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CHAPTER V NON-PERFORMING ASSETS OF KCCB The high rise in gross and NPA of the cooperative banking in the
recent past is at an exponential rate and it indicates a heavy toll on
cooperative credit discipline. This is further supported by recovery
climate, legal system, approach of the lenders towards lending and many
other factors. Despite myriad problems and the existing set up, the
cooperative banks have to perform well and achieve the target for NPA
reduction affixed as per the RBI norms. In order to achieve the target, a
professional approach is required in dealing with the NPA. The following
proactive steps would help the cooperative bankers in sharpening their
professional skills, who particularly deal with managing NPA.
1. Potential NPA accounts are to be monitored continuously. The
critical overdue amount is to be recovered. In the accounts where
there is temporary cash flow problem, the account is to be
restructured/rescheduled well before the account slips to NPA.
2. Powers for scarifies have been given down the line up to senior
level officers in various banks. The powers have to be judiciously
utilized to cover bona fied and genuine defaulters either for writing
off or settling the account through bullet payment.
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3. One time settlement of NPA –special scheme for marginal farmers
with outstanding balance upto Rs. 50,000/- announced by RBI is
operative with modifications. Serious steps should be taken to
cover more and more accounts under the scheme.
4. Compromise policy guidelines may be arrived at on the lines of
commercial banks.
5. The guidelines for considering compromise proposal through the
forum of LOK Adalat ars to be followed for effecting recovery.
6. The branch is also authorized to refer the suit filed cases involving
outstanding of Rs.10 lakhs and above to conciliation proceeding of
DRT as and when they are held. Such cases are to be considered
under bank’s compromise policy guidelines.
7. The recovery efforts can be expedited by conducting recovery
camps and periodical visits to the borrowers.
8. The farmer’s club, PMRY clubs, NABARD Mitra mandalis and
many other such forums are exploited for recovery of dues.
9. Maintaining close rapport with the borrower, eliciting
relevant/required information, ensuring end utilization, monitoring
through stock statements, inspection report, unit visit report, etc.
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forms part of follow up measures, which have a major impact on
the reduction of NPA.
The cooperative credit institutions hither to protected and
nourished by the government machinery in the area of rural development
are now exposed to open market operations. The introduction of
prudential norms had a direct bearing on the balance sheet of the
cooperative banks. The introduction of new accounting procedures
namely, income recognition, asset classification and provisioning have
affected the working of the cooperative bank and also their profitability.
The capital can be strengthened only through accumulated earning and
their retention. Managing these aspects in the competitive environment is
a big challenge to cooperative banks. This situation warrants an effective
credit and recovery management and a good performance in funds
management.
The prudential norms of accounting were introduced in cooperative
bank three years later in the commercial banks. The RBI had already
introduced 90 days overdue norms for identification of NPAs both for
commercial and cooperative banks and was given effect from 31st March,
2004. The cooperative banks have to overhaul the administration and
branch management, particularly in the lending and recovery area to
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check the creation of NPA and take steps to recover NPAs. Recovery of
loans in cooperative banks had taken a back seat in view of the inherent
advertisement.
Assets Classification
A bank’s assets portfolio is basically classified into performing and
non-performing assets. The cooperative banks started classifying their
assets as per the new prudential norms introduced by the RBI in 1996-97.
The classification of advances is under four broad categories, i.e.,
standard, sub-standard. Doubtful and loss instead of the old health- code
system. Substandard, doubtful and loss assets are individually and
collectively known as NPAs.
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Performing Asset
Performing assets are the loans and advances which generate
periodical income and repayments, as and when due or within the
minimum lag of one quarter.
Non- performing asset
A non-performing asset is one where interest and/or repayment of
instalment has not been paid within six months from its due date. The
effect of an asset turning out to be a NPA is the advance indication of that
asset slipping into bad and doubtful category. At present, a loan asset will
become NPA if the due amount is not paid within one quarter instead of
two quarters except agricultural advances. The four types of assets as per
the RBI norms are as follows:
1. Standard assets:
A standard asset is a performing asset. The standard asset continues
to generate income flow, and repayments are received as and when they
fall due. It also includes loans and advances where default for payment
does not exceed one quarter.
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2. Sub-standard assets:
These are the loans and advances which are classified as NPA for
a period not exceeding 18 months by March 2005 as per RBI guidelines:
3. Doubtful assets :
These are NAPs that remain in sub-standard category for a period
exceeding 18 months.
4. Loss assets:
Loss assets are those assets which are classified as bad and non-
recoverable by the concerned bank or by statutory auditors or by RBI
inspectors. The loss assets may be some loans and advances not being
serviced by borrowers for a long time or it may be a loan in the category
of doubtful asset but in the opinion of bank or auditors, it may not be a
recoverable sum. Unless and until these sums are written off from the
balance sheet, they will continue to appear in the balance sheet but under
the heading “loss asset”.
Provision for NPA
Assets classification is done to identify non-performing assets and
segregate them into three categories as sub-standard, doubtful and loss
based on the recovery prospects. Provisioning is the allocation of money
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every year to meet a possible future loss. The performance of business
may not be the same every year. It depends upon various political,
economic and business factors. If there is serious failure of business in a
row of years, then many business-borrowers may fail to payback their
loans to banks. When the banks write off such loans in a year or two, it
will result in huge losses depending upon the size of loans written off.
This will not only distort the performance of the bank for that year but
also comparative performance with previous years becomes difficult.
More so, in banking industry a big loss in a year for a bank may lead to a
run on the bank affecting its own survival itself. Hence, banks are advised
to evaluate their various loan accounts on balance sheet date into the four
categories mentioned above. The annual provisioning acts as shock
absorber and obviates the need for writing off big amounts in a year or so.
Reasons for Assets becoming NPAs
A number of factors are responsible for the ever increasing size of
NPAs in the central cooperative banks. The central cooperative banks
have higher percentage of NAPs compared to public and private sector
banks10. A few prominent reasons for assets becoming NPA are as under:
� Poor credit appraisal system. Lack of vision/foresightedness while
sanctioning, reviewing or enhancing credit limits.
� Lack of proper monitoring.
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� Inadequate legal support.
� Change in economic policies/environment.
� Non-transparent accounting policy and poor auditing practices.
� Directed/schematic lending to certain sectors.
� Government policy in waiver of interest, write off, etc.
Effects of NPAs
� The NPAs drag on profitability of the cooperative banks because
besides provisioning, banks are also required to meet the cost of
funding these unproductive assets.
� The NPAs reduce earning capacity of assets. Return on assets also
gets affected. The NPAs carry risk weights of 100 per cent. (to the
extent it is uncovered ). Hence, they block capital for maintaining
capital adequacy.
� As NPAs do not earn any income, they adversely affect the Capital
Adequacy Ratio.
� Recycling of funds is affected.
� Carrying NPAs required incurrence of cost of capital adequacy
and cost of funds blocked in NPAs.
� NPAs demoralize the operating staff11.
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Various parameters for rating of NPA management are discussed
below.
Gross NPA Ratio
Gross NPA is the total of all loan assets that are classified as NPA
as per the RBI guidelines as on a balance sheet date. Gross NPA ratio is
the ratio of gross NPA to gross advances of the KCCB. When it is
expressed in percentage, it is known as gross NPA percentage.
Gross NPAs Gross NPA Ratio = ------------------------- X 100 Gross Advances
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TABLE : 5.1 Gross NPA to Gross Advances
(Rs. in lakhs)
Year Gross NPA (Rs.)
Gross Advances
(Rs.)
Gross NPA Ratio
1998-99 3990.75 24157.19 16.52
1999-00 4190.60 24091.08 17.39
2000-01 4504.20 25078.70 17.96
2001-02 5313.30 26762.23 19.85
2002-03 5606.17 30636.70 18.30
2003-04 10293.04 29621.21 34.75
2004-05 5158.75 32496.90 15.87
2005-06 6422.59 36267.71 17.71
2006-07 5285.63 30831.40 17.14
2007-08 5788.19 40835.73 14.17
Source : Compiled from annual reports of the KCCB.
It indicates the quality of credit portfolio of the KCCB. High gross
NPA ratio indicates low quality credit portfolio of the bank and vice
versa. The gross NPA ratio should be determined for different categories
of loans to know the contributing factor for high NPA in a bank. It will
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help to take remedial course as well as to review the disbursement of
loans category wise.Table 5.1 provides the gross NPA ratio for the
KCCB.
The table shows the least percentage of gross NPA to gross
advance in 2007-08. The percentage of NPA and quantum of NPA both
had an increasing trend from the base year of 1998-09 to 2001-02.
Thereafter it came down for 2002-03. In the subsequent year, it increased
at peak stage during the whole study period. Afterwards, it suddenly
decreased in 2004-05. During the year 2005-06 and 2006-07 both gross
NPA and gross advances slowly increased in comparison with the
previous years. The average NPA of the KCCB during the study period is
18.96 percent. By increasing gross advance, the ratio is brought down
even though the gross NPA is not reduced substantially.
Net NPA Ratio
Net NPA is worked out by subtracting the provisions held in
respect of the non performing assets as well as bad and doubtful debts
from the figure of gross NPAs i.e., the net NPA is simply worked out as
the gross NPA minus provisions held for NPA accounts. Net advances are
arrived at by deducting the provisions from gross advances. The net NPA
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percentage is the ratio of the net advances expressed in terms of
percentage:
TABLE 5.2 Net NPA to Net Assets
(Rs. In lakhs)
Year Net NPAs (Rs.)
Net Advances (Rs.)
Ratio (%)
1998-99 3155.89 23322.33 13.53
1999-00 3282.43 23182.91 14.16
2000-01 3338.99 23925.87 13.96
2001-02 4029.40 25478.33 15.82
2002-03 3493.70 28524.23 12.25
2003-04 6416.23 25744.40 24.92
2004-05 2498.55 29836.70 8.37
2005-06 2245.18 29845.12 7.52
2006-07 990.54 25545.77 3.88
2007-08 693.47 35047.54 1.98
Source : Compiled from annual reports of the KCCB.
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Net NPA Net NPA Ratio = ----------------------------- X 100
Net Advances It indicates the degree of risk prevailing in the credit portfolio of
the bank. High net NPA ratio indicates the high quantity of risky assets in
the bank for which no provision has been made. Table 5.2 shows the net
NPA ratio of KCCB.
The net NPA ratio was the least in the year 2007-08 i.e., 1.98
percent and the highest percentage of net NPA ratio was in the year 2003-
04 i.e., 24.92 percent. When the provisions for NPA increased, the net
NPA might come down provided there was no addition of fresh NPAs.
The net NPA ratio steeply reduced from 24.92 percent in the year 2003-
04 because of increased provisioning.
From the analysis of the table, it is suggested that the KCCB has to
plunge into action immediately to recover the NPAs in all possible ways.
Recovery of NPAs will help the KCCB.
Problem Asset Ratio
The total asset is taken as total of all assets including cash but
discounting the loss and contra items. Among the total assets, the non-
performing assets are identified as problem assets because,
1. these are non performing
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2. managing NPA is costly
3. they attract provisioning i.e., they eat away a portion of
a. income of the bank.
4. existence of NPA affects the morale of the staff of the bank
5. follow up of NPA is time consuming and
6. the NPA borrowers corrupt the honest borrowers
The ratio of gross NPA to total assets is termed as problem asset ratio.
Gross NPAs Problem Asset Ratio = ------------------------- X 100 Total Assets
It has direct bearing on return on asset as well as the liquidity risk
management of the bank. High problem asset ratio means high illiquid.
The gross NPAs beyond a certain percentage of total assets will cripple
the total business performance of the bank. The existence of NPA in a
bank is like a parasite which will not only eat away the income of the
bank, but also develop problem in all functions of the bank. To minimise
the finance problem in the bank, the problem ratio must be brought to the
manageable minimum.
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TABLE : 5.3 Gross NPA to Total Assets
(Rs. In lakhs)
Year Gross NPA (Rs.)
Total Assets (Rs.)
Problem Assets Ratio
1998-99 3990.75 34033.80 11.73
1999-00 4190.60 35382.14 11.84
2000-01 4504.20 38997.07 11.55
2001-02 5313.30 42352.63 12.55
2002-03 5606.17 47429.89 11.82
2003-04 10293.04 48271.45 21.32
2004-05 5158.75 46554.07 11.08
2005-06 6422.59 52039.38 12.34
2006-07 5285.63 50037.58 10.56
2007-08 5788.19 61683.77 9.38
Source : Compiled from annual reports of the KCCB.
Table 5.3 brings out the problem asset ratio. The KCCB had this
ratio at a minimum of 9.38 percent in the year 2007-08 and highest of
21.32 percent in the year 2003-04. The table clearly brings out the fact
that the KCCB has not paid adequate attention to the reduction of NPA
and hence problem ratio is not controlled. It is suggested that KCCB Ltd.
must deploy its effective personnel to deal with the NPA with a powerful
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recovery strategy. The reduction of NPA and arresting of the creation of
new NPA are the solutions to control the problem assets ratio. The gross
NPA to gross advance may be higher in a bank, but its gross NPA to total
assets may be lower because of the higher amount of the denominator.
Depositors’ Safety Ratio
It is also known as standard assets to total outside liabilities ratio.
Here, standard assets mean total of standard loan assets and investments;
outside liabilities are total liabilities minus capital and reserves.
Depositors’ Safety Ratio is the ratio of Standard Assets to total outside
liabilities.
Total Standard Assets Depositors’ Safety Ratio = ------------------------------------ x 100 Total Outside Liabilities
It indicates the degree of safety of the depositors’ money. High
ratio means high safety to the depositors. Further this spells out the
percentage of quality assets ( Standard assets) created out of the borrowed
funds, namely the total outside liability which mainly includes the
deposits. Higher the percentage of performing assets (Standard assets) to
the total outside liabilities elicits higher safety to the depositors.
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TABLE : 5.4 Depositors' Safety Ratio
(Rs. in lakhs)
Year Standard Assets
(Rs.)
Total Outside Liabilities
(Rs.)
Standard assets to Outside Liability
Ratio
1998-99 20166.44 30999.74 65.05
1999-00 19900.49 32120.48 61.96
2000-01 20573.90 35381.74 58.15
2001-02 21448.93 38495.28 55.72
2002-03 25030.56 41288.92 60.62
2003-04 19328.17 41549.25 46.52
2004-05 27338.15 40853.16 66.92
2005-06 29845.12 44663.05 66.82
2006-07 25545.77 41119.78 62.13
2007-08 35047.54 50686.00 69.15
Source : Compiled from annual reports of the KCCB.
Table 5.4 gives the depositors’ safety ratio of the KCCB. The
standard assets and percentage of NPA to outside liability has fluctuated
during the study period. The average ratio is arrived at 61.30 percent for
the ten years though it is ranging between 46.52 percent and 69.14
percent. Therefore it is suggested the KCCB has to practice
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professionalized credit management in order to maintain and increase the
standard assets i.e., performing assets.
Shareholders’ Risk Ratio
NPA is a burden to the bank management because of its non
performing nature as well as its costly management. Under the new
prudential norms, banks have to maintain the prescribed level of capital
with reference to the risk weighted assets. Strengthening the capital is
possible by addition of share capital and ploughing back the profits. The
accumulation of NPA directly affects the net profit because of the
provisioning norms. The loss incurred by the banks due to increased NPA
weakens the capital position of the bank and thereby affects the capital
adequacy ratio. The reduction in the profit or incurring loss affects the
interest of the shareholders.
Shareholders’ Risk Ratio is the ratio of net NPAs to the share
holders’ net worth of the bank.
Net NPAs
Shareholders’ Risk Ratio = ---------------------------------- X 100 Total Capital & Reserves
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TABLE : 5.5 Gross NPA to Share Holders Fund
(Rs. in lakhs)
Source : Compiled from annual reports of the KCCB.
Table 5.5 shows the shareholders’ risk ratio of the KCCB. During the
study periods, three years ratio only showed more than 100 percent, ie.,
104.02 percent, 100.65 percent and 104.46 percent in 1998-99 , 1999-00
and 2001-02 respectively. The average ratio of net NPA to total capital
and reserves for the 10 years arrived at is 64.55 percent. Increase in this
ratio increases the shareholders’ risk, as a result shareholders will be
Year Net NPA
(Rs.)
Share Holders Net Worth
(Rs.)
NPA to Shareholders
Fund
1998-99 3155.89 3034.06 104.02
1999-00 3282.43 3261.66 100.64
2000-01 3338.99 3615.33 92.36
2001-02
4029.40 3857.35 104.46
2002-03 3493.70 6140.97 56.89
2003-04 6416.16 6722.2 95.45
2004-05 2498.55 5700.91 43.83
2005-06 2245.18 7376.33 30.44
2006-07 990.54 8917.8 11.11
2007-08 693.47 10997.8 6.31
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reluctant to deal with the bank because of its weak capital structure and
increased NPA position. To strengthen the capital in order to achieve the
required CAR, the KCCB must concentrate more on NPA management.
Provision Ratio
Under the new prudential norms, the KCCB classifies the assets to
identify the NPAs. Provisioning norms were applied to substandard,
doubtful and loss categories of assets only. But now provisioning norms
have been extended to the standard assets also taking into account the
possibility of slippage to substandard category. The provisioning for NPA
is made to the debit of profit and loss account of the bank, which affects
the income and in turn the profits. More NPAs attract more provisioning.
The transparency in the identification of NPA and its proper classification
will provide a clean picture of the quality of assets of the bank.
Provision ratio is the ratio of the total provisions held in respect of
non- performing assets to gross NPAs of the bank.
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Total Provisions Provision Ratio = --------------------------------- X 100 Gross NPAs
It indicates the degree of safety measures adopted by the banks. It
has direct bearing on profitability, dividend and safety of the
shareholders’ fund. If the provision ratio is less, it indicates that the banks
have made under-provision. Lesser provisioning is possible only by
identifying lesser NPAs. Lesser NPA must be due to more recovery. But
at times banks do window-dressing and camouflage certain NPAs under
the pretext of security coverage.
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TABLE- 5.6 Total Provisions to Gross NPA
(Rs.in lakhs)
Year Total
Provisions (Rs.)
Gross NPA (Rs.)
Provisions to NPA Ratio
1998-99 768.12 3990.75 19.25
1999-00 908.17
4190.60 21.67
2000-01 1165.21
4504.20 25.87
2001-02 1283.90
5313.30 24.16
2002-03 2112.47
5606.17 37.68
2003-04 3876.81
10293.04 37.66
2004-05 2660.20
5158.75 51.57
2005-06 4177.41
6422.59 65.04
2006-07 4295.09
5285.63 81.26
2007-08 5094.72
5788.19 88.02
Source : Compiled from annual reports of the KCCB.
Table 5.6 exhibits the provision ratio of the KCCB. The ratio
slowly increased from 20.92 percent in 1998-99 to 88.02 percent in 2007-
08. The average ratio of the provisions to gross NPA for the decade is
45.39 percent. Proper classification of NPA and provisioning as per
norms are very much necessary for the KCCB to know its factual
financial position. The awareness of the factual financial position will
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help the KCCB to formulate its future financial planning in order to
reduce NPA, thereby reduce provisions, which will result in profitability.
Substandard Asset Ratio
Out of the Total NPAs, substandard assets are fresh NPAs. If they
are not attended to immediately, they will slip to doubtful or loss assets.
By recovering the defaulted interest and investment, bank can upgrade
the substandard assets to standard assets and thereby avoid higher
percentage of provisioning. Also the NPA level will come down. This
ratio will help to understand the fresh addition of NPAs. It is the ratio of
substandard assets to gross NPA of the bank.
Sub-standard Assets Substandard Asset Ratio = -------------------------------- X 100 Gross NPAs
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TABLE - 5.7 Sub-Standard Assets Ratio
(Rs.in lakhs)
Source : Compiled from annual reports of the KCCB.
It indicates the scope of up gradation/ improvement in NPA. Table
5.7 presents the substandard assets ratio of the KCCB. The ratio slowly
decreased from 75.12 percent in 1998-99 to 38.09 percent in 2002.03
afterwards it increased to 47.13 percent in 2003-04 and 48 percent in
2004-05. In the subsequent years, it decreased to 19.24 percent, 4.24
percent and 3.41 percent in 2005-06, 2006-07 and 2007-08 respectively.
Substandard asset is due to non-recovery of interest and investmentfor
two quarters (presently it is one quarter). They are fresh NPAs. Efforts
taken to upgrade these assets to standard assets will yield good results
Year
Sub-standard
Assets (Rs.)
Gross NPA (Rs.)
Sub-standard
Assets Ratio
1998-99 2997.86 3990.75 75.12
1999-00 2903.75 4190.60 69.29
2000-01 1989.35 4504.20 44.17
2001-02 2967.77 5313.30 55.86
2002-03 2135.32 5606.17 38.09
2003-04 4850.76 10293.04 47.13
2004-05 2476.20 5158.75 48.00
2005-06 1235.47 6422.59 19.24
2006-07 224.37 5285.63 4.24
2007-08 197.43 5788.19 3.41
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when compared to the efforts taken on other categories of assets, namely
doubtful and loss assets.
Doubtful Asset Ratio
When adequate care or follow-up is not done in upgrading the
substandard assets, they slip down to doubtful assets. In case of doubtful
assets, the immediate action to be taken by the bank is to protect the
securities offered and assets created, both immovable and movables and
collateral securities. In case of doubtful assets, provisioning is done based
on the secured and unsecured portion of the loan assets. For unsecured
portion, the provision is made at 100 percent. Hence, the securities taken
by the bank are to be protected on priority basis. It is the ratio of total
doubtful assets to gross NPAs of the bank.
Total Doubtful Assets Doubtful Asset Ratio = ---------------------------------- x 100
Gross NPAs
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TABLE- 5.8 Doubtful Assets Ratio
(Rs. in lakhs)
Source : Compiled from annual reports of the KCCB.
It indicates scope for compromise settlement to reduce NPAs.
Table 5.8 shows the doubtful assets ratio of the KCCB. The ratio slowly
increased from 7.66 percent in 1998-99 to 87.48 percent in 2007-08. The
average ratio of doubtful assets to gross NPA for the decade is 47.98
percent.
The doubtful assets are those assets which are very difficult to
recover. They are prone to become loss assets if the bank does not take
hard steps to recover employing legal steps or through compromise
Year
Doubtful Assets (Rs.)
Gross NPAs (Rs.)
Doubtful Assets
Ratio
1998-99 305.55 3990.75 7.66
1999-00 616.29 4190.60 14.71
2000-01 1865.65 4504.20 41.42
2001-02 1699.11 5313.30 31.98
2002-03 2887.44 5606.17 51.50
2003-04 4592.36 10293.04 44.62
2004-05 2269.85 5158.75 44.00
2005-06 4538.95 6422.59 70.67
2006-07 4533.94 5285.63 85.78
2007-08 5063.72 5788.19 87.48
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settlement. The charges created by the bank on the loan assets as well as
collateral securities are to be ensured and strengthened. The bank has to
take all efforts to cover the entire outstanding by way of securities
charged under hypothecation, pledge or mortgage. While taking steps to
recover the dues, priority may be given to cover the unsecured portion if
any by any type of securities. This will enable the bank to minimise its
provisions, which in turn improve profitability.
Loss Asset Ratio
For a bank, loss assets should not exist in the balance sheet. It
should be wiped out either by recovery or by write off. Existence of loss
assets is a burden on provisioning and on capital adequacy ratio. Further
it is a burden to the bank which attracts unwanted service cost. The bank
can employ The RBI’s compromise schemes for one time settlements to
wipe out the loss assets from the balance sheet.
It is the ratio of total loss assets to gross NPA of the bank. IT
indicates the proportion of bad loans in the bank.
Total Loss Assets Loss Asset Ratio = -------------------------------- x 100 Gross NPAs
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TABLE - 5.9 Loss Assets Ratio
(Rs. in lakhs)
Year Total
Loss Assets (Rs.)
Gross NPA (Rs.)
LossAssets Ratio
1998-99 687.34 3990.75 17.22
1999-00 670.56 4190.60 16.00
2000-01 649.20 4504.20 14.41
2001-02 646.42 5313.30 12.17
2002-03 583.41 5606.17 10.41
2003-04 849.92 10293.04 8.26
2004-05 412.70 5158.75 8.00
2005-06 648.17 6422.59 10.09
2006-07 527.32 5285.63 9.98
2007-08 527.04 5788.19 9.11 Source : Compiled from annual reports of the KCCB.
Table 5.9 provides the loss assets ratio of the KCCB. The ratio of
loss assets decreased from 17.22 percent in 1998-99 to 9.11 percent in
2007-08. The average ratio arrived at is 11.57 percent during the study
period. Therefore the KCCB must note to tighten its credit management
as well as recovery policy to avoid slippage to loss assets. With several
decades of rich experience, it manages to exist in the banking business
and also prepares to compete with the aggressive commercial banking.
Among the challenges faced by the cooperative banking, the crucial one
is the phenomenon of NPA.
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Regarding NPA problems, proper identification of the causes and
taking steps to rectify them are important for the KCCB. While every
effort is being made by KCCB in reducing the NPA, the creation of fresh
NPA poses threat to the bank. Higher incidence of fresh NPAs nullifies
the efforts made by the KCCB towards recovery of existing NPAs. The
incremental NPA results in higher provisioning and consequently leads
the bank to slow down its credit expansion. Declined growth in credit
expansion affects the business performance of the KCCB.
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TABLE 5.10 Profile of Non-performing Assets of KCCB Ltd.
(Rs. In lakhs)
Particulars 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
Loans Outstanding (Rs.)
24157.19 24091.08 25078.70 26762.23 30636.70 29621.21 32496.90 36267.71 30831.40 40835.73
Standard Assets (Rs.)
20166.44 19900.49 20573.90 21448.93 25030.56 19328.17 27338.15 29845.12 25545.77 35047.54
Sub-standard Assets (Rs.)
2997.86 2903.75 1989.35 2967.77 2135.32 4850.76 2476.20 1235.47 224.37 197.43
Doubtful Assets (Rs.)
305.55 616.29 1865.65 1699.11 2887.44 4592.36 2269.85 4538.95 4533.94 5063.72
Loss Assets (Rs.) 687.34 670.56 649.20 646.42 583.41 849.92 412.70 648.17 527.32 527.04
Gross NPA (Rs.) 3990.75 4190.60 4504.20 5313.30 5606.17 10293.04 5158.75 6422.59 5285.63 5788.19
Percentage of NPA to Loans outstanding
16.52 17.39 17.96 19.85 18.30 34.75 15.87 17.71 17.14 14.17
Source : Compiled from annual reports of the KCCB
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References
1. Mistra T.P. (2003) Managing Non-performing Assets – A
Professional Approach, IBA Bulletin, January – P.14.
2. Ibid.
3. Ibid., P.15.
4. Ibid.
5. Ibid., PP. 18-19.
6. Dash N.K.(1997), A Practical Guide for Urban Cooperative Banks
on Income Recognition: Asset Classification Norms and Reduction
of NPAs, Cooperative Perspective, July – September, P.1.
7. Natarajen S. and Parameawaran R. (2004), Indian Banking,
S.Chand And Company Ltd., New Delhi, P.85.
8. Ibid.
9. Ibid., P.86.
10. Sood R.K. (2001), Non-Performing Assets in Public Sector Banks:
An Analysis of Causes and Solutions Thereof. IBA Bulletin,P.18.
11. Ibid.
12. Dass N.K. Op. cit., P.19.
13. Sudhakar V.K. (1998), Policies and Persepectives of NPA
Reduction in Banks, IBA Bulletin, November, P.9.
14. Ibid.
15. Sood R.K. Op.cit., P.19.
16. Adivarahan V. (2000), Reduction of NPA- Whether an Insue
mountable Task ? IBA Bulletin, January, P.16.
17. Ibid.
18. Ibid.
19. Sambasivsrao S. (2002), A primer for NPA Management, IBA
Bulletin June, P.23.
194
20. Ibid.
21. Ibid.
22. Ibid.