

dealing with the bank.

EXPOSURE

As per the RBI guidelines per party exposure is restricted to 15% of share capital

and Free Reserves and group exposures it is 40%. RBI has given liberty to recalculate theexposure on the basis of profitability of September half. However irrespective of these it is

restricted at lower level i.e. Rs.1.55 crore for individual and Rs.3.50 crores for group.

#SANCTIONING AUTHORITY


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1. AGM

Rs.1.00 lac for all types of fresh loan except staff loan and Rs.2.00 lacs for renewal

2. CEO

Rs.2.00 lacs for all types of fresh loan except staff housing loan and Rs.4.00 lacs for

renewal

3. COE

Committee of executives comprising of all the executives shall have authority to grant all

type of fresh loan up to Rs.15.00 lacs except loan against FDR/LIC/GOVT. security and

staff housing loan as also renewal of all working capital facilities irrespective of limit.

4. Chairman/Vice Chairman/Founder Chairman

Loan against FDR/LIC/GOVT. security and any adhoc request.

5. LOAN COMMITTEE

All types of loans to single borrower up to Rs.77.50 lacs and Rs.1.75 crores for group

borrower.

6. BOARD

All types of loan within exposure ceiling for individual and group borrower.

# DISBURSAL FORMALITIES

A. WORKING CAPITAL FACILITY

1. Fresh/additional limit against stock to be released only after party obtains adequate

insurance for stock and submit stock/book debts statement.

2. In case of new unit, working capital facility to be released, only after the unit starts

commercial production.


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B. TERM FINANCE

1. So far as possible, disbursement to be made by direct payment to seller.

2. At every time of disbursement, matching contribution to be made by the borrower.

3. Immediately after disbursement, branch to follow up insurance policy, receipt for

payment made, invoice etc

C. GENERAL

1. Disbursement to be made only after complying with all the terms and conditions ofsanction, complete documentation and obtaining disbursal authority.

2. In case of Private Ltd. Company, charge with ROC to be registered immediately on

disbursal of credit facility.

3. Before disbursal branch to ensure that borrowers/guarantors become member of the

bank.

POST SANCTION

A. TERM FINANCE

1. On installation of machineries branch to inspect the unit and to ensure that machineries

as per sanction is received & place the inspection report on record.

2. At least twice a year, branch to inspect the unit to ensure that machineries financed by

the bank are in running condition.

B. WORKING CAPITAL


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1. No finance to be considered against inter-firm receivable and for the receivables of more

than 90 days.

2. Drawing power to be arrived at regularly every month on the basis of stock

statement/book debt statement submitted by the party.

3. Branch to ensure that receipt and payment through CC/OD accounts represent genuine

business transactions.

4. Branch to carry out inspection of the unit at least on quarterly basis.

Renewal of working capital facility

1. Personal balance sheet of proprietor/partner/directors is also to be obtained.

2. Branch to submit the renewal papers along with memorandum for renewal to higher

authority for renewal, with its comments on performance with the bank, financial

performance viz. sales, profit etc

3. If financial performance does not justify the limit at current level, branch to persuade the

party to reduce the limit.

4. Where the accounts are statutorily required to be audited, branch to obtain audited

accounts at the time of renewal.

Npa Norms Of NDCC Bank

CLASSIFICATION:


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Doubtful Asset-Categories

NORMS CATEGORY

Overdue above 3 years and upto 4 years

D1

Overdue over 4 years, but not exceeding 6 years

D2

Overdue exceeding 6 years

D3

Loss Asset:

Loss assets are those assets (loans)

o Which as considered as unrealizable


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They include overdue loans in cases

o Where decrees or execution petition have been time barred

o Where document are lost

o Where no other legal proof is available to claim the debt

Loss assets are those assets:

Where the members and their sureties are declared as insolvent or have died leaving

no tangible assets.

Where the members have left the area of operation of the society, leaving no

property and their sureties have also no means to pay dues.

Where the loan is fictitious.

Where amount cannot be recovered (as in case of liquidated society).

PROVISIONING NORMS:

Asset category Provision to be made

(% of outstanding in

particular category)

Standard assets 0.25%

Substandard assets 10.00%

Doubtful- unsecured 100.00%

Doubtful-secured-D1 20.00%



Loss assets 100.00%

Loans exempted from NPA:


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Advances granted against-

o Term deposit

o National saving certificate(NSC)

o Kisan vikas patra(KVP)

o Indra vikas patra(IVP)

o Life policies, staff loan- are exempted from NPA norms

Treated as standard assets and provision of 0.25% should be made.

In the case of loan issued under the back-end subsidy-scheme provision is to be

made net of subsidy amount.

RECOVERY POLICY AT NDCC BANK

BANKS POLICY:

At present they are making recovery but procedure for the same is not documented

in the form of policy. Although the bank is committed to collection/recovery of its dues but

the dignity of and respect for the customer is central to their recovery policy. The policy is

framed on the principal of courtesy, fair treatment and persuasion.

GUIDELINES FOR BRANCH/RECOVERY STAFF:

All the branches of NDCC bank have to follow the following guidelines

1. Branch should continuously inform the borrower about the due date of repayment

schedule. Recovery efforts should starts from the first month of default itself.

2. Position of overdue account to be reviewed on the monthly basis to arrest slippage of

fresh accounts to NPA category.


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3. If the branch does not get response from the borrower for paying the amount, they have

to visit the unit and meet with the borrower. During visit to customers place for collectionof dues, decency and decorum would be maintained and customers privacy would berespected as far as practicable.

4. If the branch does not get any favorable response, during personal visit, they shouldwrite a notice letter to borrower.

5. If borrower still behaves irresponsible, they should meet the guarantor and ask guarantor

to peruse the borrower. Guarantor must be informed about legal complication to arise if

borrower fails to repay the dues.

6. On failure of all the recovery steps, branch to contact Area office/Control centre.

7. Area office/Control centre to call the borrower along with guarantor and try to find outthe reason for overdue. If borrower is in genuine difficulty, problem should be resolved in a

mutually acceptable and in an orderly manner.

8. If party behaves indifferent, legal actions must be initiated. In such case prompt legal

action and seizure action should be taken. Preference to be given for steps under

Securitization Act rather than go for filling a case in the court of Board of Nominees.

9. Reasonable notice would be given before Repossession of Security and its realization,

unless the borrower is about to dispose of/remove the whole or any part of the security

from the locality where it ordinarily remained or by whom it is used or caused to beremained or used, as the case may be, at the time of creation of security.

10. The aim of possession under Securitization or State co-op. Act will be to recover thedues and will not be aimed at whimsical deprivation of the property. The bank shall resort

to repossession of the security only when the collection/recovery of dues is not

forthcoming in spite of request made and the policy for repossession shall be in accordancewith the terms and conditions of the loan documents and with in the legal framework. The

policy should be fair and transparent in repossess, in valuation and realization of security.


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ANALYSISOF

DATA


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Year wise npa at NDCC bank

YEAR 2007 (RS. IN LACS)

Details Amount %of Total

STANDARD ASSETS 5912.6791.90084

SUB-STANDARD ASSETS 189.752.949291

DOUBTFUL ASSETS 316.694.922324

LOSS ASSETS 14.64 0.22755

TOTAL 6433.75 100


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STANDARD ASSETS 6923.74 93.95

SUB-STANDARD ASSETS 143.60 1.95

DOUBTFUL ASSETS 291.00 3.95


TOTAL 7369.18 100


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TOTAL 7707.72 100


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TOTAL 7093.63 100


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TOTAL 10340.26 100


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SEGMENT WISE CLASSIFICATION OF NPA

Segments 2005 2006 2007

No.ofA/C

Amount No.ofA/C

Amount No.ofA/C

Amount

Total

advances

NPA Total

advances

NPA Total

advances

NPA

Retail trade 267 752.63 17.69 248 641.90 20.21 343 802.03 76.81Small

business

31 46.48 4.38 25 44.17 20.15 122 88.02 50.93


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Small scale

ind

582 4021.55 210.74 642 3832.29 44.88 975 6323.86 180.86

Construction

& repairs

246 323.43 21.02 231 343.86 2.70 345 459.76 22.43

Agriculture 2 3.72 0.00 0 0.00 0.00 517 115.64 012

Small road &transportation

10 5.23 0.00 0 0.00 0.00 34 8.18 1.90

Professional 84 89.81 5.00 2 7.33 0.00 80 72.52 3.10

Education 2 10.71 0.00 8 3041 0.00 3 7.26 0.00Other priority

sector

0 0.00 0.00 55 41.82 3.47 326 68.05 16.42

Other non-priority sector

375 2454.16 177.26 285 2178.85 134.41 310 2394.94 186.20

Total 1599 7707.72 436.09 1496 7093.63 225.82 3055 10340.26 538.77

RATIO ANALYSIS

To analyze the NPA situation in bank and from that to know about the banks credit

appraisal system and level of risk in bank I have done the ratio analysis. Ratio analysis isthe tool which will help us to do financial analysis of bank. Some names of ratio are as

follows:

1. GROSS NPA RATIO.

2. NET NPA RATIO.


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3. PROBLEM ASSETS RATIO.

4. SHAREHOLDERS RISK RATIO.

5. PROVISION RATIO.

6. SUB-STANDARD ASSETS RATIO.

7. DOUBTFUL ASSETS RATIO.

8. LOSS ASSETS RATIO.

1. GROSS NPA RATIO

Gross NPA is the sum of the total assets which are classified as the NPA by bank at

the end of every year. Gross NPA is the ratio of Gross NPA to Gross Advances. It is

expressed in percentage form.

Gross NPA Ratio = Gross NPA * 100

Gross Advances

ANALYSIS

Gross NPA ratio shows the banks credit appraisal policy. High Gross NPA ratio

Years Gross NPA Gross advances Gross NPA ratio %

(Rs. in lacs)2007 521.08 6433.75 8.10%

2008 445.44 7369.18 6.04%

2009 436.09 7707.72 5.68%2010 225.82 7093.63 3.18%

2011 538.77 10340.26 5.21%


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means bank have liberal appraisal policy and vice-versa.

In NDCC bank this ratio was 8.10% in March-2007 and it has been decreased fromyear 2007 to 2010 from 8.10% to 3.18%. But again in March-2011 this ratio reach at

5.21%.

However it is revels from the chart that banks Gross NPA ratio is continuouslydecreasing which is positive trend for bank and we can say that bank have good appraisal

system.

2. NET NPA RATIO

The Net NPA Ratio is the ratio of net NPA to Net Advances. This ratio shows thedegree of risk in banks portfolio. Net NPA ratio can be obtain by Gross NPA minus theNPA provisions divided by Net advances.

Net NPA Ratio = Net NPA *100Net Advances

Net NPA=gross NPA provision for NPA

Net advances=gross NPA provision for NPA

ANALYSIS

Net NPA ratio shows the degree of risk in portfolio of bank. High net NPA ratio

means banks dont have enough fund to do provision against the Gross NPA.

In NDCC Bank Net NPA ratio was 4.82% in year March-2007 which shows that in thatyear bank had not enough fund for provisions. But after that from March-2008 to March-

2011 Net NPA ratio is 0.00% which shows that bank has now enough provision capacity.

So, here the degree of risk is less.

NDCC bank has done more provision every year which is good at one side but at

other side it also reduces the profit of bank.

Years Net NPA Net advances Net NPA ratio %

(Rs. in lacs)

2007 299.13 6211.80 4.82%2008 0.00 6888.84 0.00%

2009 0.00 7236.74 0.00%

2010 0.00 6622.57 0.00%2011 0.00 9733.62 0.00%


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When all bank will do provision then Net NPA will become zero but if we want to

know the true and fair situation of bank we must consider the Gross NPA of bank.

3. PROBLEM ASSETS RATIO

This ratio is also known as the Gross NPA to Total Assets ratio. This ratio shows

the percentage of risk on the total assets of the bank. High ratio means high risk for bank.

Problem

Problem Assets Ratio = Gross NPA *100Total Assets

ANALYSIS

This ratio shows the percentage of risk on the assets of bank. It shows the level of risk on

banks assets. High ratio shows the high risk on liquidity.

In NDCC Bank this ratio was 3.89% in March-2007 and after that it has been decreased

from 3.89% to 1.21% in March-2010. But again it increase to 2.23% in March- 2011.

This ratio is continuously decreasing in bank except in March-2011. But overall this ratio is

good for bank which indicates the level of risk is low in bank.

Years Gross NPA Total assets Problem assets ratio

%(Rs. in lacs)

2007 521.08 13381.91 3.89%

2008 445.44 15935.97 2.80%

2009 436.09 16337.35 2.69%2010 225.82 18675.05 1.21%

2011 538.77 24202.77 2.23%


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4. SHAREHOLDERS RISK RATIO

It is the ratio of Net NPA to Total capital and reserve of bank.

Shareholders risk Ratio = Net NPA *100Total Capital & Reserves

ANALYSIS

This ratio shows the degree of risk with share holders investment. High ratio

means high ratio with the investment.

In NDCC Bank this ratio was 16.68% in year March-2007 which shows that in that

year risk on share holders investment was quite high but after that this ratio is 0.00% up to

year March-2011, which shows that Bank have enough capacity for provision and the riskon investment is nil.

As we know that this ratio is 0.00% show the risk is nil but on the other side

because of more provision the profit will decrease and the shareholder will get less

dividends.

Years Net NPA Total capital &

reserves

Shareholders risk

ratio %

(Rs. in lacs)2007 299.13 1793.76 16.68%

2008 0.00 2075.06 0.00%

2009 0.00 2262.39 0.00%

2010 0.00 2551.64 0.00%2011 0.00 3014.58 0.00%


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5. PROVISION RATIO

Provisions are to be made against the Gross NPA of bank. As bank make provision

for NPA it directly affects the profit of bank. This ratio shows the relation of total provision

to Gross NPA.

Provision Ratio = Total Provision *100

Gross NPA

ANALYSIS

Provision ratio shows the degree of provision that is made against the Gross NPA

of bank. As bank made the provision it directly affect the profit of bank and also the

dividend payout ratio of bank too.

If Provision ratio is less then it means that bank has make under provision and if

provision is more then it means that it is over provision.

In NDCC Bank they have made 42.59% provision in March-2007 which shows that it was

under provision but after that in March-2008 and March-2009 it is 107.83% and 108%

respectively which indicate that provision was nearer to total amount of Gross NPA but in

March-2010 the provision ratio reach at 208.59% which indicate that it is the very over

provision. And again in March-2011 it is 112.60% which is fair ratio.

Years Total provision Gross NPA Provision ratio %(Rs. in lacs)

2007 221.95 521.08 42.59%

2008 480.34 445.44 107.83%2009 470.98 436.09 108.00%

2010 471.06 225.82 208.59%

2011 606.64 538.77 112.60%


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NDCC bank should make the provision in the range of 100% to 115%. The provision in

March-2010 which is 208.59% is very high and it is not necessary to do that.

6. SUB-STANDARD ASSETS RATIO

Sub-standard Assets Ratio = Total Sub-standard Assets *100

Gross NPA

ANALYSIS

This ratio shows the percentage of Sub-Standard assets in the Gross NPA of bank. High

Sub-Standard ratio means more proportion of Sub-Standard asset in the Gross NPA.

High ratio shows that there is a chance of recovery of assets is high.

In NDCC bank this ratio was 36.41% in March-2007 which is good for bank and it is

5.42% in year March-2010 which is not good for bank.

As the level of Sub-Standard assets are more the chances of recovery of NPA are high.

7. DOUBTFUL ASSETS RATIO

It is the ratio of total doubtful assets to Gross NPA of the bank.

Years Sub-standard assets Gross NPA Sub-standard assets

ratio %

(Rs. in lacs)

2007 189.75 521.08 36.41%2008 143.60 445.44 32.24%

2009 156.65 436.06 35.92%

2010 12.24 225.82 5.42%2011 120.12 538.77 22.30%


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Doubtful Asset Ratio = Total Doubtful Assets *100

Gross NPA

ANALYSIS

This ratio shows the percentage of Doubtful assets in the Gross NPA of bank. High

Doubtful assets ratio means more proportion of Doubtful asset in the Gross NPA.

More Doubtful assets means Bank should take action through recovery policy to reduce the

level of Doubtful assets.

As the Doubtful assets ratio is high which shows that bank should take quick action to

reduce that level.

This ratio should be less for the bank.

In NDCC Bank this ratio is in between from 60.00% to 65.00% in year from March- 2007

to March-2009 but in March-2010 this ratio reach at 94.58% which indicate that bank must

take some necessary action to recover it. And again in March-2011 this ratio decrease to

48.03% which is good for bank.

8. LOSS ASSETS RATIO

It is the ratio of Total loss assets to Gross NPA of bank.

Loss Assets Ratio = Total loss Assets *100

Gross NPA

Years Total doubtful assets Gross NPA Doubtful assets ratio

%

(Rs. in lacs)

2007 316.69 521.08 60.78%

2008 291.00 445.44 65.33%2009 378.40 436.09 63.84%

2010 231.58 225.82 94.58%

2011 258.80 538.77 48.03%


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ANALYSIS

This ratio shows the percentage of loss assets in the Gross NPA of bank. High loss

assets ratio means more proportion of loss asset in the Gross NPA.

This should be less in bank. The high ratio indicates that bank has more fraudulent

account and it is bad for bank. The bank must take necessary action to reduce the level of

loss assets.

In NDCC Bank this ratio is 2.81% in March-2007 and from it reach at 0.00% in the

year March-2010. This ratio is decreasing in bank which is good for bank but again in

March -2011 this ratio reaches at 29.67% which is the very high increase and it is very bad

for bank

Hence, bank should take some action to reduce the level of loss assets from the total

NPA.

FINDINGS FROM RATIO:

From ratio I am able to find the following findings

1.The Gross NPA ratio of bank is 8.10% in the year 2007 after then it reaches to 5.21% in

Years Total loss assets Gross NPA loss assets ratio %

(Rs. in lacs)2007 14.64 521.08 2.81%

2008 10.84 445.44 2.43%

2009 1.04 436.09 0.24%

2010 0.00 225.82 0.00%2011 159.85 538.77 29.67%


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the year 2011. Hence, the idle gross NPA ratio is 5.00% and bank have 5.21%. So, we can

say that banks financial condition is good.

2. Banks Net NPA ratio is 4.82% in the year 2007 and from 2008 to 2011 it remains

0.00% which is positive for bank.

3. The Problem assets ratio was 3.89% in the year 2007 which was the highest ratio and

from that year it is decrease to 1.21% in the year 2010 which is good for bank. And this

ratio is 2.23% in the year 2011.

4. Provision ratio for the year 2007 is 42.59% which show that there was under provision in

that year but in year 2011 this ratio is 112.60% which shows that bank have enough profit

for the provision.

5. It will be considered good if the Sub-standard assets ratio is high. For City bank thisratio is 36.41% in the year 2007 which is good but it reaches to 5.42% in the year 2010

which is very bad for banks health.

6. Doubtful assets ratio should be low for the good health of bank and in City bank this

ratio is 94.58% in the year 2010 which is very bad but in year 2011 this ratio decrease to


7. Loss assets ratio should be zero and bank have 0.00% in the year 2010 which is good but

in year 2011 this ratio reaches to 29.67% which is very rapid change within one year. And

it is also bad for bank.

CLASSIFICATION OF TOTAL NPA:

Years 2007 2008 2009 2010 2011

(Rs. In lacs)

Sub-standard 189.76 143.60 156.65 12.24 120.12


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assets

Doubtful

assets

316.69 291.00 278.40 213.58 258.80

Loss assets 14.64 10.84 1.04 0.00 159.85

Total 521.09 445.44 436.09 225.82 538.77

CLASSIFICATION OF TOTAL ADVANCES

Years 2007 2008 2009 2010 2011

(Rs. In lacs)

Total

NPA

521.08 445.44 436.09 225.82 538.77

Standard 5912.67 6923.74 7266.63 6867.81 9801.49

PERCENTAGE

Years


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assets

Total

advances

6433.75 7369.18 7707.72 7093.63 10340.26

Rs.

In

lacs

Years


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CONCLUSIONS

&SUGGESIONS


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CONCLUSION

Now, as we know that NON-PERFORMING ASSETS is like a black spot on

diamond. They affect the profit of bank and also the financial health of bank. This NPA

have number of effects on banks working.

During my training in bank I gathered as much as possible information about NPA

from bank and on the basis my experience I conclude the following points:

NDCC banks NPA level is decreasing year by year which good for bank.

In year 2011 NDCC bank own NPA is very low but because of merger with Barodaindustrial co-op bank the level of NPA was increase.

The Gross NPA ratio of bank is 8.10% in the year 2007 after then it reaches to

5.21% in the year 2011. Hence, the idle gross NPA ratio is 5.00% and bank have

5.21%. So, we can say that banks financial condition is good.

Banks Net NPA ratio is 4.82% in the year 2007 and from 2008 to 2011 it remains


Loss assets ratio should be zero and bank have 0.00% in the year 2010 which is

good but in year 2011 this ratio reaches to 29.67% which is very rapid change with

in a one year. And it is also bad for bank.

NDCC Bank has sound credit appraisal system and also sound recovery policy.

NDCC Banks NPA level is decreasing year by year and because of that NDCC

Bank is being considered a positive image in the minds of its customers.

Hence in present time the position of NPA in bank is much better then the pastposition. In year 1997 in India the Gross NPA was 15.7% but now it is 3.00% in the

year 2007. This is very favorable to Indian economy and also banking sector of

India.

Governments act and also the Narsimhan committee on NPA are very useful to

reduce the level of NPA.


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So, I can conclude that level NPA in any bank is important parameter to analyze the

health of bank.

Suggestions:

1. NDCC banks NPA level is decreasing year by year which good for bank but bank

should follow the recovery policy strictly.

2. In City Co. bank there is no any special recovery department so bank should develop the

department for the fastest recovery of NPA.

3. Bank should motivate the staff to do fast recovery NPA.

4. Bank have more NPA in Small Scale Industry so, they should try to reduce that level of

NPA.


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BIBLIOGRAPHY


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BIBILIOGRAPHY

JOURNALS

Co-Operative Bankers Diary 2008

-by John Dsalve

Annual Report of NDCC Co-Operative Bank

-year, 2003, 2004,2005,2006,2007

Periodical circular and statement of RBI regarding to NPA managing and UCBs

WEBSITES

http://finance.indiamart.com/investment_in_india/banking_in_india.html

http://www.rbi.org.in/Home.aspx

http://www.banknetindia.com/banking/cintro.htm

http://www.investorwords.com/

http://www.indiabankassociation.com/

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