Rahul22 10-2013

A STUDY ON MANGAEMENT OF NPA’s IN THE

FATEHGARH COOPERATIVE BANK

SUBMITTED TOMs. Rubeena Bajwa

(Assistant professor)

SUBMITTED BYRAHULRoll no.12062149Mba 2yr.

CONTENT1. Introduction of co-operative bank2. The punjab state cooperative bank3. Network of punjab state cooperative bank4. Mission statement5. Co-operative banking products6. Introduction about topic7. Objectives of the study8. Review literature9. Research methodology10. Data analysis and intrepretation11. Findings12. Suggestions13. Conclusion

INTRODUCTION OF CO-OPERATIVE BANK

The Co-operative banks are an important constituent of the Indian Financial System judging by the role assigned to them the expectations they are supposed to fulfill their number and the number of offices they operate. The co-operative movement originated in the West, but the importance that such banks have assumed in India is rarely paralleled anywhere else in the world. Their role in rural financing continues to be important even today, and their business in the urban areas also has increased phenomenally in recent years mainly due to the sharp increase in the number of primary co-operative banks. Co-operative bank regulated by Reserve Bank of India, NABARD.

CONT…… The co-operative banks in rural areas mainly finance

agricultural based activities including farming, cattle, milk, personal finance etc. along with some small scale industries and self-employment driven activities, the co-operative banks in urban areas mainly finance various categories of people for self-employment, industries, small scale units, home finance, consumer finance, personal finance, etc. Though registered under the Co-operative Societies Act of the Respective States the banking related activities of the co-operative banks are also regulated by the Reserve Bank of India. They are governed by the Banking Regulations Act 1949 and Banking Laws (Co-operative Societies) Act, 1965.

The Punjab State Cooperative Bank

The Punjab State Cooperative Bank Ltd.(PSCB) was established & registered under Punjab Cooperative Societies Act on 31st august 1949 with Registration No.720 as principal financing institution of the cooperative movement in the state. It is an Apex institution of the District Central Cooperative Banks (DCCBs) functioning in the state. The governance of village level Primary Agriculture Cooperative Societies, District Central Cooperative Banks & PSCB is ensured by elected board through a democratic election system under The Punjab Cooperative Societies Act.

NETWORK OF PSCB

Punjab State Cooperative Bank (PSCB) with its 5 Regional and 19 local Branches in the State.

There are 20 district Central cooperative banks having 804 branches and 29 extension counters in the state of Punjab are affiliated with the bank.

Creating innovative financial products for the poorest of the poor

Personal accidental insurance scheme Crop insurance scheme KISAN Credit cardCommercial loan scheme

MISSION STATEMENT

Co-operative Bank Corporate Mission Is to Become A Strong And Competitive Cooperative Banking Network Which Offers Innovative Financial Product Along with different Range Of Services To Serve Rural Masses With Short-Term Cooperative Credit Structure To Serve The People Of PUNJAB.

Prodect

Educational

Loans. Kisan Credit card

Scheme

Saving A/c

Current A/c

Fixed A/c

Recurring Deposit

A/c

Personal Loans.

Micro Finance

Home Loan

Vehicle Loans.

CO-OPERATIVE BANKING PRODUCTS

INTRODUCTION ABOUT TOPIC

NON PERFORMING ASSETS (NPA)

LMTSOM

Why Loan accounts go bad ?

BORROWER-SIDE

Lack of PlanningDiversion of FundsDisputes withinNo contribution No modernizationImproper monitoringIndustrial RelationsNatural Calamities

BANKER – SIDE

Defective SanctionNo post-sanction

supervisionDelay in releasesDirected lending Slow decision making

process

Performing Asset

An account does not disclose any problems and carry more than normal risk attached to the business

All loan facilities which are regular !

Non Performing Assets (NPA)

NPA is defined as a credit facility in respect of which the interest and/or installment of principal has remained ‘past due’ for a specified period of time.

An asset, including a leased asset, becomes non-performing when it ceases to generate income for the bank.

In accounting, originally Bad & Doubtful Debts

TYPES OF NPA

Gross NPA: Gross NPAs are the sum total of all loan assets

that are classified as NPAs as per RBI guidelines as on Balance Sheet date. Gross NPA reflects the quality of the loans made by banks. It consists of all the non standard assets like as sub-standard, doubtful, and loss assets.

Gross NPAs Gross NPAs___ Gross Advances

Net Gross NPA: Net NPAs are those type of NPAs in which the

bank has deducted the provision regarding NPAs. Net NPA shows the actual burden of banks.

Net Gross NPAs = NPAs – Provisions Gross Advances - Provisions

CATEGORIES OF NPA

Standard Assets: Arrears of interest and the principal amount of loan does not exceed 90 days at the end of financial year

Substandard Assets – Which has remained NPA for a period less than or equal to 12 months.

Doubtful Assets – Which has remained in the sub-standard category for a period of 12 months

D1 i.e. up to 1 year : 20% provision is made by the banks D2 i.e. up to 2 year: 30% provision is made by the bank D3 i.e. up to 3 year : 100% provision is made by the bank.

Loss Assets – where loss has been identified by the bank or internal or external auditors or the RBI inspection but the amount has not been written off wholly.

PROVISIONING NORMS

STANDARD ASSETS – general provision of a minimum of 0.40 percent on standard assets

SUBSTANDARD ASSETS – 10% on total outstanding balance, 10 % on unsecured exposures identified as sub-standard & 100% for unsecured “doubtful” assets.

DOUBTFUL ASSETS – 100% to the extent advance not covered by realizable value of security. 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

FACTORS FOR RISE IN NPAs

The banking sector has been facing the serious problems of the rising NPAs. But the problem of NPAs is more in public sector banks when compared to private sector banks and foreign banks.

• INTERNAL FACTORS

• EXTERNAL FACTORS

EXTERNAL FACTORS

Ineffective recovery tribunal

Willful Defaults

Natural calamities

Industrial sickness

Lack of demand

Change in Govt. policies

INTERNAL FACTORS

Defective Lending process

Inappropriate technology

Analyze the balance sheet.

Purpose of the loan

Poor credit appraisal system

Managerial Problems

Absence of regular industrial visit

IMPACT OF NPA

Profitability

Liquidity

Involvement of management

Credit loss

Bad effect on goodwill

Bad effect on equity value

TOOLS FOR RECOVERING NPA

LOK ADALATS

DEBT RECOVERY TRIBUNALS (DRT)

LOK ADALAT

To settle disputes involving account in “doubtful” and “loss” category.

Outstanding balance of Rs.5 lakhs for compromise settlement.

Proved to be quite effective for speedy justice and recovery of small loans.

Progress through this channel is expected to pick up in the coming years

DEBT RECOVERY TRIBUNALS (DRT)

To recover their bad Debt quickly and efficiently.

33 Debt Recovery Tribunal and 5 Debt Recovery Appellate Tribunal

It is the special court established by central government for the purpose of bank or any financial institutions recovery.

The judges of this court are the retired judges of high court.

In this court only the recovery cases of Rs.10 lakhs and above can be filed.

OBJECTIVES OF THE STUDY

To study Non-Performing asset which are create a bad debts for bank.

To identified composite of the loan products.

To study the status of NPA in fatehgarh Sahib Co-operative bank.

REVIEW LITERATURES.NO

AUTHOR’S NAME

TITLE FINDINGS

1. Dr. N.M.Bachhawat (2003)

Dr. N.M.Bachhawat (2003), in his article “Review of Important Aspects of NPAs of Banks in India in The Post Reform Period”

An assets would be considered non-performing assets if interest on such assets remains past due for a period exceeding 180 days at the balance sheet date..

CONTD……..S.NO

AUTHOR’S NAME

TITLE FINDINGS

2. Y.V. Reddy (2009)

Y.V. Reddy (2009), in his article “Reforming India’s Financial Sector- Changing Dimensions and Emerging Issues”

The Committee believes that the balance sheet of banks and financial institutions should be made transparent and full disclosures made in the balance sheets as recommended by the International Accounting standards Committee.

CONTD…..S.NO

AUTHOR’S NAME

TITLE FINDINGS

3.

P.N.Joshi (2003)

P.N.Joshi (2003), in his article “Non-Performing Assets - Causes, Extent and Remedies”

In fact, the internationally accepted norm is to relate the ratio to total assets. In our country loans form barely 52 per cent of the total credit-deposit ratio being around 54 per cent. The remaining 48 per cent of the 43 assets are held in CRR (5 per cent) and actual SLR (38 per cent) 5 per cent being other assets. 43 percent of the assets (CRR+SLR) are the safest and risk free being funds with the RBI.

RESEARCH METHODOLOGY

Sources of Data Collection: PRIMARY DATA:

In this study, personal interviews with senior officials of different departments of and various members of finance and accounts department of the bank.

SECONDARY DATA: The secondary data are those data which have already been

collected by someone else and which have already been passed through statistics process. The published data as maintained by bank like company manuals, annual reports balance sheets of bank, NPA management last Four years.

LIMITATIONS:

The study is based on the data of past three or four years only.

The data for study covers only a single bank

As majority of the customers are employees of the bank, they might be biased in giving the information

The time period of the research was limited to 6 weeks.

DATA ANALYSIS AND INTREPRETATION

TOTAL 261359974

Cash credit societies

1074463

Loan to individuals

106808064

Other loan 300362

Short term loan

153177085

Chart Title

Short term loanOther loanCash credit societiesLoan to indi-viduals

I have last year balance sheet of 2012-13 according to data bank have total liabilities is Rs.287725882.32 and total property & assets is same balance but total loan on balance sheet is Rs.261359974 and this is different types of loan.

Loan to individualsPersonal loan 18315980

Vehicle loan 5626181

Non farming sector(Composite) 918961

Loan against team deposit 624610

S.R.T.O. 378565

Self help group 178000

Urban house loan 1138016

Rural house loan 1044060

Cow loan 111697

Consumer loan/salary persons 1794911

Consumer loan/Non salary

persons

622348

Cash credit farmers 67927999

Cash credit traders 631071

Two wheeler to farmers 1125268

18%

6% 1%1%

0%

0%

1%1%0%

2%1%

68%

1%1%

TYPES OF LOANS

Personal loan Vehicle loan Non farming sector(Composite)Loan against team depositS.R.T.O. Self help group Urban house loan Rural house loan Cow loan Consumer loan/salary personsConsumer loan/Non salary persons Cash credit farmers Cash credit traders Two wheeler to farmers

DATA ANALYSIS AND INTREPRETATIONStatus of NPA on March 2008

Total Loan Outstanding

31031

Standard Assets

28516.14

% of Standard Assets

91.95%

Total NPA 2493.86

% of NPA 8.042%

Sub-Standard Assets

1451.34

Overdue 3 to 4 Years

201.29


304.25

Overdue Above 6 Years

225.34

Loss Assets 311.64

Classification of NPA

58%

8%

12%

9%

12%

Chart TitleSub-Standard AssetsOverdue 3 to 4 YearsOverdue 4 to 6 YearsOverdue Above 6 YearsLoss Assets

This chart shows the position of NPA in KDCB. In 2008 the contribution of sub- standard assets in NPA is 58% and the overdue 3-4 year is 8%, 4 to 6 years 12% and overdue above 6 years is 9%. The loss assets of the bank are 13% of the total NPA. Standard assets in 2008 are 91.95% of the total assets and NPA is 8.042%. In 2008 NPA has been decreased than 2007 in KDCB.

Status of NPA on March 2009Total Loan Outstanding

22450.20

Standard Assets

20300.45


90.42%

Total NPA 2149.75

% of NPA 9.57%

Sub-Standard Assets

1290.35


378.85


100.94


150.54

Loss Assets 229.07


60%18%

5%

7%

11%

Chart Title

Sub-Standard Assets Overdue 3 to 4 YearsOverdue 4 to 6 Years Overdue Above 6 YearsLoss Assets

This chart shows that in the year 2009 sub-standard Assets are 60% of the total NPA .The assets with overdue 3 to 4 Years are 17%, 4 to 6 years are 5% and assets with overdue above 6 years are 7% of the total NPA. The amount of loss assets has decreased in 2009, which is 11%. Standard assets are 90.42 % in this year and NPA is 9.57 % in 2009, which is less than last years. Thus 9.57 % has been reduced in the profit of KDCB In 2009.


24848.77

Standard Assets

23224.90


93.46%

Total NPA 1623.87

% of NPA 6.54%

Sub-Standard Assets

1033.31


81.24


141.96


129.75

Loss Assets 237.61


Sub-Standard Assets64%

Overdue 3 to 4

Years5%

Overdue 4 to 6

Years9%

Over-due

Above 6

Years8%

Loss Assets15%

In 2010 the contribution of sub- standard assets in NPA is 64% and the overdue 3-4 year is 5%, 4 to 6 years 9% and overdue above 6 years is 8%. The loss assets of the bank are 14% of the total NPA. Standard assets in 2010 are 93.46% of the total assets and NPA is 6.54%


27145.77

Standard Assets

25238.03


92.97%

Total NPA 1907.71

% of NPA 7.03%

Sub-Standard Assets

1060.93


318.25


115.59


105.37

Loss Assets 307.57


Sub-Standard Assets56%

Overdue 3 to 4 Years17%

Overdue 4 to 6 Years6%


6%

Loss Assets16%

This chart shows that in the year 2011 sub-standard Assets are 56 % of the total NPA .The assets with overdue 3 to 4 Years are 17 %, 4 to 6 years are 6 % and assets with overdue above 6 years are 5 % of the total NPA. The amount of loss assets has increased in 2011, which is 16 %. Standard assets are 92.97 % in this year and NPA is 7.03 % in 2010, which is less than last years. Thus 7.03% has been reduced in the profit of KDCB In 2010.

FINDINGSMost of the people prefer to take long loan which is

more than 3years.Easy repayment and less formalities are the main

factors determining customers selection of loansQuality of services provided by the staff is

satisfactory because the number of customers visiting in this branch are very so that the customers are properly dealt with.

Customers are satisfied with the mode of payment of installments.

Average time for the processing of loan is less than the other banks i.e between 7 days.

SUGGESTIONSThe bank should adopt the modern

methods of banking like internet banking, credit cards, ATM, etc

The bank should plan to introduce new schemes for attracting new customer and satisfying the present ones.

The bank should improve the customer services of the bank to a better extent.

Improve dept recovery tribunals take legal action.

CONCLUSION

The PSCB is facing a serious problem of NPA. To conclude with, till recent past, corporate borrowers even after defaulting continuously never had any real fear of bank taking any action to recover their dues despite the fact that their entire assets were hypothecated to the banks. This is because there was no legal Act framed to safeguard the real interest of banks

To improve the efficiency and profitability, the NPA has to be scheduled. In order to bring the situation under control, some steps have been taken recently

Economy & Finance

Rahul22 10-2013