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Managing NPAs in Fatehgarh Cooperative Bank
1. A STUDY ON
MANGAEMENT OF NPA’s IN
THE FATEHGARH
COOPERATIVE BANK
SUBMITTED TO
Ms. Rubeena Bajwa
(Assistant professor)
SUBMITTED BY
RAHUL
Roll no.12062149
Mba 2yr.
2. CONTENT
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
Introduction of co-operative bank
The punjab state cooperative bank
Network of punjab state cooperative bank
Mission statement
Co-operative banking products
Introduction about topic
Objectives of the study
Review literature
Research methodology
Data analysis and intrepretation
Findings
Suggestions
Conclusion
3. 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.
4. 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 selfemployment, 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.
5. 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.
6. 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 card
Commercial loan scheme
7. 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.
11. Why Loan accounts go bad ?
BORROWER-SIDE
Lack of Planning
Diversion of Funds
Disputes within
No contribution
No modernization
Improper monitoring
Industrial Relations
Natural Calamities
BANKER – SIDE
Defective Sanction
No post-sanction
supervision
Delay in releases
Directed lending
Slow decision making
process
12. 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 !
13. 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 nonperforming when it ceases to generate income
for the bank.
In accounting, originally Bad & Doubtful Debts
14. 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
15.
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
16. 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 substandard 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.
17. 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 substandard & 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 substandard
LOSS ASSETS – 100% of the outstanding
18. 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
20. 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
23. 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
24. 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.
25. 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.
26. REVIEW LITERATURE
S.
AUTHOR’S
NO NAME
TITLE
FINDINGS
1.
Dr.
N.M.Bachhawa
t (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..
Dr.
N.M.Bachhawat
(2003)
27. CONTD……..
S.N
O
AUTHOR’
S NAME
TITLE
FINDINGS
2.
Y.V. Reddy
(2009)
Y.V. Reddy
(2009), in
his article
“Reforming
India‟s
Financial
SectorChanging
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.
28. CONTD…..
S.N
O
AUTHOR’S
NAME
3.
P.N.Joshi
(2003)
TITLE
FINDINGS
P.N.Joshi
(2003), in his
article “NonPerforming
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 creditdeposit 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.
29. 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.
30. 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.
31. DATA ANALYSIS AND INTREPRETATION
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.
TOTAL
261359974
Cash credit
societies
1074463
Loan to
individuals
106808064
Short term
loan
Other loan
Cash credit
societies
Other loan
300362
Short term
loan
153177085
Loan to
individuals
32. Loan to individuals
Personal loan
18315980
Vehicle loan
5626181
Non farming sector(Composite)
918961
TYPES OF LOANS
Personal loan
Vehicle loan
Non farming sector(Composite)
Loan against team deposit
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
622348
S.R.T.O.
Self help group
Urban house loan
Rural house loan
Cow loan
Consumer loan/salary persons
1%1%
18%
5%
Cash credit farmers
67927999
Cash credit traders
631071
Two wheeler to farmers
1125268
0% 1%
1% 1%
0%
68%
persons
0%
1%
1%
2%
33. DATA ANALYSIS AND INTREPRETATION
Status of NPA on March 2008
Total Loan
Outstanding
31031
1451.34
28516.14
SubStandard
Assets
91.95%
Overdue 3
to 4 Years
201.29
Total NPA
2493.86
Overdue 4
to 6 Years
304.25
% of NPA
8.042%
Overdue
Above 6
Years
225.34
Standard
Assets
% of Standard
Assets
Loss Assets 311.64
34. Classification of NPA
Chart Title
Sub-Standard Assets
Overdue 3 to 4 Years
Overdue 4 to 6 Years
Overdue Above 6 Years
Loss Assets
13%
9%
12%
8%
58%
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.
35. Status of NPA on March 2009
Total Loan
Outstanding
Standard
Assets
22450.20
20300.45
SubStandard
Assets
1290.35
90.42%
Overdue 3 to 378.85
4 Years
Total NPA
2149.75
Overdue 4 to 100.94
6 Years
% of NPA
9.57%
% of Standard
Assets
Overdue
Above 6
Years
150.54
Loss Assets
229.07
36. Classification of NPA
Chart Title
Sub-Standard Assets
Overdue 3 to 4 Years
Overdue 4 to 6 Years
Overdue Above 6 Years
Loss Assets
11%
7%
5%
17%
60%
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.
37. Status of NPA on March 2010
Total Loan
Outstanding
24848.77
1033.31
23224.90
SubStandard
Assets
93.46%
Overdue 3
to 4 Years
81.24
Total NPA
1623.87
Overdue 4
to 6 Years
141.96
% of NPA
6.54%
Overdue
Above 6
Years
129.75
Standard
Assets
% of Standard
Assets
Loss Assets 237.61
38. Classification of NPA
Overdue
Above 6
Years
8%
Overdue 4
to 6 Years
9%
Overdue 3
to 4 Years
5%
Loss Assets
14%
SubStandard
Assets
64%
In 2010 the contribution of substandard 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%
39. Status of NPA on March 2011
Total Loan
Outstanding
27145.77
Standard
Assets
1060.93
25238.03
SubStandard
Assets
% of
Standard
Assets
92.97%
Overdue 3
to 4 Years
318.25
115.59
Total NPA
1907.71
Overdue 4
to 6 Years
% of NPA
7.03%
Overdue
Above 6
Years
105.37
Loss Assets 307.57
40. Classification of NPA
Overdue
Above 6
Years
5%
Overdue 4
to 6 Years
6%
Overdue 3
to 4 Years
17%
Loss
Assets
16%
SubStandard
Assets
56%
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.
41. FINDINGS
Most 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 loans
Quality 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.
42. SUGGESTIONS
The 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.
43. 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
