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Chapter-6

RECOVERY OF LOANS AND NPAS


RECOVERY
Performance analysis of a bank cannot be conducted solely on the basis of
resources mobilised or advances made. Resources mobilisation, deployment of
resources and recycling of resources are three main centres of banking business
operations. Therefore, recovery is equally important activity in banking.
Recovery in co-operative banks is still more important as they are supposed to
meet their social commitments too. Any delay in recovery hampers the recycling of
funds and banks ability to return the loans to higher financial institutions is also
impaired. As a result, good borrowers and prospective members suffer.
Overdue problem is harmful for defaulter borrowers too. When they fail to
return the money, bank charges them penal rate of interest. It burdens them with more
financial liabilities and they could not avail of fresh loans. Any delay in recovery on
the part of co-operative bank management also creates a situation for mis-utilization
of funds at the hands of borrowers as they may spend their borrowings on nonproductive activities.
The advances of co-operative banks are mainly directed towards agriculture,
tiny/small scale industries and small business enterprises. These sectors are
characterised by higher risks and lower returns. These activities can easily succumb to
the vagaries of nature, changes in government policies and other pulls from various
quarters. (Padmanabhan, (1997) found that the following factors have a bearing on
recovery of loans in the agriculture and rural sector:

136

Low production/productivity level in the farms owned by small and marginal


farmers on account of inadequate finance, non-adoption of scientific
agriculture practices, etc;

Occurrence of natural calamities (drought, flood, pest attack, etc.)

A large number of small farmers/small units have been facing marketing


problems;

Crowding of activities leads to non-viability of large number small/tiny


industrial units;

Lack of managerial expertise and technical competence;

Imperfect rural markets-farmers/rural entrepreneurs not realising remunerative


prices and exploitation by middlemen;

Infrastructure constraints-absence of backward and forward linkage;

The mortality rate is very high in case small borrowers who are not getting
adequate extension support at the appropriate time from various agencies; and

The recovery climate has been vitiated by waiver of loans and therefore, a part
of borrower community, despite income generation, is unwilling to repay
banks dues.
Finding that the recovery of loans is essential for the smooth and efficient

working of co-operative banks, an effort has been made to study the recovery position
of some of these selected banks in Punjab and Haryana.
Absolute amount recovered during a year is important for a bank for its funds
management. It helps the bank to rotate and plough back the funds. On the other hand,
per centage of recovery to total demand of bank (demand means amount to be
recovered during the year/ season) is also an important factor and indicates the

137

efficiency of the bank in recovery management. Therefore both absolute and


relative recovery positions have been studied. Tables 6.1A, 6.3A, 6.5A, 6.7A, 6.9A,
6.11A, 6.13A and 6.15A present total demand of the DCCBs, which are annexured as
annexure I.
PUNJAB DCCBs
HIGH PROFITABILITY DCCBs IN PUNJAB
Trend Analysis
Table 6.1 :

Trends in Recovery of Loans in High Profitability DCCBs in


Punjab :1999-00 to 2007-08
(` in lakh)

Short-term
Agrl.
Non-Agrl.
1999-00
16048
2066
2000-01
17426
315
2001-02
17982
407
2002-03
20670
254
2003-04
21775
959
2004-05
24250
2253
2005-06
24994
2035
2006-07
23658
2672
2007-08
35605
2571
Average
22489.78
1503.56
C.V.
26.02
67.08
C.G.R.
8.55
23.56
t-value
6.76***
1.78
Trend Equation
Constant
12946.76
308.06
Beta
1908.80
239.10
t-value
5.26***
2.26*
Year

Source :

Medium-term
Agrl.
Non- Agrl.
180
304
214
992
218
1107
291
1978
401
1307
552
1644
682
2006
388
1645
176
2134
344.67 1457.44
51.64
40.53
8.00
18.76
1.20
3.01**
203.42
28.25
1.28

562.19
179.05
3.94***

Other
Loans

21

2291
1999
3146
1864.25
70.90

Total
Loans
18598
18947
19735
23193
24442
28699
32008
30362
43632
26624.00
30.39
10.53
8.96***
12920.25
2740.55
6.56***

Basic Data on Performance of District Central Co-operative Banks,


Published by NAFSCOB, Mumbai, 1999-00 to 2007-08

Note : *** Significant at 1% level


** Significant at 5 % level
*Significant at 10 % level

138

It is clear from Table 6.1 that total recovery increased significantly from
`18598 lakh in 1999-00 to `43632 lakh in 2007-08 at the compound growth rate of
10.53 per cent per annum in high profitability DCCBs, Punjab. Similarly, there was a
significant increase in the recovery of short-term agricultural loans (8.55%) and
medium-term non-agricultural loans (18.76%). Recovery of short-term agricultural
loans increased from `16048 lakh to `35605 lakh from 1999-00 to 2007-08, while
medium-term non-agricultural loans recovery increased from ` 304 lakh to ` 2134
lakh during the same period. Though there was an overall increase in recovery of
short-term non-agricultural loans and medium-term agricultural loans, but the increase
appeared to be non-significant.
Recovery in relation to Demand
A perusal of Table 6.2 provides that on the average the proportionate share of
total recovery out of demand came to be 96.23 per cent in high profitability DCCBs of
Punjab. It was 100.74 per cent of the demand in short-term agricultural loans. It
exceeded 100 per cent in the case of short-term agricultural loans, i.e., 167.16 per cent
recovery of demand during the year 2000-01.
Normally, it may not be more than 100 per cent as recovery cannot be
more than demand. But it was due to advance recovery received in that year.
Recovery as percentage of demand for loan came to be 76.54 percent in the case of
short-term non-agricultural loan, 81.04 per cent in medium-term agricultural loan and
71.18 per cent in medium-term non-agricultural loan. The recovery of other loans
could not be studied due to the absence of demand as well as demand for other loans
in 5 out of 9 years under study. There was a significant decline in recovery of
medium-term non-agricultural loans at the rate of -2.44 per cent compounded
annually.

139

Table 6.2 :

Recovery in relation to Demand for Loan in High Profitability


DCCBs in Punjab 1999-00 to 2007-08
(Percentage)
Short-term

Year

Agrl.

Non-Agrl

Medium-term
Agrl.

Non- Agrl.

Other
Loans

Total
Loans

1999-00

91.67

81.69

81.82

83.06

90.19

2000-01

167.16

53.03

88.80

77.80

151.15

2001-02

90.48

55.60

83.52

74.70

2002-03

90.94

90.07

89.26

67.51

88.29

2003-04

91.61

74.75

90.93

65.09

87.63

2004-05

91.84

78.42

89.61

67.13

88.73

2005-06

92.68

83.23

89.50

72.05

88.49

90.04

2006-07

94.22

87.18

93.72

70.03

89.88

91.56

2007-08

96.11

84.91

22.22

63.27

90.92

91.47

Average

100.74

76.54

81.04

71.18

68.92

96.23

C.V.

24.78

17.50

27.58

9.01

60.53

21.47

C.G.R.

-2.43

3.93

-7.86

-2.44

-2.26

t-value

0.97

1.68

1.53

3.19**

1.02

6.36

87.02

Trend Equation
Constant

117.06

63.30

98.65

80.20

110.16

Beta

-3.26

2.65

-3.52

-1.80

-2.79

t-value

1.01

1.70

1.27

3.19*

1.05

Source :

Basic Data on Performance of District Central Co-operative Banks,


Published by NAFSCOB, Mumbai, 1999-00 to 2007-08

Note : ** Significant at 5 % level


*Significant at 10 % level
On an average, medium-term non-agricultural loans were only 10.18 per cent
of total loan outstandings (Table 5.2), hence, their declining recovery per centage
would affect the per centage of total recovery only to a marginal extent. The overall
recovery position in high profitability DCCBs in Punjab seems to be good. High per
centage of recovery may be the reason for stagnation in recovery.

140

AVERAGE PROFITABILITY DCCBs IN PUNJAB


Trend Analysis
Table 6.3 :

Year

Trends in Loans Recovery in Average Profitability DCCBs in


Punjab: 1999-00 to 2007-08
(` in lakh)
Short-term

Medium-term

Other
Loans

Total
Loans

1999-00

Agrl.
18728

Non-Agrl
1016

Agrl.
556

Non- Agrl.
981

1134

22415

2000-01

21374

1176

435

1120

3460

27565

2001-02

20569

1355

397

1216

4058

27595

2002-03

22260

1826

592

1456

5421

31555

2003-04

27871

2290

173

1958

6067

38359

2004-05

28368

3198

193

2503

6067

40329

2005-06

36056

3731

485

3326

3852

47450

2006-07

36852

3769

652

4013

3764

49050

2007-08

48838

3897

111

5820

5731

64397

Average

28990.67

2473.11

399.33

2488.11

4394.89 38746.11

C.V.

34.21

48.10

49.38

65.48

36.64

34.27

C.G.R.

12.06

21.04

-9.44

25.24

11.89

12.90

t-value

9.70***

10.84***

1.32

15.33***

1.82

15.45***

Trend Equation
Constant

11995.62

354.19

512.00

-287.06

2767.06 15340.37

Beta

3399.27

423.78

-22.53

555.03

325.57

4681.12

t-value

7.20***

11.74***

0.87

6.86***

1.76

9.81***

Source : Basic Data on Performance of District Central Co-operative Banks,


Published by NAFSCOB, Mumbai, 1999-00 to 2007-08
Note : *** Significant at 1% level
Table 6.3 depicts that recovery increased significantly from ` 22415 lakh in
1999-00 to `64397 lakh in 2007-08 in average profitability DCCBs in Punjab. It is
encouraging to note that the recovery of short-term agricultural loan, short-term nonagricultural loans and medium-term non-agricultural loans registered a significant

141

increase during the same period. It increased from ` 18728 lakh in 1999-00 to `48838
lakh in 2007-08 in short-term agricultural loans. The increase was from `1016 lakh to
`3897 lakh and from ` 981 lakh to `5820 lakh from 1999-00 to 2007-08
respectively in short-term non- agricultural loans and medium-term non agricultural
loans. Recovery in relation to Demand
Table 6.4 :

Year

Recovery in relation to Demand for Loan in Average Profitability


DCCBs in Punjab: 1999-00 to 2007-08
(Percentage)
Short-term
Agrl.

Non-Agrl

Medium-term
Agrl.

Non- Agrl.

Other
Loans

Total
Loans

1999-00

93.34

88.35

53.67

91.43

85.52

90.94

2000-01

94.42

86.47

33.75

89.53

94.00

91.22

2001-02

92.30

91.74

46.43

91.02

84.45

89.72

2002-03

89.52

93.50

76.98

88.94

86.89

88.98

2003-04

93.35

93.74

20.26

84.98

88.76

90.70

2004-05

93.45

94.78

21.98

84.25

88.76

90.80

2005-06

93.75

93.98

66.44

78.39

86.35

91.49

2006-07

91.85

91.24

94.08

79.15

84.79

90.08

2007-08

94.43

91.59

80.43

80.43

89.31

92.31

Average

92.94

91.71

54.89

85.35

87.65

90.69

C.V.

1.66

3.01

48.25

6.03

3.39

1.09

C.G.R.

0.06

0.61

7.18

-2.04

-0.12

0.14

t-value

0.27

1.74

0.91

6.71***

0.25

0.95

Trend Equation
Constant

92.65

88.96

32.13

94.10

88.12

90.08

Beta

0.06

0.55

4.55

-1.75

-0.11

0.12

t-value

0.27

1.72

1.41

6.80***

0.28

0.96

Source :

Note :

Basic Data on Performance of District Central Co-operative Banks,


Published by NAFSCOB, Mumbai, 1999-00 to 2007-08
*** Significant at 1% level

142

A glance at Table 6.4 provides that the proportionate share of total recovery
out of total demand for loans worked out to be 90.69 per cent on the average of 9
years under study. The average proportion of recovery out of demand was the highest
to the tune of 92.94 per cent in the case of short-term agricultural loans, followed by
91.71 per cent in short-term non-agricultural loans, 87.65 per cent against other loans
and 85.35 per cent in the case of medium-term non-agricultural loans.
The recovery as a proportion of demand was found to be the lowest to the tune
of 54.89 per cent in the case of medium-term agricultural loans. The proportionate
recovery of medium-term non-agricultural loans showed a significant decline at the
rate of -2.04 per cent compounded annually. The recovery as percentage of demand of
all types of loans except medium-term non- agricultural loans has shown a stagnant
trend.
LOW PROFITABILITY DCCBs IN PUNJAB
Trend Analysis
It can be observed from Table 6.5 that total recovery of loans increased
significantly from ` 20687 lakh in 1999-00 to ` 49317 lakh in 2007-08 at the
compound growth rate of 12.85 per cent per annum. It is pertinent to note that
recovery of all types of loans, except other loans, increased significantly. The
Compound Growth Rate of recovery was the highest to the order of 63.52 per cent in
the case of medium-term agricultural loans, followed by 35.10 per cent in short-term
non-agricultural loans. Thus, in general terms, recovery of every type of loan
registered a significant increase during the period of study.

143

Table 6.5 :

Trends in Loans Recovery in Low Profitability DCCBs in Punjab :


1999-00 to 2007-08
(` in lakh)
Short-term

Year

Medium-term

Other
Loans

Total
Loans

Agrl.

Non-Agrl

Agrl.

Non- Agrl.

1999-00

20319

37

313

12

20687

2000-01

19024

1124

12

20172

2001-02

21133

15

16

1486

32

22682

2002-03

21909

23

10

1607

17

23566

2003-04

27467

27

75

2199

29773

2004-05

29082

30

80

2290

31490

2005-06

36566

51

259

2675

59

39610

2006-07

40836

71

288

3312

44514

2007-08

45546

59

285

3420

49317

Average

29098.00

32.33

117.00

2047.33

17.67

31312.33

C.V.

33.51

70.98

105.46

49.84

99.26

34.64

C.G.R.

12.19

35.10

63.52

26.99

-5.36

12.85

t-value

10.02***

9.93***

3.11**

4.53***

0.52

12.18***

Trend Equation
Constant

12065.18

-7.42

-83.25

209.58

16.83

12202.02

Beta

3406.38

7.95

40.05

367.55

0.17

3822.10

t-value

8.71***

7.93***

5.13***

15.94***

0.07

9.74***

Source :

Basic Data on Performance of District Central Co-operative Banks,


Published by NAFSCOB, Mumbai, 1999-00 to 2007-08

Note : *** Significant at 1% level


** Significant at 5 % level
Recovery in relation to Demand
Table 6.6 reveals that on an average, proportionate share of recovery out of
demand for loan appeared to be 83.05 per cent. The proportion of recovery out of
demand appeared to be the highest to the order of 85.18 per cent in the case of shortterm agricultural loans, followed by 68.50 per cent in medium-term non-agricultural
loans. The proportion of recovery out of demand was found to be the lowest to the

144

tune of 23.11 per cent in the case of other loans. The total recovery as a proportion of
total demand remained constant at about 83 per cent, while it increased significantly
in the case of short-term agricultural loans at the rate of 0.59 per cent and 16.33 per
cent compounded annually in medium-term loans.
Table 6.6 :

Year

Recovery in relation to Demand for Loan in Low Profitability


DCCBs in Punjab: 1999- 00 to 2007-08
(Percentage)
Short-term

Medium-term

Other
Loans

Total
Loans

Agrl.

Non-Agrl

Agrl.

Non- Agrl.

1999-00

84.20

26.09

50.00

77.09

25.00

83.81

2000-01

83.82

29.03

11.54

81.45

3.60

82.45

2001-02

84.12

39.47

41.03

78.21

4.51

81.56

2002-03

82.63

46.00

17.54

70.30

12.23

81.13

2003-04

85.10

48.21

68.18

69.63

5.75

83.43

2004-05

85.83

60.00

55.17

62.48

9.88

83.25

2005-06

87.11

37.23

84.36

59.22

95.16

84.28

2006-07

86.30

45.81

68.74

59.70

25.93

83.26

2007-08

87.54

37.82

66.43

58.38

25.93

84.30

Average

85.18

41.07

51.44

68.50

23.11

83.05

C.V.

1.92

25.15

47.39

13.08

123.66

1.36

C.G.R.

0.59

5.13

16.33

-4.43

22.04

0.24

t-value

3.99***

1.62

1.90*

8.36***

1.46

1.46

Trend Equation
Constant

82.68

32.18

21.31

83.99

2.31

82.06

Beta

0.50

1.78

6.03

-3.10

4.16

0.20

t-value

4.04***

1.42

2.44**

7.78***

1.15

1.47

Source :

Basic Data on Performance of District Central Co-operative Banks,


Published by NAFSCOB, Mumbai, 1999-00 to 2007-08

Note : *** Significant at 1% level


** Significant at 5 % level
*Significant at 10 % level

145

On the other hand, the proportion of recovery out of demand declined


significantly at the rate of -4.43 per cent per annum in the case of medium-term nonagricultural loans. The proportion of recovery of other loans remained fluctuating
from 4.51 per cent to 95.16 per cent during the period of study. It shows that vast
fluctuations exist in the recovery of other loans in relation to the demand which
hamper the growth of these banks.
Total recovery had registered a significant growth rate in all the
categories of selected DCCBs during the period of study. Average recovery per
centage to demand in total loans during the period of study was 96.23, 90.69 and
83.05 per cent respectively in the high, average and low profitability DCCBs. It
may be inferred that recovery position of the DCCBs had directly affected with
the profitability of the banks. Short-term agricultural loans had recorded the
highest per centage of recovery in all types of selected DCCBs in Punjab.
Expertise of DCCBs staff in handling agricultural customers and immediate reavailability of the loan may be the important factor for this.
ALL SELECTED DCCBs IN PUNJAB
Trend Analysis
Table 6.7 describes that total recovery of loans increased significantly at the
CGR of 12.22 per cent per annum from ` 61700 lakh in 1999-00 to ` 157346 lakh in
2007-08 in all the selected DCCBs in Punjab. It is encouraging to observe that
recovery of all types of loans, except medium-term agricultural loan, increased
significantly during the period under study.

146

Table 6.7 :

Trends in Loans Recovery in the Selected DCCBs in Punjab :


1999-00 to 2007-08
(` in lakh)
Short-term

Year

Agrl.

Medium-term

Non-Agrl

Agrl.

Non- Agrl.

Other
Loans

Total
Loans

1999-00

55095

3088

773

1598

1146

61700

2000-01

57824

1500

652

3236

3472

66684

2001-02

59684

1777

631

3809

4111

70012

2002-03

64839

2103

893

5041

5438

78314

2003-04

77113

3276

649

5464

6072

92574

2004-05

81700

5481

825

6437

6075

100518

2005-06

97616

5817

1426

8007

6202

119068

2006-07

101346

6512

1328

8970

5770

123926

2007-08

129989

6527

572

11374

8884

157346

Average

80578.44

4009.00

861.00

5992.89

5241.11

96682.44

C.V.

31.11

51.68

36.09

51.07

41.07

32.97

C.G.R.

11.13

19.58

4.22

23.45

19.42

12.22

t-value

11.95***

3.82***

0.96

8.78***

3.54***

16.78***

Trend Equation
Constant

37003.28

654.83

632.17

484.72

1685.69

40466.36

Beta

8714.45

670.83

45.77

1101.63

711.08

11243.29

t-value

8.23***

5.08***

1.17

15.48***

5.62***

9.90

Source :

Basic Data on Performance of District Central Co-operative Banks,


Published by NAFSCOB, Mumbai, 1999-00 to 2007-08

Note : *** Significant at 1% level


Recovery in relation to Total Demand
A perusal of Table 6.8 provides that on an average, the proportion of recovery
out of total demand worked at 88.98 per cent. It was highest to the order of 91.37 per
cent in the case of short- term agricultural loan, followed by 85.43 per cent and 84.39
per cent in short-term non-agricultural loan and other loans respectively. The average
proportion of recovery out of demand came to 75.04 per cent in the case of medium-

147

term non- agricultural loan and 59.68 per cent in medium-term agricultural loan in all
the selected DCCBs in Punjab. The recovery as a per cent of demand was stagnant in
all types of loans except a significant decline at the rate of -2.94 per cent in the case of
medium-term non-agricultural loan.
Table 6.8 :

Year

Recovery in relation to Demand for Loan in All the Selected


DCCBs in Punjab : 1999- 00 to 2007-08
(Percentage)
Short-term
Agrl.

Non-Agrl

Medium-term
Agrl.

Non- Agrl.

Other
Loans

Total
Loans

1999-00

89.29

83.41

58.12

86.61

83.41

88.20

2000-01

103.71

75.57

41.90

82.85

86.50

99.21

2001-02

88.71

79.08

54.63

80.73

70.33

86.17

2002-03

87.49

92.04

77.52

73.56

85.26

86.27

2003-04

89.77

86.62

46.19

73.15

83.02

87.44

2004-05

90.13

87.04

50.34

70.85

87.84

87.73

2005-06

90.89

88.78

79.27

69.36

87.20

88.59

2006-07

90.05

88.59

87.02

69.18

86.25

87.84

2007-08

92.32

87.74

42.09

69.07

89.70

89.42

Average

91.37

85.43

59.68

75.04

84.39

88.98

C.V.

5.27

6.08

28.86

8.85

6.72

4.46

C.G.R.

-0.35

1.43

2.04

-2.94

1.24

-0.40

t-value

0.52

2.10*

0.53

7.75***

1.41

0.70

Trend Equation
Constant

93.19

79.53

51.90

86.43

79.33

90.90

Beta

-0.36

1.18

1.56

-2.28

1.01

0.38

t-value

0.56

2.10*

0.68

7.22***

1.48

0.72

Source :

Basic Data on Performance of District Central Co-operative Banks,


Published by NAFSCOB, Mumbai, 1999-00 to 2007-08

Note : *** Significant at 1% level


*Significant at 10 % level

148

HARYANA DCCBs
HIGH PROFITABILITY DCCBs IN HARYANA
Trend Analysis
The data presented in Table 6.9 reveals that total recovery of loans increased
significantly from `23622 lakh in 1999-00 to `52293 lakh in 2007-08 at the
compound growth rate of 10.36 per cent per annum.
Table 6.9 :

Year

Trends in Loans Recovery in High Profitability DCCBs in


Haryana: 1999-00 to 2007- 08
(` in lakh)
Short-term

Medium-term

Other
Loans

Total
Loans

1999-00

Agrl.
18810

Non-Agrl
1585

Agrl.
109

Non- Agrl.
544

2574

23622

2000-01

23139

2036

48

811

1713

27747

2001-02

26558

1987

60

692

3738

33035

2002-03

25438

3688

486

411

6760

36783

2003-04

28953

3541

265

728

5274

38761

2004-05

36058

2364

414

520

11399

50755

2005-06

36842

2061

557

444

7444

47348

2006-07

40052

5682

500

727

1879

48840

2007-08

40105

2791

611

1050

7736

52293

Average

30661.67

2859.44

338.89

658.56

5390.78

39909.33

C.V.

25.49

44.70

65.62

30.69

60.19

26.24

C.G.R.

9.93

8.64

35.48

2.79

11.59

10.36

t-value

9.97***

1.76

3.38**

0.67

1.25

8.03***

Trend Equation
Constant

16735.81

1643.94

-18.28

543.14

2624.36

21530.26

Beta

2785.12

243.10

71.43

23.08

553.28

3676.02

t-value

11.81***

1.61

4.90***

0.87

1.40

9.22***

Source :

Basic Data on Performance of District Central Co-operative Banks,


Published by NAFSCOB, Mumbai, 1999-00 to 2007-08

Note : *** Significant at 1% level


** Significant at 5 % level

149

Similarly, the recovery of short-term agricultural loans increased significantly


from `18810 lakh to `40105 lakh during the same period, while recovery of mediumterm agricultural loans increased significantly from `109 lakh in 1999-00 to `611 lakh
in 2007-08. Though an increase was recorded in recovery of all other types of loans
but the wide fluctuations turned the increase non-significant in high profitability
DCCBs in Haryana.
Recovery in relation to Demand
Table 6.10 : Recovery in relation to Demand for Loan in High Profitability
DCCBs in Haryana :1999-00 to 2007-08
(Percentage)
Short-term

Year

Agrl.

Non-Agrl

Medium-term
Agrl.

Non- Agrl.

Other
Loans

Total
Loans

1999-00

79.23

67.62

62.64

56.49

98.24

79.16

2000-01

81.69

75.27

41.38

68.38

94.33

81.26

2001-02

79.53

74.70

1.86

61.13

99.36

74.79

2002-03

79.82

81.11

82.37

46.13

99.75

82.33

2003-04

78.11

83.61

74.86

61.18

98.43

80.41

2004-05

83.75

77.58

81.50

52.58

98.95

85.86

2005-06

80.51

76.39

76.83

45.21

97.64

81.93

2006-07

79.53

94.12

71.94

56.58

91.75

80.82

2007-08

77.51

75.23

83.58

55.79

97.59

79.25

Average

79.96

78.40

64.11

55.94

97.34

80.64

C.V.

2.34

9.42

41.81

13.14

2.69

3.68

C.G.R.

-0.16

1.85

18.61

-1.80

-0.25

0.36

t-value

0.51

1.72

1.00

1.07

0.70

0.72

Trend Equation
Constant

80.58

71.17

37.07

61.24

98.55

79.24

Beta

-0.12

1.45

5.41

-1.06

-0.24

0.28

t-value

0.49

1.68

1.75

1.14

0.70

0.71

Source :

Basic Data on Performance of District Central Co-operative Banks,


Published by NAFSCOB, Mumbai, 1999-00 to 2007-08

150

The analysis of data presented in Table 6.10 highlights that the proportion of
recovery out of total demand for loan emerged to be 80.64 per cent at the average
level in high profitability DCCBs in Haryana. The highest proportion of recovery out
of demand was found to be 97.34 per cent in the case of other loans, while it was
lowest to the tune of 55.94 per cent in medium-term non-agricultural loans. Shortterm and medium-term agricultural loans recorded 79.96 and 64.11 per cent as
average recovery. The proportion of recovery out of demand remained almost
stagnant in all types of loans. This indicated that level of recovery was stagnant in
high profitability DCCBs in Haryana. Thus, there is need to increase the
proportion of recovery, particularly in the case of medium-term agricultural and
non-agricultural loans.
AVERAGE PROFITABILITY DCCBs IN HARYANA
Trend Analysis
It is obvious from Table 6.11 that total recovery increased significantly at a
compound growth rate of 14.82 per cent per annum from ` 17630 lakh in 1999-00 to
` 54108 lakh in 2007-08 in average profitability DCCBs in Haryana. It is encouraging
to note a significant increase in recovery of all types of loans. The compound growth
rate was the highest to the order of 99.27 per cent in the case of other loans, followed
by 48.00 per cent in medium-term agricultural loan. The rate of increase was found to
be the lowest to the tune of 3.27 per cent in the case of medium-term non-agricultural
loan, followed by 12.83 per cent in the case of short-term agricultural loan and 18.39
per cent in recovery of short-term non-agricultural loan in average profitability
DCCBs in Haryana.

151

Table 6.11 : Trends in Loans Recovery in Average Profitability DCCBs in


Haryana:1999-00 to 2007-08 (` in lakh)
Short-term

Year

Agrl.

Medium-term

Non-Agrl

Agrl.

Other
Loans

Non- Agrl.

Total
Loans

1999-00

15435

1596

110

486

17630

2000-01

17613

1630

94

468

246

20051

2001-02

14762

2331

126

500

10

17729

2002-03

16592

3575

211

516

10

20904

2003-04

24851

4255

969

517

30

30622

2004-05

28702

4461

1140

528

37

34868

2005-06

30813

2433

950

558

600

35354

2006-07

32283

2467

1133

536

1511

37930

2007-08

36136

13628

1455

669

2220

54108

Average

24131.89

4041.78

687.56

530.89

518.56

29910.67

C.V.

34.03

92.63

79.14

10.98

155.69

40.64

C.G.R.

12.83

18.39

48.00

3.27

99.27

14.82

t-value

6.75***

2.39**

5.22***

4.30***

2.44**

7.94***

Trend Equation
Constant

9879.72

-268.97

-235.28

442.22

-637.28

9180.42

Beta

2850.43

862.15

184.57

17.73

231.17

4146.05

t-value

8.11***

2.15*

6.64***

3.99***

3.34***

6.92***

Source :

Basic Data on Performance of District Central Co-operative Banks,


Published by NAFSCOB, Mumbai, 1999-00 to 2007-08

Note : *** Significant at 1% level


** Significant at 5 % level
*Significant at 10 % level
Recovery in relation to Demand
Table 6.12 brings out that on the average the proportionate share of
recovery out of total demand for loan appeared to be 77.95 per cent. It was highest to
the order of 83.45 per cent in the case of short-term non-agricultural loan and lowest
to the tune of 45.49 per cent in other loans. Average recovery performance in shortterm agricultural loans was 77.54 per cent and it was 78.22 per cent in medium-term

152

agricultural loans. The increase in proportion of recovery out of demand was found
to be significant in the case of short-term non-agricultural loan. The proportion of
recovery of all other types of loans registered almost stagnation in average
profitability DCCBs in Haryana.
Table 6.12 : Recovery in relation to Demand for Loan in Average Profitability
DCCBs in Haryana:1999-00 to 2007-08
(Percentage)
Short-term
Agrl.
Non-Agrl
1999-00
76.63
73.55
2000-01
77.65
74.36
2001-02
76.40
77.86
2002-03
77.15
81.36
2003-04
78.42
87.86
2004-05
81.35
89.08
2005-06
79.96
84.83
2006-07
75.79
85.01
2007-08
74.52
97.16
Average
77.54
83.45
C.V.
2.72
9.08
C.G.R.
-0.07
3.01
t-value
0.18
5.33***
Trend Equation
Constant
77.77
71.10
Beta
-0.04
2.47
t-value
0.15
5.21***
Year

Source :

Medium-term
Agrl.
Non- Agrl.
89.43
58.84
86.24
72.45
76.36
78.86
47.10
79.75
82.26
78.45
87.42
75.32
80.30
74.60
75.43
70.07
79.46
71.70
78.22
73.34
16.15
8.73
-0.26
0.87
0.10
0.70

100.00
80.66
13.33
13.33
7.46
8.79
40.49
69.38
76.00
45.49
80.00
0.43
0.03

75.79
77.31
76.45
77.22
78.98
81.63
78.89
75.95
79.33
77.95
2.45
0.41
1.39

80.23
-0.40
0.23

52.17
-1.33
0.27

76.33
0.32
1.38

70.72
0.52
0.61

Other
Loans

Total
Loans

Basic Data on Performance of District Central Co-operative Banks,


Published by NAFSCOB, Mumbai, 1999-00 to 2007-08

Note : *** Significant at 1% level


LOW PROFITABILITY DCCBs IN HARYANA
Trend Analysis
Table 6.13 shows that total recovery of loans increased significantly at the
growth rate of 7.82 per cent compounded annually from ` 38860 lakh in 1999-00 to `

153

67531 lakh in 2007-08 in low profitability DCCBs in Haryana. Similarly, the recovery
of short-term agricultural loans increased significantly from ` 28402 lakh to ` 59013
lakh during the same period.
Table 6.13:

Year

Trends in Loans Recovery in Low Profitability DCCBs in Haryana


: 1999-00 to 2007-08
(` in lakh)
Short-term

Medium-term

Other
Loans

Total
Loans

1999-00

Agrl.
28402

Non-Agrl
7832

Agrl.
577

Non- Agrl.
985

1064

38860

2000-01

34178

2762

330

750

2206

40226

2001-02

31223

4739

196

735

12

36905

2002-03

31547

6658

136

330

147

38818

2003-04

39832

5798

741

518

139

47028

2004-05

38673

8691

967

517

169

49017

2005-06

49874

7399

1356

493

200

59322

2006-07

50692

5954

1003

499

344

58492

2007-08

59013

6730

985

547

256

67531

Average

40381.56

6284.78

699.00

597.11

504.11

48466.56

C.V.

26.13

28.08

59.86

32.42

140.35

22.73

C.G.R.

9.14

4.87

20.73

-6.33

-8.77

7.82

t-value

7.36***

1.07

2.01*

1.89*

0.49

6.64***

Trend Equation
Constant

22346.66

5241.36

132.17

830.61

1205.78 29757.55

Beta

3606.90

208.68

113.37

-46.70

-140.33

3741.92

t-value

7.05***

0.91

2.93**

2.33*

1.71

6.70***

Source :

Basic Data on Performance of District Central Co-operative Banks,


Published by NAFSCOB, Mumbai, 1999-00 to 2007-08

Note : *** Significant at 1% level


** Significant at 5 % level
*Significant at 10 % level
A slightly significant increase in the recovery of medium-term agricultural
loan (from ` 577 lakh to ` 985 lakh) during the same period was also observed. There
154

was almost stagnation in recovery of short- term non-agricultural loan as indicated by


the non-significant t-value, while abrupt changes in recovery of other loans (these
fluctuated between `12 lakh in 2001-02 and `2206 lakh in 2000-01) turned the
growth rate non-significant. A significant decline in the recovery of medium-term
non-agricultural loan could be observed in low profitability DCCBs in Haryana.
Recovery in relation to Demand
Table 6.14 : Recovery in relation to Demand for Loan in Low Profitability
DCCBs in Haryana: 1999-00 to 2007-08
(Percentage)
Year

Short-term

Medium-term

Other
Loans

Total
Loans

1999-00

Agrl.
70.25

Non-Agrl
91.05

Agrl.
86.64

Non- Agrl.
48.12

97.88

73.55

2000-01

69.83

84.00

87.77

39.31

99.10

70.89

2001-02

70.73

86.97

80.99

40.36

85.71

71.43

2002-03

68.55

87.18

47.72

42.91

16.41

69.81

2003-04

75.36

91.51

79.85

31.74

41.62

75.74

2004-05

70.71

94.13

77.17

48.14

15.13

72.76

2005-06

75.68

91.22

89.45

39.57

15.66

76.00

2006-07

67.30

88.29

88.06

36.99

23.39

67.99

2007-08

71.36

91.06

105.80

37.26

15.27

71.71

Average

71.08

89.49

82.60

40.49

45.57

72.21

C.V.

3.94

3.46

18.73

13.07

82.51

3.64

C.G.R.

0.20

0.54

2.51

1.87

-22.43

-0.10

t-value

0.37

1.23

0.86

1.14

4.36***

0.20

Trend Equation
Constant

70.34

87.13

72.28

44.38

103.82

72.54

Beta

0.15

0.47

2.07

-0.78

-11.65

-0.07

t-value

0.39

1.22

1.04

1.17

4.24***

0.18

Source :

Basic Data on Performance of District Central Co-operative Banks,


Published by NAFSCOB, Mumbai, 1999-00 to 2007-08

Note : *** Significant at 1% level

155

Table 6.14 presents that the proportion of recovery out of total demand for
loan came to be 72.21 per cent on the average of 9 years under study. The proportion
of recovery out of demand was the highest to the order of 89.49 per cent in the case of
short- term non-agricultural loan while it was lowest to the tune of 40.49 and 45.57
per cent in the case of medium-term non-agricultural loan and other loans. There was a
significant decline in proportion of recovery out of demand in the case of other
loans. It came down from 97.88 per cent in 1999-00 to only 15.27 per cent in 200708.
The proportion of recovery out of demand in all other types of loans remained
almost stagnant in low profitability DCCBs in Haryana.
On the basis of above analysis it can be inferred that absolute recovery
had registered a significant growth in all the selected DCCBs in Haryana during
the period of study. Average per centage of total recovery to demand during the
period of study was 80.64, 77.54 and 72.72 respectively in high, average and low
profitability DCCBs. Hence, it may be deduced that profitability had direct
correlation with recovery position of DCCBs . Proportionate recovery of shortterm agricultural loan was 79.96, 77.564 and 71.08 per cent respectively in high,
average and low profitability DCCBs.
ALL SELECTED DCCBs IN HARYANA
Trend Analysis
A glance at Table 6.15 provides that total recovery of loans increased
significantly from ` 80112 lakh in 1999-00 to `173932 lakh in 2007-08 in all the
selected DCCBs in Haryana at the compound growth rate of 10.34 per cent per

156

annum. Similarly, there was a significant increase in recovery of short-term


agricultural loans from ` 62647 lakh to `135254 during the same period.

Table 6.15:

Trends in Loans Recovery in the Selected DCCBs in Haryana:


1999-00 to 2007-08
(` in lakh)
Short-term

Year

Medium-term

Other
Loans

Total
Loans

1999-00

Agrl.
62647

Non-Agrl
11013

Agrl.
796

Non- Agrl.
2015

3641

80112

2000-01

74930

6428

472

2029

4165

88024

2001-02

72543

9057

382

1927

3760

87669

2002-03

73577

13921

833

1257

6917

96505

2003-04

93636

13594

1975

1763

5443

116411

2004-05

103433

15516

2521

1565

11605

134640

2005-06

117529

11893

2863

1495

8244

142024

2006-07

123027

14103

2636

1762

3734

145262

2007-08

135254

23149

3051

2266

10212

173932

Average

95175.11

13186.00

1725.44

1786.56

6413.44

118286.56

C.V.

27.30

35.51

63.53

17.44

47.06

27.47

C.G.R.

10.28

10.48

29.85

-0.40

10.31

10.34

t-value

11.31***

2.97**

4.09***

0.16

1.83

13.22***

Trend Equation
Constant

48962.67

6616.33

-121.39

1815.97

3192.86

60467.96

Beta

9242.45

1313.93

369.37

-5.88

644.12

11564.42

t-value

11.45***

3.18**

6.34***

0.14

1.91*

11.57***

Source :

Basic Data on Performance of District Central Co-operative Banks,


Published by NAFSCOB, Mumbai, 1999-00 to 2007-08

Note : *** Significant at 1% level


** Significant at 5 % level
*Significant at 10 % level
The increase was also found to be significant in recovery of short-term nonagricultural loans and medium-term agricultural loans. The recovery of short-term
non-agricultural loans increased from ` 11013 lakh in 1999-00 to `23149 lakh in
157

2007-08 while the recovery of medium-term agricultural loans increased from `796
lakh in 1999-00 to ` 3051 lakh in 2007-08. The abrupt increase in recovery of other
loans in 2007-08 turned the increasing trend non-significant.
Recovery in relation to Demand

Table 6.16 : Recovery in Relation to Demand for Loan in all the Selected
DCCBs in Haryana: 1999- 00 to 2007-08
(Percentage)
Short-term

Year

Medium-term

Other
Loans

Total
Loans

1999-00

Agrl.
74.30

Non-Agrl
83.97

Agrl.
82.66

Non- Agrl.
52.53

98.14

75.62

2000-01

74.96

78.53

78.54

54.25

95.81

75.34

2001-02

74.89

81.57

10.52

53.72

97.64

73.65

2002-03

74.02

83.97

62.96

54.49

89.27

75.78

2003-04

76.99

88.19

80.28

50.65

89.32

78.09

2004-05

77.75

89.75

82.25

56.62

88.87

79.57

2005-06

78.25

86.96

83.62

50.24

79.40

78.61

2006-07

73.11

89.93

79.02

51.84

65.54

73.96

2007-08

73.94

92.12

87.35

52.91

81.54

76.17

Average

75.36

86.11

71.91

53.03

87.28

76.31

C.V.

2.44

5.13

33.38

3.78

11.99

2.68

C.G.R.

0.07

1.63

8.06

-0.34

-3.76

0.25

t-value

0.21

4.34***

0.84

0.67

3.84***

0.71

Trend Equation
Constant

75.07

79.16

56.44

53.91

103.46

75.33

Beta

0.06

1.39

3.09

-0.18

-3.23

0.20

t-value

0.22

4.48***

1.00

0.66

4.21***

0.72

Source :

Basic Data on Performance of District Central Co-operative Banks,


Published by NAFSCOB, Mumbai, 1999-00 to 2007-08

Note : *** Significant at 1% level


The analysis given in Table 6.16 shows that on the average of 9 years under
study, the proportion of recovery out of total demand for loans came to be 76.31 per
158

cent. It ranged from as low as 53.03 per cent in the case of medium-term nonagricultural loan to as high as 87.28 per cent in other loans. There was a significant
increase in the proportion of recovery out of demand for short-term non-agricultural
loan, while in spite of the highest average recovery, the proportion of recovery out of
demand for other loans declined significantly at the rate of -3.76 per cent per annum.
The overall recovery position of loans demands special attention in
certain areas of loans, particularly in the case of other loans where there has
been a declining trend. The stagnation in the proportion of recovery out of
demand for other types of loans is also a cause of concern for the selected DCCBs
in Haryana.
Comparison of Loans Recovery in Punjab and Haryana
Table 6.17:

Recovery

Comparison of Loans Recovery in DCCBs in Punjab and Haryana


during 1999- 00 to 2007-08
(` in lakh)
Punjab

Haryana

t-value

ST-Agrl.

Mean
80578

SD
25068

Mean
95175

SD
25983

1.21

ST-Non Agrl.

4009

2072

13186

4682

5.38***

MT-Agrl.

861

311

1725

1096

2.28**

MT-Non Agrl.

5993

3061

1787

312

4.10***

Others

5241

2152

6413

3018

0.95

Total

96682

31876

118287

32493

1.42

Source :

Basic Data on Performance of District Central Co-operative Banks,


Published by NAFSCOB, Mumbai, 1999-00 to 2007-08

Note : *** Significant at 1% level


** Significant at 5 % level
Table 6.17 presents the comparison of average recovery of different types of
loans in DCCBs in Punjab and Haryana. The total mean recovery came to be ` 96682

159

lakh in Punjab which was statistically at par with `118287 lakh in Haryana as
indicated by the non-significant t-value. However, the mean recovery of short-term
non-agricultural loan and medium-term agricultural loan was significantly higher in
Haryana as compared to that in Punjab. On the other hand, the recovery of mediumterm non-agricultural loan was significantly higher in DCCBs in Punjab as compared
to that in DCCBs in Haryana. Table 6.18 explains that proportion of recovery out of
demand for loan appeared to be 88.98 per cent in DCCBs in Punjab, which was
significantly higher than that in DCCBs in Haryana, i.e., 76.31 per cent. The
proportion of recovery out of demand for short-term agricultural loan and mediumterm non-agricultural loan was also significantly higher in DCCBs in Punjab as
compared to those in DCCBs in Haryana.

Table 6.18 : Comparison of Proportion of Recovery in Demand for Loan in


DCCBs in Punjab and Haryana during 1999-00 to 2007-08

Recovery/Demand

Punjab
Mean

Haryana
SD

Mean

SD

ST-Agrl.

91.37

4.82

75.36

1.84

ST-Non Agrl.

85.43

5.19

86.11

4.42

MT-Agrl.

59.68

17.22

71.91

24.00

MT-Non Agrl.

75.04

6.64

53.03

2.00

Others

84.39

5.67

87.28

10.46

Total

88.98

3.97

76.31

2.05

Source :

t-value

Basic Data on Performance of District Central Co-operative Banks,


Published by NAFSCOB, Mumbai, 1999-00 to 2007-08

Note : *** Significant at 1% level


** Significant at 5 % level
*Significant at 10 % level

160

On the basis of whole analysis, it can be said that the proportion of


recovery out of demand for loan was more encouraging in Punjab as compared
to the fluctuating and unstable trends in DCCBs in Haryana. Therefore, the
recovery management of loans ought to be made efficient in Haryana.
NON - PERFORMING ASSETS IN CO-OPERATIVE BANKS
The Narasimham Committee (1991) on financial system made several
recommendations with regard to reforms in the financial sector. One of the most
important recommendations made by the committee relates to the reflection of actual
financial health of the banks in their Profit & Loss Accounts and Balance-sheets. The
committee recommended that
1.

The prudential norms for income recognition should be objective and based on
actual record of recovery rather than on any subjective consideration.

2.

The classification of assets should be done on the basis of objective criteria


which would ensure a uniform and consistent application of norms.

3.

The provisioning should be made on the basis of classification of assets into


four categories, viz. standard, substandard, doubtful and loss assets.
While accepting the above recommendations, RBI issued guidelines to

Commercial Banks and the Urban Co-operative Banks to adopt the above system
from the year 1992-93. Regional Rural Banks were advised to implement the norms
of income recognition and asset classification from the year ending 31st March, 1996
(Provisioning to be made from the year ending 31st March, 1997). Further, it was
decided by RBI that the prudential norms of income recognition, asset classification
and provisioning be extended to the State Co-Operative Banks and the Central Co-

161

operative Banks from the year ending 31st March, 1997 (PSCB, 2001). RBI (1996)
guidelines on the subject are summarised below:
(i)
a)

INCOME RECOGNITION
The State Co-operative Banks and Central Co-operative Banks (SCBs/CCBs)
should not take the unrealised income to Profit and Loss Account. In States
where the SCBs/CCBs are required to take such unrealised income to P and L
A/c as per the relative provisions of the State Act/Rules, those banks will have
to make full provisions for equivalent amount by charging interest to
overdue loans and if such interest remains unrealised, the same may not be
taken to income account and matching provision be made. Accrued interest
taken into account in the previous year should also be provided in full in cases
where the same has become overdue.

b)

Fees, commission and other income may be treated as income only if the
account is classified as Standard. Besides, a matching provision should be
created in the extent such items were treated as income in the previous year
but not realised in the subsequent year.

c)

Fees and commission earned as a result of renegotiation or rescheduling of


outstanding debit should be recognised on an accrual basis over the period of
time covering the renegotiated or rescheduling of credit.

d)

In the case of credit facilities guaranteed by government overdue interest can


be taken to profit and loss account only if matching provision is made.

e)

The bills purchased /discounted should be treated as overdue if the same


remain unpaid. Interest may be charged to search bills and taken to profit and
loss account only if matching provision is made.

162

(ii) CLASSIFICATION OF ASSETS


As per guidelines of RBI (1996), classification of agricultural and nonagricultural loans is required to be done into two broad categories:
Performing Assets (Standard Assets)
The borrower accounts which do not disclose any problem and do not carry
more than normal risk attached to business qualify for classification as standard
assets. In other words, all current loans, short-term agriculture loans and nonagriculture loans which have not become NPAs may be treated as standard assets.
Non-Performing Assets
The Securitization Reconstruction of Financial Assets and Enforcement of
Security Interest Act, 2002 defined non- performing assets (NPAs) as an asset or
account of a borrower, which has been classified by a bank or financial institution as
sub-standard, doubtful, or loss assets in accordance with the direction or guidelines
relating to assets classification issued by the RBI.
NPA is defined generally as a credit facility in respect of which interest and/
or principal in arrears have not been received for one quarter or more.
NORMS FOR ASSET CLASSIFICATION
Criteria for Classification of Assets
On the basis of age of overdues, classification of agricultural and nonagricultural loans is required to be done into the following four categories:
(1)

Good/Standard Assets
Standard asset is one which does not disclose any problem and which does not

carry more than normal risk attached to business. Thus, in general, all the current

163

loans, short-term agricultural and non-agricultural loans which have not become
NPAs may be treated as standard assets.
(2)

Sub-standard Assets
A non-performing asset may be classified as sub-standard on the basis of the

following criteria:
a)

An asset, which has remained overdue for a period not exceeding 3 years in
respect of both agricultural and non-agricultural loans should be treated as
sub-standard.

b)

In the case of all types of term loans, where instalments are overdue for a
period not exceeding 3 years, the entire outstanding term loan should be
treated as sub-standard.

c)

An asset, where the terms and conditions of the loan regarding the payment
of interest and repayment of principal have been renegotiated or rescheduled
after commencement of production, should be classified as sub-standard and
should remain so in such category for at least two years of satisfactory
performance under renegotiated or rescheduled terms. In other words, the
classification of an asset should not be upgraded merely as a result of
rescheduling unless there is satisfactory compliance of the above conditions.

3.

Doubtful Asset
A non-performing asset may be classified as doubtful on the basis of following

criteria:
a)

An asset which has remained overdue for a period exceeding three years in
respect of both agricultural and non-agricultural loans should be treated as
doubtful.

164

b)

In the case of all types of term loans, where instalments are overdue for more
than three years, the entire outstandings in term loans should be treated as
doubtful.

4.

Loss Assets
Loss assets are those where loss is identified by the bank/auditors/RBI/

NABARD inspectors but the amount has not been written off wholly or partly. In
other words an asset,which is considered unrealisable and/or of such little value that
its continuance as a doubtful asset is not worthwhile, should be treated as loss asset.
Such loss assets will include overdue loans in which cases (a) decree or execution
petitions have been time barred or documents are lost or no other legal proof is
available to claim the debt, (b) where the members and their sureties are declared
insolvent or have died leaving no tangible assets, (c) where the members have left the
areas of operation of the society leaving no property, their sureties have also no means
to pay the dues, (d) where the loan is fictitious or when gross misutilisation is
noticed, and (e) amounts, which cannot be recovered in case of liquidated societies.
(iii)

PROVISIONING
NORMS
CLASSIFICATION

ON

THE

BASIS

OF

ASSETS

Provisioning is necessary, considering the erosion in the value of security


charged to the banks over a period of time. Therefore, after the assets of
DCCBs/SCBs are classified into various categories (standard, sub-standard, doubtful
and loss assets) necessary provision has to be made for the same. The details of
provisioning requirements in respect of various categories of assets are mentioned
below (RBI, 1996).

165

1. Standard Asset
Provision is required to be made as follows:
(a)

On direct advances to agriculture and SME sectors : 0.25%

(b)

On all other types of advances : 0.40%

2. Sub-standard Asset
A general provision of 10% of the total outstandings in this category may be
made.
3. Doubtful Assets
(a)

100% is to be made of the extent to which the advance is not covered by


realisable value of securities to which the bank has a valid recourse and the
realisable value is estimated on a realisation basis

(b)

Over and above item (a), provision is to be made depending upon the period
for which an asset has remained overdue/NPA, 20% to 100% of the secured
portion (i.e., estimated realisable value of the outstandings on the following
basis:

IV.
1.

Criteria

% Provision

Overdues above 3 years and up to 4 years

20%

Overdues over 4 years, but not exceeding 6 years

30%

Overdues exceeding 6 years

100%

Loss Asset
The entire loss asset should be written off. If the assets are permitted to retain
in the books for any reason, 100% of the outstanding thereof should be fully
provided for.
166

2.

The following aspects, however, may be kept in view while making provisions
(RBI, 1996).

(i)

All agricultural loans may be treated as fully secured as the same are disbursed
against charge on land as provided in the respective State Co-operative
Societies Acts/Rules.

(ii)

Liability towards Provident Fund and gratuity should be estimated on actuarial


basis and full provided for

(iii)

Advances against term deposits, NSCs eligible for surrender, IVPs, KVPs
and life policies are exempted from provisioning. Therefore, the above
accounts may not be classified as NPAs/Overdue.

(iv)

Advances against gold ornaments, government securities and all other kinds of
securities are not exempted from provisioning requirements.

(v)

The investment portfolio of a bank would normally consist of both approved


securities (Predominately Government Securities) and Other (shares,
debentures and bonds of co-operative and other institutions). Investments in
approved securities should be bifurcated into permanent and current
investments. Permanent investments are those which banks intend to hold till
maturity and current investments are those which banks intend to deal in, i.e.,
buy and sell on a day-to-day basis. Banks should keep not more than 50% of
their investments in permanent category. While the depreciation in respect of
permanent investments is not likely to affect their realisable value on maturity,
depreciation need not be provided for investments in the permanent category.
Investments under current category should be carried at lower of cost value
167

of market value, on a consistent basis. Depreciation in the current investments, if


any, should thereof be fully provided for. Banks following a more prudent
method of valuation (e.g., all the investments marked to market) should
continue to do so and there should not be slip back in their case.
Investments should be shown in the balance-sheet net of depreciation. It is,
however, open to banks to show the book value of investments, the depreciation there
against and net amount of investments separately.
As regards valuation of securities other than approved securities these should
be valued at lower of cost price or market value. Investment in the shares of cooperative institutions, however, may be valued at carrying cost price.
NON-PERFORMING ASSETS IN DCCBs
Non-performing assets are a very serious problem in financial institutions.
NPAs have been the single most vexing problem faced by the banks. It resulted in
deteriorating the process of resources mobilization in terms of non-recovery of loans,
loss of interest thereof and the provisions made to accommodate these non-recovered
loans. This affects business activity very badly, particularly in terms of re-advancing
the loans and hence, earning interest. Banks that have been identified as weak are
mainly so because of loss of their income, high carrying cost of NPAs, both in terms
of their funding as well as provisioning and general stagnation of operations caused
by NPAs in their books. In DCCBs, this problem is more acute due to political
interference and subsidized finance (Sabina, 2008).
Therefore, it is very much relevant here to study the trends in non-performing
assets.
PUNJAB DCCBs
168

HIGH PROFITABILITY DCCBs IN PUNJAB


Table 6.19:

Trends in NPAs in High Profitability DCCBs in Punjab : 1999-00


to 2007-08
(` in lakh)
Total
NPAs

Year

Provisions
Made

Loans
Outstanding

% of NPAs
to Loans
Outstanding

1999-00

1135.90

456.80

16361

6.94

2000-01

1375.61

516.67

24329

5.65

2001-02

1996.57

692.19

30013

6.65

2002-03

2758.85

659.43

34445

8.01

2003-04

2605.77

834.42

34615

7.53

2004-05

3054.75

965.61

35286

8.66

2005-06

3045.79

1228.25

39564

7.70

2006-07

3203.91

1924.88

32986

9.71

2007-08

3506.93

2197.57

43632

8.04

Average

2520.45

1052.87

32359.00

7.65

C.V.

33.10

58.98

24.99

15.35

C.G.R.

14.25

21.65

2.06

t-value

5.64***

11.03***

0.62

Constant

1073.51

5.70

8.47

Beta

289.39

209.43

0.16

t-value

8.05***

6.38

0.57

2014-15

5703.75

3356.58

11.03

2019-20

7150.70

4403.73

11.83

Trend Equation

Projections

% Change Over 2007-08


2014-15

62.64

52.74

37.23

2019-20

103.90

100.39

47.18

Source :

Basic Data on Performance of District Central Co-operative Banks,


Published by NAFSCOB, Mumbai, 1999-00 to 2007-08

Note : *** Significant at 1% level

169

A cursory look at Table 6.19 reveals that NPAs increased from ` 1135.90 lakh
in 1999-00 to ` 3506.93 lakh in 2007-08, registering a significant growth at the rate of
14.25 per cent compounded annually. The provisions made also depict a significantly
increasing trend from `456.80 lakh to `2197.57 lakh during the same period in high
profit DCCBs in Punjab. The rate of increase was higher in provisions (21.65%) as
compared to NPAs (14.25%). It shows that these DCCBs had failed to recover
their old NPAs and due to ageing of the NPAs provisions had to be made as a
higher rate. Hence, recovery of old NPAs is essential for these banks. Trend
equation shows that NPAs would increase by 62.64 per cent in 2014-15 and further to
103.90 per cent in 2019-20 over those during 2007-08, if this trend is not checked.
The further trend is similar in the case of provisions made against NPAs. The
proportion of NPAs in outstanding loans fluctuated between a minimum of 5.65 per
cent in 2000-01 to a maximum of 9.71 per cent in 2006-07 with an overall average of
7.65 per cent during the period of study. Compound growth rate of percentage of
NPAs to loans outstanding was recorded at 2.06 per annum.
AVERAGE PROFITABILITY DCCBs IN PUNJAB
The analysis given in Table 6.20 indicates that the NPAs increased from `
711.48 lakh in 1999-00 to `2993.76 lakh in 2007-08 registering a significant
compound growth rate of 21.26 per cent per annum. The provisions made against
NPAs also showed significant increase during this period. This shows that average
profitability DCCBs in Punjab used to make proportionate provisions to accommodate
NPAs. It can be said that the NPAs would increase by 72.36 per cent in 2014-2015
and 123.83 per cent in 2019-20 over 2007-08 in the average profitability DCCBs in

170

Punjab, if present trend is not checked. The provisions against NPAs would increase
by 45.34 and 91.11 per cent in 2014-15 and 2019-20 respectively.
Table 6.20:

Trends in NPAs in Average Profitability DCCBs in Punjab: 199900 to 2007-08


(` in lakh)
Total
NPAs

Year

Provisions
Made

Loans
Outstanding

% of NPAs
to Loans Outstanding

1999-00

711.48

224.82

25220

2.82

2000-01

704.67

248.26

33004

2.14

2001-02

1288.7

301.73

43510

2.96

2002-03

1433.98

377.98

58001

2.47

2003-04

1504.33

452.33

55941

2.69

2004-05

1864.2

665.75

50197

3.71

2005-06

2659.97

710.88

46960

5.66

2006-07

2767.75

802.7

52659

5.26

2007-08

2993.76

1253.66

64397

4.65

Average

1769.87

559.79

3.60

C.V.

48.79

59.75

35.96

C.G.R.

21.26

23.52

5.92

t-value

9.81***

16.49***

1.97*

Constant

228.94

-13.94

3.14

Beta

308.19

114.75

0.23

t-value

12.25***

7.26***

1.99*

2014-15

5159.98

1822.06

6.82

2019-20

6700.93

2395.81

7.97

Trend Equation

Projections

% Change Over 2007-08


2014-15

72.36

45.34

46.70

2019-20

123.83

91.11

71.44

Source :

Basic Data on Performance of District Central Co-operative Banks,


Published by NAFSCOB, Mumbai, 1999-00 to 2007-08

Note : *** Significant at 1% level


*Significant at 10 % level

171

The proportion of NPAs in total outstanding loans indicated a significant


increase from 2.82 per cent in 1999-00 to 5.66 in 2005-06 but declined to 4.65 per
cent in the last year of study. The overall growth rate came to be 5.92 per cent
compounded annually. The NPAs as a per cent of outstanding loans would be 6.82 per
cent in 2014-15 and 7.97 per cent in 2019-20 in average profitability DCCBs in
Punjab. Higher compound growth rate of provisioning (23.52 per cent) as compared
to CGR of NPAs (21.26 per cent) is a cause of concern for these banks.
LOW PROFITABILITY DCCBs IN PUNJAB
The data provided contained in Table 6.21 reveals that NPAs increased from
`1597.83 lakh in 1999-00 to ` 7076.64 lakh in 2007-08, showing a significant growth
rate of 20.78 per cent compounded annually in low profitability DCCBs in Punjab.
The provisions made against NPAs also increased from ` 742.93 lakh to ` 2596.02
lakh during the same period with a significant growth rate of 17.90 per cent
compounded annually. This showed that NPAs and provisions went hand in hand in
low profitability DCCBs in Punjab. The NPAs as a proportion of outstanding loans
increased from 6.67 per cent in 1999-00 to 24.79 per cent in 2005-06 which declined
to 14.35 per cent in 2007-08, but over the period it increased significantly at a
compound growth rate of 5.89 per cent. Though NPAs had increased in these banks
but the compound growth rate of provisions (17.90 per cent) is less than CGR of
NPAs (20.78 per cent) during the period of study. It shows that these banks had
succeeded in recovering their old NPAs, which speaks about their good
management practices.

172

Table 6.21 : Trends in NPAs in Low Profitability DCCBs in Punjab : 1999-00


to 2007-08
(` in lakh)
Total
NPAs

Year

Provisions
Made

Loans
Outstanding

% of NPAs
to Loans
Outstanding

1999-00

1597.83

742.93

23941

6.67

2000-01

1917.46

780.9

26078

7.35

2001-02

2835.66

812.67

30843

9.19

2002-03

3613.76

935.93

35893

10.07

2003-04

4668.14

1103.04

39711

11.76

2004-05

5286.05

1435.38

41058

12.87

2005-06

5934.12

1439.35

23941

24.79

2006-07

6194.24

2347.69

52361

11.83

2007-08

7076.64

2596.02

49317

14.35

Average

4347.10

1354.88

12.10

C.V.

45.03

50.71

44.45

C.G.R.

20.78

17.90

5.89

t-value

9.46***

9.10***

1.99*

Constant

795.86

199.42

10.05

Beta

710.25

231.09

0.63

t-value

23.54***

6.26***

1.84

2014-15

12159.86

3896.86

20.13

2019-20

15711.11

5052.31

23.28

Trend Equation

Projections

% Change Over 2007-08


2014-15

71.83

50.11

40.29

2019-20

122.01

94.62

62.24

Source :

Basic Data on Performance of District Central Co-operative Banks,


Published by NAFSCOB, Mumbai, 1999-00 to 2007-08

Note : *** Significant at 1% level


*Significant at 10 % level

173

The trend equation indicates that NPAs would be higher by 71.83 per cent in
2014-15 and further to 122.01 per cent in 2019-20 over 2007-08, while provisions
made against NPAs would be 50.11 and 94.62 per cent higher in 2014-15 and 201920 respectively over those in 2007-08, if this trend of NPAs is not checked. The
proportion of NPAs in outstanding loans would be 20.13 per cent in 2014-15 and
23.28 per cent in 2019-20.
Increased NPAs would result in loss of principal amount, loss of interest
income and higher incidence of provisioning. Therefore, reduction in NPAs is of
utmost importance for low profitability DCCBs in Punjab to improve their
profitability and financial position.
ALL SELECTED DCCBs IN PUNJAB
Table 6.22 indicates that NPAs increased significantly from ` 3445.21 lakh in
1999-00 to ` 13577.33 lakh in 2007-08 at a compound growth rate of 18.88 per cent
per annum. Similarly, provisions made against NPAs also registered a significant
increase from `1424.55 lakh to ` 6047.25 lakh during the same period at the rate of
20.21 per cent compounded annually. The trend equations revealed that NPAs would
increase by 69.57 and 117.73 per cent in 2014-15 and 2019-20 respectively over
2007-08, if this trend continues. Similarly, provisions would be 50.08 per cent higher
in 2014-15 and 95.99 per cent in 2019-20 over those in 2007-08.
Table 6.7A shows that demand of the bank for recovery had constantly
increased from ` 69954 lakh in 1999-00 to `175965 lakh in 2007-08. Recovery as a
percentage of total loan had remained almost constant (between 86.0 per cent to 89.0
per cent in these years) except for 2000-01 when it was 99.21 per cent. As a result,
absolute amount of overdues and NPAs had increased during the period of study.

174

Table 6.22:

Trends in NPAs Recovery in the Selected DCCBs in Punjab: 199900 to 2007-08


(` in lakh)
Total
NPAs

Year

Provisions
Made

Loans
Outstanding

% of NPAs
to Loans
Outstanding

1999-00

3445.21

1424.55

65522

5.26

2000-01

3997.74

1545.83

83411

4.79

2001-02

6120.93

1806.59

104366

5.86

2002-03

7806.59

1973.34

128339

6.08

2003-04

8778.24

2389.79

130267

6.74

2004-05

10205

3066.74

126541

8.06

2005-06

11639.88

3378.48

110465

10.54

2006-07

12165.9

5075.27

138006

8.82

2007-08

13577.33

6047.25

157346

8.63

Average

8637.42

2967.54

7.20

C.V.

41.71

54.83

26.61

C.G.R.

18.88

20.21

4.62

t-value

9.06***

12.97***

1.62

Constant

2098.32

191.18

6.85

Beta

1307.82

555.27

0.33

t-value

24.17***

6.95***

1.55

2014-15

23023.44

9075.50

12.13

2019-20

29562.54

11851.85

13.78

Trend Equation

Projections

% Change Over 2007-08


2014-15

69.57

50.08

40.57

2019-20

117.73

95.99

59.69

Source :

Basic Data on Performance of District Central Co-operative Banks,


Published by NAFSCOB, Mumbai, 1999-00 to 2007-08

Note : *** Significant at 1% level


NPAs in absolute terms had shown a significant growth in all the selected
DCCBs in Punjab during the period of study. CGR of NPAs was 14.25, 21.26 and

175

20.78 per cent in high, average and low profitability DCCBs respectively. NPAs
as proportion of outstanding loans remained constant in the selected DCCBs in
Punjab. This shows that banks were unable to recover old NPAs and/or some per
centage of new loans advanced also became NPAs.
Tables 6.19, 6.20 and 6.21 indicate that NPAs as a per centage of total
loan outstandings on the average were 7.65 per cent, 3.60 per cent and 12.10 per
cent respectively in high, average and low profitability DCCBs.
HARYANA DCCBs
HIGH PROFITABILITY DCCBs IN HARYANA
Table 6.23 demonstrates that NPAs increased from `631.80 lakh in 1999-00 to
` 4007.99 lakh in 2007-08, registering a significant rate of increase of 22.75 per cent
compounded annually. Similarly, the provisions made against NPAs increased
significantly from `532.05 lakh to `1599.30 lakh during the same period in high
profitability DCCBs in Haryana. A significant increase in the proportion of NPAs in
outstanding loans was also observed. It increased from 2.67 per cent in 1999-00 to
8.64 per cent in 2007-08 with overall compound growth rate of 12.13 per cent. These
are the only DCCBs under study in which compound growth rate of percentage NPAs
to loans outstanding, i.e., 12.13 per cent is more than compound growth rate of loans
outstanding, i.e., 9.41 per cent. This shows that NPAs increased faster than
outstanding loans. Compound growth rate of provisioning (17.38 per cent) which
was lower than compound growth rate of NPAs (22.75 per cent), indicates that
management of these DCCBs had succeeded in recovering old NPAs to some
extent. But increasing trend of NPAs with 12.13 CGR (more than CGR of total loan
outstandings) is a cause of serious concern for the management.

176

Table 6.23 : Trends in NPAs in High Profitability DCCBs in Haryana : 1999-00


to 2007-08
(` in lakh)
Total
NPAs

Year

Provisions
Made

Loans
Outstanding

% of NPAs
to Loans
Outstanding

1999-00

631.80

532.05

23622

2.67

2000-01

910.19

553.19

22641

4.02

2001-02

1212.78

635.19

30194

4.02

2002-03

1581.21

693.61

33120

4.77

2003-04

3517.74

1093.24

37210

9.45

2004-05

2801.75

1142.44

38149

7.34

2005-06

3003.11

1473.64

40266

7.46

2006-07

2110.21

1518.0

43813

4.82

2007-08

4007.99

1599.30

46401

8.64

Average

2197.42

1026.74

5.91

C.V.

54.56

42.45

39.93

C.G.R.

22.75

17.38

12.13

t-value

4.32***

10.34***

2.76**

Constant

371.92

252.64

2.52

beta

365.10

154.82

0.56

t-value

4.00***

11.09***

2.37**

2014-15

6213.52

2729.76

11.48

2019-20

8039.02

3503.86

14.28

Trend Equation

Projections

% Change Over 2007-08


2014-15

55.03

70.68

32.91

2019-20

100.57

119.09

65.32

Source :

Basic Data on Performance of District Central Co-operative Banks,


Published by NAFSCOB, Mumbai, 1999-00 to 2007-08

Note : *** Significant at 1% level


** Significant at 5 % level

177

Keeping in view the trend equations, it can be predicted that NPAs would
increase by 55.03 per cent in 2014-15 and further by 100.57 per cent in 2019-20 over
those in 2007-08 in high profitability DCCBs in Haryana, if this trend is not checked.
Similarly, the provisions would be 70.68 and 119.09 per cent higher as compared to
those in 2007-08. It is discouraging to note that NPAs as proportion of outstanding
loans would increase to 11.48 per cent in 2014-15 and 14.28 per cent in 2019-20 in
high profitability DCCBs in Haryana.
AVERAGE PROFITABILITY DCCBs IN HARYANA
Table 6.24 brings out that NPAs increased from ` 2518.64 lakh in 1999-00 to
`5328.30 lakh in 2007-08 at a significant compound growth rate of 8.26 per cent per
annum in average profitability DCCBs in Haryana. Similarly, the provisions made to
accommodate the NPAs were `917.95 lakh in 1999-00, which significantly increased
to `1870.38 lakh in 2007-08 at the growth rate of 9.27 per cent compounded annually.
NPAs proportion in outstanding loans was fluctuating throughout the study but
it always remained more than 9.47 per cent with overall average of 12.56 per cent.
The trend needs to be checked. If the trend is not checked NPAs in absolute terms
would be higher by 33.21 per cent in 2014-15 and 60.98 per cent in 2019-20 over
those in 2007-08 in average profitability DCCBs in Haryana. Similarly, provisions
would increase by 37.35 per cent in 2014-15 and by 68.54 per cent in 2019-20 over
2007-08.

178

Table 6.24 : Trends in NPAs in Average Profitability DCCBs in Haryana :


1999-00 to 2007-08
(` in lakh)
Total
NPAs

Year

Provisions
Made

Loans
Outstanding

% of NPAs
to Loans
Outstanding

1999-00

2518.64

917.95

17165

14.67

2000-01

3049.84

1112.27

31045

9.82

2001-02

3014.77

924.3

23736

12.70

2002-03

4403.44

1058.46

26036

16.91

2003-04

3685.55

1158.36

29067

12.68

2004-05

3559.89

1279.38

31967

11.14

2005-06

4527.80

1580.4

34928

12.96

2006-07

4494.70

1665.33

47448

9.47

2007-08

5328.30

1870.38

41973

12.69

Average

3842.55

1285.20

12.56

C.V.

23.62

26.62

18.39

C.G.R.

8.26

9.27

-4.10

t-value

5.17***

6.98***

1.68

Constant

2362.90

701.70

17.11

beta

295.93

116.70

-0.60

t-value

5.25**

6.92***

1.51

2014-15

7097.78

2568.90

7.51

2019-20

8577.43

3152.40

4.51

Trend Equation

Projections

% Change Over 2007-08


2014-15

33.21

37.35

-40.84

2019-20

60.98

68.54

-64.47

Source :

Basic Data on Performance of District Central Co-operative Banks,


Published by NAFSCOB, Mumbai, 1999-00 to 2007-08

Note : *** Significant at 1% level


** Significant at 5 % level

179

LOW PROFITABILITY DCCBs IN HARYANA


Table 6.25 : Trends in NPAs in low profitability DCCBs in Haryana : 1999-00
to 2007- 08
(` in lakh)
Total
NPAs

Year

Provisions
Made

Loans
Outstanding

% of NPAs
to Loans
Outstanding

1999-00

1358.16

293.65

46839

2.90

2000-01

1494.07

342.25

52740

2.83

2001-02

1744.79

393.25

40201

4.34

2002-03

1883.46

539.91

47449

3.97

2003-04

1688.71

657.7

50902

3.32

2004-05

2187.05

863.62

56098

3.90

2005-06

2540.75

1086.11

64368

3.95

2006-07

2167.24

1196.25

72017

3.01

2007-08

1943.36

1212.33

78940

2.46

Average

1889.73

731.67

3.41

C.V.

19.56

50.45

19.03

C.G.R.

5.92

21.99

-2.78

t-value

3.44**

14.72***

1.08

Constant

1368.41

69.50

4.38

beta

104.26

132.44

-0.09

t-value

3.22**

13.95***

0.94

2014-15

3036.57

2188.54

2.94

2019-20

3557.87

2850.74

2.49

Trend Equation

Projections

% Change Over 2007-08


2014-15

56.25

80.52

19.42

2019-20

83.08

135.15

1.14

Source :

Basic Data on Performance of District Central Co-operative Banks,


Published by NAFSCOB, Mumbai, 1999-00 to 2007-08

Note : *** Significant at 1% level


** Significant at 5 % level

180

Table 6.25 indicates that NPAs increased from ` 1358.16 lakh to ` 1943.36
lakh from 1999-00 to 2007-08 at a significant growth rate of 5.92 per cent
compounded annually in low profitability DCCBs in Haryana. The provisions made
against NPAs increased from ` 293.65 lakh in 1999-00 to ` 1212.33 lakh in 2019-20,
registering a compound growth rate of 21.99 per cent per annum. The provisions
made against NPAs increased at a much faster rate than NPAs itself. The compound
growth rate of provisioning, i.e., 21.99 per cent was much higher than 5.92 per cent
CGR of total NPAs. The proportion of NPAs total loan outstanding was almost
stagnant. It establishes that management of these DCCBs had not been able to
recover old NPAs and ageing NPAs had increased provisioning requirements, it
needs to be checked. The NPAs would be higher by 56.25 per cent in 2014-15 and
83.08 per cent in 2019-20 as compared to those in 2007-08 in low profitability
DCCBs in Haryana, if present trend is not checked.
The proportion of NPAs in outstanding loans was 4.34 per cent in 2001-02 and
2.46 in 2007-08. In all other years during the study period, it remained almost
stagnant between 3 per cent and 4 per cent.
It is pertinent to note that NPAs as a per centage of total loans outstanding
were the lowest, i.e., 3.41 per cent (Table 6.25) in low profitability DCCBs as
compared to high profitability DCCBs (5.91 per cent, Table 6.23) and average
profitability DCCBs (12.56 per cent, Table 6.24). It may be inferred that profitability
of DCCBs is not affected by NPAs alone.

181

ALL SELECTED DCCBs IN HARYANA


Table 6.26 : Trends in NPAs in the Selected DCCBs in Haryana : 1999-00 to
2007-08 (` in lakh)
Total
NPAs

Year

Provisions
Made

Loans
Outstanding

% of NPAs
to Loans
Outstanding

1999-00

4508.60

1743.65

87626

5.15

2000-01

5454.10

2007.71

106426

5.12

2001-02

5972.34

1952.74

94131

6.34

2002-03

7868.11

2291.98

106605

7.38

2003-04

8892

2909.30

117179

7.59

2004-05

8548.69

3285.44

126214

6.77

2005-06

10071.66

4140.15

139562

7.22

2006-07

8772.15

4379.58

163278

5.37

2007-08

11279.65

4682.01

167314

6.74

Average

7929.70

3043.62

6.41

C.V.

28.02

37.22

15.16

C.G.R.

10.93

14.56

0.79

t-value

6.69***

13.45***

0.50

Constant

4103.24

1023.84

6.51

Beta

765.29

403.96

0.05

t-value

7.51***

12.01***

0.42

2014-15

16347.88

7487.20

7.31

2019-20

20174.33

9507.00

7.56

Trend Equation

Projections

% Change Over 2007-08


2014-15

44.93

59.91

8.43

2019-20

78.86

103.05

12.14

Source :

Basic Data on Performance of District Central Co-operative Banks,


Published by NAFSCOB, Mumbai, 1999-00 to 2007-08

Note :*** Significant at 1% level


182

The analysis presented in Table 6.26 shows that NPAs increased from `
4508.60 lakh in 1999-00 to `11279.65 lakh in 2007-08 at a significant growth rate of
10.93 per cent compounded annually. The provisions made against NPAs also showed a
significant increase at the rate of 14.56 per cent compounded annually. These
increased from `1743.65 lakh to `4682.01 lakh during the same period. This showed
that rate of increase in provisions was higher than that in NPAs in all the selected
DCCBs in Haryana. Trend equation shows that in future also the increase in
provisions would be 44.93 per cent in 2014-15 and 78.86 per cent in 2019-20, while
the increase would be 59.91 per cent in 2014-15 and 103.05 per cent in provisions
over that in 2007-2008.
Absolute NPAs in DCCBs in Haryana also had registered a significant
growth. Annual CGR of high, average and low profitability DCCBs was 22.75,
8.26 and 5.92 respectively. The NPAs as proportion of outstanding loans
remained constant despite increase in loan outstandings. It shows that new loans
advanced had also become NPAs, at already prevailing rate of NPAs which needs
to be checked.
As revealed by Tables 6.23, 6.24 and 6.25, NPAs as a proportion of loans
outstanding registered a significant increasing trend in high profitability DCCBs,
while in average and low profitability DCCBs it was constant.

Comparison of NPAs in DCCBs of Punjab and Haryana


The analysis given in Table 6.27 shows that average NPAs in DCCBs in
Punjab were ` 8637.42 lakh which appeared to be statistically at par with `7929.70
lakh in DCCBs in Haryana. Similarly, the provisions made against NPAs were at par
183

in both the states. However, the NPAs as per centage of outstanding loans were
significantly higher in DCCBs in Punjab, i.e., 7.20 per cent as compared to those in
DCCBs in Haryana, i.e., 6.41 per cent.
Table 6.27 : Comparison of NPAs in DCCBs in Punjab and Haryana during
1999-00 to 2007-08
Particulars

Punjab
Mean

Haryana
SD

Mean

SD

t-value

NPAs

8637.42

3602.72

7929.70

2221.90

0.51

Provisions

2967.54

1627.10

3043.62

1132.84

0.12

Loans O/S

116029.22

123148.33

%NPAs to

7.20

6.41

0.57

loans O/S
Source :

Basic Data on Performance of District Central Co-operative Banks,


Published by NAFSCOB, Mumbai, 1999-00 to 2007-08

On the basis of whole analysis, it can be said that the position of NPAs in
DCCBs of both the states was not satisfactory. They were increasing and would
increase in future, if not checked. However, the NPAs as proportion of
outstanding loans, by and large, remained stagnant except in high profitability
DCCBs in Haryana despite increase in loan outstandings.
This shows that the recovery efforts of these banks failed to yield the
desired results as some per centage of new loans had also become NPAs, which
need to be curtailed.

184

REFERENCES
Narasimham, M.(1991), Report of Committee on Financial System, Govt. of India.
Padmanabhan, K.S.(1997), Management of Non- Performing Assets, Inter-faculty
note, BIRD, Lucknow.
PSCB (2001), Guidelines on Income Recognition and Asset Classification and
Provisioning, An Internal Publication of the Bank.
RBI (June 1996), Income Recognition, Asset Classification, Provisioning and Other
related Matters. Circular No. B.C. 155/07.37.02/ 95-96.
Sabina, Kumar (2008), Management of Non- performing Advances: A Study of
District Central Co-operative Banks of Punjab, An Unpublished Ph.D. Thesis,
Submitted to H.P. University Shimla, p.306.

185