Summer internship tranning report on jccb final


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Summer internship tranning report on jccb final

  2. 2. Page | 2 Parul Institute of Management & Research (Formerly Dr.J K Patel Institute of Management) CERTIFICATE “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
  3. 3. Page | 3 ACKNOWLEDGEMENT 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.
  4. 4. Page | 4 DECLERATION 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.)
  7. 7. 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 public debt. 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 century 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
  8. 8. 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.
  9. 9. 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
  10. 10. 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 bank”.
  11. 11. Page | 11 STATUS WISE BIFURCATION OF BANKS Scheduled 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 Banks
  12. 12. Page | 12 Non-Scheduled Bank 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.
  13. 13. Page | 13 TYPES OF BANKS Reserve Bank of India Nationalize Bank State Bank Group Old private bank New private bank Foreign 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 April 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 NATIONALIZE BANKS 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.
  14. 14. Page | 14 STATE BANKS 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. FORIEN BANKS 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.
  15. 15. Page | 15 State Bank of Saurashtra sponsors Regional Rural Banks in Saurashtra. CO-OPERATIVE BANKS State Co-operative Banks Central / District Co-operative Banks Primary / Urban Co-operative Banks
  16. 16. 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 transfers etc. 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.
  17. 17. 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 financial interest” HEWERT KELVERT “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.
  18. 18. Page | 18  PRINCIPLES:- 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 membership. 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
  19. 19. 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 structures. 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:
  20. 20. Page | 20 CO-OPERATIVE BANKS 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 particular district. 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 member. STATE CO – OPERATIVE CENTERAL CO- OPERATIVE BANK PRIMARY CO- OPERATIVE BANK
  21. 21. Page | 21
  22. 22. Page | 22 HISTORY OF THE JUNAGADH COMMERCIAL CO-OPERATIVE BANK 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.
  23. 23. Page | 23 BASIC INFORMATION NAME: - THE JUNAGADH COMMERCIAL CO-OPERATIVE BANK LTD. ADDRESS: - HEAD OFFICE / REG. OFFICE: The Junagadh Commercial Co-operative Bank Ltd. ChandrakantMalaviaSmrutiBhavan, Choksi Bazaar, Junagadh. – 362001 Phone no. : (0285) 2620496 Fax no. : (0285)2628340 E-mail : 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 BankLtd. Choksi bazar Branch, Junagadh – 362001 Phone no. : (0285) 2620496 BANKERS : Reserve Bank of India State Bank of India State Bank of Saurashtra AUDITOR : ______________________ Certified auditor, Junagadh-362001
  24. 24. Page | 24 VISION MISSION AND GOAL  VISION 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.  MISSION 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.  GOAL 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 SHRI P.D.GADHAVI SMT. PRITIBEN D. KOTECHA SHRI PRAKASHBHAI A. TALATI SHRI ASHISHBHAI PAREKH
  26. 26. Page | 26 BRANCHES OF JUNAGADH COMMERCIAL CO-OPERATIVE BANK Head Office ChandrakantMalaviya SmurtiBhavan ChoksiBazzar Limbadi Branch Gandhinagar Branch Manavadar Branch Vanthli BranchKesoad Branch Kodinar Branch Dolatpara Branch Joshipara Branch
  27. 27. Page | 27 ORGANISATION STRUCTURE Borad Of Director Chairman Vice Chairman Managing Director General Manager Branch Manager Accountant Officers Clerks Peons
  28. 28. 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.  Cashing cheques.  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.
  29. 29. 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. - (in lacs) - - 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 Working capital 7774.63 8530.57 9804 Profit 48.25 23.24 12.54 No of branch 8 9 9 Dividend 15% 15% 15%
  30. 30. Page | 30 MAIN FUND INFLOW  Capital The owned funds consisting of paid capital of the bank, reserve fund, and other reserves.  Deposits 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.  Borrowings 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, etc.  Others 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.
  31. 31. 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 RBI.
  32. 32. Page | 32  Loanable Fund 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  Others Purchase of fixed assets, purchase of marketable securities, addition to advances, addition to inventories, payment to creditors, payment of dividend, etc..
  33. 33. 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‟.
  34. 34. Page | 34 CREDIT MANAGEMENT “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.
  35. 35. Page | 35 FORMS OF CREDIT Loan/term loan 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 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. Overdrafts 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
  36. 36. 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 Bills Purchase 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 bills. Bills Discount 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. Bank Guarantee 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.
  37. 37. 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 years. - 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.
  38. 38. 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.
  39. 39. Page | 39 PROCESS OF CREDIT FOLLOWED BY JCCB 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. APPLICATION CREDIT APPRAISAL SANCTION LATTER SUBMISSION TO HIGHER AUTHORITY FOR APPROVAL UNIT INSPECTION TITLE CLEAR CERTIFICATE PAYMENT GIVEN TO CUSTOMER REGISRTATION OF PROPERTY DOCUMENTATION
  40. 40. 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 for credit. STEP 5: SENCTION LETTER After approval by higher authority sanction letter is given to the loan department for give a credit. 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 certificate. 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 loan.
  41. 41. Page | 41 STEP 9: PAYMENT GIVEN TO CUSTOMER After all this procedure credit payment is given to the borrower in a form of cash
  42. 42. 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
  43. 43. Page | 43 SCRUTINY OF CREDIT While scrutinizing an application from the bank takes into consideration-safety, liquidity, purpose profitability, security, and spread of advances.  Safety Bank has to see that the prospective borrower is a reliable user of the finance and bank‟s money is safe in his hands.  Liquidity Bank has to find out that the borrower is quite capable in repaying the finance within the period.  Purpose 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.  Profitability 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.  Security 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.
  44. 44. 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.
  45. 45. Page | 45 TYPES OF CREDIT HYPOTHECATION LOAN HYPOTHICATION CASH CREDIT VEHICLE LOAN PERSONAL LOAN GOLD LOAN GOLD OVERDRAFT LOAN POSATL CERTIFICATE LOAN EMPLOYMENT LOAN REAL ESTATE LOAN Types of Loan Rate of Interest As On 31-3-2013 Hypothecation Loan 13.00% 14.00% 15.00% Hypothecation cash credit 14.00% 15.00% Vehicle loan Commercial Personal 14.00% 15.00% Personal loan 14.50% 15.00% Gold loan 13.00% Gold over draft 14.00% Postal certificate 11.00%
  46. 46. Page | 46 CREDIT APPRAISAL 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 and ability 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 BPM tools. The Junagadh commercial co-operative banks have the specific credit appraisal system which is added into annexure.
  47. 47. 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.
  48. 48. 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 % at present. 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 Educational loans Consumption loan 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.
  49. 49. 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. DDeeffiinniittiioonnss:: An asset, including a leased asset, becomes non-performing when it ceases to generate income for the bank.
  50. 50. Page | 50 CLASSIFICATION OF NPAS The primary (urban) co-operative banks should classify their assets into the following broad groups, viz. Performing assets - Standard assets Non-performing assets - Sub-standard assets - Doubtful assets - Loss assets After identification of borrowed accounts as NPA the next stage is asset classification Standard assets 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. Sub-standard assets 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.
  51. 51. 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. Doubtful assets 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. Loss assets 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.
  52. 52. Page | 52 PROVISIONS FOR NPAS IN JCCB Assets classification % Of provision to be made Standard assets - Agriculture - real estate Sub standard assets - secured - unsecured Doubtful assets A. Doubtful up to 1 year B. Doubtful for above 1 year but not 3 year C. Doubtful above 3 years Loss 25% 1% 1% 100% 20% 30% 50% 100%
  53. 53. 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 into  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- Undated Not renewed  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
  54. 54. Page | 54  Inadequate monitoring of court cases and delays in execution  Lack of income generation due to natural calamities and other uncertainties.
  55. 55. 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 recoverable. 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.
  56. 56. 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 management. METHODS OF RECOVERY Recovery through Salary/ Wage Settlement of Dispute Issue recovery Certificate Right to appeal
  57. 57. Page | 57 RESEACH METHEDOLOGY 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 as follows:
  58. 58. Page | 58 LITERATURE REVIEW  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 countries.  Research Paper on “Rooting Out Non-Performing Assets” by Nachiket Mor, ICICI research centre- 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
  59. 59. 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.
  60. 60. Page | 60 OBJECTIVE OF STUDY PRIMARY OBJECTIVE : 1. To study and understand the Credit management of JCCB. SECONDARY OBJECTIVE 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.
  61. 61. 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.
  62. 62. 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  GROSS NPA Year Gross NPA in RS 2008-09 26882000 2009-10 48916000 2010-11 20745000 2011-12 22896000 2012-13 20680000
  63. 63. Page | 63 Analysis 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.  NET N.P.A Year Net NPA in RS 2008-09 967000 2009-10 19339000 2010-11 0 2011-12 0 2012-13 0 Analysis 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.
  64. 64. Page | 64 HYPOTHESIS TESTING 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 1 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 1.92 140.15 20.367 TOTAL OBSERVED
  65. 65. Page | 65 WHERE, O = Observed frequency. E= Expected frequency. E= TOTAL OBSERVED FREQUENCY NO OF FREQUENCY. Degree of freedom = n-1 = 5-1 =4 STEP 3: LEVEL OF SIGNIFICANCE Х2 = (0.05, 4) = 9.49 STEP 4: DECISION Х2 c = 20.367 >Х2 ( 0.05, 4) = 9.49 H0: Rejected Ha: Accepted Interpretation: 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.
  66. 66. 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. WHERE, O = Observed frequency. 2 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 29.01 11.03 TOTAL OBSERVED
  67. 67. Page | 67 E= Expected frequency. C= No of parameters being estimated from the sample data. WHERE , E= TOTAL OBSERVED FREQUENCY NO OF FREQUENCY. Degree of freedom = n-1-C = 5-1-2 =2 STEP 3: LEVEL OF SIGNIFICANCE Х2 = (0.05, 2) = 5.99 STEP 4: DECISIONS Х2c = 11.03 > Х2 ( 0.05, 2) = 5.99 H0: Rejected Ha: Accepted Interpretation: 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.
  68. 68. 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.
  69. 69. Page | 69 FINDINGS 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
  70. 70. Page | 70 CONCLUSION 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.
  71. 71. Page | 71 REFERENCE NO NAME 1 Prashanth K Reddy, IIM- Ahmadabad 2 Nachiket Mor, ICICI research centre 3 Gaurav Vallabh, Anoop Bhatia, Saurabh Mishra BIBLIOGRAPHY 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. 5 6 7 8
  72. 72. Page | 72 BALANCE SHEET OF JCCB Schedule-1 Capital 31.03.2013 31.03.2012 Authorized capital [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 Schedule-2 Reserve & surplus 31.03.2013 31.03.2012 Free reserves 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
  73. 73. 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 Capital Reserve 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 Other Reserve Charitable Fund 417669.26 417669.26 Walfare Fund 561458.39 622458.39 Co – Operative Propaganda Fund 94917.85 106917.85 Member Reserve Shareholder Members Gifts 0.00 0.00 Staff Reserve Staff Benefits Fund 128781.00 128781.00 Depreciation Reserve Investment Depreciation reserve 5030675.00 549600.00 Sub Total 104579674.25 98380583.05 Profit & Loss Account Profit 2011-2012 Balance in Profit & loss Account 12542969.26 2333867.80 Total 117122643.51 100714450.85
  74. 74. Page | 74 Schedule-3 Deposits 31.03.2013 31.03.2012 Demand Deposit Current Deposit 95768139.12 99318677.85 Cash Credit 1534948.97 4952896.52 Sub Total 97303088.09 104271574.37 Saving Deposit 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 Term Deposit 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 Schedule-4 Borrowings 31.03.2013 31.03.2012
  75. 75. Page | 75 Borrowings from Reserve Bank Of India 0.00 0.00 Borrowings from other Bank & institute Total 0.00 0.00 Schedule-5 Other Liability & Provision 31.03.2013 31.03.2012 Overdue Interest Reserve Overdue Interest Reserve (GD A/c) 611368.00 280105.00 Overdue Interest Reserve (GW A/c) 1308116.00 872279.00 Overdue Interest Reserve (GP A/c) 681337.00 411593.00 Overdue Interest Reserve(GOLD A/c) 8721.00 1022182.00 Sub Total 2609542.00 2586159.00 Interest payable On deposit Interest payable (compulsory saving) 0.00 0.00 Interest payable matured deposit 2627607.00 3029130.00 Interest payable (Fixed deposit) 4180348.53 3487993.53 Interest payable (Recurring) 2500314.00 1509310.00 Sub Total 9308269.53 8026433.53 Sundry Liability Credit equalization fund 96258.00 96258.00 Education fund 5100.00 125737.60 Draft payable 90456.00 22600.00 Pay sleep account 2007550.00 2285893.30 Bills payable 0.00 0.00 Pay order vvns share holder 0.00 618500.00 Share vyaktigat payable 0.00 62550.00 Payorder (share swap Limbdi) 0.00 312580.00 Payorder (share swap Rushika) 0.00 3933.00 Dividend payable -38 2009-10 0.00 0.00 Dividend payable -41 2010-11 0.00 978132.00 Dividend payable -42 2011-12 791299.60 Insurance deposit 0.00 0.00 Election deposit 0.00 0.00 Share application 0.00 0.00 Share application (Group B) 0.00 Nominal membership 0.00 0.00 Misc. payable 569300.00 1251216.00 TDS staff/ other 0.00 0.00 Clearing house 0.00 0.00 Sundry creditor 355504.58 6443913.14 Prov. Closing allow payable 1050000.00 925000.00 Prov. bonus payable 1200000.00 1025000.00 Prov. Leave payable 395000.00 400000.00 Prov. Gratuity payable LIC 0.00 0.00
  76. 76. 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 - 158403535.47 Total 1155333.50 1224475.50 Schedule – 6 Cash & balance with RBI 31.03.2013 31.03.2012
  77. 77. Page | 77 Cash on hand 39067361.80 16038087.07 Cash at ATM Total 39067361.80 16038087.07 Schedule –7 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
  78. 78. 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 Schedule –8 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 Schedule -9 Loan & Advance 31.03.2013 31.03.2012 Short term 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
  79. 79. Page | 79 Mortgage loan 4490904.81 4494833.81 Fixed deposit overdraft 0.00 0.00 Goldy loan 11661.00 21996480.00 Gold loan 42897174.60 27608056.00 Gold loan (diamond) 80053099.70 55031783.00 Gold loan (white) 54442702.44 37678328.00 Gold loan (platinum) 2482596.16 1573234.99 Staff over draft 12215713.28 12602878.37 Subtotal 362351109.04 324346861.48 Unsecured loan & advance Surety cash credit 313759.199 349197.61 T.O.D on current A/c 30418.00 30418.00 Subtotal 344177.19 379615.61 Medium term loan & long term Hypothecation loan 77521131.00 76735551.25 Housing loan 63514839.50 516104732.50 Immovable loan 536699.70 780622.70 Hire purchase loan 3009839.65 3287200.90 Postal certi. Loan 1321590.00 2158995.00 Education loan 0.00 0.00 Staff loan 393550.00 308304.00 Staff salary loan 114547.00 91317.00 Staff housing loan 7402201.00 5177246.00 Consumer staff loan 350709.00 321854.00 Staff vehicle loan 766596.00 875121.00 Sub Total 154931702.85 141346944.35 Unsecured Loan & advance Employment loan 9745126.34 10951135.34 Vajpai employment loan 1318104.00 1270426.00 Cash credit 545605.05 691587.55 Cash credit (installment c2) 5254915.56 3151354.56 Sub total 16863750.95 16064503.45 Total 534490740.06 482137924.89 Schedule 10 Fixed assets 31.03.2013 31.03.2012 Land & building 4369609.00 4855122.00 Furniture 2783581.00 3094125.00 S.D.V & Locker system 896238.00 995821.00 Air condition & electricity 2232613.00 257646.00 Computer system & networking 226703.00 287084.00 Networking & software 2114.00 5286.00 Vehicles 329436.00 754262.00
  80. 80. Page | 80 Total 10840294.00 12568546.00 Schedule 11 Other assets 31.03.2013 31.03.2012 1 interest receivable On other banks deposit 3519967.00 5094795.00 On csgl account 2990807.00 1955367.00 On staff loan 1433350.00 1209241.00 Sub total 7944124.00 8680466.75 2 staff receivable Festival advance 770335.00 567654.00 LTC advance 27000.00 21000.00 3 office, stock, stamps & other Office expense 191500.00 64888.00 Adhesive stamps advance 37080.00 61700.00 Stamp agency stock 953610.00 1025460.00 Stationary stocks 387435.00 215160.00 Library stock account 6360.00 6360.00 Insurance premium advance 0.00 0.00 Locker rent receivable 0.00 61600.00 4 Taxes & refund receivable Income tax paid (u.apl) 3672336.00 3819075 Income tax receivable (TDS) 23192.00 0.00 Income tax refund receivable 1212070.00 1212070.00 Advance tax 2010-11 0.00 3500000.00 Advance tax 2011-12 4500000.00 5 Advance Deposit for business Telephone deposit 41831.00 41831.00 Geb deposit 48248.00 48248.00 Postage stamp advance 25493.00 1337.00 Office deposit 2880.00 2880.00 Total 19843494.00 18908666.00 Schedule 12 Contingent liability 31.03.2013 31.03.2012 Guarantee issue 458800.00 300078.00 Total 458800.00 300078.00 Schedule 13 Note: off balance sheet item 31.03.2013 31.03.2012 Employee GGCA investment 15034936.00 13548068.00
  81. 81. Page | 81 Employee PF investment A/c 8845937.00 8199451.00 Share holder gift stock silver coin 451989.12 4519893.12 Leave encash investment (licgles) 2460208.00 1961095.00 OBC(outward bills receivable) 850417.00 888031.06 IBC (inward bills receivable) 10420.00 75190.00 Outstanding interest receivable 9782435.75 8680466.75 total 37436342.87 33804290.93 Schedule 14 Interest & discount earned 31.03.2013 31.03.2012 Interest earned on advance 69953663.31 66118670.86 Interest earned on deposit Interest call money deposit 1915632.25 1206108.58 Interest income term deposit 10952081.99 8723272.20 Interest earned on investment Interest investment GOI/ BOND 16021770.00 13065540.33 Dividend income 154711.00 125329.00 Total 98997858.55 89238920.97 Schedule 15 Other income 31.03.2013 31.03.2012 Commission income 1331497.71 1345115.99 Form fee 9600.00 10300.00 Stationary income 248551.50 275900.50 Service charge income 4931600.48 6045951.81 Document charge income 310775.00 213590.00 Late fee income 15419.00 10687.00 Locker rent income 462630.00 400263.00 Stamps sale commission a/c 163673.00 140000.00 Share transfer fee 355608.00 284043.00 Notice fee 222647.86 0.00 Other income 66535.00 60802.00 Membership fee 0.00 0.00 MMCB provision written back 0.00 0.00 Daily Depo written back 0.00 2000000.00 Contingent reserve written 0.00 5039814.00 Profit on sale of other asset 0.00 0.00 Share holder benevolent w‟back 0.00 1056279.00 Total 8118537.00 16882746.00 Schedule 16 Interest expended 31.03.2013 31.03.2012 Interest expended on deposit 53943983.79 44733606.00
  82. 82. Page | 82 Total 53943983.79 44733606.00 Schedule 17 Other expense 31.03.2013 31.03.2012 Salary & other allowances 21443349.00 20328933.00 Municipal taxes exp. 0.00 0.00 Office rent 58420.00 55520.00 Municipal taxes 1232494.00 1531294.00 Insurance premium 519728.62 577803.09 Light bills 814635.00 776732.00 Service tax 33382.00 207292.00 Legal exp. 0.00 3199.00 Legal exp suit field a/c 300044.00 286989.00 Audit fee 209626.00 213494.00 Telephone expense 260523.47 137889.24 Post & telegraph exp 593524.00 616718.84 Stationary exp. 593524.00 616718.84 Advertisement (non fbt) 302384.00 256049.00 Advertisement (non fbt) 17410.00 55932.26 Repairing & maintained 502858.86 440835.24 Computer expense 0.00 665.00 Depreciation 1772791.00 2066839.23 Computer peripheral 41226.00 0.00 Bank charge 71871.45 55002.45 Vehicle expense 0.00 130590.66 Merger expense 282006.00 174009.48 General meeting expense 0.00 205000.00 Customer meeting exp. 230416.00 321720.00 EGM exp. 0.00 0.00 Newspaper expense 8083.00 4350.00 Travelling exp. 78259.00 94809.00 Training exp. 0.00 4820.00 Office exp. 164597.00 238689.03 Lavajam exp.. 67394.19 39744.00 Remittance exp. 866086.00 204384.00 Conveyance tours & travels 25000.00 23760.00 Tea refreshment staff 62985.00 247973.50 Hospitality 201680.00 228445.00 Branch inauguration limdi 0.00 239872.00 Misc. expense 0.00 3200.00 Premium on G sec written off 349552.00 349552.00 Income tax paid 247038.00 574702.00 Other expense 0.00 0.00 Cibie report chg 31881.00 0.00
  83. 83. Page | 83 Training fee 4800.00 300.00 Total 31348368.05 31245039.42 Schedule 18 Provision & contingencies 31.03.2013 31.03.2012 Provision for taxation 4500000.00 3500000.00 Total 4500000.00 3500000.00 Schedule 19 Provision & contingencies 31.03.2013 31.03.2012 Acquisition cost Rushikamahilashakari Bank 0.00 1427395.00 Acquisition cost Limbdivibhagiyanagrik bank 0.00 9296508.84 Prov. For standard assets 200000.00 400000.00 Prov. Investment depreciation reserve 4481075.00 484200.00 Provision for Bad & doubtful 100000.00 776830.21 Daily depo written off 0.00 5039814.00 MadhavpurMerc. FDR written off 0.00 200000.00 Prov. MMCB fix Depo. Investment 0.00 0.00 Income tax paid U‟ aapeal prov. 3672336.00 Income tax refund receivable – Prov 1212070.00 Total 4781075.00 24309154.05 Profit & Loss Account Particular sch 31.03.2013 31.03.2012 1.Income Interest & discount 14 98997858.55 89238920.97 Other income 15 8118537.55 16882746.30 Total 107116396.10 106121667.27 Provision & contingencies 31.03.2013 31.03.2012 Provision for taxation 4500000.00 3500000.00 Total 4500000.00 3500000.00
  84. 84. Page | 84 2. expenditure Interest Expended 16 53943983.79 44733606.00 Other expense 17 31348368.05 31245039.42 Total 85292351.84 75978645.42 3. profit before tax & provision (1-2) 21824044.26 30143021.85 Less: provision for taxation 18 4500000.00 3500000.00 Less: provision for contingencies 19 4781075.00 24309154.05 Total provision contingencies 9281075.00 27809154.05 4. Net profit transfer to bal. sheet 12542969.26 2333867.80 Balance sheet Particular sch 31.03.2013 31.03.2012 Capital & liability Capital 1 21877940.00 21441190.00 Reserve & surplus 2 117122643.51 100714450.85 Deposit 3 811468417.71 700621913.90 Borrowing 4 0.00 0.00 Other liability & provision 5 30020785.21 30279271.07 Total 980489786.43 853056825.82 Assets & properties Cash & balance with RBI 6 39067361.80 16038087.07 Balance with banks & call money dep. 7 144450669.50 125774832.86 Investment 8 231797227.00 197628769.00 Loan & advance 9 534490740.03 482137924.89 Fixed assets 10 10840294.00 12568546.00 Other assets 11 19843494.00 18908666.00 Total 980489786.43 18908666.00 Contingent liability 12 458800.00 300078.00 Off balance sheet item 13 37436342.87 33804290.93 Total 37895142.87 34104368.93