Académique Documents
Professionnel Documents
Culture Documents
Submitted By:
Basanth Kumar G
USN: 1DS15MBA13
Submitted To:
DAYANANDA SAGAR COLLEGE OF ENGINEERING
DEPARTMENT OF MANAGEMENT STUDIES
In partial fulfillment of the requirements for the award of the degree of
Firstly, I would like to express my sincere thanks to our respected Principal, Dr. C P S
PRAKASH, Dayananda Sagar College of Engineering, Bangalore for giving me an opportunity
to undertake this internship. I thank our respected Head of the Department, Dr. K.G.
HEMALATHA, Department of Management Studies, Dayananda Sagar College of Engineering,
Bangalore, for motivating me to gain the learning experience through this project.
I express my sincere and hearty thanks to Mr. N Manjunatha, General Manager, and
Mr. B. Gangadhara, Deputy General Manager - External Guide The Bangalore city Co-
Operative Bank, Bangalore, his suggestion and encouragement given to pursue this project
successfully.
Last but not the least, I am grateful and thankful to my beloved Parents and all of my friends for
their moral support and suggestions and encouragement
USN: 1DS15MBA13
EXECUTIVE SUMMARY
Finance is concerned with the broad sense as an activity of mobilization of savings and directing
them in investment. Finance is life blood and native centre of business. Whether business is
small, medium or large it requires adequate amount of finance. Finance is required to establish
business buy fixed assets, to produce product, to keep men machines at work and to encourage
management to maximize earnings of the firm even existing firm needs additional finance for
expansion.
Banking is nothing but a service. Banks are business organization selling banking services.
Banks continuously reassess how a customer views bank services, what is new and emerging
customer aspiration and how these can be satisfied.
The Bangalore City Co-operative Bank Limited, a leading Urban Co operative Bank in India was
founded by Sri. K. Ramaswamaiah and other Co-operators during the beginning of the Co-
operative movement in our country, with prime object of encouraging thrift and savings habit
among the public and to freed the members from the clutches of private money lenders.
Non-Performing Assets are popularly known as NPA. Commercial Banks assets are of various
types. All those assets which generate periodical income are called as Performing Assets (PA).
While all those assets which do not generate periodical income are called as Non-Performing
Assets (NPA). If the customers do not repay principal amount and interest for a certain period of
time then such loans become non-performing assets (NPA). Thus non-performing assets are
basically nonperforming loans. In India, the time frame given for classifying the asset as NPA is
180 days as compared to 45 days to 90 days of international norms.
It's a known fact that the banks and financial institutions in India face the problem of swelling
non-performing assets (NPAs) and the issue is becoming more and more unmanageable. In order
to bring the situation under control, some steps have been taken recently. The Securitization and
Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 was passed
by Parliament, which is an important step towards elimination or reduction of NPAs.
A strong banking sector is important for flourishing economy. The crash of the banking sector
may have an unfavorable blow on other sectors. Non-performing assets are one of the major
concerns for banks in India. Non-performing assets, also called non-performing loans, are loans,
made by a bank or finance company, on which repayments or interest payments are not being
made on time. A high level of NPAs suggests high probability of a large number of credit
defaults that affect the profitability and net-worth of banks and also erodes the value of the asset.
The problem of NPAs, which was ignored till recently, has been given considerable attention
after liberalization of the financial sector in India. At present NPA in the banking sector is
increasing year by year particularly in nationalized banks. NPA is becoming the bane of
nationalized banks. The prime aim of this paper is to give brief idea about the concepts of Non
Performing Assets and trends of NPA in nationalized banks in India.
Banks are not allowed to book any income from non-performing assets. Also, they have to make
provision for the NPAs, which impacts profitability adversely. The concept of classification of
bank advances in several categories started in the late 80s scheme but at that time the
terminology of NPA did not exist. It was early 90 schemes when Anglo- American model had
several block of categorization of bank assets. Prior to introduction of assets classification, banks
in India had system of their own. However this accounting is not in conformity with international
standards.
TABLE OF CONTENTS
Chapter Particulars Page No.
An internship is a learning situation where the student has the opportunity to gain practical
experience. When placed in this situation, students expand their concepts of different
organizational structures and different working relationships within the workplace. The
intern is expected to provide information on the organization, in which he or she worked,
descriptions of specific work completed, and recreational aspects relevant to the assigned
tasks. Internships give opportunity to students to apply their knowledge in real world
environments. It develops skills which help them perform well at their jobs.
I did my internship project in Bangalore City Co-Operative Bank limited for the span of 8
weeks starting from 12th of January 2017. During my course of internship i had a opportunity
to gain practical experience. How the business is performed in the real world, what are the
procedures involved in granting the loan, how are the interest rate calculated and many such
things. It was a good working environment and an open place for learning banking activities.
In the last term of final year of Master of Business Administration (MBA) course, I was sent
to The Bangalore City Co-Operative Bank Limited (BCCBL) to have a practical exposure on
banking activities under the program A study on an Impact of Non Performing Assets in the
Performance of Financial Institutions with Special Reference to BCCBL Bank. The
Bangalore City Co-operative Bank Limited, a leading Urban Co operative Bank in India was
founded by Sri. K. Ramaswamaiah and other Co-operators during the beginning of the Co-
operative movement in our country, with prime object of encouraging thrift and savings habit
among the public and to freed the members from the clutches of private money lenders. The
topic which was selected to study was what will be the impact on financial institutions which
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Impact of NPA in the Performance of Financial Institutions with Special Reference to BCCB ltd
is affected by the Non Performing assets with special reference to BCCBL Bank. This study
will also focus on how an asset will become a Non Performing Asset (NPA) and how will it
affect the profitability of the bank, and what the steps taken by the bank to overcome those
Nonperforming assets and improve the profitability of the Banking institutions.
The NPA is one of the biggest problems that the Banks are facing today. If the proper
management of the NPAs is not undertaken it would hamper the business of the banks. If the
concept of NPAs is taken very lightly it would be dangerous for the whole banking sector. The
NPAs would destroy the current profit, interest income and would affect the smooth functioning
of the recycling of the funds.
The level of NPA will have a direct impact on the banks profitability and growth of the bank.
NPA are always a burden to the bank since no income is derived from it. Banks tries to minimize
NPA due to their negative impact on the performance of the bank. Many banks have incurred
losses due to NPAS. Modern Concepts of NPAs includes Income Recognition & Asset
Classification Norms provided by RBI. The accumulation of huge non-performing assets in
banks has assumed great importance. The depth of the problem of bad debts was first realized
only in early 1990s. The magnitude of NPAs in banks and financial institution is over Rs.
1,50,000 crores.
While gross NPA reflects the quality of the loan made by banks, net NPA shows the actual
burden of banks. Now it is increasingly evident that the major defaulters are the big borrowers
coming from the non-priority sector. The banks and financial institution have to take the
initiative to reduce NPAs in a time bound strategic approach.
Public sector banks figure prominently in the debate not only because they dominate the banking
industries, but also since they have much larger NPAs compared with the private sector banks.
This raises a concern in the industry because it is generally felt that NPAs reduce the profitability
of a banks and weaken its financial health.
For the recovery of NPAs a board frame work has evolved for the management. Under which
several options are provided for debt recovery and restricting. Banks and FIs have the freedom to
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Impact of NPA in the Performance of Financial Institutions with Special Reference to BCCB ltd
design and implement their own policies for recovery and write-off incorporating compromise
and negotiated settlements
The bank is continuously making profit since from the date of its inception and
disbursing dividend to its members and also in 'A' Grade Audit classification.
Visionary and transparent directors on the board and dedicated professional staffs are
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Impact of NPA in the Performance of Financial Institutions with Special Reference to BCCB ltd
External causes: Natural calamities and climatic conditions, Recession, changes in Government
policies changes in economic conditions, Industry related problems, Impact of liberalization on
industries, Technical problems
Internal causes: Internal defaulters, Faculty projects, Most of the project reports are ground
realities, proper linkages, product pricing etc. Some approach for the heck of starting a
venture, with poor knowledge of product risks, over depended on poorly paid killed workers and
technicians, Building up pressure for sanctions, Inept handling by bankers lack of
professionalism and appraisal standards, Non-observance of system, procedures and no
insistence of collaterals etc, Lack of post sanction monitoring, unchecked diversions.
The main source of data for this study is the past records prepared by the bank.
The data regarding bank history & profile are collected through Exploratory Research
Design.
Primary data The primary data will be collected through direct discussion with officials of the
bank and departmental & bank guides.
Secondary data The secondary data will be collected from various sources such as,
Banks annual report.
Journals, Magazines.
1. The Report of the Rural Banking Enquiry Committee (Thakurdas Committee) (1949)
Concluded that proper investigate action was very essential. Banks have to maintain close
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Impact of NPA in the Performance of Financial Institutions with Special Reference to BCCB ltd
contacts with the borrowers, keep track of the end-use of funds lent to the borrowers
effective recovery of advances as per the repayment schedule.
2. RBI's Study Team on Over dues (1974) Estimated that more than three-fourths of the over
dues were due to wilful default. Faulty lending policies, failure to link credit with marketing,
lack of will on the part of management to take strong action against recalcitrant and wilful
defaulters, lack of financial discipline and apathetic of some of the State Governments
towards creating an environment conducive and congenial to repayment of dues were the
causes for over dues.
3. According to the Report of the Agriculture Credit Review Committee (1989), over dues
prevented recycling of funds, impaired refinance eligibility and productivity of co-operative
banks. Nearly 26 per cent of the resources deployed by the credit agencies for the agriculture
sector were locked up in over dues and were not available for recycling. At the institutional
level, the clogging of over dues had severely impaired the eligibility of the credit agencies,
for refinance from NABARD. As a defaulter, the borrower is cut off from any access to
credit from institutions. This affects his productive enterprise.
4. Gopala Krishnan (1996), Suggested that the bad effect of Debt Relief Schemes should be
erased from the minds of borrowers.
5. The Working Committee (1999) on NPAs considered write-off, compromise, one time
settlement for recovery of NPAs. It recommended compromise model forth recovery of
NPAs as the most effective mechanism. However both write-off and compromise are steps to
be taken with caution and due monitoring.
6. RBI study (1999) Stated that banks were required to closely monitor the operations of the
borrowable units. In respect of accounts where the classification of asset worsens, banks
were required to take prompt steps to recover the dues and staff accountability was required
to be examined. Special emphasis was given on monitoring of large NPA accounts, also on
reduction of NPAs, through up-gradation, recovery, and compromise settlements.
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Impact of NPA in the Performance of Financial Institutions with Special Reference to BCCB ltd
8. S.Sambasiva Rao (2002), Suggested declaring default of bank loans as criminal offence and
punishment be awarded along with financial recovery, authorizing seizure agencies and
giving them a legal status to recover loans.
9. According to Samal (2002), NPA overhang was due to defects in legal processes like
prolonged / delayed legal system, absence of proper legal framework for non-payment of
bank's dues.
10. Reddy, B. Rama Chandra and Reddy, S Vijayulu (2003), View that the new challenges
faced by the banks are forcing to attempt all new things with the same old rigid structure and
system. What required is more managerial and administrative freedom to the management
with commensurate and result oriented accountabilities. They stressed that the banks should
move towards professional banking with requisite freedom to operate freely in the market
within the regulatory and prudential framework prescribed by the Reserve Bank of India.
11. Sachin Agrawal and Kavita Agrawal,(2006) Held that the proper policies adopted by the
banks regarding disbursement of the loan, good chain of recovery, continuous and systematic
way of working has also made the NPAs to diminishing rates
12. Fulbag Singh and Balwinder Singh (2006) examined the funds management in the Central
Co-operative Banks in Punjab. They observed that higher proportion of own funds in the
working funds of the bank and the concerned shown by the bank in the timely recovery of
loans resulted in an increased monetary boundary of the central co-operative banks in Punjab.
They concluded that less dependence on the new outside resources helped these banks in
increasing their financial margin.
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Impact of NPA in the Performance of Financial Institutions with Special Reference to BCCB ltd
13. Avinash V.Raikar (2006), Analyzed the issues, problems and prospects of co-operative
credit institutions (CCIs) in India. He has found that the major problems of the CCIs are dual
control, high over dues and low resource base. He concludes that the future survival of these
institutions would be determined by its ability to technologically modernize themselves,
innovation of new products and its reach among the agrarian society.
15. Lakshmanan.C and Dharmendran, A(2007) Studied the impact of Non Performing Assets
(NPAs) on performance variables in Chennai Central Co-operative Bank. They examined
performance variables namely, net profit, investment, legal expenses and spread. They
observed that the results of NPAs on all the above performance variables were negative and
insignificant at 5 percent level in all the equation. They concluded that the effective
management of NPAs is essential to strengthen the financial position of the bank.
The study is purely based on the facts and figure collected from the bank or its other
sources.
The study is conducted on the basis of date which was provided by the bank.
Information pertaining to NPA category wise / Individual wise is not given bank.
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CHAPTER 2
2.1 INDUSTRY PROFILE
INTRODUCTION:
Finance is ne f the majr elements, which activates the verall grwth f ecnmy. Because in
the mdern mney riented ecnmy finance is the ne f the basic fundatin f all kinds f
ecnmic activities. It is the master key which prvides access t all surces fr being emplyed
in manufacturing and merchandising activities. It is rightly been said that business terms is
prcurement f funds and their effective utilizatin.
The term finance can be defined as, management f the flw f mney thrugh as riginatin
whether it be a crpratin, schl, and Bank r gvernment agency. Managing finance is an
applied field f business administratin.
The financial system r the financial sector f any country consists of specialized and non
specialized financial institutions f organized and unorganized financial markets f financial
instruments and services, which facilitate transfer f funds procedures and practices adpted in
the markets and financial interrelationship, are als part of the system.
FINANCIAL
SYSTEM
Organized Unorganized
Primary Secondary
Primary Secondary
Short Term Medium Term Long Term
FINANCIAL MARKETS:
Money lenders,
Capital Market Money indigenous
Market Bankers, etc.
FINANCIAL SERVICES:
Merchant Banking
Lan syndication
Leasing
Hire purchase
Factoring
Venture capital
Mutual funds
Custdial service
Securitization f debt
Lines f credit
FINANCIAL INSTRUMENTS:
A financial instrument refers t thse documents which represent financial claims assets
financial instruments can also called as financial securities this instruments are be classified int
Secondary securities-this securities issued by some intermediaries E.g. UTI and mutual
funds again these securities may be classified n the basis of duration as follows:
Medium term securities- maturity period between 1-5 years. E.g. Debentures
Long term securities- maturity period more than 5 years. E.g. gilts
Impact of NPA in the Performance of Financial Institutions with Special Reference to BCCB ltd
FINANCIAL INSTITUTION:
The primary role of a financial institution is to serve as an intermediary between lenders and
borrowers. Financial institution are the rganized sector function under the over all surveillance
of the RBI.
RBI
Public Sector
All India Life Insurance Post Office Unit Trust Firms
Institutions Company Savings Bank of India
Public Sector
Private
Banks
General Insurance Other Sector Firms
NABARD
Mutual
State Level Company
Funds
Institution
National Housing
Private Sector
Bank
Banks
INTRODUCTION TO BANKING
Banking is nothing but a service. Banks are business organization selling Banking services.
Banks continuously reassess hw a customer views Bank services, what are new and emerging
customer aspirations and how these can be satisfied.
Impact of NPA in the Performance of Financial Institutions with Special Reference to BCCB ltd
ORIGIN:
Since the Banking activities were started in different periods in different countries, there is n
unanimous view regarding the origin of the word Bank. The word Bank is derived frm the
French word Banco or Bancus, which means a Bench. In fact the early Jew in Lombardy
transacted their Banking business sitting on benches. When the business ailed, the benches were
broken and hence the word Bankrupt came in to vogue.
Greece was the first cuntry to introduce a satisfactory system of coinage. After the invention of
coins, a meaningful system of banking came into accunt all the avenue of a banking a credit
system.
Rome was the first country to start a bank at the department of state level in the 4th century B.C.
with transactions such as depositing and investment in other frms. In India ancient records
shows that banking was popular and money leading was a common practice among the common
people.
In the olden days goldsmith, merchants and money lender conducted the business. They had
transaction among themselves by which funds were transferred from one business firm to
another. They had no general or uniform principles f banking, leading, rate of interest, etc.
DEFINITION:
The Indian Banking Companies Act, 1949 section 5(b), defines Banking as accepting for the
purpose of lending or investment of deposits from the public, repayable on demand or otherwise
and withdrawals by cheque, drafts, and orders r otherwise.
Banks are backbone of our society. A Bank must meet the financial needs of a customer, by
acting as a custodian of his assets, providing credit facilities and assisting him to speedily put
through financial transaction of one type or another. Banking, when you come to think of it, are
people. It is not figures, files and ledgers. Bank services needs considerable improvement on an
emergent basis. The time has come for Banks to look inward to find out what is the nature and
quality of the products they sell, what is the prduct demanded by the customer.
Impact of NPA in the Performance of Financial Institutions with Special Reference to BCCB ltd
It would be unrealistic today to believe that Banks are mere financial institutions, wrking for
profit. Banks essentially are now social organizations, regarding financial services to sub serving
the socio-economic objectives f the society.
BANKING IN INDIA:
The Indian companies Act defines the term banking as accepting for the purpose of lending or
investment of deposits f money from the public, repayable on demand otherwise and
withdrawal by cheque, draft or otherwise.
A bank is a dealer in money and credit. The business of banking consist of borrowing and
lending banks Act as financial intermediaries between savers (lenders) and investors (borrowers)
by accepting deposits of money from a large n. of customers and lending a major position of
accumulating pool of money to those who wish to borrow. In this process bank secure
reasonable return from the savers, make funds available to the investors at a cost and earn a
profit for themselves after covering the cost of funds and providing for corporate taxes to the
government. Thus, the banking institution in a country mobilizes savings by accepting monetary
deposits from the people, participate in the mechanism for the exchange of goods and services
and extend credit while lending money
CLASSIFICATION OF BANKS:
Banks are classified into several types based n the function they perform. Generally banks are
classified into:
1. Investment banks
2. Commercial banks
3. Exchange banks
4. Co- operative banks
5. Land develpment banks
6. Saving banks
7. Central banks
Impact of NPA in the Performance of Financial Institutions with Special Reference to BCCB ltd
BANKING STRUCTURE
Scheduled Banks
Scheduled Urban
Nationalized SBI & its
Co-operative
Banks Associates
Banks
FUNCTION OF BANKING:
4. The acquiring, the holding, issuing n commission underwriting, dealing in stock, funds
shares, debentures, bonds, securities of all kinds.
5. Collecting, transmitting f money and securities.
7. The purchasing and selling of bonds, scripts and other form of securities on behalf of
constituents or others.
8. Lending or advancing of money in the form of different types of loan.
9. The drawing, making, accepting, discounting, buying and selling collecting and dealing
in bills of exchange, promissory notes, coupons, drafts, bills f landing, railway receipts,
warrants, debenture, certificates, securities, both negotiable and negotiable.
4. Contracting for public and private loans and negotiation and issuing the same.
6. Managing to sell and realise any property r any interest in any such property.
The modern Banking system in India started with establishment of the first Joint Stock Bank.
Bank of Hindustan and Bengal Bank came t existence. In the mid of 19th century East India
company established 3 Banks:
These Banks were independent units and called presidency Banks. These 3 Banks were
amalgamated in 1920. And new Bank Imperial Bank of India was nationalized with a new name
State Bank of India by passing State Bank of India Act 1955. The RBI as a central Bank was
nationalized in the year 1935 by an act the RBI Act passed in the parliament.
Several new Banks as Punjab National Bank, Bank of Baroda, Canara Bank, Indian Bank, Bank
of India etc. were established. At present the number of nationalized Banks are 20 and above.
Several foreign Banks were allowed as per the guidelines of RBI.
The Central Bank of India called the Reserve Bank of India was constituted under the Reserve
Bank of India Act, 1934 to regulate the issue of Bank notes and keeping of reserves with a view
to securing monetary stability in India and generally to operate the currency and credit system of
India to its advantage. Amongst its multifarious functions affecting the Indian Financial System,
the RBI regulates and prohibits the issue of prospectus or advertisement soliciting deposits of
money, regulates the functioning of non-Banking institutions and transacts Government business.
Its regulatory involvement in the Indian Capital Markets is primarily f debt management
through primary dealers, foreign exchange control and liquidity support to market participants.
The RBI regulates participants in the securities markets when a foreign transaction is involved.
Transactions that include Indian issuers issuing of security outside India, such as GDRs and
ADRs, and Financial Institutional Investors (FIIs) r Foreign Brokers selling, buying or dealing
in Indian Securities need the permission of RBI.
As the Central Banking authority of India, the Reserve Bank of India performs the following
traditional functions of the central Bank:
It provides currency and operates the clearing system for the Banks.
It formulates and implements monetary and credit policies.
It functions as the Bankers Bank.
It supervises the perations of credit institutions.
It regulates foreign exchange transactions.
It moderates the fluctuations in the exchange value of the rupee.
Impact of NPA in the Performance of Financial Institutions with Special Reference to BCCB ltd
In addition to the traditional functions f the Central Banking authority, the Reserve Bank of
India performs several functions aimed at developing the Indian financial system:
It seeks to integrate the unorganized financial sector with the organized financial sector.
It encourages the extension of the commercial Banking system in the rural areas.
It influences the allocation f credit.
It promotes the development of new institutions
The continued good performance of the Indian economy promises increasing opportunities for
business growth. The financial sector is also witnessing far-reaching changes. The new
generations Private Sector Banks have become active competitors. The foreign Banks are likely
to increase their operations. This scenari, though challenging, is leading to improvements in the
functioning of the Public Sector Banks as well. They are now in the process of improving their
capabilities in information technology. Product Innovation and Business Process Re-engineering
are also gaining the centre stage. With competition driving down the interest spread, thrust on
business volumes, non-interest income, recovery and cost control are likely to increase further.
Technology would further influence customer service, delivery of prducts and risk management
practices. In order to conform to the global best practices in the area of risk management, Banks
would be increasingly focusing more on new types of risks like operational risks.
COMMERCIAL BANKS:
Banks in India were started on the British pattern in the beginning of the 19th century. In those
days all the Banks were Joint Stock Banks and large numbers of them were small and weak. At
the time of 2nd world war, about 1500 joint stock Banks were perating in undivided India, out of
which over 1400 were non scheduled Banks. Bad and dishonest management managed a quiet
few of them and naturally these were a number of Banks failures. Hence the gvernment has to
steps in and the Banking companies act 1949 (which subsequently renamed as Banking
Regulation Act) was enacted which led to gradual elimination of weak Banks. Who were not in a
position to fulfil various requirements f the Act? In order to strengthen the weak Banks and
revive public confidence in the Banking system. A new section 45 was inserted in the Banking
Impact of NPA in the Performance of Financial Institutions with Special Reference to BCCB ltd
Today Banks are broadly classified into two i.e. scheduled Banks or Commercial Banks and non
scheduled Banks.
Commercial Banks are those Banks which are included in the 2nd schedule of section 42(6)(a) of
RBI Act 1934 conditions:
It must have a paid up capital and reserves f an aggregate value of not less then Rs.
5,00,0000.
It must satisfy RBI that is affairs are nt conducted in a manner detrimental to depositors
it must be a state cooperative Bank or a corporation or a company. Under the companies
act, 1956 or an institution noticed by the Central Government in this behalf or a
corporation or a company incorporated by or under any law in force in any place outside
India.
The scheduled Banks enjoy certain privileges like appreciating RBI fr financial assistance,
refinanced etc. and correspondingly they have certain obligations like maintaining certain cash
reserves as prescribed by RBI submission of returns.
Nationalization of public sector commercial Banks is considered a water shed in the history of
mainstream rural Banking in India. The existing evidence does suggest that the rural credit
market in the country has expanded significantly in the post nationalization phase. While
acknowledging the cntribution made by commercial Banks in the area of rural lending and
saving mobilization. This shows that the accent on development banking of commercial Banks
did weaken considerably in the eighties and nineties. It further argues that the so called
development outlook of the Banking sector is in fact reflected ne, and does not by itself signify
Impact of NPA in the Performance of Financial Institutions with Special Reference to BCCB ltd
its belief in the Bank ability of the poor moreover increased credit lw present cannot tackle the
problem of development.
CO-OPERATIVE BANKS:
The co-operative bank in India started functioning almost 100 years ago. The co- operative bank
is an important constituent of the Indian financial system, judging by the roll assigned to co-
operative, the expectation is the co-operative is supposed to fulfil their number and the number
of offices the co-operative bank perate though the co-operative movement originated in the
west, but the importance of such banks have assumed in India is rarely paralleled anywhere else
in the world. The co-operative banks in India play an important role even today in rural
financing. The businesses of co-operative bank in the urban area also have increased
phenomenally in recent years due t the sharp increase in the number of primary co-operative
banks. While the co-operative banks in rural area mainly finance agricultural based activities
including farming, cattle, milk, hatchery, personal finance etc. along with some small scale
industries driven activities, the c-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.
Co-operative banks in India registered under the co-operative societies Act. The co-operative
bank is also regulated by the RBI. They are governed by the banking regulations Act 1949 and
banking laws (co-operative societies) Act, 1965.
According to NAFCUB (National Federation of Urban Co-operative Banks and Credit Societies
Ltd) the total deposits and landing of c-operative bank in India is much more than old private
Old private sector banks and also the new private sector bank. This exponential growth of co-
operative banks in India is attributed mainly of their much better local reach, personal interaction
with customers and their ability to catch the nerve of the local clientele.
In the words of Henry Wolff co-operative banking is a agency which is in a position to deal
with the small means of his own terms.
Impact of NPA in the Performance of Financial Institutions with Special Reference to BCCB ltd
Devine defines a mutual society formed composed and governed by working people themselves
for encouraging regular saving and granting small lans on easy terms of interest and
repayments.
1. They are organised and managed on the principle of co-operation self help and mutual
help. They function with the rural of one member one vote.
2. Co-operative banks perform all the main banking function of deposits mobilization
supply of credit and provision for remittance facilities.
3. Co-operative banks are perhaps the first government supported agency in India.
4. Co-operative banks belong to money market as well as capital markets.
5. Co-operative banks accept current, saving, fixed and other type of time deposits from
individual and institutions including banks.
6. Co-operative banks do banking business mainly in agricultural and rural sector.
7. Some co-operative banks are schedule co-perative banks while others are non-scheduled
banks.
8. Co-operative banks also required to comply with requirements of Statutory Liquidity
Ratio (SLR) and Cash Reserve Ratio (CRR) liquidity requirements as other scheduled
and non-scheduled banks.
CO-OPERATIVE BANKS
BRANCHES OF
PRIMARY LAND STATE LAND
PRIMARY DEVELOPMENT
DEVELOPMENT BANKS
AGRICULTURAL BANKS
CREIDT SOCIETIES
Impact of NPA in the Performance of Financial Institutions with Special Reference to BCCB ltd
The 20th century of Indian history has witnessed two people movements, of which one was
freedom struggle under the leadership of Mahatma Gandhiji, against the British to free the nation
form foreign rule and the other was Co-perative movement against capitalists with aim to
improve the economic condition to the poor and backward ones.
The co-operative movement was started in India with the introduction of co-operative societies
Act, 1904 and during the initial stages of co-operative movement our bank The Bangalore City
Co-operative Bank Ltd., Bangalore came in to existence as credit co-operative society during the
year 1905 and later converted as urban co-operative bank on 06-04-1907 as first Urban co-
operative bank of the then Mysore province.
The Bangalore City Co-operative Bank Ltd was formed under the leadership of Sir K.
Ramaswamaiah, Head Master, London Mission Schol and his friends with the main Objective
of promoting thrift and savings habit among its member and to free the members from the
clutches of money lenders during the year 1907, our bank has mobilised share capital of Rs.
2727/- from 150 members and deposit of Rs. 2265/- and also lent Rs. 4036/- to its members.
The bank has made a profit of Rs. 156/- and declared a dividend of 13.02% in the first year. It is
pleasure to note that our bank has mobilised share capital in easy monthly instalments from
members during initial period.
Since the date of inception, the bank never had a setback in mobilisation to share capital/deposit
and in grant of loans and advances and in its profit. It is pleasure to note that our bank is one
among the Top 3 Urban Co-op banks of the state f Karnataka.
The Bangalore City Co-operative Bank Limited, a leading Urban Co operative Bank in India was
founded by Sri. K. Ramaswamaiah and other Co-operators during the beginning of the Co-
Impact of NPA in the Performance of Financial Institutions with Special Reference to BCCB ltd
operative movement in our country , with prime object of encouraging thrift and savings
habit among the public and to freed the members frm the clutches of private money lenders.
Initially the bank started as a Credit co-operative Society in the year 1905 and later converted as
Urban Co-operative Bank on 06-04-1907. The bank began with 150 members, mobilised Share
capital of Rs.2727 from them and also mobilized Deposits of Rs. 2265 from which advanced
Rs.4036/- and disbursed dividend at 13.02% in the inception year.
Today the total business of the bank has crossed Rs. 1300.00 crores and now it is placed as Top
Urban Co-operative bank of the State of Karnataka.
The Bank is functioning on the sound principles of co-operation and successfully completed
more than 100 years of banking service. The bank is continuously making profit since from the
date of its inception and disbursing dividend t its members and also in 'A' Grade Audit
classification. Visionary and transparent directors on the board and dedicated professional staffs
are responsible for this achievement.
Our bank celebrated Silver Jubilee in 1932, Golden Jubilee in 1957, Diamond Jubilee in 1967,
Platinum Jubilee in 1977 and Centenary Celebrations on 31-03-2007.
Our bank has been honoured as best urban co-operative bank for the 3 consecutive year Viz.
1926, 1927 and 1928 by Sri. Kanteerava Narsimharaja Wadeyar Bhadur, Prince of the Then
Mysore Province. The Govt. Of Karnataka has als honoured our bank as best urban co-
operative bank for the financial years viz. 2001-02, 2003-04, 2011-12, 2012-13 and 2013-2014
and also for completion of 100 years of Co-operative service during centenary Celebrations of
Co-operative year in the year 2007-08.
Our bank has always certified with A Audit Class by the Department of Co-operative
Our Net NPA level is 2.93% fr the Year ending 31-03-2016 and efforts are made to
We have 20 branches located in different parts of the city of Bangalore, one each Ramanagar and
in Mysore the branches are making profit. It is als pleasure to note that our 21st branch is
opening shortly at Anjana Nagar, Bangalore.
It pleasure to note apart from banking activities our bank has also contributed generously for
constructing a ward at Kidwai Institute of Onclogy, Bangalore and for Rehabilitation of Victims
affected in Natural calamities like floods, earth quake, tsunami, famine etc. In different part of
the country, conducting free eye camps and medical camps, donated of regional institute of co-
operative Management to renovate its classroom, the Karnataka State Urban Co-operative Banks
Federation to have its own building, to victims of kargil war, to provide drinking water under
Rajeev Gandhi Drinking water and Sanitary Scheme and donate Rs. 10,00,000/- to Sri Jayadeva
Institute Of Cardiovascular Science and Research, Bangalore to provide assistance free treatment
for the poor people.
We have 220 staff and salaries are paid in accrdance with recommendation of State Urban
Banks Federation.
Recently we have obtained permission from the Reserve Bank of India and Register of Co-
operative Societies for extending the area of peration of the bank to the whole State of
Karnataka and planned to open branches in other District Centres of Karnataka in future.
We have implemented Cre Banking, providing Rupay ATM Cards facility, Any Branch
Banking, Cheque Clearing with RTGS/NEFT Facility
THE BANGALORE CITY CO-OPERATIVE BANK LIMITED was the first urban co-
operative bank in the country established in April 16, 1907 by K. RAMASWMAYYA and
friends.
The Bangalore City Co-perative Bank Limited was established under the Co-operative society
Act bearing registration number 314/CS, 8.4.1907 from the registrar of co-operative societies in
Karnataka and the license was granted by RBI NO.UBD/KA/642, dated 11.11.1986 for
Impact of NPA in the Performance of Financial Institutions with Special Reference to BCCB ltd
conducting the banking business with an intension to provide loan and give high interest on
deposit customers and members. The BCC bank is ne among the top urban co-operative Banks
in the country.
The bank has been extending credit facility and also inculcating the habit of saving among the
small traders, footpath vendors, fruit and vegetable vendors, hawkers coming under priority
sector.
The bank has made advances to large number of 3 wheelers self-employed wners and thus has
extended self completed its 100 years in 2007.
In consideration of the application submitted to the Govt. of India, to get registered the above
image of goddess Lakshmi as Trademark, as per the Trademark Act in 1959, sec 23(2), rule
62(1) Trademark no. 943843 dated 31.7.2000 the Govt. approved and registered they above
image as a Trademark and has been given a letter f approval on 15.3.2008
The business carried by the bank is generally related with providing short term and long term
loans and it also accepts deposit from the public. BCCB also provides loans t processing,
marketing and consumer as well as agriculture in Karnataka and working capital loans to state
level and national level institutions. They offer all types of banking services t customers like
deposits, loans, DD, pay order, bank guarantees, cheques collection facility, etc.
Impact of NPA in the Performance of Financial Institutions with Special Reference to BCCB ltd
Provision of short term loan to carryout seasonal agricultural and for the purpose of sale
of agricultural products.
Provision for medium term loan for irrigation poultry farming, animal husbandry..... etc.
Acceptance of deposits.
VISION:
To mobilize deposit of Rs. 1000 crres and to raise advances portfolio in the next 8 years and to
increase the network of banking to 25 branches.
MSISION:
To promote the effectiveness of credit and reduce the risk in granting a credit thru careful
and continuous supervision.
QUALITY POLICY:
Following are some of the rules and regulations provided by the bank for the benefits of
customers.
Banks will give standing instructions for the payment of bills, rents, interest, and
insurance.
Avail nomination facilities to a/c holders including savings bank a/c and current account
holders.
Withdrawals.
Cash receipts.
Sanctions of loans.
Lockers facility.
Clearing cheques.
Updating passbok.
Pay order.
Telegraphic transfer.
AREA OF OPERATION:
Bangalore City Co-operation bank Limited works in the regional level only. It does not work in
national. The bank has a wide spread network of 20 branches along with the administration
office of Chamarajpet and all the branches have been computerized under jurisdiction of
INFRASTRUCTURES FACILITIES:
The bank has 160*134 sq feet size. The building is built in 100*100 sq. Feet of the site. A
ground floor and first floor is built to carry out the banking activities. It is built for own use. In
the ground floor, there is a head office branches of the bank in the 1st floor, there is an
administrative office. The head office of the bank is located in Chamarajapet, Bangalore. It has
13 branches including 1 head office. The entire branch has computer facilities. Each branch has
its own department which are fully furnished and well equipped fr smooth functioning of the
banking activities. Proper lighting, ventilation, drinking water facilities is arranged.
Impact of NPA in the Performance of Financial Institutions with Special Reference to BCCB ltd
BRANCHES OF BCCB:
YEARS AREA
OWNERSHIP PATTERN:
DIRECTORS
Shri. Anjanasappa
Shri. K. Krishanappa
Shri. RadhaKrishna N
Shri. Ragunath C
Shri. Basavaraju
Shri. Munikrishna M
Smt. Meenakumari K P
Smt. Vijaya G S
Shri. Hanumadasaiah
Shri. U.P.Puranaik
Shri. K. Shivanna
COMPETITIORS:
As the Bangalore city co-operative bank ltd is the urban co-operative bank it is facing
competition from the commercial bank under takes a number of banking service. Since the urban
co-operative banks are localised and do not have network have network of bankers they are not
in position to meet all the banking services
Therefore the institution like government, public sector under takings and the urban co-operative
banks are facing competition from commercial banks.
Bank of Baroda
Bank of India
Canara bank
IDBI bank
Oriental bank
Indian bank
ORGANISATIONAL STRUCUTRE:
PRESIDENT
VICE-PRESIDENT
BOARD OF DIRECTOR
GENERAL MANAGE
ASSISTANT GENERAL
BRANCH MANAGER
ACCOUNTANT
ASSISTANT ACCOUNTANT
SENIOR ASSISTANT
EMPLOYEES
Impact of NPA in the Performance of Financial Institutions with Special Reference to BCCB ltd
WORKFLOW MODEL:
Loan form is given to the customer; customer fills the form and submits it with the necessary
original documents customer approaches the banks branch office.
Case worker scrutinizes the application and sends it to the branch manager
Bank manager inspects property & sends the application to the administrative office
Valuation of the property takes place, when board approves, sanction of loan takes place
For the year 1926, 1927 and 1928, the bank has been awarded as The best co-operative bank of
the Karnataka state by the Maharaja of Mysre, Shriman Shri Kanteerava Narasimha Raja
Odeyar. The bank has always certified with A class by the Audit.
Years Awards
A scan of internal and external environment is an important part of strategic planning process.
Environmental factors to the firm usually can be classified as the strength or weakness and those
Impact of NPA in the Performance of Financial Institutions with Special Reference to BCCB ltd
External to the firm can be classified as the opportunities or threats. Such an analysis of the
strategy environment is referred as SWOT Analysis.
The SWOT analysis provides information that is helpful in matching the firms resources and
capabilities to the competitive environment on which it operates. As such, it is on instrumental in
the strategy formation
STRENGHT:
Trust and belied in the minds of customer as it is the oldest co-operative bank in India
Very strong financial credibility as the financial position of the bank is very good
Lowest commission rate (Rs. 10 to 300) on pay order, demand draft and bank draft.
Lowest interest on jewels loans (12.5% interest upto 3 lakhs) in all the branches of the
bank.
WEAKNESS:
OPPORTUNITY:
Scope of development.
THREATS:
The pressure n margins due to increased competition on both liability and assets
products is affecting the productivity.
The growth of capital market and emergence of mutual funds is posing a threat to the
deposit accretion with the bank.
RECORY PROCEDURE:
The management of NPA is the difficult task in practice. Management of NPAs means, how to
settle the NPAs account in the books. In simple it focuses on the methods of settlement of NPAs
account. The methods are differs from bank of bank. The following paragraph explains some
general methods of management of NPAs by the banks. The same infrmation is given in the
chart.
COMPROMISE
LEGAL REMEDIES
REGULAR TRAINING PROGRAM
RECOVERY CAMPS
WRITE OFF
SPOT VISIT
REHABLITATION OF POTENTIALLY VIABLE
OTHER METHODS
Impact of NPA in the Performance of Financial Institutions with Special Reference to BCCB ltd
To make all branches to core banking facilities and help the customers.
Provide training for employees to acquire more knowledge about the bank work.
The bank wants to increase its operations by setting up its branches all over the
Karnataka.
There are planning to enter core banking.
Launching of mobile banking, Tele-banking, ATM facility.
Interest and or installment of principal remain due for a period of more than 90 days in
respect of a term loan.
The account remains out of order in respect of a overdraft /cash credit (OD/CC)
The bills remain overdue for a period of more than 90 days in the case of bills purchased
& discounted.
A loan granted for short duration crops will be treated as NPA if the installment of
principal or interest there on remains overdue for two crp seasons.
A loan granted for short duration crops will be treated as NPA if the installment of
principal or interest there on remains overdue for ne crop seasons.
For the purpose of guidelines long duration crops would be crops with crop season
longer than one year & crops, which are not long duration crops. Would be treated as
short duration crops the crop season for each crop, which means the period up to
harvesting of the crops raised would be as determined by the state level bankers
committee in each state.
Depending on the duration of crops raised by an agriculturist the above NPA norms
would also be made applicable to agricultural terms loan availed by him.
Any amount to be received remains overdue for a perid of more than 90 days in respect
of other accounts.
An over draft/cash credit account shall be treated as NPA if it remains out of order for 90 days.
An account should be treated as out of order if the o/s balance remains continuously in
excess of the sanctioned limit r drawing power, whichever is less. The balance o/s in
LC/BG/DPG paid accunt and FIBP accounts shall be added (nationally) to the principal
Impact of NPA in the Performance of Financial Institutions with Special Reference to BCCB ltd
operating account i.e. OD/CC or current account to determine whether the account is out
of order or not.
In cases where the o/s balance in the principal operating account i.e. OD/CC account is
less than the sanctioned limit or drawing power, whichever is less but there are no credits
continuously for 90 days as on the date of balance sheet (from 1st Jan to 31st march), these
accounts should be treated as out of order from the beginning i.e. 1st Jan. in other words
the account shall be treated as out of order for 90 days as n 31st march and hence slips to
NPA on the date of balance sheet i.e. 31st march.
For examples
if liability under overdraft/ cash credit (after nationally adding devolved liability under
LC/BG/DPG paid account) remains continuously in excess of sanctioned limit or drawing
power, whichever is less, on all days during the period from 01/11/05 to 29/01/06, it
becomes NPA on 29/01/06(i.e. continuously overdrawn for 90 days)
if an overdraft/cash credit account is within limit/drawing power but there are n credits
continuously during the period from 01/01/2006 to 31/03/06, the accunt becomes NPA
on 31/03/06 (i.e. no credits continuously for 90 days)
if an over draft/cash credit account is within limit / drawing power but the credits
received during the period from 01/01/06 to 31/03/06 is less than the interest debited
during the period ( i.e. interest debited during the period not covered by credits received
during the period ) the accounts becomes NPA on 31/03/06.
Impact of NPA in the Performance of Financial Institutions with Special Reference to BCCB ltd
A bill purchased /discounted shall be treated as NPA if it remains overdue for a period of more
than 90 days.
Illustration
A use once bill (DATBD) falling due for payment on 31/01/05 as per tenor of the bill,
becomes NPA on 29/01/06 (i.e. more than 90 days from the due date) if it remains
unpaid.
AGRICULTURAL LOAN:
A loan granted for short duration crops will be treated as NPA, if the installment of
principal or interest there on remains overdue for two crop seasons.
A loan granted for long duration crops will be treated as NPA, if the installment of
principal or interest thereon remains overdue for one crop season. For the purpose of
above guidelines, long duration crps, would be treated as short duration crops. The
crop season for each crop, which means the period up to harvesting of the crops raised,
would be as determined by the state level bankers committee in each state.
Depending up on the duration of crps raised by an agriculturist the above NPA norms
would also be applicable to agricultural term loans availed by him.
OTHER ADVANCE:
Advance against term deposits inclusive of accrued interest if any NSCs eligible for surrender,
indira vikas Patras, kisan vikas Patras and life insurance plicies shall not be treated as NPAs.
Impact of NPA in the Performance of Financial Institutions with Special Reference to BCCB ltd
Such securities are exempt from provision requirement to the extent s covered by such
securities and hence they shall be classified as standard assets only. Advances again gold
ornaments, govt securities & all other securities are not covered by this exemptions.
The credit facility backed by guarantee of a central govt. repudiates its guarantee when invoked.
This exemption from classification is not for the purpose of income recognition, hence credit
facilities backed by central govt. guarantee is invoked and repudiated, however the unrecovered
portion of interest, if any, debited during the current and previous year shall be reversed &
income shall be recognized on cash basis only.
If central govt. guarantee is not adequate to cover the full liability asset classification and
provisioning norms applicable for advances shall be applied on un covered portion.
With effect from the year ending March 31/2006, state govt. guaranteed advances would attract
asset classification and provisioning norms, if interest and or installment of principal r any other
amount due to the bank remains overdue for more than 90 days. In other words advances
guaranteed by state govt. shall be treated at par with ther advances for the purpose of asset
classification and provisioning.
A loan repayable in installments becomes NPA when interest and /or installment of principal
remain overdue for a period of more than 90 days.
The 91st day from the due date of earliest up paid interest r installment of principal is the date of
NPA.
Illustration
if interest due for the month ended 31/12/05 is nt paid, it becomes NPA on 31/03/06
(i.e. over due for more than 90 days)
SPECIAL CASES
In the case of loans repayable in equated in monthly installments where a part of the interest is
included in the installment, NPA status shall be determined n the basis of equated monthly
installment and not with reference to the date of debit f monthly interest.
In the case of loans given for industrial projects or for agricultural plantation etc. where
moratorium is available for payment of interest, becomes due only after the moratorium or
gestation period is over therefore such amounts of interest do not become overdue with reference
to date of debit of interest. They becme verdue after due date for payment of interest, if
uncollected.
In the case of housing loan, vehicle loan r similar advances granted to staff members where
interest is payable after recovery of principal, interest need not be considered as overdue from
the first month onwards. Such loans/advances should be classified as NPA only when there is a
default in repayment of installment of principal or payment of interest on the respective due
dates.
Advance payments
Where the borrower has made advance payment of installments fixed towards the loan & as on
31/03/06 the loan account is regular, such loan account need not be treated as NPA even if
technically interest is due for more than 90 days.
Branches shall not classify an advance as NPA merely due to the existence of some deficiencies
which are temporary in nature such as non availability of adequate drawing power based on the
Impact of NPA in the Performance of Financial Institutions with Special Reference to BCCB ltd
latest available stock statements, balance o/s exceeding the limit temporarily, non submission
stock statements & non-renewal of the limits on the due date etc. in the matter of classification of
accounts with such deficiencies branches may follow the following guidelines.
Sub-standard assets
It may be noted that each sub-standard asset shall be classified as either secured exposure
or unsecured exposure & provision shall be made on o/s balance.
Doubtful assets
A doubtful asset is one, which has remained NPA for period exceeding 12 months.
Doubtful assets shall be bifurcated in to doubtful assets less than one year b/w 1 and 3
years, above 3 years doubtful assets and above 3 years shall be further bifurcated in to
existing stock
Further each doubtful asset shall be bifurcated in to secured portion and unsecured
portion for provisioning purpose.
Impact of NPA in the Performance of Financial Institutions with Special Reference to BCCB ltd
Loss assets
A loss asset is one where loss has been identified by the bank or internal or external auditors or
RBI inspection. In other words, such an asset is considered un collectable & of such little value
that its continuance as a bankable asset is not warranted although there may be some salvage or
recovery value.
A NPA shall be treated as loss asset, irrespective of age of NPA, if it is un collectible due to:
Realizable value of securing has become nil or negligible due t erosion in the value of
security.(value may be treated as negligible if it is less than 10% of the o/s in the
borrower account)
Loans up to Rs 40.00 lakhs granted for financing distribution of inputs for the allied
activities such as cattle feed, poultry feed etc.
Loans for contribution and running storage facilities (warehouse, market yard, godown)
including cold storage units.
Loans to arthias (commission agents in rural and semi urban areas functioning in
markets/mandis) for meeting their working capital requirements n account of credit
extended to formers for supply of inputs.
Impact of NPA in the Performance of Financial Institutions with Special Reference to BCCB ltd
If arrears of interest and principal are paid by the borrower in the case of loan accounts
classified as NPAs, the account should no longer be treated as nn-performing and may
be classified as standard in other words an account, which become NPA due to non-
payment of interest and / or instalment of principal up on payment of arrears of principal
in fall, stands upgraded as standard asset on the day of clearing the arrears full.
Accounts classified as NPA may get up graded any day during the year to performing
asset under following circumstances.
In case of loans, the a/c is fully regularized by payment of arrears of interest &
installments.
In case of OD/CC a/c, the over drawls allowed have been regularized /
reimbursed or the party has started operating the accunt with in limit/ drawing
power or the credits are enough to cover the interest debited.
In the case of bills limit, all overdue bills have been realized/recovered.
In case of a borrower having multiple accounts, the accounts can be upgraded as standard
asset only if all accounts of the borrower or regular on the day of up gradation.
Impact of NPA in the Performance of Financial Institutions with Special Reference to BCCB ltd
For example:
A borrower has OD, CDD & LC limits of Rs 10 lacs, Rs 1 lacs & Rs 2 lacs
respectively & term loan of Rs 4 lacs.
Balance in OD a/c is equal to as less than drawing power throughout the year
except during the period 10/10/05 to 31/12/05, when the balance exceeded
drawing power OD a/c, on its own was not ut of order for 90 days & hence
did not slip to NPA.
Five LCs each amounting to Rs 10 lacs was devolved during 15th Dec 2005
30th Jan 2006, each LC paid a/c was closed before completion of 90 days.
Hence no LC paid account become NPA. If they are considered as individual
loans.
The asset classification of borrower accounts where a solitary or a few credits are
recorded before the balance sheet date should be handled with care & without scope for
subjectivity where the a/c indicates inherent weakness on the basis f the data available,
the NPA should be deemed as a NPA in other genuine cases, branch must furnish
satisfactory evidence to the statutory auditors/ inspecting officers about the manner of
regularization of the account to eliminate doubts on their performing status.
Accounts shall be regularized by genuine credits for up gradating the account from NPA, to
standard assets. Regularization of account by allowing TOD/ Ad hock limit replacement of
instalments, conversion of loan discounting/purchasing of accommdation cheques, transfer
of funds from accounts of sister concern, other than on genuine trade/ business related
transaction etc shall not allow the account to be up grade as standard asset.
Income recognition
Income from non-performing asset is not recognized on accrual basis but is booked as income
only when it is actually received. Therefore interest on NPAs shall be charged to the account
only when it is actually received. As and when recovery is made in NPAs expenses incurred but
not charged to the accounted shall be debited to the account & credited t the mice income first
balance of recovery made or interest up to the end of the provisions month not charged to the
account whichever is less shall be debited to the account and credited t the interest on NPA.
After debiting the expenses & interest to the NPA (real a/c) balance in real account shall not be
exceeds the balance in shadow a/c since balance in shadow a/c are the ttal dues of the borrower.
Interest reversal
The un recovered portion of interest debited, during the current year (2005-06) & corresponding
previous year (2004-05), in a/c that have slipped to NPA during the current year i.e. 2005-06.
Shall be recovered as at the close of the year. This will apply to central Govt guaranteed account
with overdue more than 90 days als, though they are treated as standard asset.
Impact of NPA in the Performance of Financial Institutions with Special Reference to BCCB ltd
D1 Stage: If NPA exists for more than two years but des not exceed 3 years than the asset is
said to be in the D1 stage.
D2 Stage: The NPA exists for more than 3 years but up to 5 years
D3 Stage: If the NPA exists for the more than 5 years then the assets is said to have entered the
stage.
SERVICE CHARGES
COLLECTION CHARGES
For Out Station Cheques
COLLECTION CHARGES
CHARGES FOR BILLS
Separate charges are prescribed for retirement of bills (IBC) and purchase of DD/MT/POs in cash
for amounts up to Rs.50000/- as RBI directives do not permit acceptance of cash abve Rs.50000/-.
CHAPTER 4
4.1 ANALYSIS AND INTERPRETATION OF THE DATA
Impact of NPA in the Performance of Financial Institutions with Special Reference to BCCB ltd
This chapter deals with the data analysis and interpretation of data collected from the bank. The
balance sheet and relevant which was published in the annual reports we recollected and studied.
The reference period for the study is five year 2012 to 2016 guidance was taken from the
officials of the bank to under the concept and analyzed how the level of non-perfrming of the
bank.
TABLE: 01
Table showing the no. of accounts of total loans outstanding given by Bangalre City Co-
operative bank ltd for 5 fiscal year.
ANALYSYS:
The above table gives the data regarding the number of accounts of total loans outstanding made
by BCCB ltd for 5 financial years. It clearly says that its been reducing from year t year and
the outstanding loans of the bank have been decreasing.
Impact of NPA in the Performance of Financial Institutions with Special Reference to BCCB ltd
GRAPH: 01
20000 Non-
performing
assets
15000 accounts
Standard
10000
assets
accounts
5000
0
2011-2012 2012-2013 2013-2014 2014-2015 2015-2016
INTERPRETAION:
By looking at the graph we can interpret that the total number of lans outstanding is been
reduced by year and year. In the year 2012 it was 21478 and its been reduced to 18685 in the
year 2016. And in that the non-performing assets accounts have been reduced
Impact of NPA in the Performance of Financial Institutions with Special Reference to BCCB ltd
YEAR
Principle Interest
GRAPH: 02 showing the total amount outstanding with principle and interest.
120,000.00
100,000.00
80,000.00
60,000.00 Interest
Principle
40,000.00
20,000.00
0.00
2011-2012 2012-2013 2013-2014 2014-2015 2015-2016
INTERPRETATION:
The specific finding from the study is that as there is a gradual increase in the total amount
outstanding in the last five years, this is not appreciable to the growth of the profitability of the
bank.
Impact of NPA in the Performance of Financial Institutions with Special Reference to BCCB ltd
53,420.98 50,439.80
2011-2012 2981.18
70,315.99 66,148.88
2012-2013 4167.11
86,104.91 80,484.47
2013-2014 5620.44
90,792.67 84,320.94
2014-2015 6471.73
102,102.56 94,187.99
2015-2016 7914.57
GRAPH: 03 Graph showing the Split of amount outstanding into standard assets and NPA
120000
100000
80000
60000 NPA
40000
Standard
20000 assets
0
2011-2012 2012-2013 2013-2014 2014-2015 2015-2016
INTERPRETATION:
The specific finding from the study is that in the total outstanding loan amount the non
performing assets and the standard assets have been splited and the Non performing assets are
decreasing
Impact of NPA in the Performance of Financial Institutions with Special Reference to BCCB ltd
YEAR Standard Sub Standard Doubtful asset (up Doubtful asset Doubtful asset
assets assets to 1yr) (above 1yr) (above 3yr)
2011-12 94.90 4.07 0.43 0.28 0.32
98%
88%
2011-20122012-20132013-20142014-20152015-2016
INTERPRETATION:
The above table gives the data percentage of the total loan amount. As most of 94+ % is acquired
by the standard assets and the rest 6% is been acquired by the NPA. So it is a appreciation for the
company
Impact of NPA in the Performance of Financial Institutions with Special Reference to BCCB ltd
GRAPH: 05 Graph showing the provision which the bank has to make during the year.
1600
1400
1200
Non-performing
1000 Assets
800
Substandard
600 assets
400
Standard Assets
200
0
2011-12 2012-13 2013-14 2014-15 2015-16
INTERPRETATON:
From the above graph we can infer that the provision which has to be made in the BCCB ltd has
been increasing continuously in 2012-2016. This affects the profitability of the bank.
Impact of NPA in the Performance of Financial Institutions with Special Reference to BCCB ltd
YEAR
Standard Assets Sub Standard Assets Non Performing Assets
GRAPH: 06 Graph showing the total provision at the end of the every fiscal year.
5000
4500
4000
3500
Non
3000 Performing
2500 Assets
2000
Sub Standard
1500
Assets
1000
500
0
2011-12 2012-13 2013-14 2014-15 2015-16
INTERPRETATION:
From the above graph we can infer that the total provision at the end of every year has been
increasing and as the provision is been increased its been affected the growth of the bank.
Impact of NPA in the Performance of Financial Institutions with Special Reference to BCCB ltd
31-03-2011 3176.70
31-03-2012 2685.88
31-03-2013 3797.59
31-03-2014 5065.95
31-03-2015 5960.29
31-03-2016 7013.92
8000
7000
6000
5000
4000
3000
2000 Gross NPA
1000
0
INTERPRETATION:
The Gross NPA of BCCB ltd is been Increasing from year to year and the Gross NPA consist of
the Sub Standard assets, Doubtful assets and lss assets.
Impact of NPA in the Performance of Financial Institutions with Special Reference to BCCB ltd
31-03-2011 7.15
31-03-2012 5.10
31-03-2013 5.48
31-03-2014 6.01
31-03-2015 6.66
31-03-2016 7.04
8
7
6
5
4
3
Gross NPA as
2 % to gross
Advances
1
0
INTERPRETATION:
The gross NPA as a percentage of Gross Advances is been decreased in the year 2012 but again
its gradually it increased from the year 2013 to 2016
Impact of NPA in the Performance of Financial Institutions with Special Reference to BCCB ltd
31-03-2011 2382.54
31-03-2012 2555.60
31-03-2013 2725.54
31-03-2014 2950.07
31-03-2015 3634.80
31-03-2016 4214.06
GRAPH: 09 Graph showing the total NPA provision held during the previous years.
4500
4000
3500
3000
2500
2000 NPA Provision held
1500
1000
500
0
31-03-11 31-03-12 31-03-13 31-03-14 31-03-15 31-03-16
INTERPRETATION:
The provision for NPA held during the last 6 year as been increasing from year to year.
Impact of NPA in the Performance of Financial Institutions with Special Reference to BCCB ltd
31-03-2011 42029.58
31-03-2012 50094.57
31-03-2013 66529.73
31-03-2014 81326.04
31-03-2015 85922.18
31-03-2016 95406.09
120000
100000
80000
60000
Net
40000
Advances
20000
0
31-03-11 31-03-12 31-03-13 31-03-14 31-03-15 31-03-16
INTERPRETATION:
From the above graph we can infer that the net advances of NPA is been increasing. The Net
Advances is calculated by (Gross advances Deductions Total NPA Provisions).
Impact of NPA in the Performance of Financial Institutions with Special Reference to BCCB ltd
31-03-2011 794.16
31-03-2012 130.28
31-03-2013 1072.05
31-03-2014 2115.88
31-03-2015 2325.49
31-03-2016 2799.86
3000
2500
2000
1500
500
0
INTERPRETATION:
The Net NPA had decreased in the year 2012 and after that its been increasing till the year 2016.
The Net NPA is calculated as (Gross NPA deductions total NPA provision)
Impact of NPA in the Performance of Financial Institutions with Special Reference to BCCB ltd
31-03-2011 1.89
31-03-2012 0.26
31-03-2013 1.61
31-03-2014 2.60
31-03-2015 2.71
31-03-2016 2.93
3.5
2.5
0
31-03-11 31-03-12 31-03013 31-03-14 31-03-15 31-03-16
INTERPRETATION:
The net NPA as the percentage of net advances was low as 0.26 in the year 2012 but later from
that year its been increased to 2.93 as it is the highest from all the year in the year 2016.
CHAPTER 5
5.1 FINDING SOLUTION
5.2 SUGGESTION
5.3 CONCLUSION
FINDINGS:
For every problem there will be a solution. Without finding a prblem and solution the prject
will not come to an end. These are some of important findings of my project.
The Bangalore City Co-operative bank ltd is one of the leading banks in country acting as a
catalyst for the growth of the Indian econmy.
The results about repayment by the customers were tricky. There is a good record in the
repayment of the individual loans like personal loan, car loan and housing loan the loan
payment is good in case of vehicle loan. The loan repayment is very poor in other sector.
More than 50% of the total credit given to other sector has become NPA.
The bank branches are limited to BCCB ltd.
Findings the study it is found that the interest rate of different types of loan will be
fluctuating.
Small enterprises are provided loan under business loan category.
Bank operates customers of middle class and upper middle class people.
Recovery camps have organized.
Repayment schedule is not fixed correlating with actual period.
The NPA plays a major role in the performance of the bank in contributing to the net
profit. Hence bank has taken several recovery measures.
There are a large number of scattered accounts in the bank which makes the bank
difficult in realizing the accounts.
The bank is adopting carious strategies to reduce NPA.
Allotting of loan has increased in 2016-17 when compared to the financial year 2014-15
and 2015-16.
During the project process i found that bank officials and staffs were co-operative while
dealing with customers.
With the help of computerization it has enabled the banks staff t perform their task
efficiently.
The bank branches are limited to Bangalore city only.
Impact of NPA in the Performance of Financial Institutions with Special Reference to BCCB ltd
Finding the study it is found that the interest rates of different types of loans will be
fluctuating.
Small enterprises are provided loans under business loan category.
Bank operates mostly to customers of middle class lower middle class people.
Bank having website and online banking.
SUGGESTIONS:
The bank has to extend their branches throughout the state and expand as the bank grows.
Bank has to introduce new loan scheme to encourage more and more different classes of
people.
The profit position can be improved by reducing the interest rate on loans.
The BCCB ltd must introduce ATMs throughout the city s that services rendered to the
customers will have a better impact on the bank.
A follow up on the performance of its borrowers is necessary. This would help the bank
in identifying sickness in the company and be prepared for losses arising from them.
List of wilful defaulters should be made public. Such defaulters should be discouraged
when they make an attempt to approach the bank for more loans.
Bank should upgrade their system/techniques of credit appraisal.
Primitive interaction with the borrowers with relatively large dues should be held at
various levels to ascertain their true financial position and to take corrective steps.
There is need to educate people on their obligations to return the money borrowed from
the bank.
Many borrowers may not know the rules and regulations regarding the recovery of
advances, those people have to be made aware of the new rules and regulations at the
time of lending loan to the borrowers.
Other liabilities and provisions of the bank have been increasing year by year. It is not
good thing to the bank for long term because liabilities are always burden to the business.
So the bank should concentrate on decreasing and provision.
Presently the bank invest more amounts on the fixed assets it is advisable to the bank to
reduce the excess of investment on assets in order to avid idealess of funds.
Impact of NPA in the Performance of Financial Institutions with Special Reference to BCCB ltd
Presently the bank not having more ATM facility; the bank should establish more ATM
facility to provide faster service to customers.
Bank should concentrate on providing additional services to the existing customers other
than the normal banking operations.
The bank should concentrate on minimizing the interest expenses. The increasing the
interest expenses are not healthier thing to the bank.
Education and training of employees is a must for the implementation of sound ALM
programmes.
Bank should invest a significant amount in human resources development so that in
future.
CONCLUSION:
Growing NPA is one of the biggest problems that the Indian banks are facing today. If
proper management of the NPAs is not undertaken it would hamper the efficiency of the
banks. If the concept of NPAs is taken very lightly it would be dangerous for the banking
sector. The NPAs destroy the current profit and interest income and affect the smooth
functioning of the recycling of the funds. Banks all so redistribute losses to other
borrowers by charging higher interest rates. Lower deposit rates and higher lending rates
repress savings and financial markets, which in turn hampers the economic growth of the
country. Thus, it is highly essential for the banks to focus their attention on growth of
NPAs and take appropriate measures to regulate their growth.
From this study it will help bank in terms as strength of the bank and measures to be
taken by the banks to solve the problems faced by the banks. As a part of my academic
study this work has been conducted and through which i gained vast knowledge about
assets and liabilities management of the bank and its important with the help of
coordination of the bank officials the work has been successfully accomplished.
From the study of this project the overall performance of the Bangalore city co-operative
bank is satisfactory and also the banking a dominate role in the co-operative banking
industry. So according to this study on BCCB is growing moderate and satisfactory.
Impact of NPA in the Performance of Financial Institutions with Special Reference to BCCB ltd
The study of loans and advances undertaken Bangalore City Co-operative Bank was
done to analyze the financial performance and to suggest the measure to improve the
current performance.
The bank possesses a sound investment planning and also it has good profit it is playing a
dominate role in co-operative banking industries.
Bangalore city co-operative bank has been set up to provide essential help for promoting
economic development of the country. It plays a natural role in providing financial
assistance to small and medium scale industry which are located in rural and urban areas.
It provides advance facility within the short span of time. Compared to other nationalized
bank in Bangalore, it takes every primitive measure while issuing loans. For this reason
only bank must not face any problem while recovering loans back. Most of the banks face
problems while issuing and getting back from improper documentation. Here in this
bank, growing person should provide two securities also.
Performance of the bank is very good. Finally we can conclude private sector bank are
laying strong and powerful role than sector bank.
LEARNING EXPERIENCE:
As per the requirements of the university, i have gone through the project of 10 weeks. It
has really given an opportunity for me to know the functioning of the Bangalore city co-
operative bank ltd. The 10 week project has created a sense of practical exposure as to
what actually as organization is and i understand management concept of an organization.
The project at the Bangalore city co-operative bank ltd has given made a clear picture of
an organization. A study on non-performing asset provided an opportunity to know
some valuable information. I also came across real problem faced by organization in
conducting service activities and the way in which management tackles those problems.
The experience i gained from training ws very exhaustive. I learnt about organising the
business in most connective manner keeping in mind to explore new products strategies,
work place, and organization culture, polices and style of management.
The SWOT analysis provided an improved analytical thinking and increased the ability of
thinking in relating what factors can become strength, weakness, opportunity and threat
Impact of NPA in the Performance of Financial Institutions with Special Reference to BCCB ltd
to an organization in the internal environment and how to take advantage of strength and
opportunity to overcome weakness and threats.
The Bangalore City co-operative bank ltd must introduce ATMs throughout the city so that
services rendered to the customers will have a better impact on the bank. Bank has to introduce
loan scheme to encourage more and more different classes of people.
The profit position can be improved by reducing the interest rates on loans. Bangalore city co-
operative bank has been set up to provide essential help for promoting economics development
of the country. It plays a natural role in providing financial assistance to small and medium scale
industries are located in rural and urban areas.
BIBLIOGRAPHY
Impact of NPA in the Performance of Financial Institutions with Special Reference to BCCB ltd
JOURNALS:
1. Banking and finance
2. Finance India
3. Indian management
WEBSITES:
1. www.bangalorecitycooperativebank.co.in
2. www.rbi.org.in
3. www.bankingawareness.com
4. www.investopedia.com
5. www.risklossary.com
COMPANY REPORTS:
Annual reports of BCCB 2011,2012,2013,2014, 2015, 2016
Company broachers
Past records and journals
Impact of NPA in the Performance of Financial Institutions with Special Reference to BCCB ltd
ANNEXURES:
BALANCE SHEET AS ON 31/03/2010
Computer 11,37,464
Provisions 76,97,857
Depreciation 50,63,171
Computer 13,52,898
Provisions 3,80,59,709
Depreciation 52,52,102
Computer 13,50,938
Provisions 5,70,75,242
Depreciation 41,86,424
DSCE-DOMS Page 1
Basanth Kumar
by Basanth Kumar G
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