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 4
2.1. Profile of the Nawanagar Bank 5
2.2. History of the Nawanagar Bank 7
2.3. Board of Directors 9
2.4. Detail about various branches and branch managers 11
2.5. SWOT Analysis 12
2.6. Management Committees 13
2.7. Product and Service Portfolio 15

2.8. Corporate Social Service by the Bank 25

2.9. Awards and Achievements by the Bank. 25

2.10. Future Plans 26

3. Conceptual Framework of NPA 27

3.1. Introduction 28
3.2. Definition 29
3.3. Income Recognition 32
3.4. Asset Classification 34
3.5. Guidelines for Asset Classification 35
3.6. Causes and Consequences of NPA 37
4. Research Methodology 39
4.1. Introduction 40
4.2. Rationale for Study 41
4.3. Problem Statement 41
4.4. Review of Literature 42
4.5. Research Objectives 44
4.6. Research Design 45
4.7. Population And Sample Size 45
4.8. Sampling Design 46
4.9. Period of the Study 46

JVIMS Jamnagar
 4.10. Scope of the Study 46
4.11. Data Collection Instruments 47
4.12. Tools for Analysis 48
4.13. Hypothesis for the Study 52
4.14. Limitations of the Study 53

5. Analysis of NPA 54
5.1. Gross NPA to Gross Advances 55
5.2. Interest Income to Working Funds 58
5.3. Operating Expense to Total Income 61
5.4. Net Profit to Total Assets 64
5.5. Total Investment to Total Assets 67
5.6. Gross NPA to Total Assets 70
5.7. Percentage Change in Gross NPAs 73
5.8. Percentage Change in BDDR 75
5.9. Gross NPA to BDDR. 77
6. Findings and Conclusion 80
7. Suggestions 83
8. Appendices 84
8.1. List of Tables 84
8.2. List of Charts 85
8.3. Two Way ANOVA 85
8.4. Profit & Loss a/c and Balance Sheet of Nawanagar Bank 86
8.5. Profit & Loss a/c and Balance Sheet of Vardhman Bank 87
8.6. Profit & Loss a/c and Balance Sheet of Jamnagar peoples
Bank 88
8.7. Profit & Loss a/c and Balance Sheet of Mahila Bank 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

IDBI Export Import Bank of India National

(EXIM-BANK) IIBI NABARD Housing
Commercial Bank
Bank (C.B.)
National State Level
Level
India Foreign
C.B C.B

IFCI ICICI SIDBI

Public Private
sector Sector
Bank Bank Cooperative Land Development R.R.B
Bank Bank

State
State Land
Cooperative
Development
Bank Bank

Central Primary
(District) Land
cooperative Development
Bank Bank

Primary
Cooperative
Bank

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

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

On 31-03-1981 On 31-03-2010
Particulars
( Figures in lacs) ( 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 DATE OF NAME OF

BRANCH STARTING 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 LOCKER TYPE
OF A B C
CUSTOMER (SMALL) (MEDIUM) (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 2,51,33,000 2,69,71,000 3,16,60,600 4,14,32,225 4,53,74,000

Capital

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

Advances

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

Profits

Working 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

Fund

Audit A A A A A
Class
(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 Guidelines application
from 31-3-2001 from 31-3-2004
Term loan interest /installment remains 180 days 90 days
overdue for more than
Overdraft/ Remain out of order Remain out of order
cash credit a/c
Bills purchased and discounted remain 180 days 90 days
overdue for more than
Agricultural loan interest/ installment Two harvest seasons but not Two harvest seasons but not
remain overdue for more than exceeding two and half year exceeding two and half year
Other accounts-any account to be 180 days 90 days
received remain overdue for more than
(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.

JVIMS Jamnagar
 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.

JVIMS Jamnagar
  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

JVIMS Jamnagar
 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.

JVIMS Jamnagar
 DATA FORMS

Chart no. 2
Types of data

Primary
data

Types of
data

Secondary
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.

JVIMS Jamnagar
 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 Sum of Squares Degree of Mean Square F-ratio
of (SS) Freedom (MS)
Variation (df)
Between (Tj)2 _ (T)2 (r – 1) SS between rows MS between rows
Rows nj n (r -1) MS residual
Between (Ti)2 _ (T)2 (c -1) SS between rows MS between columns
Columns (c -1) MS residual
ni n
Error Total SS – (SS (c -1) (r -1) SS residual
between (c -1) (r -1)
columns + SS
between rows)
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

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
(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.

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 Sum of Squares Degree of Mean Square F-ratio
of (SS) Freedom (MS)
Variation (df)
Between (Tj)2 _ (T)2 (r – 1) SS between rows MS between rows
Rows nj n (r -1) MS residual
Between (Ti)2 _ (T)2 (c -1) SS between rows MS between columns
Columns ni n (c -1) MS residual
Error Total SS – (SS (c -1) (r -1) SS residual
between (c -1) (r -1)
columns + SS
between rows)
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 151370788.10 174857371.95 210250450.62 242898301.23 266147331.39

INCOME
OPERATIVE 25282487.85 36976981.3 37228750.6 39468840.9 47146528.02
EXPENSES
TOTAL 162450481.75 185870802.41 230588417.47 261963691.38 279618776.71
INCOME
NET 34131000 32247000 43837000 41686000 44992000
PROFIT
GROSS 7502800 13800000 16100000 17541000 15611000
NPA
GROSS 392217000 378010000 555121000 843552000 957148000
ADVANCES
TOTAL 525527278 580959995 559013770 557521691.98 1865679041.5
INVESTMENT
BDDR 77914568.68 83034222.68 85035188.68 87858323.68 91695301.68

TOTAL 2049885747 2194936522 2650581911 3132641393 3438360901

ASSESTS
WORKING 1952859000 2194936000 2650582000 3123641000 3438361000
FUNDS

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 4362843.78 4632995.96 6756899.43 7867015.21 8695438.55

INCOME
OPERATIVE 1445333.60 1542401.39 1724120.51 1987833.25 2265924.46
EXPENSES
TOTAL 46432000.30 4933973.93 7104759.82 8144711.13 9169342.45
INCOME
NET 922000 1242000 1868000 1870331.10 1906649.59
PROFIT
GROSS 524000 654000 1163000 650000 638000
NPA
GROSS 15251000 15825000 16992000 20100000 22477000
ADVANCES
TOTAL 4722500 4722500 7229000 7801500 65689621
INVESTMENT
BDDR 1766404 2212499 2902499 3482499 3938499

TOTAL 47894627.8 6080660.8 77792941.76 85330088.04 102485516.2

ASSESTS
WORKING 47000000 60000000 75800000 84200000 102400000
FUNDS

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 26472683.78 27553849.85 33698890.06 41130470.63 45274790.06

INCOME
OPERATIVE 13219576.2 13294068.85 12919658.55 17206014.3 20528432.33
EXPENSES
TOTAL 28776097.72 29893494.26 36394983.2 44035476.43 48629955.11
INCOME
NET 2545910.16 1069989.64 2952271.54 3472820.00 3710006.35
PROFIT
GROSS 17266380.81 14685517.0 9757379.44 7737511.02 9757379.44
NPA
GROSS 125800000 135588000 158677000 171001000 196925000
ADVANCES
TOTAL 113759000 103368000 101731500 101407500 101083500
INVESTMENT
BDDR 25494357 25534636 25550734 25590912 25616597

TOTAL 421356452.5 439699863.7 511292825.1 556331950.2 631605215.2

ASSESTS
WORKING 421300000 439700000 511300000 556300000 631600000
FUNDS

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 3563102.25 2907035.19 2450946.21 3290333.31 4660870.83

INCOME
OPERATIVE 5425130.55 3517167.28 3523983.81 3604105.84 3618908.46
EXPENSES
TOTAL 6392384.95 5465316.56 5345564.09 10120476.15 10236591.18
INCOME
NET -6607816.31 -1999151.82 -7252901.62 1168593.54 1062759.32
PROFIT
GROSS 31481000 29872000 22023398 22959260 19050515
NPA
GROSS 37782565.97 42131121.47 36097699.05 35376511.07 35901058.73
ADVANCES
TOTAL 12703064 12484700 12409550 12334400 13164250
INVESTMENT
BDDR 6947000 9018980 14894373 12894373 10894373

TOTAL 80980183.4 97676321.9 106419398.0 109112794.5 125385305.0

ASSESTS
WORKING 8758000 99675000 113493000 108812000 125385000
FUNDS

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

JVIMS Jamnagar