Rahul Jivtode

8/3/2019 Rahul Jivtode

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PROJECT REPORTON

Non Performing Assets in Tirupati Urban Co-operative Bank Ltd.Submitted to:

RASHTRASANT TUKDOJI MAHARAJ NAGPUR UNIVERSITY

An outline of research work to be submitted forManagement Thesis in partial fulfillment of the

requirement of the MBA program.

DMIMS NAGPUR

Research Student Faculty Guide

Rahul Jivtode Mr. Aakash AgrawalFacultyDMIMSNagpur


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Certificate

This is to certify that THE ABOVE MENTIONED NAMES are bonafidestudent of MBA (III

rdYear) of Datta Meghe institute of management studies,

Nagpur, during 2010-2011.

The project entitled Non Performing Assets in Tirupati UrbanCo-operative Bank Ltd. is been submitted to Datta Meghe Institute ofManagement Studies as a Summer Internship Project.

Dr. Amishi Arora Mr. Aakash Agrawal

Director Faculty


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DECLARTION

We hereby declare that the project report entitled on NonPerforming Assets in Tirupati Urban Co-operative Bank Ltd.. Orany part there has not been submitted earlier to any Institute or University for

the award of any other Degree or Diploma, not the data has been derived any

thesis of any University.

The sources of material, data used in this study have been duly

acknowledged.


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ACKNOWLEDGEMENT

At the successful completion of project on Banking industries, We

would like to express my gratitude and thanks to, Mr. Aakash Agrawal,

lecturer, Datta meghe institute of management studies; for guidance, support

and help without which the completion of project was not possible.

We would like to show our gratitude toward Dr. Amishi Arora &

other teaching staff of our college who were the sources of inspiration and

motivation all through the program.


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Contents

Title Page No.

Introduction of banking company.6

Bank Profile.14

Introduction of NPA22

Objective of study...30

Research Methodology .....32

Sector of non performing Asset and data Analysi..35

Conclusion ...47

Suggestion49

Bibliography.50


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INTRODUCTIONOF

BANKING INDUSTRY


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DEFINITION OF BANK

An organization, usually acorporation,chartered by a state or federal government,

which does most or all of the following: receives demand deposits and time deposits, honors

instruments drawn on them, and pays interest on them; discounts notes, makes loans, and

invests in securities; collects checks, drafts, and notes; certifies depositor's checks; and issues

drafts and cashier's checks.

DEFINITION OF BANKING

In general terms, Thebusiness activity of accepting and safeguarding money owned

by other individuals and entities, and then lending out this money in order to earn a profit

So we can say that Banking is a company, which transacts the business of banking.

The Banking Regulations Acts defines the business as banking by stating the essential

function of a banker.

The term banking is defined as Accepting for the purpose of leading or investment,

deposits of money from the public, repayable on demand or otherwise and withdrawal by

cheque, draft, order or otherwise.

HISTORY OF BANKING IN INDIA

Without a sound and effective banking system in India it cannot have a healthy

economy. The banking system of India should not only be hassle free but it should be able to

meet new challenges posed by the technology and any other external and internal factors.

For the past three decades India's banking system has several outstanding

achievements to its credit. The most striking is its extensive reach. It is no longer confined toonly metropolitans or cosmopolitans in India. In fact, Indian banking system has reached
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even to the remote corners of the country. This is one of the main reasons of India's growth

process.

The government's regular policy for Indian bank since 1969 has paid rich dividends

with the nationalization of 14 major private banks of India.

Not long ago, an account holder had to wait for hours at the bank counters for getting

a draft or for withdrawing his own money. Today, he has a choice. Gone are days when the

most efficient bank transferred money from one branch to other in two days. Now it is simple

as instant messaging or dials a pizza. Money has become the order of the day.

The first bank in India, though conservative, was established in 1786. From 1786 till

today, the journey of Indian Banking System can be segregated into three distinct phases.

They are as mentioned below:

. Early phase from 1786 to 1969 of Indian Banks

.Nationalization of Indian Banks and up to 1991 prior to Indian banking sector Reforms

. New phase of Indian Banking System with the advent of Indian Financial & Banking

Sector Reforms after 1991To make this write-up more explanatory, we divide scenario in

Phase I, Phase II and Phase III

PHASE I

The General Bank of India was set up in the year 1786. Next were Bank of Hindustan

and Bengal Bank. The East India Company established Bank of Bengal (1809), Bank of

Bombay (1840) and Bank of Madras (1843) as independent units and called it Presidency

Banks. These three banks were amalgamated in 1920 and Imperial Bank of India was

established which started as private shareholders banks, mostly Europeans shareholders.

In 1865 Allahabad Bank was established and first time exclusively by Indians, Punjab

National Bank Ltd. was set up in 1894 with headquarters at Lahore. Between 1906 and 1913,


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Bank of India, Central Bank of India, Bank of Baroda, Canara Bank, Indian Bank, and Bank

of Mysore were set up. Reserve Bank of India came in 1935.

During the first phase the growth was very slow and banks also experienced periodic

failures between 1913 and 1948. There were approximately 1100 banks, mostly small. To

streamline the functioning and activities of commercial banks, the Government of India came

up with The Banking Companies Act, 1949 which was later changed to Banking Regulation

Act 1949 as per amending Act of 1965 (Act No. 23 of 1965). Reserve Bank of India was

vested with extensive powers for the supervision of banking in India as the Central Banking

Authority.

PHASE II

Government took major steps in this Indian Banking Sector Reform after

independence. In 1955, it nationalized Imperial Bank of India with extensive banking

facilities on a large scale especially in rural and semi-urban areas. It formed State Bank of

India to act as the principal agent of RBI and to handle banking transactions of the Union and

State Governments all over the country.

Seven banks forming subsidiary of State Bank of India was nationalized in 1960 on

19th July, 1969, major process of nationalization was carried out. It was the effort of the then

City Minister of India, Mrs. Indira Gandhi. 14 major commercial banks in the country were

nationalized.

Second phase of nationalization Indian Banking Sector Reform was carried out in

1980 with seven more banks. This step brought 80% of the banking segment in India under

Government ownership.

The following are the steps taken by the Government of India to Regulate Banking

Institutions in the Country:

. 1949: Enactment of Banking Regulation Act.

. 1955: Nationalization of State Bank of India.

. 1959: Nationalization of SBI subsidiaries.

. 1961: Insurance cover extended to deposits.


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. 1969: Nationalization of 14 major banks.

. 1971: Creation of credit guarantee corporation.

. 1975: Creation of regional rural banks.

. 1980: Nationalization of seven banks with deposits over 200 crore.

Banking in the sunshine of Government ownership gave the public implicit faith and

immense confidence about the sustainability of these institutions.

PHASE III

This phase has introduced many more products and facilities in the banking sector in

its reforms measure. In 1991, under the chairmanship of M Narasimham, a committee was set

up by his name which worked for the liberalization of banking practices.

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

put to give a satisfactory service to customers. Phone banking and net banking is introduced.

The entire system became more convenient and swift. Time is given more importance than

money.

The financial system of India has shown a great deal of resilience. It is sheltered from

any crisis triggered by any external macroeconomics shock as other East Asian Countries

suffered. This is all due to a flexible exchange rate regime, the foreign reserves are high, the

capital account is not yet fully convertible, and banks and their customers have limited

foreign exchange exposure.

RESERVE BANK OF INDIA (RBI)

The central bank of the country is the Reserve Bank of India (RBI). It was established

in April 1935 with a share capital of Rs. 5 crores on the basis of the recommendations of the

Hilton Young Commission. The share capital was divided into shares of Rs. 100 each fully

paid which was entirely owned by private shareholders in the beginning. The Government

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

Reserve Bank of India was nationalized in the year 1949. The general

superintendence and direction of the Bank is entrusted to Central Board of Directors of 20


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members, the Governor and four Deputy Governors, one Government official from the

Ministry of Finance, ten nominated Directors by the Government to give representation to

important elements in the economic life of the country, and four nominated Directors by the

Central Government to represent the four local Boards with the headquarters at Mumbai,

Kolkata, Chennai and New Delhi. Local Boards consist of five members each Central

Government appointed for a term of four years to represent territorial and economic interests

and the interests of co-operative and indigenous banks.

The Reserve Bank of India Act, 1934 was commenced on April 1, 1935. The Act,

1934 (II of 1934) provides the statutory basis of the functioning of the Bank.

The Bank was constituted for the need of following:

.To regulate the issue of banknotes to maintain reserves with a view to securing

monetary stability and

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

ORGANISATION STRUCTURE OF RBI

THE BANKING SYSTEM

Almost 80% of the business is still controlled by Public Sector Banks (PSBs). PSBs

are still dominating the commercial banking system. Shares of the leading PSBs are already

listed on the stock exchanges.The RBI has given licenses to new private sector banks as part

of the liberalization process. The RBI has also been granting licenses to industrial houses.

Many banks are successfully running in the retail and consumer segments but are yet to

deliver services to industrial finance, retail trade, small business and agricultural finance. The

PSBs will play an important role in the industry due to its number of branches and foreignbanks facing the constraint of limited number of branches. Hence, in order to achieve an

efficient banking system, the onus is on the Government to encourage the PSBs to be run on

professional lines.

BANKING SECTORS IN INDIA

BANKS


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Public Private Co-operative Regional Rural Foreign

Sector bank sector bank bank bank bank

CO-OPERATIVE BANKS

The Co-operative banks have a history of almost 100 years. 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.

Some of the co-operative banks are quite forward looking and have developed

sufficient core competencies to challenge state and private sector banks.

According to NAFCUB the total deposits & landings of Co-operative Banks is much

more than Old Private Sector Banks & also the New Private Sector Banks. This exponential

growth of Co-operative Banks is attributed mainly to their much better local reach, personal

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

Though registered under the Co-operative Societies Act of the Respective States

(where formed originally) 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.

CO-OPERATIVE BANKS FINANCE RURAL AREA AS UNDER

. Farming

. Cattle

. Milk

. Hatchery


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. Personal finance

CO-OPERATIVE BANKS FINANCE URBEN AREA AS UNDER

. Self-employment

. Industries

. Small scale units

. Home finance

. Consumer finance

. Personal finance

FACTS ABOUT CO-OPERATIVE BANK

. Some cooperative banks in India are more forward than many of the state and

private sector banks.

. According to NAFCUB the total deposits & landings of Cooperative Banks in

India is much more than Old Private Sector Banks & also the New Private Sector

Banks.

. This exponential growth of Co operative Banks in India is attributed mainly to

their much better local reach, personal interaction with customers, and their ability to

catch the nerve of the local client.


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INTRODUCTION

OF

TIRUPATI URBAN CO-OP.

BANK LTD


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Introduction

TIRUPATI URBAN CO-OP BANK LTD, a Primary Urban Co-op Bank, registered under

Co-op. Societies Act 1960 and a licensed Bank by RBI, was established on 4th April 1996, at

Nagpur, by Hon.Shri Dattaji Meghe, Member of Parliament.

The Banks Board consists of 20 Directors with two of its Directors, being Chartered

Accountants, with highly professional experience in Banking and Bank Audit, The Bank is

working under the leadership of Shri Samir Dattatrayaji Meghe, as Chairman of the Bank

.

Tirupati Urban Co-op Bank, one of the leading and best performer Bank in Co-op Banking

Sector, is working with total 11 branches and Head office ( nine branches in city of Nagpur,

one at Wardha and one at Airoli, New Mumbai) with its Area of Operation as Entire State of

Maharashtra.

The Bank Branches are catering all types of Banking services, round the week, i.e. Morning,

Evening, and even on Sunday, with modern infrastructure facilities, and amenities to the

customers and showing best performance through, last fifteen years, such as:

Adequate and well furnished, and Air-Conditioned, premises.

All branches are fully computerized from the day one, and have been interred

connected through Interconnectivity.

SMS mobile banking services are available to its customers, free of cost, on account

of which a customer can get the balance in his Saving / Current account, and also five

last transactions, on his mobile, instantly.


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Bank has well experienced and trained Managerial & qualified employees, to provide

prompt and satisfactory services to the customers.

To start with, Bank has provided ATM facilities, at its Shraddhanand peth, and YCCEHingna Road, Nagpur Branches.

Bank has been certified ISO 9001-2000, during 2003.

Bank is in Grade One and rated as A grade in audits/Inspections during past.

On account of its best performance, the Bank has been awarded Best Urban Co-op

Bank Awards, and honored with Late Vasantdada Patil Puraskar successively for

last seven years, by Maharashtra State Co-op Bank Association, Mumbai and

Vidarbha Co-op Banks Association, Nagpur Bank has also been awarded by Frontiers

Banking, Mumbai for 2008, and 2009, for innovation in Decision Support and

Excellence in Marketing.

Bank is member of Deposit Credit Guarantee Corporation Of India, and as such

deposits of the Customers are secured to the extent of Rs 1 lack, as per DICGC

scheme,


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Goals & Quality Objectives of the Bank

Area of operation being Entire State of Maharashtra, we propose to open Branches, in

other Districts in State, in near future.

Bank has opened ATMs at two branches ( Main Branch and YCCE Branch) Duringthe year, and propose to extend the facility at other branches in near future.

To provide Core Banking facility and achieve planned growth in principle parameters

viz. Deposits, Credit ,Profit and to bring down the NPA to Zero %.

To work with complaint free performance, improve loyalty, confidence and ultimate

satisfaction of our Share Holders , Depositors, and thus getting excellent rating from

the customers.

To develop human resources and to ensure their optimal utilization by improving

productivity for efficient customer service.

To sustain and improve shareholders loyalty, confidence and to ensure adequate value

for money to the satisfaction of share holders.

To bring continuous improvement in the system and strive for up-gradation of

technology for operational efficiency and ultimate customers satisfaction.

Quality Policy:


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Tirupati Urban Co-op Bank Ltd, will strive for organizational excellence and

endeavor to provide highest degree of satisfaction to its services, technology

and resources within the framework of co-operative principles and statutory

guidelines.

Achievements

Banks Performance During Past Five Years :

Rs in Lac

Financial Year Deposit Loans and Advances Profit Share Capital Net NPA % CRAR %

2004-05 9057.61 5864.69 89.98 235.57 2.14% 16.78%

2005-06 10681.46 6438.69 185.00 251.26 1.92% 14.58%

2006-07 13124.94 7791.14 157.10 * 336.24 0.96% 12.58%

2007-08 15107.14 9149,45 264.87 * 384.96 2.20% 14.35%

2008-09 18000.00 11223.00 319.00 * 470.00 0.40% 16.74%

2009-10 21011.12 12502.73 373.15 * 529.46 0.73% 17.65%

Net Profit is after Income Tax

Other Important Features of the Bank :

Rs in Lac

Particular March 2009 March 2010

Total Reserves Rs 1111.96 Rs 1381.62

Own Funds Rs 1790.78 Rs 2132.91

Investments Rs 7757.23 Rs 10439.75

Working Capital Rs 20434.04 Rs 24218.25

Per Employee Business Rs 317.58 Rs 351.78


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Board of Directors

Sr. No. Name Designation

1 Shri Samir Dattarayaji Meghe Chairman

2 Shri Pramod Vinayakrao Darne Vice - Chairman

3 Shri Sagar Dattarayaji Meghe Director

4 Shri Rajendra Bhausaheb Mulak, M.L.A. Director

5 Shri Prem Grover Director

6 Shri Prakash Sanghavi Director

7 Dr. Shri Dilip Gode Director

8 Shri B. J. Bajaj, C.A. Director

9 Mohd. Kamil Ansari Director

10 Shri Annaji Raut Director

11 Shri Sudhakar Deshmukh, M.L.A. Director

12 Shri Rajay Surana Director

13 Shri Narayan Ahuja Director

14 Shri Raghunath Malikar Director

15 Shri Mahendra Thakur Director

16 Smt Sushila Jadhav Director

17 Smt Sumati Wankhede Director

18 Mrs Archana Vaidya Director

19 Shri M.L.Pande Director

20 Shri Ramesh Borkute Director

21 Shri Nitin Korke Employees Representative

Shri. Rajendra Raut

Chief Executive Officer


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Branches

Head Office :

172, Shraddhanand Peth, South Ambazari Road,

Nagpur-440010

Tel : 0712 - 2221120, 2221686, 2231696

Mob. : +91 9158884857, +91 9158884850, +91 9158884860

Website : www.tirupatibank.com

E-mail : [email protected]

Gaindhibag, Nagpur :

Inland Building Gitanjali Square, Central Avenue Road,Nagpur-440010

Tel : 0712 - 2727959, 2727650

Mob. : +91 9158884844

Sakkardara, Nagpur :

Tajshree Towers, Umred Road, Sakkardara Chowk,

Nagpur-440010

Tel : 0712 - 2757432, 2756716

Mob. : +91 9158884861

Narendra Nagar, Nagpur :

3/B, Vijayanand Society, Narendra Nagar, Ring Road,

Nagpur-440010

Tel : 0712 - 2704335, 2704312

Mob. : +91 9158884847

Anant Nagar, Nagpur :

Surana Bhavan ,Near Jafar Nagar Church, Borgaon Road,

Nagpur-440010

Tel : 0712 - 2595210, 2592414

Mob. : +91 9158884859

Yashwantrao Chavan College of Engineering, Wanadongri :

Hingna Road, Wanadongri,

Nagpur

Tel : 0712 - 9571042, 76886

Mob. : +91 9158884849

Vimaltai Tidke Convent, Nagpur :

Laxmi Apartment, Plot No 3, Dindayal Nagar, Pratap Nagar, Ring Road,

Nagpur

Tel : 0712 - 2282214

Mob. : +91 9158884856


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Kannamwar College of Engineering, Nagpur :

New Nandanwan, Opposite KDK Engineering College,

Nagpur

Tel : 0712 - 2711489

Mob. : +91 9158884862

Ganeshpeth, Nagpur :

414, Rahul Complex, Wing No-1, 1st Floor Ganesh Peth,

Nagpur

Tel : 0712 - 6640341

Mob. : +91 9158884863

Wardha :

Anaj Line,

Wardha

Tel : 07152 - 250422

Mob. : +91 9158884858

Airoli, New Mumbai :

Plot No 30, Sector16, Airoli,

New Mumbai

Tel : 022 - 5884846

Mob. : +91 9158884846


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INTRODUCTION

OFNON-PERFORMING

ASSETS


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NON-PERFORMING ASSETS

. MEANING

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

Earlier an asset was considered as non performing asset based on the concept of past

due.

. DEFINITION

A NPA was defined as credit in respect of which interest and/or installment of

principal has remained past due for a specific period of time. The specific period of

time was reduced in a phased manner as under:

Year ended March,31 Specific Period

1993 4 Quarters

1994 3 Quarters

1995 2 Quarters

2004 1 Quarters

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

the due date. However, with effect from March31, 2001 the past due concept has

been dispensed with and the period is reckoned from the due date of payment.


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. NORMS FOR IDENTIFICATION OF NPA

With an intense to use the international best practice and to ensure greater

transparency, 90 days overdue norms are accepted for the identification of NPA

from the year ended March 31, 2004.

With effect from March 31, 2004, a NPA shall be counted on loan and

advances where:

A. Interest and / or installment of principal remain overdue for a period of more than 90

days in respect of a term loan.

B. The account remains out of order for a period of 90 days, in respect of an Overdraft/

Cash Credit (OD/CC).

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

purchased and discounted.

D. Any amount to be received remains overdue for a period of more than 90 days in

respect of any other accounts.

Tier 2 bank like all the Urban Co-Operative Banks (UCBs) other than the

Tier 1 bank i.e. Unit bank shall classify their loan accounts as NPA as per

90 day norm as hitherto.


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FACTORS RESPONSIBLE FOR NPA

. Improper selection of borrowers activities

. Weak credit appraisal system

. Industrial problem

. Inefficiency in management of borrower

. Slackness in credit management & monitoring

. Lack of proper follow up by bank

. Recession in the market

. Due to natural calamities and other uncertainties

INDIAN ECONOMY AND NPA

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

to close to 3.0 per cent in 2006 (15.7 per cent at end-March 1997). Net NPAs of the banking

sector are now at close to one per cent and the gap between the gross and net NPAs has

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

The decline in NPAs is particularly significant as income recognition, asset

classification and provisioning norms were tightened over the years. For instance, banks now

follow 90-day delinquency norm as against 180-day earlier. Banks are also required to make

general provisioning (0.40 per cent) for standard advances.According to Reserve Bank of India, improved profitability, underpinned by robust

macroeconomic environment and upturn in interest rate cycle, has enabled banks

to reduce the backlog of NPAs.


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NARSIMHAN COMMITTEE

. FIRST COMMITTEE

The committee on financial system, also known as Narsimhan Committee, under the

chairmanship of Shri M. Narsimhan, appointed by the RBI recommended the introduction of

these prudential accounting norms by Indian Banks in its report submitted in December 1991.

The committee was of view of that

A. If banks want to know the true and fair financial health of bank then they should

observed the prudential accounting norms while making balance sheet and profit &

loss account.

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

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

categories.

The income recognition, Assets Classification and provisioning norms also known as

Prudential Accounting Norms, provided that a bank should not show profit which is merely a

book profit by resorting to practice like debiting interest to a loan account irrespective of its

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

loan losses.

. NARSIMHAN COMMITTEES RECOMMENATIONS

@. Committee has suggested that banks should operate on the basis of financial autonomy

and operational flexibility.

@. It has recommended Capital Adequacy Norm of 8%

@. These norms are applicable to all UCBs from 1st

April, 1992.


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. SECOND COMMITTEE

The first committee had made recommendations in 1991, which had resulted in basic

changes in the matter of treatment of income, assets classification and provisioning norms,

etcit was considered necessary for government to continue the improvement with striker

rules in future also and for that second committee was made to continue changes with certain

modifications.

The second committee includes the following points:

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

Adequacy Norm is 9% which was 8% earlier.

2. Banks cant classify the account as NPA which are guaranteed by the Central /

State government, effective from the year 2000-2001.

3. As per the existing norms, no provisions for standard assets but from March 31st

2000, there is a norm of 0.25 percent on standard assets.

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

securities with effect from the year ending 31st

March, 2000. In future, this provision

is likely to be raised to 5%.

5. The present norm is of 180 days for the account to be treated as NPA but after 31st

March, 2000, this period is reduced to 90 days only.

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

till 31st

March, 2000. The percentage has to be brought down to less than 3% with

effect from 31st

March, 2002.


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ASSETS CLASSIFICATION

. CHART OF ASSETS CLASSIFICATION

ASSETS

PERFORMING ASSETS NON-PERFORMING

OR ASSETS

STANDERED ASSETS

SUB-STANDERED DOUBTFUL LOSS

ASSETS ASSETS ASSETS

LESS THAN 1 TO 3 ABOVE

1 YEAR YEARS 3 YEARS


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. DEFINITION AS PER THE CLASSIFICATION OF ASSETS

Reserve Bank of India (RBI) has issued guidelines on provisioning requirement with

respect to bank advances. In terms of these guidelines, bank advances are mainly classified in

to following categories:

1. STANDARD ASSETS:Standard assets are one which does not carry any problems and which does not carry

more than normal risk attached to the business. Such assets should not be an NPA.

2. SUB-STANDARD ASSETS:These assets involved the two types of view as follows

In respect to the norms of March 31, 2005 an asset would be classified as Sub standard if

it remained NPA for a period less than or equal to 12 months.

An assets where the terms of the loan agreement regarding interest & principal have been

regenerated or rescheduled after commencement of production, should be classified as sub-

standard and should remain in such category for at least 12 months of satisfactory

performance under the re-negotiated terms.

3. DOUBTFUL ASSETS:In respect to the norms of March 31, 2005 an asset is required to be classified as doubtful,

if it has remained NPA for more than 12 months.

A loan which is classified as doubtful has all the weaknesses inherent as that classified as

Sub-standard with the added characteristic that the weaknesses make collection or liquidation

in full, on the basis of the currently known facts, conditions and values, highly questionable

and improbable.

Some types of these assets are

A. Less than 1 year

B. 1 to 3 year

C. 3 year and above

4. LOSS ASSETS


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

auditors or by the Co-operation department or by the RBI inspection but the amount has not

been written of, wholly or partly.

Objective of Study


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The main objectives of the studies are:

To study and understand the concept of NPA

To study the NPA in different sector of the bank.

To understand the effect of NPA on banks profit and its prestige

To understand how corrective measures taken by bank for NPA

To understand RBIS rules and regulations for the control of NPA

To understand the credit appraisal policy and NPA recovery policy of bank


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Research Methodology


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Research Methodology

Introduction

In the complex arena of financial sector the new concept of Non performing assets

was introduced by RBI. As per new guidelines the credit facility has divided as performing

Assets and Non performing Assets.

Non performing assets are those advances on which interest and principal amount

remains due for more than two quarters i.e. 180 days.

Review of Literature

For the review of literature the researcher had referred to various books in collage

library and collection relevant information required for Non performing assets. The

researcher had also visited various internet sites for review of literature.

Selection of topic

The researcher had selected the topic Non Performing Assets of Tirupati Urban

CO-operative Bank Ltd. Because non performing assets are the major cause of concern in

the banking sector as reducing their profitability.

Rational or Significance


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By going through the research project one can easily get the basic knowledge about

Non performing Assets, Factors affecting the accumulation of Non performing Assets,

securitization and reconstruction of financial assets and enforcement of security interest Act-

2002.

Coverage of or major valuables

1. Non Performing assets

2. Classification of assets

3. Provisioning of Non Performing Assets

Research Design

The research had described the fact and in a systematic way and hence designed is

descriptive in nature.

Scope of the study

Area

The researcher had conducted the research in the Tirupati urban co-

operative bank ltd.

Time

The researcher had completed the research within one month.

Data Collection

The researcher had personally contacted the respondents and asked for relevant

information necessary for the study of non performing assets.


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Limitation of research

The main limitation of the research conducted by the researcher is that he has limited his

study to Tirupati urban co-operative bank ltd.only.

SECTORS OF NON PERFORMING ASSETS IN

Tirupati urban cooperativebank ltd.


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Sectors of NPA in Retail Loans

Vehicle loan

Housing loan

Mortgage loan

Tern loan

Personal loan

Educational loan


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Vehicle Loan

Vehicle loan is considered for purchase of :

Two Wheeler Purchase of Car Three Wheeler / Five Wheeler / Tempo Commercial Vehicles Like Truck etc

Eligibility :

The applicant must have assured monthly income to repay the EMI Possess Driving License In case of Taxi / Auto Rickshaw, permit from RTO

Extent of Loan :

For New vehicles, for own personal use :

Maximum 85% of the cost of the vehicle Maximum 70% of the vehicle which not more than three years old

Rate of Interest :

New Car loan @ 10.50% p.a. with monthly rest New two wheeler loan @ 11.50% p.a. with monthly rest Old Vehicles @ 11.50% p.a. with monthly rest Commercial new vehicles @ 11.50% p.a. with monthly rest Commercial old vehicles @ 15.00% p.a. with monthly rest

Repayment :

Entire loan is to be repaid with maximum period of


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Maximum 5 years in 60 equal monthly installment

Security :

Hypothecation of Vehicle, Registration of Charge with RTO with Bank Clause

Insurance of the Vehicle with Bank Clause Guarantee from two suitable Guarantors

Charges :

Applicant Member shall purchase shares of the Bank 2.5% of the Loan Amount Insurance and other documentation charges

Documents Needed

Proof of income

Salaried -your latest salary slip

Self employed- your latest IT return

Proof of residence

Phone bill, Electricity bill, Driving license, Ration card

Proof of Identity

Latest Photograph of or copy of driving license-IT pan card\ Election ID card

Signature Verification

From your bank or copy of Driving license \ IT pan card.


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Personal Loan

Eligibility : The persons having monthly source of income

Purpose :

o Medical treatment

o Marriage purpose / House hold purpose

o Education of their wards

Extent of Loan :

o Unsecured loan : Maximum Rs 50,000/-

o Secured Loans : Maximum Rs 100,000

Rate of Interest :

o For Education purpose @ 12% p.a. with monthly rest

o For others @ 15.50% p.a. with monthly rest

Security :

o Unsecured Loans : Guarantee from two suitable Guarantors

o Post dated cheques towards Repayment of EMI

Repayment :

o Consumer Loan shall be recovered within maximum period of Five years ,in 36 monthly

installments

Loan Charges :

o Documentation Charges


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o Mortgage / legal, charges

o Processing fee @ 1.15% of the loan amount

Documents Needed

Proof of income

Salaried -your latest salary slip

Self employed- your latest IT return

Proof of residence

Phone bill, Electricity bill, Driving license, Ration card

Proof of Identity

Latest Photograph of or copy of driving license-IT pan card\ Election ID card

Signature Verification

Your latest banking statement


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Financial Highlights

Banks performance during the past five years is as under

Rs. In lacs.

Financial Year Deposit Loans and Advances Profit Share Capital Net NPA % CRAR %

2004-05 9057.61 5864.69 89.98 235.57 2.14% 16.78%

2005-06 10681.46 6438.69 185.00 251.26 1.92% 14.58%

2006-07 13124.94 7791.14 157.10 * 336.24 0.96% 12.58%

2007-08 15107.14 9149,45 264.87 * 384.96 2.20% 14.35%

2008-09 18000.00 11223.00 319.00 * 470.00 0.40% 16.74%

2009-10 21011.12 12502.73 373.15 * 529.46 0.73% 17.65%


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Graph of Deposit, Loan and Invesments

0

5000

10000

15000

20000

25000

2007-08 2008-09 2009-10

Deposit

Loan

Investment


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The above graph shows financial aspects of the bank in which

there in a three consecutive financial years showing the deposits,

loans and investments of the bank, shows the respective in three

consecutive years.

The above graph shows the net profit after tax earned by the

bank in last three consecutive years, which shows that the bank

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

2007-08 2008-09 2009-10

Net Profit After Tax

percentage


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has been earning proft in a progressive direction and which

interprets the financial condition of the bank.

Net NPA

2007-08, 2.20%

2008-09, 0.40%

2009-10, 0.73%


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The bank has 2.20% NPA in the year 2007-08 and that has been

reduce 0.75%. at the year 2008-09 it has been 0.40%, and in

year 2009-10 it has been 0.73% which is increase.

Reasons for NPA in banks

In liberalizing economy banking and financial sectoes get high priority. Banking

sector of having a serious problem due to non performing.

NPA is defined as an advance for which interest or repayment of principal or both

remain out standing for a period of more than two quarters. The level of NPA act as

an indicator showing the bankers credit risks and efficiency of allocation of resource.

Reasons


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Various studied have been conducted to analysis the reasons for NPA. Whatever may

be complete elimination of NPA is possible. The reasons may be widely classified in

two:

1. Over hang components

2. Incremental components

Over hang components is due to the environment reasons, business cycle etc.

Incremental components may be due to internal bank management, credit policy, terms

of credit etc.

Reasons for NPA in Tirupati Urban CO-Operative Bank Ltd.

Default customer

Low paying capacity of customers

Wrong intention of customers

Accidents of customers

Comparison between NPAs of years 2006-07 and 2007-08

In the year 2007-08 NPA of vehicles loans decreased by 0.97% because of regular

follow up of bank to customers than the year 2006-07.


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In the year 2007-08 NPA of personal loans increased by 2.45% because of defaults

customers than the year 2006-07

In the year 2007-08 NPA of education loan increased by 0.25% than the year 2006-07

because bank has just started to give these kind of loan.

Management of NPA:

Various steps have been takenby the bank to recover and reduce NPAs. some of them are:-

One time settlement

Compromise scheme

Debt recovery tribunal

Credit information on defaulters and role of credit information bureaus.

Lok adalats.

Conclusion


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Conclusion

Now as we know that NON-PERFORMING ASSETS is like a black spot on

diamond. They affect the profit of bank and also the financial health of bank. This NPA have

number of effects on banks working.

During my training in bank I gathered as much as possible information about NPA

from bank and on the basis my experience I conclude the following points:

Tirupati urban Co. banks NPA level is decreasing year by year which good for bank.

In year 2009 Tirupati urban Co. banks own NPA is very low but in year 2010 NPA

was increase.

Co. Bank has sound credit appraisal system and also sound recovery policy.


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SUGGSTIONS

1. Tirupati Urban Co. banks NPA level is decreasing year by year which good for bankbut bank should follow the recovery policy strictly.

2. In Tirupati Urban Co. bank there is no any special recovery department so bank

should develop the department for the fastest recovery of NPA.

3. Bank should motivate the staff to do fast recovery NPA.


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Bibliography


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Bibliography

Books:-

Annual Report of Tirupati Urban Co-Operative Bank

Bank Credit ManagementG. Viojayaragavan,Ph. D

Money, Banking, International, trade and public finance- D.M. Mithani

Website:-

www.investopedia.com

www.google.com

www.tirupatibank.com
http://www.investopedia.com/http://www.investopedia.com/http://www.google.com/http://www.google.com/http://www.tirupatibank.com/http://www.tirupatibank.com/http://www.tirupatibank.com/http://www.google.com/http://www.investopedia.com/