Thyagaraj co operative bank project report

A project report on Thyagaraj co operative bank

1. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 1
Internship Report On
A STUDY ON NON PERFORMING ASSETS AT THYGARAJA
CO-OPERATIVE BANK
BY
JAGADEESH NAIDU .Y
USN: 1GA12MBA21
Submitted to
VISVESVARAYA TECHNOLOGICAL UNIVERSITY, BELGAUM
In partial fulfillment of the requirements for the award of the degree of
MASTER OF BUSINESS ADMINISTRATION
Under the guidance of
INTERNAL GUIDE EXTERNAL GUIDE
MR. CHANDRASHEKAR RAO MRS.SHUBHA .M
ASSOCIATE PROFESSOR ASSISTANTMANAGER


Department of MBA,
GLOBAL ACADEMY OF TECHNOLOGY
Rajarajeshwari Nagar, Ideal Homes Township,
Off Mysore Road, Bangalore-98

2012-14

2. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 2

3. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 3

4. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 4

DECLARATION


I hereby declare that the project entitled “A STUDY ON NON PERFORMING
ASSETS” AT SREE THAYAGARAJA CO OPERATIVE BANK LIMITED Bangalore.
The project was undertaken in accordance with the requirements of Visveswaraya
Technological University, Belgaum. I have prepared this project report under the guidance of
my External Guide, Mrs SHUBHA.M External Guide and my Internal Guide Mr.
CHANDRASHE KAR RAO , Department of management studies, GLOBAL
ACADEMY OF TECHNOLOGY. I further declare that this project work is entirely based
on the information provided to me by the company and is a result of my own efforts.

I submit the project report to the Visvesvaraya Technological University, Belgaum,
in Partial Fulfillment of the requirement of the award of degree in Master of Business
Administration.


DATE: NAME: JAGADEESH NAIDU .Y
PLACE: BANGALORE USN: 1GA12MBA21

5. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 5
ACKNOWLEDGEMENT
A culmination of the project is the stage that makes transformation of students with
theoretical background to profession with lot of knowledge and awareness from a mere idea
to a visible reality. This study acknowledges some guidance, some perspiration and lot of
inspiration. I would like to acknowledge my obligation to all who have extended their co-
operation all along my study tenure of my project.
My hearty thanks to my external guide Mrs SHUBHA.M External Guide SREE
THAYAGARAJA CO OPERATIVE BANK . Bangalore, for all the encouragement and
helping hand extended to me for this project.
I express my profound gratitude to my internal guide Mr. CHANDRASHEKAR RAO, and
Mr. B.R.VENKATESH, HOD, Department Of management studies, GAT, whose
comments and advices improved the study.
I have also received direct or indirect assistance and suggestions especially from my family
and friends and acquaintances that are associated with my Project, I thank them whole-
heartedly.
Above all, I thank the Almighty for the blessing showed upon me for my studies.
DATE: JAGADEESNAIDU.Y
PLACE: BANGALORE

6. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 6
CHAPTER
NO.
CONTENTS PAGE NO.
EXECUTIVE SUMMARY
PART-A
1 INTRODUCTION 1-8
Introduction about the internship
Topic Chosen for study
Need of the study
Objective of the study
Scope of the study
Methodology
Literature review
Limitations of the study

2 INDUSTRY PROFILE 9-21
COMPANY PROFILE 22-33
Background ,promoters and inception of the company
Vision, mission & quality policy
Products and service profile
Area of operations
Infrastructure facilities
Competitors information
SWOT analysis
Future growth and prospects
Financial Statement

3 THEORETICAL BACKGROUND OF THE STUDY 34-49

7. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 7





4 ANALYSIS AND INTERPRETATION 49-61
5 SUMMARY OF FINDINGS 62-63
CONCLUSION 64
SUGGESTION & RECOMMENDATIONS 64
BIBLIOGRAPHY
ANNEXURE

8. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 8

LIST OF TABLES

Table No Particulars Page
No
Table 4.1 table showing amount of loans and advances for 2009-10 to
2012-13
50
Table 4.2 showing different sector wise loans and advances for 2011-12
& 2012-13
51
Table 4.3 Table showing non performing assets for years 2009-10 to
2012-13
51-53
Table 4.4 table showing percentage of NPA and gross advances

54
Table 4.5 table showing gross advances and percentage of NPA

54-55
Table 4.6 table showing the percentage of net and gross NPA 55-56
Table 4.7 table showing substandard and doubtful assets according to RBI
regulations
56-57
Table 4.8 table showing substandard ,doubtful and loss assets in lakhs
rupees with total
57-58
Table 4.9 table showing sector wise loans provided in 2012-13: 59-60
Table 4.10 percentage of loans and advances in the year 2012-13 sector
wise:
61

9. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 9

LIST OF CHARTS

Chart No Particulars Page No
Chart 4.1
graph showing amount of loans and advances

50
Chart 4.2
graph showing the different types of loans and advances with
its percentage
51
Chart 4.3
graph showing non performing asset

51-53
Chart 4.4
graph showing net NPA

54
Chart 4.5
graph showing gross advances and percentage of NPA

54-55
Chart 4.6
graph showing the percentage of net and gross NPA
55-56
Chart 4.7
graph showing substandard and doubtful assets according to
RBI
56-57
Chart 4.8
graph showing substandard ,doubtful assets and loss along
with its total
57-58
Chart 4.9
graph showing sector wise loans provided in 2012-13:

59-60
Chart 4.10
percentage of loans and advances in the year 2012-13 sector
wise:

61

10. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 10
Executive summary
A crucial issue, which is engaging the constant attention of the banking
industry is alarming high level of non-performing assets (NPA). The
repayment of loans taken is a major issue. When loans are not paid within the
set period of times it becomes NPA. Another important anxiety before the
banking industry is the high transaction cost of carrying NPA in their books.
The resolution of NPA problem requires greater accountability in part of
corporate, greater disclosure in case of defaults, an efficient credit
information sharing system and an appropriate legal framework pertaining to
banking system, court procedures and actual recoveries made within
acceptable time frame.

NPA has become the critical performance area for the banks. There are many
internal and external factors for the rise of NPA. The essential component of
a sound NPA management syst em is quick identification of non performing
advances, their containment at minimum levels and ensuring that their
impingement on the bank are minimum. The project was carried at Thyagaraja
co-operative bank nr colony Bangalore during the month of April, 2014 to
June 2014.

The study done on NPA in Thyagaraja co -operative bank comprises the
general trends of NPA in the bank over the years, comparative study of NPA
of the bank in eight different regions over the past three year, implications of
high level of NPA and suggesting effective measures for resolving the
problem loans and hence making the banks NPA level healthy. From the
analysis carried out in the study on NPA of the Thyagaraja co-operative bank
it reveals that the efforts undertaken by the bank in this respect is
satisfactory. Banks NPA has reduced considerably over the years. Bank has
succeeded in preventing fresh NPA as well as recovering existing NPA.
Profitability and viability of the bank has increased.

11. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 11
Introduction about the Internship:
Internship (project work) is an integral part of the academic curriculum. It is an initiative to
bridge the gap between knowledge and its application through a series of interventions that
will enable to gain insights and exposure to the industry.

A research is a logical and systematic plan prepared for directing a research study it
specifies the methodology and techniques to be adopted for the collection, measurement
and analysis of data. It is the plan, structure and strategy of investigating the conceived
idea so as to obtain answers to research questions. The plan is the overall scheme or
programme of research. The internship is done at Thyagaraja co operative bank about the
“Non Performing Assets”

Meaning of NPA (Non Performing Assets):-
A loan is treated as non performing asset by a bank when that loan does not
generate any income to the bank or when it becomes difficult for the bank to
recover that loan. An amount due under any credit facility is “past due” when
it has not been paid within 30 days from the due date. Due to the
improvement in the payment and settlement systems, recovery claims, up
gradation of technology in the banking system etc, it was decided to dispense
with ‘past due’ concept, with effort from march31st 2001. Accordingly, as
from the date, a non performing asset (NPA) shall be an advance where:-
1. Interest and /or instalment of principal remain overdue for a
period of more than 180 days in respect of a term loan,
2. The account remains ‘out of order’ for a period of more than
180 days, in respect of an over draft of cash credit (OD/CC),
3. The bill remains overdue for a period of more than 180days in
case of bills purchased and discounted,
4. Interest and/or instalment of principal remains overdue for two harvest
seasons but for a period not exceeding two half years
in the case of an advance granted for agricultural purpose, and
5. Any amount to be received remains overdue for a period of more than
180 days in respect of other accounts.

12. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 12
With a view to moving towards international best practices and to ensure
greater transparency, it has been decided to adopt the ’90 days overdue’
norm for identification of NPAs, from the year ending march 31
st
2004, a
non performing asset (NPA) shall be a loan or an advance where:-
1. Interest and/or instalment of principal remain overdue for a period of
more than 90 days in respect of a term loan,
2. The account remains ‘out of order’ for a period of more than 90 days,
in respect of an over draft or cash credit (OD/CC)
3. The bill remains overdue for a period of more than 90 days in case of
bills purchased and discounted,
4. Any amount to be received remains overdue for a period of more than
90 days in respect of other accounts.
5. In case of loans granted for agriculture purpose/activity the RBI in its
circular has modified the existing norms and following revised norms
should be followed to all direct agricultural advances as below:
 A loan granted for short duration crops will be treated as NPA if the
instalment of principal or interest thereon remains unpaid ford two
crop seasons beyond the due date.
 A loan granted on long duration crops will be treated as NPA if the
instalment of principal or interest thereon remains unpaid one crop
season beyond the due date.
 “long duration” would be crops with crop season longer than one year
and crops which are not “long duration crops would be treated as short
duration crops”.
 Depending upon the duration of crops raised by an agriculturist the
above NPA norms would also be made applicable to agricultural term
loans availed of by him in respect of agricultural loans other than those
specified above.
 The study compares the NPA figures of the bank for different years,
which indicates the position of NPA of the bank over the years. Along
with it reveals how the various schemes adopted by the bank are
successful in reducing the NPA.

13. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 13
 The study compares the NPA figures of the bank for different years,
which indicates the position of NPA of the bank over the years. Along
with it reveals how the various schemes adopted by the bank are
successful in reducing the NPA.
 The identification of NPA in respect of all other agricultural loans
other than specified above would be done on the same basis on the no-
agricultural advances, which at present are the 90 days delinquency
norms

‘out of order’
An account should be treated as ‘out of order’ if the outstanding
balance remains continuously in excess of the sanctioned limit/drawing
power. In case where the outstanding balance in the principal operating
account is less than the sanctioned limit or drawing power, but there are no
credits continuously for 6 months as on the date of balance sheet or credits
are not enough to cover the interest debited during the same period, these
account should be treated as ‘out of order’.

‘overdue’
Any amount due to the bank under any credit facility is ‘overdue’ if it
is not paid on the due fixed by the bank.

Statement of the proble m:
One of the major issues in the banking business is recovery of the loans
given. If the loan is not repaid within the stipulated time period it will
become NPA. There are many factors for the raise of NPA. Internal factors
are diversion of funds, business f ailures; inefficient management etc.
External factors are recession, natural calamities, changes in government
policies etc. Perhaps willful default is the single largest contributing factor.
The increasing NPA will challenge the profitability and viability of the bank.

14. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 14
Objectives of the study:
Following are the objectives of this study:-
1. To understand the reason for NPA in banks.
2. To understand the trend of NPA in Thyagaraja co-operative
bank.
3. To study the particular sector which leads to highest NPA
in Thyagaraja co operative bank.
4. To find the remedial measures to prevent the fresh NPA and
to recover the existing NPAs.

Scope of study:
The study covers the concept of NPA in banks with special reference to
Thyagaraja co operative bank, regional office. It covers the general trend of
NPA in Thyagaraja co operative bank over the five years, the reason for the
occurrence of NPA and the remedial measures taken by the bank to reduce
and to prevent the NPA.

Research methodology:
The study is descriptive one. It indicates the trend of NPA over the years and
comparison of various sectors leading to NPA. Data collection was done
through circulars of RBI, brochures and financial statements of the
Thyagaraja co operative bank, direct interactions with the employees of the
bank and the internet.

Tools and techniques for data collection
 Primary source of data
 Secondary source of data.

Primary data
The data originally collected by an investigator or an agency for the first time for any
statistical investigation and used by them in the statistical analysis, these primary data will be

15. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 15
collected from various sources being books, dairy published by the organization, branch
offices and even small note sheet from the company.

Secondary data
The data published or unpublished which have already been collected and processed by some
agency or person and take over from there and used by any other agency for their statistical
work are termed as secondary data. These data was obtained from audited profit and loss
account, latest NPA statement, balance sheet, auditor’s report, director’s report etc.

Limitation of the study:
1. Due to time constraint the study could not be done in depth.
2. The topic NPA is very vast, and all areas of NPA is not studied
in the report.
3. Complete information was not disclose, hence data collection
was problem
4. The collection of data was limited only the RBI circulars, bank
brochures and interaction with the employees.

Causes of the NPA:
1. Loopholes in the system resulting to NPA and lack of strict
implementation of the regulation.
2. Lack of proper contact between the various branches of the bank.
3. Large number of small loans scattered over different regions.
4. Willful default among the borrowers.
5. Difficulty in recovery environment.

Review of literature
According to a study by Brown Bridge (1998), most of the bank failures were caused by
nonperforming loans. Arrears affecting more than half the loan portfolios were typical of the
failed banks. Many of the bad debts were attributable to moral hazard: the adverse incentives
on bank owners to adopt imprudent lending strategies, in particular insider lending and
lending at high interest rates to borrowers in the most risky segments of the credit markets.

16. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 16
According to Gorter and Bloem (2002) non-performing loans are mainly caused by an
inevitable number of wrong economic decisions by individuals and plain bad luck (inclement
weather, unexpected price changes for certain products, etc.). Under such circumstances, the
holders of loans can make an allowance for a normal share of non-performance in the form of
bad loan provisions, or they may spread the risk by taking out insurance.

Petya Koeva (2003), his study on the performance of Indian banks. During financial
liberalization states that new empirical evidence on the impact of financial liberalization on
the performance of Indian commercial banks. The analysis focuses on examining the
behavior and determinants of bank intermediation costs and profitability during the
liberalization period. The empirical results suggest that ownership type has a significant
effect on some performance indicators and that the observed increase in competition during
financial liberalization has been associated with lower intermediation costs and profitability
of the Indian banks.

Das and Ghosh (2003) empirically examined non-performing loans of India’s public sector.
Banks in terms of various indicators such as asset size, credit growth and macroeconomic
condition, and operating efficiency indicators. Sergio (1996) in a study of non-performing
loans in Italy found evidence that, an increase in the riskiness of loan assets is rooted in a
bank’s lending policy adducing to relatively unselective and inadequate assessment of
sectoral prospects.

Vradi et.al (2006), his study on´ measurement of efficiency of bank in India concluded that
in modern world performance of banking is more important to stable the economy .in order to
see the efficiency of Indian banks we have see the fore indicators i.e. Profitability,
productivity, assets, quality and financial management for all banks includes public sector,
private sector banks in India for the period 2000 and 1999 to 2002-2003. For measuring
efficiency of banks we have adopted development envelopment analysis and found that
public sectors banks are more efficient then other banks in India.

17. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 17
Brijesh k. Saho et.al (2007), this paper attempts to examine, the performance trends of the
Indian commercial banks for the period: 1997-98 - 2004-05. Our broad empirical findings are
Indicative in many ways. First, the increasing average annual trends in technical efficiency
for all ownership groups indicate an affirmative gesture about the effect of the reform process
on the performance of the Indian banking sector. Second, the higher cost efficiency accrual of
private banks over nationalized banks indicate that nationalized banks, though old, do not
reflect their learning experience in their cost minimizing behaviour due to x-inefficiency
factors arising from government ownership. This finding also highlights the possible stronger
disciplining role played by the capital market indicating a strong link between market for
corporate control and efficiency of private enterprise assumed by property right hypothesis.
And, finally, concerning the scale elasticity behaviour, the technology and market-based
results differ significantly supporting the empirical distinction between returns to scale and
economies of scale, often used interchangeably in the literature.

Roma Mitra et.al (2008), a stable and efficient banking sector is an essential precondition to
Increase the economic level of a country. This paper tries to model and evaluate the
efficiency of 50 Indian banks. The inefficiency can be analyzed and quantified for every
evaluated unit. The aim of this paper is to estimate and compare efficiency of the banking
sector in India. The Analysis is supposed to verify or reject the hypothesis whether the
banking sector fulfils its Intermediation function sufficiently to compete with the global
players. The results are insightful to the financial policy planner as it identifies priority areas
for different banks, which can improve the performance. This paper evaluates the
performance of banking sectors in India.

B.satish kumar (2008), in his article on an evaluation of the financial performance of Indian
Private sector banks wrote private sector banks play an important role in development of
Indian economy. After liberalization the banking industry underwent major changes. The
economic reforms totally have changed the banking sector. RBI permitted new banks to be
started in the private sector as per the recommendation of Narashiman committee. The Indian
banking industry was dominated by public sector banks. But now the situations have changed
new generation banks with used of technology and professional management has gained a
reasonable position in the banking industry.

18. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 18
M. Karunakar et.al (2008), study the important aspect of norms and guidelines for making
the whole sector vibrant and competitive. The problem of losses and lower profitability of
non- performing assets (NPA) and liability mismatch in banks and financial sector depend on
how various risks are managed in their business. Besides capital to risk Weightage assets
ratio of public sector banks, management of credit risk and measures to control the menace of
NPAs are also discussed. The lasting solution to the problem of NPAs can be achieved only
with proper credit assessment and risk management mechanism. It is better to avoid NPAs at
the market stage of credit consolidation by putting in place of rigorous and appropriate credit
appraisal mechanisms.

Nelson m. Waweru et.al (2009), study that many financial institutions that collapsed in
Kenya since 1986 failed due to non performing loans, this study investigated the causes of
nonperforming loans, the actions that bank managers have taken to mitigate that problem and
the level of success of such actions. Using a sample of 30 managers selected from the ten
largest banks the study found that national economic downturn was perceived as the most
important external factor. Customer failure to disclose vital information during the loan
application process was considered to be the main customer specific factor. The study further
found that lack of an aggressive debt collection policy was perceived as the main bank
specific factor, contributing to the non performing debt problem in kenya.













INDUSTRY PROFILE

19. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 19
About Banking Industry:
From the ancient times in India, an indigenous banking system has prevailed. The
businessmen called Shroffs, Seths, Sahukars, Mahajans, Chettis etc. had been carrying on the
business of banking since ancient times. These indigenous bankers included very small
money lenders to shroffs with huge businesses, who carried on the large and specialized
business even greater than the business of banks. The origin of western type commercial
Banking in India dates back to the 18th century.

The story of banking starts from Bank of Hindusthan established in 1770 and it was first bank
at Calcutta under European management. In 1786 General Bank of India was set up. Since
Calcutta was the most active trading port in India, mainly due to the trade of the British
Empire, it became a banking center. Three Presidency banks were set up under charters from
the British East India Company- Bank of Calcutta, Bank of Bombay and the Bank of Madras.
These worked as quasi central banks in India for many years.

The Bank of Calcutta established in 1806 immediately became Bank of Bengal. In 1921 these
3 banks merged with each other and Imperial Bank of India got birth. It is today's State Bank
of India. The name was changed after India's Independence in 1955. So State bank of India is
the oldest Bank of India. In 1839, there was a fruitless effort by Indian merchants to establish
a Bank called Union Bank. It failed within a decade. Next came Allahabad Bank which was
established in 1865 and working even today.

The oldest Public Sector Bank in India having branches all over India and serving the
customers for the last 145 years is Allahabad Bank. Allahabad bank is also known as one of
India's Oldest Joint Stock Bank. The Oldest Joint Stock bank of India was Bank of Upper
India established in 1863 and failed in 1913. The first Bank of India with Limited Liability to
be managed by Indian Board was Oudh Commercial Bank. It was established in 1881 at
Faizabad. This bank failed in 1958. The first bank purely managed by Indian was Punjab
National Bank, established in Lahore in 1895. The Punjab national Bank has not only
survived till date but also is one of the largest banks in India.
However, the first Indian commercial bank which was wholly owned and managed by
Indians was Central Bank of India which was established in 1911. So this bank is called
India's First Truly Swadeshi bank.

20. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 20

India is one of the top 10 economies globally, with vast potential for the banking sector to
grow. The last decade witnessed a tremendous upsurge in transactions through ATMs, and
Internet and mobile banking. In 2014, the country’s Rs 81 trillion (US$ 1.34 trillion) banking
industry is set for a greater change. Two new banks have already received licences from the
government. Furthermore, the Reserve Bank of India’s (RBI) new norms will provide
incentives to banks to spot potential bad loans and take corrective steps that will curb the
practices of rogue borrowers.

The Indian government’s role in expanding the banking industry has been significant.
Through the Financial Inclusion Plan (FY 10–13), banking connectivity in the country
increased more than three-fold to 211,234 villages in 2013 from 67,694 at the beginning of
the plan.

Banks are also looking at new ways to attract customers. In September, 2013, ICICI bank
leveraged the popularity of the social platform, and launched its Facebook banking service,
Pockets. The service enables customers to transfer funds and pay bills from within the
website.

Market Size
The revenue of Indian banks increased four-fold from US$ 11.8 billion to US$ 46.9 billion
during the period 2001–2010. In the same period, the profit after tax increased from US$ 1.4
billion to US$ 12 billion.
In 2012–13, Indian banks had 170 overseas branches (163 in 2011–12) while foreign banks
had 316 branches in India (309 in 2011–12).
Credit to housing sector grew at a compound annual growth rate (CAGR) of 11.1 per cent
during the period FY 2008–13. Total banking sector credit is expected to grow at a CAGR of
18.1 per cent (in terms of INR) to touch US$ 2.4 trillion by 2017.


Recent Developments
Infrastructure Development Finance Company (IDFC) and Bandhan Financial Services Pvt
Ltd have been chosen among a field of 25 banks by the RBI to set up banks. ‘In-principle’

21. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 21
approval has been given to the banks, which are both non-banking finance companies. While
Mumbai-based IDFC is categorised as an infrastructure finance company, Kolkata-based
Bandhan is a microfinance establishment.

Bandhan covers 5.5 million customers, nearly all of them women whose loans average Rs
10,000. The bank seeks to continue catering to a rural and unbanked customer base from its
current branch network. "Why go after the same person and ask him to get another account?
Why not just go after those who do not have any bank accounts," said Mr Chandra Shekhar
Ghosh, the bank’s Managing Director.

Banks and housing finance companies (HFCs) together enjoyed a 20 per cent growth in home
loans in FY 2013–14, according to Mr RV Verma, Chairman and Managing Director,
National Housing Bank. Home loans disbursed by banks and HFCs collectively grew by Rs
1.60 trillion (US$ 26.59 billion) in FY 2013–14 to reach Rs 9.60 trillion (US$ 159.58 billion)
at the end of the fiscal. “We expect the growth (in home loans) to continue. There is every
reason to believe that,” said Mr Verma.

Jammu and Kashmir (J&K) Bank is looking at opportunities to increase its presence outside
the country. The bank is likely to establish branches in London and Dubai to strengthen its
relationships with current customers who have business interests in Europe and West Asia.
“We have a number of business relationships in these countries and it makes sense for us to
have a presence there,” said Mr Mushtaq Ahmad, Chairman and Chief Executive Officer,
J&K Bank.

Indian banks operating abroad enjoyed a higher credit growth in comparison to foreign banks
operating in India, as per an RBI survey on international trade in banking services for 2012–
13. According to the survey, growth of credit extended by Indian banks’ branches operating
overseas grew by 31.7 per cent to Rs 585,570 crore (US$ 97.36 billion); credit extended by
foreign banks based in India increased 27.5 per cent to touch Rs 307,700 crore ($51.15
billion).
Strong growth in agriculture and services sectors as well as the personal loans segment has
helped push bank credit growth during the period April–November, 2013 to 7.2 per cent,
compared to 6.6 per cent during the same period of 2012, according to a report by credit

22. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 22
rating agency CARE Ratings. During the period, loans to the agri sector grew by 5.2 per cent
compared to 2.3 per cent in 2012. "Higher growth in credit to agriculture may be attributed to
the expected better kharif crop which has been announced by the Ministry of Agriculture,"
according to the report.

ICICI Bank is looking at different ways to maximise the digital opportunity for growth. The
bank is doubling the number of cities it covers with 'tablet banking' and offering its customers
services such as video conferencing, so they can talk to the money managers from the
comfort of their homes. "The idea is thinking ahead of your customer. Not just what they may
want today but what could they want tomorrow," said Mr Rajiv Sabharwal, Executive
Director, ICICI.

Bank of India (BoI) launched its card-less cash withdrawal facility in March 2014. Under this
service, a BOI customer can transfer money to anyone, using the bank’s ATMs or through
Internet banking. The sender has to provide the beneficiary’s mobile number, a sender code,
and the amount through internet banking or text message. The beneficiary, after receiving a
code from the bank can visit any BOI ATM with instant money transfer facility and withdraw
the money within a fortnight of the transfer.

Simple steps such as memorising one's PIN, lowering credit limits on cards, using virtual
cards and deactivating transactional services connected to a mobile number could bring down
bank frauds, says experts. Regular changing of the password can also save an account from
attacks. “If there is a change in the email or phone number, it should be immediately updated
with the bank," said a cyber-crime investigation specialist.

Government Initiatives
The RBI has issued extra guidelines for banks giving gold metal loans (GMLs). To safeguard
against fraud, the central bank has asked lenders to check the credit worthiness of borrowers;
collateral securities against the loan; and trade cycle of the manufacturing activity, before
sanctioning the loans. "Lack of proper monitoring mechanism and not ensuring end use of
GML has resulted in certain instances of frauds/misuse related to GML by certain
unscrupulous jewellers," stated the RBI in a notification.

23. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 23
The Cabinet Committee on Economic Affairs (CCEA) has given the green signal to a
proposal to increase foreign holding in Axis Bank from 49 per cent to 62 per cent. The move
could bring in overseas investment of nearly Rs 7,250 crore (US$ 1.20 billion) into the
country. The CCEA nod is dependent on FIIs’ holding capped at 49 per cent.

Road Ahead
India’s banking sector has the potential to become the fifth largest banking sector globally by
2020 and the third largest by 2025. The industry has witnessed discernable development, with
deposits growing at a CAGR of 21.2 per cent (in terms of INR) in the period FY 06–13; in
FY 13 total deposits stood at US$ 1,274.3 billion.

Today, banks are turning their focus to servicing clients. Banks in the country, including
those in the public sector, are emphasising on enhancing their technology infrastructure, in
order to improve customer experience and gain a competitive edge. The popularity of internet
and mobile banking is higher than ever before, with Customer Relationship Management
(CRM) and data warehousing expected to drive the next wave of technology in banks. Indian
banks are also progressively adopting an integrated approach to risk management. Most
banks already have in place the framework for asset–liability match, credit and derivatives
risk management.

Introduction of co-operative banks
In 1904 the co-operative movement was started in India with a view to provide agriculturists
with finance required for agricultural operations at low rates of interest.
Germany is the birth place of co-operative credit movement in the world. Herr f. W.
Raiffeisen and Herr Franz Schulz of Germany are the pioneers in the field of co-operative
credit. The poverty and the heavy indebtedness of peasants to moneylenders forced Herr f.
W. Raiffeisen to promote co-operative credit societies in the rule areas of Germany to free the
peasants from the clutches of the moneylenders and to promote the economic condition of the
peasants. Similarly, the poverty and the heavy indebtedness of artisans, craftsmen and
industrial workers to moneylenders forced Herr Franz Schulz to promote co-operative credit
societies in the urban areas of Germany to free the artisans and the industrial workers from
the clutches of the money lenders and to help them to stand on their own legs. These to types
of credit societies worked usefully. The useful working of those to types of co-operative

24. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 24
credit societies in Germany contribute to the emergency of co-operative societies or co-
operative credit societies or co-operative banks in other countries of the old including India.

Co-operative banks are important constituents of the Indian financial system, judging by the
rule assigned to them, the expectations they are supposed to fulfil, their number and the range
of office they operate the co-operative moment organized in the west, but the important
which such banks have assumed in India is rarely parallel anywhere else in the world.

Co-operative banking in India
India is on agricultural country. Agriculture is on important sector of Indian economy.
Agricultural like any other industry, requires adequate credit of all types, viz., short-term,
medium-term and long-term consequently the village moneylenders where the only source of
credit for Indian agriculturists in village till very recently. The chronic poverty heavy
independency to moneylenders and stagnation of rural masses attracted the attention of the
government and made the government to steps up for the creation of on institutional credit
agency for the provision of cheap and adequate credit to agriculturists in rule areas. The result
was the emergency of the co-operative banking.

The co-operative moment was started in India in 1904 with the objective of providing finance
to agriculturists for productive purpose at low rate of interest, and the by, receiving from the
clutches of the moneylenders. A large number of agricultural credit co-operative societies
where setup in villages and under the co-operative society’s act of 1904 the co-operative act
of 1912 contribute establishment of central co-operative banks and the state co-operative
banks to provide are – finance to primary credit society. This could not mobilize funds by
their own efforts. By facilitating the formation of central and state co-operative credit
moment in India the co-operative credit moment made good progress during and after the
first world war of 1914 to 1918. But during the great depression of 1929 to 1933, it requested
a serious set back. With the out break of second world war of 1939 to 1945, the co-operative
credit moment made considerable progress once again. The numbers of co-operative credit
institution has encouraged, their members and gone up and their deposits and advance also
and had increased considerably. During the post – independence era, much progress has been
made in co-operative banking to the keen interest shown by the reserve bank of India in co-
operative credit moment.

25. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 25

Meaning and definition of co-operative banks
According to Henry Warf “co-operative is an agency which is in a position to deal with the
small man on his terms accepting the security, he has without drawing on the protecting of
the rich.”

According to Devine “co-operative bank mutual society formed composed and governed by
the working proper them for encourages regular savings and granting small loans on easy
terms of interest and easy payments.”

Characteristics of co-operative banking
 Co-operative banks do all the banking business some of the well-developed
co-operative banks are scheduled banks.
 Co-operative banks accept all types of deposits including current, savings and
fixed deposits both members and non-members,
 Service and not profit main motto of co-operative banks.
 The cost of co-operative banking is relatively low because of the low cost management.
 The rate of interest charge by co-operative banks is, generally low. In fact, to enable the
co-operative banks to provide credit at low rates of interest, the central bank provides
financial assistance to co-operative banks at concessional rates (i.e., at rates lower than
the bank rates).
 Co-operative banks mainly finance agriculture and allied activities, Co-operative banks
are mainly rural oriented.





Objectives of co-operative banking
The main objectives of co-operative banking system are:
 To promote thrift among the members, and thereby, increase the supply of funds.
 To tap outside sources for the supply of funds.

26. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 26
 To promote the effective use of credit and reduce the risk in the granting of credit
through careful and continuous supervision of the operation of the borrowing members.
 To reduced the cost of management through the honorary services of members and
thereby keep the cost of credit as low as possible.
 To make the co-operative credit societies or co-operative banks credit worthy and to
enable to raise sufficient funds to finance other co-operative enterprise.

Principles of co-operative banking
Co-operative banking has certain principles of its own. The important principles of
co-operative banking are:
 Principle of co-operation and mutual help.
 Principle of service and not profit
 Principle of ‘one man one vote’ in management.
 Principle of thrift and savings.
 Principle of personalization of credit (i.e., laying emphasis
on credit-worthiness and honesty of the borrowing members).

Types of co-operative banks
Co-operative banks can be broadly classified into two types, viz.,
1. Agricultural co-operative banks
2. Non-agricultural co-operative banks

Agricultural co-operative banks covers all co-operative agencies or institutions which meet
the short-term, medium-term and long-term financial requirements of agriculture and allied
activities. Agricultural co-operative banks can be sub-divided into:
a) Short-term and medium-term agricultural credit co-operative institutions, which meet
the short- term credit requirements of the agriculturists, and
b) long-term agricultural credit co-operative institutions, which meet the long-term
credit requirements of the agriculturists.

For instance, in India, the short-term and medium-term credit institutions include the primary
agricultural credit societies or rural banks at the bottom level (i.e., at the village level), the
central co-operative banks in the middle level (i.e., at the district level) and state co-operative

27. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 27
banks at the top level (i.e., state level). The long-term credit institutions in India include the
primary land mortgage banks or land development at taluk or district and at state level.

Non agricultural co-operative banks refer to all co-operative credit institutions which
engage in finance activities other than agriculture in commercial and industrial towns and
trade center’s. They finance salaried employees, artisans and craftsmen, small traders and
small-scale and cottage industries. Co-operative urban banks, employee’s co-operative credit
societies and industrial banks fall under the category of non-agricultural co-operative banks.

Merits of co-operative banking
Co-operative banking has certain merits or benefits. The man merits of the co-operative
banking are:

I. Co-operative banks play a very significant role in rural banking. It is owing to the following
reasons.
a. Co-operative banks have a rural oriented
b. They have local feel
c. They are familiar with rural problems.
d. They have attitudinal identification with rural economy.
e. Their methods and procedures and orientation are best adapted
to the rural economy.
II. As the management of co-operative banks at the lower rung of the ladder depends on the
honorary services of the members, the cost of operation is relatively low.
III. Co-operative banking has strengthened the character of the agricultural borrowers.
IV. Co-operative banking has taught the agriculturist to borrow at the right time, in the right
amount and for right purpose, and to repay the loans on the right dates and also to save as
that they may not have to borrow at all.
V. The impact of the co-operative banking on the rural peasants is very great.
VI. With the expansion of co-operative banking in rural areas, the hold of village moneylenders
over rural masses has been considerably loosened.
VII. The expansion of co-operative banking in rural areas has force the village moneylenders to
lowers their rates of interest and lessen their malpractices.

28. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 28
VIII. The principle of “one man, one vote”, enshrine in co-operative banking provides a training
ground to rural masses to learn and practice democracy at all walks of life to acquire the
practical knowledge of managing various types of business enterprises in the interests of the
society at large.
IX. Co-operative banking is widely accepted as the only means of eradicating poverty and
raising the standard of living of the rural masses.

Limitations of co-operative banking
Co-operative banking has, no doubt, enjoys several merits. But it is not free from defects or
limitations. It suffers from the following limitations:
I. The co-operative banking structure is weak. A top-heavy structure of co-operative
banking is built on very flimsy foundation.
II. The size of co-operative banks. Particularly the size of the agricultural primary credit
societies is very small. The small size of co-operative banks has checked the growth of
growth of co-operative banking.
III. Co-operative bans are not able to mobilize adequate resources from members as well as
non-members for one reason or the other. Therefore, they have to depend upon the central
bank for re-finance facilities to a large extent.
IV. On account of limited funds at their disposal, co-operative banks are not able to grant
adequate credit to their members.
V. There is utter reliance on honorary services of members even for day-to-day management
in the case of co-operative banks, particularly in the case of co-operative banks at the
bottom level. This has resulted in inefficiency in management.
VI. Most of the co-operative banks at the bottom level, i.e. The agricultural primary credit
societies, are in the hands of influential people of the villages. This has led to
indiscriminate advancement of loans without looking into the character of repaying
capacity of the borrowers and the purpose of credit. The result is the poor recovery of
advances from the borrowers.
VII. Most of the loans given by agricultural primary credit societies are concentrated in a few
persons mostly related to each other. This has also resulted in poor recovery of advances.
VIII. The limited managerial talents available with the co-operative banks and are also
responsible for the recoveries of advances, greater incidence of bad debts loss of funds.

29. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 29
IX. Many people in rural areas have the misconception that co-operative banks are charitable
government institutions for dispensing credit. This has resulted in the poor recovery of
advances and the failure of co-operative banking system.
X. Due to the lack of honesty and integrity of the persons in charge of the day-to-day
administration, cases of defalcation and embezzlement of funds are quit common in the
case of many co-operative credit societies. This has resulted in the unsuccessful working
of many credits co-operative societies, particularly in rural areas.
The peculiar nature of the agricultural industry and the illiteracy and heavy indebtedness of
the farmers have also contributed to the inefficient working of many primary co-operative
credit societies.

Co-operative banking structure in india
India is an agricultural country. Agriculture is an important sector of Indian economy.
Agriculture like any other industry, requires adequate credit of all types, viz., short-term,
medium-term and long-term consequently the village moneylenders were the only source of
credit for indian agriculturists in village till very recently. The chronic poverty, heavy
indebtedness to moneylenders and stagnation of rural masses attracted the attention of the
government to take steps for the creation of an institutional credit agency for the provision of
cheap and adequate credit to agriculturists in rural areas. The result was the emergence of the
co-operative banking.

The co-operative movement was started in India in 1904 with the objective of providing
finance to agriculturists for productive purpose at low rate of interests, and they by, receiving
from the clutches of the money lenders. A large number of agricultural credit co-operative
societies were setup in the villages an under the co-operative society’s act of 1904. The co-
operative society act of 1912 contributed to the establishment of central co-operative banks
and the state co-operative banks to provide re-finance to primary credit societies. This could
not mobilize funds by their own efforts. By facilitating the formation of central and state co-
operative credit movement in India. The co-operative credit movement made good progress
during and after the first world war of 1914 to 1918. But during the great depression of 1929
to 1933, it received a serious set back. With the outbreak of second world war of 1939 to
1945, the co-operative credit movement made considerable progress once again. The number
had gone up and their deposits and advances also had increase considerably. During the post

30. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 30
independence era, much progress has been made in co-operative banking thanks to the keen
interests shown by the reserve bank of India n co-operative credit movement.

At the top of the co-operative structure is the state co-operative or Thyagaraja co operative
bank. It controls the working of he district central co-operative banks. It acts a link between
reserve bank and the district central co-operative banks. It directs the co-operative movement
in certain state individuals are also allowed to become its members.

Its capital comes from share capital, public deposits and loans and advances form state and
the reserve bank of India. It also performs banking functions. Next in the ladder are the
district central co-operative banks. It is under the control of state co-operative bank. It has its
resources from the share capital, public deposits and loans and advances from Thyagaraja co
operative bank.

At the bottom of the structures are the rural co-operative societies. In the rural areas are the
primary co-operatives, which deal with the farmers, getting their resources from share capital,
public deposit but a major portion of its resources came from the district central co-operative
banks and state co-operative banks. Their main aim is to lend for agriculture.

In the urban areas both district and state co-operatives control the co-operatives. In some
states only Thyagaraja co operative bank or state co-operatives controls the urban co-
operatives. Besides the three tier structure at the state level, there are other credit agencies
specially established. These are:
1. National bank for agriculture and rural development (NABARD).
2. The rural electrification co-operation.
3. The national co-operative development co-operation.



Banking Structure in India

31. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 31



COMPANY PROFILE
History of Thyagaraja Co-operative Bank
Way back in 1963 financial institutions were not extending helping hand to lower middle
class and socially backward in case of financial emergencies.

32. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 32
Dr. M.V.Krishna Rao and few like minded persons visualized setting of co-operative bank to
tackle the deficiency.
Accordingly, sree Thyagaraja co-operative bank limited was registered as a bank on
13.03.1963 with initial membership of 309 and paid-up share capital of rs.18, 45,000 and it is
one of leading co-operative bank in Karnataka. It is a light for the million people and a source
for the needy.
The new born baby thus started its eventful long journey towards matured banking. We are
today bank with 8 branches with paid-up share capital of rs.7.21 crores and membership of
26,217.
Thyagaraja co-operative bank limited was first situate in n. R. Colony Basavanagudi
Bangalore-560004.
The Thyagaraja co-operative bank is a pioneer in agricultural finance and allied activities.
Over the past 48 years since its inception it has played a crucial role in the development of
agriculture credit structure in the state of Karnataka.
The principle functions of the bank are to finance term loans for seasonal agricultural
operations and for marketing of agricultural products. Advancing medium term loans for
development of agricultural infrastructure such as lift irrigation, dairy, poultry, plantation,
etc., and it also lend loan to their members to buy or to build their own business. And they
also lend loan to their members to buy or to build their own house, and to start small scale
industries.
Thyagaraja co-operative bank is serving through its network of 9 branches in Bangalore city
and offers all type of service to its customers. The growth in deposits as well as in loans and
advances shows appreciable raise from year to year. It has now built up a strong capital base
and is ranked as one of the premier state co-operative banks in the country.
Thyagaraja co-operative bank is known for its performance and have been graded-i by
reserve bank of India and grade-‘a’ by statutory auditors without break. That speaks, of our
stability and consistency. And it is poised for greater growth and to scale new heights.

Development of Thyagarja Co-operative Bank
The Thyagaraja co-operative bank is developing day-by-day. During the past 48 years the ban
has achieved so many things some of the achievements of the bank are:
 The Thyagaraja co-operative bank has its own funds of rs.63.51 crores.
 The bank has its 12 branches in Bangalore city.

33. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 33
 during 2012-2013 the bank has earned a profit of 4,80,28,112-56rs.
 the bank has increased its profit by 81.40 percentages.
 in 2011-2012 the bank has distributed 15% of its profit to their members.
 the Thyagaraja co-operative bank has graded-1 by reserve bank of india.
 the bank has getting grade-‘a’ from auditors continuously without break.

Aims of Thyagaraja co-operative bank
The following are the aims of Thyagaraja co-operative bank:
 To lend cash loans and advances to the members by accepting the deposits,
grants and donation as per the rules made by the board members.
 To conduct the normal banking business.
 To provide the safety locker facilities to the customer on the hire system.
 To grant the loan after the pledge of securities.
 To provide more special facility for the senior citizens.
 To open new branches in all over Karnataka as per prior permission of RBI.
 To provide ATM facility for the members of the bank in main branch.
 To start new schemes in deposits and loans.
 To give much more training for there employees.
 To provide more loan facilities to there members.

The main operation of the bank
 Cash receipts/deposits
 Cash withdrawal
 Sanctions and disbursement of loans
 Locker facilities
 Updating and issuing of new pass book and cheques books
 Issuing demand draft
 RTGS facilities

Important service rendered by bank
1. Subsidiary services to customers
 Locker facility

34. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 34
 DD/Pay order
 Cheque discount
 Safe keeping of valuables
 Well furnished branches with relaxed ambience.
 Cheque drop facility
 Encashment of cheques at door for sicky and bed-ridden
 RTGS facility through Thyagaraja co operative bank
 ECS facility
 Death claim settlement standing instruction
 Quick realization of outstation cheques


2. Social services
 Medical aid up to rs.10000-00 for members
 free medical checkup for members at our branch situated at no. 14,
1st main, Basavanagudi, n.r.Colony, Bangalore-4 on every Sunday-10am
 organization of free medical camp and blood donation camps.
 Separate service counter for senior citizens.
 Prathibha Purskara for members children (for merited students as per bank
Specificaiton) at general body
 Demand draft without commission for members children for higher education.







Deposits
The following accounts are providing by the bank to customers:
 Savings bank account
 Fixed bank account

35. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 35
 Current account
 Recurring deposit account
 Loans granted
 Based on fixed deposits
 Consumer durable loans
 Business/profession loans
 Personal loans
 Vehicle loans
 Gold loans
 Guarantee loans
 Base on IVP/NSC/LC bonds
 Education loan
 Loans against deposits housing loan

Vision Of Thyagaraja Co Operative Bank Limited
as a state co-operative bank Thyagaraja co operative bank shall be a dominant financial
institution in the state, leading the state to economic prosperity.
* Thyagaraja co operative bank shall be the model of an effective, protective dynamic and
financially sound organization responsive to state goals and aspirations.
* Thyagaraja co operative bank shall maintain highly trained and motivated professionals
committed to the highest standards of ethics and excellence.
* Thyagaraja co operative bank shall contribute to building progressive and good standard
of co-operative societies in the services of farmers and rural mass.
* Thyagaraja co operative bank shall contribute to building progressive and good standard
of co-operative societies in the services of formers and rural mass.



Mission of Thyagaraja Co Operative Bank Limited.
ensuing the best quality of life and success of farmers, primary agricultural co-operative
societies, district central co-operative banks, clients and employees.
 For farmers:

36. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 36
Thyagaraja co operative bank shall continue to improve their socio-economic status
through timely financial agricultural activities support for agricultural activities.

 For clients:
Thyagaraja co operative bank shall deliver innovative and advance products and
services in protective and effective manner to meet their local demands.

 For pacs and dcc banks:
Thyagaraja co operative bank shall ensure mutual co-operation and complement
action to achieve optimum gains in an environment of trust and confidence.

 For our employees:
Thyagaraja co operative bank shall ensure a work atmosphere of mutual respect and
teamwork within a system of recognition and regards. Bank shall continue to provide
appropriate training and value enhancement to ensure the highest degree of
professionalism and integrity. Thyagaraja co operative bank shall hold our organization
composed of highly competent people driven by superior technology.

 For the people of Karnataka
Thyagaraja co operative bank commits our unwavering loyalty and dedicated service
in the pursuit of state interest.

Rules and regulations provided by the bank for the benefit of customer
 Avail nomination facilities to account holders including saving bank account holders.
 Bank will exchange multiplied currency notes as per RBI guidelines.
 Bank will give standing instruction for the payment of bills, interest and insurance etc.
 Bank provides require and important guidelines to the locker holders.

Awards achieved
In 2013 best bank award
Ownership pattern

37. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 37
Sl No. Name Designations
1 SUNDRE GOWDA Persident
2 V.N.VEERANAGAPPA Vice persident
3 MOHAN N HARDEKAR General manager
4 S.V.SHIVARAM Director
5 P.V.SHASHI KUMAR Director
6 M.N.KAMBE GOWDA Director
7 P.K.GIRISH Director
8 M.S.NAGARAHNA Director
9 T.R.MURTHY Director
10 D.PRASANNA KUMAR Director
11 SATYANARAYANGUPTA Director
12 C.CHENNAIAH Director
13 S.N.UMASHANKAR Director
14 A.S.RAMESH Director

Corporate office
No 5, 9
th
cross, n r colony
Bangalore – 560019
Ph: 2298155/56/57
Fax: [phone]
Competitors information
 National co-operative bank
 Bangalore city co-operative bank

38. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 38
 Vishveshwaraya co-operative bank
 Bharath co-operative bank
 Sri Subramuneshwara co-operative bank
 Amanat co-operative bank
 Shamrao vital co-operative bank
 Raddi co-operative bank
 Janata seva co-operative bank
 Tumkur grain merchant co-operative bank

Future growth and prospects
 The bank wants to increase its operation by setting up its branches all over the
Karnataka.
 They are planning to enter core banking
 Mobilization of savings, deposits, loans etc,
 Installation of ATM facility in all the areas
 Introduction of more added services such as home banking, net working services,
 e- banking and e- sampling
 Foreign exchange business.
 To provide the safety locker facilities to the customer on the hire system.
 To grant the loan after the pledge of securities.
 To make branches to core banking facilities and help to customers.
 To acquire own building for all the branches.
 To provide training for employees to acquire more knowledge about the bank work
 To provide more loan facility to there members.
 To provide more and special facility for the senior citizens.



ORGANIZATION STRUCTURE:

39. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 39































SWOT ANALYSIS

40. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 40
Identification of the threats and opportunities in the environment and the
strengths and weakness of the firm is the cornerstone of business policy
formulation. It is these factors which determine the course of action to ensure
the survival of the firm.

The environment might present many opportunities but a company might
not have strength to exploit all the opportunities. Similarly, sometimes a firm
will not have the strength to meet the environmental threats. If a company,
thus, finds that it will not have the competence to survive in a particular line
of business, it will be prudent to give it up and concentrate on such business
for which the firm is most competent. The economic liberalization in India in
1991 drastically changed the business environment. Many companies have
exited several of their business and have been concentrating on their core
business

STRENGTHS
 The factors that have contributed to the success of the bank is its
workforce because the bank has highly educated workforce, young and
energetic employees within the age group of 25-45this helps the junior
employees to learn from the experience of the senior employees
 The bank is professionally managed. The bank is one of the few banks in
India which gives importance to technology in order to serve it customers
better it is one of the few banks which uses ‘Finacle’ software’s.
 The banks strengths lie in management capabilities, focused strategy,
speedy decision making.
 There has been expansion of branches and ATM services by the bank
during the last few years.
 The banks provides good infrastructural facility to its to its staff and help
them to concentrate more on their job,
 The bank has introduced various schemes
WEAKNESSES
 The weaknesses of the bank includes that the bank has majority of the
branches in the southern region.

41. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 41
 Non-verification of reserve bank of India defaulters list while processing
credit proposals.
 Delay in follow up on various accounts.
 Delay in crystallization of export bills discounted.
 Sanction terms and conditions were not complied with in many cases
revealing inadequate/ineffective mechanism to monitor and follow-up of
such cases.
 The stocks hypothecated to the bank were not adequately insured/not
insured in some cases.
 There were instances of frequent returns of cheques and the branches had
not taken up the matter with the borrowers concerned to maintain financial
discipline.

OPPORTUNITIES
 Economic prosperity and the consequent increase in purchasing power have given a fillip
to a customer base.
 To capture more market in home loans, small scale sectors and medium enterprises.

THREATS-
 Cut throat competition from all nationalized banks, private bank and foreign banks.
 Unforeseen economic conditions prevailing in the country.
 Frequently change in rules and guidelines by the reserve bank of India and government.
 As the bank majority business comes from the south any effect to the
economy here would have an adverse effect on the performance of the
bank.
 Since it’s a smaller bank when compared to heavy weights like SBI and
corporation bank the bank is always under treat of being taken over by
other banks.
 The emergence of rapidly changing pace of the technology that is being
adopted which makes it very difficult to maintain the pace.
FINANCIAL PERFORMAN
Ratio of financial performance 2012-13 & 2011-12
Current ratio:

42. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 42
2012-13



2012-13
121249492.6/ 22511892.76
=5.38%

2011-12
121249492.6/10668707.18
=11.36%
ratio of current asset to fixed assets:




2012-13
121249492.6/46808786.14
=2.59%
2011-12
121249492.6/46808786.14
=2.59%
Returns on shareholder’s equity



2012-13
48028112.56/107143450*100
=44.82%


2011-12
=41021706.26/95185650*100
Current Ration = Current Assets
Current Liabilities
Ratio of Current Asset to Fixed Assets = Current Assets
Fixed assets
Returns on Share Holders Equity = Net Profit after Taxes x 100
Share holder’s Equity

43. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 43
=43.09%
Total asset turnover ratio:



2012-13
=168058278.76/3537510386.47
=0.047%


2011-12
=168058278.76/3537510386.47
=0.047%
. Return on total resources:




2011-12
=41021706.26/3537510386.47*100
=1.15%
2012-13
=48028112.56/3537510386.47*10
=1.35%







Theoretical Background of the Study
Total Asset Turnover Ratio = Net Assets
Total Assets
Return on Total Resources = Net Profit after Taxes x 100
Total Assets

44. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 44
The theoretical study provides the background and the tools for the NPA. It explains the
method of analysis, advantages and disadvantages, scope and limitations of the various tools
used to analyze the company’s financial position.

The focus of the financial analysis is on key figures in the financial statements and the
significant relationships that exist between them. The analysis of financial statements is a
process of evaluating relationship between component parts of financial statements to obtain
a better understanding of the company’s position and performance. The first task of the
financial analyst is to select the information relevant to the decision under consideration from
the total information contained in the financial statement. The second step involved in
financial analysis is to arrange the information in a way to highlight significant relationships.
The final step is interpretation and drawings of inferences and conclusions. In brief, financial
analysis is the process of selection, relation and evaluation.

The present data is devoted to an in depth analysis of financial statements use for decision-
making. The present data is mainly focused on NPA as the most widely used technique of
financial statement analysis, importance of NPA and limitations of NPA.
In today banks have become a part and parcel of our life. Now banks offer access even a
common and their activities extend to areas which are untouched. Apart from their
traditional business oriented functions they have now come out to fulfil national
responsibilities. They accelerate the economic growth of a country and steer the wheels of
the economy towards its goal of “self reliance in all fields”.

NPA (Non-Performing Assets)
Definition
a loan or lease that is not meeting its stated principal and interest payments. Banks usually
classify as nonperforming assets any commercial loans which are more than 90 days overdue
and any consumer loans which are more than 180 days overdue. More generally, an asset
which is not producing income.

In India, an asset is classified as a non-performing asset (NPA) if interest or installments of
principal due remain unpaid for more than 180 days. However, with effect from march 2004,
default status would be given to a borrower if dues are not paid for 90 days. If any advance or

45. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 45
credit facilities granted by a bank to a borrower become non-performing, then the bank will
have to treat all the advances/credit facilities granted to that borrower as non-performing
without having any regard to the fact that there may still exist certain advances/credit
facilities having performing status.

What is a NPA (non performing asset)
Action for enforcement of security interest can be initiated only if the secured asset is
classified as non performing asset.
Non performing asset means an asset or account of borrower, which has been classified by a
bank or financial institution as sub-standard, doubtful or loss asset, in accordance with the
directions or guidelines relating to asset classification issued by RBI.
An amount due under any credit facility is treated as "past due" when it has not been paid
within 30 days from the due date. Due to the improvement in the payment and settlement
systems, recovery climate, up gradation of technology in the banking system, etc., it was
decided to dispense with 'past due' concept. Accordingly, a non performing asset (NPA)
shell be an advance where
i. Interest and /or installment of principal remain overdue for a period of more than 180
days in respect of a term loan,
ii. The account remains 'out of order' for a period of more than 180 days, in respect of an
overdraft/ cash credit(OD/CC),
iii. The bill remains overdue for a period of more than 180 days in the case of bills
purchased and discounted,
iv. Interest and/ or installment of principal remains overdue for two harvest seasons but
for a period not exceeding two half years in the case of an advance granted for
agricultural purpose, and
v. Any amount to be received remains overdue for a period of more than 180 days in
respect of other accounts.
With a view to moving towards international best practices and to ensure greater
transparency, it has been decided to adopt the '90 days overdue' norm for identification of
NPAs, from the year ending march 31, 2008.
The list of NPAs from 2004 in the sector wise:

46. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 46


The above table depicts the total amount of NPAs at nationalized banks in India as on
31
st
march from 2004 to 2013. And also the above table depicts the composition of NPAs of
different sector at nationalized banks. During 2004 non-priority sector share was 51.14%,
priority sector share was 47.74% and public sector was 1.11% in NPAs of nationalized banks.
During 2005 priority sector share was 51.17%, non-priority sector share was 47.94% and
public sector share was 0.88%. During 2006 priority sector, non priority sector and public
sector share in NPAs of nationalized banks was 53.66%, 43.48% and 2.87% respectively. In
the year 2007 priority sector share was 61.28%, non-priority sector share was 37.55% and
public sector share was 1.17%. During 2008, priority sector share was 67.21%, non-priority
sector 31.96% and public sector share was 0.83%. In the year 2009 priority sector, non-
priority sector and public sector share was 60.10%, 38.76% and 1.13% respectively in the
NPAs. In the year 2010 priority sector share was 56.13%, non-priority sector share was 43.08
and public sector share was 0.97% in NPAs, during year 2011 priority sector, non-priority
sector and public sector share was 59.90%, 39.47% and 0.64% respectively. In the year 2012
priority sector share was 48.34%, non-priority sector share was 51.37% and public sector
share was 0.29%. And in the year 2013 priority sector was 42.21%, non-priority sector share
was 57.71% and public sector share was 0.08% in the amount of NPAs of nationalized banks
in India.
Out of order

47. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 47
An account should be treated as 'out of order' if the outstanding balance remains continuously
in excess of the sanctioned limit/ drawing power. In case where the outstanding balance in the
principal operating account is less than the sanctioned limit/ drawing power, but there are no
credits continuously for six months as on the date of balance sheet or credits are not enough
to cover the interest debited during the same period, these account should be treated as 'out of
order'.

Overdue
any amount due to the bank under any credit facility is 'overdue' if it is not paid on the due
date fixed by the bank.

Difficulties with the non-performing assets:
1. Owners do not receive a market return on their capital. In the worst case, if the bank
fails, owners lose their assets. In modern times, this may affect a broad pool of
shareholders.
2. Depositors do not receive a market return on savings. In the worst case if the bank fails,
depositors lose their assets or uninsured balance. Banks also redistribute losses to other
borrowers by charging higher interest rates. Lower deposit rates and higher lending rates
repress savings and financial markets, which hampers economic growth.
3. Non-performing loans epitomize bad investment. They misallocate credit from good
projects, which do not receive funding, to failed projects. Bad investment ends up in
misallocation of capital and, by extension, labor and natural resources. The economy
performs below its production potential.
4. Non-performing loans may spill over the banking system and contract the money stock,
which may lead to economic contraction. This spillover effect can channelize through
illiquidity or bank insolvency; (a) when many borrowers fail to pay interest, banks may
experience liquidity shortages. These shortages can jam payments across the country, (b)
illiquidity constraints bank in paying depositors e.g. cashing their paychecks. Banking
panic follows. A run on banks by depositors as part of the national money stock become
inoperative. The money stock contracts and economic contraction follows (c)
undercapitalized banks exceeds the bank’s capital base.
Lending by banks has been highly politicized. It is common knowledge that loans are given
to various industrial houses not on commercial considerations and viability of project but on

48. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 48
political considerations; some politician would ask the bank to extend the loan to a particular
corporate and the bank would oblige. In normal circumstances banks, before extending any
loan, would make a thorough study of the actual need of the party concerned, the prospects of
the business in which it is engaged, its track record, the quality of management and so on.
Since this is not looked into, many of the loans become NPAs.
The loans for the weaker sections of the society and the waiving of the loans to farmers are
another dimension of the politicization of bank lending.

Most of the depositor’s money has been frittered away by the banks at the instance of
politicians, while the same depositors are being made to pay through taxes to cover the losses
of the bank.

The effects of NPA are:-
1. They decrease profitability.
2. They reduce capital assets and lending limits.
3. They increase loan loss reserves.
4. They bring unwanted attention from government regulators.

an analysis of factors contributing to NPAs
An analysis of the contributory factors resulting in the emergence of NPAs on a large scale
amongst commercial banks and financial institutions would lead to the following
conceptualization:

1 PSBs performed creditably in respect of all parameters set for them. However, in the
early 1990s, it emerged that PSBs were suffering from acute capital inadequacy and
many of them had negative profitability. This is because the parameters set for their
functioning were deficient and they did not project the paramount need for these
corporate goals. Incorrect goal perception and identification led them to the wrong
destination.

2 The pre-reform era witnessed directed banking for PSBs which functioned under the
overall control and direction of the finance ministry, which along with the reserve bank
of India (RBI), decided/directed all aspects of the working of the banks, leaving little

49. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 49
freedom to price their products in competition with each other, cater their products to
segments of their choice, or invest their funds in their best interest as they determined.

3 Since the 1970s, the SCBs of India functioned totally as captive capsule units cut off
from international banking and unable to participate in the structural transformations, the
sweeping changes, and the new types of lending products emerging in global banking
institutions. Their personnel lacked needed training and knowledge resources required to
compete with international players.

4 Major policy decisions were taken externally by the finance ministry/RBI. The
environment of receiving decisions from a political background as distinguished from a
professional outfit prevented the best talents coming to occupy key positions.

5 Audit and control functions remained under the control of executive officers, which were
not independent and were thus unable to correct the effect of serious flaws in policies
and directions of their superiors.

6 The quantum of credit extended by the psbs increased by about 160 times in the three
decades after nationalization (from around 3000 crore in 1970 to 475 113 crore on 31
march 2000). The banks were not sufficiently developed in terms of skills and expertise
to regulate such growth and manage the diverse risks that emerged in the process.

7 The need for organizing an effective mechanism to gather and disseminate credit
information amongst the commercial banks was never felt or implemented. The archaic
laws of secrecy of customer information prevented banks from publishing names of
defaulters for common knowledge of the other banks in the system.

8 Effective recovery from defaulting and overdue borrowers was hampered on account of a
sizeable overhang component arising from infirmities in the existing process of debt
recovery, inadequate legal provisions on foreclosure and bankruptcy and difficulties in
the execution of court decrees. Legal remedies were beset with too many formalities and
were very time-consuming.

50. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 50
9 Effective corporate management was an alien concept. In respect of PSBs, the boards
were ineffective and the only/main shareholder was the government of India. The
government exercised multiple roles and concerns, and the instinct to act as a watchful
shareholder and increase shareholders value of banks and financial institutions was never
felt or experienced.

10 Credit management on the part of the lenders to the borrowers to secure their genuine
and bonafide interests was not based on pragmatically calculated anticipated cash flows
of the borrower’s concern, while recovery of installments of term loans was not out of
profits and surplus generated but through recourse to the corpus of working capital of the
borrowing concerns.

11 Functional inefficiency was also caused due to overstaffing, manual processing of
bloated operations and a failure to computerize the banks in India, when elsewhere
throughout the world the system switched over to computerization of operations.

Impacts of NPAs on the Working of Cooperative Banks
NPAs affected the profitability, liquidity and competitive functioning of public and private
sector banks, and finally the psychology of the bankers in respect of their disposition towards
credit delivery and credit expansion.

Impact on profitability
Cooperative banks incurred a total amount of Rs. 20895.27 lakhs towards provisioning NPAs
at the end of year 2008. The enormous provisioning of NPAs together with the holding cost
of such non-productive assets over the years has acted as a severe drain on the profitability of
the PSBs. Equity issues of nationalized banks that have already tapped the market are now
quoted at a discount in the secondary market. This has alternatively forced PSBs to borrow
heavily from the debt market to build tier ii capital to meet capital adequacy norms, thus
putting severe pressure on their profit margins. It is worthwhile to compare the aggregate
figures of the 19 nationalized banks as published by RBI in its report on trends and progress
of banking in India (see table1.7).

A. Impact on the outlook of bankers towards credit delivery

51. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 51
The psychology of the banks today is to insulate themselves with zero percent risk and turn
lukewarm to fresh credit. This has adversely affected credit growth compared to growth of
deposits, resulting in a low c/d ratio of around 50% to 54% for the industry. It is evident that
the existence of collateral security may at best convert the credit extended to productive
sectors into an investment against real estate, but will not prevent the account turning into
NPAs. Furthermore, blocked assets and real estate represent the most illiquid security and
NPAs, in such cases, have the tendency to persist for a long duration. Nationalized banks
have reached the dead end of the tunnel and their future prosperity depends on an urgent
solution of this lingering threat.

B. Excessive focus on credit risk management
The most important business implication of NPAs is that they lead to credit risk management
assuming priority over other aspects of the bank's functioning. The bank's whole machinery is
thus pre-occupied with recovery procedures rather than on expanding business. A bank would
be forced to incur carrying costs on non-income yielding assets. Other consequences would
be a reduction in interest income, high levels of provisioning, stress on profitability and
capital adequacy, a gradual decline in the ability to meet steady increases in costs, increased
pressure on net interest margins, thereby reducing competitiveness, a steady erosion of capital
resources and increased difficulty in augmenting capital resources.

The less appreciated implications are reputational risks arising out of greater disclosures on
quantum and movement of NPAs, provisions, etc. The non-quantifiable implications can be
psychological, like risk aversion, lower morale and disinclination to take decisions at all
levels of staff in the bank.

c. High cost of funds due to NPAs
Quite often genuine borrowers face difficulties in raising funds from banks due to mounting
NPAs. Either the bank is reluctant to provide the requisite funds to genuine borrowers or, if
the funds are provided, they come at a very high cost to compensate the lender’s losses due to
NPAs. Therefore, corporations often prefer to raise funds through commercial paper where
the interest rate on working capital charged by banks is higher.

D. Impact of banks scrip’s on stock exchanges

52. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 52
The RBI has included stock market behavior of bank scrip’s in its annual review of the
banking sector. As per a RBI report, despite the various reforms being carried out in Indian
stock exchanges, much bank scrip remains illiquid and thinly traded. In fact, of 25 banks
traded on the national stock exchange (NSE), the share of the top five banks in turnover and
capitalization constituted 96% and 83% respectively during 2007-2008

E. Excess liquidity-lending-default
The banks in India are faced with the problem of increasing liquidity in the system. Further,
RBI is increasing the liquidity in the system through various rate cuts. Banks can get rid of
their excess liquidity by increasing lending, but often shy away from such an option due to
the high risk of default. However, almost all of the banks are facing the problem of bad loans,
non-performing assets, thinning margins, etc. As a result of which, they are reluctant to grant
loans to corporations. As such, when the RBI announces a rate cut, the news is no longer
warmly greeted by bankers.

F. The importance of credit ratings in assessing the risk of default for lenders
Banks rely on credit rating agencies to measure credit risk and assign a probability of default.
However, credit rating is not foolproof. Besides, there may be conflicts of interest, which a
credit rating agency may not be able to resolve in the interest of investors and lenders. Stock
prices are an important, but not the sole indicator of the credit risk involved. Stock prices are
much more forward-looking in assessing the creditworthiness of a business enterprise.

G. Usage of financial statements in assessing the risk of default for lenders
For banks and financial institutions, both the balance sheet and income statement have a key
role to play by providing valuable information on a borrower’s viability. However, the
approach of scrutinizing financial statements is a backward looking approach. This is because
the focus of accounting is on past performance and current positions. The key accounting
ratios generally used for the purpose of ascertaining the creditworthiness of a business entity
is the debt-equity ratio and interest coverage ratio. Highly rated companies generally have
low leverage. This is because high leverage is followed by high fixed interest charges, non-
payment of which results in default.

Current Status Of NPAs And Indian Banks: A Statistical Introspection

53. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 53
Indian banking in 2002 represents a change from where it was in the preceding decade. There
has been a decade of professional banking moving towards global standards. Banks, in
general, performed extremely well in 2001-2002 and onwards.

In 1992-1993, the profitability of the PSBs as a group turned negative with as many as twelve
nationalized banks reporting net losses. By march 1996, the outer time limit prescribed for
attaining capital adequacy of 8%, eight public sector banks were still short of the prescribed
limit. The public sector banks which suffered losses of rs.3 293 crore in 1992-1993 and rs. 4
349 crore in 1993-1994, i.e. In the initial years of introduction of prudential norms, ended the
year 1997-1998 with a net profit of rs.5 027 crore. Net NPAs of public sector banks formed
8.2% of the net advances and 3.3% of the total assets as at the end of march 1998.
Corresponding figures as at 31 march 2002 are 5.82% and 2.42%. PSBs recorded an
aggregate net profit of rs.8 301 crore in 2001-2002.

Measures Taken To Deal With NPAs
 Dismantling of controls and deregulation of working of commercial banks,
permitting entry of new private sector banks and permission for foreign banks to open
more branches. This had the effect of opening Indian banking to global standards by
making them function efficiently in a competitive environment. This was the initial step
to create a structural framework for the PSBs to enable them to adjust to the new
environment and turn into dynamic and self-reliant operating units.
 The process of deregulation freed the banks from the control of the finance ministry
and RBI. The RBI, hereafter, acts as a regulator. In the year 1994, RBI further fine-tuned
the process by constituting a separate board of financial supervision (BFS) with the
objective of segregating the supervisory role from the regulatory functions of RBI. Banks
now operate independently in a competitive financial market, but have to comply with
prudential norms and safeguards essential for their wellbeing.

 RBI made prudential norms, as conveyed by the Basel accord of 1988, applicable to
Indian banks. These included standards relating to capital adequacy, income recognition,
asset classification and provisioning for non-performing assets. This had the effect of
providing much-needed transparency about the state of affairs of each bank and enabled
instant corrective measures to be executed.

54. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 54
 Banks were permitted to seek infusions of fresh equity from the public with the
government retaining a 51% share of equity capital. A number of PSBs entered the
market and raised tier i and tier ii capital accordingly. This has created a new class of
stakeholder (albeit shareholders) vitally interested in the wellbeing of the banks and
qualified/empowered to question the board of directors at the appropriate forum.
 Governance: RBI emphasized the paramount importance of accepting norms of good
corporate governance by banks. While the securities exchange board of India (SEBI) has
introduced a general set of norms applicable to all companies including banking
companies, RBI has further covered the special needs of banking companies by bringing
out an appropriate set of standards.
 The credit information bureau (India) ltd.: in order to expedite credit and investment
decisions by banks and financial institutions, and curb the accretion of fresh NPAs, the
credit information bureau (India) ltd., (CIBIL) was set up by the state bank of India in
association with HDFC in august 2000. CIBIL was to be technology driven to ensure
speedy processing, periodic updating and availability of error-free data at all times in the
system. As a first step towards activating the CIBIL, it was decided to initiate the process
of collection and dissemination of some relevant information within the existing legal
framework. The RBI accordingly decided to constitute a group drawing representation
from CIBIL, the Indian banks' association (IBA), select banks and FIs to examine the
possibility of the CIBIL performing the role of collecting and disseminating information
on the list of suit-filed accounts and the list of defaulters, including willful defaulters,
which is presently handled by the reserve bank. The group is also expected to examine
other aspects of information collection and dissemination, such as the extent, periodicity
and coverage, and the feasibility of supplying information on-line to members in the
future.
 Norms of lenders' liability: RBI has come out with broad guidelines for framing the fair
practices code with regard to lenders' liability to be followed by commercial banks and
financial institutions, emphasizing transparency and proper assessment of borrowers'
credit requirements. RBI has issued a draft of the model code and has advised the
individual banks to adopt model guidelines for framing their respective fair practices
codes with the approval of their boards. This is a balancing measure. It imposes a self-
discipline on the part of the banks, which will only indirectly prevent accounts turning
into NPAs on account of the bank's own failures or wrong actions.

55. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 55
 Risk assessment and risk management: since the year 1998, the RBI has been making
serious efforts towards evolving a suitable and comprehensive model for risk-
management by the banks and to integrate this new discipline in the working systems of
banks. The RBI has identified risk-prone areas in asset-liability management, credit
management, changes in market conditions and counter-party and country risks and has
evolved suitable models for managing all such risks. RBI has also evolved a system of
risk-based supervision of banks. It also advised banks on a parallel scheme for carrying
out internal audit based on risk perception.
 E-banking and VRS: the influence of these areas of banking reforms may not appear
directly relevant to a reduction of NPAs. However, computerization provides for data-
accuracy and operational efficiency and results in a better management information
service (MIS). VRS rationalizes the work force, which in turn results in better
productivity and operational efficiency.
 RBI has also cautioned banks on the use of gains from the sale of investments: it
has advised banks to follow a more prudent policy for utilizing the gains realized on sales
of securities arising from a decline in interest rates and also for building up adequate
reserves to guard against any possible reversal of the interest rate environment due to
unexpected developments. Accordingly, banks are required to build an investment
fluctuation reserve (IFR) of a minimum of 5% of all investments in the “held for trading”
and “available for sale” categories within five years. As on 31march 2002, the IFR of all
the banks put together stood at rs. 3 223 crore or 0.71% of the total investment of Rs. 4
540 000 crore. Of the total investments, the state bank of India group alone accounted for
rs. 1 850 587 crore against which it has set aside Rs. 1 228 crore in ifr, or a coverage of
0.66%.
 RBI guidelines on fair practices code for lenders are applicable to SCBs/AIFIs
(excluding RRBs and labs): according to the fair practices code, which is at the core of
lender liability, the lenders must treat their borrowers fairly, and when they do not, they
can be subject to litigation by the borrower for a variety of reasons, inter alia, breach of
contract, breach of fiduciary duty, fraud and misrepresentation, and negligent loan
processing and administration.
 Compromise settlement schemes: banks are free to design and implement their own
policies for recovery and write-off incorporating compromise and negotiated settlements
with the approval of their boards, particularly for old and unresolved cases falling under

56. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 56
the NPA category. The policy framework suggested by RBI provides for setting up of
independent settlement advisory committees headed by a retired judge of the high court to
scrutinize and recommend compromise proposals. Specific guidelines were issued in may
1999 to PSBs for one time non-discretionary and non-discriminatory settlement (OTS) of
NPAs of the small enterprise sector. The scheme was operative up to September 30, 2000.
(public sector banks recovered Rs. 668 crore through compromise settlement under this
scheme). Guidelines were modified in July 2000 for recovery of the stock of NPAs of Rs.
5 crore and less, as on 31 march 1997. (the above guidelines which were valid up to 30
June 2001, helped the public sector banks to recover Rs. 2 600 crore by September 2001).
An OTS scheme covering advances of Rs. 25 000 and below continues to be in operation
and guidelines in pursuance to the budget announcement of the honorable finance
minister providing for OTS for advances up to rs.50 000 in respect of NPAs of
small/marginal farmers are being drawn up.
 Circulation of information on defaulters: the RBI has put in place a system for periodic
circulation of details of willful defaults of borrowers of banks and financial institutions.
This serves as a cautionary list while considering requests for new or additional credit
limits from defaulting borrowing units and also from the directors/proprietors/partners of
these entities. RBI also publishes a list of borrowers (with aggregate outstanding of Rs. 1
crore and above) against whom banks and FIs have filed suits for recovery of their funds,
as on 31 march every year. These measures serve as a negative basket of steps shutting
off fresh loans to these defaulters.
 Recovery action against large NPAs: RBI advised public sector banks to examine all
cases of willful default of Rs. 1 crore and above and file suits in such cases, and file
criminal cases in regard to willful defaults. Boards of directors are required to review
NPA accounts of rs.1 crore and above with special reference to fixing of staff
accountability.

 Special mention accounts: in a recent circular, RBI has suggested to the banks to have a
new asset category or “special mention accounts” for early identification of bad debts.
This would be strictly for internal monitoring. Loans and advances overdue for less than
one quarter and two quarters would come under this category. Data regarding such
accounts will have to be submitted by banks to the RBI. However, special mention assets
would not require provisioning, as they are not classified as NPAs. An asset may be

57. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 57
transferred to this category once the earliest signs of sickness/irregularities are identified.
This will help banks look at accounts with potential problems in a focused manner right
from the onset of the problem, so that monitoring and remedial actions can be more
effective.

Once these accounts are categorized and reported as such, proper top management
attention would also be ensured. Borrowers having genuine problems due to a temporary
mismatch in funds flow or sudden requirements of additional funds may be entertained at
the branch level and for this purpose, a special limit to tide over such contingencies may
be built into the sanction process itself.

RBI guidelines on classification of bank advances:
The reserve bank of India (RBI) has issued guidelines on provisioning requirements with
respect to bank advances. In terms of these guidelines, bank advances are mainly classified
into:
 standard assets: such an asset is not a non-performing asset. In other words, it carries
not more than normal risk attached to the business.
 Sub-standard assets: it is classified as non-performing for a period not exceeding 18
months.
 doubtful assets: an asset that has remained an NPA for a period exceeding 18 months
is a doubtful asset.
 loss assets: here loss is identified by the banks concerned, by internal auditors, by
external auditors, or by the reserve bank India upon inspection.



NPAs of co-operative banks

58. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 58

Based on loan loss provisioning
The net NPAs have continually declined from 23.2% in 2004-05 to 7.0% in 2012 in urban
cooperative banks. RBI regulations require that banks build provisions up to at least a level of
50% of their gross NPAs. The current provisioning is 35% of gross NPAs.

Overview
As can be seen, the main culprits are not the priority sectors or PSU’s, but are the large
Industries. If government sops to agriculture and SSI’s are excluded, the NPA in the priority
Sectors are even lower.

59. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 59
The problem India faces is not lack of strict prudential norms but the following
aspects:-
1. The legal impediments and time consuming nature of asset disposal process.
2. ‘postponement’ of the problem in order to report higher earnings.
3. Manipulation by the debtors using political influence a perverse effect of the slow
legal process is that banks are shying away from risks by investing a greater than
required proportion of their assets in the form of sovereign debt paper.

The government recently enacted the asset reconstruction ordinance to try and tackle the
problem. It gave wide ranging powers for banks to dispose of assets and allowed creation of
asset reconstruction companies for this purpose.

ANALYSIS AND INTERPRETATION:
Table 4.1: table showing amount of loans and advances for 2009-10 to 2012-13
Years Amount (in lakhs)
2009-2010 11063.15
2010-2011 13599.16
2011-2012 17408.60
2012-2013 22243.36
source – secondary data

Analysis:
The above table shows the total amount of loans and advances for the year 2009-2010, 2010-
2011, and 2011-2012 as 11063.15lakhs, 13599.16 lakhs, 17408.60lakhs and 22243.36 in the
year 2012-13.






Graph 4.1: graph showing amount of loans and advances

60. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 60

Interpretation:
From the above graph it is clear that the loans and advances has gone up by 13599.16 in the
year 2010-11, by 17408.60 in the year 2011-12 and by 22243.36 in 2012-13. Bank is able to
provide more and more advances and loans in increasing trend.

Table 4.2: showing different sector wise loans and advances for 2011-12 & 2012-13
Loans
Amount of loans and advances (in lakhs)
2011-12 2012-13
Mortgage loans 4432.35 5458.73
Rent loans 506.32 471.52
Salary loans 101.6 91.53
I p l loans 5805.57 6976.54
Od loans 538.64 679
C c loans 169.91 214.68
Education, cd loans 38.3 64.92
Vehicle, business loans 681.31 762.05
Gold loans 3468.37 5624.11
Surety loans 963.31 896.61
Other loans 699.92 1003.67
Total loans 17408.60 22243.36
source – secondary data
Graph-4.2: graph showing the different types of loans and advances with its percentage.
11063.15
13599.16
17408.6
22243.36
0
5000
10000
15000
20000
25000
2009-2010 2010-2011 2011-2012 2012-2013
Amount (in lakhs)
Amount (in lakhs)

61. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 61

Analysis: the above table graph shows the sector wise loans provided by the bank in 2011-12
and 2012-13. Except salary and security loans bank has increased its loans to all sectors in
2012-13 compared to 2011-12.

Interpretation:
From the above graph it is clearly evident that majority amount of loans, are from from
mortgage loan, ipl and gold loans in both the years 2011-12 and 2012-13.

Table 4.3
Table showing non performing assets for years 2009-10 to 2012-13
Year Amount (in lakhs)
2009-2010 1357.43
2010-2011 1337.88
2011-2012 1166.98
2012-2013 1343.92

Analysis: the above table shows that the amount of non-performing assets is 1357.43 lakhs,
1337.88 lakhs, and 1166.98 lakhs for the year 2009-10, 2010-11 and 2011-12. In 2012-13
NPAs came down to 1343.92lakhs.
0
1000
2000
3000
4000
5000
6000
7000
8000
M ort ga ge
Re nt
S al ary
I P L
OD
C C L
E duc at io n , CD
V ehi c le , bus i nes s
Gol d
S uri t y Ot her
Amount of loans and advances (in lakhs) 2011-12Amount of loans and advances (in lakhs) 2012-13

62. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 62
Graph 4.3:graph showing non performing asset


Interpretation
From the above graph and table it is clearly evident that cooperative bank has reduced the
gross NPAs in the year 2011-12. Parallelly we can observe that there is again sudden growth
in the gross advances in 2012-13 year.

Net NPAs calculation for 2011, 2012 & 2013
Position of net advances / net NPAs as on 31st march 2013 in lakh rupees
Sl.
No. Particulars
As on
31.03.2011
As on
31.03.2012
As on
31.03.2013
1 Gross advances 13599.16 17408.6 22243.36
2 Gross NPAs 1337.88 1166.98 1343.92
3 Gross NPAs as percentage to gross
advances
9.84% 6.70% 6.04
Deductions - - -
- balance in interest suspense account /
OIR*
- - -
- DICGC/ECGC claims received and
held pending adjustment
- - -
- part payment on NPA account - - - Amount (in Lakhs)
1357.43
1337.88
1166.98
1343.92
1050
1100
1150
1200
1250
1300
1350
1400
2009-2010 2010-2011 2011-2012 2012-2013

63. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 63
received and kept in suspense account
4 Total deductions - - -
5 Total NPA provisions held (bddr
balance after appropriation)
1989.07 2071.41 2160.41

6 Net advances (1)(-)(4)(-)(5) 11610.09 15337.19 20082.95
7 Net NPAs (2)(-)(4)(-)(5) (-) 651.19 (-) 904.43 (-) 816.49
8 Net NPAs as percentage of net
advances
(-) 5.61% (-) 5.90% (-) 4.07%

* i.e., accrued interest on NPA a/c if included (capitalised) in loans and
advances.


Table 4.4: table showing percentage of NPA and gross advances
year Net NPA ( in lakhs)
2009-2010 -512.44
2010-2011 -651.19
2011-2012 -904.43
2012-2013 -816.49

Analysis:
Form the table 2009-10, 2010-11, 2011-12 and 2012-13 for the net NPA was -512.44, 651.19,
904.43 and 816.49 respectively.

64. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 64
Graph 4.4: graph showing net NPA

Interpretation: though advances have come down in the year 2011-12, the gross NPAs have
increased to the extent of 904.43 which is highest in the Thyagaraja cooperative bank so far.

Table 4.5 : table showing gross advances and percentage of NPA
year Gross loans/advances Percentage of NPA
2009-2010 11063.15 12.27%
2010-2011 13599.16 9.84 %
2011-2012 17408.6 6.70 %
2012-2013 22243.36 6.04 %
source – secondary data
Analysis:
Form the table 2009-10, 2010-11, 2011-12 and 2012-13 the gross NPAs were 12.27%, 9.84%
6.70%, and 6.04%







Graph 4.5: graph showing gross advances and percentage of NPA NET N.P.A ( in lakhs)
-512.44
-651.19
-904.43
-816.49
-1000
-900
-800
-700
-600
-500
-400
-300
-200
-100
0
2009-2010 2010-2011 2011-2012 2012-2013

65. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 65

source : table- 7

Interpretation:
Form the above graph and table it is clearly evident that that there is a % decrease trend in the
NPA to gross advances .and it is lowest in the year 2012-13


Table 4.6: table showing the percentage of net and gross NPA

Year Percentage of gross
NPA
Percentage of net NPA
after provision
2009-2010 12.27% 0 %
2010-2011 9.84 % 5.61%
2011-2012 6.70 % 5.90%
2012-2013 6.04 % 4.07%
source – secondary data

Analysis: the above table shows the percentage of gross NPA and net NPA for the year
2009-2010 as 12.27% and 0%, for 2010-2011, 9.84% and 5.61%, for 2011-2012, 6.70% and
for 2012-13, 6.04% and 4.07%

Graph 4.6: graph showing the percentage of net and gross NPA
11063.15
13599.16
17408.6
22243.36
12.27%
9.84%
6.70%
6.04%
0.00%2.00%4.00%6.00%8.00%10.00%12.00%14.00%
0 5000 10000 15000 20000 25000
2009-2010
2010-2011
2011-2012
2012-2013
Gross loans/AdvancesPercentage of N.P.A

66. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 66


source : table-9
Interpretation
The net NPA for the year 2009-2010 was 0% as the provision given to NPAs was higher and
nullified the net NPAs and in remaining years 2011-12 was with highest.


Table 4.7: table showing substandard and doubtful assets according to r.b.i regulations








Analysis:
The above table shows the substandard and doubtful assets according to RBI regulations for
2009-10 as 635.05 and 417.14, 2010-11 is 663.60 and 347.57, 2011-12 is 789.28 respectively
and 261.11 and 829.61, 356.47 in 2012-13.


12.27%
9.84%
6.70%
6.04%
0%
5.61%
5.90%
4.07%
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
18.00%
2009-2010 2010-2011 2011-2012 2012-2013
Percentage of gross N.P.APercentage of Net N.P.A after provision
Year Substandard
assets (in lakhs)
Doubtful assets (in
lakhs)
2009-2010 635.05 417.14
2010-2011 663.60 347.57
2011-2012 789.28 261.11
2012-2013 829.61 356.47

67. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 67
Graph 4.7 :graph showing substandard and doubtful assets according to RBI regulations

Interpretation:
The above graph shows the classification of assets according to RBIregulations. The increase
has been shown in the doubtful assets each year where as downtrend was there till 2011-12 in
doubtful assets and taken u turn in 2012-13.


Table 4.8: table showing substandard ,doubtful and loss assets in lakhs rupees with total.







635.05
417.14
663.6
347.57
789.28
261.11
829.61
356.47
0
100
200
300
400
500
600
700
800
900
2009-2010 2010-2011 2011-2012 2012-2013
Substandard assets (in lakhs)Doubtful assets (in lakhs)
Year Substandard assets Doubtful assets Loss assets Total
2009-2010 635.05 417.14 322.29 1337.48
2010-2011 663.60 347.57 326.71 1337.88
2011-2012 789.28 261.11 319.46 1369.85
2012-2013 829.61 356.47 306.96 1493.04

68. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 68
Graph 4.8: graph showing substandard ,doubtful assets and loss along with its total


Analysis:
The above table shows the substandard and doubtful assets according to RBI regulations for
2009-10 as 635.05 and 417.14, 2010-11 is 663.60 and 347.57, 2011-12 is 789.28 respectively
and 261.11 and 829.61, 356.47 in 2012-13. Loss assets formed for the same time period are
322.29, 326.71, 319.46 and 306.96 lakh rupees respectively.

Interpretation: the above graph shows the classification of assets according to RBI
regulations. The increase has been shown in the doubtful assets each year where as
downtrend was there till 2011-12 in doubtful assets and taken reverse turn in 2012-13. From
2011-12 loss assets are coming down where as total NPAs are highest in the year 2012-13
due to increase in substandard assets.





635.05
663.6
789.28
829.61
417.14
347.57
261.11
356.47
322.29 326.71 319.46 306.96
1337.48 1337.88
1369.85
1493.04
0
200
400
600
800
1000
1200
1400
1600
2009-2010 2010-2011 2011-2012 2012-2013
Substandard assets (in lakhs)Doubtful assets (in lakhs)Loss assetsTotal

69. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 69
Table 4.9 table showing sector wise loans provided in 2012-13:

Loans
Amount of loans and NPAs(in lakhs) 2012-13
Loans NPAs % NPAs to loans
Mortgage loans 5458.73 166.00 3.041
Rent discount loans 471.52 0 0
Salary loans 91.53 88.27 96.43833
I PL loans 6976.54 262.41 3.76132
Od loans 679 62.32 9.178203
C c loans 214.68 50.37 23.46283
Education, cd loans 64.92 0 0
Vehicle, business loans 762.05 168.52 22.11403
Gold loans 5624.11 343.38 6.105499
Surety loans 896.61 202.65 22.6018
Other loans 1003.67 0 0
Total loans 22243.36 1343.92 100%















Graph 4.9: table showing sector wise loans provided in 2012-13:

70. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 70


Analysis: by looking at the sectorial loans and advances along with the percentage NPAs
given by Thyagaraja cooperative bank, gold loans with 343.38 lakhs, i p l loans with
262.41lakhs, surety loans with 202.65 lakhs and vehicle & business loans with 168.52 are
standing in the frontline.

Interpretation: looking at the % figures and graph, it is evident that salary loans are highest
troublesome loans and to the extent of 94% of loans provided in this sector are falling as
NPAs and need to be taken care for this sector in providing loans as well as in collecting the
debts.





Table 4.10: percentage of loans and advances in the year 2012-13 sector wise: 0
5000
10000
15000
20000
25000
M ort ga ge l oans
Re nt D is co unt l o ans
S al ary lo ans
I P L l o ans
OD l oa ns
C C l oans
E duc at io n, C D lo ans
V ehi c le , bus i nes s l oan s
Gol d l oa ns
S ure ty l oa ns
Ot her l oa ns Tot al lo ans
Amount of loans and advances (in lakhs) 2012-13 NPAs
Amount of loans and advances (in lakhs) 2012-13 Loans

71. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 71
Loans types NPAs in 2012-13 % NPA
Mortgage loans 166 12.35192571
Rent discount loans 0 0
Salary loans 88.27 6.568099292
I p l loans 262.41 19.52571582
Od loans 62.32 4.637180785
C c loans 50.37 3.747990952
Education, cd loans 0 0
Vehicle, business loans 168.52 12.53943687
Gold loans 343.38 25.55062801
Surety loans 202.65 15.07902256
Other loans 0 0
Total= 1343.92 100%

Graph 4.10 : percentage of loans and advances in the year 2012-13 sector wise:

Analysis: looking at the table figures which gives us the information about the 2012-13 year
%NPAs to the corresponding sector, we can observe that rent discount loans, education, cd
loans, other loans like agricultural loan are with zero naps with very good repayment methods
followed.
Interpretation: from the above graph and table we can interpret that gold loans are the
highest NPA providers in terms of cash and percentage in the overall NPAs for the year
2012-13.
SUMMARY OF FINDINGS % NPA sector wise
12%
0%
7%
19%
5%
4%
0%
13%
25%
15%
0%
Mortgage loans
Rent Discount loans
Salary loans
I P L loans
OD loans
C C loans
Education, CD loans
Vehicle, business loans
Gold loans
Surety loans
Other loans

72. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 72
 The total amount of loans and advances for the year 2009-2010, 2010-2011, and
2011-2012 as 11063.15lakhs, 13599.16 lakhs, 17408.60lakhs and 22243.36 in the
year 2012-13.
 The sector wise loans provided by the bank in 2011-12 and 2012-13. Except salary
and security loans bank has increased its loans to all sectors in 2012-13 compared to
2011-12.
 Majority amount of loans, are from mortgage loan, IPL and gold loans in both the
years 2011-12 and 2012-13.
 The amount of non-performing assets is 1357.43 lakhs, 1337.88 lakhs, and 1166.98
lakhs for the year 2009-10, 2010-11 and 2011-12. In 2012-13 NPAs came down to
1343.92lakhs.
 Cooperative bank has reduced the gross NPAs in the year 2011-12. Parallelly we can
observe that there is again sudden growth in the gross advances in 2012-13 year.
 For 2009-10, 2010-11, 2011-12 and 2012-13, the net NPA was -512.44, 651.19,
904.43 and 816.49 respectively.
 Though advances have come down in the year 2011-12, the gross NPAs have
increased to the extent of 904.43 which is highest in the Thyagaraja cooperative bank
so far.
 2009-10, 2010-11, 2011-12 and 2012-13 the gross NPAs were 12.27%, 9.84% 6.70%,
and 6.04%.
 That there is a % decrease trend in the NPA to gross advances .and it is lowest in the
year 2012-13.
 The percentage of gross NPA and net NPA for the year 2009-2010 as 12.27% and
0%, for 2010-2011, 9.84% and 5.61%, for 2011-2012, 6.70% and for 2012-13, 6.04%
and 4.07%.
 The net NPA for the year 2009-2010 was 0% as the provision given to NPAs was
higher and nullified the net NPAs and in remaining years 2011-12 was with highest.
 The substandard and doubtful assets according to RBI regulations for 2009-10 as
635.05 and 417.14, 2010-11 is 663.60 and 347.57, 2011-12 is 789.28 respectively and
261.11 and 829.61, 356.47 in 2012-13.

73. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 73
 The classification of assets according to r.b.i regulations. The increase has been
shown in the doubtful assets each year where as downtrend was there till 2011-12 in
doubtful assets and taken u turn in 2012-13.
 The substandard and doubtful assets according to RBI regulations for 2009-10 as
635.05 and 417.14, 2010-11 is 663.60 and 347.57, 2011-12 is 789.28 respectively and
261.11 and 829.61, 356.47 in 2012-13. Loss assets formed for the same time period
are 322.29, 326.71, 319.46 and 306.96 lakh rupees respectively.
 The classification of assets according to r.b.i regulations. The increase has been
shown in the doubtful assets each year where as downtrend was there till 2011-12 in
doubtful assets and taken reverse turn in 2012-13. From 2011-12 loss assets are
coming down where as total NPAs are highest in the year 2012-13 due to increase in
substandard assets.
 Looking at the sectorial loans and advances along with the percentage NPAs given by
Thyagaraja cooperative bank, gold loans with 343.38 lakhs, i p l loans with
262.41lakhs, surety loans with 202.65 lakhs and vehicle & business loans with
168.52 are standing in the frontline.
 Looking at the % figures and graph, it is evident that salary loans are highest
troublesome loans and to the extent of 94% of loans provided in this sector are falling
as NPAs and need to be taken care for this sector in providing loans as well as in
collecting the debts.
 Looking at the table figures which gives us the information about the 2012-13 year
%NPAs to the corresponding sector, we can observe that rent discount loans,
education, cd loans, other loans like agricultural loan are with zero naps with very
good repayment methods followed.
 Gold loans are the highest NPA providers in terms of cash and percentage in the
overall NPAs for the year 2012-13.

74. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 74
CONCLUSIONS
The dissertation study on non-performing assets at Sree Thyagaraja co-operative bank. It has
given me an opportunity to understand the co-operative financial sector. The bank is
performing very well in every aspect, of its dealing form the past 50 years the bank has
grown in leaps and bonds. All the branches of the bank are being computerized. The working
capital as well as profit of the bank has gone up tremendously.
From the study we can conclude that the Sree Thyagaraja co-operative bank has been
following well established system, policies and procedures with respect to NPAs and
recovery. The bank has recovered the loans in a systematic manner; disbursement of loans/
advances to all the priority sectors has and crossed the total business targets for 2011-12
and2012-13. However, as suggested, the bank should consider some additional strategies and
policies to face as suggested, the bank should consider some additional strategies and
policies to face challenges of competitors in future, to improve the quality of its services of
lending and recovery.

SUGGESTIONS/RECOMMENDATIONS
 Bank should create a new model of banking business by giving loans to credit worthy
and persons having clean credit history.
 The branches concerned should continuously monitor loans to identify accounts that
are potential to non performing assets.
 Timely visit by the field staff and marketing personal contact with the borrowers.
 Proper follow-up with the support of al the staff members who were having good
touch with the customers.
 The bank should concentrate more on credit appraisal, monitoring credit risk
management and recoveries.
 The bank should offer re-scheduling of loans for those borrowers who were struggling
with high interest rate environment.
 Conducting in-house training programs for the managers concerned with the recovery
about the latest and regulation also on the responsibilities available for the recovery of
NPAs.
 Fresh addition to NPAs can be prevented by proper credit management of loans and
advances and proper documentation at the time of disbursement of loan.
BIBLIOGRAPHY:

75. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 75
Nelson M. Waweru et.al (2009), Global Journal of Finance and Banking Issues Volume 3,
No. 3, 2009

Kevin Greenidge et.al (2010), Forecasting non-performing loans in Barbados, 80 / business,
finance & economics in emerging economies vol. 5 no. 1 2010

Gorter, N. & Bloem M., (2002), the macroeconomic statistical treatment of NPLs,
Publication of the Organization for Economic Corporation & Development

Brownbridge, M., (1998) the Causes of Financial Distress in Local Banks in Africa and
Implications for Prudential Policy

M. Karunakar et.al (2008), Are non - Performing Assets Gloomy or Greedy from Indian
Perspective, Research Journal of Social Sciences, 3: 4-12, 2008

Bloem, A.M., & Goerter, C.N (2001), ‘The Macroeconomic Statistical Treatment of Non-
Performing loans’, Discussion Paper, Statistics Department of the IMF, Decembere1, 2001

Das, A., & Ghosh, S (2003), ‘Determinants of Credit Risk’, Paper presented at the
Conference on Money, Risk and Investment held at Nottingham Trent University, November
2003.

Anurag, 2007, Causes for Non Performing Assets in Public Sector Banks, [Online] Available
at: http://www.123eng.com/forum/viewtopic.php?p=14590.

G.V.K. Kasthuri, 2009. Basel Norms for Indian Banks, [Online] Available at:
http://gvkk.blogspot.com

Management and resolution of NPAs legal and regulatory regime, [Online] Available at:
http:// www.mbaknol.com

76. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 76
Sl no Books and websites Authors
1. Financial management I.M.Pondey,
Reddy and Appanaih
2. Auditing Shekhar and Shekhar
3. Brochures of the bank
4. Website of the bank Www.Thyagarajabank.com
5. Byelaws of the bank

Internet:
www.google.com
www.org/wiki/banking_in_india
www.investopedia.com
www.icba.coop
www.caclubindia.com






ANNEXURE
Profit and loss account from 01/04/2011 to 31/3/2012
amout in crores
Account Loss Account Profit
Interest paid on deposit 165491887.42 Interest received on loans 197999843.48

Staff expenses 57316401.00 Penal interest on loans 2191403.65
Administrative cost 9559373.29 Interest received
On investments
1058776371.25

77. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 77








BALANCE SHEET AS ON 31.03.2012
amount in crores
Depreciation 2197953.00 Other income 20579749.59
Expenses 6284990.00
Provisions 44675057.00
Investment depreciation
reserve

1479057.00

Net profit 41021706.26
Grand total 326547367.97 Grand total 326547367.97
Liabilities Amount Assets Amount
Share capital 95185650.00 Cash 110580785.44
Reserves and
surplus

498008720.97
Balance with other
banks

6618384.65

Deposits and other
accounts
2749235756.34 Fixed deposits 146032392.22
Borrowings

_
Money at call and
short notice

22513563.00
Bills receivable
(contra entry)
10668707.18 Investments 1104533155.00

78. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 78




























PROFIT AND LOSS ACCOUNT FROM 01/04/2012 TO 31/3/2013

amount in crores
Account Loss Account Profit
Other investments 240132916.00
Interest payable on
deposits
28827234.69 Loans and advances 1740859931.77
Other liabilities 53596611.03
Bills receivable
(contra entry)
10668707.18
Interest receivable
from loans (contra)
60963000.00
Interest receivable
from NPA (contra
entry)
60963000.00
Net profit 41021706.26 Land and building 36517458.00
Furniture and fixture 10291328.14
Other assets 47798765.00
Total 3537510386.47 Total 3537510386.47
Bank guarantee 9793.00 Bank guarantee 9793.00
Grand total 3537520179.47 Grand total 3537520179.47

79. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 79
Interest paid on
deposit
229570591.59 Interest received on loans 262155362.36
Staff expenses 62980317.00 Penal interest on loans 2085479.87
Administrative cost 15357070.50 Interest received
On investments
117217228.60
Depreciation 4201553.00 Other income 24671036.82
Expenses 6284990.00
Provisions 41251995.00
Investment
depreciation
reserve

0.00

Net profit 48028112.56
Grand total 406129107.65 Grand total 406129107.65










BALANCE SHEET AS ON 31/03/2013

amount in crores
Liabilities Amount Assets Amount
Share capital 107143450.00 Cash 110580785.44

80. A STUDY ON NON PERFORMING ASSETS AT THYAGARAJA CO-OPERATIVE BANK


GLOBAL ACADEMY OF TECHNOLOGY (GAT ), BANGALORE-560 098. Page 80
Reserves and
surplus
527980707.23 Balance with other banks 6618384.65
Deposits and other
accounts
3433534497.74 Fixed deposits 146032392.22
Borrowings _ Money at call and short notice 22513563.00
Bills receivable
(contra entry)
22511892.76 Investments 1104533155.00
Other investments 240132916.00
Interest payable on
deposits
59061494.28 Loans and advances 1740859931.77
Other liabilities 64944114.03 Bills receivable (contra entry) 10668707.18
Interest receivable
from loans
(contra)
65914084.00 Interest receivable from NPA
(contra entry)
60963000.00
Net profit 48028112.56 Land and building 36517458.00
Furniture and fixture 10291328.14
Other assets 47798765.00
Total 4330587717.60 Total 3537510386.47
Bank guarantee 9793.00 Bank guarantee 9793.00
Grand total 4330597510.60 Grand total 4330597510.60