A STUDY ON NPA IN TGMC BANK LIMITED

A STUDY ON NPA IN TGMC BANK LIMITED 2008

INTRODUCTION

A healthy banking system is essential for any economy striving to achieve

good growth and remain in an increasingly global business environment. The

Indian banking system, with one of the largest banking network in the world, has

witnessed a series of reforms over the past few years line deregulation of interest

rates, dilution of the government stake in public sector banks, guideline being

issued for risk management, asset classification and provisioning etc.

Its known fact that the bank and financial institution in Indian face the

problem of swelling non-performing assets (NPAs) and the issue is becoming

more and more unmanageable.

In the changed scenario, it has now become extremely important for Indian

banks to remain competitive for surviving. This kind of rapid growth however led

to strains in the operational efficiency of banks and accumulation of non

performing assets in their loan portfolios.

The origin of the problem of burgeoning NPAs lies in the quality of managing

credit risk by the banks concerned. What is need is having adequate preventive

measures in place namely, fixing pre-sanctioning appraisal responsibility and

having an effective post-disbursement supervision. Banks concerned should

continuously monitor loans to identify account that have potential to become

non-performing

1 SRI SIDDHARTHA INSTITUTE OF MANAGEMENT STUDIES, TUMKUR.


BANKING BACKGROUND

Meaning of a bank:

A bank is an institution, which accepts deposits and lends money.

Functions of bank:

The functions of bank may be divided into two broad categories

* Primary function

* Secondary function

1. Primary function:

* Accepting deposits.

* Leading money or investment.

2. Secondary functions:

* Agency services

* General utility services.

TYPES OF BANK:

RBI has statistical tables related to the bank in India. Banking structure of

the country is broadly composed of commercial banks both scheduled and non-

scheduled, foreign banks and co-operative banks, even through organized

controlled and governed by separate Acts and Rules. They are all engaged in

providing credit to different segment of our economy.



Commercial and foreign banks are engaged in providing credit to the highly

organized industrial and commercial undertakings.

The co-operative banks have assumed the different role of providing

banking facilities on widely extended basis to the disorganized agricultural sector

of the Indian economy.

1. CENTRAL BANKS:

The important functions of the central bank on India-RBI are as follows.

1. To issue currency notes.

2. To regulate and supervise commercial banks and other financial

institutions.

3. To regulate and control money market.

4. To frame credit policy, regulate and control credits.

5. To implements the banking and financial policy of the government of

India.

6. To regulate & control the foreign exchange.

7. To publish monetary and financial indicators.



2. COMMERCIAL BANK:

It can be defined as “A financial institution which accept deposit, draws

cheques, and lends money to commerce industry & society. Commercial bank

borrows money or accepts deposits and lends to those who needs funds for

commercial and industrial purpose. Thus they act as dealers for the need of funds

of the society.

Commercial bank accepts deposits in the from of:

a. Fixed deposits

b. Savings bank account

c. Current account and miscellaneous account as pigmy deposits’ home

safe deposit etc. Deposits are accepted to make advances in the from

of

a. Cash credit

b. Overdraft

c. Loans for short & long periods.

Apart from these full functions they also render a number of services to

their customers such as collection of cheques, bill of exchange, discounting of

bills, handle and promissory notes, Safe custody of valuables, remittance

facilities, payment of insurance premium, payment of electricity bills etc.

commercial banks. They are owned and controlled by central government where

as private sector bank are owned & controlled by the shareholders. Some banks 4 SRI SIDDHARTHA INSTITUTE OF MANAGEMENT STUDIES, TUMKUR.


are functioning in co-operative banks incorporated under co-operative society’s

act of the respective state.

3. INDUSTRIAL BANKS:

These banks provide long-term funds to industrial enterprises. They are

also known as development banks as they provide financial technological and

managerial assistance for the development of industries. They perform the

following functions.

1. Provide long term loan to industrial organization for expansion &

modernization programs.

2. Promotions of new industrial centers by working as under writers.

3. To provide technological guidance in the management of industries.

4. Controlling the affairs of the industrial undertaking by securing

representation on their board of directors.

Till 1947 there were no industrial banks in India. RBI and center

government have taken active part in the setting up of such banks to finance large

medium and small-scale industries. E.g. of Industrial banks are industrial Finance

corporation state finance corporation, industrial credit and Investment

Corporation of India & industrial Development bank etc.



4. EXCHANGE BANK:

These banks undertake the usual banking business but they specialize in

foreign exchange transaction. At present there are 16 exchange banks in India

and they conduct foreign trade transaction. They also render other service

incidental to financing such as collecting and supplying formation about foreign

customers, providing remittance facilities etc. these banks have also entered in

the field of internal trade. They compete with Indian commercial banks in their

specialization the licensing of these is controlled by the Banking regulation Act

1949. RBI controls foreign exchange control regulations & other banking

transactions.

5. RURAL BANKS:

In India, regional rural banks have been setup in backward and rural areas.

Where coverage of commercial and co-operative banking is not well spread. The

purpose of such banks is to finance agriculture, and provide employment to rural

educated youth who possess the requisite orientation to look after the need of the

rural areas. Rural banks try to combine advantages of both co-operative and

commercial banks. The regional rural banks have been included in second



schedule of the RBI act therefore enjoy the same privilege and facilities of the

scheduled banks.

6. AGRICULTURE BANKS:

These banks provide long-term finance to farmers for purchase of tools,

equipments machinery and for permanent improvement of land. In India these

banks were set up to provide loans for the purpose of repayment of loans to

village moneylenders and indigenous bankers. These banks were also known as

land mortgage banks but now emphasis have been shifted to providing long term

loans facilities. In India these banks have been developed in the co-operative

sector.

7. EXIM BANKS:

The export and import bank of India was set up in January 1982 with its

head office in Bombay. If part of normal banking functions are conducted by

there connected with import and export of goods. This bank performs several

other functions for example financing of export out of India and imports into

India, Financing joint ventures in foreign countries financing the import and

export of machinery and equipment lease etc. It also undertakes purchasing

discounting and negotiation of export bills.7 SRI SIDDHARTHA INSTITUTE OF MANAGEMENT STUDIES, TUMKUR.


8. CO-OPERATIVE BANKS:

These banks are formed under the principle of co-operative to provide the

loans to farmers. Small scale industrial concerns, promote in general Self- Help

among the lower and middle-income groups of the society. Services are the base

of such co-operative organization. These banks are helpful to small farmers,

artisans and in mobilizing rural deposits.

PRINCIPLE OF CO-OPERATIVE ORGANISATION:

For clear understanding of the co-operative ideology and to differentiate

from other business enterprises the founding father of co-operative movements

have laid down some finer principles, which are expected to serve as guide posts

for the future development of the co-operative movement. These principles have

considerable significance in the growth of the co-operative movement.

CO-OPERATIVE BANKS AND THEIR FUNCTIONS:



Co-operative bank is a co-operative organization whose main functions are

acceptance of deposits and lending of credit for functional of co-operative banks

these are further sub categorized as:

1. Primary credit societies:

A primary credit society is an association of ten or more persons residing in

particular locality knowing each other intimately and showing interest in welfare

of another. The sources of funds are entrance fees, share capital, reserve funds

deposits from members and non-members etc. primary credit societies function

are as follows.

Granting short and medium loan to members.

Encouraging saving among rural society.

Mobilizing rural savings.

Supplying from input like seeds, fertilizers etc to members

2. Central co-operative banks:

Because of failure of primary credit societies in mobilizing enough

deposits from their members for meeting their requirements, they needed help of

any agency. These central co-operative banks were established to provide re-



finance to the primary credit societies. They supervise and guide the affiliated

primary credit societies. Central co-operative bank functions as follows.

To lend money to the primary credit societies.

Pool the surplus resources of some primary credit societies and

provide it to needy primary credit societies.

Supervise and guide the affiliated primary credit societies.

Raise loans from co-operative banks and lend it to primary credit

societies.

Commercial banking operation.

3. State co-operative banks:

Also know as the apex bank, it controls and co-ordinates the working of all

co-operative credit institutions in the state. It is found in the state capital. Their

funds consist of share capital, reserve fund, deposits from members, local

authorities, general public and reserve bank of India. Its functions are as follows:

To lend funds to the central co-operative bank.

Act as balancing centers between central co-operative banks.

Borrow funds from RBI and lend it to central co-operative bank.

Act as intermediary between the money market and co-operative.



FEATURES OF CO-OPERATIVE BANK:

The important characteristics features of co-operative banks are:

1. Co-operative banks are concerned with the performance of the

banking functions of acceptance of deposits and lending of funds.

2. Co-operative banks are established under the co-operative societies

Act.

3. A co-operative bank is an association of persons, and not of capital.

4. For co-operative banks, their borrowings are linked with their owned

funds in the sense that amount of borrowings by a co-operative bank

is, generally, fixed at certain times.

5. Co-operative banks have a federal structure. In India, short-term co-

operative banks have a three-tier set up, and long term co-operative

banks have two tiers set up.

6. Co-operative banks are democratic institution, in the sense that they

follow the principle of ‘one man, one vote’ in their management.



7. Co-operative banks are based on the principle of mutual help.

8. Thrifts and savings is the essence of the working of co-operative

banks.

9. Personalization of credit is the special feature of co-operative banks.

That is, in co-operative banking, greater emphasis is placed on the

credit-worthiness and character of the borrowing members.

10. For Co-operative banks, the purpose for which credit is given gets

greater importance. Service and not profits is the main motto of co-

operative banks.

11. Co-operative banks at the bottom level depend on honorary

services of members. That is why, the management of the co-

operative banks at the lower rung of ladder is generally costly, but is

insufficient.

12.The rate of interest charged by co-operative banks is generally low.

13.Co-operative banks mainly finance agriculture and allied activities.

14. Co-operative banks are basically rural-oriented.

15. The operations of a co-operative bank are, generally, restricted to a

specified area, say, a village, a district or state.

16. Co-operative banks, generally, declare only limited dividends out of

their profits in accordance with the provisions of the co-operative

societies.



TYPES OF CO-OPERATIVE BANKS:

Co-operative banks are broadly classified into two types i.e

I. Agricultural co-operative banks.

II. Non-agricultural co-operative banks.

Agricultural co-operative banks cover all co-operative agencies or

institutions which meet the short term, medium term financial requirements of

agriculture an allied activities. Agricultural co-operative banks are further sub-

divided into

A. Short term and medium term agricultural

B. Long term agricultural credit institutions.

Non-agricultural co-operative banks refer to all co-operative credit

institutions which finance activities other than agriculture in commercial and 13 SRI SIDDHARTHA INSTITUTE OF MANAGEMENT STUDIES, TUMKUR.


industrial towns and trade centers. They finance salaried employees, artisans and

craftsmen, small traders and small scale and cottage industries. Co-operative

urban banks employees, co-operative credit societies and industrial banks fall

under the category of non agricultural co-operative banks.



STUDY ON NPA:

It’s a known fact that banks and financial institutions in India face the

problem of swelling non-performing assets and the issue is becoming more and

unmanageable. In order to bring the situation under control, the securitization

and construction of financial assets and enforcement of security interest act-2002

was passed by parliament.

As asset is classified as non-performing if dues in the form of principal and

interest are not paid by the borrower for a period of 180 days. However with

effect from March 2004, default status would be given to a borrower if dues are

not paid for 90 days. If any advance or credit facilities granted by bank to a

borrower become non-performing, then the bank will have to treat all the

advance/credit facilities granted to that borrower as non performing without

having any regard to the fact that there many still exist certain advance/credit

facilities having performing status.

Such a huge level of NPAs exits in the India Banking System:

The origin of the problem of burgeoning NPAs lies in the quality of

managing credit risk by the banks concerned. What is needed is having adequate

preventive measure in place namely. Fixing pre sanctioning appraisal

responsibility and having an effective post-disbursement supervision. Banks

concerned should continuously monitor loans to identify accounts that have

potential to become non-performing.



NAPs have become as issue for banks and financial institution:

To start with performance in terms of profitability is a benchmark for any

business enterprise including the banking industry. However, increasing NPAs

have a direct impact on banks profitability as legally banks are not allowed to

book income on such accounts and at the same time banks are forced to make

provision on such assets as per the Reserve Bank of India (RBI) guidelines.

Also, with increasing deposits made by the public in the banking system,

the banking industry cannot afford defaults by borrowers since NPAs affects the

repayment capacity of banks.

Further, Reserve Bank of India (RBI) successfully creates excess liquidity

in the system through various rates cuts and banks fail to utilize this benefit to its

advantage due to the fear of burgeoning non-performing assets.

Credit risk and NPAs

Credit risk management is confused with managing NPAs. However there

is an appreciable difference b/w the two. NPAs are the result of past action whose

effects are realize in the present i.e. they represent credit risk that has already

materialized and default has already taken place.

On the other hand managing credit risk is a much more forward-looking

approach and is mainly concerned with managing the quality of credit. Portfolio



before default takes place. In other words, an attempt is made to avoid possible

default by properly managing credit risk.

Considering the current global recession and unreliable information in financial

statements, there is high credit risk in the banking and lending business.

To create a defense again such an uncertainty, bankers are expected to develop an

effective internal credit risk model for the purpose of credit risk management.

India economy and Non Performing Assets:

Undoubtedly, the world economy gas slowed down, recession is at its

peak, globally stock markets have tumbled and business itself is getting hard to

do. The Indian economy has been much effected due to high fiscal deficit, poor

infrastructure facilities, sticky legally system, cutting of exposures to emerging

markets by FII’s etc,

Further, international rating agencies like, standard and poor have lowered

India’s credit rating to sub-investment grade. Such negative aspects have often

outweighed positives such as increase in forex reserves and manageable inflation

rate.

Under, such a situation, it goes without saying that banks are no exception

and are bound to face the heat of a global down turn. One would be surprised to

known that the banks and financial institution in India hold NPA worth Rs. 1,



10,000 cores; bankers have realized that unless the level of NPA’s is reduced

drastically, they will find it difficult to survive.

Global Developments and NPA’s;

The core banking business is of mobilizing the deposits and utilizing it for

lending to industry. Lending business is generally encouraged because it has the

effect of funds being transferred from the system to productive purposes which

results into economic growth.

Non-performing Assets has emerged since over a decade as an alarming

threat for the banking industry in our country. Sending distressing signals and the

Sustainability and endurability of the affected banks. The positive results of the

chain of measures affected under banking reforms by the Government of India.

And RBI in terms of the two committee reports of its period has been

neutralized by the ill effects of this surging threat. Despite various correctional

steps administered to solve this problem. Concrete results are eluding. It is a

sweeping and all pervasive virus confronted universally on banking and financial

institutions. The severity of the problem is however actually suffered by

nationalized banks, followed by the RBI groups and the all Indian Financial

Institutions.



The deregulation in interest rates, grant of financial autonomy to bank in

the area if credit entry of foreign banks and emergence of new private banks has

made the Banking environment more competitive. While the total share in banks

credit continues to be dominated by Public sector banks, the share of foreign

banks is showing an increasing fraud, with same political hurdles.

A announced in the union budget for 2004-05. it has been decided to give

an option to foreign banks to either operate as branches of their parent banks or

set up subsidiaries.

Meaning of NPA;

An asset is to be treated as NPA when it ceases to generate any income for

the bank and interest or installments remain past due to two or more quarters on

the date of Balance Sheet.

In other words, classifying the advances as Standard Asset, there should

not be more than on quarter installment or interest remaining past due as on the

Balance Sheet date.

Term Loan:

A Term Loan is one where interest and or installment of principle remain

overdue for a period of more than 90 days will be treated as NPA. Thus, an

amount which falls due on 31.12.05 will be 90 days old if unpaid as on 31.03.06.



The requirement is that the over due period should be more than 90 days.

Therefore, such an amount needn’t be classified as NPA. Any amount which had

become payable before 31.12.05 will be NPA as at 31.03.2006 if it remains

unpaid.

Overdraft/ Cash Credit:

An overdraft/Cash credit will become NPA as at 31.03.2006 under the

following circumstances;

a) If the outstanding balance remains continuously in excess of the

sanctioned limit or the drawing power or,

b) If there are no credits continuously for 90 days as on the Balance Sheet

date or the credits are not enough to cover the interest debited during

the same period.

The period from 1st Jan. 2006 is of 90 days. Hence, the above two

requirements will have to be tested for this period of 90 days to determine

whether the account becomes NPA or not as on 31st March 2006.

Bill purchased and discounted:

If the bills remain overdue for a period of more than 90 days, then such

bills would be classified as NPA. As mentioned before the bills purchased and



discontinued before 31st Dec. 2005 if unpaid as at 31st March 2006 will be treated

as NPA.

Others:

Any amount to be received remains overdue for a period of more than 90

days in respect of other accounts.

As per the recent RBI guidelines the overall ceiling for foreign direct

investment in private sector banks has also been enhanced. In the changed

scenario, it has now become extremely important for India banks to remain

competitive for surviving. Universally, there is a more towards consolidation and

convergence. This kind of rapid growth however led to strains in the operational

efficiency of banks and the accumulation of non performing acts in their bank

loan portfolios.

In recent years one factor that has common to all countries facing

economic turmeric has been weak banking system contributing to NPA’s. It has

been contention of many bankers that the Government and supervisory

authorities should only provide a conducive environment for handling, these

situations through appropriate fiscal and monetary policies supported by a sound

regulatory and supervisory framework.

Hence, the immediate concern of the policy makers and practitioners in the

banking industry is the existing mass and or near bad loans that have now called



over the years. The result is the constitution of the committee on banking

reforms.

RBI issued guidelines on income recognition, asset classification and

provision norms compelling the banks to disclose real financial position in their

annual aspects also to take prudent steps to improve their credit portfolios. The

objective should be to reduce the average level of Net NPA’s in all banks to

minimum extent possible say 2% in about 3 years.

Exempted assets:

The following categories of advances are totally exempted from assets

classification income recognition and provisioning

Advances against banks own term deposits including recessing deposits.

National saving certificate.

L.I.C policies.

Indira vikas pathras.

Kissan vikas pathras.

Steps for identification of NPA’s

If the balance on loan outstanding as on 30th June the year under audit less

amount recovered from 1st July to 31st march to year under audit is more



than the sanctioned limit, there is an arrears of interest for more than the

quarters and hence the amount will become NPA.

If the above worked out amount is less than sanctioned limit, then arrears

of installments has to be worked out as follows.

From the balance out standing in the account as on 31st August, of the year

under audit, deduct the remittances made from September 1st to March 31st

of the year under audit.

From the amount of advances deduct the installment amount over due

deduct the installments amounts overdue up to august 31st of the year

under audit if the amount marked out as per above is more then the amount

worked out as then, the account will become NPA.

Management of NPA’s:

The most important facet of risk in India remains credit risk. Banks have

been successful in containing their non-performing assets, despite adoption of 90

day delinquency norm and the over hang problem. Net NPA’s have now fallen to

about just tow percent of net advances. Banks have been able to achieve this by

using treasury profits during the last few ears. Various measures initiated by the

Government, the Reserve Bank and the banks then selves have also facilitated the

recovery and management of NPA’s.



The securitization and reconstruction of Financial Assets and Enforcement

of Security Interest (SARFAESI) Act, 2002 has significantly strengthened the

lender’s ability to enforce its right to collateral.

The Act has also created enabling conditions for asset reconstruction

companies. The corporate debt restructuring (CDR) system has also emerged as a

time bound and transparent mechanism for arriving at a consensual financial

arrangement between the creditor and the borrower.

The enactment of the credit information companies Act, 2005 will also

enable sharing of credit information and progressive formation of credit

information bureaus, which should help in reducing transaction costs of banks in

extending credit to small and medium borrowers.

This should also enable banks to keep the NPA’s levels low, which, in

turn, would improve credit delivery and promote appropriate credit pricing.

Banks, however, need to further strengthen the risk management systems and

enhance further capacity building.



INDUSTRY PROFILE

Banking industry has been facilitating this task to a satisfy level during the

last few decades. But major threat in the Indian Bank Industry is the rising level

of non performing asset which the threat the industry and profit margin in fact the

major task before the Indian banks is to reduce ratio of non-performing assets to

total assets, based upon the new income recognition norms. In this context, the

issuance of these risk management guidelines by the RBI became considerable

significance. It emphasis on the need of a bank to adopt visit management

strategy and to reduce their NPA and in order to improve that business of that

bank.

Bank adopt risk management and strategies and to reduce their NPA and in

order to improve their business the bank would have to provide not only quality

service by adopting newer technologies but also newer service the banks will

have to reap the economic scale and scope in order to cost out and raise their 25 SRI SIDDHARTHA INSTITUTE OF MANAGEMENT STUDIES, TUMKUR.


profitability, the central instrument against NPAs must be bankers themselves

first.

They must have detailed and shared knowledge of the credit characteristic

of they have key borrowers, strategically, this remains largely on informs word of

mouth process, in Indian Banking, many decades ago RBI itself used to collect

the credit information from the Indian Banks and mis-communication it to all

financial institution regulated by it, this practice came to half in 1970’s because

information system became increasingly.

Inadequate in fact of the mass expansion of the banking system till today in

the absence of an adequate, information network, banks about to generate

information flows about major defaulter, even in mutual use.

The effective management of NPA’s single major issue which will decided

the facts of the SBM branch bank in future the periodical change in solving the

problems of NPA by time testes method and future innovative step to reduce the

NPA is in very essential at this juncture.

Hence, this study research has emphasized on the operational efficiency of

the bank in Karnataka State with regard to management of NPA’s potential

strategic it had adopted to meet the challenge in the same area in future. Also the

researcher has tried to suggest some measure which would be helpful to the bank

in effective management of NPA and based on his analysis and findings. Bankers

must have the authority to trim NPA’s through across table settlement and other



discretionary instrument that would facilitate early detention and surgery of loans

that go has these big sized bank may turn out.

Despite the emergence of a number of dynamic private sector banks and

entry by a large number of foreign banks, the biggest banks in India are all in the

public sector, i.e., they are corporatized banks with the Government as the

controlling shareholder. The 27 public sector banks collect over 77% of the

deposits and have over 90% of branches.

While banks in India occasionally provide long-term loans, financing fixed

capital is primarily the responsibility of specialized long term lending institutions

such as the Industrial Finance Corporation of India. Banks typically, provide

short-term working capital to firms.

These loans are given as a credit line with a pre-specified limit and an

interest rate that is set at a few % points higher than prime. The gap between the

interest rate and the prime rate is fixed in advance based on the banks credit

rating and other characteristics but cannot be more than 4%. Credit lines in India

charge interest only on the part that is used up and given that the interest rate is

pre-specified all borrowers should want as large credit line as they could get.

A Year isn’t too long a time when it comes to financial institutions like

banks. Yet, there are plenty of changes we find in banks. There are different

banks like Corporation Bank, HDFC Bank, ICICI Bank, Andhra Bank, Punjab 27 SRI SIDDHARTHA INSTITUTE OF MANAGEMENT STUDIES, TUMKUR.


National Bank, Karur Vysya Bank, Karnataka Bank, State of Bank of Indian and

Bank of Baroda, which have their own importance in the banking industry. The

biggest gainers in terms of jumping places on the list were public sector banks.

Karnataka Bank, for instance, was leading bank in 2004, but this year some other

bank took the place. India Overseas Bank, State Bank of Mysore and Punjab

National Bank are some other banks that stood better rankings.

The rise of India’s public sector banks is but a pointer to the dramatic

changes sweeping through the industry for some years. A growing economy,

greater consumer confidence and appetite for credit, and greater thrust on

technology have helped the more aggressive public sector unit banks not just

grow their business, but drum their balance sheets into shape.

According to the Reserve Bank of India’s banking review of 2004-05,

there was a notable pickup in credit to the commercial sector, and a renewed

demand from industry for investments and a surge in exports. While both

operating profits and net profits grew slowly (-2.2% and 0.9%, respectively

compared to 2.7% and 1.1% in 2003-04) in absolute terms, the banks still made a

lot of money Rs. 20,705 crores in total net profits in the case of our different

banks.



Impressively enough, the Non Performing Assets monster is on the run.

Over the last five years, the industry has halved its bad debts. Bad loans as a

percentage of advances shrank to 2.2% from 2.9% the year before. The industry

focus now is on scaling up both domestically and in markets abroad. Widening

the product and services portfolio, and better using technology to make banking

more accessible and efficient.

Now, the India’s best bank is HDFC bank and Centurion Bank, it had

decided to step back and look at the industry changing contours. With the

possible opening up of the banking sector in 2009 will mean for the competitors.

Banks should use as an opportunity to get their growth strategies in place.

They should grow through mergers and acquisitions. Bankers are rushing

to tap the countries small and medium enterprises.

The fact that it has been growing upwards of 10% annually and that profit

margins here are better than those in corporate lending. Small Medium

enterprises apart, looked at what will soon become a headline-grabbing affair in

the banking industry. Mergers and acquisitions, not the one to make a case for

consolidation in the industry arguing that India needs is not a large number of

small banks but a small number of large banks.

Indeed, underlining the frenetic activity in the sector is the growing

realization that strong and large banks are what the country needs to drive its

economy. Indian banks must be given time to get their act together.



BANK PROFILE

ORIGIN OF TGMC BANK LTD:

Tumkur grain merchant co-operative bank limited, B.H. Road in an urban

co-operative bank is one of the visionary merchant classes of Tumkur.

The TGMC bank was incorporated on 16-09-1963 by registering at

Mysore State co-operative register office with a register No. Of 270 with 275

members & with authorized capital Rs 5 lacks. In the beginning tears, TGMC

bank carried out its banking operation under the guidance of Bangalore gain

merchant co-operative bank limited.



Mr. A.K.A Parshwanath, founder chairman of the TGMC bank. On 02-10-

1963 election was held for board of management & 12 directors were elected.

Bank has made considerable progress since then 1963 there were only 257

member having capitalization of 1, 35,000. Since then, there is considerable

increase of member joining the bank. Now it has 6633 members. Bank celebrated

its silver jubilee on 31-01-1992 & 44th anniversary in 29/09/2007.

TGMC bank is first fully computerized bank in Tumkur. Bank is offers

good services to its customers. Bank is increasing its profit over the year and

recently it has schedule bank status by achieving deposit of Rs. 225 crores.

Deposit though competition & many challenges in financial credit system

in Karnataka when compared to other co-operative bank, RBI have rated the bank

as “A” grade bank.

The reality behind the great success of this bank is good administration of

president Sir. N.R. Jagadish for his best advice, suggestion, and direction. The

Board of Directors and employees have also dedicated for the development of the

bank.

The reality behind the great success of this bank is good administration of

president Sir. N.R. Jagadish for his best advice, suggestion, and direction. The

board of directors and employees have also dedicated for the development of the

bank.



BOARD OF DIRECTORS AT THE TIME OF ESTABLISHMENT. In the

Year 1936;

Sri. A.K.A. Parshwanath – president.

Sri Gubbi Huchappa.

Sri. D.S. Siddappa.

Sri N.R. Jagadish

Directors-P.G. Srinivassetty, T.N. Kempu Honnayya,H.V. Shivradurayya,

G.B. Chidananda, H.N. Thimayya, C.L. Shekharappa and Y.

Chandrashedarappa.

DISTRIBUTION NETWORK/ AREAS OF OPERATION:

The area of operation of is confined to:

1. Tumkur district.

2. Bangalore urban and rural district.

3. Mysore district.

TUMKUR GRAIN MERCHANTS CO-OPERATIVE BANK LIMITED.



HEAD OFFICE:

B.H. Road, Tumkur-572103

Phone: 0813-2255905

Fax: 0816-2257636

Email: [email protected]

RBI License No: UBD: KA: 912:P: 11/11/1987

BRANCHES:

♦ Tumkur Branch:

S.S. Puram branch B.H. Road Tumkur. License No. UBD: GL: 2155. 16/05/1990

J.C. Road Branch J.C. Road, Tumkur License No: UBD: KA: 912P, 20-03-1994

Raghavendra Nagar Branch: Setty hally road License No: UBD: G.G: 49, 28-03-1994

Sadashivanagar Branch, Kunigal road, Tumkur License No: UBD: G.G.L: 49, 28-03-1994

A.P.M.C. Yard Branch, Tumkur License No: UBD: G.G.L. 274, 12-12-1997

♦ Tiptur Branch

Address: Jayadeva Complex, railway station road License No: UBD: G.G.L. 183,13-04-1999


mailto:[email protected]


♦ Sira Branch:

Adders: Hanuman bus complex, N.H. 4, Sira, License No. UBD: G.G.G.L 259, 31-07-1999

♦ Bangalore branches:

Address: No. 2, 11th cross, 4th block, Dr. Rajkumar roadRajajinagar License No: UBD: B.G.B.L. 333, 24-03-1999

Address: Basaveshwaranagar Branch, 3rd Stage, 4th Block, Basaveshwaranagar. License No. UBD: B.G.B.L. 413, 09-01-2002

Addres: Jayanagar Branch, No 239/19, 9th main road, and 3rd Block, Jayanagar. License No: UBD: B.G.B.L. 416, 20-01-2002

Address: Indiranagar Branch. License No; UBD: B.G.B.L. 493 01-04-2004

♦ Mysore Branch:

Adders: Ramavilas Road, K.R. Mahal road Mysore License No: UBD: B.G.B.L. 353, 28-07-1999



BOARD OF MANAGEMENT OF TGMC BANK LIMITED:

Elec

tion Process of TGMC Bank Limited:

The election will be held to appoint the Board of management of the bank.

All the share holders/ members of the bank are eligible to stand for election. Each

member can cast one vote. Through democratic process 18 members of Board of

management will be constituted. These 18 members will choose 1 president and 1

vice-president among them. The tenure of Board of management is 5 years.

Annual general body meeting of bank is preceded over by these members.

The members can also resign from their post, before completion of the terms, if

they desire to do so. President is supreme authority in the board of management.

ORGANIZATION STRUCTURE:


1 President

nt

1 Vice President 16 Directors + ( 2 inviters)

18 Members



SHARE HOLDERS

PRESIDENT

DEPUTY GENERAL MANAGER

GENERAL MANAGER/CEO

VICE PRESIDENT

BOARD OF DIRECTORS

ASSISTANT GENERAL MANAGER

MANAGER

ASSISTANT MANAGER

SENIOR ASSISTANT MANAGER

JUNIOR ASSISTANT MANAGER

SUB-STAFF & ATTENDERS


The bank has full time chairman/ president & also CEO & 18 board of

director who provide necessary vision & policy formulation. General and senior

manager for team formulation & implementation of strategies.

BOARD OF MANAGEMENT OF TGMC BANK LIMITED FOR;

N.R. JAGADISH- Industrialist

(President)

K.Y. SHIVANNA-Business

(Vice-president)

DIRECTORS:

R.J. Anantharajaiah-Business

M.N. Narasimhamurty nayak-Business

H.M. Divyananda murthy-Business

G.C. Murugappa-Business

Prabhu devaradhya-Business

T.M. Chennaih-Business

M.S. Dinesh jain-Business

T.R. Suresh-Business

M.P. Mahesh-Industrialist



G.S. Anup Kumar-Industrialist

K.B. Kanthraju-Industrialist

K.V. Srinath-Industrialist

* B.S. Suranarayanaguptha

* Mrs. Vijayasujay T.R

Various committees of TGMC Bank Limited:

The following sub committees are formed to carry out administrative

affairs of bank. President N.R. Jagadish and Vice-president K.Y. Shivanna are

part of it.

The bank has farmed 3 sub-committees:

1. Joint loan/hypothecation & Pledge loan committee

2. LMP/Machinery loan committee

3. Branch control/recruitment/investment & audit.

The sub committees will purse and render clear picture about loan proposal

and help board to take wise decisions.



Department/section in TGMC Bank Limited:

The various departments and section at the Branch level comprising of,

♦ Deposit section

♦ Loan section

♦ Bills/clearing/DD/pay order section

♦ Cash section

♦ Saving bank/ current account

♦ Miscellaneous

At the level of administrative office:

♦ Administrative section-looks after conducting board meeting

♦ Shares section

♦ Management information & planning & development section

♦ Management section

♦ Recovery department

♦ Electronic data processing section

♦ Stores section.



Each department function under the control of chief executive officer, who

ensures effective functioning of their respective duly assisted by manager etc.,

Bank logo:

Bank logo is designed from the beginning of the bank on 16-09-1963 &

logo shows bank’s motto.

VISSION STATEMENT & MISSION STATEMENT:

Working for your growth and your trust is our asset.

Business hours:

Monday to Friday, Working hour- 10:30 to 05:30 pm

Transaction hour- 10:30 to 02:30 pm

On Saturday, Working hours- 10:30 to 12:30 pm

Sunday holiday



FUNCTIONS OF TGMC BANK LTD:

The main functions of TGMC Bank Ltd. are as follows.

1. The main functions of TGMC Bank Ltd is they provide short term and

medium term loans to various sectors, and they are play a vital role in

finance.

2. They raise deposits from the members as well as non-members for the

purpose of the meeting the credit requirements of the bank.

3. Besides the above functions, they also carry on ordinary banking

operation such as acceptance of deposits from the public, leading the

loans and advances against proper securities. Collection of cheques,

receiving of valuable for safe custody discounting of bills, DD

arrangement and investing the surplus funds in government securities

etc.

Human resource management in TGMC Bank Ltd:

Human resource is very important for any concern. TGMC BANK limited

has very talented & gifted human resources.



Number of employees and salary structure:

SL. No Job Title Number Salary Scale

1 Chief executive 01 10620-14960

2 Deputy general manager 01 9580-14200

3 Assistant general manager 02 8000-13440

4 Chief internal auditor 01 7400-13120

5 Manager/accountant 08 6300-11840

6 Assistant manager/accountant 16 5575-10620

7 Senior assistant 14 5200-9580

8 Junior assistant 53 4575-8400

9 Sub-staff at tenders 20 3300-6300



Monthly salary is provided to employees. It varies with grade and level of

management they present.

Training: All the 114 employees are disciplined and honest. Training &

seminars are conducted for bank employees to improve their working & skills.

Computer training is also provided to cope with modern technological changes.

Presently the total staff members are:

Managers

Chief accountant / assistant manager

Cashier and clerks

Attendees and watchman.

Auditing & accounting system at TGMC Bank Limited:

Accounts are maintained under double entry system of book keeping.

Ledger is maintained to record each transaction. The bank is using “PENTA

BANK SOFTWARD & AILMENT SOFTWARD”. All accounts are

maintained under this software.



Each department function under the control of chief executive officer, who

ensure effective functioning of their respective department duly assisted by

managers etc.,

Auditing system:

The bank has good auditing control system. Bank has appointed 2 internal

auditors to check the internal discrepancies & to strengthen the internal affairs of

the bank in accordance in the RBI guidelines & system & procedures.

External auditing is done by Assistant Director of co-operative societies

who are appointed by the govt. u/s 441 of KCS act external audit is done by

Mallayya, Assistant director, co-operative Union Audit Department, Tumkur

division, Tumkur.

Awards: in the year 2003 TGMC Bank Limited got the award of ‘The Best

Managed Urban Co-operative Bank in Karnataka.’

Strategic alliance:

TGMC Bank Ltd has strategic alliance with Karnataka State co-operative,

Apex bank under inland mutual arrangement scheme under the alliance.

Providing DD & cheques collection facilities all over India with the help of



ICICI bank Bangalore. TGMC Bank Ltd works towards mutual interest in

following areas.

1. Payment & transfer services

2. Collection of cheques and bills

3. Issues of DDs on members banks

4. Documentary credit and other forms of trade finance

5. Working capital & long term financing needs of each other clients.

Associated institution of TGMC bank limited:

G.M.A education trust

Sri Mahalakshmi charitable trust

Grain merchants charitable trust

Grain merchants association

Any Branch banking:

TGMC Bank limited introduced ABB facilities in 10-07-2003 to its

customers. The system has been introduced to widen the service and to take care

of needs of the public, at present no charge for these facilities.

ABB as the name suggests is the product for any Branch banking. In which

the customer of ABB Branch can carry out his banking transaction in any of the

above Branches.



For the following transaction this facility is available now;

♠ Balance enquiry

♠ Settlement of account

♠ Cash deposits

♠ Cash withdrawals

♠ Fund transfer credit

♠ Fund transfer debit

♠ Cheque book request

♠Cheque status request

♠ Stop payments of a Cheque

This scheme covers only saving bank account, current account, cash and

credit a/c etc.

Schemes in the TGMC Bank Limited:

The schemes are among the best in the banking sector:

1. Current account:

An account to take care of all business requirements with ‘Any Branch

Banking’ facility. These deposits contribute major portion of the bank circulating

media of exchange. Bank does not pay any interest for these deposits. Rs. 50 will

be charged for these deposits as bank charges for every half year and also charge

Rs. 2 for every cheque leaf.46 SRI SIDDHARTHA INSTITUTE OF MANAGEMENT STUDIES, TUMKUR.


2. Savings Bank account:

People with steady monthly income save their earnings through this

account. There are certain restrictions in withdrawals. Bank pays interest at a

nominal rate. I.e. 4% and minimum balance is Rs. 500

3. Fixed deposit account:

Money is accepted for a fixed period. The rate of interest is higher than

other accounts. Minimum period is 15 days. Interest can be withdrawn on

monthly, quarterly or half yearly. The longer the period the higher the interest.

4. Mangala cash certificate:

In this scheme the capital amount gets doubled in 129 months. Interest will

accumulate quarterly minimum period is 3 years. Only matured dated interest can

be withdrawn on maturity date. Interest can be withdrawn along with principle

amount and compound interest.

5. Cumulative term deposit:

In this scheme it is specified amount is deposited every month.47 SRI SIDDHARTHA INSTITUTE OF MANAGEMENT STUDIES, TUMKUR.


Maximum period is one year. Interest can be drawn on matured date.

Interest can be accumulated quarterly.

6. Non-resident account:

Non-resident Indians can open savings bank accounts, fixed deposits and

mangala cash certificated accounts at designated Branches.

7. General insurance scheme:

The Bank has been providing General insurance scheme to their customers,

Influencing on M/s. Reliance General insurance & Reliance life insurance.

8. There are several other schemes of attract deposit from public.

Rate of interest on fixed deposit:

1. 15 to 90 Days 6%

2. 91 to 180 Days 7%

3. 181 to 1 Year 8%

4. Above 1Year to 3 Years 10%

5. Above 3 Years 9%48 SRI SIDDHARTHA INSTITUTE OF MANAGEMENT STUDIES, TUMKUR.


[For senior citizens, widows 1% additional interest on term deposits of

above 1 year]

Advancing of loans:

The deposits received are invested by advancing loan to needs of the

borrowers for higher rates interest. This function is the source of profit for banks.

The various loan schemes are:

□ Working capital loan for traders

□ Term loan for acquiring capital assets, letters of credits, solvency

certificates for industrialists

□ Loans are also provided to buy buses, cars, tractors, earthmovers and all

types of vehicles for transport operator.

□ Personal loans for purchase of computers, consumer durables,

constructions, purchase of flat, house, complexes etc.

□ Pledge loan for whole sale dealer, loan against warehouse receipts, loan

against mortgage of property, loan against stocks held in cold storage of

property, loan against stocks held in cold storage ware houses



□ Loan for employed and professional. It includes term loan operating/

setting up clinics and for starting education institutions.

Other schemes/ services include:

Issue of DD

Issue of banker’s cheque

Gift cheques

Collection of cheques. /DD/bills

Safe deposit lockers.

Rising of funds:

The bank will raise its funds by the following ways, when there is need.

They are:

Issue of shares

Accepting deposits of various kinds & by issue of cash certificates.

Obtaining cash/ credit overdraft or other loans from Karnataka State co-

operative bank & with prior approval of registrar from any of the

nationalized commercial banks.

Donations



Entrance Fee

Accepting subscription fund from members, Welfare funds or death relief

funds.

Distribution of profits:

At the general meeting, the net profit earned by the bank in the years as

calculated as per rule 22 of rules shall be announced & distributed as under.

Before distribution of profit & losses of previous year or years shall be deducted

out of net profit and remaining profit only shall be distributed.

The appropriation of profit is towards following mentioned funds:

Statutory reserve fund-25

Co-operative education fund-2%

Common good fund-10%

Bad debts reserve-25%

Building fund-10%

Propaganda fund-5%



Investment fluctuation fund-10%

Staff welfare fund

Golden jubilee fund

Period divided equalization fund

Bonus

Contribution to society:

The bank has to contribute to so many social functions at various

occasions. The banking running G.M. Education center, G.M. Charitable Trust,

G.M. Medical Trust etc. where in the bank members can avail free medicines,

education to their children, G.M. Mahalakshmi temple Trust, etc…..

Silent features of TGMC Bank Limited:

The following are the salient features of the bank:

Very attractive interest rates on all deposits, more than nationalized banks.

Continuous increases in net profits

Rapid development in the new technology at a faster pace

All deposits having nomination facilities



Tailor made deposits schemes to all classes of people

NRE/NRO accounts accepted

Providing short term loans at low rate of interest

Quick cheque collection facility

Working hours extended for 7 days a week at S.S Puram Branch, Tumkur.

Rajajinagar Branch, Bangalore.

All deposits up to Rs. 1 lakhs is guaranteed by deposits insurance scheme in

DICGC.

Easy procedure and documentation to avail loans

Total banking transactions are fully computerized with LAN system.

Objectives of the bank:

The following are the objectives of the bank:

To build up quality loan asset portfolio

To start new branches i.e. expansion

To reduce cost of deposits

To increase customer satisfaction

To set up net interest margin53 SRI SIDDHARTHA INSTITUTE OF MANAGEMENT STUDIES, TUMKUR.


To provide ATM facilities to customers

To increase non-interest incomes

To reduce cash holding and bank balances

To reduce operating costs

To increase net profit

To provide safe lockers facility for all branches

To offer gold loans for customers

To innovate services

To absorb operational efficiency

To focus on skill development

To maintain personal integrity

To provide versatile banking services

Micro Finance Provide to small Business man

Introduce core Banking Facilities for feature.

Rate of interest on loans:

1. Pledge Loan 11.50%



2. Gold Loan & Housing Loan 12.50%

3. Joint Loan, Term Loan an Machinery Loan

Hypothecation Loan (Commercial)

12.50%

4. (Old Vehicle) 13.50%

5. (New Vehicle)

Hypothecation Loan (Personal/Private)

13.00%

6. (Old Vehicle) 13.00%

7. (New Vehicle)

Loan on Mortgage of Property,

12.50%

8. Consumable Article Loan, Cash Credit

Loan, Over Draft Loan,

NSC/LIC/Share/Bonds/ and all other Loans.

13.00%

Bird eye-view of Financial positions of the Bank for 2006-07

Total Business Crossed 47060.49

Net Profit 1150.57

Interest Income 2999.43



Non-Interest Income 153.88

Non-Interest Expenditure 364.36

Profit Employee 10.75

Business per Employee 439.82

Earning Assets 28357.21

Total Income/Working Capital 9.34

C.R.A.R 14.13%

Return on Assets 3.05%

Coverage Ratio 9.04%

Total Income/Total Assets 9.29%

CD Ratio 83.14%

RESEARCH DESIGN:

NON PERFORMING ASSETS:

Definition:



♦ An asset which ceases to yield income is an NPA

♦ Income from NPA should not be recognized on accrual basis and should be

booked as income only when it in actually received. This will apply to all the

NPA’s.

♦ No interest should be applied on NPA, but calculation of interest (as prescribed

periodically) should be recorded in the account.

STATEMENT OF THE PROBLEM:

The problem is selected to analyze the non-performing assets in the

Janatha Co-operative Bank Ltd.

Hence the study is to be conducted to evaluate the level of NPA in the

Janatha Co-operative Bank Ltd, in Bangalore City, Study the effectiveness

measured taken by bank to reduce the level of NPA to minimum level and to

suggest the remedial measures to control the NPA and also to give better scope to

the management about dealing with the NPA of the bank.

OBJECTIVE OF THIS STUDY:

♦ To study the factors responsible for the cause of NPA in the bank.

♦ To study the trends in profitability & NPA for the last 4 years.57 SRI SIDDHARTHA INSTITUTE OF MANAGEMENT STUDIES, TUMKUR.


♦ To study the effect of NPA on the profitability of bank.

♦ To study and provide suggestion and recommendation for the growth and

prospects of the bank.

Scope of the study:

The bank will be able to assess the efficiency with regard to management

of NPA, recovery of over dues and improvements of the profitability. It also

helps the banks to assess the further widening of the financial base and come out

with some valuable measures and methods.

♦ Selection of the suitable borrowers and in general banking and government

sponsored schemes.

♦ Involvement, Orientation and motivation of staff with system of the bank and

reducing the NPA.

Limitations of the study:

♦ The study concentrates only on the non-performing assets.



♦ The project period is short.

♦ There are some facts and figures which are considered to be confidential on the

part of the bank and those are not disclosed.

Research methodology:

Data sources:

The data collecting for the study is divided in to two ways.

1. Primary data.

2. Secondary data.

Primary data:-

Hence, the study is the finance management. Then the chance of primary

data is less, but the interviews from the managers and the chief accountants will

be made.

Secondary data:

Secondary data is from published materials that is Journals, news papers,

annual report and magazines.

Data Collection Tools:



Questionnaire is used for collection of data from the sampling respondents.

Sampling design:

The researcher has identified this bank for the present study little

information has been collected from bank through the interview to manager and

staff. The causes for NPA were analyzed based on various parameters through

interviews. Further the data will be processed by applying statistical too to arrive

at valid conclusions.

Conceptual definition of this study:

1. Non performing Assets:

An asset is to be treated as non-performing asset when its ceases to

generate any income for the bank and if interest or installment remain past due to

two or more quarters as on the date of balance sheet.

In other words while classifying the advance as standard asset, there should

not be more than on one quarter installment or interest remaining past due on the

balance sheet date.

2. Past due concept:60 SRI SIDDHARTHA INSTITUTE OF MANAGEMENT STUDIES, TUMKUR.


The interest or installment becomes past due after 30 days from the date

becomes due. For example the interest due of quarter ended 30th September

becomes due on 30th October.

3. Interest non collected account:

It is interest not collected account it is cumulative in nature and the new

interest due which is not collected would be added to the previous year interest

not collected account and recorded in their books of accounts.

4. Sub-standard assets:

An asset is classified as sub-standard if it remain as a non-performing for

period not exceeding two years. However RBI has reduced the period of two yrs

to18 months.

NOTE: The information stated on the basis of research methodology of O.R.

Krishna Swamy.



REVIEW OF LITERATURE:

Prof. Sanjay Kumar has discussed “NPA in regional rural banks, Impact

and Management’

The study was undertaken for a period of 1995-1999. The study was

conducted to analyze the loan asset, impact of NPA & Management of NPA.

NPA have become most critical factor governing the performance of banks. NPA

have various implications on profitability, liquidity & solvency of the regional

rural banks.

The study has shown that out of the legal, policy and operational support, it

is the latter which is critical to management of NPAs. The recovery of NPA’s

through crystallized collateral and other bank - stopping is subject to a prolix

process, as the present legal and other systems normally do not provide a fast and

effective exit route.

As regards policy support, it is time consuming if provided externally.

Hence, the RRBs have to mostly depend on the internal guidance and operational

support in devising suitable policy and strategies for NPAs have successfully

experimented in this regard and with internal interventions at the organizations

and staff level, have been able to contain the menace of NPAs and to improve

recovery to a great extent.



Some of the prominent practice adopted by the RRBs is hello borrowers’

campaign, liking of social status of borrowers with good and regular loan

accounts, effective involvement of revenue authorities and informal efforts. Thus,

RRBs should devise alternative strategies specific to their area, clientele and

environment to manage NPAs efficiently and effectively.

Management of non performing Assets:

An effective and prudent management of non-performing asset consists of:

♦ To check creation of NPAs in the first place particularly of fresh loans

♦ Improvement in the quality of NPAs i.e. to reduce slippage of a low grade NPA

to the next higher level

♦ Reduction of NPAs.

Thus, efforts to improve NPAs position or in other words quality of loan

portfolio can be broadly groped.



THEORETICAL BACKGROUND OF THE STUDY:

Non performing assets:

Definition:

As asset becomes non performing asset when it ceases to generate the

profit to its owner. Earlier assets were considered as non performing assets based

on the concept of “past due” or non performing asset was defined as credit in

respect of which interest and/installment of principal has remained “past Due” for

the specific period of time. The specific period was reduced in a phased manner

as under.

Year ending 31st March Specific Period

1993 4 quarters

1994 3 quarters

1995 2 quarters.

An amount is considered as past due when it remains outstanding for 30

days beyond the due date. However, with effect from March 31st 2001 the past



due concept has been dispensed with accordingly. Front the date 31st March 2004

the non performing assets is an advance where

1. Interest and/installment of principal remain over due for a period of

more than 90 days in respect of term loan.

2. The account remains out of order @ for a period of more than 90 days

in respect of an overdraft.

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

of bills purchased and discounted.

4. Interest or installment of principal remains overdue for two harvest

seasons but for a period not exceeding two half year in the case of and

advance granted for agricultural loans.

5. Any amount received remains overdue for a period of more than 90days

in respect to other accounts.

TREATMENT OF ACCOUNTS AS NPA:

Record of Recovery:

The treatment of assets as NPA should be based on the record of Recovery.

Banks should not treat an advance as NPA merely due to existence of some

deficiencies, Which are of temporary in nature Such as non availability of

adequate balance, Outstanding balance exceeding the limit and non submission of

stock statement, non renewable of the limits on the due date, etc.. Where there is



a threat of loss or the recoverability of the advances is in doubts, the assets should

be treated as NPA.

Borrowers wise not facility wise:

In respect of a borrower having more than one facility with a bank all the

facilities granted by the bank will have to be treated as NPA. However in respect

of financing under multiple banking arrangements, each bank may classify the

borrower accounts according to its own records recovery and other aspects.

Determination of NPA under different types of loans and advance:

1. TERM LOAN:

Term loan accounts will be treated as NPA if interest/installment remain

past due for period of two quarters i.e., there should not be more than one quarter

interest/installment remaining past due to avoid the account from NPA status.

Cash Credit and Overdraft: A cash credit or overdraft will be treated as NPA if

the account remains out of order for a period of 2 quarter during the year ending

31st March. An account should be treated as “out of order”’ if the outstanding

balance remains continuously in excess of sanctioned limit.



Drawing power in case where the outstanding balance in the principal

operation account is less than the sanctioned limit/drawing power but there are no

credit continuously for six months as on the date of the balance sheet or credit are

not enough to cover the interest debited during the same period, such account

should be treated as order.

2. BILLS PURCHASED AND DISCOUNTED:

The bill purchased/discounted should be treated as NPA if the bill remains

overdue and un-paid for a period of two quarters as on the date of balance sheet.

However, overdue interest should not be charged and taken to profit and loss a/c

in respect of over due bills unless they are realized.

3. OTHER ACCOUNTS:

Any other facilities should be treated as NPA if any account to be received

in respect of that facility remains past due for periods.

4. CASH CREDIT AND OVERDUES:

A cash credit overdrafts account will be located as NPA the account

remains out of order to a period of more than 180 days during a year. An account

should be treated as out of order, where out standing balance remains

continuously in cases of the sanctioned limit/drawing power.

The cases when the out standing as with in the limit/drawing power, but



no credit in the account continuously for a period of more than 180 days or on its

date of balance sheet of the bank. I.e. 1st March of the each year.

PROVISIONING FOR LOANS AND ADVANCES:

Taking in to accounts the time lag between an accounts becoming doubtful

of recovery. Its recognition as such, the realization of the security and the erosion

over time in the value of security and the erosion over time in the value of

security charged to the bank, it has been decided that bank should make provision

against sub standard assets, Doubtful assets and loss assets. Detailed instructions

in this regard are furnished bellow.

SUB-STANDARD ASSETS:

A general provision of 10% of total outstanding while arriving at the

provisioning requirement value of security in any form including term deposits.

NTSC’s surrender value of life policies could be deducted.

DOUBTFUL ASSETS:



1.100% of the extent to which the advance is not covered by the realizable value

of the security to which the bank has a valid resource and the realizable value is

estimated on a realistic basis

2. Over and above item 1 depending upon the period for which the assets have

remained doubtful. 20% to 50% of the secured portion on the following basis.

Consideration period of

Advances as doubtful

Up to 3years

3 to 5 years

More than 5 years

Doubt full assets are not covered by

% of provision.

20 %

30 %

50 %

100 %



Any securities

In case of the advances guaranteed by ECGC provision should be made

only after the realizable value of securities is deducted from the out standing.

The quantum of provision is based on the quality of loan assets. Standard

assets are perfectly good and no provision is required on these. Sub standard

assets are non-performing for less than tow years and there is a high chance of

recovery.

10 percent of the amounts due on sub standard assets need to be provided.

Doubt full assets are non performing assets for two or more years. These may be

covered by security or not covered by any society.

ASSETS CLASSIFICATION:

Co-operative banks should classify their advance in to two broad

Categories:

Standard assets:



Standard assets is one which does not disclosed any problem and which

does not carry more than normal risk attached to the business such an asset is not

an NPA.

Non performing assets:

Banks are required to classify non-performing assets further into the

following three categories based on the period for which the assets has remained

non-performing and reliability of the dues.

Sub-standard Assets.

Doubtful Assets.

Loss Assets.

Sub-standard assets:

♦ A sub-standard assets is one, which has remained NPA for a period less than or

equal to 12 months.

♦ Further sub-standard assets shall be segregated in to secured exposure &

‘unsecured exposure’ for the purpose of determining the rate of provision. Un

secured-exposure is defined as an exposure where the realizable value of the

security, as assessed by the bank/approved values/ Reserve Bank’s inspecting

officers, is not more than 10% abilities, of the o/s exposure ‘exposure’ shall



include all funded and non-funded exposures (including underwriting & similar

commitments) ‘security’ means tangible security properly changed to bank and

will not including in intangible securities like guarantees, comfort letters et.

Therefore all clean loans and loans with security less than 0% under sub-standard

category may be treated as ‘unsecured exposure’.

It may be noted that each sub-standard asset shall be classified as either

secured exposure or un secured exposure & provision shall be made on o/s

balance.

DOUBTFUL ASSETS:

♦ A doubtful asset is one, which has remained NPA for period exceeding 12

months.

♦ Doubtful assets shall be bifurcated in to doubtful assets less than one year b/w 1

and3 years, above 3 years doubtful assets and above 3 years shall be further

bifurcated in to “existing stock”.

♦ Further each doubtful asset shall be bifurcated in to secured portion and

unsecured portion for provisioning purpose.

LOSS ASSETS:

A loss asset is one where loss has been identified by the bank or internal or

external auditors or RBI inspection. In other words, such as asset is considered un



collectable & of such little value that its continuance as a bankable asset is not

warranted although there may be some salvage or recovery value.

A NPA shall be treated as loss asset, irrespective of age of NPA, if it is un

collectible due to,

♦ Serious credit impairment viz fraud etc.

♦ Realizable value of securing has become nil or negligible due to erosion in the

value of security. (Value may be treated as negligible if it is less than 10% of the

o/s in the borrower account).

NPA AT DIFFERENT STAGE:

D1 stage: If NPA exists for more than two years but does not exceed 3 years than

the asset is said to be in the D1 stage.

D2 stage: The NPA exists for more than 3 years but up to 5 years.

D3 stage: If the NPA exists for the more than 5 years then assets is said to have

entered the D3 stage.

Adoption of 90 days Norm for Recognition of Loan Impairment:



At present, a loan is classified as non-performing when the interest and/or

installment of principal remain overdue for a period of more than 180 days as

against the international best practice of 90 days payment delinquency. With a

view to moving towards international best practices and to ensure greater

transparency, it has been decided to adopt the 90 days norm from the year ending

March 31, 2004.

NOTE: This information stated with the help of Indian Financial System by P.N.

Vershney and D.K. Mittal.

DATA ANALYSIS AND INTERPRETATION

Introduction:

Analysis and interpretation are giving meaning to the collected information

by comparing them with the existing information. Analysis is placing the

collected data in some order or format so that the data acquire a meaning. Raw

data become information only when they are placed in a meaningful form.

Interpretation involves drawing conclusions from the gathered data.

There are three tasks to be performed if the collected data are to be used in

the most effective manner.74 SRI SIDDHARTHA INSTITUTE OF MANAGEMENT STUDIES, TUMKUR.


1. An intensive review must be made of all the data collected for the

project with reference to the studies objectives.

2. These data are then analyzed with the help of techniques selected

earlier.

3. The results emerging from these analyses are then related to the studies

objectives.

The collected data have to be analyzed fully on the basis of the data

collected, an analysis has been made. Some researchers make the mistake of

postponing the selection of their analytical techniques until they collect the data.

There are numerous articles published in various trade and academic

journals describing new models and techniques for analysis, besides text books

on statistics which outline various analytical techniques.

These documents should be consulted before deciding the framework of

analysis. The analysis may be descriptive analysis and casual analysis.

Interpretation means drawing inferences from the collected facts after the

analytical study. Interpretation helps the researcher to understand the abstract

principle that works beneath his findings. He can line up his finding with those of

other studies having relationship with the established concept. Interpretation also

enables the researcher to establish concepts, which will be the basis of future

research. Moreover, interpretation helps the target audience to understand the real

significance of his research findings.



TABLE: 1

TYPE OF DEPOSIT

(Rs. In lakhs)

Particulars 2006 2007

Fixed Deposit 18617.49 20223.61

Saving Deposit 2545.40 3078.55



Current Deposit 1313.64 2394.74

TOTAL 22476.53 25696.9

SOURCE: Annual Report

Fixed deposit includes cash certificates, R/D, Maturity deposit, NRE

deposit, NER certificate, Matured deposit, Matured R/D, Matured jayalaxmi

small deposit, matured cash certificate, etc.

TABLE: 2

TYPES OF LOAN (Rs. In lakhs)

Sl.No

Particulars 2006 TOTAL 2007 TOTAL

1 Short-term loan:

Joint loan Installment Joint loan

190.21 166.84



Advanced loan R/D loan Cash Certificate loan Gold loan F/D loan Loan on NSC Pledged loan Loan on LIC Bond Bill purchases

TOTAL

3.84

2979.57

7.63

308.79

15.18

161.91

0.87

1847.83

0.28

11.45

5527.60

3.13

3234.81

6.78

276.22

18.99

179.96

0.27

763.65

0.00

12.59

4663.29

2 Medium-term loan:

Loan on mortgage property Vehicle loan Machinery loan Consumer loan Housing loan Staffing loan Festival loan Staff vehicle loan

TOTAL

11232.37

1496.76

1257.34

3.90

157.98

1.23

1.07

5872.02

1307.07

455.24

2.72

46.25

2.26

1.17



14150.69

0.15

7686.91

3 Long-term loan:

Long-term loan on mortgage property

Loan on vehicle Long-term installment loan Long-term housing loan

TOTAL

8229.12

42.32

651.99

89.91

9013.34

SOURCE: Annual Report.

TABLE: 3

FINANCIAL POSITION OF THE BANK

THE STATEMENT OF THE BANK POSITION AS UNDER

(Rs. In lakhs)

Year Members Share capital Deposit Loan Profit/Loss



1994-95 3927 111.33 1305.85 1361.29 101.90

1995-96 3662 138.87 1929.17 2018.10 143.27

1996-97 4084 195.70 3170.82 2928.45 212.97

1997-98 4662 291.66 4586.93 3925.25 242.45

1998-99 5242 348.58 6257.62 4843.12 272.54

1999-00 6000 400.61 8763.28 6515.67 399.14

2000-01 6411 435.81 12290.98 8666.20 446.478

2001-02 6850 463.13 14676.52 11491.18 805.26

2002-03 6970 459.64 16554.42 13151.89 685.53

2003-04 7374 458.94 18796.62 14398.60 852.51

2004-05 7384 457.49 20027.03 15359.63 859.91

2005-06 7550 477.39 22476.53 19270.30 916.15

2006-07 7867 496.90 25696.91 21363.58 1150.57


TABLE: 4

PAID UP SHARE CAPITAL AND RESERVE AND OTHER FUNDS

(Rs in lakhs)



Sl. No Year Paid up share capital Reserves and other funds

1 2003-04 458.94 3003.81

2 2004-05 457.50 3672.06

3 2005-06 477.39 4445.37

4 2006-07 5361.50 5985.03


Concepts:

The table shows the constant increasing in the reserves and other funds and

also paid up share capital should be increasing.

Analysis:

In the years 2003-04, 2004-05, 2005-06 and 2006-07, the paid up share

capital Rs458.94, Rs 457.50, Rs 477.39 and Rs 5361.50 respectively increasing,

And , bearing 2003-04, 2004-05,2005-06 and 2006-07 the reserves and other

funds is Rs 3003.81, Rs 3672.06, Rs 4445.37 and Rs 5985.03 respectively

increasing.

Interpretation:

It shows that it is a healthy trend of the bank.



PAID UP SHARE CAPTIAL AND RESERVE AND

OTHER FUNDS

TABLE: 5



DEPOSITS AND ADVANCES (Rs in lakhs)

Sl. No Year Advances Deposits

1 2003-04 14398.60 18796.62

2 2004-05 15359.63 20027.03

3 2005-06 19678.30 22476.54

4 2006-07 21363.58 25696.91


Concepts:

The above table statement shows that advances and deposits of the TGMC

bank limited.

Analysis:

Here the bank advances shows in an increasing trend the years 2003-04,

2004-05,2005-06,and 2006-07 is Rs 14398.60,Rs 15359.63, Rs 19678.30 and

21363.58 is respectively increasing.

And, the 4th column of this table shows deposits of the bank it is also

increasing in year by year. for like 2003-04,2004-05,2005-06 and 2006-07 the

amount is Rs 18796.62 ,Rs20027.03,Rs22476.54,and 25696.91 is respectively.

Interpretation:83 SRI SIDDHARTHA INSTITUTE OF MANAGEMENT STUDIES, TUMKUR.


The advances and deposits is gradually increasing year by year .This is a

healthier position of the bank.

DEPOSIT AND ADVANCES



TABLE: 6

NET PROFIT (Rs in lakhs)

Sl. No year Net profit

1 2003-04 852.51

2 2004-05 859.91

3 2005-06 916.15

4 2006-07 1150.57


Concepts:

The bank has maintained good conditions when compared to 4years net

profit , it shows an increasing trend.

Analysis:

The net profit of the bank in 2003-04 was Rs. 852.51lakhs; in 2004-05 it

was Rs. 859.91lakhs, in 2005-06 it was Rs.916.15lakhs and 2006-07 is Rs

1150.57.

Interpretation:



The net profit is compared to last years is increasing, this shows the

healthier position of the bank.

NET PROFIT



TABLE: 7

QUALITY ASSETS (Rs. In lakhs)

Sl.No Year Standard Assets (%) NPA (%)

1 2003-04 13968 (97.01%) 14.90 (2.07)

2 2004-05 14878.80 (96.87%)

3 2005-06 19245.30 (97.80%)

4 2006-07 20722.60 (97%)


Concepts:

As against the standard assets the movement of NPA is shown in the table.

Analysis:

Percentage of performance of the standard assets is in the increasing trend,

which can be called a healthier development of performance of the bank as a

whole, at the same time the level of NPA in percentage-wise shows the

decreasing trend.

Interpretation:



This shows that the bank is taking proper steps to recover the dues by the

customer, etc.; when the rate of NPA is decreasing it will help the growth of the

bank.

QUALITY ASSETS



\

TABLE: 8



ASSETS CLASSIFICATION AT TGMC BANK LTD (Rs. in lakhs)

Year Total loan Standard assets Sub-standard assets Doubtful assets

2003-04 14398.60 13968 421.89 298.04

2004-05 15359.63 14424.21 511.12 424.30

2005-06 19678.30 18730.97 553.39 393.95

2006-07 21363.58 20259.21 380.20 719.45


Concepts:

The above table shows the bank total loan, standard assets, substandard

assets and doubtful assets.

Analysis:

The table shows the constant increasing in the standard assets from the

financial year 2003-04 to 06-07, the comparative of columns 1 and 2 reveals that

the standard assets as against total loans are increasing when the standard assets

will increasing from year to year. In sub-standard assets the data shows the assets

increasing from year to year. A doubtful asset shows that only in the financial

year 2003-04 is Rs. 298.04lakhs, in the year 2004-05 it was Rs. 424.30lakhs, in

2005-06 it was Rs. 393.95 lakhs and 06-07 it shows Rs. 719.45lakhs in doubtful

assets.

Interpretation:



It shows that it is a healthy trend of the bank.

CLASSIFICATION OF ASSETS

TABLE: 9



NPA & PROVISION MADE DURING THE LAST 4 YEAR

(Rs. in lakhs)

Year NPA’s Provision Amount

2003-04 14.90 2.98

2004-05 -------- --------

2005-06 -------- --------

2006-07 -------- --------


Concepts:

Provision calls for keeping aside the specified amount safeguarding the

future mis-happening i.e., to cope up with the future contingencies.

Analysis:

The bank in the year 2003-04 the NPA amount is Rs. 14.90 lakhs and the

provision is Rs. 2.98 lakhs it shows the decreasing trend. In the last 3 years like

2004-05, 05-06 and 06-07 there is no NPA and provision.

Interpretation:

Through this we can analyze that the bank is in a healthier trend.



NON PERFORMING ASSETS AND PROVISIONS MADE FOR THE

LAST FOUR YEARS:



TABLE: 10

PROFIT & PROVISION OF TGMC BANK AN ANALYSIS

(Rs. in lakhs)

Year Gross profit NPA provision Net profit

2003-04 2675.60 2.89 852.51

2004-05 2627 -------- 859.91

2005-06 4010.10 -------- 916.15

2006-07 3153.30 -------- 1150.57


Concepts:

The above statement shows the gross profit, provision made on NPA’s and

the Net profit of TGMC Bank ltd for last four years.

Analysis:

Here the researcher analyzed the impact of NPA on the profitability of the

NPA. In the year 2003-04 the bank earned a gross profit of Rs. 2675.60 while

provision made during the year was Rs. 2.89 lakhs. Provisioning norms were first

introduced to co-operative bank, RBI, the net elect was on the profit which had

sub statistically increased to posture figure it amounted to Rs.852.51 lakhs.



In the year 2004-05 the gross profit of Rs. 2627 lakhs whereas provision

made is Nil and the Net profit was 859.91 lakhs which was position figure.

Bearing 2005-06 and 06-07 the gross profit was Rs. 4010.10 lakhs and

3153.30 lakhs respectively and NPA provision made Nil in both the year and net

profit is Rs. 916.15 and 1150.57 lakhs.

Interpretation:

The profit rate compare to last years is increasing this shows the healthier

position of the bank.

PROFIT AND PROVISION OF THE BANK FOR THE LAST FOUR

YEAR



TABLE: 11

TURNOVER OF THE BANK IN LAST FOUR YEARS (Rs.in lakhs)

Year Previous year profit Current year profit Turnover of the year

2003-04 685.53 852.51 23111.87

2004-05 852.51 859.91 25016.49

2005-06 859.91 916.15 28315.45

2006-07 916.15 1150.57 33775.84




Concepts:

The above table shows the compression of the bank previous year profit and

current year profit trends, and also increasing trend of the turnover.

Analysis:

The turnover of the bank in 2003-04 was Rs. 23111.87 lakhs, in 2004-05 it

was 25016.49 lakhs, in 2005-06 it was 28315.45 lakhs and in 2006-07 it was

33775.84 lakhs. There is a study increase in the turnover from year to year.

Current year profit – Previous year profit

Growth rate = ----------------------------------------------------- *100

Previous year profit or loss

Interpretation:

There is a steady increase in turnover from year to year.

TURNOVER OF THE BANK IN LAST FOUR YEARS



TABLE: 12

GROWTH RATE OF THE BANK

(Rs.in lakhs)

YearCurrent/Previous year profit*100

Previous year profit/lossPercentage



2003-04 0.2435 24.35%

2004-05 0.0086 0.86%

2005-06 0.065 6.5%

2006-07 0.2559 25.59%


Concepts:

The term, bank growth rate percentage has been increasing trend from year to

year.

Analysis:

The growth rate of the bank is decreasing in the year 2003-04 i.e., 0.86%

but after 2004-05 it shows an increasing trend over the years. The growth rate of

the bank in 2006-07 is 25.59% it is very high when compared to 2003-04.

Interpretation:

The rate and growth is gradually increasing year by year and it shows a

very healthier trend of the bank.

GROWTH RATE OF THE BANK



REASON FOR CAUSE OF NPA:



♦ Willful-default/intentional default

♦ Due to unavoidable factor i.e. factors beyond borrowers and control.

Unfair market price

Loss of asset due to accidents.

♦ Diversion of funds/mis-utilization of funds for other purposes, other than for

actual purpose for which the loan was lent.

♦ Lack of awareness’ about consequences of default to borrowers.

♦ Due to loan waiver factor, which makes borrowers careless/non responsible to

make the prompt repayment of land.

♦ Delay in enforcing legal action against defaulters.

♦ Deficiency if the scheme i.e. let or subsidies of art of loan make the borrowers

irresponsible about default.

♦ Law differences between co-operative banks regional rural bank.



EFFORTS MADE BY THE MANAGER TOWARDS RECOVERY OF

OVERDUE:

♦ Frequent & regular follow up by the field staff/manager.

♦ Issue of notices that is regular notices to borrowers regarding their account

becoming as default.

♦ Educating borrowers about default and its consequence.

♦ Recovery camps are conducted periodically.

♦ Interest/installment demand notice are sent to borrowers.

♦ Managers of branches accompanied by other staff conduit regular field visits.

♦ Awareness about the NPA being told.

♦ Advising the borrowers to pay the interest at least.

♦ Renewal of the account/loan is done i.e. further tending to the present

borrowers.

♦ Convincing for other schemes that directly motivate the borrowers to pay off

the loan and evil fresh to an intensive recovery campus & awareness campus it

harvesting seasons to initiate repayment.



IMPORTANT STAGES FOR REDUCING THE NPA AND RECOVERY

OF LOANS:

Stage-1 Identification of beneficiary & scheme suitable to him.

Stage-2 Disbursement of loan & its granting.

Stage-3 The time when account enters “due for repayment”.

Stage-4 The time when account becomes doubtful/loss.

Among the above, first stage is very important because,

It will depend on the success of the schemes & prompts repayment.

Fixation of correct repayment schemes.

To see that the income is generated regularly.

Proper utilization of loan amount for the purpose actually meant for.

To see the funds are not diverted.

Not giving any scopes to default.

Suitable candidates are selected for the scheme.

To avoid forceful finance for activities not available to the beneficiaries.

To reduce over dues at the branch level.103 SRI SIDDHARTHA INSTITUTE OF MANAGEMENT STUDIES, TUMKUR.


VALUABLE SUGGESTION GIVEN BY THE MANAGER TO REDUCE

NPA:

Valuable suggestions to reduce NPA they are as follows:

Proper identification of schemes and beneficiary.

Suitable selection of borrowers.

Assessment of integrity & worth of the borrowers in the initial stage.

Advances for the need based activities only.

Proper follow up.

Timely visit by the field staff & making personal contacts with the

borrowers.

Regular issue of demand notice.

Promote renewals of loans.

Educating the borrowers in prompt repayment of loan consequences in

case of non-repayment of loan.

Filing of suits in the court & auction of security charged to the bank.

Compromise settlement with the default borrowers.



Conducting of recovery campus along with State Government officials like

revenue department.

Getting help from the controlling authority in case of emergency.

Identification of the NPA in the initial stage & steps to be taken to recover

the loan & minimize the NPA.

Proper follow up with the support of all the staff members who where

having good touch with customers.

Giving wide publicity in local newspaper & distribution of pamphlets in

the villages for the repayment of loan.

The important steps to be taken by the bank in reducing the level of NPA

are as follows:

Accelerating the field visit and to have close follow-up.

Sending timely notice.

List out recoverable NPA and identifying minimum amount of recovery.

Identify the potential NPAs and arrive at minimum amount of recovery

required to continuance as standard assets.



Legal action:

Proper follow up suit-fail cases.

Legal action should be initiated promptly. All suits faceted cases to be

reviewed property and specific action plans for such cases firmed up.

Where cases have been decreasing execution proceeding should be drown

up immediately.



SUMMARY OF FINDINGS AND SUGGESTION

Summary:

The bank, paid up share capital and reserves and other funds can shows

an increasing trend from year to year.

The advances and deposits is gradually increasing year by year. This is

a healthier position of the bank.

According to financial report it is observed that the standard assets are

increasing every year for the year 2003-04, 2004-05,2005-06 and

2006-07.The standard assets are Rs.13968.0 lakhs (97.01%),14878.8

lakhs (96.87%), 19245.8 lakhs (97.80%),and 20722.6lakhs(97.0%).

The assets classification of NPA in TGMC Bank for the year 2006-06

Sub standard assets Rs 1219.86lakhs and doubt full assets is nil.

The position of the bank NPA in the year 2003-04 only is Rs

14.90lakhs .in year 2004-05,2005-06 and 2006-07 is respectively nil.

The provision made for NPA only in the year 2003-04 is Rs

14.90lakhs, during the years 2004-05, 2005-06,and 2006-07 there is no

NPA and no provision made.



The net profit of the bank in years 03-04, 04-05, and 05-06 is

Rs852.51lakhs, 851.91lakhs, and 916.15lakhs respectively .During the

year 06-07 the net profit is increasing Rs1150.57lakhs it is a good sine

due to effective recovery of NPA.



FINDINGS

Based on the analysis of the bank , the standard assets is increasing year by

year, at the same time the level of NPA has been decreasing and also

shows “Nil” in past three years . This shows the healthy trend in the

performance of the bank.

In the years 2004-05, 05-06, and 06-07 the bank has reached comfortable

position in terms of earning of the profit and effective recovery of NPA.

The efforts made by the managers and there subordinates is reducing the

level of NPA in their branches is satisfactory.NPA and the provision made

for the during the 2004-05, 05-06 and 06-07 is Nil.

The growth rate of the bank is decreasing in the year 2003-04 i.e., 0.86%

but after 2004-05 it shows an increasing trend over the years. The growth

rate of the bank in 2006-07 is 25.59% it is very high when compared to

2003-04.

In September 2000 bank was got schedule bank status by achieved deposit

of Rs 100 crores.



Bank gives all types of loans and advances except agriculture loans and

educational loan.

Bank sanctions the loans and advances to all customers.

In every audit it getting “A” grade.

SUGGESTIONS

The steps taken by the bank in reducing the level of NPA is satisfactory.

They have to maintain the same steps in future also.

The growth rate of the bank is fluctuating year by year; it is not a good

sign to bank. Hence, they should take proper steps to increase their growth

rate efficiently.

Bank as to be introducing modern electronic machines like, ATM, Teller

System and password systems.



CONCLUSION

I feel happy to express my views and share my knowledge and what I

learnt in my project study.

By analyzing NPA of the TGMC Bank Limited for the last four years. The

NPA is nil during the year 2004-05, 05-06 and 06-07 which is satisfactory. It is a

healthy and good sign of bank; it is possible by bank because of its increase in

efficiency in sanctioning the quality advances and recovery of over dues by

sincere efforts. The efforts taken by the management to reduce the level of NPA

is up to the mark... Performance of the bank is satisfactory in 2006-07 compared

to its previous year.

Tumkur Grain Merchants Co-Operative Bank Limited is having

satisfactory financial position.


A STUDY ON NPA IN TGMC BANK LIMITED

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