“A STUDY ON ANALYSIS OF NON PERMORMING

ASSETS IN COOEPRATIVE BANKS”

EXECUTIVE SUMMARY

Banking sector plays a important role in flourishing economy. The failure of the banking
sector may have an adverse impact on other sectors. Non-performing assets are one of the
major concerns for banks in India. The problem of NPAs is not only affecting the banks but
also the whole economy. Different measures have been introduced by RBI in order to have
control over NPA of the banks and to improve the asset quality.

This project analyses the Non-Performing Assets of the Cooperative banks and their recovery
mechanism. This project basically studies the NPA’s of Bassein Catholic Cooperative Bank
(Malad Branch) as a case study to

 Analyze there NPA position over the two consecutive years.

 Study the figures relating to number of accounts under NPA and amount outstanding
against advances.
 Study their recovery procedure of Non – Performing Assets.

Based on the analysis of their reports, conclusion has been drawn regarding their NPA
position and tools commonly suggested by RBI to recover Non – Performing Assets are taken
into consideration. The entire project is based on secondary information collected through
internet as well as the data which was provided by the officials of Malad Branch of Bassein
CatholicCooperativeBank

1
INTRODUCTION

A strong banking sector play an important in flourishing economy. One among the foremost
necessary and major roles contend by banking sector is that of lending business. It is
generally encouraged because it has the effect of funds being transferred from the system to
productive function, which also results into economic growth and development. As there are
pros and cons in everything, the same is with lending business that carries credit risk, which
arises from the failure of borrower to fulfil its contractual obligations either during the course
of a transaction or on a future obligation.

The failure of the banking sector could have an adverse impact on other sectors. Non-
performing assets are one of the foremost issues for banks in India. NPAs reflect the
performance of banks. A high level of NPAs suggests high probability of a large number of
credit defaults that have an effect on the profitability and net-worth of banks and also erodes
the value of the asset. The NPA growth involves the need of provisions, that reduces the
overall profits and shareholder’s value.

Non-performing assets are those which are not been yielding revenue for a long period of
time. The bank will always face the problem of NPA because of poor recovery of advances
granted by the bank and several other reasons like adopting a poor recovery method thus
when the loan is not recovered from the bank effectively and expeditiously that balance
amount will become the NPA to the bank it may create some huge problem to the bank’s
financial status. It feels necessary to undertake the study concerning management of NPAs.

In order to reduce NPAs, RBI has banned loans to directors and their family members and
also directed these banks to accelerate their statutory liquidity ratio (SLR) investments in
government securities. The problem of NPAs in Indian banks is nothing but a reflection of
the state of health of the industry and trade. This project deals with understanding the concept
of NPAs, its magnitude and major causes for an account becoming non-performing in banks
and its final remarks.

2
Non-Performing Assets (NPA)

Money or Assets provided by banks to companies or the firms as loans sometimes remain
unpaid by borrowers. This late or non-payment of loans is termed as Non-Performing Assets
(NPA). They are also termed as bad assets. In India, the RBI monitors the whole banking
system and is considered as the country’s central bank, if for a period of more than 90 days,
the interest or instalment amount is overdue then that loan account will be termed as a Non-
Performing Asset.

The concept of NPAs originated when Reserve Bank of India introduced ‘prudential norms,
on the recommendations of the Narashimam Committee in the year 1992-93. As per the
prudential norms laid down by RBI,” An asset is considered to be “non-performing” if
interest on instillments of principal due remain unpaid for more than180 days (from
March31,2004, it has been decided to adopt the ,90 days, overdue norm for identification of
NPAs). In simple words, until expected income is realized from the asset, it is treated as
performing asset but when it fails to generate income or deliver value on due date it is treated
as non-performing asset. Accordingly, a non-performing asset would be a loan or an advance
where:

 interest and /or instalments of principal remain overdue for a period of more than 90
days, in respect of a term loan;
 the account remains ¸out of order, in respect of overdraft/cash credit;
 the bill remains overdue for a period of more than 90 days in case of bill purchased
and discounted;
 interest and or instalments 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 purposes.

Any amount to be received remains overdue for a period of more than 90 days in respect of
other accounts. Banks have been advised by the RBI that they should identify the non-
performing assets and ensure that interest on such assets is not recognized as income and
taken to the profit and loss account. Banks should recognize their income on accrual basis in
respect of income on performing assets and on cash basis in respect of income on non-
performing assets. Any interest accrued and credited to income account must be cancelled by
a reserve entry once the credit facility comes under the category of non-performing assets.

3
 Loan Have to Repay within90 days
Borrowedby an
Individual

Interest Amount calculated on basis of Principal Amount

Loan Borrowed by anNot recovered after 90Non-

Individual daysPerformin gAssets

Fig 1.1 Process of Non- Performing Assets

Reasons for the Rise in NPA level-

 From 2000-2008, the Indian economy was in a boom phase and banks, especially
public sector banks, have started lending extensively to companies.

 However, with the financial crisis in 2008-09, corporate profits decreased and the
Government banned lending to the projects. The situation became serious with the
substantial delay in environmental permits, affecting the infrastructure sector – power,
iron, and steel – and resulting in volatility in prices of raw materials and a shortage of
supply.

 Another reason is the tranquil lending norms adopted by banks, especially to the big
4
corporate houses, preceding analysis of their financials and their credit ratings.

5
Impact of NPAs-
 Depositors get lower returns on their investments and may also lose any uninsured
deposits.
 Borrowers have to pay a higher rate of interests on the loans in order to compensate
bad loans.
 Reputation of the bank’s shareholders is negatively affected.
 Increase in the failure due to bad investments and redirection of funds from good to
bad projects.
 Liquidity of banks is affected.

ASSET CLASSIFICATION-
 Categories of NPAs
Banks need to classify non-performing assets further into the following three categories based
on the period for which the asset has remained non-performing.
a. Standard Assets
b. Sub-standard Assets
c. Doubtful Assets
d. Loss Assets

a) Standard Assets
Standard assets are those assets which have remained non-performing for a period of 12
months or less than 12 months and the risk of such asset is normal.

b) Sub-standard Assets
Substandard assets are those which are non-performing for a period of more than 12 months,
such kind of advances possess more than normal risk and the creditworthiness of the
borrower is quite weak.

c)Doubtful Assets
For a period, which is exceeding 18 months, non-performing assets come under the category
of Doubtful Assets. Doubtful assets itself means that the bank is highly doubtful of the
recovery of its advances. The collection of such kind of advances is highly questionable and
there is the least probability that the loan amount can be recovered from the borrower.

6
d)Loss Assets
A loss asset is one where loss has been identified by the bank or internal or external auditors
or the RBI inspection but the amount has not been written off completely. In other words,
such an asset is considered uncollectible and of which little value that its continuance as a
bankable asset is not warranted although there may be some salvage or recovery value.

Provisions for NPA-

Classification Provisions
Loss 100%
Doubtful (Unsecured) 100%
Secured- Up to 1 year 25%
Between 1 year to 3 years 40%
3 years and above 100%
Substandard (Secured) 15%
Unsecured 25%

Table 1.1

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 CAUSES OF NON-PERFORMING ASSETS-
The banking sector has been facing the severe problems of the rising NPAs. But the problem
of NPAs is more in public sector banks when compared to private sector banks and foreign
banks, the NPAs are increasing due to external as well as internal factors.

EXTERNAL FACTORS-
 Ineffective recovery tribunal
The Government has set of numbers of recovery tribunals, which works for recovery of loans
and advances, due to their carelessness and ineffectiveness in their work the bank may suffers
the consequence of non-recover, their by reducing their profitability and liquidity.

 Wilful Defaults
There are borrowers who are competent to pay back loans but are intentionally withdrawing
it. These groups of people should be recognized and proper measures should be taken in order
to get back the money lended to them as advances and loans.

 Change on Government policies

With every new government, banking sector gets new policies for its operation, so it has to
cope with the changing principles and policies for the regulation of the rising of NPAs. For
example, the fallout of the handloom sector is continuing as most of the weavers’ Co-
operative societies have become defunct largely due to withdrawal of state patronage. The
restoration plan worked out by the Central government to renew the handloom sector has not
yet been implemented, so the over dues due to the handloom sectors are becoming NPAs.

INTERNAL FACTORS-
 Poor credit appraisal system
Deprived credit appraisal is an additional factor for the increase in NPAs, due to poor credit
appraisal the bank gives advances to those who are not able to repay it back. The bank should
use better credit appraisal to reduce the NPAs.

 Managerial deficiencies
The banker should always select the borrower very cautiously and should take tangible assets
as security to safeguard its interests. When accepting securities, banks should consider, the
Marketability, Acceptability, Safety, Transferability etc. The banker should follow the
principle of diversification of risk based on the famous maxim “do not keep all the eggs in
one basket”, which means that the banker should not grant advances to a only a few big farms

8
 or to concentrate them in few industries or in a few cities. If a big customer meets misfortune
or certain traders or industries affected badly, the overall position of the bank will not be
affected.

 Inappropriate Technology
Due to improper technology and management information system, market driven decisions
on real time basis cannot be taken. Proper MIS and financial accounting system has not been
implemented in the banks, which leads to poor credit collection which leads to NPA;
therefore, all the branches of the bank should be computerized.

OBJECTIVES FOR THE STUDY-

 The study aims to achieve the following objectives:

 To understand the concept of NPA.
 To study the impact of NPAs on banks.
 To study the various tools to recover NPAs.
 To know the recovery process of NPAs followed by Cooperative Banks

9
 1. INDUSTRY OVERVIEW-
About Banking Sector
Today banks have become an integral part of our life. There was a time when people living in
the cities could only benefit from banking. In modern times even common man is being able
to enjoy banking services. This is because banking services is evolving continuously. Banks
are fulfilling the needs of all the sections of the society, be it industrialists, professionals,
homemakers, traders, agriculturists and many more. Different people understand the
meaning of the term “bank” in different ways, depending upon their needs. For a
businessman it means a financial institution, for a common man it means a place where he
can store his money safely, for a homemaker and a student it means a place where they can
deposit and withdraw money as per their requirements. In simple words, banks can be
understood as prominent financial intermediaries. They provide a link in the flow of funds
from savers to users. The word ‘BANK’ is said to have originated from the word Bank,
Bancus or Banque. Banking is the backbone of modern commerce.

 As per the Reserve Bank of India (RBI), India’s banking sector is sufficiently capitalized and
well-regulated. The financial and economic conditions in the country are far superior to any
other country in the world. Credit, market and liquidity risk studies suggest that Indian banks are
generally tough and have survived the global downturn well.
 Indian banking industry has recently witnessed an innovative banking models like payments and
small finance banks. RBI’s new measures may go a long way in helping the restructuring of the
domestic banking industry.
 The digital payments system in India has evolved the most among 25 countries with India’s
Immediate Payment Service (IMPS) being the only system at level 5 in the Faster Payments
Innovation Index (FPII).

10
 Market Size-

The Indian banking system consists of 27 public sector banks, 21 private sector banks, 49
foreign banks, 56 regional rural banks, 1,562 urban cooperative banks and 94,384 rural
cooperative banks, in addition to cooperative credit institutions (FY17 data). In FY07-18,
total lending increased at a CAGR of 10.94 per cent and total deposits increased at a CAGR
of 11.66 per cent. India’s retail credit market is the fourth largest in the emerging countries. It
increased to US$ 281 billion on December 2017 from US$ 181 billion on December 2014.

Recent Developments-

 Indian banks are increasingly focusing on adopting integrated approach to risk management by
embracing the international banking supervision accord of Basel II, and majority of the banks
already meet capital requirements of Basel III, which has a deadline of March 31, 2019.
 As of May, 2019 Deposits under Pradhan Mantri Jan Dhan Yojana (PMJDY) increased to Rs
983.20 billion (US$ 14.07 billion) and 355.4 million accounts were opened in India.
 The digital payments revolution will trigger massive changes in the way credit is disbursed in
India. Debit cards have radically replaced credit cards as the preferred payment mode in India,
after demonetization. Debit cards garnered a share of 87.14 per cent of the total card spending.

11
Classification of Banks-

Fig 2.1

12
 Fig 2.3

As you can see from the above graph During the fiscal year FY16-FY20, credit off-take grew
at a CAGR of 13.93%. Whereas in FY20, total credit extended surged to US$ 1,936.29
billion.

The Indian banking system comprises of 20 public sector banks, 22 private sector banks, 44
foreign banks, 44 regional rural banks, 1,542 urban cooperative banks, and 94,384 rural
cooperative banks in addition to cooperative credit institutions.

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2. COMPANY PROFILE

HISTORY OF BASSEIN CATHOLIC CO-OP BANK LTD-

Bassein catholic Co-op bank ltd was established as Credit Co-operative Society by Social
reformer Rev Msgr. P. J. Monis, Christian missionary on 6th February 1918 along with social
activists in vasai to bring financial freedom in the region of Vasai. Through his mission he
succeeded in up-lifting the society, which has brought massive change in the peoples
lifestyle, education and financial stability.

PRODUCTS AND SERVICES-

 Trade Finance
 Net Banking
 E- Lobby
 Franking facility
 Mutual Fund Investment
 Insurance and Investment
 ATM/ Rupay Debit card
 SMS Banking
 Mobile Banking
 RTGS/NEFT
 Government Schemes

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 MILESTONES

 Established as credit society in the year 6th February 1918

 Converted into Urban Co-Op bank in 1966.
 "Scheduled bank status" conferred on the Bank in 1990.
 Implementation of Core Banking Software in 2010 across all branches.
 Tied up with SIDBI for Credit link Capital Subsidy
 Tied up with CRISIL & SMERA credit rating agency for Rating for Units.

Introduction of RUPAY debit card-

 AD-1 License granted by RBI in 2015.

 Papdy, Bangli and Holi branch completed 50 glorious years of service.
 Net banking Facility in 2016

AWARDS-

 The spectacular performance of the bank, over the years has been duly acknowledged by Co-
operative Banking Association/Federations by bestowing the following awards.
 The Maharashtra State Co-operative Banks Association Ltd., in the year 2014-15 awarded the
Bank “Late Padma Bhushan Vasant Dada Patil, Best Urban Co-op. Bank” amongst all
scheduled/ multi state co-operative banks in Maharashtra.
 Avis Publication has awarded the Bank “BANCO PURASKAR 2014”- 1st prize for the best
performance for the financial year 2013-2014 in the category of Banks having deposits of Rs.
3000 to Rs. 5000 crores.
 ‘Sahakar Bhushan’ Award 2013-14 by Maharashtra Government.
 ‘Pratibimba’ Award 2013-14 for Annual Report by Sahakar Sugandha magazine published by
Sahakar Bharti. The Indian Banker magazine has given 1st rank to our Bank on the basis of
Average Cost of Funds, Return on Assets, CRAR, and Business per Employees
 Banking Frontiers Year 2011 Award for Excellence in Recovery & NPA Management in large
Urban Co-Operative Banks Category the Bank has 45 branches with 37 Onsite and 2 Off
site ATMs. All the branches operate on CBS.

15
3. LITERATURE REVIEW-

Vivek Rajbahadur Singh (2016)

Has done study on Non- Performing Assets of Commercial Banks and it’s recovery in India.
He has done the study, where aggregate data related to NPA for Public sector Banks, Private
Sector Banks and Foreign Banks is used. According to his study, The Non-Performing Assets
have always created a big problem for the banks in India. It is just not only problem for the
banks but for the economy too. The money locked up in NPAs has a direct impact on
profitability of the bank as Indian banks are highly dependent on income from interest on
funds lent. His study shows that extent of NPA is comparatively very high in public sectors
banks. Although various steps have been taken by government to reduce the NPAs but still a
lot needs to be done to curb this problem. The NPAs level of our banks is still high as
compared to the foreign banks. It is not at all possible to have zero NPAs. The bank
management should speed up the recovery process. The problem of recovery is not with
small borrowers but with large borrowers and a strict policy should be followed for solving
this problem. He concluded that the problem of NPA needs lots of serious efforts otherwise
NPAs will keep killing the profitability of banks which is not good for the growing Indian
economy at all.

Ujjwal Mishra and Jayant Pawaskar (2017)-

His research paper, “A Study of Non-Performing Assets and its Impact on Banking Sector”.
His study is based on secondary data pertaining to the period 2011-16. In his study he has
used Analytical tools of data analysis, in this analytical tool he has done Ratio analysis and
has used Statistical tools for data analysis. He has drawn interpretation on basis of various
ratios. He concluded that the bank seems to have an increasing trend of NPA in last four
years. The bank needs be proactive in the selection of clients and customers while
sanctioning of loans. The operation of the bank is wide enough to cater to the needs of broad
spectrum of the society and economy of India at large. Bank needs to have better credit
appraisal system so as to prevent NPAs from occurring. However, once NPAs do come into
existence, the problem can be solved only if there is enabling legal structure, since recovery
of NPAs often requires litigation and court orders to recover stock loans.

16
Ambuj Tiwari and Vipul Garg (2018)-

His research paper, A Study of Non-Performing Assets of Indian Banking System and Its
Impact on Economy. The aim of this research paper is to study the current trend of NPAs in
Indian scheduled banks. The paper further examines its impact on Indian banking sector and
on Indian economy. His studied is conducted for the selected public sector bank and private
sector bank. He concluded that managing bad loans and controlling them at lowest level has
become paramount important for the banking sector in recent years. It is found that the
impact of NPAs on the Indian economy is because of mismanagement in banks.

Nivedita (2018)-

Her research paper, “A Study on NPA of State Cooperative Banks in India”. The motive of
this research paper is to access the non-performing assets of state cooperative banks all over
India. Cooperative banks are accepting deposits from members and non-members; therefore,
it is required to find out the NPA status of these banks. The study has found that NPA status
is different in each region of our country. This paper also focuses on the impact of NPA on
cooperative

17
4. RESEARCH METHODOLOGY-

Research Design

The focus of this study is to obtain the knowledge of Non- Performing Assets in Cooperative
Banks and the recovery mechanism used by them.

Data Collection:

The data for this report is collected through secondary sources in order to study the concept
of NPAs and its recovery tools and procedure.

The data collected through following sources:

 Official RBI website.

 Official website of Bassein Catholic Cooperative Bank.
 NPA reports of Bassein Catholic Cooperative Bank (Malad Branch).
 Research Papers on NPAs.

The following study evolves around Non-Performing Assets of Bassein Catholic Cooperative
Bank of its Malad Branch. This Branch is operated by Manager followed by Assistant
Manager and three staff working on Cash and Front Counter. The study is conducted in a
form of case study of the bank of their Non-Performing Assets and how they recover the
funds out of such assets, what policies or procedure do they follow are taken into
consideration by the way of their NPA reports and its position over the two financial year
2017-18 and 2018-19.

18
5. ANALYSIS AND FINDINGS-

Annual Financial Statement of Loans and Advances-

(Rs. In Thousands)
AS ON 31.03.2018 AS ON 31.03.2019
PURPOSE NO. OF AMOUNT NO. OF AMOUNT % TO
ACCOUNTS OUTSTANDING ACCOUNTS OUSTANDING TOTAL
2 3 5 6 7
INDUSTRY
(a) Small- scale 14 474.22 20 458.43 3.74
Industries
(b) Others
TRADE
(a)Wholesale trade 16 6020 9 5583 45.66
(b)Retail trade 20 1928 16 1972 16.12
Professionals & self- 1 30.02 1 23.81 0.19
employed artisans and
craftsmen
Transport operators 4 25.62 5 21.57 0.17
Education 5 24.79 6 69.28 0.56
Construction and/or 34 585.54 17 451.59 3.69
repairs to building etc.
Agricultural Loans 3 870.05 2 766.78 6.27
(a) Agricultural
production loan
(b) Activities allied to
Agriculture
Consumption/
Ceremonial Purposes

Repayment of PMLN 49 690 100 2634 21.54

Others (Other Personal 69 476 60 245.86 2.06
Loan & Against
Deposits)
215 11124 236 12227.29 100

Source: Bassein Catholic Cooperative Bank (Malad Branch)

Table 7.1

19
This is Annual Financial statement of Loans and Advances of Bassein Catholic
Cooperative Bank Ltd. (Malad Branch). This table shows Purpose- wise analysis of
Loans and Advances outstanding including Overdraft and Cash Credits as at the end of
the last financial year i.e., 31st March 2018 and on the date of inspection i.e., 31 st March
2019.

The purpose wise analysis includes Industry, Trade, Professionals, Transport operators,
Education, Construction, Agriculture, Consumption, Personal Mortgage loan and Other
Personal loan. Interpretation of this report starts with Industry. Industry is further
classified as Small- Scale Industries and Others. Small- Scale Industries shows that in
current year (2019) there has been an increase from 14 accounts to 20 accounts.
However, amount outstanding for current year (2019) is less than previous year, this
ultimately has shown changes in % to Total. Further the Trade includes Wholesale trade
and Retail trade, out of which Retail trade shows higher number of accounts in
comparison of Wholesale trade. However, the amount outstanding in the Wholesale trade
is higher than that of Retail trade., which shows higher % to total in the same. On
individual aspects of Wholesale trade and Retail trade, amount outstanding in Wholesale
trade of current year in slight lower than previous year i.e., 5583 thousand < 6020
thousand.

From the report it can be analyzed that further number of accounts outstanding for loans
and advances and cash credits is higher for purpose of construction, repayment of
Personal Mortgage loan and Other Personal loan. Amount outstanding for the Personal
Mortgage loan is higher in 2019 i.e., 2634 thousand than the previous year.

Out of the statement number of accounts for purpose of Professionals is lower with only
1 account outstanding followed by loans and advances for purpose of Transport
operators and Education. Loans and advances for Agricultural purpose has amount
outstanding of 766.78 thousand for current year (2019) lower than amount outstanding
for previous year i.e., 870.05 thousand.

Thus, to conclude there are 215 accounts outstanding with an amount of total 11124.30
thousand which is slight lower than that of current year (2019) which is 236 accounts
outstanding with an amount of 12227.29 thousand in total.

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 Annual NPA Report-
31-Mar-18 31-Mar-19

Rs. In Thousands Rs. In

Thousands
Category Total NPA's NPA's as Total NPA's NPA's as
Advances percentage of Advances percentage of
Outstanding advances Outsatnding advances

Priority sector

Agriculture

Micro and small 30104 5614

Enterprises
Education Loans 2479.65 4327

Housing Loans 12196.78 6931

Other priority sector

Professional 3002

Total

Non Priority Sector

Medium and large

Industries
Other non- priority 1064647.94 4145 0.37% 1205857 6601 0.53%
sector
Total

Grand Total 1112430.37 4145 0.37% 1222729 6601 0.53%

Source: Bassein Catholic Cooperative Bank (Malad Branch)

Table 7.2

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This is Annual NPA report of Bassein Catholic Cooperative Bank (Malad Branch)
This table shows segment- wise breakup of NPA’s for the Financial year 2018 and 2019.

In this table there are two categories viz Priority sector and non-Priority sector. The
Priority sector further includes Agriculture, Micro and Small Enterprises, Education
loans, Housing loans, Other Priority sector and Professional. The Non-Priority sector
includes Medium and Large Industries and Other Non-Priority sector.
The total advances outstanding in priority sector is higher in Micro and Small
Enterprises which is 30104 thousand in 2018 which is comparably low in current year
(2019) i.e., 5614 thousand.
Housing loans outstanding total; advances follow Micro and Small Enterprises with
12196.78 thousand further followed by Professional and Education Loans in 2018.
However, in current year (2019) the total advances in housing loan is slight higher
followed by advances in Micro and Small enterprises and Education Loans. No advances
are pending for Professional; category of Agriculture is also NIL in both the financial
year.

The total NPA’s for the year 2018 is around 4145 thousand and for the year 2019 it is
6601, which shows there are more NPA’s in current year. Thus, by comparing the NPA’s
with the total outstanding amount the percentage of their difference shows 0.37%. in
2018 whereas in 2019 it is 0.53% which is higher.

Thus, after analyzing the NPA statement for both the financial year it can be concluded
that 2019 has more NPA though the outstanding advances in 2019 is much lower than
2018, however the outstanding advances in non- priority sector is higher in comparison
to previous year (2018). Even though 2018 has outstanding advances from professional
which was no longer present in 2019 the NPA in 2019 shows an increasing trend.

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 NPA movement during the year 2018-19-
NPA MOVEMENT DURING THE YEAR 2018-19

PARTICULAR NO. OF ACCOUNTS AMOUNT

NPA AS ON 31.03.2018 3 41.45

RECOVERY DURING THE YEAR

ADDITION DURING THE YEAR 2 24.56

NPA AS ON 31.03.2019 5 66.01

Source: Bassein Catholic Cooperative Bank (Malad Branch)

Table 7.3

The following table shows the NPA movement during the year 2018-19 of Bassein
Catholic Cooperative Bank (Malad Branch). It has been analyzed that there is no
recovery done during this time frame. The table shows that there were 3 accounts
classified as NPA for the year 2018 with an amount outstanding of 41.45 thousand. An
addition was made during the year of 2 accounts with an amount of 24.56 thousand.
Thus, at the end of the year i.e., on 31st March 2019, the total of 5 accounts with an
amount of 66.01 thousand were outstanding.

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 DEPOSITS:

Type of 2018-19 (Cr) % 2017-18 (Cr)

Current 265.33 3.81 254.44 4.17
Savings 1361.13 19.56 1259.50 20.65
Term 5331.64 76.63 4584.53 75.18
Total 6958.10 100.00 6098.47 100.00
Table 7.4

The pace of growth in deposits of the bank remained higher at 14.10% as compared to
the growth rate in banking sector at 9.5%. During the F.Y. 2018-19, the bank's deposit
grew by 859.63 Crore from 6098.47 Crore to 6958.10 Crore.

ADVANCES:

Type of Advances 2018-19 % 2017-18 %

Term Loans 2971.87 70.44 2919.58 72.37
Cash Credit 785.84 18.62 719.49 17.83
Overdraft 461.54 10.94 395.42 9.80
Total 4219.25 100.00 4034.49 100.00
Table 7.5

Credit in banking sector grew 14% in F.Y. 2018-19. Bank credit to micro and small
industries was flat at 0.6% and credit to medium industries was 0.7%. Meanwhile, there
are structural changes happening in Indian banking industry due to the innovative
banking models rolled out like payments and small finance banks.

24
 NON-PERFORMING ASSETS (NPA):

NON-PERFORMING ASSETS (NPA): (In Crores)

Particulars 2018-19 % 2017-18 %

Gross NPA 209.86 4.97 158.79 3.94
Net NPA - - - -
Total Advances 4219.25 - 4034.49 -

Like all other banks, there were challenges faced in the recovery of NPAs. However, on
account of the prompt and timely action by the bank's recovery team, the stressed assets were
resolved. Due to which bank's Gross NPA stood at T 209.86 Crore as on 31s' March, 2019
amounting to 4.97% of Gross Advances of the bank.

25
 NPA
250
209.86
200

158.79
150

100

50

0
2017-2018 2018-2019

Gross NPA

Fig 7.1

The gross NPA ratios of Scheduled Commercial Banks during F.Y. 2018-19 stood at 9.3 %,
which continues to reflect the poor credit scenario. The Bank has also made requisite
provisions in respect of NPAs as per the extant guidelines of the Reserve Bank of India,
pursuant to which, the bank's percentage of Net NPAs to the Net Advances is 0% for the year
ending 311" March, 2019

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PROCESS OF RECOVERY OF LOANS-

 In the event of default in repayment by a borrower, his account must be declared as

NPA, and a written notice is issued to the borrower informing him to repay his
liabilities.
 As per the guidelines under SARFAESI Act, the customer whose account has been
classified as NPA has to make payment of entire amount within 60 days of the
issuance of the notice or the bank has a right to take over the possession of the
property of the customer kept as a security against advances.
 Recovery in the Co-operative banks can be done as per SARFAESI Act, 2002 and
Maharashtra State Co-operative Act 1960
 Under the section 101 of Maharashtra State Co-operative Act, 1960 a certificate is
granted by the Registrar under sub-section (1) or (2) as a conclusive proof of the
arrears stated to be due therein, and the same shall be recoverable according to the law
for the time being in force for the recovery.
 On receipt of the Recovery Certificate, the Recovery Officer shall prepare demand
notice for being sent to the Sale-Officer for attaching the movable property of the
member concerned.
 The Sale Officer, on receipt of recovery paper from the Recovery Officer, shall visit
the flat of the member concerned for preparing an inventory of the movable property
and handover such list to the member concerned and serve the demand notice on the
defaulter member.
 If the amount not paid by the member concerned immediately on service of the
demand notice, the Sale Officer will seize the movable property.
 Thereafter, the Sale Officer publish sale notice in two newspapers out of which one in
Marathi and other in English within one month.
 Then the Sale Officer will fix the date, time and place for auction of the movable
property seized and auction out the same and pay the sale proceeds thereof to the
Society, in satisfaction of the outstanding dues payable by the defaulting member to
the society.

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TOOLS FOR RECOVERING NPAS

Credit information bureau (India) limited (CIBIL):

 The Credit Information Bureau (India) Limited (CIBIL) was setup in 2001 by the
State Bank of India, HDFC ltd. M/s Dun and Brad Street Information Service (India)
Pvt Ltd. And M/s Trans Union
 CIBIL help the banks reduce their NPAs by getting faster credit information about
customers.
 The CIBIL maintains a database of negative and positive information of all
borrowers.
 accounts and provides it in the form of credit information reports (CIRS) to its
members.
 It now has 87 members which include commercial banks, financial institutions
housing finance institutions and non-banking finance companies.
 Only those members who provide full data about their borrowers to CIBIL are
allowed to access reports.

Lok Adalat’s

 To settle disputes involving account in “doubtful” and “loss” category.

 Outstanding balance of Rs. 5 lacs for compromise settlement.
 Proved to be quite effective for speedy justice and recovery of small loans.

Debt Recovery Tribunals (DRT)

 To recover bad debt quickly and efficiently.

 DRT has powers to grant injunctions against the disposal, transfer or creation of third-
party interest by debtors in the properties charged to creditor and to pass attachment
orders in respect of charged properties
 In case of non-realization of the decreed amount by way of sale of the charged
properties, the personal properties if the guarantors can also be attached and sold.

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Asset Recovery Construction Industry Limited (ARCIL)-

 A company which is set up with the objective of taking over distressed assets from
banks or financial institutions and to reconstruct or re-pack these assets to make those
assets saleable.
 To buy out troubled loan from banks and make special efforts at recovering value
from the assets, if necessary by special legislation, with special powers for recovery.
 Restructuring of weak banks to divest the bad loan portfolio.

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6. LIMITATION OF THE PROJECT-
 This project covers limited information of NPA with reference to Bassein Catholic
Co- Operative Bank of its Malad Branch.
 Bank data for NPA is restricted to only 2 years.

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7. CONCLUSION-

Banking sector plays an important role in economic development of the country. One of the
most important and major roles played by banking sector is that of lending business. It is
generally encouraged because it has the effect of funds being transferred from the system to
productive purposes, which also results into economic growth. Money or Assets provided by
banks to companies as loans sometimes remain unpaid by borrowers. This late or non-
payment of loans is defined as Non-Performing Assets (NPA). A high level of NPAs suggests
high probability of a large number of credit defaults that affect the profitability and net-worth
of banks and also erodes the value of the asset.

The above information collected is of Bassein Catholic Cooperative bank (Malad Branch). It
can be concluded from the above report that over last 2 years the NPA position of Bassein
Catholic Cooperative Bank shows a slight increase and there is deterioration is the asset
quality. A systematic process for the recovery of the assets is followed under SARFAESI
Act, 2002 and Maharashtra State Cooperative Act, 1960. Like all other banks challenges are
faced in the recovery of NPA’s. However prompt and timely actions are been taken by the
bank’s recovery team. Special efforts are being made to dispose off the properties taken into
possession.

Various tools are being used for the recovery of NPAs. Thus, Effective credit monitoring,
timely actions and use of legal recourse wherever necessary are considered to be the key
factors in maintain asset quality of bank.

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8. REFERNCES-

WEB LINKS

 https://www.sesameindia.com/blog/the-significance-of-recovery-tools-in-npa-
management- sesameindia/
 http://www.indiancooperative.com/lawslegislations/recovery-under-section-101-of-
the-m- c-s-act-1960/
 https://www.bccb.co.in
 https://www.rbi.org.in

 Vivek Rajbahadur Singh (2016) – “A study on Non – Performing Assets of

Commercial Banks and its recovery in India”. Annual Research Journal of SCMS,
Pune. Volume 04
 Retrieved from https://www.scmspune.ac.in/chapter/2016/Chapter%209.pdf
 Ujjwal Mishra and Jayant Pawaskar (2017) – “A study of Non- Performing Assets
and its impact on Banking sector”. Journal for Research. Volume 03
 Retrieved from https://www.journal4research.org/
 Ambuj Tiwari and Vipul Garg (2018)- “A study of Non- Performing Assets of
Indian Banking System and its impact on Economy”. IJMBS. Volume 08
 Retrieved from http://www.ijmbs.com/Vol8/issue2/2-ambuj-tiwari.pdf
 Nivedita (2018)- “A study on NPA of State Cooperative Banks in India”. BEST:
International Journal of Management Information. Volume 06

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