Structure of Co

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Topics:-1.Research on current recovery methods used at nagrik bank

or

2.research on improving present recovery process at nagrik bank

Features:

1.The Bank has completed its 58 yrs of dedicated services.

2.Convenient Banking hours.

3 Attractive higher rates of interest are offered to depositors compared to other banks.

4.Facility for Draft on all important centers in India

5.Facility for FREE RTGS/NEFT exclusively for our all dedicated customers.

Objective 2 and 3 clear karo

Objective 7 ane 8 same nathi?

Hypothesis avu muko "Profitability of NSB can be increased by using new recovery method."

The new method you suggest must be according to RBI norms.

Name of Bank: Shree Bhavnagar Nagrik Sahakari Bank

Type Of Bank: Co-operative Bank

Head Office Address : 14,gangajaliya talav,Bhavnagar 364001

Number of Branches

Exploratory Research

As the term suggests, exploratory research is often conducted because a problem has

not been clearly defined as yet, or its real scope is as yet unclear. It allows the

researcher to familiarize him/herself with the problem or concept to be studied, and

perhaps generate hypotheses (definition of hypothesis) to be tested. It is the initial

research, before moreconclusive research(definition ofconclusive research) is

undertaken. Exploratory research helps determine the bestresearch design, data
http://www.htm.uoguelph.ca/MJResearch/ResearchProcess/ConclusiveResearch.htmhttp://www.htm.uoguelph.ca/MJResearch/ResearchProcess/ConclusiveResearch.htmhttp://www.htm.uoguelph.ca/MJResearch/ResearchProcess/ConclusiveResearch.htmhttp://www.htm.uoguelph.ca/MJResearch/ResearchProcess/ResearchDesignDataCollectionTechniquesandSelectionofSubjects.htmhttp://www.htm.uoguelph.ca/MJResearch/ResearchProcess/ResearchDesignDataCollectionTechniquesandSelectionofSubjects.htmhttp://www.htm.uoguelph.ca/MJResearch/ResearchProcess/ResearchDesignDataCollectionTechniquesandSelectionofSubjects.htmhttp://www.htm.uoguelph.ca/MJResearch/ResearchProcess/ConclusiveResearch.htm


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collection method and selection of subjects, and sometimes it even concludes that the

problem does not exist!

Another common reason for conducting exploratory research is to test concepts before

they are put in the marketplace, always a very costly endeavour. In concept testing,

consumers are provided either with a written concept or a prototype for a new, revisedor repositioned product, service or strategy.

Exploratory research can be quite informal, relying on secondary researchsuch as

reviewing available literature and/or data, orqualitative(definition ofqualitative

research) approaches such as informal discussions with consumers, employees,

management or competitors, and more formal approaches through in-depth

interviews, focus groups, projective methods, case studies or pilot studies.

The results of exploratory research are not usually useful for decision-making by

themselves, but they can provide significant insight into a given situation. Althoughthe results of qualitative research can give some indication as to the "why", "how" and

"when" something occurs, it cannot tell us "how often" or "how many". In other

words, the results can neither be generalized; they are not representative of the whole

population being studied.

http://www.htm.uoguelph.ca/MJResearch/ResearchProcess/ExploratoryResearch.htm

Structure of co-operative bank

Primary cooperative bank

central
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state

Introduction:Indian banking is the lifeline of the nation and its people. Banking hashelped in developing the vital sectors of the economy and usher in a newdawn of progress on the Indian horizon. The sector has translated thehopes and aspirations of millions of people into reality. But to do so, it hashad to control miles and miles of difficult terrain, suffer the indignities offoreign rule and the pangs of partition. Today, Indian banks can con fidentlycompete with modern banks of the world. Before the 20 th century, usury, orlending money at a high rate of interest, was widely prevalent in rural IndiaEntry of Joint stock banks and development of Cooperative movementhave taken over a good deal of business from the hands of the Indianmoney lender, who although still exist, have lost his menacing teeth. In theIndian Banking System, Cooperative banks exist side by side withcommercial banks and play a supplementary role in providing need

-based finance, especially for agricultural and agriculture- based operationsincluding farming, cattle, milk, hatchery, personal finance etc. along withsome small industries and self-employment driven activities. Generally, co-operative banks are governed by the respective co-operative actsof state governments. But, since banks began to be regulated by the RBIafter1st March 1966, these banks are also regulated by the RBI after amendment to the Banking Regulation Act 1949.The Reserve Bank is responsible for licensing ofbanks and branches, and it also regulates credit limits to state co-operativebanks on behalf of primary co-operative banks for financing SSI units.


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4

Banking in India originated in the first decade of 18th

century with The GeneralBank of India coming into existence in 1786. This was followed by

Bank ofHindustan. Both these banks are now defunct. After this, the Indian governmentestablished three presidency banks in India. The first of three was the BankofBengal, whichobtainscharter in 1809, theother two presidency bank, viz.,theBank of Bombay and the Bank of Madras,were established in 1840 and 1843,respectively.The three presidency banks were subsequentlyamalgamated intothe Imperial Bank of India (IBI) under the Imperial Bank of India Act, 1920

which is now known as the StateBank of India.

A couple of decadeslater, foreign banks like Credit Lyonnaisstarted theirCalcutta operations in the 1850s. At that point of time, Calcutta was themostactive trading port, mainly due to the trade of the British Empire, and due to

which banking activity took roots there and prospered. The first fully Indianowned bank was the Allahabad Bank, which was established in 1865.By the 1900s, the market expanded with the establishment of banks suchasPunjab National Bank, in 1895 in Lahore and Bank of India, in 1906, inMumbai


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both of which were founded under private ownership. The ReserveBank of India formally took on the responsibilityof regulating the Indian

banking sector from 1935. After Indias independence in 1947, the

ReserveBank was nationalized and given broader powers.

As the banking institutions expand and become increasingly complex undertheimpact of deregulation, innovation and technological upgradation, it iscrucial to

maintainbalance between efficiency and stability. During the last 30 years sincenationalization tremendous changes have taken place in the financial markets aswell as in the banking industry due to financial sector reforms.The banks haveshed their traditional functions and have been innovating, improving andcoming out with new types of services to cater emerging needs of their5

customers.Banks have been given greater freedom to frame their own policies.Rapid advancement of technologyhas contributed to significant reduction intransaction costs, facilitated greater diversification of portfolio andimprovements in credit delivery of banks. Prudential norms, in line withinternational standards, have been put in place for promoting andenhancing the

efficiency of banks. The processof institution building has been strengthenedwith severalmeasures in the areas of debt recovery, asset reconstruction andsecuritization, consolidation, convergence, mass banking etc.Despite this commendable progress, serious problem have emergedreflecting in


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products and use of state-of-the-art technology.Gradual deregulation that is being ushered in while stimulating thecompetitionwould also facilitate forging mutually beneficial relationships, which wouldultimatelyenhance the qualityand content of banking.

In the final phase, thebanking system in India will give a good account of itself only with thecombined efforts of cooperative banks, regional rural banks anddevelopmentbanking institutions which are expected to provide an adequate number ofeffective retail outlets to meet the emerging socio-economic challenges duringthe next two decades.The electronic age has also affected the banking system,leading to very fast electronic fund transfer.However, the development ofelectronic banking hasalso led to new areas of risk such as data security andintegrity requiring new techniques of ris

kmanagement.Cooperative (mutual) banks are an importantpart of many financial systems.Ina number of countries, they are among the largest financial institutionswhen


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considered as a group. Moreover, the share of cooperative banks has beenincreasing in recent years; in the sample of banks in advanced economiesandemerging markets analyzed in this paper, the market share of cooperativebanksin terms of total banking sectorassets increased from about 9 percent in mid-1990s to about 14 percent in 2004.(http://shodhganga.inflibnet.ac.in/bitstream/10603/2299/10/10_chapter%201.pdf)

What is banking

Banking Industry is a service industry. It provides various services to its customers. Traditionally

the services were restricted to deposits and loans. The started by taking deposits from peoplewho had surplus of money and lending this money to borrowers who wanted money to invest.They charged interest from borrowers and gave interest to depositors. There was difference in

rate of interest between deposits and lending and that constituted the major source of revenue for

banks.

Banking is a service industry providing services to those who want to lend, borrow or invest.

This is putting it as simply as possible. Banking started like this, but today banking industry is

one of the most complex and hugely diverse industries and offers a portfolio of large number ofservices.

Now a days banks are large and complex organizations. Their clients range from individuals and

corporate institutions, other banks and governments of entire nations. Banking is a service

industry, means that they don't produce physical things but provide services to their clients. Thedeal with all types of money transactions, borrowing it, lending it, and many other related

activities that are explained in this tutorial.


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definition

A banking company is the one which transacts the business of banking which means

accepting, for the purpose of lending and investment of deposits of money fr om the publ ic,

repayable on demand or otherwise and withdrawals by cheques, draf t, order or otherwise.

The definition of a bank varies from country to country. Under English common law, a banker is

defined as a person who carries on the business of banking, which is specified as: conducting

current accounts for his customers, paying cheques drawn on him, and collecting cheques for hiscustomers. In India the banking company is defined as the one which transacts the business of

banking which means accepting, for the purpose of lending and investment of deposits of money

from the public, repayable on demand or otherwise and withdrawals by cheques, draft, order or

otherwise.

In simple terms, a bank accepts money on deposits, repayable on demand and also earns a

margin of profit by lending money. A bank stimulates economic activity in the market by dealingin money. It mobilizes the savings of people and makes funds available to business financing

their capital and revenue expenditure. It also deals in financial instruments and provides financial

services for a price i.e., interest, discount, commission, etc.
http://www.technofunc.com/index.php/domain-knowledge/banking-domain/item/what-is-banking


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Bank is an institution that accepts deposits, makes loans, pays checks, and provides financial

services. A primary role of banks is connecting those with funds, such as investors and

depositors, to those seeking funds, such as individuals or businesses needing loans.

overview

Banking Defined:

A bank is a financial institution that provides banking and other financial services to theircustomers. A bank is generally understood as an institution which provides fundamental banking

services such as accepting deposits and providing loans. There are also non- banking institutions

that provide certain banking services without meeting the legal definition of a bank. Banks are a

subset of the financial services industry.

Need for Banking:

Banks are large and complex organizations. Their clients range from individuals and institutions,all the way up to the governments and central banks of entire countries. The Banking sectoroffers several facilities to their customers including safeguarding their money and valuables and

providing them with various types of credit loans to meet their various needs like home loans,

consumer loans, personal loans etc. Banks also provide additional services like credit, and

payment services, such as checking accounts, money orders, and cashier's cheques.

The banks also offer investment and insurance products. As a variety of models for cooperation

and integration among finance industries have emerged, some of the traditional distinctionsbetween banks, insurance companies, and securities firms are fast diminishing. In spite of all

these developments, banks continue to maintain and perform their primary roleaccepting

deposits and lending funds from these deposits. Banking is an important undertaking. Themovement of capital handled by banks allows economies to grow and prosper. Businesses and

governments need money to operate, and banks act as intermediaries between the suppliers of

funds and users of funds.

Functions of the Bank:

Bank provides various services and offer many products. The following discussion

explains various functions of the bank:

Provide security to the savings of customers by safeguarding it and offering interest on

the deposits kept with it.

Control the supply of money and credit and arrange funds to the parties who need themby borrowing from parties who have surplus.

Encourage public confidence in the working of the financial system

Increase savings speedily and efficiently.

Avoid focus of financial powers in the hands of a few individuals and institutions.

Set equal norms and conditions to all types of customers

Banking Regulations:


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Banks operating in most of the countries are exposed to various stringent regulations. Most

governments enforce rules and procedures to govern their operations and service offerings, and

the manner in which they grow and expand their facilities to better serve the public. A bankerworks within the financial system to provide loans, accept deposits, and provide other services to

their customers. They must do so within a climate of extensive regulation, designed primarily to

protect the public interests. The main reasons why the banks are heavily regulated are as follows:

To protect the safety of the public's savings.

To control the supply of money and credit in order to achieve a nation's broad economicgoal.

To ensure equal opportunity and fairness in the public's access to credit and other vital

financial services.

To promote public confidence in the financial system, so that savings are made speedilyand efficiently.

To avoid concentrations of financial power in the hands of a few individuals and

institutions.

Provide the Government with credit, tax revenues and other services. To help sectors of the economy that they have special credit needs for example Housing,

small business and agricultural loans etc.

Law of banking:

Banking law is based on a contractual agreement between the bank and customer. The customer

is any entity for which the bank agrees to conduct an account or business. The law implies rights

and obligations into this relationship as follows:

The bank account balance is the financial position between the bank and the customer:

when the account is in credit, the bank owes the balance to the customer; when theaccount is overdrawn, the customer owes the balance to the bank.

The bank agrees to pay the customer's cheques up to the amount standing to the credit of

the customer's account, plus any agreed overdraft limit.

The bank may not pay from the customer's account without a mandate from the customer,example cheques drawn by the customer.

The bank agrees to promptly collect the cheques deposited to the customer's account as

the customer's agent, and to credit the proceeds to the customer's account.

The bank has a right to combine the customer's accounts, since each account is just an

aspect of the same credit relationship.

The bank has a lien on cheques deposited to the customer's account, to the extent that the

customer is indebted to the bank.

The bank must not disclose details of transactions through the customer's account

unless the customer consents, there is a public duty to disclose, the bank's interests

require it, or the law demands it.

The bank must not close a customer's account without reasonable notice, since chequesare outstanding in the ordinary course of business for several days.


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These implied contractual terms may be modified by express agreement between the customer

and the bank. The statutes and regulations in force within a particular jurisdiction may also

modify the above terms and/or create new rights, obligations or limitations relevant to the bank-customer relationship.

(http://www.technofunc.com/index.php/domain-knowledge/banking-domain/item/banking-segments)

Co-operative Banks in India

Posted on August 26, 2012 by admin inBanking.

Co-operative Banks are government supported financial agency in India, which are organized

and managed with the dictum of co-operation, self-help and mutual help. It functions with the

no profit and no loss model. As other banks in the country, Co -operative banks perform all the

basic banking functions like borrowing and lending of credits.

In India, Co-operative Banks are working for nearly hundred years. Co-operative Banks areconsidered as one of the important financial institutions in the country. The major contributions

of these banks are mostly in rural areas where they play the most vital role in rural financing and

micro financing. The major strengths of co-operative banks are their easy local reach, transparentinteraction with the customers and their efficient services to common people.
http://www.technofunc.com/index.php/domain-knowledge/banking-domain/item/banking-segmentshttp://www.technofunc.com/index.php/domain-knowledge/banking-domain/item/banking-segmentshttp://www.technofunc.com/index.php/domain-knowledge/banking-domain/item/banking-segmentshttp://crackmba.com/category/banking/http://crackmba.com/category/banking/http://crackmba.com/category/banking/http://www.technofunc.com/index.php/domain-knowledge/banking-domain/item/overview-of-banking-industryhttp://crackmba.com/category/banking/http://www.technofunc.com/index.php/domain-knowledge/banking-domain/item/banking-segments


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Objectives of Co-Operative Banks

Engage in rural financing and micro financing

Main objective is to remove the dominance of common man by the middle man and

money lenders.

Ensure credit services to farmers at low rate of interest providing socio-economiccondition to the people.

Provide financial support for the needy people and farmers in the rural areas

Provides personal finance services for those engaged in small-scale industries and self-employment driven activities for peoples in rural areas as well as in urban areas

Categories of Co-operative Banks

The need of Co-operative banks in India is much important to support the financial requirements

of the people. To provide a much established support to every person in the country and for thedevelopment of the nation, Co-operative banks are categorized at various dimensions and at

various levels.

The Co-operative Banks can be divided into two categories based on their functions. They are,

LongTerm Co-operative Credit Institutions

ShortTerm Co-operative Credit Institutions

LongTerm Co-operative Credit Institutions functions and provide services at three levels:

State Level

District Level Village Level

ShortTerm Co-operative Credit Institutions are further divided into three sub-categories:

State Co-operative Banks

District Co-operative Banks

Primary Agricultural Co-operative Societies

Apart from these classifications, the co-operative banking structure in India is further divided

into five main groups:

Primary Urban Co-operative Banks

Primary Agricultural Credit Societies

District Central Co-operative Banks

State Co-operative Banks

Land Development Banks

Functions of Co-operative Banks


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The Cooperative Banks functions with the objective of fulfilling the credit requirements

and needs of people living in the rural and urban areas.

Perform multiple activities and functions at large extent to carry out developments andregulation in the society that strengthen the co-operative movements.

Primary Urban Co-operative Banks (PUCBs):

The Urban Co-operative Banks are those that function in urban and semi-urban areas. Generally

it is referred as Primary Co-operative Banks. The functions of PUCBs are:

Lending money to small borrowers and businesses

Provide working capital loans and term loans

Provide advances against shares and debentures

Primary Agricultural Credit Societies (PACS)

These institutions act as a core of Indian Co-operative movement. The main objectives of PACSare:

Raising the capital of the bank to provide loans and support for customers

Motivating the habit of savings amongst customers and collecting deposits

To provide services and inputs to people for their welfare and development

To support and motivate various income augmenting activities

District Central Co-operative Banks (DCCBs)

The Primary Agricultural Credit societies are affiliated to the DCCBs. The functions of DCCBs

are:

Act as a support centre for district central financing agencies

Arranging credit to primaries

Managing banking business

Approve, supervise and control implementation of policies

State Co-operative Banks (SCBs)

The District Central Co-operative Banks are in turn affiliated to SCBs. The functions of SCBs

are:

Serve as balancing centre in the States

Organise provision of credit for credit worthy farmers

Carry out banking business

Leader of the Co-operatives in the States

Land Development Banks (LDBs)


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The LDBs are used to meet the needs of agricultural sector through long term credits. The LDBs

functions at two levels. One is the Central LDBs operating at the state level and the other is

Primary LDBs operating at district level or taluka level. The functions of LDBs are:

Provide services to meet the requirements for developing areas

Providing loans on the security of mortgages Raising their resources by floating debentures in the market

Although, Co-operative banks mainly do business in the agriculture and rural areas, some groupslike PUCBs, DCCBs and SCBs operate in semi-urban, urban and metropolitan areas also.

Products and Services

The Products offered by the Co-operative banks includes:

Deposits

Savings Bank Account

Current Account

Recurring Deposit

Fixed Deposit

Cash Certificate

Loans

Loans to Salaried Employees

Home Need Loans

Loans to Pensioners Loans under Women Entrepreneur Development Scheme

Building Mortgage Loan

Education Loan

Housing Loan

Loan to Physically Challenged Persons

The Services offered by the Co-operative banks includes:

Clearing

Safe Deposit Locker

Automated Teller Machine (ATM) Demand Draft / Pay Order

Regulation

Co-operative Banks in India are registered under the Co-operative Societies Act and areregulated by Reserve Bank of India.


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(http://crackmba.com/co-operative-banks-in-india/)

HISTORY OF BHAVNAGAR CO-OPERATIVE BANK

The bank was established on 08-02-1955, Regn.No.1149, with the blessings of its

profounder: Late Shri Bhogilal Maganlal Shah,Late Shri Venilal Maganlal Parekh

(Veni Kaka) Who laid down the strongest foundation of the bank and its goodwill and all

the board of directors till the date who have nourished and cared it at their level best

with their utmost direction, all time sincere contribution in the rapid growth and sound

financial position. Today the bank has expanded it's network of business in 8 fully

computerized branches, located at different locations covering prime areas of the

Bhavnagar city, providing prompt, dedicated, personalized services by humble, sincere,

efficient staff. The bank also provides its latest customer terminal facilities at twobranches:

Bank started with the name of SHREE BHAVNAGAR VIBHAGIY SAHKARI BANK

LIMITED. but now it changes with the name of SHREE BHAVNAGAR NAGRIK

SAHAKARI BANK LTD

The first member of the bank was shree Bhogilal shah who gives their work for the bank

continuoes at 18 years. After him at 30 years contines give work by shree jethalalsankarlal desai who was the first MD of this bank and his nickname is desai saheb

After the death of bhogilal shah shree venikaka come for the chief member sheet,and

given work continuesly for 30 year.shree venikaka is BOD (board of director) of the

bank now.shree venikaka is MD and Niranjanbhai Dave who is chairman of the bank

give their work for bank now.

http://www.theratnakarbank.com/pdfs/bp/Recovery%20Policy%20-%202012.pdf
http://crackmba.com/co-operative-banks-in-india/http://crackmba.com/co-operative-banks-in-india/http://crackmba.com/co-operative-banks-in-india/http://www.theratnakarbank.com/pdfs/bp/Recovery%20Policy%20-%202012.pdfhttp://www.theratnakarbank.com/pdfs/bp/Recovery%20Policy%20-%202012.pdfhttp://www.theratnakarbank.com/pdfs/bp/Recovery%20Policy%20-%202012.pdfhttp://crackmba.com/co-operative-banks-in-india/


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Necessity of recovey of loan amounts

We are familiar about the working of Urban Co-op. Banks. The Urban Co-op. Banks mobilisedeposits from the members of the public. The banks have introduced various deposits schemes

which induce the common man to save more money. The Urban Co-op. Banks accept deposits

for the purpose of lending. One of the most important functions of the banks is to create credit.Except in a few cases like interest on savings bank deposits and interest on export credit and

interest on small loans upto Rs2 lakh which are administered

( under the control of the RBI), most of the interest rates on deposits as well as loans & advances

can now be freely set by the banks themselves.

It is the primary duty and function of the Urban Co-op. Banks to safeguard the interest of

depositors. Whenever deposits are accepted, the bank agrees and undertakes to repay the amount

of deposits with interest to the depositor on maturity. The ownership of the deposit amount vestswith the customer and the custody of the deposit amount is with the Banker. So whenever

Advances and Loans are sanctioned to shareholders / members of the Bank, the Banker has totake utmost care to see that the Borrower repays the amount of loan with interest so as to enable

the Banker to repay the amount of deposit with interest to the customer.

It is with background, it will be clear that the banker must be vigilant about the utilization of theamount of advances and loans made to be shareholders/nominal member. If the Banker isreluctant and negligent towards recovery of loan amounts and advances, it will be very difficult

for the bank to repay the amount of "DEPOSIT AMOUNTS" to the customers on maturity.

What is meant by overdues

The Urban Co-op. Banks should exercise caution, necessary checks and adopt detailed scrutinymeasures to process loan applications, received from the different shareholders.

This is necessary to ensure that every borrower has a proper repaying capacity for repayment of

the amount of loans and advances that would be sanctioned. Securities are also taken to ensure

that in case the borrower fails to repay the amount of loan, the securities can be attached and soldout and the debts can be liquidated.

Even with this background, though there is a detailed scrutiny of loan application, it is observedthat there are very few cases, where the judgment of the bankers fail. In such 'Fail Cases' the

borrowers are not ready and willing to repay the amount of loan, the securities can be attached

and sold out and the debts can be liquidated.

We have also studied that whenever loans and advances are sanctioned, the borrowing

shareholders nominal members and sureties etc.are required to execute Demand Promissory Noteand other allied Loan Agreements such as Deed of Hypothecation, Deed of Mortgage and

immovable properties, Deed of pledge etc.


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On careful reading the Loan agreements, we observe the following points are stipulated in each

Agreement/Bond.

a) Date of sanction of loan

b) Amount of loan sanctioned.

c) Rate of Interest that would be charged. d) Last date of repayment of loan.

e) Period for which loan is granted.

f) The mode of repayment of loan, i.e on monthly basis / on quarterly basis etc.

g) Rate of penal interest in case there are defaults committed by the borrower in

respect of repayment of loan amount.

h) Details regarding securities offered.

Normal measures to be adopted by bank officials for recovery of dues

Whenever, a borrower commits breach of agreement in respect of repayment of schedule of the

amount of loans with interest etc., we safely say that there are 'OVERDUES ' in the LoanAccount.

Once the Loan A/c is an overdue A/c i.e. the borrower has committed default in repayment of

loan amount as per the dates specified in the Agreement, then the Banker has necessarily toadopt measures which will result into recovery of overdue amounts.

We now proceed to suggest certain measures to be adopted by Urban Co-op. Banks for effectingrecovery of overdue amounts.

Whenever the borrower commits default in repayment of loan amount, immediately the bank

should serve ' Preliminary Notices' on the principal borrower and the sureties advising them torepay the amount of overdues with interest etc. Such Preliminary Notices should invariably

mention information which is of factual nature relating to (i) amount of loan sanctioned (ii) dateof sanction of loan (iii) Names of the sureties (iv)amount of the loan sanctioned (v) amount of

over dues with interest etc. on a particular date. In addition to the above it must also be

communicated the bank shall proceed to take further action against the principal borrower and

sureties in case of failure to repay the amount of loan/over dues. It has been often said 'A' stitchin time saves nine'. Thus, the banker must be vigilant, right from the disbursement of loan

amount till the recovery of the entire loan amount. There should be effective supervision over

the amount of loan sanctioned.

Recovery through salary / wages

After issue of such preliminary notices, there may be a positive response from the principal

borrower and he may repay the amount of defaulted loan installment, or the principal borrower

and the surety may approach the authorities of the bank and may explain their genuinedifficulties regarding repayment of loan amount or there may offer to repay the dues partially.

There may be cases where there is no response from the borrower / sureties.


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With this background, the bank should proceed further to devise such steps which will result in

recovery of dues. Under various State Cooperative Acts (e.g. Section 49 of M.C.S. Act 1960) it

has been provided that if a member of a society./Bank authorises his Employer to makededuction from his salary/wages, in order to satisfy the claims of the society/Bank, then on

receipt of requisition letter from the concerned Bank, the Employer shall proceed to make

deduction from the salary/wages from the concerned employee/member to meet the claims of theBank. The Employer must remit the amount so deducted immediately to the Bank concerned.

Non-compliance of these provisions under the State Cooperative Act shall be constructed as'offence' and further Civil and Criminal action can be instituted against suchErring Employer.

In addition to the above, there are provisions under the Indian Payment of Wages Act 1936 (videSection 7(2) and Section 7(2)(j) which stipulates that the Employer shall make deduction from

the salary/wages of an Employee to satisfy the claims of the Cooperative Society / Banks.

Settlement of Disputes

Based on the noting of the Management, the Board of Directors may pass a Resolutionauthorizing the Manager/or such other officer to file "Dispute Application in the Co-op.Court

against the defaulting principal borrower and his sureties. Section 91 of the MCS Act empowers

the co-operative courts to decide on Disputes and Section 95 further empowers the court todirect attachment of property before announcement of the award which is called Attachmentbefore award or order and interlocutory order if it is satisfied that the parties to the dispute are

likely to remove/ dispose off whole or part of his property. Section 95 similarly empowers the

Registrar / Officer authorised by him to take the above measures in case of disputes referred tohim.

Under Section 96 of the MCS Act, the Co-operative courts after giving reasonable opportunity tothe parties to the dispute may make an award on the dispute. The related procedures and

documents needed have been detailed below:

The Dispute Application shall consist of following papers/documents etc.

A. A copy of the plaint- the plaint should mention the date of

Loan Application

The date of Promissory Note & other loan agreements, bonds executed in favour of the

Bank. Description of the securities offered.

Details regarding sanction of loan.

Details regarding recovery effected.

Details of the loan amounts outstanding together with interest, penal interest etc.,

Date of issue of notice requesting the borrowings & sureties to repay the entire amount of

loan with interest.


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In the concluding para of the plaint we have to mention about the 'Prayer Clause' requesting the

Hon. Court to grant an Award/Decree in favour of the Bank.

The prayer clause normally consists of following important points -

The opponents may be held responsible to repay the entire amount of loan with interest. If the opponents fail to pay the amount of loan, the disputant may be entitled to attach the

movable and immovable property of the opponents.

The disputant may be entitled to sell the attached property and recover the amount duefrom the opponents.

Any other orders to meet the ends of justice.

Along with the copy of the plaint, the Bank is required to enclose 'Certified True Copies' of thefollowing documents i.e.

o Copy of the Resolution passed by the Board of Directors for filing the dispute inthe Co-op. Court.

o Copy of the notices issued to the principal borrower and the sureties.

o Acknowledgement receipts received from the postal authorities regarding serviceof notices.

o Copies of the promissory note and loan agreement /Bond etc.

o A copy of Deed of Mortgage, if any.

o Statement of loan account.

o Any other papers relevant to the dispute.

o A copy of the Treasury challan indicating the amount deposited to meet the

Arbitration cost.o On receipt of "Dispute Application" the Court shall issue summons to all the

opponents mentioned in the application.

o After serving the summons, the opponents are directed to file their ' WrittenStatement' or 'Say' or ' Reply ' to the ' Dispute Application'.

o After carefully reading the plaint and ' Written statement' filed by the opponents

the court shall proceed to frame issues ' involved in the dispute'.

o The courts shall direct the disputant and the opponents to produce documentary

evidences in support of their say or claims etc.

o After this, the authorized officer of the Disputant shall stand in the 'Witness Box'

and explain the circumstances which led to filing of dispute against theopponents.

o The advocates for the opponents are at liberty to do 'Cross-Examination' of the

Bank officials.

o The opponents are subsequently required to stand in the 'Witness Box' and explaintheir stand to Hon. Court.

o The Bank official or the Advocate is also at liberty to do a cross examination of

the opponent.


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Thus, in short the application under Section 101 is similar to that of 'dispute application'. We are

required to enclose all the papers relevant to documents etc., alongwith the application under

Section 101.

The Urban Co-op. Banks, after obtaining awards are required to execute the same so as to

recover the decreetal amount from the opponents.

In Maharashtra, there are special provisions under the Maharashtra Co-op. Societies Act, 1960.

Under Section 156 of the M.C.S. Act 1960 the Registrar or a person empowered by the Registrar,is Competent to execute the awards against the opponents.

There are following broad methods / measures by which an award can be executed.

By issue of Demand Notice to opponents directing them to repay the entire amount as

mentioned in the award.

By attachment of movable property.

By sale of movable property. By attachment of immovable property.

Without attachment, in case of Mortgage Decree, immovable property can be sold out.

The Registrar of Co-op. Societies in Maharashtra State, has also empowered the officials, notbelow the rank of Branch Manager of Urban Co-op. Banks, to exercise the powers under Section

156 of M.C.S. Act 1960 read with Rule 107 of M.C.S. Rules 1961.

Debt Recovery TribunalThe Debts Recovery Tribunals were established by the Government of

India under an Act of Parliament (Act 51 of 1993) for expeditious adjudication and recovery of

debts due to banks and financial institutions. Accordingly the DRTs were set up in different parts

of the country as per the Recovery of Debts due to banks and Financial Institutions Act, 1993and Debts Recovery Tribunal (Procedure) Rules, 1993.

As per the provisions ( Section 19) of the DRT Act , banks and financial Institutions could apply

to the Tribunal for recovery of debts of Rs 10 Lakh or more by making an application called

Original application to it. The Tribunal has powers to pass an interim order preventing theborrower from selling/ disposing off / tampering with the property and can pass orders for

attaching the properties of the borrower in case it is satisfied that the latter may sell/ dispose off

whole or part of the property. Further the Tribunal has powers to appoint a receiver for taking

care of the property.

Issue of Decree under section 19(20) of the Act- The Tribunal, after giving opportunities to boththe parties, issues an order directing the borrower to pay a specific amount to the bank. Based onthe order, the Tribunal then issues a certificate of recovery to the Recovery Officer. The RO can

then proceed to recover the amount by attachment & sale of property or by appointment of

receiver for management of the property in terms of section 25 of the Act. As per Section 20 ofthe Act, the aggrieved party can file an appeal against the order of the DRT before the Appellate

Tribunal within 45 days.


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Recent Judgement of a three member bench of the Supreme Court:

The Supreme Court held that Cooperative banks can recover outstanding loans only through themechanism provided in State cooperative laws and need not approach the Debts Recovery

Tribunal. The Bench pointed out that the reason for excluding cooperative banks from the

purview of the RDB Act seemed to be that they had comprehensive, self-contained and lessexpensive remedies available under the State Co-operative Societies Acts, while commercial

banks and financial institutions had to file suits in civil courts. The RDB Act was, therefore,

designed to deal with other banks and financial institutions, which had to have recourse to thetime-consuming process of civil courts. The bench held that If cooperative disputes also went to

the tribunals, they would be overburdened and the whole object of speedy recovery of debts due

to banks and financial institutions would be defeated. In conclusion, unless this decision of the

bench is revised, the co-operative banks can not recover their loans through the DRTs.

SARFAESI Act, 2002

There are 3 objectives of the Act viz., to regulate:

o Securitization and

o Reconstruction of financial assets and

o Enforcement of security interest.

From the point of view of the UCBs, the Enforcement of security interest is of particular

importance and use for recovery of their bad loans. The specialty of the Act is that the securityinterest can be enforced without intervention of the courts subject to procedures being followed

as per provisions of the Act and the related Rules.

Procedure to be followed:

o Under Section 13(2) of the Act, a 60 days notice has to be served by the bank onthe borrower with a request to discharge the loan liability

o The notice must contain details of :

amount payable by the borrower;

ecurity interest intended to be enforced.

on receipt of notice, if the borrower makes a representation or raises an

objection, the secured creditor must consider such representation or

objection.

if the secured creditor comes to the conclusion that the said representation

or objection is not acceptable or tenable, he must communicate the reasons

for non-acceptance of representation or objection within one week of

receipt of the above.

MODES OF RECOVERY AVAILABLE (S.13(4))

If borrower fails to discharge the liability, secured creditor has the following options

Take possession of secured asset


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Take over the management of the business of the borrower including

The right to transfer by way of lease, sale, assignment, etc.

The said rights must be exercised only where substantial part of businessof borrower is held as security for the debt.

Appoint a manager to manage the security asset taken over.

Issue notice to persons who acquired the secured asset from the borroweror from whom money is due.

The CMM( chief metropolitan magistrate)or DM

(district magistrate)is empowered even to use

force necessary for taking steps towards

securing compliance

Non-application under the Act- Section 31 -The exemptions under this Act i.e. properties which

can not be attached have been detailed in the schedule to the Act. Some of the important onesrelevant for the UCBs are:

Any security interest securing repayment of any financial assistance not

exceeding Rs.1 lakh.

Security interest not registered under this Act.

Any security interest created in agricultural land.

A lien on any goods, money or security given under the Indian ContractAct, 1872

A pledge of movables u/s 172 of the Indian Contract Act

Any conditional sale or hire-purchase or lease or any other contract in

which no security interest has been created. Rights of unpaid seller u/s 47 of Sale of Goods Act.

Properties not liable to attachment under s.60 of cpc 1908 excluding

properties specifically charged for raising the loan.

The amount due is less than 20 per cent of the principal and interest

RIGHT TO APPEAL: Under the Act, the borrower can appeal before DRT by payingthe fee within 45 days (S.17). The appeal can be entertained only when the borrower

deposits fifty per cent of the amounts claimed in the notice.

DRT can consider the legality of action taken by the bank. If it finds it wrongful, it can

restore the business or management to the borrower. If , however, the DRT finds that theaction taken by the bank is as per the provisions of the law , then the bank/ secured

creditor can proceed to take action under Section 13(4) of the Act. The application has to

be disposed of by the DRT within 60 days and if its pending for four months, either thebank or the borrower can appeal to the Appellate Tribunal for expeditious Tribunal.

An application for recovery of balance amount, if any, by secured creditor can be

presented to the debt recovery tribunal by the authorised officer (AO)of the bank or canbe sent by registered post addressed to the registrar of debt recovery tribunal.

Appeal to the APPELLATE TRIBUNAL under Section 18:


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Persons aggrieved by the order of DRT to prefer an application before the appellate

tribunal within 30 days.

The appellate tribunal is vested with power to reduce the deposit amount to not less than25 percent.

Miscellaneous aspects: No civil court has any jurisdiction under this Act.

The Indian Limitation Act, 1963 is applicable to this Act.

The SARFAESI Rules specify as to who should be the AO of a bank, the place of serving of the

Demand Notice , the mode of its delivery, measures to be taken if the amount mentioned in thenotice is not paid- the manner of takeover of possession of property, steps to be taken thereafter,

custody of property, manner in which the property could be sold, the manner of valuation of

assets, serving of notice before sale & the contents of the sale notice, sale of assets & issuance of

certificate of sale, appointment of Manager, procedure for recovery of shortfall of amount due tothe bank.

A judicious of the available measures will greatly facilitate recovery of loans in banks.

http://www.cab.org.in/Lists/Knowledge%20Bank/DispForm.aspx?ID=31

14th june 8:20pm

http://wiki.answers.com/Q/How_do_you_reduce_the_non_performing_assets How

do you reduce the non performing assets?

Answer:By adoptin proper credit evaluation process. There is no one method for reducing the NPA.

Multiple strategies should be adopted from the beginning. The first stage is proper credit

evaluation process. It should be based on objective evaluation and the project should be

economically viable and technically feasible. Only such projects which can generate income

and which RBI has permitted should be financed. Once the loan is sanctioned the post

followup should be meticulously followed. Regular monitoring of delinquent loans is essential.

If the delinquencies are due to reasons beyond the control of borrower, for example, as in the

case of excess of rains, flood, famine, etc the banker should suitably restructure the loans takinginto consideration of the genuine difficulty of the borrowers. Recovery, it should be remembered,

should always be at the cost of borrower's prosperity. The recovery process is an ongoing

process and it should be professionally handled. My own experience is that if we are honest and

keep the interest of the borrower and if the borrower is made to feel whatever steps we are taking
http://www.cab.org.in/Lists/Knowledge%20Bank/DispForm.aspx?ID=31http://www.cab.org.in/Lists/Knowledge%20Bank/DispForm.aspx?ID=31http://www.cab.org.in/Lists/Knowledge%20Bank/DispForm.aspx?ID=31


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is in his own interest he will positively respond. In addition to our honesty and promptness, the

language we use while communicating to the borrower also matters very much. The language

should be healthy, positive and should NOT blame the borrower directly for delinquency of theloans. That attitude of the banker also matters. M.J. SUBRAMANYAM, BANGALORE

http://wiki.answers.com/Q/How_do_you_reduce_the_non_performing_assets

Documents

Structure of Co