NPA Project Report

7/27/2019 NPA Project Report

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1 A report on Non-performing assets at Apex bank

CHAPTER 1

INTRODUCTION[INDUSTRY PROFILE]

Banking is as old as civilization itself, initially banking meant money lending. The

business of banking existed in Babylonia as early as 2000 BC. The Babylonians

developed a banking system where money was lent in temples against the security of

Gold and Silver left with them for safe custody.

In ancient Greece around the same time, there existed banking business. Even then

temples were used as depositories for the surplus funds of the people and were also used

as centers of the money lending business. The priests acted as financial agents of the

money lending business.

The practice of granting credit existed in ancient Rome. The Romans adopted

Greek system of banking. The banking business had a set back after the death of the

emperor JUSTINIAN in 565A.D. With the advent of trade and commerce in the middle

age, the banking business was mostly confined to only money lending. The JEWS and

LAMBARDY dominated the money lending business in the medieval period. The

Christians were forbidden by their religion to indulge in money lending. However in the

course of time with the weakening of the hold of religion and with the development of

trade and commerce around the 13th century, the Christians also entered the field of

money lending.


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Banking business originated in England during the reign of Queen Elizabeth I.

Goldsmiths mainly did banking business. They accepted the valuables and the funds of

their customers for safe custody and issued receipts against the valuable lest for safe

custody. But in the course of time their receipts became payable to barrier on demand.

The banking business suffered a setback during the reign of Charles II in 1640 that

declined to return the funds and valuables deposited by the Goldsmiths with the

exchequer under the case of government. This led to the growth of private banking and

also the establishment of the Bank of England in 1694.

1. Banking business in ancient times.

The ancient Hindu Scripture refers to the prevalence of money lending activities in

the Vedic period. The epics Ramayana and Mahabharata refer banking business as full

fledged activity. During the Smriti period, which followed the Vedic period the members

of the Vaish community largely carried on banking business. In ancient times banking

business was mainly in the form of money lending. It laid a strong foundation for

banking industry.

2. Banking in pre-independence period

During the pre-independence period, Indigenous Banking and Money Lenders

primarily carried on banking business. Farmers main sources of loans were indigenous

bankers and money lenders, even to the present times especially in rural and urban areas.

Indigenous bankers have been operating in India since the ancient times mainly in

small towns, semi urban areas and rural areas. Indigenous banking is carried on by all

castes of people, but it is generally monopoly/ed by certain banking caste such as Shroffs


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in Maharashtra, Seths in West Bengal, Baniyas in Uttar Pradesh, Sahukars in Punjab,

Chettiars in Tamil Nadu, Marwaries and Jains in Rajasthan and Gujarat.

3. Development of Indian banking industry in the post independence period

During the pre-independence era Indian banking industry had to pass through

several economic crisis and bank failures. But with India attaining independence the

banking situation has completely changed. Some of the developments during the post

independence period until today are:

The nationalization of Reserve Bank of India on 1st January 1949. The passing of the banking regulation act in 1949. The nationalization and conversion of the Imperial Bank of India into the State

Bank of India on 11th July 1955.

The nationalization of 14 major commercial banks on 19th July 1969 and the futurenationalization of 6 commercial banks on 15th April 1980.

Establishment of Regional Rural Banks to cater to the needs of rural areas. About196 rural banks are catering to the needs of rural people.

Setting up of Land Development Banks to cater to the long-term credit needs ofagriculturists.

Setting up of special financial institutions for meeting the specialized need ofcertain sectors of the economy. Some of the specialized institutions are:

Industrial Development Bank of India (IDBI).

Industrial Credit and Investment Corporation of India (ICICI).

State Financial Corporation (SFC).

Industrial Development Corporation (IDC).


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Small Industries Development Bank of India (SIDBI).

Industrial Bank for Reconstruction and Development (IBRD).

National Bank for Agriculture and Rural Development (NABARD).

Export Import Bank of India (EXIM).

Export Credit Guarantee Corporation of India.

The National Housing Bank.

Present Banking Scenario

The Indian Banking System of today can be compared with finest banking system

in the whole world. Today the Indian banking system is on very sound lines with a

network of branch spread all over the country and serving all sections of the society with

innovative banking programs.

Todays Indian banking system comprises of 27 public sector banks, 30 private

sector non schedule commercial banks, several private sector new commercial banks, 27

foreign schedule banks, 196 regional rural banks, several thousand co-operative banks

and several land development banks. Institutions like Life Insurance Corporation of India

and Unit Trust Bank of India also plays an important role in Indian banking system.

With the liberalization of the economy in 1991 the banking sector has undergone a

revolution. Foreign banks are based in India and this has led to further improvement andsophistication of banking service due to competition.


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Definition:

The Indian banking regulation act of 1949 has aptly defined the term Banking in

section 5(1) (B) as accepting for the purpose of lending or investments of deposits of

money from the public, repayable on demand or otherwise and withdraw able by cheque,

draft, and orderor otherwise

Banking Structure or Banking System in India

The constituents in the banking sector of India are

1.

The Reserve Bank of India2. The State Bank of India and its Subsidiaries3. The Nationalized and the Private Sector Indian Commercial Banks.4. The Private Sector Foreign Exchange Banks in India5. The Co-operative Banks and the Land Development Banks6. The Regional Rural Banks.

Indian Commercial Banks

Banks that carry on commercial banking operation such as acceptance of deposits

from the public, repayable on demand or alter a short period and the granting of short

term credit mainly to trade, commerce and industry with a wide network of branches

throughout the country.

Commercial banks can be classified as

1. Public Sector Banks2. Private Sector Banks


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CO OPERATIVE BANK STRUCTURE


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National Bank of Agriculture and Rural Development

Short term

Lending

RBI

Urban Credit Co-Operative

Banks

STATE CO-OPERATIVE APEX BANK

Agricultural Credit Co-

Operative Banks

Non Agriculture Credit Co-

Operative Banks

Long term

Lending

State Level State Land

Bank

District Central

Co-operative

FSS MP Co-Operative Bank Grain Bank

Primary Land

Development

Bank

Land

Mortgages

Bank

Credit

Housing Banks, Urban Banks

Employees Credit Societies

Specialized Co-Operatives

IndustrialCo-

Operative

ConsumerCo-

Operative

Non-Credit

Primary Co-Operative Bank


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[NON-PERFORMING ASSETS]

Definition

A loan or lease that is not meeting its stated principal and interest payments. Banks

usually classify as nonperforming assets any commercial loans which are more than 90

days overdue and any consumer loans which are more than 180 days overdue. More

generally, anassetwhich is not producing income which is considers as NPA.

In India, an asset is classified as a Non-Performing Asset (NPA) if interest or

installments of principal due remain unpaid for more than 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 a 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.

What is a NPA?

Action for enforcement of security interest can be initiated only if the secured asset is

classified as Non Performing Asset.

Non Performing Asset means an asset or account of borrower, which has been classified

by a bank or financial institution as sub-standard, doubtful or loss asset, in accordance

with the directions or guidelines relating to asset classification issued by RBI.

An amount due under any credit facility is treated as "past due" when it has not been paid

within 30 days from the due date. Due to the improvement in the payment and settlement

systems, recovery climate, up gradation of technology in the banking system, etc., it was
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decided to dispense with 'past due' concept, with effect from March 31, 2001.

Accordingly, as from that date, a Non performing asset (NPA) shell be an advance where

i.

Interest and /or installment of principal remain overdue for aii. The account remains 'out of order' for a period of more than 180 days, in respect

period of more than 180 days in respect of a Term Loan, of an overdraft/ cash

Credit(OD/CC),

iii. The bill remains overdue for a period of more than 180 days in the case of billspurchased and discounted,

iv. Interest and/ or installment of principal remains overdue for two harvest seasonsbut for a period not exceeding two half years in the case of an advance granted for

agricultural purpose, and

v. Any amount to be received remains overdue for a period of more than 180 days inrespect of other accounts.

CLASSIFICATION OF ASSETS:

Performing assets /standard assets

Non-performing assets (NPA)

CLASSIFICATION OF NPAs:

Standard assets Sub-standard assets Doubtful assets Loss assets


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1) Standard Assets:Standard Assets is one, which does not disclose any problem and which does

not carry more than normal risk attached to business. Thus in general, all the currentloans, agricultural and non-agricultural loans, which have not become NPA, may be

treated as standard assets.

2) Sub-Standard Assets:A Non-performing asset may be classified as sub-standard on the basis of the

following criteria.

An asset which has remained overdue for a period not exceeding 3 years inrespect of both agricultural loans should be treated as substandard.

In case of all types of term loans, where installments are overdue for aperiod not exceeding 3years, the entire outstanding in term loan should be

treated as sub-standard.

An asset, where the terms and conditions of the loans regarding payment ofinterest and repayment of principal have been renegotiated or rescheduled,

after commencement of production should be classified sub-standard and

should remain so in such category for atleast one year of satisfactory

performance under the renegotiated or rescheduled terms. In other words

the classification of an asset should not be upgraded merely as a result of

rescheduling unless there is satisfactory compliance of the above condition.

3) Doubtful Assets:These are the assets "the recovers of which is highly questionable and impossible" it is

usually a non performing asset for a period exceeding 3 years in respect of both

agricultural and Non-agricultural loans. In case of all types of term loans, where


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installments are overdue for more than 3 years, the entire outstanding in term loan should

be treated as doubtful. As in the case of sub-standard assets, rescheduling does not entitle

a bank to upgrade the quality of advance automatically.

4) Loss Assets:

They are those were lose is identified as no recoverable by the bank / Auditor / RBI /

NABARD inspectors but the amount has not been written of wholly or partially. in other

words, an asset which is considered unrealizable and / or of such little value that its

continuance as a doubtful asset is not worthwhile, should be treated as a loss asset. Such

loss assets will include overdue loans in cases.

Where decrees or execution petitions have been time barred or documents are lostor no legal proof is available to claim the debt.

Where the members and their sureties are declared insolvent or have died leavingno tangible assets.

Where the members have left the area of operation of the society (refers to theborrower) in whose the respective Loan Account with SCB / CCB leaving no

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

Where the loan is fictitious or when gross misutilisation is notices, and Amounts which cannot be recovered in case of liquidation societies.

PROVISIONING NORMS:

Standard Assets: - General provision of a minimum of 0.25%. Sub-Standard Assets:- 10% on total outstanding balance, 10% on unsecured

exposures identified as sub standard & 100% for unsecured "doubtful" assets.


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Doubtful Assets: - 100% to the extent advance not covered by realizable value ofSecurity. In case of secured portion, provision may be made in the range of 20% to

100% depending on the period of asset remaining sub standard. Loss Assets: - 100% of the outstanding.

Overdue

Any amount due to the bank under any credit facility is 'overdue' if it is not paid on

the due date fixed by the bank.

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 savings. In the worst case if the bank

fails, depositors lose their assets or uninsured balance. Banks also redistribute losses to

other borrowers by charging higher interest rates. Lower deposit rates and higher lending

rates repress savings and financial markets, which hampers economic growth.

3. Non-Performing 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, labor and natural resources. The economy

performs below its production potential.

4. Non-performing loans may spill over the banking system and contract the money

stock, which may lead to economic contraction. This spillover effect can channelize

through illiquidity or bank insolvency;


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(a) When many borrowers fail to pay interest, banks may experience liquidity shortages.

These shortages can jam payments across the country,

(b) Illiquidity constraints bank in paying depositors e.g. cashing their paychecks.

Banking panic follows. A run on banks by depositors as part of the national money stock

become inoperative. The money stock contracts and economic contraction follows

(c) Undercapitalized banks exceed the banks capital base.

Lending by banks has been highly politicized. It is common knowledge that loans are

given to various industrial houses not on commercial considerations and viability of

project but on political considerations; some politician would ask the bank to extend the

loan to a particular corporate and the bank would oblige. In normal circumstances banks,

before extending any loan, would make a thorough study of the actual need of the party

concerned, the prospects of the business in which it is engaged, its track record, the

quality of management and so on. Since this is not looked into, many of the loans become

NPAs.

The loans for the weaker sections of the society and the waiving of the loans to farmers

are another dimension of the politicization of bank lending.

Most of the depositors money has been frittered away by the banks at the instance of

politicians, while the same depositors are being made to pay through taxes to cover the

losses of the bank.

The effects of NPA are:-

1. They decrease profitability.2. They reduce capital assets and lending limits.3. They increase loan loss reserves.4. They bring unwanted attention from government regulators.


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An analysis of factors contributing to NPAs

An analysis of the contributory factors resulting in the emergence of NPAs on a large

scale amongst commercial banks and financial institutions would lead to the following

conceptualization:

1. PSBs performed creditably in respect of all parameters set for them. However, in

the early 1990s, it emerged that PSBs were suffering from acute capital inadequacy and

many of them had negative profitability. This is because the parameters set for their

functioning were deficient and they did not project the paramount need for thesecorporate goals. Incorrect goal perception and identification led them to the wrong

destination.

2. The pre-reform era witnessed directed banking for PSBs which functioned under

the overall control and direction of the Finance Ministry, which along with the Reserve

Bank of India (RBI), decided/directed all aspects of the working of the banks, leaving

little freedom to price their products in competition with each other, cater their products

to segments of their choice, or invest their funds in their best interest as they determined.

3. Since the 1970s, the SCBs of India functioned totally as captive capsule units cut

off from international banking and unable to participate in the structural transformations,

the sweeping changes, and the new types of lending products emerging in global banking

institutions. Their personnel lacked needed training and knowledge resources required to

compete with international players.

4. Major policy decisions were taken externally by the Finance Ministry/RBI. The

environment of receiving decisions from a political background as distinguished from a

professional outfit prevented the best talents coming to occupy key positions.


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5 The quantum of credit extended by the PSBs increased by about 160 times in the

three decades after nationalization (from around 3000 crore in 1970 to 475 113 Crore on31 March 2000). The Banks were not sufficiently developed in terms of skills and

expertise to regulate such growth and manage the diverse risks that emerged in the

process.

6 The need for organizing an effective mechanism to gather and disseminate credit

information amongst the commercial banks was never felt or implemented. The archaic

laws of secrecy of customer information prevented banks from publishing names of

defaulters for common knowledge of the other banks in the system.

7 Effective recovery from defaulting and overdue borrowers was hampered on account

of a sizeable overhang component arising from infirmities in the existing process of debt

recovery, inadequate legal provisions on foreclosure and bankruptcy and difficulties in

the execution of court decrees. Legal remedies were beset with too many formalities and

were very time-consuming.

8 Effective corporate management was an alien concept. In respect of PSBs, the boards

were ineffective and the only/main shareholder was the government of India. The

government exercised multiple roles and concerns, and the instinct to act as a watchful

shareholder and increase shareholders value of banks and financial institutions was never

felt or experienced.

9 Credit management on the part of the lenders to the borrowers to secure their genuine

and bonafideinterests was not based on pragmatically calculated anticipated cash flows

of the borrowers concern, while recovery of installments of term loans was not out of


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profits and surplus generated but through recourse to the corpus of working capital of the

borrowing concerns.

10 Functional inefficiency was also caused due to overstaffing, manual processing of

Bloated operations and a failure to computerize the banks in India, when elsewhere

Throughout the world the system switched over to computerization of operations.

Impacts of NPAs on the working of cooperative banks

NPAs affected the profitability, liquidity and competitive functioning of public and

private sector banks, and finally the psychology of the bankers in respect of their

disposition towards credit delivery and credit expansion.

Impact on profitability

Cooperative banks incurred a total amount of Rs. 31 251 crore towards provisioning

NPAs from 1 April 1993 to 31 March 2001. This has brought net NPAs to Rs.32 632

crore or 6.2% of net advances. The enormous provisioning of NPAs together with the

holding cost of such non-productive assets over the years has acted as a severe drain on

the profitability of the PSBs. Equity issues of nationalized banks that have already tapped

the market are now quoted at a discount in the secondary market. This has alternatively

forced PSBs to borrow heavily from the debt market to build Tier II capital to meet

capital adequacy norms, thus putting severe pressure on their profit margins. It is

worthwhile to compare the aggregate figures of the 19 nationalized banks for the year

ended March 2001, as published by RBI in its Report on Trends and Progress of Banking

in India


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Measures taken to deal with NPAs

Dismantling of controls and deregulation of working of commercial banks,

permitting entry of new private sector banks and permission for foreign banks to

open more branches. This had the effect of opening Indian banking to global

standards by making them function efficiently in a competitive environment. This

was the initial step to create a structural framework for the PSBs to enable them to

adjust to the new environment and turn into dynamic and self-reliant operating

units.

The process of deregulationfreed the banks from the control of the FinanceMinistryand RBI. The RBI, hereafter, acts as a regulator. In the year 1994, RBI

further fine-tuned the process by constituting a separate Board of Financial

Supervision (BFS) with the objective of segregating the supervisory role from the

regulatory functions of RBI. Banks now operate independently in a competitive

financial market, but have to comply with prudential norms and safeguards

essential for their wellbeing.

RBI made prudential norms,as conveyed by the Basel Accord of 1988,applicable to Indian banks. These included standards relating to capital adequacy,

income recognition, asset classification and provisioning for non-performing

assets. This had the effect of providing much-needed transparency about the state

of affairs of each bank and enabled instant corrective measures to be executed.

Banks were permitted to seek infusions of freshequityfrom the public with thegovernment retaining a 51% share of equity capital. A number of PSBs entered the

market and raised Tier I and Tier II capital accordingly. This has created a new


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class of stakeholder (albeit shareholders) vitally interested in the wellbeing of the

banks and qualified/empowered to question the Board of Directors at the

appropriate forum.

Governance:RBI emphasized the paramount importance of accepting norms ofgood corporate governance by banks. While the Securities Exchange Board of

India (SEBI) has introduced a general set of norms applicable to all companies

including banking companies, RBI has further covered the special needs of

banking companies by bringing out an appropriate set of standards.

The Credit Information Bureau (India) Ltd.: In order to expedite credit andinvestment decisions by banks and financial institutions, and curb the accretion of

fresh NPAs, the Credit Information Bureau (India) Ltd., (CIBIL) was set up by the

State Bank of India in association with HDFC in August 2000. CIBIL was to be

technology driven to ensure speedy processing, periodic updating and availability

of error-free data at all times in the system. As a first step towards activating the

CIBIL, it was decided to initiate the process of collection and dissemination of

some relevant information within the existing legal framework. The RBI

accordingly decided to constitute a group drawing representation from CIBIL, the

Indian Banks' Association (IBA), select banks and FIs to examine the possibility

of the CIBIL performing the role of collecting and disseminating information on

the list of suit-filed accounts and the list of defaulters, including willful defaulters,

which is presently handled by the Reserve Bank. The group is also expected to

examine other aspects of information collection and dissemination, such as the

extent, periodicity and coverage, and the feasibility of supplying information on-

line to members in the future.


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Norms of lenders' liability:RBI has come out with broad guidelines for framingthe Fair Practices Code with regard to lenders' liability to be followed by

commercial banks and financial institutions, emphasizing transparency and properassessment of borrowers' credit requirements. RBI has issued a draft of the model

code and has advised the individual banks to adopt model guidelines for framing

their respective Fair Practices Codes with the approval of their Boards. This is a

balancing measure. It imposes self-discipline on the part of the banks, which will

only indirectly prevent accounts turning into NPAs on account of the bank's own

failures or wrong actions.

Risk assessment and risk management: Since the year 1998, the RBI has beenmaking serious efforts towards evolving a suitable and comprehensive model for

risk-management by the banks and to integrate this new discipline in the working

systems of banks. The RBI has identified risk-prone areas in asset-liability

management, credit management, changes in market conditions and counter-party

and country risks and has evolved suitable models for managing all such risks.

RBI has also evolved a system of Risk-based Supervision of Banks. It also advised

banks on a parallel scheme for carrying out internal audit based on risk perception.

E-banking and VRS:The influence of these areas of banking reforms may notappear directly relevant to a reduction of NPAs. However, computerization

provides for data-accuracy and operational efficiency and results in a better

Management Information Service (MIS). VRS rationalizes the work force, which

in turn results in better productivity and operational efficiency.

RBI Guidelines on Fair Practices Code for Lenders are applicable toSCBs/AIFIs (excluding RRBs and LABS): According to the Fair Practices Code,

which is at the core of lender liability, the lenders must treat their borrowers fairly,


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and when they do not, they can be subject to litigation by the borrower for a

variety of reasons, inter alia, breach of contract, breach of fiduciary duty, fraud

and misrepresentation, and negligent loan processing and administration.

Compromise settlement schemes:Banks are free to design and implement theirown policies for recovery and write-off incorporating compromise and negotiated

settlements with the approval of their Boards, particularly for old and unresolved

cases falling under the NPA category. The policy framework suggested by RBI

provides for setting up of independent Settlement Advisory Committees headed by

a retired judge of the High Court to scrutinize and recommend compromise

proposals. Specific guidelines were issued in May 1999 to PSBs for one time non-

discretionary and non-discriminatory settlement (OTS) of NPAs of the small

enterprise sector. The scheme was operative up to September 30, 2000. (Public

sector banks recovered Rs. 668 crore through compromise settlement under this

scheme). Guidelines were modified in July 2000 for recovery of the stock of NPAs

of Rs. 5 crore and less, as on 31 March 1997. (The above guidelines which were

valid up to 30 June 2001, helped the public sector banks to recover Rs. 2 600 crore

by September 2001). An OTS scheme covering advances of Rs. 25 000 and below

continues to be in operation and guidelines in pursuance to the budget

announcement of the Honorable Finance Minister providing for OTS for advances

up to Rs.50 000 in respect of NPAs of small/marginal farmers are being drawn up.

Circulation of information on defaulters: The RBI has put in place a system forperiodic circulation of details of willful defaults of borrowers of banks and

financial institutions. This serves as a cautionary list while considering requests

for new or additional credit limits from defaulting borrowing units and also from

the directors/proprietors/partners of these entities. RBI also publishes a list of

borrowers (with aggregate outstanding of Rs. 1 crore and above) against whom


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banks and FIs have filed suits for recovery of their funds, as on 31 March every

year. These measures serve as a negative basket of steps shutting off fresh loans to

these defaulters.

Recovery action against large NPAs: RBI advised public sector banks toexamine all cases of willful default of Rs. 1 crore and above and file suits in such

cases, and file criminal cases in regard to willful defaults. Boards of Directors are

required to review NPA accounts of Rs.1 crore and above with special reference to

fixing of staff accountability.

Special mention accounts: In a recent circular, RBI has suggested to the banks tohave a new asset category or special mention accounts for early identification of

bad debts. This would be strictly for internal monitoring. Loans and advances

overdue for less than one quarter and two quarters would come under this

category. Data regarding such accounts will have to be submitted by banks to the

RBI. However, special mention assets would not require provisioning, as they are

not classified as NPAs. An asset may be transferred to this category once the

earliest signs of sickness/irregularities are identified. This will help banks look at

accounts with potential problems in a focused manner right from the onset of the

problem, so that monitoring and remedial actions can be more effective. Once

these accounts are categorized and reported as such, proper top management

attention would also be ensured. Borrowers having genuine problems due to a

temporary mismatch in funds flow or sudden requirements of additional funds

may be entertained at the branch level and for this purpose, a special limit to tide

over such contingencies may be built into the sanction process itself.


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CHAPTER 2

[RESEARCHDESIGNANDMETHODOLOGY]

Title of the project

A report on Non-performing assets at Apex bank, head office Bangalore

Statement of problem

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

research problem is to identify the causes for the NPA. The problem lies in understanding

and analyzing the NPAs and to undertaken to know the status of NPAs.

OBJECTIVES OF THE STUDY

The main objective of study includes the following:

To Know the Concept of Non Performing Asset. To analyze the NPA of Karnataka state co-operative bank. To have an overview of history, growth and development, functioning, schemes

and facilities available at Apex bank.

To know Preventive Measures To Know the Impact of NPAs To Know the Reasons for NPAs To study various types of NPA To give suggestions, which may help the bank in controlling their level of NPA


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Scope of study

The study of non-performing asset is a well-researched area and contributes

constructively to the benefit of the banks, financial institution and other interested people.

The study shows the developments and stability in earnings.

Methodology

Introduction

The quality of the project work depends on the methodology adopted for the study.

Methodology, in turn, depends on the nature of the project work. The use of proper

methodology is an essential part of any research. In order to conduct the study

scientifically, suitable methods & measures are to be followed.

Research Design

The type of research used for the collection & analysis of the data is Historical

Research Method.

The main source of data for this study is the past records prepared by the bank.

The focus of the study is to determine the non-performing assets of the bank since its

inception & to identify the ways in which the performance especially the non-performing

assets of the Apex Bank can be improved.

The data regarding bank history & profile are collected through Exploratory

Research Design particularly through the study of secondary sources and discussions

with individuals.

Data Collection Method

By taking guidance from bank guide & departmental guide.

Secondary Data


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Collection of data through bank annual reports, bank manuals and other relevantdocuments.

Collection of data through the literature provided by the bank.

Journals, Websites,

Limitations of the study

Though sincere effort has been made during the study, certain limitations cannot be

avoided. They are as follows:-

Difference in definitionsNonperforming assets is based on NPA statement of the bank

Prepared as per accounting practices.

This practice in some cases may lead to window dressing to cover up bad financialposition.

This study is based only on 3 years NPA statement.NPA statement suffers from inherent weakness of accounting practices, such as their

historical nature of matching principle etc

RESEARCH INSTRUMENT

As a research instrument I have taken guidance from banks employees and also by

the faculty of my college.


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CHAPTER 3

[COMPANY PROFILE]

Co operative sector has a long history of more than a century. In the co Operative

movement, agriculture credit sector has acquired a special Importance in order to avoid

the exploitation of poor farmers from the middlemen and money lenders and to provide

suitable assistance to the eligible farmers. As our nation is basically an agricultural

country, agriculture credit system plays an important role in the development of this

Sector. Through this system, the credit sector is extending helping hand to The farmers in

its own way to boost the agricultural production in the state in Particular and in the

country at large Karnataka State Co Operative Apex Bank over the ninety five Years,

since its inception has always come forward to extend its assuring Hand to the farmers of

the state through District Central Co Operative Banks, Primary Agriculture Co Operative

Societies working under three tier Agriculture Co Operative Credit System. Besides the

bank is providing the needed financial assistance, for development of human resources,

training, computerization and all other encouragement from time to the District CentralCo Operative Banks and Primary Agriculture Co Operative Societies.

PREAMBLE:

The Karnataka State Co-operative Bank was established in the year 1915 and the late

Varadaraja Iyengar has been its founder president. It made a humble beginning with a

working capital of Rs.1.80 lakh comprising of Rs.1.26 lakhs as deposits. Over 90 years,

the institution has grown by leaps and bounds and today its working capital is

Rs.4718.28 crores with deposit level of Rs.2264.14 crores and own fund of Rs.265.91

crores. The bank has earned Rs.13.35 crores.

Apex bank is a pioneer in agriculture finance and allied activities. Apex bank is ranked as

one of the premier state co-operative banks in the country. The main objectives of the


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bank are to serve the farmers in the state by providing short term and long term

agricultural loans, general banking business and function as a leader of the co-operative

banks in the state.

NATURE OF BUSINESS

The business carried by the bank is generally related with providing short term and

long term agricultural loans. It also accepts deposits from the public. Apex bank also

provides cash credit loans to processing, marketing and consumer co-operatives as well

as sugar factories in Karnataka and working capital loans to state level and national level

institutions.

Quality Objectives:

To serve as a state co-operative bank and as a balancing center in the state ofKarnataka for registered co-operative societies.

To raise funds by way of deposits, loans, grants, donations, subscriptions,subsidies etc for financing the members by way of loans, cash credits, overdrafts

and advances.

To develop, assist and co-ordinate the member DCCBs and other co-operativesocieties and secure financial assistance for them.

To arrange/hold periodical co-operative conferences of the DCCBs and othermembers of the bank and to take action for the growth and development of the co-

operative credit movement.

BRANCHES AT BANGALORE

The area of operation of bank covers almost the entire Bangalore. It has 38 branches in

Bangalore and head quarters is situated in Chamarajpet. The branch offices of bank are


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adequately delegated with power of sanction of disbursements. If the loans are to be

provided up to 10 lakhs then it is handled by concerned branch offices but if it is more

than 10 lakhs then it is handled by main branch.

Ashoka Pillar Branch Banashankari Branch Basaweswarnagar Branch Chandralayout Branch Gandhinagar Branch Ganganagar Branch Girinagar Branch Gokula Branch H S R Agara Branch Indiranagar Branch Jayanagar Market Complex Jayanagar 9th Block branch J P Nagar Branch Kengeri Satellite Town Branch Koramangala Branch Lakkasandra Branch Legislators Home Branch Magadi Road Branch Mahalakshmipuram Branch M S Building Branch Public Utility Building Branch Padmanabhanagar Branch Rajajinagar Branch


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R P C Layout Branch R T Nagar Branch Shivajinagar Branch Vijayanagar Branch Vyalikaval Branch Vidhanasoudha Branch Vivekananda College Ext. Counter Br. K R Puram Branch Yelhanka Branch Bommsandra Branch Rajarajeswarinagar Branch B T M Layout Branch Sunkadakatte Branch T Dasarahalli Branch Banashankari 3rd Stage

Mahadevapura Branch

SOURCES OF FUNDS:

KSC banks main sources of funds are owned funds, deposits and Borrowings.

1. SHARE CAPITAL :The share capital position of the bank as on 31.3.2010 is rupees 8124.08 Lakhs,

increased to the extent of rupees 12.90 lakhs in share capital during the current year.

2. RESERVES :The reserves of bank totaling to rupees 37994.96 lakhs as at the end of March 2010

includes statutory reserves of rupees 20376.24 lakhs, Agricultural Credit stabilization


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fund of rupees 3881.30 lakhs, agricultural credit Guarantee relief fund of rupees 255.37

lakhs, bad and doubtful debts reserve of rupees 4152.51 lakhs, building fund of rupees

1587.13 lakhs, investments Depreciation fund of rupees 3139.66 lakhs, contingentprovision for standard Assets of rupees 1350.00 lakhs and others of rupees 3252.74

lakhs.

3. DEPOSITS:Deposits from the main source of bank funds. The deposits of the bank as on 31.3.2010

aggregated to rupees 447903.77 lakhs and constituted 66.84% of the working capital.

4. BORROWINGS:The second main source of the bank is funds borrowings which amounted to Rupees

164757.00 lakhs as on 31.3.2010 and constituted 24.59% of the Working capital.

DEPLOYMENT OF FUNDS:

LOANS AND ADVANCE:

The loans and advances of our bank as on 31.3.2010 stood at rupees 314628.40 lakhs as

against rupees 349254.68 lakhs as on 31.3.2009.

SHORT TERM AGRICULTURAL ADVANCES:

During the year, NABARD had sanctioned total short term credit limits aggregated to

rupees 148300.00 lakhs on behalf of 21 District Central Co Operative Banks. During

the year 2009-10 the NABARD had extended Their limit to District Central Co

Operative Banks which had not complied with section 11 of B.R Act.. The bank has

also sanctioned an additional SAO limit of rupees 77900.00 lakhs to 21 District

Central Co Operative Banks out of its own resources. The total short term loans

outstanding from District Central Co Operative Banks as on 31.3.2010 amounted to


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rupees 207884.86 lakhs as compared to rupees 238589.99 lakhs as on 31.3.2009.The

amount of short term agricultural loans advanced by the District Central Co

Operative Banks has considerably increased over the last five Years. Previous yearthe liquidity support for agricultural loan has been Sanctioned, due to this reason the

outstanding under short term agricultural Loan has decreased during 2009-2010 when

compared to 2008-2009.

SAO LOANS AT CONCESSIONAL INTEREST RATES:

Ksc bank has been sanctioning SAO limits in addition to the NABARD limits.

Commencing from 2007-08, Apex bank has started disbursing SAO loans upto 30%of the NABARD limits out of its own resources at concessional rates of interest to

District Central Co Operative Banks in the state. During the year 2009-10, rupees

39000.00 lakhs has been disbursed at a concessional interest rate at 4.65% though,

the interest earnings of the bank are very much affected, it has sanctioned these loans

at concessional interest rate in the interest of the farmers of the state and with a view

to strengthen the District Central Co Operative Banks. The government of Karnataka

is the first in the country to declare a scheme of advancing agricultural credit to the

farmers in the state at a concessional interest rate of 3% for the financial year 2008-

09 and continued for the year 2009-10.this has helped the farmers in the state and

most of the co operative institutions which have improved their financial viability

and moved towards profitability.

MEDIUM TERM LOANS UNDER SCHEMATIC LENDING:

Schemes on project lending basis were taken up for implementation by the bank

through the District Central Co Operative Banks with refinance facilities from

NABARD for minor irrigation, dairy development, Integrated Rural Development

Programme, Bio-gas Development, Self Help Groups and other activities. During the


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year 2009-10, Apex Bank has advanced RS.10329.69 lakhs to the District Central Co

Operative Banks and RS. 7959.92 lakhs claimed under refinance from NABARD.

The bank has disbursed a sum of RS.2369.77 lakhs out of its own resources. A sumof RS. 18913.23 lakhs Was outstanding as on 31.3.2010.

MEDIUM TERM LOANS UNDER NON-FARM SECTOR:

The District Central Co Operative Bank have not claimed any refinance under

NABARDs non farm sector refinance scheme during the year 2009-10 for financing

tiny and cottage industries etc..however, a sum of RS. 730.46 lakhs was outstanding

as on 31.3.2010.

CASH CREDIT LOANS:

RS.23211.32 lakhs has been sanctioned to the District Central Co Operative Banks,

state level co operative institutions, National Level Co -operative institutions, co

operatives and private sugar factories and other institutions Under cash credit limits

during the year 2009-10. A sum of RS. 33918.04 Lakhs was outstanding as on

31.3.2010 as compared to RS. 31774.00 lakhs as on 31.3.2009.

WORKING CAPITAL:

The total working capital of KSC banks as on 31.3.2010 stood at RS.670134.14 lakhs

as against RS. 643725.78 lakhs as on 31.3.2009. The Increase in the working capital

amounted to RS. 26408.36 lakhs during the Year 2009-10, recording a growth rate of

4.10%.

NET PROFIT:

The bank has earned a net profit of RS. 1245.00 lakhs before tax for the year ended

31.3.2010. The bank has made provision of RS. 320.00 lakhs towards income tax for


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the financial year 2009-10, thus it has earned a net profit of RS. 925.00 lakhs after

tax.

RECOVERY:

In respect of agricultural loans, the percentage of recovery as on 31.3.2010 and

30.06.2010 was 100%. For the corresponding period of the previous year, the

recovery percentage stood at 96.92% and 97.35% respectively. The total percentage

of recovery of all the loans at Apex Bank level was stood at 97.63% as at the end of

31.3.2010.The percentage of recovery of agricultural loans at District Central Co

Operative Bank level was 80.05% as on 31.3.2010 as against 75.77% as on31.3.2009. The total percentage of recovery of all the loans at District Central Co

Operative Bank level was 81.42%.

NON PERFORMING ASSETS (NPAs):

The Non performing Assets of the bank stood at RS. 14602.61 lakhs as on 31.3.2010

as against RS. 19201.99 lakhs as on 31.3.2009. Thus, the PA position of the bank has

considerably reduced during 2009-10. During the year 2009-10, our bank has made

recovery of RS. 887.32 lakhs from sugar sector, RS. 4765.47 lakhs from District

Central Co -Operative Banksagricultural loan a/c and RS.1053.41 lakhs from other

sector, thus percentage of total NPA has come down from 5050% to 4.64% during

the year 2009-10.The sector-wise position of NPAs is as under.

(RS. In lakhs)


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SECTOR 31.03.2009 31.03.2010

The above figures indicate the quantum of NPAs pertaining to sugar sector is more when

compared to other sectors. During 2009-10, the banks had given more attention and

importance for the recovery of overdue loans in respect of sugar sector, Individual

Housing Loans and other loans by filing the disputes under section 70 of KCS Act and

also under securitization Act. The NPA in Agricultural loan of Kolar District Central Co

Operative Bank is fully recovered.

AGRICULTURAL DEBT WAIVER AND DEBT RELEIF SCHEME 2008:

The Honble Union Finance Minister in his budget 2008-09 had announced Debt

Waiver and Debt Relief Scheme for providing relief to the farmers. Under this scheme

the audited claims of 21 District Central Co Operative Banks in our state on behalf of

1,94,402 farmers is RS. 381.45 crores, out Of which, RS. 344.86 crores has been

released by the Government and RS. 36.59 crores is yet to be released.

Amount % Amount %

a) agriculture

sector

4765.47 1.36% 0.00 0.00%

b) sugar

sector

11501.02 3.29% 10755.53 3.99%

c) other

sector

2935.50 0.84% 3847.08 1.25%

TOTAL NPAs 19201.99 5.50% 14602.61 4.64%

NET NPAs 1.70% 1.13%


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AUDIT AND INSPECTION:

(a) The concurrent audit of all the branches of the bank for the year 2009-10 Has been

completed.

(b) The bank has an internal audit and inspection department which is Focusing on

independently evaluation the adequacy of all internal Controls, ensuring adherence to

operative guidelines, regulatory and Legal requirements. The department pro-actively

recommending Improvements in operational process and service quality in banks

Branches. To ensure qualitative audit, compliance report received Being, placed before

the banks monitoring and review committee to review the performance of each branchwith regulatory guidelines The concurrent audit has been introduced in all the branches.

(c) INSECPTION OF District Central Co Operative Banks:

Inspection of 8 District Central Co Operative Banks for the year 2008-09 has been

completed and inspection of 11 District Central Co Operative Banks for the year 2009-10

will be conducted during Current year 2010-11.

(d) THE STATUTORY AUDITORS OF THE BANK:

The statutory audit of the bank for the year 2009-10 was entrusted to m/s. Sudhakar pai

associates, Chartered Accountants, Bangalore, who have already completed the audit

work and submitted their report.

AGRICULTURAL CO-OPERATIVE STAFF TRAINING INSTITUTE:

The bank continues to provide appropriate training and values enhancement to ensurethe highest degree of professionalism and integrity. The bank has conducted various

training programmes in co-ordination with NABARD for the employees of Apex bank,

District Central Co Operative Banks and staff of primary agricultural co- operative

societies and also for Urban co-op banks during the year 2009-10. During the year


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2009-10, training programmes were conducted for the benefit of 1590 participants. The

training programmes covered business development, project valuation, modern banking

financing of small scale industries, development action plan, schematic lending,computer applications, prudential norms, workshop on management information system,

self help groups, inter-personal relationship and customer service, etc..

DEVELOPMENT ACTION PLAN:

Apex bank has successfully implemented five years comprehensive development action

plans in a phased manner since 1994-95 as per the guidelines laid down by the

government of India and NABARD, in order to make the bank sustainable, self-viableunit and to achieve more progress. Based on the original action plan, the bank has

prepared annual action plan every year and implemented in the banking activities in order

to fulfill certain economic and social obligations. Presently 4th phased original development

action plan is being implemented in the bank which has a currency of year from 2007-08

to 20011-12. The Karnataka state co-operative apex bank ltd has achieved the growth rate

under various financial parameters as per the annual development action plan the year

2009-10. The Karnataka state co-operative apex bank ltd. is actively participating in the

state monitoring and review committee meeting for the success of the development action

plan of district central co operative banks. Besides, the designated nodal officers of our

bank attending the district level monitoring and review committee meeting quarterly and

give the invaluable suggestions for overall progress of district central co-operative banks.

MANAGEMENT AND MEETINGS:

During the year 2009-10, 9 board meetings, 9 executive committee meetings, and 17 sub-

committee meetings were held.


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AUDIT CLASSIFICATION:

The statutory auditors of the bank m/s sudhakar pai associates, chartered accountants of

the bank have given A class audit classification to the bank for the year 2009-10.

ACHIEVEMENTS DURING 2009-10:

A) In view of converting our branches as self reliant and viable, we have Formulatedand implemented new loan products viz Apex vidya, Apex personal, Apex cash,

pravasa, Apex rent, Apex BDA site loan scheme, loan scheme for BDA initial

deposit, Apex overdraft, Apex Retail, Apex mahile, Apex swayam udyoga, Apex

gold, Apex nivruthi, Apex vruthipara loan facilities to the existing loan facilities.

b) All KSC branches in Bangalore city have been modernised and upgraded To provide

better customer services by total automation.

RTGS and NEFT System has been implemented for speedy transfer of Funds. The bank have entered in to an agreement with oriental insurance company ltd.,

and introducing various insurance products in KSC Bank, and also arranged

group insurance scheme for the savings bank account holders.

The bank have incorporated corporate slogan and changed KSC Bank logo inview of present scenario in the competitive banking sector.

PROPOSED SCHEMES/ OBEJECTIVES FOR THE 2010-11:


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During the year 2010-11, the bank is very keen on deposit mobilization, providing

various loan facilities and introduced various new schemes to earn more profit.

(a) DEPOSITS:

The bank has mobilized RS. 4479.04 crores as on 31.03.2010 as against RS. 3892.42

crores as on 31.03.2009. It is proposed to mobilize additional deposits of RS. 671.85

crores for the year 2010-11 to reach total deposit of RS 5150.89 crores.

(b) LOANS AND ADVANCES:

The target for advancing short term agricultural loans by the District Central Co-Operative Banks during the year 2010-11 has been fixed at RS.4095.86 crores against

lending of RS. 3576.68 crores during the year 2009-10. Similarly the target for

advancing medium term loan for agriculture has been fixed at RS. 201.47 crores during

2010-11 as against RS. 166.60 crores during 2009-10. The total advance outstanding of

the bank was RS. 3146.28 crores as on 31.3.2010 as against RS.3492.55 crores as on

31.3.2009. During the year2010-11, it is proposed to reach the level of RS. 3900.00

crores, of which RS. 2840.00 crores towards agricultural loans and RS. 1060.00 crores

towards non-agricultural loans. The bank has advanced RS. 24452.19 lakhs under various

type of loans through its 31 branches as against the given target of RS. 31900.00 lakhs

during the year 2009-10. During the year 2010-11, it is proposed to advance RS.

50000.00 lakhs under different type of loans at branch level.

(c ) WORKING CAPITAL:

The total working capital of the bank stood at RS. 6701.34 crores as on 31.3.2010 as

against RS. 6437.26 crores as on 31.3.2009. It is proposed to reach the working capital

level to an extent of RS. 7604.00 crores by the end march 2011.


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(d) MICRO FINANCE THROUGH COOPERATIVE INSTITUTIONS:

Vision document 2010 has been prepared for up scaling micro finance through self help

groups by the cooperative bank in Karnataka. It is proposed to form 15000 SHGs

through cooperative institutions and extend bank credit of RS. 500.00 crores to 33500

SHGs during the year 2010-11 under SHGs formation and bank linkage programme.

(e) CREDIT TO DAIRY INDUSTRY / MILCH ANIMALS:

It is proposed to finance dairy industry/ milch animals at the rate of 6% interest through

District Central Co-Operative Banks and PACS under a new scheme announced by the

state government.

(f) CREDIT FACILITIES TO TOURISM INDUSTRIES:

The bank intends to finance tourism entrepreneurs to develop the tourism places in

Karnataka as announced by the honble chief minister of Karnataka in budget 2010-11 at

10% interest rate. Reimbursement will also be given to District Central Co-Operative

Banks under this scheme.

(g) PROFIT:

It is proposed to earn gross profit of 36.00 crores during the year 2010-11.

PROPOSED OTHER SCHEMES DURING THE YEAR 2010-11:


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In order to extend banking services to the citizens of other areas of Bangalore city, it is

intended to open 9 new branches in Bangalore city, the reserve bank of India has already

given license for opening of these branches and further action has been initiated to openthe 9 branches at the earliest. Proposal for opening of 2 more new branches in Bangalore

city and 4 new branches in the revenue divisions of the state is pending with reserve bank

of India for clearance..------ and they have got the clearance and now they have opened

around 40 branches in Bangalore city.

Service to customers

The Karnataka State Co-Operative Apex Bank Limited provides following services to the

societies:

Financing of short term loans Financing of medium term loans Financing of Kisan credit card scheme/loan Credit facilities to self help groups, Advancing medium term loans for economic

development and providing cash credit loans

Advancing workshop capital loans Collection of Cheques and drafts Loans through various schemes Personal banking

1) Financing of short term loans:


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Financing of short term loans for seasonal agricultural operations and for marketing of

crops. These loans are repayable within one year.

2) Financing of medium term loans:

These loans are sanctioned for agricultural purpose and non-agricultural purpose.

3) Financing of Kisan credit card schemes/loan:

Kisan credit card aims at providing timely and adequate credit support to farmers for their

cultivation including investment credit needs in a flexible and cost effective manner. All

DCC banks in the state have implemented the kisan credit scheme.

4) Credit facilities to self help groups:

All the DCCBs have taken keen interest in the formation of self help groups in co-

ordination with PACS. Self help groups mobilize their savings and avail credit facilities

from DCCBs and PACS.

5) Advancing medium term loans with economic development

These loans are advanced for the agricultural infrastructures such as lift irrigation, diary,

poultry, plantation, gobar gas etc that constitutes schematic lending.

6) Providing cash credit loans:

Providing cash credit loans to processing marketing and consumer co-operatives as well

as sugar factories in Karnataka and also term loans to sugar factories under consortium

agreement.

7) Advancing working capital loans:


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Advancing working capital loans to state level co-operatives like MARKFED, KCCF and

to the national level co-operatives like IFFCO and KRIBHCO. The bank provide similar

facilities to public sector undertakings like Karnataka Silk Marketing Board, KarnatakaHandloom Development Corporation, Karnataka Small Scale Industries Development

Corporations, Food Corporations of India directly and also through consortium

arrangements with commercial banks

8) Collection of Cheques and Drafts:

The bank extends finance to the non-farm sector and to the development of cottage

industries, small scale industries and rural artisan and weavers. It is a scheduled bank inall aspects including remittance of funds, demand drafts, mail transfers, collection of

Cheques and drafts.

9) Loans through various schemes:

Such as:

Vehicle loans Housing loans Mortgage loans Installment loans Jewel loans

10) Personal Banking: Apex bank provides the following deposit schemes to the

customers:

11) Fixed Deposits:

In this account, the customer deposits the deposit money period up to 10 years


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12) Current Deposits:

In this type, the individuals or businessmen operate. This account is kept open for the

entire day. The customer can make any number of deposits and withdrawals in a day

during business hour.

13) Saving Bank Deposits: In this deposits, the low income class groups and marginal

customers deposits the money.

FINANCIAL PERFORMANCE:

During the financial year 2009-2010, our bank has earned a net profit of rupees

1245.00 lakhs before the provision for income tax. This was rupees 1950.00 lakhs during

the year 2008-09. The bank has come under the purview of the income tax from the

financial year 2006-07 onwards. The bank has made provision for income tax of rupees

320.00 lakhs during the year 2009-10. Our Bank has earned a net profit of rupees 925.00

lakhs after the provision for tax and thus the overall performance of the bank remains

good.

FINANCIAL KEY INDICATORS: (AS AT END MARCH 2010)

SLNO.

PARTICULARS 31.03.2009 31.03.2010

1 Membership 101 108

2 Share capital 8,111.18 8124.08

(Rs. In lakhs)


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3 Reserves 37,354.63 37994.96

4 Own Funds 34,867.17 36640.25

5 Deposits 3,89,241.32 447903.77

6 Working capital 6,43,725.78 670134.14

7 Borrowings 196667.92 164757.00

8 Cash balance & balance with

other banks

22505.12 30644.03

9 Investments (including call

money)

269652.58 322734.07

10 Advances 349254.68 314628.40

11 Net Profit 12500.00 925.00

INVESTMENTS: ( RS. IN LAKHS)

1. State and central government 116361.28

2. Other trustee securities 1055.00

3. In shares of co operative institutions 1515.66

4. Other Investment 104362.13

TOTAL 223294.07


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CHAPTER 4

[DATAANALYSISANDINTERPRETATION]

TABLE NO.1:

Table showing the LOANS AND ADVANCES OUTSTANDING at apex bank

during 2007-2011

(in lakhs)

YEAR LOANS AND ADVANCES OUTSTANDING

2006-2007 178574.78

2007-2008 223765.69

2008-2009 349254.68

2009-2010 314628.4

2010-2011 406283.74

Analysis:


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The table shows the amount of loans and advances outstanding during period of 2007 to

2011.from the above table it can be analyzed that loans and advances outstanding of bank

is increasing from 2007 to 2011.Except it has decreased in 2010 compared to 2009 and2011.

CHART NO.1:

Chart showing the LOANS AND ADVANCES OUTSTANDING at ap ex bank

during 2007-2011

Inference:

0

50000

100000

150000

200000

250000

300000

350000

400000

450000

LOANS AND ADVANCES OUTSTANDING

LOANS AND ADVANCES

OUTSTANDING


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From the above analysis it is interpreted the loans and advances of the bank is fluctuating

year by year from 2009 to 2010 and it as increased in the year 2011 compared to the

other four previous years. And this has a considerable impact on the bank profitabilityand financial performance.

TABLE NO.2:

Table showing the total NPAs of apex bank in respect to credit facilities

during 2007-20011

(In lakhs)

YEAR TOTAL NPA

2006-2007 24,490.21

2007-2008 20895.27

2008-2009 19201.99

2009-2010 14808.11

2010-2011 17512.4

Analysis:

The above table showing the total NPAs of apexbank during the year 2007-2011.from

the table it can be analyzed that the level of NPA was considerably reducing from the


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year 2007 to 2010 and then slightly increased in 2011.and compared to the year 2006-

2007 to 2008-2009 it has reduced in 2011 . In the year 2010 it has least total NPA

CHART NO.2:

Chart showing the total NPAs of apex bank in respect to credit facilities

during 2007-20011

TOTAL NPA0.00

5,000.00

10,000.00

15,000.00

20,000.00

25,000.00

TOTAL NPA

TOTAL NPA


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Inference:

From the above analysis it is interpreted that the recovery of NPA position of the apex

bank has considerably improved from 2007 to 2010 .it show that the bank has taken

effective steps to control volume of NPA.

TABLE NO.3:

Table showing the classification of assets at Apex bank.

(In lakhs)

YEAR Sub-standard Doubtful Loss

2007-2008 9074.82 11273.68 546.77

2008-2009 6438.28 12358.89 404.82

2009-2010 3823.42 10648.17 336.52

2010-2011 9670.49 7478.44 363.47

Analysis:


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The table shows the classification of assets into different categories. The substandard

assets are decreasing year after year and slightly increased in 2011.

Doubtful assets have been fluctuating year after year and it shows the decreased level in

2011.

Loss assets show a drastic decrease in its value from 2008 to 2010 and slightly up in the

year 2011.

CHART NO.3:

CHART showing the classification of assets at Apex bank.

0

2000

4000

6000

8000

10000

12000

14000

2007-2008 2008-2009 2009-2010 2010-2011

Assets classifiction

Sub-standard

Doubtful

Loss


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Inference:

Decrease in the sub standard assets from 2008 to 2010 shows the development in the

banks performance. The doubtful assets are gradually decreasing. The loss assets are

decreasing year after year. The decrease in the sub-standard assets and doubtful assets are

due to the strict recovery policy of the bank. The loss assets show an irregular pattern for

strict recovery measures are to be followed.

TABLE NO.4:

Table showing the level of sub-standard assets to total NPA at apex bank during 2007

to 2011

(in lakhs)

YEARTOTAL SUB-

STANDARD ASSETS

TOTAL

NPA

% OF SUB-STANDARD

ASSETS

2007-2008 9074.82 20895.27 43.43%

2008-2009 6438.28 19201.99 33.52%

2009-2010 3823.42 14808.11 25.81%

2010-2011 9670.49 17512.4 55.22%


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Analysis:

From the above statement it can be analyzed that total sub-standard assets to total NPA

has decreased from Rs.9074.82 in the year 2007-2008 to 2009-2010 it has decreased to

RS.3823 and it has increased in the year 2010-2011.

CHART NO.4:

Chart showing the level of sub-standard assets to total NPA at apex bank during 2007

to 2011

0

5000

10000

15000

20000

25000

2007-2008 2008-20092009-2010

2010-2011

year

Total Loss Assets

TOTAL NPA

% Of Loss Assets


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Inference:

From the above analysis it is interpreted that both the level of sub-standard assets and

total NPA the year 2009-2010 have been decreased .it shows the bank has taken effective

steps to control the level of NPA. Unfortunately the total sub-standard assets is slightly

increased in 2011 .it appreciable that total NPA is reduced compare to the year 2007-

2009

TABLE NO.5:

The table showing the level of doubtful assets to total NPA at apex bank during the

year 2007-2011

(In lakhs)

YEAR TOTAL doubtfulassets

TOTAL NPA % OF doubtfulassets

2007-2008 11273.68 20895.27 53.95%

2008-2009 12358.89 19201.99 64.36%

2009-2010 10648.17 14808.11 71.90%


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2010-2011 7478.44 17512.4 42.55%

Analysis:

From the above table it can be analyzed that there is reduction in doubtful assets for past

4 years. In the year 2008 the % of doubtful assets was 53.95% and in 2008- 2009 to

2009-2010 the % was increased to 71.90% and reduced to 42.55% in 2011.

CHART NO.5:

The chart showing the level of doubtful assets to total NPA at apex bank during the

year 2007-2011


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Inference:

From the above analysis it is interpreted that the level of doubtful assets was fluctuating

year by year to total NPA. It shows the adverse effect on the profitability of the bank

TABLE NO.6:

The table showing the level of loss assets to total NPA at apex bank during the year

2007-2011

0

5000

10000

15000

20000

25000

year

Total Loss Assets

TOTAL NPA

% Of Loss Assets


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(in lakhs)

YEAR Total Loss Assets

TOTAL

NPA % Of Loss Assets

2007-2008 546.77 20895.27 2.62%

2008-2009 404.82 19201.99 2.11%

2009-2010 336.52 14808.11 2.27%

2010-2011 363.47 17512.4 2.07%

Analysis:

From the above statement it can be analyzed that total level of loss assets was

considerably decreased during 2007-2008 to 2010-2011 compared to previous year. In

the year 2007-08 it was 2.62% and reduced to 2.11% in 2009 and then slightly increased

to 2.27% in 2010 and again decreased in 2011

CHART NO.6:

The chart showing the level of loss assets to total NPA at apex bank during the year

2007-2011


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Inference:

From the above analysis it is interpreted that the level of loss assets to total NPA was

highly decreased in the year 2011.it shows the bank has taken effective steps to control

the level of NPA

TABLE NO.7:

Table showing the percentage of total NPA to total loans and advances outstanding

(in lakhs)

0

5000

10000

15000

20000

25000

2007-2008 2008-2009 2009-2010 2010-2011

Total Loss Assets

TOTAL NPA

% Of Loss Assets


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YEARTOTAL

NPA

Total Loans and

ADVANCES

% total Loans and

ADVANCES

2007-2008 20895.27 280484.04 7.45%

2008-2009 19201.99 349254.68 5.49%

2009-2010 14808.11 314628.4 4.70%

2010-2011 17512.4 406283.74 4.30%

Analysis:

From the above table it can be analyzed that the level of total NPA to total loans and

advances was considerably decreasing from 2007 to 2011

From the year 2007-08 it was 7.45% and decreased to 5.49%, 4.70%, 4.30% from the

respective following year 2009 to 2011.

CHART NO.7:

Chart showing the percentage of total NPA to total loans and advances


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Inference:

From the above analysis it can be interpreted that the total loans and advances of the bankincreased from 2007-2008 to 2010- 2011 and also the bank has taken effective steps to

control the level of NPA.

TABLE NO.8:

Table showing total provisioning required and provisioning actually made at apex

bank.

0

50000

100000

150000

200000

250000

300000

350000

400000

450000

2007-2008 2008-2009 2009-2010 2010-2011

TOTAL NPA

Total Loans and ADVANCES

% total Loans and ADVANCES


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(in lakhs)

YEAR provisioning required provisioning actually made Surplus provision

2007-2008 14751.24 17558.87 2807.63

2008-2009 15432.62 17852.86 2420.24

2009-2010 13812.66 14801.7 989.04

2010-2011 12556.81 15385.49 2828.68

Analysis:

From the above statement it can be analyzed that the provision made against NPA was

considerably fluctuating year by year i.e. the surplus provision in the year 2007-2008 it

was 2807.63 and decreased to 989.04 in the year 2010 and it has increased to 2828.68 in

2011.

CHART NO.8:

Chart showing total provisioning required and provisioning actually made at apex

bank.


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Inference:

The above chart represents provisions required and provisions actually created for NPAS

it indicates the degree of safety measures adopted by the bank, as the bank has been

creating surplus provision for NPAs during last 4 years

TABLE NO.9:

Table showing the deposit growth in apex bank

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

2007-2008 2008-2009 2009-2010 2010-2011

provisioning required

provisioning actually made

Surplus provision


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YEAR Deposits (in crores )

2007-2008 3119.37

2008-2009 3892.41

2009-2010 4479.04

2010-2011 4646.67

Analysis:

From the table it can be observed that the total deposits have increased from 3119.37 in2007-2008 to 3892.41 in 2009, 4479.04 in 2010 and 4646.67 in 2011 .

CHART NO.9:

Chart showing the deposit growth at apex bank


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Inference:

The deposits have increased from 3119.37 to 4646.67 i.e. from 2008 to 2011. this shows

that there is substantial growth in deposits growth rate.

TABLE NO.10:

Table showing the growth of reserves at the apex bank from 2008 to 2011

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

2007-2008 2008-2009 2009-2010 2010-2011

Deposits (in crores )

Deposits (in crores )


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Year Reserves (in crores)

2007-2008 233.52

2008-2009 255.06

2009-2010 275.9

2010-2011 293.97

Analysis:

From the above data it is noticed that there was a substantial increase in the reserves from

Rs.233.52 cores in 2008 to Rs. 255.06 cores in 20079 and further to Rs. 275.9 cores in

2010. Further to 293.97 in 2011.

CHART NO.10:

Chart showing the growth of reserves at the apex bank from 2008 to 2011.


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Inference:

The reserves have increased every quarter during the period 2008 to 2011 from Rs.233.52

crores in the year 2008 to Rs.293.97 crores by the year 2011. This shows that the banks

growth rate has increased due to better management of NPAs.

TABLE NO.11:

Table showing the sector wise position of NPA of apex bank during 2008 to 2010

0

50

100

150

200

250

300

2007-2008 2008-2009 2009-2010 2010-2011

Reserves ( in crores)

Reserves ( in cores)


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particulars 2007-2008 2008-2009 2009-2010

Agricultural sector 5117.88 4765.47 0

sugar sector 12711.78 11501.5 10755.53

other sectors 3065.61 2935.5 3847.08

Total NPA 20895.27 19201.99 14808.11

Analysis:

From the above statement it can be analyzed that the total level of NPA of agricultural

sector was decreased in 2009 compared to 2008 .

It can be easily find out that the level of NPA of sugar sector was decreasing from 2008

to 2010 and total NPA also decreasing year after year.

CHART NO.11:

Chart showing the sector wise position of NPA of 2008 to 2010


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Inference:

From the above analysis it is interpreted that the level of NPA of sugar sector was more

in the total NPA, IT shows that recovery steps of bank from the sugar sector was

effective.

TABLE NO.12:

Table showing the percentage of sector wise position of NPA during 2007 to 2010

0

5000

10000

15000

20000

25000

Agricultural sector

s

sugar sector other sectors Total NPA

2007-2008

2008-2009

2009-2010


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particulars

2006-

2007

2006-

2007%

2007-

2008

2007-

2008%

2008-

2009

2008-

2009%

2009-

2010

2009-

2010%

agricultural

sector4598.63 2.06% 5117.88 1.82% 4765.47 1.36% 0 0%

sugar sector 16877.96 7.54% 12711.78 4.53% 11501.02 3.30% 10755.53 3.99%

other

sectors3013.62 1.34% 3065.61 1.10% 2935.5 0.84% 3847.08 1.25%

Total NPA 24490.21 10.94% 20895.27 7.45% 19201.99 5.50% 14602.61 4.64%

Analysis:

From the above statement it can be analyzed that the total NPA of agricultural sector has

been fluctuating from 2007 to 2009 .the total NPA of sugar sector has also been slightly

fluctuating from 2008 to 2010.and the total NPA of other sectors are also been slightly

fluctuating 2007 to 2010.

The percentage of total NPA has been decreasing from the year 2007 it was 10.94% then

it reduced to 7.45% in 2008.and again it reduced in 2009 by 5.50% and then slightly

reduced by 4.64% in 2010.

CHART NO.12:

Chart showing the percentage of sector wise position of NPA during 2007 to 2010


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Inference:

From the above analysis it can be interpreted that the recovery in sugar sector was made

effectively compare to other sectors. Totally the NPA level of the bank is reducing year

by year it shows the effective steps taken by a bank to recover NPAs.

CHAPTER 5

[Findings, suggestions and conclusion]

agricultural sector

other sector

0

5000

10000

15000

20000

25000

agricultural sector

sugar sector

other sector

total NPA


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SUMMARY OF FINDINGS

The level of doubtful assets in the year 2009 to 2011 was decreased continuously Total Loans and Advances outstanding increased from 314628.4 in 2010 to

406283.74 in 2011

Increase in NPA has a direct impact on the profitability and growth of the bank. The level of doubtful assets in the year 2009 to 2011 was decreased continuously The level of sub-standard asset has been decreasing from 2008 to 2010 and

increased in 2011

The level of loss assets have been decreasing from 2008 to 2011,in 2008 it was546.77 and decreased to 363.47 in 2011 this shows that the bank has implemented

an effective way of recovery of NPA.

The Bank made the provisions as per the norms prescribed under the prudentialnorms.

The study confines that there is continuous decrease in the NPAs percentageduring 2007 to 2010 from 3.15 % to 1.13%

The bank is adopting various strategies in minimizing NPA The NPA plays a major role in assessing the performance of the bank and it also

contributes to net profits of the bank. Hence, bank has taken several steps for

recovery of NPAS

Loans and Advances of the Bank are mainly concentrating on Agricultural sectors.


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There is an increase in deposits and in their share capital year by year, because ofthe bank attracting more and more depositors and other smooth flow of their

operations Borrowings of the bank has fluctuating from 2008 to 2011 Net profit of the bank during the year 2008-2009 was 12.50 crores and it has

increased to 23.00cr in 2011(tentative)

The Bank has continued to provide appropriate training and value enhancement toensure the highest degree of professionalism and integrity.

SUGGESTIONS

Based on the Analysis of the Study, following are the suggested measures towards

effective management of NPA such as,


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Providing adequate training to the staff of the Bank for effective management ofNPA.

Banks should take advantage of mergers and acquisitions of sick units in order toreduce the NPAs.

The modification of lending policy is required to reduce the level of NPA. The bank has followed recommendations of Narasimhan committee for effective

management of NPA.

With the financial support from the NABARD the Apex Bank conduct varioustraining programs for its own staff and also DCC Banks, PAACs and UCB

through its training institute (Agricultural Co-operative Staff Training Institution -

ACSTI)

Before granting loan to various sectors, bank has to make proper verification ofDocuments of various sectors to protect it from the legal complications.

Banks has made provisions as per the norms prescribed under the prudential normsunder the guidelines given by the Reserve Bank of India

Adequate training to all the staff members of the bank regarding the managementof the NPA should be given.

The bank should maintain a separate recovery cell for the recovery of loans andadvance made by the bank.


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Before granting loan to a borrower the Bank has to obtain brief history aboutborrower to find out his credibility and reliability then he will repay the loan

amount on time.

The sanctioning of Loans and Advances to borrower should be done keeping inview of the progress made by the Bank.

Necessary information on Standard, Sub-Standard, Doubtful, Loss Assets shouldbe given in time at regular intervals.

The Bank should provide with Low rate of interest so that farmers can easily repaythe loan amount,

It is appropriate to educate the customers, which will have a good impact on therecovery of loan.

Bank should not encourage unsecured loans. Focus on high value NPA accounts can be done by improving quality of credit Bank should consider some additional strategies and policies to face challenges of

the competitors in future, to improve the quality of its service of lending and

recovery

Appraisals and prompt action on credit audit reports should be undertaken. Conducting and launching massive recovery campaign in each zone and branch

offices by making up to date information on the assets with greater consideration

NPA Project Report

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