JVIMS Jamnagar

A

SUMMER INTERNSIP PROGRAMME

AT

THE NAWANAGAR CO OPERATIVE BANK LIMITED

AND STUDY ON

“THE MANAGEMENT OF NPA IN CO-OPERATIVE BANKS”

(WITH SPECIAL REFERANCE TO JAMNAGER CITY)

SUBMITTED BY

VORA KHUSHBOO D.

MBA SEM-III

Guided by

PROF. KAUSHAL BHATT

ACADEMIC YEAR

2009-2011

SUBMITTED TO

JAYSUKHLAL VADHAR INSTITUTE OF MANAGEMENT STUDIES

(JVIMS)

JAMNAGAR

AFFILIATED TO

GUJARAT TECNOLOGYCAL UNIVERSITY (GTU)

AHEMDABAD

JVIMS Jamnagar

DECLARATION

I undersigned VORA KHUSHBOO D. a student of MBA 3rd

semester declare that I have

prepared this project report on “ The Organizational Study Of The Nawanagar Co-Operative

Bank Limited and study on “MANAGEMENT OF NPA IN CO OPERATIVE BANKS” at

under Mr. AJAY SHETH and by PROF. KAUSHAL BHATT of JVIMS.

I also declare that this project report is my own preparation and not copied from anywhere

else.

(Signature)

___________

Student's Name

Roll No.:

(Note: - This declaration is to be signed by student)

JVIMS Jamnagar

ACKNOWLEDGEMENT

I express my sincere gratitude towards Mr. Ramniklal Shah (Managing director-The

Nawanager co-operative Bank Ltd.) and Mr. Kiranbhai R. Madhvani (Chairman-The

Nawanager co-operative Bank Ltd.) for providing me with this opportunity to undertake a

summer training, which groomed me and gave me an insight into the corporate world.

I am deeply indebted to Mr. Ajay R. Sheth (Branch manager-main branch-The NCBL) who

acted as my mentor and guided me through every step of the project. His guidance and

unprecedented support made it possible for me to diligently explore every aspect of the

project. I am grateful to Mr. Nitin Mehta (Assistant manager- main branch) whose constant

help proved to be highly useful in successful completion of the project.

I would also like to express my heartfelt gratitude to Jayshukhlal Vadhar Institute of

Management. I also acknowledge our esteemed faculty Mr. Kaushal Bhatt who strengthened

our foundation and enable us to put our first step in corporate world.

Lastly, I thank all those people who directly and indirectly supported me in my

encouragement. Thanking them all is a small gesture of generosity

JVIMS Jamnagar

PREFACE

Practical knowledge gives an opportunity to measure the connection between concepts and

their execution, to test and verify application of theories and comprehends interaction

between management theory and real-life exposure. To procure practical knowledge and to

get real insight into organizational culture summer internship programme has been made a

part of curriculum of MBA programme.

The objective of summer internship programme at the end of second semester of MBA is to

develop skill and knowledge among students to develop a practical bias as a supplement to

the theoretical study of management.

The preparation of this project report is based on facts and findings noted during the

information received during summer internship programme and from written and published

documents and the secondary information.

The study report on the comparative analysis of NPA of the different co-operative banks

gives an insight into the performance of the different banks and the different ways they opt

for the management of the NPAs.

JVIMS Jamnagar

CONTENTS

Sr. no. Particulars Page no.

1. Industry Detail 1

2. Company Detail

2.1. Profile of the Nawanagar Bank

2.2. History of the Nawanagar Bank

2.3. Board of Directors

2.4. Detail about various branches and branch managers

2.5. SWOT Analysis

2.6. Management Committees

2.7. Product and Service Portfolio

2.8. Corporate Social Service by the Bank

2.9. Awards and Achievements by the Bank.

2.10. Future Plans

4

5

7

9

11

12

13

15

25

25

26

3. Conceptual Framework of NPA

3.1. Introduction

3.2. Definition

3.3. Income Recognition

3.4. Asset Classification

3.5. Guidelines for Asset Classification

3.6. Causes and Consequences of NPA

27

28

29

32

34

35

37

4. Research Methodology

4.1. Introduction

4.2. Rationale for Study

4.3. Problem Statement

4.4. Review of Literature

4.5. Research Objectives

4.6. Research Design

4.7. Population And Sample Size

4.8. Sampling Design

4.9. Period of the Study

39

40

41

41

42

44

45

45

46

46

JVIMS Jamnagar

4.10. Scope of the Study

4.11. Data Collection Instruments

4.12. Tools for Analysis

4.13. Hypothesis for the Study

4.14. Limitations of the Study

46

47

48

52

53

5. Analysis of NPA

5.1. Gross NPA to Gross Advances

5.2. Interest Income to Working Funds

5.3. Operating Expense to Total Income

5.4. Net Profit to Total Assets

5.5. Total Investment to Total Assets

5.6. Gross NPA to Total Assets

5.7. Percentage Change in Gross NPAs

5.8. Percentage Change in BDDR

5.9. Gross NPA to BDDR.

54

55

58

61

64

67

70

73

75

77

6. Findings and Conclusion 80

7. Suggestions 83

8. Appendices

8.1. List of Tables

8.2. List of Charts

8.3. Two Way ANOVA

8.4. Profit & Loss a/c and Balance Sheet of Nawanagar Bank

8.5. Profit & Loss a/c and Balance Sheet of Vardhman Bank

8.6. Profit & Loss a/c and Balance Sheet of Jamnagar peoples

Bank

8.7. Profit & Loss a/c and Balance Sheet of Mahila Bank

84

84

85

85

86

87

88

89

9. Bibliography 90

JVIMS Jamnagar

INDUSTRY

DETAILS

JVIMS Jamnagar

BANKING INDUSTRY

INTRODUCTION

Banking in India originated in the first decade of 18th

century with The General Bank of

India coming into existing in 1786. This was followed by Bank of Hindustan. Both these

bank are now defunct. The oldest bank in existence in India is the State Bank of India being

established as “The Bank of Bengal” in Calcutta in June 1806. A couple of decade later

foreign bank like credit Lyonnais started their Calcutta operation in the 1850s. At that point

of time, Calcutta was the most active trading port, mainly due to the trade of British Empire,

and due to which banking activity took roots there and prospered. The first fully India owned

bank was the Allahabad Bank, which was established in 1865.

By the 1900s, the market expanded with the establishment of bank such as Punjab National

Bank, in 1895 in Lahore and Bank of India, in 1906, in Mumbai- both of which were founded

under private ownership. The Reserve Bank of India formally took on the responsibility of

regulating the India banking sector form 1935. After India‟s independence in 1947, the

Reserve Bank was nationalized and given broader powers.

JVIMS Jamnagar

(Chart no: 1)

BANKING SYSTEM IN INDIA

Apex Banking Institution

RBI

(Source: BANKING THEORY & PRACTICE, By – P.K Srivastava)

IDBI Export Import Bank of India

(EXIM-BANK) IIBI NABARD National

Housing

Bank Commercial

Bank (C.B.)

India

C.B

Foreign

C.B

Public

sector

Bank

Private

Sector

Bank

National

Level State Level

IFCI ICICI SIDBI

Cooperative

Bank Land Development

Bank R.R.B

State

Cooperative

Bank

Central

(District)

cooperative

Bank

Primary

Cooperative

Bank

State Land

Development

Bank

Primary

Land

Development

Bank

JVIMS Jamnagar

COMPANY

DETAILS

JVIMS Jamnagar

PROFILE OF THE NAWANAGER BANK

NAWANAGAR BANK had 120 sq. feet premises with 6 employees and 50 lacks deposits in

1986 and now the bank is proud to possess 8 branches (all computerized) around 100 devoted

employees and more than 250 cores of deposits. Before 15 years the system of Nawanagar

Bank got connected with LAN system. Nawanagar was the first ever fully air-conditioned

bank.

Since its inception it provides loans for different purposes to the Small scale units,

Manufacturers, Doctors, etc. It has played a great role in the Industrial development by

providing loans for Passenger Rickshaw, Goods Rickshaw, Trucks, Tempos, Taxis, Medical

Instruments, Factory Sheds, and Construction etc. which indirectly helped in the industrial

development. Farmers and other people are provided loans against gold, whereas middle class

people are provided with Housing Finance in the form of finance provided for construction or

for purchasing house with reasonable interest and conditions.

Bank has completed its prestigious 31years of service and is acclaimed “NUMERO UNO”

co-operative Bank in city. The motto of Nawanagar bank is “co-operation & service.”

JVIMS Jamnagar

“YOUR CO-OPERATION OUR SERVICE”

Following are the details of the bank in brief:

Name of the Bank: The Nawanagar Co-Operative Bank Ltd.

Phone Number. :( 0288) – 2676909, 2540493

E-mail ID: mail@nawanagarbank.co.in

No. & Date of Registration: C – 1907, 17th July 1978

Date of Issue of License: 2nd

April 1980

Area of Operation : 20 kms. Around, from the respective branch

No. & Name of Branches: 1.DigVijay Plot Branch

2. Udhyognagar Branch

3. Hospital Road Branch

4. Saru Section Branch

5. Ranjit Road Branch

6. Gulabnagar Branch

7. Dared Branch

8. Khodiyar Colony Branch

JVIMS Jamnagar

HISTORY OF THE NAWANAGAR BANK

Co-operative banks are formed on the principle of co-operation to extend credit facilities to

farmers and small scale industrial concerns and promotes in general the habit of thrift and

self-help among the low and middle income groups of the society. The Commercial Co-

operative Bank in Jamnagar, based on this principle was highly succeeded and by seeing this

and also the capital requirements of the SSI and need for its development, Late Cabinet

Minister and the Managing Director of the Commercial Co-operative Bank, Late Shri

Gulabchandbhai Shah decided to start a new Co-operative Bank in the area of Dig Vijay Plot.

However, at that time it was very difficult to win the trust of the people and achieving the

license. Because, of this the Bank witnessed many hurdles in the beginning. The promoters

and the bank had to struggle a lot for the getting the primary or necessary share capital as

well as the shareholders. Mr. Gulabchandbhai Shah –Advisor, Mr. Madhusudan Zhaveri and

Late Jayantibhai Aniaria–Chairman constantly tried to get the license for the establishment of

the bank.

Finally on 17th July, 1978 the bank got registered and The Nawanagar Co-operative Bank

received the license from the RBI on 28th August, 1980.

In any Institution „Success‟ depends on the management. So, management must be

experienced, enthusiastic and efficient. The manager should have all the abilities but

unfortunately the Nawanagar Co-operative Bank didn‟t had any experienced manager in the

first 6 years and thus was not able to obtain the expected results. In the year 1986, Mr. K.P.

Jani was retiring from Central Bank of India – Bombay and had experience of 42 years in

different branches, and had played successful role during his service in the Central Bank of

India – Jamnagar and keeping this in mind he was recruited in Nawanagar Bank during the

same year.

Mr. Jani‟s experience truly helped the staff of the bank and under his solid managerial ship

the bank recorded a tremendous change within 3 to 4 years in the bank‟s Deposits, Loans and

Profitability. He also played a great role in creating synergy among banks Directors,

JVIMS Jamnagar

Workers, Customers and Shareholders. Since then the bank had never looked back and

gradually establish its position as a prominent bank of Jamnagar.

Customer Service is also a crucial part of business and since 1980; the bank had two key

objectives i.e. to provide higher and quicker customer service and the development of the

city. So for this they gradually opened 8 Branches in different areas of Jamnagar, all of which

are centrally computerized, air-conditioned and are linked by “LAN” system. At present the

management of the bank is also trying to inter-link all of its branches so that it can provide

better services to its customers. The growth of the Nawanagar Bank can also be judged by

comparing the results dated 31st March, 1981 and 31st March, 2010.

TABLE NO. 1

RESULTS OF 1981 & 2010

Particulars On 31-03-1981

( Figures in lacs)

On 31-03-2010

( Figures in lacs)

Paid Up Share Capital 3.00 453.74

Reserves 0.21 7243.77

Deposits 25.37 25142.29

Advances 10.59 9571.48

Profit / Loss -0.32 449.92

Working Capital 32.76 34383.61

Source: The 32th

Annual Report of the Nawanagar Bank

JVIMS Jamnagar

BOARD OF DIRECTORS

1. Shri Kiran R. Madhvani Chairman

2. Shri Satishchandra M. Kundalia Vice-Chairman

3. Shri Ramniklal K. Shah Managing Director

4. Shri Nathalal V. Mungra Joint Managing Director

5. Shri Nilesh M. Toliya Director

6. Shri Dhirajlal J. Kanakhra Director

7. Shri Dhirajlal M. Shah Director

8. Shri Parmanand V. Khattar Director

10. Shri Chandulal R. Shah Director

11. Shri Subhashchandra K. Shah Director

12. Shri Vijaykumar M. Sheth Director

13. Shri Prasantbhai M. Mahershi Director

14. Shri Vrajlal G. Khareya Director

15. Shri Hiteshbhai G. Parmar Director

16. Shri Harishbhai H. Mehta Director

17. Shri Umeshbhai V. Makad General Manager

18. Shri Sureshchandra J. Fofariya Deputy General Manager

18. Shri Keshavlal P Jani Advisor

AUDITORS OF

THE NAWANAGAR CO-OPERATIVE BANK LTD.

Auditor: Finava & Associates.

Prop: Manoj Finava.

JVIMS Jamnagar

VISION

The vision statement shows why the company is in present business. In simple words,

through Vision we can get an idea about the goals of the company.

Nawanagar Bank‟s Vision is

“Service and Co-operation by providing the finance facilities”

The above vision statement of the bank clearly shows that bank‟s goal is to provide service

and Co-operation and satisfy the financial needs of their customers.

MISSION

The mission statement indicates what an organization wants to achieve with the available

resources and within a short period of time. Mission is a path moving towards the vision and

show a way how to achieve the goals. It may be changed periodically to take the advantage of

the changing market scenario or to keep pace with the changing Governmental Policies and

Economic Conditions of the country.

Nawanagar Bank‟s mission is

“To give the effective return on deposits and provide a loan to the needful member of

the bank”.

The mission statement makes it very clear that why the Nawanagar bank is in its present

business. It main purpose is to provide the effective return to the depositors and loans to the

needy members i.e. shareholders of the bank.

JVIMS Jamnagar

DETAIL ABOUT VARIOUS BRANCHES

AND BRANCH MANAGERS

NAME OF

BRANCH

DATE OF

STARTING

NAME OF

BRANCH

MANAGER

Dig Vijay Branch 28th

Aug. 1980 Mr. A.R. Sheth

Udhyognagar Branch 22nd

Oct. 1993 Mr. R.S. Shah

Hospital Road Branch 11th

Dec. 1995 Mr. N.P. Vora

Saru Section Branch 28th

Mar. 1996 Mr. K.H. Shah

Ranjit Road Branch 16th

Mar. 1998 Mr. S.C. Mehta

Gulabnagar Branch 17th

Mar. 2001 Mr. P.H. Mehta

Dared Branch 12th

May, 2008 Mr. R.P. Shah

Khodiyar Colony Branch 29th

sept.2009 Mr. V.G. Vora

One extension counter has been started in L. G. Hariya school in last year

JVIMS Jamnagar

S.W.O.T. ANALYSIS

STRENGTH

Self motivated as well as committed and coordinated staff.

Transparency in operation.

Good Management and Well Accounting System established.

All the branches are linked with Main Branch

Bank provides speedy and customized service.

Bank provides the facility of Foreign Inward Bill Collection & Foreign Bill

Remittance

Any staff member is not a part of any union.

WEAKNESS

Limited area for operation.

No branches outside Jamnagar

Insufficient capacities for deposits mobilization and servicing.

Advances are less compared to deposits.

OPPORTUNITIES

Positive response from public, financial institutions, SIDBI, etc.

Starting of Bank assurance.

Development of new application for existing products.

More number of schemes for advances.

To start ATMs.

Technological innovation.

THREATS

Multinational & Private Banks are established with huge facilities & professional

approach.

NCBL need to establish and practice innovative strategies in order to hold its present

market share otherwise it will lose “NUMERO UNO” position.

A shift in the consumer‟s taste.

JVIMS Jamnagar

MANAGEMENT COMMITTEES

Management is the task of managing men, materials, money and machines effectively and

efficiently. A sound management is an essential prerequisite for a successful organization.

For managing various activities at Nawanagar Bank, several committees are formed since its

inception.

Main Advance Committee:

This committee takes the decision about the loans amounting from Rs.10 Lacks to

Rs.25 Lacks. It consists of 7 members.

Mini Advance Committee:

This committee takes the decision about the loans amounting from Rs.3 lacks to Rs.10

lacks. It also consists of 7 members.

Peta Committee:

This committee sanctions the loan amount up to Rs.3,00,000 There are 4 members in

the committee.

Staff Committee:

This committee considers all the matters concerning to Personnel Administration of

Bank, Revision of Pay Scale, Recruitment, etc. There are 7 members in the committee

Audit & Recovery And Assets & liabilities Management Committee:

Bank has appointed concurrent and special auditors for conducting the audit work of

bank accounts. This committee reviews various audit reports and their follow-up. There are 6

members in Audit & Assets Liability Management and Recovery Management Committee.

Share Holder Welfare Committee:

To consider welfare measures of the share holders such as Reimbursement of Medical

Expenses up to 10,000, Annual Gifts consisting of silver coin of 100 gm, Special Gold coin

JVIMS Jamnagar

of 4 gm were given on completion of 25 years of bank, this committee is held. There are 7

members in this committee.

Investment Committee:

This committee considers various proposals for deployment of banks surplus fund

from time to time and takes the important decision pertaining to the surplus funds. There are

4 members in the committee who also takes care regarding the maintenance of various ratios

such as CRR, SLR, etc

Settlement Advisory Committee:

This committee considers proposals of bank dues under the Time Settlement Scheme

by RBI. There are 6 members in the committee.

Members Welfare Committee:

This committee considers Various Welfare measures for the Shareholders Such as

Reimbursement of Medical expenses, Prize Schemes, Annual gifts to members. There are 4

members in the committee

Thus, in this way different committees work for the progress and development of The

Nawanagar Co-operative Bank

JVIMS Jamnagar

PRODUCT AND SERVICE PORTFOLIO

The various products and services offered are discussed as follows:

ACCEPTANCE OF DEPOSITS

There are different kinds of deposits which bank accept and pay interest at different rates.

The rates of interest are decided on the basis of time or period of deposits and the purpose of

deposits.

The following are the different deposits which Nawanagar Bank accepts and their respective

rates (per annum) which it provides:

Current Deposits NIL

Savings Deposits 3.5%

Term Deposits 6 to 9%

Daily Collection Scheme 2.5%

Let us discuss all of the above deposits in brief:

CURRENT DEPOSITS :

Current deposits are normally preferred by businessman and industrial units which carry out

day-to-day transactions. Current deposits carry no interest. There are no restrictions on the

deposits and withdrawal from this account.

SAVINGS DEPOSITS :

Savings as the name suggest, is the type of deposit which is mostly preferred by the small and

medium income group of customers, students, housewives, etc. This type of deposit allows

JVIMS Jamnagar

the customer to deposit the money any number of time in a day whereas for the withdrawal

there is a limit. Thus, it provides annually 3.5% interest on the amount in the deposit.

TERM DEPOSITS :

Term deposits are the deposits for the predetermined time period. It is normally preferred by

the people who have idle money on hand for longer period of duration. There restrictions on

the withdrawal from this deposit. There are various term deposits like–Mahalaxmi deposits,

Fixed deposits, Anukul deposits, Recurring deposits, etc. let us discuss all of them one by

one:

Fixed Deposit:

This is the type of deposit in which customer deposits money for a long period of time and

the investor is given facility to withdraw interest at the end of each month. It can also be said

as Monthly Income Deposit. In this type of deposit the investor is provided simple interest.

This type of deposit is mostly preferred by the regular income earners.

Mahalaxmi Deposit:

This deposit is mostly similar to the Fixed Deposit but here the interest provided is

compounded every year. In this type of deposit the investor is not allowed to withdraw the

money before the maturity date. If in case they ask to withdraw it before maturity than the

investor has to suffer the loss of some interest. It is mostly preferred by the investors who

have idle money in their hand.

Double Deposit:

This is again similar to the fixed deposit but here the time period is equal to the period in

which the amount gets double. The investors in this type of deposit cannot get the flexibility

for the time period to invest. It is mostly preferred by the customers who are having idled

money on hand for long time or who want to get their money double within a long period of

time. This type of deposit is generally not preferred by the customers as the time period is not

fix and the maturity date is too long. As per the policy of NCBL they are giving the term

deposit up to 5 years only. Thus they have stopped issuing double deposit.

Recurring Deposit:

JVIMS Jamnagar

This is the type of deposit in which the investor invests a certain pre-decided sum of money

at the end of each year. In this type of deposit the investor is getting interest on the

compounding basis. So, the interest gets increase as the amount gets increase every month.

This kind of deposit is preferred by the investors who cannot make the huge investment at the

same time but can invest on the monthly basis.

Anukul Deposit:

This deposit is similar to the Mahalaxmi deposit in which the investor will get interest on the

compounding basis but the period for this deposit is uncertain. So, this type of deposit suits

the type of investors who have enough idle money on hand and will not require this money in

future. This is the deposit which is offered only by very few banks. The investor is given the

facility to withdraw the money at the time of requirement.

TABLE NO. 2

TERM DEPOSITS INTEREST CHART

Period from… Period To… General Sr. Citizen

30 Days 45 Days… 4.00% 4.50%

46 Days 90 Days 4.50% 5.00%

91 Days 179 Days… 5.50% 6.00%

180 Days 1 Year 6.50% 7.00%

Above 1 Year 2 Year 7.50% 8.00%

Above 2 Year 5 Year 7.25% 7.75%

Source: The NCBL Branch

Below 91 days – Minimum Amount Rs.5, 000.

Senior Citizen – 60 year and above.

TDS is applicable if interest is above Rs. 10000

JVIMS Jamnagar

LOANS & ADVANCES

The Nawanagar Co-operative Bank does provide the Loans and Advances to its customers in

the following way:

CASH CREDIT(CC)

CC against stock and book debt is one kind of lending facility generally given to the

merchants, sole-proprietors, partnership firms and companies. For this kind of facility certain

condition needs to be fulfilled like–every year renewal of the limit is compulsory, every

month stock register need to be submitted. The interest which is charged is as follows:

Up to Rs. 5,00,000 10.50% p.a.

Between Rs. 5,00,000 –1,00,00,000 11.00% p.a.

The maximum limit which can be granted is Rs. 1, 00, 00,000/-

HOUSING LOAN

This type of loan is provided to the share holders of the bank who are residing in the

Jamnagar city and who will use the property for its own use. This loan is provided for the

purpose of purchasing the factory building, to buy land for residence, or for its construction.

Following are some of the terms and conditions –

80% of the contract price of property or Rs. 20,00,000 whichever is less are

provided as loan.

Repayment period 120 months or 60 months in case it is for business.

In some rare cases the period is extended to 180 months (for residence) and 120

months, if for the purpose of business.

The interest charged is 10% p.a.

CLEAN LOAN

This loan is provided to the shareholders of the bank without any security in case of any

emergency faced by the share holder. The maximum amount which can be granted is Rs.

15,000/-.

LOAN AGAINST THE GOVT. SECURITY

The persons who are the holders of LIC, NSC, KVP or any other govt. security can get loan

against govt. securities.

JVIMS Jamnagar

Interest is charged @ 9.5%.

Interest @ 10% (If Overdraft Limit is given).

LOAN AGAINST SHARE

This loan is provided to shareholders of the listed companies and the Interest is charged @

11%.

VEHICLE LOAN (except two wheeler)

This type of loan is provided to the shareholders of the bank who may need the loan to buy

vehicle for his personal use or for the purpose of business. Following are some of the terms

and conditions –

The amount of loan is either equal to the 85% of the quotation of Rs. 50,00,000/-

whichever is less.

The time period is 60 months.

The interest charged p.a. is as follows –

o If for personal use 11.00%

o If for business use 12.00%

o If for the use of doctor or professional 10.50%

EDUCATION LOAN

This type of loan is given to the students whose parents are the shareholders of the bank. It is

provided to the students who have scored at least 60% marks in the previous exam and

his/her age is between 16-28 years. Following are some other conditions –

50% of the total expenses of the studies but maximum Rs. 2,00,000

In case if the student studies abroad than maximum Rs. 5,00,000

The interest charged p.a. is as under –

Loan amount up to Rs. 50,000/- 8.00%

Loan amount above Rs. 50,000/- 9.00%

JVIMS Jamnagar

OTHER FACILITIES

Following are some of the other facilities or services which are provided by the bank:

LOCKER FACILITY :

The bank is providing the facility of the Locker to their shareholders and other

customers of the bank. The users can use this locker for keeping their precious ornaments or

items, important documents, etc. the items kept here are very safe and the key of the locker is

provided to the user but the locker will not open by that one key. Along with it another key is

also required and that is available with the bank. So, the customer may remain tension free if

they have kept their precious item with bank. The interest charged for this purpose is shown

in the following table:

TABLE NO. 3

LIST OF LOCKER RENT

TYPE

OF

CUSTOMER

LOCKER TYPE

A

(SMALL)

B

(MEDIUM)

C

(LARGE)

GENERAL 450 750 1000

SHAREHOLDERS 400 600 850

Source: The NCBL Branch

ADHESIVE STAMP :

Special Adhesive Stamp on Hand or Stamp Franking is the facility provided by the

bank to its customer without charging any extra amount. This facility can be availed for the

entire document where non-judicial stamp is to be affixed. Bank has acquired from Govt. of

Gujarat. It receives 1% commission. Bank is the highest commission earner of adhesive

stamp facility in Jamnagar.

BIILS PURCHASE / BILLS DISCOUNT :

Bank is providing the facility to encase the outstanding bills before the maturity date.

Bank is also purchasing the bills form the traders @ 12% and takes the responsibility to

JVIMS Jamnagar

collect the payment from the counter party. Secondly, they are also discounting the bills @

10% i.e. they are granting the money in against of the bills of the traders.

REAL TIME GROSS SETTLMENT:

RTGS is the abbreviated form real time gross settlement which provides the facility

of interbank transfers in real time without any transfer of hard cash. It is simpler and

easier than cheque and draft with respect to issuance and remittance. NCBL provides this

facility only for debit transactions i.e. client can make payment to other parties but cannot

receive the amount from the other party.

MICR CHEQUE PROCESSING FACILITY:

MICR is the technology which allows the characters prints on the bottom of the

check to be read by reader-sorter machines. A special formulation of ink or toner, MICR can

be printed with impact machines, on a printing press, or a laser printer.

The magnetically charged printing allows each character to be recognized based on

the magnetic signal created by each character‟s unique shape. These shapes create by a

unique magnetic “fingerprint” which allows the reader-sorter machines to recognize each

character. Since MICR is a machine readable process, it is imperative that each character is

accurately placed and is free of irregular marks or voids. The uniformity of print is another

key component to readability.

PARIVAR BACHAT YOJANA:

In the Nawanagar Co-operative Bank Ltd., there is one policy which is distributed with

the help of this channel. The deposit policy named “Parivar Bachat Yojna” is served by

the bank agents. The agents visit the customer‟s place and collect the money as per the

terms and conditions of the bank and that is why this policy is also known as Daily

Collection Schemes.

FOREIGN EXCHANGE FACILITY (IMPORT FACILITY) :

The NCBL is also providing the Export-Import facility to their clients. By availing

this facility the customers of the bank can do their export and import through the bank in the

foreign countries. In this way they can expand their business in international market by

reducing the risk. To provide this facility to its customers the bank has the correspondent

arrangement with foreign banks. The bank is doing the work like a payment mechanism

JVIMS Jamnagar

system. It helps to pay the money in against of the import goods or collect the money on

behalf of the domestic exporter in against of exported goods. The bank has obtained the

license from the RBI and thus got the authority for Sanker Tekri Branch. The bank is

providing two type of service Inward Remittance i.e. Payment Collection from the foreign

countries and Import payment i.e. Debit Payment. For the exchange transaction, in case of

rupee-dollar transaction, rupee-dollar prices have to be fixed and these prices are fixed from

the Mumbai, as the value of rupee-dollar is fluctuating. This is done through HDFC Bank.

HDFC Bank is providing this facility by charging Rs.750 per transaction. Only Sanker Tekri

Branch provides this facility. For doing Import-Export the below mentioned documents are

required:

Open general license declaration

FEMA declaration

2 copies of A1 form

Import Export code (IEC)‟s self attested copies

If someone in India gets currency as a gift or from the relatives who live in foreign

country and if the amount of such transaction is large then the Purpose Letter is needed from

the person who has gifted such currency. If the amount is small then the person who has

received such amount directly gets the Indian Rupee against the foreign currency from the

bank.

OTHERS :

Other facilities like issuing drafts, cheque collection, etc. are provided by the bank. The bank

issues the demand draft and the pay order by charging the nominal commission. The

Nawanagar Bank has contracts with the bank outside city and so it accepts the outstation

cheques. It claims that the cheques of the cities in which it has contract will definitely be

cleared within 10 days. It sends cheque through courier services in cities it has a contract and

other cities through Registered A.D. post. It deducts commission from the amount as its

charge.

Even now bank has started providing a special service regarding the bank statement to its

customer. Any customer can now know the status of his account and can take out the

statement of his transaction sitting at home. This is done through a dial up connection. This

service saves the time of the customer and can easily take out his account statement.

JVIMS Jamnagar

Table no 4

FINANCIAL STATUS

PERFORMANCE OF LAST 5 YEARS

Particulars 2005-06 2006-07 2007-08 2008-09 2009-2010

Paid-Up

Capital

2,51,33,000 2,69,71,000 3,16,60,600 4,14,32,225 4,53,74,000

Reserves

49,47,22,000 53,01,00,000 58,42,16,001.97 63,67,20,423.25 72,43,77,000

Deposits

1,43,46,13,000 1,53,68,00,000 1,88,72,76,758.32 2,21,19,88,311.67 2,51,42,29,000

Loans &

Advances

39,22,17,000 37,80,00,000 55,51,20,757.73 84,35,51,683.77 95,71,48,000

Net

Profits

3,41,31,000 4,62,67,000 4,38,37,420.28 4,16,86,019.03 4,49,92,000

Working

Fund

1,95,28,59,000 2,19,49,36,000 2,65,05,82,000 3,12,36,41,000 3,43,83,61,000

Audit

Class

A A A A A

(Source: Annual Reports of NCBL)

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CORPORATE SOCIAL RESPONSIBILITIES

BY THE BANK

The following activities have been done by the bank as a part of the corporate social

responsibility..

Donated Rs. 25 lacs at SAMARPAN HOSPITAL for the healthcare & welfare of

society.

Donated Rs. 11 lacs for ICU centre.

Donated Rs. 11 lacs at kidney dialyses centre at ANDA BAWA ASHRAM

Donated Rs. 11 lacs at OSHWAL EDUCATION TRUST & Rs. 5 lacs for renovation

of schools affected by earthquake.

Donated Rs. 11 lacs for welfare & growth of city.

Awards & Achievements of the Bank

The NCBL achieved following awards till now:

Achieved first prize in year 1998-99 for overall excellence by NATIONAL

FEDERATION OF CO-OPERATIVE BANK & CREDIT LTD. (NFCB) New Delhi.

In the year 2007 GUJARAT CO-OPERATIVE FEDERATION has rewarded the bank

for performing activities at low cost.

In the year 2007-08 bank attained first position for overall excellence by GUJARAT

RAJYA SAHAKARI SANGH.

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FUTURE PLANS

Naturally, where there is management there will be plans for the future. To have plans

for the future and to work on those plans are two different things. All the organizations may

have plans for the future but, only those will be getting the success that really work hard on

their plans.

NCBL also have some future plans and is also working on those future plans. Some of

the future plans of NCBL are presented below:

They are planning to go for core banking.

They are planning to issue Local Credit Cards to their customers

They plan to set up Tele-Banking facility for their customers. They are working on this

plan.

Plans are on the anvil to have 24 hours working for the better functioning.

The bank has an ambitious plan to construct its own multi-storied Head Office on 5,000

sq. feet area with 3,000 deposit lockers.

The bank is planning to do online banking i.e. to make all of its branches online.

Lastly, the bank is also poised to have paperless branch, a novel concept is urban

marketing.

Thus, these are some of the future plans of NCBL and I hope that they will be

successful in achieving their plans in the near future and their dreams come true.

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CONCEPTUAL FRAMEWORK

OF

NON PERFORMING ASSETS

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INTRODUCTION

Non-performing assets, also called non-performing loans, are loans, made by a bank or

finance company, on which repayments or interest payments are not being made on time.

A loan is an asset for a bank as the interest payments and the repayment of the principal

create a stream of cash flows. It is from the interest payments than a bank makes its profits.

Banks usually treat assets as non-performing if they are not serviced for some time. If

payments are late for a short time a loan is classified as past due. Once a payment becomes

really late (usually 90 days) the loan classified as non-performing.

A high level of non-performing assets compared to similar lenders may be a sign of

problems, as may a sudden increase. However this needs to be looked at in the context of the

type of lending being done. Some banks lend to higher risk customers than others and

therefore tend to have a higher proportion of non-performing debt, but will make up for this

by charging borrowers higher interest rates, increasing spreads. A mortgage lender will

almost certainly have lower non-performing assets than a credit card specialist, but the latter

will have higher spreads and may well make a bigger profit on the same assets, even if it

eventually has to write off the non-performing loans.

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WHAT IS NPA?

DEFINITION:

Action for enforcement of security interest can be initiated only if the secured assets are

classified as Non Performing Asset.

Non Performing Asset means an asset or account of borrower, which has been classified by a

bank as sub-standard, doubtful or loss asset, in accordance with the direction or guidelines

relating to asset classification issued by RBI.

An amount due under any credit facility is treated as “past due” when it has not been paid

within 30 days from the due date. Due to the improvement in the payment and settlement

systems, recovery climate, up gradation of technology in the banking system, etc., it was

decided to dispense with „past due‟ concept, with effect from March 31, 2001. Accordingly

as from that date, Non Performing asset (NPA) shall be an advances where

i. Interest and/ or installment of principle remain overdue for a period of more than 90

days in respect of a Term Loan.

ii. The account remains „out of order‟ fir a period of more than 90 days, in respect of

an overdraft/ cash credit (OD/ CC)

iii. The bill remains overdue for a period of more than 90 days in case of bills

purchased and discounted,

iv. Interest and/or installment of principal remains overdue for two harvest seasons

but for a period not exceeding two half years in the case of an advance granted for

agriculture purpose and

v. Any amount to be received remains overdue for a period of more than 90 days in

respect of other accounts.

With effect from 30 September 2004, a loan granted for short duration crops will be treated

as NPA, if the installment of principle or interest thereon remains overdue for two crop

seasons.

JVIMS Jamnagar

With effect from 30 September 2004, a loan granted for long duration crops will be treated as

NPA, if the installment of principle or interest thereon remains overdue for one crop season.

As a facilitating measure for smooth transition to 90 days norm, banks have been advised to

move over to charging of interest at monthly rests, by 1 April 2002. However, the date of

classification of an advance as NPA should not be changed on account of charging of interest

at monthly rests. Banks should, therefore, continue to classify an account as NPA only if the

interest charged during any quarter is not serviced fully within 90 days from the end of the

quarter.

WHEN AN ACCOUNT BECOMES NPA?

For each NPA accounts we must know the date of account becoming NPA.

This is necessary for not only corrective follow-up measures but also to determine the amount

of provision required to be made.

WHY AN ACCOUNT BECOME NPA?

Account becomes NPAs on account of various internal and external factors.

INTERNAL FACTORS:

Improper appraisal of the credit proposal / credit requirement

Lack of supervision and follow-up

Vested interest / malafide intention.

Improper treatment to borrower (attitude as well as system constraint)

EXTERNAL FACTORS:

Recession in economy / industry not visualized earlier

Failure of product / service to take off

Internal conflict amongst the promoters

Mismanagement of unit.

Willful default.

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Table no 5

RBI Guidelines for NPA Recognition

Loans and advances Guidelines applicable

from 31-3-2001

Guidelines application

from 31-3-2004

Term loan interest /installment remains

overdue for more than

180 days 90 days

Overdraft/

cash credit a/c

Remain out of order Remain out of order

Bills purchased and discounted remain

overdue for more than

180 days 90 days

Agricultural loan interest/ installment

remain overdue for more than

Two harvest seasons but not

exceeding two and half year

Two harvest seasons but not

exceeding two and half year

Other accounts-any account to be

received remain overdue for more than

180 days 90 days

(Source- www.rbi.gov)

„Out of order‟ status

An account should be treated as „out of order‟ if the outstanding balance remains

continuously in excess of the sanctioned limit/drawing power. In case where the outstanding

balance in the principle operating account is less than the sanctioned limit/ drawing power,

but there are no credits continuously for 90 days as on date of balance sheet or credits are not

enough to cover the interest debited during the same period, these account should be treated

as „out of order‟.

Overdue

Any amount due to the bank under any credit facility is „overdue‟ if it is not paid on the due

date fixed by the financial institution.

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INCOME RECOGNITION

Income Recognition- Policy

The policy of income recognition has to be objective and based on the record of recovery.

Internationally income from NPA is not recognized on accrual basis but is booked as income

only when it is actually received. Therefore, the banks should not charge and take to income

account interest on any NPA.

However, interest on advances against term deposits, NSCs, IVPs, KVPs and life policies

may be taken to income account on the due date, provided adequate margin is available in the

accounts.

Fees and commissions earned by the banks as a result of re-negotiations or rescheduling of

outstanding debts should be recognized on an accrual basis over the period of time covered

by the re-negotiated or rescheduled extension of credit.

If government- guaranteed advances become NPA, the interest on such advances should not

be taken to income account unless the interest has been realized.

Reversal of Income

If any advance, including bills purchased and discounted, becomes an NPA as at the close of

any year, interest accrued and credited to income account in the corresponding previous year,

should be reversed or provided for if the same is not realized. This will apply to government-

guaranteed accounts also.

In respect of NPAs, fees, commissions, and similar income that have accrued should cease to

accrue in the current period and should be reversed or provided for with respect to past

periods, if uncollected.

Leased assets: the finance charge component of finance income as defined in „AS 19 – leases

issued by the Council of the Institute of Chartered Accountants of India on the leased assed

which has accrued and was credited to income account before the asset become non-

performing and remaining unrealized should be reversed or provided for in the current

accounting period.

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Appropriation of Recovery in NPAs

Interest realized on NPAs may be taken to income account provided the credits in the

accounts towards interest are not out of fresh/additional credit facilities sanctioned to the

borrower concerned.

In the absence of a clear agreement between the bank and the borrower for the purpose of

appropriation of recoveries in NPAs, banks should adopt an accounting principle and exercise

the right of appropriation of recoveries in a uniform and consistent manner.

Interest Application

There is no objection to the banks using their own discretion in debiting interest to an NPA

account taking the same to interest suspense account or maintaining only a record of such

interest in Performa accounts.

Reporting of NPAs

Banks are required to furnish a report on NPAs as on 31 March each year after completion of

audit. The NPAs would relate to the bank‟s global portfolio, including the advances at the

foreign branches.

While reporting NPA figures to the RBI, the amount held in interest suspense account, should

be shown as a deduction from gross NPAs as well as gross advances while arriving at the net

NPAs. Banks which do not maintain interest suspense account for parking interest due to

non-performing advance accounts, may furnish the amount of interest receivable on NPAs as

a foot note to the report.

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ASSET CLASSIFICATION

Standard Assets

Which are not NPAs, but involve business risks, require a minimum of 0.25 percent provision

on global portfolio but not on domestic portfolio.

Sub- Standard Assets

A sub-standard asset was one, which was classified as NPA for a period not exceeding two

years. With effect from 31 March 2001, a sub-standard asset is one, which has remained NPA

for period less than or equal to 18 months. In such cases, the current net worth of the

borrower/guarantor or the current market of the security charged is not enough to ensure

recovery of the dues to the banks in full. In other words, such an asset will have well defined

credit weaknesses that jeopardize the liquidation of the debt and are characterized by the

distinct possibility that the banks will sustain some loss, if deficiencies are not corrected.

Doubtful Assets

A doubtful asset was one, which remained NPA for a period exceeding two years. With effect

from 31 March 2001, an asset is to be classified as doubtful, if it has remained NPA for a

period exceeding 18 months. A loan classified as doubtful has all the weaknesses inherent in

assets that were classified as sub-standard, with the added characteristic that the weaknesses

make collection or liquidation in full, on the basis of currently known facts, conditions and

values – highly questionable and improbable. With effect from 31 March 2005, an asset

would be classified as doubtful if it remained in the sub-standard category for 12 months.

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 wholly. In other words, such an

asset is considered uncollectable and of such little value that its continuance as a bankable

asset is not warranted although there may be some salvage or recovery value.

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Guidelines for Classification of Assets:

1) Classification of assets into above categories should be done taking into account the

degree of well defined credit weaknesses and the dependencies on collateral security

for realization of dues.

2) Banks should establish appropriate internal systems to eliminate the tendency to delay

postpone the identification of NPAs, especially in respect of high value of accounts.

3) Account with temporary deficiencies:

The classification of an asset as NPA should be based on the record of recovery.

Bank should not classify an advance account as NPA merely due to the existence of some

deficiencies, which are temporary in nature as non-availability of adequate drawing power

based on latest stock.

4) Asset classification to be borrower-wise and not facility-wise

It is difficult to envisage a situation when only one facility to a borrower becomes a

problem credit and not others. Therefore, all the facilities granted by a bank to a borrower

will have to be treated as NPA and not the particular facility or a part. Thereof, which has

become irregular.

5) Advances under consortium arrangements:

Asset classified of accounts under consortium should be based on the record of

recovery of the individual member banks and other aspects having a bearing on the

recoverability of the advances.

6) Accounts where there is erosion in the value of security:

Erosion on the value of security can be reckoned as significant when the realizable

value of the security is less than 50 percent of the value assessed by the bank or accepted by

RBI at the time of last inspection, as the case may be. Such NPAs may be straightaway

classified under doubtful category and provisioning should be made as applicable to doubtful

assets.

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7) Agricultural advances:

In respect of advances granted for agricultural purpose where interest and/or

installment of principal remains unpaid after it has become past due for two harvest seasons

but for a period not exceeding two half years, such an advance should be treated as NPA.

Where the natural calamities impair the repaying capacity of agricultural borrowers,

banks may decide on their own as a relief measure-conversion of the short-term production

loan into a term or re-schedulement of the repayment period.

In such cases of conversion or re-schedulement, the term loan as well as fresh

short-term loan may be treated as current dues and need not be classified as NPA.

8) Restructuring/ Rescheduling of loans:

A standard asset where the terms of the loan agreement regarding interest and

principal has been renegotiated or rescheduled after the commencement of production should

be classified as sub-standard and should remain in such category for at least one year of

satisfactory performance under the renegotiated or restructured terms. In case of substandard

and doubtful assets also, rescheduling does not entitle a bank to upgrade the quality of

advances unless there is satisfactory performance under the rescheduled/ renegotiated terms.

9) Exceptions:

As trading involves only buying and selling of commodities and the problems

associated with manufacturing units such as bottleneck in commercial production, time and

cost escalation, etc. are not applicable to them. These guidelines will not be applied to

restructuring/ rescheduling of credit facilities extended to traders.

JVIMS Jamnagar

CAUSES AND CONSEQUENCES OF NPAs

One of the reasons for the accumulation of large portfolio of NPAs with banks is that often

lending is not linked to productive investment and the recovery of credit is not linked to

product sale. The borrowers are mainly farmers and small scale industries owners whose

financial conditions are generally bad. The volume of bank credit stacked in sick industries is

the evidence of this malady.

Sometimes it is found that on the advice from BIFR and directions given from the courts the

banks have been providing loans to the sick industries, this type of practice has been also

aggravating the NPAs situations. Besides the faulty lending policy and compulsion from the

government to lend the priority sector, there are many other causes which are responsible for

the accumulation of NPAs.

Many of these causes are related to faulty credit management like

Defective credit recovery mechanism.

Lack of professionalism in the work force.

Long time lag between sanctions and disbursements.

Unscientific repayment schedule.

Misutilization of loans by the borrowers regarding their due date.

Lack of strong legal mechanism.

Political intervention at local level.

Have been contributing for mounting NPAs in banks in India. If the level of NPAs not

controlled timely, they will

Reduce the earning capacity of assets and badly affect the ROA.

Higher provisioning requirement on mounting NPAs adversely affect capital

adequacy and also banks profitability.

Cost of capital will increase due to NPAs and require economic value added.

NPAs cause to decrease the value of shares sometimes even below their book value in

the capital market.

Affect the market competitiveness.

Causes for the reduction in availability of fund for further credit expansion due to the

unproductiveness of the existing portfolio.

NPAs affect the risk taking ability of the banks.

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On the whole it affects the credibility of the bank and the bank will be in a difficult

position in raising fresh capital from the market in case of future financial need.

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RESEARCH

METHODOLOGY

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INTRODUCTION

Research is an ORGANIZED and SYSTEMATIC way of FINDING ANSWERS to

QUESTIONS.

SYSTEMATIC because there is a definite set of procedures and steps which you will follow.

There are certain things in the research process which are always done in order to get the

most accurate results.

ORGANIZED, that there is a structure or method in going about doing research. It is a

planned procedure, not a spontaneous one. It is focused and limited to a specific scope.

FINDING ANSWERS is the end of all research. Whether it is the answer to a hypothesis or

even a simple question, research is successful when we find answers. Sometimes the answer

is no, but it is still an answer.

QUESTIONS are central to research. If there is no question, then the answer is of no use.

Research is focused on relevant, useful and important questions. Without a question, research

has no focus, drive or purpose.

Research is done to gain some knowledge so as it may aid in understanding the information

gathered on specific topic. It is a scientific and systematic way of understanding information

on specific and particular subjects. It is a scientific investigation to understand the cause and

effect as well as the reasons through investigation. It is an academic activity. And it is to be

used in technical sense.

JVIMS Jamnagar

RATIONALE FOR THE STUDY

The profitability performance of Commercial banks has become fascinating topic for

conversation, comment and debate. There is growing evidence of concern of the authorities

for the declining profitability of the banking system due to Non-performing Assets. The

Reserve bank of India stresses on banks profitability and suggests various methods to reduce

the Non-performing Assets.

With the change in the social and economic objectives of Indian commercial banks, it

becomes extremely essential to assess their profitability performance and find remedial

measures to reduce the Non-performing Assets in the wake of the new banking philosophy.

The approach of policy-makers towards profitability has changed, with the result that low

profits have become a fact of life. Therefore, it is high time to concentrate on analyzing the

profitability performance and factors leading to Non-performing Assets.

PROBLEM STATEMENT

Banks are supposed to play an important role in achieving objective of economic

development by providing effective institutional credit support to various regions and sectors.

Banking has been viewed as a catalytic agent that must develop and support not only one

element of the national economy, but also provide an effective link between the productive,

distributive and consumption side of it.

Due to stringent competition in the banking industry, banks have to concentrate on the

development of the resources and accelerate the collection mechanism to make it viable to

strengthen profitability and efficiency in a better way. In this regard the researcher has probed

further to find answer of this question that what are factors affecting the NPA and in what

way it affects the profits.

Thus the problem statement here is “How to Manage NPA of Different Co-Operative

Banks”

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REVIEW OF LITERATURE

“Non Performing Assets in co-operative banks”

By K. Ravichandran and R. Mayilsamy (2008)

Non Performing Assets (NPAs), as a syndrome, though not new to the Cooperative Banking

Structure has been causing trouble and confusion during the recent past. Because NPAs as the

percentage to total recoverable funds acts as a constraint on the efficiency of the lending

institution and their capacity to borrow funds and lend to agriculture. Inordinate delay in

recovery of loan builds up NPAs, which affect the health of Cooperative Banks. The

Committee on Banking Sector Reforms reported that funds blocked in NPAs increase the cost

of financial inter-mediation as banks resort to raising deposits and borrowings at a higher cost

as a measure to minimize the balance between the cash outflow and cash inflow arising out of

the NPAs and the money locked up NPAs are not available for productive uses and to the

extent that banks seek to make provisions for NPAs. This has an adverse impact on the

profitability of the banks both in short and long run.

“Non Performing Assets in commercial banks”

By Vibha Jain (2007)

The book provides a comprehensive coverage of the challenges facing the banking industry in India in

tackling the bargaining problem of Non-Performing Assets (NPAs). It traces the history of growth of

NPAs in the banking industry caused initially by directed lending due to strong government hold on

banks. The government control also kept the issue under wraps for a long time, understanding the

enormity of the problem only at the advent of economic reforms in early nineties. The book elucidates

the various measures taken by Reserve Bank of India to Control NPAs over the last decade and a half

and critically analyses the success obtained in containing the same.

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“Management of Non Performing Assets in Banks and Financial

Institutions”

By B. Ramachandra Reddy (2008)

Non-performing assets (NPAs) not only eat into profitability and hamper their ability to

recycle funds, but also shake the public confidence which is crucial for existence of any

financial institution. The present trend of NPAs is alarming and calls for rigorous and

concerted efforts by banks and financial institutions as well as government. This book is

based on the selected papers presented by academicians‟ and bankers in a national seminar

which discussed various aspects of the issue in detail.

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RESEARCH OBJECTIVES

With an outlook of the every research, it has been conducted for specific objective. It must

have clear-cut problem and based on it the objectives must also be clearly defined. Therefore,

that research gets clear idea about their task. Research objectives help the researcher to

achieve his task easily. Also after the completion of research project can be evaluated based

on the research objective. Thus it is at most important to define the research objective.

Research refers to a scientific search for pertinent information on a special topic. In fact,

research is an art of scientific investigation. In short, research is a systematized effort to gain

new knowledge. So research is systematic way of finding something new.

The purpose of research is to discover answers to question through the application of

scientific procedures. The main aim of research is to find out the truth which is hidden and

which has not been discovered as yet. Though each research study have its own specific

purpose. Without any objectives we cannot do any research.

Thus, the objectives are very important.

The primary objectives behind this research are as follows

To check the status of Non-performing assets of selected co-operative banks during study

period.

To analyze the factors responsible for the Non- performing assets of selected co-operative

banks during study period.

The secondary objectives are as follows

To check the Gross NPA to Gross Advance ratio in selected banks during study

period.

To check the Gross NPA to Total Assets Ratio in selected banks during study period.

To check the Interest Income to Working Funds Ratio in selected banks during study

period.

To check the percentage change in Gross NPA Ratio in selected banks during study

period.

To check the Total investments to Total Assets Ratio in selected banks during study

period.

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To check the Operating Expense to Total Income Ratio in selected banks during study

period.

To check the Net Profit to Total Assets Ratio in selected banks during study period.

RESEARCH DESIGN

“A research design is the arrangement of conditions for collection and analysis of data in a

manner that aims to combine relevance to the research purpose with economy in procedure”

In fact, the research design is the conceptual structure within which research is conducted, it

constitutes the blueprint for the collection, measurement and analysis of data

For this research purpose, the research design is exploratory research design.

POPULATION AND SAMPLE SIZE

The population for the study of research is as follow

The Nawanagar co-operative bank ltd.

The Rajkot Nagrik sahakari bank ltd.

The Vardhaman co-operative bank ltd.

The Commercial co-operative bank ltd.

The Jamnagar peoples co-operative bank ltd.

The Jamnagar district co-operative bank ltd.

The Mahila co-operative bank ltd.

The darken bank is selected as sample on the basis of convenient of getting the data

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SAMPLING DESIGN

It is not possible to study each and every member of the population for the research purpose.

So it is very much necessary to draw sample from the population for the research purpose and

to study them.

When some of the elements are selected with the intention of finding out something about the

population from which they are taken, that group of elements are referred to as sample and

the way in which sample is selected is referred to as „sample design‟.

The sampling design for this research “convenience based non – probability sampling”.

The non – probability sampling means wherein items for the sample are deliberately selected

by the researcher leading to personal basis.

For this research purpose, the units of analysis are chosen deliberately. The information has

been collected for this research is convenience of the researcher.

PERIOD OF THE STUDY

The study covers a period of five financial years from 2005-06 to 2009-10.

SCOPE OF STUDY

We have selected 4 co-operative banks which are as follows

The Nawanagar co-operative bank ltd.

The vardhaman co-operative bank ltd.

The mahila co-operative bank ltd.

The Jamnagar peoples co-operative bank ltd.

The sample is selected on the basis of convenient of getting the data of co-operative

banks in the Jamnagar city.

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DATA FORMS

Chart no. 2

Types of data

Primary & Secondary data The primary data are those data which are collected afresh and for the first time which

happened to be original in character.

The secondary data are those which are already been collected by someone else and

which have already been passed through the statistical process.

Data collection instrument

In this also there are various methods for data collection. For this research purpose, the data

have been collected from the annual reports of respective banks, RBI bulletin, journals,

magazines, newspapers and internet which are basically secondary form of data. Additionally

textbooks are also referred extensively to collect information relating to this study.

Types of

data

Primary

data

Secondary

data

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TOOLS OF ANALYSIS

RATIO ANALYSIS FOR NPA

Factor contributing to Non- performing assets, the major components like Total advances,

Operating profit, Net profit and Total Assets have been considered.

Ratios like:

Gross NPA to Gross Advances

Interest income to working funds

Operating expense to total income

Net profit to total assets

Total investment to total assets

Gross NPA to total assets

Percentage change in gross NPAs

Percentage change in BDDR

Gross NPA to BDDR.

STATISTICAL TOOLS

MEAN:

In mathematics and statistics, the arithmetic mean (or simply the mean) of a list of numbers is

the sum of the entire list divided by the number of items in the list. If the list is a statistical

population, then the mean of that population is called a population mean. If the list is a

statistical sample, we call the resulting statistic a sample mean. The mean is the most

commonly-used type of average and is often referred to simply as the average.

The term “mean” or “arithmetic mean” is preferred in mathematics and statistics to

distinguish it from other averages such as the median and the mode. The arithmetic mean is

the “standard” average, often simply called the “mean”.

JVIMS Jamnagar

STANDARD DEVIATION:

In statistics, standard deviation is a simple measure of the variability or dispersion of a data

set. A low standard deviation indicates that the data points tend to be very close to the same

value (the mean), while high standard deviation indicates that the data are “spread out” over a

large range of values. In addition to expressing the variability of a population, standard

deviation is commonly used to measure confidence in statistical conclusions.

The term “standard deviation” was first used [1] in writing by Karl Pearson [2] in 1894

following use by him in lectures. This was as a replacement for earlier alternative names for

the same idea; for example Gauss used “mean error” [3] a useful property of standard

deviation is that, unlike variance, it is expressed in the same units as the data.

CO-EFFICIENT OF VARIANCE

In probability theory and statistics, the coefficient of variance (CV) is a normalized measure

of dispersion of a probability distribution. It is defined as the ratio of the standard deviation to

the mean.

This is only defined for non-zero mean, and is most useful for variables that are always

positive. It is also known as unitized risk.

The coefficient of variation should only be computed for data measured on a ratio scale. It

does not have any meaning for data on an interval scale.

Coefficient of variance =

×100

JVIMS Jamnagar

TWO- WAY ANOVA TABLE

The ANOVA procedure is one of the most powerful statistical techniques. ANOVA is a

general technique that can be used to test the hypothesis that the means among two or more

groups are equal, under the assumption that the sampled populations are normally distributed.

The two-way analysis of variance is an extension to the one-way analysis of variance. There

are two independent variables (hence the name two-way).

TWO-WAY ANOVA TABLE

Source

of

Variation

Sum of Squares

(SS)

Degree of

Freedom

(df)

Mean Square

(MS)

F-ratio

Between

Rows (Tj)2 _ (T)2

nj n

(r – 1) SS between rows

(r -1)

MS between rows

MS residual

Between

Columns (Ti)2 _ (T)2

ni n

(c -1) SS between rows

(c -1)

MS between columns

MS residual

Error Total SS – (SS

between

columns + SS

between rows)

(c -1) (r -1) SS residual

(c -1) (r -1)

Total -

(C*r – 1)

In the table c= no. of columns

r= no of rows

SS residual = Total SS-(SS between columns + SS between rows)

JVIMS Jamnagar

HYPOTHESIS FOR THE STUDY

Ho: There is no significant difference in Gross NPA to Gross Advances Ratio in selected

banks during the study period.

Ho: There is no significant difference in Operating Expense to Total income Ratio in

selected banks during the study period.

Ho: There is no significant difference in Net Profit to Total Assets Ratio in selected banks

during the study period.

Ho: There is no significance difference in Total Investment to Total Assets Ratio in selected

banks during the study period.

Ho: There is no significance difference in Gross NPA to Total Assets Ratio in selected banks

during the study period.

Ho: There is no significance difference in Interest Income to Working Funds Ratio in

selected banks during the study period.

Ho: There is no significance difference in Gross NPA to bad debt provision Ratio in selected

banks during the study period.

JVIMS Jamnagar

LIMITATION OF THE STUDY

Nothing is perfect in this world. Everything has its own advantages and limitations. Same like

this, this study has its own limitations. Its limitations are described as under.

The study concentrates on the analysis of quantitative financial data. The qualitative

aspect of progress of banking in India has not been analyzed. The emerging trend in

qualitative aspects of banking as customer service, job satisfaction, regional

disparities, concentration of bank branches and morale of bank employees and general

public etc have not been taken into consideration.

While computing the data for the purpose of analysis the approximation of decimal

places leads to minor variations in ratio which are bound to exist in the present study.

Time constraint is the limitation of the study.

Most of all banks do not disclose true information of NPA so this may be one

limitation of the study.

Most of the co-operative banks make more provision for NPAs than requirements.

This way they show Net NPAs as zero. So the main limitation of the study is that we

cannot find any ratio related to Net NPA.

JVIMS Jamnagar

ANALYSIS

OF

NPA

JVIMS Jamnagar

1) GROSS NPA TO GROSS ADVANCE

With increasing advances the gross NPA is also expected to increase correspondingly. The

efficiency of the bank lies in reducing the share of the NPA to Total Advances. Hence, the

present paragraph attempts to discuss trends in the share of Gross NPA to Total Advances.

TABLE: 6

GROSS NPA TO GROSS ADVANCE

(FIGURES IN

%)

Year NCBL VCB JPB MCB

2005-2006 1.91 3.43 13.72 83.32

2006-2007 3.65 4.13 5.17 70.90

2007-2008 2.90 6.84 6.14 61.01

2008-2009 2.08 3.23 4.52 64.89

2009-2010 1.63 2.84 4.95 53.06

MEAN 2.43 4.09 6.90 66.64

S.D. 0.83 1.60 3.85 11.35

C.V 34.15 39.11 55.79 17.03

Source: Annual Report

Interpretation

From the above table it reveals that in the year 2005-06 Gross NPA to Gross Advances ratio

of NCBL was 1.91% and in year 2006-07 it was the highest 3.65% and continuously decrease

for 3 years in 2007-08 it was 2.90% and 2008-09 it was 2.08% and in year 2009-10 it was

1.63%.

The average ratio is 2.43%.

JVIMS Jamnagar

In VCB in 2005-06 the ratio is 3.43% and this ratio increase 4.13% in year 2006-07 and in

year 2007-08 it was the highest 6.84% and then it decline continuously 2 year in 2008-09 it

was 3.23% and in 2009-10 it was 2.84%. The average ratio is 4.09%

In JPB in 2005-06 the ratio was highest 13.72% and decreased to 5.17% in 2006-07. It again

increased to 6.14% in 2007-08. Than it decreased continuously for 2 years, thus it was 4.52%

in 2008-09 and 4.92% in 2009-10. The average ratio was 6.90%

In MCB in the year 2005-06 the ratio was highest 83.32% and after that it showed

continuously decline for next 2 years. In 2006-07 it became 70.90%, in 2007-08 it was

61.01% which than increased to 64.89% in 2008-09 and again decreased to 53.06% in 2009-

10. The average ratio was 66.64%

From the above data we can conclude that The NAWANAGAR BANK LTD shows the better

performance by least average of 2.43% whereas the worst situation was of MAHILA BANK

which showed the average 66.64%. The averages of other banks are 4.09% of

VARDHAMAN BANK and 6.90% of J P BANK.

Again the MCB shows the lowest coefficient of variance 17.03 whereas JPB shows the

highest coefficient of variance 55.79 lower the coefficient of variance higher the stability in

bank so here MCB shows greater stability than others. The coefficient of variance of other

banks is NCBL 34.15 and VCB 39.11.

Testing of hypothesis

Ho: there is no significant difference in Gross NPA to Gross Advances Ratio in selected

banks during the study period.

H1: there is significant difference in Gross NPA to Gross Advances Ratio in selected banks

during the study period.

JVIMS Jamnagar

TABLE NO. : 7

ANOVA TABLE FOR GROSS NPA TO GROSS ADVANCES

Source of Variation SS df MS F F crit

Rows 215.0418 4 53.76046 1.729107 3.259167

Columns 14540.45 3 4846.818 155.889 3.490295

Error 373.0975 12 31.09146

Total 15128.59 19

(At 5% significance level)

For rows calculated value is 1.72<3.25 tabulated value.

From the above table we can see that in rows i.e. year wise the calculated value is less than

tabulated value i.e. Fc<Ft. so, the null hypothesis i.e. there is no significant difference in

Gross NPA to Gross Advances ratio during the study period is accepted. It means that there is

no significant difference in Gross NPA to Gross Advances during study period.

For columns calculated value is 155.88>3.49 tabulated value.

In column i.e. bank wise the calculated value is more than tabulated value i.e. Fc>Ft. so the

null hypothesis that there is no significant difference in Gross NPA to Gross Advances ratio

in selected banks is rejected. It means that there is significant difference in Gross NPA to

Gross Advances of selected banks.

JVIMS Jamnagar

2) INTEREST INCOME TO WORKING FUNDS

Interest Income to Working funds is the profitability ratio which shows the profitability of the

banks. This ratio indicate that how much bank has earn form the working funds. Higher the

ratio greater position of the bank whereas less the ratio less profitability.

FORMULA =

TABLE NO: 8

INTEREST INCOME TO WORKING FUNDS

(FIGURES IN

%)

YEAR NCBL VCB JPB MCB

2005-2006 7.75 9.28 6.28 5.75

2006-2007 7.96 7.72 6.26 4.24

2007-2008 7.93 8.91 6.59 3.44

2008-2009 7.77 9.34 7.39 4.85

2009-2010 7.74 8.49 7.17 4.24

MEAN 7.83 8.75 6.74 4.50

S.D 0.11 0.67 0.52 0.85

C.V 1.40 7.65 7.71 18.88

Source: Annual Report

Interpretation

From the above table it reveals that in this year 2005-2006 Interest Income to Working

Funds ratio of NCBL is 7.75% which is increase and become 7.96% in year 2006-2007 then

it is continuously decrease for next three year. In 2007-2008 it is 7.93%. Which become

7.77% in year 2008-2009 and then it is slightly decrease and become 7.74% in year 2009-

2010. The average ratio is 7.83%

JVIMS Jamnagar

The interest income to working funds ratio of VCB is 9.28% in 2005-06 which decreased to

7.72% in 2006-07. Then it continuously increased for 2 years. It was 8.91% in 2007-08 and

was 9.34% in 2008-09. Then it decreased to 8.49% in year 2009-10. The average ratio was

8.75%

In JP Bank in the year 2005-06 this ratio was 6.28% then it decreased to 6.26% in the year

2006-07. Then it showed a continuous increase for 2 years. It became 6.59% in the year

2007-08 and 7.39% in the year 2008-09. It again decreased in the year 2009-10 and became

7.17%. The average ratio was 6.74%.

In MCB in the year 2005-06 the ratio was 5.75%. then it continuously decreased for 2 years.

It became 4.24% in the year 2006-07 and 3.44% in the year 2007-08. Than it increased in the

year 2008-09 to 4.85% and again decreased to 4.24% in the year 2009-10. The average ratio

was 4.50%

From the above data we can conclude that the VCB shows the better performance by highest

average ratio of 8.75% whereas worst situation was of MCB with the lowest average ratio of

4.50% in the ratio of interest income to working funds the average of other banks are 7.83%

of NCBL and 6.74% of JP bank.

NCBL shows the lowest coefficient of variance of 1.40% and MCB shows the highest of

18.88% lower the coefficient of variance greater the stability in the bank. So here NCBL

shows greater position than others. The coefficient of variance of other banks is 7.65% in

VCB and 7.17% in JP bank.

TESTING OF HYPOTHESIS

Ho: there is no significant difference in interest income to working funds in selected banks

during the study period.

H1: there is significant difference in interest income to working funds in selected banks

during the study period.

JVIMS Jamnagar

TABLE NO: 9

ANOVA TABLE FOR INTEREST INCOME TO WORKING FUNDS

Source of Variation SS Df MS F F crit

Rows 1.87575 4 0.468937 1.418183 3.259167

Columns 50.17482 3 16.72494 50.58035 3.490295

Error 3.96793 12 0.330661

Total 56.0185 19

(At 5% significance level)

For rows calculated value is 1.41<3.25 tabulated value.

From the above table we can see that in rows i.e. year wise calculated value is less than

tabulated value i.e. Fc<Ft. so null hypothesis that there is no significant difference in interest

income to working funds ratio during the study period is accepted. It means that there is no

significant difference in Interest income to working funds ratio during study period.

For columns calculated value is 50.58> 3.49 tabulated value

In columns i.e. bank wise calculated value is more than tabulated value i.e. Fc>Ft. so null

hypothesis that there is no significant difference in Interest income to working funds ratio in

selected banks is rejected. It means that there is significant difference in Interest income to

working funds ratio of selected banks.

JVIMS Jamnagar

3) OPERATING EXPENSE TO TOTAL INCOME

The increasing NPA affects the level of income of the bank. Also it increases the expense of

the banks as depending on the amount of NPA. The banks make allocations under provision

and contingences. This affects the expenditure, the income and ultimately the profit. Based on

the view the present paragraph it is attempted to discuss the ratio of operating expense to total

income.

TABLE NO: 10

OPERATING EXPENSE TO TOTAL INCOME

(FIGURE IN %)

YEAR NCBL VCB JPB MCB

2005-2006 15.56 31.12 45.93 84.86

2006-2007 19.89 31.27 44.47 65.35

2007-2008 16.14 24.26 35.49 65.92

2008-2009 15.06 24.41 39.07 35.61

2009-2010 16.86 24.71 41.65 35.35

MEAN 16.70 27.15 41.32 57.42

S.D 1.90 3.69 4.19 21.51

C.V 11.37 13.57 10.14 37.46

Source: Annual Report

Interpretation

From the above table it reveals that in NCBL in the year 2005-06 operating expense to total

income ratio is 15.56% which increased to 19.89% in year 2006-07. It decreased and became

16.14% in year 2007-08 and again decreased to 15.06% in the year 2008-09. In the year

2009-10 it increased to 16.86%. The average ratio was 16.70%.

In VCB in the year 2005-06 the ratio was 31.12% and increased to 31.27% in the year 2006-

07. It then decreased to 24.26% in the year 2007-08. It than continuously increased for 2

JVIMS Jamnagar

years and became 24.41% in the year 2008-09 and it became 24.71% in the year 2009-10.

The average ratio is 27.15%

In JP bank in the year 2005-06 the ratio was 45.93% which decreased to 44.47% in the year

2006-07. Then it again decreased to 35.49% in the year 2007-08. In the year 2008-09 it

increased to 39.07% and it became 41.65% in the year 2009-10. The average ratio was

41.32%

In MCB bank in the year 2005-06 the ratio was 84.86% which drastically decreased to

65.35% in the year 2006-07. Then it slightly increased to 65.92% in the year 2007-08. Again

it decreased to 35.61% in the year 2008-09. Finally it became 35.35% in the year 2009-10.

The average ratio was 57.42%.

From the above data we can conclude that NCBL shows the better performance by least

average of 16.70% whereas worst situation is of MCB with highest average of 57.42%. in the

ratio of operating expense to total income the average of other banks are 27.15% of VCB and

41.32% of JP bank.

JP bank shows the lowest coefficient of variance of 10.14% and MCB shows the highest

37.46% lower the coefficient of variance the greater the stability of bank so JP bank shows

the greater position than others. The coefficient of variance of other banks is 11.37% in

NCBL and 13.57% in VCB.

TESTING OF HYPOTHESIS

Ho: There is no significant difference in operating expense to total income in selected

banks during the study period.

H1: There is significant difference in operating expense to total income in selected banks

during the study period.

JVIMS Jamnagar

TABLE NO: 11

ANOVA TABLE FOR OPERATING EXPENSE TO TOTAL INCOME

Source of Variation SS Df MS F F crit

Rows 735.3022 4 183.8255 1.757785 3.259167

Columns 4686.131 3 1562.044 14.93665 3.490295

Error 1254.935 12 104.5779

Total 6676.368 19

(At 5% significance level)

For rows calculated value is 1.75<3.25 tabulated value.

From the above table we can see that in rows i.e. year wise calculated value is less than

tabulated value i.e. Fc<Ft. so null hypothesis that there is no significant difference in

operating expense to total income ratio during the study period is accepted. It means that

there is no significant difference in Operating expense to total income ratio during study

period.

For columns calculated value is 14.93> 3.49 tabulated value

In columns i.e. bank wise calculated value is more than tabulated value i.e. Fc>Ft. so null

hypothesis that there is no significant difference in operating expense to total income ratio in

selected banks is rejected. It means that there is significant difference in Operating expense

to total income ratio of selected banks.

JVIMS Jamnagar

4) NET PROFIT TO TOTAL ASSETS

This ratio measures return on asset employed or the efficiency in utilization of the asset. It is

arrived by dividing by the net profit to total asset.

TABLE NO: 12

NET PROFIT TO TOTAL ASSETS

(FIGURES IN %)

YEAR NCBL VCB JPB MCB

2005-2006 1.66 1.92 0.60 0.00

2006-2007 1.47 2.04 0.24 0.00

2007-2008 0.77 2.40 0.58 0.00

2008-2009 1.33 2.19 0.62 1.07

2009-2010 1.32 1.86 0.59 0.84

MEAN 1.31 2.08 0.53 0.38

S.D 0.33 0.22 0.16 0.53

C.V 25.19 10.57 30.18 139.21

Source: Annual Report

Interpretation

From the above table it reveals that in the year 2005-06 Net Profit to Total Asset ratio of

NCBL is 1.66% in year 2005-06 which become 1.47% in year 2006-07. Then it decrease to

0.77% in year 2007-08. In the year 2008-09 it increase to 1.33% and then it slightly decrease

to 1.32%. The average ratio is 1.31%.

In VCB this ratio was 1.92% in the year 2005-06 which increased for 2 years. In 2006-07 it

became 2.04% and in 2007-08 it became 2.40%. than it decreased for 2 years and became

JVIMS Jamnagar

2.19 in the year 2008-09 and in the year 2009-10 it became 1.86%. the average ratio was

2.08%.

In JP bank in 2005-06 this ratio was 0.60% and decreased in year 2006-07 and became 0.24%

than it again increased and became 0.58% in the year 2007-08. It was 0.62% in the year

2008-09. Finally it was 0.59% in the year 2009-10. The average ratio was 0.53%

In MCB there was continuous loss for 3 years thus the ratio of Net profit to total Assets is nil

for 2005 to 2008. In the year 2008-09 this ratio was 1.07% and it decreased to 0.84% in the

year 2009-10.

From the above table we can conclude that VCB shows the better performance by highest

average of 2.08% whereas the worst situation was of MCB with the lowest average of 0.38%

in the ratio of Net profit to total asset. The average of other bank is 1.31% of NCBL and

0.53% in JP bank.

Again VCB shows the lowest coefficient of variance 10.57% and MCB shows the highest

139.21% lower the coefficient of variance greater the stability of bank. So here VCB bank

shows greater position than other banks. The coefficient of variance of other banks is 25.19%

of NCBL and 30.18% of JP bank.

TESTING OF HYPOTHESIS

Ho: There is no significant difference in Net profit to total assets in selected banks during

the study period.

H1: There is significant difference in Net profit to total assets in selected banks during the

study period.

JVIMS Jamnagar

TABLE NO: 13

ANOVA TABLE FOR NET PROFIT TO TOTAL ASSETS

Source of

Variation SS Df MS F F crit

Rows 0.3859 4 0.096475 0.78842 3.259167

Columns 9.25462 3 3.084873 25.21042 3.490295

Error 1.46838 12 0.122365

Total 11.1089 19

(At 5% significance level)

For rows calculated value is 0.78<3.25 tabulated value.

From the above table we can see that in rows i.e. year wise calculated value is less than

tabulated value i.e. Fc<Ft. so null hypothesis that there is no significant difference in Net

profit to total assets ratio during the study period is accepted. It means that there is no

significant difference in Net profit to total assets ratio during study period.

For columns calculated value is 25.21> 3.49 tabulated value

In columns i.e. bank wise calculated value is more than tabulated value i.e. Fc>Ft. so null

hypothesis that there is no significant difference in Net profit to total assets ratio in selected

banks is rejected. It means that there is significant difference in Net profit to total assets

ratio of selected banks.

JVIMS Jamnagar

5) TOTAL INVESTMENT TO TOTAL ASSETS

This ratio is a tool to measure the percentage of total assets locked up in investment. The

higher the ratio of total investment to total assets the better is the position of the bank.

TABLE NO: 14

TOTAL INVESTMENT TO TOTAL ASSETS

(FIGURES IN %)

YEAR NCBL VCB JPB MCB

2005-2006 25.63 9.86 26.99 15.68

2006-2007 26.46 7.80 23.51 12.78

2007-2008 21.09 9.29 19.89 11.66

2008-2009 17.84 9.14 18.22 11.30

2009-2010 54.26 64.09 16.00 10.49

Avg. 29.05 20.04 20.92 12.38

S.D. 14.51 24.63 4.36 2.02

C.V. 49.94 122.9 20.84 16.31

Source: Annual Report

Interpretation

From the table we can conclude that in NCBL in the year 2005-06 the total investment to

total assets ratio was 25.63% which increased to 26.46% in the year 2006-07. Then it showed

a continuous decrease for 2 years. It became 21.09% in the year 2007-08 and 17.84% in the

year 2008-09. Again it increased to 54.26% in the year 2009-10. The average was 29.05%.

In VCB this ratio was 9.86% in the year 2005-06 which decreased to 7.80% in the year 2006-

07. Again it increased to 9.29% in the year 2007-08. It decreased and became 9.14% in the

year 2008-09. It was highest in the year 2009-10 i.e. 64.09%. the average was 20.04%.

JVIMS Jamnagar

In JP bank in the year 2005-06 this ratio was 26.99% then it showed a continuous decreasing

trend for next all years. In the year 2006-07 it became 23.51%. It decreased to 19.89% in the

year 2007-08. It became 18.22% and 16.00% respectively for the years 2008-09 and 2009-10.

The average ratio was 20.92%.

In MCB in the year 2005-06 this ratio was 15.68%. Here also a decreasing trend is seen for

next all years. In 2006-07 it decreased and became 12.78%. It than became 11.66% in the

year 2007-08. It was recorded 11.30% in the year 2008-09 and 10.49% in the year 2009-10.

The average was found to be 12.38%.

TESTING OF HYPOTHESIS

Ho: There is no significant difference in Total investment to total assets in selected banks

during the study period.

H1: There is significant difference in Total investment to total assets in selected banks

during the study period.

TABLE NO: 15

ANOVA TABLE FOR TOTAL INVESTMENT TO TOTAL ASSETS

(At 5% significance level)

For rows calculated value is 1.85<3.25 tabulated value.

From the above table we can see that in rows i.e. year wise calculated value is less than

tabulated value i.e. Fc<Ft. so null hypothesis that there is no significant difference in Total

investment to total assets ratio during the study period is accepted. It means that there is no

significant difference in Total investment to total assets ratio during study period.

Source of Variation SS Df MS F F crit

Rows 1286.746 4 321.6865 1.858681 3.259167

Columns 697.3062 3 232.4354 1.342994 3.490295

Error 2076.87 12 173.0725

Total 4060.922 19

JVIMS Jamnagar

For columns calculated value is 1.34< 3.49 tabulated value

In columns i.e. bank wise calculated value is less than tabulated value i.e. Fc<Ft. so null

hypothesis that there is no significant difference in total investment to total assets ratio in

selected banks is accepted. It means that there is no significant difference in Total

investment to total assets ratio of selected banks.

JVIMS Jamnagar

6) GROSS NPA TO TOTAL ASSET

In this ratio gross NPA is to be measured by the bank to the total assets. In any case the NPA

ratio should be less in number. So, less the ratio better the performance of the bank.

TABLE NO: 16

GROSS NPA TO TOTAL ASSETS

(FIGURES IN

%)

YEAR NCBL VCB JPB MCB

2005-2006 0.36 1.09 4.09 38.87

2006-2007 0.63 1.08 3.33 30.58

2007-2008 0.60 1.49 1.90 20.69

2008-2009 0.56 0.76 1.39 21.04

2009-2010 0.45 0.62 1.54 15.19

Avg. 0.52 1.008 2.45 25.27

S.D. 0.11 0.34 1.19 9.40

C.V. 21.15 33.73 48.57 37.19

Source: Annual Report

Interpretation

From the table we can see that the Gross NPA to total Assets ratio in NCBL was 0.36% in the

year 2005-06 which increased to 0.63% in the year 2006-07. Than it decreased for 3 years

and became 0.60% in 2007-08 and 0.56% in the year 2008-09. It was 0.45% in the year 2009-

10. The average was 0.52%.

JVIMS Jamnagar

In VCB in the year 2005-06 this ratio was 1.09% which decreased to 1.08% in the next year

2006-07. It increased to 1.49% in the year 2007-08. It continuously declined for next 2 years

and it became 0.76% and 0.62% in the years 2008-09 and 2009-10 respectively. The average

was found to be 1.008%

In JP Bank this ratio was 4.09% it showed continuous decline for next 3 years. It became

3.33% in the year 2006-07 and 1.90% in the year 2007-08. It further decreased to 1.39% in

the year 2008-09 and then it became 1.54% in the year 2009-10. The average was 2.45%

In MCB in the year 2005-06 this ratio was found to be 38.87% which then decreased for 2

years and became 30.58% in the year 2006-07 and 20.69% in the year 2007-08. Than it

increased to 21.04% in the year 2008-09 and became 15.19% in the year 2009-10. The

average was 25.27%.

TESTING OF HYPOTHESIS

Ho: There is no significant difference in Gross NPA to total assets in selected banks during

the study period.

H1: There is significant difference in Gross NPA to total assets in selected banks during the

study period.

TABLE NO: 17

ANOVA TABLE FOR GROSS NPA TO TOTAL ASSETS

Source of Variation SS df MS F F crit

Rows 113.16 4 28.28999 1.376102 3.259167

Columns 2160.721 3 720.2403 35.03443 3.490295

Error 246.6968 12 20.55807

Total 2520.578 19

(At 5% significance level)

For rows calculated value is 1.37<3.25 tabulated value.

JVIMS Jamnagar

From the above table we can see that in rows i.e. year wise calculated value is less than

tabulated value i.e. Fc<Ft. so null hypothesis that there is no significant difference in Gross

NPA to total assets ratio during the study period is accepted. It means that there is no

significant difference in Gross NPA to total assets ratio during study period.

For columns calculated value is 35.03> 3.49 tabulated value

In columns i.e. bank wise calculated value is more than tabulated value i.e. Fc>Ft. so null

hypothesis that there is no significant difference in Gross NPA to total assets ratio in selected

banks is rejected. It means that there is significant difference in Gross NPA to total assets

ratio of selected banks.

JVIMS Jamnagar

7) PERCENTAGE CHANGE IN GROSS NPA

It measures the movement in Gross NPAs in relation to Gross NPA in previous year. The

higher the reduction in Gross NPA level the better it is for bank.

TABLE NO: 18

PERCENTAGE CHANGE IN GROSS NPA

(FIGURES IN

%)

YEAR NCBL VCB JPB MCB

2005-2006 Base year Base year Base year Base year

2006-2007 83.93 24.81 -14.94 -5.11

2007-2008 16.66 77.82 -33.55 -26.27

2008-2009 8.79 -44.11 -20.70 4.24

2009-2010 -19.00 -1.84 26.10 -17.02

Source: Annual Report

Interpretation

From the above table it reveals that in the year 2006-07 percentage change in gross NPA ratio

of NCBL is 83.93% and then it consistently decreased for next all years and it became

16.66% in the year 2007-08, 8.79% in the year 2008-09 and finally became -19.00% in the

year 2009-10.

In VCB in the year 2006-07 this ratio was 24.81% which increased to 77.82% in the year

2007-08 then it decreased drastically to -44.11% in the year 2008-09. Finally it became -

1.84% in the year 2009-10.

JVIMS Jamnagar

In JP bank this ratio was -14.94% in the year 2006-07 which decreased to -33.55% in the year

2007-08. Again it increased to -20.70% in the year 2008-09 then it increased drastically to

26.10% in the year 2009-10.

In MCB in the year 2006-07 this ratio was -5.11% which decreased to -26.27% in the year

2007-08. Again it increased to 4.24% in the year 2008-09. Finally in the year 2009-10 it was

17.02%

From the above data we can conclude that NCBL shows consistent progress by continuously

decreasing the level of Gross NPA. In VCB the performance is fluctuating. First there is

increase in the level of Gross NPA but later it decreased for next all years. In JP bank also the

performance is fluctuating. First there was decrease in the level of Gross NPA but then it

continuously increase for next 2 years. In MCB the performance was most fluctuating. There

was constant increase and decrease in Gross NPA.

JVIMS Jamnagar

8) PERCENTAGE CHANGE IN BDDR

It measures the movement of BDDR in relation to BDDR of previous year. The higher the

increment in BDDR the better it is for bank.

TABLE NO: 19

PERCENTAGE CHANGE IN BDDR

(FIGURES IN

%)

YEAR NCBL VCB JPB MCB

2005-2006 Base year Base year Base year Base year

2006-2007 6.57 25.31 0.16 29.82

2007-2008 2.40 31.13 0.06 65.14

2008-2009 3.32 19.98 0.16 -13.42

2009-2010 4.36 13.09 0.10 -15.51

Source: Annual Report

Interpretation

From the above table it can be seen that in NCBL in the year 2006-07 the percentage change

in BDDR is 6.57%. Then it decreased to 2.40% in the year 2007-08. It again increased to

3.32% in the year 2008-09 and it became 4.36% in the year 2009-10. The average percentage

change in BDDR is 4.16%.

In VCB in the year 2006-07 the percentage change in BDDR was 25.31% which increased to

31.13% in the year 2007-08. Than it continuously decreased for 2 years and became 19.98%

in 2008-09 and 13.09% in the year 2009-10. The average was 22.38%

JVIMS Jamnagar

In JP bank in the year 2006-07 the percentage change in BDDR was 0.16% which decreased

to 0.06% in the year 2007-08 which again increased to 0.16% in the year 2008-09 and

decreased to 0.10% in the year 2009-10. The average percentage change in BDDR was

0.12%

In MCB bank in the year 2006-07 the percentage change in BDDR was 29.82% which

increased to 65.14% in the year 2007-08. Than it continuously decreased for 2 years and

became -13.42% in the year 2008-09 and it became -15.51% in the year 2009-10. The

average of this bank was

16.51%

JVIMS Jamnagar

9) GROSS NPA TO BDDR

It measures the percentage of BDDR which are as Gross NPA. The lower ratio of Gross NPA

to BDDR shows the better performance of the bank.

TABLE NO: 20

GROSS NPA TO BDDR

(FIGURES IN

%)

YEAR NCBL VCB JPB MCB

2005-2006 9.63 29.67 67.73 453.15

2006-2007 16.62 29.55 57.51 331.21

2007-2008 18.93 40.07 38.18 147.86

2008-2009 19.94 18.66 30.23 178.05

2009-2010 17.05 16.20 38.09 174.86

MEAN 16.43 26.83 46.34 257.02

S.D 4.00 9.62 15.62 131.21

C.V 24.34 35.85 33.70 51.05

Source: Annual Report

Interpretation

From the above table it reveals that in the year 2005-06 Gross NPA to BDDR of NCBL was

9.63% and continuously increase for four years, in 2006-07 it was 16.62%, in 2007-2008 it

become 18.93% then it increase in year 2008-09 and become 19.94% and it slightly increase

in year 2009-10 and become 17.05%. The average is 16.43%

In VCB in the year 2005-06 the gross NPA to BDDR was 29.67% which decreased to

29.55% in the year 2006-07. In year 2007-08 it become 40.07%. Than it continuously

JVIMS Jamnagar

decreased for 2 years and became 18.66% in 2008-09 and 16.20% in the year 2009-10. The

average was 26.83%

In JP bank in the year 2005-06 the Gross NPA to BDDR was 67.73% which continuously

decreased for three year in the year 2006-07 it was 57.51%. In the year 2007-08 it become

38.81% and decreased to 30.23% in the year 2008-09. And in year2009-10 it increase to

38.09%. The average of Gross NPA to BDDR was 46.34%

In MCB in the year 2005-06 the Gross NPA to BDDR was 453.15 which continuously

decrease for two years. In 2006-2007 it is 331.21 then it becomes 147.86% in year 2007-08.

Then it increase to 178.05% then it decrease and become 174.86% in year 2009-10. The

average of this bank was 257.02%

From the above data we can conclude that NCBL shows the better performance by the least

average of 16.43% whereas worst situation was of MCB with the highest average of 257.02%

in the ratio of Gross NPA to BDDR. The average of other banks is VCB 26.83% and JP bank

46.34%.

The NCBL shows the lowest coefficient of variance 24.34% and MCB shows the highest

51.05%.The lower the coefficient of variance greater the stability in the bank so here NCBL

shows the greater position than other banks. The coefficient of variance of other banks is

35.85% VCB and in JP bank 33.70%.

TESTING OF HYPOTHESIS

Ho: There is no significant difference in Gross NPA to BDDR in selected banks during the

study period.

H1: There is significant difference in Gross NPA to BDDR in selected banks during the

study period.

JVIMS Jamnagar

TABLE NO: 21

ANOVA TABLE FOR GROSS NPA TO BDDR

Source of Variation SS df MS F F crit

Rows 20937.55 4 5234.388 1.272845 3.259167

Columns 195804.8 3 65268.25 15.87127 3.490295

Error 49348.23 12 4112.353

Total 266090.5 19

(At 5% significance level)

For rows calculated value is 1.27<3.25 tabulated value.

From the above table we can see that in rows i.e. year wise calculated value is less than

tabulated value i.e. Fc<Ft. so null hypothesis that there is no significant difference in Gross

NPA to BDDR ratio during the study period is accepted. It means that there is no significant

difference in Gross NPA to BDDR ratio during study period.

For columns calculated value is 15.87> 3.49 tabulated value

In columns i.e. bank wise calculated value is more than tabulated value i.e. Fc>Ft. so null

hypothesis that there is no significant difference in Gross NPA to BDDR ratio in selected

banks is rejected. It means that there is significant difference in Gross NPA to BDDR ratio

of selected banks.

JVIMS Jamnagar

FINDINGS

In the ratio of gross NPA to gross advances The Nawanagar bank shows better

performance than other selected co-op banks. And Mahila bank has high level of

Gross NPA but shows better stability with least coefficient of variance.

In the ratio of Interest income to working funds Vardhman bank shows better

performance with highest mean but its stability is less as compared to The Nawanagar

bank whereas The Mahila bank shows the worst performance among the selected

banks.

In the ratio of Operating expense to total income The Nawanagar bank shows the

better performance with least mean whereas in terms of stability The Jamnagar

Peoples bank stands first.

In the ratio of Net profit to total assets as compared to other banks Vardhman bank

shows the better performance in both ways. In terms of average and in terms of

stability also. Whereas Mahila bank shows the worst performance.

In the ratio of Total investment to total assets The Nawanagar bank shows better

performance with highest investment but it shows instability also whereas The

Jamnagar Peoples bank has less investment as compared to The Nawanagar but its

stability is highest.

In the ratio of Gross NPA to total assets The Nawanagar bank shows the better

performance in both ways with least average and high stability whereas worst

performance is recorded in The Mahila bank.

In the ratio of Gross NPA to BDDR The Nawanagar bank shows better performance

by maintaining the lower level of Gross NPA whereas The Mahila bank fails to

decrease the level of Gross NPA.

JVIMS Jamnagar

In the ratio of percentage change in Gross NPA The Nawanagar bank shows constant

progress by continuously decreasing the level of Gross NPA whereas Jamnagar

Peoples bank shows the most fluctuating trend among the selected co-op banks.

Overall all in seven ratios out of nine ratios The Nawanagar bank shows the better

performance as compared to other selected co-op banks.

Among all co-op banks The Nawanagar bank showed the outstanding performance

during the study period whereas The Mahila bank showed underperformance.

JVIMS Jamnagar

CONCLUSION

Banking sector is one of the largest revenue generated sector in India. In this study we

analyzed Management of Non Performing assets by different co-operative banks of

Jamnagar district. This study reveals the effectiveness and soundness of the bank in

terms of liquidity and management. In this study the Nawanagar co-operative bank is

more successful as compared to other selected co-operative banks.

In terms of co-efficient of variance i.e. stability all banks show fluctuating nature. But

Nawanagar bank is more stable as compared to other selected co-operative banks. In

terms of average i.e. functionality also Nawanagar show good results as compared to

other selected banks whereas Mahila co-operative bank shows the worst results.

JVIMS Jamnagar

SUGESTIONS:

Co-operative banks should follow the below steps in order to manage their NPA

Loans should be granted to people after checking their capacity of repayment.

The documents given for loan by customers should be properly verified before

granting of the loan.

Strict follow up should be taken even if the EMI is late by one month.

In case an account has been converted into NPA bank should try to recover its money

from mortgage papers or any other such properties.

Even after following above steps the customer does not repay the loan then legal steps

should be taken against the customers.

JVIMS Jamnagar

APPENDICES

LIST OF TABLES

Sr.no. Contents Page no.

1. Results of 1981 & 2010 of Nawanagar bank 8

2. Term deposits & interest table of Nawanagar bank 17

3. List of locker rent 20

4. Financial status of Nawanagar bank 24

5. RBI guidelines for NPA recognition 31

6. Gross NPA to Gross advance 55

7. ANOVA table for Gross NPA to Gross advance 57

8. Interest income to working funds 58

9. ANOVA table for Interest income to working funds 60

10. Operating expense to total income 61

11. ANOVA table for operating expense to total income 63

12. Net profit to total assets 64

13. ANOVA table for net profit to total assets 66

14. Total investment to total assets 67

15. ANOVA table for total investment to total assets 68

16. Gross NPA to total assets 70

17. ANOVA table for Gross NPA to total assets 71

18. Percentage change in gross NPA 73

19. Percentage change in BDDR 75

20. Gross NPA to BDDR 77

21. ANOVA table for Gross NPA to BDDR 79

LIST OF CHARTS

Sr. no. Contents Page no.

1. Banking system of India 3

2. Data forms 47

JVIMS Jamnagar

ANALYSIS OF VARIANCE TABLE FOR TWO-WAY

ANOVA

Source

of

Variation

Sum of Squares

(SS)

Degree of

Freedom

(df)

Mean Square

(MS)

F-ratio

Between

Rows (Tj)2 _ (T)2

nj n

(r – 1) SS between rows

(r -1)

MS between rows

MS residual

Between

Columns (Ti)2 _ (T)2

ni n

(c -1) SS between rows

(c -1)

MS between columns

MS residual

Error Total SS – (SS

between

columns + SS

between rows)

(c -1) (r -1) SS residual

(c -1) (r -1)

Total -

(C*r – 1)

In the table c= no. of columns

r= no of rows

SS residual = Total SS-(SS between columns + SS between rows)

JVIMS Jamnagar

THE PROFIT & LOSS A/C & BALANCE SHEET OF

NAWANAGAR CO-OPERATIVE BANK

PARTICULARS

2005-2006 2006-2007 2007-2008 2008-2009 2009-2010

INTEREST

INCOME

151370788.10 174857371.95 210250450.62 242898301.23 266147331.39

OPERATIVE

EXPENSES

25282487.85 36976981.3 37228750.6 39468840.9 47146528.02

TOTAL

INCOME

162450481.75 185870802.41 230588417.47 261963691.38 279618776.71

NET

PROFIT

34131000 32247000 43837000 41686000 44992000

GROSS

NPA

7502800 13800000 16100000 17541000 15611000

GROSS

ADVANCES

392217000 378010000 555121000 843552000 957148000

TOTAL

INVESTMENT

525527278 580959995 559013770 557521691.98 1865679041.5

BDDR

77914568.68 83034222.68 85035188.68 87858323.68 91695301.68

TOTAL

ASSESTS

2049885747 2194936522 2650581911 3132641393 3438360901

WORKING

FUNDS

1952859000 2194936000 2650582000 3123641000 3438361000

JVIMS Jamnagar

THE PROFIT AND LOSS A/C & BALANCE SHEET OF

VARDAMAN CO-OPERATIVE BANK

PARTICULARS

2005-2006 2006-2007 2007-2008 2008-2009 2009-2010

INTEREST

INCOME

4362843.78 4632995.96 6756899.43 7867015.21 8695438.55

OPERATIVE

EXPENSES

1445333.60 1542401.39 1724120.51 1987833.25 2265924.46

TOTAL

INCOME

46432000.30 4933973.93 7104759.82 8144711.13 9169342.45

NET

PROFIT

922000 1242000 1868000 1870331.10 1906649.59

GROSS

NPA

524000 654000 1163000 650000 638000

GROSS

ADVANCES

15251000 15825000 16992000 20100000 22477000

TOTAL

INVESTMENT

4722500 4722500 7229000 7801500 65689621

BDDR

1766404 2212499 2902499 3482499 3938499

TOTAL

ASSESTS

47894627.8 6080660.8 77792941.76 85330088.04 102485516.2

WORKING

FUNDS

47000000 60000000 75800000 84200000 102400000

JVIMS Jamnagar

THE PROFIT AND LOSS A/C & BALANCE SHEET OF

JAMNAGAR PEOPLES CO-OPERATIVE BANK

PARTICULARS

2005-2006 2006-2007 2007-2008 2008-2009 2009-2010

INTEREST

INCOME

26472683.78 27553849.85 33698890.06 41130470.63 45274790.06

OPERATIVE

EXPENSES

13219576.2 13294068.85 12919658.55 17206014.3 20528432.33

TOTAL

INCOME

28776097.72 29893494.26 36394983.2 44035476.43 48629955.11

NET

PROFIT

2545910.16 1069989.64 2952271.54 3472820.00 3710006.35

GROSS

NPA

17266380.81 14685517.0 9757379.44 7737511.02 9757379.44

GROSS

ADVANCES

125800000 135588000 158677000 171001000 196925000

TOTAL

INVESTMENT

113759000 103368000 101731500 101407500 101083500

BDDR

25494357 25534636 25550734 25590912 25616597

TOTAL

ASSESTS

421356452.5 439699863.7 511292825.1 556331950.2 631605215.2

WORKING

FUNDS

421300000 439700000 511300000 556300000 631600000

JVIMS Jamnagar

THE PROFIT AND LOSS A/C & BALANCE SHEET OF

MAHILA CO-OPERATIVE BANK

PARTICULARS

2005-2006 2006-2007 2007-2008 2008-2009 2009-2010

INTEREST

INCOME

3563102.25 2907035.19 2450946.21 3290333.31

4660870.83

OPERATIVE

EXPENSES

5425130.55 3517167.28 3523983.81 3604105.84 3618908.46

TOTAL

INCOME

6392384.95 5465316.56 5345564.09 10120476.15 10236591.18

NET

PROFIT

-6607816.31 -1999151.82 -7252901.62 1168593.54 1062759.32

GROSS

NPA

31481000 29872000 22023398 22959260 19050515

GROSS

ADVANCES

37782565.97 42131121.47 36097699.05 35376511.07 35901058.73

TOTAL

INVESTMENT

12703064 12484700 12409550 12334400 13164250

BDDR

6947000 9018980 14894373 12894373 10894373

TOTAL

ASSESTS

80980183.4 97676321.9 106419398.0 109112794.5 125385305.0

WORKING

FUNDS

8758000 99675000 113493000 108812000 125385000

JVIMS Jamnagar

BIBLIOGRAPHY

BOOKS REFERED

Dr. P.K. Srivastava ; “BANKING THEORY AND PRACTICES” 10TH

edition

Himalaya Publication House, 2007.

Annual reports of selected banks.

Research methodology by C. R. Kothari.

“Management of NPA in Urban co-operative banks” by National Institute of

Urban Co-operative Banks, 2001.

WEBSITES VISITED:

www.google.com

www.sebi.gov.in

www.wikipedia.com

www.rbi.org.in