A project report on non performing assets amp amp amp banking studies PDF

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CONTENTS

SL. NO 1

2

3

PA PAR RTICUAL TICUALARS ARS

PAGE .NO

1-3 EXECUTIVE SUMMARY

4 INTRODUCTION TO THE STUDY

5-13 INDUSTRY PROFILE

14-27

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ORGANISATION PROFILE 5

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28-60 NON PERFORMING ASSETS

61 OBJECTIVES OF THE STUDY

62-63 METHODOLOGY

64-70 ANALYSIS AND INTERPRETATION OF DATA

71 FINDINGS

72 SUGGESTIONS

73 CONCLUSION BIBLIOGRAPHY

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Project Report on Non Performing Assets & Banking

EXECUTIVE SUMMARY Industry Profile Banking in India has its origin as carry as the Vedic period. It is believed that the transition from money lending to banking must have occurred even before Manu, the great Hindu jurist, who has devoted a section of his work to deposits and advances and laid down rules relating to the interest. During the mogal period, the indigenous bankers played a very important role in lending money and financing foreign trade and commerce. During the days of East India Company, it was to turn of the agency houses top carry on the banking business. The general bank of India was the first joint stock bank to be established in the year 1786.The others which followed were the Bank of Hindustan and the Bengal Bank

Company Profile The Belgaum District Central Co-operative Bank established in the year 1918 and The Belgaum District central Co-operative Bank’s operations were started by the following year that is by 1919. The bank is established mainly for the purpose to serve the Farmers and general people who were in the hands of private and capitalist in the year 1919. Now the bank is successfully running by serving all the sectors. Now a day all the sectors are affected by the Political interferences, lack of honesty, lack of social service and lack of innovative ideas. But BDCC Bank is going far away from these difficulties. There are totally 650 employees, 5 Deputy General Managers, & 1 General Manager. Total branches of the bank are 84 plus 1 Head office. The Bank is currently achieved Rs.605.97 crores deposits, Rs.592.64 crores Advances, Rs.104041.95 crores working capital. By which the bank is running in the success path. Loan Repayment is recorded with 75% which has made an important aspect for the deposits and advances. The BDCC Bank has over 85 Branch offices.

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Project Report on Non Performing Assets & Banking

SCOPE OF THE STUDY: 

The scope of the study here was confined to the organization only.

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The study covers to find out the strategy required to reduce the NPAs.

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The concentration is given only in understanding the NPAs growth with the reference of BDCC Bank.

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The data is purely based on the secondary data and collected from website and journal.

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The scope is limited to drawn conclusions from analysis and interpretation of the primary and secondary data of the BDCC bank.

OBJECTIVES OF THE STUDY: 

To offer useful suggestions to reduce the NPAs in the bank

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To evaluate the BDCC Bank’s assets quality.

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To study the management of total assets and advances of the BDCC Bank.

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To analyze sector wise non-performing assets.

METHODOLOGY: Introduction The quality of the project work depends on the methodology adopted for the study. Methodology, in turn, depends on the nature of the project work. The use of proper methodology is an essential part of any research. In order to conduct a study scientifically, suitable methods and measures are to be followed.

Research Design: The type of research used for the collection and analysis of the data is “Historical Research Method”. The main source of data for this study is the past record prepared by the bank. The

Project Report on Non Performing Assets & Banking focus of the study is to determine the non-performing assets of the bank since its inception and to identify the ways in which the performance especially the non-performing assets of the BDCC Bank can be improved. The data regarding bank history and profile are collected through “Exploratory Research Design” particularly through the study of secondary sources and discussions with individuals.

Project Report on Non Performing Assets & Banking

Data collection method Primary data: Discussion with the manager and officers of the bank to get general information about the bank and its activities. 

Having face to face discussions with the bank officials.

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By taking guidance from bank guide and departmental guide.

Secondary data: Collection of data through bank annual reports, bank manuals and other relevant documents. Collection of data through the literature provided by the bank

RECOMMENDATIONS: Banks concerned should continuously monitor loans to identify accounts that have potential to become non-performing. BDCC Bank should offer rescheduling of loans of those borrowers who were struggling with high interest rates in a falling interest rate environment. BDCC Bank should concentrate more on credit appraisal, monitoring, credit risk management and recoveries.

CONCLUSION: NPA Act is fine, comprehensive and an extra-ordinary piece of legislation. It is also a reassuring sign of Government’s commitment to reforms. The Act empowers bank to change or take over the management or even take possession of secured assets of the borrowers and sell or lease out the assets. This is for the first time that the banks can take over the immovable assets of the defaulting borrowers without the intervention of the court. They can claim future receivables and supersede the Board of Directors of the defaulting corporate. No court, other than Debt Recovery Tribunal, can entertain any appeal against the action taken by banks and financial institutions under this act.

INTRODUCTION TO THE STUDY A study on the Management of ‘Non Performing Assets’ in the BDCC Bank is done at the BDCC Bank near central bus stand, Belgaum (Dist), Karnataka state. The type of research used for the collection and analysis of the data is “Historical Research Method”. The main source of data for this study is the past records prepared by the bank. The focus of the study is to determine the Non Performing Assets of the bank since its inception and to identify the ways in which the performance especially the non-performing assets of the BDCC Bank can be improved. The data regarding bank history and profile are collected through “Exploratory Research Design” particularly through the study of secondary sources and discussions with individuals.

Title of the Project: “A STUDY ON BDCC BANK AND ITS NON PERFORMING ASSETSS” BACKGROUND OF PROJECT TOPIC A crucial issue which is engaging the constant attention of the banking industry is the alarmingly high level of non performing assets (NPA). Another major anxiety before the banking industry is the high transaction cost of carrying non performing assets in their books. The resolution of the non performing assets problem requires greater accountability on the part of the corporate, greater disclosure in the case of defaults, an efficient credit information sharing system and an appropriate legal framework pertaining to the banking system so that court procedures can be stream lined and actual recoveries made within an acceptable time frame. So the project title “A Study on The Management of Non Performing Assets in the BDCC Bank” looks in to the implications of high NPAs and suggests effective recovery measures for resolving problem loans and thus making the banks NPAs level healthy. It also compares the position of BDCC Bank with other public sector banks in terms of their NPAs in the last five years and also to study the management of total assets and advances of the BDCC Bank among other public sector banks.

INDUSTRY PROFILE MEANING OF BANKS: A banking company in India has been defined in the banking companies Act 1949 as “One which transacts the business of banking which means the accepting of the purpose of sending or investment of deposits of money from the public repayable on demand or otherwise and withdrawal by cheque, draft order or otherwise”.

History: Banking in India has its origin as carry as the Vedic period. It is believed that the transition from money lending to banking must have occurred even before Manu, the great Hindu jurist, who has devoted a section of his work to deposits and advances and laid down rules relating to the interest. During the mogal period, the indigenous bankers played a very important role in lending money and financing foreign trade and commerce. During the days of East India Company, it was to turn of the agency houses top carry on the banking business. The general bank of India was the first joint stock bank to be established in the year 1786.The others which followed were the Bank of Hindustan and the Bengal Bank. The Bank of Hindustan is reported to have continued till 1906, while the other two failed in the meantime. In the first half of the 19th Century the East India Company established three banks; The Bank of Bengal in 1809, The Bank of Bombay in 1840 and The Bank of Madras in 1843.These three banks also known as presidency banks and were independent units and functioned well. These three banks were amalgamated in 1920 and The Imperial Bank of India was established on the 27th Jan 1921, with the passing of the SBI Act in 1955, the undertaking of The Imperial Bank of India was taken over by the newly constituted SBI. The Reserve Bank which is the Central Bank was created in 1935 by passing of RBI Act 1934, in the wake of swadeshi movement, a number of banks with Indian Management were established in the country namely Punjab National Bank Ltd, Bank of India Ltd, Canara Bank Ltd, Indian Bank Ltd, The Bank of Baroda Ltd, The Central Bank of India Ltd .On July 19th 1969, 14 Major Banks of the country were nationalized and in 15th April 1980 six more commercial private sector banks were also taken over by the government. The Indian Banking industry, which is governed by the Banking Regulation Act of India 1949, can be broadly classified into two major categories, non-scheduled banks and

Project Report on Non Performing Assets & Banking scheduled banks. Scheduled Banks comprise commercial banks and the co-operative banks. The first phase of financial reforms resulted in the nationalization of 14 major banks in 1969 and resulted in a shift from class banking to mass banking. This in turn resulted in the significant growth in the geographical coverage of banks. Every bank had to earmark a min percentage of their loan portfolio to sectors identified as “priority sectors” the manufacturing sector also grew during the 1970’s in protected environments and the banking sector was a critical source. The next wave of reforms saw the nationalization of 6 more commercial banks in 1980 since then the number of scheduled commercial banks increased four- fold and the number of bank branches increased to eight fold. After the second phase of financial sector reforms and liberalization of the sector in the early nineties. The PSB’s found it extremely difficult to complete with the new private sector banks and the foreign banks. The new private sector first made their appearance after the guidelines permitting them were issued in January 1993.This is how the Banking Industry grew.

The Indian Banking System: Banking in our country is already witnessing the sea changes as the banking sector seeks new technology and its applications. The best port is that the benefits are beginning to reach the masses. Earlier this domain was the preserve of very few organizations. Foreign banks with heavy investments in technology started giving some “Out of the world” customer services. But, such services were available only to selected few- the very large account holders. Then came the liberalization and with it a multitude of private banks, a large segment of the urban population now requires minimal time and space for its banking needs. Automated teller machines or popularly known as ATM are the three alphabets that have changed the concept of banking like nothing before. Instead of tellers handling your own cash, today there are efficient machines that don’t talk but just dispense cash. Under the Reserve Bank of India Act 1934, banks are classified as scheduled banks and non-scheduled banks. The scheduled banks are those, which are entered in the Second Schedule of RBI Act, 1934. Such banks are those, which have paid- up capital and reserves of an aggregate value of not less then Rs.5 lacs and which satisfy RBI that their affairs are carried out in the interest of their depositors. All commercial banks Indian and Foreign, regional rural banks and state cooperative banks are Scheduled banks. Non Scheduled banks are those, which have not been included in the Second Schedule of the RBI Act, 1934.The organized banking system in India

can be broadly classified into three categories: (i) Commercial Banks (ii) Regional Rural Banks and (iii) Co-operative banks. The Reserve Bank of India is the supreme monetary and banking authority in the country and has the responsibility to control the banking system in the country. It keeps the reserves of all commercial banks and hence is known as the “Reserve Bank” Banks play important role in economic development of a country, like:

 Banks mobilise the small savings of the people and make them available for productive purposes.

 Promotes the habit of savings among the people thereby offering attractive rates of interests on their deposits.

 Provides safety and security to the surplus money of the depositors and as well provides a convenient and economical method of payment.

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Banks provide convenient means of transfer of fund from one place to another.

 Helps the movement of capital from regions where it is not very useful to regions where it can be more useful.

 Banks advances exposure in trade and commerce, industry and agriculture by knowing their financial requirements and prospects.

 Bank acts as an intermediary between the depositors and the investors. Bank also acts as mediator between exporter and importer who does foreign trades. Thus Indian banking has come from a long way from being a sleepy business institution to a highly pro-active and dynamic entity. This transformation has been largely brought about by the large dose of liberalization and economic reforms that allowed banks to explore new business opportunities rather than generating revenues from conventional streams (i.e. borrowing and lending). The banking in India is highly fragmented with 30 banking units contributing to almost 50% of deposits and 60% of advances.

The Structure of Indian Banking: The Indian banking industry has Reserve Bank of India as its Regulatory Authority. This is a mix of the Public sector, Private sector, Co-operative banks and foreign banks. The private sector banks are again split into old banks and new banks.

Reserve Bank of India [Central Bank]

Scheduled

Scheduled Commercial Banks

Public Sector Banks

Nationalized Banks

Scheduled Co-operative Banks

ForeignPrivate Se ctorRegional Banks Bank s

SBI & its Associates

Old Private Sector Banks

Scheduled Urban Co-Operative Banks Scheduled State Co-Operative Banks

New Private Sector

Project Report on Non Performing Assets & Banking

Co-operative Banking: India is a country where agriculture is still a predominant activity. Our farmers by and large are poor and usually used to depend on money lenders Indigenous bankers and financiers etc. Till 1951-52 the money lenders were providing 70% of the requirements of farmers and thus constituted the most important source of rural finance. However the share of Moneylenders in rural credit was reduced to 49%. This was due to high rates of interest, dishonesty and fraudulent practices followed by the money lenders. The cooperative Movement was started in India in 1904 with the objective of providing finance to agriculturists for productive purpose at low rates of interest and thereby relieving agriculturists from the chetches of the Money lenders. The co-operative society Act of 1912 contributed to the establishment of central co-operative banks and the state co-operative banks to provide refinance to primary credit societies which could not mobilize funds by their own efforts. The co-operative credit movement made food progress during and after the 1 st world of 191418, but during the great depression of 1929-1933, it received a serious setback. With the out break of Second World War of 1939-45, the co-operative credit movement made considerable progress once again. Since then, the progress has been maintained. A co-operative bank promotes economic activity and provides banking facilities and service to the rural people. The significant role of co-operative banks in the agricultural economy imparts a lesson to commercial banks and dispels from their minds the age old inertia and the gloom of conservatism by shifting emphasis from credit worthiness of the purpose and from tangible security to the character of the business. Co-operative means “ a form of organization where in persons voluntarily associate together as human beings on the basis of equality for the promotion of the economic interest of themselves”. So, co-operatives are characterized by voluntary association and open membership, democratic management, limited interest on capital, education and training equity of distribution of profits etc. “Each for all and all for each” is the underlying principle of cooperatives.

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The main principles of these societies are: 

Restricted membership to rural masses

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Limited area of operation

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No share capital

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Unlimited liability of the members

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The management of the society is honorary

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Schulze Delitzsch societies are a form of urban credit societies.

The main

principles of these are: 

Membership is open to artisans, middle class people

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Living in towns and cities

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Large area of operation

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Limited liability of members

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Large share capital

So, co-operative came as an answer to the problem of rural indebtedness which was rampant through act the country during the later decades of 19th century. It was an official remedy to be introduced on a voluntary basis, with the principles of self-help, thrift and mutual co-operation. This was supposed to be the beginning of genuine Indian co-operative movement. So the objective of co-operative movement is actively implementing socio economic program with the ultimate aim of uplifting the living standard of economically backward and weaker section of society. In 1919 the government of India Act 1919 was passed and co-operation became a state subject. So several states passed their own acts for the development of the co-operative movement in their respective states through the co-operative movement in India was born at the beginning of century as an instrument of dealing with agricultural indebt ness, it was only after attaining independence that attaining independence that attention was paid in a big way to this issue. After independence the co-operative movem...