Final Semester Mba Banking-project

A STUDY ON NON PERFORMING ASSETS AT "BCCB LTD"

CHAPTER SCHEME

Chapter 1:

INTRODUCTION

The project report of The Bangalore City Co-operative Bank Ltd.

has been designed into five chapters. This chapter deals with an

introduction to Banking, Reserve Bank of India, beginning of finance and

introduction to NON-PERFORMING ASSETS (NPA).

Chapter 2 :

RESEARCH DESIGN

This chapter deals with the methodology of research this includes:

1. Introduction

2. Title of study

3. Statement of the problem

4. Objectives

5. Scope of the Study

6. Benefits from the study

7. Source of Data Collection

Primary Data

Secondary Data

8. Methodology

9. Limitations of the Study

10. Chapter Scheme

SIKKIM MANIPAL UNIVERSITY


Chapter 3 :

BANK PROFILE

A Profile of "The Bangalore City Co-operative Bank

Ltd". This Chapter gives an insight into the background of the

BCCB Ltd.

Chapter 4:

DATA ANALYSIS & INTERPRETATION

This chapter is one of the Core Chapter of the report, where

the primary data is analyzed. This chapter mainly deals with the analysis

of data relating to (NPA) "NON-PERFORMING ASSET" of "The Bangalore

City Co-operative Bank Ltd". Here the data is analyzed by using Statistical

tools, techniques & inferences are drawn from the results obtained. This

chapter also consists of charts in order to support the tables.

Chapter 5 :

SUMMARY OF FINDINGS

This Chapter concludes the study by summarizing the inferences

drawn from the analysis & on the basis of inferences; final conclusion

drawn in relation to the set objective of research; further suggestions

have been made as completion of the study.


SESHADRIPURAM FIRST GRADE COLLEGE


Chapter 6 : SUGGESTIONS

This Chapter concludes the study further suggestions that have

been made as completion of the study.

Chapter 7 : CONCLUSION

This Chapter concludes the study by final conclusion drawn in

relation to the set objective of research.

Chapter 8 : ANNEXURES

This Chapter includes the bank balance sheet to the current fiscal

year.

Chapter 9 : BIBLIOGRAPHY

This Chapter includes the documentation reference links through the

knowledge acquired during project implementation.



CHAPTER-1

INTRODUCTION



INTRODUCTION

INTRODUCTION ABOUT BANKING INDUSTRY:

The word bank originated the French word ‘benque’ or Italian

‘banco’ which means an office for monitory transaction over the

counter. In those days banks or desks were used as centers for monitory

transactions.

During the barter system also, there existed traces of banking, i.e.

people used to deposit cattle and agricultural products in specified

places get loans of some other form in exchange for these. There is solid

evidence found in records excavated from Mesopotamia, showing some

bank existed around 1700 B.C. During this time barley, silver, gold,

copper, etc., were used as a standard for valuation.

ORIGIN OF BANKING INDUSTRY:

Greece was the first country to introduce a satisfactory system of

coinage. After the invention of coins started, a meaningful system of

banking came into existence taking into account all the avenue of

banking a credit system.

Rome was the first country to start a bank at the department of

state level in the 4th century B.C. with transactions such as depositing

and investments in other forms. In India ancient records show that

banking was popular and money lending was a common practice among

the common people.

In the olden days’ Goldsmith, merchants and money lenders

conducted the business. They had transactions among themselves by

which funds were transferred from one business firm to another. They



had no general or uniform principles of banking, lending, rate of interest,

etc.

INTRODUCTION TO BANKING IN INDIA

The Indian Companies Act defines the term banking as “accepting

for the purpose of lending or investment of deposits of money from the

public, repayable on demand or otherwise and withdrawable by cheque,

draft or otherwise”.

A Banker is a dealer in money and credit. The business of Banking

consists of borrowing and lending banks acts as financial intermediaries

between savers (lenders) and investors (borrowers) by accepting

deposits of money from a large number of customers and lending a

major position of a accumulated ‘pool’ of money to those who wish to

borrower. In this process banks secure reasonable return for the savers,

make funds available to the investors at a cost and earn a profit for

themselves after covering the cost of funds and providing for corporate

taxes to the government. Thus, the banking institutions in a country

mobilizes savings by accepting monetary deposits from the people,

participate in the mechanism for the exchange of goods and services and

extend credit while lending money.

HISTORY OF MODERN BANKING IN INDIA

Pre-nationalization period:

The history of modern banking in India dates back to the last

quarter of 18th century. During this period the English agency houses of

Bombay and Calcutta started banking business to India. They setup the



Bank of Hindustan around 1770 followed by setting up of quasi

government banking institutions like presidency bank of Bombay in 1840

and presidency Bank of Madras in 1873.

In 1921 all these banks were amalgamated and imperial bank was

constituted. In the late 19th and early 20th centuries, the Swadeshi

Movement inspired to start banks in India. The Indian Banks were

established during this period. In 1935 the Reserve Bank of India was

established as a central bank for regulating and controlling the Banking

business in the country. Soon after independence, the Reserve Bank was

nationalized in September 1948. The outlook of Reserve Bank further

changed after the inception of planning in 1950-51 and the country

adopting a socialistic pattern of society.

Post-nationalization period:

On an account of the top-sided growth of the banking system and

to bridge the gap between a few industrial houses and banks, the

scheme of the social control was imposed on banks with effect from Feb

1, 1969. It resulted in setting up of National Credit Council for more

equitable distribution of bank credit and legislative changes in the

Banking Regulation Act for making the board of directors of the banks

more board based. As a result the government resorted to a more

radical measure by nationalizing 14 major banks on July 1969. Later on in

April 1980, six more banks were nationalized to achieve the objective.

The objective of nationalization was to control the commanding

heights of economy and to meet progressively and serve he needs of the



developing economy in conforming to the national policy and objectives.

Another welcome feature of post – nationalization period is setting up of

regional rural banks setting up of regional rural banks as per the

provisions of the Regional Rural Bank Act 1976. These banks confine in

themselves the simplicity of operations as required by local conditions

and the efficiency and businesslike approach of commercial banks. At

the end of June 1986 there were 194 regional rural banks covering 342

districts. Thus, the banking system, during the post – nationalization

period has undergone a major structural transformation. There has been

a phenomenal expansion of branch network particularly the hitherto

under banked areas.

Present scenario of banking industry:

The Indian banking can be broadly categorized into

nationalized (government oriented), private banks and specialized

banking institution. The RBI acts as a centralized body monitoring any

discrepancies and shortcoming in the system. Since the nationalized

banks have required a place of prominence and has then seen

tremendous progress.

The need to become highly customer focused has forced the slow

of moving public sector banks to adapt a fast track approach.

The Indian Banking has come a long way from a sleepy business

institution to a highly proactive and dynamic activity. This

transformation has been largely brought by the large close of

liberalization and economic reform that allowed banks to explore new

business opportunities rather than generating revenue from



conventional stream i.e. borrowing and lending. The Co-operative banks

too have invested heavily in information technology to after

computerized banks services its clients.

New Generation Banking:

The liberalized policy of government of India permitted entry of

private sector in banking; the industry has witnessed the entry of new

generation private banks. The major parameter that distinguishes these

banks from all the other banks in Indian Banking is the level of services

that is offered to the customer. Verifying the focus has always being

centered on the customer understanding his needs and delighting him

with various configurations of benefits and a wide portfolio of product

and services. The popularities of these banks can be gauged by the fact,

that in as short span of time, these banks have gained considerable

customer confidence and consequently have shown impressive growth

sales.

CLASSIFICATION OF BANKS

Banks are classified into several types based on the function they

perform. Generally banks are classified into

1. Investment banks

2. Exchange banks

3. Commercial banks

4. Co-operative banks

5. Land development banks

6. Savings banks



7. Central banks

FUNCTIONS OF BANKING

A. The main functions are as follows;

1. Borrowing of money in the form of deposits.

2. Lending or advancing of money in the form of different

types of loan.

3. The drawing, making, accepting, discounting, buying and

selling, collecting and dealing in bills of exchange,

promissory notes, coupons, drafts, bills of lading, railway

receipts, warrants, debentures, certificates, securities both

negotiable and non-negotiable.

4. The granting and issuing of credit, travelers cheques, etc.

5. The acquiring, holding, issuing on commission,

underwriting, dealing in stock, funds, shares, debentures,

bonds, securities of all kinds.

6. Providing safe deposits vaults.

7. Collecting transmitting of money and securities.

8. Buying and selling of foreign notes.

9. The purchasing and selling of bonds scripts and other forms

of securities on behalf of constituents or others.

B. The subsidiary functions of banks are:

1. Acting as agents for governments or local authorities or any

other persons.

2. Carrying out agency business of any description.



3. Contracting for public and private loans and negotiation and

issuing the same.

4. Carrying on guarantee and indemnity business.

5. Managing to sell and realize any property or any interest in

any such property.

6. Undertaking and executing of trusts.

7. Granting of pensions and allowances and making payments

towards pensions.

RESERVE BANK OF INDIA

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 the recommendations 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 the beginning. The

Government held shares of nominal value of Rs. 2, 20,000.

Reserve 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 the Ministry 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 at Mumbai,

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

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

Functions of Reserve Bank of India

The Reserve Bank of India Act of 1934 entrust all the important functions of a Central bank the Reserve Bank of India.

a. Bank of Issue.

b. Bank to Government

c. Bankers Bank

d. Lender of the Last Resort

e. Controller of Credit

f. Custodian of Foreign Reserves

g. Supervisory functions



CO-OPERATIVE BANKS

The Co operative banks in India started functioning almost 100

years ago. The Co-operative bank is an important constituent of the

Indian Financial System, judging by the role assigned to cooperative,

the expectations the co-operative is supposed to fulfill, their number,

and the number of offices the co-operative 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 in India play an important role even

today in rural financing. The businesses of cooperative bank in the urban

areas also have increased phenomenally in recent years due to the sharp

increase in the number of primary co-operative banks.

While the co-operative banks in rural areas mainly finance

agricultural based activities including farming, cattle, milk, hatchery,

personal finance etc. 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, home finance, consumer finance, personal

finance, etc.


BANKS

Public Sector Bank

Foreign Bank

Co-Operative Bank

Private Sector Bank

Regional Rural Bank


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.

Cooperative banks in India finance rural areas under:

1. Farming

2. Cattle

3. Milk

4. Hatchery

5. Personal finance

Cooperative banks in India finance urban areas under:

1. Self-employment

2. Industries

3. Small scale units

4. Home finance

5. Consumer finance

6. Personal finance

According to NAFCUB the total deposits & lending 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 much better local reach,

personal interaction with customers and their ability to catch the nerve

of the local clientele.



AIMS OF CO-OPERATIVE BANKS

·To promote savings among members and thereby increase the

supply of funds.

·To tap outside sources for the supply of funds.

·To promote the effective use of credit and to reduce the risk in

the granting of credit.

·To reduce the cost of management through the honorary services.

Recent Developments

Over the years, primary (urban) cooperative banks have registered

a significant growth in number, size and volume of business handled. As

on 31st March, 2009 there were 2,104 UCBs of which 56 were scheduled

banks. About 79 percent of these are located in five states, - Andhra

Pradesh, Gujarat, Karnataka, Maharashtra and Tamil Nadu. Recently the

problems faced by a few large UCBs have highlighted some of the

difficulties these banks face and policy endeavors are geared to

consolidating and strengthening this sector and improving governance.

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.· 1960: 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 200crores.

In third new phase of Indian banking with the advent of financial and

banking sector reforms, introduced many more products and facilities in

the banking sector. In 1991 under the chairmanship of M. Narashiman

committee was set up by his name which worked for liberalization of

banking practices.

The country is flooded with foreign banks and their ATM stations. Efforts

are being put to give a satisfactory to customers.

FACTS ABOUT CO-OPERATIVE BANK

· Some cooperative banks in India are more forward than many of

the state and private sector banks.

· According to NAFCUB the total deposits & landings 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 much better local reach, personal

interaction with customers, and their ability to catch the nerve of

the local client.



EVOLUTION OF CO-OPERATAIVE BANK IN INDIA

The Cooperatives were first started in Europe to serve the credit-

starved people in Europe as a self-reliant, self-managed people’s

movement with no role for the Government. British India replicated the

Raiffeisen-type cooperative movement in India to mitigate the miseries

of the poor farmers, particularly harassment by moneylenders.

The first credit cooperative society was formed in Banking in the

year 1903 with the support of Government of Bengal. It was registered

under the Friendly Societies Act of the British Government. Cooperative

Credit Societies Act of India was enacted on 25th March 1904.

Cooperation became a State subject in 1919. In 1951, 501 Central

Cooperative Unions were renamed as Central Cooperative Banks. Land

Mortgage Cooperative Banks were established in 1938 to provide loans

initially for debt relief and land improvement.

Cooperatives have played an important role in the liberation and

development of our country. The word Cooperative has become

synonymous for dedicated and efficient management of rural credit

system. Reserve Bank of India started refinancing cooperatives for

Seasonal Agricultural Operations from 1939. From 1948, Reserve Bank

started refinancing State Cooperative Banks for meeting the credit needs

of Central Cooperative Banks and through them the Primary Agricultural

Cooperative Societies. Only 3% of rural families availed farm credit in

1951.

In 1954, the All India Rural Credit Survey Committee

recommended strengthening of DCC Banks and PACS with State



partnership and patronage to solve the farmers’ woes. Registrar of

Cooperative Societies became the custodian of Cooperatives from 1962

with the enactment of respective State Acts. Reserve Bank introduced

Seasonality and Scale of Finance for crop loans and provided for

conversion, replacement and re-schedulement to tide over crop loss due

to calamities.

The Primary Agricultural Cooperative Societies became multi-

purpose. Reorganization of PACS into viable units, FSCS, LAMPS started

under action programme of RBI in 1964. The finding of All India Rural

Credit Review Committee that coverage of cooperatives is limited to

hardly 30% of farmers led to nationalization of Banks. However,

Cooperatives have played a key role in meeting the credit needs of

weaker sections of farmers.

The establishment of Regional Rural Banks from 1975 has not

reduced the problems of rural credit as they reached only 6% of the

farmers. Cooperatives have contributed their part in the implementation

of 20-point programme and Integrated Rural Development Programme.

Though the Cooperatives were lagging behind in rural credit till 1991,

they regained their prime place with 62% share in rural crop loans

between 1991 and 2001.



DEFINITION OF CO-OPERATIVE BANKS:

In the words of Henry Wolff “Co-operative banking is an agency

which is in a position to deal with the small means on his own terms”.

Devine defines “a mutual society formed composed and governed

by working people themselves for encouraging regular saving and

generating miniature loans on easy terms of interest and repayments”.

FEATURES OF CO-OPERATIVE BANKS:

1. They are organized and managed on the principles of co-

operation self-help and mutual help. They function with the

rule of “one member one vote”.

2. Co-operative banks perform all the main banking function of

deposit mobilization, supply of credit and provision for

remittance facilities.

3. Co-operative banks belong to the money market as well as the

capital markets.

4. Co-operative banks are perhaps the first government

supported agency in India.

5. Co-operative banks accept current, saving, fixed and other

types of time deposits from individuals and institutions

including banks.

6. Co-operative banks do banking business mainly in the

agricultural and rural sector.



7. Some co-operative banks are schedule co-operative banks

while others are non-schedule co-operative banks.

8. Co-operative banks also required to comply with requirement

of statutory liquidity ratio [SLR] and cash reserve ratio [CRR]

liquidity requirements as other scheduled and non-scheduled

banks.

STRUCTURE OF COOPERATIVE BANKS

Following are the features of cooperative banks, which make them

hold in integral position in banking sector:


CO-OPERATIVE BANKS

STATE CO-OPERATIVE BANKS

STATE LAND DEVELOPMENT BANKS

URBAN CO-OPERATIVE BANKS

CENTRAL CO-OPERATIVE

BANKS

PRIMARY AGRICULTURAL

CREDIT SOCIETIES

CENTRAL LAND DEVELOPMENT

BANKS

BRANCHES OF STATE LAND DEVELOPMENT BANKS

PRIMARY LAND DEVELOPMENT

BANKS


1. The nature of cooperative banks is service oriented. So,

without intention of profit they provide quality service within

reach of common people.

2. Co-operative banks account for 42% of institutional lending in

rural sector and its covers about 65% of rural population.

3. The deposits and credit of these banks are about 15% and 35%

respectively of those of commercial banks.

4. The government and RBI have taken a number of steps to

improve the health and strength of co-operative banking in

India. In keeping with other financial sector reforms certain co-

operative banking sector reforms have also been carried out

after 1991.

5. The main factor for their increasing role is their local

operations. They mobilize deposits in a local area, which are

used for lending in same locality. Hence with increase in its

branches it contributes to balanced regional development.

6. Co-operative banks operations are of mixed type. Urban co-

operative banks, primary co-operative banks and state co-

operative banks.

7. District cooperative banks have a number of branches subject

to this it can be said that each cooperative institution in a

separate entity with a definite jurisdiction and has an

independent board.



8. Cooperative banks belong to money market as well capital

market. Primary Agricultural credit societies provide short term

and long term loans. Land development banks provide long-

term loans. Urban co-operative banks meet working capital

needs and fixed capital requirements. They also issue

debentures.

REFORMS IN CO-OPERATIVE BANKS

The field of rural credit is so vast in India the problems so diverse

and complex and the field of experimentation so wise that only if the

important issues and challenges before the rural credit are taken

adequately cooperative banks as major purveyors of rural credit would

be able to make the crucial difference in the lives of millions of our

countrymen in the countryside.

The financial sector reforms 1991 aimed at promoting a diversified

and efficient, competitive financial sector with the ultimate objective of

improving the efficiency of available resources, increasing the return on

investments and promoting an accelerated growth of the real sector of

the economy. In conformity with this and banking sector reforms gave

raise to reforms in cooperative sector, which is an integral part in

delivery of rural credit and promote its growth.

Reserve Bank of India has over the years put its faith in

cooperative banks as they hold a major share in agricultural credit. With

its number if branches it can percolate to all the corners of the country.

The Indian financial system has undergone several changes and now



comprises of widespread network of financial institutions. Accordingly

the co-operative credit structure has also grown. Despite the progress

reforms are required to bring out efficiently reduce non-performing

assets and increase capital base.

These reforms aim at improving the financial health and

capabilities by prescribing prudential norms. Prudential norms are

required for cooperative banks to reduce non-performing assets. Due to

the non-performing assets co-operative credit system is affected as a

whole.

INTRODUCTION TO FINANCE

Finance is regarded as life blood of an enterprise. This is because

in the modern money oriented economy finance is one of the basic

foundations of all kinds of economic activities. It is master key, which

provides access to all sources for being rightly said that business needs

money begets more money only when it is properly managed therefore

efficient management of its finance.

At any movement a business firm can be viewed as a part of funds

these funds come from a variety of sources like investors in the company

stock creditors, who lend in money and past earnings retained in the

business. Fund provided from these sources are committed to a number

of uses like fixed assets used in production of product & services

inventory used in the production facilitates sales, account, receivable

owned by customer, cash and marketable securities used for transaction

and liquidity purpose by given movements the pool changes and these

changes are known as fund flow.



Meaning of finance

Finance is defined as "the provision of money as the time when it

is required every enterprise, whether big, medium or small needs

finance to carry on its operations and to achieve its target. Finance is

regarded as the life blood of the business enterprise without adequate

finance no enterprise can possibly accomplish its objectives.

Definition of Finance

According to HG. Doug all "Business finance can broadly defined

as the activity concerned with planning, controlling and administering of

funds used in the business"

Function of FinanceFinancial Decisions or Finance Functions are closely inter-

connected. All decisions mostly involve finance. When a decision

involves finance, it is a financial decision in a business firm. In all the

following financial areas of decision-making, the role of finance manager

is vital. We can classify the finance functions or financial decisions into

four major groups:

1. Investment Decision or Long-term Asset mix decision

2. Finance Decision or Capital mix decision

3. Liquidity Decision or Short-term asset mix decision

4. Dividend Decision or Profit allocation decision

Scope of finance



The scope of finance function is as wide as the periphery of

finance. It concentrates primarily on money management and the

different auxiliaries which are incidental to for effective money

management, the different resources of business enterprise must be

mobilized. Decision on purchase of fixed assets and the methods of

utilization whether on working capital or investment and surplus funds

all these fall within the purview of finance function.

INTRODUCTION TO NON-PERFORMING ASSETS

Indian laws permitted banks to conceal much with the result that

the Balance Sheet and Profit and Loss A/c rarely revealed the true state

of their affairs.

The Narasimhan Committee therefore strongly emphasized the

need for bringing transparency in the financial statements of the banks

and recommended for a new set of formats for Balance Sheet and Profit

and Loss statements which were made effective from 1991-1992.

Banks provide loan and advances subjects to borrowers promise

for the payment of principal and interest in the future. In this process

banks are exposed to various types of risks including credit risk arising

from non-performing of loans and defaults of borrowers.

Moreover with Globalization and diversified ownership where

credit rating agencies constantly review the strength of the banks

managing the levels of NPAs assumes greater importance.



The cost of financial intermediation by banks is high partly

because of the cross subsidization of NPA. NPA is inevitable burden of

the banking industry. NPAs badly affect the financial health of the banks.

Hence control and management of NPAs have assumed serious

importance. It is well known fact that NPAs are the threat on the

profitability of the banks because the banks have not only to make

provisions but they have to meet the cost of funding these

unremunerative assets.

DEFINITIONS OF NON-PERFORMING ASSETS

An asset is classified as non-performing asset (NPA’s) if the

borrower does not pay dues in the form of principal and interest 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

advances/credit facilities granted to that borrower as non-performing

without having any regard to the fact that there may still exist certain

advances/ credit facilities having performing status.

In simple words, an asset which ceases to yield is a non-

performing asset.

Norms for Identification of NPA

Interest and/or installment of principal remain overdue for a

period of more than 90 days in respect of a term loan,


MOM=M0000000


The account remains 'out of order' for a period of more than

90 days ,in respect of an overdraft/cash credit (0D/CC)

The bill remains overdue for a period of more than 90 days in

case of bill purchased or discounted.

Interest and/or principal remains overdue for two harvest

season but for a period not exceeding two half years in case of

an advance granted for agricultural purpose ,and

The objectives of NPA Management

1.To make more assets performing.

2.To reduce quantum of NPA's and

3.To minimize the amount of provision requirements.

Effective NPA management involves the following aspects.

1. Understanding of NPA amount.

2. Identification of NPA' s;

3. Prevention of NPA's

4. Proper NPA accounting system

5. Up-gradation of fresh NPA's

6. Liquidation of chronic NPA's

7. Use of MIS and IT in NPA management.

8. Formulation of comprehensive NPA management

policy/strategies.

9. Rating of NPA management.

CAUSES FOR NON-PERFROMING ASSETS



EXTERNAL FACTORS :- Natural calamities and climatic conditions Recession, changes in Government policies changes in economic

conditions.

Industry related problems.

Impact of liberalization on industries.

Technical problems

INTERNAL FACTORS :-

Defective Lending process

Inappropriate technology

Improper SWOT analysis

Poor credit appraisal system

Managerial deficiencies

Internal defaulters Faculty projects.

Most of the project reports are ground realities, proper

linkages, product pricing etc.

Some approach for the "heck - of starting a venture, with

poor knowledge of product risks, over depended on poorly

paid killed workers and technicians.

Building up pressure for sanctions.

In depth handling by bankers lack of professionalism and appraisal

standards.

Non-observance of system, procedures and non-insistence of collaterals etc.

Lack of post sanction monitoring, unchecked diversions.

INDIAN ECONOMY AND NPA



Gross NPAs (non-performing assets) in Indian banking sector have

declined sharply to close to 3.0 per cent in 2006 (15.7 per cent at end-

March 1997). Net NPAs of the banking sector are now at close to one

per cent and the gap between the gross and net NPAs has narrowed

over the years. Recovery of dues is also more than the fresh slippages.

The decline in NPAs is particularly significant as income

recognition, asset classification and provisioning norms were tightened

over the years. For instance, banks now follow 90-day delinquency norm

as against 180-day earlier. Banks are also required to make general

provisioning (0.40 per cent) for standard advances.

According to Reserve Bank of India, improved profitability,

underpinned by robust macroeconomic environment and upturn in

interest rate cycle, has enabled banks to reduce the backlog of NPAs.

NARSIMHAN COMMITEE

FIRST COMMITEE

The committee on financial system, also known as Narsimhan

Committee, under the chairmanship of Shri M. Narsimhan, appointed by

the RBI recommended the introduction of these prudential accounting

norms by Indian Banks in its report submitted in December 1991. The

committee was of view of that...

A. If banks want to know the true and fair financial health of

bank then they should observed the prudential accounting

norms while making balance sheet and profit & loss account.



B. Classification of assets has to be done on the basis of objective

criteria.

C. Provisioning should be made on the basis of classification into

four different categories.

The income recognition, Assets Classification and provisioning norms

also known as Prudential Accounting Norms, provided that a bank

should not show profit which is merely a book profit by resorting to

practice like debiting interest to a loan account irrespective of its

chance of recovery and booking the same as income or by not making

provisions towards loan losses.

NARSIMHAN COMMITTEE'S RECOMMENATIONS

a. Committee has suggested that banks should operate on the basis

of financial autonomy and operational flexibility.

b. It has recommended "Capital Adequacy Norm" of 8%

c. These norms are applicable to all UCB's from 1st April, 1992.

SECOND COMMITTEE

The first committee had made recommendations in 1991, which

had resulted in basic changes in the matter of treatment of income,

assets classification and provisioning norms, etc.. .it was considered

necessary for government to continue the improvement with striker

rules in future also and for that second committee was made to



continue changes with certain modifications.

The second committee includes the following points:

1. If bank is working in foreign countries at presently then for them

the "Capital Adequacy Norm" is 9% which was 8% earlier.

2. Banks can't classify the account as NPA which are guaranteed by

the Central / State government, effective from the year 2000-

2001.

3. As per the existing norms, no provisions for standard assets but

from March 31st 2000, there is a norm of 0.25 percent on

standard assets.

4. Banks have to make a provision of 2.5% on their investment in

Government securities with effect from the year ending 31st

March, 2000. In future, this provision is likely to be raised to 5%.

5. The present norm is of 180 days for the account to be treated as

NPA but after 31st March, 2000, this period is reduced to 90 days

only.

6. Banks have been asked to reduce the level of NPA to 5% of their

total advances till 31st March, 2000. The percentage has to be

brought down to less than 3% with effect from 31st March, 2002.

SIKKIM MANIPAL UNIVERSITY STANDARD

ASSETS

A

S

S

E

T

S

r

...................

LESS

1 TO 3

THAN 1

YEARS

YEAR


RBI INTRODUCED PRUDENTIAL NORMS ON THE

RECOMMENDATIONS OF THE NARASIMHAM COMMITTEE IN THE

YEAR 92-93.

The above norms have three main criteria:

1. Asset classification

2. Income Recognition

3. Provisioning

1. ASSET CLASSIFICATION:

For the purpose of making provisions for bad and doubtful loans and

advances, banks need to classify them into the following broad

categories;


ASSETS CLASSIFICATION

PERFORMING ASSETS

NON PERFORMING ASSETS

STANDARDSUB-

STANDARD ASSETS

1 TO 3 YEARSLESS THAN 1 YEAR

LOSS ASSET

ABOVE 3 YEARS

DOUBTFULASSETS


A. Performing assets: Also known as Standard Assets are the assets

which do not disclose any problem and which do not carry more than

the normal risk attached to the business. Performing asset is one

which generates income for the bank. It is an asset where the interest

and or principal are not overdue beyond 180 days (modified to 90

days, w.e.f., Mar 2004) at the end of the financial year.

B. Non-performing asset: An amount is to be treated as non performing

asset when it ceases to generate income for the Bank. An asset may

be treated as Non Performing Asset (NPA), if interest and /or

installment of Principal remain overdue for a period exceeding

180days (modified to 90 days w.e.f. Mar 04) and Banks and FIs should

not take into their Income account, the interest accrued on such

NPAs, unless it is actually received/recovered.

NPAs are further classified into: Substandard Assets: Loans which are non-performing for a

period not exceeding two years, where the current net-worth

of the borrower or the current market value of the security,

against which the loan is taken, is not enough to ensure full

recovery of the debt.

Doubtful Assets: Loans which have remained non-performing

for a period exceeding two years and which are not classified as

loss assets by the management or the internal/external auditor

appointed by RBI.

Loss Assets: Assets where loss has been identified by the

internal/external auditor of the bank or the RBI, but the



amount has not been written-off wholly or partly. These assets

are considered unrecoverable and are of little value to the

lending institution.

2. INCOME RECOGNITION

The income recognition is linked to the concept of performance of

the assets. In other words the income from performing assets only is

to be recognized. The income from non-performing assets is

recognized only to the extent of actual recovery made during the

accounting year.

3. PROVISIONING

The amount of provision required to be created for each asset

depends on the classification of the assets, availability/value of

security, other guarantee available and the age of the NPA etc.

IMPACT OF NON-PERFORMING ASSSETS

a) Non-Performing Assets are drag on profitability of banks

because besides provisioning banks are also required to meet

the cost of funding these unproductive assets.

b) Non-Performing Assets reduce earning capacity of assets.

Return on assets also gets affected.

c) As Non-Performing Assets not earn any income, they adversely

affect capital adequacy ratio.

d) No recycling of funds.



e) Non-performing assets also attract cost of capital for

maintaining capital adequacy ratio.

f) Non-Performing assets demoralize the operating staff and

stakeholders.

g) It will badly affect the image of the bank concerned.

h) Affect the moral of the employees and decisions making for

fresh loans suffer.

i) Enhances administrative, legal and recovery costs.

GENRAL CAUSES OF NON-PERFORMING ASSETS

Directed and pre-approved natures of loans sanctioned under

sponsored programmes.

Misutilisation of loans and subsidies.

Diversion of funds.

Absence of security.

Lack of effective follow-up (post-sanction supervision& control).

Absence of bankruptcy and foreclosure laws.

Decrepit legal system.

Cost in-effective legal recovery measures.

Difficulty in execution of decrees obtained.

Lack of marketing support.

Improper and inadequate credit appraisal.



Demand recession.

Frequent changes in Government’s policies.

Industrial sickness and labour problems.

Technology obsolescence.

Incompetence-Management failures.

MEASURES TO TACKLE THE NON PERFORMING ASSETS

1. LOK ADALATS:

Lok Adalats have been set up for recovery of dues in accounts

falling in the Doubtful and loss category with outstanding balance up to 5

lakhs, by way of compromise settlement.

2. CIVIL COURTS

For claims below Rs.10 lakhs, the banks and FIs can initiate

proceedings under the Code of Civil Procedure of 1908, as amended, in a

civil court.

The courts are empowered to pass injunction orders restraining

the debtor through itself or through its directors, representatives, etc

from disposing of, parting with or dealing in any manner with the subject

property.

Courts are also empowered to pass attachment and sales orders

for subject property before judgment, in case necessary.

3. DEBT RECOVERY TRIBUNAL (DRT)



CDR is an non-statutory mechanism institutionalized in the year

2001 to provide timely and transparent system for restructuring

corporate debts of Rs.20 crores and above, of viable entities financed by

Banks and FIs under consortium or multiple banking arrangements.

It is a voluntary system based on Debtor - Creditor Agreement

(DCA) and Inters Creditor Agreement (ICA). At present 10 FIs and 49

Public and Private sector Banks are the members of the CDR mechanism.

4. REVENUE RECOVERY ACT:

In some states, revenue recovery act has been made applicable to

banks. Since this is also expeditious process of adjudicating claims, banks

may be notified to cover the Act by state.

5. ONE TIME SETTLEMENT SCHEMES (OTSS)

One Time Settlement Schemes launched in May’99 & July’00 has

enabled Banks to recover outstanding amount in default up to 10 crores

has been introduced in the month of Feb’03 its results will be seen in due

course.

RECOVERY OF NPA

IMPORTANCE OF RECOVERY:

· Increase in the income of bank.

· Increase in the trust of share holder in bank.

· Level of NPA reduces as the recovery done.

· Decrease in provisioning requirements.



STEPS TAKEN BY GOVERNMENT TO RECOVERING

NPA: SECURITIZATION ACT

This act is also applicable to all Urban Co-Operative Banks.

According to this act Bank 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.

Difficulties with the Non Performing Assets

1. Owners do not receive a market return on their capital. In the

worst case, if the bank fails, owners lose their assets. In modern

times, this may affect a broad pool of shareholders.

2. Depositors do not receive a market return on saving. In the worst

case if the bank fails, depositors lose their assets or uninsured

balance.

3. Banks redistribute losses to other borrowers by charging higher

interest rates, lower deposit rates and higher lending rates

repress saving and financial market, which hamper economic

growth.

4. Nonperforming loans epitomize bad investment. They misallocate

credit from good projects, which do not receive funding, to failed

projects. Bad investment ends up in misallocation of capital, and

by extension, labour and natural resources. The economy



performs below its production potential.

5. Non Performing asset may spill over the banking system and

contract the money stock, which may lead to economic

contraction. This spillover effect can channelize through liquidity

or bank insolvency:

a. When many borrowers fail to pay interest, banks may

experience liquidity shortages. This can jam payment

across the country.

b. Liquidity constraints bank in paying depositors.

c. Under capitalized banks exceeds the bank's capital base.

Legal methods available for recovery of loans in The Bangalore City Co

Operative Bank Ltd. (BCCB)

The various legal proceedings for recovery of debt are:-

1. Legal notice

2. Complaint

3. Suit

4. Summons to defendant

5. Written statements from the defendant.

6. Discovery and inspection

7. Notice to admit facts

8. Summon witness

9. Hearing and disposable of units. 10. Judgment debtor



INTRODUCTION OF SECURITISATION ACT 2002

Securitisation and Reconstruction of Financial Assets and

Enforcement of Security Interest Act (SARFAESIA), 2002 extends to

whole of India including the State of Jammu & Kashmir. The act is

effective from 21.06.2002. It also covers the earlier loans which are

outstanding.

The need for the setting up an Asset Reconstruction Company for

acquiring distressed assets from Banks and FIs with a view to develop

market for such assets was being felt, since long. Narasimhan Committee

1 & 2 and the Verma Committee on restructuring of weak Banks has

strongly recommended the setting up of Asset Reconstruction

Companies (ARCs).

The business of Securitization and Reconstruction is primarily

meant for more than one purpose:

To regulate the business of securitization and reconstruction

of the financial interest.

To regulate enforcement of the security interest and for the

matters connected therewith or the matters incidental

thereto.

The debt securitization is a new concept in the Indian financial

markets and is primarily meant for enhancing the liquidity of the Banks

and FIs which have extended financial assistance to the borrowers for

various purposes. The debt securitization makes available with these

institutions the security papers against the financial assets which have



been created out of the financial assistance sanctioned and disbursed by

these institutions and in the case of a default by the borrowers the

secured creditors can have a recourse to either the securitization of the

financial asset or the reconstruction of the same.



CHAPTER-2

RESEARCH DESIGN



RESEARCH DESIGN

Research Design of the study is a conceptual structure a sketch or

plan laid out of conducting the study. It is considered as a blue print of

the final copy of the project where it shows the activities undertaken

while doing the study. It constitutes the steps taken beginning with

collection, clarifying, and analyzing, interpreting, processing and final

putting it in an actual form.

According to Clair Sleets & other "A research design is

arrangement for collection and analysis of data in manner that aims to

combine relevance to the research purpose with economy in procedure".

Research is defined as "a scientific & systematic search for

pertinent information on a specific topic". Research is an art of scientific

investigation. Research is a systemized effort to gain new knowledge. It is

a careful inquiry especially through search for new facts in any branch of

knowledge. The search for knowledge through objective and systematic

method of finding solution to a problem is a research.



DESIGN OF THE STUDY

TITLE OF THE STUDY

“A STUDY ON NON PERFORMING ASSETS AT

THE BANGALORE CITY CO-OPERATIVE BANK

LTD, BANGALORE.”

STATEMENT OF THE PROBLEM:

Banking institutions by proving financial assistance to business

units have contributed to economic growth of the country. In recent

years Loans and advances given by them are not yielding expected

returns giving rise to NPA's.

The NPAs are growing in such a rate where banks profits are eaten

away by NPAs. Hence there is need to study the causes of such NPAs and

steps taken by banking institutions and government to downsize such

NPAs.

NEED AND IMPORTANCE OF THE STUDY

The Banks and Financial Institutions have been burdened with ever

increasing Non Performing Assets.

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

· It helps to know the strategies adopted by banks to reduce the NPA level and to understand the NPA provisions norms in bank.



OBJECTIVES OF THE STUDY

The main objectives of the study are

1. To identify the nature of the problem in NPA's.

2. Reasons/causes for the NPA's in agriculture sector the recovery of

loans is very tricky.

3. To assess the financial implications of NPA's at The Bangalore city

Cooperative Bank Ltd.

4. To study relevant models and their application in reducing NPA's

at The Bangalore City Co-operative Bank Ltd.

5. To analyze the recovery strategies for improving the profitability

of The Bangalore City Co-operative Bank Ltd.

6. To identify appropriate measures to control of NPA's in The

Bangalore City Co-operative Bank Ltd.

SCOPE OF THE STUDY

Scope of study is general term means the extent to which it is

possible to cover the subject. The area of operation is confined to the

NPA in "The Bangalore City Co-operative Bank Ltd", Bangalore.

This study attempt to find out NPA in The Bangalore city Co-operative Bank.

In this study financial report of 2006-07, 2007-08, 2008-09, 2009-10 and 2010-11 are used.



METHODOLOGY OF THE STUDY

1. Collection of data from The Bangalore City Co-operative Bank Ltd.

2. Discussion with the executives on The Bangalore City Co-operative

Bank Ltd, through an interview schedule.

TOOLS FOR THE COLLECTION OF DATA

Sources of data:

The data consisted of both primary data and secondary data

1. Primary data: “Primary data is first hand information which is

collected a fresh and thus happens to be original in character”.

This data is collected through Personal discussions with

the General Manager, Deputy General Manager, Assistant

General Manager and other officers in charge of recovery

department through structured questionnaire were held.

2. Secondary data: “Secondary data are those which have already

been passed through the statistical process”.

These data is collected from RBI/IBA bulletins and

journals, financial magazines, financial statements/Annual

reports and Audited Reports of the Banks, Text books and

Websites.



Data analysis:

The data collected from the primary and secondary sources

relating to NPAs has been analyzed and tabulated and draw the

appropriate tables. Interpretations were made based on tables.

LIMITATIONS OF THE STUDY:

1. The study is confined to only one Bank i.e. The Bangalore City

Co-operative Bank Ltd.

2. Due to time constraint depth analysis could not be made.

3. The actual identity of the Banks is kept confidential due to the

sensitive nature of the topic

4. Some of the information is of confidential in nature that could

not be divulged for the study.

5. The study is limited only for NPAs mechanism as time is the

main constraint.

REFERENCE PERIOD

Five years annual reports & audited data are considered

which includes 2008-09, 2009-10 and 2010-11.



CHAPTER-3

BANK PROFILE



BANK PROFILE

History of the Bangalore City Co-Operative Bank Limited

“THE BANGALORE CITY CO-OPERATIVE BANK LIMITED” was

the first urban co-operative bank in the country started in April 06,

1907 by Sri.K.Ramaswamy and others.

[Administrative Office: No.3, Pampamahakavi Road, Chamarajpet, Bangalore – 560018.]

The Bangalore City Co-operative Bank Limited was

established under the Co-operative society act bearing

registration number 314/CS, dated 08.04.1907 from the Registrar

of Co-operative Societies in Karnataka and the License was

granted by RBI No.UBD/KA/642, dated 11.11.1986 for conducting

the “Banking Business”. The bank has 12 branches along with one

administration office and all branches have been computerized

under the jurisdiction of Bangalore City Co-operative Corporation,



Bangalore Development Authority and Bangalore urban

&peripheral areas. The operation of the bank is throughout

Bangalore Co-operative Limited.

Trademark of “The Bangalore City Co-operative Bank Ltd”.:

In consideration of the application submitted to the Govt. of India,

to get registered the above image of godess Lakshmi as

Trademark, as per the Trademark Act of 1959, sec 23(2), rule 62(1)

Trademark No.943843 dated 31-7-2000

the Govt. approved and registered the

above image as a trademark and has been

given letter of approval on 15-03-2008.

GOALS AND OBJECTIVES OF THE BANK:

The Bangalore City Co-operative Bank Ltd., believes that every

individual from each status of society needs affordable, relevant and

quality services. The goals and objectives of bank are as follows;

1. To take measures / steps to increase the deposits to Rs.500

crores and loans and advances to Rs.370 crores.

2. To earn more than Rs.9 crores of net profit.

3. To reduce the net non-performing assets to 0%.



4. To give more advantages to customers by converting all the

branches into core- banking system.

5. To take steps to have own building for all the branches.

6. To provide more and more training and development

programmes to increase efficiency of employees.

7. To encourage savings, self help and co-operative principles

among the members and depositors of the bank.

8. To undertake banking transaction and co-operative system as

per direction of RBI, Central Government and State Government.

9. To reduce the cost of the management through the honorary

services of members and thereby keep the cost of credit as low

as possible.

10.To promote the effectiveness of credit and to reduce the risk in

granting a credit through careful and continuous supervision of

the operations of the borrowing members.



VISION STATEMENT

OUR VISION IS OUR MISSION

Founded in 1907, this unique financial institution rests on the

pillars of thrift, fellowship, character, accommodation and the selfless

service of all individuals and organizations who wish to help themselves

progress. We see ourselves as a family of honest, loyal and committed

professionals, harmoniously employing technology, innovation and the

human touch to achieve customer satisfaction and goodwill are the

cornerstones of our success and the focus of all our efforts.

The prosperity of our customer is the engine of our success and

they will find in us a fast, timely, flexible, co-operative and competitive

partner in their progress. We are committed to approachability,

simplicity and transparency in our dealings with all our stakeholders and

shall be a temple of their trust.

`We shall use our employee involvement and sense of

togetherness to generate high levels of teamwork, efficiency, excellence

and profits. We shall mobilize aggressively, invest wisely, disburse

prudently, recover assiduously, reduce costs and create a learning

organization that offers products and services in tune with and ahead of

the time.



ORGANIZATION CHART OF THE BANGALORE CITY CO-OPERATIVE BANK

LTD.



BRANCHES:

At the end of the financial year 2008-09, including administrative

office “The Bangalore City Co-operative Bank Ltd” is having 13 branches

throughout the Bangalore City. Its branch wise deposit, loans &

advances and net profit are as follows.

Rs. 000’s

SL. NO.

BRANCHESDATE OF STARTED

TOTAL DEPOSITS

TOTAL LOANS &

ADVANCES

NET PROFIT

1. Main Branch, Chamarajpet.

06-04-2007 906580 819506 33202

2. Vijaynagar 24-02-1980 642129 419626 8777

3. Vijayanagar 9th Block 25.01.1981 396813 173112 302

4. Indiranagar 19-12-1983 571798 182287 1535

5. Chamarajpet West 07-02-1988 163382 248523 14617

6. Shanthinagar 03-09.1992 94564 143545 6492

7. Mahalakshmipuram 07-07-1994 264201 160861 1204

8. Sanjaynagar 11-08-1994 220257 95412 1045

9. Padmanabhanagar 04-09-1995 144098 113703 2157

10. Koramangala 30-10-1996 165431 181855 10849

11. Avalahalli 16-01-2002 154604 210876 10021

12. R.T.Nagar 15-02-2002 57433 159250 9038

13. Jnana Jyothi Nagar 22-03-2009 3019 838 3



AWARDS:

Since from the opening, the bank has been functioning effectively.

The Bangalore City Co-operative Bank Ltd., was awarded by “Shri.

Kanteerava Narasimha Raja Odeyar Bahadur” Ex. King of Mysore in

1926, 1927 and 1928 as the “Best Urban Co-operative Bank”.

In 2001-2002 and 2003-2004 the State Government of Karnataka

awarded as the “Best Urban Co-Operative Bank”.

COMPETITORS INFORMATION:

As The Bangalore City Co-operative Bank Ltd., is the urban Co-

operative Bank, it is facing competition from the commercial banks.

Commercial banks undertake a number of banking services. Since the

urban co-operative banks are localized and do not have network of

bankers they are not in a position to meet all the banking services.

Therefore the institution like Government, public sector undertakings

and the urban co-operative banks are facing competition from the

commercial banks.



BANK ADMINISTRATIVE COMMITTEE

President - Avalahalli Chandrappa. R.

Vice president - Bhagyalakshmamma. L.

BOARD OF DIRECTORS

· Dr. Devraj.T.M

· Anjanappa

· C.M. Bhagyalakshmamma

· K. Krishnappa.

· C. Govindraj

· Basavaraju

· C.K. Chikkanaiya

· T.P.Yoga

· K.P. Suresh

· C. Raghunath

· G.S. Vijay

· U.P. Puranik.

· K. Krishnamurthy.

· P. Doddaiya

· N. Manjunath

Resource mobilization



1. Customer profile

The bank has maintained a profile important customer and the

branch as achieved to a greater extend by getting new connections from

other Institution and individuals.

2. Popularity of deposit scheme

The different deposit schemes like fixed deposits, Rajatha cash

Certificates; Arunodaya cash certificate and Nirantara Yogakshema

deposits are becoming very popular. The bank is staving popularized

these schemes.

3. Customer services

By and loge tile services provided by the bank is good and these

are No complaints from the curt service in Bangalore city co-operative

Bank is the one of the reasons for attracting more customers meeting

over the Recommendation by the sub committees and Board meeting.

4. Deployment of fund

As the bank is situated in residential area the lending rate has

been less but by introducing new and attractive schemes like Rajatha

cash certificates etc, the lending has been increasing. The bank is also

making sin cue efforts to bring a significant change in the deployment of

funds.

5. Recovery

The branch is giving it most importance for the recovery of the

overdue loans. This is implemented with the help of the sale officer. Tile

bank has obtained the services of sale officer with the co-operation of

the other three co-operative Banks under the law.

6. Human Resource



Staff relationship in the bank is excellent. A sub-committee

monitors the day-to-day affairs in the head office. This sub-committee

corrects the mistakes and gives its previous suggestions to the staff

member to provide excellent service.

7. Profitability

Sincere effects are made to recover non-performing assets so as

to realize unchanged interest cash remittance is also affected by

monitoring the cash holding of the branch with the given prescribed

limits.

Main operations of Bank

· Cash Receipts/Deposits.

· Cash Withdrawals.

· Sanctions and disbursement.

· Locker facilities,

· Updating and disbursement of loan.

· Issuing demand drafts.

Product Profile:-

The different types of loans and advances are as follows:

1. House construction loan.

2. Loan on immovable property.

3. Vehicle loan.



4. Site purchasing loan.

5. Loan for business on site.

6. Industrial loan.

7. Security loan.

8. Business loan.

9. Business improvement loan.

10. Gold loan.

11. Two wheeler loan.

12. IVP/VSC/LIC bond loan.

13. Overdraft on current account.

14. Overdraft on deposits.

15. Loans on deposits.

16. Festival advance.

17. Staff vehicle loan.

18. Special salary advance.

19. Staff houses building loan.



CHAPTER-4

DATA ANALYSIS AND

INTERPRETATION



ANALYSIS AND INTERPRETATION OF DATA

Banking system which constitutes the core of the financial sector

plays a vital role in transmitting monetary policy impulses to the

economic system. Therefore its efficiency and development are vital for

enhancing growth and improving the changes for stability. During the

recent past, profits of the Bank came under pressure due to rise in

interest rates, decrease in non-interest income and increase in provisions

and contingencies.

The Banks and Financial Institutions have also been burdened with

ever increasing Non Performing Assets

The mounting menace of NPAs has raised the cost of credit, made

Indian businessmen uncompetitive as compared to their counterparts in

other countries. It has made Banks more averse to risks and squeezed

genuine Small and Medium enterprises from accessing competitive credit

and has throttled their enterprising spirits as well to a great extent.

Till 2002 neither there were any legal provisions for facilitating

Securitization of financial assets of Banks nor was there any legal

framework to take possession of securities and sell them without the

intervention of the court.

The Securitization and Reconstruction of Financial Assets Act, 2002

was a step in this direction. The Act has provided an enabling legal

framework for setting up of Securitization or Reconstruction Company

and the manner of acquisition of financial Assets by such companies. This

Act has been enacted to help Banks and FIs to tackle the NPAs problem.



The Securitization Act enables the Banks and FIs to sell off/transfer

the NPAs without the intervention of court and the sale proceeds of the

assets are to be used for payment to the secured creditors for the assets

taken over from them. The Act was bound to create ripples in the

corporate sector and at the same time provide a much needed balm to

the banks and financial institutions.

REASONS FOR NPAs IN THE BANK:

The main reasons for NPAs in The Bangalore City Co-operative

Bank Ltd. are as follows;

1. Improper credit appraisal

2. Willful default

3. Diversion of funds

4. Lack of effective follow up

5. Cost ineffective legal measures

6. Difficulty in execution of decrees



MEASURES FOR THE RECOVERY OF NPAs ADOPTED BY THE BANK

The Bangalore City Co-operative Bank follows following measures

to recover those NPAs;

1. Legal Measures

2. Persuasion method

3. Coercion method

LEGAL RECOVERY MEASURES TAKEN BY THE BANK

1. If the branch people are not able to recover the loan

amount, the file is referred to Legal Department for

arbitration.

2. The legal department will initiate all the steps to recover

the amount, finally E.P (Execution Petition) will be filled.

3. The E.P files are handed by Sale Officer / ARCs who is

appointed from co-operative department. As soon as the

file is received, the sale officer will send the recovery force

to identify the defaulter and his property. After

identification, form no.6 will be issued attaching the

property for sale and to pay the amount within 10days.

4. If the party does not settle the amount with in 10days, then

Form no.8 & 9 (sale date of the mortgaged property) will be

fixed gig one month time.



5. Even though after issuing of Form No.8 & 9, if the party

does not give fruitful than a paper publication “fixing the

sale of property” will be advertised.

6. Before three days of option, the locality people where the

mortgage property exists and the others are invited to

participate.

7. Then auction of that property will be conducted among the

bidders and the auctions will be confirmed to the highest

bidder.



T A B L E : 4 . 1

Table showing Classification of NPA at BCCB Ltd.

[Rs. In lakhs]

Particular

s

2006-07 2007-08 2008-09 2009-10 2010-11

Total % Total % Total % Total % Total %

Standard

Assets

12677.6

4

84.4

2

21099.6

3

90.2

9

25985.1

4

88.1

3

32236.7

8

91.3

3

41235.4

3

92.8

5

Sub

Standard

Assets

1721.44 11.4

6

1807.89 7.47 2968.32 10.0

7

2384.37 6.75 2608.21 5.87

Doubtful

Assets

618.40 4.12 460.92 1.97 530.98 1.80 677.04 1.92 568.48 1.28

Analysis:

The above table shows the Classification of NPA of BCCB Ltd for

the last 5 years. The Standard Assets are showing an increasing tendency

during 2007 to 2011 from 87.42% to 92.85% which is favorable for bank.

The Sub-standard Assets are continuously decreasing during 2007

to 2011 from 11.46 to 5.87. This is not favorable for bank it should try to

increase it further.

The doubtful assets are gradually decreasing from 4.12% to 1.28%

during 2007- 2011 and bank should try to reduce it further.



GRAPH: 4.1

The Graph showing Classification of NPA at BCCB Ltd

Interpretation:

The standard Assets are showing an increasing trend during the last 5

years and it is favorable for bank. The sub-standard assets are showing

an overall decreasing trend which is not favorable for bank and it should

try to increase by adopting effective measures. The Doubtful Assets are

showing a gradual decrease during previous years which is good for bank

and should try to decrease it further.


"-;


RATIO ANALYSIS

The relationship between two related items of financial

statements is known as ratio. A ratio is just one number expressed in

terms of another. The Ratio is customarily expressed in three different

ways. It may be expressed as a proportion between the two figures.

Second it may be expressed in terms of percentage. Third, it may be

expressed in terms of rates.

To analyzed the NPA situation in bank and from that to

know about the banks credit appraisal system and level of risk in bank.

Ratios are as follows:

1. GROSS NPA RATIO.

2. NET NPA RATIO.

3. PROBLEM ASSETS RATIO.

4. PROVISION RATIO.

5. SUB-STANDARD ASSETS RATIO.

6. DOUBTFUL ASSETS RATIO.



TABLE : 4.2

Gross NPA Ratio:

Gross NPA Ratio is the ratio of gross NPA to gross advances of the

Bank. Gross NPA is the sum of all loan assets that are classified as NPA

as per the RBI guidelines. The ratio is to be counted in tens of

percentage and the formula for GNPA is as follows:

Gross NPAGross NPA Ratio = * 100

Gross Advances

The table showing Gross NPA Ratio in the BCCB Ltd. [Rs. in iakhs]

Years Gross NPA Gross Advances Gross NPA Ratio2006-07 2339.84 15017.48 15.58%2007-08 2268.83 23368.44 9.70%2008-09 3499.30 29484.58 11.86%2009-10 3061.41 35298.19 8.67%2010-11 3176.07 44412.12 7.15%

Analysis:

Gross NPA ratio shows the bank's credit appraisal policy. High

Gross NPA ratio means bank have liberal appraisal policy and vice-

versa.

In BCCB Ltd. Gross NPA ratio was 15.58% in March-2007 and it has

been decreased in the year 2008 to 9.70%. However in the year 2009 it

increased to 11.86% and then onward ratio is continuously decreasing

from 8.67% to 7.15%. Gross NPA ratio is lower hence bank has taken

effective measures to reduce the ratio.



GRAPH: 4.2

The graph showing Gross NPA Ratio in the BCCB Ltd.

Interpretation:

The Gross NPA Ratio shows overall decrease for the last 5 years

except for year 2008-09. Hence the bank has taken measure to recover

its NPA and is trying to decrease it further.

TABLE: 4.3



Net NPA Ratio:

The Net NPA percentage is the ratio of net NPA to net

advances, in which the provision is to be deducted from the gross

advance. The provision is to be made for NPA account. The formula for

that is:

Net NPANet NPA Ratio = *100

Net Advances

The table showing Net NPA Ratio in the BCCB Ltd.

[Rs. In lakhs]

Years Net NPA Net Advances Net NPA Ratio

2006-07 359.23 13036.87 2.75%2007-08 203.71 21303.32 0.95%2008-09 1332.04 27317.32 4.87%2009-10 821.69 33058.47 2.48%2010-11 794.16 42029.58 1.88%

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 don't have enough fund to do provision against

the Gross NPA.

In BCCB Ltd Net NPA ratio was 2.75% in March-2007 and it

has been decreased in year 2007 to 2011 from 2.75% to 1.88% except

in the year 2009 it has reached to 4.87% due to Global Recession.

Net NPA ratios are lower Hence; measures have been taken to reduce

Net NPA.

GRAPH 4.3


http://Recession.Net/

http://Recession.Net/


The graph showing Net NPA Ratio in the BCCB Ltd.

Interpretation:

The Net NPA Ratio has been gradually decreasing from the year

2007 to 2011, but in the year 2008-09 it has gone up more than

50% compared to previous years. This shows that bank has done

enough provisions compared to previous years.



TABLE: 4.4

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.

Gross NPAProblem Assets Ratio =

T o t a l A s s e t

The table showing Problem Asset Ratio in the BCCB Ltd.

[Rs. in lakhsl

Years Gross NPA Total Assets Problem Asset Ratio

2006-07 2339.84 15017.48 15.58%2007-08 2268.83 23368.44 9.70%2008-09 3499.30 29484.44 11.56%2009-10 3061.41 35298.19 8.67%2010-11 3176.7 44412.12 7.15%

Analysis:

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

the level of risk on bank's assets.

In BCCB Ltd Problem Asset ratio was 15.58% in March-2007 and after

that it has been decreased from 15.58% to 9.70% in March-2008.

But again it had been increased to 11.56% in March-2009.This ratio

is continuously decreasing in bank except in March-2009.


* 100


GRAPH: 4.4

The graph showing Problem Asset Ratio in the BCCB Ltd.

Interpretation:

The problem Asset Ratio is continuously decreasing tendency in 2006-

07, but in the year 2008-09 there is an increasing tendency. From

2008-09 there is a gradual decrease in the ratio. This is appreciable to

the growth of the bank. This is achieved by adopting the various

recovery measures by the bank.



TABLE: 4.5PROVISION RATIOProvisions are to be made for to keep safety against the NPA,

& it directly affect on the gross profit of the Banks. The provision

Ratio is nothing but total provision held for NPA to gross NPA of

the Banks.

Total ProvisionProvision Ratio = *100

Gross NPA

The table showing provision at Ratio in the BCCB Ltd. [Rs. in Lakhs]

Years Total Provision Gross NPA Provision Ratio (%)2006-07 1980.61 2339.84 84.64%

2007-08 2065.12 2268.83 91.02%2008-09 2167.26 3499.30 61.93%2009-10 2239.72 3061.41 73.15%2010-11 2382.54 3176.7 75.00%

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.

In BCCB Ltd they have made 84.64% and 91.02% provision

in March-2007 and 2008 which shows that it was over provision

but after that in March-2009, 2010 and 2011 it is 61.93%,

73.15% and 75% respectively which indicate that provision

are fair. So, the bank is trying to balance between Over Provision

and Under Provision.



GRAPH: 4.5

The graph showing Provision Ratio in the BCCB Ltd.

Interpretation:

The Provision ratio during 2007and 2008 are in increasing tendency and

there is a sudden decrease during 2008 from then onwards gradual

increase can be seen in the graph. The bank is making efforts to

overcome the over and under provision situation.

TABLE: 4.6



SUB-STANDARD ASSETS RATIO.

It is the ratio of Total Substandard Assets to Gross NPA of the bank.

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

Gross NPA

The table showing Sub-Standard Assets Ratio in the BCCB Ltd.

[Rs. in Lakhs]

Years Total sub-Standard

Gross NPA Sub-standard

Assets Ratio (%)2006-07 1721.44 2339.84 73.57%2007-08 1807.89 2268.83 79.68%2008-09 2968.32 3499.30 84.82%2009-10 2384.37 3061.41 77.88%2010-11 2608.21 3176.7 82.10%

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 BCCB Ltd this ratio was 73.57% in March-2007, it is

continuously increasing during 5 fiscal years which is good for bank

and it is 82.10% in year March-2011 this is Favorable for bank. As the

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

are high.

GRAPH 4.6



The graph showing Sub-Standard Assets Ratio in the BCCB Ltd.

Interpretation:

The Sub-standard Assets Ratio is continuously increasing

during 2007 and 2009, but sudden decrease can be seen during

2010 the bank has taken effective measure to increase the

substandard assets during 2011. Higher the sub-standard asset ratio

the chance of assets recovery will be high.



TABLE: 4.7

DOUBTFUL ASSETS RATIO.

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

Doubtful Asset Ratio =

Gross NPA

The table showing Doubtful Assets Ratio in the BCCB Ltd.

[Rs. in Lakhs]

Years Total Doubtful

Assets

Gross NPA Doubtful Assets

Ratio (%)2006-07 618.40 2339.84 26.42%

2007-08 460.92 2268.83 20.31%

2008-09 530.98 3499.30 15.17%

2009-10 677.04 3061.41 22.11%

2010-11 568.48 3176.07 17.89%

Analysis:

This ratio shows the percentage of Doubtful assets in the Gross NPA of

bank. More Doubtful assets means Bank should take action through

recovery policy to reduce the level of Doubtful assets.

In BCCB Ltd Doubtful Assets Ratio was 26.42% in March-2007 and it has

been decreased from year 2007 to 2009 from 26.42% to 15.17%. But

again in March- 2010 this ratio reach at 22.11% and again in March

2011 this ratio decrease to 17.89% which is good for bank.


Total Doubtful Assets

* 100


GRAPH: 4.7

The graph showing Doubtful Assets Ratio in The BCCB Ltd.

Interpretation:

The Doubtful asset ratio is decreasing continuously from 2007 to

2009, but increases abruptly in 2010. Hence bank has taking

various effective measures to decrease the Doubtful assets during

2011 and is trying to decrease it further.



CONSOLIDATED NPA STATEMENT AS ON 2008-09 TO 2010-

11

Types of loan

2008-09 2009-10 2010-11

AMOUNT AMOUNT AMOUNT

TOTAL

ADVANCES NPA

TOTAL

ADVANCES N PA

TOTAL

ADVANCES NP A

BUSINESS LOAN 8992908 2370103 15723904 2988420 21471627 5524607

JEWELRY LOAN 141261957 18941736 189930579 14578637 294755902 16496598

SPECIAL JEWELRY LOAN

15790140 Nil 35916758 1768803 45657811 1239426

LONG TERM CONSTRUCTION LOAN

137777550 10277327 144413030 4636714 148180211 2726711

LONG TERM LOAN 2459245780 303692503 2944806172 203479088 3722783633 167314865

SHORT TERM LOAN 27362920 9057922 21266583 8257205 16797765 8556293

TRANSPORT

OPERATIONAL16308904 4684540 16803190 4072700 24272514 4049920

VEHICLE LOAN 1294853 104679 3023591 120542 4057196 159127

DEPOSIT LOAN 75557484 Nil 95921492 Nil 84581843 Nil

STAFF LOANS 39048067 Nil 41834744 Nil 41635798 Nil

OTHER PRIORITY SECTORS

25803304 801299 20179326 476267 35017911 247268

TOTAL 2948443867 349930109 3529819369 240378376 4441212211 206314815



TABLE: 4.8

The table showing percentage of total NPA to total Advances in the

BCCB Ltd. for 5 fiscal years.

Years Total NPA

(Rs, in lakhs)

Total Advances

(Rs. in Lakhs)

NPA in

Percentage

2006-07 2339.84 15017.48 15.58

2007-08 2268.83 23368.44 9.71

2008-09 3499.30 29484.58 11.87

2009-10 3061.41 35298.19 8.67

2010-11 3176.07 44412.12 7.15

Analysis:

F r o m t h e a b o v e t a b l e s h o w s t h e p e r c e n t a g e o f t o t a l

N P A t o t o t a l Advances/Credit in the BCCB Ltd. It is showing

continuously decreasing trend from the financial year 2006-07 to

2010-11, i.e. it is 15.58 per cent in 2006-07 and reduced to 7.15

percent in 2010-11.Except in the year 2008-09 due to

Recession. It shows that an effort has been taken to control the NPA.



GRAPH: 4.8

The graph showing percentage of total NPA in total Advances in the

BCCB Ltd.

Interpretation

The decrease in the total NPA to total credit in the past five years shows

the development in the bank's performance. The bank is taking

action in large number of cases for recovery of its NPAs. This has

helped the bank to recover its NPAs and lower the level of NPAs and it

is striving hard to decrease it to full extent.



TABLE: 4.9

The table showing the percentage of total NPA in Long term loans to

total advances given Long Term Loan at the BCCB Ltd.

years NPA Total Advances NPA in

Percentage

2006-07 147564584 1283527973 11.49

2007-08 160226191 2034963787 7.87

2008-09 314770657 2599996638 12.10

2009-10 208591669 3091189709 6.74

2010-11 170288444 3872049769 4.39

Analysis:

The percentage of total NPA in long term loans to total credit

given in agriculture sector is showing decreasing trend from the

financial year 2006-07 to 2010-11. It shows that effective steps have

been taken by bank to control the NPA.



GRAPH: 4.9

The graph showing the percentage of total NPA in Long term loans to total advances given Long Term Loans in at the BCCB Ltd.

Interpretation:

The specific finding from the study is that as there is a gradual decrease

in the percentage of NPA during the last five years, this is appreciable to

the growth of the profitability of the bank. This is achieved by

adopting the various strict recovery measures by bank.



TABLE: 4.10

The table showing the percentage of total NPA in Short term loans to

total advances given in Short Term Loans at the BCCB Ltd.

Years NPA Total Advances NPA in

Percentage

2006-07 13201433 45467846 29.03

2007-08 10677612 37426270 28.52

2008-09 9057922 27362920 33.10

2009-10 8257205 21266583 38.82

2010-11 8556293 16797765 50.93

Analysis:

The percentage of total NPA in short term loans to total credit given

in sugar sector is showing an increasing trend during the past 5 years

i.e., 2006-07, 2007-08,2008-09,2009-10 and 2010-11 respectively.



GRAPH: 4.10

The graph showing the percentage of total NPA in Short term loans to

total advances given in Short Term Loan sector at the BCCB Ltd.

Interpretation:

NPA is increasing continuously every year. It indicate dangerous

signal. Bank has to take best measure to control NPA in short teini

loans. Though this graph we can understand that the inherent

quality of the bank's credit appraisal capability is very weak and it

should focus to a large extent in reduction of its NPA in short term

loans.



TABLE: 4.11

The table showing the percentage of NPA in other loans to total

advances given in other loans at the BCCB Ltd.

Years Total NPA Total Advances NPA in

Percentage2006-07 13246156 177727738 7.45

2007-08 16146205 264459875 6.10

2008-09 26101530 321084309 8.12

2009-10 23529502 417363077 5.63

2010-11 27470078 552364676 4.97

Analysis:

The percentage of total NPA in other loans to total credit given in other

loans is showing continuously decreasing trend in 2007-08 when

compared to 2006-07. But in 2008-09 again it is increased to 8.12

percent, later on it is decreased to 5.63 percent and 4.97 percent in

2009-10 and 2010-11 respectively.



GRAPH: 4.11

The graph showing the percentage of NPA in other loans to total

advances loans at the BCCB Ltd.

Interpretation:

When compared to short term loans NPA in other loans is very less.

Every best possible effort is taken by the bank to curb the growth of

NPA. The bank has been focusing its attention on the recovery of

NPAs and as a result it has been able to reduce the NPAs during the last

years.



TABLE: 4.12

The table showing the percentage change in NPA to total

advances at the BCCB Ltd.

Years NPA Trend

2006-07 2339.84 100

2007-08 2268.83 96.96

2008-09 3499.30 154.23

2009-10 3061.41 87.48

2010-11 3176.7 103.76

NOTE: In the above table 2006-07 taken as base year

Analysis:

The above table shows the percentage change in NPA to total

advances at the BCCB Ltd. The change in NPA to total advances

shows continuously increasing trend in 2008-09,2010-11

except in years (2007-08, 2009-10) are showing decreasing

trend.


SESHADRIPURAM FIRST GRADE COLLEGE


GRAPH: 4.12

The graph showing the percentage change in NPA to total advances at

the BCCB Ltd.

Interpretation:

The total NPA in the BCCB Ltd has been increased in last year's

2008-09, 2010-1 1 and the remaining years 2009-10, 2007-08

showing decreasing trend. This enhances the risk of the bank. Banks

have to improve its performance.



TABLE: 4.13

The table showing the percentage change in NPA in long

term loans at the BCCB Ltd.

Years NPA Trend percentage

of NPA

2006-07 147564584 100

2007-08 160226191 108.57

2008-09 314770657 196.45

2009-10 208591669 66.26

2010-11 170288444 81.63


Analysis:

The above table shows the percentage change in NPA long

term loans at the BCCB Ltd. There is an increasing trend in

NPA in the financial year 2006-07 and 2007-08 by 108.57

percent and 196.45 percent. In 2009-10 it has been decreased

to 66.26 percent. But in year 2010-11 it again increased to

81.63 percent.



GRAPH: 4.13

The graph showing the percentage change in NPA in long term

loans at the BCCB Ltd.

Interpretation

The NPA in long term loans has increasing tendency in 2007-08, but in

the year 2009-10 there is a decreasing tendency. But in 2010-11

increase can be seen in the percentage of the NPA to loans and

advances. Bank has to take effective measures to reduce the NPA in

long term loans.



TABLE: 4.14

The table showing the percentage change in NPA in Short term loans at

the BCCB Ltd.


of NPA2006-07 13201433 100

2007-08 10677612 80.88

2008-09 9057922 84.83

2009-10 8257205 91.15

2010-11 8556293 103.62


Analysis:

The above table shows the percentage change in NPA short term loans

at BCCB Ltd. The percentage change in NPA in short term loans have

gone up during the financial year 2008-09 to 2010-11. But in 2007-08 it

has decreased to 80.88 percent. It shows that NPA is increased in

last year's when compared to previous years.



GRAPH 4.14

The graph showing the percentage change in NPA in Short term

loans at the BCCB Ltd.

Interpretation:

The total NPA in short a term loan has been increasing since 2008-09

till 2010-11 from 84.83 percent to 103.62 percent. During 2007-08 the

bank had given more attention and importance for the recovery of

short term loans and had taken many effective steps in this regard.



T A B L E : 4 . 1 5

The table showing the percentage change in NPA in other loans at theBCCB Ltd.


of NPA

2006-07 13246156 100

2007-08 16146205 121.89

2008-09 26101530 161.65

2009-10 23529502 90.14

2010-11 27470078 116.74


Analysis:

The above table shows the percentage change in NPA in other

sector at the BCCB Ltd. During 2007-08 and 2008-09 the NPA has

increased by 161.65 per cent. However in 2009-10 it has decreased by

90.14 per cent. But again in 2010 - 11 NPA in other loans has increased

by 116.74 percent.



GRAPH: 4.15

The graph showing the percentage change in NPA in other sector at the

BCCB Ltd.

Interpretation:

When compared to short term loans the NPA in other loans is high

except in 2009-10. This enhances the risk of the bank. The bank has to

formulate a strict recovery policy to reduce it further.



TABLE: 4.16

The table showing the comparison of NPA to advances in Long term

loans and total advances.

Years NPA % of NPA to

advances given

in long term

loans

% of NPA to

total

advances

2006-07 147564584 11.49 9.82

2007-08 160226191 7.87 6.85

2008-09 314770657 12.10 10.6

2009-10 208591669 6.74 5.90

2010-11 170288444 4.39 3.83

Analysis:

The above table shows comparison of NPA to advances in long term

loans and total advances. In the year 2006-07 percentage of NPA to

total advances was 9.82 percent and percentage of NPA to advances in

long term loans was 11.49 percent. Later on the NPA to total advances

and NPA to advances given in long term loans are gradually decreasing

and it is 3.83 percent in the years 2010-11



GRAPH: 4.16

The graph showing the comparison of NPA to advances in Long term loans and total advances.

Interpretation:

The above NPA as compared to total advances is less. The bank has

to fallow the same NPA recovery measures in order to retain the

position of NPA at nil. The bank should closely monitor NPAs and must

put in place NPA management plan for efficient recovery.



TABLE: 4.17

The table showing the comparison of NPA to advances in Short term

loans and total advances.


Advances given

In

Short term loans

% of NPA to

total advances

2006-07 13201433 29.03 0.87

2007-08 10677612 28.52 0.45

2008-09 9057922 33.10 0.30

2009-10 8257205 38.82 0.23

2010-11 8556293 50.93 0.19

Analysis:

The above table shows comparison of NPA to advances in short term

loans and total advances. In 2006-07 NPA to total advances was 0.87

percent and NPA to advances in short term loans is 29.03. Later on

the NPA to advances given in short term loans is continuously

increasing and the percent of NPA to total advances is continuously

decreasing.



GRAPH: 4.17

The graph showing the comparison of NPA to advances in Short

term loans and total advances.

Interpretation:

The NPA amount is compared to total advances is very less. When it

compared to advances given in short term loans is very high. Through

this table we can understand that the inherent quality of the bank's

credit appraisal capability is very week and it should focus to large

extent in reduction of its NPA in short term loans.



TABLE: 4.18

The table showing the comparison of NPA to advances in other loans

and total advances.


Advances given

In

Other loans

% of NPA to

total advances

2006-07 13246156 7.45 0.88

2007-08 16146205 6.10 0.69

2008-09 26101530 8.12 0.88

2009-10 23529502 5.63 0.66

2010-11 27470078 4.97 0.61

Analysis:

The above table shows comparison of NPA to advances in other loans

and total advances. The percentage of NPA to total advances is lower

when compared to advances given in other sector. In both the cases

the percentage shows a decreasing trend but in the year 2008-09

percentages of other loans NPA to total advances is increased.



GRAPH: 4.18

The graph showing the comparison of NPA to advances in

other loans and total advances.

Interpretation:

The bank is taking several steps to curb the level of NPA and is

closely monitoring NPAs and put in place NPA management

plan for efficient recovery. The bank has formulated a recovery

policy with built in mechanism to settle NPAs by compromise as well.



CHAPTER-5

SUMMARY OF

FINDINGS



SUMMARY FINDINGS

1. The NPA of the bank stood at Rs. 3176.07 lakhs as on

31.03.2011 as against 3061.41 lakhs as on 31.03.2010

2. The Gross NPA ratio of bank has been continuously decreasing

from year 2007 to 2011 except in the year 2009 Hence; bank

has taken effective measures to reduce the NPA.

3. The Net NPA ratio is showing a continuously decreasing trend

during 2007 to 2011 this shows that bank has done enough

provisions compared to previous years.

4. The Problem Asset ratio is showing decreasing trend during 2007

to 2011 except in the year 2009. This is appreciable to the

growth of the bank. This is achieved by adopting the various

recovery measures by the bank.

5. The Provision ratio is continuously decreasing except in 2007-

08. This indicates that bank is trying to balance between over

provision and under provision.

6. Sub-Standard assets are substantially increasing during 2007,

2008, 2010 and decreasing in 2009 and 2011. Bank should try

to decrease it further.

7. Doubtful Assets are continuously decreasing except in the year



2010this shows that bank has taken necessary action to reduce

doubtful assets.

8. The result about repayment by the customers was tricky.

There is a good record in the repayment of the loans like

Business loan, Staff loan, Vehicle loans and Term loans. The

loan repayment is very poor in Short term loans.

9. The percentage of total NPA in Long term loans showing a

continuously decreasing trend when compared with advances

given in long term loans and to total advances during 2007 to

2011 from 9.82% to 3.83%.

10.More than 45% of the total credit given in Short term loans has

become NPA. When short term loans are compared with total

advances it is continuously decreasing.

11.The percentage change in NPA to total advances at BCCB Ltd is

showing an overall increasing trend when compare to previous

year.

12.The percentage of total NPA in other loans are showing

continuous decreasing trend during the financial year 2007-

2011.



CHAPTER-6

SUGGESTIONS



SUGGESTIONS

The successful management of Non Performing Assets depends not

only on the policies and the norms stipulated by the regulatory

authorities and the management of the bank but also on how far the

industrial finance has been extended, their portfolios and the present

position of the new account.

In this crucial function, the research will not be completed without

suggestions and recommendations, which improves the performance.

The following are the suggestions are made bringing down the NPAs:

1. In BCCB Ltd NPA level is decreasing year by year which good for

bank but bank should follow the recovery policy strictly to

reduce it to full extent.

2. In year 2008-09 BCCB Ltd NPA is very high, because of

Global recession bank has to form a special recovery policy to

handle recession.

3. The Bank have more NPA in Short term loans so, they should

try to reduce that level of NPA.

4. There is a need to have periodic review of accounts

inspection of units by audit department.



5. Timely visit by the field staff and making personal contact

with the borrowers.

6. Conducting training programs for the staff concerned with the

recovery about the latest rules and regulations and also on

the possibilities available for the recovery of NPAs.

7. Bank has to motivate the recovery staff to increase the recovery

rate.



CHAPTER-7

CONCLUSION



CONCLUSION

The project on Non Performing Assets at The Bangalore City Co-

Operative Bank ltd has been a great source of knowledge. It has

given me an opportunity to understand the co operative financial

sector.

The best model for reducing the level of Non Performing Assets at

The Bangalore City Co-Operative Bank ltd to give more emphasis

for technological improvements for proper and regular monitoring

and follow up the accounts.

The recovery strategies for impaired loans need to be revised with

the following considerations by setting a time for recovery of a

particular impaired loans and assigning the responsibility to a

particular person for the recovery of particular loan along with the

infrastructure and power to take action concerning to that loan.

Apart from the said conclusions, the level of reduction of Non

Performing Assets and to increase the like special efforts should be

made in respect of large advances and more attention needs to be

paid for strategies planning by employees with self set goals

educating borrowers.



CHAPTER-8

ANNEXURES



ANNEXUREBalance Sheet of 3 Years from 2009 - 2011

Particulars 2008-2009 2009-2010 2010-2011

Share capital 17,33,63,267.00 21,84,53,827.00 28,71,12,907.00

Reserves and other

funds44,98,27,118.92 48,25,77,806.42 54,26,10,058.56

Deposits 378,63,09,868.54 489,58,18,010.17 597,62,10,335.29

Suspense account

47,56,009.22 31,66,479.82 30,27,360.65

Other liabilities

20,000.00

Branch accounts

139,07,04,668.64 192,26,71,750.25 227,31,69,875.70

Cash at bank

10,01,13,012.07 13,13,73,812.41 17,50,07,942.68

Investment 140,58,20,493.00 199,13,74,743.00 229,13,05,825.19

Loans and Advances

294,84,43,868.82 352,98,19,370.3 444,12,12,211.50

Other assets 13,23,88,764.75 15,44,37,682.19 17,18,64,797.84

Brach Account

139,10,93,476.53 192,41,44,939.10 227,30,16,187.70

Furniture and Fixture

79,51,791.14 1,21,91,561.10 1,28,68,259.12

Building Cost

91,43,744.70 89,15,151.00 2,01,72,212.30

Generator Cost

6,67,687.55 8,10,238.80 10,17,846.45

Vehicle Cost 2,39,902.80 1,19,952.40 6,48,328.80

Computer Cost

60,08,168.75 42,21,351.90 20,81,688.05



Profit and loss Account of 3years from 2009-2011(Amount in Rs)

EXPENDITURE 2008-2009 2009-2010 2010-2011

Interest on Deposits

28,63,72,094.50 38,95,11,846.50 44,39,35,172.37

Interest on Provision Account

35,02,741.00 91,70,906.00 74,06,399.00

Establishment Account

5,23,37,753.00 6,03,69,103.00 8,44,37,935.00

Administrative Expenses

30,96,724.25 42,91,247.78 44,67,473.11

Conveyance Expenses

61,900.00 60,800.00 81,000.00

Other Expenditure

9,52,90,633.74 13,92,45,174.02 15,74,03,723.63

Computer 12,13,919.00 11,37,464.42 13,52,898.00

Provisions 1,05,41,426.00 76,97,857.00 3,80,59,709.00

Insurance & Tax 32,26,635.00 42,21,386.17 53,79,089.00

Depreciation Account

36,93,283.89 50,63,171.55 52,52,102.51

TOTAL 45,93,37,110.38 62,07,68,956.44 74,77,75,501.62

INCOME

Interest on Loans 36,04,22,492.00 43,48,66,244.63 56,08,52,799.80

Interest on Investments

8,12,65,519.99 11,85,85,513.55 14,32,44,509.11

Rent Received 74,838.00 69,738.00 40,940.00

Other Items 6,92,74,317.88 12,06,25,262.71 12,31,83,806.17

TOTAL 51,10,37,167.87 67,41,46,758.89 82,73,41,790.18

NET PROFIT 5,17,00,057.49 5,33,77,802.45 7,95,66,288.56



CHAPTER-9

BIBLIOGRAPHY



BIBLIOGRAPHY

JOURNALS:

· Annual Reports of "The Bangalore City Co-Operative Bank Ltd".

· Periodical circular and statement of RBI regarding to

NPAmanagement.

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/


http://www.indiabankassociation.com/

http://www.investorwords.com/

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

http://finance.indiamart.com/investment%20in%20india/banking%20in%20india.html

http://finance.indiamart.com/investment%20in%20india/banking%20in%20india.html

Final Semester Mba Banking-project

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