CHAPTER: 1

INTRODUCTION

OF

PROJECT

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 Introduction of project
Banks play a very important role in the economic development of every Nation. They have
control over a large part the supply in circulation. It is an establishment, which deals with
money. Banks are the main stimulus of the economic progress of country. The basic functions of
the banks are the accepting all kind of deposit and lending of money. A strong banking sector is
important for the banking economy. The failure of the banking sector may have adverse impact
on the other sectors.

In general there are several challenges confronting the bank in its day to day operations. The
main challenges facing the bank are the disbursement of funds in quality assets (loan & advance)
or otherwise it leads to NON PERFORNIG ASSETS. It is one the major concern for bank in
India.

Non Performing Assets reflect the performance of the bank .In simple term more the value of
Non Performing Assets more is the chances of a large Number of credit defaults that a affect the
profitability and Net worth of banks and also corrodes the value of the assets. The Non
Performing Assets growth involves the necessity of provision which reduce the overall profit and
shareholder value. The problem of Non Performing is not only affecting the bank but also the
whole economy. In fact high level of Non Performing Assets. In Indian banks nothing but
reflection of the state of health of the industry and trade.

Non Performing Assets has emerged since over decade as an alarming threat to the banking
industry in our country sending distressing single on the sustainability and endure ability of the
affected bank.

A project has been prepared under the title of Non Performing Assets in Thane Janata Sahakari
Co-Bank Ltd. in Kalwa.

The Thane Janata Sahakari Bank Ltd (TJSB) and has emerged as one of the leading multi state
scheduled co-operative Bank in the country.

TJSB presently is catering to the needs of society through a close network of 54 Branches and 1
Extension Counters spread all over the city of Thane, Mumbai, Navi Mumbai, Nasik, Pune &
Satara. All these Branches have made remarkable progress on all fronts in all these years.

TJSB believes that "customer delight" is the ultimate goal and has a strong belief that Customers
& all Stakeholders wholehearted support, absolute faith and their patronage has largely been

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responsible for its enviable growth. TJSB is committed to provide banking with speed, comfort
and convenience.

1. Scope of the project

(1) The Project study is about the co-operative bank.

(2) It consists of the general impact of NPA in bank.

(3) The risk covered in Thane Janata Sahakari Bank Ltd. bank is one of the major factor
the management and evaluation of the Assets Bank.

(4) It also helps the strategies for survival and growth of the bank.

(5) It is relevant to inflows and outflow of banking sector in India.

2. Objectives of Study

(1) To analyze the bank policy and system to recover the level of Non Performing
Assets.

(2) To understand the banking norms and conceptual framework of banks in India.

(3) To understand how corrective measures taken by bank for non Performing Assets.

(4) To understand RBI’s rules and regulation for the control of Non Performing Assets.

(5) To analyze the current position of Thane Janata Sahakari Bank ltd. And to study the
present management of bank.

2. Research Methodology

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 Research is one kind of process to get knowledge about some
topic. Research is done so that systematic analysis can be done and problem can also be
solved.

The title of Study

Here it is “Non Performing Assets”

Benefits from the study

(1) It helps to know detail about Non Performing Assets and the situation of Non
Performing Assets in Bank.

(2) It helps to know the strategies adopted by bank to reduce the Non Performing Assets
level and understand the Non Performing Assets provision norm in bank.

Research Problem
Non Performing Assets affect the profit of bank and also the prestige of bank. So here the
research problem is to identify the causes for the NPA and indentify the action to reduce the Non
Performing Assets.

Research Design
Here the research design is exploratory which helps to explore the Non Performing Assets
problems of bank.

Research Instrument
As a research instrument had been taken guidance from the Branch Manager and staff of Thane
Janata Sahakari Bank Ltd.

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Data Collection
➢ Primary Data
➢ Secondary Data

Hence it is an exploratory research there is not any dependence on primary data.

Sources of Secondary data

(1) Annual report
(2) Journals
(3) Website
(4) Books

Analysis and Report writing

Here, done ratio analysis and used various chart for analysis purpose and also written
report on it.

2. Limitation of Project

(1) The study was restricted only to the Non-Performing Assets of Thane Janata
Sahakari Bank Ltd.

(2) The study was conducted mainly through secondary data.

(3) The correctance of data depends upon willingness of bank official to share data

(4) The data collected and subsequent study is restricted for specific time frame.

2. Direction for Future

(1) The Project of Non Performing Assets of Thane Janata Sahakari Bank Ltd. gives

the direction of future research.

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 (2) This research gives knowledge about every aspect of Non Performing Assets.

(3) It gives the direction about how we reduce Non Performing Assets in Bank and

convert in to profitability for Bank.

2. Chapter Plan

1. Chapter first signifies about scope of the project, objective of study, research of
methodology, direction of future.

2. Chapter second highlights about definition of bank, history of bank, Reserve bank of
India, types of bank.

3. Chapter third provides introduction about THANE JANATA SAHAKARI BANK LTD
profile, organization structure, award and achievement.

4. Chapter fourth explains about meaning of Non-Performing Assets, which are norms used
to indentify NPA, factor affecting NPA, Indian economic and NPA, classification of
NPA, which tools uses to recovery of NPA.

5. Chapter fifth reflects about TJSB bank and NPA, credit appraisal policy use by TJSB
bank, NPA norms of TJSB bank.

6. Chapters sixth provide and analyze classification of total NPA, advance NPA, yearly
wise NPA at TJSB bank, ratio analysis of NPA.

7. Chapter seventh deals with conclusions and suggestion, bibliography.

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 CHAPTER: 2

INTRODUCTION

OF

BANKING INDUSTRY

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Definition of BANK
“An organization , usually a corporation chartered by a state or deferral government which does
most or all of following receives demand deposit and time deposit honors instruments drawn on
them , and pays interest on them ; discounts note, make loans , and invest in securities ; collect
check , drafts and notes ;certifies depositor’s check; and issues draft and cashier’s checks.

Definition of Banking
In general term,” The business activity of accepting and safeguarding money owned by other
individuals and entities and then lending out this money in order to earn a profit.

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

The Banking Regulation Act defines the business as banking by starting the essential function of
a Banker.

The term banking is defined as “Accepting for the purpose of leading or investment , deposit of
Money from the public , repayable on demand or otherwise and withdrawal by cheque, draft,
order or otherwise.

History of Banking in India

Without a sound and effective banking system in India is cannot have healthy economy. The
banking system of India should not only be hassle free built should be able to meet new
challenge posed by the technology and any other external and internal factors.

For the past three decades India’s banking system has several outstanding achievements to its
credit. The most striking is its extensive reach. It is no longer confined to only metropolitan in

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India. In fact, Indian banking system has reached even to the remote corners of the country. This
is one of the main reasons of India’s growth process.

The government’s regular policy for Indian bank Since1969 has paid rich dividend with the
nationalization of 14 major private bank of India. Not long ago, an account had wait for hours at
the bank counters for getting draft or far withdrawing his own money. Today, he has a choice.
Gone are day when the most efficient bank transferred money from one branch to anther in two
hours.

Now it is simple as instant messaging or dials a pizza. Money has become the order of the day.

The fist bank in India through conservative was established in 1786. Form 1786 till today, the

Journey of India banking system can be segregated into three distinct phase. They are as

Mentioned as below

(1) Early phase from 1786 to 1969 of India Bank.

(2) Nationalization of Indian Banks and up to 1991 prior to Indian banking sector Returns.
(3) New with the advent of Indian Financial and Banking sectors Returns after 1991 to make
this write up.

More explanatory, we divided scenario in phase I, phase II and phase III.

Phase I

The General Bank of India was setup in the year 1786. Next were Bank of Hindustan and Bengal
Bank. The East India Company established Bank of Bengal(1809), Bank of Bombey(1840) and
Bank of Madrsh(1893) as independent unit and called it Presidency Bank . These three bank
were amalgamated in 1920 and Imperial Bank of India was established which started as private
shareholders.

In 1865 Allahabad Bank was establish and first time exclusively by Indians;
Punjab National Bank Ltd. Was setup in 1984 with head quarters at Lahore. Between 1906 and
1913 Bank of India, Central bank of India, Bank of Baroda, Canara Bank, Indian Bank and Bank
of Maysure were setup. Reserve Bank of India came in 1935.

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During this first phase the growth was very slow and bank also experienced periodic failure
between 1913 and 1948.These were approximately 1100 banks. Mostly small to streamline the
functioning and activities of commercial banks the Government of India came up with Banking
companies Act 1949 which latter change to Banking Act of 1965( Act of 23 of 1965). Reserve
Bank of India was vested with extensive powers for the Supervision of Banking in India as the
central banking Authority.

Phase II

Government took major steps in this Indian Banking Reform after independence. In 1955 it
nationalized Imperial Bank of India with extensive Banking facilities on a large scale especially
in rural and semi urban areas. In formed State Bank of India to act as principal agent of RBI and
to handle banking transaction of the union and state Government all over the country.

Seven banks forming subsidiary of State Bank of India was nationalized in 1960
th
on 19 july1969, major process of nationalization was carried out .It was effort of the then chief
Minister of India. Mrs. Indira Gandhi, 14 major commercial banks in the country was
nationalized.

Second phase of nationalization Indian Bank sector Reform was carried out in 1980 with seven
more banks. This setup brought 80% of the banking segment in India under Government
ownership.

The following are the steps taken by the Government of India to Regulate Banking
Institution in the country.

(1) 1949 : Enactment of Banking Regulations Act .

(2) 1955 : Nationalization of State Bank of India.
(3) 1959 : Nationalization of State Bank of India Subsidiaries.
(4) 1961 : Insurance cover extended to deposite.
(5) 1969 : Nationalization of 14 majors bank.
(6) 1971 : Creation of credit guarantee corporation.
(7) 1975 : Creation of regional rural bank.
(8) 1980 : Nationalization of seven banks with deposit over 200crore.

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 Banking in the sunshine of Government ownership gave the public implicit faith and
immense confidence about the sub satiability of these institutions.

Phase III

This phase has introduced many more product and facilities in the banking sectors in its
reforms measure in 1991, under the chairmanship of M Narasimbam a committee was set up by
his name which worked for the liberalization of banking practices.

The country is flooded with foreign banks and their ATM stations. Efforts are being put to
give a satisfactory service to customers. Phone banking and Net banking in introduced. The
entire system became more convenient and swift. Time is given more importance than money.

The financial system of the India has shown a great deal of resilience. It is sheltered
from any crises triggered by any external macroeconomics shock as other East Asian Countries
suffered. This is all due to a foreign are high the capital account is not yet fully convertible and
banks and their customer have limited foreign exchanged exposure.

 Reserve Bank of India (RBI)

The central bank of the country is the Reserve Bank of India (RBI). It was established in
April 1935 with a share capital of Rs5crores on the basis of the recommendations of the Hilton
Young Commission. The share capital was divided into share of Rs100 each fully paid which
was entirely owned by private shareholder in the beginning .The Government held share of
nominal value of Rs2,20,000.

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

superintendence and direction of the bank is entrusted to central Board of Directors of 20
members, the Governor and four Deputy Governors. One Government official from the Ministry

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of Finance ten nominated Directors by the Government to give representation to important
element in the economic life of the country and four nominated Director by the Central
Government to resent the four local Boards with the headquarters at Mumbai, Kolkata, Chennai
and New Delhi. Local Boards consist of five members each Central Government appointed for a
team of four years to represent territorial and economic interest and the interests of co-operative
and indigenous Bank.

The Reserve Bank of India Act, 1934 was commenced on April 1 1935. The Act,
1934 (II of 1934) provides the statutory basis of the functioning of the Bank.

The Bank was constituted for the need of following:-

(1) To regulate the issue of bank notes to maintain reserve with a view to securing monetary
stability.
(2) To operate the credit and currency system of the country to its advantage.

 ORGANISATION STRUCTUR OF RBI

THE BANKING SYSTEM

Almost 80% of the business is still controlled by Public Sector Banks (PSBs) .PSBs are still
dominating the commercial banking system. Shares of the leading PSBs are already listed on the
stock exchanges.

The RBI has given license to new private sectors banks as part of the liberalization process.
The RBI has also been granting license to industrial houses. Many banks are successfully
running in the retail and consumer segment but are yet to deliver services to industrial finance,
retail trade small business and agricultural finance.

The PSBs will play an important role in the industry due its number of branches and foreign
banks facing the constraint of limited number of branches .Hence in order to achieve an efficient
banking system, the onus is on the Government to encourage the PSBs to be run on professional
lines.

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 Banking Sectors India

Public Private Co-Operative Regional Foreign

Sector Bank Banks Bank Rural Bank Bank

 Co-Operative Bank

The co-operative banks have a history of almost 100 years. The co-operative banks are an
important of the Indian financial system, judging by the role assigned to them, the expectations
they are supposed to fulfill, their number, and the number of offices they operate. The co-
operative movement originated in the west, but the important that such banks have assumed in
India is rarely paralleled anywhere else in the world. Their role in rural financing continuous to
be important even today and their business in the urban areas also have increased phenomenally
in recent years mainly due to the sharp increase in the number of primary co-operative banks.

Some of the co-operative banks are quit forward looking and have developed sufficient
competencies to challenge state and private sector banks.

According to NAFCUB the total deposit and landings of co-operative Banks is much more than
old private Banks. This exponential growth of co-operative Banks is attributed mainly to their
ability to catch the nerve of the local clientele.

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Though registered under the co-operative societies Act of the Respective states (where formed
originally) the banking related activities of the co- operative banks are also regulated by the
Reserve by the Banking Regulation Act 1949 and Banking law (Co-Operative) Act 1965.

 CO-OPERATIVE BANK FINANCE RURAL AREA AS UNDER

➢ Farming
➢ Cattle
➢ Milk
➢ Hatchery
➢ Personal finance

 CO-OPERATIVE BANKS FINANCE URBEN AREA AS UNDER

➢ Self-employment
➢ Industries
➢ Small scale units
➢ Self-employment
➢ Industries
➢ Small scale units
➢ Home finance
➢ Consumer finance
➢ Personal finance

 FACTS ABOUT CO-OPERATIVE BANK

➢ Some co-operative banks in India are more forward then many of the state and private
sector bank.

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 ➢ According to NAFCUB the total deposits and landing of Co-operative Bank in India is
much more than Old Private Sectors Banks and New Private Sector Banks.
➢ This exponential growth of Co-operative Banks in India is attributed mainly to their
much better local reach, personal interaction with customers, and their ability the nerve of
the local client.

 Regional Rural Bank

Regional Rural Banks were established under the provisions of an Ordinance promulgated on
the 26th September 1975 and the RRB Act, 1976 with an objective to ensure sufficient
institutional credit for agriculture and other rural sectors. The RRBs mobilize financial resources
from rural / semi-urban areas and grant loans and advances mostly to small and marginal
farmers, agricultural laborers and rural artisans. The area of operation of RRBs is limited to the
area as notified by GOI covering one or more districts in the State.

RRBs are jointly owned by GOI, the concerned State Government and Sponsor Banks (27
scheduled commercial banks and one State Cooperative Bank); the issued capital of a RRB is
shared by the owners in the proportion of 50%, 15% and 35%respectively.

RRBs started their development process on 2nd October 1975 with the formation of a single
bank (Prathama Grameen Bank). As on 31 March 2006, there were 133 RRBs (post-merger)
covering 525 districts with a network of 14,494 branches. RRBs were originally conceived as
low cost institutions having a rural ethos, local feel and pro poor focus. However, within a very
short time, most banks were making losses. The original assumptions as to the low cost nature of
these institutions were belied.

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When the reform process in the banking sector was initiated, RRBs were taken up for a close
look. The GOI in consultation with RBI and NABARD started the reform process thru’ a
comprehensive package for RRBs including cleansing their balance sheets and recapitalizing
them. Extant lending restrictions were removed and space and variety available for investment of
their surplus funds was expanded. Simultaneously, a number of human resource development
and Organizational Development Initiatives (ODI) were taken up by NABARD with funding
support of the Swiss Development Corporation (SDC) and with the tools of training and
exposure visits, ODI, technology support, computerization and use of IT, system development,
etc. for business development and productivity improvement. By end March 2005, there was a
remarkable improvement in the financial performance of RRBs as compared to the position
prevailing in 1994-95. The number of banks reporting profits went up to 166 of the 196 RRBs.
As on 31 March 2006, of the total 133 RRBs (post merger), 111 posted profits and 75 of these
RRBs were sustainably viable organizations having no accumulated losses as also posting
current profits.

GOI initiated the process of structural consolidation of RRBs by amalgamating RRBs sponsored
by the same bank within a State as per the recommendations of the Vyas Committee (2004). The
amalgamated RRBs were expected to provide better customer service due to better infrastructure,
computerization of branches, pooling of experienced work force, common publicity / marketing
efforts, etc. and also derive the benefits of a large area of operation, enhanced credit exposure
limits and more diverse banking activities. As a result of the amalgamation, the number of RRBs
was under the amalgamation process, 145 RRBs have been amalgamated to form 45 new RRBs.

 Foreign Bank

The foreign banks in India are slowly but steadily creating a niche for themselves. With the
globalization hitting the world, the concept of banking has changed substantially over the last
couple of years. Some of the foreign banks have successfully introduced latest technologies in
the banking practices in India. This has made the banking business in the country more smooth
and interesting for the customers.

The concept of foreign banks in India has changed the prevailing banking scenario in the
country. The banking industry is now more competitive and customer-friendly than before. The
foreign banks have brought forth some innovations and changes in the banking industry of the
country.

The Reserve Bank of India (RBI) is the supreme monetary authority of the country and tops the
entire banking hierarchy. The scheduled banks under the authority of Reserve Bank of India are
further categorized into two segments - commercial banks and co-operative banks. The
commercial banks are then again subdivided into two classes - private sector banks and public

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sector banks. In the year 1994, the Government of India allowed the new private banks to
operate in the country and this changed the face of banking in the country.

According to the new rules set by Reserve Bank of India in the new budget, some decisions
regarding foreign banks in India have been taken. The steps taken by the central monetary
authority provide some extent of liberty to the foreign banks and they are hopeful to grow
unshackled. The foreign banks in India are now allowed to set up local subsidiaries in the
country. The policy also states that the foreign banks are not allowed to acquire any Indian bank
unless the Indian bank is listed as a weak bank by the RBI. The Indian subsidiaries of the foreign
banks are not allowed to open branches freely in the country.

This is list of some foreign banks in India as of September, 2011:

• ABN AMRO Bank N.V.

• American Express Bank.
• Arab Bangladesh Bank.
• Bank of America.
• Barclays Bank.
• Citibank.
• JPMorgan Chase Bank.
• HSBC (Hongkong & Shanghai Banking Corporation) Bank.

CHAPTER: 3

Introduction

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 OF

TJSB CO-OP Bank

 INTRODUCTION OF BANK

TJSB is the name of bank where the bank to serve to its banking services to customers.

The bank is governed by the Maharashtra co-operative societies act, a legislation enacted by state
of Maharashtra in India.

The TJSB co-operative bank was started in 1972. The dynamism infused by the Board of
Directors, unflinching loyalties of clientele and devotion of staff has propelled the sound
foundation of The Thane Janata Sahakari Bank Ltd (TJSB) and has emerged as one of the
leading multi state scheduled co-operative Bank in the country.

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TJSB presently is catering to the needs of society through a close network of 54 Branches and 1
Extension Counters spread all over the city of Thane, Mumbai, Navi Mumbai, Nasik, Pune &
Satara. All these Branches have made remarkable progress on all fronts in all these years.

TJSB is the first Bank in Co-operative sector to install Cheque Depository Machines at 44
branches, which are operational 24 X 7.

TJSB has put in place Real Time Gross Settlement System (RTGS) transactions. With Core
Banking Solution in place the Bank is Providing RTGS facility to all its customers.

TJSB has initiated process for strategic alliance with other Banks for the usage of their delivery
channels by which nearly 60000 ATMs will be available to Bank’s customers across the country.

TJSB is first Bank In the country to introduce Automated Cheque Issuance Machine which
enables Customers to take Personalized Cheque Book 24 X 7.

 PROFILE OF TJSB CO-OP. BANK

➢ Professional Board and Pragmatic decision making.

➢ Consistent profit and growth for last 39 Years.
➢ Equilibrium in Growth and profits.
➢ Strong Internal Reserves and CRAR at 15.47%.
➢ Balanced Credit Portfolio & focus on Retail /SME Segment.
➢ Strong Focus on Recovery and NPA Management.
➢ One of the very few co-operative banks to get AD1 license to deal in Foreign exchange.
➢ Exclusive financial solutions for professionals under special scheme of loans
"Sanjeevani".
➢ First Co-op Bank to offer Banc assurance Product in association with Max New York
Life Insurance Co. Ltd.
➢ Easy solution for medical expenses through Medi claim policy especially for TJSB
account holders with a very low premium in association with Oriental Insurance Co. Ltd.
➢ Provinding assitance for investments in Mutual Funds with expert advice through UTI &
Kotak Mahindra Mutual Fund.
➢ For receiving money from overseas in just 10 minutes through 'Money Gram'.
➢ Anywhere Any Branch Banking facility in all Branches.
➢ 58 ATM’s installed in Branches at Thane, Mumbai, Pune, Nashik and Satara.
➢ 24x 7 Cheque Issuance Machine at e-Lobby at Naupada Branch.
➢ 24x 7 Cheque Depository machine at 44 branches.
➢ Value Added services for Customers.

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 Awards & Achievements

➢ The Indian Bank Association (IBA) have accolade TJSB with the TECHNOLOGY
BANK OF THE YEAR award in the Co-operative Banks category for FY 2009. IBA has
first felicitated TJSB with Special Jury Award for "Acknowledging Outstanding
Achievements in Banking Technology" in the Year 2007.
➢ Awarded by The Maharashtra Urban Co-operative Bank's Federation for 'Best Urban Co-
operative Bank' in Maharashtra amongst the urban Co-operative banks having Deposits
over Rs. 500crores.

➢ Awarded by Maharashtra Urban Co-operative Bank's Federation for 'Best Urban Co-
operative Bank' in Maharashtra for The Year 2004-05 amongst the urban Co-operative
banks having Deposits over Rs.500crores.

➢ TJSB has been awarded 1st Prize as "Padmabhushan Vasantdada Patil Utkarsha Nagari
Sahakari Bank" for the F.Y.2003-2004 from Kokan Region for the second time
consecutively.

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 ➢ TJSB was recognized amongst top 5 Co-Operative banks in the country, during
centenary celebration of Co-Operative movement by Kalupur Commerical Co-
Operative Bank Ltd.

➢ "Banking Frontiers has conferred 5 awards to TJSB on 28/07/2008 as

1. Best M&A (Merger and Acquisition)

2. Innovation in CBS,
3. Innovation in Marketing
4. Innovation in Self Service
5. Innovation in Branch Up-gradation. In the category of big Co-operative banks having
business mixes more than 500crores.

➢ The Thane Janata Sahakari Bank has won the award by 'Banking Frontiers' for e-
security implementation and best website in the category of big co-opeartive banks
having business mix of more than 500crores.

BOARD OF DIRECTORS

NO. NAME DESIGNATION

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1 Shri. Vidyadhar Achyut Chairman
Vaishampayan
2 Shri. Bhalchandra Vice Chairman
Vaman Date
3 Mrs. Anuradha Director
Ramchandra Apte
4 Shri. Ramakant Director
Khushalchand Agarwal
5 Mrs. Padma Balkrishnan Director
Iyer
6 Shri. Ramesh Director
Khushaldas Kanani
7 Shri. Madhukar Dharma Director
Khutade
8 Shri. Namdeo Dattatray Director
Mandge
9 Shri. C. Nandgopal Director
Menon
10 Shri. Vivek Manohar Director
Patki
11 Shri. Pradeep Dattatray Director
Thakur
12 Shri. Vinodkumar Director
Bansal

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.

ORGANISATION STRUCTURE

CHAIRMAN

DIRECTORS

CHIEF MANAGER

DIVISIONAL MANAGER

BRANCH MANAGER

STAFF OFFICER

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 Registered Office & Head Office of bank

➢ Registered Office

1st Floor, Madhukar Bhavan,

Road No. 16, Wagle Estate,
Thane - 400 604.

➢ Head Office

Madhukar Bhavan,Road No. 16,

Wagle Estate, Thane - 400 604.

➢ Branches in Various Regions

Branch of Thane Janata Sahakari Bank Ltd are placed in various regions of
Maharashtra.

(1) Thane

(2) Mumbai

(3) Navi Mumbai

(4) Pune

(5) Nasik

(6) Western Maharashtra

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 CHAPTER: 4

INTRODUCTION

OF

NON-PERFORMING ASSESTS

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 NON-PERFROMING ASSETS
 MEANING
An asset becomes non-performing when it ceases to generate income for the bank. Earlier an
asset was considered as non performing asset based on the concept of “past due”.

 DEFINITION
A non-performing assets was defined as credit in respect of interest and/ or installment of
principal has remained “past due” for a specific period of time. The specific period of time was
in phased manner as under:

Year ended March 31 Specific Period

1993 4 Quarters
1994 3 Quarters
1995 2 Quarters
2004 1 Quarters

An amount is considered as past due, when it remains outstanding for 30 days beyond the due
date. However, with effect from March31, 2001 the “past due” concept has been dispensed with
the period is reckoned from the due date of payment

NORMS FOR IDENTIFICATION OF NPA

With an intense to use the international best practice and to ensure greater transparency,”90
days” overdue norms are accepted for the identification of NPA from the year ended March 31,
2004.

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

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 A. Interest and / or installment of principal remain overdue for a period of more than 90
days in respect of a term loan.
B. The account remains out of order for a period of 90 days, in respect of an Overdraft/ Cash
Credit (OD/CC).
C. The bills remain overdue for a period of more than 90 days in the case of purchased and
discounted.
D. Any amount to be received remains overdue for a period of more than 90 days in respect
of any other accounts.

Tier 2 bank like all the Urban Co-Operative Banks(UCBs) other than the Tier 1 bank i.e Unit
bank shall classify their loan accounts as NPA as per 90 day norm as hitherto.

FACTORS RESPONSIBLE FOR NPA

 Improper selection of borrower’ activities.

 Weak credit appraisal system.
 Industrial problem.
 Inefficiency in management of borrower.
 Slackness in credit management & monitoring.
 Lack of proper follow up by bank.
 Recession in the market.
 Due to natural calamities and other uncertainties.

INDIAN ECONOMY AND NPA

Gross NPA (Non-performing assets) in Indian banking sector have declined sharply to close to
3.0 per cent in 2006 (15.7 per cent at end-March 1997). Net NPAs of the banking sector are at
close to one per cent and the gap between the gross and net NPAs has narrowed over the years.
Recovery of dues is also more than the fresh slippages.

The decline in NPAs is particularly significant as income recognition, asset classification and
provisioning norms were tightened over the years. For instance, banks now follow 90-day

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delinquency norms as against 180-day earlier. Banks are also required to make general
provisioning (0.40 per cent) for standard advances.

According to Reserve Bank of India, improved profitability, underpinned by robust

macroeconomic environment and upturn in interest rate cycle, has enabled banks to reduce the
backlog of NPAs.

NARSIMHAN COMMITTEE

➢ FIRST COMMITTEE
The committee on financial system, also known as Narsimhan committee, under the
chairmanship of Shri M. Narsimhan, appointed by the RBI recommended the introduction of
these prudential accounting norms by Indian Bank in its report submitted in December 1991. The
committee was of view of that…

A. If banks want to know the true and fair financial health of bank then they should
observed the prudential accounting norms while making balance sheet and profit & loss
account.
B. Classification of assets has to be done on the basis of objective criteria.
C. Provisioning should be made on the basis of classification into four different categories.

The income recognition, Assets Classification and provisioning norms also known as Prudential
Accounting Norms, provided that a bank should not show profit which is merely is a book profit
by resorting to practice like debiting interest to a loan account irrespective of its chance of
recovery and booking the same as income or by not making provisions towards loan losses.

NARSIMHAN COMMITTEE’S RECOMMENTIONS

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  Committee has suggested that banks should operate on the basis of financial autonomy
and operational flexibility.

 It has recommended “Capital Adequacy Norm” of 18%.

 These norms are applicable to all UCB‘s from 1st April, 1992.

➢ SECOND COMMITTEE

The first committee had made recommendations in 1991, which had resulted in basic changes in
the matter of treatment of income, assets classification and provisioning norms, etc … it was
considered necessary for government to continue the improvement with striker rules in future
also and for that second committee was made to continue changes with certain modifications.

The second committee includes the following point:

1. If bank is working in foreign countries at present then for them the “Capital Adequacy
Norms” is 9% which was 8% earlier.

2. Banks can’t classify the account as NAP which are guaranteed by the Central/State
government, effective from the year 2000-2001.

3. As per the existing norms, no provisions for standard assets but from March 31st 2000,
there is norm of 0.25 percent on standard assets.

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

with effect from the year ending 31st March, 2000. In future, this provision is likely to be
raised to 5%.

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5. The present norm is of 180 days for the account to be treated as NPA but after 31st
March, 2000, this period is reduced to 90 days only.

6. Banks have asked to reduce the level of NPA to 5% of their total advances till 31 st March,
2000. The percentage has to be brought down to less than 3% with effect from 31 st
March2002.

ASSETS CLASSIFACTION

CHART OF ASSETS CLASSIFICATION

ASSETS

PERFORMING ASSETS NON-PERFORMING

OR ASSETS

STANDERED ASSETS

SUB-STANDERED DOUBTFUL LOSS

ASSEST ASSETS ASSETS

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 LESS THAN 1 TO 3 ABOVE

1 YEAR YEARS 3 YEARS

DEFINITION AS PER THE CLASSIFICATION OF ASSETS

Reserve bank of India (RBI) has issued guidelines on provisioning requirement with respect to
bank advances. In terms of guideline, bank advances are mainly classified in to fallowing
categories:

1. STANDARD ASSETS:

Standard assets are one which does not carry any problems and which does not carry
more than normal risk attached to the business. Such assets should not be an NPA.

2. SUB-STANDARD ASSETS:

These assets involved the two types of view as follows….

➢ In respect to the norms of March 31, 2005 an assets would be classified as Sub standard
if it remained NPA for a period less than or equal to 12 months.
➢ An assets where the terms of the loan agreement regarding interest & principal have been
regenerated or rescheduled after commencement of production, should be classified as

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 sub-standard and should remain such category for at least 12 months of satisfactory
performance under the renegotiated terms.

1. DOUBTFUL ASSETS:

In respect to the norms of March 31, 2005 an asset is required to be classified as doubtful,
if it has remained NPA for more than 12 months.
A loan which is classified as doubtful has all the weaknesses inherent as that classified as
Sub-standard with the added characteristic that the weaknesses make collection or
liquidation in full, on the basis of the currently know fact, conditions and values, highly
questionable and improbable.
Some types of these assets are………
A. Less than 1 year
B. 1 to 3 year
C. 3 year and above

1. LOSS ASSETS

A Loss asset is one where loss has been identified by the bank or internal or external
auditors or by the Co-operation department or by the RBI inspection but the amount has
not been written of, wholly or partly.

READY RECKONKER FOR ASSET CLASSIFICATION

NO. WHEN DATE OF NPA FALLS? ASSETS CLASSIFICATION AS

ON 31-03-2007
1. Between 1-10-2006 & 31-03-2007 Sub-Standard assets

2. Between 1-10-2005 & 30-09-2006 Doubtful up to 1 year

3. Between 1-10-2003 & 30-09-2002 Doubtful assets of year to 3year

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4. On or before 30-09-2003 Doubtful assets of more than 3 year

5. No NPA date Loss asset

6. No security or salvage value of

security is less than 5%

7. Chance of realization of dues from all

available sources is practically
negligible or zero.
8. Account has been identified by the
bank or internal / external auditors or
RBI inspectors as loss assets, which
has not been written off.

GUIDELINES FOR CLASSIFICATION OF ASSETSS

The guidelines are as follows…….

1. BASIC CONSIDRATION:

 In simple term the classification of assets should be done by considering the well
defined credit weakness & extent of dependence on collateral security for
realization of dues.
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  In account where there is a potential to threat to recovery on account and
existence of other factor such as fraud committed by it will not be prudent for
bank to classify that account first as sub-standard and then as doubtful. Such
account should be straight away classified as doubtful asset or loss asset, as
appropriate, irrespective of the period for which it has remained as NPA.

1. ADVANCES GRANTED UNDER REHABILITATION PACKAES:

 Banks are not permitted to do classification of any advances in respect of which

the term have been re-negotiated unless the package of re-negotiated terms has
worked satisfactory for a period of one year.

 A similar relaxation is also made in respect of SSI units which are identified as
sick by bank themselves and where rehabilitation packages programs have been
drawn by the banks themselves or under consortium arrangements.

1. INTERNAL SYSTEM FOR CLASSIFICATION OF ASSETS AS

NPA:

 Banks should establish appropriate internal systems to eliminate the tendency

to delay or postpone the identification of NPAs, especially in respect of high
value accounts. The banks may fix a minimum cut-off point decide what
would constitute a high value account depending upon their respective
business levels. The cut-off point should be valid for the entire accounting
year.

 Responsibility and validation level for proper assets classification may be

fixed by bank.

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  The system should ensure that doubts in assets classification due to any reason
are settled though specified internal channels within one month from the date
on which the account would have been classified as NPA as per extant
guidelines.

INCOME RECOGNITION POLICY

According to the act of 1st April, 1992 the income recognition policy is as follows……

 The policy of income recognition has to be objective and based on the record of
recovery. Income from non-performing assets is not recognized on accrual basis but is
booked as income only when it is actually received. Therefore, banks should not take to
income account on non-performing assets on accrual basis.

 However, interest on advances against term deposit, NSCs, IVPs, KVPs, and Life
policies may be taken to income account on the due date, provided adequate margin is
available in the account.

 Fees and commission earned by the banks as a result of re-negotiation or rescheduling of

outstanding debt should be recognized on an accrual basis over the period of time
covered by the re-negotiated or rescheduling of credit.

 If Government guaranteed advances becomes ’overdue’ and thereby NPA, the interest on
such advances should not be taken to income account unless the interest has been
realized.

PROVISIONING NORMS

 According to the norms the provisions should be made on the non-performing assets on
the basis of classification of assets as we have already discussed.

 Taking into account this provisioning norms the bank have to make provision on different
assets like Loss assets, doubtful assets and standard assets as below:-

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(1) LOSS ASSETS

• The entire assets should be written off after obtaining necessary approval from
the competent authority and as per the provisions at of Co-Operative society
act. If the assets are permitted to remain in the books for any reasons, 100% of
outstanding should be provided for.

• If expected salvage value of the loss assets is negligible then 100% provision
should made on it.

(1) SUB STANDARD ASSETS

• A general provision of 10% on the total outstanding should be made on the

advanced given.

(1) DOUBTFUL ASSETS

• On doubtful assets provision made from 20% to 100% as per the period of assets.
The table below shows the provision on doubtful assets.

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 Period for which the advance has Provision Requirement
remained in `doubtful’ category
Up to One year 20%

Up to Up to one year 30%

More than Three year -50% as on March 31,2007
(1) Outstanding NPA as on March -60% as on March 31,2008
31,2007 -75% as on March 31,2009
-100% as on March 31,2010

(2) Advances classified as `doubtful -100%

for more than years’ on or April
1, 2007

(1) STANDARD ASSETS

• From the year ended March 31, 2000, the banks should make a general provision
of a minimum of 0.25% on the standard assets.

• However, Tier 2 banks are required to do higher provisioning on standard assets

as under:-
A. General provisioning requirement is 0.40% from the present level of 0.25%.
But in case of agriculture or in SME investors the provisioning rate is required
to be 0.25%.

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 (1) HIGHER PROVISIONS
• There is no objection if the banks create bad and doubtful debts reserve beyond
the specified limits on their own or if provided in the respective State Co-
Operative Societies Acts.

MANAGEMENT OF NPA
It is very necessary for the bank to keep the level of NPA as low as possible. Because
NPA is one kind of obstacle in the source of bank so, for that the management of NPA in bank is
necessary. And this management can be done by following way:-

1. Framing reasonably well documented lone policy and rules.

2. Sound credit appraisal on the well-settled banking norms.
3. Emphasizing reduction in Gross NPAs rather than Net NPAs.
4. Pasting of sale notice/ wall posters on the house pledged as security.
5. Recovery effort starts from the month default itself. Prompt legal action should be taken.
6. Position of overdue accounts is reviewed on a weekly basis to arrest slippage of fresh
account to NPA.
7. Half yearly balance confirmation certificates are obtained from the borrowers regularly.
8. A committee is constituted at Head Office, to review irregular accounts.
9. Due to lower credit risk and consequent higher profitability, greater encouragement is
given to small borrowers.
10. Recovery competition system is extended among the staff members. The recovering
highest amount is felicitated.
11. Adopting the system of market intelligence for deciding the credibility of the borrowers.
12. Creation of a separate ‘Recovery Department’ with Special Recovery Officer appointed
by the RCS.

RCOVERY OF NPA
 IMPORTANCE OF RECOVERY:-

1. Increase in the income of bank.

2. Increase in the trust of share holder in bank.
3. Level of NPA reduces as the recovery done.
4. Decrease in the provisioning requirements.

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  STEPS TAKEN BY GOVERNMENT TO RECOVERING NPA:-

SECURITIZATION ACT

• Now this act is also applicable to all Urban Co-Operative Banks.

• According to this act Bank can take direct possession of the movable and
immovable property mortgages against loans and out the same for such recovery,
without depending on legal process in the court.
• Maharashtra state has also by amending under co-op soc, act empower co-op bank
to appoint their staff as officer on getting order from the board of nominees.
Above both act are benefited to bank the recovery of NPA.

CHAPTER: 4

TJSB BANK

&

Page | 39
 NON-PERFORMING ASSETS

CREDIT APPRASIAL POLICY AT TJSB BANK

 INTRODUCTION
At the time of registration of bank, Loan rules were framed and approved by the DRCS,
Maharashtra. Thereafter with the approval of Board, loan rules were changed considering
guidelines issued by RBI from time to time. Now in view to increasing branch network in
number of geographically also, one common document viz. Appraisal policy framed.

 POLICY ON PRE-SANCTION

1. Application for loan should be in standardized form as devised by the bank.

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2. Branch to collect all the papers/information/documents as suggested in the respective
application form.

3. Branch to visit the borrower’s office /factory/residency and to satisfy themselves before
recommending any loan to higher authority and to keep record of such visit.

4. If applicant maintains loan/current/saving account with any other bank/financial

institution to verify such account statement and to satisfy them.

5. Branch to ascertain the promptness of applicant in making payment of Power

bill/Property Tax/LIC Premium/Existing loan interest or installment, before
recommending the proposal to higher authority.

 APPRAISAL

A. WORKING CAPITAL FACILITY

1. Working capital requirement to be assessed properly considering past performing,

holding period for debtors as also for inventory at various level, sales, etc…..

2. Working capital facilities beyond Rs.5 lacks should not be considered in the form of
overdraft.

A. TERM FINANCE

1. Term loan limit to be arrived25% margin in respect of Machinery/Equipment and

Vehicles while 50% against land & building electrification, furniture fixtures.

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 2. Sources for margin money existing earning to be ascertained.

3. Repayment capacity, considering existing to be ascertained.

4. Moratorium period to be fixed considering time required going in for commercial

production.

A. GENERAL

1. Credit facilities should not exceed segment wise, individual as also group exposures.

2. In case of switch over from other bank, branch to obtain credit information report
from the concerned bank.

3. In case of existing borrower/group borrower, branch to satisfy themselves about their

dealing with the bank.

 EXPOSURE

As per the RBI guidelines per party exposure is restricted to 15% of share capital and
Free Reserves and group exposures it is 40%. RBI has given liberty to recalculate the
exposure on the basis of profitability of September half. However
irrespective of these it is restricted at lower level i.e. Rs.1.55 core for individual
and 3.50 cores for group.

NPA NORMS OF TJSB BANK

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 CLASSIFICATION :->

1. SUB STANDARD ASSETS

Overdue of 90 days and for loan up to Rs. 1.00lacs overdue for 6 months NPA up to 12
months remain in sub standard assets.

2. DOUBTFUL ASSETS
NPA for more than 12 months is doubtful assets.

 PROVISION

1. STANDARD ASSETS

 0.25% of standard assets in SME.

 0.40% in case of all other standard loans.
 1.00% for personal loan, Commercial Real Estate Loan, Loan against shares.
 And for housing loan up to Rs. 20.00 lacs the provision is 2.00%.

1. SUB STANDARD ASSETS

 10% of sub standard assets

1. Doubtful assets

 20% for NPA from 13 months to 24 months

 30% for NPA from 25 months to 48 months
 50% for NPA from 49 months and above

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  100% for loss assets

RECOVERY POLICY AT TJSB BANK

 BANK POLICY
At present they are making recovery but procedure for the same is not documented in the
form of policy. Although the bank is committed to collection/recovery of its dues but the
dignity of and respect for the customer is central to their recovery policy. The policy is
framed o the principal courtesy, fair treatment and persuasion.

 GUIDELINES FOR BRANCH/RECOVERY STATE :->

All the branches of the TJSB Bank have to follow the following guidelines………

1. Branch to continuously inform the borrower about the due date of repayment
schedule. Recovery efforts to starts from the first month of default itself.

2. Position of overdue account to be reviewed on the monthly basis to arrest slippage of

fresh account to NPA category.

3. If the branch does not get response from the borrower for paying the amount, they
have to visit the unit and meet with the borrower. During visit to customer’s place
for collection of dues, decency and decorum would be maintained and customer’s
Privacy would be respected as for as practicable.

4. If the branch does not get any favorable response, during personal visit, they should
write a notice letter to borrower.

5. If borrower still behaves irresponsible, they should meet the guarantor and ask
guarantor to peruse the borrower. Guarantor must be informed about legal
complication to arise if borrower fails to repay the dues.

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6. On failure of all the recovery steps, branch to contact Area office/Control centre.

7. Area office/Control centre to call the borrower along with guarantor and try to find
out the reason or overdue. If borrower is in genuine difficulty, problem to be
resolved in a mutually acceptable and in an orderly manner.

8. If party behaves indifferent, legal actions must be initiated. In such case prompt legal
action and seizure action to be taken. Preference to be given for steps under
Securitization Act rather than go for filling a case in the court of Board of Nominees.

9. Reasonable notice would be given before Repossession of security and its

realization, unless the borrower is about to dispose of/remove the whole or any part
of the security from the locality where it ordinarily remained or by whom it is used
or caused to be remained or used, as the case may be, at the time of creation of
security.

CHAPTER: 6

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 NPA ANALYSIS

OF

TJSB BANK

CLASSIFICATION OF TOTAL NPA

Total NPA mainly classified in to three part (1) Sub- Standard Assets, (2) Doubtful Assets,
(3) Loss Assets. Classification of Total NPA done only know about assets position in Bank.
Bank want know about their NPA position and take appropriate action to recover NPA.

The following table shows all three types of assets and different years of TJSB bank.

Page | 46
 YEAR 2007 2008 2009 2010 2011

SUB- 212.12 268.02 303.69 28.11 507.42

STANDARD
ASSETS
DOUBTFUL 467.86 504.12 541.69 497.80 552.07
ASSETS
LOSS 0.00 0.00 0.00 0.00 0.00
ASSETS

TOTAL NPA 679.98 772.14 845.38 525.91 1059.49

Bar diagram of Classification of Total NPA

Page | 47
 CLASSIFICTION OF TOTAL ADVANCES

YEAR 2007 2008 2009 2010 2011

TOTAL NAP 408.2 857.6 958.2 778.3 681.2

SATANDARD 8622.7 11990.9 14107.9 16012.25 19237.5

ASSETS
TOTALADVANCES 9030.9 12848.5 15066.1 19790.8 19918.7

Bar diagram of Classification of Total Advances

Page | 48
YEAR WISE NPA AT TJSB BANK
 NPA IN YEAR 2007
(Rs. In Ten LACS)

Details Amount %of Total

STANDARD ASSEST 8622.7 92.52

SUB-STANDARD ASSETS 212.12 2.46

DOUBTFUL ASSETS 467.86 5.02

LOSS ASSETS 0.00 0.00

Total 9319.9 100

 NAP IN YEAR 2008

(Rs. Ten in
LACS)

Details Amount %of Total

STANDARD ASSEST 11990.9 93.95
SUB-STANDARD ASSETS 268.02 2.10
DOUBTFUL ASSETS 504.14 3.95
LOSS ASSETS 0.00 0.00

Page | 49
 Total 12763.06 100

 NPA IN YEAR 2009

(Rs. Ten in LACS)

Details Amount %of Total

STANDARD ASSEST 14107.9 94.28

SUB-STANDARD ASSETS 303.76 2.03

DOUBTFUL ASSETS 541.69 3.62

LOSS ASSETS 0.00 0.00

Total 14963.83 100

 NPA IN YEAR 2010

(Rs. Ten in LACS)

Page | 50
 Details Amount %of Total
STANDARD ASSEST 16012.5 96.82

SUB-STANDARD ASSETS 28.11 0.17

DOUBTFUL ASSETS 497.80 3.01

LOSS ASSETS 0.00 0.00

Total 16538.42 100

Page | 51
  NPA IN YEAR 2011
(Rs. Ten in LACS)

Details Amount %of Total

STANDARD ASSEST 19237.5 94.78

SUB-STANDARD ASSETS 507.42 2.50

DOUBTFUL ASSETS 552.07 2.72

LOSS ASSETS 0.00 0.00

Total 20297.00 100

RATIO ANALYSIS

To analyze the NPA situation in the bank and from that to know about the
bank credit appraisal and level of risk in the bank.We have done the ratio analysis. Ratio
analysis is the tool which will helps us to do financial analysis of bank.

Some names of ratio are as follows: ->

1. GROSS NPA RATIO.

2. NET NPA RATIO.

3. PROBLEM ASSETS RATIO.

4. SHAREHOLDER’S RISK RATIO.

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5. PROVISION RATIO.

6. SUB-SATANDARED ASSETS RATIO.

7. DOUBTFUL ASSETS RATIO.

8. LOSS ASSETS RATIO.

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 1. GROSS NPA RATIO

Gross NPA is the sum of the total assets which are classified as the NPA by bank at
the end of every year. Gross NPA is the ratio of Gross NPA to Gross Advances. It is expressed in
percentage from.

Gross NPA Ratio = Gross NPA *100

Gross Advances

(Rs. Ten laces)

YEAR GROSS NPA GROSS GROSS NPA

ADVANCES RATIO (%)
2007 408.2 9030.9 4.25%
2008 857.6 12848.5 6.67%
2009 958.2 15066.1 6.36%
2010 778.3 16790.8 4.64%
2011 681.2 19918.7 3.42%

Page | 54
Bar diagram of Gross NPA Ratio

• Analysis :
Goss NPA ratio shows the bank’s credit appraisal policy. High Gross NPA ratio means bank
have liberal appraisal policy and vice-versa.

In TJSB bank this ratio was 4.25% in March 2007 and it will be increased to 6.67% in March
2008 but thereafter has been decreased continuously 6.67% to 3.42% from year 2008 to 2011.

It is revels form the chart that bank’s Gross NPA ratio is continuously decreasing which is
positive trend for bank and we can say bank have good appraisal system.

1. NET NPA RATIO

The Net NPA Ratio is the ratio of net NPA Advances. This ratio shows the degree of
risk in bank’s portfolio. Net NPA ratio can be obtained by Gross NPA minus the
NPA provisions divided by Net advances.

Net NPA Ratio = Net NPA *100

Net Advances

YEAR NET NPA NET NET

Page | 55
 ADVANCES NPA RATIO (%)
2007 0.00 62112.80 0.00%
2008 0.00 68881.84 0.00%
2009 0.00 72363.74 0.00%
2010 0.00 66222.75 0.00%
2011 0.00 97330.62 0.00%

Bar diagram of NET NPA Ratio

• ANALYSIS :

Page | 56
NET NPA ratio shows the degree of risk in portfolio of bank. High net NPA ratio means
banks don’t have enough fund to do provision against the Gross NPA.

In TJSB bank Net NPA ratio was 0.00% from March 2007 to March 2011.Which shows
that bank has enough provision capacity. So here the degree of risk is less.

TJSB bank has done more provision every year which is good at one side but at other
side it is also reduces the profit of bank and shareholder will get more dividend.

When all bank will do provision then Net NPA will become zero but if we want to know
the true and fair situation of bank we must consider the Gross NPA of bank.

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1. PROBLEM ASSEST RATIO

This ratio is also known as the Gross NPA to Total Assets ratio. This ratio shows the
percentage of risk on the total assets of the bank. High ratio means high risk for bank.

Problem Assets Ratio= Gross NPA * 100

Total Assets

YEAR GROSS NPA TOTAL PROBLEM

ASSETS RATIO
ASSETS (%)
2007 408.2 10256.28 3.98%
2008 857.6 26015.64 3.29%
2009 958.2 30474.86 3.14%
2010 778.3 35181.75 2.21%
2011 681.2 43763.72 1.55%

Page | 58
Bar diagram of Problem Assets Ratio

• ANALYSIS:
This ratio shows the percentage of risk on the assets of banks. It shows the level of risk
on bank’s assets shoe the high risk on liquidity.

In TJSB this ratio was 3.98% in March 2007 and after that it has been decreased from
3.98% to 1.55% in March 2011.

The ratio is continuously decreasing in bank. This ratio is good for the bank which
indicates the level of risk in low in bank.

1. SHAREHOLDER’S RISK RATIO

It is the ratio of Net NPA to Total capital and reserve of bank.

Shareholder’s risk Ratio = Net NPA * 100

Total Capital & Reserve

Page | 59
 YEAR NET NPA TOTAL CAPITAL SHAREHOLDER’S
& RESERVE RISK RATIO (%)
2007 0.00 3528.76 0.00%
2008 0.00 3087.10 0.00%
2009 0.00 2688.71 0.00%
2010 0.00 3895.08 0.00%
2011 0.00 3310.22 0.00%

Bar diagram of Shareholder’s Risk Ratio

• ANALYSIS:

Page | 60
The ratio shows the degree of risk with share holder’s investment. High ratio means high
ratio with the investment.

In TJSB Bank this ratio was 0.00% in year March 2007 which shows that in that year
risk on share holder’s investment was low this ratio is continue up to year march
2011,which show that Bank have enough capacity for provision and the risk on
investment is nil.

As we know that this ratio is 0.0% shows the risk is nil but on the other side because of
more provision the profit will decrease and the shareholder will get more dividends.

1. PROVISION RATIO:
Provisions are to be made against the Gross NPA of bank. As bank make provision
for NPA it directly affects the profit of bank. This ratio shows the relation total
provision to Gross NPA.

Provision Ratio = Total Provision *100

Gross NPA

YEAR TOTAL GROSS NAP PROVISION

PROVISION RATIO (%)
2007 310.08 408.2 75.96%
2008 794.79 857.6 92.67%
2009 930.46 958.2 97.10%
2010 1114.23 778.3 143.16%
2011 986.37 681.2 144.79%

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Bar diagram of Provision Ratio

• ANALYSIS:
Provision ratio shows the degree of provision that is made against the Gross NPA of
bank. As bank made the provision it directly affect the profit of bank and also the
dividend payout ratio of bank too.

If Provision ratio is less then it means that bank has make under provision and if
provision is more then it means that it is over provision.

In TJSB bank they made 75.96% provision in March 2007 which shows that is was under
provision but after in March 2008 and March 2009 it is 92.67% and 97.10% respectively
which indicates that provision was nearer to total amount of Gross NPA but in March
2010 and March 2011 the provision ratio reach at 143.16% and144.79% which indicates
that the provision is very high.

TJSB bank should make the provision in the range of 100% to 115%. The provision in
March 2011 which is 144.79% is very high and it is not necessary to do that.

1. SUB-STANDARD ASSETS RATIO:

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Sub-standard Assets Ratio = Total sub-standard Assets *100
Gross NPA

YEAR SUB-STANDARS GROSS NPA SUB-STANDARD

ASSETS ASSETS RATIO
(%)
2007 212.12 408.2 51.96%
2008 268.02 857.6 31.25%
2009 303.76 958.2 31.70%
2010 28.11 778.3 3.12%
2011 507.42 681.2 74.48%

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Bar diagram of Sub-Standard Assets Ratio

• ANALYSIS:
This ratio shows the percentage of Sub-Standard assets in the Gross NPA of bank. High
Sub-Standard ratio means more proportion of Sub Standard assets in the Gross NPA.

High ratio shows that chance of recovery of assets its high.

In TJSB bank this ratio was 51.96% in March 2007 which is good for bank and it is 3.12
% in year March 2010 which is not good for bank.

As the level of Sub-Standard assets are chances of recovery of NPA high.

1. DOUBTFUL ASSETS RATIO:

It is the ratio of total doubtful assets to Gross NPA of the Bank.

Doubtful Assets Ratio = Total Doubtful Assets *100

Gross NPA

YEAR TOTAL GROSS NAP DOUBTFUL

DOUBTFUL ASSETS RATIO
ASSETS (%)
2006 467.86 408.2 114.61%

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 2007 504.14 857.6 59.13%
2008 541.69 958.2 56.53%
2009 497.80 778.3 63.95%
2010 552.07 681.2 81.04%

Bar diagram of Doubtful Assets Ratio

• ANALYSIS:
This ratio shows the percentage of doubtful assets in the Gross NPA of bank. High
Doubtful assets ratio means more proportion of Doubtful assets in the Gross NPA.

More Doubt assets means Bank should take action through recovery policy to reduce the
level of Doubtful assets.

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As the Doubtful assets ratio is high shows that bank should take quick action to reduce
that level.

This ratio should be less for the bank.

In TJSB Bank ratio is114% in March 2007 but after March 2008 and 2010 ratio is
between 55.00% to 65.00%. Once again March 2011 this ratio reach at 81.04% which is
not good for bank and bank must take some necessary action to recover it.

1. LOSS ASSETS RATIO

It is ratio of Total loss assets to Gross NPA of bank.

Loss Assets Ratio= Total Loss Assets *100

Gross NPA

YEAR TOTAL LOSS GROSS NAP LOSS

ASSETS
ASSETS RATIO
(%)
2006 0.00 408.2 0.00%
2007 0.00 857.6 0.00%
2008 0.00 958.2 0.00%
2009 0.00 778.3 0.00%
2010 0.00 681.2 0.00%

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Bar diagram of Loss Assets Ratio

• ANALYSIS:

This ratio shows the percentage of loss assets in the Gross NPA of bank. High loss assets
ratio more proportion of loss asset in the Gross NPA.

This should be less in bank. The high ratio indicates that bank is not good position. The
bank must take necessary action to reduce the level of loss assets.

In TJSB Co. Bank this ratio is 0.0% in March 2007 and from March 2007 it is constant.
This ratio is zero in bank which is good for bank.

FINDINGS FROM RATIO

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Ratio analysis reveals that Bank’s financial condition is good.

The observations are as follows:-

1. The Gross NPA ratio bank is 4.52% in the year 2007 after then it reaches to 3.42% in
the year 2011. Hence, the ideal gross NPA ratio is 4.00% and bank have3.42%. So,
we can say that bank’s financial condition is good.

2. Bank’s Net NPA ratio is 0.00% from 2007 to 2011 which is positive for Bank.

3. The Problem assets ratio was 3.98% in the year 2007 was the heighted ratio and from
that year it decreases to 1.55% in that year 2011 which is good for bank.

4. Provision ratio for the year 2007 is 75.96% which show that it was under provision
but in the year 2009 this ratio is 97.10% which shows that bank have profit for
provision.

5. It will be considered good if the Sub-Standard assets ratio is high. For TJSB bank this
ratio is 51.96% in the year 2007 which is good but it reached to 3.12% in year 2010
which is not favorable to the Bank.

6. Doubtful assets ratio should be low for the good health of bank and in TJSB bank this
ratio is 114.61% in the year 2007 which is very bad but in year 2009 this ratio
decrease to 56.53% which is positive for bank.

7. Loss assets ratio should be zero and bank have 0.00% ratio from March 2007 to
2011Which is good for TJSB Bank.

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CHAPTER: 7

CONCLUSION

&

SUGGESTION

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CONCLUSION:
Now as we know that NON-PERFORMING ASSETS is like a black spot on diamond.
They affect the profit of bank and also the financial health of the bank. This NPA have number
of effects on bank working.

Based on the collection and analysis of data as well as the introduction with bank officer, it
is observed that :->

• TJSB Co- bank’s NPA level is decreasing year by year which good for bank.
• TJSB Bank’s own NPA is very low.
• The Gross NPA ratio of bank is 4.25% in the year 2007 after then it reaches to 6.67% in
the year 2008. Hence, the idle gross NPA ratio is 5.00% and bank have 3.42%. So, we
can say that bank’s financial condition is good.
• Bank’s net NPA ratio is 0.00% from 2007 to 2011 it remains 0.00% which positive for
bank.
• Loss assets ratio should be zero and bank have 0.00% in the year 2007 to 2011 which is
good.
• TJSB Co. Bank has sound credit appraisal system and also sound recovery policy.
• TJSB Co. Bank’s NAA level is decreasing year by year and because of the TJSB Co.
Bank is being considered very good bank by citizens of Thane.
• Hence in present time the position of NPA in bank is much better than the past position.
In year 1997 in India the Gross NPA was 15.7% but now it is 0.00% in the year 2011.
This is very favorable to Indian economy and also banking sector if India.
• Government’s act and also the Narsimhan committee on NPA are very useful to reduce
the level of NPA.
• So, it can be concluded that level NPA in any bank is important parameter to analyze the
health of bank.

SUGGETIONS
1. TJSB Co. bank’s NPA level is decreasing year by year which good for bank but bank
should follow the recovery policy strictly.
2. In TJSB Co. bank there is no any special recovery department so bank should develop the
department for the fastest recovery of NPA.
3. Bank should motivate the staff to do fast recovery NPA.
4. Bank have more NPA in Small Scale Industry so, they should try to reduce that level of
NPA.

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BIBLIOGRAPHY

JOURNALS

• Annual Report of City Co-Operative Bank

➢ year , 2007, 2008, 2009, 2010, 2011

• Periodical circular and statement of RBI regarding to NPA managing and UCB’s

WEBSITES

• www.tjsb.co.in
• Http://finance.indiamart.com/investment_in_indian/banking_in_india.html
• http://w.w.w.banknctindia.com/banking/cintro.htm
• http://w.w.w.rbi,org.in/Home.aspx
• http://w.w.w.google.com

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 APPENDICES

 BALANCE SHEET AS ON 31ST MARCH 2011

(Rs in Thousands)

LIABLITIES As on As on ASSETS As on As on

31st Mar 31stMar 31st Mar 31st Mar

2011 2010 2011 2010
CAPITAL 5,51,108 4,00,890 CASH AND 2268989 1990078
BANK
BALANCES
RESERVE FUND 33,43,973 29,09,338 BALANCES 4680912 3209194
AND OTHER WITH OTHER
RESERVES BANK
D 3,47,15,81 2,79,97,28 MONEY AT 0 0
EPOSITS AND 4 9 CALL &SHORT
OTHER NOTICE
ACCOUNTS
BORROWINGS 19,73,786 19,27,530 INVESTMENTS 1,35,52,68 1,10,02,77
1 2
BILLS FOR 1,71,519 1,25,728 ADVANCES 1,99,18,70 1,67,60,79
COLLECTION 6 7
BRANCH 0 0 INTEREST 10,99,072 10,02,768
ADJUSTMENTS RECEIVEABLE
OVERDUE 5,42,833 5,40,287 BRANCH 6,288 3,951
INTEREST ADJUSTMENTS
RESERVE
INTEREST 1,41,164 1,24,506 BILLS 1,71,519 1,25,728
PAYABLE RECEIVABLE

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OTHER 15,64,940 12,81,821 FIXSD ASSETS 4,90,940 4,80,980
LIABILITIES
AMORTISATIO 26,312 2,03,587 CAPITAL 84,485 17,922
N RESERVE WORK IN
PROGRESS
PROFIT AND 4,95,778 4,41,929 OTHER 11,61,244 9,89,434
LOSS ASSETS
COST OF 3,28,892 3,39,311
ACQUISITION
GRAND TOTAL 4,37,63,72 3,59,52,90 GRAND TOTAL 4,37,63,72 3,59,53,90
8 5 8 5

 PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH 2011

(Rs in Thousands)
EXPENDITURE Year ended Year ended INCOME Year ended Year ended
31 Mar 31 Mar 31Mar 31Mar
2011 2010 2011 2010
Interest on 2113993 1858762 Interest on 2195877 1892422
Deposits & Advances
Borrowings
Salaries and 313507 252464 Interest on 1343149 1131880
allowances Investment

Directors and local 201 265 Dividend on 5 4

committee shares
members fees
Rent, Rate, Taxes, 114811 96831 Commission, 65923 59210
Insurance, and Exchange
Lighting and
Brokerage

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Legal and 7929 3529 Rent on safe 8595 8158
Professional Deposit
Charges Lockers
Postage, Telegrams 17154 13006 Income from 14106 5955
and Telephone sale of
Charges securities
Travelling and 7459 4799 Other 141275 90428
conveyance Income

Audit Fees 8682 6888 Written off 2609 6905

Bad Debts
recovered
Repair and 23427 15702 BDDR 30971 149842
Maintenance Written Back

Depreciation on 102905 75046

Fixed Assets

Amortization of 30811 50096

Premium on
Securities

EXPENDITURE Year ended Year ended INCOME Year ended Year ended
31 Mar 31 Mar 31Mar 31Mar
2011 2010 2011 2010
Printing and 10410 9660
Stationery

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Advertisement 35845 32062

Loss on sale of 75 230

Assets

Bank charges 9697 5785

Clearing & 5119 4331

Encoding charges
Security Charges 15004 10251

Contractual 7497 8155

Expenses

Other Expenses 401816 27662

Bad debts Written 30971 149842

Off

Provisions and 179571 129547

contingencies

PROFIT BEFORE 722026 589890

TAX

Income Tax 240000 153500

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Deferred Tax (13733) (5529)
NET PROFIT 495759 441919

TOTAL 3802510 3344804 TOTAL 3802510 3344804

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