Page | 1
COMPREHENSIVE PROJECT REPORT
“ THE JUNAGADH COMMERCIAL CO-OPERATIVE BANK ”
PARUL INSTITUTE OF MANAGEMENT & RESEARCH
IN PARTIAL FULFILLMENT OF THE
REQUIREMENT OF THE AWARD FOR THE DEGREE OF
MASTER OF BUSINESS ASMINISTRATION
Gujarat Technological University
UNDER THE GUIDANCE OF
Faculty Guide Company Guide
MR. DIVYANG JOSHI MR. MAHENDRABHAI HIMSHU
(SUMIT J. VACHHANI)
Batch: 2012-14, Enrollment No.:127110592331
MBA SEMESTER III
PARUL INSTITUTE OF MANAGEMENT & RESEARCH
Affiliated to Gujarat Technological University
Page | 2
Parul Institute of Management & Research
(Formerly Dr.J K Patel Institute of Management)
“Certified that this Comprehensive Project Report Titled CREDIT MANAGEMENT” is
the bonafide work of Mr.SUMIT J. VACHHANI (Enrollment No127110592331), who
carried out the research under my supervision. I also certify further, that to the best of
my knowledge the work reported herein does not form part of any other project report or
dissertation on the basis of which a degree or award was conferred on an earlier occasion
on this or any other candidate
Prof. Divyang Joshi Dr.P.G.K.Murthy
(Faculty Guide) Director
Page | 3
Industrial development has its own important in every country; industrial
development is called the “Barometer” to measure development of the country.
I am heartily thankful to the Director Dr.P.G.K.MURTI, Assistant Prof.
DIVYANG JOSHI and all staff member of PARUL INSTITUTE OF MGT &
RESEARCH of being source of inspiration and for allowing me to visit at THE
JUNAGADH COMMERCIAL CO-OPERATIVE BANK at JUNAGADH.
I owe a deep sense of gratitude to all the members of company giving permission
to take visit of the industry.
I am also thankful to MR.MANDALIYA SIR &MR. MAHENDRABHAI
HIMSHU for their encouragement, guidance & best cooperation in preparing this
report.& for the enhancement of my knowledge by sharing their so many valuable time.
Page | 4
I, SUMIT J. VACHHANI hereby declare that the report for
Comprehensive Project entitled “CREDIT MANAGEMENT” is a
result of our own work and our indebtedness to other work
publications, references, if any, have been duly acknowledged.
Date: - Yours Faithfully
Place: -JUNAGADH (Vachhani Sumit j.)
Page | 5
NO. PARTICULAR PAGE NO.
1 INTRODUCTION OF BANK
HISTROY OF BANK
CURRENT SCANIRO OF INDIAN BANK
TYPES OF BANK
STATUS WISE BIFURCATION OF BANK
FUNCTION OF BANK
2 COMPANY INFORMATION
INTRODUCTION OF CO- OPERATIVE BANK
TYPES OF CO-OPERATIVE BANK
HISTORY OF JCCB
BASIC INFORMATION OF JCCB
BRANCHES OF JCCB
SERVICE PROVIDE BY JCCB
VISION, MISSION AND GOAL
PROGRESS AT GLANCE
3 ABOUT THE CONCEPT
MAIN FUND FLOW
MEANING OF CREDIT
FROM OF CREDIT
TIMES WISE BIFURCATION OF ADVANCE
SECURITY WISE BIFURCATION OF ADVANCE
Page | 6
PROCESS OF CREDIT FOLLWED BY JCCB
CREDIT POLICY OF JCCB
SCRUTINY OF CREDIT
TYPES OF CREDIT
CREDIT MONITORING, FOLLOW UP, AND
4 NPA CONCEPT
INTRODUCTION OF NPA
CLASSIFICATION OF NPA OF JCCB
PROVISION OF NPA IN JCCB
REASON FOR NPA
NPA REDUCTION TECHNIQUES
METHOD OF RECOVERY
5 RESEARCH METHDOLOGY
OBJECTIVE OF THE STUDY
TITLE OF THE STUDY
SOURCE OF DATA
LIMITATION OF STUDY
BALANCE SHEET OF THE JCCB
Page | 7
HISTORY OF BANKING INDUSTRY
The word „Bank‟ it derived from the word „bancus‟ or „banque‟ that is a French.
There were others of the opinion that the word „Bank‟ is originally derived from the
German word „back‟ meaning joint for which was Italianized into „banco‟.
As early as 2000 B.C., the Babylonians has developed a banking system. There is
evidence to show the temples of Babylon were used as banks. After a period of time,
there was a spread of irreligion, which soon destroyed the public sense of security in
depositing money and valuable in temples. The priests were longer acting as financial 45
agents. The Romans did minute regulations, as to conduct private banking and to create
confidence in it. Loan banks were also common in Rome. From these the poor citizens
received loans without paying interest, against security of land for 3 or 4 years.
During the early periods, although private individuals mostly did the banking
business, many countries established public banks either for the purpose of facilitating
commerce or to serve the government.
However, upon the revival of civilization, growing necessity forced the issued in
the middle of the 12th
century and banks were established at Venice and Genoa. The
Bank of Venice established in 1157 is supposed to be the most ancient bank. Originally,
it was not a bank in the modern sense, during simply an office for the transfer of the
Again the origin of modern banking may be traced to the money dealers in
Florence, who received money on deposit, and were lenders of money in the 14th
and also in 1349, the business of banking was carried on by drapers of Barcelona.
In India, as early as the Vedic Period, banking, in most crude from existed. The
books of Manu contain references regarding deposits, pledges, policy of loans, and rate of
Page | 8
interest. True, the banking in those days largely mint money lending and they did not
know the complicated mechanism of modern banking.
This is true not only in the case of India but also of other countries. Although, the
business of banking is as old as authentic history, banking institutions have since than
changed in character and content very much. They have developed from a few simple
operations involving the satisfaction of a few individual wants to the complicated
mechanism of modern banking, involving the satisfaction of capital slowly seeking
employment and thus providing the very life blood of commerce.
Page | 9
CURRENT SCENARIO OF INDIAN BANKING
As far as the present scenario is concerned the Banking Industry is in a transition
phase. The Public Sector Banks (PSBs), which are the foundation of the Indian Banking
system account for more than 78 per cent of total banking industry assets. Unfortunately
they are burdened with excessive Non Performing assets (NPAs), massive manpower and
lack of modern technology.
Banks in India can be categorized into non-scheduled banks and scheduled banks.
Scheduled banks constitute of commercial banks and co-operative banks. There are about
67,000 branches of Scheduled banks spread across India. During the first phase of
financial reforms, there was a nationalization of 14 major banks in 1969. This crucial step
led to a shift from Class banking to Mass banking. Since then the growth of the banking
Industry in India has been a continuous process.
On the other hand the Private Sector Banks in India are witnessing immense
progress. They are leaders in Internet banking, mobile banking, phone banking, ATMs.
On the other hand the Public Sector Banks are still facing the problem of unhappy
employees. There has been a decrease of 20 percent in the employee strength of the
private sector in the wake of the Voluntary Retirement Schemes (VRS). As far as foreign
banks are concerned they are likely to succeed in India.
Indusland Bank was the first private bank to be set up in India. IDBI, ING Vyasa
Bank, SBI Commercial and International Bank Ltd, Dhanalakshmi Bank Ltd,
KarurVysya Bank Ltd, Bank of Rajasthan Ltd etc are some Private Sector Banks. Banks
from the Public Sector include Punjab National bank, Vijaya Bank, UCO Bank, Oriental
Bank, Allahabad Bank, Andhra Bank etc.ANZGrindlays Bank, ABN-AMRO Bank,
American Express Bank Ltd, Citibank etc are some foreign banks operating in India.
Rural banks have undergone many changes due to alterations in the financial
system of the country. As a result there were changes in the functioning of the rural
Page | 10
banks. The article below highlights some of the hindrances, which the rural banks
encounter while operating.
Scheduled Banks in India constitute those banks, which have been included in the
Second Schedule of Reserve Bank of India (RBI) Act, 1934. RBI in turn includes only
those banks in this schedule that satisfy the criteria laid down vide section 42 (6) (a) of
the Act. As on 30th
June 1999, there were 300 scheduled banks in India having a total
network of 64,918 branches.
“Scheduled banks in India” means the State Bank of India constituted under the
State Bank of India Act, 1955 (23 of 1955), a subsidiary bank as defined in the State
Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959), a corresponding new bank
constituted under section 3 of the Banking Companies (Acquisition and Transfer of
Undertakings) Act, 1970 (5 of 1970), or under section 3 of the Banking Companies
(Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980), or any other bank
being a bank included in the Second Schedule to the Reserve Bank of India Act, 1934 (2
of 1934), but does not include a co-operative bank”.
“Non-scheduled bank in India” means a banking company as defined in clause of
section 5 of the Banking Regulation Act, 1949 (10 of 1949), which is not a scheduled
Page | 11
STATUS WISE BIFURCATION OF BANKS
In first schedule, Government of India notifies the Primary Banks, which are licensed
and whose demand and time liability are not less than 50 corers in 1987.
Government of India notifies the Primary banks, which are licensed and whose
demand and time liability are not less than 100 corers can only qualify to be included in
the second schedule since 1993.
A Bank becomes scheduled when it fulfills the followings:
„A‟ grade rating from RBI
Demand and Time Liability over 100 Corers
Satisfy the RBI guidelines related to CRR and SLR
As per the norms Priority Sector wise lending
Benefits of Being a Scheduled co-operative are described below:
RBI would provide Rediscounting facility at nominal rate
RBI gives remittance facility at par
The demerit of being a scheduled co-operative bank is that the bank will not get 0.5%
subsidy from RBI.
The conferment of scheduled status on the banks has certain advantages like refinance
facility, directly industrial finance from Reserve Bank of India.
Scheduled Banks Non-Scheduled
Page | 12
The banks, which are not applicable as per the criteria of Scheduled Banks, are called
as a Non-scheduled Banks. These are very small banks.
Page | 13
TYPES OF BANKS
Reserve Bank of India
State Bank Group
Old private bank
New private bank
Regional rural bank(RRB)
RESERVE BANK OF INDIA
The Hilton-young commission, appointed in 1926 has recommended the necessity of
centrally empowered institution to have effective control over currency and financial
transaction in the country. Accordingly, the Government had then passed Reserve Bank
of India Act, 1934 and established the Reserve Bank of India with effect from 1st
1935. The principal aim behind this was to organize proper control over the currency
management in the interest of country benefits and to maintain financial stability. With
this, the RBI mainly looks after the following important functions:
-To keep effective control over creation of credits and currency supply
-To control the Banking transactions of Central and State Governments
-To act as Central administered Authority of all other Banks in the Country.
-To organize control over Foreign Currency Transaction
-To assist for improvement in financial aspects of the country
The Banking Company Act establishes it in July 1969 by nationalization of 14 major
banks of India. The sent percent ownership of the bank is of government of India.
Page | 14
The State Bank of India was established under the State Bank of India Act, 1955, the
subsidiary banks under the State Bank of India (subsidiary Banks) Act, 1959. The
Reserve Bank of India owns the State Bank of India, to a large extent, and rest of the part
is some private ownership in the share capital of State Bank of India. The State Bank of
India owns the subsidiary Banks.
OLD PRIVATE BANKS
These banks are registered under Company Act, 1956. Basic difference between co-
operative banks and private banks is its aim. Co-operative banks work for its member and
private banks work for earn profit.
NEW PRIVATE BANKS
These banks lead the market of Indian banking business in very short period, because
of its variety of services and approach to handle customer, also because of long working
hours and speed of services. This is also registered under the Company Act, 1956.
Foreign Bank means multi-countries bank. In case of India Foreign Banks are such
Banks, which open its branch office in India and their head office is outside of India.
REGIONAL RURAL BANKS (RRB)
Regional Rural Banks are added in Indian Banking since October 1975. The
Government of India in terms of the provision of the Regional Rural Bank Act 1976 has
established these banks. The distinctive feature of Regional Rural Bank is that through it
is a separate body corporate with the Commercial Bank, which has sponsored the
proposal to establish it. The Central Government, while establishing a Regional Rural
Bank at the request of a Commercial Bank, shall specify the local limits within which it
shall operate. The Regional Rural Bank may establish its branches or agencies at any
place within the notified area.
Page | 15
State Bank of Saurashtra sponsors Regional Rural Banks in Saurashtra.
State Co-operative Banks
Central / District Co-operative Banks
Primary / Urban Co-operative Banks
Page | 16
FUNCTION OF BANKS
According to section (1) of the Banking Regulation of Act 1949, Banking means
accepting, for the purpose of lending or investment, of deposits of money from the
public, repayable on demand or otherwise and withdrawal by cheque, draft, order or
otherwise. Besides these functions, Section of the Act sets out other forms of business a
bank can carry on.
Other functions of bank are:
I. Collecting cheques, bills etc. for customers.
II. Dealing in foreign exchange.
III. Issuing guarantees, indemnities, letters of credit, traveler‟s cheques etc.
IV. Extending remittance services such as demand drafts mail transfer, telegraphic
V. Acting as agents for central and state governments or any other person in respect of
collection of taxes, pension payments, income tax, consultancy etc.
VI. Providing facilities like safe custody, locker etc.
VII. Acting as executor, administrative, trustee etc.
The banking industry today, however, is one of complexity. There are an array of
financial service provider‟s different products and services, not to mention the enormous
amount of different.
Page | 17
INTRODUCTION OF CO-OPERATIVE BANKS
Co-operative banks are formed on the principle of co-operative 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 group of the society.
The distinguish feature of the co-operative bank is the absence of profit motive co-
operative banks are very helpful to meet the requirements of small farmers, artesian,
etc in India in mobilizing rural deposits. Today, however, the co-operative have been
putting more weight on their lending activities than on deposit mobilizing.
Co-operative banking came into vogue in India in 1904 when the first co-
operative credit society was passed. The main function of a co-operative credit
society was to provide cheap credit to the members who are small people with small
mean and small need and finance. Another object was to inoculate the saving habit
anamong the agriculture and makes them take advantage of co-operation from fellow
members of the society. The co-operative movement in banking has since then makes
good progress from credit co-operative societies. The district level co-operative bank
cover the need of the various types of members. We could bring green revolution in
agriculture sector only due to co-operative activities.
“Co –operative is an effective self – reliance done by organism.”
SIR HORAS ORGANISM
“Co – operative is one type of organism in which people join to encourage their
“Co – operative is the step taken for equal profit or loss under mutual management by
mutually using their own resources and factors willingly.”
HERICK M. T.
Page | 18
The co – operative principles are guidelines by which co –operative put their
values into practice.
1) VOLUNTARY AND OPEN MEMBERSHIP:-
Co – operatives are voluntary organization open to all persons able to use their
services and willing to accept the responsibilities of membership, without gender, social,
racial, political or religious discrimination.
2) DEMOCRATIC MEMBER CONTROL:-
Co – operative do their members, who actively participate in setting their policies and
making decision, men and women serving control democratic organizations, as elected
representatives are accountable to the membership. In primary co – operative members
have equal voting right (one member, one vote) and co – operatives at other levels are
also organized in a democratic manner.
3) MEMBER ECONOMIC PARTICIPATION:-
Members contribute equitably to and democratically control the capital of their co –
operative. At least part of the capital is usually receiving limited compensation if any on
capital subscribed as condition of membership. Members allocate surpluses for any of the
following purposes: developing their co – operative, possible by setting up reserves, part
of which at least would be indivisible, benefiting members in proportions to their
transactions with the co –operative and supporting other activities approved by the
4) AUTONOMY AND INDEPENDENCE:-
Co – operatives are autonomous, self – help organizations controlled by their
members. If they enter into agreements with other organizations, including governments
Page | 19
to raise capital from external sources, they do so in terms that ensure democratic control
by their members and maintain their co – operative autonomy.
5) EDUCATION, TRAINING AND INFORMATION:-
Co – operative provide education and training for their members, elected
representatives, managers and employee so that they can contribute effectively to the
development of their co – operatives. They inform the general public – particular young
people and opinion leaders about the nature and benefit of corporation.
6) CO – OPERATION AMONG CO – OPERATIVE:-
Co – operative serve their members most effectively and strengthen the co – operative
movement by working to gather through local, national, regional and international
7) CONCERN FOR COMMUNITY:-
Co-operative work is the sustainable development of their communities through
policies approved by their members.
STRUCTURE OF CO – OPERATIVE BANK IN INDIA:-
The co – operative banking structure in India may divided into three component
parts, viz., (1) primary credit societies at the base, (2) central co – operative banks at
the district level in the middle, and (3) provincial or state co – operative banks (also
called apex banks) at the top.
Co – operative banking has three – tire structure as under:
Page | 20
State Co-operative Banks
State Co-operative Bank means the principal Co-operative society in the state. The
primary objective of which is the financing other co-operative societies in the state.
Central / District Co-operative Banks
Central / District co-operative Bank means the principal co-operative society in a
district, the primary objective of which is the financing of other co-operative in that
Primary / Urban Co-operative Banks
The primary objective of principal business of which the transaction is of banking
business and paid up share capital and reserve of which are not less than rupees 100,000
and bye-laws of which do not permit admission of any other co-operative society as a
STATE CO –
Page | 22
HISTORY OF THE JUNAGADH COMMERCIAL CO-OPERATIVE
The Junagadh Commercial Co-operative Bank Ltd was registered under the Co-
operative Society Act on Reserve Bank License no. GJ 521P, was established on 18th
Feb. 1971. At that time the farmers, small shopkeepers and the workers of small villages
used to borrow money from “SHAHUKARS” at high rate of interest. Their life became
miserable diem per diem. Their life was ruined due to various kinds of exploitation.
The entrepreneur of the bank, “ShriChandrakantMalvia”, was aware about these
problems. He wished to free these peoples from the exploitation. After a lot of thinking,
he felt that if a co-operative bank is established in a economically backward area like
Junagadh, the farmers, small workers, businessmen and other people will get a relief from
these and thus the Junagadh Commercial Co-operative Bank came into existence.
The working of bank was started on 30th
Sep, 1971 in Junagadh city under
supervision of highly knowledgeable manager Mr. Ambalal Shah. In the beginning, the
bank provides finance to farmer and small businessmen at feasible and low rate of
interest. The bank progressed at a slow and steady pace. Observing the progress and
working of bank, the surrounding for the expansion and opening of branches.
Page | 23
NAME: - THE JUNAGADH COMMERCIAL CO-OPERATIVE BANK LTD.
ADDRESS: - HEAD OFFICE / REG. OFFICE:
The Junagadh Commercial Co-operative
Junagadh. – 362001
Phone no. : (0285) 2620496
Fax no. : (0285)2628340
E-mail : firstname.lastname@example.org
DATE OF ESTABLISHMENT : 18-02-1971
REG. NO. : se-8821 18-02-1971
RESERVE BANK LICENSE NO : GJ 521 P
COMMENCEMENT OF WORK : 30-09-1971
AUDITORS : _________________________
BRANCH OFFICE : The Junagadh Com. Co-operative
Choksi bazar Branch,
Junagadh – 362001
Phone no. : (0285) 2620496
BANKERS : Reserve Bank of India
State Bank of India
State Bank of Saurashtra
AUDITOR : ______________________
Page | 24
VISION MISSION AND GOAL
The aim of junagadh commercial co-operative bank is to provide a ivy league
Banking facility to the common hoipolloi of the society at an economical rate.
To be a preferred of the banking services in the area where bank operates and to
achieve hefty profit which would be partly used for the benefit of society, rat chat up the
hoipolloi and general growth and co- operative movement.
Junagadh commercial co-operative bank‟s business philosophy based on core values
o Operational excellence
o Customer focus
o Up liftmen through co-operation.
BOARD OF DIRECTORS:-
MR. DOLARRAI V. KOTECHA (CHAIRMAN)
MR. ASHISHBHAI J. MANKAD (VICE CHAIRMAN)
MR.VASANTRAI K. BHATT (MANAGING DIRECTOR)
SHRI GOVINDBHAI R. DEWANI
SHRI MANIKANT G. SHAH
SMT. PRITIBEN D. KOTECHA
SHRI PRAKASHBHAI A. TALATI
SHRI ASHISHBHAI PAREKH
Page | 25
SHRI IQBALBHAI MARFATIYA
SHRI PRAVINBHAI J. GONDHIYA
SHRI BHAVESHBHAI V. VORA
SHRI AMARSHIBHAI SOLANKI
SHRI BHARATBAHI J. UPADHYAY
SHRI SUNILBHAI H. NAVANI
SHRI DOLARRAI V. KOTECHA (CHAIRMAN)
SHRI ASHISHBHAI J. MANKAD (VICE CHAIRMAN)
SHRI VASANTRAI K. BHATT (MANAGING DIRECTOR)
SHRI ASHISHBHAI PAREKH
SHRI SUNILBHAI H. NAVANI
SHRI BHAVESHBHAI V. VORA
SHRI IQBALBHAI MARFATIYA
RECOVERY & LEGAL COMMITTEE:-
SHRI. POPATLAL D. GADHAVI
SHRI. IQABALBHAI M. MARFATIA
SHRI. ASHISH J. PAREKH
Page | 26
BRANCHES OF JUNAGADH COMMERCIAL CO-OPERATIVE
Vanthli BranchKesoad Branch
Page | 27
Page | 28
SERVICES PROVIDED BY JCCB
The basic type of services offered by bank depends upon the type of bank and the
country. Services typically provided include:
Taking deposits from their customers and issuing current or checking accounts
and saving accounts to individuals and businesses.
Extending loans to individuals and businesses.
Facilitating money transactions such as wire transfers and cashier‟s checks.
Issuing credit cards, ATM cards and debit cards.
Storing valuable, particularly in the safe deposit box.
Cashing and distributing bank rolls.
Consumer and commercial financial advisory services.
Pension and retirement planning.
Financial transactions can be performed through many different channels as following:
A branch, banking centre or financial centre is a retail location where a bank or
financial institution offers a wide array of face to face service to its customers.
ATM is a device for computerized telecommunication that provides financial
institution‟s customers a method of financial transactions in a public space
without the need for a human clerk or a bank teller.
Mail is a part of the postal system which itself is a system where in written
documents typically enclosed in envelopes, and also small packages containing
other matter are delivered to destinations around the world.
Page | 29
PROGRESS AT A GLANCE
The JCCO Bank has been continuously in the upward north. Thus bank continuously has
been progressing and providing best of the best service to their customer and fully
adopted the K.Y.C. approach and online system.
Share capital 183.47 214.41 219
Reserve fund 863.31 1057.24 1171
Deposit 6464.59 7006.22 8114
Advances 3934.97 4821.38 5344
7774.63 8530.57 9804
Profit 48.25 23.24 12.54
No of branch 8 9 9
Dividend 15% 15% 15%
Page | 30
MAIN FUND INFLOW
The owned funds consisting of paid capital of the bank, reserve fund, and other reserves.
It is sum of current deposits, fixed deposits, saving deposits, special saving deposits, NRI
deposits, inoperative deposits, etc. It is the main Cash Inflow for any institution.
The borrowed funds consisting of borrowings from other banks (as per some writer
deposits of various types is also part of borrowed funds), debentures offered to public,
Increase in current liabilities, reduction in debtors, fund from operations like net income,
depreciation, and reserves, less payment to creditors, reduction in advances, reduction in
inventories, reduction in cash, sold marketable securities, etc.
Page | 31
MAIN FUND OUTFLOW
CRR (Cash Reserve Ratio) with Reserve Bank Of India
The capacity of credits creation of bank is depending upon their cash flow
received. To restrict this credit creation, the reserve bank of India has directed their
terms. In case of scheduled banks and sec.18 of banking regulation act are required to
maintain the cash reserve ratio @4.75 and non-scheduled bank @ 3% of their demand
and time liability amounts separately. The co-operative banks cash reserve ratio is @3%
fixed by RBI in AUG 2010The scheduled banks are required to deposit the cash reserve
ratio amount with Reserve Bank of India while the non-scheduled banks are required to
maintain separate account for this. The Reserve Bank of India is also empowered to raise
the cash reserve ratio up to 15% only in respect of scheduled banks.
Time liability is related with time like, fixed deposits
Demand liability is related with the demand like, Current deposits, inoperative deposit,
and matured fixed deposits
SLR (Statutory Liquidity Ratio)
The cash flow for regular banking transactions mainly depends upon deposit
received in the bank. The reserve bank of India there fore puts some restrictions on
utilization of these
amounts. The scheduled and non-scheduled banks are required to deposit 24% amount of
their demand and time liability amount in the security approved by reserve bank of India.
These securities are converted into cash and therefore they are termed as „liquid assets‟
and 25% amount termed as „liquid ratio‟. The reserve bank of India is empowered to raise
this liquidity ratio from 25% to 40%. It is maintained average fortnight and reported to
Page | 32
Credit deposit ratio is not more than 70%.Loanable funds means amount of
money, which is applicable for lending. Three main factors own fund, deposits, and
borrowings decide it. Advances can never be more than loanable fund.
Loanable fund is a total of:
75% of own funds
70% of deposits
100% of borrowings
Purchase of fixed assets, purchase of marketable securities, addition to advances,
addition to inventories, payment to creditors, payment of dividend, etc..
Page | 33
MEANING of CREDIT
The word „credit‟ is actually derived from the Latin word „Credere‟. „Credere‟
means to have trust or faith. Thus „credit‟ is directly related with trust. That is why State
Ford stated that „Credit is nothing more than that of trust‟. By this we can say that credit
is a tool that is resulted by the complete mutual trust/faith.
„Credit creation implies a situation when a bank may receive interest simply by
permitting customer to overdraw their accounts or by purchasing securities and paying
for them its own cheque or bank may pay amount to borrower or directly to seller of
goods whom against borrower get amount‟.
Page | 34
“Credit allows the customer to buy now pay later”.
CREDIT MANAGEMENT can be defined as management of loans and advances in
Banks. In other words credit management means successfully managing the credit by
paying the debt obligations on time for the amount required.
A credit is a legal contract where one party receives resource or wealth from another
party and promises to repay him on a future date along with interest. In simple terms, a
credit is an agreement of postponed payments of goods bought or loan. With the issuance
of a credit, a debt is formed.
Page | 35
FORMS OF CREDIT
In case of a loan a specified amount is sanctioned by the banker to the customer,
who may either draw the amount in case immediately or may like the amount to be
credited to his current account. But legally it is presumed that he has withdrawn the
amount from the bank and deposited it in his current account. He is required to pay
interest on the full amount from the date of sanction. A loan may be repayable in
installments or in lump sum.
Cash credit is the main method of lending in India and accounts for above 70% of
total bank credit. Under the system, the banker specifies the limit, called the cash credit
limit for each customer, up to which the customer is permitted to borrower against the
security of tangible assets or guarantees. The customer withdraws from his cash credit
account as and when requires the funds and deposits any amount of money, which he
finds surplus with him on any day. The cash credit amount is thus an active and running
account to which deposits and withdrawals may be affected frequently. The customer is
required to provide tangible assets as security to cover the amount borrowed from the
banker. The borrower is charged interest on the actual amount utilized by borrower and
for the period actually utilized only.
When a current amount holder is permitted by the banker to draw more than what
stands to his credit, such an advance is called an overdraft. The banker may take some
collateral security or may grant such advance on the personal security of the borrower.
The customer is permitted to withdraw the amount as and when he needs it and to repay it
Page | 36
by means of deposit in his account as and when it is feasible for him. Interest is charged
on the exact amount overdrawn by the customer and for the period of its actual utilization
The Banker credits customer‟s account with the amount of the bill after deduction
his charges. As the demand bills are repayable on demand and there is no maturity, the
banker is entitled to demand their payment immediately on presentation before of
drawee. Their practice adopted in the case of demand bills, is known as purchase of the
In case of bills discounting, a bank credits the amount of the bill to the drawer‟s
account before the realization of the bill and thus lends its funds to him after deduction
his charges. The bills purchased and bills discounted by a bank are, therefore, shown in
its balance sheet as part of loans and advances. In case of a bill maturing after a period of
time maximum for 180 days in JCCB, the banker retains the bill for that period and
realizes the amount of bill from the drawer on its due date. This practice is called
discounting of the bill.
It is a contract to perform the promise or discharge the liability of a third person in
case of his default. In case of guarantee, Bank is taking responsibility to pay the amount
to seller if buyer will not pay amount in time.
Page | 37
TIME WISE BIFURCATION OF ADVANCES
Short-term Finance: up to 12months
Refer to any investment and financial plan or anything else lasting for one year or
less. Short term investments and financial plan usually involve less uncertainty than long
term investments. Because generally speaking market trends are more easily predictable
for one year than for any longer period. Likewise short term financial plans are more
easily amendable as a result of the short term frame.
-Medium-term Finance: 12 to 36 months
Referring to any investment or financial plan with a term longer than short term
but shorter than long term called as medium term finance. It could be in weeks or a few
- Long-term Finance: Above 36 months
Describe a plan, strategy, security, or anything else with a term of longer than one
year. Theexact number of years varies according to the usage. For example, along term
financial plan outlines investment and other financial goals for any time more than one
fiscal year. While a long term bond has a maturity of 10 or more years.
Page | 38
SECURITY WISE BIFURCATION OF ADVANCES
1. Secured Finance / Advances:
Secured Advances are those advances, which provide absolute safety to the
Banker by means of a charge, created on the tangible assets of the borrower in favor of
the Banker. In such cases, the Banker gets certain rights in the tangible assets over which
a charge is created. A Secured Loan or Advance means a loan or advance made on the
security of assets, the market value of which is not at any time less than the amount of
such loan or advance.
2. Unsecured Finance / Advances:
Unsecured Loan or Advance means a loan or advance, which are not secured, this
types of advances is not preferable for any banking institutions.
Page | 39
PROCESS OF CREDIT FOLLOWED BY
STEP 1: APPLICATION
A customer seeking an advance is required to submit an appropriate application
form. There are different types of application forms for different types of advances
available. The information furnished in the application covers, inter alias, the following:
name and address of the borrower and his establishment, the details of borrower‟s
business, the nature and amount of security offered. The application form has to be
supported by various ancillary statements like the financial statements and financial
projections of the firm. A separate inquiry department is set under the loan department.
Here, different types of application forms are available and collect process charge from
borrower; application is accepted and entered into computer.
SUBMISSION TO HIGHER AUTHORITY
TITLE CLEAR CERTIFICATE
PAYMENT GIVEN TO CUSTOMER
REGISRTATION OF PROPERTY
Page | 40
STEP 2: CREDIT APPRAISAL
Credit Appraisal is the process by which a lender appraises the technical
feasibility, economic viability and bankability including creditworthiness of the
prospective borrower. Credit appraisal process of a customer lies in assessing if that
customer is liable to repay the loan amount in the stipulated time, or not. Here bank has
their own methodology to determine if a borrower is creditworthy or not.
STEP 3: UNIT INSPECTION
It is a one specific procedure of physical inspection of particular unit by the legal
inspector appointed by bank or the senior officer. Where overall unit inspected by them
and then actual position known and after it higher authority will decide such decisions
about credit given or not.
STEP 4: SUBMISSION TO HIGHER AUTHORITY FOR APPROVAL
After inspection the loan application is send to the higher authority for approval.
After checking overall documents and inspection report higher authority give approval
STEP 5: SENCTION LETTER
After approval by higher authority sanction letter is given to the loan department for give
STEP 6: TITLE CLEAR CERIFICATE
Starting from agriculture land transferring to non agriculture land various stages
of land owner and last owner of non-agriculture land on government record .this type of
procedure certified by any lawyer and submitted to bank in a form of title clear
STEP 7: REGISTRATION OF PROPERTY
After the procedure of title clear certificate mortgage registration of property on
the name of bank is one of important procedure done by the registrar.
STEP 8: DOCUMENTATION
Banks and borrowers do an written legal agreement for credit given by bank and
on which conditions and borrower‟s eligibility for payment and promise to repay the
Page | 41
STEP 9: PAYMENT GIVEN TO CUSTOMER
After all this procedure credit payment is given to the borrower in a form of cash
Page | 42
CREDIT POLICY OF JCCB
According to the preamble of RBI Act of 1934, the main functions of RBI are to
regulate the issue of bank notes and keeping of reserves with a view to secure monetary
stability and generally to operate the currency and credit systems of the country to its
advantage . Credit policy can be looked upon as a short term policy instrument to make
connections in the economy as it progresses. It is customary for the Reserve bank to
announce the credit policy for the first half of the fiscal year. The credit policy indicates
the current economic scenario while at the same time indicates the areas where
creditpolicy initiatives are required. It also specifies the various policy measures to be
indicated by the reserve bank over the next six months.
The credit policy measures may include some or all of the following measures
depending upon the prevailing situations:
Reserve Bank‟s expectation of deposit growth and achieve the targeted growth
rate. Measures to control liquidity in the banking system which may include CRR, SLR
and curtailment of refinance facilities.
Changes in bank deposit and lend interest rate and their effect on savings and
deposit mobilization, priority sector lending, investment and bank profitability.
Measure to promote agricultural growth and rural development.
Change in re-financing and bills re-discounting facilities. So, also individual banks must
also prepare their own credit policy in conformation with the guidelines issued by RBI. A
bank‟s credit policy is of,
a. Tight or Restrictive
b. Liberal or Non restrictive
Page | 43
SCRUTINY OF CREDIT
While scrutinizing an application from the bank takes into consideration-safety,
liquidity, purpose profitability, security, and spread of advances.
Bank has to see that the prospective borrower is a reliable user of the finance and bank‟s
money is safe in his hands.
Bank has to find out that the borrower is quite capable in repaying the finance within
The purpose for the finance should not be illegal. It should be creative, service
oriented, development oriented, and like. Banks should check end use of funds.
If the project or purpose of the finance is not profitable in the hands of the borrower
than he will not be in a position of repay the amount to bank. It should be profitable
enough to generate the income to satisfy his needs and bank‟s dues.
The bank has to take into consideration the character, capacity, and capital of the
prospective borrower. Bigger advances and cash credit are to be secured with collateral
security over and above prime security.
Spread of advances
For having balanced economy the bank should choose to spread the finance amongst
various sectors of the society, so that the risk of incoming bad advances is minimized.
Page | 44
Concentration on one type of advances may turn into bad advances if the scheme
becomes ineffective due to some natural calamities or government rules or change in
taste or demands of the society.
Page | 45
TYPES OF CREDIT
HYPOTHICATION CASH CREDIT
GOLD OVERDRAFT LOAN
POSATL CERTIFICATE LOAN
REAL ESTATE LOAN
Types of Loan Rate of Interest
As On 31-3-2013
Hypothecation Loan 13.00%
Hypothecation cash credit 14.00%
Personal loan 14.50%
Gold loan 13.00%
Gold over draft 14.00%
Postal certificate 11.00%
Page | 46
The assessment of the various risks that can impact on the repayment of loan is
credit appraisal. In short, you are determining "Will I get my money back?" Depending
on the purpose of loan and the quantum, the appraisal process may be simple or
elaborate. For small personal loans, credit scoring based on income, life style and existing
liabilities may suffice. But for project financing, the process comprises technical,
commercial, marketing, financial, managerial appraisals as also implementation schedule
It is a process of appraising credit worthiness of a loan applicant. Factors like age,
income, number of dependents, nature of employment, continuality of employment,
repayment capacity , previous loans, credit cards etc. are taken into account while
appraising the credit worthiness of a person. Every bank or institution has its own panel
of officials for this purpose.
Customers are now able to manage NPA's better and mitigate risk by automating
the entire credit appraisal process. They are now able to record & verify information
related to their customers, capture information related to projects and also send
application to third party appraisal agent/company. Our Business Process Management
practice further enhances these workflows by implementing industry standard third party
The Junagadh commercial co-operative banks have the specific credit appraisal
system which is added into annexure.
Page | 47
CREDIT MONITORING, FOLLOW UP AND REVIEW
When we lend, it is essential for us that to keep watch on it till we recover it. This
is called credit monitoring in terms of banking.
CREDIT MONITORING SYSTEM in JCCB
In the JCCB, there is system for credit monitoring specially account, which is
above 10, 00,000 rupees is described below:
Find out the list of potential NPA accounts above 10, 00,000 rupees
Statements of potential NPA accounts are submitted to head office from branches
Head office monitoring this every three months and prepare report on it.
Report is submitted to board of directors.
Follow up action for credit monitoring in JCCB:
Consolidation of data, which comes from the branches and every month, update
the data and generate this and use it for follow up
Head office directly sends the notice to account holders of such accounts
To stop the slippage of the potential NPA accounts, banks organize the committee under
authorization of Mr. MARADIA and Mr. BHATT with the help every branch recovery
officers, they try to recover. General Manager arranges the meeting for that and gives
guidelines to the committee member.
Page | 48
OBSERVATION FINDINGS AND SUGGESTIONS
System of loan portfolio review and monitoring
There is system of weekly review and monitoring of loan portfolio in the JCCB
every week a statement is prepare to be acquainted with the present credit deposit ratio, if
this ratio is less than 70% for example 65%, it represent that bank can finance up to 5 %
Items of priority sectors
Advances to individuals for activities allied to agriculture Loans and advances to
cottage/small scale industries and equipment /system for development of new and
renewable sources of energy.
Advances to road and water transport operators for purchase of one vehicle
Private retail traders dealing in essential commodities (fair practice shop)
Small business enterprise
Professionals and self employed persons
Timely renew and review by credit limit
Every year JCCB review cash credit accounts and every three years renew that
accounts. At the time of review bank only keep in view the turnover of business, account
inspection, field inspection, renew insurance, renew shop act license, proof of rent,
income tax return or assessment of income tax, turnover with bank. But process of renew
of accounts is totally inspection of party. Bank considers last three year‟s business
progress of the party and deal with bank also.
Page | 49
INTRODUCTION OF NPA
NPA The three letters Strike terror in banking sector and business circle today. NPA is
short form of “Non Performing Asset”. The dreaded NPA rule says simply this: when
interest or other due to a bank remains unpaid for more than 90 days, the entire bank loan
automatically turns a non performing asset. The recovery of loan has always been
problem for banks and financial institution. To come out of these first we need to think is
it possible to avoid NPA, no cannot be then left is to look after the factor responsible for
it and managing those factors.
An asset, including a leased asset, becomes non-performing when it
ceases to generate income for the bank.
Page | 50
CLASSIFICATION OF NPAS
The primary (urban) co-operative banks should classify their assets into the following
broad groups, viz.
- Standard assets
- Sub-standard assets
- Doubtful assets
- Loss assets
After identification of borrowed accounts as NPA the next stage is asset classification
Standard Assets is one, which does not disclose any problems and which does not
carry more than normal risk attached to the business. Such as asset should not be an NPA.
In case of sub-standard assets, the current net worth of the borrower/guarantors or
current market value of the security charged is not enough to ensure recovery of the dues
to the banks in full. In other words, such assets will have well defined credit weakness
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.
An asset where the terms of the loan agreement regarding interest and principal
have been re-negotiated or rescheduled after commencement of production, should be
classified a sub standard and should remain in such category for at least 18 months of
satisfactory performance under the re-negotiated or rescheduled terms. If interest and
installment paid regularly as per term re-scheduled.
Page | 51
In other words, the classification of an asset should not be upgraded merely as a
result of rescheduling, unless there is satisfactory compliance of this condition.
An asset is required to be classified as doubtful, if it has remained in the sub-
standard category for 12 months. As in the case of sub-standard assets, rescheduling does
not entitle the bank to upgrade the quality of an advance automatically.
A loan classified as doubtful thus all the weakness inherent as that 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 importable.
A loss asset is one where loss has been identified by the bank or internal or
external auditors or by the co-operation department or by the Reserve Bank Of India
inspection but the amount has not been written off, wholly or partly, in other words, such
an asset is considered un-collectible and of such little value that its continuance as a
bankable asset is not warranted although there may be some salvage or recovery value.
Page | 52
PROVISIONS FOR NPAS IN JCCB
Assets classification % Of provision to be
- real estate
Sub standard assets
A. Doubtful up to 1 year
B. Doubtful for above 1 year but not
C. Doubtful above 3 years
Page | 53
REASONS FOR NPA
“Assets which are not generate actual income or which are classified in to overdue
account and if account becomes an overdue above 90days .those assets can be classifies
into non-preforming assets.”
OTHER REASONS AS IS UNDER:
Improper selection of borrowers activities
Weak appraisal system for credit proposal industries problem/prospects not locked
Lack of proper monitoring and follow up measures.
Managerial competence of borrower given less consideration
Change in economic policies / environment.
Lack of proper follow up by banks.
Irregularities in deficiencies in documentation-
Non transparent accounting policy and poor auditing practices.
Lack of coordination between Bank / FIs.
Failure on part of the promoters to bring in their portion of equity from their own
sources or public issue due to market turning unfavorable.
Assessment of borrower and guarantors net worth on market opinion
Inadequate staff to contact borrowers frequently
Failure to take punitive (strict and effective) actions against defaulters
Bank‟s failure to appreciate the acts of prompt repayers
Non action/co-operation of government agencies in recovery
Effect of agricultural debt relief scheme
Page | 54
Inadequate monitoring of court cases and delays in execution
Lack of income generation due to natural calamities and other uncertainties.
Page | 55
NPA REDUCTION TECHNIQUES
Recovery management consist of the functions and activities the bank carries out
acquire back what the bank has advanced with principal amount as well as interest on the
same. So it is recovery of what the bank has advanced to loanee for carrying out their
purpose/ objective of taking a loan.
Recovery is the act against the borrowers the pay out the debt taken by them.It is
an procedure to recover the debt from borrowers as soon as possible and as most as
Recovery management is very much important part of the credit management
because no any company or an organization survives if they are not capable as enough to
recover company‟s debt as soon as possible.
Recovery department or we can say recovery manager plays very much important
role in the credit management of the organization.
National institute of co-operative management, Gandhinagar decided some strict
action against the loanee/borrower for the debt recovery.
Page | 56
METHODS OF RECOVERY
Following are the recovery methods followed by The Junagadh Commercial co-
operative bank which is guided by the RBI and national institute of co-operative
METHODS OF RECOVERY
Page | 57
Research is actually a voyage of discovery. It is the pursuit of truth with the help
of study, observation, comparison & experiment. In today‟s modern world it is difficult to
survive without making research in latest trend and activities.
Research can be defined as the search for knowledge or any systematic
investigation to establish facts. The primary purpose for applied research (as opposed to
basic research) is discovering, interpreting, and the development of methods and systems
for the advancement of human knowledge on a wide variety of scientific matters of our
world and the universe.
Research methodology, being the most important part of the study, should get
extra attention. Besides this, all efforts have been put to apply appropriate methodology
suitable for each type of study. Marketing research is the systematic gathering, recording,
and analyzing of data about problem relating to the marketing of goods and services.
Research is a process of knowing new fat and verifying old ones by the
application of scientific method. Research as per common man refers to search for
knowledge. Some people consider research as a movement, a movement from unknown
to known. It is systematic search or information on a systematic topic.For my analysis
purpose I go to secondary data so I used Non-parametrictest. Where I use chi square test
Page | 58
Research Paper – “A comparative study of Non Performance Assets in India” by
Prashanth K Reddy, IIM- Ahmadabad-
This article discusses about the financial sector reform in India which has progressed
rapidly on aspects like interest rate deregulation, reduction in reserve requirements,
barriers to entry, prudential norms and risk based supervision but the progress on th
e structural-institutional aspects has been much slower and is a cause for concern. It
tells about what changes are required to tackle the NPA problem. This paper also
deals with the experiences of other Asian countries in handling of NPAs. It also
suggests mechanisms to handle the problem by drawing on experiences from other
Research Paper on “Rooting Out Non-Performing Assets” by Nachiket Mor, ICICI
The paper attempts to highlight some major micro-level issues that are at the root of
why unsustainable performance levels are being observed within Banks. The authors
argue that unless the micro level issues are dealt with, even after the systemic issues
are resolved, the problem of NPAs or other failures of the intermediation process may
resurface with greater intensity. The manner in which banks manage the three phases
in the life cycle of an asset (creation, monitoring and recovery) determines the quality
of the intermediation process within a bank. In this paper, the need for internally
consistent business models to guide the behavior of a bank in each of these three
phases is discussed.
Non-Performing Assets of Indian Public, Private and Foreign Sector Banks: An
Empirical Assessment by: Gaurav Vallabh, Anoop Bhatia, Saurabh Mishra-
This paper explores an empirical approach to the analysis of Non-Performing Assets
(NPAs) of public, private and foreign sector banks in India. The NPAs are considered
Page | 59
as an important parameter to judge the performance and financial health of banks.
The level of NPAs is one of the drivers of financial stability and growth of the
banking sector. This paper aims to find the fundamental factors which impact NPAs
of banks. A model consisting of two types of factors, viz., macroeconomic factors and
bank-specific parameters, is developed and the behavior of NPAs of the three
categories of banks is observed. This model tries to extend the methodology of
widely-known Altman model. The empirical analysis assesses how macroeconomic
factors and bank-specific parameters affect NPAs of a particular category of banks.
The macroeconomic factors of the model included are GDP growth rate and excise
duty, and the bank-specific parameters are Credit Deposit Ratio (CDR), loan
exposure to priority sector, Capital Adequacy Ratio (CAR), and liquidity risk. The
results show that movement in NPAs over the years can be explained well by the
factors considered in the model for the public and private sector banks. The co-
linearity between independent variables was measured by Durbin-Watson test and
VIF characteristic and it was found to be a little for public and private banks. The
factors included in the model explain 97.1% (adjusted R-square value of regression
results) of variations in NPAs of public banks and 76.9% of the same of private
banks. The other important results derived from the analysis include the finding that
banks „exposure to priority sector lending reduces NPAs.
Page | 60
OBJECTIVE OF STUDY
PRIMARY OBJECTIVE :
1. To study and understand the Credit management of JCCB.
2. To study and understand the process of sanctioning the loan.
3. To study and understand the criteria for sanctioning the loan
4. To study the bank‟s policy towards NPA.
Page | 61
TITLE OF STUDY
The title of the study is “CREDIT MANAGEMENT” which means those credit
given by the bank to the where borrowers are default of delay of interest of principal
payment or repayment of credit. Banks are now required to recognize.
Today there is huge competition in the banking sector. Banks are now just not
depositing, receiving or paying money but it has become One Step Banking. Only a step
in banking the banks should satisfy all the monetary requirements of the people along
with the repayment which the borrowers have take and have to pay in time so the
liquidity will remain sustain the competition prevailing in the sector makes all the
requirements of the people possible.
All the research help me a lot to know about reason behind non paying and
this non performing asset become more in number than it would difficult to maintain the
cash out flow in the bank.
Page | 62
SOURCES OF DATA
Primary data collection
Primary data is basically the live data which collected on field while doing calls
with the customers and I shows them list of question for which I had required their
responses. In some cases I got no response from their side and then on the basis of my
previous experience I filled those fields.
Secondary data collection
For preparing the theoretical background of the study, I have used secondary data
from articles, books and annual reports of JUNAGADH COMERCIAL CO-
OPERATIVE BANK LTD.
Secondary data are collected by someone else. So, it becomes secondary information
for the research
Year Gross NPA in RS
Page | 63
Here we can see that there is reduction in the year 2010-11 approximant 58% and
2011-12 raise and than 2012-13 it is fall. So that it is indicate that bank has strengthen his
position from the out of order advance.
Year Net NPA in RS
Here in the year 2008-09 it is 967000 and then it is increased in the year 2009-10 and
then after rest of the year it becomes zero. It is indicate that bank advance monitoring
policy quite efficient.
Page | 64
CHI-SQUARE TESTFOR GROSS NPA
STEP: 1 SETTING OF HYPOTHESIS
H0: There is no significance difference between gross NPA Observed frequency and
gross NPA expected frequency.
Ha: There is significance difference between gross NPA Observed frequency and gross
NPA expected frequency.
STEP: 2 CALCULATIONS FOR TEST STATISTICS
year O E (O-E) (O-E)2 (O-E)2/E
2009 26.88 28.03 -1.15 1.32 0.047
2010 48.92 28.03 20.89 436.39 15.57
2011 20.75 28.03 -7.28 53 1.89
2012 22.9 28.03 -5.13 26.31 0.94
2013 20.7 28.03 -7.33 53.73 1.92
Page | 65
O = Observed frequency.
E= Expected frequency.
E= TOTAL OBSERVED FREQUENCY
NO OF FREQUENCY.
Degree of freedom = n-1
STEP 3: LEVEL OF SIGNIFICANCE
(0.05, 4) = 9.49
STEP 4: DECISION
c = 20.367 >Х2
( 0.05, 4) = 9.49
So, there is significance difference between past data and present data. It show that the
bank has strengthen his position from the out of order advance.
Page | 66
CHI-SQUARE TEST FOR NET N.P.A
STEP 1: SETTING OF HYPOTHESIS
H0: There is no significance difference between Net NPA Observed frequency and Net
NPA expected frequency.
Ha : There is significance difference between Net NPA Observed frequency and Net
NPA expected frequency.
STEP 2: CALCULATIONS FOR TEST STATISTICS.
O = Observed frequency.
NET N.P.A (Rs IN 10Lacs)
Year O E (O-E) (O-E)2 (O-E)2/E
2009 9.67 5.80 3.87 14.98 1.55
2010 19.34 5.80 13.54 183.33 9.48
2011 0 5.80 -5.80 33.64 0
2012 0 5.80 -5.80 33.64 0
2013 0 5.80 -5.80 33.64 0
Page | 67
E= Expected frequency.
C= No of parameters being estimated from the sample data.
E= TOTAL OBSERVED FREQUENCY
NO OF FREQUENCY.
Degree of freedom = n-1-C
STEP 3: LEVEL OF SIGNIFICANCE
Х2 = (0.05, 2) = 5.99
STEP 4: DECISIONS
Х2c = 11.03 > Х2 ( 0.05, 2) = 5.99
So, there is significance difference between past data and present
data. It shows that the bank credit management is better and company credit
monitoring policy is quite efficient.
Page | 68
LIMITATION OF STUDY
Nothing in the world is complete and my presented work is not an exception to this
saying. Since banking is a very vast topic to cover, it includes a lot of things and NPA is
also a very big affair. The limitations that I felt in my study are:
I take past 5 year data for my research but it not describe actual study. So there is
limitation of the study.
There are many tools for the calculation of the NPA. It also gives the accurate
decision on NPA.
We can also use other tools for NPA calculation. The other tools are return on
investment, NPA ratio analysis etc.
Page | 69
All procedure take maximum fifteen days to passed loan in which to deposit the
document and all necessary paper would create a road blocks.
Those borrowers who did not pay the dues it would create a negative in the profitability.
In finance side, most of the people are prefer to get.
Also from the reason I can come to know that people do not agree that co-operative bank
has advantage and flexibility than private banks in terms of law , interest rate, large
network and fast processing.
There existing rating system in the Junagadh commercial Co-operative bank did not
consider the rating of interest coverage ratio, and debt service ratio.
The bank did not manage the credit risk by getting the credit risk information from the
other bank in order to lend.
The current ratio is not a very good indicator of the credit worth in case of the borrower.
Where as the debt equity ratio and the interest coverage ratio is a very good indicator of
the credit worthiness of the borrower
Page | 70
The project work on CREDIT MANAGEMENT has proved to be a fruitful and
learning experience for me. Practical training apart from theory lectures has interested to
me. This project work has given me an opportunity to learn various aspects of banks and
as well as research in NPA
This project work has helped us to relate the theoretical process with the practical
aspects of the market research. During our research I acquired a detailed knowledge
about the role of the bank and its function. That is got an overall idea about how a NPA
research is to be conducted, through this project work. Thus this practical approach filled
in the gaps of our long-standing theoretical knowledge.
From the research analysis I conclude that
Overall performance of co-operative bank is average as compare to others
in most of the segment and it should tries to grow in the rest of the segment in which it
has lagging behind.
Page | 71
1 Prashanth K Reddy, IIM- Ahmadabad
2 Nachiket Mor, ICICI research centre
3 Gaurav Vallabh, Anoop Bhatia, Saurabh Mishra
NO NAME OF BOOK
1 Shekhar K.C. Banking Theory and Practices
2 C.R. Kothari- Research Methodology: WishwaPrakashan- New Delhi.2003
3 Khan and Jain-Finance Management: TATA McGrewhill New Delhi. 2006
4 Bedi H.L.; Hardikar V.K. Practical Banking Advances. New Delhi: Institute
of banking studies, 1975.
Page | 72
BALANCE SHEET OF JCCB
Capital 31.03.2013 31.03.2012
[400000 share of 100 each] 40000000.00 20000000.00
[200000 share of 50 each ] 10000000.00 10000000.00
Subscribe & paid up capital
[207446 share of 100 each] 20365 21227600.00 20744600.00
[196196 share of 100 each] 21294
Share capital (LIMBADI BRANCH) 530240.00 696590.00
SHARE CAPITAL – (GROUP B) 120100.00
TOTAL 21877940.00 21441190.00
Reserve & surplus 31.03.2013 31.03.2012
Statutory reserve 36170915.92 34781843.92
Contingent reserve 651031.67 651031.67
Building fund 13630374.39 3481843.92
Dividend equalization fund 354806.00 1696779.80
Development fund 1194769.39 1194769.39
Risk coverage Reserve
Bad debts reserve fund 30100000.00 30000000.00
Page | 73
Special B.D.D.R 6232905.58 5882825.58
B.D.D.R (NPAs A/c) 0.00 0.00
Lambadi Branch Daily collection 0.00 0.00
Provision Madhavpura Marc. Co-op Bank 0.00 0.00
Overdue interest Receivable reserve A/c 3784656.63 3784656.63
Contingency provision against Standard assests 2200000.00 2000000.00
Merger Adjustment A/c (Vanthli) 983202.47 312477.47
Merger Adjustment A/c (Limbdi) 1258666.70 929253.70
Merger Bank (Rushika) Collection A/c 1784844.00 1691144.00
Charitable Fund 417669.26 417669.26
Walfare Fund 561458.39 622458.39
Co – Operative Propaganda Fund 94917.85 106917.85
Shareholder Members Gifts 0.00 0.00
Staff Benefits Fund 128781.00 128781.00
Investment Depreciation reserve 5030675.00 549600.00
Sub Total 104579674.25 98380583.05
Profit & Loss Account
Balance in Profit & loss Account 12542969.26 2333867.80
Total 117122643.51 100714450.85
Page | 74
Deposits 31.03.2013 31.03.2012
Current Deposit 95768139.12 99318677.85
Cash Credit 1534948.97 4952896.52
Sub Total 97303088.09 104271574.37
Saving deposit 177454806.77 179598299.66
Sanstha saving deposit 69269.00 66842.00
Small saving deposit 2089583.00 1444781.00
Special saving deposit 268402.68 244095.17
Sub Total 179882061.45 181354017.83
Fix deposit 166066725.00 122487907.00
Double benefit deposit 5026632.00 6097459.00
Re investment deposit 349017570.17 274051460.98
Recurring deposit 13495483.00 9941453.00
Members compulsory deposit 0.00 1600648.72
Silver collection deposits 657093.00 794506.00
Gold collection deposits 19765.00 22887.00
Sub Total 534283268.17 414996321.70
Total 811468417.71 700621913.90
Sub schedule for credit balance in cash credit account
Cash Credit 31.03.2013 31.03.2012
Hypo. Cash credit CR balance 1457357.18 4485131.61
Surety cash credit CR balance 10492.20 7839.82
F.D.O.D CRbalance 28720.19 121654.21
Secured overdraft CRbalance 15708.50 301577.41
Staff overdraft loan CRbalance 22670.90 36693.47
Total 1534948.97 4952896.52
Borrowings 31.03.2013 31.03.2012
Page | 76
Prov. Insurance premium payable 0.00 0.00
Income tax payable 4500000.00 3500000.00
Prov. Special allowance payable 0.00 251000.00
Income tax paid under appeal – prov. 3672336.00 3672336.00
Income tax refund receivable – prov. 1212070.00 1212070.00
Other liability(credit balance in loan ac) 12766.00 60006.00
Inter branch adjustment (net) 1155333.50 1224475.50
Sub Total 18102973.68 19666678.54
Total 30020785.21 30279271.07
Sub schedule for credit balance in Loan account 31.03.2013 31.03.2012
Gold LoanCR balance 0.00 57714.00
Housing LoanCR balance 9211.00 1951.00
Hire purchase LoanCR balance 0.00 0.00
Cash credit CR balance 0.00 0.00
Staff vehicle LoanCR balance 0.00 0.00
Employment LoanCR balance 0.00 0.00
Postal certificate LoanCR balance 3555.00 0.00
Gold (Diamond)LoanCR balance 0.00 0.00
Gold (White) LoanCR balance 0.00 0.00
HypothecationCR balance 0.00 341.00
Pledge LoanCR balance 0.00 0.00
Gold loan (platinum) LoanCR balance 0.00 0.00
Vajpai Employee LoanCR balance 0.00 0.00
Staff salary LoanCR balance 0.00 0.00
Total 12766.00 60006.00
Sub schedule for inter branch adjustment 31.03.2013 31.03.2012
Joshipara Branch Account 66766388.19 55577891.98
Dolatpara Branch Account 25200851.88 36718209.20
Kodinar Branch Account -285467.33 -1807952.55
Keshod Branch Account 62369553.52 38960650.81
Vanthli Branch Account 36799614.46 37412642.32
Manavadar Branch Account -11043545.64 -6284247.25
Gandhinagar Branch Account 6673691.58 1378803.15
Limbadi Branch Account 2113899.81 -2327986.69
Head office Branch Account -187439652.97 -
Total 1155333.50 1224475.50
Schedule – 6
Cash & balance with RBI 31.03.2013 31.03.2012
Page | 77
Cash on hand 39067361.80 16038087.07
Cash at ATM
Total 39067361.80 16038087.07
Balance with banks & call deposit 31.03.2013 31.03.2012
1. balance in current account with other bank
a.Balance with SCB & CCB of the district
Gujarat state co- op Bank Ltd. 1961245.45 236598.45
Junagadh Dist. co- op Bank Ltd. 142200.73 77851.73
Ahmadabad Dist. co- op Bank Ltd. 2672566.23 3709436.41
Surendranagar Dist. co- op Bank Ltd. 15452.73 15297.73
Sub Total 4791465.14 4039184.32
b. balance with SBI & other notified bank
State bank of India 10586112.21 14812872.48
Bank of Baroda 13501.00 13725.00
Dena bank 10785.00 11000.53
Union bank of India 245886.68 58518.38
Sub Total 10856285.62 14896116.39
c. Balance with private sector bank
IDBI bank Ltd. 42736.00 43490.00
HDFC bank Ltd. 4735922.00 5250476.03
AXIS bank Ltd. 2260013.73 11211213.01
ICICI bank Ltd. 126979.11 29800.11
Sub Total 7165650.84 16534979.15
TOTAL(1A+1B+1C) 22813401.60 35470279.86
2 Balance in deposit account with other bank
a. term deposit with SCB & CCB of other bank
Gujarat state co- op Bank Ltd. 37500000.00 7500000.00
Junagadh Dist. co- op Bank Ltd. 0.00 0.00
Ahmadabad Dist. co- op Bank Ltd. 20500000.00 20500000.00
Surendranagar Dist. co- op Bank Ltd. 0.00 0.00
Sub Total 58000000.00 28000000.00
b. term deposit with SBI & other bank
State bank of India 11237268.00 30604553.00
Punjab bank of India 22500000.00 0.00
Sub Total 33737268.00 30604553.00
c. Term deposit with private bank
IDBI bank Ltd. 9900000.00 11700000.00
Page | 78
HDFC bank Ltd. 0.00 0.00
AXIS bank Ltd. 20000000.00 0.00
Sub Total 29900000.00 11700000.00
Total (2a+2b+2c) 121637268.00 70304553.00
3. madhavpura mercantile co – op bank 0.00 0.00
4. Money call & short term 0.00 20000000.00
Total[1+2+3+4] 144450669.60 125774832.86
Sub schedule balance with CCB/SCB 31.03.2013 31.03.2012
Gujarat state co- op. bank limbdi branch 0.00 -189405.28
Gujarat state co- op. bank -19612545.45 -47193.17
Sub total -1961245.45 -236598.45
Investment 31.03.2013 31.03.2012
1.investment in government security
Central Government security 229958027.00 19625969.00
State government security 0.00 0.00
Sub total 229958027 19625569.00
2. investment in shares of other co operative institute
Gujarat co- op bank share 1500000.00 1030000.00
JDCC bank share 65000.00 65000.00
Surendernagar dist. co- op share 273100.00 273100.00
Ahmadabad dist. Co – op bank share 100.00 100.00
Saurashtra co- op spinning mills 500.00 500.00
Sub total 1839200.00 1369200.00
total 231797227.00 197628769.00
Loan & Advance 31.03.2013 31.03.2012
Secured loan & Advance
Jcom trader plus 992452.95 1459496.95
Hypothecation cash credit 145607434.11 149089548.83
Secured over draft 19157369.99 12812221.59
Pledge loan 0.00 0.00