npa project report
TRANSCRIPT
-
7/27/2019 NPA Project Report
1/78
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.
-
7/27/2019 NPA Project Report
2/78
2 A report on Non-performing assets at Apex bank
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
-
7/27/2019 NPA Project Report
3/78
3 A report on Non-performing assets at Apex bank
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).
-
7/27/2019 NPA Project Report
4/78
4 A report on Non-performing assets at Apex bank
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.
-
7/27/2019 NPA Project Report
5/78
5 A report on Non-performing assets at Apex bank
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
-
7/27/2019 NPA Project Report
6/78
6 A report on Non-performing assets at Apex bank
CO OPERATIVE BANK STRUCTURE
-
7/27/2019 NPA Project Report
7/78
7 A report on Non-performing assets at Apex bank
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
-
7/27/2019 NPA Project Report
8/78
8 A report on Non-performing assets at Apex bank
[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
http://www.investorwords.com/273/asset.htmlhttp://www.investorwords.com/273/asset.htmlhttp://www.investorwords.com/273/asset.htmlhttp://www.investorwords.com/273/asset.html -
7/27/2019 NPA Project Report
9/78
9 A report on Non-performing assets at Apex bank
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
-
7/27/2019 NPA Project Report
10/78
10 A report on Non-performing assets at Apex bank
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
-
7/27/2019 NPA Project Report
11/78
11 A report on Non-performing assets at Apex bank
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.
-
7/27/2019 NPA Project Report
12/78
12 A report on Non-performing assets at Apex bank
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;
-
7/27/2019 NPA Project Report
13/78
13 A report on Non-performing assets at Apex bank
(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.
-
7/27/2019 NPA Project Report
14/78
14 A report on Non-performing assets at Apex bank
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.
-
7/27/2019 NPA Project Report
15/78
15 A report on Non-performing assets at Apex bank
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
-
7/27/2019 NPA Project Report
16/78
16 A report on Non-performing assets at Apex bank
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
-
7/27/2019 NPA Project Report
17/78
17 A report on Non-performing assets at Apex bank
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
-
7/27/2019 NPA Project Report
18/78
18 A report on Non-performing assets at Apex bank
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.
-
7/27/2019 NPA Project Report
19/78
19 A report on Non-performing assets at Apex bank
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,
-
7/27/2019 NPA Project Report
20/78
20 A report on Non-performing assets at Apex bank
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
-
7/27/2019 NPA Project Report
21/78
21 A report on Non-performing assets at Apex bank
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.
-
7/27/2019 NPA Project Report
22/78
22 A report on Non-performing assets at Apex bank
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
-
7/27/2019 NPA Project Report
23/78
23 A report on Non-performing assets at Apex bank
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
-
7/27/2019 NPA Project Report
24/78
24 A report on Non-performing assets at Apex bank
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.
-
7/27/2019 NPA Project Report
25/78
25 A report on Non-performing assets at Apex bank
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
-
7/27/2019 NPA Project Report
26/78
26 A report on Non-performing assets at Apex bank
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
-
7/27/2019 NPA Project Report
27/78
27 A report on Non-performing assets at Apex bank
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
-
7/27/2019 NPA Project Report
28/78
28 A report on Non-performing assets at Apex bank
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
-
7/27/2019 NPA Project Report
29/78
29 A report on Non-performing assets at Apex bank
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
-
7/27/2019 NPA Project Report
30/78
30 A report on Non-performing assets at Apex bank
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
-
7/27/2019 NPA Project Report
31/78
31 A report on Non-performing assets at Apex bank
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
-
7/27/2019 NPA Project Report
32/78
32 A report on Non-performing assets at Apex bank
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)
-
7/27/2019 NPA Project Report
33/78
33 A report on Non-performing assets at Apex bank
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%
-
7/27/2019 NPA Project Report
34/78
34 A report on Non-performing assets at Apex bank
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
-
7/27/2019 NPA Project Report
35/78
35 A report on Non-performing assets at Apex bank
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.
-
7/27/2019 NPA Project Report
36/78
36 A report on Non-performing assets at Apex bank
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:
-
7/27/2019 NPA Project Report
37/78
37 A report on Non-performing assets at Apex bank
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.
-
7/27/2019 NPA Project Report
38/78
38 A report on Non-performing assets at Apex bank
(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:
-
7/27/2019 NPA Project Report
39/78
39 A report on Non-performing assets at Apex bank
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:
-
7/27/2019 NPA Project Report
40/78
40 A report on Non-performing assets at Apex bank
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:
-
7/27/2019 NPA Project Report
41/78
41 A report on Non-performing assets at Apex bank
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
-
7/27/2019 NPA Project Report
42/78
42 A report on Non-performing assets at Apex bank
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)
-
7/27/2019 NPA Project Report
43/78
43 A report on Non-performing assets at Apex bank
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
-
7/27/2019 NPA Project Report
44/78
44 A report on Non-performing assets at Apex bank
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:
-
7/27/2019 NPA Project Report
45/78
45 A report on Non-performing assets at Apex bank
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
-
7/27/2019 NPA Project Report
46/78
46 A report on Non-performing assets at Apex bank
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
-
7/27/2019 NPA Project Report
47/78
47 A report on Non-performing assets at Apex bank
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
-
7/27/2019 NPA Project Report
48/78
48 A report on Non-performing assets at Apex bank
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:
-
7/27/2019 NPA Project Report
49/78
49 A report on Non-performing assets at Apex bank
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
-
7/27/2019 NPA Project Report
50/78
50 A report on Non-performing assets at Apex bank
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%
-
7/27/2019 NPA Project Report
51/78
51 A report on Non-performing assets at Apex bank
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
-
7/27/2019 NPA Project Report
52/78
52 A report on Non-performing assets at Apex bank
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%
-
7/27/2019 NPA Project Report
53/78
53 A report on Non-performing assets at Apex bank
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
-
7/27/2019 NPA Project Report
54/78
54 A report on Non-performing assets at Apex bank
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
-
7/27/2019 NPA Project Report
55/78
55 A report on Non-performing assets at Apex bank
(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
-
7/27/2019 NPA Project Report
56/78
56 A report on Non-performing assets at Apex bank
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
-
7/27/2019 NPA Project Report
57/78
57 A report on Non-performing assets at Apex bank
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
-
7/27/2019 NPA Project Report
58/78
58 A report on Non-performing assets at Apex bank
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
-
7/27/2019 NPA Project Report
59/78
59 A report on Non-performing assets at Apex bank
(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.
-
7/27/2019 NPA Project Report
60/78
60 A report on Non-performing assets at Apex bank
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
-
7/27/2019 NPA Project Report
61/78
61 A report on Non-performing assets at Apex bank
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
-
7/27/2019 NPA Project Report
62/78
62 A report on Non-performing assets at Apex bank
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 )
-
7/27/2019 NPA Project Report
63/78
63 A report on Non-performing assets at Apex bank
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.
-
7/27/2019 NPA Project Report
64/78
64 A report on Non-performing assets at Apex bank
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)
-
7/27/2019 NPA Project Report
65/78
65 A report on Non-performing assets at Apex bank
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
-
7/27/2019 NPA Project Report
66/78
66 A report on Non-performing assets at Apex bank
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
-
7/27/2019 NPA Project Report
67/78
67 A report on Non-performing assets at Apex bank
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
-
7/27/2019 NPA Project Report
68/78
68 A report on Non-performing assets at Apex bank
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
-
7/27/2019 NPA Project Report
69/78
69 A report on Non-performing assets at Apex bank
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.
-
7/27/2019 NPA Project Report
70/78
70 A report on Non-performing assets at Apex bank
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,
-
7/27/2019 NPA Project Report
71/78
71 A report on Non-performing assets at Apex bank
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.
-
7/27/2019 NPA Project Report
72/78
72 A report on Non-performing assets at Apex bank
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