CERTIFICATE

This is to certify that the project work entitled The Credit Management with reference to Kendrapara Urban Co-operative Bank is a original piece of work done by Mr.Susanta Rout (Regd. No0906227047), student of C.V.Raman College of Engineering, under my guidance and supervision for the partial fulfillment of the requirement for the degree in MBA under BPUT. To the best of my knowledge and belief, the thesis embodies the work of the candidate herself and has been duly completed. Simultaneously, the thesis fulfills the requirements of the rules and regulations related to the summer internship of the institute and I am assured that the project is up to the standard both in respect to the contents and language for being referred to the examiner.

Ms Sanjita Lenka Faculty (HR), Internal Guide, C.V.Raman College of Engineering.

DECLARATION
I do here declare that this project is a study on Credit

Management with Reference To The Kendrapara Urban Co-operative Bank is a record of independent research work carried out by me under the supervision of Mr.Kailash Chandra Samal (Head Clerk cum

Cashier,) Mr. Rajib Lochan Panda, Manager(Loan and Recovery). This report is a partial fulfillment of MBA in C.v Raman College of

Engineering, Bhubaneswar of my own and it is not submitted to any other Institute or University or Published elsewhere or for any Award of degree or Diploma.

Mr. Susanta Rout, Regd.No.-0906227047, C V Raman College of Engineering,BBSR

ACKNOWLEDGEMENT
I take this opportunity to offer my sincere feelings of gratitude to the Cooperation and advice given to me to bring up this project work. In this regard I would like to thanks Prof. S.C Sahoo, Honable HOD the Department of Management for giving me permission to undergo this training programme. I am obliged to my guide, Mr.Kailasha Chandra Samal, Mr.Rajib Lochan Panda and other employees of the Kendrapara Urban Cooperative Bank for having given an opportunity to undertake the project work in this field. I am grateful to my uncle Mr.Babaji Charana Pradhan (Branch Manager, Bank of Baroda) for giving me valuable guidance to do project work successfully. I would like to express my thanks to Prof. C.R Satapathy (Asst.Prof. Finance), Mr. S.C Das (Faculty, Finance), Ms. Sanjita Lenka (Faculty, HR) and other faculty members.

Mr. Susanta Rout Regd.no-0906227047 C.V Raman College of Engineering, BBSR

CONTENTS
(1)CHAPTER 1: INTRODUCTION
OBJECTIVES NATURE AND SCOPE. RESEARCH METHODOLOGY. LITITATIONS. (2)CHAPTER 2: ORGANISATION PROFILE HISTORY OF THE ORGANISATION FUNCTIONS OF THE BANK BENEFICIAL SCHEMES PROVADED BY BANK GROWTH AND DEVLOPMENT (3)CHAPTER 3: DATA ANALYSIS, INTERPRETATION TABLES,GRAPHS,ANALYSIS AND INTERPRITATION

(4)CHAPTER 4: RESEARCH FINDINGS

CONCLUSION SUGGESTIONS. APPENDIX

CHAPTER-1

INTRODUCTION
Credit management is a systematic and objective collection of and analysis of data about the faults in credit policy, collection procedure. The credit management is to regulate the credit in a proper way for the growth and expansion of the organization. The RBI being the central bank of the country takes regular steps to control the expansion of the credit so as to keep the money supply and inflation within in control to the desired extent. It also proper takes proper measures to allocate the credit to the deserving sectors at a reasonable cost so that the economy goes in proper direction. The cooperative association formulates some credit policy, rules, terms to be followed by the co-operative banks, which is in accordance with the central bank of India. In order to put banks and financial institutions on guard against borrowers who have defaulted in their installment dues to other lending institutions, the Finance Minister declared in his budget speech on 28.02.1994 that RBI would formulate a scheme to collect & circulate the name of the defaulting borrowers. To recover the NPA there also a Debt Recovery Tribunals established by the central bank. The recovery of debts due to Banks and Financial institutions Act was enacted on 27th Aug 1993 and come in to effect with retrospective effect from 24th day of June 1993. It provides the establishment of tribunals for the expeditious adjudications and recovery debts of banks and financial institutions. A good and planned credit policy is helps in reducing the NPA and which leads the to achieve the objective.

OBJECTIVES
The basic objective of the study to find out the followings: To know about the credit policy of the Kendrapara Urban Cooperative Bank To know about which documents are needed the bank while a customer applied for loan at Kendrapara Urban Cooperative Bank. To know about the credit policy and recovery process. To know about the NPA of the bank and causes of the NPA.
To study the work process of loan and recovery sections and

implementations.

SCOPE
The geographical study is conducted in the Kendrapara area. The study is conducted on the deposits, loans and recovery sections of the bank.

METHODOLOGY
The data collected for the purpose of the study are of the following sources : Collection of the from primary sources is, By personal interview and discussion with employee of the organization. Collection of data from secondary sources

 Information relating to historical background, type, size and growth of Kendrapara Urban Cooperative Bank. Annual administrative reports Official records Employee of the Kendrapara Urban Cooperative Bank.

NEED FOR THE STUDY

The primary need for the study is to know deeply the different types of loans and advances to different sector, collection procedure, credit policy and different types of deposits with bank. Supplement to above primary needs there are other secondary needs as well which are furnished under, To know about the Kendrapara Urban Cooperative Bank, and its relevant organizations and their functions. To strengthen employee-employee relationship. To know about its new future planning. To examine the pattern of organization structure and relationship among the branches. Customs and vigilance formalities. To know about cooperative banks and its societies.

LIMITATIONS
Due to work pressure my mentor in the Kendrapara Urban Cooperative Bank was short of time. Some entries were restricted in some areas of the organization which restrict me collect some important information related to my study. Unwillingness of the respondent to give information. The bank is unable to provide the annual report of 2009-2010 due to their audit starts at late.

CHAPTER-2

HISTROY OF KENDRAPARA URBAN CO-OPERATIVE BANK

The Kendrapara Urban Co-operative Bank is a big co-operative bank in our state Orissa. Now the bank is a front line co-operative bank in our state. The Kendrapara Urban Co-operative bank was registered on 26.09.1986 ,under the president ship of Honorable minister Sj. Bhagabat Prasad Mohanty. The starts functioning from the 26.02.1988. The bank is started with a aim of providing service to the customer and to the society . Initially the bank started with the 423 individual members as share holders. Authorized share capital of the bank is 20,00,000/- of one lakh share of Rs 20/- each. Each share holders contributing the share capital of Rs 166540/-. As on 30.06.1987 the collected share capital of Rs 166540.00 from the individual members. Govt. has not purchased any share in the year 1986-1987. The bank was started at near old bus stand, Kendrapara ,but now the bank is to near Kendrapara College by constructing own building to a very good location. At the time of starting the area of operation of the bank was confined within the Kendrapara municipality area of 35 villages. The first board meeting was helped by the Sj. Bhagabat Prasad Mohanty as president of the bank. The bank accounts are first audited by the Sri B.C Mohapatra.

The bank started with the objective to encourage thrift ,self help group and co-operation among members. To accept deposit of money and to give loan and advances to public to release money. The bank is graded as A Grade in year 2008-2009. The reserve bank also inspected the bank and graded as Grade II, so that the bank can be secure grade -1 by take care of some minor problems. After getting Grade-1 the bank can provide ATM facilities to the customers. The bank also provides the service during the time of the flood, cyclone etc. The gets the prize as one the great co-operative bank of Orissa in 56th Nikhila Bhart co-operative Union week by the Honorable Minister Dr.Damodar Rout. And also get the Great co-operative union on distritic level. In this year the bank proposes to expand their branches to the nearby distritic Jagasinghpur and Jajpur.

THE BRANCHES OF BANK

Main Branch-: Kendrapara town, Near Kendrapara Auto College. Old Bus stand Branch-:Kendrapara town, Near Old Bus stand. Marsaghai Branch-: Marsaghai, Kendrapara. Patamundai Branch-:Patamundai, Kendrapara. Aul Branch-:Aul , Kendrapara. Chandol Branch-:Chandol,

Kendrapara.

DETAILS OF THE OF THE BANK

Name of the bank and address -: The Kendrapara Urban Co-operative Bank Ltd. At/po-Kendrapara, Dist-Kendrapara, Pin-754211, ORISSA Regd.No and date Area of operation No. of directors No. of nominated directors Total no. of Employees No. of Branches -:123/KE, dt-26.09.1986 -: Whole Kendrapara distrait. -:12. -:02. -:95. -:06

FUNCTIONS OF BANK
The functions of bank is mainly of two types ,such as (1)Primary function. (2)Secondary function. The primary functions are , (a)accepting deposits. (b)Granting loans and advances.

The secondary functions are , (a)Issuing letter of credit, cheques , circular notes etc. (b)Under self custody of valuable, important documents and securities by providing safe deposits or lockers. Transfer of money from one place to another and from one branch to another branch. (d)Collecting and supplying business information. (e)Providing report on the creditworthiness of the customer.

ORGANISATION STRUCTURE

PRESIDENT

VICE PRESIDENT

CHIEF EXECUTIVE MANAGER

GENERAL MANAGER
GEN.ADMI NISTRATIVE MANAGER LOAN AND RECOVERY MANAGER

BRANCH MANAGER

ACCOUNTS MANAGER

AUDIT AND INISPECTION MANAGER

ACCOUTAN T

JUNIOR ACCOUTAN T SUBORDIN ATES

FIELD OFFICER

MARKETIN G OFFICER

SUBORDIN ATES

SUBORDIN ATES

SUBORDIN ATES

BENIFICIAL SCHEME
FIXED DEPOSITS-: Deposits accepted for fixed deposits. i.e for a minimum period of 15 days and above at higher rates of interest than toHer banks. RECURRING DEPOSITS-: Small saving accumulate in a big way. For monthly installments Rs 10/- and its multiples for a period of one year and above. An attractive scheme for service holder and businessmen. PRAGATI REINVESTMENT SCHEME-: A long term plan multiples your money by reinvestmenting maximum permissible interest governed by the R.B.I ideal investment for children, students for future benefits. BHAGYALAXMI DEPOSIT SCHEME-: The bank at your door step. The bank exclusively designed for the benefit of businessmen, professionals and small savers. The authorized agents of bank collect deposits from the prospective depositors daily.

CHAPTER-3

CUSTOMERS ACCOUNTS WITH THE BANKER

The relationship between the banker and his customer begins with the opening of an account by the former in the name of the latter. Initially all the accounts are opened with a deposit of money by the customer and hence these accounts are called deposit accounts. The bulk of resources of a bank are mobilized by accepting deposits from the public, which is one of the essential functions of the banker, according to the definition of Banking Regulation Act, 1949.

The banker solicits deposits from the members of the public belonging to different walks of life, engaged in numerous economic activities and having different financial status. Therefore the banks are introduced types of accounts with various facilities and privileges. That mainly includes the fixed deposits, the current deposits, the savings bank deposits and some other deposits. In recent year a few new types of accounts have also introduced by banks such as recurring deposits, students deposit accounts, multi-purpose deposit scheme, super saving scheme, janata deposit scheme, re-investment plan, etc. These types of deposits are included under the other types of deposits. Types of deposits accounts are discussed below.:(1)FIXED DEPOSIT ACCOUNTS In this category are included the deposits with the banks for a fixed period which specified at the time of making the deposits. Such deposits are ,therefore called Fixed Deposits or Term Deposits. A fixed deposit is repayable on the expiry of a spiced period of time, chosen by the depositor at the time of deposit. The rate of interest and other terms and conditions on which the banks accepted fixed deposits were regulated by the Reserve bank of India in exercise of the powers conferred upon it by sections 21 and 35A of the banking regulation Ac,1949. In1992 fixed deposits were classified in to different categories with varying periods of maturity starting from 46 days.

Since 1992 reserve bank of India commenced the policy of gradual deregulation over deposit interest rates. Reserve Bank of India permitted the banks to prescribes their own rates of interest on fixed deposits of different maturities, but the max.rate of interest was fixed by it. This ceiling rate was revised several times. In Oct.1997, the ceiling rate itself was also withdrawn and thus the deposit interest rates were totally freed from Reserve Banks Regulations.Banks are now free to fix their own rates of interest on fixed deposits of different maturities.further,On Apr.29,1998,the min.period of maturity of term deposits was reduced from 30 days to 15 days. Hitherto a restriction was imposed on the banks that they must offer same rate on the deposits of the same maturity irrespective of the size such deposits. This restriction has also been removed since April 29, 1998. Banks are now The max rate of interest paid by the Kendrapara Urban Co-operative Bank is 8.75% whose maturity period is more than 5year less than 10year and rate of interest is 4.00% whose maturity period is 15 days to 45 days. The fixed deposits of the Kendrapara Urban Co-operative Bank of last years, from 2004-2005 to 2008-2009. YEARS 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 FIXED DEPOSITS(Rs in lacs) 855.31 843.32 839.05 919.71 4067.87

FIXED DEPOSITS
4500 4000 3500 3000 2500 2000 1500 1000 500 0 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009

The fixed deposits in 2004-2005 is 855.31 which is decreases in 2005-2006 and also in 2006-2007.After that the fixed deposit increases with a increasing rate, which is a positive sign for the banks growth in future. (2)CURRENT DEPOSITS A current account is a running and active account which may be operated upon any number of times during the working days. There is no restriction on the number and the amount of withdrawals from a current account. As the banker under an obligation to repay these deposits on demand, they are called demand liabilities of a banker. To meet such liabilities the banker keeps sufficient cash reserves against such deposits vis--vis the saving and fixed deposits. Current accounts suit the requirement of big businessman, joint stock companies, institutions, public authorities and public corporations etc., whose banking tractions happen to be numerous on every working days. Special character of the current account is as follows, A current account is meant for the convenience of his customers.

The banks not to pay any interest on the credit balance in the current account.

 In case of unremunarative accounts involving lot of work but without the maintenance of sufficient balance, the banker charges incidental expenses from the customer.

A current account carries certain privileges which are not given to a savings account holder. The current deposit amounts of the Kendrapara Urban Co-operative Bank of last 5-years are shown below.

YEARS 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009

AMOUNTS(Rs in lacs) 57.09 75.45 125.48 185.89 180.75

200 180 160 140 120 100 80 60 40 20 0 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 Series1

The current deposits increases at a increasing rate from 2004-2005 to 2007-2008, after that there are small decreases in 2008-2009,because of there is more increases in the fixed deposits in that year. The current deposit is more in 20072008 and less in 2004-2005.

(3)SAVINGS BANK ACCOUNT A savings bank account is meant for the people of the lower and middle classes who wish to save a part of their current income to meet their future needs and also intend to earn an income from the savings. The banks therefore impose certain restrictions on the savings bank account and also offer a reasonable rate of interest. The need of keeping cash reserves against such deposits is comparatively larger and vice-versa the fixed deposits but smaller as against the current deposits, because of the restrictions on the no of withdraws. With the extension of banking facilities during the last decade and the growth of banking habit amongst the people, the saving deposits of all scheduled commercial banks have gone up substantially.

There are certain restrictions on the savings account, such as Restrictions on withdraws regarding the number and amount of withdraws within a specified period of time. The number of withdraws over a period of six month is limited to 50 times. A depositor cannot withdraws a amount of Rs smaller than Rs 1, or any sum which is not a multiple of RS 1.The amount of cheque is Rs 5.

Bank restricts on minimum balance should to be maintained in the account. The rate of interest payable by the banks on deposits maintained in savings accounts is prescribed by the Reserve Bank of India. The savings amount of the Kendrapara Urban Co-operative Bank of last five years, from 2004-2005 to 2008-2009.

YEARS 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009

AMOUNTS(Rs in lacs) 1095.08 1230.37 1400.21 1646.31 1674.33

1800 1600 1400 1200 1000 800 600 400 200 0 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 Series1

The savings account of the bank increases with a increasing rate from the year 2004-2005 to 2008-2009 ,which implies the sound growth of the bank. It shows the growth of the with a smoothen way. (4)OTHER DEPOSITS A variant of savings bank account is the re recurring deposits or cumulative deposit accounts introduced by banks in recent years. This account is intended to inculcate the habit of saving in a regular basis as an inducement is offered in the form of comparatively higher rate of interest. The other deposits mainly includes recurring deposits , students deposit account , multipurpose deposit scheme, reinvestment plan, pigmy deposit scheme etc., The rate of interest on this type of accounts is comparatively same as with the savings account which is in accordance with the Reserve Bank of India. In case a depositor is compelled to close the accounts before its maturity, the pays no interest if the deposits made for a period of less than 3 month, interest at 1.5% is payable for deposits made up to 6 months, 4% on deposits made up to 12 months.

The recurring deposit account can be opened by any person ,more than one person jointly or severally, by minor in the name of guardian.

While opening a account the depositor is given a pass book which is to be presented to the bank at the time of monthly deposits and repayment of the amounts. The other deposits of the Kendrapara Urban Co-operative Bank for last five years from 2004-2005 to2008-2009 are shown below in table with the graphical representation. YEARS 2004-2005 2005-2006 2006-2007 20072008 2008-2009 AMOUNTS(Rs in lacs) 1310.08 1697.70 1896.86 2287.03 25.69

2500

2000

1500 Series1 1000

500

0 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009

The other deposits of the bank increases with a increasing rate from 20042005 to 2007-2008 but due to there are more increases in the fixed deposits, the other deposits affected heavily in the year 2008-2009.

TOTAL DEPOSITS The total deposits of the Kendrapara Urban Co-operative bank is the sum total of the fixed deposits, current deposit account, savings account of the bank and the other deposits. The total deposits for the last five year of the Kendrapara Urban Co-operative Bank are shown below in both tabular and graphical form. (Rs in lacs) YEARS FIXED DEPOSITS 855.31 843.32 839.05 919.71 4067.87 CURRENT DEPOSITS 57.09 75.45 125.48 185.89 180.75 SAVINGS OTHER DEPOSITS DEPOSITS 1095.08 1230.37 1400.21 1646.31 1674.33 1310.08 1697.70 1896.86 2287.03 25.09 TOTAL DEPOSITS

2004-2005 2005-2006 2006-2007 2007-2008 2008-2009

3317.56 3846.84 4216.60 5038.94 5948.64

In the year 2004-2005 the other deposits of the bank is most significant part of the total deposits, in this year the savings bank deposit also contribute the more to the bank. Where the current deposit is very low in accordance with the others. Fixed deposits contribute a moderate amount to the bank. In the year 2005-2006 there are the other deposits of the bank increase

8000 7000 6000 5000 4000 3000 2000 1000 0 FIXED CURRENT CURRENT SAVINGS OTHER DEPOSITSDEPOSITSDEPOSITSDEPOSITSDEPOSITS 2008-2009 2007-2008 2006-2007 2005-2006 2004-2005

In the year 2005-2006 there are the other deposits of the bank increases and also take significant part of the total deposits. The deposits of the bank in this year are goes downward but the savings deposit and current deposits of the bank with a increasing rate. The current deposit of the bank in 2006-2007 is increases with a faster rate, where the other deposit is more than the others. The savings deposit of the bank is increases but the fixed deposit of the bank is moves downward, which is somehow affects the growth of the bank. In 2007-2008 the all types of deposits of the bank are increases. The year 2008-2009 is the year of the fixed depositors, in this year the fixed deposits of the bank is increases with a very faster rate than the previous year, which affects the current deposits and the other deposits, the current deposits of the bank falls with small amount but the other deposit of bank affected heavily. After the entire total deposits of the bank moves forward smoothly with a increasing rate. From this we conclude that it is positive sign for bright future of the bank.

CREDIT MANAGEMENT
MEANING AND DEFINATION OF CREDIT MANAGEMENT Credit management is term used to identify accounting functions usually conducted under the umbrella of accounts receivables. Essentially this collection of process involves the qualifying the of credit to a customer, monitors the reception and logging of payments on outstanding invoices, the initiation of collection procedure s, and the resolution of disputes or queries regarding charges on a customer invoice, When it functioning effectively ,credit management serves as an excellent way for the business to remain financially stable. The process of credit management begins with accurately assessing the credit-worthiness of the customer base. This is particularly important if the organization chooses extent credit line or revolving to certain customers. Proper credit management is calls for setting specific criteria that customer must have before receiving the credit. As a part of the evaluation process credit management is also calls for determining the total credit line that will be extended to a given customers. DEFINITION Credit management involves the policies and practices followed by financial organization for granting credit and receiving the collections from the customers.

FACTORS AFFECTING CREDIT MANAGEMENT There are several factors the credit management in the to evaluate and qualify a customer for the receipt of some form of commercial credit. This includes gathering data on the customers current financial condition. The current credit position of the customer.

 The current ratio between the income and outstanding financial obligations will also be taken in to consideration. The capacity of the creditor to invest or not. The demand of the sector in which the creditor want to invest.

Competent management seeks to not only to protect the vendor from possible losses , but also protect the customer from creating more debt obligations that cannot be settled in a timely manner. After establishing a credit limit for a customer credit management focuses on providing the client with accurate and timely statements or invoices. GOAL AND OBJECTIVES OF CREDIT MANAGEMENT Asses and assure credit risk and manage it such a way that risks (losses ) are minimized & return is optimized.

To achieve target lone recovery followed by risk based return by managing a credit portfolio. Install a system and control measures for periodic reviews. CREDIT MANAGEMENT Credit management is a process of managing credit using following steps, Formulation of credit policy. Credit intention. Credit evaluation and risk assessment. Credit monitoring and control.

CREDIT POLICY

Credit policy provides a brooder framework of reference and uniform standards. It should be flexible to meet various situations. It should aim to provide guidance for what to do, how to do. Should contain segmentation of credit portfolio. Should consider legal and regulatory environment. Should clearly specify certain parameters like maximum amount of loan ,deposit and capital etc. Should clearly state the delegates authorized for processing and approval of loan. Guideline for interest rate. Quality of credit. Should put a good administrative set up for credit administration. CREDIT INTENTION Target market planning is the most important aspect of the credit intention. Target market refers to business disciplines and selectivity. The target market (TM) process follow the formulation of overall business strategy of the bank. Identifying business potential ,defining desirable oppernuties and adhering to resultant marketing objective. TM identifies the acceptable and desirable profile of customer and the product to be offered. Define risk acceptance criteria (RACs).

CREDIT EVALUATION OF RISK ASSES MENT

The 3cs of the credit. Character. Capacity. Collateral. RISK ASSESMENT

Business risk. Management risk. Terms of loan. Critical success factor. Risk based charging of interest. CREDIT MONITORING AND CONTROL Periodic review. Interim review. Quarterly accounts. Identification of early warning signs. Classification of NPA. Rehabitation of NPA. (Remedial management).

NON PERFORMING ASSET (NPA)

Definition A loan or lease that is not meeting its stated principal and interest payments. Banks usually classify as nonperforming assets any commercial loans which are more than 90 days overdue and any consumer loans which are more than 180 days overdue. More generally, an asset which is not producing income. Conceptually an asset becomes nonperforming, when it ceases to generate income for the bank. The RBI has given the following guide lines for classification of advance account to NPAs.

I.LOAN ACCOUNTS
A loan account (term loan) is to be classified as NPA when interest and installment of principal remain overdue for a period of more than 90 day. An account will be classified as NPA, if the charges during any quarter are not service fully with in 90 day form the end of the quarter. Similarly it also be classified as NPA if the installment due is not serviced with in 90 day from its due date.

II.CASH CREDIT OR OVERDRAFT ACCOUNT

A cash credit or over draft account is to be classified as NPA when it remains out of order for a period of more than 90 days. A cash credit over draft account is treated as out of order if the outstanding in the account remains continuously in asses of the sanctioned limit /drawing power.

III. Bill purchase/ bill discounted account A bill purchased /bill discounted account will be classified as a NPA if the bill remains over due for a period of more than 90 days. IV.AGRICULTURAL ADVANCES A crop loan account for short duration cropped will be classified as NPA if the principal or interest there on remains overdue for two crop seasons. A crop loan account for long duration crops will be classified as NPA principal or interest there on remains overdue for one crop seasons. if the

A term loan given for agricultural purposed will be classified as NPA if the principal or interest over due for one crop season or two crop seasons depending on the duration of crop raised by the borrower/ agriculturist. V .NPA DUE TO IRREGULARITY IN OPERATION OF ACCUNT In case of cash credit account, where the stock statement has not been obtained for a continuous period of more than 3 months as on the date of the balance sheet, the account will be classified as NPA. An account where the limits have not been reviewed or renewed for a period of more than 180 days from its due date or form the date of adhoc will be treated as NPA. VI. ORTHER POINTS ON NPA CLASSIFICATION Consortiums advances: in case of Consortium advance, the account will be classified as NPA by a member bank depending on the record of recovery in its own books irrespective of the recovery status with the lead bank or any other member bank. NPA classification borrower wise and not facility wise Exempted categories Advances guarantees by govt.:

CLASSIFICATION OF NON PERFORMING ASSETS (NPA)

Based on the period for which the accounts have remained none performing and also their realisabity are required to classify all non performing assets in to the following three categories. (a) Sub-standard asset,(b)doubtful asset and (c)loss asset. Asset which is performing will be classified as standard asset. A sub-standard asset is an account which has remained in NPA category for a period of not more than 12 months. A doubtful asset is one which has remained in NPA category for more than 12 months. In other words, ounces an account becomes NPA, it is classified as substandard asset and it remain in this classification 12 months and unless upgraded to standard asset, it is then classified as doubtful asset. A loss asset is one where loss has been indtified by the bank or internal auditor or external auditor or by RBI inspector but the amount has not been written off wholly. It is an asset which is considered uncollectable and is of such little value that its continuance as a bankable asset is not warranted although there may be some salvage or recovery value.

PROFIT AND LOSS ACCOUNT FOR THE YEAR 2008-2009

EXPENDITURE
Previous year Sl no balance 28371360.73 1 10111867.00 1256069.00 51322.00 191001.00 172800.00 1022204.00 423873.00 615528.00 1150271.50 1438000.00 91000.00 143434.00 2240130.00 50000.00 1463413.79 48792274.02 18 19 Income Tax Paid Net profit after Tax 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Particulars Int on deposits and borrowings Salary and allowances Rent,Taxes,Insurance,Lighting Legal expenditure Postage, Telegram,Telephone Audit fees paid Depreciation and Repair Printining and Stationary O.T.S Loss Other Expenses Prov.for Bad & Doubtful Asset Prov. For Standrad asset Prov. For building dep. Prov.for Recoveries Prov. For Election exp. Prov. For aeere D.A to staff Profit before Tax Amount(Rs in lacs) 40283614.98 11522046.81 1124297.50 68832.00 231298.50 198000.00 1098457.00 304392.50 161314.79 1100676.50 2502000.00 192000.00 143434.00 2487288.00 50000.00 500000.00 2456446.60 64424099.18 751673.00 1704773.60

INCOME

Previous Balance 4572189.87 2456372.05 583712.10 48792274.02

Sl.no Particulars 1 2 3 Int. and discount Comm.Exchange&Brokrage Other Incomes

Amount(Rs) 61876721.43 1846546.26 700831.49 64424099.18

BALANCE SHEET FOR THE YEAR 2008-2009 CAPITAL AND LIABILITIES

OPENING S.N BALANCE AS ON 01.04.08 1 14221750.00 12430.00 2 2982769.38 3459199.92 197975.95 345109.25 5774.00 166070.46 110710.00 89430.00 700000.00 1000000.00 3 HEAD OF ACCOUNTS INNER COLUMN(Rs) 1711580.00 13280.00 17130860.00 OUTER COLUMN(Rs)

PAID UP SHARE CAPITAL (a)Indivisual Share Capital (b)Nominal Share RESERVE FUND &OTHER RESERVE (a)Statutory Reserve fund (b)Building fund Dividend equalization fund (d)Bad debt fund (e)Flood and famine fund (f)Common good fund (g)Coop education fund (h)Jubilee fund (i)Investment dep fund (j)Investmentf luctuation resev. PRINCIPAL/SUBSIDIARY FUND A/C FOR SHARE CAPITAL (a)Central coop. banks (b)Other coop. banks

3348622.38 3459199.92 230065.95 345109.25 5774.00 68284.46 58537.00 89430.00 700000.00 1000000.00 9305022.96

4 164631169.21 320673265.00 18589624.91

DEPOSITS i.Savings bank deposit 16743188.27 ii.Fixed deposits (a)Indivisuals 409354708.00 iii.Current deposit 18075686.78 (a)Indivisuals (b)Money at cal l& short notice

594863583.05 5 BORROWINGS (a)From SBI/state/club (b)Short term loan/OD which secured Midterm loan (secured) (d)Govt. and other approved securities (e)Other tangible securities Bills for collection Bills payble after beingcollection Intrest payble on deposits Intrest payble on borrowings Provi. For O.D Provi. accounts Provi. For NPA Provi. For standard asset Sundry liabilities Suspense BLD Audit fees payble Pay order Demand draft U.D profit Profit for year 2008-2009 GRAND TOTAL

4600000.00 142282.00

4600000.00 142282.00

6183973.00

7 8 9 10 11 12 13 14 15 16 17 18 19

11007666.00

11007666.00

16652228.00 10783132.55 14064865.00 936200.00 3652210.82 172800.00 787045.00 3148937.00 1463413,79 5850300083.24

13797085.00 13963854.55 16566865.00 1128200.00 4135757.46 163095.00 198000.00 3846950.00 1785234.00 1039023.79 1704773.60 695378252.41

13797085.00 13963854.55 16566865.00 1128200.00 4135757.46 163095.00 198000.00 3846950.00 1785234.00 1039023.79 1704773.60 695378252.41

PROPERTIES AND ASSETS

OPENINING Sl.no HEAD OF ACCOUNTS BALANCE AS ON 01.04.08 16889116.85 1 (a)Cash in hand 111.50 (b)Postage in hand 2 29708941.16 1297485.00 64469227.37 3 4 72500000.00 Balance with other bank (a)Current deposit (b)Savings deposit Fixed deposits Money at short call notice Investment (a)Central and State Govt. (b)Other Securities Share in coop. (d)Other investment INNER COLUMN 21053664.85 131.00 21053795.85 29529262.61 119663.00 95861864.68 125510790.29 OUTER COLUMN

72500000.00

2628133.00 5 50.00 2000.00 6 101934850.77 162650587.69 45204568.00

2993296.00 75493296.00

Investment out of principal subsidiary (a)Central coop. bank 50.00 (b)State coop. bank 2000.00 2050.00 ADVANCES i.Short term loan (a)Cash Credit (b)Other tangible securities of advances Loan against deposits ii.Mid term loan (a)Gold ornament loan (b)Govt securities Other tangible securities (d)Receivable from G.O.I INTREST RECEIVABLE OF WHICH

124278689.22 18448520.00 50759686.00 46641985.00

11289237.00

417408117.22

16652228.00 5712631.00 412168.00 8 9 216017.00 37526.00 3541383.72 10 155558.75 11 1854534.35 212272.00 3627.00 106352.00 11877569.50 6407971.58 180248.00 8000.00 1707595.00 585030083.24 12 13 14 15 16 17

(a)Intrest on loan (b)Intrest on investment Intrest on HB loans (d)Intrest on G.O.I Bills receivable as per contra LAND AND BUILDING (a)Land (b)Boundary wall Main building SUNDRY DEBTOR (a)Cycle stand construction FURNITURE AND FIXTURE AFTER DEPRICIATION (a)Dead stock (b)Contigential dead stock Book and library (d)Electrical fittings Other Assets Suspense Head office Vehicle Sundry Debtor Computer GRAND TOTAL

13797085.00 13178890.00 68872.00 446485.00

27491332.00

216017.00 37526.00 3541383.72 3794926.72 155558.75 155558.75

1806240.35 169395.00 3879.00 91363.00 14443136.00 6300632.23 144198.00 3794926.72 14443136.00 6300632.23 144198.00

1367260.00 1367260.00 695378252.41 695378252.41

Loans and investment for last 3 years (Rs in lacs)

Sl.no 1 2 3 4 5 6 7 Type of loan Term loan(gen) Gold loan LATD/LAPC/LAPR PERSONAL LOAN/CD LOAN CASH CREDIT LOAN TRANSPORT LOAN STAFF ADVANCE TOTAL 2006-07 597.39 303.73 435.91 36.47 2007-08 778.33 336.59 452.05 53.54 2008-09 889.25 466.42 507.60 71.33 1242.79 683.92 199.88 4061.19 112.89 4174.08 1343.33 370.22 2009-10 922.35 570.02 615.94 79.24 1414.84 927.71 216.23 4746.33 67.45 4813.78 1993.29 405.98

862.64 1019.35 632.14 612.61 162.05 182.02 3030.33 3484.49 (D.W.D.R)

Investment in SLR Investment in NON-SLR

RECOVERY OF LOAN FOR LAST 5 YEARS (Rs in lacs)

YEAR 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 20092010(UNAU DITED)

DEMAND 452.84 3243.14 6607.09 8162.49 8914.59 10923.98

COLLECTION 363.74 2892.67 6237.01 7717.44 8477.85 10447.07

BALANCE 89.10 350.47 370.08 455.05 436.74 476.91

%OF COLLECTION 80.32 89.23 94.39% 94.55% 95.10% 95.63%

THE NPA & PROGRESS IN COLLECTING NPA FOR THE BANK FOR LAST FIVE YEAAS
YEARS LOANS & INVESTMENT ADVANCES GROSS NPA PROVISIONS NET NPA FOR NPA IN % 90.49 212.85(12. 3%) 340.58(12. 5%) 31758(10.5 %) 390.05(11. 2%) 382.03(9.3 5%) 430.93(9.3 4%)

2005

2538.49

725.00

403.34(15.9%)

2006

2721.81

725.00

446.42(16.4%)

105.84

2007

3030.33

725.00

443.85(14.6%)

126.27

2008

3484.49

1395.97

530.70(15.4%)

140.65

2009

4174.08

1713.55

547.70(13.12%)

165.67

2010 (UNAUDI TED)

4813.78

2399.29

631.28(13.11%)

200.35

NET NPA
500 450 400 350 300 250 200 150 100 50 0 2005 2006 2007 2008 2009 2010(Un audited)

NET NPA

From this we conclude that the cumulative amount of the NPA increases and increases in a up and down motion, but overall we can say the NPA amount increases, but the percentage of NPA rate decreases from year to year. The NPA rate in 2005 is 12.3% which is now in 2010 is 9.34%, it is less than the previous year 2009 is 9.53%. It shows the credit policy of the bank is good which helps organization for move forward in smooth rate for their growth and expansion. The recovery rate of loans and advances increases with a increasing rate from year to year. In 2004-2005 the recovery percentage is 80.32% which increases to 89.23% in 2005-2006 . in the year 2009 the recovery percentage increases up to the 95.10% which is the positive points for organization to achieve the objectives of the organization in future. It states that the credit policy of the bank is good. There are need the credit awareness, interim review, periodic review, customer awareness to increase the recovery rate. There are the main important causes of default in payment of installments is due to the irregularity in the monsoon, natural happenings such as cyclone, flood etc., which affects the very much to the customers, because most of the people taking loan for the agriculture in the rural area. And also some other causes which affects the people who taking loan for doing business, the

causes such as the price hike in market index rate, at that time there are more fund has been invested in purchasing and holding goods, so that causes difficult to them for the repayment of timely installments.

CHAPTER-4

CONCLUSION

The credit management is a most vital activity of any bank. It is a very sensitive area in the field of banking. Credit management includes the cases on the credit policy, process of granting loan, recovery practice, and how to minimize the NPA. From the study of the credit policy of the Kendrapara Urban cooperative bank, it is conclude that the recovery of loan and advances with a increasing from year to year. The present credit management policy of the bank is good but there is need some improvement to minimize the NPA or zero NPA. Overall the bank need to follow the proper procedure for granting the loan and advances to the customer and should make good cooperation with other nationalized banks. From the study I hope that once the time will come when The Kendrapara Urban Co-operative Bank will get a chance to show the Excellency in management and create a new position among the cooperative banks and can cope with modern preference of the customer and will get a specialty position.

SUGESSATIONS
The bank must have to improve its customer service. The bank must consider about the while take fixed deposits and granting loans. The bank must to satisfy the present customer, which attract other. The bank must to provide the service like service provided by his competitors. The bank must to provide the provide all the facilities which is provided by other banks.

Appendix

BIBLIOGRAPHY
BOOKS

1. Varshney P.N (Ph.D), Banking Law and Practice, New Delhi, Sultan Chand & Sons, 2003 Editation. 2. Sharma R.K. and Gupta S.K. ,Financial Managament, New Delhi, Kalyani Publishers, 2009 Editation. 3. Gordon and Natarajan, Financial Markets and Services, Mumbai, Himalaya Publishing House, 2007 Edition. 4. Dash S.K, TIT BITS OF General Advances & Financial Services, Bhubaneswar, Bank House, 2008 Edition.
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