This document analyzes the financial statements of non-performing assets (NPAs) at The Co-operative Bank of Rajkot Ltd. It defines NPAs and cooperative banks. The bank was founded in 1980 and now has 27 branches. The document compares the bank's NPA ratios, capital adequacy ratios, deposits, and own funds to Rajkot Nagarik Sahakari Bank Ltd. It finds that The Co-operative Bank of Rajkot Ltd has lower gross NPA and higher capital adequacy ratios, indicating better asset quality. Strategies to prevent and cure NPAs are discussed.

2. Financial statement analysis of
non-performing assets management
(The co-operative Bank of Rajkot Ltd.)
Submitted By:-
Dinjal Narendrabhai Tanna
B-04

3. My work
1
• General banking operation observation
2
• Financial data analysis of NPA
3
• Comparative analysis with other banks

4. What is cooperative bank?
According to the
International
Co-operative Alliance
Statement of
co-operative identity,
a co-operative is an
autonomous association of
persons united voluntarily to
meet their common economic,
social, and cultural needs and
aspirations through a jointly-
owned and democratically-
controlled enterprise.

5. Co-operatives
are based on
the values of
self-help, self-
responsibility,
democracy,
equality, equity
and solidarity.
co-operative
members
believe in the
ethical values of
honesty,
openness, social
responsibility
and caring for
others.

6. The Co-operative Bank of Rajkot Ltd
1
• Ramnikbhai Dhami, Chief Promoter and founder of this Bank, co-
operative leader and advocate by profession laid a strong foundation
of bank on 24.11.1980
2
• The bank was started in a small premises and converted into a large
and most popular bank having its branch network in the entire
Rajkot District ,Junagadh District and also branches in
Surendranagar and Ahmedabad city .
3
• Now 27 branches and 11 ATM are in all our Gujarat.

7. What is NPA?
A Non-performing asset (NPA) is defined as a credit facility in
respect of which the interest and/or installment of Bond finance
principal has remained ‘past due’ for a specified period of time.
Once the borrower has failed to make interest or principle payments for
90 days the loan is considered to be a non-performing asset.

8. Accordingly, with effect from
March 31, 2004, a non-performing asset
(NPA)is a loan or an advance
where;
1
• Interest and/or installment of principal remain overdue for a
period of more than 91 days in respect of a term loan,
2
• The account remains ‘out of order’ for a period of more than
90 days, in respect of an Overdraft /Cash Credit (OD/CC),
3
• The bill remains overdue for a period of more than 90 days in
the case of bills purchased and discounted,

9. Classification of NPA:
• A sub standard asset is one which has been
classified as NPA for a period not exceeding 12
months.
Sub-
standard
assets:
• A doubtful asset is one which has remained
NPA for a period exceeding 12 months.
Doubtful
Assets:
• Where loss has been identified by the bank,
internal or external auditor or central bank
inspectors. But the amount has not been written
off, wholly or partly.
Loss
assets:

10. IMPACT OF MERGER (Details of Acquisition
Cost & Gross NPA of Merged Banks)
[RS. In Lacs]
Sr.
no.
Name of merged bank Date of
Merger
No. of
Branches
Gross
NPA Rs.
Gross NPA
as on
31.03.2015
Acquisitio
n
Cost Rs.
1 Mahila Utkarsh Bank-Ahmedabad 02-Apr-07 5 137.16 22.16 612.95
2 Amruta Mahila Bank-Su.nagar 18-Aug-
08
1 14.75 NIL 6.77
3 Vaso Co-Op. Bank Ltd., Vaso 04-Oct-10 3 1187.02 523.13 2247.12
4 Dakor Nagarik Bank Ltd., Dakor 10-Oct-11 1 182.32 94.55 208.55
5 Yawal Peoples Co-Op. Bank, Yawal 09-Jan-12 1 46.55 17.67 30.26
6 Co-Op. Bank of Baroda Ltd., Baroda 04-Oct-14 2 108.17 09.73 235.15
total 13 1675.97 667.24 3340.80

11. Gross NPAs in %
2.32% 2.29%
1.62%
1.08%
0.66%
0.05% 0.01% ZERO ZERO ZERO
2011 2012 2013 2014 2015
rajbankNPA
due to merger Linear (due to merger)

12. Strategies for overcoming NPAs
Various steps have been taken by the government and RBI to recover
and reduce NPAs. These strategies are necessary to control NPAs.
1. Preventive management and
2. Curative management

13. Preventive Management
1. Early Warning Signals
2. Financial warning signals
3. Management related warning signals
4. Banking related signals
5. Watch-list/Special Mention Category
6. Willful Defaulters

14. Curative Management
1. One Time Settlement Schemes
(Up to Rs. 10crores, the minimum amount that should be
recovered should be 100% of the outstanding balance in the
account.)
2. Lok Adalats (Rs. 5 lakh for compromise settlement under Lok
Adalat)
3. Debt Recovery Tribunals (DRTs)
4. Securitization and SARFAESI Act

15. Comparative analysis between
“The Co-operative Bank of Rajkot Ltd”
and
“Rajkot Nagarik Sahakari Bank Ltd”

16. Deposit growth
2133
2572
2951
3242
1026
1182
1421
1656
2012 2013 2014 2015
Deposit
Rs.Inlacs
years
Deposit growth comparison
Nagarik bank Raj bank

17. Own fund
368
403
437
491
172
220
245
286
2012 2013 2014 2015
Ownfund
Rs.Inlacs
years
Own fund comparison
Nagarik bank Raj bank

18. Financial ratio’s comparison:

19. Capital adequacy ratio (CAR):
A bank's capital ratio is the ratio of qualifying capital to risk adjusted
(or weighted) assets. The RBI has set the minimum capital adequacy
ratio at 9% for all banks. A ratio below the minimum indicates that the
bank is not adequately capitalized to expand its operations. The ratio
ensures that the bank do not expand their business without having
adequate capital.
CAR = Tier I capital + Tier II capital / Risk weighted assets

20. It must be noted that it would be difficult for an investor to calculate
this ratio as banks do not disclose the details required for calculating the
denominator (risk weighted average) of this ratio in detail. As such,
banks provide their CAR from time to time.
Tier I Capital funds include paid-up equity capital, statutory and capital
reserves, and perpetual debt instruments eligible for inclusion in Tier I
capital.
Tier II capital is the secondary bank capital which includes items such
as undisclosed reserves, general loss reserves, subordinated term debt,
amongst others.

21. Particulars Raj bank(2015) Nagarik bank(2015)
Capital tier 1 19,356.79 21662.14
Capital tier 2 3,968.01 5108.30
Total of tier 1and tier 2 23,324.81 26770.44
Total risk weighted assets 1,09,344.93 216387.96
Capital to risk weighted assets ratio(CRAR) 21.33 % 12.37%

22. • Raj bank:
CAR = Tier I capital + Tier II capital / Risk weighted assets
= 23,324.81/1,09,344.93
= 21.33%
• Nagarik bank:
CAR = Tier I capital + Tier II capital / Risk weighted assets
= 26770.44/216387.96
= 12.37%

23. raj bank, 21.33%
nagarik bank,
12.37%
RAJ BANK NAGARIK BANK
%ofCRAR
banks
CRAR OF BOTH BANKS
% of CRAR

24. Gross NPA to Total Advances:
The net NPA to loans (advances) ratio is used as a measure of the
overall quality of the bank's loan book. An NPA are those assets for
which interest is overdue for more than 90 days (or 3 months).
Gross NPAs are calculated by reducing cumulative balance of
provisions outstanding at a period end from gross NPAs. Higher ratio
reflects rising bad quality of loans.
Gross NPA ratio = gross non-performing assets / Loans given

25. Comparison of gross NPA ratio
Years Raj bank(2015)
Gross NPAs IN %
Nagarik bank(2015)
Gross NPAs IN %
2014 1.08% 4.82%
2015 0.66% 6.10%

26. 2014, 1.08%
2015, 0.66%
2014, 4.82%
2015, 6.10%
2014 2015
GrossNPAsin%
YEARs
comparison of gross NPA
raj bank
nagarik bank

27. Recommendation
• Each bank should have its own independence credit rating agency which
should evaluate the financial capacity.
• The credit rating agencies should regularly evaluate the financial condition of
the clients.
• Special accounts should be made of the clients where monthly loan
concentration report should be made.

28. References
http://www.yourarticlelibrary.com/banking/banking-system-in-india-
12-types-of-banks/42579/
http://www.icba.coop/co-operative-bank/what-is-a-co-operative-
bank.html
http://www.jagranjosh.com/articles/what-is-banking-and-banking-
system-1352112728-1
https://en.wikipedia.org/wiki/Non-performing_asset